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From Monica's Blog…

"Merry Christmas, Sheriff!" Homeland Security Treats Texas Town to a Brand New Surveillance Drone!

“What? You Don’t LOVE It?!”

I read in today’s Wall Street Journal that Homeland Security bought Montgomery County, Texas, a $300,000 surveillance drone. Not only does this smack of both the surveillance state and crony capitalism–the US government is promoting drone sales abroad as well–but it’s an abuse of taxpayers’ money to use federal funds to pad the policing power of municipalities. Federal funding of municipal responsibilities eliminates even the indirect possibility of connecting the costs and (alleged) benefits of government spending. (In this case in particular, the benefits themselves are clearly mixed. The title of the article tells the story: The Law’s New Eye in the Sky: Police Departments’ Use of Drones Is Raising Concerns Over Privacy and Safety.)
The Articles of Confederation and Thomas Jefferson’s own philosophy both forbade forced taxation at the federal level. American citizens were meant to have control of their government and that meant keeping taxing and spending decisions close to home. It is the disconnection of spending decisions from even the implied consent of the taxed that allows government to get out of control. Faced with the direct connection between spending and taxation, a citizenry will push back when an expense is clearly not worth the money, or worse is actually potentially harmful to the people–local governments reject such initiatives all the time. However, as taxes go underground and spending decisions become more remote, it’s harder for taxpayers to identify when enough is enough, much less to stop the madness.
The government, of course, does all it can to forestall tax resistance. Providing the mechanism to obfuscate excessive taxation and circumvent tax resistance is what makes the Federal Reserve such an insidious tool of big banksters and crony capitalists. The Fed, which is and always has been a private corporation owned by large banks, makes an agreement with the Treasury: abdicate to us your right to control the money supply, and in turn we will print money to buy the bonds that finance your profligate spending and allow you to shift the tax burden onto a future constituency.
The withholding method of taxation is similarly devious. By forcing one’s employer to make it a condition of employment that he pays your tax bill before he pays your wages, the government has eliminated its traditional stooge, the tax collector, and the natural resistance he engenders.  Co-opting employers masks the use of force inherent in all taxation and emasculates a powerful tool of taxpayer resistance, the tax revolt.
In the case of Montgomery’s drone, not only is the tax side of the equation manipulated by using federal funds for a purely local purpose, but also the spending side is manipulated by masquerading cronyism and intrusiveness as a public good, i.e., defense. Nothing will push the tax resistance threshold higher than fear of physical danger. . . .Enter the Drug War and the War on Terror.
In these cases the government creates an ever-increasing demand for its own services because it is both the antagonist and the hero.  The more the government spends battling reactionary and amorphous opponents such as drugs and terror, the greater the dangers become, and there can never be a definitive victory because there is no definitive enemy. The Drug War is surging in Mexico and Guatemala and at the same time heroin production in Afghanistan is going through the roof thanks to both the Great American Drug War and the Glorious War on Terror. In its own right, the War on Terror has eliminated the two most powerful opponents of radical Islam in the Middle East, Saddam Hussein and Muammar Gaddafi. (I am not defending these two murderers, just making a point.) The government gets bigger, the cronies get paid, the people acquiesce to higher and higher spending, and it can go on forever.
Well, almost forever.
The obvious underlying horror of Montgomery’s drone is not that you and I paid for it, it’s that Homeland Security didn’t donate the drone in an altruistic effort to help local law enforcement investigate accidents and keep good citizens safe. There are myriad self-serving reasons that Homeland Security would want down-home drones like this one. Among these reasons, I fear, is to monitor those same good citizens for signs they’ve had enough of spendthrift and overreaching government and might finally be mounting a resistance. When that day comes, the citizens of Montgomery County might wish they had left this particular present under the tree.

