Cafe Hayek: Shughart on Bailouts

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April 15, 2008

Shughart on Bailouts

Don Boudreaux

My former GMU colleague (now at the University of Mississippi, and a Senior Fellow at The Independent Institute) Bill Shughart wrote this important warning about government-funded and directed bailouts. Here's an excerpt:

The record of government bailouts of private financial institutions in the 1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of the entire U.S. savings & loan industry in the late 1980s and early 1990s (which cost $125 billion) teaches that emergency loans keep weak institutions alive just long enough for their problems to increase. Bailouts encourage more risk-taking and eliminate the freedom to fail that is just as essential to a free-market economy as the freedom to succeed.

The end result is likely to be further government intrusion into the private economy.

Posted by Don Boudreaux in Current Affairs, Nanny State, Regulation, Risk and Safety | Permalink

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Comments

Yes, more -- and more and more -- government intrusion, as bail-outs (i.e., money-printing) lead to the very nationalization its proponents hope to avoid -- http://online.wsj.com/article_email/SB120813349057411671-lMyQjAxMDI4MDE4NDExMzQzWj.html

And with the inevitable onset of a hyperinflationary depression -- http://www.netcastdaily.com/broadcast/fsn2008-0412-2.mp3 -- look for the government to reward itself with the creation of a continental superstate -- http://www.eagleforum.org/column/2008/apr08/08-04-16.html

Posted by: David White | Apr 15, 2008 9:26:16 AM

For what it is worth: HTML Primer #4: Linking Pages

Posted by: LowcountryJoe | Apr 15, 2008 11:32:30 AM

This is made worse with the fact that through banking regulations such as those present in Basel II we are stimulating the creation of fewer and fewer large banks that is going to be more tempting or more needed to bail out.

The trick which allows for as little costly bailouts as possible and that allows the market to move swiftly is keeping our eggs in as many baskets as possible…even if we have to recur to a progressive tax on the size of the banks of the type “the bigger you are…the harder you fall… the more it will hurt…the more you have to set aside in a special bailout fund” tax.

Posted by: Per Kurowski | Apr 15, 2008 12:12:47 PM

From The Club for Growth's webpage today: S&P Warns of Possible Downgrade of US Debt [bail-out related thoughts]

Posted by: LowcountryJoe | Apr 15, 2008 12:18:54 PM

indeed.

But here's the real question:

Why don't the economists who are actually in charge of such matters ever adhere to such warnings? Do they really believe that they know something beyond this warning that can render it moot?

Posted by: John V | Apr 15, 2008 1:03:20 PM

LowcountryJoe:

Thanks, let me give it a try with the first link I posted above:

WSJ says inflate problems away.

(There are sites I frequent that make this MUCH easier, including bold and italics.)

Posted by: David White | Apr 15, 2008 3:39:36 PM

OK, it worked. So here are the other two links:

The coming hyperinflationary depression.

The coming North American Union.

Posted by: David White | Apr 15, 2008 3:43:05 PM

My SmartPhone does not do the cut and paste thing so well. It'll do it but there's serious drawbacks. Hyperlinks work out so much better for me when I have spare time to peruse the Cafe during the day.

Posted by: LowcountryJoe | Apr 15, 2008 5:24:19 PM

The thing is, it's you free market fundamentalists that make these bailouts possible. You fail to realize that business men are, by and large, not ideological capitalists. Businessmen are, by and large, socialists bent on using the coercive power of the state to garner more profit.

Yet you lionize them as heroes. You have created a situation in which small businesses (including employees who suffer horrible market regulation) get no bailouts, but big business "heroes" do.

Screw big businessmen, and screw you for sticking up for them, too.

Posted by: Jeff | Apr 15, 2008 9:47:08 PM

Yet you lionize them as heroes. You have created a situation in which small businesses (including employees who suffer horrible market regulation) get no bailouts, but big business "heroes" do.

Screw big businessmen, and screw you for sticking up for them, too.

Posted by: Jeff | Apr 15, 2008 9:48:16 PM

Jeff,
What are you talking about?
Who lionizes businessmen around here?
Can you cite some examples?

Posted by: Sam Grove | Apr 16, 2008 12:02:12 AM

Jeff,

The 'free market fundametalist', a term which I take to mean anyone who understands and promotes the fundamentals of a free market, ought to be under no misconceptions regarding the intentions of businessmen. In fact, I suspect that almost every regular patron of Cafe Hayek has fully absorbed Adam Smith's understanding of businessmen, as men who contribute to the general welfare less by intent, but more as a byproduct of pursuing their selfish interests.

I think that, perhaps, you are mistaking an understable awe and appreciation of big business and its output for a hero worship of the businessmen themselves.

The term 'capitalist' is peculiar. Nobody would think to call someone a 'socialist' who was not a supporter of socialism, yet we frequently call people 'capitalists' despite the fact they do not support capitalism, and are oftentimes opposed to capitalism. A truly Orwellian twist.

Regards,
Lee

Posted by: Lee Kelly | Apr 16, 2008 12:21:15 AM

"Nobody would think to call someone a 'socialist' who was not a supporter of socialism"

~~Socialism = non-Libertarianism~~

Posted by: Gil | Apr 16, 2008 2:40:30 AM

Gil, socialism can be interpreted as the idea that the government can do good things by coercing people. So, yes, individualists like libertarians believe that people are best-off when you keep them save from violence, but otherwise leavve people free.

Posted by: Russ Nelson | Apr 16, 2008 3:20:22 AM

Congratulations Jeff, with this post you remind us of what the looney left is really all about. Stupidity, ignorance, and hate. But that's ok Jeff you don't need to hang around we already have a resident left looney that finds it impossible to read and comprehend what people are saying.

Posted by: Jeff | Apr 15, 2008 9:47:08 PM

muirpidity, such as displayed by muirduck (aka muirgeo) and which was the impetus for creating the term "muirpidity", as Jeff just showed us by posting above, is not unique.

Posted by: vidyohs | Apr 16, 2008 6:25:08 AM

Yet you lionize them as heroes...and screw you for sticking up for them, too.

Jeff,

Just because you posted it twice does not make your statements on "free market fundamentalists" any less of an outright misread/mischaracterization.

Read this blog entry found at the Cafe from just last May. There's probably a handful of blog entries with a similar message to tell.

Before you read it, though, perhaps you should remove your head from the dark place in which you last had it stuffed.

Posted by: LowcountryJoe | Apr 16, 2008 6:32:13 AM

Don Boudreaux “Bailouts encourage more risk-taking”

Since bailouts will probably always hang around it would then seem to be important to look closer at the… risk-taking for what? part.

Not having a hangover (a bank-crisis) might just be the result of not have gone to the party and in that sense we need to stop focusing solely on the hangovers and begin measuring the results of the whole cycle, party and hangover, boom and bust!

For instance the South Korean growth boom that went into a bank crisis in 1997-1998 seems to have been a much more productive cycle for South Korea than what the current boom-bust seems to have been for the United States.

Posted by: Per Kurowski | Apr 16, 2008 7:22:16 AM

Jeff's post is clearly terrible, but I think buried in there is an interesting point. How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument? They use us to gain greater freedom for risk taking and then switch to the other side when the risks turn south.

Posted by: Deryl G | Apr 16, 2008 8:40:40 AM

I can't think of a single person I might apply the words "free market fundamentalist" to who would support a government bail-out. Generally a "free market" at its most fundamental level is defined by "no government interference". In other words, government does not get involved, whether for good or ill intentions.

Some of the risks inherent in bail outs is spending lots of money to prop up an ailing industry, encouraging excessive risk taking by industries who think they can rely on "free" government insurance, and creating barriers for entry for smaller companies that are not "too big to fail".

Say a car company released a year of cars that all had alternators made in China that worked fine, but that exploded violently after 5 years and no one knew. So 5 years down the road, cars start blowing up, lawsuits start flying, and no one wants the car brand, or any of the other models the company makes. Well, the company employs thousands of people, and being such a large blue chip company, millions of people had tied their retirement savings to them. Does the government bail the company out? If so, bear in mind that the car manufacturer is probably doomed. The reputation of "death machine" is too strong to allow the company to continue, so at best the government can bail them out only to have them die a few years down the road, short a miracle. Is that worth it?

The issue of excessive risk and barriers to entry are related. Anytime the government sets a precedent of getting some company out of trouble, similar companies will start to rely on it. Riskier tactics will start to evolve since where as before the company might lose its shirt, it now relys on the fact the government will save it if it goes too far. At some point the government will either be stuck bailing them out, or leaving them to die. While they should be left to die, they will have a fairly strong arguement for a bail out on the basis that some other company was, and so they deserve to be as well.
On the other hand, smaller companies that are pretty far from "too big to fail" will not be able to rely on the government to cover their excessively risky behavior. They are at an unatural disadvantage compared to the bigger companies simply on the basis of "what size will the government protect?"

