The Mises Community

Henry Hazlitt sobre el Rescate de los Bancos

Rodrigo Diaz — Wed, 15 Oct 2008 19:54:00 GMT

Blog del Mises Institute - Artículo diario por Scott A Kjar | Publicado el 10/15/2008.

El Secretario del Tesoro Henry Paulson necesita cambiar su lista de lecturas. En lugar de leer balances y estados de ingresos de la desfalleciente industria bancaria, necesita leer el libro clásico de Henry Hazlitt Economía en una lección. Le hubiera costado a Paulson mucho menos de los US $ 700 mil millones que gastó en el rescate, y podría haber aprendido un poco de economía en el proceso.

Hazlitt entrega "su lección" en el capítulo 1, y procede a llenar el resto del libro con ejemplos. "Su lección", basada en trabajos de Frédéric Bastiat, es que "el arte de la economía consiste en buscar no sólo en lo inmediato, sino en el largo alcance, los efectos de cualquier acto o política; y que se necesita hacer el seguimiento de las consecuencias de esa política no sólo para un grupo, sino para todos los grupos ".

Por ejemplo, en el capítulo 2, Hazlitt ofrece la conocida "falacia de la ventana rota", en la que un matón rompe la ventana de un comerciante con una piedra. La gente lo ve como una tragedia, pero un astuto burócrata de Washington podría argumentar que crea nuevos puestos de trabajo para vidrieros. Como señala Hazlitt, sin embargo, los recursos que el comerciante invierte en la nueva ventana podrían haber sido utilizados en otros lugares, tal vez en un nuevo traje para él mismo. Así, mientras que el vidriero recibe nuevos negocios, el sastre pierde la misma cantidad de ellos. No hay beneficio neto, de hecho hay una pérdida neta. Ausente el matón, el comerciante habría tenido además de una ventana, un nuevo traje y presente el matón, el comerciante tiene una ventana, pero no su traje. A pesar de que el daño fue a la ventana, se pierde el traje para el comerciante y, por tanto, para la sociedad.

En el capítulo 6, titulado "El crédito desvía la producción", Hazlitt discute las políticas de préstamo del gobierno, tales como crédito adicional a los agricultores o a los propietarios de negocios. Sin embargo, señala, los beneficiarios de estos programas rara vez son los más productivos: los agricultores y propietarios de negocios. Después de todo, las personas más productivas son capaces de pedir prestado el dinero a prestamistas privados. Son sólo las personas y empresas menos productivas, incapaces de obtener fondos en el mercado libre, quienes deben acudir al gobierno.

Por ejemplo, supongamos que hay una granja para la venta. Un prestamista privado normalmente estaría dispuesto a prestar dinero a un agricultor A quien ha demostrado sus habilidades en el pasado, en lugar de prestarle al agricultor B, quien ha demostrado un nivel menor de productividad que ha A. Sin embargo, debido a que el gobierno cobra impuestos a los ciudadanos o toma el dinero de los mercados de capitales, los prestamistas privados tienen menos fondos disponibles para hacer préstamos a A.

En lugar de ello, el gobierno presta dinero a B sobre la base de que B es menos privilegiado, en necesidad de ayuda, o algún otro argumento de origen político. El prestatario más productivo, A, pierde la escasa tierra disponible, mientras que el prestatario menos productivo, B, accede al beneficio del recurso. Debido a que el individuo menos productivo adquiere el escaso recurso, habrá menos producción en total, y la sociedad en su conjunto estará peor.

Además, Hazlitt dice que el gobierno toma más riesgos con el dinero de los contribuyentes que los prestamistas privados con su propio dinero. Los prestamistas privados que hacen préstamos dudosos se quiebran y se ven obligados a salir del negocio. Pero, cuando el gobierno se involucra, presta fondos a empresas riesgosas, ya que los burócratas que aprueban el préstamo erróneo no enfrentan recriminaciones personales - mucho menos afrontan alguna pérdida de beneficios por el error.

En otras palabras, los prestamistas privados emprenden la acción A, mientras que los prestamistas del gobierno emprenden la acción B, y la acción B es el camino menos productivo. Después de todo, no hay necesidad de que el gobierno tome la acción A: esa bien puede ser manejada en el mercado libre.

Por lo tanto, así sucede con la actual erupción de rescates. Sea cual sea el precio final, $500 mil millones, $750 mil millones, $1 billón de dólares, o más - el hecho es que el gobierno obtiene su dinero, ya sea de impuestos, de préstamos, o mediante el uso de la imprenta. Es difícil en breve plazo aumentar los impuestos en $ 1 billón, y dado que hay un pequeño obstáculo que frena la capacidad del gobierno para imprimir el dinero, (1) sabemos que el gobierno emitirá bonos. En otras palabras, el Gobierno pedirá prestado el dinero en los mercados privados de capital.

Como señala Hazlitt, sin embargo, los mercados privados de capital (los que no están en quiebra ni haciendo cola para obtener un rescate), prefieren prestar sus fondos a las empresas más productivas. Si el capital privado quisiera prestar directamente a los bancos en problemas, ya estaría en capacidad de hacerlo. El hecho de que el capital privado no está prestando a los bancos es una clara indicación de que el actual rescate del gobierno es contrario a los principios del mercado libre.

El argumento de que el gobierno está de alguna manera bombeando nuevo capital al mercado es absurdo. El gobierno en realidad obtiene prestado el dinero de los mercados de capitales y luego, a su vez, lo inyecta en los mercados de capitales. No hay ninguna fuente adicional de financiación, sólo existe una desviación de fondos de los puntos de venta más productivos a los menos productivos, y el gobierno actúa como intermediario.

