Private Prisons: The More Americans They Put Behind Bars The More Money They Make

by Michael Snyder

How would you describe an industry that wants to put more Americans in prison and keep them there longer so that it can make more money?? In America today, approximately 130,000 people are locked up in private prisons that are being run by for-profit companies, and that number is growing very rapidly.? Overall, the U.S. has approximately 25 percent of the entire global prison population even though it only has 5 percent of the total global population.? The United States has the highest incarceration rate on the entire globe by far, and no nation in the history of the world has ever locked up more of its own citizens than we have.? Are we really such a cesspool of filth and decay that we need to lock up so many of our own people?? Or are there some other factors at work?? Could part of the problem be that we have allowed companies to lock up men and women in cages for profit?? The two largest private prison companies combined to bring in close to $3,000,000,000 in revenue in 2010, and the largest private prison companies have spent tens of millions of dollars on lobbying and campaign contributions over the past decade.? Putting Americans behind bars has become very big business, and those companies have been given a perverse incentive to push for even more Americans to be locked up.? It is a system that is absolutely teeming with corruption, and it is going to get a lot worse unless someone does something about it.

One of the keys to success in the private prison business it to get politicians to vote your way.? That is why the big private prison companies spend so much money on lobbying and campaign contributions.? The following is an excerpt from a report put out by the Justice Policy Institute entitled "Gaming the System: How the Political Strategies of Private Prison Companies Promote Ineffective Incarceration Policies"...

For-profit private prison companies primarily use three strategies to influence policy: lobbying, direct campaign contributions, and building relationships, networks, and associations.

Over the years, these political strategies have allowed private prison companies to promote policies that lead to higher rates of incarceration and thus greater profit margins for their company. In particular, private prison companies have had either influence over or helped to draft model legislation such as "three-strikes" and "truth-in-sentencing" laws, both of which have driven up incarceration rates and ultimately created more opportunities for private prison companies to bid on contracts to increase revenues.

If you can believe it, three of the largest private prison companies have spent approximately $45,000,000 combined on lobbying and campaign contributions over the past decade.

Would they be spending so much money if those companies did not believe that it was getting results?

Just look at what has happened to the U.S. prison population over the past several decades.? Prior to 1980, there were virtually no private prisons in the United States.? But since that time, we have seen the overall prison population and the private prison population absolutely explode.

For example, between 1990 and 2009 the number of Americans in private prisons grew by about?1600 percent.

Overall, the U.S. prison population more than quadrupled between 1980 and 2007.

So something has definitely changed.

Not that it is wrong to put people in prison when they commit crimes.? Of course not.? And right now violent crime is rapidly rising in many of our largest cities.? When people commit violent crimes they need to be removed from the streets.

But when you put those criminals into the hands of private companies that are just in it to make a buck, the potential for abuse is enormous.

For example, when auditors visited one private prison in Texas, they "got so much fecal matter on their shoes they had to wipe their feet on the grass outside."

The prisoners were literally living in their own manure.

How would you feel if a member of your own family was locked up in such a facility?

And the truth is that there seem to be endless stories of abuse in private prisons.? One private prison company reportedly charges inmates $5.00 a minute to make phone calls but only pays them $1.00 a day to work...

Last year the Corrections Corporation of America (CCA), the nation's largest private prison company, received $74 million of taxpayers' money to run immigration detention centers. Their largest facility in Lumpkin, Georgia, receives $200 a night for each of the 2,000 detainees it holds, and rakes in yearly profits between $35 million and $50 million.

Prisoners held in this remote facility depend on the prison's phones to communicate with their lawyers and loved ones. Exploiting inmates' need, CCA charges detainees here $5 per minute to make phone calls. Yet the prison only pays inmates who work at the facility $1 a day. At that rate, it would take five days to pay for just one minute.

Speaking of work, private prisons have found that exploiting their inmates as a source of slave labor can be extraordinarily profitable.? Today, private prisons are stealing jobs from ordinary American workers in a whole host of industries.? The following is from an article by Vicky Pelaez...

According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.

And many of the largest corporations in America have rushed in to take advantage of this pool of very cheap slave labor.? Just check out some of the big names that have been exploiting prison labor...

