Southern Bread Blog

I’ve been hearing a lot lately from the conservative punditry and talk shows that Obama is just horrible for not immediately giving General McChrystal more troops for Afghanistan. The presiding sentiment from them seems to be that whenever a General says that he needs something then by god, you better give it to him. Somehow, the military is infallible in their eyes I guess, which seems very odd to me. Why is it that a staunch conservative like Rush Limbaugh, who doesn’t trust the government’s involvement in any other area is so quick to lay down and just accept the government’s monopoly over defense. Does it make sense that he totally distrusts the government’s involvement in postal delivery, yet does trust them with weapons of mass destruction? I don’t get it. Guns are for people, not governments.

But, the more disturbing part of this line of thinking jumped out at me as I was reading some more in John Chodes excellent book Destroying The Republic: Jabez Curry and the Re-Education of the Old South. He has a good section on Ulysses S. Grant’s post-war mental transformation toward radical republicanism. And in it, he quotes Adam Badeau’s book Grant in Peace:

On the 18th of December, at the conclusion of his tour, Grant reported to the President that “the mass of thinking men of the South accepted the situation in good faith”; and while he recommended that a strong military force should still be retained in the Southern States, he declared his belief that “the citizens of that region are anxious to return to self-government within the Union as soon as possible.”

–Badeau, Grant in Peace

Do you think that the men and women of the South would be so quick to go along with the whims of a General if it was us that he was wanting to retain occupation over? I don’t think so. The South was occupied under military rule for years after the war ended. We were in the same position that Iraq and Afghanistan is now. We wanted the occupiers out of our land so we could get back to living our lives after they destroyed them. Let me re-phrase the above quote and see if it doesn’t make my point a bit clearer:

On the 18th of December, at the conclusion of his tour, Patreaus reported to President Bush that “the mass of thinking men of Afghanistan accepted the situation in good faith”; and while he recommended that a strong military force should still be retained in Iraq and Afghanistan, he declared his belief that “the citizens of that region are anxious to return to self-government as soon as possible.”

It’s always easy to find justification for military action after the fact. We can look back now and say that we “liberated” a million Iraqi’s from Saddam Hussein. Grant could also look back later after the war and say that he “liberated” a hundred thousand blacks from slavery. But, the fact remains that post-facto justifications don’t absolve from properly justifying our actions at the outset. Our military is there in Afghanistan now, doing what? Sitting around getting killed by random insurgency and destabilizing society by our very presence. And Iraq still has car bombs going off in Baghdad. Remember all the car bombs that struck Baghdad before we invaded? No, of course you don’t. Because that kind of street terrorism didn’t start until we got there.

If you are reading this and interpreting anything I said above as some kind of left-wing nutjob craziness then think again. I’m not anti-war. I’m anti-government. I’ll say it again: if we, as conservatives, don’t trust the government to do even the simplest of tasks then why would we trust them with guns and weapons of mass destruction? When wars need fighting then it’s every able-bodied man’s responsibility to grow a chest and go into battle. But, that’s a far cry from just placing unfettered loyalty in a government-run death machine that, evidently, nobody in the world can even come close to matching. I have many friends and family that are or used to be in the military. They have my love and respect. The government that puts them in harms way for stupid reasons does not.

It’s time for us as honest conservatives – and especially Southern conservatives – to re-learn the words of Thomas Jefferson:

“The Greeks and Romans had no standing armies, yet they defended themselves. The Greeks by their laws, and the Romans by the spirit of their people, took care to put into the hands of their rulers no such engine of oppression as a standing army. Their system was to make every man a soldier and oblige him to repair to the standard of his country whenever that was reared. This made them invincible; and the same remedy will make us so.”

–Thomas Jefferson to Thomas Cooper, 1814. ME 14:184

Epic.

Here are some recent must-listens from Jack Spirko’s Survival Podcast show. My wife and I have been getting more into a preparedness mindset since the first of the year and it’s changed our outlook on a lot of things. Jack calls it “modern survivalism” but the principles he talks about every week are really just taking people back to their roots, before modern culture came and plasticized our lives. If you’re 50+ years old, do you remember when part of life was getting out and doing some vegetable gardening? Today all we plant is flowers. Do you remember when your parents bought their first new car? It was probably at age 40 or 50 as opposed to age 25 these days. Do you remember life before the television took the place of the dinner table?

