Cryptocurrencies and China Imperil the Reserve Currency Status of the US Dollar

Alexander Herborn Gunther Schnabl

(Originally posted on

In his book Denationalisation of Money, F.A. Hayek argued that governments have never devoted their power to provide proper money over time. They “have refrained from grossly abusing it only when they were under such a discipline as the gold standard imposed.”1 The gold backing of the US dollar as the global reserve currency was lifted in the early 1970s, and paper currencies, so-called fiat currencies, have since become the norm. Following this decision, the paper currencies have dramatically lost value against gold (figure 1). Since the turn of the millennium, this process has substantially accelerated.

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Fannie and Freddie Are Just Government Agencies. They’re Likely to Stay that Way.

Ryan McMaken

(Originally posted on

Last Week, the US Supreme Court confirmed that Fannie Mae and Freddie Mac are essentially government-owned corporations, and are likely to stay that way.

The Court didn’t say this in so many words, but the ruling (namely, Collins v. Yellen) helps to end the fiction that Fannie and Freddie are private organizations only temporarily in a state of “conservatorship” under the control of the US government.

The ruling itself is seemingly extremely mundane. The Court ruled that the chief executive of the Federal Housing and Finance Agency (FHFA)—the government agency that effectively owns Fannie and Freddie—was for all practical purposes a government appointee like any other executive from a government agency. Moreover, the Court refused to intervene to end the federal government’s practice of “sweeping” funds from Fannie and Freddie and placing those funds in the US Treasury.

In effect, the rulings confirm what more cynical and savvy observers have long known: that Fannie and Freddie have always been quasi-government organizations, and are now full-on government bodies following the bailout and takeover of the two corporations which occurred in September 2008.

In other words, in practice, Fannie and Freddie are no more “private” entities than is Pemex, Mexico’s state-owned petroleum company.

As Lew Rockwell noted at the time of the government’s takeover in 2008:

This past week, the government announced that it would take Freddie Mac and Fannie Mae, the mortgage giants, under conservatorship, which is a nice way of saying that they will be nationalized.

We don’t use the word nationalize any more. We can try an experiment and read the new term “conservatorship” back into history. In fact, we might say that Stalin and Lenin put Russia’s industries under a kind of conservatorship. Or we might say that Mao pushed a kind of land conservatorship, or that Hitler’s policy was one of national conservatorship. Marx’s little book could be retitled The Conservatorship Manifesto.

You see, the government keeps having to make up new names for these things because the old policies, which were not that different in content, failed so miserably. The old terms become discredited and new terms become necessary, in an effort to fool the public.

So, although we now politely—nearly 13 years later—refer to Fannie and Freddie as companies “in conservatorship”—the reality is these companies have been nationalized.

Of course, they were never truly private. Fannie and Freddie were created by Congress to add liquidity to the mortgage markets by buying up mortgages in the secondary market. For investors, the desirability of their stock to investors long rested on the implicit promise—a de facto wink and nod—making it clear that Congress would never allow these companies to fail. Yet, not even this was enough for the management at Fannie and Freddie. As early as the late 1990s, Fannie Mae was likely “misstat[ing] its financial statements.” Freddie engaged in similar behavior.  None of t his affected what many investors were banking on: that in case of any major disruptions to the housing market, the federal government would force the taxpayers to bail these companies out.

That’s exactly what happened in 2008, as just the latest spasm of “financialization” which sucked ever more resources out of the non-financial economy in order to pour more cash into the financial sector.

Yet, investors perhaps did not expect the feds to expropriate the companies, although such terms were never used. Both investors and federal regulators have continued to fight over just how fully these companied had been nationalized. Last week’s ruling makes it clear they are indeed truly nationalized, and the money that flows into Fannie and Freddie is the federal government’s money.

Nor should we expect this to change any time soon. Approximately half of the mortgage market at this point is backed by Fannie and Freddie, and that means the stakes are high. Congress needs Fannie and Freddie to grease the wheels of the mortgage market and to ensure that there is always plenty of money sloshing around in the mortgage markets so that interest rates remain low and the homeownership rate is propped up.

To trust Fannie and Freddie to the “free market” might allow interest rates to adjust to a significantly higher rate, and that’s clearly not tolerable in the current climate in Washington, DC.

It’s clear Washington never intended these companies to be truly private, but the current housing market is so fragile and so reliant on artificial amounts of liquidity—and artificially low interest rates—that it appears clear federal officials will continue to insist on direct control.

It’s all just another example of how the modern US economy is heavily socialized, financialized, subsidized, and controlled by federal technocrats.

The Court has just told us what we already knew, but now it’s getting harder to investors to deny this reality. Following the ruling last week, Fannie and Freddie stock plummeted 45 percent at one point, and remains at a multi-year low as investors now increasingly suspect hopes for “reprivatization” are in vain.Author:

Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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Interventionism Turns Crisis into Depression

Mark Thornton

(Originally posted on

Austrian economists have a well-developed theory that explains the boom, bubble, bust, and recovery. A good introduction to the Austrian theory of the business cycle can be found in Larry Sechrest’s article “Explaining Malinvestment and Overinvestment.” Larry wrote the article to provide a pedagogical device for economics students, but academic economists will probably be able to understand it as well.