At least 37 states have legalized the contracting of prison labor by private corporations that mount their operations inside state prisons. The list of such companies contains the cream of U.S. corporate society: IBM, Boeing, Motorola, Microsoft, AT&T, Wireless, Texas Instrument, Dell, Compaq, Honeywell, Hewlett-Packard, Nortel, Lucent Technologies, 3Com, Intel, Northern Telecom, TWA, Nordstrom's, Revlon, Macy's, Pierre Cardin, Target Stores, and many more. All of these businesses are excited about the economic boom generation by prison labor. Just between 1980 and 1994, profits went up from $392 million to $1.31 billion. Inmates in state penitentiaries generally receive the minimum wage for their work, but not all; in Colorado, they get about $2 per hour, well under the minimum. And in privately-run prisons, they receive as little as 17 cents per hour for a maximum of six hours a day, the equivalent of $20 per month. The highest-paying private prison is CCA in Tennessee, where prisoners receive 50 cents per hour for what they call "highly skilled positions." At those rates, it is no surprise that inmates find the pay in federal prisons to be very generous. There, they can earn $1.25 an hour and work eight hours a day, and sometimes overtime. They can send home $200-$300 per month.

But of course some of the biggest profits for private prisons come from detaining young people.? Today, private prison companies operate more than 50 percent of all "youth correctional facilities" in the United States.

And sometimes judges have even been bribed by these companies to sentence kids to very harsh sentences and to send them to their facilities.? The following is?from a report about two judges in Pennsylvania that were recently convicted for taking money to send kids to private prisons...

Michael Conahan, a former jurist in Luzerne County, was sentenced on Friday to 210 months in custody by Senior U.S. District Court Judge Edwin M. Kosik II. Conahan was also ordered to pay $874,000 in restitution. [...] As Main Justice reported in August, Ciavarella, former president judge of the Court of Common Pleas and former judge of the Juvenile Court for Luzerne County, was sentenced to 28 years in prison and ordered to make restitution of $965,930. [...]

Conahan's role in the "cash for kids" scheme was to order the closing of a county-run detention center, clearing the way for Ciavarella, once known as a strict "law and order" judge, to send young offenders to private facilities. This arrangement worked out well for Ciavarella and Conahan, as well as the builder of the facilities and a developer, who pleaded guilty to lesser charges.

The arrangement didn't work out so well for the young offenders, some of them sent away for offenses that were little more than pranks and would have merited probation, or perhaps just scoldings, if the judges had tried to live up to their oaths.

Are you starting to see why private prisons are such a problem?

Hundreds of kids had their lives permanently altered by those corrupt judges.

When you allow people to make money by locking other people up in cages, you are just asking for trouble.

The more Americans they put behind bars, the more money these private prisons make.? It is a system that needs to be brought to an end.

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Assuming that all victimless crimes are banned and prisons are only a means for providing restitution to victims and families of the victim, aren't private prisons a good thing? I would rather see one of those "Harlem Shake" idiots above behind bars than a drug dealer. Getting restitution (money) for victims families is not justice. Money doesn't bring someone back from the dead. At the end of the day everyone is in it for themselves thats why private prisons are flourishing. There is no justice in this world the only thing you can do is pray and read the bible. This is one of the reasons justice should be kept pure of such perverting influences as personal benefit.

Those who enthuse over the idea of "private justice" should take heed: If government justice is perverted by profit motive, then how much more perverted would be a justice operated by private citizens or companies given the power to grind the axe of their profit motives?

The only answer is less private involvement in justice: Not a perfect answer, but better than the alternative.

Private justice doesn't necessarily mean throwing people in cages, it'd probably revolve around restitution and making victims whole, rather than robbing them and victimizing them a second time by forcing them to pay for their abuser's imprisonment.

"Government justice" is a contradiction in terms.

Oh, yes, probably not in cages. But ... such justice would tend to be in the hands of the motivated. So, as an example, RIAA would want to be in charge of private justice related to copyright infringement; and would have you making restitution for songs you didn't steal (because it's profitable to make you do false restitution), based on a claim that they can only be made whole by that false restitution.

In fact, it's because of RIAA and similar groups that you can be charged $150,000 for a song you accidentally shared. Private justice? Not a bit.

And, really, if you think these prison corporations would go away and give up on having their cages filled...well, their cages would still be filled. Their motivation for profit doesn't go away just because they're in charge of justice...