Accounting Reform Precipitates Financial Crisis

I just read a great article by one of my favorite Austrian economists, Jesus Huerta de Soto, explaining an aspect of the financial crisis that I never heard anyone point out. The government cannot be trusted with the money, the law or, apparently, accounting standards! I found the following article at Professor Huerta de Soto’s page “articles in English” on his website Here is the full text:
Jesús Huerta de Soto
Professor of Political Economy, Universidad Rey Juan Carlos
The years of “irrational exuberance” which have characterized the current economic
cycle have culminated in a profound crisis in both the banking system and financial
markets, a crisis which threatens to trigger an acute, global economic recession. A
central feature of the recent period of artificial expansion was a gradual corruption, on
the American continent as well as in Europe, of the traditional principles of accounting
as practiced globally for centuries. To be specific, acceptance of the International
Accounting Standards (IAS) and their incorporation into law in different countries (in
Spain via the new General Accounting Plan, in effect as of January 1, 2008) have meant
the abandonment of the traditional principle of prudence and its replacement by the
principle of fair value in the assessment of the value of balance sheet assets, particularly
financial assets. In this abandonment of the traditional principle of prudence, a highly
influential role has been played by stock brokers, analysts, investment banks (which,
fortunately, are now on their way to extinction), and in general, all parties interested in
“inflating” book values in order to bring them closer to supposedly more “objective”
stock-market values, which in the past rose continually in an economic process of
financial euphoria. In fact, during the years of the “speculative bubble,” this process
was characterized by a feedback loop: rising stock-market values were immediately
entered into the books, and then such accounting entries were sought as justification for
further artificial increases in the prices of assets listed on the stock market.
In this wild race to abandon traditional accounting principles and replace them with
others more “in line with the times,” it became common to evaluate companies based on
unorthodox suppositions and purely subjective criteria which in the new standards
replace the only truly objective criterion (that of historical cost). Now, the collapse of
financial markets and economic agents’ widespread loss of faith in banks and their
accounting practices have revealed the serious error involved in yielding to the IAS and
their abandonment of traditional accounting principles based on prudence, the error of
indulging in the vices of “creative,” fair-value accounting.
It is in this context that we must view the recent measures taken in the United States and
the European Union to “soften” the impact of fair-value accounting for financial
institutions. This is a step in the right direction, but it falls short and is taken for the
wrong reasons. Indeed, those in charge at financial institutions are attempting to “shut
the barn door when the horse is bolting”; that is, when the dramatic fall in the value of
“toxic” or “illiquid” assets has endangered the solvency of their institutions. However,
these people were delighted with the new IAS during the preceding years of “irrational
exuberance,” in which increasing and excessive values in the stock and financial
markets graced their balance sheets with staggering figures corresponding to their own
profits and net worth, figures which in turn encouraged them to run risks with
practically no thought of danger. Hence, we see that the IAS act in a pro-cyclic manner
by heightening volatility and erroneously biasing business management: in times of
prosperity, they create a false “wealth effect” which prompts people to take
disproportionate risks; when, from one day to the next, the errors committed come to
light, the loss in the value of assets immediately decapitalizes companies, which are
obliged to sell assets and attempt to recapitalize at the worst moment, i.e. when assets
are worth the least and financial markets dry up. Clearly, accounting principles which,
like those of the IAS, have proven so disturbing must be abandoned as soon as possible,
and all of the accounting reforms recently enacted, specifically the Spanish one, which
came into effect January 1, must be reversed. This is so not only because these reforms
mean a dead end in a period of financial crisis and recession, but especially because it is
vital that in periods of prosperity we stick to the principle of prudence in valuation, a
principle which has shaped all accounting systems from the time of Luca Pacioli at the
beginning of the fifteenth century to the adoption of the false idol of the IAS.
In short, the greatest error of the accounting reform recently introduced worldwide is
that it scraps centuries of accounting experience and business management when it
replaces the prudence principle, as the highest ranking among all traditional accounting
principles, with the “fair value” principle, which is simply the introduction of the
volatile market value for an entire set of assets, particularly financial assets.
This Copernican turn is extremely harmful and threatens the very foundations of the
market economy for several reasons. First, to violate the traditional principle of
prudence and require that accounting entries reflect market values is to provoke,
depending upon the conditions of the economic cycle, an inflation of book values with
surpluses which have not materialized and which, in many cases, may never materialize.
The artificial “wealth effect” this can produce, especially during the boom phase of each
economic cycle, leads to the allocation of paper (or merely temporary) profits, the
acceptance of disproportionate risks, and in short, the commission of systematic
entrepreneurial errors and the consumption of the nation’s capital, to the detriment of its
healthy productive structure and its capacity for long-term growth.
Second, we must emphasize that the purpose of accounting is not to reflect supposed
“real” values (which in any case are subjective and which are determined and vary daily
in the corresponding markets) under the pretext of attaining a (poorly understood)
“accounting transparency.” Instead, the purpose of accounting is to permit the prudent
management of each company and to prevent capital consumption, by applying strict
standards of accounting conservatism (based on the prudence principle and the
recording of either historical cost or market value, whichever is less), standards which
ensure at all times that distributable profits come from a safe surplus which can be
distributed without in any way endangering the future viability and capitalization of the
Third, we must bear in mind that market value is not an objective value: in the market
there are no equilibrium prices a third party can objectively determine. Quite the
opposite is true; market values arise from subjective assessments and fluctuate sharply,
and hence their use in accounting eliminates much of the clarity, certainty, and
information balance sheets contained in the past. Today, balance sheets have become
largely unintelligible and useless to economic agents. Furthermore, the volatility
inherent in market values, particularly over the economic cycle, robs accounting based
on the “new principles” of much of its potential as a guide for action for company
managers and leads them to systematically commit major errors in management.
Moreover, if this state of affairs is serious for a financial institution, it is much more so
for any of the small and medium-sized enterprises which make up 90 percent of the
industrial base.
Fourth, we must remember that the abolished accounting standards already stipulated
that in the additional notes of the annual report, stockholders be informed as of a certain
date of the market value of the largest assets, but this in no way affected the stability nor
the traditional principles of prudence demanded by any accounting assessment of the
different entries in the balance sheet. Furthermore, the accounting standards abolished
were prudent and anti-cyclic, and they allowed for provisions to cover all sorts of
contingencies, provisions sadly missing now.
Just as “war is too important to be left to the generals,” accounting is too vital for the
economy and everyone’s finances to have been left to the experts, whether they be
visionary professors, auditors eager to strengthen their position, analysts, (ex)
investment bankers, or any of the manifold international committees. All have been as
arrogant in the defense of their false science as they have been ignorant of their role as
mere sorcerer’s apprentices playing with a fire that has been on the verge of provoking
the most severe financial crisis to ravage the world since 1929.
Madrid, December 8, 2008

