I have been hammering away at the Republican politicians for the last couple of weeks, particularly those found in Washington DC.  It is not that I favor the Democrats in any way, but I find they are slightly less dishonest.  At least the Democratic politicians don’t usually pretend to be in favor of smaller government.  They play their class warfare and lie in other ways, but that is a subject for another day.

I have discussed before (here and here) the Federal Reserve’s policy of “Operation Twist”.  This is the Fed’s policy to buy long-term government debt in favor of short-term debt.  Its main purpose is to lower long-term interest rates.

I already discussed some of the reasons that the Fed might want to do this, as well as some of the possible unintended bad consequences.  For today’s post, I want to discuss another bad side effect of this policy of setting interest rates below where the market would set them.

Interest rates tell us the price of money.  Almost everyone would prefer to have one dollar in their pocket today than have it a year from now, even if their intention is to save it.  If someone is going to defer getting paid a dollar today and instead get paid a dollar one year from now, then this person would expect some additional reward.  This extra amount is the interest rate.

The interest rate serves as a price.  Since it is essentially a price, it also serves as a signal to the market.  If interest rates are really high, then that means the market is signaling that savings are too low.  People are consuming too much and not saving enough for the future.  The high interest rate provides an incentive.  It is an incentive for people to save more, as they will get rewarded with a higher interest rate for their savings.  It is also an incentive for people to borrow less, since their borrowing costs will be so high.

There is a saying that the solution to high prices is high prices.  The same goes for interest rates.  The solution to high interest rates is high interest rates.

The same goes for low interest rates.  This is a signal that savings are high.  It actually gives incentive for people to borrow more due to the low rates.

It should be mentioned that interest rates also reflect expected inflation and risk.  If there is a big risk that the lender won’t be able to pay off the loan or if there is an expectation that there will be high inflation, then the interest rate will reflect these things.  But it is important to know that these are only two factors and we should not forget that interest rates are also an indication of the time value of money as discussed above.

If the federal government manipulates the price of oil or tampers with the production of corn, it mostly just affects these things and the other products that rely on them.  However, when the government/ Fed tampers with the interest rate, they are tampering with the price of money.  Money is used on one side of a trade in almost all transactions, unless you count barter (which is not much in a high division of labor economy).  So when the Fed tampers with the interest rates, it is really distorting the entire marketplace.

While it is impossible to say what interest rates would be exactly in a free market economy, there can be little doubt that they are artificially low right now, if anything.  This is a problem because it distorts the need for savings.  It is telling the market that interest rates are really low because savings are so high.  The problem is that this may not be the case.

Fortunately, despite the government’s profligate spending, many Americans are actually trying to save more, spend less, and pay down debt.  Unfortunately, it is still not enough to offset all of the bad that the government is doing.  If the Fed would stop buying government debt, then interest rates would eventually rise and Washington DC would be forced to cut back.  It would raise the rates on long-term bonds and it would also send a signal to people to save more.

Interest rates are low because of the bad economy and the fear that goes with it.  But the Fed is not helping in continuing to buy government debt with all of its schemes.  Of course, the Fed and the governments are also the cause of the bad economy in the first place.

In some ways, it might be better if the Fed were to create money out of thin air by directly handing it over to the government to spend, instead of buying its debt.  It would still be counterfeiting, but at least it would be more transparent.  It would also have less of an effect on interest rates.

We should demand an end to price controls, starting with the controlling of interest rates.  The free market should determine rates, which would allocate capital in the most efficient way.  This would mean more prosperity and a higher standard of living in the long run.

There is this ongoing myth that the Republican Party is in favor of capitalism and smaller government.  In comparison to the Democrats, maybe this is right.  But if you compare the policies and actual results, there really isn’t much of a difference at all.

Brushing aside foreign policy (where the Republicans are huge advocates of bigger government), the Republican politicians in DC are horrendous, even in comparison to Democrats.  The only major difference is in their rhetoric.  When it comes to economics, Republican voters are probably quite a bit better than Democrats in advocating capitalism and less government.  This is why the Republican politicians talk about smaller government.  They are fooling their constituency.

