When Bastiat speaks of “the Law”, he is referring not to any one particular law, but to the system of codes, rules and regulations that we are to live by as imposed on us by a government. Government is force. And the rules it forces you to obey, taken as a whole, are “the Law.” This is the subject of the book.

His premise is simple, and he repeats it often: “The law is justice.” It’s not anything else. The appropriate use of law is the protection of life, property and liberty. Because these things preceded the law, the law will always be metaphysically subordinate to them. When the law steps outside of that narrow vision, it creates injustice, in violation of it’s nature. This is his argument in a nutshell. He starts this way:

We hold from God the gift which includes all others. This gift is life — physical, intellectual, and moral life.

But life cannot maintain itself alone. The Creator of life has entrusted us with the responsibility of preserving, developing, and perfecting it. In order that we may accomplish this, He has provided us with a collection of marvelous faculties. And He has put us in the midst of a variety of natural resources. By the application of our faculties to these natural resources we convert them into products, and use them. This process is necessary in order that life may run its appointed course.

Life, faculties, production — in other words, individuality, liberty, property — this is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation, and are superior to it. Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.

..

If this is true, then nothing can be more evident than this: The law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.

–Frederic Bastiat, The Law

He goes on to define property as that which is obtained by labor, and plunder as that which is taken by force from the labor of others. The main thrust being that if an individual can’t, by law, do a certain thing, then government (the will of many individuals) can’t do that thing either. In this context, taxation is “legal plunder”, war is legal murder, etc.

What does he say about the state of post-civil war America?

…look at the United States [in 1850]. There is no country in the world where the law is kept more within its proper domain: the protection of every person’s liberty and property. As a consequence of this, there appears to be no country in the world where the social order rests on a firmer foundation. But even in the United States, there are two issues — and only two — that have always endangered the public peace.

What are these two issues? They are slavery and tariffs. These are the only two issues where, contrary to the general spirit of the republic of the United States, law has assumed the character of a plunderer.

Slavery is a violation, by law, of liberty. The protective tariff is a violation, by law, of property.

It is a most remarkable fact that this double legal crime — a sorrowful inheritance from the Old World — should be the only issue which can, and perhaps will, lead to the ruin of the Union. It is indeed impossible to imagine, at the very heart of a society, a more astounding fact than this: The law has come to be an instrument of injustice. And if this fact brings terrible consequences to the United States — where the proper purpose of the law has been perverted only in the instances of slavery and tariffs — what must be the consequences in Europe, where the perversion of the law is a principle; a system?

–Frederic Bastiat, The Law

Ron Paul was right. This is a truly great book. There are a million quotes I could paste in here. Too many. It will, at the very least, give you a better understanding of Ron Paul’s own philosophy of government.

Writing for Bloomberg View yesterday, Peter Orszag explained how in the private sector, “defined contribution” pensions have become the rule:

“The defined-contribution concept is already familiar to most American workers through their retirement benefits. Over the past two decades, company retirement programs have moved decisively away from defined-benefit plans, in which workers are paid a given amount of retirement income, and toward defined- contribution 401(k) plans, in which risks — from fluctuating financial markets, for example — are borne by workers.”

“In 1985, a total of 89 of the Fortune 100 companies offered their new hires a traditional defined-benefit pension plan, and just 10 of them offered only a defined-contribution plan. Today, only 13 of the Fortune 100 companies offer a traditional defined-benefit plan, and 70 offer only a defined-contribution plan.”

Orszag predicts that the same trend should be expected in the health-care market too. In fact, he claims that the adoption of the president’s health-care bill will accelerate this transition.

–Veronique de Rugy, NRO Corner

What is Peter Orszag saying here? He’s saying that a transition period is beginning where more and more of our health care costs are going to be paid by us directly, instead of our employers. This won’t come in the form of higher premiums. It will come in the form of higher co-pays and higher deductibles. This has already begun in the place where I work.

Every company I’ve worked for over my career has split my monthly health care premium costs with me 50/50 and every year the premium goes up about 8%-10%. This is a fairly standard way of doing it in the private sector corporate world. But, two years ago, we were notified that in order to avert an increase in premiums, we were raising the deductibles for certain procedures and raising the co-pay by $10 per visit. The same thing happened again this year. You see what’s happening right? The premium didn’t rise, but my out-of-pocket costs still rose. I’m paying a larger percentage of my health care costs now, even though my premium hasn’t risen in two years. This is what you can expect to happen over the course of the next decade or two. It’s unavoidable.

