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The Daily Reckoning | Tuesday, May 10, 2011 Imagining how a truly laissez-faire society might exist and operate, Current job openings...rare as a U-6, sushi-grade scallop, Plus, Bill Bonner on conflicting economic reports and how the Fed made the rich richer... ------------------------------------------------------- Uncovered: A Way to Tap into an "Other" Pool of Government-Backed Income Potential... ..that only a handful of Americans know about. And with Social Security becoming less and less of a guarantee, now is the time to act. Click here now and discover a way to protect your retirement from the uncertainties surrounding Social Security. The Changing Face of “Everyday Life” Deficits, Unemployment and the National Sturm and Drang Eric Fry Reporting from Laguna Beach, California... In yesterday's edition of The Daily Reckoning we observed, "Confident citizens do not usually buy record amounts of guns and gold." We speculated that the simultaneous booms in gold-buying and gun-buying were probably not portents of smooth sailing ahead. Both purchases, in their own way, are extreme responses to "everyday life." Beaver Cleaver never bought a Colt 45. Ozzie and Harriet never stashed gold under their mattress. So why are Americans buying guns and gold? Why the national sturm und drang?...Why the coast-to-coast Sturm Rugers? We can't say with specificity, but we can guess with generalities. One significant generality is the stubbornly high national unemployment rate. We're talking about the "U-6" series from the Bureau of Labor Statistics. What is U-6? It is both a rare, sushi-grade scallop and a data series that includes unemployed workers, as well as "underemployed" and "discouraged" workers. The stubbornly high U-6 unemployment number shows quite clearly that jobs have become as rare as...well...a U-6 scallop. As the chart below illustrates, the U-6 rate has been hovering in the 16% to 17% range for most of the last two years, despite massive, trillion-dollar "stimulus measures" by both the federal government (directly) and by the Federal Reserve (indirectly). Bernanke's unprecedented, trillion-dollar money printing schemes - which have ballooned the Fed balance sheet from about $800 billion to nearly $2.5 trillion - have failed to stimulate anything other than bad press. The Chairmen continues to insist that he is working some kind of macro-economic miracle by printing dollars and buying Treasury bonds. He insists this scheme is contributing to an economic recovery. But the U-6 number, to name just one of the many dismal economic data points floating around, suggests that Bernanke's dollar-printing is no miracle. It is a fraud, wrapped in a PhD thesis. "Once they get a taste for it," Bill Bonner observed recently, "few economies can resist spending money they didn't earn. First, they borrow from the future. Then, they steal from it, by simply printing money. Finally, you get déjà vu, as yesterday's greatest financial disasters happen, once again." There's plenty of fraud to go around. Ben Bernanke isn't the only con man. The Legislative and Executive branches of the US government are also in on the game. So what's your role in all of this, dear reader? You're the patsy. As Warren Buffet once remarked, "If you've been in a poker game for 30 minutes and you don't know who the patsy is, you're the patsy." "Consider this," our colleague, Porter Stansberry, observed recently, "Even if the US government collected 100% of the income of all the people who make more than $250,000 a year, it would have still run a deficit last year. Even if you doubled the entire amount of income taxes collected, the Federal government would have run a deficit last year. There is no way to balance our budget, no way to prevent the literal bankruptcy of our country and the runaway hyperinflation that would result, unless we dramatically cut the government's budget." What is the government's response to this grim state of affairs? Austerity? No way! The government's initial response to its trillion- dollar deficits is to conduct billion-dollar witch-hunts. As Bob Bauman, our colleague over at the Sovereign Society, explains, "The Government Accountability Office, at the request of Congress, released a study examining how the government could leverage the US passport process to recover unpaid taxes. The GAO found that in fiscal 2008, Americans who received passports owed a collective $5.8 billion to the IRS and could owe much more, since that estimate only factored in one year's worth of passport recipients." On the one hand, the tactic seems fair. Why let dead-beat taxpayers roam around the globe on an American passport? On the other hand, this tactic feels like another sign that a quasi-police state may be taking shape in America. "The real frustration," our friends at the Sovereign Society relate, "is the GAO's conclusion that, 'As federal deficits continue to mount, the federal government has a vital interest in efficiently and effectively collecting the billions of dollars of taxes owed under current law.' What about the vital interest all Americans have in a budget and financial system unburdened by punishing debt and imprudent spending?" Good question. EXPOSED: The Biggest Scam In American History! Mad men drunk on power and driven by greed are robbing YOUR retirement! Most sickening of all, Washington fully endorses this bold-faced assault on your wealth. But Chris Mayer is exposing this scam in his brand new video presentation. PLUS, he'll show you how you could protect and even grow your wealth in spite of this scam, virtually spitting in the face of these elitist thieves. Don't be a helpless victim... Click here to act right now. The Daily Reckoning Presents Freedom, Naturally: A Review of Morris and Linda Tannehill’s, The Market for Liberty Joel Bowman It is at times useful to imagine how a truly laissez-faire society, one entirely emancipated from the shackles of state coercion, might exist and operate. Morris and Linda Tannehill examine this very