Category Archives: Commentary

There is no Tea Party

It wasn’t long ago that I’d warned that the mainstream GOP would work feverishly to co-opt the participants of the original tea party, which took place during the Republican primary in 2007 when a groups of Ron Paul supporters self-organized a fundraiser to raise a $6 million money bomb for their favorite candidate on the anniversary of the Boston Tea Party.  From there, the loose network organized a number of other fundraisers, but never called themselves The Tea Party.  When Ron Paul ended his candidacy, many of those activists joined the Campaign for Liberty, Ron Paul’s PAC.

Sitting on the coast and reading mainstream media polls more interested in race than substance, it’s hard to tell how many of the over 50 million self-described Tea Partiers are aligned with the original tea party participants and how many are simply aggravated members of the GOP.  A simple question tells them apart: do you support an imperialist foreign policy?  Those that says yes, or question whether the US is imperialist, are frauds.  Those who declare the need to dismantle the American Empire are the real deal.

Why didn’t the mainstream media ask that simple question during their tea party poll… or did I miss it?

Here’s a news item: the Tea Party doesn’t exist but tea parties do and the yellow movement described here is emerging out of grassroots political action taking place around the country.  There is, of course, a battle over the Tea Party brand but it’s important to remember there is no central committee, no leadership, no platform.  The organizations throwing the ‘Tea Party Conventions’ consist mostly of traditional right-wing PACs pretending to represent The Tea Party to the mainstream media.  It’s the mission of both the mainstream media and GOP PACs to bring the tea parties back into the Republican tent without changing the GOP’s core platform.  Their strategy to achieve this mission is to attach the GOP’s nationalist faction to the tea parties by getting ultra-nationalist networks of talk-radio, religious and personality cult leaders to incite their followers to organize tea parties and, hopefully pollute the core principles of the grassroots with inflammatory and confused messages about race and immigration.  So far the GOP has successfully tricked both the mainstream and leftist alternative media into thinking that the ‘Tea Party’ is a traditionalist, nationalist, fridge movement.  Nothing could be further from the truth.

The tea parties are reintroducing the universally appealing concept of localism into our political discourse by focusing on core principles that mainstream media and political parties refuse to address.

1. Sound Money.  For decades the mainstream media has avoided any serious discussion about monetary policy or economic principle.  The financial collapse has made it clear that our corporate Keynesianism is failing the American people and we need to create economic policies that support local/grassroots development.

2. The Constitution.  Our government is currently in a state of mass Constitutional noncompliance.  This is outrageously dangerous because the Constitution is literally the only thing preventing our government from becoming an autocracy.  This situation needs to be rectified by amending the Constitution and changing unconstitutional laws.  If the Supreme Court won’t do it’s job, Congress and the President must.

3. Liberty.  The freedom to do anything as long as it harms no one is the Enlightenment’s great political achievement and the foundation of the American system of governance.  Like Europe, our citizens have been conditioned by a paternalistic government to trade their liberty for security, but unlike Europe, there is a vocal minority dedicated to the never ending struggle for individual liberty.  Tea partiers are committed to that struggle.

Corporate America will continue to shield the American people from political localism as long as it can.  The important thing to remember is that bottom-up political organizing is taking place in American and it threatens the power of the top-down media.  All this author requests is that you keep an open mind and remember the words of Gil Scott-Heron: “the revolution will not be televised.”

Parties Over

When asked why she voted for the GOP candidate for senate, a lifelong Massachusetts Democrat said she wanted to send a message to her party that she was upset.

The American people are upset.  Very upset.  The war $700+ billion dollar war continues.  The $700+ billion bailout saved Wall Street by further crippling the middle class.  Everyone is wondering what will happen to the US dollar’s value when the totality of the $1.4+ trillion dollars the Federal Reserve printed to finance these two boondoggles begins flowing through the global economy.  When the inevitable inflation begins, who will reassure the American people that the dollar is still valuable?  Bernanke?  Geithner?  The financial services industry?