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Privatize the Police

Murray N. Rothbard

(Originally posted on

Abolition of the public sector means, of course, that all pieces of land, all land areas, including streets and roads, would be owned privately, by individuals, corporations, cooperatives, or any other voluntary groupings of individuals and capital. The fact that all streets and land areas would be private would by itself solve many of the seemingly insoluble problems of private operation. What we need to do is to reorient our thinking to consider a world in which all land areas are privately owned.

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The Feds Collect Most of the Taxes in America—So They Have Most of the Power

Ryan McMaken

(Originally posted on

In 2021, it’s clear Americans now have thrown off any notions of subsidiarity and instead embraced the idea that the federal government should be called upon to fund pretty much anything and everything. From “stimulus checks” to “paycheck protection,” it’s assumed an entire national workforce can be propped up by federal spending. Moreover, in the wake of 2020’s Covid Recession, every pressure group from local governments to weapons manufacturers looks to the federal government to offer ever larger amounts of federal spending ladled out from the federal pot of more than six trillion dollars of annual spending. Need some “infrastructure”? The federal government will pay for it. Need a bailout? You know where to go. 

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The Drive for Regulatory Harmonization

Robert Higgs

(Originally posted on

Contemporary social and economic affairs take place within a bewildering complex of regulatory restrictions and requirements. Already profuse beyond comprehension, the labyrinth grows ever more extensive. In the United States, at the federal level alone, the 4,000 to 5,000 new final rules put in place each year require some 20,000 pages of the Federal Register for their official promulgation (Clyde Wayne Crews, Jr., Ten Thousand Commandments: An Annual Policymaker’s Snapshot of the Federal Regulatory State [Washington, D.C.: Competitive Enterprise Institute, March 1999], 14–15). Simultaneously, the 50 states, 3,043 counties, 19,279 municipalities, and 16,656 townships crank out countless new regulations of their own (see Statistical Abstract of the United States 1997, 297, for the number of government units in 1992).

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Sound Money versus Fiat Money: Effects on the Boom-Bust Cycle

Frank Shostak

(Originally posted on

According to the Austrian business cycle theory (ABCT), the boom-bust cycle emerges in response to a deviation in the market interest rate from the natural interest rate, or the equilibrium interest rate. It is held that the major cause for this deviation is increases in the money supply. Based on this it would appear that on a gold standard without the central bank, an increase in the supply of gold will set in motion boom-bust cycle.

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How Fiat Money Changes Culture

Stephan Livera

(Originally posted on

Can the type of money used change the culture of a society? This might seem like an absurd proposition, but it is supported by the arguments of proponents of the Austrian school of economics. 

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The Covid Lockdowns Showed Us How Dangerous Social Engineers Have Become

Birsen Filip

(Originally posted on

Since the onset of the covid-19 pandemic, governments around the world, along with a handful of unelected medical experts, have been behaving as though they are the social engineers of totalitarian regimes (e.g., fascism, Nazism, and communism). To be more precise, this select group of political leaders and medical experts have upended economies, as well as the lives of billions of ordinary people, by implementing extremely coercive and restrictive lockdowns and physical distancing measures for the stated purpose of bringing the pandemic under control and preventing future outbreaks. Specific measures have included curfews; police patrols on the streets; the compulsory closure of businesses deemed nonessential, as well as workplaces, schools, and institutions of higher education; the banning of social gatherings; the cancelation of sporting and cultural events; the suspension of religious services; and restrictions on personal movement and interactions at the local, national, and international levels. In many parts of the world, people have been subjected to mandatory stay-at-home orders, requiring them to spend most of the day confined and isolated in their homes. Lockdown measures have also been used to prohibit people from engaging in public protests and freely expressing their opinions, as failure to comply with limits on social gatherings has led to people being arrested, detained, and fined. It has also not been uncommon to see excessive police force being used to enforce lockdowns and curfews, and to disperse protests against unreasonable restrictions. Some governments have also set up detention centers for international travelers entering into their countries, where they are forced to quarantine at their own expense while they wait for the results of their covid-19 tests. Shockingly, in early June 2021, the provincial government in Ontario, Canada, went so far as to announce that residents in long-term care homes would soon be permitted to engage in “close physical contact, including handholding” and “brief hugs” with visitors when both parties are fully immunized.

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Central Banks See No Way out of the Low Interest Rate Trap

Thomas Mayer

Gunther Schnabl

(Originally posted on

Since the 1980s, slower economic growth in the industrial countries has been accompanied by declining interest rates. They have even turned negative in more recent years. At the same time, investment, productivity, and real GDP growth all have slowed. Recession caused by lockdowns of the economy to fight the corona pandemic in 2020/21 has accelerated the demise of interest. Even as the world economy recovers, central bankers around the world have signaled that interest rates will be kept low for a long time to come. What is going on here? Various economists have provided different theoretical and empirical explanations for the global decline of interest rates.

