Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives
Someone has created a fabulous, richly detailed parody of Austrian economics. They call it The Daily Bell and claim that its perspective reflects Austrian economics. In reality, it satirizes faux Austrian economics’ sycophancy toward elite white-collar criminals.
I was delighted to learn that they used my recent column: The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk as the vehicle for their send-up.
The send-up captures precisely faux Austrian economists’ disdainful response to adverse data – they ignore it.
The article hits its peak in capturing the servile apologies that Austrian economists offer in defense of the elite white-collar criminals who make a mockery of Austrian claims of “free markets.” The satirist emphasizes the Austrians’ hypocrisy (they love police enforcing a “rule of law” and “property rights” against blue-collar folks), by calling the FBI the “Stasi” (the East German’s secret police) when they enforce the rule of law and property rights against elite white-collar criminals. The satirist then mocks the Austrians by picturing them as eager to prevent the imprisonment of elite white-collar felons. Faux Austrian economists’ heroes have always been elite felons. The author of the satire ridicules the Justice Department’s (DOJ) abject failure to investigate, much less prosecute, the elite felons of finance that drove our ongoing crisis. He skewers DOJ for going AWOL during this crisis by employing over-the-top mockery. The author states that DOJ is so effective in prosecuting the elite white-collar criminals that drove this crisis and sanctions them so viciously that they have created an “ever-expanding gulag of slave-laborers.” One man’s “Club Fed” is a faux Austrian’s “gulag.” The reality, of course, is that no Wall Street bankster inhabits this non-existent white-collar gulag. That gap between reality and the hysterical claims of tortured banksters is what makes the passage hilarious.
The author of the satire of Austrian economics uses the nom de plume of Anthony Wile, which is a fabulous insider joke. The real Anthony Wile was the infamous subject of an SEC action for securities fraud. What a brilliant conceit – assuming the name of a man identified by the SEC as one of the perpetrators of a crude white-collar fraud to advance the proposition that only fascists would prosecute elite white-collar frauds. Here are the lowlights of what the SEC investigation of the real Anthony Wile and his colleagues found:
U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 21696 / OCTOBER 15, 2010
SECURITIES AND EXCHANGE COMMISSION V. BRIAN N. LINES, SCOTT G.S. LINES, LOM (HOLDINGS) LTD., LINES OVERSEAS MANAGEMENT LTD., LOM CAPITAL LTD., LOM SECURITIES (BERMUDA) LTD., LOM SECURITIES (CAYMAN) LTD., LOM SECURITIES (BAHAMAS) LTD., ANTHONY W. WILE, WAYNE E. WILE, ROBERT J. CHAPMAN, WILLIAM TODD PEEVER, PHILLIP JAMES CURTIS, AND RYAN G. LEEDS, 1:07-CV-11387 (DLC) (S.D.N.Y., FILED DEC. 19, 2007)
COURT ENTERS FINAL JUDGMENTS AGAINST BRIAN N. LINES, SCOTT G.S. LINES, ANTHONY W. WILE, WAYNE E. WEW (FORMERLY WAYNE E. WILE), LINES OVERSEAS MANAGEMENT LTD., LOM SECURITIES (BERMUDA) LTD., LOM SECURITIES (BAHAMAS) LTD., LOM SECURITIES (CAYMAN) LTD., AND LOM CAPITAL LTD. IN MARKET MANIPULATION CASE
The Securities and Exchange Commission today announced that the Honorable Denise Cote of the United States District Court for the Southern District of New York entered judgments of permanent injunction and other relief against Brian N. Lines, Scott G.S. Lines, Anthony W. Wile, Wayne E. Wew, Lines Overseas Management Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Bahamas) Ltd., LOM Securities (Cayman) Ltd., and LOM Capital Ltd. on October 15, 2010. (The LOM companies collectively are referred to hereinafter as the “LOM Entities”). All of the foregoing defendants, with the exception of LOM Securities (Bahamas) Ltd. and LOM Securities (Cayman) Ltd., were enjoined by the Court from violating certain of the antifraud provisions of the federal securities laws, as described below. The Court also ordered broad ancillary relief against the defendants, including as to certain defendants, disgorgement, civil money penalties, and compliance with undertakings to not trade in penny stocks quoted on certain U.S.-based electronic quotation services and, for the LOM Entities, to not maintain accounts for U.S.-resident customers. Brian and Scott Lines and the LOM Entities were ordered to disgorge over $1.9 million in profits and prejudgment interest and pay civil penalties totalling $600,000.
Without admitting or denying the Commission’s allegations, the defendants consented to the entry of the judgments against them. These judgments resolve the Commission’s claims against these defendants in a civil action that was filed on December 19, 2007, in which the Commission alleged that that these defendants had participated in a fraudulent scheme to manipulate the stock price of Sedona Software Solutions, Inc. (“SSSI”), and, except for Wile and Wew, also had participated in a second stock manipulation scheme involving SHEP Technologies, Inc. (“SHEP”) f/k/a Inside Holdings Inc. (“IHI”).
In addition to entering permanent injunctions, the Court ordered Brian and Scott Lines, who are brothers and during the relevant time were the controlling persons of the LOM Entities, to pay, jointly and severally with the LOM Entities, disgorgement of $1,277,403, prejudgment interest of $654,918. The Court also imposed civil penalties in the following amounts: $450,000 for the LOM Entities, $100,000 for Brian Lines; and $50,000 for Scott Lines. In addition to entering permanent injunctions against Anthony Wile and Wayne Wew, the Court ordered Wile to pay a civil penalty in the amount of $35,000, and Wew to disgorge approximately $8000 and pay a $10,000 civil penalty.