Así que cuando Henry Paulson sostiene que es necesario bombear dinero a los mercados de crédito para evitar que se congelen, no se molesta en averiguar que el dinero que bombea a los mercados de crédito viene directamente de los mismos mercados de crédito. Lo que hace es poco más que reorganizar las sillas de cubierta en el Titanic; intercambiando el dinero de un conjunto de intermediarios financieros por el de otros no aumenta ni la liquidez ni la solvencia. Simplemente demora el problema por unos breves momentos.

Incluso los bancos en problemas aceptan de dientes para afuera su responsabilidad fiduciaria, pero cualquier empresa privada que toma dinero de personas más productivas para entregarlo a personas menos productivas sale pronto del negocio. Sólo el gobierno puede violar la lógica de Hazlitt y sobrevivir, porque sólo el gobierno puede socializar sus pérdidas a través del sistema impositivo.

Scott A Kjar enseña economía en Baldwin-Wallace College.

Nota:

(1) El Gobierno emite bonos a prestatarios privados y, a continuación, la reserva Federal crea el nuevo dinero para comprarlos, en lugar de que el gobierno haga directamente la impresión de los nuevos billetes. Es un obstáculo muy pequeño.

TRADUCCION DE RODRIGO DIAZ

No such thing as a free lunch

HeroicLife — Wed, 15 Oct 2008 06:35:00 GMT

When arguing against the Genetic Information Nondiscrimination Act last year, I wrote

If discrimination based on comprehensive genetic screening is legal, we can expect health providers to tailor plans according to our individual risk factors. That might be to the disadvantage of a minority of high-risk individuals, but greater information about risk factors will lower uncertainty, and thus lower rates overall. Furthermore, insurers will offer incentives to people who take proactive steps to discover health risks and take steps to alleviate them. Expensive procedures such as frequent biopsies or preemptive removal of organs might be fully covered for individuals whose genetic profiles uncover a high cancer risk.

Unfortunately, Congress did not heed my arguments, and banned genetic discrimination anyway. It is now illegal for health insurers to take genetic factors into consideration when setting premiums. What effect do you think the law had on the incentive of insurance companies to pay for their customer’s genetic screening?

If the goal of the law was to encourage genetic screening, it clearly had the opposite effect. In response, celebrities are now “fighting for women to have access to MRIs and genetic testing.” Having coerced insurance companies to ignore the results of genetic testing, people now want to coerce them to pay for it.

Do you think that people who find out that they have a higher probability of having an illness with genetic factors would be more likely to purchase more health insurance than individuals with a low probability of genetic illness? As I wrote last year,

It does not take an economist to predict that rates would immediately rise, as healthy people, refusing to pay for their neighbor's health risks, stopped using insurance altogether. As the young and healthy jump ship, insurance companies would have to increase rates, accelerating the trend. Without further government interference, the health insurance business would disappear completely, shortly after millionaires on their deathbeds became the only people able to afford policies.

Are you still wondering why healthcare is so expensive in the U.S.?

255 Canadian economists say rebated carbon taxes are preferrable to cap and trade and to no action

TokyoTom — Wed, 15 Oct 2008 05:17:00 GMT

More here . Too bad they didn't take any intitiative in discussing other helpful policy measures, such as eliminating corporate real estate taxes (or allowing immediate write-off of new investments), deregulating the power industry and eliminating subsidies for particular technologies. h/t James Calder...(read more)

How does a business 'create jobs'?

thedo — Wed, 15 Oct 2008 02:22:00 GMT

This is my primary question about Barack Obama's proposed tax policy, which involves tax credits for businesses that create jobs. How do they do that? Do they just hire more people and receive a check?

Nobel but not Noble

ViennaSausage — Wed, 15 Oct 2008 00:43:00 GMT

http://freemmm.blogspot.com/2008/10/nobel-but-not-noble.html

Montesquie responds to Tabarrok

Austrian Addiction — Tue, 14 Oct 2008 16:33:04 GMT

Alex Tabarrok has said that increased police on the streets serve as a good solution for temporary crime spikes. Here's Montesque's concern on the matter: 12. Of the Power of Punishments. Experience shows that in countries remarkable for the lenity Read More......(read more)

Krugman proves whats popular isnt always right....

Jonathan — Tue, 14 Oct 2008 03:25:00 GMT

I could start this blog with a long winded declaration of what Paul Krugman has done, but I assume that most people have at least heard the rhetoric that he spews. For the longest time, I have heard that the Nobel Prize in all of its forms is a prize that shows the accomplishments of those who are the leaders of their fields. If you have some great advance, and your field is fitting, you will receive the Nobel Prize for what you have done. Today a regressive individual was awarded a progressive prize. As opposed to giving the prize to someone with an original, forward thinking positive thought, the prize has been awarded to the exact opposite. Krugman twice weekly writes about his views on the economy, but more so on his thoughts of the world and the United States at large. He wins a prize today for economics, when he has made no great contributions to the field in any persons recent memory. Paul Krugman has done a great deal to advance the liberal agenda to like minded and non-thinking individuals who swarm to the propaganda like moths to a light. I have seldom been as disappointed in something I truly believed in as I am today in the board that awards excellence in my profession/hobby. I hope that the field as a whole does not continue in the direction that Krugman hopes to take it during the seldom times that he decides to actually write about economics. The awardance of this prize just further proves the lack of a need for the prize in the first place, because it does nothing to advance the world as a whole, nor the economy. I am depressed, sad and completely disappointed with the Nobel Prize commitee and will no longer place any emphasis on what they say or who they award.

