Finished First Draft

Though I expected to reach this point before Christmas, I completed the first draft of my novel last Wednesday, December 27. It comprises 52 chapters, 80,671 words. I need to write a brief prolog and epilog, as well as an annotated bibliography for those who want to read brilliant accounts of central banking, fiat money, and a market monetary standard.

I'm trying to wait a week before beginning to edit it seriously. I find that very hard to do.

College Grad

I spent a few hours this afternoon putting together a short movie of my daughter Katie's recent graduation from Armstrong Atlantic University in Savannah, Georgia. I'm using an iMac that is ancient by current standards -- a G4 running at 1 ghz. For software I used iMovie and iDVD version 5. I wish blogger supported the posting of brief video clips, but here's a still from the footage. As you can see she was all smiles and roses.

Wikipedia Fixed It Fast

According to conservative columnist Paul Jacob, an academic wanted to demonstrate Wikipedia's vulnerability by introducing deliberate errors in remote sections of the encyclopedia. The academic

. . . expected the errors to languish for days and weeks and maybe even months, before anyone would notice exactly what he had deliberately snuck into the resource.

But Wikipedia's volunteers proved him wrong. "Within three hours, they eradicated each one of his errors . . . and even excoriated him for inventing stuff!"

Jacob wishes the whole country could be run as well as Wikipedia.

If it had been a government-run database:

1. Only select bureaucrats would have the authority to create and edit material
2. It would be inferior in depth and range of subjects
3. Any topic that interconnected with politics would be subject to political treatment
4. Mistakes would require a form to fill out and submit. The form would be multiplied several times for filing. A copy would be sent to a committee. The committee might hold a meeting to discuss whether the reported mistake is really a mistake. If a consensus was reached that it was, they would hold another meeting to discuss how best to correct it. In time, the mistake would be corrected.
5. The encyclopedia would reflect what the government and its friends wanted, not the taxpaying public.
6. The cost to taxpayers and dollar-holders for maintaining the database would be astronomical and rise each year. Budget cutbacks would affect datbase upkeep, which means reported mistakes might live there forever.
7. To win public support the Department of Education would require all government [public] schools to use the database.

Wal-Mart Fights the Fed

Vast numbers of people in this country have cast their vote for Wal-Mart and do so every time they shop there. Let the numbers speak for themselves. If Wal-Mart starts doing things people don't like, such as raising prices, a free market will allow competitors to step in and try to do better. As long as Wal-Mart and other companies don't call on government to protect them from competition, we as consumers will benefit.

Wall Street bankers didn't like the competition they were facing at the turn of the 20th century, so they "partnered" with select politicians and created the Federal Reserve System, the most destructive cartel in human history.

In a very real sense, Wal-Mart is an antidote to Fed counterfeiting. As the Fed erodes the value of the dollar through inflation, Wal-Mart puts some of that value back with attractive prices.

People who want to lay the heavy hand of government on Wal-Mart should consider that they are helping to crush what's left of free enterprise. It is the "free" in "free enterprise" that brings us material benefits.

As Sheldon Richman noted today about New Hampshire's tendency to regulate everything in sight:

"Live free or legislate".

Sennholz on Friedman

Hans Sennholz has written extensively on economics issues, largely from an Austrian perspective. Unlike other freedom advocates -- see Sheldon Richman and Jacob Hornberger and Richard Ebeling and Sheldon Richman for examples -- as well as the mainstream media -- see Fox News and The New York Times (registration required) -- Sennholz is not afraid to censure the recently-deceased Milton Friedman for his reckless and naive monetary prescriptions. In a recent commentary on Friedman's passing Sennholz says

It is strange that Professor Friedman and his fellow monetarists, who are such defenders of the market order, should call on politicians and bureaucrats to provide the most important economic good -- money. Granted, monetarists do not trust them with discretionary powers, which led Friedman to write a detailed prescription, a Constitutional Amendment; however, the Constitution is supreme force, backed by courts and police. The amendment is a political formula to be adopted by political authorities and, when enacted, a constitutional prohibition of monetary freedom.

According to Richard Ebeling and Sheldon Richman, Friedman

argued that it was misguided Federal Reserve policy in the early 1930s that generated the severity of the Great Depression -- and not any inherent failures in the market economy.

This led Friedman to make the case for a "monetary rule," under which the monetary authority would be denied any discretionary powers over the money supply. Instead, the Federal Reserve would be limited to increasing the supply of money at a fixed annual rate of around 3 percent. This would create a high degree of predictability about monetary policy and generate a relatively stable price level in a growing economy.

Sennholz, by contrast, points out that

Contrary to monetarist doctrine, an expansion of the money stock of three to five percent suffices to generate the business cycle. Economic booms and busts occur in every case of fiat expansion, whether the expansion is one percent or hundreds of percents. The magnitude of expansion does not negate its effects; it merely determines the severity of the maladjustment and necessary readjustment.

Monetarists are quick to proclaim that business recessions in general, and the Great Depression in particular, are the result of monetary contraction. Mistaking symptoms for causes, they prescribe policies that treat the symptoms; however, the prescription, which is reinflation, tends to aggravate the maladjustments and delay the necessary readjustment.

