National Review Is a Poisonously Stupid Rag

National Review Is a Poisonously Stupid Rag

“If an insufficient patriotism is one of the ills of contemporary America,” declares National Review editor Rich Lowry, “then a national divorce would prescribe arsenic as a cure. It would burn down America to save America, or at least those parts of America it considered salvageable.”

It is precisely here that the anti-secession movement goes wrong, as it has more than once before. In the manner of obtuse historians, they identify the government as the nation itself, and in this case choose the political union over the social fabric. Lowry would sooner see the American tradition perish than accept the dissolution of the federal monstrosity strangling it. Going back to the seventeenth century, American society has been marked by political decentralization, economic liberty, and meaningfully limited government, limited more often by practical constraint than by statute. This has been the tradition of American society, as distinct from the various governments that have attempted to impose on it trade regulations, prohibitions, empires, paternalism, state churches, and grants of monopoly, all with remarkably little success before the twentieth century. It must be admitted that the American character has been, for hundreds of years, quite stubborn against the edicts of London, Washington, and even Richmond.

The distinction between Washington and America is so blithely ignored by National Review that it must be emphasized here. The distinct character of American society (however you choose to characterize it) has far better claim to the name “America” than anything in the imperial city, its laws, fashions, or ambitions. When Washington DC imposed prohibition as a law, was America sober? Not in the least; to call America “dry” because the federal government had declared it so would be an absurdity. And so it is with the general character of Washington today; its nature is so out of step with the general public that a normal citizen may be expected to commit hundreds of crimes against its laws in his lifetime, merely in the course of his normal business, while the democratically elected legislature, for its part, receives consistently negative approval ratings from the very people that selected it. The voters regret the outcome of their votes, while the lawmakers regard the people’s ordinary routines as criminal. Washington and America are not a society, but two in conflict.

And it is this federal government, already so divorced culturally from the American public, and still further alien to the more independent Americans of the past, that Lowry regards as the heart and identity of “America.” For what does secession really rend apart? Does national divorce really mean a separation of Nevada from Arizona, or even New York from Texas? They are practically as separate now as they would be after secession, because they share no political ties outside the federal government itself. The only thing that is being broken is the federal bond; there are no New York laws for Texans to throw off, there are no Texas Rangers patrolling Albany, which the New Yorkers may only expel by seceding from the union. Political secession severs one political tie, and that is to the federal government. The conflict between the hostile states consists entirely in injuries done to one another by way of Washington DC, by having a hand in the election of officials that make and enforce laws to the harm of the other. Simply ending federal jurisdiction ends the low-grade war; both states will have lost both cause and means to injure each other.

Lowry speaks (with appropriate brevity) of the benefits of our federal union, citing free trade within the United States as a major loss if the union were to break up. That the federal government provides free trade in America is a direct falsehood, though it is conceivable that the separate states might be foolish enough to reinstate protectionist interference in trade. The present U.S. is not a free trade zone by any stretch, and the largest single factor in this conspiracy in restraint of trade is federal law. Without going into the full litany of federal agencies and their war on American domestic commerce, including OSHA’s ever-widening grasp to the petty extortion of the ICC, federal regulation alone would make this claim laughable. But the agencies are not alone; the federal income tax devours revenues orders of magnitude beyond anything even the most illiterate state government imposes, crippling virtually every commercial enterprise in this supposed “free trade zone” more severely than the worst abuses of the Lords of Trade upon the colonists. And though this account must be brief, the Federal Reserve, in centrally planning the money supply and the interest rate, intimately interferes with every business that uses the dollar, and inflicts nationwide crashes and inflations that a decentralized system would have a chance to resist. If domestic free trade is of benefit to Americans, that is urgent argument against political union with Washington, not for it.

Lowry goes on to call secession “self-defeating,” in the context of the presidential election. “Let’s say Texas left. That’s 40 electoral votes off the national map for Republicans.” Checkmate, Texas! Is it though? Surely it would be childish for Texans to concern themselves with the election of a president with no power over their lives. Far from self-defeat, they have achieved a much greater and longer-term goal: ensuring they will never be ruled by Clinton or Biden. By giving up the rather mean-spirited ambition of imposing a Trump on others, they have escaped all danger of having their enemies imposed on them. Who loses by this? Well, Trump, Clinton, and Biden would find it unpleasant to have their reach reduced, but every state in (or out of) the union benefits by it. It is once again the interests of Washington versus the interests of America, and quitting on America is unforgivable.

“A disaggregated United States would be instantly less powerful. Indeed, Russia and China would be delighted and presumably believe that we’d deserve to experience the equivalent of the crackup of the Soviet Union or the Qing dynasty, respectively,” Lowry hypothesizes. And indeed they might, just as many in the West delighted in the dissolution of the Soviet Union, as the liberation of millions crushed under the boot of a too-powerful, too-centralized, imperial state were set free. The more general point, regarding military strength, deserves particular attention because it speaks to the true motivation of much anti-secession sentiment, and is once again, precisely wrong. Lowry (like most neoconservatives) is judging military power in terms of resources directed to the military, not in terms of national security. To clarify, bad strategy is capable of absorbing an unlimited amount of resources; you can spend trillions without making your nation any more secure if you dedicate those trillions to a multi-decade expedition to the other side of the world, as a random example. Washington’s ambitions for a global order have transformed the relatively simple project of defending a nation surrounded by oceans and two benign neighbors into a wild goose chase after global dominance. With the federal government itself failing to produce the strategic vision of a Hadrian, the necessity of limiting the mission may perhaps only be served by limiting the federal government’s power to recruit resources out of the nation.

