Probably after his stance on the Iraq war, the issue that most prominently sets Ron Paul apart from the rest of the field of the US presidential candidates is his view of currency: particularly, his belief that the government should reinstitute the gold standard to avoid the so-called ‘inflation tax’ caused by seigniorage.  Perhaps due to the importance placed on the issue of sound money by Paul and other prominent libertarians, one of the most active threads [registration required] at the UK Libertarian Party’s forum is in the same vein.

However, I’ve avoided the discussion for reason of disagreement(perhaps counter-productive, but the day’s only so long, and I don’t have as much time to argue the toss on internet fora as I once did!). The rallying cry of ‘Safety in Gold!’ is a common one amongst libertarians, but it simply doesn’t add up. As Milton Friedman was eager to point out to those that thought gold a suitable refuge (as, indeed, the world’s governments did when he wrote Capitalism and Freedom), to link the value of money to a single commodity is insanity.

The most obvious economic argument against the gold standard is that value of gold, and indeed of any commodity, is it has no inherent or eternal value. Production technologies change in different industries at different rates, and, should mining benefit from a great investment or miraculous technological progress, the price of gold would slump, leading to inflation in a country stuck to the gold standard. The same problem applies if silver, oil, electricity, or other commodities are used as benchmarks.

To solve this problem, one would have to find a commodity that increases at exactly (or close above, if the target is small positive inflation, as can be easily justified) the rate of economic growth. As Friedman argued, the Great Depression, by and large, occurred because the money supply grew more slowly than the rate of economic growth during the 1920s: due to the gold standard. Since no commodity will increase in circulation at the same rate as economic growth, a commodity-backed currency can’t work as flawlessly as its proponents claim.

The truly libertarian solution would be to scrap the legal tender, remove any obligation on individuals interacting with the government (mostly paying taxes, etc) in sterling, and let them trade in whatever currency they see fit. A similar system existed in the 19th century; in the absence of legal tender, Spanish and Mexican silver dollars emerged as the currency of choice in east Asia, whilst the local currencies - debased by their rulers to raise currency through seigniorage - were rarely used except where dollars weren’t available.

Currency competition puts an incentive on the government of a given country to protect the value of its currency, lest people cease to use it as a means of exchange. If a government does guard the value of its money better than its competitors, it can use a limited degree of seigniorage to cover some of its operations (the ‘profit’ of being more efficient in the market of issuing currency, if you will). This would be a tax that affects only those that choose to use the currency out of their own self-interest: another way the state can raise money without coercing anyone.

I think competition is the true free-market response, and the one that libertarians ought to follow, rather than foolishly backing a government monopoly tied to the value of a lump of shiny metal.

When he passed away in 2006, Milton Friedman was rightly mourned by all, but by none more so than libertarians.  To us, he was nothing short of a hero.  His Capitalism and Freedom has become a classic in defence of both economic and civil freedoms.  In Counter-Revolution in Monetary Theory, he wrote the oft-quoted principle behind monetary policy:

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.

These words, sadly, seem to have been lost on the vast majority of economics students today.

I’ve never claimed to have any high expectations of my fellow economics students.  In fact, I barely mask by outright contempt for the vast majority of them, who fill their otherwise empty heads with propaganda spouted by the leftist lecturers in the hope that it’s their passport to a job at an investment bank.  Today took the biscuit for sheer stupidity.

In a hall of over 200 second-year economics students, not a single person ventured the correct answer to the question, “In medium-run equilibrium, what is the inflation equal to?”  OK, I’m sure some people knew the answer but couldn’t be arsed to say it.  After all, I was in the class myself, but I far too interested in seeing long it would be, and how many ridiculous answers would be proffered, before we’d somebody would guess the right one (I have to get inspiration and amusement somehow!).

It was a long time.  One third-year student, with a job at a top investment bank waiting for him on graduation, thought that it was the same as equilibrium output.  Inflation and GDP are the same?  God, help us all…

Of course, Milton Friedman was right.  By the Fisher equation, inflation is the growth of the money supply above what the real economy can support.  If the money supply increases by 5%, but GDP increases by only 3%, inflation will be 2% [Very roughly.  I’m taking some liberties, but not nearly as many as the aforementioned halfwits].  This very simple relation is lost on a year of student economists.

Judging by the Daily Mail’s front page on Tuesday, it’s a relation lost on far more.  Apparently, we can cure all our woes by reducing interest rates.  By reducing the interest rate, the government increases the money supply, leading to spiralling inflation as outlined above.  That’s a good solution for the Daily Mail’s readership of home owners, who beg for government-induced inflation to pay off their huge mortgages for them, but it’s pretty shitty for the rest of us, and, in the long-run, the economy as a whole.