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Money Laundering

by Jeffrey Tucker

The story from The Daily swept through the Internet with blazing speed. The report: Criminals around the country are stealing an inordinate number of bottles of Tide laundry detergent. This is not because the criminals plan to go into the laundry business. There is not a "grime wave." It seems that these Tide bottles are functioning as a store of value, even a form of money, within many black markets.

As the story memorably puts it, on the street, Tide is known as "liquid gold." Harrison Sprague of the Prince George's County, Maryland, Police Department says that his undercover agents are asking for drugs but being offered Tide instead. They are busting drug rings and finding more blue liquid than white powder.

To be sure, some news outlets are raising some questions about this story, pointing out that Tide theft doesn't seem to be a national problem. For my part, I have no problem with the credibility of the report. In fact, it seems entirely reasonable that new forms of currency are popping up in black markets. This is why stores are starting to add anti-theft devices to the bottles.

The driving force here is a war on the dollar. Carrying around vast amounts of cash raises questions among the authorities. It is increasingly difficult to "wash" the money through the banking system. And in any case, dollars are always losing value. So it makes sense to look for other ways to facilitate exchange. This is hardly unusual. The digital economy is getting ever better at bartering services and software as an alternative to letting dollars change hands.

But if we are to think of Tide as money, that means its use goes beyond the barter stage. People aren't acquiring Tide to wash their clothes, but rather to trade for other things, like drugs. In a limited sense, then, Tide is being used to facilitate indirect exchange. That is to say, it has become a money.

Actually, there are many conditions in which alternative monies can come to exist. You can see this among kids when they trade candy following Halloween night. The kids will gather and first begin to barter, but as the trading term continues, one candy will emerge as the one to get ? not to consume, but to trade for other things. For a brief time, one candy will emerge with monetary properties. As trading comes to an end, that very candy will be demonetized and re-emerge as a consumption good.

Money is frequently reinvented under the right conditions, emerging from a commodity currently in use. Cigarettes become money in prison. War zones become hotbeds of currency competition too, in anything from liquor to matches. Throughout history, money has taken many forms, from shells to salt to animal skins. The usual qualities of a commodity that economists say make for good money: durability, divisibility, high value per unit of weight, uniformity of quality (fungibility), recognizability.

Tide doesn't qualify in every respect. However, it is durable in the sense that it doesn't spoil. It is divisible. The tamper-proof top provides a measure of security against counterfeiting. True, it's not as good as a precious metal, but traders aren't worried about that. They are just looking for some marketable commodity that can take the place of the dollar, which has become extremely risky to use for blatantly illegal purposes.

The government's war on the dollar as a means to fight the drug war wins nothing in this case. So long as there is a market, so long as there is demand and supply, there will be pressure to come up with some means to make indirect exchange possible. Or so Ludwig von Mises explained in his treatise The Theory of Money & Credit, written in 1912, at the dawn of the central banking age.

One major problem is Tide doesn't have a stable supply, so its value as a means of exchange will be subject to inflationary pressures. The more that enters the black market, the more its price falls relative to the goods and services it can buy ? the inflationary tide could rise and rise.

But as you think about it, as bad as Tide might be as a currency, there is a sense in which the dollar is actually worse. It costs less to print on linen than it does to make a bottle of laundry detergent, meaning that the dollar is more likely to be inflated into oblivion. And whatever is wrong with detergent, if the price falls low enough, the producer doesn't have any reason to keep making it. Profit and loss signals govern how much is produced. Its physicality alone imposes some limit ? and this is not the case for the Fed's data entries that it calls money.

The monetization of Tide demonstrates something critically important about the institution of money itself. Its existence in the market owes nothing to the government or some social contract. Its emergence, as Carl Menger argued in the late 19th century, grows out of market exchange. Selecting which commodity is to become money is a matter for entrepreneurs and market forces.

No central planner ? even one within the black market community ? decided that Tide should become money. Also note that Tide is produced entirely privately, which provides an indication of what could be true of all money today. We don't need government to select it and make it. The market can handle this just fine.

There is a final lesson to observe in this case: It is sometimes asserted that only government is smart enough to be able to select, make and manage monetary affairs. Surely, private parties can't handle this job, and the attempt will just lead to chaos. But this is not so. Private markets can do all these things, including juggling many different currencies in competition with each other and managing the price relationships between them. This goes on in the developing world all the time, with even young children learning the math and workings of the currency market.