Life today is not “better” than life was in 1945. It’s worse. Kids grow up in a plastic world where food magically appears on the dinner table every night. They have no connection to the production of what they consume. Paying somebody to put new brakes on your car is not “better” than “having” to do it yourself. Sure it’s messy and takes a couple of hours. But, when you’re done you have a pride in your work and a fatter wallet because of it. And your son has a new skill that he’ll go through life with. The same applies to food. Sending your kids outside to pick and string a bushel of pole beans and then throwing them right in a skillet for dinner 30 minutes later is teaching them a life lesson that a buying a can of Green Giant just can’t.

Instead of buying apples, vinegar and cider every time you go to the grocery store, how about buying some apple trees and planting them in your back yard. Within a couple of years you’ll be producing plenty of apples to eat. Then you can take a few bushels, chop them up and make your own cider to drink and to store. Then take all of the left over apple mash from making the cider and use it to make your own vinegar with a large bucket and some hay. None of that is hard and it all teaches wonderful life skills. Plus, after a few years of changing your thinking on this kind of thing you slowly wean yourself off of “the system.” You no longer have to run out on Christmas Eve and pick up a jug of cider for when the relatives come over. You just go down in the basement and grab some you made and stored.

I could go on and on, but I’d rather let Jack explain it to you. I’ve picked out three really, really good episodes that I think would be very much worth your while to listen to. These are good introductions to being preparedness minded:

TSP – Principle One of Modern Survival:

TSP – The Last Pure Form of Revolution:

TSP – 20 Simple Steps to Independence:

While you’re at it, subscribe to Jack’s RSS feed and follow his show. You’ll be glad you did.

I’ve always been skeptical of seasonal flu hysteria, and this year it’s just become totally ridiculous. The reason that I’ve never bought into the whole “you must get the flu vaccine” thing is that it violates some of my rules of common sense analysis. Here’s what I mean:

• If it’s new, be skeptical: Ok, this might sound like I’m a dinosaur or an old curmudgeon, but that’s not true. What I mean is that whenever something new hits the scene we have a duty to be skeptical about it until it’s been thoroughly researched and proven out. The idea of taking the flu vaccine every fall is something relatively new. It’s only been during the last 20 years or so that this idea has become prevalent. Before that, any talk of the flu vaccine was met with proper skepticism and only recommended for those where the risk of flu outweighed the risk of the vaccine side effects. This article from the NY Times in 1981 proves my point:
  

  In general, influenza is a bothersome disease, but not a serious one. Those who are most likely to develop serious and potentially fatal complications, including the elderly and people who are chronically ill, are advised to obtain flu vaccinations each year.

  –Jane E. Brody, NY Times

• If different rules apply to this one thing, be skeptical: What I mean here is that if there seems to be a different set of rules for this particular thing than are being applied to all the rest of a class of like things then you have to dig deep to find out why. For instance, the cold is a virus. Why aren’t we vaccinating that? And what about strep throat? And how about viral pneumonia? And, if we can’t vaccinate efficiently against all those things then why do we assume that the influenza virus is so susceptible to vaccination? It just seems that the flu is having different rules applied to it than every other disease. Seriously? A new vaccine every freakin year? That just doesn’t seem to fit.
• If an easy financial gain link can be found, be skeptical: Ok, just ask yourself for a moment who benefits from a national campaign to be vaccinated against the flu every year. It’s easy to see that drug companies would benefit greatly from this. The largest manufacturers of flu vaccine are Glaxo-Smith Kline, Novartis and Sanofi-Aventis. Familiar names to be sure. Such an obvious link between drug company profit and a public health scare should make anyone skeptical. Think of it this way. If all of the sudden the government came out with a report next month that said that buying a new car was necessary for health reasons because old cars harbour germs in the cushions wouldn’t you be a little skeptical that GM and Chrysler had something to do with it? Also, you have to wonder why nobody knows or reports on who actually makes these vaccines. All you ever see reported is “vaccine makers” said this, or “vaccine manufacturers” did that. They never actually use their company names. For example, do a google search for “largest manufacturer of flu vaccine” and notice that you only get like 8 hits. Seriously?! Eight hits? That’s fishy. What’s to hide?
• When you see fascism, be really, really skeptical: It’s fairly obvious to me that there is a mutual benefit scenario that plays out with annual flu-scare vaccinations. The government gets the benefit of the increased power and control that comes with any national “emergency” via the ratchet effect. And that plays perfectly into the profit motives of big, fascist pharma. If you know anything about me at all then you’ll know that I have absolutely nothing against profit. I’m an anarcho-capitalist to be sure. But profit by fascism is ill-gained and wrong.
• When the numbers lie, reject it: The truth about the whole flu thing is that the 36,000 flu deaths each year that the CDC reports is just complete aggregate nonsense. Statistics are easily skewed by using aggregated numbers. When you break down the actual causes of death in detail, you’ll see that less than 1000 people actually die directly from the flu complications each year and those almost always have complicating health factors such as severe asthma. Most all of those deaths are from people in the extreme age ranges and those who already have other illnesses like HIV. The numbers lie.

