The Daily Reckoning October 19th
In this video from RT’s Capital Account with Lauren Lyster, Joel Bowman discusses the misconceptions often associated with anarcho-capitalism and offers a unique take on the state of the US economy and the defective political system that has corrupted it.
Editor’s Note: Joel Bowman recently penned an incredibly insightful article based on just these topics. Click here to read it now.
An Anarcho-Capitalist’s View of the US Economic and Political Systems appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.
FRANKLIN Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid whom, he felt, government should aid.
But the originator of the phrase “forgotten man” — William Graham Sumner (1840-1910) — had a whole different meaning in mind. Sumner aimed to expose the seemingly good intentions of government to reveal the truth of what was really happening. He boiled it down to a simple schematic: A and B decide what C should do for X.
Note the usually overlooked little matter of the fellow in position C. All the focus of political discourse is on what A and B should decide and the wants and needs of X, whether just or not. But what about C?
Here we come to a universal truth that forms a core part of the argument of Sumner’s great book It Is Not Wicked to Be Rich: “The State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it. The latter is the Forgotten Man.”
Sumner was a Yale professor and something of a polymath of the social sciences. It Is Not Wicked to Be Rich was originally published way back in 1883 as What Social Classes Owe to Each Other. It is a tightly argued, powerful little book that gets right to the heart of the nature of political relationships — of the nature of rights and duties. Sumner argues for a society based on contract and associations forged by men of their own volition who cannot forcibly extract something from another.
It may be hard to believe that something written so long ago can be so relevant to the complexities our own day. But this book is essentially about the timeless principles and ageless logic of a free society. In our era of bailouts and gigantic government budgets, we need this book now more than ever.
No doubt there are many other books that put forth similar ideas. So why republish this one? I have an easy answer: Because Sumner was such a darn good writer and clear thinker. His book is fun to read. He turns over many ideas in memorable ways. As a result, it is a powerful statement of libertarian ideas. His book deserves more attention than it gets. My own cherished copy is well marked with favored passages.
“History is only a tiresome repetition of one story,” he writes in one of those passages. That story is one of people trying to control the reins of government power for their own ends. This is not a weakness confined to generals or priests, to businessmen or scholars. It does not strike certain ages or races of people. It is not a matter of who rules or what type of government exists. (Democracies too can be tyrants.) The weakness is a universal trait, Sumner maintains, rooted in human nature.
For Sumner, the aim of laws and institutions ought to be to protect men against these vices of human nature and against arbitrary power. They ought to guarantee liberty. There are to be no compromises. “All institutions are to be tested by the degree to which they guarantee liberty,” Sumner writes.
It is not to be admitted for a moment that liberty is a means to social ends, and that it may be impaired for major considerations. Anyone who so argues has lost the bearing and relation of all the facts and factors in a free state.
To Sumner, it is a profound injustice when government uses its powers to arrogate rights from one group for another. Unfortunately, this is not a common view today. A simple illustration comes right out of the political dialogue in our own times. The “right to health care,” for instance, is a topic of much debate.
Sumner would have been appalled. As he makes plain, the “right to health care” is simply the enforcement of a duty on someone else to provide it to you. All government efforts to provide free or subsidized health care — as well as education and retirement, two other perennial hot topics — are in the same ugly moral position. They represent a kind of theft.
Often, people will justify such takings by appealing to the democratic process. This, in fact, is a key danger of democracy, Sumner felt. People are eager to assume rights at the expense of others. “That is, that they will use the political power to plunder those who have,” Sumner writes. “Those who have” often includes that murky term “the rich.” But for Sumner, the accumulation of wealth was not something to fear or to seek to erase.
Sumner has some great lines about wealth and the efforts to limit it. Wealth in a free society is earned by serving the wants and needs of your fellow men. People are rewarded on the basis of demand for their goods or services. Here is one of the passages that I’ve marked in my copy:
“If we should set a limit to the accumulation of wealth, we should say to our most valuable producers, ‘We do not want you to do us the services which you best understand how to perform, beyond a certain point.’ It would be like killing off our generals in war.”
