What About the Roads? The Folly of Socialism

By their fruits ye shall know them. Do [men] gather grapes of thorns, or figs of thistles? Even so every good tree bringeth forth good fruit; but the corrupt tree bringeth forth evil fruit. A good tree cannot bring forth evil fruit, neither can a corrupt tree bring forth good fruit. — Matthew 7:16-18

Whenever people talk about anarchy, the two straw men arguments that people present are: “What about the roads?” and “What about the poor?” Generally, liberals use a number of logical fallacies when talking about free markets. They love to use arguments that appeal to emotions such as: appeal to pity, appeal to spite and wishful thinking. On one hand, they assume that they are correct, because they view themselves as the most virtuous people. On the other hand, they think that free market proponents are evil and selfish, but they don’t present any proof for these assumptions.

Hence, we end up with the popular tactic called the false dilemma, which essentially boils down to some argument “what about the …” and using that appeal to excuse the violence. In these state religions there is no real contemplation; rather any argument or appeal is used to excuse or initiate violence against those who do not agree.

As anarcho-capitalists (ancaps) we reason that the initiation of violence is morally wrong. Furthermore, if a system is created and enforced with violence, it is necessarily evil, no matter what its stated ideals. Social safety nets and charity that rely on violence, theft, laziness and dishonesty are evil. If such systems are evil, how much good can you create with evil?

Stop Aid And Institutionalized Charity

Most of what passes for aid and charity is a state-run con job that steals money and gives it to the people administering the system. In many cases, the results are extremely negative; it destroys the lives of the people that it is trying to help.

The most egregious example of this scam is international aid. Or, as Doug Casey so eminently said, “Foreign aid might be defined as a transfer from poor people in rich countries to rich people in poor countries.”

To further define, first the money is stolen from taxpayers in a “richer” country and then is “given” to a “poor” country. They cannot actually use this money, and the money almost never enters the country (usually siphoned off by that government that people keep saying we need). Rather, they are forced to buy services and equipment from the donor country that they do not need or cannot use — usually further distorting the economy of that country. A few years ago, I worked on a project involving European foreign aid and a few African countries. The money came from European taxpayers, but most of it ended up at an American University and at the private consulting company of a lecturer at said American university.

For a while, it looked like most of the money would end up there and with a few multinational IT companies. I know someone who pointed out these facts to some of the donors; it caused a minor diplomatic incident. In other cases, foreign aid is used to dump grains in poor countries. When that happens, it pushes the price of grains to below their production cost. This forces more farmers to stop farming. Usually, the grains rot or are used to produce cheap alcohol. So International aid is a scam deliberately created to make the sheeple feel virtuous, steal money and funnel it into politically connected businesses.

All of the stolen money being forced into charity has become profitable for narcissistic do-gooders as it prolongs the problems they are claiming to solve. In the worst cases, NGOs are either fronts for intelligence agencies or lobbyists. In the late 90s in South Africa, a lot of foreign NGOs arrived and set up shop. The problem was that they were lobbyists. At a critical time, they were able to influence a lot of laws or, more importantly, the interpretation of them.

Government Involvement In The Economy Never Helps

Johannesburg still has a big problem with murder, and most murders are done with unlicensed guns that were dumped by foreign governments during the various wars.

Due to the action of the magical-minded anti-gun brigade, it is now almost impossible to own a gun; and if you use one and kill in self-defense, you go to jail for murder. Another big scandal during the early 90s involved money donated by the Swedes to anti-apartheid campaigners; most of the “aid” helped a small-time politician live the life of a rock star. In the worst cases, the aid money was donated to violent criminals who loved killing people and putting bombs in public places. In more benign cases, NGO money is used to give spoiled rich kids time to slum it in Third World countries, giving all of their valuable life experience to the poor. Those are the lucky ones. Most people who work for charities are in fact slave laborers, doing all the hard work while the directors and managers live the life of ease.

