Scott Horton Interviews Robert Higgs

Scott Horton, July 03, 2010

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Robert Higgs, senior fellow at the Independent Institute, discusses the tiresome rants of gloom and doom survivalists, why those who long for a government or economic collapse should be careful what they wish for, why federal spending can’t continue at the current level without a bond market revolt, the none-too-encouraging result of the Soviet Union’s collapse and why the US empire may face gradual cutbacks instead of outright abolition.

MP3 here. (28:55) Transcript below.

Robert Higgs is Senior Fellow in Political Economy for The Independent Institute and Editor of the Institute’s quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, and the University of Economics, Prague. He has been a visiting scholar at Oxford University and Stanford University, and a fellow for the Hoover Institution and the National Science Foundation. Dr. Higgs is the editor of The Independent Institute books Opposing the Crusader State, The Challenge of Liberty, Re-Thinking Green, Hazardous to Our Health? and Arms, Politics, and the Economy, plus the volume Emergence of the Modern Political Economy.

His authored books include Neither Liberty Nor Safety, Depression, War, and Cold War, Politická ekonomie strachu (The Political Economy of Fear, in Czech), Resurgence of the Warfare State, Against Leviathan, The Transformation of the American Economy 1865-1914, Competition and Coercion, and Crisis and Leviathan. A contributor to numerous scholarly volumes, he is the author of more than 100 articles and reviews in academic journals.

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Scott Horton interviews Robert Higgs, July 7, 2010

Scott Horton: Okay, y’all, welcome back to the show. It’s Antiwar Radio. I’m Scott Horton, and I’m joined on the line by the great Robert Higgs from The Independent Institute. Let me click on the right thing here so I can read you some of the books he wrote: Crisis and Leviathan, Depression, War, and Cold War, Against Leviathan, Resurgence of the Warfare State, Opposing the Crusader State, Neither Liberty Nor Safety, The Challenge Of Liberty, Arms, Politics, and the Economy… On and on like that it goes. He is the editor of The Independent Review. You can check out The Independent Institute at Independent.org, and, boy, this guy is more libertarian than all of y’all. He doesn’t even like it when the government does bad things to other government people, which makes him more libertarian than me, even. Welcome back to the show, Bob, how are you doing?

Robert Higgs: I’m doing fine, Scott.

Horton: Yeah, I think you’re the only libertarian I ever heard say: “I am absolutely opposed to Dick Cheney being tried for war crimes. There shouldn’t be any federal trials at all ever again for anyone.”

Higgs: Well, I don’t remember saying that, but I’d actually prefer that he were struck by lightning, and that could save us some expense, perhaps.

Horton: Well, I have a witness. It was Anthony Gregory, your colleague at The Independent Institute. He can verify this.

Higgs: I trust him more than I trust my own memory.

Horton: Yeah, well, and if you’re smart, more than you trust me too, so, we’ll double check with him. All right, now – and I know you’re smart because I read your stuff. Let’s talk about “Which End, If Any, is Near?” Which end, if any, is near, Bob?

Higgs: [laughs] I wish I knew, Scott. I assume you’re referring to a little piece I wrote recently which was a kind of a lament, I think, about the proliferation of doomsday forecasts or expectations or households or whatever they are that have appeared, particularly in the last year or so. They’re all over the web now, and on certain Websites you get hardly anything else. And some sites have more or less switched over from doing libertarian analysis to doing gloom and doom and survivalism and talking about which guns and ammo are better and so forth, so there’s been a lot of this stuff going on, and at some point I found it more than I could take, and so I had to express the opinion that I think most of it is extremely overwrought.

Horton: Well, I guess I hate to say this, but I’m sort of hopeful about an economic collapse. What Ron Paul always says is that, you know, these horrible policies, meaning the complete and total destruction of any semblance of the rule of law, especially at the national level, but really across the society in terms of at least the way it binds the power of the government (obviously it still applies to us) the endless warfare around the world, that this is only going to end, not because people listen to him but because the dollar’s going to break, because our empire’s going to fall apart like the Soviet Union. And I always figure that’s better than going out like the Germans or the Japanese.

Higgs: A lot of unfortunate things may happen. I’m not at all arguing against that. In fact I think some unfortunate things are virtually certain to happen. From one point of view they may not be unfortunate at all. For example, the government’s promises to pay benefits under Social Security, and particularly the Medicare part of Social Security, cannot be kept, so if you know arithmetic, you already know that at some point these programs are going to collapse in the sense that they will be unable to pay what they promise people and therefore in one way or another they will not make those payments. So, yes, that sort of thing is easy to not only imagine but actually to expect, and people would be well advised to plan for it, but there are a lot of other aspects of gloom and doom being discussed that are by no means sure things. Although I think the dollar conceivably might collapse at some point, I think the odds are strongly against it, and in history there have been many worse-managed currencies that managed to hang on for a very long time, and I won’t be surprised if the dollar turns out to be that way too. That doesn’t mean the dollar is going to hold its value. It almost certainly will continue to depreciate quicker or slower over time. And again that’s something that people should expect and plan for, but that’s a different matter from pell-mell abandonment of the dollar. I think, too, Scott that it’s worth recalling that when people long for a kind of overall collapse of the economy, they should think twice about that, because historically collapses like that are virtually never the occasions in which liberty comes out ahead at the end. In my work and in other people’s work that I’ve read about but not really participated in doing the research for, it seems to me that social collapses and particularly government collapses generally portend even greater totalitarianism.