Feds Seize 150 Websites for Selling Counterfeit Merchandise–Kind Of

I saw this article titled “Feds seize 150 websites in counterfeit crackdown” and thought to myself, could the Feds actually be acting within the confines of normal law enforcement? After reading last week about a fisherman who was robbed by the Feds of the largest tuna ever caught, I was in the mood to have my faith in government restored. (As if!) So I was willing to overlook two of my own peeves in the case at hand, specifically:  I don’t want the Feds anywhere near the Internet, and as an anarcho-capitalist I don’t actually believe in using government to enforce copyrights, patents and trademarks (more on that below).  But busting counterfeiters is at least an example of government action NOT in the service of gratuitous revenue generation or the ubiquitous Drug War, so I was encouraged and read on. I was at once amused to read that even the federal agent being interviewed for the article found it noteworthy that the Feds were cracking down on real crime. The article actually quotes ICE Director John Morton as saying, “This is straight crime. This is people being duped into buying a counterfeit.”

This quote demonstrates to me that Mr. Morton knows full well that most of what he does has nothing to do with “straight crime” (mala in se crime, or crime that is bad in itself), but rather he is almost always enforcing prohibitions (mala prohibita crime)–drugs, guns, prostitution–and fighting the inevitable violence that arises in black markets that perforce operate outside the law. The way I see it, mala prohibita crimes are crimes created by the government because authorities not only refuse to enforce otherwise valid contracts but actually attack people for making voluntary arms-length transactions. It drives me near to madness to think my tax dollars go to creating and then enforcing immoral laws that result in so much death and destruction. (I have actually thought that if there’s a Judgment Day the greatest sin I will have to answer for will be having paid taxes that were used to finance theft, murder and injustice.)

Director Morton’s quote genuinely delighted me, though, for another reason:  he was claiming to fight counterfeiting as the fraud of selling knock-offs under false pretenses and not for trademark infringement. As I mentioned, anarcho-capitalists such as I don’t believe the government can tell people what to do with their private property even if what they do with it is copy an idea someone else came up with and then put out in the world for all to see. It’s rather a nuanced argument and it was my last reservation about anarcho-capitalism, however, through the persuasive arguments of Stephan Kinsella, I am now totally convinced of the correctness of this position. (Concidentally, patents et al are powerful tools of crony capitalists.)

I should have stopped reading this article right there, though, ’cause wouldn’t ya know it? Director Morton was so uncomfortable with the idea of fighting “straight crime,” that he felt he had to further justify his actions. He went on to say, “Typically we don’t track the volumes of sales of these particular sites. . . . We are worried about organized crime and [that profits] are going to fuel other criminal activity.” So it IS about the Drug War after all! Or he hopes it is. In any case, it most certainly is NOT about protecting taxpayers from fraud–that would be too paltry a goal for the mighty federal government!

Maybe I shouldn’t get bent out of shape about something as apparently minor as this, but earlier today I read about a former marine, Jose Guerena Ortiz, who was suspected of selling pot. A SWAT team snuck up to his house and he, awakened by his fearful wife, grabbed his gun and the cops mowed him down in his living room in front of his four-year old. This counterfeiting article made me hope that law enforcement was doing something OTHER than trying to figure out the next guy who might be selling something they don’t like and killing him. But I guess that’s what it was all about anyway. I should’ve known.

Read the article here: Feds seize 150 websites in counterfeit crackdown

Is Operation Fast & Furious Obama's Iran-Contra?