Posted by: Hammer | Apr 16, 2008 8:56:29 AM

Deryl G: They don't. In a "free market" businesses are free to fail just as much as they are free to succeed. That means no special tax benefits, no laws protecting an industry from competition, no sweet heart deals, nothing. Essentially a "company" exists only as the sum of its employee's rights and obligations, not a being of its own under the law.

Posted by: Hammer | Apr 16, 2008 9:00:37 AM

Hammer,

I'm not sure where the problem is, but I feel like we might be "talking" past each other here.

I'm totally on board if a complete free-market. I'm also not meaning to lay any blame on others that feel this way, although I think maybe my last post made it seem as if I did.

Think about a child who goes to which ever parent he knows will give him what he wants. Business uses free-market advocates to get freedom for risk taking and uses ant-market people to get bailouts.

Are we just being used?

Posted by: Deryl G | Apr 16, 2008 9:19:37 AM

Deryl,

Of course you're being used.

And you can't post this:

"How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument? They use us to gain greater freedom for risk taking and then switch to the other side when the risks turn south."

and not make people wonder about where your head is.

If a person tells you he is for free markets and then supports any restriction of any nature (and a bail-out is clearly a restriction of the free market) then that person has lied to you and you should know it instantly and act accrodingly.

The word free, like the word unique, is not quantifiable. It is, or it is not. I can not be more free than you, if I make that statement then you should know instantly that neither of us are free because I quantified it. We are merely privileged to a different degree, not free.

Now I admit that I am an absolutist about some things, the state of man and the meanings of words are two of those things.

I despise dipolomacy and fraud when discussing the state of man. My freedom is simply too important for me to accept anything less than dead on accuracy in description, I suggest yours should be as well.

I suggest to you, Deryl, that more than anything else in the world, vague and lazy comprehension of words and their meanings result in vague and lazy thinking, which results in conflict and distrust.

Look above at the total idiocy of Jeff's posting again. The pain of his own stupidity must cause his head to hurt constantly. Nothing else explains his post.

Hammer,

The evidence of Aurthur Anderson and ENRON gave us should make it clear to Privileged market advocates that bail-outs should be forgotten and a company in distress allowed to sink quickly into memory, because vast numbers of people were thrown out of work when those two companies went under and only the rare few are still unemployed today, or even a year later. They had marketable skills. I am not saying they suffered for awhile and had to undergo change, but guarantees of outcomes, as we know, are of the socialist way, not the capitalist.

Posted by: vidyohs | Apr 16, 2008 9:40:33 AM

Ooops! Should read.

I am not saying they did not suffer for awhile and had to undergo change, but guarantees of outcomes, as we know, are of the socialist way, not the capitalist.

Posted by: vidyohs | Apr 16, 2008 9:42:53 AM

Do we allow them to play both sides of the argument?

No, we're staying principled and call BS when it is warranted. It is people who do not share our point of view that mistakenly believe that people of our persuasion somehow allowed this to happen. Besides, what is the alternative...not take the side of commerce when the asshats and moonbats talk of more regulation? Nope, we've got to call BS there, too, even though the knife in the back will likely be coming later. Principles are principles and liberty always needs defenders...especially when the defenders are in short supply.

Are we just being used?

Defenders of liberty do not get used. Rather, we get run over roughshod by the paternalists and nanny-stares on a daily basis because they're in the majority. We're neither tools nor fools but loney voices in the wilderness who are doing our best to get the others to appreciate liberty again (or, for the first time in many cases).

Posted by: LowcountryJoe | Apr 16, 2008 9:50:28 AM

It is not possible that someone as cunning and intelligent as Bernanke would really be unaware of "unintended consequences". He KNOWS that by bailing out those who should be punished he is increasing the systemic risk of the whole market. He KNOWS that in the near future more intervention will be necessary. But that is precisely what he wants: more POWER to the government!

Through the slow but steady encroachment of our economic liberties, we will soon all be led around by the government collar. Our only option will be to decide which politician offers us a nicer, plusher, comfier collar.

Posted by: Fabio Franco | Apr 16, 2008 9:58:17 AM

Where my head is:

I'm in favor of free-markets. I'm against all forms of government intervention in the economy. I also think it is important to constantly question ones assumptions and beliefs. I constantly try to understand why people don't think the way I do and I try to understand their side of it. Often times I don't have answers for their concerns from a free-market perspective. That is due to my failings, but I'm always looking to remedy that.

Posted by: Deryl G | Apr 16, 2008 10:12:00 AM

Jeff,

What has any libertarian ever said here to give validity to any of your allegations?

Let's hear it.

When I read screeds like yours above, I'm actually saddened by how misunderstood we libertarians are. The nonsensical twists of logical and sheer irony that the sheer ignorance of our positions provokes in people like yourself is a disheartening thing to read.

The bigger problem is that you like it that way. You don't strike me as interested in wanting to know what we really think.

Posted by: John V | Apr 16, 2008 10:26:24 AM

You don't strike me as interested in wanting to know what we really think.

Posted by: John V | Apr 16, 2008 10:26:24 AM

I had a college professor who called it being "contentious truth seeker." Most people cannot be described this way. They are content to just live their lives by dogma.

Posted by: Deryl G | Apr 16, 2008 10:32:51 AM

I thought this particular viewpoint was worth importing:

John Stossel, today's Townhall article:
"The lawyer's sophistry continues as he blames corporations for "making the dreams of millions of Americans 'disappear' in the form of home foreclosures and job losses."

This is more nonsense. Yes, some Americans (2 percent of those who had mortgages) suffered foreclosures, and some jobs disappeared (80,000 last month). But the lawyer and other anti-business hysterics in politics and the media never acknowledge that corporate America built those homes in the first place. It was corporate America that made homeowners' dreams possible by giving mortgages to the 98 percent of homeowners who haven't defaulted. It was also corporate America that created 25 million jobs over the past 15 years."

Posted by: vidyohs | Apr 16, 2008 10:33:13 AM

please replace "contentious" with "Conscientious".

thanks.

Posted by: Deryl G | Apr 16, 2008 10:34:11 AM

Deryl,

Pardon me for pulling on my "teacher's hat" but if I may point out you seem to have no convictions about your positions. Is this because of youth, inexperience with the world outside of our American brand of socialism, or just a lack of education in how things really work?

It is good to question your own stance, do a systems check so to speak, to keep yourself anchored in the proper position; but, once you have been educated, actually put the principles into operation and see they work better than anything you have tried before, for God's sake don't let some one come along and cause you confusion by offering as new something you have already tried and now know will fail.

Have the courage of your convictions and be able to look a challenge in the face and say, "No, I tried it and it failed, I know you tried it and it failed, I know our ancestors tried it and they failed, and finally I know that others, around the world,who thought they were smarter than you and I tried it and they failed; and, all that failure did not come because of lack of funding, or love, or devout belief, it came because the idea itself is flawed in such a way that failure is assured.

I don't understand your problem with understanding free and defending it.

Posted by: vidyohs | Apr 16, 2008 10:46:34 AM

vidyohs,

I think there is a great disparity between the image you have of me and how I really am. I suspect this is because I have not done a very good job of expressing my thoughts, and for that I apologize.

I don’t understand why you think that I don’t understand free or that I would not defend it.

Let’s go back to the question I originally asked about Jeff’s post. I felt that the general response to his post was belligerent, which I think he invited by the way he posted. However, I think inside of that post was an issue that non-libertarians may have about the free-market. I wanted a bunch of people who are smarter than me (most of the people that post here) to take a serious look at that question. From their discussion I thought I could learn and I would be in a better position to rebuke those concerns in the future.

I am 100% in favor of free-markets. I’m 100% against intervention in the economy. I am willing fight and die for freedom.

Also, I am not a utilitarian. The fact that the free-market works better than everything else, which I believe is true, is irrelevant to me.

Posted by: Deryl G | Apr 16, 2008 11:11:03 AM

Deryl,

Jeff was not asking questions, he was making stupid statements based upon total ignorance and hurling insults.

This is becoming redundant.

"How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument?
Posted by: Deryl G | Apr 16, 2008 8:40:40 AM"

There is the question or point you saw in Jeff's post, and the only way it can be a question or a point is that you do not understand the words "free market advocate". This has been pointed out to you now several times by myself and others.

"Free market advocates advocate free markets." There it is Deryl. A pretty cut and dried concept, eh? Do you see any regulations, restrictions, or special privileges in the sentence in quotes?

If.....IF, Deryl, some one advocates regulations, restrictions, or privileges for business (any business)he is NOT a free market advocate. Got that?