It would be a mistake to think of Sumner as some sort of crude defender of privilege or some uncaring social Darwinist. Sumner is eminently practical. He is a realist. He emphasizes repeatedly that life is full of uncertainties. No one can make guarantees against hardships. Moreover, one man’s hardships and misfortunes do not create a moral claim on another man’s efforts.
I also think of Sumner as a true gentleman. He is aware of the plight of humanity on this lonely planet and sympathetic to the human story, while adhering to an honorable code of conduct that, sadly, seems almost quaint today. The only duties men owe to each other, Sumner believes, are “respect, courtesy, and goodwill.” He is eloquent on this point:
“Men, therefore, owe to men, in the chances and perils of this life, aid and sympathy, on account of the common participation in human frailty and folly. This observation, however, puts aid and sympathy in the field of private and personal relations, under the regulation of reason and conscience.”
What a simple and beautiful life philosophy! Yet few see how often government power inspires a totally different set of assumptions.
The existence of government power sets man against man. It sets those who would achieve and create against those who would steal through elections and laws and taxes. In the end, the burden of government falls on that Forgotten Man, that real Forgotten Man. It is he who has worked and saved and done the right things to take care of himself and his family. Yet now he is told he must pay again for others who have not worked and saved as he.
I’ve often thought the most powerful arguments for a free society were the moral arguments, the ones that appeal to our simple sense of fair play. Sumner’s book does just that, with a cracking style and an unerring eye for the realities of life. My guess is that you won’t be able to put it down once you start. And I’m sure you’ll have lots of choice passages of your own.
Original article posted on Laissez-Faire Today
At age 68, Russ Caswell is on the verge of losing the business that’s been in his family for two generations. And it’s not for lack of customers.
Mr. Caswell is another object lesson that “If you’ve done nothing wrong, you have nothing to worry about” no longer applies.
On Nov. 5, a federal trial will begin with the curious name of United States of America v. 434 Main Street, Tewksbury, Massachusetts.
The defendant is not Mr. Caswell, but rather the Motel Caswell — a $1.5 million property Caswell owns mortgage-free. He had an eye toward possibly selling it so he could retire comfortably and take care of his gravely ill wife.
“I may sell it eventually, but the government doesn’t have the right to take it,” he tells the local Patch.com site. “It’s not right.”
Caswell is one of a growing number of Americans subject to “civil asset forfeiture” — or CAF.
“Asset forfeiture,” explains Duke professor Gary Hull, “is used by federal and state officials to seize cars, boats, cash, houses, businesses — all on the grounds that the asset might have been used or could conceivably be used in the commission of a crime, by someone, somewhere, at some point.”
Thus do the feds, along with the local police, allege that the Motel Caswell has been used for drug-related offenses going back to 1994. Note well: Russ Caswell stands accused of no crime. Nor is he accused of committing or facilitating crimes. Or that he was aware any crimes were going on at his motel.
The feds alone collected $2.5 billion last year from 15,000 CAF cases.
Recourse is, to say the least, a challenge. “To retrieve that asset, you must enter Kafka’s universe,” professor Hull says.
“Even if you have the tens or hundreds of thousands of dollars necessary to mount a defense, CAF reverses the burden of proof and forces on the property owner an impossible standard — to prove that the asset was not used to facilitate a crime, or if it was, that you did not know that the property was being used for facilitation. Further, you have to prove that you did everything possible (whatever that means) to prevent the crime(s).”
The feds have been on Caswell’s case for three years now. Should they prevail in court, both the feds and the Tewksbury police stand to profit: Under a program called “equitable sharing,” the locals get up to 80% of the booty.
“In the Caswell case,” Hull says, “that could mean $1.2 million for the Tewksbury police to spend on new cars, uniforms, hi-tech equipment, junkets to Hawaii. Meanwhile, Caswell and his wife will have been impoverished.”
The “Hawaii junkets” is not hyperbole on the professor’s part.
Over the past four years, the Milwaukee County Sheriff’s Office in Wisconsin has hauled in forfeiture money totaling $825,577. An audit released last week reveals some of the ways that money was spent…
- $11,400 on workout gear for Sheriff David Clarke Jr.’s command staff
- $8,200 for 9 flat-screen TVs, also for the command staff
- $24,900 for “customer-service training” provided by an outfit called Disney Destinations
- $77,000 for upkeep of the sheriff’s mounted patrol ($43,000 of that was to buy a Dodge Ram pickup to haul the horses around).
