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While the faux debt ceiling drama rages in Washington, DC, governments worldwide are defaulting on their debt via inflation.

Original Article: “Default by Inflation Is the Real Drama in the Global Debt Market“

Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of “Ten Great Economic Myths”. This material was prepared by Murray N. Rothbard.

The problem of forecasting interest rates illustrates the pitfalls of forecasting in general. People are contrary cusses whose behavior, thank goodness, cannot be forecast precisely in advance. Their values, ideas, expectations, and knowledge change all the time, and change in an unpredictable manner. What economist, for example, could have forecast (or did forecast) the Cabbage Patch Kid craze of the Christmas season of 1983? Every economic quantity, every price, purchase, or income figure is the embodiment of thousands, even millions, of unpredictable choices by individuals.

Many studies, formal and informal, have been made of the record of forecasting by economists, and it has been consistently abysmal. Forecasters often complain that they can do well enough as long as current trends continue; what they have difficulty in doing is catching changes in trend. But of course there is no trick in extrapolating current trends into the near future. You don’t need sophisticated computer models for that; you can do it better and far more cheaply by using a ruler. The real trick is precisely to forecast when and how trends will change, and forecasters have been notoriously bad at that. No economist forecast the depth of the 1981–82 depression, and none predicted the strength of the 1983 boom.

The next time you are swayed by the jargon or seeming expertise of the economic forecaster, ask yourself this question: If he can really predict the future so well, why is he wasting his time putting out newsletters or doing consulting when he himself could be making trillions of dollars in the stock and commodity markets?

For more episodes, visit Mises.org/MisesReport

When we think of “solar power,” we picture a field or a roof full of glass panels churning out electricity. However, this is just a more recent development in channeling the sun’s energy. Most histories of solar power will begin with stories regarding the use of magnifying glasses and mirrors to make fire. From the first to fourth centuries, the Romans began including large south-facing windows in their famous bathhouses, optimizing the heat energy the sun provided to heat the buildings.

However, this led to an interesting development. In the sixth century, not only bathhouses but also many Roman houses and public buildings all trended toward having a sunroom. As such, the Justinian Code actually enshrined “sun rights” so that each individual would be guaranteed access to the sun. Once the government enshrines access to the sun as a right, it is easy to compare “sun rights” to Murray Rothbard’s hypothetical government’s right to shoes:

The libertarian who wants to replace government by private enterprises in the above areas is thus treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax-financed monopoly from time immemorial. If the government and only the government had a monopoly of the shoe manufacturing and retailing business, how would most of the public treat the libertarian who now came along to advocate that the government get out of the shoe business and throw it open to private enterprise? He would undoubtedly be treated as follows: people would cry, “How could you? You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes to the public if the government got out of the business? Tell us that! Be constructive! It’s easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? How would the shoe firms be capitalized? How many brands would there be? What material would they use? What lasts? What would be the pricing arrangements for shoes? Wouldn’t regulation of the shoe industry be needed to see to it that the product is sound? And who would supply the poor with shoes? Suppose a poor person didn’t have the money to buy a pair?”

Once the right to sun is enshrined, all these same questions can be asked. A sunroom raises the price of a home, and the poor will be priced out without a guaranteed right to the sun. One could cry that if one didn’t support this right, one would be opposed to people having sun and receiving vitamin D. In fact, there is a stronger argument to regulate the sun. While the sun is not an economic good—it is not scarce—it far more meets the definition of a public good than shoes do. This is because public goods are both nonrivalrous and nonexcludable. This means that one person using the good does not take away from another person’s enjoyment of the good and that the use of the good cannot be prevented in such a way that nonpayers do not receive the enjoyment of the good.

Many smarter than I have discussed the flaws with public goods theory, so this article does not necessarily mean to break the theory down on economics grounds but rather to give an example of its flawed conclusion that such goods should be regulated. While the sun is not a scarce good and thus not an economic good, it becomes so in certain manners, like if a building next to your house becomes too tall and you’re prevented from receiving sunlight in your sunroom. Thus, the sun has every ground to be regulated by this theory.

However, as we all know, we have no right to the sun. Yet, we still manage to receive sunlight although we do not all have a sunroom. It’s true that without the enshrined right to the sun, many of us have ended up without a sunroom—probably even most of us. This does not mean that we have all been deprived of our natural right to the sun but merely that we have demonstrated a preference for different sorts of sun.