Horton: Well, sure, and your book, Depression, War, and Cold War, as the mark of all of that.

Higgs: The tsarist regime was horrible. But the Bolsheviks were worse. The Weimar German regime was horrible. But the Nazis were worse. The people should think twice when they hope for collapse.

Horton: Yeah, no, I’m with you, and especially when, you know, the American people are so detached from reality in so many ways now and you can see somebody like Glenn Beck take a perfectly Ron Paulian argument that, “All we’ve got to do is not be afraid and just start doing the right thing,” and then he turns the right thing into, “Let’s persecute the poor and the brown and the powerless,” instead of “Let’s end the war and shore up the dollar and reinstate the Bill of Rights,” which is how Ron finishes the sentence, you know. But, but you take a Glenn Beck, and if economic times got much worse, that whole side of the Tea Party movement could be a real kind of fascist thing, I think. It scares me.

Higgs: I share your view in that regard. I think we need to remember that when there is some kind of revolution or thorough-going collapse of the political order, what happens next really depends heavily on the kind of ideological stance that people have and what kinds of preparation and schemes have been made by activists as well. There are sometimes little groups like the Bolsheviks in old Russia. They didn’t amount to much, you know, their numbers were trivial, but they were more or less prepared to do something and take action when an opportunity arose, and so they managed to leverage that crisis into their domination of a huge society. So if we’ve got people out there who are laying their plans and are well prepared to be unscrupulous, then they have a much stronger chance of coming out on top of the heap at the end. But most of all what will happen depends on what people will be willing to tolerate. And in general when there’s some kind of collapse of society or economy, almost everybody becomes tremendously fearful and they look for salvation. And where they look for salvation and how they expect to find it hinges entirely on the dominant ideology those people hold at the time, and right now I’m afraid to say that the dominant ideology of the United States is anything but propitious for the cause of liberty.

Horton: Yeah.

Higgs: So, you know, I could easily see that if things fell apart, we’d come out of it in a few years even worse off than we are now.

Horton: I don’t know what propitious means, but it sounds right.

Higgs: [laughs]

Horton: I’ll tell you. Well, you know, the Soviet Union, that was certainly a benefit when the Soviet Union fell apart, and yet millions starved and the collapse of their system was absolutely devastating for the people of Russia and continues to be. And, hell, in America, we got FDR the last time we went through a real depression, so…

Higgs: Yeah, I think…

Horton: Hold it right there, Bob. I’m sorry, we’re going to have come back right after this break.

Horton: All right, y’all, welcome back to the show. It’s Antiwar Radio. I’m Scott Horton, and I’m so selfish, I’m sitting here pining for an economic collapse just because I’m sick and tired of talking about war all day, every day, and yet Robert Higgs is saying, “Be careful what you wish for, young man,” something along those lines. Now, and then I guess your real point, Bob, is that the American empire is not going to collapse anytime soon. It’s going to be just like when Harry Browne died when I die, 50-60 years from now or whatever, everything is still the Permanent Crisis.

Higgs: Well, I don’t think the empire’s on the verge of collapse, Scott, but I do think, again, that it’s likely that financial constraints will bring about some changes, and in this case, probably some retrenchment. The U.S. government in the last few years has been mismanaged so badly that it’s put itself in a position that it can’t maintain indefinitely. Now, the people who run the system, I think at least some of them understand this, and that’s why they’re busily getting together in Toronto and having active discussions all the time how to disengage from some of these measures they’ve taken in the past two years to stimulate, as they imagine, the economy in this financial debacle and the recession.

But even though some of them appreciate the need for them to retrench, particularly to stop adding so much debt every year until they reach the point where the capital markets rebel against them, that that will be the real constrain on them. Because at some point the people that buy these bonds will simply lose interest in buying any more of them and in fact will want to hold fewer of them, and when that turnaround comes, and I think we may be in the neighborhood of such a turnaround right now, these governments will not be able any longer to continue spending at the same rate that they’ve been spending without financing their expenditures in even more troublesome ways such as by outright inflation of the money stock. So, if they reach the point where the financial constraint really begins to bite, they’re going to have to reduce expenditures, and that will almost certainly have to include the enormous expenditures on maintenance of the U.S. empire.

So I think there’s some hope, reason for hope, that the empire will be diminished in future years. I don’t see, with my understanding of political realities of the world, that it’s going to be given up all at once, or easily, because a great many people are going to fight to keep it, but I think the fundamental forces that hold up these governments, the U.S. government and the other advanced ones in the world, are now running against them. And so those forces ultimately will probably produce some results in the direction of retrenchment. I think it will be easier, ultimately, for the U.S. government to reduce the size of the empire than it will be for the U.S. government to cut down on old people’s pensions and medical care and so forth, because that’s going to generate just tremendous opposition politically.