Now, do you want to discuss Privileged market advocates and try to advance the claim that the participants of this cafe are "privileged market advocates"? That will be an entirely different discussion.

Posted by: vidyohs | Apr 16, 2008 11:27:20 AM

"Also, I am not a utilitarian. The fact that the free-market works better than everything else, which I believe is true, is irrelevant to me.
Posted by: Deryl G | Apr 16, 2008 11:11:03 AM"

Perhaps I begin to see a little better now why you express confusion and hesitancy.

This (that the free-market works better than everything else, which I believe is true, is irrelevant to me.) is quite breath taking. You wouldn't happen to be a certain peditrician from California using a new name, would you?

Posted by: vidyohs | Apr 16, 2008 11:33:24 AM

Jeff was not asking questions, he was making stupid statements based upon total ignorance and hurling insults.

True.

"Free market advocates advocate free markets." There it is Deryl. A pretty cut and dried concept, eh?

Yes.

If.....IF, Deryl, some one advocates regulations, restrictions, or privileges for business (any business)he is NOT a free market advocate. Got that?

Yes.

Now, do you want to discuss Privileged market advocates and try to advance the claim that the participants of this cafe are "privileged market advocates"?

I do not wish to have this discussion. I do not support the claim.

Do you think that it is possible that business will use adovocates of free-markets to advance their agenda, which may or may not be pricipledly free-market?

Posted by: Deryl G | Apr 16, 2008 11:49:42 AM

Posted by: vidyohs | Apr 16, 2008 11:33:24 AM

Do you think that free-markets cannot be defended from a Natural rights view point?

If it became clear that certain regulations would create better outcomes would you be infavor of them?

Posted by: Deryl G | Apr 16, 2008 11:52:56 AM

"Do you think that free-markets cannot be defended from a Natural rights view point?"

What have I been advancing if not a defense from a natural rights viewpoint?

If it became clear that certain regulations would create better outcomes would you be infavor of them?
Posted by: Deryl G | Apr 16, 2008 11:52:56 AM

If, Deryl, if. If frogs had wings they wouldn't bump their ass when they hop.

You find those certain regulations, explain them, and I'll consider them; but please in the process don't rehash all that has been hashed since the city of Ur. Bring something new to consider. I won't hold my breath.

Posted by: vidyohs | Apr 16, 2008 12:07:43 PM

Vidyohs,

How do you feel about Rothbard? He was a big supporter of free-markets, but he was not a utilitarian. If you have not read For a New Liberty, I would recommend it. It contains an excellent arguement against supporting free-markets via utilitarianism.

Posted by: Deryl G | Apr 16, 2008 12:10:31 PM

You find those certain regulations, explain them, and I'll consider them

I wouldn't consider them. I'm against state interference in the market on the principle that they do not have a right to tell anyone what to do with the fuits of their labor.

Posted by: Deryl G | Apr 16, 2008 12:19:25 PM

Deryl,

There are grey areas in every topic that philosophers (philosopher as a deep-thinking person) dare to enter. Some grey areas are wide and some are narrow. Some philosophers prefer central planning and other prefer individual liberty. Some frequently change their preferences based on the grey area being discussed while others tend to be fixed on principles.

Here at the Cafe, many libertarian philosophers will attempt to stay fixed and principled on those values of liberty because that is our preference. While sometimes 'leaving the reservation' for a grey area, or two, our default position is one of sidling up to liberty. I'm finding your most recent comments (doubting) troubling. And just like another person has mentioned, I'm starting to wonder if you've been genuine with us.

Posted by: LowcountryJoe | Apr 16, 2008 12:34:34 PM

I have never read Rothbard and probably never will except in quotes found in Reason or Liberty magazines. The same can be said of Adam Smith, Freidman, Mises, Hayek, Keynes, Marx and Lennin.

I know enough of what they thought and wrote to know I either agree, disagree, or have misfeelings about all of them; but, none guide my thoughts or actions.

I know enough of life to know that no theory fits everything so I have been and still am prepared to think my way through life.

The fact is, Deryl, everything I know about free markets et. al, is from the process of reverse engineering so to speak. I thus formed beliefs and am reluctant to change them because I know they work, that's why they become beliefs.

I am not disparaging the thought of Rothbard, Mises, Freidman, or Hayek. If you tell me that Rothbard is a supporter of free markets, but not being utilitarian he........ You would lose me at the word but because I am not interested in his or your but(s) concerning free markets.

I know that America has never had free markets and do not at this date, but history does show that on those occasions that restrictions on markets have been the least the more dynamic and prosperous the people, individually and collectively, have been. So I see no reason to compromise in any way in my belief in and desire for free markets. I see the intelligence in the observation, "If markets can be dynamic and properous loosely restricted, what could they become totally free"

Let Rothbard and Deryl et. al. work on theories of why this should all be so. Vidyohs will concentrate on working to make it so.

Posted by: vidyohs | Apr 16, 2008 12:41:07 PM

Interesting discussion. Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

Posted by: Methinks | Apr 16, 2008 12:45:58 PM

LCJ,

I don't know how to address the issue of my honesty. Obviously making the claim of being honest does not do much of anything. I'll keep posting here and maybe people will be pursuaded.

I would like to state that I have never advocated for any interference in the economy from the government. I may have asked questions of those who advocate for free-markets, but I saw this in more of a devils-advocate role. I used it as a way to better understand the issues. Also, sometimes I don't agree with a persons reasons for advocacy, and I will question those reasons.

An example would be my discussion with Methinks about coporations. A lot of that was centered around my misunderstanding of how corporations work, but even then I was only calling for a removal of state interference and not for an expansion.

Obviously if I've lost all credibility then there won't be much sense in me to continue to post, but I hope that is not the case.

Posted by: Deryl G | Apr 16, 2008 12:49:40 PM

No, Deryl, you have not lost all credibility with me but you have lost some. This is just with me, though. And I am just another faceless person on an Internet forum with an opinion who enjoys -- perhaps too much -- sharing it with others whether they wish to read it or not. Continue to post, then. Because even if I were the self-nominated member of the board police around here, I really could not do anything from keeping you from sharing your views.

Posted by: LowcountryJoe | Apr 16, 2008 1:01:42 PM

Vidyohs,

Would this be a adequate (although not pefect) summary of what your stance is:

The more markets are fee the better they peform, so lets free them up as much as possible.

If so, I have no wish to interefere with that.

I enjoy the theoretical side of freedom. It's just a preference I have. That is what I'm here to discuss. In that discussion I may ask questions that challenge the free-market position, but that is not because I'm anti-market. It is because I find that asking challenging questions is the best way I learn. If someone claims 'A therfore B', even if I agree with the conclusion, I may question A because I don't have as good an understanding of the whole idea as I would like. Getting answers to those questions is how I hope to resolve my problem.

Posted by: Deryl G | Apr 16, 2008 1:04:56 PM

"I enjoy the theoretical side of freedom.
Posted by: Deryl G | Apr 16, 2008 1:04:56 PM"

Perhaps you might just revel and rejoice in the practical side as well?

Posted by: vidyohs | Apr 16, 2008 1:21:50 PM

Lucie....you gots some splaining to do!

Interesting discussion. Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

Posted by: Methinks | Apr 16, 2008 12:45:58 PM

If you please.

Posted by: vidyohs | Apr 16, 2008 1:25:57 PM

Perhaps you might just revel and rejoice in the practical side as well?

Posted by: vidyohs | Apr 16, 2008 1:21:50 PM

While I'm not 100% confident that I know what you mean by this, I think I do 'rejoice in the practical side'.

I marvel at the accomplishments of capitalism and I get frustrated on a regular basis by those in government who are essentially leeches living of the productive members of our country.

I don't ask this to be flippant; could you give me a bit of an explanation of what you mean?

Posted by: Deryl G | Apr 16, 2008 1:39:24 PM

Do not assume that difficulties in communication are all your own. It takes two to communicate.

I once went through a whole list of points with a young woman. After every point I made, she said: "I agree with that."

After about ten points had been agreed with she said: "I agree with everything you say, but I disagree with you."

I just threw my hands up.

Emotions often get in the way. If someone has an emotional investment in a contrary opinion, then it really doesn't matter much what you say. They will have to make a discovery before they can move off of their 'investment'.

Posted by: Sam Grove | Apr 16, 2008 1:53:05 PM

Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

Maybe, but I think the larger problem is ignorance and sheer hypocrisy.

I remember briefly covering mercantilism in high school, but it was viewed in a historical perspective only. It's a term entirely absent from the lexicon of the left.

Perhaps we should forthrightly present ourselves as opposed to socialism AND mercantilism.

I think we should also reclaim the 'Liberal' label and call those other folk 'Progressive'.

Posted by: Sam Grove | Apr 16, 2008 2:13:37 PM

close italic

Posted by: Sam Grove | Apr 16, 2008 2:16:10 PM

Deryl,

I must be off to practice my beloved capitalism.