In its Complaint in the civil action, the Commission alleged that, in early 2002, Brian and Scott Lines assisted two LOM customers, defendants William Todd Peever and Phillip James Curtis, to secretly acquire a publicly-traded OTCBB shell company named Inside Holdings, Inc. (“IHI”). Peever and Curtis then arranged for a reverse merger of IHI with SHEP Ltd., a private company that purportedly owned certain intellectual property. Peever and Curtis paid three touters to publish a series of highly positive reports recommending investments in the newly-merged entity, SHEP Technologies, Inc. The Commission’s complaint alleged, in pertinent part, that during the first half of 2003, Peever, Curtis, and the Lines brothers sold over three million SHEP shares into this artificially-stimulated demand in an unregistered distribution of SHEP stock. As part of the alleged scheme, the Lines brothers, Peever, and Curtis failed to file required reports regarding their beneficial ownership of IHI and SHEP stock, and Brian Lines caused several false reports to be filed with the Commission in order to conceal that Peever and Curtis, among others, owned substantial positions in, and had been selling, SHEP stock.
As further alleged in the Commission’s Complaint, in late 2002, Anthony Wile and another individual formed Renaissance Mining Corporation (“Renaissance”) and thereafter engaged in substantial promotional activities that created the misleading impression that Renaissance had acquired three Central American gold mines and was the “Leading Gold Producer in Latin America.” In fact, Renaissance had only executed a non-binding Letter of Intent to acquire those mines and lacked the funding necessary to consummate the acquisition. The Complaint further alleges that Wile acted in concert with the Lines brothers, who acquired a publicly-traded shell, Sedona Software Solutions, Inc., using LOM accounts in the names of nominees to disguise their ownership of the Sedona shell, as part of a plan to merge Sedona with Renaissance.
The Complaint alleges that, in early 2003, Wile and his associate primed the market for Renaissance/Sedona by disseminating materially false and misleading information that misrepresented the ownership of the gold mines and created the impression that the Renaissance/Sedona merger had been completed. Wile and his associate also arranged for the Renaissance/Sedona offering to be touted to prospective investors by Robert Chapman, the publisher of an on-line investment newsletter, and three other newsletter writers, all of whom purchased Renaissance shares for nominal sums. Through this deceptive promotional campaign, Wile and his associate informed the market that there would be an opportunity to invest in Renaissance by acquiring Sedona stock at approximately $10 per share beginning on January 21, 2003.
According to the Complaint’s allegations, on that date, Wile orchestrated a pre-arranged manipulative trade between his uncle, defendant Wayne E. Wile (who subsequently changed his name to Wayne Wew), and Brian Lines to artificially drive up the price of Sedona stock from $.03 per share to over $9.00 per share and stimulate trading in the stock. The Complaint alleged that Scott Lines solicited investors, including at least one LOM customer in the United States, to purchase Renaissance stock in anticipation of the merger between Renaissance and Sedona, without disclosing that he and Brian Lines owned the Sedona shell corporation. The Complaint further alleged that, after Renaissance and Sedona had announced their pending merger, the Lines brothers sold 143,000 shares of Sedona stock in an unregistered distribution to numerous public investors at between $8.95 and $9.45 per share, reaping over $1 million in illegal profits. On January 29, 2003, the Commission suspended trading in Sedona’s stock.
Final judgments were entered by the Court against each defendant and provide the following relief, respectively:
(i) Brian Lines is permanently enjoined from violating the antifraud, securities offering registration, and securities ownership disclosure provisions of the federal securities laws, Sections 5 and 17(a) of the Securities Act of 1933 (“Securities Act”) and Sections 13(d) and 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Scott Lines and the LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $100,000; and (4) ordered to comply with an undertaking to not trade for a period of three years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File;
(ii) Scott Lines is permanently enjoined from violating the antifraud, broker-dealer registration, securities offering registration, and securities ownership disclosure provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act and Sections 13(d), 15(a), and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Brian Lines and the LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $50,000; and (4) ordered to comply with an undertaking not to trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File;
(iii) Lines Overseas Management Ltd. is permanently enjoined from violating the antifraud, securities offering registration, and securities ownership disclosure provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act, and Section 13(d) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally with the other settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;
(iv) LOM Capital Ltd. and LOM Securities (Bermuda) Ltd. are permanently enjoined from violating the antifraud and securities offering registration provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act and, in addition, LOM Securities (Bermuda) is permanently enjoined from violating the broker-dealer registration provision, Section 15(a) of the Exchange Act; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally with the other settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;
(v) LOM Securities (Bahamas) Ltd. and LOM Securities (Cayman) Ltd. are permanently enjoined from violating the securities offering registration provision, Section 5 of the Securities Act; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally among the settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;
(vi) Anthony Wile is permanently enjoined from violating the antifraud and securities offering registration provisions, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 5 and 17(a) of the Securities Act; (2) ordered to pay a civil penalty in the amount of $35,000; (3) barred from serving as an officer or director of a public company for a period of five years; and (4) barred from participating in an offering of penny stock for a period of three years;
(vii) Wayne Wew (formerly Wayne E. Wile) is permanently enjoined from violating the antifraud provisions, Sections 17(a)(2) and (3) of the Securities Act; (2) ordered to pay disgorgement in the amount of $5,422, plus prejudgment interest thereon in the amount of $2,608; and (3) ordered to pay a civil penalty in the amount of $10,000.
As part of a global settlement with the LOM Entities, Brian Lines, and Scott Lines, the Commission agreed to dismiss with prejudice the pending civil enforcement action against LOM Holdings Ltd., which is the parent holding company for the LOM Entities.