The biggest problem Tide money now faces is a security issue. When you see the armored car driving up to the local Walgreens, you'll know that they are working on getting the problem solved. The sight can make us all nostalgic for the old days when our official money was something at least as real and useful as laundry detergent.
__
Jeffrey Tucker, publisher and executive editor of Laissez-Faire Books, is author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World. You can write him directly here.

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USA in financial meltdown -- but Israel still wants more money

US government cannot pay its debts, but Israel is asking for more cash as usual

Stocks lower as anxiety grows over looming threat of U.S. debt default

SOURCE

Stocks lower as anxiety grows over looming threat of U.S. debt default (2011)
http://www.dailymail.co.uk/money/markets/article-2019235/FTSE-PREVIEW-U-S-debt-ceiling-standoff-hits-stocks.html

FURTHER READING

Israel wants 20 Billion more (2011)
http://www.businessinsider.com/ehud-barak-20-billion-defense-2011-3

US regime promises Israel THIRTY BILLION DOLLARS from American tax-payers -- a 25% increase! (2007)
http://www.theinsider.org/news/article.asp?id=2571

Israel asks America for $12 billion dollars more (2003)
http://www.theinsider.org/news/article.asp?id=247

Israel wants $450 million extra from US for new Nazi-style checkpoints (2005)
http://www.theinsider.org/news/article.asp?id=0787

US taxes pay $700 million more aid to Israel than to all Africa (2002)
http://www.theinsider.org/news/article.asp?id=22

Israel secretly sells American nuclear weapons to China (2004)
http://www.theinsider.org/news/article.asp?id=776

Israel caught spying on America again (2004)
http://www.theinsider.org/news/article.asp?id=566

*** HACKING NOTICE ***

This article was restored from backup after being hacked -- within a week of us naming and shaming Google as a company which actively provides free hosting for a major hacking network:

http://twitter.com/theinsider_org/status/106344598795845632

It was a lame automated brute force attack, but very inconvenient for people working hard to produce this website -- and what makes this especially stupid is that this website clearly agrees with most of what the hackers in question are saying.

It's lame to attack a website for making a stand. It's beyond lame to do so when the hackers are blindly deleting articles that actually agree with most of what the hackers themselves are saying in their own activism literature.

Err, take a closer look my friends, you attacked a website that supports your cause. Doh! That doesn't mean we can't be critical, too. We say it how it is. That's no grounds for a cyber attack.

"The Insider" mailing list article, 29 July 2011.

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Central Banks: "Gold Is Money"

by Per Bylund

No, you didn?t hear them actually say it. In fact, Bernanke says quite clearly ?no? ? gold is not money. But their actions speak much louder than words. The Financial Times reports that central bank gold buying is at a 40-year high. In other words, whereas central banks have primarily been net sellers of gold since the crash of the Bretton Woods system, they are now net buyers ? and quite heavily so.

This is especially the case in rapidly growing economies such as the People?s Republic of China. So while European and American central banks are (still) selling gold and ?investing? in paper currencies/fiat monies, the developing world is going heavy on what used to be the world accepted means of exchange. As the West goes down the tubes, the ?new? economies are not only growing in terms of wealth and prosperity, but they are also adopting sound money. Meanwhile, we are getting rid of paper money?for the sake of saving money ? and replace it with digital ones and zeroes. (But at least we have ?more money? than they do!)

So if we look to what central banks do and not to what they say, then Bernanke was quite obviously lying. In case anyone thought differently?

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"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened..." - Winston Churchill

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Why the State Demands Control of Money

by Hans-Hermann Hoppe

Imagine you are in command of the state, defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that your subjects must pay you to perform the task of ultimate decision making.

To act under these constraints ? or rather, lack of constraints ? is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief. Not from your point of view, of course, but mischief from the point of view of those subject to your rule as ultimate judge. Predictably, you will use your position to enrich yourself at other people's expense.

More specifically, we can predict in particular what your attitude and policy vis-?-vis money and banking will be.