While the candlemakers of the world may want to use the government to deprive us completely of sunlight, we must not go the other direction and act as though we have a so-called right to the sun. While, obviously, sun rights are not the battle of today, every time we hear an advocate coming out with a different idea of new positive rights, we must remember that each and every one of them is as ridiculous as a right to the sun.

The U.S. Supreme Court on Thursday rejected race-based admissions in higher education at Harvard University and the University of North Carolina at Chapel Hill (UNC). The ruling likely calls into question the legality of most race-based college admissions policies, especially at elite colleges.

In the ruling (Students for Fair Admissions v. Harvard) a majority of the justices ruled that the use of racial preferences in the admissions process at the two colleges violated the Equal Protection Clause of the Fourteenth Amendment. Federal law did not require racial preferences in admissions at the time of the ruling, but the federal government tolerated the discriminatory use of racial preferences by higher education institutions. This toleration persisted for decades in spite of the scheme’s apparent violation of federal legislation that educational institutions—among many other institutions and private businesses—cannot discriminate against applicants based on membership within any particular racial or ethnic group. 

Thus, opponents of affirmative action—most of them conservatives—have fallen all over themselves to praise Thursday’s decision as a great victory. For those who hope for Supreme Court decisions that actually do something to limit federal power or protect private property, however, this decision contains little to praise. Rather, the court’s ruling this week reiterates the power of the federal government to govern virtually every institution in America in the name of fighting discrimination. Even worse is the fact that the court could have—and should have—ruled against Harvard and UNC using nothing more than Title VI of the Civil Rights Act. That would have actually limited federal power. Instead, the court took a different path designed to solidify federal power and re-assert federal prerogatives.

In other words, opponents of affirmative action have won a small skirmish for their little cause, but opponents of regime power have won nothing at all. 

The Problem with the Equal Protection Clause

One of the most pernicious developments in the history of federal law was the adoption of the so-called “Equal Protection Clause” (found in the Fourteenth Amendment).

This new section of the constitution, adopted in 1868, turns the Bill of Rights on its head. The Bill of Rights, of course, was written to limit federal power only. It’s why the First Amendment begins with the phrase “Congress shall make no law…” Note there is no mention of state legislatures. It was only after the adoption of the Fourteenth Amendment that federal courts took upon themselves new powers to force every state and local government to comply with federal courts’ novel interpretations of the Bill of Rights. Known as “incorporation” this new legal doctrine ensured that the Bill of Rights functioned to expand federal power rather than limit it. As a result, the United States ceased to be a true confederation of states—as described by the Constitution as ratified in 1788—and moved much further toward becoming a unitary state.

[Read More: “End the Incorporation Doctrine” by Ryan McMaken]

Moreover, over time, federal courts began to apply the Equal Protection Clause far beyond even the deeds of state and local governments. Legal scholar Allen Mendenhall has summed up the damage done: 

the Supreme Court would later turn to the Equal Protection Clause and the Due Process Clause to strike down state laws under the Fourteenth Amendment. But the Supreme Court has not stopped at state laws: gradually it has used the Equal Protection Clause and the Due Process Clause as a pretext for regulating private citizens and businesses. The Fourteenth Amendment, which was intended to reduce discrimination, has even been used, ironically, to uphold affirmative-action programs that discriminate against certain classes of people.

Ceding power to federal judges does not predispose them to liberty. Because Section Five of the Fourteenth Amendment permits Congress to pass amendments or enact laws dealing with state infringements on individual liberty, it isn’t necessary or constitutionally sound for the federal judiciary to assume that role. Members of Congress, unlike federal judges who enjoy life tenure, are accountable to the voters in their states and are thus more likely to suffer from their infidelity to the Constitution.

Thus, it has become commonplace for federal judges to justify federal meddling in private businesses and other private institutions. Unfortunately, so-called conservative judges are no different, and they have been more than happy to preserve and expand the reach of the federal government using the Equal Protection Clause as justification. 

This Is No Victory Against Federal “Anti-Discrimination” Schemes 

We see this in this week’s ruling from the Supreme Court. The court’s opinion bases its ruling against the University of North Carolina and Harvard University—a state institution and a private university respectively—on the Equal Protection Clause. This is clear in the ruling as written by the ultra-establishment judge John Roberts (who also ruled in favor of Obamacare): 

For the reasons provided above, the Harvard and UNC admissions programs cannot be reconciled with the guarantees of the Equal Protection Clause….Respondents’ admissions systems—however well intentioned and implemented in good faith—… must therefore be invalidated under the Equal Protection Clause of the Fourteenth Amendment.