One link that has been gaining more and more solid independent research behind it is the link between Vitamin-D and cold/flu contraction. There is a lot of good evidence now showing that Vitamin-D deficiency is a main factor in a weak immune system. You can read about it here on Steve Gibson’s Vitamin-D page and the video below is a good reference too. Vitamin-D is actually not a vitamin at all. It’s a sort of super-hormone that the body uses for all kinds of things. It’s not naturally found in food either. But you won’t find any of this in any of the CDC/HHS propaganda literature because Vitamin-D isn’t patentable so it therefore doesn’t help big pharma to push that headline.

Last time we looked at the Panic of 1819 and saw how it shaped up as a classic example of an inflation-fueled boom/crash cycle born out of fiat money printing and specie payment suspension. Well, guess what the Panic of 1837 was like. Yep. You guessed it. Same story all over again.

The boom that preceded the 1837 panic and subsequent deep recession took on a little different form than the one that led up to 1819, but the fundamentals were basically the same. We might want to praise Andrew Jackson for ending the second Bank of the United States in 1836, but his own mistakes on monetary policy would just compound what the federal and state banks had begun:

Temin completely ignores the expansion in banking after President Jackson hinted in his first annual message (December 1829) that he would oppose a renewal of the charter for the second Bank of the United States. From January 1830 to December 1833, the number of banks increased from 330 to 506, a 53% increase. Then, from 1833 to 1837, the number of banks increased from 506 to 788, a 56% increase. The chartering of so many new banks meant that the banking system as a whole could inflate the money supply significantly even while maintaining the same proportion of reserves. Contemporary political economists (Gallatin, Gouge, and Raguet) all cited Jackson’s campaign against the federal bank as spurring a bank mania in the states. Bank projectors and state legislators rushed to organize and charter new banks in the hope not only of getting a share of the public deposits but a share in the bank business being forfeited by the Bank of the United States’ loss of prestige, circulation, and deposits resulting from the loss of its privileged federal status.

–Scott Trask, The Panic of 1837

I bet that sounds familiar doesn’t it. Did you notice how many new banks popped up during the 2000′s? Lots and lots. Entrepeneurs aren’t stupid. If there’s a good investment to be made they will find it. Banking was just such an investment in the leadup to our most current bust, and it was a great investment in the 1830′s too. After all, with reserve rates low, low interest rates and plenty of government money to use as capital reserves who wouldn’t want a piece of that action. That’s easy banking right there.

And speaking of low reserve requirements, by 1837 reserves had fallen to 13.7% (that’s specie by the way, not paper. And the Fed reserve limit is 10% today). It’s at this point that the stage was set for some good ol’ fashion bank runs:

Furthermore, there is evidence that the state-bank depositories did lend out at least part of the public deposits with which they were entrusted. Treasury Secretary Taney informed them that they were expected to increase their discounts after receiving the government funds; and when the government in 1837 called on the banks to pay out the remainder of the surplus fund s deposited with them in previous years, the banks replied that the money was gone. Thus, it seems clear that by depositing the government’s funds in the state banks, President Jackson did contribute to the inflation of the mid-1830s.

–Scott Trask, The Panic of 1837

But all of that isn’t even the best part. What makes the 1830′s boom so intriguing is that it had a major real estate/land bubble just like our most current crisis of 2008/09. And it was fueled by worthless bank note printing by state banks, similar to what happened in the run up to 1819:

Finally, Temin’s contention that the land boom of the 1830s had a deflationary effect upon the economy is simply insane. The government accepted state bank paper in payment for the purchase of public lands. When the Bank of the United States was the fiscal agent of the federal government (from 1817 through mid-1833), this money was deposited in the federal bank or one of its branches. As the B.U.S. was a specie-paying bank, and as merchants and the public felt less compunction about withdrawing specie from it compared to their local bank, the federal bank had to keep a large stock of specie. If state bank notes began to accumulate due to an increase in land sales, the managers would have to return at least some of them for payment. This acted to check or restrain the state banks from inflating. However, after mid-1833, the B.U.S. was no longer the fiscal agent of the federal government, so state-bank paper used to purchase public lands now ended up in a state bank. The state banks then lent it out again. The same money could now be used to purchase more land, or for other purposes. It could be lent out a third and fourth time. Federal land sales simply exploded after 1833. They went from $4.2 million in 1833 to $6.1 million in 1834, $16.2 million in 1835, and $24.9 million in 1836, and $6.9 million the first few months of 1837 before the panic. While the price of public land was fixed by law, its price could, and did, rise after it was sold to the first purchaser (often a land speculator who bought up large amounts only to sell it at a profit).

