WTF, Max?!

Column by Mark Davis.

Exclusive to STR

I’ve enjoyed Max Keiser and the Keiser Report for the last few years. His stands pointing out the thoroughly corrupt financial system, supporting silver and gold money and calling out the US Treasury Department pimps like Paulson and Geithner with their revolving door to Goldman Sachs have been outstanding. Max also took a very courageous stand against CIA renditions. So I was somewhat surprised and confused when I saw this report. Still, it was not the report itself that inspired me to weigh in, but the not allowing of a seemingly simple comment that I made to be posted. This intensified my curiosity and led me here. First some background.

The stance that Mises was a “fake Austrian” economist is so silly and over the top that I just had to laugh. I could not see what Max was trying to accomplish, but his usual stand-up comic style of investigative journalism had turned more serious and esoteric. The lightweight “Austrian economist” (Sandeep Jaitley) he interviewed seemed so confused and contradictory that it came off as contrived nonsense. Keiser wasn’t trying to use any wit whatsoever, just attack von Mises and, it seems, libertarians in general. The shot across the bow warning at the end to Lew Rockwell seemed to reveal a bit of personal animosity, but I certainly don’t know that. It all seemed so bizarre and out of character that I just had to wonder: WTF, Max?! Hmmm, anyway, Tom Woods reacted in a reserved manner, pointing out the silliness of the Mises heresy comments here.

Then Max Keiser responded to Woods’ straightforward little economics lesson with an abbreviated rant saying:

The idea that private interests preserve the capital value of resources (‘unless they are interfered with by the state’) produces a superior economic outcome over the public interest's preservation of capital value of resources is the type of pseudoscience, faux-Austrian claptrap that gives rise to economic dictatorialism, completely blind to the actual consequences of its actions. What Woods is advocating here is in effect central planning, but the ‘right kind’ of central planning by the ‘right people’; the complete opposite of what Austrians say they are supposedly in favor of and a complete contradiction of what Menger was trying to elucidate before the Mises crowd came along and poisoned the water.”

Woods replied to Keiser’s snarky response with this. Thomas Woods is more than capable of defending himself, and my interest was still peripheral at best, as I often seek entertainment value in such trivial matters. However, Max’s response and the comments section below it appeared to me to go beyond the original academic finer points of Austrian economic theory and into justifications for the state. This got me going a bit.

First, I believe the root of this controversy goes back to the fractional reserve banking debate between Antal Fekete (pro-FRB) and Murray Rothbard (anti-FRB). Both views promote a gold standard and differ over, basically, the definition of fraud. There are some sidebars as to using mathematical models and ultimately it’s about promoting Fekete’s Real Bills Doctrine, but the academic discussion boils down to ethical standards. This is where the disagreement over the true line of Austrian economics becomes a point of contention and gets heated, with Fekete and his followers (that now apparently includes Keiser) seeking a theoretical fig-leaf for promoting what many Austrians consider to be fraudulent financial instruments. To do this, they have to throw Mises under the bus as a “fake Austrian” and purge the popular Austrian movement of heretics that oppose fractional reserve banking.

That being said, the point I wanted to make was to challenge the statist projection that it is the Austrians who are “completely blind to the actual consequences of [their] actions.” As if statists of any kind have ever done that with respect to state interventions, ha! Further, it was my intention to point out “the gun in the room” that statists always, and I mean always, ignore. My quick comment was:

There appears to be a common theme here among the statists seeking to denigrate the philosophy of non-aggression and property rights: that the world, or any part thereof, can only be 'run by' 1) state central planners or 2) corporate central planners. This is a false dilemma, and the idea that it is possible for anyone or anything to truly 'run' an economy reveals a childish worldview that glorifies the power of central authority.

Corporations and the state have a symbiotic relationship. The modern state was organized as a corporation (e.g., The Massachusetts Bay Colony) and corporations only exist because of privileges enforced by the state (e.g., limited liability). The men that 'run' the biggest corporations also 'run' the state, so trying to separate them is impossible. So to view the state and corporations as confrontational is naïve and just what these powerful men wish. The state and corporations are now and forever joined at the hip. A true lover of liberty must oppose both as one and the same.