Radio interview this morning

Austrian Addiction — Mon, 13 Oct 2008 19:18:53 GMT

Doubt many people caught it but I was interviewed on talk radio this morning. Robinette's "Think Tank," gave me a call to discuss the economic platforms of McCain and Obama. To sum up my points were: 1) There is little to no differences Read More......(read more)

Programa de Alivio para Asnos en Dificultades

Rodrigo Diaz — Mon, 13 Oct 2008 10:47:00 GMT

Antal E. Fekete

Universidad Viva del Estándar del Oro

La precipitada caída al nivel de los 8600 del índice Dow Jones de acciones industriales, el pasado jueves 9 de Octubre, puso de manifiesto, que el rescate de las entidades financieras con US$ 700 mil millones es un ejercicio en futilidad. El esfuerzo de rescate ha administrado el medicamento equivocado ocasión tras ocasión. El trasiego de activos podridos al balance del banco central no es el camino indicado. La consolidación de los bancos a través de fusiones forzadas no es el camino indicado. La reducción de las tasas de interés no es el camino indicado. Estas medidas empeoran el problema, no lo remedian.

Todos los recursos para controlar la creciente crisis de crédito que se han propuesto o se han puesto en práctica se basan en diagnósticos erróneos. Esto no es una crisis de hipotecas mal otorgadas ni una crisis inmobiliaria. Ni ha sido causada por una inadecuada o laxa reglamentación de los préstamos, ni por la temeraria imprudencia de los bancos al aumentar agresivamente sus activos.

Esta crisis ha sido causada por el marchitamiento de las tasas de capital debido a la paulatina destrucción del capital de los bancos durante los últimos 28 años por la reducción de las tasas de interés. Como he venido diciendo una y otra vez, la reducción de las tasas de interés destruye el capital al aumentar el valor de liquidación de la deuda - un insidioso proceso que no ha sido percibido por ningún otro observador. Sólo es posible ignorar la disipación del capital mientras dure el capital. Tan pronto como el capital se agota, cesa la disipación. No queda nada para disipar. En ese instante el problema se hace dolorosamente evidente.

El término "valor de liquidación de la deuda" se explica por sí mismo, es igual al monto que permite liquidar la deuda antes de la fecha de vencimiento, liquidación que puede ser necesaria en caso de una adquisición, de una fusión, de un matrimonio a punta de revólver, de una quiebra, o específicamente, por la nacionalización del sistema bancario. La verdad es que cuando la tasa de interés baja, el valor de liquidación de la deuda se eleva. ¿Por qué? Porque la sucesión de pagos de intereses se descuenta a una menor tasa de interés. Por lo tanto, en la fecha de vencimiento no alcanzará para la liquidación de la deuda.

He aquí un ejemplo conocido: Cuando la tasa de interés baja, de inmediato el mercado aumenta la oferta por el precio de los bonos. Esto es lo mismo que decir que el valor de liquidación de la deuda subyacente de los bonos se eleva. Los deudores que desean liquidar su deuda en bonos antes del vencimiento no quedan fuera del gancho en los mismos términos. El mercado exige más que la libra de carne acordada originalmente para liberar al deudor de su obligación. Este ejemplo demuestra claramente que una caída en la tasa de interés, lejos de aliviar la carga de la deuda, la agrava.

El capital de los bancos es un débito, y se ha venido reduciendo por la persistente caída de las tasas de interés. El deterioro del capital ha sido ignorado y, tras 28 años de negligencia, el sistema bancario mundial se encuentra ahora desprovisto de capital. Aquellos accionistas que saben leer los balances, ven más allá de los valores disfrazados que los bancos ponen en sus activos y, se deshacen de las acciones del banco antes que su capital llegue del todo a cero.

La única manera como se puede resolver esta crisis es a través de la recapitalización de los bancos con oro. Contrariamente a la propaganda keynesiana, el oro no es una reliquia de tiempos bárbaros. Ni sirve para propósitos decorativos. Además el oro tampoco sirve para adornar la vitrina del balance. El oro es único entre los activos financieros en el sentido de que no tiene como contrapartida un pasivo en el balance como los demás activos. De ello se deduce que el oro, el oro por sí solo, sobrevivirá cualquier consolidación de un balance bancario. El oro no puede compensarse como lo hacen otros papeles del activo en caso de fusiones, adquisiciones y/o absorciones, ni en el caso de la nacionalización del sistema bancario.

La debilidad fatal del actual esfuerzo de rescate es precisamente este: la consolidación de los bancos, así como la consolidación del monstruo de las derivadas, lejos de poner fin a la putrefacción, la acelerará. Por ejemplo, si uno consolida el monstruo de las derivadas, se cancelarán demandas y contra-demandas a través de swaps de créditos incumplidos, pero aparecerán todos los riesgos como no cubiertos. La recapitalización con más dinero sin respaldo no funciona. Se necesita algo más sólido que las irredimibles promesas de pago. Se requiere el oro.

Lamentablemente, nuestros dirigentes políticos y encargados de formular políticas carecen de la fortaleza moral para admitir que se han equivocado totalmente en relación al oro y su papel en el sistema financiero. Tampoco tienen la sabiduría para darse cuenta que para limpiar los restos del choque del tren tienen que desandar todo el camino hasta el momento inicial del descarrilamiento: la decisión loca de desvincular el oro del sistema monetario en 1971. Los políticos y sus sicofantes académicos se atendrán a su sólida mascota, TARP, sigla en Inglés para Troubled Ass Relief Program (perdón por mi juego de palabras al cortar la cola de la palabra «asset»). Esta es su forma de encubrir el hecho de que la crisis de crédito es de su propia creación.