But it’s all good: The audit found, “none of the spending violated federal rules governing asset forfeiture money,” according to the Milwaukee Journal-Sentinel.
You don’t have to own property like Mr. Caswell to fall into Kafka’s universe. All you need to do is commit a moving violation and carry a wad of cash.
On Jan. 7, 2009, Anthony Smelley was pulled over on Interstate 70 in Putnam County, Ind. He was on his way from Detroit to St. Louis to visit his aunt. He’d had recently won a $50,000 settlement from a car accident. He was taking $17,500 of it to St. Louis to buy his aunt a new car.
You can see where this is going: Smelley was pulled over for an unsafe lane change and an obscured license plate. He was also driving with an expired license. During the stop, the officer asked Smelley to get out of the car and patted him down, discovering the cash. The dogs were called in and “alerted” to the presence of drugs.
But a search of the car turned up no drugs, and Smelley never faced criminal charges. The $17,500, however, was judged guilty as hell.
“To make matters worse,” wrote Reason’s Radley Balko, “the county was represented not by an elected public official, but by Christopher Gambill, an attorney in private practice who handles several Indiana counties’ forfeiture cases on a contingency basis, earning 25-33% of what he wins in court, a system stacked with twisted incentives.”
In the end, Smelley did prevail and got his money back. But it took 13 months… and he wasn’t compensated for his time, interest on the money, court costs or attorney’s fees.
The Outrageous and Totally Legal Threat to Your Wealth appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.
Well, the two-day currency rally ran out of steam yesterday afternoon, and soon the selling (most likely profit taking) began, and the euro (EUR) lost the 1.31 figure, and the Aussie dollar (AUD) lost the $1.04 figure. The risk sentiment has lost its vigor, and we begin this Friday morning with a bias to buy dollars. Why? Oh, I could go on for days about why not. But, it’s the markets, and fickle traders have short attention spans, and are easily influenced by stupid pet tricks!
I want to take a few minutes this morning to talk about the Chinese renminbi/yuan (CNY). As renminbi holders know, or if you keep score at home using the currency round-up, the renminbi had been “locked down” with any movement, and any movements we saw were to the weaker side of the ledger. I explained that it was similar to 2008 when the financial meltdown hit, the Chinese held the renminbi steady for 1 & 1/2 years, till June 2009. So, this time the Chinese held the renminbi steady until there were signs that the Chinese economy had bottomed in the second quarter.
With those signs confirmed, the Chinese government began allowing the renminbi to gain versus the dollar once again. For the past month (mid-Sept to now) the renminbi has gained over 1%… And since mid-July when the renminbi hit its 2012 low at 6.3964, the currency has gained 2.25%… So, the Chinese officials must feel very confident that the economy has bottomed and is on its way back to leading the world in economic growth. There has been a return of hot money flows into China, and with the currency appreciating, it indicates to me that Chinese officials are OK with this.
And also, don’t forget the games that people play. They even play them in China. The renminbi could be getting stronger versus the dollar ahead of the US elections, so that when a candidate wants to bang on them for their currency manipulation, (which hasn’t been officially been called that) the Chinese can smile and point to the 2.25% appreciation in the past 3 months.
But more importantly, to me, is something that I told you a long time ago, and that is that the Chinese are working diligently to rebalance their economy from strictly exporting to domestic demand. And this currency appreciation leads to that, folks. It makes Chinese exports more expensive, and brings imports in at cheaper prices, thus rebalancing the economy, and helping the domestic demand.
Will the pace of appreciation continue? I doubt it. There are just too many questions about the global growth engines of the US and Eurozone hanging over China’s decision to allow further appreciation. But, hey! Maybe the Chinese will surprise me! That would be a great surprise, eh?
Ok… See, I told you it would take a few minutes to get through the update on China. But before I go, let me remind you that the Chinese continue to hoard gold, mined and imported. As I told you over a year ago, it is my belief that the when the Chinese are ready to float the renminbi, they will back it with gold. Probably not 100% backing, but any backing would make the renminbi the most attractive currency in the world, immediately. Can you say “new reserve currency of the world”? I knew you could!
