The Book Washington D.C Is Afraid Of

It should be obvious to every observant American that the government based out of Washington D.C. is out of control. From a country founded on the concept of freedom, the executive branch, the legislative branch and the judicial branch ignore the fundamental precepts of the Constitution and attempt to regulate "the People"  and take at will.

It seems there is little "the People" can do, with all three branches of government ganging up against them. Tom Woods, though, argues that there is something that can be done, and that something is nullification.

In a brilliant book, Nullification: How to Resist Federal Tyranny in the 21st Century, Woods'  educates readers on the Constitution, and what it means, in a manner that most assuredly you did not learn in High School or college. Most importantly, Woods focuses on the concept of nullification, a concept that goes back to Thomas Jefferson. The concept being that states have the right to nullify unconstitutional laws.

As examples of nullification, he discusses the current attempts by some states to legalize medicinal marijuana (despite opposition at the Federal level). He discusses the actions by states that for all practical purposes nullified the federal Real ID Act of 2005. Woods writes that half of the states issued formal declarations that they had no intention of  complying with the federal mandate. Woods states that “resistance was so widespread that although the law is still on the books, the federal government has, in effect, given up trying to enforce it.”

Woods also points out that nullification  can go beyond the state level and be carried out on an individual level. He cites jury nullification as an example.

Most intriguing, Woods suggests that nullification could take the form of states requiring its citizens to send federal income tax money to the states where it would be put into escrow accounts, where the states then individually determine what legitimately should go to the federal government, with perhaps the states sending the rest back to its citizens.

If you haven't figured it out, this is a radical book, but it is radical constitutionalism, soundly argued. Given the overbearing reach of the Federal government, the nation, outside of Washington D.C., is fed up. This is the book that can provide the manual to take back the country. There are already indications Washington D.C. is scared of this book. I am writing this on Saturday June 26,  after returning from the Borders Books at the corner of 14th Street and F Street in Washington D.C. This Borders is just two blocks from the White House. Woods' book is officially not scheduled to be released until Monday June 28, but as is often the case,  the book was put on the shelf a couple of days early.

When I spotted the book it was face forward, the way they put books they want to promote, but there was only one copy. This struck me as odd given that the book was face forward, which suggested to me there was originally other copies. Further, since the book isn't officially out until Monday, it's doubly odd there is only one copy. I found a clerk and asked him if he could tell me how many copies of the book the store originally received. He looked it up for me. First, he noticed that the book wasn't officially out until Monday, but that the store had originally received 6 copies. He looked confused that there was only one copy left. I said to him, "That's alright. I think I understand."

A book that provides a playbook on how to reverse out of control government is selling like hotcakes just blocks from the White House. I get it. Some people are very afraid of this book and need to find out what is in it real fast. They know this book has nation changing potential. I say buy the book, get the nullification argument down cold, get in on the debate and scare the hell out of Washington D.C.

George Soros Stumbles in the Face of Tom Woods' Influenced Questioning

Dixie Flatline writes:

The first Chinese participant does a fantastic job of challenging George Soros, with what sounds to me, like an argument directly out of Tom Woods NYT bestseller, Meltdown. Now I haven’t read Meltdown, but I have caught all of Woods’ articles and speeches available online, and feel I can confidently make that assessment.

At 2:30, the Chinese participant mentions that markets can correct themselves, and Soros argues they cannot.

Notice how Soros stumbles when he talks about how markets are smarter than regulators, then claims that only regulators can stop perpetual market failure. And the questioner does a wonderful job of pointing out, that only expansion of the monetary base can provide the necessary environment for these large booms, and Soros starts blinking, which sometimes is a sign of discomfort (approx. 4:30)

Great video, and wonderful to see the oligarchs challenged, particularly in Asia, which is where the hope for rational, free market economics, specifically Austrian Economics, has enormous potential to take hold. As the flows of capital shift from the West to the East, its my feeling that change in economic attitudes will come where people have a healthy disrespect for the state, for propaganda, and the population generally values intellectualism, and savings.

Watch the video:

John Carney Headed to CNBC

CNBC has announced that John Carney will be joining CNBC.com. In addition to writing for the site, Carney will also appear regularly on CNBC’s Business Day programming.

This is a great spot for Carney. He's a great reporter with great connections. And, he has fans everywhere.

Sometime back after I wrote a post about Carney, here's what Tom Woods emailed me:

FYI, you are certainly correct about his talent. I knew him at Harvard -- he spent a year there while enrolled at SUNY Binghamton -- and we hit it off right away. Extremely smart and a great writer. I have never felt a dinner with him was wasted time. He and I in fact watched the 2000 election returns in a Manhattan bar together.

The CNBC press release announcing Carney's joining the network is in the EPJ Vault, here.

Forgotten Facts of American Labor History

By Thomas E. Woods

Just about everything that people think they know about labor unions and wage rates is wrong.