Libertarians do not believe in the ability of free markets to regulate behavior. Statists can only see collectivist entities (forest) at the expense of individuals (trees) and often mischaracterize libertarians as believing in free-market magic. But men regulate men; the only question is by what method. The state is a monopoly on the use of force (ring of power) that men use to impose their wills on other men based on authoritarian ideals and institutions. This is why men who seek the ring of power are inevitably flawed individuals. The free market is an amalgamation of individuals and voluntary institutions that seek to cooperate for mutual benefit based on libertarian ideals. The former glorifies the power and influence of violence and the latter glorifies the power and influence of self-interest. Any system based on the benevolent use of violence is self-defeating, while systems based on the recognition of other men’s self-interest will prosper.”

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Mark Davis's picture
Columns on STR: 55

Mark Davis is a husband, father and real estate analyst/investor enjoying the freedoms we still have in Longwood, Florida.

Comments

tzo's picture

Max seems to be operating under the assumption that the government created/enabled corporations that we see today controlling much of the world's wealth would exist in a world without government.

Your observation that there is no clear line between government and corporation is accurate, I believe. What is perceived to be corporate control today is in fact government control. Without government, there are no corporations. The very definition of corporation disallows anyone from arguing this point.

Where there is currently one or two corporations controlling an entire market, there would be fifty smaller ones. Heck, even thirty years ago there were many more, smaller companies competing in every market before they were absorbed, one by one, into the government/corporation maw.

So even a cursory glance at recent American history shows that Max's ideas aren't accurate even when there is reduced government influence in business. And so much the further off base he is in the case of no government at all.

Suverans2's picture

″Despite all the flags fluttering on First Avenue there are no nations any more, only companies; International companies.″ ~ Kuman-Kuman

    28 USC [United States Code] § 3002 - Definitions
    (15) "United States" means —
    (A) a Federal corporation... [Emphasis added]

All the rest of them, including the so-called "several States", are "subsidiary corporations" created by, attached to, and controlled by, the "parent corporation".

    "One disadvantage of the parent-subsidiary relationship is the possibility of multiple taxation." ~ West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

Nah, that could never happen. Could it?

Mark Davis's picture

The democratic-corporate-state is a three ring circus and the banking elite are the grand masters at the middle of it all. Keiser sounds like he is more of a progressive these days than I previously thought. Stacy Herbert commented on his board that Keiser is so smart that he "figured out" that libertarians are just a bunch of rednecks and crazy Christians who want to set up a theocracy and make Gary North the Pharaoh; or something like that, it’s hard to "figure out" exactly what their agenda is. It certainly isn’t to stand up to the state. But to focus on reining in corporation by further empowering the state is naïve, at best and dangerous at worst.

Paul's picture

Well, Keiser is a loose cannon. It doesn't take a lot of time to figure that out. Take him for his entertainment value more than anything.

As to fractional reserve banking, perhaps I'm mistaken, but in a free society both fractional reserve and full reserve banks will exist. Fractional reserve banking is not fraudulent if the people who use them know what they are getting into, any more than lotteries are fraudulent. It's only when they are covered by central banks (i.e., resources supplied involuntarily by taxpayers) that they become evil.

Mark Davis's picture

Paul - Its not like gambling because when you buy a lottery ticket the seller tells you that you could lose your money. When you deposit money in a fractional reserve bank the banker promises you that your money is always available. This is fraud. It may be a matter of semantics that Suverans2 can straighten us out on, but quasi-transparency doesn’t change the fundamental scam of creating money out of thin air. A free-market with competing money scams is an improvement over a monopoly money scam, but it still harms innocents. Free-market counterfeiters are no better than monopoly counterfeiters other than the fact that you can avoid them if there are 100% reserve bankers to do business with. This is, of course, why the bankers set up the monopoly (Fed) to begin with: because they would be put out of business by honest bankers. In addition to the fact that maybe one out of a thousand people really understand fractional reserve banking, there are the people in the economy who will be harmed by the credit money inflation that causes malinvestment booms and busts. And when it comes unraveled everybody in the community suffers. It doesn’t become a scam when a bank run finally reveals it, because it was a scam all along that a lot of people were profiting from. Just because I understand FRB and will take out a loan from people printing money out of thin to get a better terms doesn’t change the basics of the scam, it just makes me one of the scammers getting in on the con.

