Flirtin' With Resistance

I'm outta money, outta hope, it looks like self-destruction
Well how much more can we take with all of this corruption?
--Molly Hatchet

While off their intraday highs, ten year treasury yields are flirting with recent highs at ~2.7%.

Stochastics are not twisty overbought, meaning that there may be energy-in-reserve to mount a significant challenge to resistance here.

An important battleground here...

no positions

Income Inequality by Force

"Hey, Cyn, guess where I am?"
--Tess McGill (Working Girl)

Spot on observation that although President Obama calls growing income inequality 'morally wrong,' income disparity has grown more on his watch than in other recent administration. These pages have frequently discussed the effects of government policy, and this administration's efforts in particular, on the distribution of income and wealth (examples here, here, here, here).

Income inequality itself is not morally wrong. In fact, it is an essential feature of a thriving market economy, as it empowers consumers to motivate producers to better meet marketplace needs. Those producers who do so are compensated well; those who do not do so are paid less.

Although it gets less attention, an even more important feature of a market economy is income mobility, defined as the extent to which people can move (up or down) in income. In unhampered markets, people who better serve the needs of the market move to higher income brackets; those who do not do so drop to lower levels.

Distributions of income and wealth therefore have natural shapes and variances to them, reflecting voluntary cooperation among people seeking to improve their circumstances.

The problem occurs when force is applied to unnaturally alter the distributions. When people use force on their own to alter income or wealth distributions, it is called robbery, fraud, slavery, etc.

When people employ government agents to forcefully alter income or wealth patterns, the associated policies go by many names: welfare, war, fiscal policy, monetary policy, et al. Some of these policies force the distribution tighter while others serve to widen it.

Currently, the policies enacted by the Obama administration are, on the net, serving to force the distribution wider.

If this president is serious about reducing income inequality then he should not apply even more force to the system in hopes of reducing the spread between rich and poor.

The correct response is to remove force from the system.

Feds vs Fourth Amendment

"What can I say? I'm a spy."
--Harry Tasker (True Lies)

Consistent with discussion on these pages, Jacob Hornberger observes that broad federal government surveillance schemes are clearly unconstitutional per the Fourth Amendment. Any search or seizure must be specific by place and person. There is no justification for ongoing or 'blanket' programs.

Government officials claim that these programs are necessary in order to keep us safe. But, as JH notes, there are no exceptions written into the Fourth Amendment that nullify the law in the name of national security.

The framers knew exactly what they were doing when they wrote this amendment. They understood that the federal government would inevitably attract people who would like to do the things prohibited by the Fourth Amendment.

People like those currently in office.

The Fourth Amendment prohibits federal officials from indiscriminately searching homes, businesses, and personal effects. In the event of a crime, the feds cannot go door to door in search of evidence. They also cannot search everyone's things in order to prevent a crime.

If federal officials want to search a person or a person's possessions, then they must get a warrant authorized by a judge. In order to get a warrant, law enforcement officials must swear out an affidavit specifying precisely the evidence that is being sought. They must also produce evidence of 'probable cause.' If officials fail to do either of those things, then it is the judge's responsibility to deny the search warrant application.

People seeking to enact/enforce NSA spying, the Patriot Act, and related programs are precisely the type of people that the framers were seeking to restrain.

Rewriting GDP History

Welcome to the Grand Illusion
Come on in and see what's happening
--Styx

Need more economic activity if you're in government? Then just change the numbers. This week the Bureau of Economic Analysis will revise historic GDP numbers upward.

The BEA will do so by capitalizing intangibles such as spending on research and development. Until this week, R&D has been viewed as an expense--a cost of creating the output that GDP is supposed to measure.

Under the new and improved GDP metric, such costs will now be considered 'investments' and added to GDP. Some other intangible added to GDP include the value of movie originals, long lasting TV programs, books, and sound recordings. Not the sales of these things, mind you, but their assessed and changing value of balance sheet assets.

These changes are estimated to add about 3% to historical GDP since 1929.

In a rare moment of bureaucratic candor, a BEA spokesman observed that the agency is "essentially rewriting economic history."

Practically speaking, this provides government with one more mechanism for fudging the numbers. All officials have to do label all federal spending program as an R&D investments, and then watch GDP soar.

After the historical data are changed, perhaps we'll learn that there was no Great Depression after all.

Fundamental Lesson for Politicians

Doug Carlin: What if you had to tell someone the most important thing in the world, but you knew they'd never believe you?
Claire Kuchever: I'd try. 
--Deja Vu

Sheldon Richmond directs this missive toward President Obama, but his message is one that all politicians must learn. Richmond presents reasoning, grounded in fundamental axioms, as to why government intervention restrains prosperity. The thought process goes like this.

We live in a world of scarcity, where our wants and needs always outstrip means to achieve them.

We therefore economize in order to achieve as many desirable ends as possible.

Economizing means that scarce resources such as materials, labor, and time must be allocated toward one purpose at the expense of another. It also means that we seek the most benefit from the least cost.

Each of us chooses among competing ends by assessing the tradeoffs (a.k.a. opportunity costs), because we do not want to inadvertently give up something we prefer in exchange for something we value less.

When free of government interference, markets help us accomplish the economizing process to a remarkable degree thanks to the pricing system, which helps coordinate production and distribution in a manner that allocates resources to meet needs at the top of our lists.

Government intervention throws this process out of whack. Government forcibly takes resources from people and reallocates those resources in manners other than those desired by people engaging in voluntary exchange.

Moreover, the incentive system for government projects almost guarantees that the resources taken by force will fail miserably. While private sector producers are motivated by profit--which can be realized only if customer needs are met well and in an efficient manner, government bureaucrats face no such motive. Instead, politicians are motivated by the prospect of receiving votes, which leads them to allocate resources for the benefit of special interest groups that promise support at the polls.

Unhampered markets assure that bad trade-offs are avoided or are correctly quickly. No corresponding process exists in hampered markets. Resources are allocated by prospects of political favor. Misallocations, and the likelihood that they will persist, are nearly certain.

Because top consumer needs are no longer being addressed by the market, when government takes resources from some for the benefit of, prosperity declines.