The Court previously had entered permanent injunctive relief against defendants Peever, Curtis, and Chapman. The Commission’s claims for monetary relief against those defendants remain pending before the Court.
For additional information, please see Litigation Releases Nos. 20407 (Dec. 17, 2007); 20733 (Sept. 22, 2008); and 21577 (June 28, 2010).”
http://www.sec.gov/litigation/litreleases/2010/lr21696.htm
The faux Austrian satirical web site uses this pathetic episode as another opportunity for humor when it presents a faux bio of the not-as-wily-as-he-thought Wile:
He has put this knowledge to good use, working with top mining executives and venture entrepreneurs to generate some of the most successful business efforts of the 2000s.
There is a similar gem prominently featured on the web site: the admonition that the key to a successful society is “personal accountability.” What a perfect accompaniment to an article demanding that the elites who grew wealthy through fraud not be prosecuted. The satirist has a great gift for irony.
Prior variants of Wile’s website contained this defense of Wile.
http://thedailybell.com/2012/Anthony-Wile
(accessed 11/13/2011)
In 2000, Wile experienced a brief role as the CEO of a start-up junior mining company that became the subject of a civil attack by the SEC. Wile and others fought for more than seven years at great personal and financial expense before eventually settling the case without admitting any wrongdoing. The assets of the company in question were subsequently purchased by a New York Stock Exchange listed company and the properties have now produced more gold than was initially suggested. Hundreds of investors lost literally tens of millions in deserved future profits because the SEC accused the company of over-promising a merger that was actually taking place. Perhaps this experience adds to Wile’s fervor to expose the power elite and their societal manipulations.
[Perhaps? This is supposed to be Wile’s web site. Why is Wile guessing at the source of Wile’s “fervor?” For that matter, why is Wile referring to himself as “Wile” rather than “I?” Why aren’t Wile’s actions (as found by the SEC staff’s investigation) nasty “societal manipulations?” Why isn’t Wile part of the “power elite?” Note that the SEC’s characteristic failure to actually litigate its cases or get admissions of the facts means that Wile gets to pose as the victim of some kind of evil conspiracy. The Department of Justice, equally characteristically, failed to prosecute despite SEC staff investigation findings that should have led to felony charges. Some gulag!]
It is time for a word about real Austrian economists. They hate elite frauds and want them prosecuted vigorously. Ludwig von Mises and Friederich Hayek are the two most famous Austrian economists.
Hayek, F.A. The Road to Serfdom
To create conditions in which competition will be as effective as possible, to prevent fraud and deception, to break up monopolies— these tasks provide a wide and unquestioned field for state activity.
The Constitution of Liberty
There remains, however, one other kind of harmful action that is generally thought desirable to prevent and which at first might seem distinct. This is fraud and deception. Yet, though it would be straining the meaning of words to call them ‘coercion,’ on examination it appears that the reasons why we want to prevent them are the same as those applying to coercion. Deception, like coercion, is a form of manipulating the data on which a person counts, in order to make him do what deceiver wants him to do. Where it is successful, the deceived becomes in the same manner the unwilling tool, serving another man’s ends without advancing his own. Though we have no single word to cover both, all we have said of coercion applies equally to fraud and deception.
With this correction, it seems that freedom demands no more than that coercion and violence, fraud and deception, be prevented, except for the use of coercion by government for the sole purpose of enforcing known rules intended to ensure the best conditions under which the individual may give his activities a coherent, rational pattern…..
Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions…. Liberty and responsibility are inseparable.
Mises, L.
Government ought to protect the individuals within the country against the violent and fraudulent attacks of gangsters, and it should defend the country against foreign enemies.
The faux Austrian website and the faux (or real, who can tell) Wile piles layer upon layer of satire. The website contains articles that make the term “bizarre” deeply inadequate. One of the site’s favorite motifs is that an international conspiracy of the top bankers that caused the ongoing global crisis is using the Occupy Wall Street (OWS) movement to demand that the fraudulent bop bankers that caused the crisis be prosecuted. The dastardly OWS person carrying the water for this conspiracy of international bank elites is David DeGraw.
[T]here is an Anglo-American power elite trying to establish a world government. We cannot necessarily explain WHY anyone would want to do such a thing. But apparently someone does. Actually more than a “someone” – a handful of impossibly wealth banking families, located mainly in the one-square-mile City of London.
These families – and one family in particular – apparently have control of a worldwide central banking apparatus. With the ability to print money-from-nothing around the world, the Rothschilds have amassed a fortune that may be in excess of US$300 trillion. (Nobody really knows.)
This too is a wonderful satiric technique. I particularly like the “Nobody really knows” parenthetical as a modifier for a (gigantic) number that has already been made a non-number by the use of the word “may” (with a lead-in sentence rendered impotent by the use of “apparently”). A true Austrian-school economist, however, would never admit that central banks could create over $300 trillion in money (over 15 times the GDP of the U.S.) without producing even material inflation over the last 30 years. So, where do the Rothschilds invest or deposit their over $300 trillion? Given the fact that the Austrian school considers even massive income disparities irrelevant, it must be a very good thing for the world (from an Austrian perspective) that the Rothschilds have created such a massive increase in societal wealth without producing anything that even approached hyper-inflation.
David DeGraw must be the most skilled operative in the world if the Rothschilds have chosen him to run their “false flag” operation that recruited the OWS as their secret ally. Indeed, the Rothschilds are so clever that they doubtless picked DeGraw as their operative because he has been a persistent critic of central banks (the devils incarnate in this satire), then picked me because I am a persistent critic of central banks and want us to prosecute the elite banksters that drove the crisis. Why? We can’t explain WHY.