–Scott Trask, The Panic of 1837

But a fiat printing bank is a fiat printing bank, whether it’s at the national or state level. Giving any institution the power to print money that isn’t backed by a commodity that has real value like gold, silver, etc. is going to guarantee a boom/bust will ensue. And that’s exactly why the Federal Reserve needs to be ended. It’s the most monstrous inflationary fiat money machine that the world has ever seen.

Skip ahead to the 4:20 mark. Schiff has some good stuff to say about the ridiculous nature of college tuition that I’ve talked about a lot here:

So we can finally cut out all the talk of Obama being post-partisan. In a crystal clear example of partisan thuggery, Obama and Eric Holder have stomped all over the rights of a North Carolina town and said they can’t remove party labels from their ballots:

KINSTON, N.C. | Voters in this small city decided overwhelmingly last year to do away with the party affiliation of candidates in local elections, but the Obama administration recently overruled the electorate and decided that equal rights for black voters cannot be achieved without the Democratic Party.

The Justice Department’s ruling, which affects races for City Council and mayor, went so far as to say partisan elections are needed so that black voters can elect their “candidates of choice” – identified by the department as those who are Democrats and almost exclusively black.

–Ben Conery, Wash. Times

Pardon my french, but what the hell makes the Federal Government, and especially the executive branch think that they have any jurisdiction over the elections of a small town in North Carolina. I haven’t seen such a clear violation of state sovereignty in a long, long time. And beyond that, I hope this finally puts a stop to all the ridiculous nonsense about Obama being post-partisan. If Obama’s post-partisan then Dick Cheney is anti-war.

They’re only paid to arrest, harass, imprison, taze and ticket you.

Our analysis of booms, busts and panics in the time before the Federal Reserve must begin with the Panic of 1819. That’s where Murray Rothbard started, so that’s where we’ll start as well. He describes this episode as “America’s first great economic crisis and depression.” He explains the idea further by saying that it “was a crisis marked with strong hints of modern depressions; it appeared to come mysteriously from within the economic system itself. Without obvious reasons, processes of production and exchange went awry.” In short, it was a thoroughly modern depression in every sense.

To understand the Panic of 1819 properly, it must be viewed in it’s proper context as being inextricably linked to the war of 1812. War’s are among the most powerful inflationary forces that exist and the war of 1812 was no exception. Governments love to wage war, and to wage a proper war it’s almost always necessary to fire up the printing press and inflate the currency. This is exactly what happened starting in 1811. Banks outside of New England were buying government bonds like mad to finance the war. When it became obvious in 1814 that the outstanding bank notes could not be covered by gold reserves, the Federal government issued a declaration for the suspension of specie payment. This simply meant that, by law, the banks weren’t required to redeem their notes in gold.

CJ Maloney lays it out like this:

Now freed from having to actually raise money (gold) prior to issuing paper promises for it, the banking system’s highly inflationary printing binge went into overdrive. During the war’s three years, domestic prices rose by 25% and import prices by 70%.

From 1811 to 1815, banks multiplied like mushrooms on a dung heap, lending out credit they didn’t have as if it were manna from heaven. Where actual money in bank vaults had decreased by 9.4% during that period, paper bank notes and deposits, all with claims on that money, had increased by 87.2%. Keynes himself would have been proud (Rothbard 2002, p. 73).

–Maloney, Mises.org

All of this led to a, now classic, easy credit consumption binge(sound familiar?) where imports severely outpaced exports. Trade imbalances are a classic symptom of currency debasement. As a country inflates it’s currency, it’s citizens begin to import goods from other countries who haven’t inflated because prices in the non-inflated country are cheaper(again, sound familiar?). People in 1815 were buying everything they could get their hands on, fueled by the moral hazard that the government injected into the system by buying paper debt and suspending gold redemption. There was no central bank yet, but all of the classic checks and balances on free banking that the market imposes had been legislatively removed by Washington. What we got next would just add more fuel to the fire: the second Bank of the United States.

The second Bank of the United States was chartered in 1816 under the auspices of bringing inflation under control. But, of course that’s not what they did:

Instead, the men who ran the new central bank promised not to demand redemption of any state bank paper notes until over one year later. And they bailed out the insolvent state banks with $6 million in taxpayer money. The more things change, the more they stay the same.