The standard tale that practically every student hears over the course of his education is that before the emergence of labor unions, American workers were terribly exploited and their wages were consistently falling. The improvement in labor's condition was due entirely or at least in large part to labor unionism and favorable federal legislation. In the absence of these, it is widely assumed, people would still be working 80-hour weeks and children would still be working in mines.

This oft-heard tale is, however, almost entirely false, and those parts of it that are true (the low standard of living that people enjoyed in the nineteenth century, for example) are true for reasons other than those alleged by pro-union historians, who see in them only confirmation of their prejudices against the market economy.

As late as the 1920s, labor law in America was based on the following considerations.

Freedom of contract and association were essential principles. A laborer was perfectly free to reject any offer of compensation that an employer might make to him, and an employer was likewise entitled to reject any offer made by a laborer. An employee was free to withhold his labor services if unsatisfied with his employer's terms; likewise, a group of laborers jointly exercising this individual right were permitted to do so. No one, however, was allowed to prevent individuals who wished to work from exercising their right to do so.

Strikers – like anyone else – were forbidden to interfere with consumers' right to shop where they liked. And strikes could not obstruct suppliers from making deliveries, since to do so would again violate the rights of others. Finally, since the employer's plant was private property, the employer had the absolute right to decide who would be permitted to enter, and complete strangers who wished to enter for the purpose of agitating his employees could be lawfully excluded altogether.

This common-sense legal approach to labor unionism began to give way with the Norris-La Guardia Act, signed by Herbert Hoover in 1932. The legislation made "yellow dog" contracts – in which an employee could be required to promise to refrain from union activity as a condition of employment – unenforceable in the courts. The Act also exempted labor unions from prosecution under the Sherman Antitrust Act. Although the Sherman Act should certainly have been (and still should be) repealed, if there were ever an institution guilty of "restraint of trade" it was labor unions, which not only withheld their own labor but which also used intimidation and force to keep down non-union competition. They would henceforth be exempt from behavior that the law deemed criminal in any other context.

Read the rest here.

Nullification: How to Resist Federal Tyranny in the 21st Century

Tom Woods' new book is scheduled for release on June 29. Pre-order here.

Tom Woods to Discuss Nullification on NPR

One way ObamaCare may be stopped is through nullification. Tom Woods will be discussing the subject on National Public Radio.  He writes at LRC:

Tomorrow at 10:00am ET I’ll be on NPR’s “On Point” alongside a Duke law professor to discuss the various nullification/federalism initiatives around the country. I for one would welcome your calls — 1-800-423-8255. Here’s a full list of stations; some broadcast the program live, others air it later. And here’s how to listen online

.

Tom Woods Does the East Coast

You are real lucky if you are in the Hartford area, or Virginia area, this week. Tom Woods will be speaking at a number of venues, and two of his speeches will be on  Austrian Business Cycle Theory. Woods writes:

When I was last in Hartford I had an interesting exchange with the Chairman of ING Insurance, who, while a nice guy, thought he was zinging me when he said Austria’s economy wasn’t really worth all the emphasis I was placing on it. This Wednesday I’ll be speaking in Hartford again, this time at Trinity College. At 4pm I’ll talk about Catholic social teaching and the market economy, and then at 8pm I’ll talk about Austrian business cycle theory, the financial crisis, and issues like that. Both events take place in Rittenberg Lounge, Mather Hall.

On Thursday I’ll speak at 7:30pm at Virginia’s Hampden-Sydney College (Crawley Forum), two of whose professors collaborated on this prize-winning article on Austrian business cycle theory.

The Jekyll Island Club Pictures

The Jekyll Island Club is the location where a secret meeting took place in November 1910 to plot the formation of the Federal Reserve. Rockefeller and Morgan interests were well represented.

On the evening of November 22, 1910, Sen. Nelson Aldrich(A Rockefeller operative. His daughter married John D. Rockefeller Jr.), A.P. Andrews (Assistant Secretary of the Treasury Department), Paul Warburg (representing Kuhn, Loeb & Co.), Frank A. Vanderlip (president of the National City Bank of New York-a Rockefeller controlled bank), Henry P. Davison (senior partner of J. P. Morgan Company), Charles D. Norton (president of the Morgan-dominated First National Bank of New York), and Benjamin Strong (representing J. P. Morgan), together representing about one fourth the worlds wealth at the time, left Hoboken, New Jersey on a train in complete secrecy, dropping their last names in favor of first names, or code names, so no one would discover who they all were. The cover story they used was that they were going on a duck hunting trip on Jekyll Island. In a sense this was true, the ducks were the America people.

This weekend another meeting was held at the Jekyll Island Club. It was the good guys this time, plotting an End to the Fed.