La primera de las Torres Gemelas, la Torre de Babel de las derivadas, se ha derrumbado, aunque no se puede ver todavía porque la polvareda no se ha asentado aún. El derrocamiento de la segunda, la Torre de Babel de la Deuda, seguirá a su debido tiempo - a menos que se recapitalicen los bancos con oro deliberadamente con toda velocidad.

El colapso de la Torre de Babel de la Deuda sería una catástrofe de primera magnitud, que afectaría negativamente a todo el mundo. Se pondría en marcha la Grande Gran Depresión del siglo XXI, haciendo que la Gran Depresión del siglo XX se vea leve en comparación.

Calendario de eventos

En la ciudad de Nueva York, el 16 de octubre de 2008
Comité de Investigación Monetaria y Educación, Inc. , Cena Anual de Otoño.
El Profesor Fekete es orador invitado. El título de su charla es:
El mecanismo de destrucción de capital.
Informes: cmre@bellsouth.net

Santa Clara, California, 3 de noviembre de 2008
Universidad de Santa Clara, organizada por el Civil Society Institute
El Profesor Fekete es el orador invitado. El título de su charla es:
Reforma Monetaria: Oro y letras de cambio.
Informes: ffoldvary@scu.edu

San Francisco, California, 4 de noviembre de 2008
Club Económico de San Francisco
El Profesor Fekete es el orador invitado. El título de su charla es:
La Teoría Revisionista y la Historia de la Gran Depresión - ¿Puede volver a ocurrir?
Informes: ifkbischoff@yahoo.com

Canberra, Australia, 11-14 noviembre 2008
"Universidad Viva del Estándar del Oro”, quinto período de sesiones. Este es el último período de sesiones de GSUL ya que nuestro patrocinador, el Sr. Eric Sprott de Sprott Asset Management, Inc., ha retirado su apoyo diciendo que, en su opinión, los resultados no justifican el costo. Venga con nosotros y juzgue usted mismo. Este seminario de 4 días lo hemos llamado Iniciación al Estudio de la Base del Oro - Herramienta Comercial para los Inversionistas en Oro, Herramienta de Mercadeo para los Mineros de Oro, y Sistema de Alerta Temprana para Todos los Demás.

Una descripción más detallada de este seminario se encuentra al final de mi artículo Corta tu cola para salvar mi cara! de septiembre pasado en www.professorfekete.com
Informes: feketeaustralia@yahoo.com

En vista de los extraordinarios acontecimientos que tienen lugar en el mundo de las finanzas y ahora en la escena bancaria, habrá una reunión extraordinaria para responder a las preguntas de los participantes y tener un debate desde nuestro particular punto de vista, a saber, que esto no es una crisis sub-prime, ni siquiera una crisis del dólar. Esta es una crisis del oro que no puede resolverse amordazando el oro mismo.

Canberra, Australia, noviembre 15, 2008
Mesas redondas: Los pollos de 1933 y 1971 vienen de regreso a casa a pernoctar y a sacar capital del banco.
Informes: feketeaustralia@yahoo.com

10 de octubre de 2008.

AE Fekete

TRADUCCIÓN DE RODRIGO DÍAZ

Random Thoughts on Tolstoy

idi0m — Mon, 13 Oct 2008 06:23:00 GMT

Maslova in Prison - Chapter 1

Though hundreds of thousands had done their very best to disfigure the small piece of land on which they were crowded together, by paving the ground with stones, scraping away every vestige of vegetation, cutting down the trees, turning away birds and beasts, and filling the air with the smoke of naphtha and coal, still spring was spring, even in the town.

The sun shone warm, the air was balmy; everywhere, where it did not get scraped away, the grass revived and sprang up between the paving-stones as well as on the narrow strips of lawn on the boulevards. The birches, the poplars, and the wild cherry unfolded their gummy and fragrant leaves, the limes were expanding their opening buds; crows, sparrows, and pigeons, filled with the joy of spring, were getting their nests ready; the flies were buzzing along the walls, warmed by the sunshine. All were glad, the plants, the birds, the insects, and the children. But men, grown-up men and women, did not leave off cheating and tormenting themselves and each other. It was not this spring morning men thought sacred and worthy of consideration not the beauty of God's world, given for a joy to all creatures, this beauty which inclines the heart to peace, to harmony, and to love, but only their own devices for enslaving one another.

Thus, in the prison office of the Government town, it was not the fact that men and animals had received the grace and gladness of spring that was considered sacred and important, but that a notice, numbered and with a superscription, had come the day before, ordering that on this 28th day of April, at 9 a.m., three prisoners at present detained in the prison, a man and two women (one of these women, as the chief criminal, to be conducted separately), had to appear at Court. So now, on the 28th of April, at 8 o'clock, a jailer and soon after him a woman warder with curly grey hair, dressed in a jacket with sleeves trimmed with gold, with a blue-edged belt round her waist, and having a look of suffering on her face, came into the corridor.

"You want Maslova?" she asked, coming up to the cell with the jailer who was on duty.

The jailer, rattling the iron padlock, opened the door of the cell, from which there came a whiff of air fouler even than that in the corridor, and called out, "Maslova! to the Court," and closed the door again.

Even into the prison yard the breeze had brought the fresh vivifying air from the fields. But in the corridor the air was laden with the germs of typhoid, the smell of sewage, putrefaction, and tar; every newcomer felt sad and dejected in it. The woman warder felt this, though she was used to bad air. She had just come in from outside, and entering the corridor, she at once became sleepy.

From inside the cell came the sound of bustle and women's voices, and the patter of bare feet on the floor.