I learned that the Rothschilds hate and wish to destroy the largest banks. The largest banks, however, are the central banks leading supporters. Why? We can’t explain WHY. All of this would be confusing if the blog had any pretense to rationality or reality.
The web site and interviews on the web with whoever plays Mr. Wile are so loopy, with such vibrant excursions into multiple Twilight Zones that it is hard to pick a favorite satirical delusion. In an hour of bemused perusing I learned that Osama bin Laden had been dead for years (the raid on his compound in Pakistan was a fake), it is likely that we used military force in Libya because they were about to mint a gold coin that would become their national currency, the World Trade Center towers were blown up by the U.S., and hyper-inflation is about to go global any minute.
I grew up largely in Dearborn, Michigan (home of Ford Motor Company). Henry Ford was infamous for distributing The Protocols of the Learned Elders of Zion (the Czarist forgery exposing the Jewish conspiracy to rule the world), so I found that reading the Rothschild rant was like noshing on comfort food.
Sorry, have to cut this short, but I just received a call from the City of London. Mr. Rothschild may be calling (nobody really knows). And if nobody really knows, it could be true. Why? We don’t know WHY
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More Proof, if anyone needed any, that among the mentally ill, those who suffer from hyper-manic, paranoid and delusional symptoms are fascinated with economic theories and have a clear preference for the “free market” varieties.
Best Austrian economics satire ever, Bill? Obviously you missed MY satire, “Thinking Along the Right Lines.”
http://ecologicalheadstand.blogspot.com/p/thinking-along-right-lines.html
Something tells me that you missed the entire humor in Bill Black’s post.
Does the Sandwichman strike you as irony tone deaf? No? But alas, maybe I missed the humor in your comment in which you only pretended to not catch the sarcasm in my pretending not to catch the sarcasm in Bill Black’s calling a faux Austrian blog a satire of a faux Austrian blog.
I am glad to hear, though, that earlier reports of your untimely demise were exaggerated.
Don’t overdose on snarking! Time-out for both of you. ;-)
Wayne Wew (gasp)! Must (gasp) read (gasp) rest (gasp) later!
Seldom have I had a question answered so resoundingly.
Oh brother. I only know one fringey dude with a fixation on the British and the city of London, some money, and a talent for spinning reams and reams of convoluted content, mostly nuts but right twice a day. (Like calling for Glass-Steagall, but in a breathless, dictatorial voice.)
Oh there he is now. Bingo! http://thedailybell.com/images/library/larouche150.jpg
I think you’re safe shutting the Daily Bell and not wasting any time on them.
This might be my favourite NC comment for some time.
Thanks Philip!
I <3 Lyndon Larouche!
In an ironic way, of course…
I’m only going to state the obvious here. The word “Austrian” appears 19 times in Bill’s comments and 0 times in the article he comments on.
Austrian, Austrian, Austrian, Austrian, Austrian
This post has nothing to do with Austrian trade cycle theory and a lot to do with rhetoric.
I’ve never read The Daily Bell, I probably never will, but I still can’t dismiss trade cycle theory. Did we really lose six million jobs or should they have been there in the first place? The counter factual curse. We’ll never know.
I confess I did not plow through this entire riposte. Nevertheless, I am confused. Does Prof Black contend that Hayek was against government action to break up monopolies, or that he was in favor of coddling white collar criminals? His Road to Serfdom is entirely to the contrary. Its point was that collectivism creates intolerable conflicts and inevitably brings the worst people to the top. History has born him out. Our American failure has been a failure to enforce the law against elite criminals. You can’t blame that on Hayek. It is a consequence of big money politics and governmental corruption.
Sorry, but what is “collectivism”? As you use it, it seems to refer to any form of social organization. And since I find it pretty hard to see the past forty years of increasing emphasis on individualism as a time in which society became more “collectivist”, I am afraid I do not understand your criticism.
If you had plowed through the rest of the article you would have seen Prof. Black give two quotes from Hayek and one from Mises. The quotes from Hayek showed that, at least in those two works, he clearly stated that preventing fraud and deception was a legitimate reason for government to intervene in the market. Indeed, in the second quote he compared fraud with coercion, in that it caused the victim to advance the interest of the malefactor and not his own interest. However I found that the quote from Mises was in no way clear that government had any business interfering with fraud and deception. Maybe Mises said so somewhere else, but he didn’t say so in the quote Prof. Black gave us.
I have to say that I find both gentlemen unreadable. I wo9uld rather read Marx any day of the week than be forced to read them.
>> Its point was that collectivism creates intolerable conflicts and inevitably brings the worst people to the top.
How do you get a “top” without any “collectivism” (group activity)? Or, if you mean “collectivism” as in “any government”, have you not seen “the worst people” sometimes also lead private companies?
Corporate collectivism is dragging down this country and the American people know it.
I used to read and comment at the Daily Bell till I quit in disgust. They claim to be for liberty but strangely that liberty requires that we all be forced to use gold as money.
As for the Austrians, both Mises and Rothbard (sadly) were in favor of a gold standard too.
I doubt the Daily Bell is an intentional parody. But if kooks abound the fault lies with the current system which cannot be called sane itself.
F. Beard, you claim that “they claim to be for liberty but strangely that liberty requires that we all be forced to use gold as money”
No problem, then, to prove your accusation and cite JUST ONE article by the Daily Bell where they express a “requirement to use gold as money”, right?