Under the sponsorship of the Mises Institute, some of the best minds in economics were brought together to explain and discuss the Fed. Checkout the speakers and their topics:


Robert Murphy "Only the Austrians Can Explain Depressions"

Christopher Westley "Why the Fed Got Birthed"

Peter G. Klein "Did Keynesian Economics Win the Battle of Ideas?"

Douglas E. French "Failure and Prosperity"

Llewellyn H. Rockwell, Jr. "Parallel Lives: Liberty or Power?"

Joseph Salerno "The Macroeconomics of the Fed: Mainstream and Austrian"

Mark Thornton "What Were They Saying in July 2007?

George Selgin "The Fed's Dismal Record"

Gary North "Heckle and Jekyll: How Murray Rothbard Got the Fed's Story Right"

Thomas Woods "The Source and Workings of the Latest Crisis"

Ron Paul "My Battle Against the Fed"

How radical of a group is this? An informed source tells me EPJ was referenced and quoted approvingly.

Ilya Kinros was there and sends along these pictures:

Bob Murphy, author of The Politically Incorrect Guide to the Great Depression and the New Deal, drew a crowd.

The Austrian Business Cycle Theory Enforcers, Tom Woods and Joe Salerno--Never mention John Maynard Keynes in front of them.

They couldn't get enough of Murphy-Here they line up to get personal nuggets of wisdom from the man.

A hallowed hall in the Jekyll Island Club hotel.

100 years too late, Ilya prepares to plant a bug inside the now named, "Federal Reserve" room, where it is thought the plotting was done that resulted in the creation of the Fed.

Inside the room where the Federal Reserve Act was likely designed.

Details about the Jekyll Island Club here.

Where Did the Money Come from to Fuel the Housing Bubble?

by Tom Woods

No supporter of the market economy could have been surprised when the recent financial crisis was inevitably blamed on “capitalism” and “deregulation.” The free market, we were told, was a recipe for financial instability. “Advocates of the free market must confront the fact that both the Great Depression and the current financial chaos were preceded by years of laissez-faire economic policies,” wrote Katrina van den Heuvel, editor of The Nation, and author Eric Schlossel, in September 2008.

It is not enough to call this a distortion of the truth. It is a grotesque distortion, worthy of the Soviet politburo. The crisis is in fact the altogether predictable fruit of massive government and central-bank distortions of the economy. That may be why the free-market economists of the Austrian School were practically the only ones to have seen it coming.

There has been much discussion on right-wing radio and in the conservative press about Fannie Mae, Freddie Mac, and the Community Reinvestment Act (CRA), which have been described as forms of government intervention that contributed to the financial crisis. To a certain extent that is all well and good: Fannie and Freddie enjoyed special government-granted privileges, along with an implicit bailout guarantee, that allowed them to become much more substantial actors in the secondary mortgage market than would have been possible in a free market. Furthermore, politicizing the lending process and cajoling banks into abandoning traditional standards of creditworthiness cannot make a positive contribution to the health of the banking industry.

But although there is no question that those factors exacerbated the problems that led to the crisis, they are not the primary culprits. Britain has also experienced a housing collapse, even though there is no British analogue of Fannie, Freddie, and the CRA. Moreover, no matter what encouragements these and other institutions may have given to home purchases, where did all the money come from to buy all those houses and drive up their prices so high so quickly?

We should instead focus on the Federal Reserve System, an institution few Americans know much about but which, in addition to systematically undermining the value of the U.S. dollar – which has lost at least 95 percent of its value under the Fed’s supervision – gives rise to the boom-bust business cycle.

A business-cycle primer

Economist F.A. Hayek wanted to understand why the economy moved in a boom-bust pattern – why there was, in the words of the British economist Lionel Robbins, a sudden “cluster of error” among entrepreneurs. Why should the people the market has rewarded in the past for their skill at anticipating consumer demand suddenly commit serious errors and all in the same direction?

Hayek won the Nobel Prize for his answer.

Building on the insights of Ludwig von Mises, who first began to develop what is known as Austrian business-cycle theory in his book The Theory of Money and Credit in 1912, Hayek pinpointed the central bank’s artificial creation of credit as the nonmarket culprit in the business cycle. (Economist Jesús Huerta de Soto applies Austrian business-cycle theory to cycles that occur in countries that have lacked a central bank in his treatise Money, Bank Credit, and Economic Cycles.)

To understand Hayek’s point, which exonerates the free market, consider two scenarios.

Scenario 1. Consider what happens when the public increases its savings. Since banks now have more funds to lend (namely, the saved funds deposited by the public), the rate of interest it charges on loans will fall. The lower interest rates, in turn, stimulate an expansion in long-term investment projects, which are more sensitive to interest rates than short-term projects are. (Think of the difference in the decline in monthly payments that would occur between a 30-year mortgage and a 1-year mortgage if interest rates came down by even 2 percentage points.)