One way or another, America must defend itself from having its whole life sucked into the service of the wild dreams of the Bushes, Clintons, Cheneys, and McCains. And if this clear strategic necessity is too much to ask of Washington’s personnel then Washington’s personnel must have a reduced hold on America’s resources. Political secession might not be the only solution to our suicidal foreign policy consensus, but it is the consistent federal failure to do what must be done that pushes us ever closer to the necessity of political breakup, to achieve by other means what competent strategic leadership would have done decades ago.

As for the opposing “superpowers” of Russia and China, Lowry alludes to our nuclear arsenal and the difficulty of splitting it up, apparently without noticing that it is mathematically impossible to split 3,800 warheads between two nations, and not have one of them (or both) still be the largest nuclear power in the world. If China is a threat with its 300 warheads, then the U.S. can afford to split into up to twelve nations, every one still better armed than the Chinese. And all this without even invoking the natural mutual-defense impulses of Americans for Americans, whether under the federal yoke or free from it. In the nuclear sphere, secession poses no real threat to a deterrent that was radically overbuilt to begin with, and in the sphere of conventional war Lincoln’s dark prophecy is truer than ever: “All the armies of Europe and Asia…could not by force take a drink from the Ohio River or make a track on the Blue Ridge in the trial of a thousand years.”

While the desire to preserve the centralized military (and the centralized command that squanders it) is the core of the classic resistance to secession, it is another of Lowry’s challenges that truly gets to the heart of the matter. “But if we are going to split up because we can’t even agree on bathroom policies or pronouns, how are we going to agree to divvy up our territory and resources?” Such a question reveals the true issue at stake, and the reason twenty-first century America is widely musing about political breakup. For most Americans throughout history (including many in our own time), the idea of a nationwide “bathroom policy” could only be expressed in the form of a joke. For us to have reached a situation where politics reaches this deeply into what is at once mundane, trivial, and personal speaks to a true insanity in the scope of modern government. “We can’t agree on bathroom policy” is not an admission of disunion, but of idiocy. One might call this condition, where national policy will be satisfied with nothing less than ruling over every toilet in the nation, a pathological unity. Americans are (politically speaking) crowded unnaturally close, worrying about one another’s bathroom as if it were any of their business. In light of the existence of “bathroom policy” it should be obvious that Americans would be seeking some means to return to their traditional political decentralization, and rebuild social harmony by restoring healthy boundaries.

Sam Peters is a contractor and libertarian writer.

Socialists Backstab Workers By Supporting Economic Lockdowns

Socialists Backstab Workers By Supporting Economic Lockdowns

Leftists support the lockdowns, conservatives oppose. With a few exceptions, pandemic policy has lined the tribes up with impressive neatness, and while many factors contribute to any ideological divide, the socialist influence on the broader left is here playing a crucial and unexpected role.

While the trademark of progressives has long been the grand social engineering project, the socialists’ motivation for supporting such policies (and allying with the rest of the left) is their stated goal of helping the workers. Workers’ movements, centered around workers’ issues, sign on to progressive methods and policies as a means to an end: They hope that the scientific management the progressives install will benefit the group they represent.

But with lockdowns costing millions of workers their jobs, depriving them of necessities and devastating small businesses and family savings, the socialist movement within the left is providing an essential service to the progressives who imposed this policy. How can the costs of such a desperate experiment be justified? The real, crushing costs are borne by the vulnerable, not concentrated on the affluent like a Sanders tax plan. Regardless of the necessity of the policy, or its benefits, facing up to tradeoffs is to be avoided in politics, especially when those tradeoffs amount to ruining the lives of millions. A frank reckoning along the lines of “x thousand lives saved is worth y million livelihoods destroyed,” is unlikely, even with the most favorable numbers.

And it is here that the intellectual influence of the American socialists comes to the aid of the progressive cause. How can we minimize the impact of tens of millions of unemployment applications? How can we look upon the livelihoods wrecked, not by natural disaster, but by our deliberate policy, as a small enough thing to ignore? By denigrating the notion of “livelihood.” The democratic socialists who celebrated driving Amazon’s headquarters out of New York must look at jobs in a very different light than do job applicants. If jobs and businesses are viewed as the means by which the masses feed their children, their destruction is a tragedy, but if workers have nothing to lose but their chains, it is no such matter. Inflicting losses on workers is ironically sanitized by an ideology committed to defending workers, because it insists they have nothing to defend. In regarding jobs as exploitative, and economic freedom not as opportunity (as in the view of immigrants actively pursuing it) but as a predatory struggle, the socialist blinds himself to the interests of living workers.

The persistent problem for American socialists is the disconnect between their image of the impoverished worker, wages suppressed by the iron law, barely surviving at all, and the lived experience of a large mass of American workers. That workers should succeed and elevate themselves by working in “exploitative” employment relationships, or competing in the “dog-eat-dog” world of small business, forms no part of the socialist’s vision of the world. But for those workers who do succeed on their own terms in the market, that success is a matter of personal pride and identity that will not be wrenched away without a fight. The welders, mechanics, machinists, framers, nurses, electricians, plumbers, roofers, (and on and on into more trades than I could name) who have improved their conditions of life and fed their families by doing these jobs are absolutely hostile to a socialist pitch that involves treating them as charity cases. It insults their personal achievements, and erases their identity, to be treated like Russian serfs needing political liberation as a gift from Bernie Sanders. The successful worker is as repelled by this condescending kind of socialism as the unemployed are drawn to it.