Horton: Well now, ironically speaking and so forth, what role does the empire of bases play in propping up the dollar in the sense of impressing upon foreign leaders how they probably ought to still want to buy American securities?

Higgs: I don’t think it plays much of a role, Scott. You know, there’s a certain amount of intimidation that is part and parcel of the U.S. empire, and so this so-called central bank cooperation, for example, is a reflection of the clout that the U.S. brings to the table whatever the issue happens to be, whether it’s financial cooperation or military cooperation or anything else, but most of the people who hold U.S. debt and the debt of other governments are private individuals and institutions, and I think these people are practically all living in a world of very mobile capital. They can, with a push of a button, move tremendous sums of money anywhere in the world very quickly, and I simply don’t think they’re going to be intimidated by how many bases the U.S. happens to be maintaining in Somewhereistan.

Horton: In other words, these [bases] are simply a gross and net loss. There’s no – you know, there’s a whole theory that part of the reason that America wanted to attack Iraq is because he wanted to start buying his oil in euros and that kind of thing, and here they wanted to spend trillions of dollars doing a regime change to, in essence, prop up the dollar. But you think that probably doesn’t hold water then?

Higgs: I’ve never thought there was much to that idea, frankly. First of all, the magnitudes are trivial, when you look at the amounts of money at stake.

Horton: There is the example, though, right?

Higgs: There might be an example, but again the U.S. can invade Iraq fairly readily compared to its ability to invade and wreak havoc in a lot of other parts of the world. So I think other factors lie much more strongly behind the U.S. invasion of Iraq. But in any event, I think the empire is and always has been for the U.S. a net loser, but it’s not maintained for its aggregated benefits and costs, it’s maintained for the benefits it brings to the people who run it or are cozy with those who run it. So, so, it’s a ripoff.. It’s like virtually everything the government does. It goes about under an umbrella of misrepresentation about national security and weapons of mass destruction la la la la la, but that’s just for the boobeoisie. The people who actually run the system are interested in much more definite things, and I think in most of the cases where it looks like a screw-up for U.S. foreign policy, or the empire in general, these people who run the system still come out smelling like roses.

Horton: Yeah, of course. You’re the one who takes the blame. I saw you on C-SPAN, you’re the guy who got us into this mess, you mean old man.

Higgs: [laughs]

Horton: Now, which by the way, I highly recommend Bob Higgs on C-SPAN, Robert Higgs on C-SPAN, the three-hour call-in episode, to anyone who feels like gut laughing all day. Or crying, whichever you prefer. But now here’s the thing, though, we run up against what you’re saying about when times get bad, rather than the people who run the state retrenching, it tends to be a “Crisis and Leviathan” situation. We go into the Great Depression, everybody blames Bob Higgs and the libertarian free market for causing the problem, and what we need is another New Deal and another New Deal. I’m looking at your article entitled, “Crisis and Leviathan” at the Independent Institute, which is also the name of your book, talking about the revolution within the form that we’re undergoing right now. While everybody’s watching the oil spill, there’s a revolution inside the White House and inside the Congress as we speak, Bob. And if it’s okay, I’d like to keep you one more segment and ask you about that.

Higgs: Okay.

Horton: Thanks. Hang tight. Antiwar Radio.

Horton: All right, y’all, welcome back to the show, Antiwar Radio, and lucky me, lucky you, we’ve got Robert Higgs to stay one more segment with us. He’s at The Independent Institute, that’s Independent.org, the author of Crisis and Leviathan, and, Bob, I guess this is where we get back to ideology. When a crisis comes, are we going to start rolling back some of our excesses, like, you know, all the money spent torturing people to death, or are we just going to have more of what it seems like we’re in the midst of right now, which when Garet Garrett talked about Franklin Roosevelt back in the ’30s, he called it a revolution within the form. He said, “All the revolutionaries are inside the White House and everybody else is outside the gate saying ‘Stop, stop.’” So, it seems like that’s where we’re already at. The dollar, if there’s a run on the dollar, like they say, I guess the crackup boom is the worse case scenario, then what do we get? Just military dictatorship?

Higgs: Well, I wouldn’t rule that out. They’ve certainly made preparation for that if they need it. Of course they would prefer not to have things get to that point, I’m sure, but I don’t think the people who control the U.S. government are going to just walk away from their power ever. I think they’ll do what they feel is necessary to retain their power, and I think they are unscrupulous people, and if they have to do horrible things, that’s what they’ll do. So, that’s the main reason I think why we all ought to be hoping that we don’t have any kind of a breakdown of the existing order because we’re likely to have a really fierce, terrible response to it from the government. And to make things work, a great many Americans will back the government when it takes these actions. As you know, governments always identify certain scapegoats and people to blame and hold responsible, and whether its economic royalists or communists or whatever it happens to be at the time, you identify the enemy, you start smearing everybody who gets in your way and putting people in prison right and left. So, I think our government is perfectly capable of reacting fiercely to the prospect of losing its grip on power. Now, that doesn’t mean they’ll never lose their grip, I simply think that when they do, and I think ultimately they probably will, it will be a much more gradual process of decay in which more and more people, as it were, simply walk away from them, refuse to cooperate any longer, withdraw their support, and eventually behave in such a noncooperative, evasive and sabotaging manner that the government can no longer accumulate resources and can no longer command enough allegiance to do its will.