Assume that you rule over a territory that has developed beyond the stage of a primitive barter economy and where a common medium of exchange, i.e., a money, is in use. First off, it is easy to see why you would be particularly interested in money and monetary affairs. As state ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income. But rather than confiscating various producer or consumer goods, you will naturally prefer to confiscate money. Because money, as the most easily and widely saleable and acceptable good of all, allows you the greatest freedom to spend your income as you like, on the greatest variety of goods. First and foremost, then, the taxes you impose on society will be money taxes, whether on property or income. You will want to maximize your money-tax revenues.

In this attempt, however, you will quickly encounter some rather intractable difficulties. Eventually, your attempts to further increase your tax income will encounter resistance in that higher tax rates will not lead to higher but to lower tax revenue. Your income ? your spending money ? declines, because producers, burdened with increasingly higher tax rates, simply produce less.

In this situation, you only have one other option to further increase or at least maintain your current level of spending: by borrowing such funds. And for that you must go to banks ? and hence your special interest also in banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your future well-being. They will want you to stay in business, i.e., they want the state to go on in its exploitation business. And since banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a negative, if you borrow money from banks you are not only expected to pay your loan back, but to pay interest on top.

The question, then, that arises for you as the ruler is, How can I free myself of these two constraints, i.e., of tax-resistance in the form of falling tax revenue and of the need to borrow from and pay interest to banks?

It is not too difficult to see what the ultimate solution to your problem is.

You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)

Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") ? and the more so the cheaper the money commodity.

In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).

What are the effects? First and foremost, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. There exist just as many other goods around as before. This immediately refutes the notion ? apparently held by most if not all mainstream economists ? that "more" money can somehow increase "social wealth." To believe this, as everyone proposing a so-called easy-money policy as an efficient and "socially responsible" way out of economic troubles apparently does, is to believe in magic: that stones ? or rather paper ? can be turned into bread.

Rather, what the additional money you printed will affect is twofold. On the one hand, money prices will be higher than they would otherwise be, and the purchasing power per unit of money will be lower. In a word, the result will be inflation. More importantly, however, all the while the greater amount of money does not increase (or decrease) the total amount of presently existing social wealth (the total quantity of all goods in society), it redistributes the existing wealth in favor of you and your friends and acquaintances, i.e., those who get your money first. You and your friends are relatively enriched (own a larger part of the total social wealth) at the expense of impoverishing others (who as a result own less).

The problem, for you and your friends, with this institutional setup is not that it doesn't work. It works perfectly, always to your own (and your friends') advantage and always at the expense of others. All you have to do is to avoid hyperinflation. For in that case people would avoid using money and flee into real values, thus robbing you of your magic wand. The problem with your paper-money monopoly, if there is one at all, is only that this fact will be immediately noticed also by others and recognized as the big, criminal rip-off that it indeed is.

But this problem can be overcome, too, if, in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank.

Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don't even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).

What are the consequences of this monetary policy? To a large extent they are the same as with an easy money policy: First, an easy credit policy is also inflationary. More money is brought into circulation and prices will be higher, and the purchasing power of money lower, than would have been the case otherwise. Second, the credit expansion too has no effect on the quantity or quality of all goods currently in existence. It neither increases nor decreases their amount. More money is just this: more paper. It does not and cannot increase social wealth by one iota. Third, easy credit also engenders a systematic redistribution of social wealth in favor of you, the central bank, and the commercial banks within your cartel. You receive an interest return on money that you have created at practically zero cost out of thin air (instead of on money costly saved out of an existing income), and so do the banks, who earn additional interest on your costless money loans. Both you and your banker friends thereby appropriate an "unearned income." You and the banks are enriched at the expense of all "real" money savers (who receive a lower interest return than they otherwise would, i.e., without the injection of your and the banks' cheap credit into the credit market).

On the other hand, there also exists a fundamental difference between an easy, print-and-spend money policy and an easy, print-and-loan credit policy.

First off, an easy credit policy alters the production structure ? what is produced and by whom ? in a highly significant way.

You, the chief of the central bank, can create credit out of thin air. You do not have to first save money out of your money income, i.e., cut your own expenses, and thus abstain from buying certain nonmoney goods (as every normal person must, if he extends credit to someone). You only have to turn on the printing press and can thus undercut any interest rate demanded of borrowers by savers elsewhere in the market. Granting credit does not involve any sacrifice on your part (which is why this institution is so "nice"). If things then go well, you will be paid a positive-interest return on your paper investment, and if they don't go well ? well, as the monopoly producer of money, you can always make up losses more easily than anyone else: by covering your losses with even more printed paper.

