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free trade & free markets moral hazard

Is It Still Capitalism?

Is it still capitalism if the capital is guaranteed?

“The U.S. government will guarantee all customer funds in Silicon Valley Bank (SVB) after a series of bad decisions and a run on deposits led to the bank’s collapse,” explains Elizabeth Nolan Brown in Reason

Technically, the bank isn’t being bailed out. Its customers are. And that’s a lot more popular than bailing out banks directly. There are more bank customers who vote than bankers who vote — though there is probably more political donations from banks directly seeking banking policy “correctives” than bank customers doing the same. That’s almost apodictically true.

The most bizarre element? While the FDIC, the federal agency that insures depositors of this and similar banks, is designed to guarantee depositors’ capital up to a certain limited amount ($250,000, more or less), the regulatory triumvirate of Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chair Martin Gruenberg declare that “all depositors of this institution will be made whole.” 

All.

Even the super-rich.

The key concept, here, is moral hazard — “The decision creates bad incentives for financial institutions and their customers” is how Ms. Brown puts it. We’ve been through all of this before. Is there really any question? The answers are in.

So, to the opening, Is it still capitalism if the capital is guaranteed? — if even Prince Harry’s fortune will be guaranteed — the answer is No.

Sorta. 

It’s a special kind of capitalism. State-dominated capitalism; Neo-mercantilism; f***-ism. Use whichever term.

As we contemplate a profit-and-loss system without loss, and how the losses will be made up within the financial system, just remember that the federal government playing the role of Savior is not itself costless, and . . . its debt keeps growing. And the Ultimate Result of all this still looms.

Immoral hazard.

This is Common Sense. I’m Paul Jacob.


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general freedom ideological culture media and media people

Showcialism, Schmocialism

Americans have never gotten into “socialism” like the rest of the world. This places pushers of socialistic ideas in a tricky situation. So they often defend socialism in less than honest ways. 

William Neuman, formerly of the New York Times, is a current example of this. St. Martin’s has just published his Things Are Never So Bad That They Can’t Get Worse: Inside the Collapse of Venezuela, and boy, do we get a story.

Hugo Chávez called himself a socialist, repeatedly, but Neuman won’t accept it. Why? Venezuela was basically ruined by Chávez and his henchmen and successors. So the former New York Times reporter provides excuses. 

Which is not to say I have read his book, or will. I am entirely trusting a review by Jim Epstein, at Reason, and agreeing per a plethora of other examples with Epstien’s critique of Neuman’s denialism.

While Neuman insists that Chávez was, in effect, a SINO (Socialist In Name Only), using the s-word just as cover — “showcialismo” — Epstein takes us back to reality. “One classic definition of socialism is government control of the means of production. Chávez nationalized banks, oil companies, telecommunications, millions of acres of farmland, supermarkets, stores, the cement industry” and on and on. Now wonder, then, that “nationalization led to deterioration, abandonment, and collapse.”

Neuman cannot blame socialism, oh no. So he lamely argues it was just “bad management.”

But that is what socialism is, and must be. Even when managed by the very best experts, those experts must fail, in the end, because they lack the expertise that counts — the know-how that is spread out among all participants in society. 

Markets leverage that knowledge best.

This is Common Sense. I’m Paul Jacob.


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Common Sense general freedom

A Fitter Course

The times may not seem to indicate jubilations and thanksgivings, but any time is a good time to practice gratitude — to those who deserve it, and on a more basic level, too — so, regardless of the pandemic, the misguided responses, social unrest, racial mistrust, the threat of totalitarianism and war, remember: things could be worse.

At Thanksgiving, especially, it might do us good to consult William Bradford’s account* of the History of “Plimoth Plantation,” a document that recounts how his fellow Pilgrim settlers established, endured, barely survived, recovered, and eventually thrived in Massachusetts.

By the spring of 1623 — a little over three years after first settlement in Plymouth — things were going badly. Bradford writes of the tragic situation:

[M]any sould away their cloathes and bed coverings; others (so base were they) became servants to [the] Indeans, and would cutt them woode & fetch them water, for a cap full of corne; others fell to plaine stealing, both night & day, from [the] Indeans, of which they greevosly complained. In [the] end, they came to that misery, that some starved & dyed with could & hunger.

