Truth about Federal Reserve

The truth about the Federal Reserve by experts not paid by DC:

Lewis Lehrman

James Grant

Joesph Salerno

from Ron Paul's hearings on the truth about our currency and how it is causing unrest around the world.

Public Employee Unions

When I argue for improved outcomes for kids especially our inner city kids who have only one option to break the cycle of poverty, a good education, I'm often accused of not wanting to pay more in taxes or not caring about the children. This essay explains a lot.

The Political Economy of Government Employee Unions

The main reason why so many state and local governments are bankrupt, or on the verge of bankruptcy, is the combination of government-run monopolies and government-employee unions. Government-employee unions have vastly more power than do private-sector unions because the entities they work for are typically monopolies.

When the employees of a grocery store, for example, go on strike and shut down the store, consumers can simply shop elsewhere, and the grocery-store management is perfectly free to hire replacement workers. In contrast, when a city teachers' or garbage-truck drivers' union goes on strike, there is no school and no garbage collection as long as the strike goes on. In addition, teachers' tenure (typically after two or three years in government schools) and civil-service regulations make it extremely costly if not virtually impossible to hire replacement workers.

Thus, when government bureaucrats go on strike they have the ability to completely shut down the entire "industry" they "work" in indefinitely. The taxpayers will complain bitterly about the absence of schools and garbage collection, forcing the mayor, governor, or city councillors to quickly cave in to the union's demands to avoid risking the loss of their own jobs due to voter dissatisfaction. This process is the primary reason why, in general, the expenses of state and local governments have skyrocketed year in and year out, while the "production" of government employees declines.

For decades, researchers have noted that the more money that is spent per pupil in the government schools, the worse is the performance of the students. Similar outcomes are prevalent in all other areas of government "service." As Milton Friedman once wrote, government bureaucracies – especially unionized ones – are like economic black holes where increased "inputs" lead to declining "outputs." The more that is spent on government schools, the less educated are the students. The more that is spent on welfare, the more poverty there is, and so on. This of course is the exact opposite of normal economic life in the private sector, where increased inputs lead to more products and services, not fewer.

Thirty years ago, the economist Sharon Smith was publishing research showing that government employees were paid as much as 40 percent more than comparable private-sector employees. If anything, that wage premium has likely increased.

The enormous power of government-employee unions effectively transfers the power to tax from voters to the unions. Because government-employee unions can so easily force elected officials to raise taxes to meet their "demands," it is they, not the voters, who control the rate of taxation within a political jurisdiction. They are the beneficiaries of a particular form of taxation without representation (not that taxation with representation is much better). This is why some states have laws prohibiting strikes by government-employee unions. (The unions often strike anyway.)

Politicians are caught in a political bind by government-employee unions: if they cave in to their wage demands and raise taxes to finance them, then they increase the chances of being kicked out of office themselves in the next election. The "solution" to this dilemma has been to offer government-employee unions moderate wage increases but spectacular pension promises. This allows politicians to pander to the unions but defer the costs to the future, long after the panderers are retired from politics.

As taxpayers in California, Wisconsin, Indiana, and many other states are realizing, the future has arrived. The Wall Street Journal reports that state and local governments in the United States currently have $3.5 trillion in unfunded pension liabilities. They must either raise taxes dramatically to fund these liabilities, as some have already done, or drastically cut back or eliminate government-employee pensions.

Government-employee unions are primarily interested in maximizing the profits of the union. Consequently, they use civil-service regulations as a tool to protect the job of every last government bureaucrat, no matter how incompetent or irresponsible he or she is. Fewer employed bureaucrats means fewer union dues are being paid. Thus, it is almost guaranteed that government-employee unions will challenge in court the attempted dismissal of all bureaucrats save the occasional ones who are accused of actual criminal behavior. This means that firing an incompetent government school teacher, for example, can take months, or years, of legal wrangling.