Without costs and no genuine, personal risk of losses, then, you can grant credit essentially indiscriminately, to everyone and for any purpose, without concern for the creditworthiness of the debtor or the soundness of his business plan. Because of your "easy" credit, certain people (in particular investment bankers) who otherwise would not be deemed sufficiently creditworthy, and certain projects (in particular of banks and their main clients) that would not be considered profitable but wasteful or too risky instead do get credit and do get funded.

Essentially, the same applies to the commercial banks within your banking cartel. Because of their special relationship to you, as the first recipients of your costless low-interest paper-money credit, the banks, too, can offer loans to prospective lenders at interest rates below market interest rates ? and if things go well for them they go well; and if they don't, they can rely on you, as the monopolistic producer of money, to bail them out in the same way as you bail yourself out of any financial trouble: by more paper money. Accordingly, the banks too will be less discriminating in the selection of their clients and their business plans and more prone to funding the "wrong" people and the "wrong" projects.

And there is a second significant difference between a print-and-spend and a print-and-loan policy and this difference explains why the income and wealth redistribution in your and your banker friends' favor that is set in motion by easy credit takes the specific form of a temporal ? boom-bust ? cycle, i.e., of an initial phase of seeming general prosperity (of expected increases in future incomes and wealth) followed by a phase of widespread impoverishment (when the prosperity of the boom period is revealed as a widespread illusion).

This boom-bust feature is the logical ? and physically necessary ? consequence of credit created out of thin air, of credit unbacked by savings, of fiduciary credit (or however else you may call it) and of the fact that every investment takes time and only shows later on, at some time in the future, whether it is successful or not.

The reason for the business cycle is as elementary as it is fundamental. Robinson Crusoe can give a loan of fish (which he has not consumed) to Friday. Friday can convert these savings into a fishing net (he can eat the fish while constructing the net), and with the help of the net, then, Friday, in principle, is capable of repaying his loan to Robinson, plus interest, and still earn a profit of additional fish for himself. But this is physically impossible if Robinson's loan is only a paper note, denominated in fish, but unbacked by real-fish savings, i.e., if Robinson has no fish because he has consumed them all.

Then, and necessarily so, Friday must fail in his investment endeavor. In a simple barter economy, of course, this becomes immediately apparent. Friday will not accept Robinson's paper credit in the first place (but only real, commodity credit), and because of this, the boom-bust cycle will not get started. But in a complex monetary economy, the fact that credit was created out of thin air is not noticeable: every credit note looks like any other, and because of this the notes are accepted by the takers of credit.

This does not change the fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever (by savings) must fail, but it explains why a boom ? an increased level of investment accompanied by the expectation of higher future income and wealth ? can get started (Friday does accept the note instead of immediately refusing it). And it explains why it then takes a while until the physical reality reasserts itself and reveals such expectations as illusory.

But what's a little crisis to you? Even if your path to riches is through repeated crises, brought about by your paper-money regime and central-bank policies, from your point of view ? from the viewpoint as the head of state and chief of the central bank ? this form of print-and-loan wealth redistribution in your own and your banker friends' favor, while less immediate than that achieved with a simple print-and-spend policy, is still much preferable, because it is far more difficult to see through and recognize for what it is. Rather than coming across as a plain fraud and parasite, in pursuing an easy-credit policy you can even pretend that you are engaged in the selfless task of "investing in the future" (rather than spending on present frivolities) and "healing" economic crises (rather than causing them).

What a world we live in!
__
Hans-Hermann Hoppe, an Austrian School economist and anarchocapitalist philosopher, is professor emeritus of economics at UNLV, a distinguished fellow with the Ludwig von Mises Institute, and founder and president of The Property and Freedom Society. Send him mail. See Hans-Hermann Hoppe's article archives.

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Status Change: Gold Moves From Investment To Money

by Rich Danker

Big banks do not typically give themselves over to political pronouncements, but that did not stop the Erste Group from declaring on the front page of its gold report published last month, ?The foundation of a return to ?sound money? has been laid.? The Austria-based financial services provider surveys the new dynamics of gold and monetary policy and finds that not only is its price likely to continue to rise, but so will its acceptance by governments as money.

