Ranting to /dev/null

I believe that the tax protestors' primary argument is that Article I, Section 9 in the original Constitution stated that, "no Capitation, or other direct Tax shall be laid, unless in Proportion to the Census of Enumeration herein before directed to be taken." They would then proceed to argue that the 16th amendment, which alters this section, was never legally ratified in 1913.

I am sympathetic to the tax protestors' arguments insomuch as the federal income tax is an absolute abomination. I am not, however, sympathetic towards their actions.

Regarding Mr. Brown, I find it interesting that he lives his life as completely free from the use of government services as possible. Of any American, he probably has the least responsibility to pay taxes than anyone else.

Cheek v. United States, 498 U.S. 192 (1991), which holds that the argument that the Sixteenth Amendment was not properly ratified and that income taxes are unconstitutional is frivolous and unreasonable. The Seventh Circuit case from which the SCOTUS case originated held that the argument that the Sixteenth Amendment was not properly ratified is "objectively unreasonable" and will not under any circumstances be considered reasonable. Cheek v. United States, 882 F.2d 1263, 1268-69 (7th Cir. 1989) n.2. Other circuits routinely dismiss such arguments without even addressing them, because to do so might suggest that they're worth talking about. The courts treat arguments of this sort with an attitude as close to utter contempt as they get.

Though I don't like the income tax either, I am not at all sympathetic towards tax protesters. The law is the law, and not liking it doesn't change that fact. If the government wants to take your money, it can take your money. The fact that our government usually pretends to follow its own rules is quite nice, but by no means the norm.

Your responsibility to pay taxes is based on what the government says your responsibility is, not what you think your responsibility ought to be. Why? Because the government can put you in jail if you don't pay.

Well, it also depends on what the definition of "income" is. The 16th amendment authorizes Congress to "lay and collect taxes on income..."

Interestingly, in Eisner v. McComber, 252 US 189, the SCOTUS ruled that income is "profit or gain from a source." Does that mean wages, or just profit? Different people would argue differently.

In the end, however, none of this matters. A government, by definition, is nothing more than a monopoly on the use of force. All governments take property from their citizens, whether it be through direct taxation or by reducing the purchasing power of the currency through inflation. The tax protesters would accomplish far more by helping to educate people about the horrors of a direct tax and a central bank that reduces the value of your property every second of every day than they would sitting in a jail cell.

1) The actual quote is that income is "the gain derived from capital, from labor, or from both combined." So, that'd be both.

2) You're objection to the idea of a central bank is, as always, rather puzzling. Gold standards are a bad idea, and a small amount of inflation is healthy. These are not particularly controversial economic axioms, and only fringe elements like your tax protesters believe otherwise. While not "objectively unreasonable" like disputing the legality of the income tax, they are nonetheless not generally accepted.

As a final note, the ability of Congress to charter a central bank is settled precedent dating back to M'Culloch v. Maryland, 17 U.S. 386 (1819).

Monetary policy is an entirely different subject; nonetheless, I find it interesting that people who are so quick to support free markets in just about any industry are also just as quick to support the complete, centralized, socialized control of the money supply. Not supporting central banks does not make one a literal supporter of the "gold standard;" it simply makes one a supporter of the idea of competition and free enterprise in the most important industry of all: the industry of money and banking.

To reject the idea of a central bank is merely to reject the idea that a single, central bureaucrat can possibly know the precise amount of money needed within an economy. I don't advocate a forcible return to a quasi "gold standard." Why not just repeal the legal tender law and let the market decide the appropriate amount of money in the most marketable forms?

I'd also point out that saying that a little inflation is good is like saying that a little theft is good. Inflation is just about the worst form of wealth redistribution of which one might conceive, because it redistributes purchasing power from the poor to the rich. When the Fed inflates the currency, it's the government officials, the bankers, and the wealthy politically connected corporations who get to spend the newly created money first. By the time it gets to the poor, they're literally spending dollars that are worth less than when the political elite spent them.

While Congress ratified the Federal Reserve in 1913, the idea was created by the likes of Rockefeller and Morgan. I don't suspect that these wealthy bankers and industrialists merely woke up one morning thinking about how they might redistribute their own wealth to the masses; I think perhaps they had the opposite idea in mind.

Though your point about the government generally being the worst possible method of accomplishing a given end is well taken, I believe history has established that the production of currency is an exception to this rule.