Sennholz claims that Friedman's amendment

would create income and wealth with the stroke of a pen, and then distribute the booty to a long line of eager beneficiaries. The amendment would fix the quantity of issue, but the mode of its distribution, which confers favors and assigns losses, would be left to the discretion of the monetary authorities.

More precisely, the amendment would allow a favored few to seize wealth at the stroke of a pen, but his point is well-taken. Sennholz concludes that

What Professor Friedman called the dethroning of gold was, in truth, the default of central banks to make good on their legal and contractual obligations. Following the example set by the United States on August 15, 1971, central banks all defaulted in their duty to redeem their currencies in gold. The default, unfortunately, did not bring stability and prosperity; it opened the gates for world-wide inflation.

Milton Friedman had the rhetoric of a free market champion but his monetary recommendations were more on the order of Keynesian-lite. It took a bold man to blame the Fed for the Depression, as Friedman did, but it was a gross blunder to say that the Fed's mistake was not inflating enough. No wonder the Fed's Bernanke honored Friedman on his 90th birthday. In Friedman's world, the Fed was mistaken but not fundamentally wrong.

Thank you, Hans Sennholz, for bringing these issues to light.

"The Public Be Damned!"

Who said it and what does it mean?

The phrase is attributed to William Henry Vanderbilt, railroad magnate, on October 8, 1882. Vanderbilt had just arrived in Chicago from Michigan City, Indiana and was about to eat supper in his private railroad car when a young freelance reporter, Clarence Dresser, invaded his domain and demanded that Vanderbilt give him an immediate interview on the topics of railroad financing and the guidelines used for establishing freight rates.

Vanderbilt said he would talk to him after supper.

Dresser persisted: "But I have a deadline to meet, and the public has a right to know."

Whereupon Vanderbilt uttered his famous four words and told him to get out.

Dresser tried to sell the encounter to the Chicago Daily News, but they turned it down. Then he rewrote the story and sold it to the Tribune. Here is what they printed:

“Does your limited express [between New York and Chicago] pay?” Dresser asked.

“No, not a bit of it. We only run it because we are forced to do so by the action of the Pennsylvania Road. It doesn’t pay expenses. We would abandon it if it was not for our competitor keeping its train on.”

“But don’t you run it for the public benefit?”

“The public be damned. What does the public care for the railroads except to get as much out of them for as small a consideration as possible. I don’t take any stock in this silly nonsense about working for anybody’s good but our own, because we are not. When we make a move we do it because it is our interest to do so, not because we expect to do somebody else some good. Of course we like to do everything possible for the benefit of humanity in general, but when we do we first see that we are benefiting ourselves. Railroads are not run on sentiment, but on business principles and to pay, and I don’t mean to be egotistic when I say that the roads which I have had anything to do with have generally paid pretty well.”

Vanderbilt biographer William A. Croffut had another version, published in 1886:

“Why are you going to stop this fast mail-train?” Dresser asked in this version.

“Because it doesn’t pay. I can’t run a train as far as this permanently at a loss.”

“But the public find it very convenient and useful. You ought to accommodate them.”

“The public? How do you know they find it useful? How do you know, or how can I know, that they want it? If they want it, why don’t they patronize it and make it pay? That’s the only test I have of whether a thing is wanted—does it pay? If it doesn’t pay, I suppose it isn’t wanted.”

“Mr. Vanderbilt, are you working for the public or for your stockholders?”

“The public be damned! I am working for my stockholders! If the public want the train, why don’t they support it?”

On October 17, 1882, Tribune writer Rufus Hatch wrote a piece savaging Vanderbilt. Hatch claims that

Mr. Vanderbilt take the position that he has the same right to run his railways on selfish, exacting principles as the private merchant has. He forgets that his rights come from the people, when he says, "The public be damned!"

Isn't it nice to know where our rights come from?

Hatch stated further that

When the reporter [Dresser] asked his views on Railroad Commissioners, the despot [Vanderbilt] answered, "They usually have to be bought up, whenever legislation favorable to the road is needed; they are usually ignorant persons."

"The Railroad Commissioners be damned."

Hatch's hatchet job popularized the four-word response.

Vanderbilt claimed he worked for himself and his stockholders. If we take "the public" to mean those who pay to use his railroad, how is their welfare served, if at all? According to Ludwig von Mises:

In the capitalist system of society's economic organization the entrepreneurs determine the course of production. In the performance of this function they are unconditionally and totally subject to the sovereignty of the buying public, the consumers. If they fail to produce in the cheapest and best possible way those commodities which the consumers are asking for most urgently, they suffer losses and are finally eliminated from their entrepreneurial position. Other men who know better how to serve the consumers replace them.

So when Vanderbilt uttered "the public be damned," was he claiming indifference to his customers' preferences? When he died in 1885 William H. Vanderbilt was one of the richest men in the world. Money, sometimes great fortunes, can be made through political privileges and protections. The same can be achieved without political favors. James J. Hill was one of the 19th century's greatest examples of market success.

Vanderbilt tried to use political means to eliminate competition. Yet, as John Steele Gordon concluded:

. . . William Henry Vanderbilt’s purported words, while hard-nosed and certainly impolitic, are embedded in inescapable economic truth. Both father [Cornelius Vanderbilt] and son [William Vanderbilt] thought the key to success was to seek profits by giving the public good service, but both knew full well that companies that seek to serve the public rather than make a profit will not be around to do either for very long.