Take your time, I’m waiting …
No problem, then, to prove your accusation and cite JUST ONE article by the Daily Bell where they express a “requirement to use gold as money”, right? justfoundthis
“Fiat money is the opposite of honest money. Fiat money is money that is declared to have value even if it does not. Honest money has value regardless of what people say. Gold and silver are often referred to as honest money and since they have been dug out of the ground at considerable expense, they do have value regardless. People will pay variable sums for them.” from http://thedailybell.com/803/Fiat-Money.html
Actually, fiat is the ONLY ethical government money form. Government is force and needs no other backing for its money. Taxes must be paid in government money. That is all the “backing” that government money needs. So what is the purpose of requiring that government money be backed by anything else? Cui bono? Gold miners? Gold owners? Those who wish to tightly control the money supply?
That said, fiat should only be required for government debts, not private ones. We need to allow genuine alternative private money supplies for private debts as hinted at in Matthew 22:16-22 (“Render to Caesar …”).
Am I missing something here? In the quote you provided they DID NOT what you accused them of. In fact, they wrote, “Gold and silver are often referred to as honest money and since they have been dug out of the ground at considerable expense, they do have value regardless. People will pay variable sums for them.”
What exactly is wrong with that quote? Did humans use gold (and silver) on all continents as honest money for thousands of years or didn’t they?
Because you know the answer, of course … here’s another question: WHY, THEN, DID HUMANS USE GOLD AS MONEY FOR MILLENNIA?
And one last question: You wrote that, “fiat is the ONLY ethical government money form. Government is force and needs no other backing for its money”
With the above statement you imply that government (force) may be sort of “ethical”. How come?
“Did humans use gold (and silver) on all continents as honest money for thousands of years or didn’t they?”
That’s largely a myth — if you were paying attention to the most recent historical scholarship you’d know that:
http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867
Also:
http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-economic-anthropologist-david-graeber.html
But the gold story plays nicely into the conspiracy theories — and sells well to idiots — so carry on.
Am I missing something here? In the quote you provided they DID NOT what you accused them of. justfoundthis
By denying that fiat is honest (including for government debts), they would force everyone to use some private money form to pay their taxes with. The argument then is that since the free market has chosen gold in the past (Did it really? Or did government enforce that choice?) that taxes should be paid with it. However, what people may or may not have chosen to use as money in the past is irrelevant; a free market requires that people always be allowed to choose. But any money form that is required for taxes will have an enormous advantage over money forms that are not. Therefore, NO money form other than fiat should be required for taxes IF we desire a true free market in private money creation.
With the above statement you imply that government (force) may be sort of “ethical”. How come? justfoundthis
Whether it is ethical or not, government force is a present reality. However that force should not be used to advance private interests such as those of gold miners and usurers.
I just found this reply to your article:
“Naked Capitalism just picked up an article attacking DB as a “parody” of Austrian finance, so we thought we’d do a bit of research to find out why it posted the story.
The founder of Naked Capitalism is Yves Smith, a pen name of Susan Webber, and she has written a book called ECONned. She gave an interview about the book (see above) in which she said that it was based (at least in part) on the idea that financial markets lack the propensity to “self correct.”
She also said that the financial crisis was caused by financial deregulation and aided by “unwitting” Federal Reserve interest-rate polices. We don’t think so. What we tend to believe after a century or so (actually closer to 500 years, collectively) of running central banking, those who seem to be in charge know EXACTLY what it does to the larger economy. No, we don’t think it is unwitting at all.
Here’s a question: If after 100 years, central banking officials don’t understand the results of their policies, should they (the institution, anyway) be given power to run economies? And if they DO know what central banking does to an economy, aren’t they being malicious (to say the least) in continuing to foist this system on everyone else? Central bankers would seem to be either ignorant or malicious. Either way, what are they doing with the power to run and ruin economies?
In fact, what central bankers do over and over is “fix” the price of money. They do so by regulating its volume and worth. Most recently, the Fed is said to have issued US$16 TRILLION into the marketplace to support an economic system that is dying.
They should have let it die quickly. Instead, people throughout the Western world are being tortured by the money supply. One tallies the cost in human despair: People lose jobs and houses, even commit suicide. Old people eat cat-food because of horribly low interest rates.
Meanwhile, the powers-that-be launch war after war to protect this dysfunctional system by distracting people’s attention and further militarizing what is left of Western economies. Depleted uranium has killed or sickened millions overseas; still bombs drop and the poison drifts down from the sky in a gentle, endless, agonizing rain.
The modern money system is apparently the flip side of the modern economic system. It doesn’t have to be this way, though. The only arbiter of money, in truth, is the marketplace, which regulates the creation of money naturally through supply and demand – usually through the circulation of gold and silver. Too much and the price goes down and less supply becomes available. Too little and the price goes up and more supply becomes available.
It is a simple fact that price-fixing doesn’t work. Doesn’t. Can’t. Ever. So … here is another question for pro-central banking advocates (or even those who merely think the system is unwitting): How much is too much? Alan Greenspan himself admitted early in his tenure that he couldn’t find a way of accurately measuring how much money an economy needed – except in hindsight (when it’s too late).
As Austrian economics points out correctly, the overprinting of money, which central banks (and especially the Fed) do constantly, swells the economy with overconfidence and currency. This is inevitably dangerous.
Eventually, when the markets reveal the mass of promotions to be unworkable, there is a crash and people’s investments lose value. If the crash is deep enough, people lose much of what they worked for. Usually, central bankers do not. Meanwhile, remaining industry is further consolidated by the powers-that-be with additional central bank-printed capital!
One more thing. As a side effect, the powers-that-be use major downturns to pass more government regulation. Since the elites control governments behind the scenes via mercantilism, the central banking cycle is inordinately profitable. It consolidates both industry and government control in their hands.