Remember, federal law does not mandate affirmative action at UNC or Horvard. So, to rule against these affirmative action schemes is not to rule against any federal law, nor does such a ruling limit federal law in any way. Rather, the ruling asserts that federal courts get to decide what state legislatures and the Harvard governing boards do with their property.

Of course, this won’t bother most conservative opponents of Affirmative Action, few of whom could possibly care less about abuses of federal power so long as that abuse and arbitrary power is directed against the other side. Those who have no long-term strategy against federal power—and who lack any principled position in support of private property, local control, or true federalism—will not have any problem with the court’s ruling. 

The fact that the conservative wing of the court chose to double down on the Equal Protection Clause shows its centralist leanings because it could have just as easily ruled against affirmative action based on Title VI of the 1964 Civil Rights Act. Title VI states: 

No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.

Were Harvard University a truly private organization, it ought to be completely up to that institution as to how it chooses to admit students. Similarly, if UNC were truly a state-level institution, how the University of North Carolina conductions its admissions process ought to be a matter for people in North Carolina. 

Yet, as is well known, both of these institutions have received enormous piles of federal money in recent decades. This has come both in the form of outright grants, and in the form of federal student loans which allows colleges and universities to hike prices well beyond what students could pay without those loans. When it comes to grants, the dollar amounts are impressive to say the least. In 2019, federal dollars made up 70 percent of Harvard’s $800 million in research grants. The University of North Carolina received more than $700 million in federal research dollars in 2019. 

In other words, both of these institutions are quasi-federal installations, and certainly fall under the provisions of Title VI. The fact that these institutions were using race-based admissions policies—i.e., discriminating against applicants without the “correct” demographic background—means those who pay federal tax were forced to pay for these institutions’ discriminatory practices. The whole point of Title VI is to end such abuses. 

A final note: lest the reader have any lingering doubts that Roberts’ ruling is careful to not actually limit the federal government in any way, we can highlight footnote 4 on page 22:

The United States as amicus curiae contends that race-based admissions programs further compelling interests at our Nation’s military academies. No military academy is a party to these cases, however, and none of the courts below addressed the propriety of race-based admissions systems in that context. This opinion also does not address the issue, in light of the potentially distinct interests that military academies may present.

Had the court based its opinion on Title VI instead of the Equal Protection Clause, it would have been extremely difficult to deny that the military academies—which are, of course, federally funded—must cease any and all race-based preferences in admissions or any other aspect of administration. Yet, by minimizing the role of Title VI, the court found a convenient way to avoid the obvious. 

Not all of the SCOTUS judges chose to strategically ignore this fact. In his concurring opinion, Justice Gorsuch, the least-bad member of the court, specifically invoked Title VI as a sufficient reason to reject race-based admissions schemes at Harvard and UNC. He writes: 

 Title VI bears independent force beyond the Equal Protection Clause. Nothing in it grants special deference to university administrators. Nothing in it endorses racial discrimination to any degree or for any purpose. … And no one can doubt that both schools intentionally treat some applicants worse than others at least in part because of their race.

Gorsuch concludes “Title VI of the Civil Rights Act of 1964 does not [tolerate]” the discriminatory practices used at Harvard and UNC. 

In other words, the court could have ruled against affirmative action without relying on freedom-destroying provisions like the Equal Protection Clause. Had the court ruled strictly along the lines of enforcing Title VI, the court’s decision would have sent the message that the decades-old policy of shoveling federal taxpayer money to bigoted admissions officers was at an end. If the court’s conservative wing actually respected private property and true federalism it would have made it clear that—as far as federal law is concerned—institutions would still be free to discriminate as they see fit provided they receive no federal money. 

But that’s not what the court did. Instead it chose to perpetuate the court’s well-established and disastrous use of the Equal Protection Clause to ensure the federal government possesses nearly untrammeled power in the name of combatting discrimination.

In this week’s episode, Mark looks back at the history of the Inverted Yield Curve. While many observers have now dismissed the significance of the yield curve inversion in 2022 and no recession yet, Mark shows that the history of the IYC can have a completely opposite interpretation.

Be sure to follow Minor Issues at Mises.org/MinorIssues.

Allow me to explain why we have not seen a recession yet despite the collapse in base money supply. We are witnessing the stealth nationalization of the economy. What does this mean?

The entire burden of the monetary collapse and rate hikes is falling on the shoulders of families and small businesses, while large corporations and governments are virtually unaffected.