Historically, banks and other private institutions did issue their own currency. There were perhaps dozens of competing methods of exchange running around, of varying value and stability. This is no way to run an economy, and certainly no way to run an economy that covers an area more than a few dozen square miles. For a national economy to function, there must be a uniform medium of exchange backed by force of law, else chaos will emerge. It was the absence of a central bank that lead to multiple economy-wide bank failures in the late 19th and early 20th centuries. Since the creation of the Federal Reserve, there have been-to my knowledge-only two major failures: the Great Depression and the savings and loan crisis of the 1980s. The former was probably unavoidable, but the latter was caused by an absence of regulation. Finally, if Congress has not the ability to issue a national currency, their ability to regulate interstate commerce is entirely fictional.

On the other hand, your point on redistribution is not well made. Inflation hurts the rich more than the poor, for it is only the rich who possess sufficient amounts of wealth for sufficient periods of time to really feel the sting. Yes, the poor are influenced to some extent by rising prices, but prices and wages are both "sticky" and do not respond instantaneously to inflation pressures, and they tend to move in tandem. But inflation can and does have a severely negative effect upon wealth over time. If you're earning 8% interest on an investment, that seems pretty good, right? Not so fast. After taxes and inflation, you might be making 1-2%. Maybe. Any less than that and you're actually losing value, because prices are increasing faster than your wealth is. This isn't "redistribution" in any way that I'm familiar with. It's "devaluation", pure and simple.

The Federal Reserve doesn't have anything to do with wealth redistribution. Morgan and Rockefeller wanted a central bank because it was good for business because periodic bank failures are bad for business.

A comprehensive argument against the Fed, and for the principle of sound money is not necessary here, especially since it has already been made exhaustively from the time of Say, Bastiat, and Ricardo, up through Menger, Mises, Rothbard, Sennholz, Kirzner, and Hazlitt (http://en.wikipedia.org/wiki/Austrian_economics). Many published works on the subject can be found here: http://www.mises.org/store/Books-C1.aspx and here: http://www.mises.org/studyguide.aspx?action=subject&Id=11).

Historically speaking you are correct that banks could offer their own currency. Heck, any person could offer his own currency if he so chose. Nonetheless, a currency is worthless, and thus remains unused, unless it is backed by something that is a consistent store of value. The number of currencies doesn't matter, as long as they are backed by something that people trust. And I trust something tangible, like gold, far more than I trust the idle, non-contractual promises of a government official. A currency is nothing more than a representation of something of value. To say that choices lead to chaos is a bit disingenuous; rather, the truth is just the opposite: strong, orderly economies provide a multitude of choices to consumers.

It is also incorrect to say that bank runs were caused by the absence of central banks. The temptation to commit fraud in the banking industry is great. What happened before the Fed was that bankers began to lend out more than what was deposited in their banks. Then, when the depositors went to withdraw their money, it was not there and the bank failed. That's called fraud; when you make a contract with a customer in which you agree to hold his money for him, and then you spend it in such a way that you cannot honor your contract, that's fraud. Any banker who acts in such a way ought to be punished accordingly. However, instead of making fraud illegal, the Federal Reserve did the exact opposite - it legalized it. If a member bank overextends itself, then the Fed will, and is required by law, to bail it out. In fact, by establishing reserve requirements, banks only have to keep in reserve a small portion of their deposits. Consider the fact that banks in the USA only have in reserve approximately 10% of the money that has been deposited. What would happen if there was a bank run and customers tried to withdraw their money? The entire system would collapse and it would be exposed for the fraud that it is.

Consider also what happens when you deposit money in a fractional reserve bank. The bank holds onto about 10% of your deposit and then lends out the other 90%. So your money now exists in two places at the same time: your account and the pocket of the person to whom the bank lent the money. This practice is an abomination of every standard accounting rule in the book. How can something, anything, exist in two places at the same time? The fractional reserve system of banking, artificially propped up by the Fed, is nothing more than a cartel that permits its members to engage in financially questionable behavior that would never be allowed nor be profitable in a free market. When the Fed is always there to bail out a bank, then why should we ever expect the bank to have the incentive to operate in a profitable manner? In many ways, it's just a giant welfare scheme.

Anyways, I don't think that you are considering the entire picture when it comes to the Fed. Every bust, recession, and depression in the history of our nation has been preceded by an artificial boom due to the Federal Reserve lowering the rate of interest lower than the actual market rate, or increasing the money supply. When it does either of these things, investors have easier access to money, which causes them to invest in projects that would otherwise not be feasible. Thus, you have a boom (i.e. the recent real estate bubble). But eventually, the malinvestment comes crashing down, and the economy goes through a "restabilizing" period in which it re-adjusts to the natural, market rate. Those who say that the Fed is necessary to "smooth" out the recessions and busts miss the point that it was the Fed who created the busts and recessions by inflating the money supply in the first place.