End Welfare…To Help People

Another social safety scam is welfare, known colloquially in the United Kingdom as “the dole.” Besides the moral issue, where money is stolen from hard-working people and is given to lazy f**kwits who have never tried to find a job; the system does not work. The state is essentially incentivizing and paying people to become poor. Due to the bureaucratic incentives, it actually pays more to be more in debt and have more children and never get a job. The net result has been a massive increase in poverty within the U.K. Yes, everyone can afford to eat and watch reality television for the moment, but there are large parts of the country functioning like the dystopian future of Idiocracy. It is the one of many major failings of the anti-individual and anti-freedom concept of democracy, that those who live off welfare and have never earned an honest cent in their lives, are actually encouraged to vote. It is no surprise that nothing actually changes, particularly when the parasites outnumber the productive (as they currently do in 11 of the 50 States in the U.S. where there are more on welfare than who have jobs).

When anarcho-capitalists mention the problems of the state enforced monopoly of welfare, they are accused of being heartless; those who accuse us of being greedy have not even spent five minutes contemplating ethics. They just want to feel secure and self-righteous without the discomfort of self-examination. How can it even be called charity when the money is stolen under the threat of violence?

So are there any free-market, voluntary alternatives that encourage capital formation and help the poor?

Free-Market Solutions

Of course. There are actually several: Some are not known; others get more bad publicity.

One of my favorites is called a stokvel; it has a long history in the place of my birth, South Africa, and was very popular during the apartheid era, as many people could not open bank accounts. It is a type of informal, invitation-only investment club or rotating credit union. It generally needs more than 12 members to function. In its simplest form, members contribute on a weekly, fortnightly or monthly basis. At each meeting and on a rotating basis, a different member receives all of the contributions. They are free to use the money for whatever they want. Besides the financial aspect, the stokvel operates like a support group or a home church. The members are friends and family; the meetings have a social aspect where they eat drink, dance and sing together. It is almost like a church, but not like this kind of church in the United States (You won’t believe what you see in the video below.)

Thankfully, things like that don’t exist outside of the United States (or on a much smaller level).

But with stovkels, few people steal from the members. The best part of this system is that it works without banks, and the members are able to leverage much greater amounts of capital.

Another free-market alternative is grouped under the umbrella term “microfinance.” Essentially, these are relationship-based banking and financial services for those who do not have access to banks. Through the financiers, poor or nearly poor people have access to loans, savings, insurance and fund transfers. By using these services, a “community” is able to leverage greater amounts of its own capital. By using the capital to expand their business, everyone becomes richer. The lender earns money by lending his savings to responsible people, and the borrower is able to expand his business and earn more money. Everyone gets richer, which puts more money in the community that can be used for further expansion.

People are poor because of a variety of reasons. One reason that is rarely mentioned is that without capital, it is extremely difficult to start new businesses, which are used to leverage the local resources (and why TDV often features tremendous business opportunities in foreign, developing countries). By pooling local capital together and keeping the free-market incentive of profit, even poor communities can bootstrap themselves to greater wealth. Unfortunately, a lot of these hero financiers are depicted as loan sharks in popular culture (run by the financial elites).

Thanks to the Internet, most people are familiar with similar business models. Thanks to sites like Kickstarter and Indiegogo, the crowd funding model has become a very popular method to create start-ups. People with ideas can use a site’s platform to create a campaign to find funding. If they meet or exceed their funding requirements, they receive the money. Those who contribute will receive various rewards based on how much they donated. Unfortunately, due to the success of this model, the state and patent trolls have gotten involved. They will eventually legislate it and litigate it out of existence (or herd it into the Bitcoin economy).

Keynes: Destroy Savings For Prosperity!

One of the fallacies promoted by the Keynesian consumerists is that savings are harmful to the economy, because the money sits in the banks and does nothing and, therefore, the gross domestic product (another macro-economic fallacy) does not grow. Anyone with a little knowledge of fractional reserve banking will know that this is patently untrue. With more free market models, previously mentioned, poor or nearly poor communities can concentrate and leverage what sparse capital that is available to them. By following profit incentives and providing a useful good or service, these entrepreneurs will enrich their own lives, the lives of their customers and the community. Forced charity has the opposite effect; no one grows wealthy, except the people prolonging the problem. The time preferences of the recipients shortens and capital within the community is misallocated, resulting in greater impoverishment and poverty. Besides, stealing money at gunpoint and giving it to others is, to any thinking individual, just wrong.

