Is mankind's highest ideal to live without
incident or adventure? And if so,
when did this begin?

The excellent Andrew Lilico: More banking sector bailouts? When will the madness end?

The IMF Global Stability Report suggests that banks might be €200-€300 billion down as a result of the Eurozone crisis.  The predictable cry has arisen that this shortfall should be made up by governments.  Really?  So, let’s see.

It’s well worth a read. The previously prevailing consensus is unsustainable: banks must stand as commercial enterprises. As Andrew writes, “It’s not up to poor people to pay taxes so that rich people can be spared the consequences of their gambles and mistakes.” Quite right.

Via The Economic Role of Saving and Capital Goods – Mises Institute (emphasis mine):

What distinguishes contemporary life in the countries of Western civilization from conditions as they prevailed in earlier ages – and still exist for the greater number of those living today – is not the changes in the supply of labor and the skill of the workers and not the familiarity with the exploits of pure science and their utilization by the applied sciences, by technology. It is the amount of capital accumulated. The issue has been intentionally obscured by the verbiage employed by the international and national government agencies dealing with what is called foreign aid for the underdeveloped countries. What these poor countries need in order to adopt the Western methods of mass production for the satisfaction of the wants of the masses is not information about a “know how.” There is no secrecy about technological methods. They are taught at the technological schools and they are accurately described in textbooks, manuals, and periodical magazines. There are many experienced specialists available for the execution of every project that one may find practicable for these backward countries. What prevents a country like India from adopting the American methods of industry is the paucity of its supply of capital goods. As the Indian government’s confiscatory policies are deterring foreign capitalists from investing in India and as its prosocialist bigotry sabotages domestic accumulation of capital, their country depends on the alms that Western nations are giving to it.

The Government does not wish to balance the budget on the backs of the poorest. Fine. But let’s not kid ourselves: sustainable prosperity in the developing world will only come through capital accumulation: that is, through local, pro-capitalist policies.

It’s a notion we might pay attention to ourselves.

If the state taxes away ‘surplus’ cash, those people taxed are no longer free to save and invest that money. Apart from the disincentives to earning created by high taxes, those measures are prejudicial to saving and investing in the very capital goods which would raise real incomes for everyone.

Much the same can be said of inheritance tax. When capital goods are sold to pay taxes, the money which might have been invested in new capital merely changes hands and passes to the state. When that money funds the state’s present consumption or debt interest, new capital goods are not formed.

As for capital gains taxes, it’s becoming obvious that many increases in asset prices are due to currency debasement – inflation – so, far from taxing profits, capital gains taxes may actually erode capital by passing the poisonous benefits of inflation from investors to the state.

That is, inheritance taxes, capital gains taxes and complex “progressive” income taxes make the poor poorer than they would have been by diminishing the formation of new capital goods.

Those who are serious about raising the standard of living of the majority should not advocate higher tax rates for those with something to spare. If we really cared about the poor and those on modest incomes, we would slash taxes and radically simplify the tax code.

From the Mises store:

How Government in the Ancient World Tried to Deal with Modern Problems

What a fantastic way to learn ancient history: via the parallels with modern times.

H.J. Haskell was a journalist with a huge background in ancient history, and here he does what everyone has wanted done. He details the amazing catalog of government interventions in old Rome that eventually brought the empire down. He shows the spending, the inflating, the attempt to fix prices and raise wage, the infrastructure boondoggles, the gross displays of public entertainment, the welfare scams, and much more.

At every step he draws a parallel with modern times. Modern governments also destroy the money to fund the state, extend vast military empires that are unmanageable, try to control the market order, and attempt to rig political decision making in order to buy off the population.

The comparisons between then and now generate ominous lessons for our times.

This book was a smash hit when it first came out in 1939, and yet it went out of print, and hasn’t been in print in half a century.

It seems fascinating and the PDF of the book is available here.

Update: From the conclusion:

The fundamental modern social problem is the problem that Rome failed to solve. It is the problem of building a unified yet free society, with decent minimum standards of living. A society so intelligently and justly organized that there is no menacing submerged class. A society that provides reasonable incentives for the free rise of a general staff of competent managers whose ranks are always open to fresh recruits. A society that develops a social pressure under which leaders accept an enlightened and far-sighted view of their responsibilities. This is the society which the long experience of Rome sets as a goal before the modern world.

As ever, it seems, “Those who cannot remember the past are condemned to repeat it.”

Later, I’ll set out the case against inflation, which is caused by the instutional design of the banking system. For the moment, here’s a relevant article from the Cobden Centre:

Mr Smith works hard, plans carefully, and saves what he can, putting his money into a building society. He pays his credit card bills off each month, and tries to overpay his mortgage when he can.

Mr Smith got a 3% pay rise last year – inflation was only 2% – so he felt good about that. But… he doesn’t feel any wealthier.

Year after year, the government had said that the economy was growing strongly, but still, things seemed harder for his family and him. Train ticket prices up again. Heating bills rocketed when the price of oil went up, but never seemed to come down. He swears a loaf of bread and a pint of milk were much cheaper in years gone by.

When he changes his cash for Euros, he realises that his holiday in France is now unbearably expensive. His tax rates didn’t go up, but still, after all his bills were paid, he seemed to have less and less spare cash than he remembers a few years ago.

There are Mr Smiths everywhere. Careful folk, who plan, save for a rainy day and have a sense of personal responsibility.

Smith is the target.

Read the rest of the article.

Via The TaxPayers’ Alliance – Economics 101: The IFS spreadsheet doesn’t tell us what policy choices are best for the poor:

Suppose you invented a policy, some kind of economic miracle, which doubled the incomes of the poorest ten per cent of families without the Government spending a pound.  That would reduce benefit spending.  It would also increase tax revenues from the poorest.  The same method that the IFS are using in their reports would show the effects of that policy as horribly regressive, cutting spending on the poor and shifting the fiscal scales against them.

Of course that is an extreme and artificial example.  But it shows the big problem with the IFS analysis, which essentially assumes that the fortunes of the poor add up to the amount of Government money spent on them.