I think there’s much more to Operation Fast & Furious than we’ve heard about so far. Will it bring down Eric Holder? How about Obama? Listen to my take on the developing story:
Monica Perez Fast and Furious
And here are links to two more sources of ongoing information on Operation Fast & Furious:
Judicial Watch: Dump Holder

The Truth About Guns: ATF Deathwatch

And for a great overview of the operation, read this story in The Washington Times by Robert Farago & Ralph Dixon
Was CIA behind Operation Fast & Furious?
Also check out my post:
Where Does Eric Holder Get Off?

What Are the Occupiers Really Thinking?

They don’t know it, but Occupy Wall Street craves more capitalism, not less. Listen to my views on the subject in this podcast:
Monica Perez OWS
And if you really want to have some fun, watch this video (there’s a clip from this in the podcast above, but here’s the full rant).

Lies, Damn Lies and Statistics

A Congressional Budget Office report reveals that income inequality is increasing.  In this excerpt from Saturday’s show, I explain that the progressive tax system and expansionary monetary policy are at the root of the growing disparity between rich and poor in America.
Monica Perez income inequality debunked
If like I do, you crave economic truth in all its glorious detail as a purgative to the garbage forced down our throats by the State and its lackey, the mainstream media, you will enjoy the nitty gritty in this article from the great website, Zero Hedge.

Wealth Inequality in America:  Understanding the Source

It's the Boom That's the Problem!

Ron Paul points out that the booms are what cause all the cyclical devastation in our economy.  Until we stop the booms we will always have the terribly damaging busts.  What does he mean by that?  Listen to my explanation from last week’s show.
Monica Perez boom bust

CDC: More People Die in the US from Prescription Painkillers than from Cocaine & Heroin Combined

How much are we spending on the Drug War? How about the FDA? According to the Drug War Clock at, the Drug War cost the US $15 billion so far this year. In addition, President Obama’s budget request for the FDA topped $4 billion. Unfortunately, these programs not only cost an insane amount of money and keep the government all up in our shorts, they apparently do more harm than good. I have long noticed that government-controlled drugs seem to be killing people. Heroin felled quite a few stars back in the day: Janis Joplin, Jim Morrison, Sid Vicious and John Belushi to name a few. Celebrities of today, however, die from drugs that are highly regulated and controlled: Anna Nicole Smith, Michael Jackson, Heath Ledger and Brittany Murphy all died from prescription drugs.
It seems that the more we spend to have the government protect us from ourselves, the more we suffer at its hands. It could be gross incompetence, or it could be that government and its controllers are self-protecting entities who are not going to make us safe if our fear is the source of their power. The current mentality of citizens who fear an end to the Drug War or who cannot envision free market regulation of drugs reminds me of what I have heard about the behavior of the abused child. The abused child clings to his parent thinking, “If this is how someone who loves me treats me, how would someone who doesn’t love me treat me?!” It’s time to realize things will NOT be worse without government control of everything from the food we eat to the thoughts we think. Unfortunately, this study will probably be used to justify more government control, not less.
Here are a few highlights of the CDC study from the Sydney Morning Herald (sometimes you have to go out of the country just to get away from the spin!)

Elizabeth Warren's Latest Viral Video–A Little Too Convenient?

Apparently a man showed up at a volunteers meeting for Elizabeth Warren’s Massachusetts Senatorial campaign in order to do the following: announce he is unemployed, identify himself as anti-Occupy Wall Street and pro-Tea Party, call Elizabeth Warren a socialist whore, claim that Obama was born in a foreign country, and then walk out, all in approximately two minutes caught on video. Also during these two minutes Elizabeth Warren had an opportunity to: pity him for his unemployment and point out that Obama’s jobs bill would have fixed that, clarify her position on the Occupy movement by both embracing it and distancing herself from it at the same time, and point out that it’s guys like this who make it important now more than ever to keep to the Left. I don’t know about you, but this smacks of an advertising gimmick to me.

Peter Schiff at Occupy Wall Street

I don’t know where Peter Schiff gets the patience to go down to Wall Street and try to explain economic principles to the protesters there. To their credit many are reasonable, but others won’t accept his arguments even though they have none of their own.

Corporations Don't Pay Taxes, People Do!

It is my view that the corporate tax rate should be zero for the exact reasons laid out in this mainstream media report intended, as usual, to make us conclude the opposite of the truth–in this case that corporations should pay more taxes.

Biggest Public Firms Paid Little US Taxes, Study Says

Complex corporate tax law gives rise to just this sort of imbalanced taxation, but more important, it distorts economic behavior and in the end is, of course, paid by us: the employees, customers and shareholders of the corporations, and no one else. Here’s a short article from Americans for Tax Reform that lays this out nicely:
Corporations Don’t Pay Taxes–People Do!