Inflation also hurts the poor more than the rich, because it causes prices to rise, which affects those on fixed incomes. When the government creates money out of thin air (which it does through the Fed), and then spends it on a government contract (say, for example, a defense contract), the government and the defense contractor get to spend the money before it has caused prices to rise. By the time that the money has worked its way into the poor and middle classes, the economy has "adjusted" to the increased money supply by causing prices to rise. That's what I mean when I talk about the Fed redistributing wealth from the poor to the rich.

Of course, the Federal Reserve is unconstitutional to begin with. Congress has the constitutional power to print and coin money. Fine. But no branch of the federal government has the power to sign over its duties to a private, unaccountable organization, which is what the Fed is. Nobody knows what the Fed is doing on a day to day basis, and their policy meetings are not released to the public.

Then there's also the point that the primary duty of the Fed, according to the Fed, is to maintain the value of our money. Yet, since its formation in 1913, our money has lost over 90% of its value. Our money has decreased in value by 1/3 since 1990. Clearly, the Fed has failed for 9 straight decades to accomplish its most basic task.

You have fundamentally misunderstood the concept of money. Money is not a real good in the same way that cows are. Money is an entirely arbitrary medium of exchange worth exactly what the issuing entity says it's worth, no more, no less. It has no inherent value. All money, by its very nature, is minted "out of thin air". Money is created by fiat. It always has been, always will be, and there's nothing objectionable in the slightest about it.

And no, no, no, the government does not create money by spending it. It creates money by lending it to banks. Though the government is currently running a fiscal deficit, if this were actually a cause of inflation, we'd be looking at mid-double-digit inflation, not low-single-digit inflation, and would have actually experienced deflation in the early 2000s, which didn't happen.

This being the case, creating money by lending it out is entirely acceptable and, in fact, the basis for modern economies. Do you even know how the Fed works? Because your description of its functions is inaccurate in the extreme. You seem to have latched on to some bizarre, pre-19th century economic lunatic fringe and run with it. Just exactly where are you getting all this? You're obviously associated or at least involved with some group that is espousing such garbage, and I'd really like to know what I'm dealing with here.

1. Money, by definition, is an object of inherent value that is valued for its properties as a medium of exchange. Currency, or cash, is nothing more than a money substitute, which represents real money. US dollars, by definition, are not money. They are pieces of paper that have no inherent value, which used to represent (and be backed by) real money. They have "value" only insomuch as the federal government decrees them to have "value." The long-range value of every single fiat, paper currency is zero. After thousands of years, gold still remains a valuable medium of exchange.

2. The Federal Reserve does create "money" out of thin air by buying bonds from commercial banks. However, it also creates "money" by buying government bonds. If the federal government wants to buy something, and it does not want to impose a tax on anyone, then it issues a bond for X dollars, the Fed "buys" it by writing a check for X dollars (from an account that does not exist), and then the federal government spends the money.

3. The reason why the USA has not experienced double-digit inflation is because the federal government has coerced so many other countries into trading one of the world's most demanded resources in dollars: oil. US dollars are heavily demanded throughout the world, but that is starting to change now as more and more countries are trading oil in Euros (interesting side note: the US has attacked every country that has ever tried to trade oil in anything other than US dollars; it is no coincidence that one of the first things we did after deposing Saddam was to re-institute the US dollar for their oil industry).

4. I'm not sure what you mean by "lunatic fringe." These views have always been expressed by the Austrian school of economics. The Austrians were the first to explain the capital structure and the rate of interest (Eugen von Boehm-Bawerk). They were the first to explain why socialism is logically fallacious and can't work (Ludwig von Mises). And surely you've heard of Nobel Laureate F.A. Hayek. There are, of course, many others, many of whom are represented here: http://www.mises.org/

Actually, it just occurred to me that Alan Greenspan, of all people, once wrote a great summary of the gold standard here: http://www.321gold.com/fed/greenspan/1966.html

He explains what money is, why gold became the premier form of money, and how the primary function of central banking is to sustain the welfare state through fiscally irresponsible deficit spending.

1. Money is not something of inherent value. Money is a medium of exchange. It represents things that have value, but it itself has none. It is, at best a "store" of value, measuring economic quanta as backed by force of law.

2. The Fed does not buy bonds in the way you describe. It owns about $790 billion in US treasury bonds, less than 9% of the outstanding federal debt. Most of that probably represents the historic social security surplus, real taxes levied on and paid by the American people. There simply isn't enough there to support the kind of massive deficit spending you allege.