Horton: Well, and that’s really what happened with the Soviet Union, right?

Higgs: I think so. In that case, it was also a revolution from the top, of course, even though many people in the lower levels of Soviet society were surely unhappy, and hardly anybody at that point believed in communism any longer as an ideological object or, you know, the loyalty to communism had pretty much dissolved except amongst some of the very old people. But I think what the Soviet power elite realized at some point in the 1980s was that the system was doomed and that there was a way for them to come out on top as it went under. And so they did that. They snatched the state property they had controlled by various devices, and they created a lot of billionaires among themselves, and they retained a lot of control over what was worth something in the society, like the natural resource deposits and means of marketing, and they still pretty much run the system. They renamed the KGB, and they call the new system capitalism, and whoopee. But as you mentioned before, the mass of the people continue to be in very bad economic condition there. And I think there has been some improvement. I think things for the masses of the Russians are a little better than they were under communism, but certainly it’s been a top down kind of regime change that has much less substance than it appears to have.

Horton: Well now, it’s funny because, I’m looking back on this thing, and it seems like FDR had this massive failure of a New Deal for a decade or so, and then he got us into a war, because that’s what you do when all else fails is you start conscripting people, that’ll bring that unemployment rate down one way or another there, and, you know, just dump them en masse on machine gun nests on top of cliffs and stuff, that kind of thing. But we never stopped warring since 1941, in that war that FDR got us in, and now it’s brought us to this point, and we see that there’s a pseudo New Deal going on with the government intervening more than ever in terms of the markets and taking over companies and bossing them around and these kinds of things. But so does that mean that we have another major full-scale, you know, World War III coming up – I don’t know, Obama or the next guy’s only way out of the mess they’ve got us in so far – or are we at the end of this cycle?

Higgs: I think conditions are different this time, partly because the configuration of power in the world as a whole is different. The wars that we may get in now are wars like attacks on Iran. That’s a very different thing from the United States and its allies going to war against Germany, Japan and their allies in World War II.

Horton: Sure.

Higgs: But those were powerful nation states that could really put up a fight. The U.S. makes war now against people that it would appear it’s bound to defeat, and yet it can’t. That’s a kind of paradox of the U.S. empire, that it loses all of these wars of empire, because what it tries to do is impose its will on societies that don’t want to be subjects of the United States, and so they keep sabotaging U.S. control of their societies in one way or another until finally the political will wears down among the American political establishment and they give it up or make some kind of arrangement like the one in Korea. But it always ends. The shooting stops and life goes on. But these post World War II wars have all been – even though Korea and Vietnam were not negligible in any sense, but relative to World War II much smaller affairs and aimed at much different objectives, I think. This was not the same situation Roosevelt was confronting in 1939 at all, and I don’t think it will play out the same either. If, for example, the U.S. does go ahead with or without Israel to attack Iran, what I would expect is a massive outpouring all over the world of opposition to that, just as there was sooner or later great opposition to the U.S. attack on Iraq, and that will provide some constraint on what the U.S. does and some encouragement for it to back away. Again, I think that these little kind of palace wars that are dreamed up by neocon schemers for the most part, who have inside connections, are quite different from the world wars in so many ways that it’s hard to draw a parallel.

Horton: So you think that if it really did come to, I don’t know, record unemployment and a horrible 1930-style situation, that at that point that’s where they’ll have to realize and give the empire up rather than going crazy like FDR and expanding it.

Higgs: Not give it, but cut back on it I think.

Horton: Yeah. At least. Well, hopefully starting with Pakistan, Afghanistan, Iraq and Somalia, for their sakes. Thanks so much for your time, Bob, and your wisdom. Appreciate it.

Higgs: You’re welcome, Scott.

Horton: Everybody, that’s the great Bob Higgs, author of Crisis and Leviathan and Depression, War, and Cold War, Independent.org.

org.

55 Responses to “Robert Higgs”

  1. January 2002 oil = $19 per barrel.

    August 2008 oil = $147 per barrel.

    Hope?

  2. [...] This post was mentioned on Twitter by AngelaKeaton, Liberty Ideals. Liberty Ideals said: Robert Higgs #libertarian http://bit.ly/cjmERQ [...]

  3. No one really longs for collapse. What people truly long for is redemption, but the 'system' is so corrupt and so dark at this point that it seems unredeemable. How does one redeem a system that seems completely insulated from anything other than the narrowest concerns of the very, very few? At this point, most just wish the 'system' would leave them the hell alone, but that too is mere fantasy.