The problem? The colony had been engaging in something very like communism.

The experience that was had in this comone course and condition, tried sundrie years, and that amongst godly and sober men, may well evince the vanitie of that conceite of Platos & other ancients, applauded by some of later times; — that [the] taking away of propertie, and bringing in comunitie into a comone wealth, would make them happy and florishing; as if they were wiser then God.

Bradford relates the consequences of common property:

For this comunitie (so farr as it was) was found to breed much confusion & discontent, and retard much imploymet that would have been to their benefite and comforte. For [the] yong-men that were most able and fitte for labour & service did repine that they should spend their time & streingth to worke for other mens wives and children, with out any recompence. The strong, or man of parts, had no more in devission of victails & cloaths, then he that was weake and not able to doe a quarter [the] other could; this was thought injuestice. The aged and graver men to be ranked and equalised in labours, and victails, cloaths, &c., with [the] meaner & yonger sorte, thought it some indignite & disrespect unto them. And for mens wives to be commanded to doe servise for other men, as dresing their meate, washing their cloaths, &c., they deemd it a kind of slaverie, neither could many husbands well brooke it.

Yes, the s-word: Slavery. Common property was mutual slavery.

The solution? The plan for society that Bradford attributed to God. He brooked no pleading that common property didn’t work because of corruption, sin. As he put it, “seeing all men have this corruption in them, God in his wisdome saw another course fiter for them.” The course? I’ll use a word of coined by Robert Poole, one of the founders of Reason magazine: Privatization.

Basically, what the Pilgrims privatized was land, and the fruits thereof, assigning to

every family a parcell of land, according to the proportion of their number for that end, only for present use (but made no devission for inheritance), and ranged all boys & youth under some familie. This had very good success; for it made all hands very industrious, so as much more corne was planted then other waise would have bene by any means [the] Govror any other could use, and saved him a great deall of trouble, and gave farr better contente. The women now wente willingly into [the] feild, and tooke their litle-ons with them to set corne, which before would aledg weaknes, and inabilitie; whom to have compelled would have bene thought great tiranie and oppression.

Thus began the years of bounty in Massachusetts. There’s much more in Bradford’s account worth reading, including the increasingly tragic relations with the native Americans. And, indeed, one learns from reading such first-hand accounts how imperfect a creature is man.

But it is obvious that some systems of property and governance work better than others, and, on the day that our government has set forth as a day of Thanksgiving, it is worth being thankful for living in a land that has upheld — to at least some degree — the system of private property that America’s Pilgrim’s learned to see as God’s “fitter course” for corruptible man.

This is Common Sense. I’m Paul Jacob.


* This episode of Common Sense is adapted from this site’s 2011 Thanksgiving message

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ideological culture subsidy

Slackers, Unite!

International socialists may once have rallied around “workers, unite!” but today’s young “communists” are embracing a Non-Workers movement, demanding free stuff and/or a Universal Basic Income (UBI). 

This came to mind reading a recent New York Times’s op-ed, “Work Is a False Idol,” and an earlier report, “These Chinese Millennials Are ‘Chilling,’ and Beijing Isn’t Happy.” A new movement in China and elsewhere, known as “Lying Flat,” extols indolence.

Instead of a career? Working hard? 

Do nothing!

Sounds like early retirement.

Very early retirement, for this is a young adult malaise.

Cassady Rosenblum, who took the trouble to author the op-ed, quoted a poem that asked “what is it you plan to do/ with your one wild and precious life?” and answered: “Sit on the porch.”

This “Lying flat” slacker movement reminds me of a novel I haven’t read, but whose theme has stuck with me, nonetheless: Ivan Goncharov’s Oblomov. It is about a young nobleman who spends the book recumbent, or so I’m told.

“Oblomovism” was a cultural obsession before the Soviet Revolution and a problem afterward. If no one produces, how could anyone consume?

With the character Oblomov, his lethargy merely drained the capital of his family’s aristocratic past.

With the hero of the new “Lying Flat” movement, Luo Huazhong — author of the mortal classic, “Lying Flat Is Justice” — he lives off odd jobs and his savings. So far, at least, self-sufficient. 

With Ms. Rosenblum, it’s her parents’ porch, and, thereby, their savings.