If one assumes that the state does have a role in controlling the currency (and there are sound economic arguments against it), the Bank of England’s first priority should be defend the value of the currency that it requires its citizens to hold as sacrosanct.  They’re bankers: their job is to keep money safe, and that means not destroying its value.

To do that requires a knowledge of monetary theory that is sadly lost on them, on the Daily Mail, and, judging by the current crop of UCL undergraduates, on the next generation of hedge-fund managers.

We’ve already lost some of our best and brightest, but it takes the biscuit when even 102-year-olds have had enough of the UK, and are leaving for more tolerable climes. It seems that those that want to live every day and get the most out of life certainly don’t want to hang around here, so Mr and Mrs Eric King-Turner of Southampton are moving to New Zealand.

And who can blame them for their choice of destination? As a part-Kiwi myself, I find it very easy to understand how the King-Turners could decide that New Zealand is a nicer place for live than this surveillance society with runaway crime levels and over-bearing tax and regulatory systems. No government under Helen Clark could be considered enlightened, but they’re not a patch on the Clunking Fists’.

The UK seems to have a revolving door migration system, under which we attract and let in foreigners (and rightly so), but repulse and repel native-born Britons. After ten years of Labour government, with all of the above societal ills and more, it’s going from bad to worse, and you can’t blame anyone for wanting to start a new life abroad, no matter how late in the day.

Will the last person to leave Britain please turn out the lights?

Just how stupid are the people that govern and micromanage our lives? If the actions of Antonio Nunes, the head of Portugal’s equivalent of the Food Standards Agency, are to be judged, the Portuguese must be suffering from a particular degree of ineptitude not seen in this country since John Prescott hung up his croquet whites.

In addition to telling Portuguese people what they can’t eat, Nunes’s job also includes telling them where they can’t smoke. And, since New Year’s, that’s included any bars, cafés, restaurants, and casinos. So, you’d think it would occur to Senhor Nunes not to light up in a casino in the early hours of 1st January to celebrate the new year. You’d think so, but you’d be oh so wrong.

Apparently, he didn’t realise casinos were covered by the ban, and has said, “We will have to look into what is in the law”. I don’t know whether it’s more fun to believe him or not. If he was aware, he’s a crook. If he wasn’t aware, he’s an imbecile. The laws we have rammed down our throats are only as good as the people responsible for upholding them, and whether in Bloomsbury or Braga, it seems as though there’s always going to be one constant: there’s rarely a good man amongst them.

The website of a newly-created British Libertarian Party has gone live. The idea for a party has been kicked around for a while, particularly by DK, and it’s nice to see that libertarians can actually put into practice what they preach after so many false dawns before. Innovatively, the party sets its stall out as the outlet for the 17m non-voters, rather than those of us that currently support one of the established parties. We wait to see what effect the party has on the democratic process.

A libertarian will value democracy not in terms of an end in itself, as that would be committing the anthropomorphic fallacy of endowing non-humans with human qualities: the state as an end, with rights or considerations separate from those of the people it was created to serve. Instead, libertarians consider democracy important because it allows the pluralist environment within which spontaneous order can occur, and the best policies can emerge.

Although the UCL Libertarian Society is independent of all political parties, including this nascent one, the foundation of an explicitly libertarian party is a welcome addition to both democratic plurality and political debate. To engage in that debate with other libertarians, within and without the party, and help to shape the future of the Libertarian Party, visit their online forums.

If the party itself breaks through and takes the power out of the hands of the kleptocrats currently in charge and gives it back to the people, so much the better, but let’s not count our chickens on that one just yet.

The New York Times contains a very interesting article on the role of Western Union, the money transfer company, in promoting the migration of both money and people across international boundaries:

With five times as many locations worldwide as McDonald’s, Starbucks, Burger King and Wal-Mart combined, Western Union is the lone behemoth among hundreds of money transfer companies. Little noticed by the public and seldom studied by scholars, these businesses form the infrastructure of global migration, a force remaking economics, politics and cultures across the world.

I never knew that Western Union was so big, but it seems entirely logical.  A truly free market requires not just the removal of barriers to the freedom of trade of goods and services, as so often propounded by those on the right.  It also requires the free flow of the two most important factors of production: capital and labour.  That is, money and people must be allowed to cross borders, and Western Union is the best example of the two being entwined.

You can see the effect of capital crossing borders by the so-called ‘Golden Arches Theory‘ in war studies (or peace studies, as it’s known as Bradford University).  In his book The Lexus and the Olive Tree, Thomas Friedman posited that no two countries that both had McDonald’s have fought a war against each other since they have each had McDonald’s outlets.