Fortunately, it seems the the America people have decided on a political plan.  STOP EVERYTHING!  Prevent both the Democrats and the Republicans from gaining enough traction to move anything forward.  The logic is simple: everything either party does is a disaster so stop them from doing anything.

The old adage that the person is smart but people are stupid appears to be working in reverse: the individual is stupid (voting erratically and inconsistently for candidates) but the people are smart (stop the political machines.)  It seems the people might be getting it.  Make no policy passable.  Make no politician safe.  The next step is obvious: if every incumbent is guilty of contributing to our broken political system, then kick them all out.

That should be easy. If CHANGE could galvanize the nation for the presidential election, KICK THEM ALL OUT should be able to do the same for Congress.  Your role is simple: during the next election vote against every incumbent.  We the people can turn the incumbent brand from an asset into a liability.  Your Congressman is culpable in the failure of government.  It’s time they take responsibility for their actions.  Their replacement might not be the best candidate in the world, but they will fear you because they’ll know that if they’re not extraordinary, they won’t have a job in two years.

The only way we’ll get a government worth our tax dollars is by setting higher standards.  It’s easy for us to do.  Vote against the incumbents.  Let’s start off with a blank slate by kicking them all out.

HOPE for CHANGE. Sounds silly now…

OverObamaTaoBarack Obama told us he’d CHANGE America.  During the campaign, when Obama was asked about the CHANGE he would bring to Washington, he didn’t describe specific policies or proposals as much as he asked us to HOPE for the CHANGE.  The Tao Te Ching says that “hope is as hollow as fear.”  It appears Obama’s CHANGE is also hollow.

Why is hope as hollow as fear?  Because hope and fear both come from thinking about the future Self.  If an individual thinks that things will get better, they feel hopeful, if they think things will get worse, they become fearful.  HOPE did not ask us to be the change we want to see in the world.  It asked us to dream about a future with President Obama.  If we want authentic, evolutionary change to take place in America, we need to act.

Evolutionary change is rooted in ancient truths, spreads through informal channels and is applied in the most unlikely places, far from the glamour of the conventional and mainstream.  When the change emerges into the popular consciousness, it doesn’t  come packaged in a CNN Special or a New York Times commemorative coffee table book, it comes from unconditioned voices protesting a taboos that makes the experts uncomfortable.

One of the reasons it’s so difficult for evolutionary change to insert itself into culture is that evolutionaries find it difficult participating in conventional conversations which are based upon assumptions they disagreeable with.  Gay marriage is a perfect example.  A progressive will argue that the government should recognize any two individuals who want to marry while a conservative will say the government should only recognize marriages between a man and a woman.  An evolutionary would deny the government the right to recognize marriages. Why would government – the people with the right to the legitimate use of force – be informed of an individual’s marital status, must less authorize people to change that status.  The answer to this questions leads to much more significant ones about our government’s state of Constitutional noncompliance and the intrusive nature of the income tax, among others.

When evolutionary topics enter the mainstream media narrative, not only does a web of new questions emerge, but so does a world of new possibilities.  It’s like the scene in the Wizard of Oz when the curtain is pulled and the wizard is revealed as a normal man using a powerful machine.  Our natural reaction to the man behind the curtain is curiosity: who this man is, what does he want and what can his machine do?

In America, the people ‘behind the curtain’ work very hard to keep us inundated with never-ending debates, pointless news, meaningless art, disposable products, and futile projects that make it difficult to become aware of evolutionary perspectives.  They don’t do this because they want to suppress us: they do it because they want to suppress themselves.  By lying everyday to earn money and privileges that fill their ego’s with the phantom of ‘success,’ they get their vengeful reward – Vengeful because they view themselves as the victims.  From their perspective, they haven’t been victimized by the neoloiberal economic paradigm, but by other individuals who have robbed them of their dignity.  The theft may have occurred in a playground decades ago or it might take place everyday at home or at work but their need to control their environment comes from an inability to control themselves.  Homes, clothes and cars that signal outward ‘power’ often signal inner weakness.  That weakness comes out on the nights and weekends when the mind wanders away from work and ‘success’ and into its dark recesses containing more fundamental questions about competency.  Did I do a good enough job? Was my text message too revealing? Should I have said that to my father? These questions all stem from one root: did I do the right thing?  It takes a leap of faith to ask the question honestly enough so it can actually be addressed: Did I do the Right thing?