Think of what would happen were a UBI put in place. More horizontal living and less production (for redistribution). 

Oblomovism triumphs and we all lose.

After all, “Lying flat” is the perfect term for the ultimate in do-nothingism: what you do in a coffin.

This is Common Sense. I’m Paul Jacob.


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free trade & free markets international affairs

Embargo Socialism?

As the people of Cuba have revolted, this month, taking to the streets in huge marches, complete with waving of American flags, leftists in America — who love socialism and hate the Stars and Stripes — have been put in an awkward position. 

The Biden administration, in its continual prostration before progressives, initially attributed Cuban unrest to lack of COVID vaccine access. But then leftists began blaming the United States’ embargo for that and for Cuba’s sorry economic mess, blaming the U.S. as the cause of Cuban misery. 

Not Cuba’s Castro communist government! 

The problem is U.S. foreign policy, or so the memes assert. Some claim that the embargo amounts to a blockade of all international trade with Cuba.

Is this true?

“Embargo is the official term used by the U.S. government to describe the sanctions on Cuba,” Politifact explains. “While the nuances in the U.S. embargo can make it difficult for foreign companies to trade with the country, there is no evidence that they can’t,” concluding with “We rate this claim False.”

Indeed, other popular memes show that the U.S. is the only country on the planet not trading with the communist-run tyranny due south of Florida.

More interesting is the clarification of the embargo by Senator Marco Rubio. “There’s only two embargoes, here: the embargo against government-owned companies and the embargo that the Cuban regime imposes on its own people.”

It is entirely legal for Cubans and Americans to trade, says Florida’s senior U.S. senator. But the Cuban tyranny won’t let them.

All my life the U.S. has been engaged in an embargo against Cuban socialism. Against slavery. Against a government at war with its people. 

It has not yet “worked,” but I know why Cubans wave American flags.

This is Common Sense. I’m Paul Jacob.


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free trade & free markets general freedom international affairs too much government

From Socialism to Fascism

Democratic socialism might seem all fun and games . . . right up until one is forced to choose between democracy and socialism. Those countries that choose the latter, like Venezuela, lose both prosperity and democracy, and then things get really bad.

But what happens when such a society’s dictator wises up?

“Bankrupted by Socialism, Venezuela Cedes Control of Companies,” Fabiola Zerba reports for Bloomberg. “Saddled with hundreds of failed state companies in an economy barreling over a cliff, the Venezuelan government is abandoning socialist doctrine by offloading key enterprises to private investors, offering profit in exchange for a share of revenue or products.” 

If that last sounds like less than full privatization, and unnecessarily cumbersome, it is. “Dozens of chemical plants, coffee processors, grain silos and hotels confiscated over the past two decades have been transferred — but not sold — to private operators in so-called strategic alliances. . . .”

“Strategic alliances” sounds ominously . . . fascistic.

This is not gratuitous, for, as Peter Drucker explained, “Fascism is the stage reached after communism has proved an illusion.” And it is definitely not directly towards “free markets” that Venezuela now moves. Dictators and ruling juntas don’t like free markets. It makes them less integral to the wealth extraction process. 

And wealth, in their view, needs to be extracted!

It gives meaning to their lives.

Jon Miltimore, in an article at FEE, also uses the f-word, and quotes my friend Sheldon Richman’s definition: fascism, noun : “socialism with a capitalist veneer.”

Really moving beyond 20th century mistakes would entail reviving actual free markets. Not “so-called strategic alliances.”

This is Common Sense. I’m Paul Jacob.


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national politics & policies too much government

A Modest Anti-Capitalism?

Socialists are so “modest”!

But how modest?

Ask Rep. Ilhan Omar, who recently proclaimed to be “fighting to tear down systems of oppression that exist in housing, in education, in health care, in employment, in the air we breathe.” 

Gasp?

Well, maybe that isn’t so clear. So listen to Seattle City Councilwoman Kshama Sawant.

“I have a message for Jeff Bezos and his class,” Sawant warned. “If you attempt again to overturn the Amazon Tax, working people will go all out in the thousands to beat you. And we will not stop there.”

Does that sound like a threat? Or is it really just a harmless expression of politics-as-usual?