Still another point: Much fraud in financial markets is CAUSED by the overprinting of money. Such euphorias make people over-confident and greedy. It makes them easily suggestible. They participate in investments they never would involve themselves in during a less euphoric time. This is why we disagree about Naked Capitalism’s approach to the markets (if we understand it properly).
A free and fully deregulated market absent central banking and other distortions would likely be self-corrective; the Invisible Hand would work. But that’s not what we have. Central bankers didn’t “unwittingly” cause the current economic crisis. The system is SET UP to cause it.
Over the years, central banks consistently attempt a “soft landing,” thus perpetuating one side of the larger business cycle. It is like a balloon that is puffed up until it bursts and a depression ensues.
During such times, nobody knows what to invest in anymore. It is not clear what companies are viable, given the incessant money stimulation and central banks’ propensity to puff up their own distribution system of commercial banks and other huge industrial elements. Sound familiar?
Go to any city center and you’ll see dozens of gleaming bank headquarters. The world is overbanked; Banking is the last big bubble, though no one ever writes about it.
The central bank itself is the fount and fundament of the problem. If one de-emphasizes its role (or even claims its manipulations are merely unwitting), one cannot correctly analyze larger issues, in our view.
And now we have our answer as to why the site posted the story referred to above. It is twofold. First, the Daily Bell is a proponent of the laissez faire (unregulated) marketplace; second, because one of its principal once had SEC troubles. Thus, the article fits within this larger meme – that “naked capitalism” on its own is dangerous and needs to be regulated. And those who are proponents of the Invisible Hand (versus big government regulation) are inevitably crooks.
In fact, we don’t think a rational case can be made for regulation any more than a rational case can be made for the money-fixing of central banking. Is regulation ever REALLY effective? The 1930’s convulsive change in the financial industry produced the SEC, the NASD, the NYSE (as a self-regulatory organization), Glass-Steagall and basically introduced the idea that Wall Street itself needed federal oversight.
But here we are, with worse problems than ever. Now we are being told we need still MORE regulation. Regulation and laws generally are a price fix just the way money printing by central banks are a price fix. One can argue that laws and regulations are NECESSARY but one cannot argue that they do not distort the larger marketplace.
Here is just one example of how counterproductive regulation can be. In researching a book on Wall Street (for about five years) one DB-associated writer discovered that the NYSE’s former floor-based specialist system has a much different history than is ordinarily related. As even the Economist magazine pointed out a number of years ago, the specialist system was the result of one floor broker breaking his leg and standing in one place. Eventually, he began to specialize in a single stock. And thus the specialist system was born. Untrue.
In fact, from what we can tell, the real reason for the specialist system was because the NYSE was consolidating and buying up other exchanges in the 1800s. One exchange it couldn’t buy was the one run by the “Uptown Boys” that were doing continuous trading when the NYSE brokers were still involved in auctions.
Eventually a deal was struck. The Uptown Boys agreed to come downtown if they could have stock franchises and the NYSE began continuous trading,which was more lucrative for brokers. And that’s what happened. The specialist system was apparently born out of a business merger.
One cannot fully appreciate the ludicrousness of this unless one studies the subject. In the 20th century millions of words were written about the specialist system. Theses were written; degrees were handed out. The SEC debated the issue endless, especially after the 1987 Crash. And yet, the system was NEVER intended to protect investors from stock crashes, nor could it. A single specialist couldn’t prop up his stock during a panic. He didn’t have the capital to do so. No one did.
But nonetheless, the specialist system became an entrenched investor protection. The mainstream media reported on it solemnly and the NYSE honchos were very happy because their business compromise had been blessed by the regulatory authorities and turned into a market necessity. This is often how regulation seems to work. It facilitates regulatory capture. It blesses self-interest with the force of law.
Modern, centralized Wall Street is the RESULT of regulatory forces. The abuses in large part are the RESULT of regulatory price fixing and central bank money manipulation. It’s fairly indisputable, in our view.
Why does this system persist and prosper? Well, as we have pointed out, it feeds on itself. Also because there are powerful interests that want it to. It’s unfortunate, but after a combined half-century or so studying the way the modern financial industry works, we’ve concluded that there is a power elite interested in creating one-world government, one that needs to promote regulatory rule in order to create global dominance.
This is no joke. This elite that runs out of the City of London and elsewhere, doesn’t just want to create world government; it actively wants to suppress the burgeoning human population – and the implication is that it wants to do so violently if necessarily.
One simply needs to search the Internet for Georgia Guidestones to see what may be in store. Or read the writings of the Club of Rome and see who is associated with THAT.
It is unfortunately a basic dominant social theme, and an effective one: We need government to ensure that capitalism doesn’t get out of hand. Government must be seen as the arbiter of fairness and a proponent of justice for the little guy. In fact, the calculation is much more basic: No government, no new world order.
Conclusion: We perceive an increasing number of websites that pretend to be laissez faire or pro-free market but are actually supporting the meme that free markets work best when they are under the supervision of an extensive (and growing) regulatory regime. Unfortunately, they never really attack the cause of the problem, which is money printing. This would seem to be an evolving dominant social theme of the elites as they ready their next attack on what’s left of the free market, especially its financial entities.”
http://thedailybell.com/3248/What-Is-Naked-Capitalism
We perceive an increasing number of websites that pretend to be laissez faire or pro-free market but are actually supporting the meme that free markets work best when they are under the supervision of an extensive (and growing) regulatory regime. The Daily Bell
Sadly, that is true of the Daily Bell too. By insisting that fiat is illegitimate as government money, the Daily Bell instantly destroys the possibility of a true free market in private money creation.