As health insurance companies shift more of the cost on to us, it’s going to hurt. But, that doesn’t mean it’s a bad thing. Sure, some people will be hurt very badly by this. But, the net result will be a lowering of prices in the health care market as consumers have to pay more and more of the costs directly to the provider without going through the insurance company. It’s going to hurt doctors as well as consumers, since they will have to adjust to this new paradigm too.

But, as I said earlier, it’s unavoidable, and necessary. Prices simply have to come down or consumers won’t be able to pay. In case you haven’t noticed, being charged $100′s of dollars just to talk to a doctor for 5 minutes and have him write you a Zithromax prescription isn’t exactly sustainable market pricing. And the fact that the total(employee + employer) premium for my family coverage health insurance is now more than my monthly mortgage payment further indicates a massive correction coming at some point.

This really is the most comprehensive talk on the topic you’re going to find. Most people aren’t brave enough to take on this challenge(full anarcho-capitalism). And, it really helps that Murphy is such a great speaker. He makes what could be a boring topic very interesting. Here are the video and audio versions.

http://www.youtube.com/watch?v=V0_Jd_MzGCw

While everyone else in the world is focused on the policy implications of today’s speech from Fed chair Ben Bernanke, I want to talk about his analysis of the economy.

Basically, Bernanke told us today that the economy has been lagging because home prices keep falling.

“Notably, the housing sector has been a significant driver of recovery from most recessions in the United States since World War II, but this time—with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines—the rate of new home construction has remained at less than one-third of its pre-crisis level. The low level of construction has implications not only for builders but for providers of a wide range of goods and services related to housing and homebuilding.”

–John Carney, CNBC

Please don’t think that guys like Bernanke are somehow clueless of real economics. He’s just a court historian. He knows what he just said there is BS. He’s simply taking the Greenspanian approach of talking in economic-greek so that people will marvel at how smart he sounds. It took him three paragraphs to say that housing prices are too low and new home construction is weak. Well, guess what makes people buy more homes Ben? Lower home prices. You can’t have high home prices and robust construction at the same time unless you’re in an unsustainable real estate bubble. That must be what ol’ Ben is getting at. He wants to re-inflate the bubble.

Despite the spike in consumer inflation last month, which also reflected a 0.4 percent rise in food prices, inflation generally remains contained.

Given limited pricing power for producers as consumers grapple with a 9.1 percent unemployment rate, inflation is not regarded as a threat now for an economy which barely grew in the first half of the year.

–Reuters, via CNBC

I was at JC Penney’s the other day and saw that a pair of kaki’s was $72. I don’t call that “contained” inflation. Dear Reuters, inflation happens whether consumers can afford it or not. If consumers can’t afford it, the product just disappears from the shelf.

S&P 500 Historical Chart

Folks, those 90′s years were all fueled by inflation, as Bob Murphy explains.

1.8 million pensioners live below the poverty line

Despite inflation falling slightly, the Retail Price Index is still at 5.3pc with food and fuel rising rapidly, yet pensioners will only see the basic state pension increase by 4.5pc this year and other benefits by just 3.1pc.

In fact, even the standard Retail Price Index can understate older people’s living costs. Age UK Enterprises’ Silver RPI measure shows that since 2008 inflation has been higher for older people than for those under the age of 55. This is partly due to low mortgage interest rates – which are less likely to impact on older people – as well as cost increases on products and services like food and energy that over-55s spend proportionately more on.

–UK Telegraph

I’ve been singing this tune for a long time now. People who are depending on the state for their retirement in any way better figure something else out. That ship’s gonna sail at some point, in a big way. And, even if you aren’t a state pensioner, you better plan on working for a lot longer than you first thought. At this stage in the devaulation of world fiat currencies, inflation is eating up an ever larger portion of fixed incomes. You can choose not to believe this if you want. But in about a decade, when a gallon of milk costs $10, you’ll see what I mean. Inflation is real. And it disproportionately hurts older people.

(Click to see full size)

Nash Airstyle Ad touts 25 mpg

And now we have China. The latest command economy to waste vast amounts of resources. Just like the Soviets built train stations in the middle of nowhere with no tracks running to them, so does China build vast cities with nobody living in them. Watch and awe:

http://www.youtube.com/watch?v=rPILhiTJv7E

[H.T. - The Mises Blog - Link]

China is in the midst of the largest housing bubble the world has ever seen. And when it pops, either economically or socially, it’s going to be nasty. Real, real nasty.