“You see, we are fighting for far more than this tax,” the self-proclaimed socialist elaborated. “We are preparing the ground for a different kind of society, and if you, Jeff Bezos, want to drive that process forward by lashing out against us in our modest demands, then so be it. Because we are coming for you and your rotten system. We are coming to dismantle this deeply oppressive, racist, sexist, violent, utterly bankrupt system of capitalism. This police state. We cannot and will not stop until we overthrow it, and replace it with a world based, instead, on solidarity, genuine democracy, and equality: a socialist world. Thank you.”

And thank you, Ms. Sawant, for making yourself ultra-understandable.

You want to destroy private property and free markets and robust political debate and replace them with . . . well, let’s just say that if you complain about a police state now, wait’ll you get a load of what follows from your “modest” demands.

This is Common Sense. I’m Paul Jacob.


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News, Bias & Winning

In late February, ABC News suspended a veteran correspondent, David Wright, after Project Veritas released video in which the reporter acknowledged he was a socialist and criticized his network’s political coverage.

“Oh yeah,” Wright responded, when asked if he were a democratic socialist. “More than that I would consider myself a socialist.”

He also critiqued his network: “We don’t hold [Trump] to account. We also don’t give him credit for what things he does do.”

“David Wright has been suspended,” ABC said in a statement, “and to avoid any possible appearance of bias, he will be reassigned away from political coverage when he returns.”

But what if ABC’s removal of the reporter were more about hiding bias than combating it? 

That story came to mind while considering Sen. Bernie Sanders’ suspension of his presidential campaign. I was amazed at how — just when it seemed the Vermont senator might have an actual shot at capturing the Democratic nomination — a whirlwind of harsh media coverage was unleashed. Simultaneously, other candidates rushed to end their campaigns in a coordinated coronation of former Vice-President Joe Biden.

“Many of Sanders’ allies believe he was inundated with unfair attacks after his Nevada win,” The Boston Globe reported, with “some Democrats and pundits warning he would lose to Trump because he’s too far to the left.”

Meanwhile: “The Biden campaign is expected,” noted The New York Times, “to highlight a series of policy positions that show how he has moved closer to Mr. Sanders on health care and other issues.”

For Democrats and uber-progressive major media outlets, was Bernie’s problem that he’s a socialist? Or his openness and honesty about it?

Seems winning trumps everything. Pun intended.

This is Common Sense. I’m Paul Jacob.


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To Tell The Truth, Bernie Sanders, Joe Biden, socialism,

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insider corruption national politics & policies

Rage Against the Machine

The Democratic Insider Machine’s pushing of sorta senile Biden against socialist Sanders is quite breathtaking.

But that isn’t even the entirety of the Machine’s anti-democratic agenda.

“The establishment narrative warfare against [Representative Tulsi] Gabbard’s campaign dwarfs anything we’ve seen against Sanders,” writes Caitlin Johnstone on her popular blog, “and the loathing and dismissal they’ve been able to generate have severely hamstrung her run.”

No kidding. But why would the Machine prefer Sanders over Gabbard? 

“It turns out that a presidential candidate can get away with talking about economic justice and plutocracy when it comes to domestic policy,” Ms. Johnstone goes on, “and some light dissent on matters of foreign policy will be tolerated, but aggressively attacking the heart of the actual bipartisan foreign policy consensus will get you shut down, smeared and shunned like nothing else.”

This pro-war, anti-Tulsi agenda was seen right after SuperTuesday. 

You see, Representative Gabbard got a delegate, from American Samoa (where Michael Bloomberg’s vast fortune also nabbed a delegate). And, by the rules that have been followed so far, a delegate gets you onto the big debate stage.

But almost immediately, word from the Democratic National Committee hit the Twittersphere: “We have two more debates — of course the threshold will go up. By the time we have the March debate, almost 2,000 delegates will be allocated. The threshold will reflect where we are in the race, as it always has.”

The DNC — the Machine — is rewriting the rules.

Tulsi must not speak. 

Even if her competence and ecumenical appeal might actually save the Democratic Party, were her name to replace Biden and Sanders in the second or third voting round of a contested convention.

Such a fierce opponent of regime-change wars is obviously unacceptable to the Machine.

This is Common Sense. I’m Paul Jacob.


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Tulsi Gabbard, Democrats, socialism, moderates,

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