It’s a spiritual question and it requires a spiritual answer.  What is that answer?

Welcome to humanity…

The Future of Capitalism is Not Corporate

Every organization’s structure is defined by the way in which it’s members communicate.  During the industrial era, when top-down mass communication systems allowed a small group of people to send messages to large groups, corporations flourished.  As networked communication systems such as the internet spread, it shouldn’t surprise anyone that a new batch of organizational entities will emerge that will out compete corporations because they’re structured to thrive using networked communication systems.

Why won’t corporations be as competitive as these new organizations?

Corporations have a very simple incentive system that is best understood as ‘low costs, high prices.’  Every product a corporation makes is designed to cost them the least amount of money possible while simultaneously allowing them to charge the highest possible price.  Shareholders profit off the margin between those two numbers.  This business ethic, to charge the most while providing the least, is so common it’s easy to forget its perverseness.  The basic assumption in this ethic is that neither the people who produce the product, nor the people who consume it are of value.  Both entities should be marginalized as much as possible so that the difference between the cost and price is greatest, allowing the shareholders, the only entities truly valued by the corporation, to make as much profit as possible.  Increasing shareholder value is the sole purpose of a corporation as defined by the law.  In other words, it’s actually illegal for people within a corporation deliberately perform tasks that do not ultimately increase shareholder profit.

Corporations achieved what no other organizational structure had been able to do: they took us from the farm field to the electric field.  Just as corporation succeeded guilds to power the industrial revolution, more flexible structures will succeed corporations to power the information revolution.

The industrial economic paradigm is that resources are scarce while labor is abundant.  The information economy is the opposite.  Information, unlike traditional ‘working capital’ such as a factory or a resource, is not scarce: it’s abundant.  Information can only create value if it’s organized, synthesized and made consumable by intelligence.  Once made consumable, information can be shared with any and all parties interested in consuming it.  This difference creates a ‘high cost, low price’ incentive for information organizations.  Why?  Because competition is fierce and scale is instantly achievable.

This paradigm is most obvious in open source organizations like Wikipedia where the amount of time  being invested in the product continues to increase while the price remains stagnant (zero.)  The internet in general operates under the same laws because the open source community – a massive, decentralized collection of programmers who write code and release it online for free – continue to build an even more robust technological infrastructure for all to enjoy at zero cost.

Most of the products and services we consume, online or off, are commodity products given significant value via information.  McDonalds top down information distribution system informs it’s myriad franchises how to make a valuable burger and fries, how to market and how to keep costs low, among other things.  If a network of burger restaurants came together, using online collaboration tools, to create a virtual franchise that fulfilled the same role, but did it through a network instead of  a hierarchy, then they could create an information product for burger joints more powerful than McDonald’s and, eventually, defeat the corporation.  This is the future of our economy: networks of independents out performing hierarchical corporations.  This is cooperation capitalism.

Flu Season is Coming

If the governor of the state of Massachusetts declares a pandemic, his workers can enter your home, take your property, arrest you and anyone in the house, quarantine you and inject you with a needle. Is that something you’ll accept?

Some people trust the government. Most of those people advocated going to war in Iraq.

Read about this bill and ask yourself why you need to forfeit all your civil rights during the next flu pandemic. Also… why does the government need to seize control of all the flu vaccines in the instance of a flu pandemic?

If you’d prefer to keep your rights during the next crisis, check out these guys. They actually believe in freedom; just like our nation’s founding fathers.

We Agree: The Origins of a Viable Alternative Political Party

As we watch our two dominant political parties spin their wheels trying to pass or defeat outrageously inadequate legislation, it’s easy (and frightening) to imagine this deadlock continuing indefinitely.  It won’t.  I know our democracy looks feeble right now but it’s always darkest before dawn.

