Friday, May 31, 2013

Jim Rogers Endorses Key Localist Concept

How do you stop government and the banks associated with it from gaining more and more power over time?   According to the philosophy of government called Localism, one of the most important things you can do to insure that is to separate money from government.   That is, government is not permitted to mint its own coin, or issue its own currency, or make any coin or currency issued by a private entity a legal tender.   Nor is it permitted to use the tax code to discriminate among brands of private money which are of silver, gold, or other metals of intrinsic value.  

In a localist view of money, government's role is limited to making sure contracts are enforced. That is, when a private mint says that a certain type of coin contains one ounce of .999 pure palladium,  then the government is there to protect against fraud should the mint try to alter the content of those coins or unauthorized (by the private mint) persons attempt to make fakes.

It now appears that investment guru Jim Rogers sees things in a very similar way.  This article on Zero Hedge contains numerous Jim Roger's quotes about money which demonstrates that Rogers takes a very similar view of things, if not from the perspective of limiting government power, at least from the perspective of keeping money sound.   Only a functioning free market in money can guarantee sound money, not government promises.

Here is a key question and answer:

FM: You have become very favourable towards competing currencies as a solution to the crisis of fiat money.
JR: That’s the only solution that has ever worked long term. Nothing has worked a long time – including gold, silver, seashells, cattle. Nothing has worked long term except that you choose your money.
That is what Localists say.  Only you being able to choose your own money will keep money sound, and only you choosing your own government will keep government sound. No paper promises about how a central government is going to protect your rights will protect your rights.  Rather, guaranteeing the ability to leave the jurisdiction of a government which is not to your liking to one that is more to your liking will protect your rights.   And the more localized government power is, the lower the transaction costs of escaping bad government is, this forcing government into the disciplining power of the marketplace.
Centralizing control over money takes it out of the hands of individual choice and makes it harder to escape bad money.   Centralizing government power takes it out of the hands of individual choice and makes it harder to escape bad government.

Thursday, May 16, 2013

The Localist Solution for IRS and Taxation Abuse

It is of course outrageous that the IRS selectively targeted groups liable to be hostile to the administration for special scrutiny.  But this is by no means the only such incident of its kind.   As this article reminds us, almost all administrations since the 1970s have done something similar.  The right wing media tries to convince people the problem is Obama, just as the left wing media in the 1970s tried to convince people that the problem was Nixon.

They are both wrong. The problem is not merely the man, the problem is that the very purpose the tax system was designed for is abusive.   It is designed to allow for the federal government to reach its tentacles into the lives of each and every citizen to either reward them with favors or hassle and punish them.   Where as most political commentary today does not even correctly describe the problem, localism provides the answer.

Consider that we have a fiat currency.  Localists are opposed to fiat currency, but if a nation has one, there is no need whatsoever to tax either the income or the purchases of its citizens.   They could simply print the money they needed every year.   So long as the growth in the economy matched the spending, the value of the currency would not even necessarily fall any faster than ours has.   Income taxes are not needed to fund the national government.  They were not needed prior to 1913, when tariffs did the job, and they surely have not been needed since we severed the last link with the gold standard in the early 1970s and we could print fiat at will.  We this do right now for forty cents of every federal dollar we spend.

Income taxes on individuals are not needed to fund the federal government and I believe that they are not even intended to do so.  Instead, the purpose of an income tax is to give the central government power over each individual citizen, so that its minions can reward who they wish and punish who they wish.   Congressmen will have favors to sell with tax breaks.  The executive branch can instill fear and silence people who get too far out of line.    It is a tool of control rather than a necessary tool for funding the government.  It is a way for them to put their finger on you.

Some people think the solution is the so-called "Fair Tax."  It isn't.   It would just turn the IRS from an agency which audited your income to one which audited your spending. There are other problems with it as well.  For a more through deconstruction of the tax, there is the last half of this audio.

Given that taxation is necessary, and I know there are some who disagree but that is a different discussion, what system of taxation is least prone to abuse?     In localism, individuals cannot be directly taxed by the federal government, whether via income or sales taxes.   Nor can corporations which do business in only one state.  The Federal government can only be funded by taxes on multi-state corporations, tariffs, and contributions from the states, who would pay for their share of the excess costs.

Naturally this arrangement will hold spending down, and turn the states from lap dogs for the federal government to watch dogs over them.   But the best thing about the arrangement is that individual and small business is thus shielded by the state from the federal government.   The relationship between the federal government and the individual becomes much more like it was prior to 1913- they did not even know you existed unless you sought them out for something, or engaged in interstate commerce.

The astute reader may then ask what will keep state governments from abusing income tax laws or sales tax laws?  Isn't it strange how even now we don't hear about the same magnitude of abuses and problems on state sales or income taxes as we do federal taxes?   This is particularly true of small states. California has had some problems, but the Localist opinion is that California for one example, is too large and diverse to be run effectively from a single capital and should be split up.  
The truth is that the individual has much more power to resist abuse by state tax agencies than they do federal ones.   The government officials are closer, one's elected representatives are more accessible and easier to un-elect on a budget, and most of all the magic of the market place is at work.   As a last resort, you can simply leave the jurisdiction of a state which abuses its taxation system.   It is much more difficult to leave a country.   Basically localism lowers the transaction costs of escaping bad government, which sets the market place to work producing better government.

Changing who runs a system that is designed to mete out rewards and abuse won't stop the abuse.   Nor will shifting the abuse channel from oversight of income to oversight of expenditures.   The closest we can get in this imperfect world to fixing it is shielding individual citizens from taxes by the federal government and making all such taxes subject to the market place by collecting them at the state, or even local, level.  That's the localist answer.