Politicians discovered long ago that the most convenient response to this dilemma is to actually reward the incompetent bureaucrat with an administrative job that he or she will gladly accept, along with its higher pay and perks. That solves the problem of parents who complain that their children's math teacher cannot do math, while eliminating the possibility of a lawsuit by the union. This is why government-school administrative offices are bloated bureaucratic monstrosities filled with teachers who can't teach and are given the responsibilities of "administering" the entire school system instead. No private-sector school could survive with such a perverse policy.

Government-employee unions are also champions of "featherbedding" – the union practice of forcing employers to hire more than the number of people necessary to do the job. If this occurs in the private sector, the higher wage costs will make the firm less competitive and less profitable. It may even go bankrupt, as the heavily unionized American steel, automobile, and textile industries learned decades ago.

No such thing happens in government, where there are no profit-and-loss statements, in an accounting sense, and most agencies are monopolies anyway. Featherbedding in the government sector is viewed as a benefit to both politicians and unions – but certainly not to taxpayers. The unions collect more union dues with more government employees, while the politicians get to hand out more patronage jobs. Each patronage job is usually worth two or more votes, since the government employee can always be counted on to get at least one family member or close friend to vote for the politician who gave him the job. This is why, in the vast literature showing the superior efficiency of private versus government enterprises, government almost always has higher labor costs for the same functions.

Every government-employee union is a political machine that lobbies relentlessly for higher taxes, increased government spending, more featherbedding, and more pension promises – while demonizing hesitant taxpayers as uncaring enemies of children, the elderly, and the poor (who are purportedly "served" by the government bureaucrats the unions represent).

It is the old socialist trick that Frédéric Bastiat wrote about in his famous essay, The Law: The unions view advocates of school privatization, not as legitimate critics of a failed system, but as haters of children. And the unions treat critics of the welfare state, not as persons concerned with the destruction of the work ethic and of the family that has been caused by the welfare state, but as enemies of the poor.

This charade is over. American taxpayers finally seem to be aware that they are the servants, not the masters, of government at all levels. Government-employee unions have played a key role in causing bankruptcy in most American states, and their pleas for more bailouts financed by endless tax increases are finally ringing hollow.

February 26, 2011

Thomas J. DiLorenzo is professor of economics at Loyola College in Maryland

Copyright © 2011 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Letter from 2007 to Senators

November 15th, 2007

To: The Institute for Justice, The Nebraska ACLU, US Senator Hagel and US Senator Ben Nelson

Glenn Beck, on CNN Headline News November 12th, says "While our foreign enemies are the obvious ones, the physical threat may be developing domestically" and says Ron Paul's 'Revolution' and his record setting $4.3 million 'money bomb' from November 5th, Guy Fawkes Day --referring to the movie, "V is for Vendetta", when the people took back control of their government -- is tied in "with a historical terrorist attack". "if fringe elements take that disenfranchisement and turn it into violence, we endanger the freedoms we`re supposedly all fighting for."

David Horowitz said, "There`s a strain of isolationism and anarchy in the American tradition which Ron Paul is tapping into. I think it`s very significant that he chose Guy Fawkes as an image."
"There are plenty of, unfortunately, libertarian Web sites which are indistinguishable from the anti-American left these days. LewRockwell.com and others like that. Totally in bed with the Islamofascists and have turned against this country."

Lew Rockwell's site, LewRockwell.com, was thus identified by name and slandered.

Beck finishes this segment with, "The Ron Paul revolution, I think it`s meant to be a catchy slogan, but I fear some of his fringe supporters are taking the word "revolution" too literally."

Ron Paul's 'Revolution' is a non-violent attempt to change foreign policy, fix the monetary system and return control of our government to the people, the majority of whom are opposed to our war in Iraq and very skeptical of our interventionist foreign policy.

Rockwell and Paul are public figures, possibly immune from slander, but their supporters are not.

When Lew Rockwell's site's non-profit status was challenged early in the 2008 campaign as clearly supporting Ron Paul's candidacy, Rockwell gave up his non-profit status and requested private donations although no longer eligible as tax deductions. Hitting the alternative minimum anyway in 2007, I sent him $200 and on November 5th, I sent my second $100 to Ron Paul's campaign. The results of Paul's November 5th fund raising forced the main stream media to cover the Ron Paul campaign -- necessary for success.