The Republicans took over the majority in the House of Representatives in January 2011.  They have had control there for about a year and a half and yet the deficits persist.  Sean Hannity will refer to them as the Obama deficits, yet he somehow manages to ignore the fact that Republicans control the House where all spending bills are supposed to originate.

As I mentioned in my last post, the Republicans in the House can try to pass any budget they want.  If Obama vetoes it, they don’t have to pass anything.  They could say that they will only fund Medicare, Social Security, and vital national security projects.  Let the rest of the government shut down.  Or they can pass a more moderate budget that has many other things, but is balanced.

They had an opportunity to refuse to raise the debt ceiling, but they gave in.

I keep harping on this subject because I know so many Republicans who keep thinking there is some hope with electing Republicans to office.  They at least think they are the lesser of the evils, which I’m not even sure is true.

The Bush legacy is a complete disaster.  Under Bush, we got No Child Left Behind, a massive Medicare prescription drug bill (that rivals Obamacare), tariffs, the Patriot Act, Sarbanes-Oxley, two major wars, bank bailouts, car company bailouts, and massive debt, just to name some big things.

If Bush had continued as president, don’t think that the deficits right now would be much lower, if at all.  Other than the ridiculous stimulus plan at the start of his presidency, Obama has not increased government spending (in percentage terms) any more than Bush did.  Obama supporters are right in saying that Obama inherited a mess.  It really is true.  It’s just that Obama has continued the problem and made it even worse.

With Ron Paul basically out of the running, the best thing I can recommend is to stay away from politics.  The whole system is a disaster.  You should spend your time instead reading, writing, speaking, and trying to convince others on the benefits of liberty, without being too pushy or annoying. Stay away from the divisive political stuff.  Instead, focus on philosophy.  Focus on the moral and pragmatic benefits that come with a more libertarian society.

The whole big empire is actually more fragile right now than most people realize.  The Republicans are not going to save us.  They are part of the problem.  We just have to be prepared to pick up the pieces when things really fall apart.  This does not mean ruling over others.  It means convincing others that nobody needs to be ruled.

There are a lot of libertarian-leaning conservatives who think that the Republican Party is the answer to smaller government.  They think we just need to elect the right Republicans in the primaries and then win the general elections.  They think that if we get enough of them, that they will shrink the size and scope of government.  There are even some who just think we need any group of Republicans to win a majority in the House and Senate.  There are even some really naive people who think that the government will get smaller if we can just elect Mitt Romney to the presidency.

With the exception of Ron Paul, and maybe a few others to a lesser degree, the Republican politicians in Washington DC are lovers of big government.  They are defenders of the state.  It isn’t that they can’t shrink the government because there are too many Democrats blocking them.  It isn’t that they can’t shrink the government because they will lose their next election (although there might be an element of truth to that one).  It isn’t that they want to shrink the government but just can’t quite get the votes to do so.  The truth is that the Republican politicians love big government just as much as the Democrats.

The Republican Party has had the majority control of the House of Representatives since January 2011.  It has been a year and a half.  The only thing good they can legitimately claim is that the government has grown at a slower pace since they took control.  Even with that, some things are debatable.

The Republicans could have refused to raise the debt ceiling.  If that was too drastic, they could have raised it, let’s say, $50 billion per month and refused to raise it any more than that.  $50 billion per month is still $600 billion per year.  But at least they could have claimed that they cut the annual deficit in half.  Instead, they raised it over a trillion dollars and promised “spending cuts” in the future, which are really just cuts in the projected growth.

If the Republicans really wanted to be radical, they could have refused to pass a budget at all.  All spending bills are supposed to originate in the House.  Anyway, there is no way that a president can sign a budget bill that isn’t first approved by the House.  Since the Republicans have a majority in the House, they could simply approve a budget of $3 trillion (annual) or less.  They could refuse to go higher than that and there is not much anyone could do about it.  Obama and the Democrats could kick and scream and tell everyone that Republicans want to kick old people out on the street, but isn’t that what they do anyway?  Perhaps the electorate would turn on them in the next election, but we will never know because the Republicans will never willingly cut the government.

It isn’t that Republicans are spineless and lack the political will to cut government.  It is simply that they have little interest in cutting government.  Maybe a few of them genuinely did want to do that when they were running for office, but things change when you get a prestigious position and lobbyists start knocking on your door.

