Review of "Cogitations from Albert Jay Nock"

July 30, 2009

You can find this book here or here (pdf).

The book is a selection of Nock's writing from various other books.  In that sense, it's a bit hard to review, since the whole book is basically just quotes from other books.  Plus, I've already quoted some of the excerpts in my other reviews of Nock's books.

I think people new to Nock would be better off starting with his memoirs.

For those that have read a bit more of Nock, this book may help clarify some of their thinking.  For example, I think that I'll take two clarifications away.  The first is Nock's strict differentiation between "the State" and "government".  Despite what others say, I don't get the impression Nock is an anarchist (he's a minarchist).  He is simply opposed to the State.  Here are a couple excerpts that will make this point:

My point is, that if the State were limited to purely negative interventions which I enumerated, and had no oversize power beyond that, then it wouldn't be the State anymore.  It would then be government only . . .

I even think I could go to Prussia and be hammered around by the police awhile, if only they didn't pretend they were doing it for the glory of God or to make the world safe for democracy or some other loathsome humbug.

Second, for Nock, perhaps the worst consequence of the State the degredation of humanity.  With the State, people become servants or helpless – in short, the State causes moral decay.  In his own words:

Let us suppose that instead of being slow, extravagant, inefficient, wasteful, unadaptive, stupid, and at least by tendency corrupt, the State changes its character entirely and becomes infinitely wise, good, disinterested, efficient, sot that anyone may run to it with any little two-penny problem and have it solved for him at once in the wisest and best way possible.  Suppose the State close-herds the individual so far as to forestall every conceivable consequence of his own bad judgment, weakness, incompetence; suppose it confiscates all his energy and resources and employs them much more advantageously all round than he can employ them if left to himself.  My question still remains-what sort of person is the individual likely to become under these circumstances?

Whether you like these points or not, I highly recommend reading Nock.

What could have been

July 28, 2009

From Clusterstock:

On a deeper level, what Barofsky is running into is a core problem with the way the TARP was designed. There's simply no way the government could use capital injections to spur lending into a recessionary economy. It was bound to be used to increase capital cushions. And that's because the Treasury Department and the Federal Reserve simply lacked the political imagination to find a way to shore up the financial system without propping up zombie banks.

What else could they have done? Very simply, we could have allowed failing firms to fail, wiped out shareholders, devastated bondholders, seized depositor assets, perhaps while increasing liquidity to make sure healthy financial institutions had enough cash on hand to deal with any panic.


July 24, 2009

I don't really want to talk about this dude anymore, since the whole thing seems like a cry for attention (no doubt his career in academia is more ascendant than ever after this incident), but I think Mr Auster nails it.

If there is no market, how do you know the price?

July 22, 2009

According to this headline, "Taxpayers Didn't Get Screwed On The Goldman Warrants".

Goldman is paying back the "taxpayers" (or at least our masters) for a guarantee during severe crises.  The only way to determine whether or not we got screwed is to compare the value of the backstop with the amount that Goldman is paying back.

The problem is that the value of the backstop is unknown – that said, I'd be willing to wager a lot that the true cost of such a backstop would be well over what Goldman actually paid.  Regardless, we certainly can't say that taxpayers didn't get screwed.

Benanke hates the free market

July 22, 2009

Does it bother anyone else that Bernanke doesn't even bother to consider actually letting a market work the way it's supposed to?  I'm not sure what you call an economy in which this type of action is considered normal, but it certainly isn't a free economy.  From Calculated Risk:

It “may be appropriate” for the government and Congress to consider “fiscal” steps to support the industry, Bernanke said today. Ideas for fresh support for the market could include government guarantees for commercial mortgages . . .

You know what else might be appropriate?  Not taking other people's money to bailout different people who made bad loans.

Just remember, the Fed needs to be as independent as possible so that if Congress doesn't take "fiscal steps," then the Fed can use other means to keep the market from functioning.

The Fed at work

July 22, 2009

Great post:

Instead, my concern is that the current fiscal trajectory is fundamentally inconsistent with the Federal Reserve choosing to keep inflation under control. Both devices, ballooning of the Treasury's account with the Fed and enabling the Fed in effect to borrow directly on its own, are indeed as much fiscal measures as they are monetary. But to someone worried about the increasing co-mingling of monetary and fiscal policy, that blurring of the lines is not a reassuring development.

My specific worry is that we will eventually face a crisis of confidence in the Treasury and the dollar itself. It is true, as Bernanke suggests, that raising the interest rate paid on reserves in such a setting would be a policy tool that could be used in response. But it would be an unattractive measure to the point of perhaps being impossible to use in practice, for the same reason other countries have dreaded raising interest rates in the face of collapsing real economic activity and a flight from their currency.

I fear that the United States government is mistakenly assuming that it can borrow essentially unlimited sums without undermining confidence in the dollar itself. The real question of a successful exit strategy, in my opinion, is how do we extricate ourselves from the joint fiscal commitments currently assumed by the Treasury, the Fed, the FDIC, the Medicare and Social Security trust funds, and various and sundry implicit and explicit federal guarantees?

The answer, in my opinion, is not to be found in the Treasury doing even more borrowing on behalf of the Fed or the Fed doing even more borrowing on behalf of itself.

Questioning Bernanke

July 21, 2009

This is a pretty good line of questioning – I especially like the questions that get at the Fed's legal basis for its actions.