I said what I said because this:

"I enjoy the theoretical side of freedom.
Posted by: Deryl G | Apr 16, 2008 1:04:56 PM"

is the intellectual equivilant of baby drool.

Posted by: vidyohs | Apr 16, 2008 2:46:36 PM

"I can't think of a single person I might apply the words "free market fundamentalist" to who would support a government bail-out. Generally a "free market" at its most fundamental level is defined by "no government interference". In other words, government does not get involved, whether for good or ill intentions."
Posted by: Hammer | Apr 16, 2008 8:56:29 AM

Yes now you discuss the issue… when it is time to pay-up (bail-out)… but where were you all when the regulators decided to try to eliminate the failing of banks and to that effect empowered credit rating agencies to measure default risks so that they could tax it through their minimum capital requirements? And as if bank defaults is all the risk that exists.

Q. Where would you have been without any bank-crisis in your history? A. Way behind!

My problem with most free-marketers is not their free market opinions… it is the not acknowledged inconsistencies of them.

Show me one place where the bosses of this web café spelled out in time that they did not like to have the credit rating agencies putting up traffic signs in the financial markets that had to be obeyed or…?

I continuously tried to object to the use of credit rating agencies just to get thrown out by stupid free marketers that thought that since the credit rating agencies were private that had to be the free market at work.

Posted by: Per Kurowski | Apr 16, 2008 4:13:19 PM

Yes but if he does know that should he not equally know that by continuing using credit rating agencies as risk measurers he is creating the systemic risks for which he is in fact responsible?

Posted by: Per Kurowski | Apr 16, 2008 4:15:21 PM

I think what Deryl means by saying he wouldn't care if free markets were not the most efficient method of trade is that the principle of being able to freely do with the fruits of your labors is more important than efficiency.

The reason this is an important point is that there will always be someone who argues "Well, if we just pass this one little law, things will be more efficient." Normally, that wouldn't be an issue, since all of history has proven the opposite. However, very few people are fully aware of this, and it is easy to convince people that a few tweaks here and there will make things better.
So, it becomes a question at some point of whether freedom or prosperity is more important. That a free market happens to win in both courts is a lovely fact, but were one to have to choose, as so many politicians are wont to ask us to do, one must recognize that freedom is much more important.

So you see, defending free markets simply on the grounds of "they work best" leaves you open to defeat by any shill who can make a sufficiently believable luxurious gilded cage.

Posted by: Hammer | Apr 16, 2008 4:24:17 PM

Hammer,

Thank you. You explained very well what I intended.

Posted by: Deryl G | Apr 16, 2008 4:32:47 PM

Per Kurowski: I think I was a fetus, or possibly a Y chromosome with a tail. I would note that banks did fairly well before that, but hit a rough spot. Perhaps they would have done just fine without regulation after correcting their behavior, perhaps not.
I don't know what the "bosses" here dictate, but personally I think that there should not be regulation, and that most smart investors realize that credit rating is not the perfect prophesy you think they see it as.

Now, I can't speak for the purveyors of Cafe Hayek, but speaking for myself, I would not agree with any government regulation or intrusion into the business world. Again, I don't even think there should be laws as to how corporations are set up...

Posted by: Hammer | Apr 16, 2008 4:34:02 PM

It is impossible to play this hypothetical-scenario-game regarding federal reserve involvement in the economy and how laizzes faire types are supposedly being inconsistent. Perhaps if the asshats would allow the central bank to dissolve its ties to the politicians an go from quasi to fully private; the notes removed the "this note is legal tender for all debts, public and private"; and the now-polically-freed bankers stopped trying to control the business cycle to both the asshats and moonbats short-sighted satisfaction, then maybe a direct "banker involvement in the economy" question from someone like our resident Venezuelan Lefty (PK) would be a somewhat more fair question to ask.

Posted by: LowcountryJoe | Apr 16, 2008 8:13:11 PM

The strange quip Deryl G. that got me wondering was - "I am willing fight and die for freedom." What does that actually mean? Eapecially as many would see a certain nation as the U.S.S.A. I can't remember when I saw SWAT officers prying weapons from ex-anarcho-Libertarians' cold dead hands.

Posted by: Gil | Apr 16, 2008 9:02:06 PM

Hammer,

If that was what Deryl was trying to say, and he says it was, I can only say he was doing a piss poor job of it.

That being said, yes I certainly agree that freedom is more important than efficiency, and I believe that an examination of everything I said supports that.

I speak my agreement because of personal experience. When I became an entrepreneur in 1983, the feeling of freedom that came with it was like a cool drink of well water on a hot miserable day of hay baleing. Even though I know I made some mistakes and did not operate at peak efficiency at all times, by God it was mine and I was willing to take any downs that came because of my inefficiency because the up of being free was something I could never give up.

and,

"So you see, defending free markets simply on the grounds of "they work best" leaves you open to defeat by any shill who can make a sufficiently believable luxurious gilded cage.
Posted by: Hammer | Apr 16, 2008 4:24:17 PM

I think I can defend free markets on a level a tad more sophisticated than "they work best" because my experience allows me to show with conviction the steel beneath the gild.

Our friend Deryl needs to learn to say what he means instead of wandering around in vagueness.

Posted by: vidyohs | Apr 16, 2008 9:11:36 PM

More baby drool.

Posted by: Gil | Apr 16, 2008 9:02:06 PM

Posted by: vidyohs | Apr 16, 2008 9:15:00 PM

oooh Ricky,

I meant that some people may view regulations in the same light as rule of law - seeing as they're both laws written and maintained by government. For the record, I don't, but I got the impression that Deryl just might be inadvertently doing that. Just a thought.

-Lucy

Posted by: Methinks | Apr 16, 2008 10:19:59 PM

I was going to address a reply straight to your "linked name" but I wasn't confident it would reach you.

So, as this thread is wandering a tad afield of the original posting I'll do so here.

I do know somewhat of law, regulations, and resolutions and how they actually fit into the scheme of things; but I am bit of a rouge free human so my understandings may surprise you.

I would politely ask you, what is your understanding of law and regulation and how do they differ?

Second, does it not seem strange to you, viewing your education in retrospect, that on such a vital subject of law and its place in our lives, the primary education system set up in this nation does not deal with the subject at all, not even as an elective. One must reach the secondary level and specifically seek entry into the hallowed halls that teach the subjects.

You're intelligent, more important you're also a thinker, and I am sure that over the course of your life you have felt frequently uncomfortable with what was being done by government under the auspices of "law" but conventional wisdom told you to just accept it and not question even though that uncomfortable feeling remained.

Posted by: vidyohs | Apr 17, 2008 9:10:08 AM

Vidyohs,

You wouldn't be able to reach me through the email associated with my name.

This is a bit afield. And it's complicated as the definition of Rule of Law itself is up for debate. Rule of Law allows us to predict the consequences of our actions and, importantly, provides for equal treatment. The rules are the same for everyone and everyone is treated equally with regard to the rules. Regulation, at its core, is an indirect government ownership of the means of production under the false promise of greater efficiency. It is still a government rule, but one that specifically targets a single group rather than all the citizens. Its purpose is to control how specific assets may be used.

Regulatory bodies regularly seek to violate the constitution and existing laws. For example: the SEC has come up with a new rule. The new rule states that the SEC can charge you with fraud even if there is zero evidence of intent. Logically, how is it possible to defraud someone without intent? In addition, no one need be injured by this "fraud". In other words, if you happen to manage money for a living and, in the context of a conversation at a cocktail party, you mention (and everyone forgets 5 minutes later) that your return is 23% year to date (because that's what you truly believe) and it turns out your return is actually only 22.5%, the SEC can charge you with fraud. If you were a store clerk and made the same claim, that would not be fraud.

Posted by: Methinks | Apr 17, 2008 10:43:14 AM

Vidyohs,

If you want to discuss this off the board, I can contact you. Can I reach you through the email associated with your moniker?

Posted by: Methinks | Apr 17, 2008 10:46:04 AM

That's how I see 'Rule of Law'. As I said to muirgeo on more than one occasion, there should be no 'special' regulation, only the minimum to prohibit fraud and aggression.

But progressives believe that economic power trumps political power, so their goal is to regulate economic power. In order to accomplish that, they would subject us to progressive serfdom.

Posted by: Sam Grove | Apr 17, 2008 1:16:52 PM

Methinks,

Yes'm you can.

Posted by: vidyohs | Apr 17, 2008 6:37:34 PM

Methinks,

Sorry but the delays is one of the sometimes patience trying things about discussions on the internet. Shortly after posting the above I recieved a request for a "jump and run" contract job, so I was out the door. Then I got home and immediately had to turn around and take care of another matter.