One of the writers over at another investment letter recently wrote about how Russia too, is hoarding gold, and that it wouldn’t be unbelievable to see Russia back the ruble (RUB) with gold at the same time China did. Pretty interesting thought, and one I hadn’t thought about. But you can see them doing this, right? For Russia, as a part of the BRICS, has been quite vocal about ending the dollar’s reign at being the reserve currency of the world.
But none of that is going to happen right here, right now, so we have time to prepare, right?
Today. Canada will print their latest Consumer Inflation (CPI). This report will be key in either giving Bank of Canada (BOC) Governor Carney a slap on the back, or a slap to his face. Recall that earlier this week his dovish comments led to Canadian dollar/loonie (CAD) weakness. A weak CPI print today could push the loonie lower even further that what we’ve seen this week. A stronger-than-expected (+0.3%) print could erase those dovish thoughts from earlier this week, and provide an underpinning to the loonie. So watch for that today.
The loss of the strong risk sentiment pushed the Aussie dollar back below $1.04, but at this point of the morning, the Aussie dollar is holding its own above the 200-day moving average (DMA) of $1.0345. The other day we were talking about it rising above the 200 DMA, and today we’re talking about it holding above it. Crazy volatility. But, barring any major move from here, lower, the Aussie dollar will end the week up from last Friday’s figure.
And so it is with most of the currencies today. They aren’t as pretty as they were yesterday, but they are prettier than they were last week! And day-to-day stuff is what drives me crazy. I like long trends, and explain all the charts and everything else. Of course trends can’t be one-way streets, and can have volatility, but for the most part, a trend is your friend. Over the years, I’ve had quite a few readers ask me why I wrote a daily letter, when I tell people that the long-term trend is more important than the day-to-day stuff. I tell them that every day represents the end of a long trend for someone, it just depends on when they bought! And besides, what else would I do with my time if I didn’t get up hours before the rooster crows, to write? HA!
There’s always something to talk about. And today it was what was on my mind regarding China. There’s also the daily economic data, which, as I told you the other day, I don’t believe any of, these days. Remember last week when the government was jumping up and down and waving the “all-clear flag” because the Weekly Initial Jobless Claims fell what was reported to be 39,000 (but revised to 27,000 this week)? Remember? The TV cable news people for the most part, took that number, and swallowed it, hook, line and sinker. But wasn’t it curious that such a large number of claims fell in a week without a holiday? Of course it was!
So… I told you on Monday this week that the difference last week was that California either didn’t file their claims or didn’t file all of them. So, guess what happened with the Weekly Jobless Claims from last week? They bounced 46,000 to 388,000 (from last week’s 342,000)!!!!!! OK… My conspiracy blood is boiling this morning on this stuff. If someone hadn’t asked the question, or been curious about the drop the previous week, the government could have gone ahead and kept the Jobless Claims down this week. And guess what also coincides with this week’s numbers? The October payroll employment survey. Now, the government wouldn’t be fudging the numbers lower to make them look better than they are, would they? Like I said, my conspiracy blood is boiling on this… and yours should too!
Truth be told, the economy is still muddling along at a very slow pace, and adding jobs at an even slower pace. I have a slide I use in presentations that shows this gigantic turtle with the title “economy”, and two guys riding the turtle, and one guy says, “This says the recovery is slowing down” and the other guy responds, “How can they tell?” Laugh, laugh, I thought I’d die, it seems so funny to me! Well. The cartoon is funny, not the economy. Who could laugh about that?
The other day, US New Home Starts were a moon shot higher in numbers. Pretty amazing to me. But then, I haven’t seen the breakdown yet. The most recent gains in housing starts have been in multi-family units. But something that doesn’t make sense to me is that while housing starts are soaring, mortgage applications are falling through the floor. (They fell 4.2% so far this month). But, again, it’s data. I don’t believe any of it any longer.
US leading indicators were up 0.6% in September, erasing the -0.4% decline in August… Again, the leading indicators reversed just like that? Isn’t that difficult to believe?
