Power & Market

Tough talk and strong predictions were made by Federal Reserve Chair Jerome Powell this week. CNBC reports that the Fed will continue raising rates until inflation returns to a “healthy level.” In his own words:

We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down. We’ll go to that point. There won’t be any hesitation about that.

He doesn’t note any tangible targets such as what an “appropriate place” is, what barometer is used to gauge the success of bringing prices down, or how long it will take. The Fed will decide when the goal is reached.

Taken literally, if a Federal Funds Rate of 18% is required in order to lower prices to a healthy level, no matter the consequences, much pain lies ahead. Surely there must be a limit on how high the Fed would allow rates to soar. Yet this is not the first time he mentioned this. Last week, CNBC noted Powell warned that increasing interest rates will:

...include some pain...

Whether one is vehemently against central banking’s interventions or, like most people, don’t understand how central banking is truly against the public’s interest, we should all take note.

Afterall, he’s in charge of the money supply and interest rates. His organization is primarily responsible for the inflation we are suffering. It’s an unfortunate realization and it need not be this way. But the Fed serves a dual function of being both the cause and solution to our monetary problems.

A scan across more CNBC news headlines show a similar theme of doom and gloom:

Dow drops 1,100 points for its biggest decline since 2020 as the sell-off this year on Wall Street intensifies

The article addresses that this was the fifth time this year the Dow fell more than 800 points.

But that’s just stock market news. The food situation overseas is something we must also closely monitor, as headlines from the UK reveal:

Skipping meals and shrinking portions — Brits are being warned of ‘apocalyptic’ food price rises

Between higher prices, smaller portions and/or food shortages, we can only hope such “apocalyptic” pain will not come to our shores. So far, other than the shortage of infant formula recently seen in America, food shortages are something most Americans have never experienced.

Should things not go according to plan, perhaps we can learn from those in the UK whose inflation crisis seems more advanced than ours:

A quarter of Britons have resorted to skipping meals as inflationary pressures and a worsening food crisis conflate…

When Powell warns of pain ahead, as much as we may want to, now is not the time to doubt.

It’s difficult to say what the most painful outcome would be. But a future with high rates concurrent with high inflation could be one of the worst. There will be no easy way out of this.

Thank goodness for memes! A witty, well-placed caption on a still frame from a movie, cartoon, etc. provides welcome comic relief amidst the steady drip of stressful news these last few years. 

The latest templates are rich celebrities and bureaucrats who are basically telling us to suck it up, or buy an electric car to counter spiking gas prices in the wake of the Russian invasion of Ukraine.

Now the press is vying for some of the meme mockery.

A recent editorial in the San Antonio Express-News tells us that it’s “a small price to pay to help save Ukrainian lives and cripple Russia’s invasion.” What about the “already high fuel and oil prices” they mention in the next breath?

In any case, all of which can be summed up in three words: a weak dollar.

After the chaos that ensued from President Nixon severing its link to gold, both Presidents Reagan and Clinton came out explicitly for a strong dollar. Remember how much it cost to fill-up then? 

Probably not, because it was negligible.

Oil more clearly reflected the commodity that it is: one that is in abundant supply (we’re on “Peak Oil 3” by my count), and nearly identical from one producer to another. That kind of perfectly competitive setting keeps a natural lid on prices. 

Neither OPEC, nor Russia, nor any other producer could do anything about it because oil is priced in dollars globally (though Saudi Arabia and China are trying to shake that up). 

At the dawn of the 21^st century however, our leaders’ support for the dollar started to flag. With its subsequent devaluation, it took more to buy the black gold. Hence, its price soared to almost $140 a barrel in mid-2008 before bottoming-out at $31.

We know what else was happening then: the so-called Great Recession. Incidentally, the mortgage crisis that precipitated that can also trace its roots to the beaten-down greenback.

When the dollar is destabilized, investors start parking more of their resources in established assets, where returns are more certain. In addition to gold, the traditional hedge against dollar volatility, housing is another such asset. 

All this seem eerily familiar right now?

Multiple rounds of “quantitative easing,” two more weak-dollar presidents, and another crash (2014-2016) later, owners of energy companies had had enough. No longer interested in simply financing growth, they started demanding more fiscal discipline.

