The coronavirus pandemic and corresponding lockdown made way for “one of the greatest wealth transfers in history,” CNBC’s Jim Cramer said Thursday.
“The bigger the business, the more it moves the major averages, and that matters because this is the first recession where big business … is coming through virtually unscathed, if not going for the gold,” he added.
Cramer said it still only scratches the surface of what impact the halt in global economic activity will have on the country…
“Like the streetcar and horse-and-buggy, institutional schooling will become a cultural relic, a quaint reminder of yesteryear. We will realize that non-coercive, technology-enabled, self-directed education in collaboration with others results in better, more meaningful, more enduring learning than its institutional predecessors can offer. We will realize that we can be educated without being schooled. Indeed, the future is here.”
‘In his award-winning TED Talk, Newcastle University professor Sugata Mitra explained how children teach themselves without institutional schooling.
Mitra calls this approach “minimally invasive education” and concludes in his talk:
If you allow the educational process to self-organize, then learning emerges. It’s not about making learning happen. It’s about letting it happen.
Thanks to technology, we adults now see this learning emerge all the time in our own lives. It can be the same for our children…’
Auditing the Federal Reserve was once part of the Trump administration’s first 100 days’ action plan to “Make America Great Again,” but it appears that Wall Street banker and Treasury Secretary nominee Steve Mnuchin is now trying to undermine President Trump and the momentum of this important campaign promise.
Over the years, Sen. Rand Paul (R-Ky.) and Rep. Thomas Massie’s (R-Ky.) Federal Reserve Transparency Act has received growing bipartisan support, even from polar opposite ideologues like Sens. Bernie Sanders (I-Vt.) and Mike Lee (R-Utah), who recognize the dangers of allowing Fed officials to manipulate the economy for political gain.
In 2014, the bill passed the House with a 333-92 vote. Although it failed the Senate by a mere 7 votes, many speculate that the “Trump bump” will allow it to hop over the legislative hurdle once and for all — that is, unless Mnuchin distances the president away from it.
Although Trump recognizes that “Auditing the Fed is so important,” so much so that he publicly called out Sen. Ted Cruz (R-Texas) for missing a vote on the bill last year, Mnuchin is quietly working to stop the legislation from advancing. When questioned last week by Sen. Bill Nelson (R-Fla.), Mnuchin said, “As you know, the Federal Reserve is organized with sufficient independence to conduct monetary policy.”
Mnuchin is merely echoing his former Wall Street cohort’s talking points, and it’s important that we debunk them now before further damage is done to this important cause.
The Fed does not operate ‘independently’
The Federal Reserve has become nothing more than another arm of the executive branch, responding to the beck-and-calls of the president.
As economics scholar Robert Weintraub detailed, Fed policies almost always change to reflect the monetary views of the president. For example, when he was head of the Fed, William McChesney Martin complied with President Eisenhower’s request for very slow growth in the money supply. Years later, however, Martin then agreed to reverse course by cranking up money growth to 5 percent for President Lyndon Johnson, who depended on massive Fed inflation to finance his “Great Society.”
The same held true under Fed Chairman Arthur Burns. A former vice president of the Dallas Fed said that, “The diary [Burns] kept during the Nixon years confirms that Fed policy became subservient to administration goals and the president’s re-election campaign.”
Things have not improved in recent years. In fact, this past election cycle, the “apolitical” employees of the Federal Reserve doled out over four times more in campaign donations to Hillary Clinton, who was widely speculated to win the presidency, than any of the other candidates combined.
So no, the Fed does not act independently — its members only do what is politically and personally convenient. Only a thorough Congressional audit can stop this cozy relationship between the president and the central bank.
The Fed is not thoroughly audited
Critics such as Mnuchin and Sen. Bob Corker (R-Tenn.) often argue that this bill is useless because the Fed is already thoroughly audited. This claim is far from the truth.
Currently, the Government Accountability Office, the independent, apolitical government agency tasked with auditing the Fed, is not allowed to touch the central bank’s monetary policy deliberations, FOMC transactions, and agreements with foreign central banks.
In a testimony to Congress, the GAO expressed how the audit in its current form is virtually futile because it does not allow them to adequately determine where our money is going. The Office stated, “We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets that it has.”
In 2011, Congress ordered a limited, one-time GAO audit of Fed actions during the subprime crisis, and the results were far from pretty. That audit uncovered that the Fed lent out a whopping $16 trillion to domestic and foreign banks during the financial crisis without congressional approval.