Unfortunately, they never really attack the cause of the problem, which is money printing. The Daily Bell
The problem is not money printing per se but that we are required, one way or another, to use fiat for all debts, not just government ones.
Yawn. More crazy.
Don’t worry. The Alex Jones audience are still listening. The Naked Capitalism audience are still laughing.
Conspiracy theory wackos.
When you’re done laughing … how’s your “serious gold bubble” doing, eh?
http://fixingtheeconomists.wordpress.com/2011/04/22/cities-of-gold-is-there-a-bubble-in-the-gold-markets/
Do you think that Bernanke, like Volcker in the early 80s, will raise rates to 20% soon? No? Hmm, how exactly will an ounce of gold cost less than $1.500 in the foreseeable future then, which is not even near the inflation-adjusted high of some $2,400? Where’s the “bubble”, Philip?
That criticism is absolutely *brilliant*. So, analogously, we should also say that there was no bubble in the US housing market back in 2004 either, right?
Exactly. We should also point out that the above commenter sounds exactly like the defenders of the housing market back in 04.
“Where is it? Huh? It hasn’t burst yet. Dur-hur-dur. If it hasn’t yet burst there is no bubble. Dur-hur-dur.”
I heard this back during the housing bubble too. Now those people’s assets are owned by the banks. Ha! We’ll let posterity decide on the gold bubble too.
First, Chinese and Indians, in fact Asians all over are buying physical gold en masse. Even central banks are net buyers of gold now. According to a recent poll, 1/3 of all Germans are going to buy gold soon. Demand for physical gold is vast on all continents – and raising. Does that sound like a “bubble” to you?
Second, predatory lending with money out of thin air in the trillions, AIG, Fanny, Freddie, subprime-bundling, fraudulent Triple A repackaging and worldwide reselling, on top, CDO’s and MBS also in the trillions …
YOU SEE THAT IN GOLD?
WHERE?
Gold is in a bubble. A major bubble. But it looks like it won’t pop for some time because the conspiracy loons are piling their cash in.
The crash will come — as it did in the early 80s — either when monetary systems stabalise (watch the Euro in that regard) or when the Ponzi scheme falls apart because the world runs out of idiots with fat wallets.
Gold ain’t the only one either:
http://www.economonitor.com/lrwray/2011/09/23/the-biggest-commodity-bubble-of-all-time-response-to-critics/
But then Randy and I are probably working for ‘the Man’ to ‘crush your freedom’ or whatever. I love gold bugs. Their lack of understanding of economics is directly proportionate to their certainty that gold is the philosopher’s stone of wealth accumulation.
Again, how exactly will an ounce of gold cost less than $1.500 in the foreseeable future then, which is not even near the inflation-adjusted high of some $2,400? Where’s the “bubble”, Philip?
Ah, about the alleged semblance to the housing bubble: That’s a joke, right? Predatory lending with money out of thin air in the trillions? AIG? Fanny, Freddie? Subprime-bundling, fraudulent Triple A repackaging and worldwide reselling? On top, CDO’s and MBS also in the trillions?
YOU SEE THAT IN GOLD?
HUH?
WHAT?
Brilliant. They didn’t notice the whole “this is a guest post by Bill Black” bit, but instead pretended that it was interesting to focus on the fact that Susan Webber uses a “pen name”. Oh noes! And then they follow up with a bunch of non sequiturs that are supposed to prove something. (Or do they just use this article as a template, and do they fill in a different name at the top every time they “respond” to someone? Almost none of this seems particularly relevant..)
Bad oversight here:
>> In fact, we don’t think a rational case can be made for regulation any more than a rational case can be made for the money-fixing of central banking. Is regulation ever REALLY effective? The 1930′s convulsive change in the financial industry produced the SEC, the NASD, the NYSE (as a self-regulatory organization), Glass-Steagall and basically introduced the idea that Wall Street itself needed federal oversight.
>> But here we are, with worse problems than ever.
You skipped the parts about repealing Glass-Steagall, deregulating derivatives, not funding the SEC enough to keep pace with the expansion of the FIRE sector, and such.
Subconscious or intentional oversight?
So much writing…so much rubbish.
The SEC was flooded with specific and informed alarm about Enron, Madoff, et al. FOR YEARS. How did the SEC react? They protected the racket. That’s their job, obviously. You seem to want MORE of that – How come?
About Glass-Steagall: The ‘repeal’ of Glass-Steagall was irrelevant to financial crisis. Why?
“Although we’ve heard a great deal about how “deregulation” caused the financial crisis, specific cases of repealed legislation that would have prevented it are few and far between. The one some progressives seem to have settled on is the “repeal” of the Glass-Steagall Act of 1933, which separated commercial from investment banking. The “repeal” involved only one provision of the Act, the one preventing the same holding company from controlling both a commercial bank and an investment bank.
When we recall that stand-alone institutions, both commercial and investment, also failed during the crisis, and that all of them acquired mortgage-backed securities (which they had always been allowed to do, by the way), the Glass-Steagall “repeal” looks more and more like a red herring that appeals to people whose belief system requires them to find some way a Fed-fueled bubble could have been stopped had the right regulatory structure been in place.
(The problem with those who point to Glass-Steagall is not that they’re radical. It’s that they’re not nearly radical enough. They think the system as is, shot through with moral hazard at every level, and presided over by a market-defying central bank, is of its nature stable and without fault; we just need a few regulations.)