Lower-order stages of production are those stages closest to finished consumer goods: retail stores, services, and the like. Wholesale and marketing are examples of higher-order stages. Mining, construction, and research and development are of still higher order, since they are so remote from the finished good that reaches the consumer. When people’s consumption spending contracts, it is a perfect time for higher-order stages of production to expand: because of people’s additional saving, there is relatively less demand for consumer goods, and the resulting contraction of lower-order stages of production will release resources for use in the higher-order stages.

Scenario 2. Government-established central banks have various means at their disposal to force interest rates lower even without any corresponding increase in saving by the public. (For more on this, see The Mystery of Banking, by Murray N. Rothbard, or his shorter classic, What Has Government Done to Our Money?) Just as in the case in which public saving has increased, the lower interest rates spur expansion in higher-order stages of production.

The difference, though, is a critical one and guarantees that these artificially low interest rates will not yield the happy outcome we saw in Scenario 1. For in this case, people have not decreased their consumption spending. If anything, the low interest rates encourage further consumption. If consumption spending is not constricted, the lower-order stages of production do not contract. And if they do not contract, they do not release resources for use in the higher-order stages of production. Instead of harmonious economic development, there will instead ensue a tug of war for those resources between the higher and lower stages. In the process of this tug of war, the prices of those resources (labor, trucking services, et cetera) will be bid up, thereby threatening the profitability of higher-order projects that were begun without the expectation of this increase in costs.

Read the rest here.

Thomas E. Woods, Jr. [visit his website; send him mail] is the author of nine books, including two New York Times bestsellers: Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse and The Politically Incorrect Guide to American History. Read Congressman Ron Paul's foreword to Meltdown.

Tom Woods' Next Book

The secret is out.

In an interview, Lew Rockwell mentions that Tom Woods next book will be called, Nullification Handbook.

Here's wikipedia on nullification:

Nullification (U.S. Constitution), a legal theory that a U.S. State has the right to nullify, or invalidate, any federal law which that state has deemed unconstitutional.

Talk about a block to the growth of Big Government. Wow.

Tom Woods Speaking in Baltimore on February 17

Thomas DiLorenzo writes:

The next speaker in my Moral Foundations of Capitalism lecture series at Loyola University Maryland is Tom Woods, speaking on “A Catholic Defense of Free-Market Capitalism” on Wednesday, Feb.17.
Time: 4:30-6 PM
Place: Knott Hall B-03
Free and Open to the Public

Next Event: Rabbi Daniel Lapin, “The Morality of Economic Freedom,” March 24, 7 PM, 4th Floor Program Room, Loyola University Maryland.

For those of you in the area, Woods, author of NYT best seller, Meltdown, is worth checking out. He is a very knowledgeable speaker and he could motivate the Detroit Lions into a winning season. You'll always walk away from a Woods' speech with new insights into how the world works.

Keynesian Predictions vs. American History

The video version of Tom Woods talk at the Mises Circle in Houston that he gave on January 23, 2010 is out. If you are trying to understand the difference between Keynesian economics and Austrian economics this video is a must see. Woods is quite simply one of the best at making Austrian economics understandable. And if you already have Austrian economics down, the video is a must see as Woods details the incredible forecasting errors of Paul Samuelson, Arthur Okun and Paul Krugman.

Last Year's Top Twenty-Five

Below are the Top Twenty-Five most viewed posts for the year 2009:


#1 Shock: Inside the Healthcare Bill

#2 Obama Healthcare Step One: Killing Off the Old, Then They Are Going After Quadriplegics

#3 Who Knew?

#4 Is a Fed Governor Hinting at a Stock Market Crash Just Ahead?

#5 Proposal to Have Soldiers Pay for Service-Related Injuries with Their Own Private Insurance

#6 Fed Friendly Economists In Panic Mode Over Ron Paul Audit Legislation

#7 They Have Lost Their Minds in San Francisco

#8 U.S. Government Gold Manipulation Document Declassified

#9 The Government Panic of September 2008

#10 Naming Names: More Sibel Edmonds Explosive Testimony On Current and Former Members of Congress

#11 Penn and Teller Explain Obamanomics

#12 William F. Buckley and the CIA

#13 Pickens' Pulls Plug on Major Windmill Project: Turns Out to Be All Hot Air

#14 The Goldman Sachs Three Card Monte Act

#15 In Profile: Zhao Danyang

#16 Turkey Sent Female Agents to Seduce BiSexual Congresswoman

#17 How to Get a Job in the Obama Administration, If You Are Jewish

#18 If A Revolution Comes, They're Going After Goldman First

#19 Inside Ben Bernanke's Wallet

#20 I Told You It's a Crazy Crime Zone: The Mayor of Sacramento Robbed in San Francisco

#21 HSBC to Retail Gold Buyers: "Get Your Gold the Hell Out of Here"

#22 Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank?