idea in, The Market for Liberty: Is Government Really Necessary? Market for Liberty imagines a totally free society; one with no government intrusion whatsoever; one in which the free market is left to respond to the demands of individuals, without recourse to institutionalized coercion - implied or actual. Is such a stateless existence even possible, much less preferable? Or, as so many contend, is it merely an academically contrived utopia? Morris and Linda Tannehill address all the usual fears and protestations that a truly non-governmental - i.e. anarchist society - conjures up. Whenever there arises in conversation the mere suggestion of a totally free, laissez-faire market, the possibility that human beings might even be able to survive (much less thrive) without the safety net of State control, apologists for "benevolent government" invariably step atop their soapboxes and ask: "Yes, but who will provide education for the masses, if not the public schools?" or "Who will care for the sick and weak, if not the public hospitals?" Indeed, these are questions that deserve thoughtful, honest answers. But these questions assume realities that are not in evidence. They suppose that "the public" (i.e., the state) actually has money to "provide" these services, rather than, as is actually the case, first having to expropriate (steal) it from private, productive individuals. Furthermore, the fallacy of benign governmental control relies on the idea that governments can provide essential services more reliably and cost-effectively than the private sector. In other words, the government's obligation to provide essential services is more reliable and effective than the private sector's opportunity to provide essential services. Admittedly, this debate does not lend itself to easy, black and white conclusions. But as the Tannehill's argue persuasively, the free market provides solutions that governments would never dream of. "The big advantage of any action of the free market," contend the Tannehills, "is that errors and injustices are self-correcting. Because competition creates a need for excellence on the part of each business, a free-market institution must correct its errors in order to survive. Government, on the other hand, survives not by excellence, but by coercion; so an error or flaw in a governmental institution can (and usually will) perpetuate itself almost indefinitely, with its errors being 'corrected' by further errors. Private enterprise must, therefore, always be superior to government in any field." [It is worth mentioning here that corporations acting in collusion with the state are NOT private enterprises as the Tannehill's define them. They are simply entities that have co-opted the government's "gun-for- hire" to do their dirty work for them. Think Wall Street "bailout" recipients and their army of D.C. lobbyists. Indeed, think any institution at all that seeks unfair protection or promotion from the state.] The lines on the battlefield between the comfort of State control and the liberty of anarchy are familiar to all. The State is a protector, one side argues. The State is a prison guard, the other side argues. How, the statist is heard to question, might common disputes find resolution without the currently preferred monopoly of the state's courts? What about private monopolies that would ruthlessly jack up prices and bleed us working class proletariats to death? By what means might a laissez-faire society offer protection from foreign aggressors? How might the personal liberties underpinning the whole system be protected if it were not for the tireless work of the state's police and its myriad other law enforcement agencies? Indeed, the statist continues, how would "the law" itself even come into being, and in what shape would it find application, in the absence of the all-knowing, all-powerful state? The Tannehills address these anxieties thoroughly and logically. "Freedom is not only as moral as governmental slavery is immoral," they write, "it is as practical as government is impractical." Discussions criticizing the state's myriad shortcomings and follies are many. The Tannehill's Market for Liberty takes the extra step in providing viable, concrete solutions to state-sponsored dilemmas. The Free Market, they argue, can correct the State's tendency toward costly excesses, and can do so peacefully and voluntarily, simply by following price signals from the market itself. Market for Liberty is, for all intents and purposes, a very real, practical solution set to those most commonly presented excuses for acquiescing to governmental authority. The government is not merely a "necessary evil," the Tannehills argue. "It is necessarily evil." Of course, Market for Liberty does not project a utopia in which acts of violence simply disappear and where every individual immediately sets off on a long road to perfection. Rather, the authors illustrate how individuals acting in their own self-interest, coming together to engage in mutually-beneficial exchanges, are thus incentivized to act with honesty and integrity. "The history of governments always has been, and always will be, written in blood, fire and tears," the Tannehills assert. In Market for Liberty, they show how freedom is not only an alternative to the State, but a far superior one worth, at the very least, our immediate and undivided attention. Regards, Joel Bowman, for The Daily Reckoning P.S. Market for Liberty is one of those crystallizing works, logically and eloquently written, without recourse to Orwellian "Newspeak" to drive its point home. If you have ever considered freedom as an option, but were unsure as to how it might work in practice, we encourage you to add a copy of Morris and Linda Tannehill's classic to your reading list. At a couple of hundred pages, more or less, it's a quick, easy read...but one that will nourish your thinking about liberty and freedom forever. We're (slowly) putting together a Daily Reckoning Recommended Reading List. It's a way for Fellow Reckoners to read along with