It is the size of this class, the successful workers (success being defined in terms of the aims of each individual worker) that will decide the fate of the American socialists’ dreams. Where workers succeed by working, they have no need for a “Workers’ movement.” Where the dreams of the individuals are stifled, by disaster or by policy, there is hope for the socialists to be welcomed when they come rushing in with their political interventions. But in the calculations of the socialists themselves, the size of this class is always claimed to be zero; the worker is always the victim, or else he himself has become an exploiter. When this view is perhaps close to reality (as in post-Ming China or Tsarist Russia) the socialist’s theories guide him well enough and he can expect good success for his political movement. Where Chinese peasants stream by millions with nothing but the shirts on their backs, and in three generations have climbed to statistical affluence, the Marxist theory, and the socialist movement, are both seriously confounded.

A lockdown policy which devastates the independent livelihoods of Americans thus erodes an important base of mass resistance to socialism (even if it is a mass the socialists refuse to acknowledge), as do occupational licensing, business regulations, and tax withholding (more hated on payday than any boss). Politicians will view this as a feature or a bug, depending on their hopes for the socialist movement; they may seek to protect the livelihoods of the workers as a defense against socialism, or they may go on trying to impoverish and destroy the dreams of families in order to pave the way for their better world. G.K. Chesterton explicitly warned his contemporaries about this very issue nearly a century ago, in arguing against the Inclosures in England:

…in so far as the peasant proprietor is certainly tenacious of the peasant property, is concentrated on the interest or content with the dullness, as the case may be, he does, in fact, constitute a solid block of private property which can be counted on to resist Communism; which is not only more than can be said of the proletariat, but is very much more than any capitalists say of them. I do not believe that the proletariat is honeycombed with Bolshevism (if honey be an apt metaphor for that doctrine), but if there is any truth in the newspaper fears on that subject it would certainly seem that large properties cannot prevent the thing happening, whereas small properties can.

(The Outline of Sanity, 1927)

The fact that leading defenders of capitalism in Chesterton’s age sneered at the “rustic” small property holders and allowed cronyism to eat away at the property and security of a large class of Englishmen seemed to him a tactical error as well as a moral outrage. To excuse violations of property in the name of “modernization” is not only hypocrisy, but also, in Chesterton’s view, destroys the best bulwark against the open violations of socialism: Millions with their own independent stakes in private property, and personal motive for its defense.

The ultimate fate of America’s class of small property holders, independent livelihoods, or successful workers, is yet to be seen. Certainly the presence and size of this class has been an intrinsic element in the American standard of living, in spite of America’s lagging behind other nations in “essential” worker protections like unionization, regulation, and welfare. America has a centuries-long tradition of unusually high real wages under conditions of unusually inactive (though not absent) economic policy. Marxists put this down (when they admit it at all) to a “labor shortage,” while economists credit it to a large capital stock, which is a more sensible way of saying the same thing. In any case, the home of relative laissez-faire has been the most fertile of ground for penniless families to take root and flourish, and about the most stubbornly barren for socialist movements. These two facts are not unrelated.

Pizza-Backed Bitcoins

Pizza-Backed Bitcoins

Beneath all the gut-level suspicions about cryptocurrencies as something shadowy and unreal, there is a fundamental problem of economics that threatens to undo all the gains Bitcoin has made, and assign it inevitably to the dustbin. Regardless of the particular implementation (the subject of intense debate among technical experts) this basic problem in the economics of currencies that has led some economists to argue that neither Bitcoin, nor any other form of crypto, can ever truly serve as anything better than a purely speculative asset. The economic problem strikes at the very root of hopes for Bitcoin, unlike technical problems which human ingenuity might address; if the regression problem truly proves what it appears to, cryptocurrencies are doomed to a bubble existence before they are even mined.

Ludwig Von Mises, among the most brilliant minds in economics, lived and died before the advent of Bitcoin and had no intention of weighing in on the topic when he wrote his Theory of Money and Credit, first published in 1912. But his solution to the problem of the original valuation of a new form of money plays hell with expectations that new, fully unbacked currencies can stabilize in value and become a permanent part of an economy.