#23 A Christmas Card from the Federal Government

# 24 Tyler Cowen Rips "Ron Paul-Lew Rockwell Libertarianism"

#25 Does Goldman Sachs Run the World? (Third year in Top 25)

Just missed the Top 25:

Who is Timothy Geithner?

Insider Trading in Congress? Very Suspicious Trading By Senate's No. 2 Democrat, Dick Durbin

Top Ten

The Top Ten most read posts at EPJ for the week ended Saturday November 7, 2009:

#1 Why Tom Woods Set Off Mel Watt's Voltage - Returns to the Top Ten on news that Watt was instrumental in gutting Ron Paul's Audit the Fed Bill

#2 Shock: Inside the Healthcare Bill 16th week in the Top Ten

#3 Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says

#4 So Just Who Is Buying All the New Treasury Debt?

#5 Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank? More fall out from gutting of the Audit the Fed Bill returns this post to the Top Ten

#6 How the Obama Administration Is Fudging the Jobs Saved/Created Numbers

#7 Fed to Banks With Major Commercial Real Estate Loan Exposure: Bang You Are Dead 2nd week in Top Ten

#8 "Did You Even Read the Bill?"

#9 Larry Summers Takes Out an Obama Commie

#10 The Most Powerful Union in the World

The Vision of Tom Palmer

There is a major street brawl going on between Tom Palmer and some members of the Austrian school of economics.

The brawl started when out of the blue, in a review of a Johan Norberg book about the financial crisis, Palmer threw this in:

...Norberg is a smart guy, a meticulous researcher, and a good writer, but because it’s an exercise in economic analysis and financial journalism, with no religion thrown in. (As an example of the latter, the book Meltdown by Thomas Woods insists, contrary to the evidence, that the artificially induced boom resulted in a lengthening of the capital structure through overinvestment in too many “long-term projects.” [p. 68] In fact, what we saw was a bubble in housing, which is not a “long-term project” that will “bear fruit only in the distant future,” but a speculative investment in a durable consumer good, with an additional twist: the low refinancing rates and the inducements to refinance led many to treat their homes as ATM machines and withdraw cash to finance, not “long-term projects,” but consumption. But Mises and Hayek explained a previous boom-and-bust cycle in terms of a lengthening of the capital structure, so we must believe — we must, a priori! — that all boom-and-bust cycles must — they must! — follow the same process. That’s religion, not analysis. Woods embeds some information on the deliberately induced housing bubble and the policies of Fannie Mae, Freddie Mac, etc. in a populistic treatment of the crisis; setting aside the religion, it’s ok, but it does not compare well with the much more rigorous and financially sophisticated treatment offered by Norberg.)

Let's pull this comment apart step by step.

Palmer writes:

As an example of the latter, the book Meltdown by Thomas Woods insists, contrary to the evidence, that the artificially induced boom resulted in a lengthening of the capital structure through overinvestment in too many “long-term projects.” [p. 68] In fact, what we saw was a bubble in housing, which is not a “long-term project” that will “bear fruit only in the distant future,” but a speculative investment in a durable consumer good,

Palmer may have not noticed, but the stock market collapsed. It was a collapse of the entire capital sector, not just housing. Indeed, the IPO market ground to a complete halt, not just the housing related sector of the IPO market.

And Palmer may have not noticed but, over the last 12 months, non-construction manufacturing durable goods unemployment has climbed from 6.5% to 13.1%. Mining, quarrying, and oil and gas extraction unemployment climbed from 2.8% to 10.7%. In the information sector, unemployment has climbed from 5.0% to 11.2%

If Palmer thinks this was simply a housing crash, then he is really reading much too many headlines and not digging into the facts. I hesitate to say but, by simply reading headlines, he is taking much too much on faith.

As for Palmer claiming the housing market is not a "long term project", but instead a "long term consumer durable", he really fails to make an important distinction that Hayek taught us. Yes, housing is consumed overtime, but because it occurs overtime, part, in fact most, can certainly be called a long term project. In other words, in the construction of a house, immediate consumption is foregone to create something of greater value that will only be consumed at a later time. Instead of men laying on a beach taking in the sun for immediate consumption, they are creating products that have future value. In the case of housing, some part of the home won't be consumed for decades. If something is not consumed for decades, it's a long term project.

Palmer simply fails to understand that, as Hayek taught, it is not the physical attributes of a thing, but the purpose for which an individual assigns to a physical thing that is important. Thus, the same physical thing can have multiple attributes, a completed house can be part immediate consumer good, that which is consumed immediately, and part a product that will not be consumed until decades later, which makes the creation of, at least that part of it, a long term project.