As so often happens, bankruptcies and consolidations followed. Some organizations have emerged in private hands, which might help them avoid a new headwind: ESG limitations. 

The environmental, social and governance movement dictates that investment flow only to politically correct ventures. Needless to say, that doesn’t include oil and gas firms.

That’s ironic given that it has been them, via the deluge of natural gas unlocked by hydraulic fracturing, that have been as responsible for the steep drop in emissions as any other energy source.

Unsurprisingly, that gets as little attention in the mainstream media as does the fallout from a weak currency, which has only gotten more flaccid since the Fed floored the printing press in response to the dictatorial government shutdowns. 

Now we have politicians in self-preservation mode calling for a suspension of the federal gas tax, and naïve bureaucrats imploring the industry to produce “more right now.” No doubt that includes from the “9,000 approved, but unused, drilling permits on federal land.”

Nevermind that many of those have little potential, or how long it would take to bring product to market from the others.

It’s especially disingenuous after they, buttressed by their media cheerleaders, have erected all manner of regulatory hurdles to push the fossil fuel industry toward extinction.

Supply and demand fundamentals are not out of whack here. The price at the pump has actually gone down by a dime in my neighborhood recently. And though it is inexplicable that we’d court the likes of Venezuela and Iran for their oil, it would matter little.

When the conflict in Ukraine subsides, will these elites start to explain the (near-)doubling of energy prices of the last year or so? Will they put aside political spin, and instead consult facts, figures and history, and level-up with citizens? 

Or are we just supposed to accept it like the unnecessarily heavy-handed government response to the coronavirus? 

We’re being set up for another economic crash, and those don’t make for funny memes. 

“You do not have the right to parade through the public streets or to obstruct public thoroughfares. You have the right of assembly, yes, on your own property, and on the property of your adherents or your friends. But nobody has the ‘right’ to clog the streets.” –Ayn Rand

I encountered this quote recently on one of the social media sites. To me, the statement includes an obvious logical error and also an obvious reason for this error, so I responded simply: “No one individual is what clogs a street.”

The idea was to point out that the obvious—but dishonest—shift in the level of analysis that Rand is guilty of. She is obviously talking about individual rights yet says that individuals (plural) do not have the right to assemble in such a way as to clog the street. The problem here is that each individual indeed has the right to be in the street because it is a public throughfare. A single individual, I assume, would not amount to “clogging.” Would two? Or three? Four?

Even so, the individuals qua individuals would have equal right to be in the street but their assembly (group) would not. That’s the issue.

Let’s say it takes a dozen people to properly “clog” the street and that this is, per Rand, not allowed. This means eleven individuals have the right to be in the street, but the twelfth individual does not have that right—not because it is not their individual right, but because there are now sufficiently many individuals to clog the street. The first eleven have a right that the twelfth (and up) does not by virtue of the eleven already being there.

The same thing applies in the opposite case. Suppose there are twelve individuals already in the street. They properly “clog” the street, which is disallowed. In other words, neither one of them has the right to be there—and nobody else has the right to enter the street. But if one leaves, then they all magically gain the right to be there.

Consequently, Rand’s objectivist view, as expressed in the quote above, is one of individual rights that are contingent on how many others exercise their equal right. You have a right as an individual to be in the street, but this right only exists for as long as other individuals exercising the same right are not too many (that is, they cannot be so many that they “clog” the street).

This raises questions about what responsibility individuals have in this situation. If there are eleven individuals enjoying their time in the street, as is their right, does the entry of a twelfth person, which makes their being there unlawful, violate the eleven’s rights? They did nothing differently. Their rights changed because of another person. Or is it the other way around, that the eleven by exercising their right violate the twelfth individual because they no longer has the right to be in the street?

The quote raises many questions such as these, but these issues—seemingly arbitrary rights and apparent contradictions—arise for a specific reason: we are talking about public property. Had the street been private, then there would have been no problem. Rand says so herself: you have the right of assembly (whether or not “clogging” occurs) “on your own property.” Indeed, private property solves problems.