(As part of Darth Monti’s save Italy plan, a lot of stolen money was forced into a start-up fund in the south of Italy. They are now having trouble finding where all of the funds were sent; only the state can turn a winning business model into a vehicle of theft and corruption.)

–Alexander Jousse
The Dollar Vigilante

Commemoration Of A Canard

“I have directed Secretary Connelly to suspend temporarily the convertibility of the dollar into gold.” — Richard M. Nixon, Aug. 15, 1971

In the spirit of commemoration, we cannot allow the 42nd anniversary of Nixon’s speech go without comment. Addressing the Nation to “outline a new economic policy,” he failed to disappoint: Wage and price controls were instituted, the automobile industry was browbeaten into reducing prices and a 10 percent tariff was assessed on all imports. All this occurred before Nixon announced his grandest exploit: the termination of U.S. commitments to exchange gold for dollars with foreign governments.


Previously, the Federal Reserve’s ability to issue new money was limited by the threat of depleting the government’s gold reserves. Printing too many dollars led foreign governments to start favoring gold over holding depreciating U.S. dollars. Nixon’s actions (which proved not to be temporary) ended the last vestige of a gold standard, erased all limits on the unchecked printing of money and effectively ended the world’s currency system (known as Bretton Woods) in place since World War II.

Whether Nixon was sincere in his belief that these actions would truly, to use his terms, “nurture and stimulate” the economy or if, perchance, he knew better and deceived the American people, we have no comment. We reserve our commentary not to purpose, but to effect.

And the effect was an unmitigated disaster. Nixon promised Americans that any talk of inflation with an unconstrained Federal Reserve was a “bugaboo” and that his actions would actually “stabilize the dollar.” (If you wish to listen to Nixon in his own words, the latter part of his speech can be viewed here.) According to him, the risk of Americans paying higher prices was extremely limited:

If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

Despite these assurances, inflation became a hallmark of the 1970s as the unimpeded Federal Reserve zealously increased the money supply. The year 1973 experienced inflation of 9 percent, 1974 brought 12 percent, and the decade was closed out with a peak inflation rate of 14 percent in 1979. Since the date of Nixon’s speech, the dollar has lost 83 percent of its value. One dollar then is worth 17 cents today. What will it be worth tomorrow?

We cannot say with certainty, for while the creation of money causes inflation, the effect does not correspond fully in magnitude. Nor is it immediate. In fact, the lag between the expansion of the money supply and the onset of inflation could be years. If so, what expectations are reasonable based upon the Federal Reserve’s actions since 2008? The scary answer can be found in this chart depicting U.S. monetary growth.

[Editor’s Note: If inflation’s effects were immediate, people would catch on pretty quickly and they wouldn’t stand for it. The average American is a little too dim on real economics to understand why creating new money from nothing is a horrible idea, and the political class is far too evil not to exploit this ignorance so they can rip off dollar holders. The dollar will continue on its accelerated slide to zero while gold will go up. So keep trading those Federal Reserve Notes for gold, but be sure to internationalize your gold holdings. Click here to learn more about how TDV can help.]

To tweak a famous quote by Winston Churchill, wiping away the last traces of the gold standard was not a new beginning for U.S. monetary policy. It was not even the end of the beginning. But it was, perhaps, the beginning of the end.

-Christopher P. Casey

Christopher P. Casey, CFA®, CPA is a Managing Director at WindRock Wealth Management (www.windrockwealth.com).  Using Austrian economic theory, Mr. Casey advises wealthy individuals on their investment portfolios to maximize their returns and minimize risk in today’s world of significant government intervention.  Mr. Casey can be reached at 312-650-9602 or at chris.casey@windrockwealth.com.

The State Of The State: How Mexico’s New Currency Control Laws Will Backfire

[Editor’s Note: The following post is by The Dollar Vigilante legal correspondent Jim Karger and TDV Acapulco group moderator James Guzman. Nothing herein should be construed as legal advice. Consult a qualified attorney regarding your particular situation.]

Everyone we know who has chosen Mexico as a place to flee the police states of the United States and Canada utters one common theme: “I will never go back.” Yes, it really is that much better here. Government in Mexico exists, to be sure; but it has been slow to acquire the desire and sophistication to put its boot heel on the neck of its citizens.