Thus, when an agent like the state, which weighs 40 to 60 percent of GDP in most economies, continues to consume wealth and spend, gross domestic product does not show a recession even though consumption and private investment in real terms is declining. Bloated government spending is disguising a private sector recession and the decline in real disposable income, real wages, and margins of SMEs (small and medium enterprises). Furthermore, the accidental and exogenous factor of widespread weaker commodities is boosting the external contribution of gross domestic product.

These are the main reasons why we are living in the middle of a recession and the destruction of private wealth and wages, but the official data does not reflect it. As government weight in the economy rises faster, technical recessions may not appear in the official data, but citizens suffer it, nevertheless. The reader may think that this is good news because the spending of governments goes straight to the citizens via social spending. However, there is nothing that the state provides that it does not take away from the private sector now or in the future -deficit spending now means higher taxes and lower real wages afterward. Therefore, the flip side of “no official recession yet” is “more public debt now and after”.

The rapid decline in global money supply is staggering, at -3,4% at the end of the first quarter according to Longview. Meanwhile, in the United States, the money supply is also contracting at the fastest pace since the great recession. Consider that, in the same period, government indebtedness at a global level is up 3% and United States borrowing has also risen faster than real GDP, according to the IIF. And those deficits are financed even if the cost is higher. Governments do not care about rising borrowing costs, because you pay for it.

This all basically means a drain of liquidity for the private sector will continue for a prolonged period. Central banks scratch their heads, wondering why inflation remains persistent despite the complete reversal of the supply chain disruptions and the roundtrip of the international prices of commodities, so they keep hiking rates which have a direct negative impact on families and SMEs. Large corporations have no significant problem with higher rates, as they can access credit without any problem, finance themselves at better rates than many sovereigns, and most are swimming in cash after years of prudent balance sheet management. Some may go bust, but this is not a monetary tightening that will affect the mega caps in most cases.

So why does inflation, especially core CPI, not react faster to rate hikes? Because the largest economic agent in the economy does not care and is not reducing its imbalances. Bloated governments are consuming even more units of newly created money and that is why aggregate prices fail to reflect the price contraction of external factors like freight or energy. Furthermore, as we have seen in the gross domestic product figures of many European nations, the rents components of GDP show a massive increase in the tax rents side, while gross added value of businesses and the gross wage component remains below pre-pandemic levels. Congratulations, you wanted socialism, this is socialism: Lower real wages, lower real disposable income, and lower real savings.

With the current slump in money supply, inflation should be half what it is now, and this is even considering the tweaks in the official calculation of CPI. However, money velocity is not declining because state consumption of newly created currency units is rising despite poor real private consumption and investment. If we think of the quantitative theory of money, this may be the first private-only recession because money supply declines and money velocity growth coming from the public sector offsets it.

I am writing this column from Argentina, which is suffering a 108 percent inflation. The problem when government spending ignores any monetary tightening is that the second leg up of inflation comes from even higher state subsidies using new units of currency, and the downward spiral may start and become impossible to stop. As the interest rate and credit access of the backbone of the economy, households, and SMEs, gets worse and dries up, governments step in to solve a problem they caused by creating even more entitlement and subsidy expenditures with constantly depreciated units of currency. Of course, the U.S. and developed economies are still far from the insanity of Argentina’s 1,670 percent increase in base money (M2) in the past ten years but remember that “once you pop you cannot stop”.

The money supply slump and rate hike path so far are destroying the backbone of the economy, families, and small businesses. Normalization of monetary policy without normalization of government spending and deficits is the recipe for stagnation.

Originally published at dlacalle.com

Most cartels and trusts would never have been set up had not the governments created the necessary conditions by protectionist measures. Manufacturing and commercial monopolies owe their origin not to a tendency immanent in capitalist economy but to governmental interventionist policy directed against free trade and laisser-faire.

—Ludwig von Mises, Socialism

The concept of natural monopolies has often intrigued economists and policymakers, serving as a cornerstone for proponents of statism. They argue that certain industries naturally lead to a dominant firm, impeding competition and requiring government intervention. However, closer inspection reveals that these “natural monopolies” are illusions caused by harmful government interference.

To understand the fallacy of natural monopolies, we must first grasp the essence of a truly free market. In an unhampered market economy, multiple firms compete for consumers’ favor with innovative products and competitive prices. Market forces, like consumer preferences and business efficiency, shape resource distribution and ensure optimal outcomes. Monopolies fundamentally contradict this natural order.