But did I put myself, my liberty and my personal assets at risk? If, as Beck and Horowitz implied, LewRockwell.com and November 5th donors support an implied threat of domestic terrorism, am I not then guilty of supporting a suspected terrorist organization? Can my computer files be searched without warrant? Is the same true for all the tens of thousands of small Ron Paul 'money bomb' donors on November 5th? Will all their names end up on the no-fly list?

Is there an action that can be taken against CNN Headline News, naming Beck and Horowitz, for allowing slander on a national television broadcast and putting private citizens, such as myself, civil rights at risk -- based only on my political associations?

Name, address, etc

Please contact me and let me know my options for preserving my good name as a patriot. My Swiss ancestry makes me think that Switzerland's non-interventionist policies work much better than ours.

paper copy to Senator Ben Nelson

Here is my background.

---

My opposition to our covert foreign policy goes back to 1975. An Afghan woman, married to an assistant attorney general of Afghanistan and related to the king (still in power), lived with our family for a year while attending UNO. She was a delightful woman often making Kabul chicken, teaching us to eat with our fingers as we sat on the floor, and making elephant ear pastries for my little girls. The cultural exchange of information was rewarding for all involved.

My husband's contract at Offutt often took him to the home office in McLean, Virginia. While there, agents of our government took him to visit with the Afghan ambassador and the agents discussed the US sending trucks with large electronic equipment on top into northern Afghanistan to provide state of the art medical attention by broadcasting operations. My husband, now deceased unfortunately, is not here to clarify what happened that day. I do recall we laughed about the trucks and their equipment as more likely to be used in some covert activities on the southern border of the USSR. Little did we realize roads built in that area would allow access for tanks to eventually roll into Kabul.

Things have gotten much worse for the Afghan people since 1975 with the invasion by the USSR and the infestation of radicalism that followed, brought by not only the ISI in Pakistan but the Wahhabis from Saudi.

Eventually, I became a libertarian.

Harry Browne once said, paraphrasing, if a close friend smokes, you tell him 'quit smoking or you'll get cancer'. Browne was convinced terrorism would surely come to the USA based on 'poking that stick into the hornet's nest'- as he called the Middle East. Based on what I was hearing and seeing, I agreed. And many of us were very vocal in our concerns. Our policies were making us unsafe - not only here at home from terrorism but when we traveled overseas.

And when your friend comes to you with the news 'I have lung cancer', you do not gloat and say 'I told you so'. In fact, you are devastated by the news and tell them 'we can beat this cancer. We will do everything and anything we can to help'. Watching the towers fall on 9/11, I was devastated, inconsolably so, as were many Americans. I assumed a strike force would be sent immediately to the Afghan and Pakistani camps to capture and kill all involved in that deadly event.

The invasion of Afghanistan and the invasion of Iraq coupled with the billions in aid being poured into Pakistan's dictatorship are not making us safer. Threatening Iran is not making us safer. Passage of legislation like the Patriot Act and the continuing trend of nationalization of local law enforcement by funding measures and Homeland Security (a third defense department after the Pentagon and the covert CIA) doesn't bode well for our personal liberty. Citizens were supposed to police the federal government. The Government wasn't supposed to police us.

When Ron Paul stood up to run for President, I knew I had to do everything I could to get him elected. My grandkids are facing the falling dollar, saddled with the billions and trillions in debt and an aging boomer generation who will bankrupt Social Security and Medicare as we know them today. They are being subjected to 'fear' every day even as schools have adopted 'lock down', a term I learned when I taught classes at the Correctional Center.

My support of Ron Paul is to prevent a violent revolution, not create one. Lew Rockwell and all the libertarians I have ever known do not believe in the initiation of force against anyone -friend or foe. They know that only government agents and criminals initiate the use of force and thus they endeavor to limit the control of government over the individual by legal means.