Because Glass-Steagall was passed during the Depression, it is assumed that it was addressing a pressing need of the time. In fact, the lack of government-enforced division between commercial and investment banking had precisely zero to do with bank problems during the Great Depression. The 9,000 bank failures during the early 1930s had far more to do with the damage done by government regulation – namely, the unit-banking laws that made it difficult for banks to diversify their portfolios (by limiting them to a single office and making branching illegal) – than with a lack of regulation. These were small banks, not the behemoths for which Glass-Steagall would have been relevant. Canada had none of these stifling regulations, and had zero bank failures. (Incidentally, Canada also avoided all the post-Civil War bank panics that struck the U.S., even though Canada did not have a central bank until 1934 – yet again, reality refuses to conform to the where-would-we-be-without-our-wise-overlords comic-book version of events.)
The Glass-Steagall-did-it crowd is the same crowd that likes to claim Canada avoided the worst of the U.S. crisis because it was so much better regulated. But they can’t have it both ways – Canada did not have a Glass-Steagall law!”
http://lewrockwell.com/woods/woods183.html
>> The SEC was flooded with specific and informed alarm about Enron, Madoff, et al. FOR YEARS. How did the SEC react? They protected the racket. That’s their job, obviously.
That’s your “deregulation” meme working its way into government. For 30 years, voters and thus politicians have been embracing your ideology that regulators should get the f outta the way of business, lest they cry about bad old government. The result: The agencies still exist but do less and less of what they ought to.
>> The Glass-Steagall-did-it crowd
Ho-hum. Nice straw man. I haven’t heard anyone who spends more than a few days on blogs say “GS did it (alone)”. But, it’s one of many contributing factors.
Here, start with this:
http://www.pbs.org/wgbh/pages/frontline/warning/interviews/born.html
Derivatives were used to artificially depress interest rates and expand credit, on top of Greenspan’s stupidly low rates. We ended up with a credit bubble. Pretty basic.
No shit! Look, it’s quite simple, actually: No central banking fiat money out of thin air ponzi scheme = No credit or whatever bubbles, no vicious boom bust cycle, no bailouts, no dispossession of the middle class via inflation and taxes.
“Government is the problem” and our flat-tax structure. Who’d want to actually do the job of policing/refereeing the markets when you can instead keep most of your loot and maybe become an oligarch?
It is the use of mercantilism – government levers of powers – that gives the elite its control. In the leftist paradigm it is this same government control and more of it that will provide the solution. Huh? How does that work?
“So, where do the Rothschilds invest or deposit their over $300 trillion?”
Good question. Thus far, only the quadrillion of derivatives created by JP Morgan et al seems large enough to accommodate such a sum.
I must say I thought you were going to be critical of Austrian economics, but was pleasantly surprised by the end of the article. Also, people shouldn’t be able to say x and y complex or x-y-z complex if Eisenhower didn’t say it.
Anyway, I would distinguish between the economics implied by the mainstream or Austrian school with classical liberalism/libertarianism. Mises and Hayek’s positions about force and fraud come from their support of liberalism, not from Austrian economics. When I put on my economist hat, I throw out the normative beliefs implied by my politics. When I have my political hat on, I may borrow from the insights from economics, but I like to distinguish the two.
For instance, Austrian economics implies that complex societies that socialize the means of production will have weaker growth than countries that do not do that. That’s economics and there’s no real disagreement on this. However, someone might say that if we socialize, then it will lead to fairer outcomes and a decline in inequality. Hence, in practice, making a decision about how socialist or capitalist the economy should be would be a trade-off related to how one values force vs. inequality vs. income growth vs. future living standards, etc. Economics can’t provide that answer, only the individual’s political values can.
I know you are a theokeynesian, but really, has your defense of your position now degraded to parity and satire instead of an actual debate on the issue? That anyone who disagrees “Government can make us all rich just by borrowing and no one ever has to work or be creative ever again” (my parody is more efficient word-wise) is a heretic?
There are different denominations of libertarian, and even Austrian economics, just as not everyone from the Kansas City schoolyard agrees.
Most of the Libertarians I know want a STRONG RULE OF LAW. Not your arbitrary sets of random, often ambiguous and conflicting regulations which only priests like you can interpret and deal with (until Goldman Sachs pays the president to throw you out and put its drones in).
How about writing a law for the federal level that would give every homeowner standing to sue for treble damages over the frauds the banks have committed instead of requiring to put you on the throne to be judge and jury. You say you can define fraud that clearly, and apparently have, but turn around and say only you should be able to refer cases, and then only to the Department of Justice and hope whomever the Attorney General at the time has not been bribed.
I’m with you on prosecuting the fraud. Because it is fraud. And the system is corrupt. And I’m from the Austrian School and a libertarian.
I should be your ally.
Instead, you needlessly insult people like me and make enemies.
I only used the terms above to give you the feeling of what you are doing. Should everyone who wants to prosecute the banksters for fraud, but because that is anti-capitalist, anti-property rights, and anti-liberty get together? Or should they just dismiss you as a “Stupid blind theokeynesian that just wants a government job where he can micromanage businesses he didn’t create”?
Or should we stop hurtling insults at each other and recognize the common enemy is that corporatism is NOT in any way a free market, that government is corrupt and if only to axe the corruption needs to be axed – 10 agencies tripping over themselves to NOT do anything is 10 that can be eliminated, and that we need to find a way that routes around the corruption, so we can have commerce made regular – which is the original meaning of “regulation”, and have a market which is free because there is neither coercion or fraud, government, corporate, or personal.
I would think you would hold those whom you condemn for the corruption to be greater enemies than the rule-of-law libertarians, but perhaps I am mistaken since you seem to have more vitriol for people like me than people who wrecked the economy with their lying and cheating and paid themselves big bonuses out of your and my tax money.
I don’t think you need to get defensive here. I think you misread the article.
tz, see John Hall’s reply (above yours).