"Now, then, hurry up, Maslova, I say!" called out the jailer, and in a minute or two a small young woman with a very full bust came briskly out of the door and went up to the jailer. She had on a grey cloak over a white jacket and petticoat. On her feet she wore linen stockings and prison shoes, and round her head was tied a white kerchief, from under which a few locks of black hair were brushed over the forehead with evident intent. The face of the woman was of that whiteness peculiar to people who have lived long in confinement, and which puts one in mind of shoots of potatoes that spring up in a cellar. Her small broad hands and full neck, which showed from under the broad collar of her cloak, were of the same hue. Her black, sparkling eyes, one with a slight squint, appeared in striking contrast to the dull pallor of her face.

She carried herself very straight, expanding her full bosom.

With her head slightly thrown back, she stood in the corridor, looking straight into the eyes of the jailer, ready to comply with any order.

The jailer was about to lock the door when a wrinkled and severe-looking old woman put out her grey head and began speaking to Maslova. But the jailer closed the door, pushing the old woman's head with it. A woman's laughter was heard from the cell, and Maslova smiled, turning to the little grated opening in the cell door. The old woman pressed her face to the grating from the other side, and said, in a hoarse voice:

"Now mind, and when they begin questioning you, just repeat over the same thing, and stick to it; tell nothing that is not wanted."

"Well, it could not be worse than it is now, anyhow; I only wish it was settled one way or another."

"Of course, it will be settled one way or another," said the jailer, with a superior's self-assured witticism. "Now, then, get along! Take your places!"

The old woman's eyes vanished from the grating, and Maslova stepped out into the middle of the corridor. The warder in front, they descended the stone stairs, past the still fouler, noisy cells of the men's ward, where they were followed by eyes looking out of every one of the gratings in the doors, and entered the office, where two soldiers were waiting to escort her. A clerk who was sitting there gave one of the soldiers a paper reeking of tobacco, and pointing to the prisoner, remarked, "Take her."

The soldier, a peasant from Nijni Novgorod, with a red, pock-marked face, put the paper into the sleeve of his coat, winked to his companion, a broad-shouldered Tchouvash, and then the prisoner and the soldiers went to the front entrance, out of the prison yard, and through the town up the middle of the roughly-paved street.

Isvostchiks [cabmen], tradespeople, cooks, workmen, and government clerks, stopped and looked curiously at the prisoner; some shook their heads and thought, "This is what evil conduct, conduct unlike ours, leads to." The children stopped and gazed at the robber with frightened looks; but the thought that the soldiers were preventing her from doing more harm quieted their fears. A peasant, who had sold his charcoal, and had had some tea in the town, came up, and, after crossing himself, gave her a copeck. The prisoner blushed and muttered something; she noticed that she was attracting everybody's attention, and that pleased her. The comparatively fresh air also gladdened her, but it was painful to step on the rough stones with the ill-made prison shoes on her feet, which had become unused to walking. Passing by a corn-dealer's shop, in front of which a few pigeons were strutting about, unmolested by any one, the prisoner almost touched a grey-blue bird with her foot; it fluttered up and flew close to her ear, fanning her with its wings. She smiled, then sighed deeply as she remembered her present position.

It is a shame I cannot speak Russian so that I may listen to the words of this story in its mother tongue. It is a shame that not enough people have desired to read his works. There is every reason to regard Count Lev Nikolayevich Tolstoy as one of the greatest political philosophers, writers, dissenters and warriors of the human condition. There is no good reason to not read what he penned. As I write, I am reading Resurrection. I also have just garnered copies of <i>Anna Karenina, War and Peace</i>, and all other essays or letters I could find.

He made no mistake condemning the act of revolution or war. He critiqued anything that practiced coercion or force, from the state to private property, marriage, and the organized church’s continued beneficence to the state.

It seems as if Tolstoy’s rationale sought satiation by accepting the irrational existence. It is clear that there is a marked emotional difference, an evolution, of the Tolstoy before War and Peace – and the prophetically disquieted writer of post-Anna Karenina. Indeed it seems there was a transition from the realist to the modernist.

In War and Peace it is obvious where Tolstoy surrenders the rationality of man to the irrational existence. He captures the people in aggregate, as a force, as events that shape themselves. It seems here that he doesn’t find the individual force to be powerful at all. Somehow this changes. Anna Karenina is to the eye just another romance. However; it is blatant with criticisms of custom and excess of the aristocrats. In short; it was a story of accepting the self within and holding onto that despite societies abundant falsehood and pageantry. The tragedy with Anna was her inability to choose between the two forces; yet another vision of human weakness and the bitter struggle for integrity, but moreso love.

I cannot provide enough analysis of this ‘love’ on my own – this letter speaks for itself. I find that the more I read of his collaborative efforts with anarchists – the more I am left in silence. I can only ruminate that it was emotion that drove Tolstoy’s powerful plea.

To Gandhi, Johannesburg, Transvaal, South Africa.

KOCHETY. 7th September 1910.

I received your journal, Indian Opinion, and was glad to see what it says of those who renounce all resistance by force, and I immediately felt a wish to let you know what thoughts its perusal aroused in me.