There are few Ron Pauls in this world, particularly when you narrow it down to those running for political office.  Most politicians run for office because they want power and they want to control other people.  We are not going to achieve liberty by infiltrating the Republican Party or by electing the “right” people into office.  We are only going to achieve liberty by changing the hearts and minds of the American people.

July 4 is called Independence Day in America.  It could be called Secession Day.  Not only was it a declaration of independence from the British crown, it was an act of defiance.  It was an act of secession.

Most Americans do not favor secession.  There was a recent poll that showed 24% of Americans now favor the right of a state to secede from the U.S. (the “union”).  This is considerably higher than it was just a couple of years ago.

Yet, for the other 76% of Americans who do not approve of state secession, most of them would probably endorse the Revolutionary War on the side of the American colonists.  But why was it ok for the colonists to secede but not a state today?  Is it simply because the colonists were ruled by a king whereas today we are ruled by politicians who we get to pretend to vote for every few years.  (By the way, I’m not saying all elections are fraudulent, but just that elections don’t ever change much because of the rigged game that has been set up.)

These 76% of Americans, I hate to say it, are being hypocritical.  I suppose, giving them the benefit of the doubt, they are just being lazy in their thinking.  They don’t realize that they support the secession of the American colonists, yet don’t think people in a given state (or any other jurisdiction) should have that right today.

The ironic thing about this is that a state wanting to secede today would be much more justified in doing so.  In the 1770’s, the American colonists were paying minimal taxes to the British king.  Perhaps it was 1 or 2 percent.  Today, Americans get the privilege of paying almost half of their income towards government at all levels.  The American colonists were a free people (not counting the slaves) compared to Americans of today.

On July 4, try not to get into any major political arguments with friends and family.  But you can certainly remind them that July 4 is the date that American colonists declared that they were seceding from government rule.  Unfortunately, it just got us another government, which eventually got a lot bigger.

I have discussed the ruling on Obamacare, the hope we have with technology, and the taxes associated with Obamacare.  In this post, I will discuss the subject of panarchy and its relation to Obamacare.

I have written about panarchy before.  I believe people should be free to choose their own government and it should not be borders that necessarily determine the jurisdiction of governments.  I believe that one mistake that free market anarchists make is that they are trying to push their agenda down other’s throats just as much as statists try to push their agenda.  It doesn’t have to be this way.

Obamacare is a perfect example.  There are just over 300 million people living in the U.S.  When there is a poll done on Obamacare, it is a virtual split.  I can tell this from my own informal polling or just looking on Facebook.  I am friends with a lot of people who are in favor of Obamacare (or at least think they are).  It is amazing that people can disagree so vehemently with friends, neighbors, co-workers, family, and even spouses.  Americans do business with each other on a daily basis, yet there is this huge divide.

My solution isn’t to repeal Obamacare.  My solution is that people should be allowed to opt out of Obamacare.  They should be able to opt out of the U.S. federal government if that is their choice.

If someone is trying to tell you that Obamacare is a good thing and you strongly disagree, you don’t have to start arguing about all of the details.  You can just say: “I understand that you like the new healthcare law.  I just happen to respectfully disagree.  But am I allowed to disagree with you without having violence enacted upon me?”

The person will probably answer “no” or they won’t answer at all because they will have no idea what you are talking about.  This is your opportunity to explain that if you don’t follow Obamacare and the taxes associated with it, then armed men will eventually show up at your door and threaten you with violence.

You can ask the person again if you should be able to disagree with Obamacare without having someone threaten to shoot you.  They probably won’t want to answer the question at that point.  They will start going into their theories of government and how we all have to contribute, blah, blah, blah.

But it may turn on a lightbulb for some people.  If two people disagree so vehemently on an issue, or more likely several issues, why should they subject each other to their own desires?  Why can’t they go their separate ways on the things they disagree?  Likewise, I have friends that I can talk to about politics, but I would almost never talk to them about sports, or music, or the television shows I watch.  But these other things don’t matter because we are not forcing the other person to participate in any way.  If you don’t like a particular sport or a particular type of music, you can choose not to watch it or listen to it.  You are not forced to participate and you are not forced to pay for it (unless the government is involved).