  4. There is no return to status quo ante. And every effort in that direction will exacerbate the catastrophe.

  5. I do wish for a total collapse of the MICM. I despise the illegal genocidal wars and the official lies that excuse and support them. There can be no “redemption” without the complete destruction of the power of the evil Banksters on Wall Street and insane militarists in the Pentagon. Obama’s a puppet and is no different than Bush/Cheney. He tricked us all and is now planning the coming Zionist/Neo-Con attack on Iran. Our “government” was hijacked on 9-11 by a totally criminal cabal and we are now living in a de facto military dictatorship.

  6. "He tricked us all "

    Not all of us.

    "Our "government" was hijacked on 9-11"

    It was hijacked LONG before then.

  7. "most just wish the 'system' would leave them the hell alone, but that too is mere fantasy."

    Great comments which I agree with completely. That last sentence is spot on.

  8. I'm a big fan of Professor Higgs, but I'm more convinced than ever that the invasion of Iraq, and the U.S. and Israeli governments' current belligerence towards Iran are first and foremost about maintaining the dollar's role as the world's reserve currency. What matters is not the amounts of money involved as such, but the pivotal role oil plays in particular. The power to tax people indirectly through monetary inflation only follows the power to tax people directly:
    http://www.gold-eagle.com/editorials_05/milhouse0

    The ability to dictate which currency must be used to buy oil is effectively the power to tax the entire world. The only criminal scheme more diabolical is the proposed global imposition of carbon trading vouchers.

  9. "The ability to dictate which currency must be used to buy oil is effectively the power to tax the entire world. "

    True, but I think it goes beyond oil as well. Imagine if China demanded US customers pay them in Euros (or God forbid, Gold) for their products. Instant 3rd world status in the US.

    The Dollar is backed by something, the full firepower of the US military. Take the green funny money in exchange for goods and services or have your nation be bombed back into the stone age.

    Which puts the US in a Catch-22 position. The only reason people take the dollar is so they don't get bombed, but the more resources the MIC consumes the less value the dollar has. Cutting back the empire will destroy the dollar. Yet the empire itself destroys the dollar. All that is left is the day when a nation that can fight back (Russia, China, the EU, ect.) says no to the greenback.

    The only question this is what does the US do? The USSR died a quiet death* rather than try to give the ruble value through military intimidation or outright war. Will the US do the same? Sadly, I doubt it. That's why so many people want a total implosion. Another great Depression is still more preferable than another World war.

    *This is what I want to see in the US. A repeat of the fall of the USSR with the 50 US states playing the part of the Warsaw Pact and DC playing the part of the Kremlin. I hope someday that the US president is referred to the same way the current Afghan one is – as nothing more than the mayor of the city he works in.

  10. [...] Higgs thinks so, and considers this to be a good thing. He explains why here. Higgs’ analysis is fairly similar to that of Martin Van Creveld. According to these [...]

  11. [...] original here:  Robert Higgs « Antiwar Radio with Scott Horton and Charles Goyette By admin | category: CHARLES University | tags: answer-because, crusader, hoover, [...]

  12. "The Dollar is backed by something, the full firepower of the US military."

    Actually, that is not true. You are confusing the demand that X use USD in this or that exchange with what they are using when the demand is met.

    Insofar as the Federal Reserve, which is private, creates "money", it does not print money out of thin air as is so often repeated.

    It extends debt credit which becomes instruments of official exchange–a kind of quasi-currency–only when entering the genuine economy as loans or credit instruments of some sort. Thus "interest" is part of the System in two ways, once when the credit is extended to the Federal government , and once when it is actually loaned out by the banks and others.

    The whole system is camouflaged, not only structurally, but by the economic vocabulary.

    There is no such entity as "money supply", for example. What the System's economists means by that term is in actuality, as most of them well know, the debt credit supply.

    This is not the whole story by a long shot, but it is an important part of it unknown by most Americans.

  13. um… That is NOT what happened in the USSR. The Oligarchs rose out of the mob and had support from foreign powers to ruin Russia, from Israel and the US. They had a overhang because of oil manipulation in Saudi Arabia, mob from prohibition, and because communism creates massive black markets, it doesn't work. "They" however did not retain power, power was transferred to the enemies who were trying to take it apart for their own interest.

  14. Thomas – as long as there are people like yourself – intelligent, informed, courageous – there is hope.

  15. There is only one thing that I know for sure – there has never been a permanent empire on this planet and there will never be a permanent empire on this planet. Imagine that the Mongols used to control Russia, China and other asian countries (including Irak!!). Where are they today? Where is the Roman empire? where is the Caliphate (based in the Middle East) that controlled spain for 8 centuries? Where is the Dutch empire? Where is the Ottoman empire? Where is the British empire? Where is the French empire? Where is the Japanese empire that used to control the entire South East Asia? Where is the USSR?

    The one thing that all these empires have in common is that at one point they become so megalomaniac that they believe that they are omnipotent and they engage in practices that end up destroying their empire. Neo-empires behave the same way and they can only expect the same results – History repeats itself!.

  16. "Insofar as the Federal Reserve, which is private, creates 'money', it does not print money out of thin air as is so often repeated."

    These statements need to be addressed.