I feel perfectly comfortable discussing the topic of law and regulations here in the public forum, and, I would actually like to have the input of people like Mesa, Sam, LCJ, M. Hodak, Shawn, brotio, freedomlover et. al.. However you are my prime addressee simply because of the demonstrated ability to think, the intelligence, and the fact that your enculturation in the bad old socialist/commie encourages you to see things (I make an assumpttion here) from a different perspective.

I can honor others by acknowledging their intelligence and ability to think and do so now. I am not slighting any of the others in the least by focusing on you.

That being said, do you have access to a Black's Law Dictionary (or equivilant) and a Webster's Unabridged dictionary? It is essential when talking about law that one have the first and helpful to have the second.

The reason is that lawyers do not write in words (Webster's), they write in terms (Black's). There is a difference, and that difference is one of the prime reasons that those who represent themselves Pro Se usually lose because they do not know how to construct their case in the language of the courts.

Bill Clinton, "It depends on the what the defintion of is is". Do you think that is a ploy or a joke? It isn't. The crucila problem the Republicans had with Bill in the lead up to the impeachment was that those investigators who did his deposition were not as capable in the language of the courts as he was. Illustration: You simply can not be alone with someone else. You can be in a room exclusively with one other person, but you can not be with someone and be alone. Did Bill answer truthfully? Yes.

This is not getting us to law and regulation.

Let me go shower and I will return to post again.

Posted by: vidyohs | Apr 17, 2008 8:42:13 PM

Hello again,

Don't mistake me, I am not an admirer of Bill, but I am honest and recognize skill. He could have done better however. I would have simply said, "I don't remember being alone with Monica." Good answer, truthful, and nothing that a judge could get hot about.

Posted by: vidyohs | Apr 17, 2008 8:52:10 PM

Methinks,

We can not talk about "rule of law" until we agree on what law is.

BTW, regardless of circumstances in the past or in other nations around the globe, I will restrict my comments solely to the USA, conventional wisdom perceived and corporate.

Essentially, law applies to everyone and in the case of the corporate USA is made by our representatives in the manner prescribed in the corporate charter (constitution). Law made locally, must be measured against the law made by our national representatives and if found in conflict will be resolved in favor of the the federal.

Essentially, regulations are affective as law but are made by agencies and only apply to those who participate in a particular activity.

Thus your SEC regulations do not affect me unless I am an employee of the SEC or until I enter the world of stock ownership and stock trading, true?

EPA regulations only affect me if I am employed by the EPA or I persue some activity that makes that activity questionsable in relation to the environment. True?

Traffic regulations are meaningless to me if I am not ivolved in traveling or engaged in controlling traffic.

State Department regulations do not affect me if I am not an employee of the State Dept and if I do not want to travel out of CONUS.

IRS regulations do not affect me if I am not an IRS employee.

NFL (National Football league) regulations do not affect me unless I am an employee of that league, or on their premises.

I know that some will react here with a "com'on vidyohs", the NFL compared to the IRS"? I tell you it is not the corporation I am addressing but the legal application of their regulations.

Unfortunately the vast majority of people know what they know of law and regulation what conventional wisdom tells them they should know. And, that is almost always wrong. This is why I lament in retrospect that rudiments of law is not taught in primary schooling.

It is also unfortunate, and I am sure your past and your parents past as well as mine will verify, that those who make the law do not have to live by the law. They always build an escape hatch for themselves.

Thus you believe that SS is mandatory for ALL citizens yet you know that members of congress do not participate. Why? Are they not citizens? If they aren't citizens, what are they?

Yes, they are citizens, but they make the law and they make the exceptions to the law for themselves. You are screwed and they skate. Good deal (for them), eh? Please don't be naive enough to think that the SS is the only way congresscritters avoid the law that they write to apply to you.

((Can I confess that I have zero knowledge of how to manipulate this typepad so as to use italics and bold etc. so bear with my clumsy expression.))

Now that I have come this far, Methinks, what does the term "rule of law" mean to you and what should it mean to me?

Posted by: vidyohs | Apr 17, 2008 9:22:10 PM

Italics - enclose an "i" with angle brackets
bold - use a "b"
To close italics or bold, use a / before the letter such that /i or /b are enclosed by the angle brackets.

Posted by: Sam Grove | Apr 17, 2008 9:38:24 PM

Vidyohs,

I too had to run out today. Costco and Trader Joe's were calling my name. Loudly. It's now late on the East Coast, so I'll post this and leave the rest for tomorrow.

I do not have access to Black's unless it's available online. While I've been forced to take several law classes and to be aware of certain laws and regulations that are particular to my business, I employ a posse of lawyers to do the heavy lifting (let's just say that I know enough to know how ignorant I am). I do remember wanting to put a spike through my head as I read cases in law classes because the language of law is so precise and, thus, so convoluted. I am no lawyer and I am no expert in the law. I know some things and that is all. But I don't think the principle of the "Rule of Law" necessarily requires much knowledge of the law to discuss. I could be wrong.

We begin:

The principle of "rule of law" is intended to guard against arbitrary governance. Thus, it is opposed by anyone or any group that wishes to impose his/her/its whim. It is a system of laws which is made with reason, apply to everyone equally, and are plainly communicated to the population governed by them.

Dicey outlined three principles which establish "Rule of Law":

1.)the absolute supremacy or predominance of regular law as opposed to the influence of arbitrary power

2.)equality before the law or the equal subjection of all classes to the ordinary law of the land administered by the ordinary courts

3.)the law of the constitution is a consequence of the rights of individuals as defined and enforced by the courts

United States laws and state laws are subject to the constitution and are set by legislative bodies through a known process (how well they stick to that is debatable). Since regulatory bodies can set their own rules, they are not legislative bodies in name but they are legislative bodies in fact. In addition, they violate the Rule of Law by establishing a class system and seperate rules for each class. In the case of the SEC, specialists are granted certain powers and certain restrictions, traders another, mom & pop investors another, etc. There is not basic policing of real violations - like fraud - in the markets, there are literally different rules for everybody. The regulatory body has the right to mete out punishment but is not required to meet the standards of "Rule of Law". This is especially true of the SEC, the IRS and the FDA.

Although, the regulatory bodies themselves can be sued in court, this is a very costly process.

For example, a couple of years ago, the SEC tried to bring hedge fund managers under its regulatory authority. Hedge funds must meet certain (onerous) SEC conditions to remain out of reach of the morons at the SEC. Predictably, the SEC had a hankering for more power, thus the attempt to extend regulatory control over hedge funds. Phil Goldstein of Bulldog Investors took the SEC to court, and won. The court ruled that the SEC was overreaching. Since then, the SEC hasn't stopped harassing him, trying to find something to nail him on (although hedge funds are considered "unregulated" they are actually plenty regulated).

My original point was that people often seem to conflate Rule of Law with regulation because both are used to set rules and govern. However, one (Rule of Law) must fit certain parameters while the other (regulation) is completely arbitrary.

IRS regulations do not affect me if I am not an IRS employee

Actually, IRS regulations effect you if you are an American citizen or if you earn money in America and are not an American citizen. That's pretty scary to me. Also, SEC regulations effect you even if you don't actively engage in stock trading and, one can argue, indirectly effect you even if you keep your money under a mattress. The FDA's bullying of companies until it drives them out of business certainly effects you as does its ridiculous drug approval process. NFL regulations, on the other hand, effect you only if you are somehow affiliated with football. It seems to me that NFL rules are really the rules of a private club, Vidyohs.

I expect you'll find plenty of holes in my post to challenge me on and I look forward to reading your response...tomorrow. For tonight, I bid you goodnight!

Posted by: Methinks | Apr 17, 2008 11:19:05 PM

Methinks,

I also am not a lawyer, I just have had to learn and survive.

Again, discussing via the internet is so slow. I have an appointment this morning at 0930AM so I will have to dig into this later this afternoon.

I am not out to challenge you in a confrontational way, 'tis not me purpose, matey!

However, I would ask you, do you not see the similarities between these two concepts?

"Also, SEC regulations effect you even if you don't actively engage in stock trading and, one can argue, indirectly effect you even if you keep your money under a mattress."
and
"NFL regulations, on the other hand, effect you only if you are somehow affiliated with football."

I certainly understand the concept in your first sentence, indirect affect is a given, in my comments I was suggesting direct affect.

As the NFL is an enormous financial enterprise that also happens to be enormously popular as well as being deeply affecting to a large number of people on an intense emortional level, do you not see that its activities also have an indirect affect on your personal life even though you may never watch a game or care a fig about it. Perhaps the indirect affect of the NFL on you is felt as much as the indirect affect of the SEC is felt by me.

Be back.

Posted by: vidyohs | Apr 18, 2008 8:20:17 AM

Methinks,

I realized I have a bit more time than I thought.