Debunking the Fallacies

Critics argue that certain industries, particularly those dealing with infrastructure or network services, possess inherent characteristics that facilitate the emergence of monopolistic entities. These critics contend that high infrastructure costs or network effects, where the value of a service increases as more users adopt it, create insurmountable barriers to entry, enabling a single dominant player to establish its supremacy. However, a closer examination reveals that these characteristics alone do not guarantee monopoly formation. It is the interference of the government that tilts the scales in favor of consolidation and stifles competition.

The Telecommunications Case

Telecommunications, with its significant infrastructure demands, has been frequently labeled as an industry prone to natural monopolies. Proponents of state intervention argue that the costs associated with establishing and maintaining the necessary infrastructure make it impractical for multiple firms to compete effectively. However, this assertion fails to recognize the dynamic and innovative nature of free markets. In the absence of government-imposed barriers and licensing requirements, entrepreneurial ingenuity flourishes and finds ways to overcome what initially appears as insurmountable obstacles.

Free markets, unencumbered by government interference, incentivize entrepreneurs and businesses to seek alternative technologies and creative solutions. This entrepreneurial drive could lead to the emergence of wireless or satellite-based communication systems, offering consumers viable alternatives to traditional infrastructure-dependent services. By introducing competition and innovative approaches, these alternative technologies can disrupt the assumed inevitability of a single dominant firm.

The key insight lies in understanding that the government’s intervention itself creates an environment conducive to monopolistic dominance. Regulatory barriers and excessive red tape hinder the entry of new competitors, stifling innovation and limiting the potential for alternative solutions to emerge. By erecting such barriers, the government inadvertently perpetuates the conditions necessary for a monopolistic market structure to prevail.

Emphasis must be placed on the importance of dynamic competition as the driving force behind economic progress. The absence of government intervention allows for spontaneous order and market processes to unfold naturally, leading to a constant stream of entrepreneurial activities and innovative responses to market demands. In the realm of telecommunications, the potential for multiple firms to develop and implement alternative technologies arises precisely from this entrepreneurial discovery process.

Moreover, it is crucial to recognize that the cost considerations associated with infrastructure development are not static. Entrepreneurs and businesses are incentivized to seek more cost-effective and efficient solutions in a competitive environment. Through trial and error, these entrepreneurs and businesses find ways to reduce infrastructure costs, optimize resource allocation, and improve service delivery. These market-driven cost reductions create opportunities for new entrants and increase the feasibility of competition in the telecommunications industry.

The Fallacy of Network Effects

The assertion that network effects inherently lead to monopolistic outcomes is misguided. While it is true that network effects can contribute to the value of a service as more users adopt it, this does not preclude the existence of competition and multiple firms within the market.

In a genuinely free market, entrepreneurial competition thrives, driving firms to differentiate themselves and offer unique user experiences. The case of social media platforms like Facebook, Twitter, and Instagram provides a compelling example. Despite operating within the same broad industry of social networking, each platform has successfully carved out its own niche and attracted distinct user bases.

These platforms continually engage in fierce competition to capture users’ attention and secure advertising revenue. They do so through constant innovation and the introduction of unique features that differentiate their services. This competitive landscape not only allows for the coexistence of multiple firms but also ensures that no single platform holds a monopoly on social media.

This outcome is not surprising. The dynamic nature of the market, driven by consumer preferences and entrepreneurial creativity, ensures that competition persists and prevents monopolistic domination. Firms must continuously adapt, innovate, and provide superior value to consumers to thrive in such an environment.

Furthermore, the role of consumer choice cannot be overlooked. In a free market, consumers have the power to select the platforms that best align with their preferences, needs, and desires. This diversity of choice acts as a powerful antidote to monopolistic tendencies. If a platform fails to meet the evolving demands of consumers, they are free to switch to a competitor that better satisfies their requirements.

In contrast to the notion of natural monopolies is the market process, a spontaneous order driven by the decentralized decisions of individuals pursuing their own interests. This process fosters competition, innovation, and entrepreneurial discovery. Network effects, far from being an insurmountable barrier to entry, become an opportunity for entrepreneurs to devise new ways of offering value and attracting users.

The Role of Government Intervention

Monopolies, in their truest form, are products of government intervention and involvement in the marketplace. Through regulations, barriers to entry, and artificial privileges granted by the state, monopolistic tendencies arise.