?The past months have shown a clear trend: gold has been more and more regarded as the purest form of money and increasingly less as a commodity,? writes Erste analyst Ronald-Peter Stoferle. He tracks this status change in the way financial institutions like J.P. Morgan are accepting gold as collateral, states in the U.S. are pushing to declare gold as legal tender, and foreign central banks are adding it to their reserves. Why the movement to gold per se? It is an emphasis on asset-based rather than debt-based money. As Stoferle puts it, ?The possession of gold is tantamount to pure ownership without liabilities.?

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USA in financial meltdown -- but Israel still wants more money

US government cannot pay its debts, but Israel is asking for more cash as usual

Stocks lower as anxiety grows over looming threat of U.S. debt default

SOURCE

Stocks lower as anxiety grows over looming threat of U.S. debt default (2011)
http://www.dailymail.co.uk/money/markets/article-2019235/FTSE-PREVIEW-U-S-debt-ceiling-standoff-hits-stocks.html

FURTHER READING

Israel wants 20 Billion more (2011)
http://www.businessinsider.com/ehud-barak-20-billion-defense-2011-3

US regime promises Israel THIRTY BILLION DOLLARS from American tax-payers -- a 25% increase! (2007)
http://www.theinsider.org/news/article.asp?id=2571

Israel asks America for $12 billion dollars more (2003)
http://www.theinsider.org/news/article.asp?id=247

Israel wants $450 million extra from US for new Nazi-style checkpoints (2005)
http://www.theinsider.org/news/article.asp?id=0787

US taxes pay $700 million more aid to Israel than to all Africa (2002)
http://www.theinsider.org/news/article.asp?id=22

Israel secretly sells American nuclear weapons to China (2004)
http://www.theinsider.org/news/article.asp?id=776

Israel caught spying on America again (2004)
http://www.theinsider.org/news/article.asp?id=566

*** HACKING NOTICE ***

This article was restored from backup after being hacked -- within a week of us naming and shaming Google as a company which actively provides free hosting for a major hacking network:

http://twitter.com/theinsider_org/status/106344598795845632

It was a lame automated brute force attack, but very inconvenient for people working hard to produce this website -- and what makes this especially stupid is that this website clearly agrees with most of what the hackers in question are saying.

It's lame to attack a website for making a stand. It's beyond lame to do so when the hackers are blindly deleting articles that actually agree with most of what the hackers themselves are saying in their own activism literature.

Err, take a closer look my friends, you attacked a website that supports your cause. Doh! That doesn't mean we can't be critical, too. We say it how it is. That's no grounds for a cyber attack.

"The Insider" mailing list article, 29 July 2011.

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Fireworks: Taxpayer Money, Up in Smoke

Chris | InformationLiberation

Is it wrong that all I can see while watching the firework shows is taxpayer money going up in smoke?

As much as I enjoy fireworks, I can't help but find it angering the way the 4th of July is nothing more than some hollowed out, almost sarcastic joke of a celebration. The whole tradition of celebrating freedom in America has turned into the government taking our taxpayer money and burning it in a spectacular show of largess on the taxpayer's dime.

Meanwhile, Joe Citizen in most states is not even allowed to buy fireworks himself! The very symbol of the celebration of his freedom has been banned by the very same government which uses our tax money to put on elaborate fireworks shows to tell us how great our freedoms are!

As with all things government, it's only fine if they do it. They are above the law and us commoners need to know our place and bow down before their arbitrary dictates.

What a wonderfully free country.

If you dare to skirt the law and set off your own fireworks you have the tax feeders in costume troweling around town for some poor sap to jail.

Some land of the free!

I'll celebrate our freedoms when we are actually free. I'll celebrate when the major fireworks shows are put on by private citizens and private companies which exist on voluntary trade and symbolize freedom, as opposed to some parasite government which traffics in stolen goods.

America is dead, the government killed it.

Maybe over the next few years the American people will finally say they've had enough and throw this parasite government off the same as the American revolutionaries did the British.

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Chris; Please wake up, the District of columbia is British. The land title is held by the crown of england. we lost the war for our independence. We are a British colony. Actually MOST of the cost of a Firework show goes to the INSURANCE Industry, I did shows for 10yrs until the PAPER work & the cost of INSURANCE made it NO FUN!!!! @70 percent.

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