Perhaps, this is understood by most Austrian economists intuitively, as say, they understand that there is a difference between a banana and a banana tree. But for some, because one eats a banana, i.e. part of a banana tree, one is not working on "a long term project" when planting a young banana tree. One is just consuming long term, which of course begs the question, if all one is doing is consuming, why plant the damn tree in the first place? Just consume it long term. One wonders who would plant trees, in a Tom Plamer world, since trees are somehow just consumption.

Palmer then goes on to tell us that:

...an additional twist: the low refinancing rates and the inducements to refinance led many to treat their homes as ATM machines and withdraw cash to finance, not “long-term projects,” but consumption.

This may be an "additional twist" for Palmer, but it has certainly been recognized by Austrian theorists. Murray Rothbard in Man, Economy and State recognized that some bank lending may be made to consumers for consumption, but further recognized this for what it is, a non-distortion of the savings-consumption ratio, since it went to consumption. If you pull money from consumers by printing more money, and then give it back to them through loans for consumption, the savings-consumption ratio doesn't change. And so, while Palmer raises this reality of consumers borrowing, from his tone it appears that he is not aware that it has been brought up and covered, decades ago. For him, it is a new vision, it as if he is driving on the road and suddenly looks up a hill and it is revealed to him in this vision, great words perhaps formed in the shape that clouds suddenly take or, dare we say, on a tablet. But the words, in this vision are big and clear: Yes, consumers borrow money!

Since this "vision" has been so revealing to Palmer, he then writes from the point of view of one who has been blessed, and the rest of us have not been granted such a vision. He sees this vision and nothing else.

He ignores all money going into the capital sector. He taunts those who see such:

Mises and Hayek explained a previous boom-and-bust cycle in terms of a lengthening of the capital structure, so we must believe.— we must, a priori! — that all boom-and-bust cycles must — they must! — follow the same process.

Yes, for those who have not seen his vision, they are now all talking a blasphemous religion. What the Austrians do in recognizing money flow into the capital goods sector is now, "religion, not analysis," because of his vision that consumers borrow. To him, that the capital goods sectors of the economy from the stock market to the mining sector and the durable manufacturing sector have collapsed, is not important. These facts are religion, to the man with the vision. Everything to him is consumption. Even houses are not long term projects, damn it.

Thus, economists have two different roads they can head down at this point, attempt to understand the facts and the money flows, or follow the man with the vision and chant: Consumers borrow! Consumers borrow!!

Why Tom Woods Set Off Mel Watt's Voltage

The Tom Woods' congressional testimony last week Friday in favor of the 'Audit the Fed' bill had two very curious turns, he set off extremely hostile questioning from two congressmen, by the hearings Committee Chair Barney Frank and Representative Mel Watt. Every other Congressman that questioned Woods, and Fed General Counsel Alvarez, was seemingly concerned about where the money the Fed is printing is actually going. But not Frank and Watt.

I discussed Frank's hostility, here. Watt was even more hostile. It looked like he was hit by a lightning bolt everytime Woods tried to answer a question that Watt posed. He interrupted Woods everytime, as though Woods was taking food off of his dinner table. But, maybe that's exactly how Watt's saw Woods testimony.

Most of the top industries donating to Watt are major beneficiaries of Fed money printing. His top industry donors are at #1 the commercial bankers industry, at #3 the building trade unions (All that Fed money printing benefited the building trade unions probably more so than anyone else), and at #5 the securities and investment industry. The current #1 corporate donor to Watt is Citigroup Inc.

During 2007-08 his top contributors were:

#1 Bank of America

#2 Wachovia Corp

#3 American Express

#4 American Bankers Assn

Overall in 2007-08, he received $187,359 from the Finance/Real Estate sector, more than double the amount of money he received from any other sector. Outside of North Carolina, his home state, Watt received the most contributions from Washington D.C. and New York City. Hmm, NYC donations for a North Carolina boy.

I wonder if the good people of North Carolina know what master their representative is really serving? Representative Watt's high voltage act during Woods' testimony suggests that Watt knows all too well where a tiny bit of the money the Fed is printing is ending up, and he is really making sure that tiny money flow doesn't stop, above anything else.

Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank?

During the testimony by Tom Woods on Friday, in favor of H.R. 1207, Congressman Barney Frank stepped up to the plate with some hostile questioning. I'll let Woods give the play by play:

In my opening remarks I added to my written statement, which I wasn’t strictly reading, a phrase for which Barney Frank (D-MA) would take me to task. In my written statement, I noted that the Fed is indeed independent in the sense that it can make trillions of dollars available to unknown friends on unknown terms. I then wrote that I couldn’t imagine any self-respecting American hesitating for a moment to challenge that kind of independence. In my oral remarks, after "self-respecting American" I added the words "who isn’t bought and paid for."

Note that I wasn’t saying that anyone who opposes HR 1207 is necessarily in the pay of anyone. I was suggesting that people who thought it was just fine for the Fed to have such extraordinary discretionary powers might have a material interest at stake in the question.