Government-imposed regulatory barriers, like licensing requirements, red tape, and complex compliance standards, hinder the free operation of markets. Licensing requirements restrict entry into industries by creating hurdles for new entrants. The burdensome process of licensing deters competition and allows existing firms to maintain dominance. Excessive red tape and compliance standards divert resources away from productive activities, hampering innovation and competitiveness. These barriers distort market signals, discourage entrepreneurs, and limit consumer choice, thereby stifling market competition.

Intellectual property laws, such as patents, copyrights, and trademarks, are intended to encourage innovation and reward creators. However, these laws can unintentionally hinder competition and foster monopolistic tendencies. Intellectual property laws grant exclusive rights to inventors and creators, but they also create barriers to entry. When these exclusive rights become overly broad or extended, they enable patent and copyright holders to maintain dominance for longer periods, stifling potential competitors and limiting competition.

The complex and expensive process of obtaining and enforcing intellectual property rights further disadvantages small entrepreneurs and start-ups. Large corporations with resources and legal teams can strategically use these laws to deter competition, consolidating power in a few dominant players. It’s important to understand that innovation thrives in an environment of open competition, where ideas are freely shared and firms are motivated to continuously improve and differentiate their offerings.

Government interventions through subsidies, tax breaks, and preferential treatment disrupt the market balance by favoring certain industries and creating an uneven playing field. This distorts signals for entrepreneurs and undermines competition. Subsidies provide unfair advantages, allowing subsidized firms to gain market power and potentially lead to monopolistic tendencies. Tax breaks and preferential treatment further skew the economic landscape, hampering innovation and resource allocation. These interventions also perpetuate the misallocation of resources, hinder efficiency, and discourage new competitors and innovative solutions. Moreover, they promote rent-seeking behavior, diverting resources away from productive activities and undermining economic growth.

Conclusion

Regarding monopolies, Ludwig von Mises wrote in Human Action:

The great monopoly problem mankind has to face today is not an outgrowth of the operation of the market economy. It is a product of purposive action on the part of governments. It is not one of the evils inherent in capitalism as the demagogues trumpet. It is, on the contrary, the fruit of policies hostile to capitalism and intent upon sabotaging and destroying its operation.

The illusion of natural monopolies disappears upon scrutiny, revealing the role of government intervention and market distortions. Free markets—without constraints—foster innovation and competition, preventing monopolistic dominance. Government interference through regulations and protectionist policies perpetuates the myth of natural monopolies.

As proponents of economic freedom, it is our duty to expose fallacies, restore free markets, and promote competition for a prosperous future that empowers entrepreneurship, safeguards consumers, and drives growth. Let us rejoice in the wonders of competition and embrace its boundless potential.

July 4 is approaching, and many Americans are excited to celebrate their so-called independence. Why? How will this July 4 be any different from that of 2020? Haven’t the past three years revealed that Americans not only take liberty for granted but readily reject it? Is it not the least bit curious that some, if not most, of those who’ll be setting off fireworks also begged to be locked down and masked? Yes, the frauds that are “public health” and “democracy” have been exposed over the past three years, but what’s changed?

Doubling down on idiocy seems just as politically profitable as exposing it, so perhaps the talking heads have no interest in solutions. Their acolytes, who’d rather be coddled than be free, likewise have no interest in solutions beyond believing whatever makes them feel comfortable.

How many more decades or centuries must pass before the following thoughts are understood:

“The average man does not want to be free. He simply wants to be safe.” —H.L. Mencken (1880–1956)

“Humanity does not care for freedom. The mass of the people realize that they are not up to it: what they want is being fed, led, amused, and above everything, drilled.” —Joseph Schumpeter (1883–1950)

“Persons who are afraid to take on independent responsibility that necessarily goes with liberty . . . want to be told what to do and when to do it; they seek order rather than uncertainty, and order comes at an opportunity cost they seem willing to bear.” —James M. Buchanan (1919–2013)

“Most people quite like being afraid of something, and many dislike freedom and the responsibility that comes with it.” —Peter Hitchens

What began in 1776 as a manifesto for preserving voluntary exchange—capitalism—has been mutilated beyond recognition. The Declaration of Independence said: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Today, however, it’s painfully obvious that our government, which was intended to “secure these rights” and is allegedly “from the consent of the governed,” truly acts as if some are created “more equally.” The Declaration of Independence goes on to say that “whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.” However, the majority don’t wish to “alter or to abolish” the government; they wish to augment it.