Panarchy offers us a solution.  We shouldn’t all have to live under the same government if we expect our government to do very different things.  As long as we respect each other’s lives and properties, then I don’t care what kind of government my friends and neighbors choose, so long as I am not threatened with force to participate.

Panarchy actually makes it quite simple to defend your position on any point.  You don’t really need to know much history or economics or any details about a particular piece of legislation.  You can just say that you respectfully disagree and that you hope nobody will threaten you with violence if you want to disagree and not participate.  It puts other people in a moral bind.  It shows the immorality of any government that goes beyond simply protecting lives and property and enforcing contracts.

Panarchy will give you the moral high ground.  Take it.  Everyone who wants their Obamacare should be free to have it, as long as they are not forcing others to participate.

I have already discussed the Supreme Court’s ruling on Obamacare.  I have also discussed how it might be overcome in the future.  For this post, I want to discuss some of the taxes associated with Obamacare.

Of course, the big part of the legislation that most everyone is focused on is the individual mandate.  John Roberts ruled that this was a tax and was therefore constitutional.  Whether it is a tax or isn’t doesn’t really matter about its constitutionality.  By Roberts’ logic, the government can now just tax anything, even if it is one dollar, and then it will be constitutional.

Aside from the penalty (or tax) associated with the individual mandate, there are many other taxes associated with Obamacare, many of which have already taken effect.  Here is a good list to look at.

Apparently Obama has something against white people or those who serve white people as customers.  Since 2010, there has been an additional 10% tax on indoor tanning salons.  While some people think these are unhealthy, they can actually a be a good source of vitamin D, which can be very beneficial to your body.  Aside from this, even if people just want to look better with a tan, why is this the federal government’s business?

There is a tax that I have been paying for the last year and a half.  Every time I buy over-the-counter medication, I cannot use my HSA account.  In the past, you could use pre-tax dollars for things like tylenol and sinus medication, even if you didn’t have a prescription.  Thanks to Obamacare, you now have to use after-tax money.  By eliminating this deduction, it is a tax increase.

In 2013, there will be a new 3.8 percent tax on investment income for higher earners.  This may end up being on top of the massive tax hike coming with the expiration of the previous tax cuts.  You could have some people paying capital gains taxes of well over 40%, just on federal taxes.  Is this a potential reason to short the stock market in the near future?  This cannot be very appealing to investors.

Aside from these and many other taxes from Obamacare, it is also a nightmare for both big and small businesses.  It is more regulation and more expense.  This has already happened, particularly with health insurance companies.  It is simply more rules and more bureaucracy.  It also makes it more expensive to hire people.  It is just another reason to add to the list of reasons why unemployment is so high due to overbearing government.

Obamacare is probably not the worst thing to ever happen to America, but it is another big government piece of legislation that adds a few more straws to the camel’s back.  It is bad for business and it is bad for Americans, whether they know it or not.

I have already discussed the big picture themes of the Supreme Court’s ruling on Obamacare.  At the end of my last piece I said, “I think a combination of a new spirit of liberty in the American people and also advancing technology, can help to overcome this mess.”

For this piece, I am going to discuss technology as it relates to healthcare and medicine.

First, the U.S. health system is already a complete disaster.  It is entrenched with bureaucracy and government at all levels.  Just as there is a military-industrial complex, there is also a healthcare-industrial complex where big insurance companies, doctors, hospitals, and pharmaceutical companies send lobbyists to Washington DC (as well as state capitals) to get legislation for protection from competition and for profit.

There are a lot of reasons that prices are so high for medicine.  It goes back at least a hundred years.  Reasons include licensure laws, requiring prescriptions for certain medications, Medicare, Medicaid, HMO Act, state laws requiring insurance companies to include certain coverage, state laws prohibiting the sale of health insurance across state lines, and the tax code that permits employers to deduct premium expenses but does not allow it for individuals.  These are just a few of the major things.

Believe it or not, there are actually some countries with more socialized healthcare than the U.S. which actually have a longer life expectancy.  This may seem like an argument for socialized healthcare, but the problem is that there is no major country with a capitalist healthcare system to compare it to.

While the U.S. life expectancy is quite high and continuing to rise, there are some factors to explain why countries with socialized healthcare might have an even higher life expectancy.  Most importantly, there are other factors that include crime rates and diet that can’t be fully blamed on the healthcare system.