Profiling and Self Defense

The shadows are on the darker side
Behind those doors, it's a wilder ride
You can make or break, you can win or lose
That's a chance you take when the heat's on you
And the heat is on
--Glenn Frey

Nice discussion of profiling by Professor Williams. Profiling is a method of economizing information costs by using readily visible characteristics as a proxy for more difficult to observe characteristics. It is not unlike reductionist statistical operations that seek to obtain high predictive value from a few variables thought to be predictors.

Humans constantly profile other humans. When conversing with friends we study facial expressions and body positioning to gauge their responses to our points of view. Dating services study characteristics of members to infer good matches. Colleges use standardized tests of applicants to predict future scholastic performance.

If people did not engage in profiling, then they would need to spend more time and other resources collecting information about people before drawing conclusions. Because people seek the most benefit from the least cost, profiling is an attractive way to economize scarce resources.

However, since profiling generates predictions or conclusions under conditions of uncertainty (in this case, imperfect information), it is subject to error. Two categories of error are possible. A type 1 error (a.k.a. false positive) occurs when profiling leads to the conclusion that a relationship exists when it really doesn't. A type 2 error (a.k.a. false negative) occurs when profiling leads to the conclusion that no relationship exists when it really does.

To exemplify, let's employ a context where the use of profiling attracts considerable attention: predicting criminal behavior. A friend and I sit down to eat at a casual restaurant. Customarily, I like to sit with my back to a wall so that I have a good view of things. I proceed to scan the room for anything unusual. An unshaven younger man dressed in a long coat stands over by the bar. He appears to be alone and does not converse with others at the bar. He looks down at his watch and then looks out the front door. He does this a few times.

Perhaps he's just waiting for someone. Or perhaps he is preparing to engage in criminal activity. Robbery, shooting, bombing...

I am engaging in profiling. I am observing a limited number characteristics and behaviors of this man in the context of the surrounding situation and using my observations as the basis for forecasting criminal conduct.

If the man's wife subsequently walks in and they proceed to a table, or if the man finishes his drink and walks out the door never to return, then my forecast would be likely be wrong and I may allocate no further attention to this man. If so, I will have (thankfully) committed a type 2 error--I proposed a possible relationship that did not turn out to be true.

While scanning the room I also notice three mid-aged women sitting at a table across the way. They are dressed casually and chatting among themselves. They appear to be enjoying each other's company over dinner. Because I notice nothing suspicious, I give this group no further thought as to potential criminal behavior.

If, subsequently, one of the women suddenly stands up, pulls out a machine pistol, and screams that everyone here is going to die for jihad, then I will have (unfortunately) committed a type 1 error. I saw no possible relationship between these people and criminal activity when in fact there was one.

Note that in these two cases, the cost of the type 2 error was small while the cost of a type 1 error was large. This is typically the case, and implies that it is often worthwhile to profile in order to identify potentially dangerous situations.

As long as I do not invade the pursuits of others to do so (if I did so I would be an aggressor rather than a defender), profiling can be an effective means for economizing valuable resources, such as time, that assist in effective self-defense against aggression.

Freedom and Safety are Not Equals

"People should not be afraid of their governments. Governments should be afraid of their people."
--V (V For Vendetta)

Cogent thought process by Judge Nap on the false choice between safety and freedom. The argument goes like this.

Man was born free.

His right to freedom is inalienable, meaning that it cannot be legitimately taken away by another worldly entity.

Man created government to help protect his freedom.

Government properly does so by helping individuals protect against aggression by others.

Those who conflate safety and freedom, claiming that liberty and safety must be balanced against each other, are philosophically, historically, and constitutionally wrong. Liberty is the default position, the natural state.

Safety, on the other hand, is a good--a good that we have instructed government to obtain.

Liberty and safety are therefore not in balance because one created the other.

Every conceivable conflict between the free choices of individuals and their instructions to government to safeguard liberty must favor the free choices of individuals because freedom is inalienable. I cannot authorize government to take away your freedom and you cannot authorize government to take away mine. A majority of all but one cannot authorize government to take freedom from that one minority individual.

As such, it is the free choice of individuals to resolve the conflict between freedom and safety. It is not one that government can rightly make.

If anyone truly believes that, by silencing him or monitoring him or taxing him, government keeps him safe, and that those are the least restrictive means by which to do so, then that person is free to surrender his speech, privacy, and wealth.

The rest of us have the right to retain ours and provide for our own safety.

The reason that we have consented to limited government in the United States is to preserve the freedom to pursue happiness wherever that might lead for each individual.

That freedom cannot exist if we are subservient to government in the name of safety.

Bernanke's Fail-Well Tour

Everybody stop
Hey, what's that sound?
Everybody look what's going down
--Buffalo Springfield

Ron Paul reflects on Fed head Ben Bernanke's recent Humphrey Hawkins comments and the consequences of Fed policy. He observes, as we have many times on these pages, that the Fed's policies are lining the pockets a privileged few.

"The Fed thinks that you should lose two percent on the value of your dollar this year," he says. He also notes that if price changes were measured more accurately that the destruction in purchasing power would be even more apparent.

Where does that loss of purchasing power go? Into the pockets of bankers and to the owners of financial assets.

This is the biggest wealth transfer in the history of the world and Bernanke is trying to deceive his way to the finish line (a.k.a. retirement).

You can do as he hopes and look the other way, or you do what you can to stop being robbed.

Search Costs

Reverend Clayton: You wanna quit, Ethan?
Ethan Edwards: That'll be the day.
--The Searchers

Search costs are costs incurred by buyers ahead of a purchasing decision. They largely involve identifying and assessing various alternatives related to a prospective purchase. What sellers and products do I have to choose from? What are the product features that are important to me and how do the various choices stack up? How much do the various alternatives cost? Where can I buy this product? What are the risks associated with each alternative?

Although they may be paid in monetary terms, search costs are often paid in the form of time and attention required to scope out the purchasing choices. Search costs are 'up front' costs, meaning that they are paid in advance and largely independent of the actual purchase.