The arbitrariness of the situation is the assumption that the street is public. That arbitrariness is obvious from Miss Rand’s reliance on the vague, if at all defined, word “clog” as determinant of when otherwise rightful action suddenly becomes unlawful.

To take this one step further, this arbitrariness is the source of the state’s power and people’s desperate interest in wielding it. This interest is partly in self-defense because if the wrong people get to set the rules, then this may impose a cost on me (I either cannot be in the street or I cannot use the street because it is clogged).

Considering the substantial risk of a “wrong” person making up the wrong arbitrary rules for a piece of public property that they care about, many will realize that they are better off trying to nip the problem in the bud. Better yet, they can step ahead of it and impose rules of their own. So they engage in politics to get the “right” people in office.

It is public property that causes the problems of politics and the power that it has. The solution should be obvious: remove the cause.

[Mr. Grant studied under Mises at NYU in the early 1960s and became a friend of Rothbard’s some years thereafter.]

If you were to ask me, many years after I last spoke with Murray Rothbard, what was the first thing that comes to mind when I think about Murray now—I'm skipping for the moment the extraordinary brainpower, the powerful books and essays, and the infectious personality—then it would be his cackle. It was not the timbre of the cackle, nor its loudness, nor its length; indeed, it was not a particularly unusual cackle at all. What made Murray's cackle noteworthy to me was its frequency. Predicting precisely when Murray would cackle was not necessarily easy; what was easy, though, was predicting that it would surely emerge from him very often.

When I think about Murray's cackle, I am reminded of the title of a long essay he wrote about one of our mutual heroes, the journalist H.L. Mencken. The headline for Murray's piece called Mencken a "joyous libertarian." Anyone who spent time with Murray and had frequent exposure to his cackle realized pretty quickly that the mantle "joyous libertarian" had switched easily from Mencken to Murray. (When I attended the Mises seminar in the early Sixties, by contrast, I found Mises anything but joyous. He appeared extremely dour. Of course, this may have something to do with the fact that I was still a teenager, while Mises was over 80; such an age difference can be quite intimidating!)

But back to Murray. How did I first meet him? I became interested in the conservative movement after, as a high school student, I heard a speech by an unknown Senator named Barry Goldwater (l can even now hear Murray shouting "fascist!" at the mere mention of Goldwater's name) at Hunter College in May of 1960; he was introduced by Bill Buckley, by the way. I was piqued enough by Goldwater's passionate speech to buy Conscience of a Conservative.

This was also the time when I was thinking about college. Just about when I first encountered Goldwater, and I was trying to figure out what to major in, an uncle of mine suggested economics; as a journalist, my instinct was to major in English, but my uncle told me that economics might be more practical for me.

That decision, and my natural curiosity about economics matters, gradually led me to the names of Mises, Hazlitt and Hayek.

My childhood friend Larry Moss and I started to attend the Mises seminar at New York University. At some point around that time, someone mentioned the name Murray Rothbard to me. I don't think I had ever heard of him. I remember well that he was described to me as—I am not joking!—"an anarchist dwarf." And so, of course, I thought that this guy Rothbard must be some kind of wacko, and I hardly gave him another thought. (Once I got to know Murray, of course, I discounted the noun—but not the word preceding it.)

As I delved more and more into Austrian economics, I began to wonder about this fellow Rothbard. At some point someone (l cannot recall who) suggested a meeting with him. And so Larry and I trudged to 215 West 88th Street (sometimes the memory is good; even now, decades later, I still recall the phone number at his apartment: SC-4-1606) for what turned out to be the first of many memorable evenings.

Often those evenings stretched to 3 a.m.; in those days (the early Sixties), New Yorkers did not worry about taking the "A" train back to Queens at such forbidden hours. Larry and I met many memorable people at Murray's and (his wife) Joey's apartment, including Edith Efron and Leonard Liggio.

But, of course, it was the anarchist dwarf himself who was the engine, the soul and the heart of those evenings. He seemed to love being a host and observing the give-and-take of his guests. Nor was he ever shy; if he ever lacked an opinion about anything, I certainly can't recall such a moment!