Central planning

How well-intentioned central planning advances to fascism as decisions made not "on what do a majority of the people agree" but "what the largest single group is whose members agree sufficiently to make unified direction of all affairs possible." Our largest group now want progress, a way forward. That means a health care plan passes, not based on majority's wishes, but on what progressives can "pass." In the end, no one seems happy with result:

"The totalitarian leader must collect around him a group which is prepared voluntarily to submit to that discipline they are to impose by force upon the rest of the people. That socialism can be put into practice only by methods of which most socialists disapprove is, of course, a lesson learned by many social reformers in the past. The old socialist parties were inhibited by their democratic ideals; they did not possess the ruthlessness required for the performance of their chosen task. It is characteristic that both in Germany and in Italy the success of fascism was preceded by the refusal of the socialist parties to take over the responsibilities of government. They were unwilling wholeheartedly to employ the methods to which they had pointed the way. They still hoped for the miracle of a majority’s agreeing on a particular plan for the organization of the whole of society. Others had already learned the lesson that in a planned society the question can no longer be on what do a majority of the people agree but what the largest single group is whose members agree sufficiently to make unified direction of all affairs possible."

From Readers Digest "Road to Serfdom" pg 43 In the US, most agree on needing a Way Forward.. to where I"m not sure. They see a return to individual autonomy, as backward.

"There are three main reasons why such a numerous group, with fairly similar views, is not likely to be formed by the best but rather by the worst elements of any society.

1. First, the higher the education and intelligence of individuals become, the more their tastes and views are differentiated. If we wish to find a high degree of uniformity in outlook, we have to descend to the regions of lower moral and intellectual standards where the more primitive instincts prevail. This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards.
2. Second, since this group is not large enough to give sufficient weight to the leader’s endeavours, he will have to increase their numbers by converting more to the same simple creed. He must gain the support of the docile and gullible, who have no strong convictions of their own but are ready to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently. It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.
3. Third, to weld together a closely coherent body of supporters, the leader must appeal to a common human weakness. It seems to be easier for people to agree on a negative programme – on the hatred of an enemy, on the envy of the better off – than on any positive task.

The contrast between the ‘we’ and the ‘they’ is consequently always employed by those who seek the allegiance of huge masses.
The enemy may be internal, like the ‘Jew’ in Germany or the ‘kulak’ in Russia, or he may be external. In any case, this technique has the great advantage of leaving the leader greater freedom of action than would almost any positive programme."

Are you seeing any similarities to the USA of today? Are we seeing a growing "hatred of an enemy, on the envy of the better off?" Yep .. right on schedule just as Hayek showed us about 60 years ago.

Once our leaders understood Democracy.. but we forgot and suffer from ignorance now.

"We are a Republican Government. Real liberty is never found in despotism or in the extremes of Democracy... It has been observed that a pure democracy if it were practicable would be the most perfect government. Experience has proved that no position is more false than this. The ancient democracies in which the people themselves deliberated never possessed one good feature of government. Their very character was tyranny; their figure deformity."

~ Alexander Hamilton, Secretary of the Treasury to George Washington, author of the Federalist Papers

"Democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide."

~ John Adams, 2nd President of the United States

"A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine." --  Correction: This cannot be found by Monticello scholars and may not be true.

~ Thomas Jefferson, 3rd President of the United States

"Democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their death.

~ James Madison, 4th President of the United States, Father of the Constitution

"The experience of all former ages had shown that of all human governments, democracy was the most unstable, fluctuating and short-lived." -

~ John Quincy Adams, 6th President of the United States

"Between a balanced republic and a democracy, the difference is like that between order and chaos."

~ John Marshall, Chief Justice of the Supreme Court, 1801-1835

Agencies and their RULES.