What is the Fed doing today?
What assets has the Fed bought since then and who is it doling out money to now? The answer to these questions will remain unanswered unless Congress passes Paul and Massie’s Audit the Fed bill this session.
Allowing the Fed to rapidly inflate the money supply and secretly give out loans to foreign entities without congressional oversight is stupid policy. It has destroyed 95 percent of the dollar’s purchasing power, all for the purpose of helping the president and his favored Fed officials retain political power.
Let’s hope that President Trump, who has promised to “drain the swamp,” sees through the light of Mnuchin’s talking points and prioritizes the passage of this bill. The economy can’t be made “great again” without doing so.
IN 2011, UNEMPLOYMENT WAS at a near crisis level. The jobless rate was stuck around 9 percent nationally, an unusually high number due to the continuing effects of the financial crash.
House Democrats were aghast. “With almost five unemployed Americans for every job opening, too many people remain jobless because of a lack of work, not a lack of wanting to work,” said Congressman Lloyd Doggett, D-Tex. So in early November 2011, they introduced a bill to reauthorize Federal unemployment benefits, an insurance program designed to aide those looking for work.
Behind closed doors at the Federal Reserve however, the conversation struck a different tone.
The Federal Reserve’s mandate is to promote “maximum employment,” which essentially means: print enough money so that everyone who wants one has a job. Yet according to transcripts released this month after the traditional five-year waiting period, Federal Reserve officials in November 2011 were debating whether unemployment was caused by bad work ethics and drug use – rather than by the greatest financial crisis in 80 years. This debate then factored into the argument over setting monetary policy.
“I frequently hear of jobs going unfilled because a large number of applicants have difficulty passing basic requirements like drug tests or simply demonstrating the requisite work ethic,” said Dennis Lockhart, a former Citibank executive who ran the Atlanta Federal Reserve Bank. “One contact in the staffing industry told us that during their pretesting process, a majority—actually, 60 percent of applicants—failed to answer ‘0’ to the question of how many days a week it’s acceptable to miss work.”
The room of central bankers then broke into laughter.
Charles Plosser, the president of the Philadelphia Federal Reserve, cited “work ethic” as a common complaint he heard in his district, both in rural and inner city areas. A contact of his who owned 60 McDonald’s restaurants said “passing drug tests, passing literacy tests, and work ethic are the primary problems he has in hiring people.”
His wife, he noted, had attended a meeting in Philadelphia where employers cited literacy, work ethic, and drugs as impediments to hiring.
It was hardly the first time these bankers blamed unemployment on the unemployed, rather than, say, bankers. In an April meeting that year, Richmond Federal Reserve President Jeff Lacker told participants that “Several firms told us of difficulty finding adequate workers, because they preferred to collect unemployment benefits or can’t pass drug tests.” He reiterated that point in November, saying that in West Virginia he was told by an employment agency that “unquestionably the biggest problem in hiring skilled and unskilled workers was the inability to pass a drug test.”
Lacker’s Federal Reserve district includes West Virginia. In August, he again spoke of “widespread reports about hard drug use, OxyContin and methamphetamine, in Appalachia and other rural parts of our District—in particular, Appalachia.”
Apparently his colleagues responded with laughter again, because he then said “Drug abuse and the hardship involved in unemployment aren’t really laughing matters.” Usage, he noted, isn’t higher than the national norm in West Virginia. “It’s hard to pin this down quantitatively,” he continued, wondering if there was “something meaningful there as a contributor to impediments to labor market functioning.”
These debates took place within the Federal Open Market Committee (FOMC), the Federal Reserve body tasked with “influenc[ing] the availability and cost of money and credit to help promote national economic goals.” The debate revealed a split within the Federal Reserve system between “hawks” who worry more about inflation than unemployment, and “doves” who believe that too many are going without jobs. Typically, “hawks” tend to lean to the right politically, and “doves” tend to lean slightly more to the left.
Lacker is one of the most “hawkish” members of the FOMC, which means he tends to be in favor of higher interest rates and higher unemployment to ward off inflation. In 2015, Lacker ascribed increasing inequality to the lack of college education among the poor
Sarah Bloom Raskin, a dovish member of the Board of Governors, countered by saying that unemployment was a function of the financial crisis. “The economy remains mired in the worst slump since that of the 1930s,” she said.
