“Those who seek absolute power, even though they seek it to do what they regard as good, are simply demanding the right to enforce their own version of heaven on earth. And let me remind you, they are the very ones who always create the most hellish tyrannies. Absolute power does corrupt, and those who seek it must be suspect and must be opposed.”
–Barry Goldwater
September 13, 2024 – Odds on betting sites are up. Stossel’s site, which we cited Tuesday, shows 52% of the people laying down their money think Kamala Harris will win following her debate performance.
Beyond the bizarre sound byte, repeated ad nauseam, from Trump articulating his belief that Haitian migrants are eating cats and dogs in Ohio, voters “say” they are most concerned about the economy and immigration when surveyed. In polls, Trump still has a lead in both policy areas… but this election isn’t about policy.
And like all bets… it’s not a done deal.
We believe investors should be prepared for a lengthy, drawn-out series of court cases, and for either party to ultimately prevail.
Today, our long-time friend Lew Rockwell, founder of the Mises Institute and publisher of the opinion site LewRockwell.com, explores how social trends on “the left” are destined to become more mainstream regardless of the election outcome.
Lew draws some fairly stark conclusions if he is proven to be correct. Small caveat before, we’re not fans of the word “woke.” But that’s a debate for another day. Enjoy ~~ Addison
The Woke Plot To Destroy Our Economy
Lou Rockwell, Mises Institute
“Woke” people claim that they want to wake up racial and sexual minorities to the way they are being discriminated against. Because of past and present exploitation, blacks and other “protected” groups are not getting what rightfully belongs to them. The solution to this is that the better off, especially if they are white, should have their wealth and income seized and given to those they are exploiting.
The woke position rests on a fundamental fallacy. This is that there is a fixed amount resources, so that if the rich have more, the poor have less. But this is wrong. Resources in the free market are not a fixed sum. So long as the economy is growing, everybody can benefit. The ‘protected’ can do better without taking away what the rich have earned. The economist Paul Rubin, who died last month, gives a good account of the fallacy: “Karl Marx called his system ‘scientific socialism’ Modern leftists advocate a similar ideology and call themselves ‘woke’ to indicate that they understand the world better than the rest of us. Yet the worldview of Marxists and woke leftists alike is fundamentally primitive.
Folk economics is the economics of people untrained in economics. It is the economic view of the world that evolved in our brains before the development of the modern economy. During this period of evolution, the economy was simple, with little specialization except by age and sex, no economic growth, no technological change, limited trade, little capital, and warfare between neighboring tribes.
Zero-sum thinking was well-adapted to this world. Since there was no economic growth, incomes and wealth didn’t grow. If one person had access to more food or other goods, or greater access to females, it was likely because of expropriation from others. Since there was little capital, a ‘labor theory of value’—the idea that all value is created by labor alone—would have been appropriate, and there was little need to protect capital through property rights. Frequent warfare encouraged xenophobia.
Adam Smith and other economists challenged this worldview in the 18th century. They taught that specialization of labor was valuable, that capital was productive, and that labor and capital could work together to increase income. They also showed that property rights needed protection, that members of other tribes or groups could cooperate through trade, that wealth could be created with the proper incentives, and that the creation of wealth would benefit everyone in a society, not only the wealthy. Most important, they showed that a complex economy could work with little or no central direction.
Marx’s economic system was based on the primitive worldview of our ancestors. For him, conflict rather than cooperation between labor and capital defined the economy. He thought that the wealthy became rich only by exploiting the poor, that all income came from labor, and that the economy needed central direction because he didn’t believe markets were good at self-correction. The collapse of the Soviet Union, the largest and most expensive social-science experiment ever conducted, proved Smith right and Marx wrong.
Members of the woke left want to return to policies based on this primitive economic thinking. One of their major errors is thinking that the world is zero-sum. That assumption drives identity politics, which sees, among other things, an intrinsic conflict between blacks and whites. The Black Lives Matter movement and Critical Race Theory foment racial antagonism and resurrect xenophobia. Leftists vilify ‘millionaires and billionaires’ like Bill Gates and Elon Musk as evil and exploitative. They should recognize them as productive entrepreneurs whose innovations benefit us all.
