Monthly Archives: March 2011

U.S. Government Involvement in Libya

There is more and more talk of U.S. government intervention in Libya and other countries with protests.  There are calls for humanitarian aid and some are even saying the U.S. military should set up a no-fly zone.

Let’s examine the libertarian position on this issue.  First, it is wrong for anyone to initiate violence.  It was amazing how much restraint protestors in Egypt showed.  Even in Libya, it seems that most of the violence is coming from the government or in response to it.  It gets more complicated when a third party enters the picture.  Oftentimes, it can make things worse when an outsider steps into the picture as it can just cause more conflict.

This situation gets even more complicated because it is not one individual against another individual.  It is millions of people protesting the government, while the government is trying to retain power.  It is likely that there are also millions of people who support the Libyan government, even if tacitly.

It is important to realize that the same government that runs trillion dollar deficits, wastes tons of money, lies, cheats, steals, kills, and messes up everything it touches, cannot do anything right.  I am talking about the U.S. government here, although the same could be said for most or all governments.  But the point is that the U.S. government can’t magically make things better in Libya or anywhere else.  Washington D.C. is one of the most crime-ridden cities there is.  Let’s see the politicians clean up that one city from poverty and crime before it tries to remake the world.

From a libertarian standpoint, any individual should be free to donate money to protestors or even go over there and help them.  But it is not for the U.S. government to decide for Americans what to do.  The most that Obama and his administration should do is encourage non-violence (which would be hypocrisy of course).  The U.S. government should not spend one dime doing anything in Libya or any other countries for that matter.

With a bad economy and price inflation becoming a bigger concern, it would not be surprising for the politicians in DC to look for a distraction.  This could mean a minor war.  Another war would be horrible, but it would certainly serve as a distraction.  It could also be used as a scapegoat for high oil prices and a down economy.  Don’t rule anything out at this point.

Also, let’s keep an eye on Saudi Arabia.  If things start to erupt there, look for oil prices to spike a lot more than they already have.

Bernanke on Oil Prices

Yesterday, Ben Bernanke was in front of Congress and he spoke about the rising price of oil.  He said that a prolonged rise would pose a danger to the economy.  However, he said, “The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation.”

It is ironic that the man most responsible for rising oil prices is discussing this issue.  Although the news out of Libya and the rest of the Middle East have triggered a run-up of oil prices in the last few weeks, we shouldn’t ignore the importance of monetary policy.  First, as I discussed the other day, higher oil prices do not cause price inflation.  Monetary inflation is what causes higher oil prices.  If oil prices go up without monetary inflation, then we should expect to see other prices (especially those not directly tied to oil) go down.

When there is new money injected into the economy, this new money does not get spread around equally, especially at the beginning.  It goes into hot spots.  In the late 90’s, it went into stocks, particularly technology stocks.  In the 2000’s, it went into real estate (among other things).  Now this new money (whether it is from QE1 or QE2) is looking for hot spots.  There are disturbances in the Middle East where there is a lot of oil, therefore new money is used to bid up the price of oil.

When there is a general rise in prices over time (ignoring short-term effects of velocity), there is only one thing to blame.  It is from an increase in the money supply.  The Federal Reserve and the government that gives the Fed its power are solely responsible for this.  The central bank has been granted a monopoly over the money supply in the U.S.  Only the Fed can legally create new money out of thin air.  So for Bernanke to be sitting there talking about higher oil prices with a straight face is something to be seen.

This is why it was important for the government and bankers to change the definition of inflation.  Inflation used to be an increase in the money supply.  Now they define inflation as an increase in prices.  This is so that they don’t have to take the blame for inflation.  When there are higher prices, people like Bernanke find others to blame.  They can pick the enemy du jour.  Right now, they can blame Libya.  Then they can claim that the higher price of oil is causing inflation.  Don’t buy this nonsense.  Don’t even buy it with your depreciating dollars.