Daniel Tarullo, another dovish Federal Reserve governor appointed by President Obama, called the focus on drug use a “red herring.” He said, “We had that problem 25 years ago, 20 years ago, 10 years ago; we have it today; and we’re going to have it 5 years from now.” He cited housing debt from the largest housing bubble in history as a core driver of unemployment.
The transcripts illustrate how the controversial method of picking Federal Reserve officials plays out in setting monetary policy: The three men who cited work ethic or drug use as a cause of unemployment instead of the financial crash were picked by regional private sector businessmen to lead the local Reserve banks.
The Dodd-Frank financial reform law passed in 2010 mandated that the Federal Reserve Board in Washington approve the choices of private businessmen, but the Board has yet to reject any suggested candidates. The board members who cited the financial crash as causing unemployment were appointed by the president and confirmed by the Senate.
The concept of having private business interests selecting public officials has been criticized by experts. As Wharton professor and author of “The Power and Independence of the Federal Reserve” Peter Conti-Brown put it, “It’s not clear at all that the opaque and obscure process by which the private sector selects the Reserve Bank presidents produces superior central bankers than the public process used to select the remaining principal officers of the United States.” This controversial selection process risks having, as he put it, “a system for enhancing the influence of certain slices of society on our central banking policy.
Lacker and Lockhart are retiring this year. Advocates and experts are putting pressure on the Richmond Federal Reserve to replace retiring Reserve Bank Presidents with someone more attuned to the reality of unemployment. Fed Up, a coalition of advocates seeking to shift the Fed from its traditionally pro-bank policies, is seeking to have the regional bank President’s picked with more attention to the needs of workers.
Jordan Haedtler, deputy campaign manager of Fed Up, lashed out at Lacker’s comments as related in the newly released transcripts. “Even nine years into the recovery, workers are still struggling to get the wages and hours they need,” Haedtler said. “Yet with unemployment above double digits in huge swaths of President Lacker’s district in 2011, he was citing anecdotes about drug use and desire to collect unemployment benefits as key reasons why employers weren’t hiring. Rather than looking for solutions and talking to people who were out of work, he was seeking excuses from employers.”
President Donald Trump has a number of vacancies on the Federal Reserve Board to fill as well. He has been highly critical of Federal Reserve Chair Janet Yellen. He argued, without citing evidence, that she pursued monetary policy goals to help support Barack Obama and elect Hillary Clinton. If Yellen and Tarullo follow custom and step down from their board slots in 2018, Trump could appoint a majority of Federal Reserve board members within two years.
Despite the importance of monetary policy, the Federal Reserve keeps the transcripts of internal deliberations of the committee that sets monetary policy out of public view for at least five years. But the people who attend those meetings take other jobs — some in the financial services industry. In 2010, incoming House Oversight Committee Chairman Darrell Issa questioned whether it was appropriate for the Fed to withhold its deliberations for so long. “If the Fed’s full transcripts can be released sooner, they should be,” he said.
The debate in the Fed and within Congress was ultimately resolved. The Federal Reserve kept interest rates low. And in 2011, a new wave of recently elected Tea Party Republicans and Democrats finally compromised on language to cut unemployment benefits.
Neither West Virginia senator, Shelley Moore Capito nor Joe Manchin, would comment on Lacker’s discussion of the West Virginia drug epidemic and its relationship to unemployment. The Appalachia region, including West Virginia, went strongly for Trump in the 2016 election.
That was the ruling today out of a federal court in the Northern District of California authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons on Coinbase requesting the identities of United States Coinbase customers who transferred convertible virtual currency from 2013 to 2015. Coinbase, which is headquartered in San Francisco, California, is a company which facilitates transactions of digital currencies like Bitcoin and Ethereum.
The Department of Justice (DOJ) had made the request earlier this month (California Northern District Court, Case No. 3:16-cv-06658-JSC) on behalf of the IRS since a “John Doe” summons can only be served by the IRS with federal court approval. A “John Doe” summons is an order that does not specifically identify the person but rather identifies a person or ascertainable group or class by their activities. In the past, that’s included investors in a particular tax shelter or account holders at a defined financial institution: the IRS has made use of the procedure, for example, when seeking information about offshore accounts those related to the UBS investigation.
In granting the motion, Judge Jacqueline Scott Corley found that “[b]ased upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources.”
Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, said about the ruling, “As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance. Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use – bitcoin or traditional dollars and cents – we will work to ensure that they are fully reporting their income and paying their fair share of taxes.”
IRS Commissioner John Koskinen echoed that sentiment, saying, “Transactions in virtual currency are taxable just like those in any other property. The John Doe summons is a step designed to help the IRS ensure people doing business in the emerging economy are following the tax laws and meeting their responsibilities.”
The initial request was triggered, according to court documents, after the IRS found instances of tax evasion involving Coinbase customers. To clarify, it has not been alleged by authorities that Coinbase had any knowledge that any of its users might be involved in tax evasion.
Unlike other kinds of financial transactions, there is currently no third-party information which requires separate reporting for bitcoin (think of third-party reporting like the forms 1099 issued by your bank). This, says IRS, means that the “likelihood of underreporting is significant” which is why they are seeking information from Coinbase. Coinbase claims to be “the world’s most popular way to buy and sell bitcoin and ethereum” (Coinbase did not start accepting Ethereal, or ethers, until 2016, so it was not included in the summons).
The IRS is specifically seeking records for Coinbase users who transferred convertible virtual currency at any time between December 31, 2013, and December 31, 2015, with “any U.S. address, U.S. telephone number, U.S. e-mail domain, or U.S. bank account.” Requested records include but are not limited to user profiles, user preferences, user security settings and history, user payment methods, and other information related to the funding sources for the account/wallet/vault. And that’s just for starters. IRS is also seeking all records of account/wallet/vault activity including but not limited to records identifying the date, amount, and type of transaction, names or other identifiers of parties to the transaction; requests or instructions to send or receive bitcoin; and all related correspondences.
The request raised concerns in the tax and virtual currency communities about the scope of the information sought by authorities. Those concerns remain, and it wouldn’t be a surprise to see mounting opposition to the government’s request.
For its part, Coinbase issued a statement in response to the ruling, saying:
We are aware of, and expected, the Court’s ex parte order today. We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our U.S. customers’ legitimate privacy rights in the face of the government’s sweeping request.
“Tesla’s new line of energy-harvesting roof tiles are a key part of Elon Musk’s plan to make solar sexy.”
“[Musk] unveiled a range of textured glass tiles with integrated solar cells that are nearly indistinguishable from conventional tiling, along with a sleek update to the company’s energy-storing Powerwall.”
In his 1962 book, Patriotic Gore, Edmund Wilson wrote that “if we would grasp the significance of the Civil War in relation to the history of our time” it is important to realize that the “impulse” for centralized governmental power was very strong in the 19th century, all around the world. Wilson wrote that it was Lincoln, Lenin, and Bismarck who were more responsible than anyone in their respective countries for introducing the plague of centralized governmental bureaucracy. Lincoln became “an uncompromising dictator,” and expanded and centralized governmental power in such a way that “all the bad potentialities of the policies he had initiated were realized … in the most undesirable ways.”
The Lincoln regime destroyed the system of federalism, or states’ rights, that was established by the founding fathers. After the war, the union was no longer voluntary, and all states, North and South, became mere appendages of Washington, DC. Lincoln illegally suspended the writ of habeas corpus and imprisoned tens of thousands of political dissenters without due process; waged total war with the bombing, plundering, and mass murder of some 50,000 of his own citizens; signed ten tariff-raising bills; imposed heavy “sin taxes” on alcohol and tobacco; introduced the first federal income-tax and military-conscription laws; introduced an internal-revenue bureaucracy for the first time; executed thousands of accused deserters from the army; shut down hundreds of opposition newspapers in the Northern states; went off the gold standard and nationalized the money supply; introduced massive corporate-welfare schemes; deported an opposition member of Congress; and exploded the public debt, among other sins. By “targeting and butchering [Southern] civilians,” Murray Rothbard wrote in his essay, “America’s Two Just Wars: 1775 and 1861” (in John Denson, ed., The Costs of War), “Lincoln and Grant and Sherman paved the way for all the genocidal horrors of the monstrous 20th century.” They “opened the Pandora’s Box of genocide and the extermination of civilians …”
Commenting on the evils of such centralized governmental power in his book, Omnipotent Government, Ludwig von Mises wrote that, as new powers accrued to governments during the 19th and early 20th centuries, the powers
accrued not to the member states but to the federal government. Every step toward more government interference and toward more planning means at the same time an expansion of the jurisdiction of the central government …. It is a very significant fact that the adversaries of the trend toward more government control describe their opposition as a fight against Washington and against Berne, i.e., against centralization. It is conceived as a contest of states’ rights versus the central power. (p. 268)
All of this must be forgotten, Pulitzer prize-winning novelist Robert Penn Warren wrote in his 1961 book, The Legacy of the Civil War. It must be forgotten so that the federal government can perpetuate the lie that it possessed a “treasury of virtue” at the end of the Civil War. All of this virtue supposedly exists to this day, even if it is expressed as “American exceptionalism.” With all this “virtue,” anything the American state does, no matter how heinous, is said to be virtuous, by definition.