Some are quick to point out exceptions, but they are most certainly exceptions that prove the rule.  The ‘wars’ between the USA and Panama, Israel and Lebanon, and NATO and Serbia were not parochial nationalist conflicts, but interventions to further the cause of liberty by ending tyrannical regimes and combating terrorism.

No-one thinks that McDonald’s is a perfect safe-guard against war, but the spread of McDonald’s represents a greater principle of the movement of capital and of people, of liberal culture and of political ideals.  However, as today’s New York Times shows, a better representation is that of Western Union.  Whilst there’s no ‘golden nameplate’ theory - mostly because Western Union is so well spread across the world and is a service, rather than a franchise - it does mirror an interconnectivity of people and places like never before.

By analogy to Frédéric Bastiat’s famous saying, if money can’t cross borders, armies will.  So long as Western Union continues to facilitate the breaking down of borders between countries and cultures, it can help to maintain liberty, peace, and prosperity for not just the developed world, but the developing world as well.

Oh, good God, no. Those cretins have done it again:

Two computer discs holding the personal details of all families in the UK with a child under 16 have gone missing. The Child Benefit data on them includes name, address, date of birth, National Insurance number and, where relevant, bank details of 25m people.

In short, the government has given out comprehensive personal and financial details of almost half the population to… well, who knows? It would have to take a particularly stupid criminal to NOT commit fraud on a massive and hitherto unprecedented scale. This comes, of course, at a time when the government wants us to hand over even more information, and centralise it yet further into one handy fraudster-friendly item.

Goodness knows how they manage to keep up their incredible pace, but the Home Office and the Treasury seem to be in a heated battle to prove themselves to each be the most incompetent administrators in the world. I reckon this fuck-up puts the Treasury ahead by a nose, although there’s no doubting the Home Office’s ability to recover from this set-back.

Faux-Chancellor Alistair Darling’s statement to the Commons today would have been risible had it not been a statement of general government negligence and specific personal idiocy.

In [releasing the information] it is clear that the strict rules governing HMRC standing procedures were not followed. These procedures relate to the security and access to data as well as its transit to ensure that data is properly protected.

As this story (and the two other similar stories that he related) prove, these standing procedures don’t ensure anything. If they aren’t followed, they aren’t worth the paper they’re written on. This proves the government’s fundamental inability to be trusted with our information, because no regulation or safe-guard seems adequate to prevent them from giving our vital financial details away.

In terms of protecting confidential data, Her Majesty’s Revenue and Customs is operationally independent of Ministers. It is established by statute. It is run by its Chairman, Paul Gray, and a Board of Commissioners who are responsible for its operations, but answerable to Parliament through me.

So what if it’s operationally independent of Ministers? It’s institutionally dependent upon Ministers, who are responsible for executing the will of Parliament: and, in this case, screwing up big time. If HMRC is answerable to Parliament through Darling, Darling should be held responsible by Parliament.

That’s quite an elementary point of ministerial responsibility, as espoused by Gordon Brown yesterday:

In accordance with the Ministerial Code, Ministers are accountable for the decisions and actions of their Departments, including answers to parliamentary questions.

Huh. Do what the real Chancellor says, Darling. Fall on your sword now, lest one of the 25m people you’ve betrayed and endangered runs it through you. Back to what the condemned man said today:

If someone the innocent victim of fraud as a result of this incident, people can be assured they have protection under the Banking Code so they will not suffer any financial loss as a result.

Wait a minute. The Banking Code? The Banking Code states (under s. 12.12) that the banks accept liability for the loss of financial details of their customers’ details. So, in this case, the government has given away the details, exposed every bank and building society in the UK to yet more risk, and claims that it’s done nothing wrong, because the Banking Code protects consumers. Yes, it protects consumers, but it passes liability to banks, which have done nothing wrong.

In his devastatingly understated attack on the government, George Osborne raised this issue:

If fraud does occur—and of course it is good to hear that there is no evidence of that at present—where will the liability for any losses rest? The Chancellor said at the end of his statement that people would not lose out. Does that mean that the responsibility now rests with the Government, and, in effect, is the Chancellor now offering another general guarantee to depositors and people with bank accounts?

I would say the government should guarantee the deposits, and bear the brunt itself, but they’d only increase taxes to pay for it. It’s lose-lose-lose.