The problem Mises solved had plagued economics since the time of Adam Smith, and his solution made possible a better understanding of prices by “unifying,” as they say in the sciences, subjective value theory and theories of the value of money. This subjective value theory was one of the most important revolutions in economic thought, and was already very widely understood at the time Mises was writing. Subjective value theory simply holds that the economic value of a good is an expression of human desires for that good, not of any internal objective quality like size, mass, or “utils” (speculated to exist by early economists). Economic value is in the eye of the beholder, and it is the preferences and desires of consumers which give goods value in the first place. Thus, prices of goods are ultimately expressions of how desired they are; a Ferrari trades for more than does a wheelbarrow because the humans involved in trade like Ferraris far more than they like wheelbarrows. Not because of cost, nor physical properties, nor imagined utils, but because people are expressing their own preferences in spending decisions and they will part with far more in exchange for the one than for the other. The apparent parallel between costs and prices (ie “it costs far more to make a Ferrari than a wheelbarrow; isn’t that the reason the price is higher?”) actually arises from this same cause: Nobody will spend the kind of money it takes to build a Ferrari, unless he is building something he can sell for Ferrari prices. All kinds of goods could be produced for enormous sums, but aren’t desired in the least by consumers: exploding boomerangs, oil paintings painted over with stucco, mile-deep holes dug then filled back in. All these inanities would trade for enormous prices if cost truly drove price, but instead, it is the high trading price of expensive (highly desired) goods that creates the budget for the enormous costs of producing those goods. In short, the Subjectivist revolution showed that economic value is nothing else but an expression of people’s values; this realization forced the science of economics to loosen its grip on value as matter for scientific investigation, but at the same time resolved all kinds of snares (like the diamond-water paradox and the works of Karl Marx) that have plagued economics through the centuries.

But this sharp turn in the course of economics raised some new puzzles to replace the ones it had resolved. Of particular interest was the question of the actual level of  money prices; the Subjectivist revolution had thrown light on the question of the prices of goods relative to one another, the demand side of that question was now answered by reference to consumers’ desire for each good. But for money itself, consumers have no such direct satisfaction to refer to, they only desire money as a way of getting other goods. The subjective satisfaction of possessing money is nothing like the subjective satisfaction from any other desired good, and so this framework cannot directly explain the actual price of any good in terms of money. People have no tool by which to judge the worth of a dollar, and how easily they should spend it, or how much they should spend on any particular good, from mere subjective value.

Another way to understand the problem is as a question of original prices; if money were suddenly introduced to a barter economy, how would people know a good price from a bad price? In barter, a person simply decides whether he wants the item he is getting more than the item he is giving up. His subjective valuation of both goods is in his own mind, ready to help him decide whether he should hold out for a higher price in bananas or accept a lower one. But how does he know whether to hold out for more dollars? The dollar can do him no good except acquiring other goods by trade, he does not like or dislike the dollar as he liked or disliked item he was spending in barter. How can the exchange value of the money become fixed enough for it to be spent with confidence, or accepted without fear?

The solution has two parts, and the first seems trivial on its own. When spending money, one truly evaluates it based on what he expects he can buy with it. If he thinks of a hamburger as a six dollar item, he spends dollars elsewhere with the understanding that every six of these he gives up, he deprives himself of a hamburger, and the same for every other good for which he has some idea of its price. One holds a dollar to be valuable based on expectations about what it can be spent on, that is, based on the array of money prices known to him.

But wait hasn’t this just evaded the question? We asked how specific money prices can come to be without spenders having any idea of the magnitude of their money’s value, how can the answer be “consumers know how much their money is worth by looking at the prices of the goods they want”? We seem to be caught in a circularity here; the consumers trying to evaluate the dollar are relying on an array of existing valuations of the dollar in the form of prices. Everybody is falling back on what everybody else thinks, and so no original price data is being formed.

The answer at this point is to introduce the time element into the puzzle; consumer spending shapes prices today, but the prices consumers are thinking about when evaluating their own money are yesterday’s. The information that a consumer uses to decide how many dollars he is willing to part with in order to get an apple includes how cheaply he was able to get an apple yesterday. Past experience is constantly reshaping expectations about the value of a unit of money, which influences consumer spending behavior, which in turn plays its role in shaping present prices. Thus what appeared to be a circularity (prices determine the value of money determines spending determines prices) is in fact a spiral, with past prices determining the present value of money.

But isn’t this simply another evasion? Doesn’t the cycle of looking back to yesterday’s prices mean looking back an infinite number of days, never reaching an original price? Money must have existed eternally, and the spiral must go back forever for it to explain prices as they are today. And here is the final piece: This process of price formation evolves out of barter. In barter, there are no money prices, everything is traded simply on the basis of its use value, and so there is no need for anyone to consider yesterday’s price for anything. If he likes what he is getting more than what he is giving up, that is all he needs to consider. The more abstract value of money, with all its expectations of the future and memories of the past, is irrelevant for barter. Barter relies entirely on present, immediate evaluations of goods. But the problems of barter are severe as well, and in order to facilitate exchange, more tradable goods can benefit humanity by serving monetary functions.

One might, for instance, come to the market seeking to trade away a pig for wheat, but find the sellers of wheat to be all vegetarians. A solution would be to find some third good, something that the vegetarians wanted, being sold by somebody who did indeed want pork. This third good is serving (briefly) the function of a money. Obviously, any good serving this role serves better the greater the variety of sellers that want it. If nearly every seller at the market likes liquor, then liquor is the best choice for this money function. This kind of standardization, around a single commodity such as gold or whiskey, greatly facilitates trade when it is achieved, and it can readily be achieved when the good selected is one already traded in the market and popular among the participants. Even those who do not wish to consume the good acting as money will still accept it in trade, knowing that they can use it to purchase whatever they wish. But at the beginning of this process, gold or whiskey is trading as jewelry or drink; the prices of the good serving the monetary function are at first determined on a barter basis, as merely one good of many. It is only later, once the monetary function of the good has become well established, that the money-price question ever arises. Until then, the problem of evaluating gold or whiskey is merely the same problem it was in barter, and it is solved the same way.