their editors, a way we can discover and learn about liberty and its application together. And, as far as this editor is concerned, there are few better places to start than Market for Liberty. Feel free to pick up a discounted copy here and begin/continue your own intellectual journey towards true freedom today. And, as always, feel free to forward and/or repost this review as you wish. Liberty is a powerful message...the more people it touches, the better chance we have of seeing it realized in our lifetime. The book the US Congress never wanted you to see... Ron Paul's "Lost" Gold Bible Buried away in secret since late in the last century, this 200-page guide shows you: Why $15,000 gold is likely inevitable, BUT why that's not a GOOD thing for investors... The only REAL way out of our monetary crisis... And a glimpse into the future...when everything BUT the dollar could be used as money... We're spreading the word... Click here to find out more. Bill Bonner From Employment to Housing: “Reality” in a Great Correction Bill Bonner Reckoning from Beijing, China... We can barely keep up. One report tells us things are getting better. The next tells us that they are getting worse. Last week, for example, we thought we might finally be seeing the sell- off we've been waiting for. But yesterday, the Dow rose. Gold rose. And oil rose. Gold's back over $1,500...and oil is back over $100. As for the economy, same story. We got back-to-back updates on the employment situation, for example. No sooner had we absorbed this news on Thursday: WASHINGTON (Reuters) - The number of Americans filing for jobless aid rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed. While the surprise jump in initial claims for unemployment benefits was blamed on factors ranging from spring break layoffs to the introduction of an emergency benefits program, economists said it corroborated reports this week indicating a loss of momentum in job creation. Other reports this week showed weaker employment growth in the manufacturing and services sectors in April and a step back in private hiring, suggesting Friday's closely watched data could prove weaker than economists have been expecting. But come Friday, the news was entirely different. The report in The Financial Times told us the "stock market was boosted by [a] good jobs report." According to Friday's news, employment had gone up! A similar flip-flop came to us in the housing market - but in the other direction. Last week, there was a story that told us that sales had been surprisingly strong...hinting that the housing market had finally "bottomed out." But yesterday, The Wall Street Journal reported that the bottom had already given way: Home Market Takes a Tumble Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008 Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom. Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow. What's the real story? The real story is that we're in a Great Correction. But it is one that is having a hard time expressing itself. Every time it opens its mouth, the feds come along with duct tape. The Great Correction wants to tell the truth - that there's too much debt in the system; that most of today's 'growth' is phony, and that bad debt needs to be erased. The feds want to shut it up...they want to lend more money...and pretend the problem will go away. As a result, the 'news' we get is garbled...unclear. We have to listen hard to figure out what it really means. And more thoughts... Here's one of the stories that has gotten jumbled up and mis-reported. The rich have gotten richer, but why? The dumbbells blame 'capitalism' and ask the government to 'do something.' The real culprit is the government itself. Here's one report that got it right: How the Fed made the rich richer The 'QE2' project was supposed to ease borrowing and get consumers to spend again. Instead, it has benefited only a few while raising most people's cost of living. There's a good reason for this: As inflation surges at the store and the gas pump, the economy is stalling. And the heart of the problem could very well be the Federal Reserve's $600 billion 'QE2' money- printing initiative, which was implemented last November to great fanfare on Wall Street and is set to end in June. While the program has helped push up the cost of living for all of us - sending inflation into the red zone and damaging consumer confidence - evidence suggests its benefits have accrued only to the top tier of the net-worth ladder. Yes, the stock market has posted impressive gains since the idea of QE2 surfaced, with the Standard & Poor's 500 Index ($INX) up nearly 31% from its low last August. And that has pushed up household net worth by $2 trillion. The hope has been that this will translate into new spending and drive the economy forward. But stock ownership is concentrated among the wealthy: On average, just 12% of households worth $100,000 or less own stocks and mutual fund shares outside their retirement plans - a group that comprises 74% of the total population. While many more own shares through 401ks and IRAs, they're not in a position to easily tap that wealth for current spending. At the same time, QE2 has pushed up borrowing costs, pressing down the prices of homes - a much more widely held asset. The Case-Shiller Home Price Index started falling last summer as the idea of QE2 was floated, and it hasn't stopped since. The broad 20-city index now sits below 2009 levels. [Alan] Meltzer believes the Fed is making the same mistakes it made in the 1970s, focusing too much on unemployment while ignoring the inflation threat. The Fed dismisses that threat as transitory and says inflation expectations remain under control. This is "simply wrong" according to Meltzer, since inflationary pressures reflect real, lasting shifts in the supply/demand balance as countries like China grow and those like Saudi Arabia struggle to feed their growing appetite for resources. And while unemployment is a problem, "it's not a monetary problem." Regards, Bill Bonner for The Daily Reckoning