One of the most (of many) notable things about Murray was his reaction when you asked him a question or raised a topic for discussion. His attitude always seemed open and, charmingly, quizzical—I say ''charmingly" because Murray was of course quite fixed in his opinions, and yet he didn't always seem so.

This was quite unlike Mises, from whom Larry and I learned the word ''apodictic"; Mises not only loved (and used) that word, but he lived that word himself. But not Murray. Let me make up an example, because I can only recall the general phenomenon, rather than a particular instance: I say to Murray something that 99% of Americans would accept, such as "Well, of course, we had to get into World War II." Murray cocks his head, looks puzzled (NOT angry, not upset, not a hint that he might even slightly disagree) and says, good-naturedly, ''Really? Why do you say, that?" It was exactly as if I had said something completely uncontroversial and of little importance that was rarely discussed in one's living room, such as, "Well, of course, Washington is the capital of the United States," or if l said my eyes are brown or Frank Sinatra had recorded "All The Way."

In other words, one could say things in the presence of Murray with which (in retrospect) he furiously (and apodictically!) disagreed, and yet often his reaction would be the kind of mild response your grandmother might give you if you asked her what kind of flowers she liked.

In contrast, Murray could excoriate like few others. One of his favorite nouns was surely "fascist" and he used it very liberally indeed. Forget about Hitler; Murray lambasted as ''fascist" people from Barry Goldwater to a dear friend of mine—a libertarian who is active in Cato, mind you!—who had had the temerity to disagree with Murray on some minor doctrinal point.

Typically the evenings at Murray's and Joey's apartment were long (l don't recall his ever asking me and Larry to leave, and the conversations were lively). The talk was almost always fascinating, with much back-and-forth debating and a great deal of humor and, of course, many cackles.

Joey, Murray's wife, was a charming hostess. She seemed so sweet that I found it difficult to believe it when a mutual acquaintance told me after Joey died in the late 90s that she was in fact much tougher and meaner than Murray. I don't recall that side of her.

My chief recollection of the apartment itself was the seemingly never-ending array of bookcases—row upon row upon row of bookcases that seemed 40 feet high and topped off mere inches from the ceiling.

In addition to those enjoyable evenings with Murray and Joey, I have of course spent countless hours immersed in his books and articles. The first one I read was probably Man, Economy, and State; I have read it 2 1/2 times altogether.

While often provocative, Murray's opinions were indeed apodictic. This is most obvious, of course, in his theoretical tomes. In some cases, such as The Ethics of Liberty, I find him frequently unpersuasive. Even in such cases, however, he rarely fails to provoke; consider, for example, his distinction between copyright and patent (with which Mises disagreed) and his thoughts on what he called "Kid Lib." And of course he could be delightfully un–politically correct, such as when speaking of certain feminists.

Clearly, a lot of research went into his non-theoretical works, such as America's Great Depression and his delightful two-volume history of economic thought. Someone wrote somewhere that Murray seemed to have read EVERYTHING ever published about EVERYTHING; as one picks through his extensive footnotes, one can believe it.

Generally speaking, I find Murray's rebuttal of Keynesian and other fallacies much more thorough and convincing than Mises's. Firstly, Mises rarely addressed Keynes's arguments directly (in class at NYU, he pronounced the adjective Kuh-NAY-zee-un). Secondly, Mises's references to Keynes and others with whom he disagreed were all too often mere castigations. (By the way, I named my public relations firm after Mises; the firm is called "LVM Group," and our clients—3M, Channel 13, the Empire State Building, and others—have no idea what the name stands for.)

As a former journalist myself, I do not agree with many of the kind words others have said about Murray's writing. While there is no denying that he was an extraordinarily passionate and knowledgeable writer, I thought his writing too often pedestrian, cliché-ridden and uninspired. Someone once compared Murray's writing to our hero Mencken's, but Mencken was a WRITER; Murray was a writer, and not a great one. By contrast, while many have lambasted Mises for what they considered his dry writing, I have always found it well thought out, lucid, un-cliché-ish [I grant you that's not a word] and [I confess] often dry. But Murray did exhibit at least one good trait lacking in Mises; Murray's writing is lively.

Both in person and in his writings, Murray was one of the most exciting and inspiring people I ever met in my life. I'm glad I had the chance to know him.