The longer I live-especially now when I clearly feel the approach of death-the more I feel moved to express what I feel more strongly than anything else, and what in my opinion is of immense importance, namely, what we call the renunciation of all opposition by force, which really simply means the doctrine of the law of love unperverted by sophistries. Love, or in other words the striving of men's souls towards unity and the submissive behaviour to one another that results therefrom, represents the highest and indeed the only law of life, as every man knows and feels in the depths of his heart (and as we see most clearly in children), and knows until he becomes involved in the lying net of worldly thoughts. This law was announced by all the philosophies- Indian as well as Chinese, and Jewish, Greek and Roman. Most clearly, I think, was it announced by Christ, who said explicitly that on it hang all the Law and the Prophets. More than that, foreseeing the distortion that has hindered its recognition and may always hinder it, he specially indicated the danger of a misrepresentation that presents itself to men living by worldly interests- namely, that they may claim a right to defend their interests by force or, as he expressed it, to repay blow by blow and recover stolen property by force, etc., etc. He knew, as all reasonable men must do, that any employment of force is incompatible with love as the highest law of life, and that as soon as the use of force appears permissible even in a single case, the law itself is immediately negatived. The whole of Christian civilization, outwardly so splendid, has grown up on this strange and flagrant- partly intentional but chiefly unconscious-misunderstanding and contradiction. At bottom, however, the law of love is, and can be, no longer valid if defence by force is set up beside it. And if once the law of love is not valid, then there remains no law except the right of might. In that state Christendom has lived for 1,900 years. Certainly men have always let themselves be guided by force as the main principle of their social order. The difference between the Christian and all other nations is only this: that in Christianity the law of love had been more clearly and definitely given than in any other religion, and that its adherents solemnly recognized it. Yet despite this they deemed the use of force to be permissible, and based their lives on violence - so that the life of the Christian nations presents a greater contradiction between what they believe and the principle on which their lives are built: a contradiction between love which should pre scribe the law of conduct, and the employment of force, recognized under various forms-such as governments, courts of justice, and armies, which are accepted as necessary and esteemed. This contradiction increased with the development of the spiritual life of Christianity and in recent years has reached the utmost tension.

The question now is, that we must choose one of two things-either to admit that we recognize no religious ethics at all but let our conduct of life be decided by the right of might; or to demand that all compulsory levying of taxes be discontinued, and all our legal and police institutions, and above all, military institutions, be abolished.

This spring, at a scripture examination in a Moscow girls' school, first their religious teacher and then an archbishop who was also present, questioned the girls on the ten commandments, especially on the sixth. After the commandments had been correctly recited the archbishop sometimes put a question, usually: 'Is it always and in every case forbidden by the law of God to kill?' And the unfortunate girls, misled by their instructor, had to answer and did answer: 'Not always, for it is permissible in war and at executions.' When, however, this customary additional question-whether it is always a sin to kill-was put to one of these unfortunate creatures (what I am telling you is not an anecdote, but actually happened and was told me by an eyewitness) the girl colored up and answered decidedly and with emotion - 'Always!' And despite all the customary sophistries of the archbishop, she held steadfastly to it-that to kill is under all circumstances forbidden even in the Old Testament, and that Christ has not only forbidden us to kill, but in general to do any harm to our neighbor. The archbishop, for all his majesty and verbal dexterity, was silenced, and victory remained with the girl.

Yes, we may write in the papers of our progress in mastery of the air, of complicated diplomatic relation, of various clubs, of discoveries, of all sorts of alliances, and of so-called works of art, and we can pass lightly over what that girl said. But we cannot completely silence her, for every Christian feels the same, however vaguely he may do so. Socialism, Communism, Anarchism' Salvation Armies, the growth of crime, freedom from toil, the increasingly absurd luxury of the rich and increased misery of the poor, the fearfully rising number of suicides-are all indications of that inner contradiction which must and will be resolved. And, of course, resolved in such a manner that the law of love will be recognized and all reliance on force abandoned. Your work in the Transvaal, which to us seems to be at the end of the earth, is yet in the centre of our interest and supplies the most weighty practical proof, in which the world can now share, and not only the Christian but all the peoples of the world can participate.

I think it will please you to hear that here in Russia, too, a similar movement is rapidly attracting attention, and refusals of military service increase year by year. However small as yet is with you the number of those who renounce all resistance by force, and with us the number of men who refuse any military service-both the one and the other can say: God is with us, and God is mightier than man.

In the confession of Christianity-even a Christianity deformed as is that taught among us-and a simultaneous belief in the necessity of armies and preparations to slaughter on an ever-increasing scale, there is an obvious contradiction that cries to heaven, and that sooner or later, but probably quite soon, must appear in the light of day in its complete nakedness. That, however, will either annihilate the Christian religion, which is indispensable for the maintenance of the State, or it will sweep away the military and all the use of force bound up with it-which the State needs no less. All governments are aware of this contradiction, your British as much as our Russian, and therefore its recognition will be more energetically opposed by the governments than any other activity inimical to the State, as we in Russia have experienced and as is shown by the articles in your magazine. The governments know from what direction the greatest danger threatens them, and are on guard with watchful eyes not merely to preserve their interests but actually to fight for their very existence.

Yours etc., LEO TOLSTOY.

The Fruits of Intellectual Property Law

Eric Simmons — Mon, 13 Oct 2008 02:35:00 GMT

I recently had a debate with a friend of mine regarding intellectual property.

I took the position that intellectual property is not actually property, and that it should not be protected by law. He took the opposite position, at least with regard to the utility of intellectual property laws themselves. My friend argued that without intellectual property law, intellectual producers--Eminem, for example--would have no substantial monetary incentive to invest themselves into producing really "great" works of intellectual property.

This led me to ponder some of the things that would hypothetically disappear if intellectual property laws were to be repealed tomorrow. Among these products that would conceivably no longer have a market are big record label-produced albums, expensive Hollywood movie productions, and mass market video games. Then I pointed out that all of these "products" I brought up tended to have little productive value to society relative to the money that changes hands over them, and that in fact they are considered by many to be corrupting cultural influences. "So," I thought, "is this the fruit of intellectual property law?"

