no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: Legalese

Careful What You Wish For

January 10th, 2009

Almost four years ago, I noted that a Michigan law, the effect of which was to essentially ban mail-order wine to in-state residents from out-of-state vendors, had been struck down. The special interests were, of course, Michigan’s vinyards — heaven forbid they have to compete with California, and Michigan’s alcohol distributors — heaven forbid someone challenge their brontosaur of a business model.

All was well and good, apparently, until yesterday, when in the interest of preserving “fairness”, the Governor signed House Bill 6644, which by amending Section 436.1203 of Public Act 58 of 1998

[P]prohibits stores from sending wine directly to customers.

The wine law comes after a federal court ruling saying Michigan’s old law was unfair to out-of-state stores.

The law was, as are most laws governing commerce between “free” individuals, about protecting vested special interests. In this case, Michigan’s liquor control board, and their three-tiered distribution model.

Now, if your local liquor distributor doesn’t stock that particular label from Napa that you love, you’re out of luck, without recourse. Now, if your local liquor distributor doesn’t stock that particular label from Traverse City (MI) that you love, you’re out of luck. That is, unless a road trip to Napa (CA) or Traverse City (MI) is in your future.

The Supreme Court ruling which struck down the previous law on account of it being “unfair” to out-of-state producers was only half right, and because it was only half right, it was wrong enough to be challenged. Now, the State will prevent Michigan residents from buying any liquor, from any producer, in any State via mail order.

But hey, it’s fair, right?

A correct ruling would’ve also noted that the old law was also “unfair” to consumers, because there was not then, nor is there now, a compelling reason for the government to prevent grown men and women, from purchasing a particular brand of beer or wine merely on the basis of where it happens to have been produced, distilled or bottled.

Bastiat’s Enduring Wisdom

December 12th, 2008

If you have not read any Bastiat, you’ve got some ‘splainin’ to do.

I re-read (probably for the third time in English) Bastiat’s The Law a few weeks ago.

When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law. These two evils are of equal consequence, and it would be difficult for a person to choose between them. The nature of law is to maintain justice. This is so much the case that, in the minds of the people, law and justice are one and the same thing… [M]any persons have erroneously held that things are “just” because law makes them so. Thus, in order to make plunder appear just and sacred… it is only necessary for the law to decree and sanction it.

Bastiat is one of my favorite political philosophers: the clarity with which he writes, the ease with which he exposes his theses is unrivaled. You could draw a thousand parallels from this, or any other passage of his.

If everyone had read some Bastiat, and really taken his advice to heart, I think this world would be a much better place for everyone in it.

SEC Outlaws Interpersonal Loans

November 27th, 2008

Citing a TechCrunch article indicating that the SEC is shutting down Prosper.com, Jason Kolb comments on The Money Mafia known as the Federal Reserve system. There is some merit to what he has to say, but I think he overlooks the most important points. I wasn’t able to leave a comment at Jason’s post for some reason, but I was going to respond here anyways.

To review, Prosper.com is a peer-to-peer lending network which matches people who need money, with people who have money to lend. According to the TechCrunch article, the SEC claims that Prosper was selling investments, or could reasonably be construed by the layperson as selling investments, and therefore needs to cease and desist until registering with the SEC and falling under its regulatory umbrella. Prosper, as you might imagine, has maintained all along that it is not selling investments, it’s merely facilitating the free exchange of inter-personal loans.

Kolb comments,

The key here is that Prosper itself was not lending or borrowing, it was simply matching up willing borrowers and willing borrowers. It also provided additional services such as collection and tracking.

As far as I’m aware, this is all true. They charged a nominal fee for this service, just like eBay charges a nominal listing fee for its service: matching buyers and sellers. On eBay, the goods for sale are generally tangible. On Prosper, the “goods” for sale are interpersonal loans. The people lending money through prosper are not purchasing a security, an “investment” from Prosper.

Kolb is correct when he says, in regards to this case, “The SEC is simply acting as the enforcement arm of our private national banking cartel (emphasis in original)”, however, I think he misunderstands the nature of a central banking cartel, or at the very least, grossly overestimates the ability of individuals beholden to a banking cartel, to extricate themselves from its stranglehold by using its funny money.

The real fact is, if private citizens were allowed to freely lend to one another, the private banking cartel that is our central banking system would lose the little control they have over the economy.

Wrong. Prosper.com attempts to work within the current, broken monetary system.

As long as people are coerced into using FRNs, which can be inflated at will, the banking cartel to which he alludes maintains enough control of the monetary system to make sites like Prosper essentially a novelty. The fact of the matter is that the individual, lending on prosper, is simply not permitted to create money out of thin air in the same manner as the member banks of the Federal Reserve system. The banks’ legal privilege is the ability to create money from nothing, or,

The permission to loan into existence, money representing wealth which has not yet been created. In doing so, they are effectively mortgaging the borrowers’ productivity, while risking nothing of their own.

The individuals lending on Prosper are not allowed, by any stretch of the imagination, to create pure debt obligations without forsaking anything of their own, they issue real loans, not fiat credit, which is backed by real assets accrued by previous productivity.

Gresham’s Law states that bad money drives out good money. Federal Reserve Notes are the bad money, and they are backed by the full force and violence of the government. Ultimately, the only thing that can destroy the banking cartel’s monetary monopoly is sound money.

Maybe this is a minor issue, but I think he’s overlooked the biggest part of the problem, and in doing so, he’s saying that the emperor’s clothes are out-of-style. I’m saying that the emperor has no clothes.

Kolb makes his end-goal pretty clear, saying that he wants to create “BitTorrent, for the people,” and that such a system needs to be “Off the radar, empowered to take the risk and the profit that they decide they should take.” If he is not already familiar with agorist/counter-economic philosophies, then it’s certainly something he should investigate. His goals, and the system he wants to assist in implementing, seem to be perfectly aligned with agorist ideas of economic independence, eliminating reliance on the monopoly of the State, and personal liberties..

I’m not trying to slam him for misunderstanding the nature of just how badly broken the system really is. Technical issues of economics aside, Kolb is right: people need to be free. People need to be free to lend to one another, borrow from one another, trade with one another. They need to be allowed to fulfill their own goals, without being robbed blind by a government, or a banking cartel, or both. People need to be free.

no third solution

Blogging about liberty, anarchy, economics and politics