When Speaker Pelosi said, "we won't know what is in it [Health Care Bill] until we pass it," she was accurate. The Agency will write the RULES, not Congress and RULES are not subject to Congressional votes.
Congress, whether under Democrats or Republicans, creates Agencies with the power to make and enforce RULES including but not limited to jail time and/or fines for violators. With RULES come ENFORCERS pseudo federal police to arrest and charge violators.
Secretary Napolitano writes RULES for the TSA which put an average traveler into a zone without Constitutional rights. Speech or a flinch can result in arrest and/or detention without reading of rights. End up in the TSA's Plexiglas prison and your rights are gone. A mother is detained for over 40 minutes and misses her flight as she attempts use printed RULES showing breast milk may bypassing X-RAY. She cannot sue the TSA agents?
The Endangered Species Act is immune from individual's property rights meaning a farmer on encountering an endangered species might be more prone to shoot the thing and bury the evidence then risk losing their livelihood. RULES often backfire.
2/3rds of poisonings are from prescription drugs, yet the FDA, created to 'protect us' from snake oil sales, is not questioned or held responsible and now has additional powers to require expensive testing and approvals of natural or holistic products bankrupting small producers in favor of monopoly pharmaceuticals. Corporatism/Fascism at its worst.
SWAT teams raid a private club for raw milk and cheese purchases. "Some people balk at restrictions on selling unprocessed milk and other foods. 'How can we not have the freedom to choose what we eat?' one says. Regulators say the RULES exist for safety and fairness." Notice "RULES;" not "LAWS"
During the 1930's, families rented rooms and provided board at minimal rates but today the RULES require separate entrances and private baths meaning many live on the street instead. That's CRAZY.. but since Congress doesn't specifically pass RULES, we cannot repeal or even modify them.
To save us from the encroaching federal police state based on enforcing RULES never passed by Congress, can our new Congress require AGENCY's RULES either be advisory or subject to Congressional votes to be enforced like LAW?
The new Congress cannot mend our economy without access to Agency RULES. I hope its corrected quickly.

Gold Standard lasted Until Nixon

All 44 Allied nations met in Bretton Woods, New Hampshire and signed Agreements during the first three weeks of July 1944.

FDR had taken our currency off the Gold Standard. Bretton Woods was a system of rules, institutions, and procedures to regulate the international monetary system, -- chief among them were --an obligation for each country to adopt a monetary policy that maintained the exchange rate of their currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.

Don't let anyone tell you the gold standard is archaic and wasn't used recently. Nixon was fighting the war in Viet Nam and did not want to raise taxes (sounding familiar yet?) to pay for the war. When he ended Bretton Woods, in 1971, precious metals were stolen from our coinage. The 1960's quarters had silver worth over $5 today. The Federal Reserve had no limits to their power of expansion or inflation.

I feel so much better now that I've got that off my chest. More from NYTs.

And a hearing explaining rising prices and federal reserve actions

What Jefferson thought of English Politics

"The parliament is, by corruption, the mere instrument of the will of the administration. The real power and property in the government is in the great aristocratical families of the nation. The nest of office being too small for all of them to cuddle into at once, the contest is eternal, which shall crowd the other out. For this purpose, they are divided into two parties, the Ins and the Outs, so equal in weight that a small matter turns the balance. To keep themselves in, when they are in, every stratagem must be practised, every artifice used which may flatter the pride, the passions or power of the nation. Justice, honor, faith, must yield to the necessity of keeping themselves in place. The question whether a measure is moral, is never asked; but whether it will nourish the avarice of their merchants, or the piratical spirit of their navy, or produce any other effect which may strengthen them in their places. As to engagements, however positive, entered into by the predecessors of the Ins, why, they were their enemies; they did every thing which was wrong; and to reverse every thing they did, must, therefore, be right. This is the true character of the English government in practice, however different its theory; and it presents the singular phenomenon of a nation, the individuals of which are as faithful to their private engagements and duties, as honorable, as worthy, as those of any nation on earth, and whose government is yet the most unprincipled at this day known."
-- Thomas Jefferson to Governor John Langdon, March 5, 1810
Doesn't this apply to DC insiders now.