I know there are better examples of some "more valuable" things that are protected by intellectual property law. Take a cure for cancer, for example. Research costs money, and presumably no drug company or other entity is going to invest big in altruistically researching something that offers no big payoff. But also realize that once an entity secures that intellectual product of a cure for cancer, they own it. They could then charge whatever they want for this highly sought-after hypothetical cancer drug, since their new intellectual property would be protected by law. The fruit of intellectual property law in this scenario is not simply a cure for cancer, but a cure for cancer that can't ever again be duplicated and used freely, and that will only be available to the wealthiest of humanity, according to the whims of whoever designs it first!

Borrowing things that don't exist

jimmy — Mon, 13 Oct 2008 01:52:00 GMT

In my previous post I spoke about the role of interest rates in balancing the supply of real savings (from depositors) and demand for those savings on the part of borrowers (investors):

What's difficult to grasp here is that savings are not just abstract dollar notes. When I save, I am implicitly producing something of value (e.g. I bake some bread) and providing it to the economy whilst simultaneously not consuming anything (I don't take anything back from the economy). As the baker, I might save a couple of hundred dollars a week. What I'm actually saving though is not dollars, but loaves of bread - I'm creating a surplus of a few thousand loaves of bread in the economy which have been created, but not consumed, and are available to be "invested" by a borrower who can eat that bread for a while, during which he will not be baking any bread (e.g. while he's building a garage in his back yard). All around the economy there are millions of people in all walks of life that are saving in this manner. Some of them are saving flour, some are saving metal, some are saving wooden planks - yet others are saving accounting services and computer programming services and yet others again are saving health insurance or health care. All of these things are very real physical resources - resources that will be required by investors that need to "borrow" from the economy to start new companies or buy tractors for their farms etc. and the interest rates that savers negotiate with borrowers is the "price" of savings.

However in the absence of a sound monetary system, loans in our current economy are able to be made irrespective of whether any real savings are present or not. What then happens when this occurs?

To understand the consequences of lending in the absence of savings, imagine an economy where Mom and Pop go to work each day in an orchard. They work hard and each week they take their fruits to market and make just enough money to get buy... no more and no less. They have sufficient money to maintain the orchard and their equipment and they have sufficient money to pay for phone, TV, good steak, nice wine - to live to the standard to which they've become accustomed. Their standard of living need not necessarily be a poor standard of living, but they are none the less consuming 100% of the fruits of their labour (excuse the pun) each week and at the end of the year they have no cash savings whatsoever - their account balances at the local bank are exactly the same as they were at the start of the year.

Now imagine that all of the entrepreneurs all over the country are in exactly the same situation as Mom and Pop - which is to say that everyone is consuming the totality of their production and there are no real savings made by anyone.

Finally imagine that, despite the complete absence of any additional deposits or savings, the banks decide to make new loans in this economy to a bunch of people. In creating these loans the banks are issuing new credit which will be used as a medium of exchange and are therefore expanding the effective money supply. The result is, rather predictably, that the new money that has been lent by the banks bids for resources in the economy (metal, wood etc.) in addition to the money that was already being used to bid for these resources and the price of goods goes up - in particular the price of those goods demanded by the people who received this new credit goes up as does the price of anything the bankers are buying (since the bankers will now be earning additional money by way of interest)... which is a classic inflationary scenario. The immediate effect of this is that Mom and Pop won't be able to buy good steak - they have to buy hamburger meat instead because steak costs too much. Left to their own devices Mom and Pop would rather consume all the fruits of their labour immediately and would rather eat steak than eat hamburger meat and save, but they have now been forced to reduce their standard of living so that the bankers can issue new loans.

What is even more nefarious in all of this is that had Mom and Pop decided to save then they would have been paid interest on their savings - which is to say they would have received some long term benefits from delaying immediate consumption and satisfaction of their needs. If the interest rates were high enough to entice them to do this then Mom and Pop would even have been better off for having done so. However, since the banks didn't want to pay them sufficient interest to entice them to save (and make available the real savings that were required for the new businesses to start) and found it more expedient to simply force them into slave savings mode - essentially confiscating a portion of their wealth that had previously been used to maintain the standard of living that they aspired to - Mom and Pop will get nothing for their trouble aside from the pleasure of eating hamburger meat rather than good quality steak. If they're lucky, the bank manager might give them a good poke in the eye next time he sees them - at least then they'll know who stole their steak.

Eventually the new money in the system will push up the prices of the fruit that Mom and Pop sell and they will regain the standard of living that they had before. However, in the short term Mom and Pop have unwittingly been forced to lower their standard of living to pay for the new investments that the bank decided to "fund". The banks will recover interest on the money they lent to investors so they're more than happy to extend these loans. The bankers basically get to take a bit of Mom and Pop's wealth, lend it out, make a tidy profit and chuckle smugly to themselves over champagne on their yachts.

However, the above is not an accurate portrayal of what is currently taking place in the economy. For, the above is merely what happened in the past 8, 15 or 100 years (depending on how far you want to trace back inflation, which has been more or less unchecked since the invention of central banking at the end of the 19th century in Britain). What is happening now is rather different. For, the banks have already issued the credit and already expanded the money supply. What is becoming apparent presently is that many of those who took advantage of the lines of credit that were offered are perhaps no longer (or never were) in a position to pay the money back. Since modern banks do not maintain 100% reserves, when someone defaults on a loan the implication is that money actually disappears from the banking system entirely (just as quickly as it appeared in the system upon the creation of the loan in the first place).