Dislike of the rich makes sense in a world where one can become rich only by exploiting others, but not in a society full of creativity and useful inventions. Changing tax laws to soak the rich makes sense with a labor theory of value, but not with a sophisticated understanding of continual investment and technological change.
Adopting counterproductive woke policies such as racial job quotas, high taxes, excessive regulation of business, and price controls on some goods may not send us all the way back to the subsistence economy of our ancestors. But if policies that penalize saving and investing and that involve excessive government control are adopted, social capital, wealth, and real income will decline. If we bow to this primitive ideology, there will be increased racial animosity and conflict, slow economic growth, and fewer inventions.”
You might raise an objection to this. Even if the economy is growing, and the minorities can gain without taking resources from the rich, why should they be satisfied with what they get? Can’t they demand more of the growing economic pie? The answer is that doing this will hurt them, not help them. The way in which the economy grows is by capital accumulation, and the great bulk of this takes place through the investments of the well off. Confiscation of the income and wealth of the wealthy will slow down or stop the rate of economic growth.
This will make the “protected” worse off.
The great Ludwig von Mises proposes a thought experiment that brings out this point vividly: “A law that prohibits any individual from accumulating more than ten million or from making more than one million a year restricts the activities of precisely those entrepreneurs who are most successful in filling the wants of consumers. If such a law had been enacted in the United States fifty years ago, many who are multimillionaires today would live in more modest circumstances.
But all those new branches of industry which supply the masses with articles unheard of before would operate, if at all, on a much smaller scale, and their products would be beyond the reach of the common man. It is manifestly contrary to the interest of the consumers to prevent the most efficient entrepreneurs from expanding the sphere of their activities up to the limit to which the public approves of their conduct of business by buying their products.”
There is another way in which the woke movement undermines our economy, and this may be the most serious one of all. The conjuring up of grievances encourages blacks to hate whites. Being white is regarded by many left-wing revolutionaries as evil, and murderous violence will result from this. As the great black economist Thomas Sowell points out: “Although much of the media have their antennae out to pick up anything that might be construed as racism against blacks, they resolutely ignore even the most blatant racism by blacks against others.
That includes a pattern of violent attacks on whites in public places in Chicago, Denver, New York, Milwaukee, Philadelphia, Los Angeles and Kansas City, as well as blacks in schools beating up Asian classmates – for years – in New York and Philadelphia.
These attacks have been accompanied by explicitly racist statements by the attackers, so it is not a question of having to figure out what the motivation is. There has also been rioting and looting by these young hoodlums.”
Let’s do everything we can to counter the woke plot to destroy our economy and to encourage the free market economic policies of Ludwig von Mises and Murray Rothbard. That is the way to a prosperous economy in which all groups can live in harmony. ~~Lou Rockwell, Mises Institute
So it goes,
Addison Wiggin,
Grey Swan
P.S. The Oracle of Omaha, Warren Buffett, has been shedding his two largest positions this year. He sold off half his Apple stake, which in fairness, had grown to nearly half of his investment portfolio.
More recently, Berkshire has unloaded over $7 billion in Bank of America shares. That’s billion with a ‘B.’
Following his m.o., Buffet loaded up on BoA in the throes of the 2008 global financial crisis. The whale was able to get preferred shares yielding 10% from the bank. Buffett was also seen as a hero.
The thoughtful investor might see The Sage’s big ass sales as a sign he sees danger ahead for the economy. Buffett likes sitting on cash when the storm clouds are brewing. Then when the next big crisis hits – and it will – he’s uniquely positioned to scoop up controlling interests in corporations who need the money.
In a downward interest rate cycle, banks will be under more pressure to find profits in their commercial operations.
We appreciate that Buffett, who just turned 94, continues to think long-term. We also suspect Buffett sees the writing on the wall and expects taxes to rise under the next administration.
P.P.S Today is Friday the 13th. While the superstitious may be on edge today, historically markets aren’t. Going back to 1980, the S&P 500 has averaged a 0.3% gain on the day, according to Dow Jones Market Data.
