Big Head Press

L. Neil Smith's
Number 574, June 13, 2010

"America didn't have a drug problem
before it passed drug laws."

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Letters to the Editor

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Letter from L. Neil Smith

Letter from A.X. Perez

Another Letter from L. Neil Smith (with comments by Ken Valentine and Curt Howland)

Letter from Jim Davidson

Yet Another Letter from L. Neil Smith

Abby Sunderland's parents have been taking a lot of heat from nosy busybodies for encouraging their sixteen year old daughter to try to break the record (set, I believe, by her brother) for sailing solo around the world.

Aside from the fact that earlier in our country's history, a girl Abby's age would be considered a fully competent adult, married by now, sitting in her very own log cabin or sod house, bouncing her second baby on her knee, has it occurred to anyone that she was a hundred times safer all by herself, out in the middle of the Indian Ocean, than she would have been walking unarmed across Los Angeles or New York City?

Just a thought you might want to pass along...

L. Neil Smith

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A Month Later

I sent this letter to the El Paso Times about a month ago. They dreamed up the title. I stick to what I said, but I feel by waiting so long to publish they only got people on both sides of the issue riled instead of bringing people together to seek justice.

Oh well, it's their paper, but I figure I owe it to my friends to make sure they get the right context.

Letters: Real Americans dislike Arizona law
Posted: 06/06/2010 12:00:00 AM MDT

For those of you who do not understand why some Mexican-Americans are not really happy about the Arizona immigration law:

My grandfather, the first of his family to come to the U.S., was American enough to build the barracks at Fort Bliss during World War II. His son, my uncle, was American enough to serve in the Aleutians against the Japanese, and was in Belgium during December of 1944. He and his brother, my uncle, were American enough to build the rockets that took Americans into space and to the moon.

My dad was American enough to serve in the Navy in the Pacific during World War II. My blood kin and kin by marriage spent the 20th century building and defending America.

And Arizona cops are going to ask us for ID cards to prove we have permission to live in this country?

A.X. Perez

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Re: "From Catalhoyuk to Podunk: It's Time to Abolish City Government" by L. Neil Smith

With regard to my article about city governments, it occurs to me that city governments should be relegated to the trash heap of history if for no other reason than their contemptible and embarrassing greed—which I define as an inordinate desire for the wealth of other people.

If attempting to raise taxes during a Depression is nothing else, it is the absolute height of evil, stupidity, and insanity. When a culture's economy turns downward, it is almost always the fault of a government, and that government should have the decency (but seldom does, of course) to go away and lie low for a while. The longer the better.

This Depression is no different from any other. Our civilization desperately needs three things to heal what Bush and Obama have gleefully broken: (1) a comprehensive tax amnesty, (2) a tax holiday for at least a year, followed by (3) across-the-board tax cuts in the 99 percent range. On expectations alone, the economy would recover instantaneously.

If government can't support itself on voluntary contributions, on charity, lotteries, and bake sales, then it doesn't deserve to exist.

L. Neil Smith
Publisher and Senior Columnist
The Libertarian Enterprise

To which Ken Valentine commented:

I agree completely, but as an aside, we hear a lot about the so-called "Business Cycle."

While certain businesses do have "cycles"—certain times of the year when business is low to non-existent—like ski resorts in the summer time, and motorcycle sales in the winter; there is no one-size-hits-all business cycle. It's all a bunch of bureautic blather.

As you say, lowering taxes would do amazing things to help a country/area recover from a recession/depression.

A good example is Califnordia in the late 1970's. At that time, (among other things) property taxes were high; so high that many people— especially those on fixed incomes—were losing their homes due to their not being able to pay those high property taxes.

So they got a Proposition (Proposition 13) onto the ballot which would LOWER those property taxes—and some other taxes as well.

The politicians and bureaucrats screamed bloody murder. They told everybody that if the taxes were lowered, libraries and fire departments would have to be closed down, police would have to be laid off—all kinds of dire predictions. Well, the people of Califnordia had had enough, and they passed Prop.13 with a resounding majority.

The effect was exactly the opposite of what the politicians and bureaucrats had predicted. With YAC (Yer Average Califnordian) having more money in his/her pocket, the economy grew enormously. Within two years there were 200,000 new jobs added to the private sector, and the tax revenues from all those new jobs created the situation where not only were no government workers laid off, there were 50,000 MORE government "workers" added to the rolls.