What are the consequences for Mom and Pop in this case? In the absence of additional money injected into the system what we could expect is less people bidding for an unchanged quantity of goods, services and basic resources in society and thus price deflation. So we'd expect to see more or less the opposite of what we saw during price inflation. And just as the initial inflationary period was bad for Mom and Pop (because other actors in the economy saw the new money resulting from inflation before them and were able to outbid Mom and Pop for resources) we might expect the deflationary period to be a bit of a boon for Mom and Pop. Where price increases hit other goods before they hit fruit and veggies before, we'd expect the price decreases accompanying deflation to come to the fruit and veggie sector of the economy later than it hits other sectors of the economy... So initially perhaps Mom and Pop will be able to buy a bit more than they were able to buy before, with the same quantity of money. Those who will initially be struggling during the deflationary period are those who defaulted on their loans (naturally) and those who extended credit to these people (typically the banks). Eventually price deflation would hit the fruit and veggie sector as well, and Mom and Pop's standard of living will go back to where it was before.

The above is something of an oversimplification since strict labour laws typically prevent companies from lowering people's salaries and so the only way they have of cutting costs during a deflationary period is by laying off staff - resulting in rising unemployment. Adjustments to the structure of capital in the economy accompanying such a "bust" following an inflationary boom will also necessitate re-skilling and likely temporary unemployment in order to heal past wounds. However a full discussion about the structure of capital is beyond the scope of this post. More importantly for this post, the above description of a deflationary recession simply isn't what's currently occurring anyway. What is currently occurring is that the banks and governments around the world are frantically injecting money into the system to make up for the trillions (literally) of dollars that they pulled out of thin air over the past 8 years and which are currently evaporating as individuals and companies default on their debts. Deflation, it is held by those in the seats of power, is the worst evil known to man and must be avoided at all costs since deflation apparently causes unemployment (to be clear, not a theory I agree with but this is the common thinking anyway). For banks that make their money by inflating, the pain associated with deflation is clear to see. Furthermore, they have a trump card - the banks never lent their own money - they lent yours. They pretended to be deposit institutions that would hold their depositor's money safely in locked vaults. In reality banks are not deposit institutions at all but highly leveraged investment institutions. They keep only the tiniest fraction of the money that depositors give them. On the back of 30 million dollars in deposits a typical bank will lend almost one trillion dollars out, and therefore when but 3% of their loans go bad most banks will have no reserves whatsoever remaining. They can loose all of the money that has ever been deposited with them if they are not able to recover a mere 3% of their loans. The fact that banks lose other people's money (depositor's money to be exact) is the Achilles’ heel of the general public.

In effect, the banks have a hostage: people's deposits. Were it not for their deposits, Mom and Pop would probably say, "What do I care if prices go down? Let the banks sink - f#$% em, they're rich pricks anyway!" And given that the banks essentially got rich by stealing Mom and Pop's wealth, you'd have to have some sympathy with Mom and Pop for holding such a view. However even Mom and Pop (who don't have any savings) have at least a little money deposited with the bank - they keep sufficient funds in their current account to ensure that they're able to conduct their day to day affairs with respect to the orchard they own and the management of their household. Mom and Pop don't want to loose that money. Furthermore, although on aggregate the rate of savings in the United States may currently be negative, there will always be some people that save and others that don't. Those people that have been squirreling away money for years to save up for their wedding or their children's education certainly don't feel very comfortable about the idea that those hard earned savings might just evaporate overnight because the bank that they held those savings in happened to be, in actual fact, a highly leveraged investment vehicle and not the trustworthy deposit institution that they had presumed it was (because of the big "BANK" sign over the door).

As such, the idea of moral hazard (which most people haven't even heard of) was all too easy to sweep aside in the mass media. What was focused on instead was the frightening possibility that people might loose their deposits. A short term cure for that particular problem has thus been sought without any regard to the long term consequences of the actions taken to bring about such a quick fix.

Long term, the problem will only raise its ugly head again because banks do not lend their own money - they lend yours! The system of fractional reserve banking with a lender of last resort means that banks get to earn interest on the loan of fictive money while times are good (interest that they pay their staff salaries and healthy bonuses from) and then when it all turns to custard they really don't care, because government and the lender of last resort are both more than willing to cover up their crime by picking up the tab (and I use the word crime here in the most literal sense, since the use of false certificates of deposit which is characteristic of fractional reserve banking is recognised as a crime and known as embezzlement in all other industries). No amount of government regulation can counter-balance this. We know (as do the banks) that the government is willing to make use of force to ensure the payment of any loans that banks make and which go bad (i.e. government makes tax payers pay back the loan). For this reason, after the dust has settled in the current crisis people will continue to deposit money in banks such as Fortis and UBS, treating these institutions as the safe deposit institutions that they always treated them as despite the fact that their actions have betrayed them as being anything but, time and time again... and it will be business as usual.

The band aid which will be put on the open gash left in our economies will be completely ineffective regulation (it has to be ineffective since it does not address the root cause of the problem) and commentators in 2014 or 2016 will be taking about how the free market has failed them yet again and brought about yet another unavoidable crisis. The reality, of course, will be that the free market had nothing to do with it - the free market hasn't been seen anywhere near the banking sector for well over 100 years.

Scientists determine that there is no discrepancy between climate model predictions and tropical troposphere temperature records

TokyoTom — Sun, 12 Oct 2008 09:24:00 GMT

PhysOrg.com reports that a team of scientists led by the Lawrence Livermore National Laboratory has "helped reconcile the differences between simulated and observed temperature trends in the tropics." "Using state-of-the-art observational datasets and results from computer model simulations archived at Lawrence Livermore National Laboratory, LLNL researchers and colleagues from 11 other scientific institutions have refuted a recent claim that simulated temperature trends in the tropics...(read more)

Una Fácil Solución a la Crisis

Rodrigo Diaz — Sat, 11 Oct 2008 16:18:00 GMT

Este humoroso video, con súbtítulos en Español, contiene mucho de enseñanza.

Por favor pulse el siguiente vínculo.

The Last Laugh - George Parr - Subprime - subtitulos
by erioluk