One other interesting factor to consider is that socialized healthcare may actually be a benefit at times because it keeps you away from the doctor.  If someone is not sure whether they should see a doctor, a person living in Canada is probably less likely to go.  Even though it is “free”, it can take a long time in some places to get in, particularly for specialists.  In the U.S., people are more likely to see a doctor, particularly if they have a small out-of-pocket expense and they can get in quickly.  This is when the typical American doctor starts prescribing medications for every little problem, including things that the patient may not have even gone to the doctor for.  In many cases, it would have been more beneficial for the patient to have never seen a doctor (just my opinion).

In defense of the U.S. system (at least as compared to others), if you are a trauma patient or suffering a massive hearth attack, there is probably no place you would rather be than in a hospital in a major city inside the United States.

So what will happen to medicine now with Obamacare?  My hope is that technology makes it irrelevant over time.  Just as technology has started to make the Post Office less and less relevant with each passing day, we can hope for the same in medicine.

The internet has opened up a new world to people.  There are probably more people taking vitamins and supplements now than ever.  I attribute a large portion of this to the internet.  More people have started to take their health into their own hands.  They research diets that work, vitamins that work, and learn of alternative medicines that are not frequently mentioned by doctors.

I also see other possibilities.  I have heard of the possibility of having cruise ship doctors where there is a cruise ship clinic off the coast in international waters.  This would free the doctors and patients from the massive bureaucracy and legislation in the U.S.  If you need to see a doctor, just hop on a boat.  I suppose this could be a problem for someone living in Kansas.

If the medical industry ever becomes one-tenth of the electronic industry in terms of advancing technology, then the sky is the limit.  Maybe there will be special pills or machines that can cure people of their ailments.  Maybe these things can start making doctors less and less relevant.  I know many people think that the FDA would block this, but the FDA could not stop such technology if a person or company were determined enough.  With today’s world, someone could take their machine off-shore.  They could find a country friendly to their invention.  They could market it to Americans via the internet.

I also see more possibility of having Walmart-type clinics where a patient with a sore throat can go get a quick appointment with little expense.  Again, there are a lot of different possibilities here too.

In conclusion, Obamacare is a disaster and the whole healthcare system in the U.S. is mostly a disaster. But with the internet and advancing technology, we can set ourselves free.  We can make the bureaucrats in DC less and less relevant with all of their schemes to control us.

The Supreme Court has mostly upheld the healthcare law, also known as Obamacare.  The major portion that everyone was paying attention to was the individual mandate that would force individuals to buy health insurance or else pay a penalty (a tax).

The most surprising thing is that the chief justice, John Roberts, actually sided with the “left judges” in upholding most of the law.  This is just another stain against the Bush presidency.  There are two things that conservatives think they can brag about when it comes to Bush.  They brag about the so-called Bush tax cuts, which are set to expire again.  And they brag about getting conservatives on the bench.  Well, so much for that one now.

I actually don’t think this is necessarily the worst outcome.  As I have written before, if the court had struck down the individual mandate and upheld everything else, it may have actually led us down an even quicker path to fully socialized healthcare.

Roberts justified his decision by saying that the individual mandate is a tax (which Obama claimed wasn’t a tax when he was promoting it).  Roberts basically said that since the Congress has the power to tax, then the individual mandate is constitutional since it can be considered a tax.

In other words, the federal government can do whatever it wants now.  I guess if Obama wants to make sure that the NDAA is upheld, he should just add a small tax to it.  That way Americans can directly pay for their own kidnapping and it will be constitutional.  If the government wants to force you to exercise, or eat vegetables, or have kids, then it can just tax you for it and then it will be all legal in the eyes of Roberts and the Supreme Court.

The 10th Amendment has been close to dead for many decades.  I think it is officially dead now.

There is one major big picture thing here that I have not heard mentioned by the so-called mainstream media.  How is it that the fate of over 300 million people lies in the hands of just 9 people?  Actually, this whole decision really came down to just one person.  So because Roberts thought a certain way, or maybe was convinced by a relative, or maybe was drinking a few shots of tequila when he was writing his opinion, there are now over 300 million people subject to this ruling.