We agree then that law is intended to affect everyone, while regulations are to affect particular groups or activities.

I have no hesitation in agreeing the the rule of law is most decidedly a good thing and it is one of the sources of our wealth here in the USA.

My point is not the rule of low, but how we view law itself.

Not we, you and I per se, but how the common man sees it from his conventional wisdom view. It is a concern. Do you share this concern?

Furthermore, I have real concern over how the lawmakers are viewed by those who use nothing more than conventional wisdom to decide things. Do you share this concern as well?

I have an even deeper concern over the broad lack of knowledge and understanding in the "conventional wisdom folk" of how those lawmakers are directed to perform by the constitution.

Be back

Posted by: vidyohs | Apr 18, 2008 9:04:28 AM

Part of the problem is the belief, promulgated by government and progressives that democracy = freedom.

This leads to the assumption that the slightest fraction of input represented by one's vote is an expression of substantial power over the form of one's serfdom and that THIS is freedom.

Posted by: Sam Grove | Apr 18, 2008 10:23:11 AM

I am not out to challenge you in a confrontational way, 'tis not me purpose, matey!

Never thought you were, vidyohs. Challenge is good. Makes one think. In Thomas Sowell's biography, he described a presentation he made to the UCLA econ department as part of his interview process (I think it was, anyway). The UCLA econ department was filled with University of Chicago Econ Ph.D.'s like Sowell himself. Apparently, the econ department at the University of Chicago encourages vigorous bull sessions and its graduates, the UCLA professors proceeded to engage in vigorous debate with Dr. Sowell on the points he made in his presentation. Sowell enjoyed himself immensely. The department secretary taking notes at the session complained to the university president, "they didn't have to lay into him like that!".

As to the NFL's effect vs. the SEC's: No, I don't see the similarities.

We agree then that law is intended to affect everyone, while regulations are to affect particular groups or activities.

Actually, having thought about it some more, I think the regulations and the bodies created to design and impose these regulations are created by lawmakers to circumvent the Rule of Law.

Perhaps the existence of regulatory bodies and regulations is what changes the average person's perception of what is meant by rule of law and leads to statements like "laws are designed to protect people from themselves." If I had a dime for every time I heard that, I would never have to work again.

I'm no more concerned about the perceptions of the common man today than my ancestors were before me. The common man is, well, common. He, by definition, will never be possessed of extraordinary wisdom. And I respect his right to his common perceptions and the freedom to decide things based on those perceptions. I've seen the results of the efforts to change the common man's thinking and they were too bloody for my taste. My concerns are not much different from the founding fathers' - how do you keep the mob of common men from using their number to rob others.

Posted by: Methinks | Apr 18, 2008 1:51:03 PM

Sam, you are ridiculously quotable.

This leads to the assumption that the slightest fraction of input represented by one's vote is an expression of substantial power over the form of one's serfdom and that THIS is freedom.

Indeed.

Posted by: Methinks | Apr 18, 2008 1:52:29 PM

Thanks.

Posted by: Sam Grove | Apr 18, 2008 3:58:05 PM

"Thomas Sowell's biography" should be Thomas Sowell's AUTObiography.

Posted by: Methinks | Apr 18, 2008 5:30:41 PM

Me:
We agree then that law is intended to affect everyone, while regulations are to affect particular groups or activities.
You:
"Actually, having thought about it some more, I think the regulations and the bodies created to design and impose these regulations are created by lawmakers to circumvent the Rule of Law."

Okay, I'll try again.

In a perfect USA with perfect government and perfect citizenry with faithful following not only the letter of the law and the constitution but the spirit as well:
Can we agree that law is intended to affect everyone equally, and regulation(s) to affect particular groups or activities?

Posted by: vidyohs | Apr 18, 2008 7:57:23 PM

"As to the NFL's effect vs. the SEC's: No, I don't see the similarities."

Well you are very close to the one, perhaps my viewpoint of distance makes it easier for me.

They are similar in that both are large organizations that have regulations.

They are similar in that as you pointed out enforcement by the SEC can have a ripple down affect to me.

The trickle down affect of the NFL to me is frequent pleasant dumping of money in my lap because people who do care about it spend time while we are on the clock hashing over the weekend's games. The frequent downside affect is congested traffic and people hashing over the weekend's games and not paying me to listen, and/or neglecting their duties and leaving me standing waiting for service.

Down where I am in relation to the SEC and the NFL, I see them both as being pretty much the same in my life. I'll worry about their regulations when I decide to become involved.

"Actually, IRS regulations effect you if you are an American citizen or if you earn money in America and are not an American citizen. That's pretty scary to me."

Do you have personal knowledge that this is true or is it conventional wisdom, and I consider input from lawyers conventiona wisdom here as well.

Methinks, I have had access in the past to hard copy IRS Regs and I can tell you that in all my study I never saw one IRS reg that applied to you or I. They were just like the NFL regs, only applicable to NFL personnel. IRS regs tell IRS employees how to do their job.

Even with constant checking, I have never found one single tax accountant, tax preparer, lawyer, or IRS agent who could show me the precise law that "required" me to file an income tax return much less to pay an income tax.

My challenge to the IRS and its corporate employer the UNITED STATES OF AMERICA is "show me the law".

Conventional wisdom says I am crazy.

What do you think?

Conventional wisdom tells you that you are required by law to keep books and records to document your financial activites so as to be able to determine a "taxable" income verifiable by an IRS audit if they demand.

My knowledge and experiece tells me that if I have not received a personal letter from the Sectretary of the Treasury or his designated representative then I am not required to keep books and records.

Have you received a personal letter directing you to keep books and records or are you taking a conventional wisdom view of the law?

Posted by: vidyohs | Apr 18, 2008 8:29:46 PM

I think I picked a bad time to instigate a good discussion.

We are leaving first thing in the morning for a 3 day weekend in the Texas hill country. So I will be out of pocket till Monday late afternoon.

Posted by: vidyohs | Apr 18, 2008 8:57:17 PM

Well, have a good time, Vidyohs!

For after you get back:

Reading what you wrote about the IRS, I think maybe we have a different understanding of what constitutes an IRS regulation. Perhaps you can tell me what regulations book you're referring to. I'm referring to IRS rules as they pertain to the population under its control - that is every productive person in America and Americans abroad. And, no, I don't rely on lawyers for that. I have a posse of CPAs and tax attorneys for that sort of thing. The average lawyer doesn't know enough about tax law.

The NFL vs. SEC & IRS: Vidyohs. I'm sorry. I still don't see it. Here's the most obvious difference: If I wanted to organize a little football game in the back yard, I could do so without the NFL's interference. If I wanted to organize a little neighbourhood team, I could do it without involving the NFL. If the neighbours and I wanted to form a little partnership to sell cookies to our other neighbours, we couldn't do it without complying with IRS and SEC rules.

My challenge to the IRS and its corporate employer the UNITED STATES OF AMERICA is "show me the law".

Conventional wisdom says I am crazy.

Well, I don't think you're crazy. However, there's that little issue of jailing you for tax evasion - which they will only do if you owe enough taxes (i.e. happen to be very successful). Or the little issue of garnishing your wages and freezing your assets if you don't pay up. I don't know how they're able to do that but they do it.

Have you received a personal letter directing you to keep books and records or are you taking a conventional wisdom view of the law?

No. But only because I always have. I've seen other companies like mine receive personal letters directing them to keep books and records (because they weren't doing so to the regulator's standard) and get dragged into court by the SEC. There is no law. There is "Regulation___" that you have to comply with. So, we don't have laws but we have regulations. If we don't comply with the regulation, the courts of law will force complicity.

If you under-report your investment income, the IRS will audit you. I'd love to see what happens when people don't comply with an audit. However, you don't have to keep books and records. Oh no. Your broker is forced by the IRS and the SEC to keep those books and records on your behalf and report the information to the IRS on form 1099. If your broker refuses, they will be shut down. The fight is definitely not worth it for your broker.

That's my point. There may be no law, but the regulations are enforced as if there were one.

Posted by: Methinks | Apr 18, 2008 9:45:02 PM

Methinks,

Not gone yet so a quick response to some of the issues you bring up.

Maybe the NFL/SEC similarities will become clear if we progress farther.

Last year I asked the customers of this cafe if any knew how the Constitution gained any jurisdiction over a free man native born to the soil of any of the states. Not one person answered, not one even attempted to answer and that included such luminaries as Martin Brock and muirduck.

Law is all about jurisdiction. The very first thing a plaintiff must establish in his complaint to a court is the court's jurisdiction to hear the case; and, the first thing a defense will attack is that jurisdiction and attempt to show why the court does not have jurisdiction.

It is nice that you have highpowered CPAs and tax attorneys to handle your dealings with the IRS et. al. However, consider this about their education.