Yet, as Mexico becomes more First World, so has its government. While light years behind the USSA in intrusiveness, Mexico is following briskly in the footsteps of its northern neighbor.

Just a couple of weeks ago in the gym where we work out in San Miguel de Allende, a member got sideways with the club over fees. Rather than work it out or just take his business elsewhere he went to government and complained about “code violations.” This retaliation resulted in city officials inspecting and ultimately threatening the club’s ownership with fines and worse — all resulting in at least one employee being fired (i.e., sacrificed), and the club shut down for two consecutive Saturdays ostensibly to “retrain” its employees. That kind of in-your-face use of government as a personal weapon was unheard of here five years ago. Five years ago, he would have just taken his business elsewhere.

And Mexico is not alone among emerging states following the path of bigger and more intrusive. TDVer and Managing Partner of Galt’s Gulch Chile Ken Johnson learned the hard way the same lesson recently when trying to travel from Paraguay to Chile. He has made the trip many times. But this time, the airline agent pulled out a book and pointed to a clause that says if a passenger can’t show a Chilean ID card, doesn’t have a return ticket out of Chile or doesn’t have the money on him to buy a ticket to return, he can’t enter. [Editor’s Note: TDV Editor-In-Chief Jeff Berwick regularly prints up a fake “onward” ticket because this has happened to him dozens of times around the world.] Ken scrambled and got back to Santiago, but not without a grim reminder: “We are the state. We control you.”

Here in Mexico, the government continues to wage war with the drug cartels at the behest of — or more likely a threat by — the United States. Absolutely ineffective in curtailing the flow of drugs into the United States, Mexico has taken a different tact: Control the U.S. dollars coming back into Mexico from the sales of those drugs – specifically, making it difficult, if not impossible, to use U.S. dollars or to convert them to spendable Mexican pesos. Net-net: The war on drugs has transmogrified into the war on cash with significant collateral damage.

Mexico’s recent currency controls are nothing new. Governments always militate to complete control. Because one half of every commercial transaction is money, the easiest way for any government to control its population is to control its money. By specifically limiting what transactions can be made in cash, government gets control as well as its cut (or “mordida,” as we call it here in Mexico). To those ends, Italy recently banned cash transactions over €1,000 and Spain prohibited transactions over €2,500.

The United States, likewise, has been trying to stamp out cash transactions, using a more incremental approach, i.e., requiring banks to report customers who present more than $10,000 in currency or engage in undefined “suspicious transactions.” To learn more, watch this video in which Professor Joseph Salerno breaks down the hidden war central planners have been waging on the free markets for decades:

Various States are getting into the act, too. Louisiana, for example, passed a law making it illegal for consumers to pay for secondhand goods with cash, fearing there might be a lost sales tax dollar.

Every government needs a bogeyman to justify breathless tirades and resulting regulation. And in Mexico, the bogeymen are the drug cartels, which have ironically been created by the U.S. government’s immoral and unnecessary war on drugs.

In response, effective Sept. 14, 2010, Mexico capped the amount of dollars foreigners can exchange for pesos in banks and money exchange establishments to no more than $1,500 U.S. dollars per month. Until recently, the law has been mostly ignored, but no more. The government has notified banks and businesses they will be held accountable if they violate the law. And recently, banks here have instituted tighter controls, with several financial institutions limiting exchange up to $300 U.S. dollars in a single transaction, and others refusing to accept or exchange U.S. dollars in any amount without prior government approval.

Last year, the Mexican government went even further, limiting the use of cash in real estate transactions. Indeed, cash payments of more than a half million pesos ($38,750 U.S. dollars) for real estate are now forbidden; and cash payments for automobiles, planes, boats, jewelry, precious metals, watches, precious stones, artwork, gambling tickets, lottery tickets, raffle tickets, payment of related prizes, transfer of shares or equity for more than 200,000 pesos ($15,500 U.S. dollars) are likewise forbidden. The law carries a minimum penalty of five years in prison and a fine of 4,051,450 pesos ($316,000 U.S. dollars) or 10 percent of the prohibited transaction, whichever is greatest.