Paul's picture

" When you deposit money in a fractional reserve bank the banker promises you that your money is always available. This is fraud."

Sure. But if they didn't say those things, if they told the truth, then fractional reserve banks would not be fraudulent.

"A free-market with competing money scams is an improvement over a monopoly money scam, but it still harms innocents."

No it doesn't, not if the participants know what they are getting into. They are no longer "innocent".

"Free-market counterfeiters are no better than monopoly counterfeiters other than the fact that you can avoid them if there are 100% reserve bankers to do business with."

That "other" you are talking about is the main point, not some side issue. Anyway, without a government, how are you going to stop them? Let the market deal with them, I say. Some people want to gamble, some want to put their money in fractional reserve banks. I don't see how I can ethically stop them, even if I do disapprove.

Mark Davis's picture

" When you deposit money in a fractional reserve bank the banker promises you that your money is always available. This is fraud."

>>Sure. But if they didn't say those things, if they told the truth, then fractional reserve banks would not be fraudulent.<<

That’s a big “But if”. Thing is, they do say that or the scam has no legs. So they lie, or at least obfuscate with the intention of deceiving; which to me is the same thing.
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"A free-market with competing money scams is an improvement over a monopoly money scam, but it still harms innocents."

>>No it doesn't, not if the participants know what they are getting into. They are no longer "innocent".<<

Even if all the depositors (complete idiots) know that the bank is only keeping 5 cents of every dollar they deposit and borrowers know they are being given counterfeit money, what about the people that unknowingly accept the counterfeit money that will become worthless when full disclosure becomes common knowledge (The emperor has no clothes!)?

Again, you may claim that even these people too may know about the scam and are trying to get in on it while the getting is good, but some innocent dupe will someday be left holding the bag.
--------------------------------------------------------------

"Free-market counterfeiters are no better than monopoly counterfeiters other than the fact that you can avoid them if there are 100% reserve bankers to do business with."

>>That "other" you are talking about is the main point, not some side issue. Anyway, without a government, how are you going to stop them? Let the market deal with them, I say. Some people want to gamble, some want to put their money in fractional reserve banks. I don't see how I can ethically stop them, even if I do disapprove.<<

Hopefully most people are smart enough to both understand that “printing money out of thin air” is a scam and that full disclosure is forthcoming. I have doubts about both because most people don’t get it (dupes) now and the ones that do (knaves) have no problem foisting it on the rest.

As for ethically stopping it, how do you ethically stop any counterfeiter or other fraud? First, you stop him from passing out empty promises and then you determine who has been harmed and by how much. Then you obtain a judgment against his assets for that amount. Any good con is based on getting the mark to buy into the con that supposedly exploits someone else. FRB is a classic con job.

FRB can’t exist in a free-market which is why bankers support the state and created the Fed. Credit money is only on par with commodity money when enforced by the state.

Paul's picture

"First, you stop him from passing out empty promises"

How do I stop him? Take a gun and shoot him? I can't ethically do that.

There is an ancient principle, "caveat emptor". It's up to people to look out for themselves. We don't need governments or other criminal groups to do it for us.

" Then you obtain a judgment against his assets for that amount."

Well, we'd have to be involved in some free market justice system in now-indeterminate form to see how that would play out. I assume the defendant would simply say, "caveat emptor". Also, "everybody knows what fractional reserve banking is about - everybody knows the risks are higher." If I were a juror, I would aquit.

You act as if fractional reserve banking cannot exist unaccompanied by lying. If you think that is so, you should prove it.

BTW I admit I am no expert at banking. I just like to see assertions proved, that's all.

Speaking of Max Keiser, this is interesting:
http://www.lewrockwell.com/blog/lewrw/archives/120943.html