3. The fact that oil is traded in dollars has a minimal effect upon US monetary policy. Conspiracy theories aside (and let's be honest, suggestions of US militancy based upon the currency in which oil is traded are little more than that), people trade oil in dollars because the dollar is the most stable currency in the world, historically anyways. The US interest in seeing that oil is traded in dollars has to do with our energy requirements, not our financial requirements.

3. Yes I am familiar with the Austrian school. Are you familiar with the fact that they're viewed as being somewhat outside the mainstream and are dramatically non-empirical in their methods? Quite popular with libertarians and Objectivists alike, and tangentially influential upon the main school of economic theory, not part of it. Any school that rejects econometrics is never going to be respectable. And Greenspan has Austrian sympathies, so an article by him on the gold standard is unsurprising.

But that would explain where some of your ideas come from. You're crazy, but at least you're in good company.

The Austrian school rejects the ability to empirically explain human action. Economics is nothing more than basic truths about the human world. Human action is the basis of economics, and all subsequent economic concepts, such as price, value, cost, profit, scarcity, and so on, are derived from it.

Treating economics as a science, and trying to use mathematics to test economic theories is, to me, the crazy line of thinking. God created humans as qualitative creatures who use reason to make qualitative decisions. Human beings simply cannot be reduced to harsh, quantitative mathematical formulas. If you view economics as a set of quantitative propositions to be proved by empirical testing, then it is impossible to know whether you have ever arrived at a true conclusion about the world. Second of all, it is impossible to model human action using mathematics; humans are rational and as such, nobody follows a pre-conceived automatic procedure (at least from a human perspective; I'm not discounting God's providence here). Third of all, econometrics is deeply flawed because it incorrectly presupposes that people naturally make value judgments based on objective units, which they don't. Econometrics requires you to use numbers, which have objective, fixed units. Humans, on the other hand, do not value anything in fixed, objective units. It makes no sense to say that I value a cup of coffee as a 8.7. Finally, econometrics presupposes that human actions are only set in motion by other factors. In reality, however, there is no one set way to determine exactly how any human will react to, say, an increase in real income. The point of all this is that a mathematical, quantitative approach to economics fails because it cannot depict reality in any real sense.

It is no surprise that the vast majority of economists today support an anti-Austrian, pro-government interference view of economics. But then most non-Austrian economists are benefactors in some fashion of the public largesse, which is really all that something like econometrics is: justification of government interference in the market.

I'm not saying that I'm an econometrician. I'm actually rather sympathetic to the idea that neo-classicist economics is in need of reform. I was only observing that the Austrian school has always fallen well outside the mainstream of the discipline. You again venture towards conspiracy theory in explaining why your pet theory is not more widely accepted in academia: I'm willing to write it off to institutional inertia, but there's always the possibility that, *ahem* neo-classical models have done a better job of explaining economics than Austrian ones. I'm just sayin'.

That being said, you're bringing far more ideological than methodological critiques (no surprise there, I shouldn't think). Far from just rejecting the principle that human action can be exhaustively empirically explained, a principle with which I would join you in critiquing, you seem to be going one further step and saying that human actions cannot even be empirically described. This is a whole different kettle of fish, and leaves you trying to create economic models based upon how you think people ought to behave instead of observing them directly and attempting to describe how they actually do behave.

This refusal to treat the study of economics as supported by empirical observation goes a long way towards explaining your antipathy towards centralized currency. Historical currencies were entirely free-market and the market found them (along with the gold standard) to be utterly insufficient for modern economies. That may not appeal to your radically anti-government sensibilities, but it does seem to be a fact of history.

Seriously now, objecting to central banks and fiat-currency just makes you look like people who view the Internet with suspicion, refusing to trust them thare newfangled contraption.

I still want to know who you're working for. Such ideological purity doesn't happen in isolation.

I also note with interest that you've abandoned your silly argument about the way the Fed creates money. Point conceded?

It's hard to cede a point when we don't even agree on the definition of money. At one time, gold was money, and paper currency were just paper bank notes, representative of the real stuff. That's why your paper bills say "Federal Reserve Note" and not "Money."

Yes, you are correct in that we disagree about the definition of "money". I mean "a standardized unit of exchange." You apparently mean something different, something with "inherent value". But like unicorns and human rights, believing in imaginary concepts like "inherent value" doesn't make them real. Your churlish distinction between "Federal Reserve Note" and "money" is semantic at best and entirely without merit.