Each of them received schooling that was based on the premise that each of us is under the jurisdiction of the constitution and ultimately the IRS, SEC, et. al., so in reality they start with the assumption that Title 26 applies to ("I'm referring to IRS rules as they pertain to the population under its control - that is every productive person in America and Americans abroad.") as you put it. That assumption is never questioned.

I'd be willing to wager that in a head to head confrontation with me not one of your CPAs or Tax Attorneys could show me the law that they believe exists and that we all must comply with. The 16th Amendment? No No No, the Supreme Court ruled that the 16th Amendment gave congress no new taxing authority.

The IRS regulations I am speaking of are any that carry the title IRS Regulation #.... If an IRS agent sat with you and said, "IRS regulation #.... says you must do such and such." you can confidently look him/her in the eye and say, "No, that reg tells you what you must do and how you must act, not me."

Title 26 is what you're interested in when it comes to supposed tax law.

If you can tell me how the constitution gains jurisdiction over you then we will be well on our way to discovering what conventional wisdom is and what realities oppose it.

Wouldn't you say that for one to be charged with tax evasion that it must be first shown that there was a tax to be evaded, and that you were responsible to pay that tax? Seems reasonable, doesn't it?

Remember the IRS and other government agencies think nothing of lying to get their way. They do it in official documents, and in head to head meetings. Do you suppose that they would lie about the basic issue of do you owe the tax in the first place?

"Or the little issue of garnishing your wages and freezing your assets if you don't pay up. I don't know how they're able to do that but they do it."

I know exactly how they do it and almost universally they do it through fraud, fraud aided and abetted by ignorant county and state officials and with the collusion of judges who are also ignorant and afraid. If you have the patience before we are through I will tell you how they do it.

Nuff for now. Got to get some sleep, us wild old guys sometimes stay up to 1030PM, but not often. LOL!

Posted by: vidyohs | Apr 18, 2008 11:25:21 PM

I went eight years without filing. When an IRS agent sent a letter requesting information, I replied with a request for a signed statement that such information would not be used against me in court.

They quit sending me letters.

Posted by: Sam Grove | Apr 19, 2008 1:11:59 AM

BTW,
To any who are interested in this. It is not my intention to turn Cafe Hayek into a tax protester/refuser/information link.

I am interested in exploring virews about law and regulation and how we view those through conventional wisdom or in reality.

It is just a matter of fact that one of the most glaring examples of convoluted thinking is in realtion to tax law. There are other examples and I hope to put them out here and get input.

It is also a fact that conventional wisdom also leads people to vast misunderstanding about markets and economy, as well as what is done with the fruits of our labor once it is taken.

A worthwhile undertaking in my view, I hope others agree.

Bye now, off for a well earned 3 day weekend, have a great one yourselves!

Posted by: vidyohs | Apr 19, 2008 9:05:37 AM

I'm looking forward to the continued discussion and I'm glad it has remained in the forum.

That weakness of the internet of discussions consuming more time than they would in person is also a blessing because that time can be used to read and re-read the posts in the discussion before replying. Being able to READ those comments also helps my comprehension of the comments.

I hope it's a great three-day weekend!

Posted by: brotio | Apr 19, 2008 6:16:00 PM

I have the patience and I'd love to hear it. Whether compliance is mandated by law or not, others will not do business with me if I don't comply. We can call it mafia rule, if you like, instead of rule of law. And that's what I was sort of getting at in the first place.

There may be no law that requires me to do all those things but the effect is that it's as good as having a law. And the more successful you are, the more of an example they want to make of you.

Sam, that's a great story.

Posted by: Methinks | Apr 21, 2008 4:31:03 PM

Hello,

It was a threeday holiday with its ups and downs. It was great to spend time with my lovely lady in just laid back touring of beautiful country, stopping when we wanted, doing some rock hounding, and not having a clock or a schedule. The first day was beautiful, the next two days unexplainedly foggy until afternoon and then we had heavy cloud cover.

Anyway, on the subject of this discussion. I will try once more:

"Last year I asked the customers of this cafe if any knew how the Constitution gained any jurisdiction over a free man native born to the soil of any of the states. Not one person answered, not one even attempted to answer and that included such luminaries as Martin Brock and muirduck."

Com'on someone give it a shot. It is crucial to any understanding of law and therefore also regulations.

Posted by: vidyohs | Apr 21, 2008 10:32:57 PM

Vidyohs, I'll give it a go:

The Constitution gains jurisdiction over a free man when he consents to it.

I can't think of anything other than that, that isn't a variation of, "well it just does!"

Oh, and welcome back :)

Posted by: brotio | Apr 22, 2008 12:54:42 AM

Brotio,

Your answer is technically correct yet does not get to the whole truth.

Remember, the constitution is the corporate charter for the corporate UNITED STATES OF AMERICA, it is not technically a replacement for the Article of Confederation nor does it cancel or supercede the Articles.

The founding fathers had no authority to change the government founded by the Articles of Confederation so they didn't. They abandoned that government and the Articles of Confederation that bound them.

Abandoning something is not the same as canceling it. The thing still exists, it is just not given any voice or authority by those who abondoned it and want to keep it lost.

The free individual and his acknowledged rights are specifically mentioned in the Articles of Confederation; but you will find no place in the constitution, or its amendments, where it mentions the free individual specifically. The constitution mentions citizens, citizen is quite different from free man.

Now, back to the consent. What is missing in your answer is the important element for understanding. If you are of the native born as am I, how did you give that consent?

Posted by: vidyohs | Apr 22, 2008 9:01:50 AM

Methinks,

"I have the patience and I'd love to hear it. Whether compliance is mandated by law or not, others will not do business with me if I don't comply. We can call it mafia rule, if you like, instead of rule of law. And that's what I was sort of getting at in the first place."

I knew exactly what you meant, trust me I have been working on this line of thought for a very long time.

I used to say "every single association a human can have, but one, is based on one of three kinds of contract. The implied, the spoken, and the written. The exception being government."

Some ten years after having forumlated that concept my studious pursuit made me realize that I was wrong.

All associations a human can have are based upon the three kinds of contract, implied, spoken, or written.

As for the use of force and the willingness to use it, last week I spoke to Shawn and told him that the government is perfectly willing to kill you to gain and keep control. I know that, and I know that it doesn't, in some cases, take a hell of lot of excuse for them to come after you. And, yes, it can give each of us a very helpless feeling, no one wants to be first to step up and face the business end of a gun in the hands of a man who will pull the trigger on orders.

I have in my film library of research stuff two documentaries that I pull out and watch every year just to keep that understanding fresh. The two are "Waco, Rules of Engagement" and its sequel "Waco, New Relevations". Coupled with my knowledge of what happened to Randy Weaver at Ruby Ridge, Idaho that information is enough to keep well aware of that my view of government is not cynical, it is realistic.

I'll stop now. Gotta get ready for a video job at 1100AM, but first and on the way I must take my little companion of 17 years to the vet to see if he has come to the end of his road. This three day weekend turned out to be very rough on him and it surprised me. The "Boss" has been growing progressively weaker this last year. I don't think this week is going to be a good one for our household, so if I come and go here, bear with me.

When I next post I will put in a couple of URLs to videos that everyone should see.

Posted by: vidyohs | Apr 22, 2008 9:16:56 AM

"Waco, Rules of Engagement"
I've got that one.
The government, for the most part, rules by fraud.

Methinks, I've started on 'Meltdown'.

Posted by: Sam Grove | Apr 22, 2008 2:38:55 PM

Sam,

You need to get the "Waco, A New Relevation" to see more of the footage of the followup investigations results.

The FLR films alone will infuriate you. The there is Chuckie Schumer, an egg sucking dog if there ever was one.

Posted by: vidyohs | Apr 22, 2008 8:27:39 PM

Methinks et. al.,

If you aren't familiar with Lysander Spooner, and even if you have heard of him, the below link should be required reading for all children born here, and for immigrants as well.
http://www.lysanderspooner.org/

I recommend reading the Lysander's essay (in the form of a letter) "The Constitution of no Authority."

This link takes you to a full length documentary, "America, From Freedom to Facisim" done by Aaron Russo. If you have not seen it, it presents as good a layman's explanation of why you're paying an income tax as anything publicly distributed. It is about 1 hr 51 minutes long. After viewing it go to the the wickipedia link and look at the criticism of the film and ask yourself who wrote the criticism and for what purpose. View the film first so you can understand the criticism.
http://video.google.com/videoplay?docid=-1656880303867390173

Methinks, do you agree with me that basically "those that make the law do not have to live by that law"? Before you answer that read this:
http://www.reason.com/news/show/125449.html

What happen to that family is not an isolated incident, it is far more common than people would want to know.

I can dig deeper if you can't agree with me.