As surely true as those words are, whether I should have said them is obviously debatable. But Barney Frank’s shocked and indignant reply was still a bit over the top. Who is bought and paid for, he demanded to know. Well, how about the firms on the receiving end of Fed largesse, for one? How many of those oppose this kind of Fed independence (and how many support 1207)? I didn’t want to get into this particular subject, but I mentioned the work of Professor Lawrence H. White of George Mason University, who has shown the economics profession to be completely in thrall to the Fed – what with millions of dollars in research grants (one of the points I made to Congressman Frank) and countless other levers of influence. (See his [.pdf] article "The Federal Reserve’s Influence on Research in Monetary Economics." You might also note the more recent article on the Huffington Post, "Priceless: How the Federal Reserve Bought the Economics Profession," making the same point.) When we read about monetary economists urging the maintenance of Fed "independence," therefore, surely it’s not unreasonable to bear these factors in mind.

Of course, maybe the problem that Frank had with Woods' testimony is that it hit a little too close to home. Many of Frank's donors are clear beneficiaries of Fed money printing activities. The top donor to Frank, so far, in 2009/10 is FMR Corp (the parent name for Fidelity). Others in the top 20 donors for Frank include the American Bankers Association, the American Financial Services Assn, the Independent Community Bankers of America and, one of the greatest beneficiaries of past easy money policy, the National Assn of Home Builders. Did Frank have a guilty conscience and mistakenly think that Woods was referring to him?

Bartlett: 'Audit the Fed' Is a Crackpot Idea

Writes Bruce Bartlett:

Ron Paul finally got his wish yesterday and the House Financial Services Committee held a hearing on his legislation to audit the Federal Reserve. There were only two witnesses: the Fed's general counsel and Tom Woods, a historian from the Ludwig von Mises Institute...

I urge those curious about this issue to read both statements. I think it is abundantly clear that this is a crackpot idea. The Fed is already thoroughly audited in every area except two: monetary policy and dealings with foreign central banks. The only purpose of having additional audits of the Fed is to undermine its independence precisely with regard to these two areas. If Woods presents the best argument for doing so, the argument is very shallow indeed.

Reading only the prepared statements of Fed General Counsel Alavrez and Dr. Woods is is like reading only the introduction of a book and then critiquing the book. From Bartlett's comments, he clearly has not viewed the entire testimony.

For one, Ron Paul in his opening remarks, as I reported, knocked down the idea that H.R. 1207 is about auditing Fed monetary policy. It is not. Only Federal Reserve apologists continue to build this strawman.

Secondly, the questionning of Alvarez by Representative Alan Grayson should be enough to realize that an audit is necessary. Alvarez was evasive when Grayson quizzed him about Federal Reserve manipulation of the stock market. Alvarez also claimed he had no knowledge of front running by those who have inside information of Fed trading activities, when rumors about such trading are plentiful in the bond pits. Thus, while Bartlett attempts to focus on the strawman of auditing monetary policy, Grayson showed us two areas where a Fed audit is long over due---the area of front running the Fed, and any trading activities by the Fed in the stock market and stock futures markets. Further, an audit needs to be undertaken to determine what assets the Fed is buying. Alvarez, in testimony, attempted to deflect questonning by stating that the large majority of purchases are Treasury securities, but what the public should know is what else the Fed is buying.

Bartlett does acknowledge that Paul's bill would result in an audit of Fed activities with foreign entities, but does so grudgingly and misstates it as only an audit of foreign central banks, when, in fact, it would include an audit of Fed activities with foreign central banks, foreign governments and any other foreign entities the Fed trades with. As Representative Grayson put it, if there is a foreign savings bank called the Dick Cheney Savings Bank which has only a foreign account and the Fed is buying assets from the bank, shouldn't we know about this?

Why Bartlett, or anyone else, wouldn't want an audit of Fed transactions being done with foreign entities, is a real head scratcher.

I wonder if Bartlett would argue for giving Bernie Madoff a pass if he only ran his Ponzi scheme using foreign banks. Would it be a crackpot idea to audit Bernies foreign accounts? Using Bartlett logic it would be nuts to audit them.

What Tom Woods Should Have Said

Economist Tom Woods testified before Congress yesterday, in favor of Ron Paul's 'Audit the Fed' Bill. At one point he came under hostile questioning by Rep. Melvin L. Watt (D-NC), who at one point stated that Woods' remarks were simply "political."

Bob Murphy emails:

I can see how a politician would be frustrated with political answers.Tom should have said, "Would you like a military solution?"

Tom Woods Testimony Before Congress on 'Audit the Fed'

Prepared Testimony by Thomas Woods Jr. in Support of HR 1207, The Federal Reserve Transparency Act of 2009, House Financial Services Committee, September 25, 2009

I am speaking this morning in support of HR 1207, the Federal Reserve Transparency Act. As the Committee knows, this bill would require a full audit of the Federal Reserve by the Government Accountability Office (GAO).

