Getting money right is hard...............

      Those deliberations unfolded against a backdrop of America's long and often unsuccessful effort to maintain equilibrium between the demand for money and its supply, an effort that extended back to the controversy unleashed by Hamilton's First Bank of the United States, designed to give the economy sufficient liquidity, maintain currency stability, and ensure economic efficiency.   Jefferson and his Republican allies attacked the bank as a dangerous concentration of financial power, and its charter lapsed in 1811.  But the War of 1812 revealed the need for a central banking authority.  State banks in the Northeast, where the war was unpopular, hoarded the country's meager reserves of specie (gold and silver), forcing banks in the other regions to rely on printed money.  The result was a menacing wave of inflation and considerable economic dislocation.  Thus the Second Bank of the United States was established in 1816—and immediately slipped into corruption as its officials speculated in the bank's stock and fostered venal practices by its branch members.  When new bank leaders sought to clean up the mess by foreclosing on overdue mortgages and redeeming overextended notes from state banks, they triggered the Panic of 1819.  Banks failed, prices collapsed, unemployment soared.
     President Andrew Jackson, a sound-money man who hated all concentrations of power, killed the national bank with a series of bold and highly controversial political maneuvers in the 1830s.  But the state banks he fostered couldn't always  maintain the needed balance between money demand and money supply, and that proved disastrous when the Panic or 1837 ravaged the U. S. economy for nearly seven years.  An anguished call rose up for rescinding Jackson's last executive action, his Specie Circular, designed to curb a dangerous inflationary wave sweeping the country in conjunction with wild land speculations in the West.  Jackson's answer was to require purchases of government property to be transacted in gold or silver.
      But when the threat of inflation suddenly gave way to the threat of falling prices, or deflation, Jackson's protege and chosen successor, New York's Martin Van Buren, couldn't see that the Specie Circular was precisely the wrong medicine when the country desperately needed liquidity.  In the name of a sound currency, he clung to Jackson's old policy even as it deepened the Panic and destroyed his presidency in the 1840 elections.

-Robert W. Merry, from his book, President McKinley:  Architect of the American Century

The context for this passage is framing the silver-versus-gold debate in the lead-up to the 1896 Republican National Convention's nomination of  William McKinley for president.

My favorite optimist..................

................notes that failed populist revolts often bring the unexpected tyranny.  History may not repeat itself, but its cycles sure seem similar (and not very pretty).  Full post is here.  Two wee excerpts here:

"There is a lesson here. Europe as a whole is heading down the same path: slow growth and far too many people living off redistribution rather than enterprise — in private, public and voluntary sectors. The goose that always lays the golden eggs of prosperity is the habit of exchange and specialisation: people doing what they are good at, and getting better at it with innovation, while swapping the results freely with others through commerce."

"Yet history shows that free exchange is constantly at risk of being infected and captured by parasites and predators who live off productive people through taxes, tithes, rents, slavery, subsidy, war and theft. This is what killed the goose in ancient Greece and Rome, in Renaissance Italy and Holland’s golden age. From time to time anti-oligarch insurgents are needed to purge the parasites, expel the predators and free the economy from their burden."

More thoughts on the care and feeding.......

..................of the goose that lays the golden eggs.  Tomorrow is the date we all have to settle up with the IRS for the year 2015.  While some grumbling is perhaps expected, it pays to remember:

                               Atomism

Notions like "taxation is theft" rely on atomistic individualism for 

whatever plausibility they have. Taxation would be theft if:

1) The natural state of human beings was to exist as isolated 

individuals, somehow in full possession of a bunch of property 

despite their isolation; and

2) These atomic individuals then entered into a "social contract" 

in which they agreed to live in a society with other humans, but 

nly on the condition they get to keep all of the property they had 

when they lived alone.

Of course, both one and two are complete nonsense: human 

beings would not even be human beings apart from a human 

social group. Our natural state is to live in a group with a 

number of other human beings, and the monads of atomic 

individualism have only existed in history due to terrible 

mishaps. And they certainly possessed no property!

Furthermore, the natural state of affairs in these groups was to 

treat resources as the possession of the group. Private property 

was an innovation (and a very useful one) granting some 

individuals greater rights in regards to some resource than 

anyone else. But being granted to an individual by their social 

group, it is quite naturally subject to revocation by the group 

and to whatever other conditions the group puts upon its 

possession. Such as, for instance, "You may have control over 

this land, and the proceeds you earn from using it, on the 

condition that you return 10% of those proceeds to the group."

Tax evasion, not taxation, is theft! And you are "coerced" into 

paying your taxes only if you try to weasel out of your 

obligation to pay them, just as you are "coerced" into paying 

for your groceries.

-Gene Callahan

growing the pie....................

"... the US has done well because we have not wrangled as much as the rest of the world over distribution issues, and have left a lot of room for people to gain a lot from their own productivity.  That has led to a lot of wealth, and in general, a growing pie for everyone to benefit from.

Productivity goes in waves, and labor plays catchup with capital after technological progress.  We have seen people redeployed from agriculture and servanthood/slavery in the past 150 years.  We will see them redeployed from manufacturing in the next 100 years.  They will provide services to their fellow men, should there continue to be peace and tranquility, allowing labor income to catch up with that of capital."

-David Merkel, as extracted from here

Just wondering if the onset of.....................

......................................eoncomic freedoms in the form of free enterprise or capitalism had anything to do with the trajectory change?   Just wondering.