This account of the origin of money out of commodity barter solved a difficult problem in economics and allowed economists to more effectively study money prices by dispensing with the ad-hoc patches they had put over this apparent hole in subjective value theory. Since Mises, there has been no need for a separate, arcane account of the value of money, contrary to and ultimately incompatible with the account of the value of all other goods. The science was unified and the hole in the theory was repaired.

But what was a blessing to the twentieth century has become a thorn in the twenty-first. There is no logical reason to reverse this account of the evolution of money prices, indeed it is still the most satisfactory account of this necessary process. So are Bitcoin and the rest of the crypto contenders doomed ventures? Lacking any link to a tradable commodity, but instead being produced by GPU cycles etc. are cryptocurrencies necessarily arbitrary in value, having been flung onto the market fully formed instead of organically evolving out of people’s existing preferences? Some economists would certainly say so, particularly Misesians for whom the formation of money prices is a headline issue.

To answer this question, let us consider the comparable case of the paper and electronic U.S. dollar. Now the modern dollar is not commodity money in the sense that it once was; originally the paper dollar was gold-backed, much like a warehouse receipt for a piece of gold, ready to be reclaimed. Such redeemable paper money is virtually as good as gold, since it can, at any time, be converted into its face value in gold by the issuing institution. When somebody accepted a dollar as payment, he was assured that he was not receiving mere paper, but a firm title to some gold in a vault.

Thus the evolutionary chain of value runs from gold, as merely one good of many being exchanged in village markets, to gold as an organically evolved money, to paper money as a firm stand-in for gold locked in the vaults of banks and treasuries. It was the fixed, reliable policy of the treasury or bank to redeem dollars for gold that gave the paper dollar its original value and made it workable as a currency. The reliability of this redemption has varied wildly throughout history, until it failed entirely under Richard Nixon in the U.S. and in numerous other paper-money regimes since. But once a paper currency had a history of use and an array of historical prices for consumers to use in evaluating it, it became possible for it to continue on at least adequately without gold redemption. Though the end of gold redemption was hugely destructive for the American economy, it did not simply plunge the dollar into an abyss of being worth only the paper it was printed on.

The reason for this is not entirely down to the historical legacy of gold backing; it would have been impossible for the dollar to be introduced without gold backing, but it was not impossible for it to function without gold backing once it was well established. The reason should be clear: On the first day of the dollar, the price information people used in spending it was taken from the history of gold. Consumers could easily tell a bad dollar price from a good price by converting it into a gold price, and comparing it to the rich history of gold prices instead. This in turn allowed the economy to operate for decades in dollars and establish a similarly rich history of dollar prices for consumers to use in the future, even after the end of gold redemption.

Bank notes issued by private institutions have had a similar history, starting out as paper receipts or stand-ins for actual deposits of gold or silver held in the vaults of banks. Mises himself analyzed the process by which these fully-backed notes become mixed with “fiduciary media”, notes identical to those representing physical precious metals, but issued by the bank in excess of actual reserves. As confidence in a bank’s issued notes increases, so does its latitude in printing these highly-profitable pieces of paper. One way to understand this is to say that sellers, unaware of the falsehood of the excess notes, accept them simply in error. However, seller behavior does not reflect this, the strongest example being acceptance of the modern dollar, not only in excess of reserves but wholly and openly without them! Sellers seem willing enough to knowingly accept inflated or unbacked notes as long as they are confident against a bank run or other catastrophe wiping out the notes wholesale.

Perhaps a better way to understand the backing of banknotes and fiduciary media is as follows. The original issuing bank backs its notes by promising to redeem them for a declared amount of precious metal. This link to a commodity lets people evaluate and use the notes, spending them based on the equivalent value of the commodity. It also allows businesses to accept them with confidence in the first phase. But in accepting the notes, these businesses are adopting a behavior very much like that of the original issuing bank. The ACME Bank issues notes and promises to redeem them for a certain amount of gold; the ice cream shop across the street, in beginning to accept ACME Bank’s notes, is promising consumers to redeem ACME Bank’s notes for a certain amount of ice cream. The commitment of the ice cream shop to redemption is more flexible and less reliable, and thus less significant, than that of the bank, but the potential effect of all the various businesses that may accept a bank’s notes must soon dwarf the impact of the bank itself. The notes effectively transition from being backed by gold in the bank to being backed by every commodity offered in exchange for them. Stated a different way, the bank acts as merely the first seller to accept the notes, and firmly commits itself to accepting them in exchange for a widely-valued commodity, in order to pave the way for other businesses to do the same on whatever terms they will.

The historical fact that successful paper currencies have circulated as substitutes for the commodity they represent, and not simply been redeemed out of existence as fast as consumers can bring them in, reflects the same reality as we earlier observed with fiduciary media: It is confidence, not actual redemption, that keeps a paper money in operation. It might have appeared that this confidence was of the redeemability of the notes into gold at the bank, but we find equally effective (in our day) the full replacement of gold redemption by grocery redemption, gas redemption, housing redemption, etc. etc. The enormous array of commercial institutions which will accept dollars in exchange for a variety of goods have entirely replaced treasury’s gold backing of the dollar with their own kinds of backing, as the next step in the gradual evolution of this particular money. In this framework of understanding, the dollar is not today unbacked; it was unbacked when first conceived, and was first given backing through the promise of gold redemption. Once having that backing, however, it gathered more and more backers to it, more institutions which will reliably convert it into goods desired by consumers. The present situation is only that the original backer has dropped out of the group, while millions of the subsequent joiners-in are still carrying on the practices of which “backing” a paper currency consists.