During the 2008 presidential election, something very significant happened.  The major third party candidates (oxymoron?) including Ron Paul and Ralph Nader signed a statement called ‘We Agree.”  This statement, I believe, presents a new alternative to mainstream politics.  This document could be the foundation of a viable third party that unites libertarians and liberals against the corporate parties that dominate our political system.  Below is a copy of “We Agree.”

We Agree

Foreign Policy: The Iraq War must end as quickly as possible with removal of all our soldiers from the region. We must initiate the return of our soldiers from around the world, including Korea, Japan, Europe and the entire Middle East. We must cease the war propaganda, threats of a blockade and plans for attacks on Iran, nor should we re-ignite the cold war with Russia over Georgia. We must be willing to talk to all countries and offer friendship and trade and travel to all who are willing. We must take off the table the threat of a nuclear first strike against all nations.

Privacy: We must protect the privacy and civil liberties of all persons under US jurisdiction. We must repeal or radically change the Patriot Act, the Military Commissions Act, and the FISA legislation. We must reject the notion and practice of torture, eliminations of habeas corpus, secret tribunals, and secret prisons. We must deny immunity for corporations that spy willingly on the people for the benefit of the government. We must reject the unitary presidency, the illegal use of signing statements and excessive use of executive orders.

The National Debt: We believe that there should be no increase in the national debt. The burden of debt placed on the next generation is unjust and already threatening our economy and the value of our dollar. We must pay our bills as we go along and not unfairly place this burden on a future generation.

The Federal Reserve: We seek a thorough investigation, evaluation and audit of the Federal Reserve System and its cozy relationships with the banking, corporate, and other financial institutions. The arbitrary power to create money and credit out of thin air behind closed doors for the benefit of commercial interests must be ended. There should be no taxpayer bailouts of corporations and no corporate subsidies. Corporations should be aggressively prosecuted for their crimes and frauds.

We support opening up the debates beyond the two parties and the Commission on Presidential Debates (CPD), a private corporation co-chaired by former chairmen of the Republican and Democratic Party. It is time for our Presidential Debates to once again be hosted by a truly non-partisan civic-minded association.

-Statement of Agreement between Ron Paul, Ralph Nader, Bob Barr, Chuck Baldwin and Cynthia McKinney.

http://www.votenader.org/weagree/

The Health Care Solution

It’s called the Freelancer’s Union and they can provide you with quality health care for $180-$380/month depending on the size of the deductible.  That means you could have health care coverage for $2,000-$4,000 a year.

If the government enabled the spread of organizations like the Freelancer’s Union, and gave every American a $2,000 voucher, we could ensure that every American has basic health coverage for about $700 billion a year.  That’s a shit load of money, but it’s THREE TIMES LESS than the $2,2600 billion (aka $2.26 trillion) we currently spend per year  and every indication suggests that private health care via organizations like the Freelancer’s Union is superior to the current system or any government run one.

The most important reason a private system is better than a public one is that private health care incentivizes healthy living by encouraging people to INVEST in their own health.  The logic is simple.  Would you maintain your car if the government paid for all your repairs?  No, you’d probably drive more haphazardly, skip routine maintenance and purchase lower grade gasoline.  You’d save money in the short term by accumulating damage until a serious malfunction occurred.  Then you’d go to the government repair shop and get a major overhaul.  If you had to pay for all your repairs yourself, you’d more likely treat your vehicle with respect, driving more conservatively, perform routine maintenance and invest in high quality fuel.  You’d think about saving money in the long term by taking care of problems early so they don’t ultimately devolve into seriously expensive malfunction.  Your body is a vehicle and, while most people treat their bodies worse than they treat their cars, the economics of auto-repair and health care are not so different.

Obama’s health plan is fundamentally wrong. It taxes businesses that don’t purchase their employees health care which results in an indirect tax on anyone who purchase their own health care from organizations like the Freelancer’s Union. The ultimate result is that if you, a sovereign human being, wanted to purchase your own health care on a free market you would be taxed.  This is a horrible idea that would stunt the growth of private health care solutions and erode our personal freedoms.