Unfortunately, for the reader and me, the “long train of abuses and usurpations” over the past three years weren’t abusive enough for the majority. Sure, I could contact my elected representatives, but it seems that the past three years are no different from the past two and a half centuries: “Our repeated Petitions have been answered only by repeated injury.”

Experts in injustice—lawyers—will say that the Declaration of Independence isn’t legally binding, but what about the oath of office that politicians, bureaucrats, and members of the military swore to uphold? “I will support and defend the Constitution of the United States against all enemies, foreign and domestic.” Protecting Americans from foreign enemies is to be congratulated, but killing domestic enemies is now seen as treasonous? I fail to see the consistency. No, I’m not advocating violence; I’m simply pointing out the hypocrisy. In the “land of the free,” only the experts in injustice are allowed to interpret the Constitution.

It turns out that democracy is even worse than what Benjamin Franklin believed. Democracy is two lambs eagerly electing a wolf, which proves—to me, at least—that politics is worse than worthless (like masks “fighting” respiratory viruses). Politics is the poison that degrades everyone—even those who don’t consume it. There are no quick fixes—libertarian or otherwise. Since no one but the parasites can decide to change the manner in which they lord it over everyone else, the only solution to the malignant state is its implosion. It’s not just that the president is too old; it’s that we’re all too old to care anymore. Our once-great nation can no longer afford the incessant whining. Though it’s also quite old, the Declaration of Independence provides the path to prosperity. Why has it been shunned? Yes, “live and let live” died long ago, but isn’t it preferrable to “kill or be killed”? Our “leaders” think we’re stupid. When will we prove them wrong?

Robert Higgs concluded his article “Can the Rampaging Leviathan Be Stopped or Slowed?”: “Ultimately this criminal enterprise will attain such bloated size and scope that its own survival will no longer be possible, and it will implode, as the Soviet Union and other similarly overreaching politico-economic orders have imploded.”

Before that glorious day arrives, I wish to declare independence from the geriatric parasites—federal, state, and local—who serve only themselves, not me nor my neighbors. Other than parasitize us “peasants,” the government no doubt wishes to have nothing to do with us. The tax-fed seem to have forgotten that without taxes, they don’t eat. It’s long past time that the host shows the parasites who’s boss. The win-win scenario seems to be peacefully separating from each other. That’s something I’d like to celebrate on the Fourth of July. For those who seek domination over peace, comforting lies over inconvenient truths, or censorship over free expression, do us all a favor and #StayHome.

The Mises Institute’s Executive Editor Ryan McMaken joins Bob to discuss his latest article, in which Ryan spells out the state of the M2 money supply and possible implications for consumer prices and an impending recession.

The Ukraine war raises issues of the legitimacy and usefulness of the “rules-based” international order (RBO) that supposedly governs international relations. The United States and the North Atlantic Treaty Organization (NATO) have strongly condemned Russia’s invasion of Ukraine and its violation of international law and rules, and the US is also concerned about the economic and military rise of China and its alleged intentions to reshape the RBO.

In general, Western political analysts decry the perceived disintegration of the much-vaunted liberal international architecture promoted by the US. At the same time, both Russia and China reject both the West’s allegations and its international rules. However, what is the solution for a lasting peaceful international cooperation?

Pax Americana and the Liberal RBO

The US emerged from World War II as the world’s dominant economic and military power and sought to devise a new global balance of power to maintain peace. It imposed a Pax Americana, which applied primarily in the West and attempted to contain communism during the Cold War. The predominant view in the West is that the US upheld a global rules‐​based order fostering peace and prosperity for more than eighty years.

The new order has been considered “liberal,” because the US was founded on liberal values. Franklin D. Roosevelt and Winston Churchill expounded the fundamental principles for international cooperation in the Atlantic Charter in 1941. International institutions like the United Nations—together with its supreme authority, the UN Security Council—and the Organization for Security and Co-operation in Europe were set up to underpin international peace and security. The Bretton Woods Agreement, which created the World Bank and the International Monetary Fund, and the General Agreement on Trade and Tariffs were established to promote international free trade and economic prosperity. Both aspired to be global but were dominated by Western powers and interests.

Critics of the postwar “liberal” order declare it was neither liberal nor orderly. A wide gap emerged between the lofty ideals of benign interest and consensus building championed by the US and historical reality. Coercion, compromise, and power politics were part of the game, and the US often stretched and broke the rules of the system, in particular during the post-Cold War period. Many considered the NATO military intervention against Serbia in 1999 and the US-led invasion of Iraq in 2003, carried out without a mandate from the UN Security Council, as violations of international law.