Let me reiterate:

1. There is no evidence this data has reached the wrong hands
2. There is no evidence of fraud or criminal activity
3. Banks and building societies are putting in place safeguards to protect people’s accounts
4. Banks and building societies will continue to monitor their accounts
5. No-one will suffer any loss if they are an innocent victim of fraud

No, let me reiterate:

1. We have no evidence that it has not reached the wrong hands. We know for certain that it’s not where it should be: under lock and key and not allowed to see the light of day.
2. Given the scale of the cock-up, with 25m victims, it’s almost impossible to detect fraud.
3. Why the heck should they do anything? You dropped them in it. You sort it out.
4. Again, why should they? Banks have enough to worry about right now than monitoring people’s accounts because the government screwed us over.
5. No-one will suffer any loss. Except banks and building societies and, therefore, their customers and members.

There is no excuse for this fiasco. They shouldn’t have had that information in the first place. They certainly shouldn’t have put it all in one database. And it goes without saying that they shouldn’t have sent it by courier to the wrong address without registering the transit. This is a disaster of monumental proportions, and the government pretends that it’s all OK.

The least that should happen is that Alistair Darling’s head should roll. There is no escaping the fact that the ministerial code requires him to be responsible for all activities in his department, and that includes all agencies over which his department presides, including HMRC.

A more salient lesson can be learned from the government’s attitude towards the debacle. Not only can HMRC not be trusted to handle our information with care, but their refusal to take the blame suggests that they believe this to be an occupational hazard. The fact is that we knew that already, which is exactly why we have consistently opposed the government’s ID card scheme.

This, coupled with recent outbreaks of rank stupidity and incompetence at the Home Office, only go to show that we can trust ministers as far as we can throw them. But, so long as we are throwing them, how about we throw them out? Now: before they give away the other 35m people’s financial details. I’m sure they’ll find a way to do it.

We’re conditioned to accept the prevailing ideas of society, and most people inculcated with an inherent moderation and deference in the way that we act towards the authorities.  As a result of that deference in actuality, legend and popular folklore often tell us as much about our understanding of justice and freedom from tyranny as actions do.  The tale of William Tell is one such story.

In the 14th century, Switzerland was a very different place to the one known to us toward.  Yes, it still had the Alpine peaks and valleys and it was still back then known for its agricultural output (although chocolate may have been pushing it).  However, it was most certainly not neutral, but held firmly under the control of the Habsburgs, then a major dynasty, although not yet the preeminents that they would become, in the Holy Roman Empire.

Three Swiss cantons had signed the Federal Charter in 1291, affirming their sovereignty and independence from external forces.  The Habsburg governor of Uri, Hermann Gessler, eager to prove his dominance of the area, raised a pole in the centre of the capital, Altdorf, crowned by his hat, and ordered that all locals bow down before it, and, by it, show allegiance to the Habsburg regime and his own arbitrary rule.

Tell had other ideas, and refused.  Angered, Gessler ordered Tell to shoot an apple off the head of his son, Walter, with a crossbow, on punishment (of refusal or failure) of both being executed.  Fortunately, as that legend records, Tell proved himself to be an expert marksman, and, on 18th November 1307, 700 years ago today, successful took the apple from his son’s head.

When Gessler asked Tell why he carried a second bolt in his quiver, when Tell was clearly so talented, Tell replied that he intended to shoot Gessler if he had accidentally killed his son.  Enraged even more, Gessler had Tell locked up in a nearby castle, but, escaping thanks to a storm during transit, Tell returned to Altdorf, and killed the governor with his remaining bolt.  This sparked the people of the three cantons to rise up, and forever cast off the shackles of the Austrian regime.

Like the tale of Prometheus and that of John Galt in Atlas Shrugged, Tell defied the illogic of his overlords, and cast off his chains through righteous action against arbitrary tyranny.  All three legends, whilst none of them historically accurate, tell a similar story.  All three heroic individuals refused to bow to the absolute and unjustified rule to which they were subjected, and fought back, using both their brains and brawn.  If we judge the people by the tales that they tell, we can tell that freedom, whether in Ancient Greece, in 14th century Switzerland, or in the 20th Century, is an eternal desire, and one that cannot be denied.

I was delighted to hear that the Dutch Minister for Public Health, Wellbeing, and Sports (no comment on his title) Ab Klink has suggested that the Netherlands adopts a system to pay people to donate kidneys:

The plan to reward donors with free insurance was drawn up by the Dutch Health Council, which advises the health ministry.

Although it is illegal for a donor to sell a kidney, the council argues that the insurance option would provide an incentive to donate. It claims the dearth of kidneys has already boosted an illicit trade in organs from living donors.

Trust the Dutch to come up with good ideas, particularly whenever it comes to selling one’s body.