On November 10, 2008, Bloomberg News ran the following headline: “Fed Defies Transparency Aim in Refusal to Disclose.” The story pointed out that the Fed was refusing to identify the recipients of trillions of dollars in emergency loans or the dubious assets the central bank was accepting as collateral. When the initial $700 billion congressional bailout was being debated last September, Fed chairman Ben Bernanke and then-Secretary of the Treasury Hank Paulson couldn’t emphasize their commitment to transparency strongly enough. But “two months later, as the Fed [lent] far more than that in separate rescue programs that didn’t require approval by Congress, Americans [had] no idea where their money [was] going or what securities the banks [were] pledging in return.”

Matthew Winkler, editor-in-chief of Bloomberg News, put it simply: “Taxpayers – involuntary investors in this case – have a right to know who received loans, in what amounts, for which collateral, and why specific loans were made.”

This has been portrayed as a trivial matter being pursued by some cynical and uppity Americans who don’t know their place. But there is no good reason for Americans not to know the recipients of the Fed’s emergency lending facilities. There is no good reason for them to be kept in the dark about the Fed’s arrangements with foreign central banks. These things affect the quality of the money that our system obliges the American public to accept.

The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy.

This is a red herring. The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the rest of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress. It seeks nothing more than to open the Fed’s books to public scrutiny. Congress has a moral and legal obligation to oversee institutions it brings into existence. The convoluted scenarios by which merely opening the books will lead to an inflationary catastrophe at the hands of Congress are difficult to take seriously.

At the same time, as we hear this objection repeated time and again, we might wonder just how independent the Fed really is, what with its chairman up for reappointment by the president every four years. Have these critics never heard of the political business cycle? Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about. Let us not insult Americans’ intelligence by pretending this phenomenon does not exist.

Moreover, try to imagine a Fed chairman doggedly seeking to maintain the value of the dollar even if it meant refusing to monetize a massive deficit to fight a war or “stimulate” a depressed economy. It is not possible.

If there is any truth to the idea of Fed independence, it lay in precisely this: the Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we’re talking about, no self-respecting American would hesitate for a moment to challenge it.

A related argument warns that the legislation threatens to politicize lender-of-last-resort decisions. Again, this is untrue. But even if it were true, how would that represent a departure from current practice? I hope we are not asking Americans to believe that the decisions to bail out various financial institutions over the past two years, and in particular to allow them to become depository institutions overnight that they might qualify for assistance, were made on the basis of a pure devotion to the common good and were not political at all. Most Americans, not unreasonably, seem convinced of another thesis: that Goldman Sachs, for instance, might be just a little bit more politically well connected than the rest of us.

Opponents of HR 1207 have sometimes tried to claim that the Fed is already adequately audited. If this were true, why is the Fed in panic mode over this bill? It is the broad areas these audits exclude that the American public is increasingly interested in investigating, and these are the gaps that HR 1207 seeks to fill.

The conventional wisdom seems to be that the monetary system we have now is sound and beyond reproach, and certainly better than any system that preceded it. My purpose today is not to render judgment upon such views, however deeply misguided I happen to consider them, and however inaccurate their implicit view of nineteenth-century financial panics. My point is simply this: if our monetary system were really as strong, robust, and beyond criticism as its cheerleaders claim, why does it need to rely so heavily on public ignorance? How can it be a sound banking system that depends on keeping the public in the dark about the condition of its financial institutions?

Let me also make clear that supporters of this legislation are strongly opposed to a watered-down version of the bill – which, incidentally, would only increase public suspicion that someone is hiding something.

If the Federal Reserve Transparency Act passes and the audit takes place, the American people will have achieved a great victory. If the legislation fails, more and more Americans will begin to wonder what the Fed could be so anxious to keep hidden, and the pressure for transparency will simply intensify. A recent poll finds 75 percent of Americans already in favor of auditing the Fed. The writing is on the wall.

The Federal Reserve may as well get used to the idea that the audit is coming. That would be a far more sensible approach than the counterproductive and condescending one it has adopted thus far, in which the peons who populate the country are urged to quit pestering their betters with all these impertinent questions. The Fed should take to heart the words of consolation the American people are given whenever a new government surveillance program is uncovered: if you’re not doing anything wrong, you have nothing to worry about.

The superstitious reverence that Americans have been taught to have for the Federal Reserve is unworthy of the dignity of a free people. The Fed enjoys a government-granted monopoly on the creation of legal-tender money. It is not an unreasonable imposition for Americans to demand to know about the activities of such an institution. It is common sense.

Thomas E. Woods, Jr. is a senior fellow at the Ludwig von Mises Institute. He is the author of nine books, including two New York Times bestsellers: Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse and The Politically Incorrect Guide to American History.