The US and NATO military actions in Afghanistan in 2001 and Libya in 2011 also remain highly controversial. Efforts to spread liberalism were often illiberal, including unjustified external military interventions and the weakening of democratic institutions and free markets at home. NATO countries broke the international rules when they saw it in their own interests and protested when other powers, in particular Russia and China, challenged the RBO.

The Quest for a Multipolar World

Russia and China are contesting not only NATO’s behavior, but the very existence of the US-backed international order. The two, together with other nonaligned countries, are striving for a multipolar world in which more countries will have a say in a new global order reflecting not only US values and interests.

Vladimir Putin claims that international rules advocated by the West apply only to the rest of the world while, at the same time, it allows the West to live without rules as a global hegemon. Even some Western analysts concur that Putin may be right when he says that the West holds Russia to standards to which the West does not abide, a grievance used by Russia to justify the invasion of Ukraine.

China also denies US accusations, countering that the US is advancing its own interests under the guise of “multilateralism.” Beijing is particularly irked that the US is turning other Asian countries against it, particularly on the topic of Taiwan. China’s Ministry of Foreign Affairs recently stated that the meeting in Japan of the Group of Seven (G7) maliciously smeared China and brazenly interfered in its internal affairs. China urged the G7 not to become an accomplice to the US in curbing China’s economic development.

Most importantly, both China and Russia reject the “rules-based order” promoted by the West as an unfair alternative to international law. They claim that the liberal international order includes soft law, i.e., standards and recommendations by international organizations, with the purpose of replacing and interpreting international law in keeping with Western interests.

International rules represent mostly values that are undefined regarding their legal enforceability. Their indeterminate nature, together with the apparent violations of international law by the US, could also explain the preference by the US for international rules rather than law. The US has not only refused to sign numerous important multilateral treaties that constitute an essential feature of international law, but it is also unwilling to hold some allied countries, such as Israel, accountable for perceived violations of international law.

Such views are not only restricted to China and Russia or to the rest of the BRICS—Brazil, India, and South Africa—but are held by many other countries making up the global south. Nearly twenty countries including Argentina, Iran, Algeria, Egypt, Saudi Arabia, Uruguay, Venezuela, and Thailand have also applied to join the BRICS. Thirty-five countries, accounting for half of the world population and one-third of the global gross domestic product (similar to the combined economies of the US and the European Union), also did not vote to condemn Russia’s invasion of Ukraine at the UN and are resisting the sanctions.

While most Western pundits still praise the virtues of the RBO principles, they also admit that the American-led order is imperfect and has eroded its legitimacy in many ways. As the global south increasingly questions US intentions, analysts believe that the West should be ready to use the RBO framework to build a more open and multilateral order. At nineteen thousand words, the recent communiqué from the Hiroshima meeting of the G7 heads of government reads like a manifesto for a world government. However, with only 10 percent of the world population and a share in global output that has gradually shrunk to 30 percent, the G7 needs to adjust its expectations to reality and accept it cannot rule the world.

Peaceful Cooperation through Market Relations

The current political and economic strife between the US and the global south reminds us that international law and institutions cannot do away with the inherent international rivalry and conflicts between governments. Broader and softer constructs like the post-World War II “liberal” international order can be more divisive and ineffective than international law. Reconciling the multitude of individual interests at the global level is more likely due to voluntary market relations rather than political and military solutions.

Ludwig von Mises has argued that the only peaceful way of human cooperation in society is based on contractual market transactions. These are voluntary exchanges under the division of labor, with respect for property rights, which preclude the violent intervention in the market either by private individuals or by government. There is no compulsion and coercion in the operation of the market where both sides of a transaction gain to their mutual satisfaction. That is why market democracy, where every penny spent counts, is superior to political democracy, where only the majority influence the state of affairs in a forceful way.

The same applies to international relations where government intervention undermines harmonious cooperation. As Mises put it in Human Action: “What is needed to make peace durable is neither international treaties and covenants nor international tribunals and organizations like the defunct League of Nations or its successor, the United Nations. If the principle of the market economy is universally accepted, such makeshifts are unnecessary.”

Regrettably, instead of heeding Mises’s advice, world politicians are constraining international trade and moving away from the prevalence of business interests. Driven by national security concerns, the decoupling and derisking from China and other global competitors risk splitting the world into rival blocks again, gravely undermining prosperity and peaceful international cooperation.