    First, it's hard to understand in what sense the Federal Reserve is 'private.' The Federal Reserve was created by the government and granted a government-enforced monopoly on bank-note issue. This allowed the banks to pretend to have more money than they really did. When people figured this out and demanded the gold those bank notes supposedly represented, the government outlawed the use of gold as money by private citizens in 1933. The Federal Reserve is and always was a creation of the government. The government serves, and always has served, first and foremost, the plutocracy.

    Second, what the Federal Reserve is (or was) required to buy with the money it creates doesn't in any way change the fact that these magic tokens are, so to speak, "created out of thin air." Nor does the notion of "debt credit" change the fact that the system is specifically designed to allow the privileged banking and financial class to effectively lend out, and invest with, and make money on money they don't actually have–except as magic tokens they and only they can create–sorry, borrow–out of 'thin air'.

    And when those same high-financiers lose a bet, the Fed prints more money and covers the bet at our expense, most recently to the tune of two TRILLION dollars. Where that money went, they won't say, but Goldman Sachs was mysteriously on the winning side of a whole lot of those bets, and their debtors mysteriously came up with the money to pay them off.

    It is a con job–a massive transfer of wealth from the economy as a whole to whoever has early access to the freshly-printed money. It robs the poor and gives to the rich. It rewards those who feed on deception and war. Their next plan is to effectively tax life itself:
    http://tinyurl.com/ycm7fgz

  17. You have an overly optimist picture of the Federal Reserve actually.

    For example, the mechanics of the Paulson bailout were as follows.

    The privately owned banks that control the Federal Reserve (about a half dozen at most) lend the US government at interest and against the collateral of future US taxes $700 billion. The Federal Government in the person of Paulson then returns the $700 billion to the same banks and financials and their familiars as a gift, with no strings attached, to be lent out at interest to the same US citizens who are liable, as Federal taxpayers, to pay interest and principal to the banks and financials that received their tax money as a free gift in the first place.

    It's a revolving door–they get you coming and going.

    And all these legally binding contracts (in theory at least) are not thin air at all.

    Anyway, it is much closer to the truth to say that the Federal Government is the creation of the private interests that control the Federal Reserve rather than the reverse.

    Sorry that does not fit your simple-minded public-private dichotmomy of what is "bad" and "what" is good.

  18. It's a con job all right, but even more of a con job than you seem to suspect.

    In fact, for those intimately familiar with economic and financial affairs from ancient times through the present, it is clearly the most monumental fraud ever perpetrated on a people in known history.

    And it is, alas, a private con job by a very small elite.

  19. It is also a quintessentially Capitalist con job.

    The only other thing that comes close is US private Health Insurance, but that is small potatoes by comparison, and they get a little messy about their legal obligations and so forth.

    Naturally the legal system is purchased right along with the government.

  20. corr: "dichotomy"

  21. i really wish scott horton would drop the seth green impersonation it's getting old

  22. "Only Communism can save US Capitalism now."

    EAC

    Actually, Slavoj Zizek somewhere makes the point that the Communist Parties in Wstern Europe for the most part have shown no interest in winning elections and coming to power.

    He doesn't mention why, though his clear implication is that they have become lazy and institutionalized.

    But there might be another explanation–having analyzed the world-wide economic catastrophe engineered by Bush and Cheney, they may have no interest whatever in getting involved in such a complex and insoluble mess.

    Let it all collapse and play it for the aftertimes.

  23. "The privately owned banks that control the Federal Reserve (about a half dozen at most) lend the US government at interest and against the collateral of future US taxes $700 billion."

    First, the $700 billion "Emergency Economic Stabilization Act" money I assume you're referring to was designed to distract attention from the other $1.2 trillion and counting the Fed created–sorry, borrowed–and spent with no accountability whatsoever.
    http://preview.tinyurl.com/2e9kgwj

    Second, how is it that this one and only one ostensibly 'private' organization has the power to 'borrow' against nothing more than the "collateral of future US taxes?" Again, in what possible sense could such an organization be considered 'private'?

    Third, the official U.S. government debt is somewhere around $13 trillion now. Including unfunded liabilities, it's really around $100 trillion and growing. The notion that this money is 'borrowed' against future tax revenue is laughable.

    E.A. Costa continues:

    "Anyway, it is much closer to the truth to say that the Federal Government is the creation of the private interests that control the Federal Reserve rather than the reverse. "

    Utter nonsense. As already mentioned, it is the government that enforces the Fed's money-creating monopoly. It is the government that collects the taxes in Federal Reserve Magic Tokens, thus insuring their continued use as money in place of the gold the government confiscated in 1933. It is the government that made the deal in the 1970s with the House of Saud (and eventually the rest of OPEC) to keep them in power if they would accept only dollars for their oil. It is the government that invaded Iraq and as their FIRST act as the new rulers switch Iraq's oil sales from euros back to dollars.

    Forgive me, but it is your cartoon notion of capitalism that is simple-minded. Government is the parasitic exploitation of the evolutionary instinct to interpret political authority as the voice of tribal consensus. Government won't become benevolent once you or someone like-minded finally gets put in charge of the world. The power you seem so eager to afford the government to battle these so-called capitalists will, ironically, wind up in their hands anyway. This is no accident.