To add injury to insult, the men who ran the central bank “jumped on the inflationary bandwagon” themselves (Dupre 2006, p. 271). Printing paper and promises with Bernanke-like abandon, within two years of its creation they had loaned $41 million worth of gold promises and issued paper bank notes redeemable in gold worth $23 million, all on top of just $2.5 million worth of gold (Dupre 2006, p. 270), a level of leverage insane enough to make a Lehman Brothers risk manager feel right at home.

–Maloney, Mises.org

You can, of course see where all of this is heading. A bubble was forming by rampant money printing with no real money(gold) to back it. What began with an attempt to deal with war-time debt blossomed into a full blown credit expansion bubble. What were the effects of this? The same kinds we see today. Exorbitant real estate/land prices, ridiculously low interest rates, rampant speculation into all kinds of wierd business schemes. Easy credit makes people do things they would never ordinarily do. And it was as true then as it is now.

The whole thing came to a head in 1819 when foreign debtors, specifically England and France, were demanding payment in gold from the Bank of the United States. This meant the bank had to call in loans from smaller state banks in order to raise enough specie to pay these foreign debts. But, of course, the smaller banks didn’t have nearly enough gold to cover the amount of paper it had printed either. When this was publicly realized the whole thing collapsed:

When it was realized that many paper bank notes were just that, their values began to collapse, many to zero (the same amount of gold you could get for it), and the money supply contracted at a ferocious rate. From the fall of 1818 to the beginning of 1819, demand liabilities at the central bank fell from $22 million to $12 million (Dupre 2006, p. 272) and the total money supply fell about 28% (Rothbard 2007, p. 89).

Insolvent banks and overextended debtors alike collapsed, while prices, no longer pumped up by the bubble, raced downward to their equilibrium. As the money supply cleansed itself of the bad apples, time and effort had to be paid so that the flow of funds could adjust back to their best uses, following prices as their guideposts. It was a massive, countrywide downturn, and introduced a slowly industrializing America to a new experience — mass unemployment.

–Maloney, Mises.org

So, as you can see, the first true economic disaster of the 19th century was completely enabled by government intrusion into the monetary system and by central banking. Suspension of specie payment led to defacto inflation since banks no longer had to redeem what they printed. This created a scenario of basically hundreds of little federal reserves that were able to inflate like mad. And when the Bank of the United States came into the fray it just accelerated the whole process.

Next time we’ll look at the Panic of 1837.

I guess this is what passes for sound critique at Bloomberg. In reviewing End the Fed, James Pressley throws Ron Paul’s conclusion that we should abolish the Federal Reserve out the window. But, not based on a thorough refutation of his main points. No, he simply paraphrases three other writers. Well, I can quote three writers to back up Ron Paul as well. Where has that gotten us? Pretty much nowhere. So, let me dissect this “brilliant” piece of book reviewing by Mr. Pressley:

…thwarting a bid by the second Bank of the United States to extend its charter beyond 1836. The U.S. would go without a central bank until the Federal Reserve System was established in 1913.

Like many clever politicians, Paul has a knack for mixing sound observations with Utopian promises. Without the Fed, he says, we would enjoy “all the privileges of modern economic life without the downside of business cycles, bubbles, inflation, unsustainable trade imbalances and the explosive growth of the government that the Fed has fostered.”

Hold on, though. Wasn’t America’s Fed-less 19th-century history punctuated with recurring booms, busts and banking panics? Paul dismisses such talk.

–James Pressley, Bloomberg

This is an oft used argument that wilts at the slightest bit of research. The “booms, busts and banking panics” of the 19th century were very much a product of government involvement in the economy. And, sometimes they were produced directly by the Fed’s pre-cursor: the Bank of the United States. Just because the Fed didn’t appear until 1913 doesn’t mean that our economy was a free market utopia. On the contrary, there were just as many government shenanigans going on then as there are now. The difference is that the market couldn’t tolerate, mask or absorb those government tricks as well as it can when you have an all-powerful central bank like we have today. The Fed simply inflates all those problems away now. But that just kicks the can down the road. And the can gets bigger with each kick.

But, back to the matter at hand. He mentions that the second Bank of the United States was abolished in 1836, but he can’t be implying that because of that we were free from government control over money. Has he forgotten the “greenback” laws passed by Lincoln during the war years? What about all the railroad “speculation” that was fueled directly by the Congress? And, what about the issuance of millions in municipal bonds to pay for “internal improvement” projects in the various states preceeding the war? He can’t think that none of this had any impact on these pre-fed booms and busts can he? I guess so. But we’re going to set the record straight. I’m going to go one by one through the major busts and panics of the 19th century and show what really happened in each case.

We’ll start tommorrow with the panic of 1819.