The search process itself can be viewed as a risk reduction strategy. The more buyers engage in search, the lower the risk that the subsequent purchase will be a dissatisfying one.

Parenthetically, producers and sellers also face up front costs. Often referred to as 'set-up' or 'order' costs, these are the costs of getting ready for production or for selling. Equipment changeovers, finding appropriate suppliers, filling out purchase requisitions, blueprinting, fixturing, and employee training are some of the up front costs that producers might encounter.

Because people are economizers, seeking the most personal benefit from the least personal cost, buyers are naturally interested in ways to reduce search cost. Because sellers know this, advertising and other media that push product information toward consumers have been developed to lower the search burden. Advertisers are not engaging in benevolent activity for doing so, of course. They hope that they will gain an edge by providing information about their products to consumers.

The internet has also been a major search cost reducer for buyers. And arguably quite an empowering one, as consumers have much more information from various sources at their fingertips.

Buyers doing their 'due diligence ahead of purchases is an important feature of unhampered markets. When buyers carefully engage in search, subsequent purchases provide high fidelity signals to sellers about what buyers perceive as value--i.e., benefits vs cost, reward vs risk. Sellers respond to positive signals (purchases) by doing more of the same. Sellers respond to negative signals (no purchases) by doing less of the same and more of something different (improvement and innovation).

Scarce resources are therefore well economized and goods are rationed according to the needs signaled by consumer purchases.

Hampered markets often prompt consumers to engage in less search than they otherwise would. Buyers search less ahead of purchases because they view interventionary forces as substitutes for search, thereby reducing the risk that purchases will be dissatisfactory. Doing so appeals to buyers' economizing nature.

The examples are legion. If buyers are concerned about the safety of food and there is a government agency that purports to oversee food safety among producers, then buyers will be apt to engage in less search to make sure that food is appropriately safe. If government subsidizes health care purchases, then consumers will be less apt to look for low cost alternatives. If government promises to reimburse all account holders in the event of bank failure, then prospective depositors will engage in less due diligence to study the balance sheets of banks as long as a 'government insured' sign hangs in the window.

Purchase behavior in hampered markets sends a distorted signal to producers about what buyers truly value--because they have not completely 'done their homework' ahead of purchases. Moreover, hampered markets create conditions of moral hazard where buyers take on more risk (by searching less) because they perceive their purchases as insured by the government.

If the interventions are severe enough, then subsequent purchasing signals sent to producers are likely to drive a significant misallocation of resources in the production and distribution systems.

Moreover, buyers, by cutting their search processes short, are likely to take on more risk than government has the capacity to mitigate.

Mainstream Republicans

They're seeing through the promises
And all the lies they dare to tell
Is it heaven or hell?
They know very well
--Journey

Based on a recent editorial claiming that Rand Paul could never be a mainstream Republican, Jacob Hornberger wonders why Paul would want to. As these pages have observed many times, there is little difference between mainstream Republicans and Democrats.

Aside from perhaps subsidies to NPR, mainstream Republicans have signed off on the entire Welfare State package. Social Security, Medicare, Medicaid, federal education programs, unemployment benefits, foreign aid, et al. Mainstream Republicans have embraced it all.

All the while, mainstream Republicans claim to be for "freedom and free enterprise." This is an empty rhetoric of deception, denial, and delusion.

In addition to enthusiastically backing the Welfare State, mainstream Republicans were the architects of the Warfare State. Starting with its 'founder' Lincoln, mainstream Republicans have favored the use of military force to accomplish its agenda. The results over the past 150 years include tens of millions dead and $trillions in wasted resources to support empire and special interest building--usually legitimized under the ruse of "national security."

Paul demonstrates that political philosophy is inaccurately viewed as a one dimensional left-right spectrum. It is better viewed in two dimensions--as a landscape. RP's positioning is far from mainstream Republicans.

The alternative position on the political landscape that Rand Paul reflects is becoming increasingly visible to many voters, particularly young ones.

This frightens mainstream Republicans to no end.

Gold on the Move

And I know, baby
Just how you feel
You got to roll with the punches
To get to what's real
--Van Halen

With a +$30 pop this am, the motion in gold is of some technical significance. Intraday, gold has broken through the multi-month near term downtrend line.

It is now filling the gap created by last month's breakdown. The 50 day moving average looms directly above.

Classic technical analysis suggests gold runs into some resistance here. Will be interesting to see how the price action unfolds from here.

position in gold

Bernanke's Whoppers

Oh, he tells me tears are something to hide
And something to fear
And I try so hard to keep in inside
So no one can hear
--Til Tuesday

Last week found Ben Bernanke sitting before Congress for his semi-annual "Humphrey Hawkins" exchange. Bernanke made some epic statements. A sample:

Congress: Are you printing money?

Bernanke: Not literally

and...

Bernanke: The amount of US student loan debt is large, but not particularly likely to cause macroeconomic instability.

(Bernanke in 2007: The sub-prime mess is grave but largely contained.)

and to a question has to whether most Fed policy gains have gone to owners of financial assets...

Bernanke: Wall Street hasn't benefited more than Main Street.

Guess no one had charts like this one handy:

See this and this if you're confused about the link between corporate profits and Fed policy.

Zimmerman and Duty to Retreat

I look at all of the people
Doing it over and over
You never get any older
I wish that you could be here
--OMD

The Zimmerman trial took place in a state with a stand your ground SYG) provision in the self-defense statutes. Twenty five states have SYG provisions. An interesting discussion of influential Supreme Court opinions that underpin SYG can be found here.

Other states have duty to retreat (DTR) provisions, meaning that a person under attack from an aggressor has a duty to retreat from the attack if it is reasonable to do so. It is important to note that just DTR laws demand retreat only if it can be accomplished in complete safety by the defender and other innocents present at the scene. If this were not the case, then it would be inconsistent with the inalienable right to be secure in one's person and possessions.

Some people who are upset with the Zimmerman trial verdict suggest that the path to justice would have differed had a DTR provision been in place.

This is doubtful.

Assume that the Zimmerman trial is conducted in a DTR state. Zimmerman's story remains the same. He claims that Trayvon Martin attacked him and pinned him to the ground, whereby Martin began pounding Zimmerman's head against the sidewalk. To defend against the attack, Zimmerman shot Martin.