There is absolutely no reason for the Federal Government to be involved in the application of health care services to the people just as the military should not be involved in community watch programs.  Individuals must be free to make their own decisions about how they treat their own bodies.  Freedom encourages responsible long term thinking that can not be successfully replicated by an authoritative system, no matter how honest the intention or complete the application.  Freedom can not be imitated.  It’s our nation’s most valuable resource and we squander it at almost every opportunity.  That is no longer acceptable.

There is also a Constitutional argument that could be made about the invalidity of any public health care scheme.  The 4th amendment, as interpreted under Roe v. Wade, clearly gives individuals the right to make their own health care decisions.  Any government action that deliberately changes the most important decision I can make about my body, how health care is delivered, is obviously unconstitutional.  My right to my body is the most fundamental right possible because if I do not have that right then, quite simply, I could be imprisoned or killed at any time by the people who do have the right to my body.

Let’s go deeper.

Big Insurance: impossible without Big Government.
Big Insurance: impossible without Big Government.

But, one might say, if health care was really about freedom and we’ve been living with deep government interference with health care for over 30 years, then we are not, nor have we been, free individuals. This is true: we’ve been enslaved. Liberated people do not hate their jobs.  Liberated people do what they enjoy all the time because there is no one forcing them to do otherwise.

Imagine how little money you’d need to be truly happy.  What if health care, food and shelter weren’t a factor because society provided you with access to each for no cost.  How much money would you need?  Aside from attracting a mate and recreation,  you wouldn’t need much else.  You’d be liberated because you’d need to earn less so you could spend more time doing what you enjoy.  The magic of the world is that you are best at doing what you truly enjoy and, in a more liberated economy free from government meddling and the monopolies that emerge from it, it’d be much easier for you to monetize your passion.  Indeed: you’d be in the sweet spot of what economists call comparative advantage.

The beauty of of the free market is that capacity doesn’t increase when people do more valuable tasks, but when people actually producing more value.  The difference is subtle but significant: economic output increases when people expand their own capacity to do work, not when they do higher priced jobs.  The more self-actualization in an economy, the more it can produce.  The goal of the free market is transforming our labor force from farm labor into self-actualized labor.  This is the trajectory of humanity’s economic development.  It is the accumulated efficiencies of thousands of years of incremental progress.

But what does this have to do with health care?

The free market is the active force enabling comparative advantage.  Government does the opposite.  It restricts freedom by enabling someone else to make decisions for you and for others.  No one knows what you love better than you do so no one but you can efficiently allocate your labor.  Only you and the creative force of freedom.

The fact that our politicians do not look at every policy and first ask whether or not it restricts people’s freedom is a great treason and violation of the spirit of the Enlightenment philosophers who founded this country.  America’s founding was rooted in a deep faith in the goodness of free human nature and a deep suspicion of institutions that prevented people from being free.  It was an outgrowth of a freedom movement.  If you’re not into freedom (many people aren’t) and think government should baby sit you and your friends – then you should either amend the Constitution or move elsewhere.  There are many countries with lower costs of living, better weather and a government that will be happy to take care of you.

Let’s not be hasty and rush a ‘reform’ plan through Congress before looking at all the options, especially an easy to implement voucher system.

Two News Films about the Food Revolution

Two new films have come out about how our food system is making us sick, destroying our environment and producing food that tastes like shit.  Both films herald the coming food revolution: a movement that encourages people to grow some their own food, buy local food, seasonal food and to take more of an interest in what they put into their bodies.

Fresh the Movie

Food Inc

Energy Bill Passes House: Dow Chemical Happy, Green Peace Sad.