Posted by: vidyohs | Apr 22, 2008 8:57:43 PM

Interesting stuff, Vidyohs.

Methinks, do you agree with me that basically "those that make the law do not have to live by that law"?

If that is true, then there is no Rule of Law. Which begs the question, "is Rule of Law possible?". Vidyohs, it's not that I can't agree with you. I can't disagree with you.

People possessed of the power to write law will surely bend that power to write exclusions for themselves or to use their position to excuse themselves from the reach of the law. I believe the founding fathers were painfully aware of this as they made every effort to spread power through a system of checks and balances. But, are those checks and balances enough and have they been maintained or systematically removed over time? Is it even possible? I have not thought about that very deeply before.

Thanks for the links. I will take some time to read them and consider the implications.

Sam, let me know what you think. I would love to know your perceptions of the stories contained within "Meltdown".

Posted by: Methinks | Apr 22, 2008 9:31:37 PM

Methinks,

"If that is true, then there is no Rule of Law. Which begs the question, "is Rule of Law possible?". Vidyohs, it's not that I can't agree with you. I can't disagree with you."

That is partly why I sought this discussion, the fact that the vast majority of Americans have been short-changed in our education about law and nearly everything we think we know is actually conventional wisdom with no basis in reality.

The problem is that we don't ask the right questions of the lawyers who write the the laws using terms instead of words, and who deliberately obsfucate everything so as to seem to say one thing but are actually leaving everything open to interpretation.

"Rule of law" can be a good thing if the laws are good, it can be a bad thing if the laws are bad. So, do we worship law and the lawmaker without putting both under the closest constant scrutiny?

Lysander shoots down the devout belief that we should change bad law through "the process", but obey it as is until it is changed. His viewpoint, one I accept whole heartedly, is that bad law is to be disobeyed from the outset with forceful resistance if necessary because his correct thinking is that if you are obeying it, even though reluctantly, is there any real incentive for the lawmaker to change it, especially if he/she/it is benefiting from the law as is?

Now this is a good question:

"But, are those checks and balances enough and have they been maintained or systematically removed over time?"

But think of what I said above about the Articles of Confederation and the Constitution, in which I pointed out that the Articles were never canceled or superceded, just abandoned. Ignoring or abandoning the "checks and balances" is as effective as cancelling them, especially if as Hitler said in 1939 when speaking to a room full of his advisors, "Isn't if fortunate for those in power that the people do not think?"

How many people do you run into on any given day would have the slightest clue as to what you were talking about in mentioning the "checks and balances" that were built into our government? How many could intelligently discuss that topic with you? Conventional wisdom says it is there so therefore it must be there, why ask? After asking you, "why ask", how many would immediately turn to speculation on who the singer on "Idle American", or whatever it is, was the better performer on the last show?

We don't think and we don't question, we just operate on our enculturation and on conventional wisdom.

Conventional wisdom says that participation in the Social Security program is mandatory, the law.

I pointed out that the SS officials will tell you themselves that there is no law requiring the requesting of a SSN or participating in the system. It is logical beyond question that if one does not have an SSN one is not participating because there is no way to correlate your "contributions" without the number in their system. Of course your name and address should be sufficient to serve, but not in their system.

Now that post was met with universal putdowns on this Cafe. I challenged people to write the SS administration and ask for themselves. To my sure and certain knowledge no one even considered actually taking the step to question the people who could give them the answer, the SS administration.

The Supreme Court ruled that Title 26, the income tax, did not create a condition of slavery. How can that be? To a logical free man, a law creating a legal taking of 50% of his fruits of labor through coercion would constitute a condition of slavery, true?

But, ask yourself this, if the income tax outlined in Title 26 is voluntary, then the ruling of the Supreme Court makes sense, does it not? After all, anything self confessed and submitted would be voluntary therefore negating any claim of coercion or slavery, true?

Conventional wisdom tells you what?

It tells you that if your door isn't being kicked in by the application of arbitrary power and stupid thinking, you haven't been tased yet for asking why you were stopped, then everything is okay, maybe that's it?

Are you willing to gamble a shot on how the constitution gains jurisdiction over you?

I apologize for sounding like a prodding teacher, but I am sounding like a prodding teacher and I can't get around it.

Posted by: vidyohs | Apr 22, 2008 10:44:51 PM

Methinks,

BTW, when I am using the word you, it is a rhetorical you, not a specific you, unless I use specfic and intentional language. Interpret all as rhetorical and non offensive, okay?

Posted by: vidyohs | Apr 22, 2008 10:47:28 PM

I read Spooner's 'No Treason' back in the early '80s, pure dynamite.

I also have been through the SS thing.

'We, The People"

Posted by: Sam Grove | Apr 22, 2008 11:07:17 PM

Vidyohs,

I believe you gave the answer to the question you asked of me, "If you are of the native born as am I, how did you give that consent?" in your following post to Methinks when you wrote, "all associations a human can have are based upon the three kinds of contract, implied, spoken, or written."

Since I haven't put my signature to the document, and haven't spoken to those who wrote it, that leaves implied. Since I haven't explicitly rejected the terms of the contract - it's implied that I agree to abide by it.

The next logical step to me, then, is that if the contract is breached then I may consider it void; but that if I choose to act upon that consideration I'd better be prepared to defend my actions with force because the other side surely will.

Posted by: brotio | Apr 23, 2008 12:37:30 AM

Brotio,

I hope you don't mind if I delay my response a tad until I return from my morning/day contract?

Posted by: vidyohs | Apr 23, 2008 7:48:45 AM

Sam,

Are you familiar with Bob Schultz of the "We the People" foundation?

He has been fighting the good fight for a long time at the highest levels he can reach.

Right now he has a lawsuit against the government because basically they refuse to accept the petitions of the foundation and those petitions gathered by the foundation.

The Supreme Court's reply, "You have the right to petition, the government does not have to listen."

Conventional wisdom about the 1st amendment down the tubes again, eh?

As Lysander points out, the application of the constitution to you and I is a fraud in and of itself.

"We the people" in the preamble does not equate to "free man", and that converts to "citizen" if one is under the jurisdiction of the constitution. Like any good corporate charter, the purpose of the constitution is the structure of the corporation, the election or appointment of its officers, and the administration of the corporation, nor more and no less. It is not about your freedom.

Posted by: vidyohs | Apr 23, 2008 7:56:27 AM

BTW, when I am using the word you, it is a rhetorical you, not a specific you, unless I use specfic and intentional language. Interpret all as rhetorical and non offensive, okay?

Goes without saying, Vidyohs. It's all good.

Posted by: Methinks | Apr 23, 2008 9:27:42 AM

No, I long ago purchased 'We the People' which details how to stop filing, deal with the IRS, and stop withholding.

Posted by: Sam Grove | Apr 23, 2008 11:52:14 AM

Methinks, it is interesting reading about the actual details of a system of insanity.

Posted by: Sam Grove | Apr 23, 2008 1:42:20 PM

Methinks,

So, what do you think? If Title 26 is law and compels one to self assess and pay an income tax would that not create involuntary servitude or slavery by law. Which of course would be in direct violation of the 13th Amendment, true?

But, if Title 26 details a voluntary assessment system and a voluntary submission of payment, then the Supreme Court would be correct in ruling that the income tax does not create involuntary servitude or slavery, true?

Is the logic correct?

Posted by: vidyohs | Apr 23, 2008 7:04:47 PM

Brotio,

As no one else has been willing to venture an opinion, I'll go ahead and tell you that yes you put yourself under the jurisdiction of the Constitution but it is not just implied, it is more devious than that and it works differently for different folks.

Methinks' folks in immigrating did apply and effectively sign a contract in seeking citizenship, so they requested to be included in the jurisdiction of the constitution. Now Methinks, a minor of age 3, can claim duress if she so chooses because no one person can contract for another. Her parents willingness to sign and contract is meaningless in application to her. At majority she is able to claim duress and refute any claim or contract tieing her to the corporate USA. Would such a fight be easy? No. Could it be done? Probably.

Now you, Sam, and myself are different. We are native born so our presence here is not something that came as a benefit or privilege from government, we have as much right to be here on our own terms as Benjamin Franklin, George Washington, Thomas Jefferson, Chief Sitting Bull, Cochise, et. al. said claim to right to be here as a free man going back to the first man that came across the land bridge those thousands of years ago.

The mechanism that puts us under the jurisdiction of the constitution is assumption (presumption & supposition). You are presumed to want to be a citizen and so are consider one, but you are never informed of this nor are you ever educated to this nor are you ever presented with the point of decision to be or not be a citizen.

You must discover the assumptive nature on your own and make your decision then, do you wish to rebut the assumption or leave it in force?

Here is what Black's Law says:

Assumption: 1. A fact or statement taken for granted; a supposition .

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