The function of backing a currency is sometimes assumed to be a state activity, but of course the most cursory glance at the history of banknotes dispels this error. Likewise, we might assume that giving notes or other kinds of tokens value depends on consumers first depositing commodities in banks and thus creating the deposits which the notes represent, but the modern history of fiat contradicts this as well. Once a currency has been established, no singular kind of backing is required, as the dollar has carried on its merry (if unhinged) way ever since the end of gold redemption. I repeat that redemption in groceries at the grocery store is fundamentally the same as redemption in gold at the bank. Once get a currency established and accepted at a number of businesses, those businesses are properly the institutions backing the currency; the necessity of the commodity-holding bank or the firm political commitment of the treasury is only to initiate the chain of events which proceeds next towards this decentralized backing of the currency. The issuing bank or treasury with its reserves of gold is critical in reassuring the first businesses to accept the notes that they are not accepting mere paper, that they will not be caught out alone, having given away goods in exchange for worthless paper. But once those same institutions are surrounded by other institutions also committed to the acceptance of the paper, these neighbors provide that confidence. The role for the issuing institution shrinks, potentially to nothing. Thus, it is the very first institution, whether government, bank, or business, that commits itself thus, “Give me your notes and I will give you this specified commodity,” takes upon itself a unique risk, that of being caught selling (“redeeming”) goods of real value for paper of none. In the worst case they will end up with all the notes, having given away a great value of goods in exchange, and facing an economy full of people who don’t want their notes and won’t give them anything for them.

This unique risk is mitigated in the bank or treasury by issuing the notes as receipts for metals which the economy definitely will exchange for other goods. During the highest-risk, initial phase of the process of integrating the notes into the economy as money, every note corresponds to deposited gold. But even in the bank itself, the gradually-increasing backing of other institutions increases the confidence in the notes, and they can begin to issue notes in excess of reserves. And they can get away with this, for centuries sometimes. The one-to-one kind of backing that the bank practices in the early stage, before issuing any fiduciary media, is a solution to the unique risk of initiating a new currency, of being the first backer of a new type of note or token or coin.

It is this problem, the problem of being the first redeemer or first acceptor of a particular kind of currency, not knowing if once you have accepted the currency whether you will find anybody else who will accept it from you, that is the whole secret of new currencies. Ultimately all currencies either find decentralized backing from a variety of institutions or they fail; indeed, decentralized backing of the kind we have been discussing is exactly what it is to be a money. The original commodities that emerged from barter to serve as money, what allowed them to do this? They emerged as moneys because they were widely accepted by sellers in the market, gold could be traded for a variety of goods because it had already the precise quality which modern currencies seek to have. It had already decentralized backing from a variety of sellers. Again, this is so essential to the operation of a money that all other forms of backing are ultimately dispensable, and no other form of backing can save a money if it fails to develop decentralized backing of the kind described above.

If gold overcame the first-redeemer problem by being priced and valued on the basis of its popularity for industrial and ornamental purposes, and bank notes overcame the first-redeemer problem by being at first convertible into gold, thus availing themselves of gold’s history, the question about cryptocurrency is whether, and how, it might perform this same feat. Modern dollars (“Federal Reserve notes”) are quite as ethereal and unreal as the most obscure cryptocurrency, yet they command goods all across the world because they overcame the first-redeemer problem and established decentralized backing; once this job has been done, they are out of danger from their “unbacked” status.

Fundamentally, the solution to the first-redeemer problem in the modern age is to attach the currency in some way to Mises’s spiral; to evolve its valuation from some existing element of the economy and thus connect the present value of the currency to an existing body of historical prices. This is exactly what gold redemption did, through two steps: 1) It allowed notes with no history of prices of their own to “borrow” gold’s history of prices and 2) It made sure that any business that chose to accept the notes was not “alone” in accepting them; there was always the institution of the bank or treasury which would also accept the notes in exchange for goods (gold). It is these two elements that must be reproduced for a new potential money to become money in fact.

Can this process be repeated in the case of Bitcoin? Certainly Bitcoin cannot simply be treated like a redeemable bank note; the continual process of mining decouples the supply of Bitcoin from the deposits it would represent. The supply mechanism of crypto is incompatible with precious metal redemption, at least in the critical early phase. However, another, similar process has already taken place, and an unorthodox solution to the first-redeemer problem has perhaps emerged in the case of Bitcoin.

In the case of banknotes, it is the original issuing bank that solves the first-redeemer problem and bears the risk (having taken steps to mitigate it by accepting deposits). But a bank could issue notes instead against its own huge stockpile of precious metals instead of those of depositors, of course facing the danger that everyone it pays in notes will be eager to redeem them, and simply clean out the bank. This behavior is far riskier (to the bank) than traditional note issue, but it would be, from the economy’s perspective, an equally good solution to the first-redeemer problem. The effects on neighboring institutions would be the same, and they would have the same reason to confidently accept the notes, and the same historical knowledge of prices to use when evaluating the notes. This riskier kind of redemption, risking one’s own assets in hopes that the issued notes will become popular, for all its downsides to the bank, is analogous to the behavior that has perhaps overcome the problem in Bitcoin’s case.