There is a simple solution to our energy problems: a ‘carbon tax.’  The federal government determines a tax on carbon emitting fuels such as oil, natural gas and coal.  The higher the tax, the less carbon is output.  This scheme is overwhelmingly supported by economists and environmentalist.
Of course, a solution that simple doesn’t provide enough complexity for special interests to leverage their political capital and distort the market to their benefit.  Thus, The American Clean Energy and Security Act of 2009 proposes a much more complex system of cap and trade that provides pork to all the necessary players.
The ‘Energy Bill’ creates a ‘cap and trade’ market.  The government determines how many emission allowances are issued every year (cap) and then organizations purchase allowances (trade) so they can legally emit carbon.  In a traditional cap and trade system, allowances are sold in a free, open market, but in the system Congress voted to pass, 85% of allowances in the first year will be allocated by the government, leaving just 15% of the allowances to be auctioned off in the free market.  This  means the government will determine which businesses can emit carbon freely and which have to pay.  By 2020, 10% of allowances will be allocated, [1. http://features.csmonitor.com/environment/2009/06/04/key-points-of-the-climate-energy-bill-before-congress] giving politicians ample time to profit.

Scary image for environmentalists... and humans.
Scary image for environmentalists... and humans.

An inherent problem with any cap and trade system is that it’s only as effective as the level of the cap.  If a cap is set high, the cost of emitting is negligible, and no progress is made.  The current cap is set too high so reductions in carbon will be modest.  The size of the bill’s incentives for green technology development is also modest.  This disappoints environmentalists and scientists most.

This bill is over 1000 pages, and I’ve probably read about the same amount as your local congressman (zero) so it’s clear that we’ll all be learning much more about this legislation in the future.  What’s clear so far is that corporate America loves this bill.  (Ford and Dow Chemical are strong advocates.) Many environmental organizations do not.  (Green Peace opposes it.) [2. http://www.nytimes.com/2009/06/27/us/politics/27climate.html] Gore says it’s the best we can do and ‘there is no back-up plan.” [3. http://blog.algore.com/2009/06/a_historic_opportunity.html] Classic.

This bill isn’t all bad.  In fact, it does do one tremendously significant thing: it creates a structure that allows the US to regulate greenhouse gas emissions.  This is a huge victory that has come 30 years too late – delayed by the same forces that pushed this bill through.  If this bill becomes law, we’ll have the structure necessary to ratify a global treaty on climate change at the Climate Conference in Copenhagen this December.  A global framework to reduce greenhouse gas emissions is a noble objective and the first milestone in the struggle to stabilize our planet’s environment.

On Goal: The QS Approach to an Energy Bill
Our objective is to reduce the emission of greenhouse gases in America to a level that will prevent climate collapse.  Our solution is to make the emission of greenhouse gases increasingly expensive.  Our mechanism is a nation-wide tax on the consumption of fuels that emit greenhouse gases.

Proposal
Scientists estimate the amount of greenhouse gases America can omit and still achieve our objective.  Economists determine the amount each fuel source must cost to achieve the necessary reduction.  The legislature enacts a law taxing fuels proportional to the amount of greenhouse gases they emit.  This means coal and oil would be taxed more heavily than natural gas.  Beef would also be taxed because the methane cattle produce is a substantial greenhouse gas.

One portion of the revenue from this tax is used to finance a rebate for low income individuals so they’re not disproportionally burdened by this tax.   Another portion of the tax is spent creating solutions to the energy problem: improving our transportation infrastructure, updating our electric grid and subsidizing the consumption of low emission energy like solar and wind.

The tax does not have loopholes special interests can use to avoid paying their fair share and can be collected by existing government institutions, so there is no need to increase the size of government.  The bill is as simple as the dreams of a sleepy puppy.

Money Supply: Force of Nature

Everyday, you and I add value to the global economy by trading.  I buy a sandwich because I value the sandwich more than I value the money it costs while the sandwich maker values the money more than the sandwich.  Both of us have exchanged something of lesser value for something of greater value and thus, our transaction increased the amount of value in the world. [1. Of course, this isn’t always the case.  Often the true cost of a good in terms of carbon dioxide emissions or deforestation is not included in the price a consumer must pay for the good. This issue is addressed by the emerging field of ‘true cost’ economics and it is not the focus of this article.] Value can be described in many different ways but, ultimately, value is time.  I like to think of ‘increasing the amount of value in the world’ as increasing the amount of time people can spend self-actualizing, and since most people don’t self-actualize during farm labor, our civilization has been doing a decent job getting people off farms so they can self actualize.