Harry Browne, 5 Years Later


Harry Browne passed away 5 years ago on March 1, 2006.  He died at the age of 72.  Harry Browne was the Libertarian Party’s presidential candidate in 1996 and 2000.
Browne wrote many books, including two books on libertarianism for his campaigns.  His 1996 campaign book was Why Government Doesn’t Work.  His 2000 campaign book had a more positive sounding title called The Great Libertarian Offer.  In addition to other libertarian books, he also wrote a self-help book in 1973 called How I Found Freedom In An Unfree World.  It offered advice on not falling into different traps in life and pointed out that individuals have choices to make in their lives, even if they aren’t always optimal.
In addition to these and others, Harry Browne wrote numerous books related to investing and economics.  His 1970 book, How You Can Profit From The Coming Devaluation, successfully predicted the devaluation of the dollar and the high inflation of the 1970’s.  Later in his career, he wrote Fail Safe Investing, which was some simple investment advice, along with a portfolio to weather any type of economic condition.
Later in his career, Browne wrote many articles that he published on the web.  They covered a wide array of topics like war, economics, the war on drugs, insider trading, and education, just to name a few.  One thing about Harry Browne is that much of his writing is timeless.  You could read something he had written 20 years ago and it would seem like it could have been written yesterday.
His original investment book in 1970 started with an explanation of money.  The first 70 pages are like an easy-to-read primer on free market economics or Austrian economics.  He always had a knack for making things easy to understand for the layman.
When Browne ran for president, his campaigns were not about winning.  He openly stated that he had almost no chance of winning.  His goal in running for president was an educational one.  He wanted to spread the word of liberty.  In his words, he wanted to show people the benefits of more liberty.  He had a way of appealing to people’s self-interest and showing them why libertarian solutions were the way to go.  When he hosted his own radio show broadcast over the internet, it was always impressive to hear him sound so principled without coming across as too overbearing.  He was not one to compromise his principles in any way, and yet he knew how to set the right tone for a conversation.
Browne was a libertarian who found it important to emphasize both the moral arguments and the utilitarian arguments for freedom.  He stood for liberty on moral grounds by pointing out that government had a monopoly on the use of violence.  At the same time, he appealed to individual self-interest.  In The Great Libertarian Offer, he advocated eliminating the income tax.  He asked the question, “would you give up your favorite federal programs if it meant you never had to pay income tax again?”  He would often ask this in conversations too, followed by asking, what would you and your family do if you had an extra $10,000 every year?
Right after September 11, 2001, Browne wrote a series of articles addressing the terror attacks in the U.S.  He basically wrote that it was inevitable due to the previous bullying of the U.S. government around the world.  A lot of people, even so-called libertarians, denounced him for his position.  It was a tough thing for him to publish when emotions were running so high at that time.  Looking back, these articles are incredibly accurate with prescient warnings that should have been heeded.  He did not want a rush to war and he did not want to see innocent people killed.  The terrorists were wrong for killing innocent people for the actions of the U.S. government, so why should more innocent people have to be killed for the actions of the terrorists?
Harry Browne had a tremendous influence on the libertarian community.  He converted many people to the cause of liberty and he helped radicalize some who already called themselves libertarians.  While he ran for president twice, he understood that winning elections was not the key to long-term victory for liberty.  He understood that it took work convincing others and Browne was somebody who practiced what he preached.
One speech that Harry Browne liked to deliver was that of hope.  He said he doubted that 1 out of 100 libertarians understood that human nature was on our side.  He said that the only time in the recent past that Americans seemingly had a clear choice for liberty was in 1980 when Ronald Reagan soundly defeated Jimmy Carter.  Browne was quick to point out that Reagan vastly expanded government, but the rhetoric made it seem like a clear choice at the time and Americans overwhelmingly chose the pro-liberty side.
He also liked to use the example of the collapse of the Berlin Wall and eventually the Soviet Empire.  Browne pointed out that, one day, they all of a sudden opened up the gates and let people out.  It was not a violent revolution.  The totalitarian system simply collapsed.
It’s not hard to imagine that Harry Browne would be pleasantly surprised today.  Certainly there are a lot of negative things going on and the U.S. government has gotten vastly bigger.  But today we are witnessing a move towards liberty.  People in the Arab states are protesting and withdrawing their consent from the dictators that have ruled over them for so long.  Meanwhile, in the U.S., Ron Paul is now a household name and has garnered a large following of young people.  The internet has revolutionized the liberty movement as it spreads truth and information like never before.
One thing that Harry Browne might be surprised about today is the strength of the anti-Fed campaign.  While he was highly critical of the Federal Reserve, it was not something he thought would appeal to the average American.  With Ron Paul crowds cheering “end the Fed”, Harry Browne would have been pleasantly surprised had he been around to see it.
Harry Browne was right that human nature is on our side.  People want to be able to live their own lives and make their own choices.  We are in the midst of a libertarian revolution and we owe a lot of thanks to people like Harry Browne who lived and promoted a life of liberty.

Harry Browne’s wisdom has been missed for 5 years now.  Fortunately, his legacy and his influence live on.