Pizza joints and others in the Bitcoin community in the early days displayed the same kind of behavior as a bank backing its notes: In an environment where nobody else wants to accept a money, they committed themselves to redeeming the coins in the form of pizza, and their publicly declared prices became the first price data for spenders of newly-mined coins. The evaluation part of the first-redeemer problem was solved by this initial step of offering pizza for a specified amount of Bitcoin, much like a bank setting the gold ratio of its notes. The confidence building part of the problem, where other institutions must be induced to accept the coins, is tackled by the firm ideological commitment or speculative position that led these pizza joints to stake out and maintain their own redemption policies for Bitcoin, even in that high-risk initial environment.

As a bank is at first the only institution to accept its notes (through redemption) and deliberately makes this fact very public in order to let others know that in the last resort, they are not going to be caught out alone, so the various businesses in the Bitcoin community which published their intention to redeem Bitcoin for pizza provided a necessary element for the adoption of Bitcoin as a money. Other institutions knew that in the last resort they are at least getting a token for some pizza when they accept Bitcoin, just as the first shops to accept banknotes knew they were at the very least getting a token for some gold in the vault. The speculative element, the concern over whether redemption will actually be performed in the future, has always been present, and it is only repeated, actual performance in the early phase, that can convince the public that a note or coin is useful as a money. The bank must truly redeem some notes; the pizza places and cabbies must really turn over some pizzas and cab rides. And the original backing institution must maintain this policy until decentralized backing develops and numerous other institutions are likewise accepting (backing) the currency.

We see then that in the development of any new kind of money of deliberate creation, the crucial step is the initial taking on of risk, for once numerous institutions will accept the currency, its place as functional money is secured. Until that happens, however, one initial holder of real goods must commit itself to redeeming the notes or coins, to acting as the first backer at risk to its own pool of resources. The redeeming banks and treasuries provided this for notes, and it seemed that without such powerful institutions, Bitcoin could not achieve the same feat. What has instead happened is the wide variety of early adopters of Bitcoin have doggedly maintained their commitment to redeeming the coins in the form of pizzas, rides home, digital art, and all the rest. A large community of ideologically committed or at least hopeful providers of goods and services have carried out, at their own risk, the services of an issuing institution in the creation of a new money. Bitcoin was introduced as a pizza-backed commodity money, just as the dollar was introduced as a gold-backed one, and the performance of the initial backing institutions of Bitcoin might, just might, have done the job.

How the left put Kavanaugh on the Supreme Court

How the left put Kavanaugh on the Supreme Court

You might think that the left would have learned its lesson after blundering into the election Donald Trump in 2016, but it seems two years to reflect on their defeat has not been enough time for Progressives to rethink the strategy that handed them the biggest electoral disaster in their history. The political drama surrounding the Kavanaugh appointment has been an orchestrated production by the left, and the result of this impassioned, well-planned campaign has only been a reprise of that disaster. In 2018, like 2016, the left has deployed a campaign of moral superiority and shame, and, like in 2016, it has only succeeded in ingratiating its target to the rest of the country. Failing to overcome Trump or Kavanaugh themselves, the progressives have settled for destroying all non-progressive opposition to Trump, and to and Kavanaugh.

Let’s look back to some arguments from Democrats in 2016, hoping to keep Trump out of the whitehouse:



“Fat pig.”

“Real quotes from Donald Trump about women.”

The famous Our Principles PAC ad video should have been a red flag that the progressive attack on Trump was going in a dangerously self-gratifying direction. Perhaps the script was ruined in sanitizing it for publication, leaving only playground insults, but the message it sends to non-puritan America could not be more perfectly aligned with Trump’s own pitch. It should have been easy to make a New York billionaire appear alien to regular Americans, but instead, Our Principles PAC chose to attack Trump for vices common outside white liberal enclaves. Exchanges of profanity between men and women, or between races, or inhabitants of rival cities or followers of rival teams are a fixture of normal America; if the argument at a fender bender was as clean as Trump’s language you’d be surprised. So what we have in the anti-Trump video is a series of upper-class women holding up as diabolical immorality behaviors common in the rest of the country; the puritan moral standard is getting aggressive again, and prohibition is popping into people’s minds. It was a threatening move to shame Trump for merely calling a woman “fat pig,” in front of millions of people who know some women they would call far worse. It wrecks the truce between the puritan aristocracy and the rougher side of America when a non-gentleman is attacked for being ungentlemanly; it’s one thing to keep the F-bombs off television, it’s another to censor the plumber.

And this absurd phenomenon gained traction and a life of its own; every attempt to scandalize Trump the way you would do to a traditional politician instead made his outsider status more credible, and appeared as a broad attack on Americans outside the puritan upper class. He could have been effectively challenged (perhaps) by a genuine working-class hero, but once the left committed itself to attacking Trump for what he shared with blue-collar America, they became like foreigners themselves. In attempting to ostracize Trump, they threw most of the country out of their clique with him.