Not that we need more government "workers."

Somebody (I don't remember who) said it best: "If mankind was perfect, we wouldn't need government. If mankind is NOT perfect, we don't dare have one."

Ken Valentine

And Curt Howland commented:

Dear Editor,

I would address Mr. Valentine's attention to the works of Mises and Rothbard, as well as historian Tom Woods, on the subject of the business cycle.

First a definition. Yes, all businesses have their ups and downs, some have seasonal cycles. Businesses also fail on a regular basis, which is a good thing because it means people have the confidence to try businesses that are not "sure things".

However, once in a while there is a wide spread grouping of business failures, usually in several loosely related fields and their accompanying economic support systems. The DotCom Boom/Bust is an excellent example, as is the recent housing bubble, of a wide spread busness failures after a period of "irrational exuberance". A "Business Cycle".

Be it 1796, 1819, 1836, 1867, 1921, 1929, 1971-9, 1991, 2000 or 2008, these recessions/depressions all have one thing in common: They were caused by central banking.

When a central bank interferes with the interest rates, it causes miscommunication of what is and is not considered a "profitable" venture. Lower interest rates create the illusion that people are saving more, are putting off purchases. Long term investment, such as "any company with the word Linux in it even if it doesn't make a profit or have a real product yet", get an abundance of investment that it would otherwise not have received.

When it becomes clear that people were not putting off purchases, all those resources that were poured into long-term investments have to be pulled back in order to deal with the short-term demands that did not decrease. The "bust", a sell-off of mal-investment and re-allocation of resources to where they are actually needed.

Or in the housing market, truly vast numbers of new houses were started, without anyone to buy them, and by the time they neared finishing, the bust had come and the developers were left with properties that they could not sell, and in some cases were worth more to tear down than to leave up and pay the taxes on themselves. Actual negative property values.

If the bust is allowed to happen, if the business cycle is allowed to complete itself without interference, then those misallocated resources and capital goods are sold off, usually at a loss, to people who have better ideas what to do with them. There is a temporary recession, while everyone licks their wounds and gets their acts back together, and then everyone gets back to work.

The recessions of 1836 and 1921, which I have specifically heard talked about in the excellent Mises presentations on the subject, both had serious monetary contractions, but lasted all of 6 months to a year before people were up and running again and doing better than before the bust.

It has only been since 1929 that massive government interference in the reallocation of malinvested resources, the "bust" which is actually the correction, has caused temporary recessions to turn into a continuous massive boom-bust cycles that, pathetically, "we" have come to take as normal.

It is illustrative that when Paul Volker, then chairman of the Federal Reserve, took interest rates "to the moon" in 1980, there was a SHARP bust and quick recovery compared to the disasters which have happened every time Greenspan and Bernenke have lowered interest rates supposedly to cause a "soft landing". Federal Reserve interest rates today are 0%. I would say that the "stimulus" packages represent substantial negative interest rates: The Federal Reserve is giving money away whether the banks want it or not.

So I couldn't agree with Mr. Valentine more about the effects of reducing government interference in people's lives. California Prop 13 was a triumph of intelligence over bureaucratic averice, and sadly was never repeated. As someone who owned property in California during the 1990s, I can also say that it didn't take too many years for the bureaucrats to figure out how to get around it. Sure the "property tax" was not awful, but the property tax bill came with a couple dozen additional line items that added up to what was going on before Prop 13 anyway.

What I have restated here is known by the name, "The Austrian Business Cycle Theory", or ABCT for short. If it seems unreasonable, keep in mind that the "mainstream" economic reason given for the business cycle is "Animal Spirits". No, seriously, I'm not making that up.

Introduction to Austrian School Economics

Austrian Business Cycle Theory and Global Crisis

Martin Van Buren: The American Gladstone (details the 1836 recession)

Why You've Never Heard of the Great Depression of 1920, Thomas E. Woods, Jr.

Keynes/Hayek: The Debate They Never Had

I find it typical that my spell checker flags "Hayek" as unknown, while "Keynes" is accepted as spelled correctly. Exactly like that video. Sheesh!

Curt Howland

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Re: "Train Wreck—Hungary" by Jim Davidson

This essay was written on Friday 4 June 2010 and published by TLE Sunday 6 June 2010.

The date of Hungary bursting into flames and driving stock prices and the value of the EU euro down was Friday 4 June.

Jim Davidson

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Please read the following:

L. Neil Smith

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