As in a SYG state, or any state with just self-defense law for that matter, the prosecution must convincingly demonstrate that Zimmerman either a) was the aggressor, or b) acted unreasonably in his self-defense.

Let's examine both.

a) The story presented during the trial was that Martin attacked Zimmerman by taking him to the ground.  Martin was the aggressor. The prosecution could not prove otherwise.

The aggressor and the point of aggression have therefore been established. This is important for DTR, or for any self-defense law for that matter, because a defender cannot choose a response to aggression until the offensive act occurs, or can be construed as imminent. Only upon aggression can an act of self-defense take place.

b) The story presented during the trial was that Martin threw Zimmerman to the ground and began pounding Zimmerman's head on the sidewalk. It was also claimed that Martin could see and possibly had access to Zimmerman's gun. The prosecution could not prove otherwise.

The prosecution proceeds to argue that Zimmerman should have retreated once he was attacked. The defense counters that Martin's initial attack was sudden and pinned Zimmerman to the ground before he could react. Zimmerman was absorbing potentially lethal blows to the head from Martin and chose a reasonable counterattack given his position. He had no time and was in no position to consider a retreat tactic.

Unless the prosecution can convince the jury that Zimmerman was in a reasonable position to safely escape between the time that Martin first moved on Zimmerman and when Zimmerman was on the ground taking head blows, which seems a tall order in this case, then DTR doesn't help the prosecution's case.

Perhaps this explains why, in post trial interviews, the Zimmerman prosecutors did not attribute much relevance of DTR in this case, and said that self-defense law "really hasn't changed all that much" with SYG.

It seems difficult for reasoning observers not to conclude similarly.

Principled Self-Defense

"Remember, best block, no be there."
--Miyagi (Karate Kid II)

Early in my martial arts journey, I learned the first principle of self-defense: avoid dangerous situations. By doing things like staying away from high crime areas and being aware of my surroundings, I can reduce my chances of being involved in a hostile situation.

At the same time, each of us has the right to life, liberty, and property. I can rightly pursue my interests as long as I do not forcefully interfere with the peaceful pursuits of others. This also means that if someone attacks me, then I have the right to defend myself.

Thus, I can justly travel through public places as long as I do so in a lawful manner. However, if I choose to walk the streets of neighborhoods that I know to be hostile, or in neighborhoods that I am not familiar with, then I am increasing the probability that I will be involved in a dangerous situation.

That may be poor judgment on my part and could be viewed by some as "looking for trouble." But pursuing my interests in a dangerous environment is my right as long as I do so in a lawful, non-aggressive manner.

A hostile situation arises when my person or interests are in imminent danger of being attacked. I may or may not be able to quickly perceive the hostile situation. For example, it may come together too fast, or be too subtle, for me to recognize.

If I do perceive it, then my preferred strategy is to escape. But I may not be able to do so. Perhaps I am surrounded by hostiles, or I judge that I can't outrun them, or I don't want to leave loved ones behind.

I might also try to defuse the situation by trying to 'talk the hostiles down,' by trying to signal that I am capable of administering a hurtful counterattack, by yelling for help, or by surrendering some possessions, such as my wallet.

The natural state of hostile situations, however, is that they move quickly. Adrenaline is rushing. Information is difficult to fully process. All available options may not be clear to me.

No matter how fast the situation is moving, the principle that I must keep in mind is this: Do not be the aggressor. The aggressor is the one who either initiates attack, or demonstrates intent and capacity for administering attack. In other words, if you are the hostile that I am facing, I may not have to wait for you to attack before you are rightfully established as the aggressor. If you are carrying a weapon, for example, and signal intent to use it on me or my loved ones, then you are the aggressor even if you haven't actually attacked.

Once the aggressor has been established, then I am either under attack or attack is reasonably construed as imminent. I am now in what some might label as classic self-defense mode. In this mode I might still look to escape or defuse the situation in a non-violent manner. But that may not be possible or come to mind at this point. Since I am being attacked, and have the right to be secure in my person and interests, I can rightfully choose to meet force with force.

If I choose to defend myself or loved ones from aggression with counterforce, then the principle is this: use the force that you deem necessary to neutralize the aggression--but no more. If I choose to defend myself, my goal is to stop the aggressor from attacking me. Perhaps this means that I seek to knock out my opponent or to pin him to the ground. However, if the aggressor is engaging in tactics that can be construed as lethal, then I can rightfully counter with lethal force of my own in order to neutralize the threat.

What I can't do is use more force than can be reasonably construed as necessary to stop the attack. For example, if an aggressor initially acts by pushing me but has signaled no intent or capacity for lethal force, and I respond by shooting that person dead, then I may have applied excessive force. I say "may" because the facts of the situation must be fully understood before ex post judgment can be reasonably rendered on the appropriateness of a particular counter-attack.

It is sometimes said that, because of the dynamics of self-defense situations and the inalienable right to defend against attack, our legal system generally gives benefit of the doubt to the defender's judgment. This may be true and righteous. But that does not absolve the defender from trying to select the appropriate measure of counterforce for the situation.

An important benefit of studying martial arts is that it prompts you to repeatedly play this progression over in your mind, and to practice responses for coping with aggressive attack.

That said, I thank God that I have never had to see this progression through to the extreme. All of the training in the world can never fully prepare an individual for coping with someone standing before you who is ready and willing to administer great bodily harm. I pray that I will never be put to this test.

Trial By Jury

"It's always difficult to keep personal prejudice out of a thing like this. And wherever you run into it, prejudice always obscures the truth. I don't really know what the truth is. I don't suppose anybody will ever really know. Nine of us now seem to feel that the defendant is innocent. But we're just gambling on probabilities - we may be wrong. We may be trying to let a guilty man go free, I don't know. Nobody really can. But we have a reasonable doubt, and that's something that's very valuable in our system. No jury can declare a man guilty unless it's sure."
--Juror #8 (12 Angry Men)

George Zimmerman was acquitted by a jury of his peers. Although the Zimmerman case was at the state level, the right to trial by jury in federal criminal prosecutions is guaranteed by the Sixth Amendment.