  24. "Second, how is it that this one and only one ostensibly 'private' organization has the power to 'borrow' against nothing more than the 'collateral of future US taxes?' Again, in what possible sense could such an organization be considered 'private'? "

    Sam Lowry

    You seem a bit mixed up, Comrade Lowry. It is the Federal Government that borrows from the PRIVATE banks of the Federal Reserve. And the Federal government uses its tax authority as collateral.

    Got it?

    Better get out your X-ray glasses and go back to the drawing boards.

  25. "It is the Federal Government that borrows from the PRIVATE banks of the Federal Reserve. And the Federal government uses its tax authority as collateral."

    Tell you what: Why don't YOU print up some magic tokens to 'lend' to the government. As they throw you in jail (assuming they don't simply shoot you), explain to me again how the Federal Reserve is a 'private' bank?

  26. Not quite, Comrade Lowry. "Magic tokens" is not the gist. Much worse.

    Lose the rose-colored glasses. The Banks that constitute the Federal Reserve are PRIVATE, got it?

    There's no doubt on that point.

  27. It always appeared that the "Federal" Reserve was really a private charter that was authorized by the US Fed govt for the profitable benefit of a small plutocratic elite…That's another thing that strikes me: the same people that scream "Socialism" whenever thegovt tries to help the down and out are also the same people getting rich off govt contracts, charters and subsidies and tax breaks..
    The same Libertarian youth screaming at the Town Hall meeting might possibly wipe-out on his motorcycle this weekend and be picked-up by an ambulance he didn't pay for, be wheeled into an emergency room he didn't pay for, be seen by a doctor he didn't pay for…be cared for by nurses he didn't pay for…….They're all big ayn randians until something happens to them and then it's, " hey, need a little help over here! "

  28. "The Banks that constitute the Federal Reserve are PRIVATE, got it? There's no doubt on that point."

    Argument by assertion? How far can we take this?

    You said: "[The Federal Reserve] does not print money out of thin air as is so often repeated."

    Fact: The Federal Reserve buys U.S. treasuries.

    Question: Where dose it get the money?

    If it doesn't (as you claim) create it out of thin air, is it, as you originally seemed to suggest, merely 'lent [...] against the collateral of future US taxes"? That is, as I wrote trying to capture your argument, is the money that the Federal Reserve uses to buy U.S. securities effectively borrowed against the federal government's authority to tax? Or, as I and others have stated, is the money simply created out of thin air?

    For what it's worth, it was a question Ben Bernanke himself refused to answer:
    http://www.youtube.com/watch?v=CtvHAqK8P14

    Do you seriously expect anyone to take you more seriously than the clown that chairs the Federal Reserve?

  29. balderdash. a stronger argument can be made that no gov't ever actually "tries to help" anyone; it is interested only in the acquisition of power and the exploitation &/or compromise of the citizenry is but a means to that end.

  30. How many recall that sarcastic old joke after after being discharged? – that snappy quip: "Sam had best not bother me again until all the crippled men and pregnant women are called up".

    Look around you. My paper regularly prints stories of the horribly injured rehabilitating back "into the ranks", the large numbers of women – grandmothers, even – manning the ramparts of Empire.

    Even the whole "gays in the military" thing is based on an entirely new premise: A Right To Serve vs. when it was merely a privilege I was allowed to briefly enjoy.

    It may not be on the verge of collapse, but it seems to trhis oberver that the Swagger has turned into a Stagger.

  31. Comrade, you are making a fool of yourself, which is a pity.

    There is no debate or argument about the banks that compose the Federal Reserve being PRIVATE entities, and quintessentially CAPITALIST as well.

    Moreover, there are levels of membership, and no more than half dozen banks actually control it.

    These banks are now also intimately connected to the major financials as well.

  32. "Privilege"–very droll.

    Yes indeed, the Finance Capitalists–who seldom see military service themselves–are quite happy to extend you the privilege of fighting and dying for them.

  33. Worlds I would destroy forever,
    Since I can create no world;
    Since my call they notice never

    – Karl Marx

  34. http://www.lewrockwell.com/rockwell/central-katri

  35. Whatever the argument, if it is keyed on "trying to help", it is worthless.

    And "citizenry" is what in your definition?

  36. Young Marx? When a Hegelian then?

    If that is the extent of your Ricardo, Marx, and Lenin you are indeed a fool, Comrade.

    Not that nihilism does not have its uses.

  37. Excellent critique of the Corporatist Capitalist government of the younger Bush at work, rivaled by the Corporatist Capitalist government of Obama in relation to the Gulf disaster, which, through the agency of British Petroleum and an indulgent regime when it comes to rape and pillage as long as it is private and Corporate, is also distinctively Capitalist–indeed hyper-Capitalist as only the US can manage it.

    As a contrast consider the Chinese Communists, who are acknowledged around the world to be not only the astute predictors of earthquakes, but also highly skilled in disaster relief afterwards.