Businesses — e.g., restaurants, bars, hotels and retail stores — may now accept a maximum of $100 U.S. dollars in cash per transaction, with no restriction on the number of transactions per customer. However, many businesses have begun refusing accept U.S. dollars at all. After all, what are they to do with U.S. dollars if their banks will not accept them in quantity?

Finally, the new law also requires notaries, real estate brokers and other dealers to report to government, specifically Mexico’s federal tax authority, the forms of payment for transactions above specified limits. Financial institutions will be required to report monthly credit card balances in excess of 50,000 pesos ($3,875). This provision was technically enforceable June 17, 2013, but the rules and regulations have not yet been published. Our lawyer in Mexico who specializes in business and real estate transactions advises us that we should expect it to be in full effect with all rules in place as soon as October of this year. In the meantime, banks have begun clamping down on receiving U.S. dollars in excess of that permitted by law. Notarios in Mexico — quasi-government officials who supervise and approve most sales transactions of size — will likewise fully comply, giving the Mexican Internal Revenue Service (Hacienda) open season on all taxable transactions, many of which have gone unnoticed under former law.

What does it all mean going forward? Like most things fomented by the state, the cure may prove worse than the disease, to-wit:

  • Mexico’s attempt to stamp the U.S. dollar out of existence in Mexico will likely result in the rise of U.S. dollars as a secondary currency that is never converted to pesos, just as dollars in the United States are rarely converted into a real currency — e.g., gold, silver and bitcoin. Mexico fails to recognize that all fiat currencies are lies agreed upon and that it doesn’t matter who printed the paper or what color it is. It works as long as people agree to accept it in exchange for goods and services.
  • Other currencies like bitcoin may take hold, replacing both the peso and the dollar.
  • Gold and silver, long secondary currencies in Mexico, will become more prevalent in commercial transactions.
  • Giant banks will continue to launder money for anyone and everyone because the penalties, if any, for doing so will fall woefully short of discouraging the unwanted conduct.

Bottom line: States are states. States do what states do: attempt to control and tax all those within their borders; and, in doing so, they fail to heed Frederic Bastiat’s inviolable dichotomy of the seen versus the unseen. Mexico is not different. Indeed, currency controls are just one step being taken to make the rich richer and to empower the state. At the same time Mexico is implementing these controls, it is planning to boost its tax coffers by an extra $50 billion a year by extending sales tax coverage to food and medicine and by starting to tax capital gains. Terrorist chatter continues that the next step in governments’ control sequence will be a combined currency among the United States, Mexico and Canada.

But this effort by the statists to kill the cash market in Mexico will fail. On the contrary, the cash market for goods and services will be expanded due to these government incursions. As discussed above, more, not fewer, transactions will take place in pesos, gold, bitcoin and even U.S. dollars that will never see the inside of a bank and will remain unknown, unrecorded and untaxed. The Mexican people have long been innovative and resilient when it comes to defeating government intrusion into their lives. We may be unsure of every avenue they will use to avoid this latest attempt by government to interfere, regulate and control their lives and their money; but we are comfortable they will succeed.

If you live in Mexico, just be sure to keep the majority of your assets well outside of Mexico and well beyond their capability to find. Contact TDV Offshore for more on that. And, preferably, like Berwick, don’t become resident if you live there. Be a tourist. Get a second residency and passport in some backwater country where they are years from these kind of transgressions.

We often give the United States and all Western governments the bird. Mexico is still infinitely freer and safer than the northernlands of North America but now we must also address the Mexican government: Chinga tu madre, criminales!

–Jim Karger and James Guzman

Jim Karger is a lawyer and frequent contributor to The Dollar Vigilante. He has represented American businesses against incursions by government and labor unions for 30 years. In 2001, he left Dallas and moved to San Miguel de Allende in the high desert of central Mexico where he sought and found a freer and simpler life for him and his wife, Kelly, and their 10 dogs. He is TDV’s San Miguel de Allende concierge and his website is found at www.crediblyconnect.com.

James Guzman is TDV’s Acapulco group moderator and an anarcho-capitalist. He manages AcaCondos and Las Torres Gemelas Private Suites (www.LTGPS.com). He also helps TDVers with other property needs in Acapulco and pretty much anything else you can think of.