Why would the framers insist on a written guarantee to jury trials in criminal court cases? Because the alternative to a jury trial is a trial in which the verdict is decided by a judge or tribunal. And the framers well knew that, because judges and tribunals are determined by political process, they are subject to making interested decisions.

A just court is one that is distinterested and focused only on the law and the facts of the case.

While it is certainly possible for a jury of peers to be interested as well, the jury selection process, the requirement that a jury verdict must be achieved by unanimous decision rather than by majority decision, and other controls reduce the likelihood that a defendant receives an unjust decision.

For a sampling of what an interested perspective looks like, observe those rioting in the streets calling Zimmerman a murderer despite a clear path of evidence suggesting otherwise that was presented during the trial. Parenthetically, a thoughtful discussion of the central issues in the case by someone who was both close to the case and who understands self-defense law is going on here (the first three parts are here, here, here.

The right to trial by jury is an important one, as it constitutes one impediment to tyranny.

National Security

"These drug cartels represent a clear and present danger to the national security of the United States."
--President Bennett (Clear and Present Danger)

Jacob Hornberger observes that the federal government rationalizes much of its unconstitutional actions under the ruse of 'national security.' The national security rationale has been particularly popular since the depths of WWII that, it can be argued, birthed the modern national security state in America.

The latest object of the national security state's rath is Edward Snowden. Snowden is being vilified by government and its media lackeys for revealing a massive government spying program on its citizens. Hornberger challenges the reader to provide an example of a totalitarian in regime in the last 100 yrs that has not engaged in large-scale surveillance of its people.

No can do, Jacob.

In addition to enabling internal spy programs, the national security ruse has facilitated covert and para-military operations elsewhere. Hornberger lists example after example--Iran, Guatemala, Chile, South Vietnam, Cuba, etc. No geographic theater has been spared Leviathan's tentacles.

It is easy, yet sad, to imagine what good the vast resources employed for 'national security' could have been, and still could be, used for. There would surely be less hunger, less disease, less homelessness had these resources been entrepreneurially and peacefully employed toward production that satisfies human needs.

The opportunity cost of the national security ruse can be seen as have to settle for lower general standard of living. Stated differently, when we fall for fall for the national security ruse, we sacrifice prosperity.

Hornberger suggests that the case of Edward Snowden offers an chance for all of us to reflect on this question:

Does a national security state apparatus have any place in a genuinely free society?

Stand Your Ground

An empty face reflects extinction
Ugly scars divide the nation
Desecrate the population
There will be no exaltation
--The Fixx

During the recent George Zimmerman murder trial, a Florida statute known as the 'Stand Your Ground' law was brought into the spotlight by the media. The statute can be found here (see clause 3). Despite the media attention, the law was not central in the Zimmerman trial deliberations.

However, the applicability of Stand Your Ground to the Zimmerman case is not the issue to be discussed here. Instead, we consider the validity of the Stand Your Ground provision itself which has been questioned by some.

As I read it, the Florida statute says that people in a public place and not breaking the law have no 'duty to retreat' if attacked. Instead, they have the right to 'stand their ground' and meet 'force with force' to defend themselves. If defenders reasonably believe that they or others face grave threat, then they are justified in applying deadly force to quell the aggressor.

This statute is wholly consistent with the natural rights of man famously elaborated by Jefferson. All people have rights to life, liberty, and property. These rights are inalienable, meaning that they cannot be legitimately revoked by any human entity.

If aggressors seek to invade the rightful pursuits of others, then individuals have the right to defend themselves against such aggression. While they may choose to back away, they have no 'duty to retreat.' Instead, defenders have a duty to select a level of defensive force commensurate with neutralizing the threat.

Yes, a defender could use poor judgment and employ more counterforce than necessary to stop an attack. Whether the level of force applied was appropriate or excessive in a particular case may be for a jury of peers to decide.

That errors in judgment can be made does not diminish the right of defenders to render such judgment in order to protect their person and property against aggression deemed as life-threatening. Each of us was born with this right and the responsibility that goes with it.

If self-defense is a God-given right, then why is an explicit Stand Your Ground provision even necessary? Isn't it obvious? After all, few states have adopted Stand Your Ground provisions. Even the Zimmerman prosecutors indicated that, with the provision, self defense law "really hasn't changed all that much."

One explanation parallels the reason why the Bill of Rights was written. Many original proponents of the Constitution argued that an elaboration of individual rights was not necessary, because any powers not explicitly delegated to the federal government in the Constitution implicitly remained with the people.

Those wary of government's all-consuming appetite for power, such as the anti-federalists, were skeptical of such claims. They argued that individual rights were more likely to be compromised if those rights weren't written down for all to see. As such, ratification of the Constitution in some states was conditional on the development of an explicit bill of individual rights.

Of course, writing them down does not guarantee that rights will not be abused by the State. Many antifederalists, for example, suspected that the design put forth in the Constitution would result in an expansive government that would overpower individual rights even if those rights were elaborated as written law.

But writing does raise awareness. People who understand their God-given right to stand their ground and defend themselves are more aware of situations where other people want to take that freedom away.

Do We Need Traffic Laws?

If you had just one minute to breathe
And they granted you one final wish
Would you ask for something like another chance?
Or something similar as this?
--Traffic

A recent study by Arthur Van Bentham found that highway driving was more dangerous in states that raised speed limits after the national 55 mph limit was repealed in 1995. He suggests that raising or eliminating speed limits would adversely affect social welfare.

It strikes me that this study merely validates a basic proposition of motor vehicle operation: the greater the speed, the higher the risk.

What Van Bentham doesn't do is consider alternative forms of traffic governance and their influence on safety and well being. This missive shares evidence from studies of some of those alternatives.

Only 1/3 of the highways in Germany have government imposed speed limits. Yet, there is little difference in fatalities on roads with speed limits vs those without. Moreover, German highway fatalities have been trending lower for years despite higher traffic flows. Currently German highway fatalities are lower than many developed countries, including the US.