It also “must be forgotten,” Warren wrote, that “the Republican platform of 1860 pledged protection to the institution of slavery … and the Republicans were ready, in 1861, to guarantee slavery in the South.” It must be forgotten that “in July, 1861, both houses of Congress, by an almost unanimous vote, affirmed that the war was waged not to interfere with the institutions of any state [i.e., slavery] but only to maintain the Union.” It must be forgotten, also, that the Emancipation Proclamation was “limited and provisional” in that “slavery was to be abolished only in the seceded states [where the government had no power to free anyone] and only if they did not return to the Union.”
“The Lincoln myth is the cornerstone of the ideology of American statism.”
It must also be forgotten, I would add, that Great Britain, Spain, France, Denmark, Sweden, the Dutch, and every other country where slavery existed in the 19th century ended slavery peacefully (as the New England states had also done).
We must also forget that most Northern states like New York, where slavery had existed for more than 200 years, “refused to adopt Negro suffrage,” Warren wrote, and that Lincoln was as much a white supremacist as any man of his time, announcing in his 1858 Charlestown, Illinois, debate with Stephen Douglas, “I am not, nor ever have been, in favor of bringing about in any way the social and political equality of the white and black races.”
The effect of all this forgetfulness about history is that “the man of righteousness tends to be so sure of his own motives that he does not need to inspect consequences” (emphasis added). A further effect of “the conviction of virtue is to make us lie automatically … and then in trying to justify the lie into a kind of superior truth.”
This last sentence is a perfect description of modern “Lincoln scholarship” in America. It is mostly a bundle of lies, half-truths, and excuse making, the purpose of which is to portray lies as truth and immoral acts as moral ones. That sentence is also the motivation for my new online Mises Academy course, beginning in January: The Great Centralizer: Lincoln and the Growth of Statism.
The Lincoln myth is the cornerstone of the ideology of American statism. Lincoln was the most-hated president of all time during his own lifetime, as Larry Tagg documents in his book, The Unpopular Mr. Lincoln: The Story of America’s Most Reviled President. The fact that he is now the most revered of all American presidents is a result of the work of generations of court historians and statist apologists who have literally rewritten American history in the same manner that the Soviets rewrote Russian history to consolidate their political power. The deification of Abe Lincoln eventually led to the deification of all presidents, and to the American state in general, as Professor Clyde Wilson has written, effectively resurrecting a version of the medieval notion of the divine right of kings. The divine right of kings is now called “American exceptionalism.”
The purpose of the course will be to apply the tools of Austrian economics, Austrian political economy, and libertarianism to demystify the Great Centralizer and to seek to learn the truth about the real nature of the American state and its economic interventions. We will not twist and “reinterpret” Lincoln’s own speeches to make him, and the state he presided over, look saintly, as is done by all “Lincoln scholars.” (The typical method of Lincoln “scholarship” is called “hagiography,” which is a religious term that was originally meant to describe studies of the lives of the saints).
Among the topics to be discussed in this six-week online course are Lincoln’s real views on race, including his lifelong infatuation with “colonization” or the deportation of all black people from America; his long history as a forceful proponent of Hamiltonian mercantilism in economic policy; the myth of secession as treason and of the union as “perpetual” and “divine”; the abolition of civil liberties in the North during the war; the introduction of total war, including the mass murder of some 50,000 Southern civilians; the economic consequences of the war, including the adoption of the entire Whig/Hamiltonian agenda of protectionism, nationalized banking, corporate welfare, large public debt, and an internal-revenue bureaucracy; and the politics of the Lincoln cult. Students will be asked to read only one publication, my book The Real Lincoln, along with several online articles that will be assigned each week.