Boy, I’m in a feisty mood this morning! I did get caught up on rest yesterday, so maybe that’s what has me so feisty this morning! And that brings me to the Big Finish, which today are some quotes by one of my fave writers/analysts, Richard Russell. He’s feeling a little feisty too. So, let’s go to the Big Finish!
Then There Was This… From King World News, the well-respected writer/analyst, the great, Richard Russell…
“In the end, I don’t think Bernanke is doing us any lasting favors. Nor do I think the institution of the Federal Reserve is doing us any favors. My kids and your kids and grandkids will curse the day when the Federal Reserve was secretly made master of the US monetary system.
“It’s a crying shame that we have only one way to protect ourselves from the predations of the Fed. That way is to own real money — gold. If they could have their way, the Fed would outlaw gold. From the Fed’s own standpoint, they have already done the next best thing — that is to subject gold to shameful taxes. As the ancient Chinese sage said, “This too shall pass.”
Chuck again. Thanks to Richard Russell… He’s talking about his kids and grandkids, like I always do, and feel badly that they will have less freedom, much higher taxes, and the inability to live like their parents and grandparents did. It’s the debt, people.
To recap. The risk sentiment faded yesterday after two days of the currencies rallying versus the dollar. There wasn’t any one thing to turn the risk sentiment sour yesterday, so maybe it was all profit taking? Chuck spends an inordinate amount of time talking about China this morning, and even adds a ditty about Russia. Jobless Claims correct last week’s drop, so where are the happy government people now? And Canadian consumer inflation (due to print this morning) could be what drives the loonie in one direction today.
Chinese Confidence Moves Renminbi Higher vs. US Dollar appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.
Willie Whitelaw probably had it right, but for the wrong reason. As Margaret Thatcher’s long-serving deputy, he is said to have accused the opposing Labor Party of “going around the country, stirring up apathy.”
We have no way of knowing for sure, but we assume Mr. Whitelaw meant this as a kind of slur. Good citizens of Britain should have taken it as a congratulation.
The phrase “stirring up apathy” has been employed many times since, usually in the service of those who wish to deride one or another particularly odious civil servant/serpent. Indeed, inspiring political apostasy is widely viewed by adherents to the civic religion of democracy as grounds for expulsion from polite, learned company.
We beg to differ.
When confronted with the false dilemma of the democratic political process, many individuals settle for the “less of two evils” as a kind of compromise. But one suspects (or hopes) they do so with a certain degree of moral discomfort. Ask a disciple of the Elephant Party, for example, if he agrees with the murderous drone attacks this moment underway in Pakistan and you will likely offend a delicate delusion of “Democrats for Peace.” Similarly, press any Donkey Party advocate on the issue of economic freedom and watch them squirm under close scrutiny of their own candidate’s position vis-à-vis the IRS, the Federal Reserve, the indigestible, 75,000-page tax code, etc., etc., etc….
Contrary to the popular snipe that “only those who vote have the right to complain,” common sense leads us to quite the opposite conclusion. It is only those who have not aggressed against others who have the right to complain when they are aggressed against. Those who, to invert a phrase, “feed the mouth that bites them,” may stand firmly, but do so on shaky ground.
A vote for either evil is nonetheless a vote for evil. It is validation of a process whereby the few are bossed around by the many, an exercise in what might fairly be termed “mobjority rules.” As such, the democratic process has met with due scorn, as aphorist Karl Kraus displayed when he observed that, “Democracy means the opportunity to be everyone’s slave.”
Indeed, there is something unsettling about the desire to be owned. And there exists something equally sinister about the impulse to own others, through whatever means and ways…including tyranny at the ballot box.
Though we can be almost certain Willie Whitelaw would not enjoy our hijacking his witty turn of phrase, we shall do so anyway. Leading up to this presidential election, we undertake to do all we can in order to “stir up apathy.”
If you’re sick of my USA, arm-waving profit opportunities, you may want to stop reading right now.
Today we’re on the global hunt for oil and gas, and yet again it’s brought us back to one hugely profitable place: our own backyard!
There is a caveat however, and an important chart…
Here’s the thing. Although oil and gas production is ramping up in the U.S. and Canada, it’s not a common occurrence outside of our borders.