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Why the Regime’s Regulatory Power Is a Standing Threat to America

Jacob G. Hornberger

(Originally posted on

Whenever some foreign regime that is independent of the U.S. Empire goes after dissenters, U.S. officials trot out the First Amendment to show how different the United States is. Here, people are free to criticize government officials without fear of being put in jail or otherwise punished for exercising their free speech rights, they proudly point out. 

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The Ratification Debate: A Standing Army vs. the Militias

Murray N. Rothbard

(Originally posted on

[This passage is excerpted from Murray N. Rothbard’s Conceived in Liberty, vol. 5, The New Republic: 1784–1791.] 

One of the most important aspects of the proposed Constitution was its authorization for a permanent national standing army, a striking contrast to the simple reserve constituting the state militia. The standing army was a particular objection of the Antifederalists, who, in the liberal antimilitary tradition, believed such an army to be inimical to the liberty of the American people. In contrast, the ex-Continental Army officers, particularly the higher officers, yearned for the power, the pelf, and the prestige that would come to them once again, and this time permanently, should there be a standing army. The leading and most aristocratic ex-army officers were cohesively organized in the ultra-reactionary and militaristic Society of the Cincinnati, which looked for a European-type army established, preferably led by a hereditary officer caste. The ex-Continental Army officers and particularly their upper strata in the convention, eagerly welcomed and fought for the proposed Constitution as their long-awaited conduit to a caste status in a standing army. Elbridge Gerry, indeed, feared the power of the Cincinnati, and this was one of the reasons why Gerry (and George Mason) opposed the popular election of the president at the convention:

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The Fed Plans to Raise Interest Rates—Years from Now

Ryan McMaken

(Originally posted on

On Wednesday, the Federal Reserve’s Federal Open Market Committee voted to continue with a target federal funds rate of 0.25 percent, and to continue with large-scale asset purchases. According to the committee’s press release:

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Capitalism Isn’t a Modern Invention. It’s Medieval.

David Gordon

(Originally posted on

During the eighteenth century, capitalism in Europe “took off” in a way it had not done before, and as a result the West surpassed all other areas of the world in economic growth. What led to this transformation? Max Weber offers the most famous answer. In The Protestant Ethic and the Spirit of Capitalism (1905), he traces the new system to the Puritans. Before them, though there were rich merchants, substantial savings and investment by private individuals was unusual. The Puritans changed matters. They viewed the self-disciplined pursuit of wealth without indulgence in luxury consumption as a sign that God had predestined them to salvation. 

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Understanding the “Private” in “Private Security”

Tate Fegley

(Originally posted on

Recently in the pages of the Mises Wire, Jason Morgan argued that private security isn’t enough in terms of ensuring personal security and that America needs militias. While I agree with much of the spirit of Dr. Morgan’s essay, there are a few things I wish to clarify and say in defense of private security.

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Biden Is Trying to Seize Control of Local Land-Use Regulations

Matt Ray

(Originally posted on

In recent years, there’s been a push to move zoning decisions further from the local level. In 2019, Oregon passed House Bill 2001, making it the first statewide law to abolish single-family zoning in many areas. By expanding the state government’s jurisdiction to include zoning decisions previously handled by local agencies, the law entails an alarming centralization of state power. This was quickly followed by the introduction of similar bills in VirginiaWashingtonMinnesota, and North Carolina. Now President Biden is attempting to increase federal influence over local zoning.

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Governments Are Failing at Their Most Basic Duties—While Promising Free Stuff

Gary Galles

(Originally posted on

Three city blocks were systematically burned to the ground as hundreds of the local police stood by and viewed the violence. They were obeying orders not to harm the arsonists. The National Guard was called, adding more armed watchers. A passive gendarmerie consorting with open rebellion has rarely been seen in American history, until recently.

Except for variation in detail and numbers, this sort of thing is happening today.

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Why Big Business Ends up Supporting the Regime

Ryan McMaken

(Originally posted on

Policymakers know they hold immense power to regulate and punish firms that don’t play ball. Industry leaders know this too. So it’s likely both sides will indeed end up “playing ball.” 

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In Defense of Debt Collection

Llewellyn H. Rockwell Jr.

(Originally posted on

You know hypocrisy, as when the pot calls the kettle black? Well, this news report gives new meaning to the idea:

The rise in American consumer debt has been accompanied by a sharp increase in complaints about aggressive and sometimes unscrupulous tactics by debt collection agencies, a phenomenon that has government regulators increasingly concerned.

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Thanks to Federal Megaspending, the Trade Deficit Has Only Gotten Worse

Mihai Macovei

(Originally posted on

President Trump’s protectionist trade measures against China and other external partners have not caused a reduction of the total US trade deficit. The latter actually grew further as China’s exports found indirect ways into the US and massive domestic spending schemes were expanded during the pandemic.

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