The phenomenon of the dog-whistle comes into its own in this situation: The popularity of Trump is already being driven by the attacks aimed at him, which inadvertently hit the general public (blowback) when Trump begins displaying “dog-whistled” or hidden racism. His opponents on the left perceive this as a secret signal intended to enlist racists to Trump’s side without alerting the masses who would condemn him for overt racism. In truth, intentionally or not, Trump gained an enormous number of votes by signaling racism not to the racists, but to the left. What can a few racists joining up with Trump do, compared to the way a hysterical leftist media can galvanize millions of Americans outside the progressive fold? Rachel Maddow’s condemnation is worth a thousand times more votes than is David Duke’s endorsement; Trump secured both without convicting himself of racism in the eyes of normal Americans. And the way he did it was by dog-whistling; he behaved in ways that sophisticated leftist intellectuals would perceive as racist, but would seem innocuous to people outside this avant-garde. The very elitism of the progressives turned sharply against them, as their ability to find the privilege and racism hidden in every facet of American life turned into a paranoid witch-hunt in the eyes of their fellows. They were correct to blame dog-whistling for contributing to their defeat; they are having a harder time realizing who the dog is.

The left could have drawn all kinds of lessons from this experience. Most obviously, they could realize from the electoral map that their actual clique is smaller than they had thought, and mere non-conformity with progressive morals is not a huge offense in the eyes of most Americans. It had been believed that the majority of the country was progressive, when it turns out that much of the country was simply willing to go along with progressivism in politics as long as it stayed in its lane. Perhaps a moderation of the agenda was in order, to give the voters time to adapt and catch up with a leftist elite that had run too far ahead. Certainly a more inclusive leftist vision would be attractive; leftism as a vehicle for normal Americans to shed the evils it condemned, rather than be judged for them. We could reflect back to the election of Barack Obama, which gave normal voters a chance to satisfyingly distance themselves from racism. Contrast this with the continuous self-flagellation over racism and misogyny demanded in 2016; the purity standard has been raised so severely that the unsophisticated have no chance of escaping charges of racism or sexism. The left won the presidency when they made it easy to be anti-racist, they lost it when they made it impossible.

What have they learned instead? To judge by the Kavanaugh controversy, nothing. More than two years after their chastening in the presidential race, the politicians, intellectuals, and twitter warriors take up their stations again, and march in the same formation into the same massacre. What’s most interesting is that this repeated self-destruction is initiated by the left; the right is not deploying some brilliant defensive strategy or really any sort of strategy, they are at least as disorganized and divided as are their opponents. The left, if anything, is more capable of concerted action than is the rough coalition of establishment Republicans, Trump admirers, surviving neocons, and all the traditional fragments of the American right, who were no more prepared for a Trump presidency than were the confident leftists of 2015. But in the confrontation between left and right in 2018, it seems a bad plan is even worse than no plan, and the better-organized leftists have managed to pull themselves together once again and successfully alienate the public, unite their enemies, and silence all their potential allies across the aisle.

The two prongs of the attack on Kavanaugh are allegations of sexual misconduct and the expectation that he will undo Roe v. Wade. Again, notice the tight focus on leftist pet issues; Kavanaugh’s record on presidential authority, privacy, and his connection to the Bush dynasty are all overlooked in favor of feminist talking points. Notice also that the overlooked offenses are against the whole country, while the emphasized offenses are of the same kind as many of Trump’s: Only progressives will buy them. In bringing in a decades-old allegation with no witnesses and no evidence, the Democrats must have known that Kavanaugh’s supporters would simply disbelieve the lone accuser, just as his opponents would simply disbelieve Kavanaugh. The divisiveness of this move is transparent, the question is why Dianne Feinstein and the rest would attempt it after suffering a humiliating electoral defeat in the same arena? Had they believed that a majority of Americans would side with them, such a divisive play might well isolate and humiliate the opposing minority, but why inflict this fate on yourself? Why choose accusations you knew many would dismiss, rather than the well-documented rulings sure to draw attacks from civil-liberties leftists, small-government conservatives, and libertarians?

In the case of Roe v. Wade the situation is even worse: The protesters warning of the end of legalized abortion in the United States are positively selling Kavanaugh to the right; for them, Roe v. Wade is probably the single most hated federal law. The rank and file conservatives understand that in this matter, the progressives are their direct enemies, and anything Planned Parenthood hates, they love. The Dr. Ford allegations are a conviction of crime in the eyes of the left, and an acquittal in the eyes of the right. But threatening Roe v. Wade is a crime to the left and heroism to the right; it is as if Kavanaugh’s enemies could not bear to associate with any but their own kind, their progressivism is too pure to touch anything but progressive causes. And as a consequence they are his strongest practical defenders, putting the spotlight on his most attractive quality to their enemies, and obscuring everything else behind the promise of an end to legalized abortion.

The left, particularly the senate Democrats, have worked hard to define the terms of the debate in this way, that is, in a way that has led directly to the confirmation of Kavanaugh to the supreme court. By leading the Republicans and the broader right into a divisive contest over feminist issues, they have led them away from their own reasons to oppose Kavanaugh as a judge. And for its part, the right has reflexively followed the left’s cues and said, “This is our man.” It is possible that no other force could so successfully coordinate so diverse and confused a coalition as the American right in 2018 than have the opposing crowds of shouting protesters and scolding media outlets. The left is the right’s most effective leadership, it practically dictates the right’s every move when the only thing the right agrees on is opposing the progressive agenda. In the wake of the Kavanaugh protests it is plain that the white supremacists were wrong to call their asinine rallies “Unite the Right,” that title clearly belongs to the pink hats and feminist slogans marching through the major cities to give us first Donald Trump, then Brett Kavanaugh.

Sam Peters is a contractor and Libertarian writer.

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