  38. Consider also the admirable relief and prevention of loss of life the Communist Cubans are renowned for in regard to hurricanes, which puts the US Capitalists to shame.

  39. Oh, guess those figures haven't reached the US media yet, nor the deluded "free marketers" at Lew Rockwell, eh?

  40. Maybe it's because despite the fact that Cuba legalized cell phones and computers a whole two years ago, no one can afford them?

  41. Sam, the cellphones and computers are like alcohol. Up to a point you drink alcohol, beyond it the alcohol drinks you.
    http://computer.howstuffworks.com/question54.htm

    http://www.youtube.com/watch?v=wU_FDnLFU9A

  42. I think Higgs is wrong to worry about Nazis and Stalinists; the more I read about Russia and China, the more you see how it made sense they would succumb to communism, there were so many real bona fide peasants and their condition was *so* bad – they seemed to me totally alien to and totally alienated from the upper and middle classes. It only happened in those places and in ancient asian and other countries lurching into the modern world. I think the only European countries which became communist did so because they were conquered, or dominated by Russia, likewise the little asian countries. And they were not (except for Cambodia) anywhere near as bad as Russia and China.

    Germany was severely traumatized as well, not just by Versailles treaty and hyperinflation, it hadn't even been a real country for very long, less than one hundred years. Spain and Italy's fascists were nowhere near as bad as that either and they also had dodgy traditions and hadn't been countries for much of their people's history. And they were going crazy against the backdrop of Russian craziness and WWI. These places hadn't even had universal suffrage for that long.

    so, my point is – I don't believe a country like the USA would stay dictatorial for very long, if it went that way at all. It just wouldn't happen, imho. (but i suppose I wouldn't want to find out either)

  43. (1) The US has among the worst wireless in the world, exactly because of "Capitalism."

    (2) most cell phones are made in China.

    You should get out more, Comrade Lowry, open your eyes and mind. You realize, naturally, that the Neo-Con Chertoff's wall against Mexico was not designed to keep Mexicans out but to keep gringos in?

    And Arizona is now looking more like Israel every day.

  44. Also this is your typical nonsensical non-sequitur, Comrade Lowry. The Communist Cubans were ahead in hurricane relief long before "cell phones" were current.

  45. You are too subjective and tendentious to be a Marxist-Leninist, Comrade Lowry. You will have to remedy this by studying logic, mathematics, philosophy, and history. Or you may have to miss the party.

    Lenin himself had a place for "markets", for example.

    But the idea that any market is "free", and especially any market under Capitalism, is an absurd delusion when it is not outright propaganda and manipulation.

    Moreover, Capitalist "competition" always moves toward monopoly, and Capitalists always buy any "state"" that is buyable. Why wouldn't they?

    The only area the Classic British Liberal Social Darwinist Capitalist wants "competition" is commoditized "labor".

    And the US is both eminently buyable and was bought and commoditized centuries ago, first by the same British Capitalists the war of independence was fought against.

    Another caveat: Capitalism plus social welfare is NOT Socialism–it is still Capitalist, as most of the West European "Socialists" are. They also remain Imperialist for the most part.

    Consider the following formula, for example:

    Bernstein/enough time = Tony Blair.

    QED.

  46. [...] Destruction – The FreemanRobert Higgs – Antiwar Radio with Scott HortonGood Economists, Bad Economists, and WalmartYouTube – Thomas Sowell on the Housing Boom and [...]

  47. Rigid Marxist Economic analysis has no prescriptions for post-Industrial Empires run by Finance Capitalists.

    Marx would have considered the possibility purely utopian and fantastic–a Capitalist Imperialist's wet dream, so to say, which exactly what the US is at present.

    He certainly had not considered that there could ever develop a whole large nation with a citizen body as doltish as the American populace.

    He also had no place for Bernays' kind of Public Relations, no inkling of the power of subliminal advertising as Capitalist propaganda, and could not have envisioned such perversities as repressive tolerance as defined by Marcuse.

    Lenin is more useful across the board.

    But the real insight is from the Communist Chinese, who have brilliantly exploited USA Finance Capitalism since Nixon and Kissinger.

  48. The US is a concealed Capitalist oligarchy, and has been since the beginning.

    The Capitalist oligarchs don't want a dictator–it would cramp their style.

  49. You also have to be careful about Austrians like Joseph T. Salerno.

    Never has an "economist" said more about banking knowing almost nothing about it, or how it presently works in the US.

  50. In short, Marx had apparently never read, nor understood if he did, P.T. Barnum's account of his life.

  51. "This Way To The Egress"–a kind of reverse J-P Sartre, one step up the hierarchy,no?

  52. " You will have to remedy this by studying logic, mathematics, philosophy, and history."

    The Federal Reserve buys U.S. treasury securities.

    Where does it get the money?

  53. Here's a little exercise for you, Comrade Lowry, every time you say "Federal Reserve", add, "an organization made up of privately owned member .banks"

  54. See plank #5 of the Communist Manifesto.

  55. Hey there, I jumped over to your page via Twitter. Not something I normally read through, although I enjoy your perspectives none the less. Thanks a lot for composing some thing worthy of reading through!

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