Wednesday, January 28, 2009

Back to Reality

Dear Reader,

The previous two blog entries laid out an alternative history version of America, and a partial vision of what life would be like if that history was true. Unfortunately, it's fantasy. Equally unfortunately, most Americans believe in a fantasy created by their government, in which they are free, justice prevails domestically, they are the destroyers of tyrants and liberators of their subjects, and free market capitalism is the economic system. Above all they believe in and trust their government to keep them secure from terrorism and foreign enemies, and to right economic wrongs and lead the way to prosperity.

We will examine each of these beliefs in due time, but first I want to concentrate on the last belief, given that the economy is in recession, and the proposed solutions of the new president's team are making daily headlines.

We seek to expose the truth about government here at the Anarchy School. We believe that the US government, in concert with the quasi-private Federal Reserve banking system, creates the business cycles that have rocked our economy for the last 96 years (since the creation of the Fed in 1913) -- the artificial boom times, or bubbles, and the resulting busts, or recessions and depressions. And we think that we're now experiencing the effects of the bursting of the mother of all bubbles, the credit market bubble, created by the policies of former Fed Chairman Alan Greenspan and exacerbated by the malinvestments and fraudulent activities spawned by the too-easy credit market he deliberately engineered.

Although we're bombarded daily with bad economic news - hundreds of thousands of jobs lost each month, the American car industry and banking system on government life support, the demise of huge investment banking firms, and so on - it's painfully obvious that many Americans are oblivious to the magnitude of the crisis, and have blind faith in a new administration to turn the economy around. In their blindness they can't see that President Obama is pursuing exactly the same economic policies that George Bush did, with an added dose of real socialism to make things even worse. For those dear readers who are familiar with financial charts and terminology, I recommend this article by Jim Quinn for a good rundown of just how bad things are, as well as a bold prediction on where we are headed:

In layman's terms, we're screwed.

Now... today's task for the aspiring anarchist is to begin to learn exactly how the federal government got us into this pickle, why an anarchistic society would have avoided it, and how to apply those lessons in leading the country back to sanity and prosperity. For if we don't do it, no one will. In that sense, this lesson is "for the children"... the future generations that we will save from tyranny, or who will be lost to it.

We do not have the expertise to teach economics here at the Anarchy School; all we can do is steer you in the right direction, but then you can definitely educate yourself. What we can, and will teach, are the reasons we have come to our conclusions about who the best teachers are.

Those teachers belong to what is known as the Austrian school of economics. Their work and line of reasoning sprang from the earlier Classical free-market economists, which was improved, refined and developed by one of the great minds of the 20th Century, Ludwig von Mises. This is an oversimplified history, as there were many other luminaries in the Austrian tradition, including Nobel laureate F.A. Hayek, and Murray Rothbard, and many more that the interested reader can learn about at the Ludwig von Mises Institute website,

Now, I assume that many of my readers are very familiar with the site and the writings of the many Austrian economists (and their compatriots in other academic fields) that toil daily for the Mises Institute. Many of you are also familiar with the Lew Rockwell website,; Lew Rockwell is the founder of the Mises Institute, and perhaps the world's leading living exponent of free-market anarchism, aka anarcho-capitalism. His writings and website articles, contributed by hundreds of libertarian thinkers (many of whom still believe the American miminal state can be revived, sadly) have given me the inspiration and intellectual ammo I needed to create this blog, and I owe them a huge debt of gratitude. I only hope I can do their ideas justice here, at the Anarchy School, and inspire others to join us.

But, I digress. The salient point about the Austrian school is that it's perfectly suited to anarchism; it is inherently anti-state in that it rejects government interference in all economic affairs, and in fact blames government for the business cycle. It also is the only school that advocates a return to the gold standard, and goes further to advocate 100% reserve requirements for demand deposits (banking terminology which we can explore in depth in a later post). Such a gold standard would go a long way to limiting the power of today's governments to go to war and would practically eliminate their power to inflate economic bubbles. The Austrian school also would eliminate central banks, such as our own Federal Reserve.

The major competing economic schools today are Keynesianism and Chicago school monetarism, both of which not only consider central banks to be legitimate, but also rely on them to make their economic programs "work". Both of these schools long ago rejected the gold standard, and both consider controlled inflation to be the prime function of the central banks, as a way to achieve lasting prosperity.

As Exhibit A in our argument in favor of the Austrian school, we invite the interested student to consider its predictive powers. Mises was perhaps the only leading economist of his day to predict the stock market crash prior to 1929 and the subsequent Depression. He published work on socialism that clearly exposed its fallacies, and why it can't possibly work as an economic system (for this he was vilified and ostracized from the economic academy, only to be vindicated - 26 years after his death - when the Iron Curtain fell in 1989 and communism was consigned to the dustbin of history). More recently, Austrian-trained financial experts such as Gary North and Peter Schiff correctly predicted the 90's stock market and the '02-'07 credit market bubble/crash cycles.

Exhibit B is, of course, the destructive record of the competing schools, and the fact of their obvious collusion with government and their fat-cat friends on Wall Street. Witness the revolving employment door between the government, Goldman Sachs, and the Federal Reserve. Their bailouts of huge banks, insurance companies, and investment firms, at taxpayer expense as well as the expense of sound businesses, were sanctioned by both the Keynesian and, though to a somewhat lesser extent, the Chicago school economists. The government is simply trying to reinflate the most gigantic bubble of all time, and in due time they will find that what the Austrians are saying is true - that the longer the inevitable collapse is delayed, the harder the crash will be. It may be decades before the US economy recovers, if ever.

Here at the Anarchy School we will prepare for the worst, and be ready to lead our countrymen back to a sound economy, when they are ready.

Until the next time,

Good night.


  1. Nitpick:

    Austrians do not advocate a gold standard, they advocate a market derived standard. Which is likely to be based on precious metals.

  2. I accept the nitpick, which is correct. Any entrepreneur that comes up with a better standard than gold will likely become a hero to the Austrians as well as myself.