That just shows that the whole system is a complete mess.  The federal government (or maybe national government would be a more appropriate term) has virtually no limits except as to not completely set off irate Americans.  The government can do virtually anything now, unless the American people decide to not take it anymore.

Americans must start paying attention and stop relying on government.  In fact, they must realize that their lives would be much better off with a drastically smaller government.  It isn’t good enough just to complain about the way things are run.  They must withdraw their consent.  They must realize that government should not be involved in healthcare or education or agriculture or housing or any of the other thousands of things it messes up.

There will probably be some new enthusiasm for state nullification, now realizing that it is foolish to rely on the Supreme Court, a branch of the federal government, to reduce the power of the federal government.

Of course, Romney, practically the founder of Obamacare in Massachusetts, is not going to save us.  The Republican politicians in DC will not save us either.  Even if they could repeal Obamacare, they would come up with something just as bad, just as Bush passed his Medicare prescription drug program.

This whole thing is far from over.  I think a combination of a new spirit of liberty in the American people and also advancing technology, can help to overcome this mess.  As long as there are free minds speaking in favor of the libertarian position, then there is hope.

There is a bit of a feud going on in the Austrian economics family.  It started with a really long article by Jesus Huerta de Soto entitled “An Austrian Defense of the Euro”.  It was published on the Mises Institute’s website.  Yes, you did read that correctly.  He actually somewhat defends the euro from an Austrian perspective.

Gary North published a long article (not quite as long though) as a rebuttal.  North blasts de Soto in so many areas, I wouldn’t even know where to start.  Gary North does have an excellent understanding of economics and morality and he makes a lot of relevant points to refute de Soto.

One of the things North discusses in his piece is 100% reserve banking.  He said that he has never seen the point made that Rothbard was an anarchist and yet he advocated for a law against fractional reserve banking.  He sees this as a contradiction.  I have commented on fractional reserve banking before.

If that wasn’t enough, Walter Block chimed in at Lew Rockwell’s blog.  North and Block have been at each other’s throats ever since their live debate on the subject of getting a PhD in economics.

Block makes the point that even though someone is an anarchist, it doesn’t mean he doesn’t believe in laws.  He just doesn’t believe in government laws.  They would be implemented by the market and private defense agencies.  Block is correct to point out that anarchists favor laws against murder, rape, etc.  It is just that they don’t believe in having a government to enforce them.

Block goes on to say, “Murray opposed (again, as a libertarian, not Austrian) the free banking (of Selgin and White).”  This doesn’t really make any sense.  If anything, you would be opposed to free banking as an Austrian, but not as a libertarian.  Austrian economics would study the pragmatism of a certain policy.  Libertarianism would study the morality of a certain policy.

There is another thing wrong with just that sentence.  Why does Block invoke the names of Selgin and White?  Why can’t he just deal with free banking in general instead of just the arguments of two individuals?  Gary North mentioned nothing about Selgin and White in his piece.  Ok, so Rothbard opposed the free banking advocated by Selgin and White.  What about the free banking not advocated by Selgin and White?  Is Block just trying to confuse the issue here?

Block says that fractional reserve banking is fraud.  Does that mean he also wants to outlaw insurance agencies?  If everyone got into a car accident tomorrow, there is no way that the insurance companies could pay everyone the contracted amount.  Yet, even without government mandates, most individuals would continue to buy car insurance voluntarily.  If he were consistent here, then he should favor laws banning insurance.

And finally, and most important, Block says that anarchists are still in favor of laws.  They just shouldn’t be government laws.  That is fine as far as I’m concerned.  But even if laws are enforced by private defense agencies, there are still guns involved.  I can understand an agency, or even an individual, using force on a murderer or rapist.  But Block wants to invoke violence regarding fractional reserve banking.  You can have consenting adults who agree to certain terms of a contract.  The bank customer can even be completely aware that the bank is not holding all deposits in reserve.  Yet Walter Block would use a gun or hire someone with a gun to break up the contract.

My question for Block is, who would you point the gun at?  Would you point the gun at the bank customers, the banker, or both?  If they did not cease and desist, would you kill them?  If you kill someone over lending, based on an agreed contract, how libertarian is that?