A little while ago, Mark Wallace wrote a great article arguing in defence of one’s right to sell one’s own organs (specifically a kidney) for LibertarianUK.  That was in response to a reality television programme, called ’The Big Donor Show‘, based around a terminally-ill woman whose task was to choose a worthy recipient for her kidneys.  Since it was a Dutch programme, made by Endemol, it’s an idea that’s come full circle.

There are clearly still flaws with the system.  The fact that the government has set the price at the cost of health insurance, independent of the rules of supply and demand, means that the reward doesn’t reflect the outlay.  If free health insurance isn’t reward enough, there won’t be enough donors.  If free health insurance is too high a price to pay, taxpayers will be punished, and kidneys will be wasted.

Moreover, it undermines the very principle of health insurance: that one pays for the risk that one accumulates oneself.  If health insurance is free, whatever it costs, the reward is lowest for the most-valuable kidneys (i.e. those owned by healthy people, who have low premiums), and highest for the least-valuable kidneys (i.e. those owned by morbidly obese alcoholics with a penchant for playing knife games on their abdomens).  Indeed, providing free health insurance for life may induce or encourage some people to traverse from the former group to the latter, by removing the financial disincentive to doing so.

Instead of improving health, by increasing the number of organ donors, it may lead to either an over-supply or under-supply of organs, in addition to the spread of a malaise of apathy towards one’s own health, as observed in this country after the NHS was established.

Take a better system.  Iran has a relatively free market in kidneys, which are priced at $2,000 to $4,000 each, depending on conditions, circumstances, and (of course) the private agreement of the donor and the recipient.  The consequence is that Iran has more kidney donors per head of the population than any other country, and 150% more than the UK.

Far be it from me to proclaim either Iran or Mark Wallace as paragons of perfection, but Iran’s policy and Mark’s argument are far more developed and intellectually-consistent than this proposal.  If it’s yours, it’s yours, without qualification or qualm, whilst a completely free market in organs will be far more effective, removing all the pragmatic barriers to the success of the system.

At the same time, this is no damp squib.  In pursuing this policy, the Dutch government is taking a courageous step towards the free market model, and slaying a supposedly sacred cow in the process.  To allow people a choice over whether they have one kidney or two, and to reap the benefits of whichever they choose, is an eminently sensible idea.  It’s too bad that the Dutch seem to have all the sensible ideas, and leave none to our government.  Is an idea donation on the cards?

It’s a rare and glorious day for British democracy when an MP comes out, not just in direction opposition to the position taken by his party, but proposes the exact opposite action altogether.  As Gordon Brown has announced the extension of compulsory education to 18, starting in 2013, that’s the exact position that Frank Field finds himself in.

Field, Labour MP for Birkenhead and former Minister of State in the Department of Social Security, has urged the government to reduce the age of the end of compulsory education to 14.  If the pupil’s parents wanted them to continue, he or she could.  But, for a pupil to qualify for this early leaving age, he or she would have to pass the equivalent of the standard Key Stage 3 tests in Maths, English, and Science: showing a basic literary, numeracy, and proficiency in each of these subjects.

In conjunction with this, the government could concentrate their pre-14 education on getting these basics right, making sure that everyone is literate and numerate at the age of 14, and making sure that nobody falls through the cracks.  This would allow people to leave education with the foundations upon which to build a career, whilst also giving them two extra years to see if their vocation is for them.

At the same time, the government could save the £11.8bn that he estimates is wasted educating people that don’t reach those basic levels.  That money could be used to fund school vouchers, scholarships for those early school-leavers to return to education later, or returned to the taxpayer from whom it came.

This is an encouraging move towards liberalising what is a very draconian and inefficient one-size-fits-all education system, and moving towards personal choice as the arbiter of a person’s education.

By this system, basic education is improved, making sure that everyone gets a level of literacy required to understand one’s legal and moral rights and participate in society.  Those people not suited to academic education get to work for two years, build up vocational experience, and contribute to, rather than take out of, the taxpayers’ pocket.

That Frank Field is the great promoter of the policy is unsurprising, given his track record.  He has displayed an unwavering belief, derived from his staunch Christianity, in the power of self-improvement and opportunity.  Because of this, and despite representing a very working class constituency, he has actively campaigned in favour of ending the welfare state.

If we want to allow people opportunities, our government has to realise that people can make the vast majority of decisions - even pertaining to the holy cows of education or health - for themselves, and for their families.  Only they can know what’s best for them.  What we all know, though, is that this system benefits nooone: letting down the underachieving children, letting down those that are saddled teaching or learning alongside them, and letting down the taxpayer.

To adopt Brown’s way of thinking, and extending this failure of a system to all those aged under 18, is madness.  To adopt Field’s way of thinking, and removing people from that trap, is common sense.