Several European cities have also done away with street signs, traffic lights, and even crosswalks in the spirit of creating 'shared spaces.' The idea is to have drivers and pedestrians negotiate with each other as they go. Rather than creating a disaster, reports indicate less accidents and better traffic flow--including more foot traffic.

While such results may seem counterintuitive or even unbelievable to people who have come to rely on State-imposed regulation, the findings should not be surprising to those who understand markets.

Markets are places where people voluntarily come together to engage in exchange. Markets foster self-regulation, lest no trade gets done.

On the other hand, government imposed regulation takes responsibility out of the hands of individuals and into the hands of armed agents. It crowds out voluntary cooperation and facilitates dependence on the State rather than on mutual interdependence.

Both theory and evidence suggest the plausibility of doing away with State-imposed traffic regs and encouraging people to cooperate with each other and self-regulate.

Snowden's Insurance Policy

"You're either very smart...or incredibly stupid."
--Brill (Enemy of the State)

It appears that Edward Snowden created an insurance policy to help protect himself from the long knives of government. The Guardian's Glen Greenwald claims that Snowden has set aside a trove of information that would "cause more damage to the U.S. government in a minute alone than anyone else has ever had in the history of the United States."

He also claims that it would be released immediately should any harm come to Snowden.

Well done, kid.

I know you need this info to protect yourself, and you've certainly stepped up higher than most have the courage to do, but I half hope you decide to release this info anyway.

A government that it totally transparent, one that keeps no secrets from its people, is more capable of being kept in check.

Pursuing Historical Truth

It's coming any day now said the captain
It's coming any day now said the priest
The people in high places may defend you
But son you better hope they keep the peace
--Bruce Hornsby and the Range

If you are interested in the truth, then popular narratives of certain historical events don't ring true to you. The JFK assassination is one of those. Despite all the king's horses that have been marshaled to tell the 'official' story, there are simply too many problems with the stream of evidence to suggest that the party line is much more than classic naked emperor pretense.

Another such event is the Civil War and its prosecution by Lincoln--a subject that these pages have considered. Once again, the evidence does not follow party line discourse. Fortunately, the divergence between the story line and fact is attracting more historians interested in setting the record straight.

It should not be surprising that those who question party lines face personal attack from those committed to the pretense. Those who challenge the Civil War/Lincoln myth, for example, are often labeled racists, pro-slavery, Southern sympathizers, etc.

It's the old juvenile defense mechanism learned on the playground: When lacking a valid counter argument grounded in truth, just call them names.

If you're committed to the truth, then you simply don't take such attacks personally. Perhaps the truth threatens them.

But why they attack doesn't matter. You stay focused on your pursuit.

Because you know that gaining a better understanding of the true course of historic events helps set you free.

Snowden's Civil Disobedience

"So, here's to the men who did what was considered wrong, in order to do what they knew was right...what they KNEW was right."
--Benjamin Franklin Gates (National Treasure)

Edward Snowden demonstrates once again his understanding of natural law. The power proclaimed by the US federal government to seize and read, without warrant, people's communications is against the law. Not only is it prohibited by the US Constitution, but it also flies in the face of natural law.

No sophistry, such as the argument that if only the government, not the public, reads these communications then it is ok, legitimizes this behavior.

The government that he has crossed has, of course, declared him an outlaw.

Big deal. Snowden knows that he was right. He refused to comply with unjust law.

Government most certainly fears that others will be emboldened to follow Snowden' civil disobedience.

FUBAR

There's a place where the light won't find you
Holding hands while the wall come tumbling down
When they do
I'll be right behind you
--Tears for Fears

Couldn't agree more with the FUBAR assessment offered by my friend Toddo. Policymaker actions, particularly those wrought by the Federal Reserve, have distorted the discounting mechanism to the point were financial markets hardly resemble what they were even a few short years ago.

Sad, sad.

Ultimate Confidence Game

"The mother of evils is speculation--leveraged debt."
--Gordon Gekko (Wall Street: Money Never Sleeps)

Leveraged financial systems are the ultimate confidence game. Real economic resources are borrowed from their owners and pyramided higher in the form of speculative loans and investments. Profits are created on paper as long as the value of those projects goes higher.

The entire system is inherently unstable and completely depends on maintaining the confidence of two groups of participants.

One group is the original providers of economic resources to the system, such as people who deposit funds in banks. Typically, banks borrow (some might say steal) these deposited funds and speculate with at least $9 dollars out of every $10 put on deposit. If the owners of those economic resources move to call in their original loans (i.e., withdraw their funds from the bank), then the ponzi collapses as banks only have 10 cents of cash for every dollar of deposits.

This is the 'bank run' scenario famously navigated by George Bailey at the Bailey Building & Loan and recently exemplified on a small scale in Cyprus.

The other group whose confidence must be maintained is the speculators who hold those financial assets (stocks, bonds, commodities, real estate) purchased with borrowed funds. Leveraged speculators realize paper profits when the value of those assets goes up relative to the value of their liabilities (i.e., the borrowed funds), thereby leaving larger residual equity.

However, this carry trade implodes when either a) asset prices significantly decline, or b) cost of servicing debt increases. If leveraged speculators fear either of these situations, then they must close out their speculative positions by selling the assets and paying back their loans before insolvency strikes.

This is the deflationary, correlated, waterfall price decline scenario witnessed in 2008.

Policymakers who choose to be complicit in this financial pyramid scheme must act in manners that instill confidence in the two groups cited above. For bank depositors, deposit insurance backstopped by the federal government (read: taxpayers) has largely done the trick thus far. People have mindlessly deposited their funds in banks with little worry about the reckless leverage building in the system.

For the leveraged speculators themselves, policymakers have largely turned to central banks to inject 'liquidity' and associated monetary stimulants whenever it is deemed that the collective speculative balance sheet is at risk of flipping upside down. The intervention has become so addictive that even the suggestion of further stimulants finds speculators salivating like Pavlov's dogs.

As with all ponzis, the only way this system persists is if policymakers are continually successful at medicating confidence among these two groups of participants--particularly those at the margin.

Does this seem a good bet?