Indeed, this was the same theme we covered earlier this year. After hearing from a handful of world’s most knowledgeable oil market analysts at a conference in London, I shared with you two important facts:
1. North America will account for 75% of crude output growth in the next five years
2. The U.S. is set to be the largest contributor to global oil growth, with the Eagle Ford and Bakken Ramping up…
If you’ve been reading your daily dispatches this shouldn’t surprise. The new reiteration, however, is that energy booms like the one America is experiencing are NOT the global norm.
Take a look at this…
The chart above illustrates a simple trend: the declining output of a once-prolific oil source, the North Sea.
It’s very similar to the chart we’ve discussed recently for the falloff in Alaska’s North Slope oil production. But unlike the Alaskan falloff, which accounted for a drop of 1.5 million bpd over more than two decades, North Sea depletion has fallen much more precipitously, dropping 3 million bpd in just 10 years.
To be sure this is similar to what we’re seeing across the globe with Mexico, Venezuela, Egypt, and other once-prolific oil production zones. (Just wait till the Middle East starts to deplete, then the treadmill really starts to tilt!)
Simply put, conventional oil is in a nasty fight with large-scale depletion. It’s the main reason why we’re not seeing a drop in global oil prices. Right now, with oil prices still teetering over $90, this can’t be understated.
Even if the wildest dreams of U.S. oil and gas are met, we’d be hard-pressed to come up with an extra 3 million bpd.
That’s the point, even though America is brimming with new oil and gas opportunities – this a broad phenomenon sweeping the globe. So while the U.S. accounts for most of the new oil production growth on a global scale – natural depletion is still holding global prices relatively high.
As you could guess, this is creating a perfect storm for U.S. energy companies.
Playing this Situation is Simple…
I cringe when I say this, because I know the heydays will be over at some point, but the best way to play this situation right now is with U.S. refiners.
With all the global cards lying on the table, U.S. refiners are profiting the most from this oil trend. (Remember that petroleum export chart we posted here a few weeks ago?) In a nutshell, the U.S. petroleum product market has doubled exports in less than five years.
And we’re not talking about small potatoes here, either. U.S. petroleum product exports are nearing 3.5 million bpd.
Heck, I didn’t even catch this till recently, but the U.S. became a “net” exporter of petroleum products in 2011. As recently as 2005 the U.S. was a net importer of over two million bpd. But in the past few years we’ve bucked the trend and exports have rocketed, creating a net positive outcome.
For the record, that’s the first time the U.S. has had net exports in this category since 1949! It’s a boom for America and a silver lining in refiner’s pockets.
When will the advantage end for U.S. refiners? Time will tell. But it could easily be a multi-year phenomenon. North America, remember, is the main growth engine for GLOBAL oil production in the next few years. So whether refiners are cashing in or not, the money is going to be flowing somewhere stateside (it’s that whole “100-year wealth event” you may have heard about.)
Looking forward, the same trend will vault domestic oil and gas companies even higher.
Matt “broken record” Insley here again, to remind you that this is a huge, investable trend. And there’s still opportunity to get in on it.
Oil production on a global scale isn’t ramping up like it is here in the U.S., so don’t be fooled by localized sensationalism. This local trend is a global opportunity to profit. Heck, the telltale sign of this trend can be seen through our friends at Statoil (STO).
The Norwegian company broke its maiden in the North Sea. Statoil is also the world’s No. #1 offshore operator. Yet, here we are in 2012 and Statoil has a primary focus for long-term growth here in the U.S. shale patch, onshore – wouldn’t you know it, that includes the Bakken, Eagle Ford and Marcellus.
It’s a turning of the tide for the U.S. Unlike the dire situation in Europe, we’re getting an energy boom precisely at the time our economy could use it most. Jobs and manufacturing are coming back and exports are booming. (Hopefully our current and future administrations can help this boom flourish even more!)
Energy producers are turning bits all around the U.S. and refiners are turning that production into export gold. For the next few years expect this trend to continue – but don’t be fooled into thinking it’s happening everywhere. Simply put, it’s not.
Keep your boots muddy,
Original article posted on Daily Resource Hunter
This Chart Puts America’s Energy Boom In Perspective… appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.