As our economies have become increasingly advanced, civilization has been freeing up more and more time.  This creates a dilemma.  If the supply of money doesn’t increase along with the amount of free time, deflation will occur: more goods + less money equals falling (and possibly unstable) prices.  So, our government wants to expand the money supply along with the expansion of time (aka productivity*labor), creating a balance between between the deflationary force of increased efficiency and the inflationary force of increased money supply.

To find this balance, the US Congress chartered a national central bank called the Federal Reserve in 1914.  The Fed’s  mission was to create stability in our economy by slowly, steadily and predictable expanding the money supply. Unfortunately, the law incorporating the Fed gave the centralized bank too much power and Congress too little oversight.  It wasn’t long before the Fed began to ‘manage’ the growth of the economy by manipulating the monetary supply.  They didn’t realize that the tools of money creation are like the forces of nature: so powerful that anything but the simplest and most predictable changes lead to myriads of unintended consequences.  Milton Friedman, the world’s #1 free-market economist, is convinced that unintended consequences of an ‘activist’ Fed inflamed the recession of 1929 into the decade long Great Depression, and, after years of argument, Ben Bernanke, the current head of the Fed, in 2002 finally agreed. Of course, the Fed has only become more active since the Great Depression and many economists outside the mainstream media bubble believe it’s this activity that has plunged our economy into what might become another depression. The Fed has, like many corporations and financial service firms, become fixated on economic entities acheiving short term, quarterly profits instead of long term, stable growth. In other words, the Fed’s actions have been oriented towards speculation instead of a value investing.  This activity, compounded year after year and complicated by quasi-government institutions like Fanny and Freddie, incentive sciewing legislation and misregulated markets has led to a singular problem: we don’t know how much money our assets are worth because our money isn’t sound.  Our economy cannot function without sound money.

Fortunately, there is a simple way to return to sound money charted by the Zen master of free-market economics: Milton Friedman.  It doesn’t involve returning to a gold standard or eliminating the Fed.  All that is required is that we follow the three simple steps recommended by Friedman in his amazing and brief 1962 treatise Capitalism and Freedom.

1. Our money supply needs to be determined by “a legislated rule instructing the monetary authority [Fed] to achieve a specified rate of growth in the stock of money…The money stock rises day by day at an annual rate of between 3% and 5%.” (Capitalism and Freedom, 54)  This will lead to deliberate, predictable, transparent action that focuses on long term stability.

2. The value of the dollar must be determined by “a system of freely floating exchange rates determined in the market by private transactions without government intervention.”  (Capitalism and Freedom, 67)

3. The Federal Government needs to sell it’s gold reserves on the free market.  It should begin selling it’s reserves immediately and plan to return all it’s stock into the marketplace over a 10 year period.  The Federal Government must stop manipulating gold prices and purchase it’s gold on the free market along with other entities.

Milton Friedman’s system would create an economy that is internally centralized, externally decentralized and completely transparent and free market oriented, thus winning it the coveted QS stamp of approval.  =<QS>=

A lingering question remains: when the money supply is expanded, how should the new money be injected into the economy?  Friedman supports the Federal Reserve system and argues convincingly that no other practical alternative exists.  However, Milton wrote his free market treatise in 1962, before the advent of the internet and peer-to-peer lending services such as prosper.com, which allows people to loan each other money and earn interest (about 7%.)  At scale, these services provide much of the functionality of banks without all of the overhead and middlemen of traditional financial institutions.  Could we use these organizations to place the expanded money supply directly into the hands of Americans instead of giving it to banks and hoping it’ll trickle down to the masses?  This is a question I will be investigating over the next few months.

In the meantime, the Federal Reserve Transparency Act is in front of congress.  Right now the Fed can’t even be audited by the public.  This act allows Congress to look into the dealing of this amazingly powerful and private institution.   Transparency is the first step towards solving our economic problems.  Tell your congressman to support this act.  It’s the most important piece of economic legislation in years.