The ultimate confidence game resembles the ultimate game of chicken.

position in SPX, Treasuries

Affiliation

"I'd rather be with someone for the wrong reasons than alone for the right ones."
--Amanda Jones (Some Kind of Wonderful)

We all feel a need to belong, to be accepted. We satisfy this need in part by affiliating ourselves with various groups--religions, schools, nationality, organizations, gender, professional associations, skin color, sports teams, etc.

The downside of affiliation is that we are prone to disengage our capacity for reason and self-awareness when we are part of a group. The phenomenon goes by many tags--groupthink, herd behavior, crowd mentality, social control, etc.

When we surrender capacity for reason and self-awareness (perhaps the most important ways that we differ from the rest of the animal kingdom), we are less capable of sound judgment. We are less able to compare actual position to our internal compass and judge good from bad, truth from lies, right from wrong.

As members of groups, we might develop an institutional mentality that condones or rationalizes practices that we would never dream of sanctioning or performing on our own.

Jefferson understood the danger of affiliation. He wrote:

"I never submitted the whole system of my opinions to the creed of any party of men whatever, in religion, in philosophy, in politics, or in anything else where I was capable of thinking for myself. Such as addiction is the last degradation of a free and moral agent. If I could not go to heaven but with a party, then I would not go there at all." (Nock: 175)

The lesson is to choose your affiliations, and your involvement in them, carefully.

Reference

Nock, A.J. (1935). Our enemy, the state. Caldwell, Idaho: The Caxton Printers, LTD.

Savings and Economic Growth

Maybe someday
Saved by zero
I'll be more together
Stretched by fewer
--The Fixx

Nice primer on why it is saving, not consumption, that drives economic growth. The logic is grounded in basic axioms. The natural state of the world is one of scarcity. Alleviating scarcity requires production--i.e., the combination of labor with other factors of production.

If all production is consumed, then standard of living is maximized in the here and now. However, consuming all production leaves nothing for growth in the future. The only way production can increase in the future is to set aside some of today's production in the form of savings, and then apply those savings toward projects that offer promise for improving future productivity (defined as the amount of output obtained per scarce unit of input).

Think of it this way. Suppose you wish to cure cancer. Curing cancer requires research. Research requires researchers. People engaged in research must eat, cloth themselves, have a place to live, etc. Where do the resources come from to support those researchers working hard to cure cancer?

The answer is that they can only come from production that others have set aside. If all production is consumed, then nothing is left over to support cancer research.

The same holds true for any productivity improvement project. Production set aside becomes savings. Savings becomes capital. Capital drives productivity improvement.

The basic proposition is this: the higher the savings rates, the greater the future economic growth.

Policymakers currently believe that consumption drives economic growth. They are pulling out all stops to encourage borrowing (i.e., consuming more than one's income by borrowing from others) and spending (consumption).

Meanwhile, policies that suppress returns on savings below the natural rate of interest discourage people from setting income aside.

What we are engaging in is capital consumption. When capital is consumed to boost standard of living in the here and now, we kill the goose that lays golden eggs for future prosperity.

Off Course

So if you're lost and on your own
You can never surrender
And if your path won't lead you home
You can never surrender
--Corey Hart

Recent Gallup data suggest that most Americans think that the signers of the Declaration would be disappointed with the way things have turned out. Nearly 3/4 of respondents thought so, up from less than half a decade ago.

This is encouraging in some ways. It demonstrates that most Americans do have a sense of the principles upon which this country was founded and an awareness of the growing gap between 'actual' and 'intended.'

Their internal compasses are working.

Moreover, it raises hope that the more people are aware of the gap, the greater the action to close the gap.

Jesus and Socialism

"Their prophet says 'submit.' Jesus says 'decide.'"
--Sybilla (Kingdom of Heaven)

Occasionally I see bumper stickers or other media that read "Jesus was a socialist." People who claim this either do not understand the definition of socialism or have not studied the life of Christ.

Socialism is public ownership and control of production. Stated differently, it is public ownership of property. There are no individual rights. Because life and liberty are linked to property, socialist systems are systems are anti-freedom and pro-authoritarian. Central authorities decide what gets produced, who does the production, and who gets the production. Socialism opposes natural law and its axioms. It is a system of force and aggression.

If Jesus was a socialist, then he would have advocated central planning and forceful submission. Imagine, for example, Christ ordering the Apostles to draw their swords and confiscate loaves and fishes from the crowd for his discretionary redistribution.

Jesus lived a life of non-aggression and volunteerism. He told people that following in his footsteps would be difficult, but people would not be forced to do so. This difficult choice was up to each individual.

Cooperate with each other, he said. Do not force others to do your will.

His death and resurrection were ultimate demonstrations of freedom over force. As Paul wrote:

"For freedom, Christ set us free. Stand firm, therefore, and do not submit again to the yoke of slavery."--Galations 5:1

Anti-freedom systems such as socialism are anti-Christ.

Making a Market for Freedom

"Oh...people will come, Ray. People will most definitely come."
--Terence Mann (Field of Dreams)

When the United States of America was founded, there were no other countries operating under the auspices of inalienable rights, equal treatment under the law, and self rule. Instead, the dominant design was one of rights conferred by rulers, discretionary treatment under the law, and submission.

The US was like the entrepreneur with the radical new idea. It made a market for a design that did not exist elsewhere: liberty. The idea was to create an environment where people could pursue their interests unencumbered by aggression from others.

It was not a perfect design out of the gates. But it was so radically different from other designs that people around the world took notice.

Almost immediately, there were buyers of the idea. Immigrants, flocked to the US to trade previous positions of restraint for the prospect of living in pursuit of their dreams.

It was that market, the market for freedom, that rapidly elevated the standard of living of the United States to a position that made it the envy of the world.

Unfortunately, for over a century, we have been poisoning the market for freedom. The poison is part socialism, part imperialism. Liberty is being replaced with aggression--often done in the name of 'security' or of 'the greater good.'

But the greater good does not benefit from restraining the individual. For most people, standard of living is now stagnant or falling. We find ourselves borrowing more and more in an attempt to stay even.

Liberty remains the radical, entrepreneurial idea. Revive this market, and watch people once again come together to create and trade in pursuit of their dreams.

Progressivism, Finality, and Truth

"You can't handle the truth!"
--Col Nathan Jessup (A Few Good Men)

On July 5th, 1926, President Calvin Coolidge delivered a speech in Philadelphia to mark the 150th anniversary of the signing of the Declaration of Independence. Coolidge demonstrates an understanding of the historical context of this country's founding that few modern presidents have matched. Among the documents that I would like to share and discuss with the young, this would certainly be one of them.

About three quarters of the way down, Coolidge addresses the common Progressive argument, one amplified during the Wilson administration, that, because the world has seen much advancement since 1776, the conclusions reached by those who founded the country, and the laws upon which those conclusions were based, are no longer relevant. Instead, the Progressive argument goes, those outdated ideas should be replaced by something more modern.

Coolidge argues that such reasoning does not apply to to the Declaration because, unlike technological advancements that render prior designs obsolete, the Declaration contains discoveries about natural law that are final and don't change with the wind. If man concludes that all people are created equal, then that is final. If they are endowed with inalienable rights, then that is final. If government derives just power from the consent of the governed, then that is final.

No advance or progress can be made beyond those propositions. Those wishing to deny the soundness of these propositions do not advance forward, but backward to a time when there was no recognition of equality, individual rights, or self rule. Those wishing to proceed backward are not more modern, but more ancient.

What Coolidge is saying is that the Declaration expresses several important findings in man's pursuit of truth. Truth that is durable is final.

Backing away from the propositions of the Declaration equates to backing away from durable truth.

Chasing Liberty

"So, here's to the men who did what was considered wrong, in order to do what they knew was right...what they KNEW was right."
--Benjamin Franklin Gates (National Treasure)

Two hundred and thirty seven years ago, a group of people put forth a declaration that was fully aligned with natural law yet considered fully radical at the time.

That all people were born equally free. That individuals had the right to pursue their interests unencumbered by aggression from others. That no worldly entity could legitimately revoke this right to liberty. That government power comes from those governed. That when government no longer acts to secure liberty, those governed are justified in throwing off that government in favor of a more capable one.

It seems that more people are waking up to the importance of this day. That's positive.

The negative is that we continue to cede freedom away. The history of the world can be seen as the struggle of force versus freedom. Thus far, force has claimed the upper hand.

Today we celebrate a day when freedom turned the tide. The question is whether this was merely a temporary turn.

Distrusting Government

Hey hung up Mr Normal
Don't try and gain my trust
'Cause you ain't gonna follow me in any of those ways
Although you think you must
--The Who

Recently, President Obama attempted to paint those who distrust government as misguided or extreme. Rand Paul countered, observing that America was founded in the spirit of distrust of government. Truth is on RP's side, as Walter Williams demonstrates. Not only is public distrust of government growing, but the original design, as well as comments from the framers, are all consistent with the understanding that government power must be carefully metered.

Williams observes that even the Supreme Court, who many have bowed to as having the ultimate authority in all things legal, is not to be trusted. He quotes Thomas Jefferson:

"To consider the judges as the ultimate arbiters of all constitutional questions is a very dangerous doctrine indeed, and would place us under the despotism of an oligarchy."

Jefferson and Madison penned the Kentucky and Virginia Resolutions in response to the Alien and Sedition Acts of the late 1790s. They stated that Americans are not bound to unlimited submission to laws enacted by the federal government that exceed its constitutional powers. In such instances, citizens can choose not to obey, or nullify, the law.

Nullification and its close cousin secession are ultimate expressions of distrust in government. Two hundred and thirty seven years ago, we chose not to obey.

Government Fears an Informed Public

"Where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance coercing your conformity and soliciting your submission."
--V (V for Vendetta)

Edward Snowden continues to demonstrate the stuff of heroes. He states that President Obama has reneged on his promise that there would be no diplomatic 'wheeling and dealing' over Snowden's case. Now, the Obama administration is pressuring foreign governments to deny Snowden's asylum petitions.

Snowden observes that the right to seek asylum is an inalienable one. Individuals have the right to defend themselves. This includes the right to seek the help of others for self-defense purposes.

The US government is moving to offend the rights that it was famously founded to defend.

Snowden observes, "These are the old, bad tools of political aggression. Their purpose is to frighten, not me, but those who would come after me."

Snowden astutely notes that in the end, the Obama administration does not fear whistleblowers like him. What it and all governments really fear is "an informed, angry public demanding the constitutional government it was promised."

Sage words for us to reflect on as we begin our Independence Day celebrations.

Self-Interest and Selfishness

And the men who spurred us on
Sit in judgement of all wrong
They decide and
The shotgun sings the song
--The Who

An axiom of human behavior is that people act. They act in ways perceived as bettering their position vs their present condition. In other words, people act in their own self-interest.

Self-interested action may be oriented toward acquiring material wealth. Or it may be oriented toward acquiring psychic income. Indeed, a person may give up material wealth in order to gain psychic income, as in the case of someone who gives to charity in exchange for a good feeling about helping others.

A subset of psychic income is spiritual income. People might give to charity because they believe that this action will better position them for the Afterlife.

Is acting in one's own self-interest equivalent to acting selfishly?

If selfishness is defined as acting out of concern for one's own interests, then the answer is yes. The objective of human action is to improve one's material or psychic position.

However, if selfishness is defined as acting out of excessive concern for one's own interests relative to others, then the answer is ambiguous. Judgment must be rendered on what constitutes excessive concern for oneself versus others.

Who best renders such a judgment? It is common for people to look upon the behavior of others and label it selfish. The problem, of course, is that these judges are employing their personal standards of what constitutes 'excessive' self-interest in others. And because those judges are acting in their own self-interest, the judgment rendered is sure to be one that promises income, whether it be material or psychic, to the judges. For instance, calling someone else selfish may make some accusers feel superior to the accused.

Scripture warns about casting such stones at others...

There are only two qualified judges of what constitutes overly selfish behavior. Each individual has to make a personal judgment, grounded in conscience, on the righteousness of his/her actions.

The final arbiter, of course, is the Creator, who will render decisive judgment.