2957 Old Rocky Ridge Road Birmingham, Alabama …June...merger or acquisition resulted. The secret to this impeccable record stems from the industry’s long history of conservative

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Nelson Nash, Founder [email protected]

David Stearns, Editor [email protected]

Monthly Newsletter - June 2017

How Safe Are Insurance Companies?byL.CarlosLara

[ReprintedfromtheNovember2014editionoftheLara-Murphy-Report, LMR]

Thefinancial strengthof the life insurance industryis impressive. Compared to commercial banks andinvestment firms, their solvency record has beennearly faultless even during hard economic times.While Americans witnessed Standard & Poor’sRating Services actually downgrade the long termcredit rating of the United States in 2011 with anegativeoutlook1,thelifeinsuranceindustrynotonlysurvived the 2008 financial crisis, it emerged fromtheGreatRecessionfinanciallysoundandcontinuingto issue policies, paying policyholder claims andservicing in-force business. This is not to say thatlife companies are totally immune to failure.Quitethe contrary, in any competitive marketplace youwillfindfinancial impairments, includingfailures—theyare inevitable.More to say that thenumberoffailures in the life insurance industry spanning aperiodofnearly200yearsissmallcontrastedtootherfinancial intermediaries in the U.S. economy. Evenso,withthefewcompaniesthathaveactuallyfailed,recovery to policyholders has been substantial. “Inthemorerecentinsolvenciesmorethan90percentofpolicyholder benefits have been recovered in full.”2Many of these insurer’s financial problems weresolvedwithoutpublicknowledgeandoftenafriendlymergeroracquisitionresulted.

The secret to this impeccable record stems fromthe industry’s long history of conservativefinancialmanagement in addition to the layers of solvency

surveillancemethodsemployedbytheindustry,third-partyanalysts,andstateregulatorsthatworktoensureafinanciallyhealthyinsuranceindustry.InthisLMR articlewewillcoversomeofthemorerelevanttoolsused by state insurance regulators tomonitor thesesecure financial enterprises. In the paragraphs thatfollowIhopetobeabletoanswerthequestionthatmostpolicyholders,includingmyself,reallywanttoknow:“What happens to my insurance cash values and benefits in a worst case scenario?”

Policyholders Come First

As stated previously in other LMR articles relatedto this subject (see the LMR Archives at www.lara-murphy.com), the life insurance industry, likemost financial intermediaries in the U.S., is highlyregulated.However,unlike thecommercialbankingindustry’s solvency monitoring tools that aim topreventriskstotheentirebankingsystem,insurance solvency monitoringisfocusedprimarilyonprotectingthepolicyholders.Astheownerofseveralinsurancepoliciesthatobjectiveiscomforting.

Additionally,wehaveoftenstatedthatunlikemostotherfinancial institutions in our economy, the insuranceindustry is regulatedat thestate level rather thanatthe federal level.This formofdecentralizationmayseemoddtomanyreaderssincemostofusareawarethatstatelawsdifferfromoneanother.However,thisishowithasworkedintheinsuranceindustrydatingbacktotheearly1900s.Aninsurancecommissioner,3eitherelectedorappointedbytheGovernor,enforceseachstate’sbodyofinsurancelaws.Insurerswishingtoconductbusinessinall50statesmustbelicensedin each state and must comply with 50 differentstate’s requirements. Regulatory uniformity amongthe50statesisachievedbyandthroughtheNational Association of Insurance Commissioners (NAIC),4 a

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BankNotes -NelsonNash’sMonthlyNewsletter-June2017

2www.infinitebanking.org [email protected]

tradeorganizationcomposedexclusivelyofinsurancecommissionersfromeachstate.

The objective of insurance commissioners, inaddition to bringing about nationwide regulatoryconsistencyandprotectingthepublic’sinterest,isto“strivetodetectfinanciallytroubledcompaniesearly,take corrective action to restore them to financialhealth when possible, and minimize the negativerepercussions to policyholders of the financialfailuresthatdooccur.”5Pleasenotethat,onceagain,the emphasis is in protecting the policyholders.Financialprofessionalstypicallyknowthisimportantinformation,butoftenneglectsharingthiswithclientsandprospects,forgettingthatfortheaverageAmericanthese regulatory differences many times representcompletely new revelations to their understandingofthelifeinsuranceindustry.Thesedistinctionscanbe immenselyhelpful inproperlyunderstanding themechanismsthatsafeguardthepublic’smoney,whichinmanycases is their life’s savings. If advisorsareto give clients a full range of essential advice thenproviding this level of information to the publicshouldnotbeoverlooked.

Risk-Based Capital Requirements

Thereareseveralimportantsolvencymonitoringtoolsusedbyinsurancecommissionersandtheirstaff,buttheonesolvencyregulationthatshouldbesingledoutas themost important isa life insurancecompany’snetworth(theexcessofassetsoverliabilities).Thistopictoohasuniquedistinctionsnotcommonlyfoundwith other financial institutions.To be precise, it isimperativetounderstandthattheprincipleliabilitieson life insurance balance sheets are actually policy reserves. In last month’s LMR article we learnedthatinsurancecompaniesfollowaveryconservativestrategyofmatchingassetstotheirlong-termliabilitycommitments known as “asset liability matching.”But here we mean specifically that state regulatorsrequireadditional capital cushionsforallpresentandfuture liabilities by mandating an overstatement offutureexpectedclaimcosts.

“For example: the mortality rates required to be used in reserve calculations are much greater than those

actually experienced by insurers. This fact results in reserves being higher than they would be were realistic mortality assumptions used. In effect, this requirement means that insurers ordinarily have some surplus or cushion embedded within their liabilities.”6

Still yet another layer of conservatism is found inthe limitations regulators place on the quality andquantityof assets tobepurchasedby insurers.Thissummons special focus on their valuation.A 2012studyoftheLifeInsuranceindustryconductedbytheFederalReserveBankofChicagorevealedthat74%ofassetswere in investment-gradebondswith44%beingcorporatebonds.7Thestudywasanimpressiveindicatorofafinanciallysolidinsurancesector.Infact,riskier investments, especially for market sensitiveinsurance products, are required by law to have anadditionalincreaseofpolicyreserves.Thisemphasisonastockpileofcapitalreinforcementswithregardstothemanagementofinsurancecompaniesishardtoignore.

In addition to thesemandates, state regulators alsorequire life insurers to use a completely differentmethodofaccountingstandardsknownasStatutory Accounting Principles(SAP).Whatmakesthisformof accounting so important is that the assessmentemphasis is placed squarely on an enterprise’ssolvency rather than on the value of a company asanongoing concern. It allows regulators to analyzemore stringently these extra reserve requirements.Needless to say SAP financial statements aremoreconservative than Generally Accepted Accounting Principles (GAAP) commonlyusedbyallotherU.S.corporations.

Finally,theseregulatorymethodsallcometogetherintheimplementationoftheNAIC’sRisk-BasedCapital(RBC)modellawthatevaluatestheadequacyofeachinsurer’s surplus (with surplus being synonymouswith capital).The riskier an issuer’s operations arethelargertheamountofcapitalitismadetohold.Aninsurerthatinvestsinlow-gradebondsexposesitselftogreaterdefault riskandtherefore it is required toholdmoresurplusthanonethatinvestsinhigh-gradebonds asmandated.This very important law spellsoutseveralcontingencyrisksoflifeinsurersandthen


BankNotes -NelsonNash’sMonthlyNewsletter-June2017makes use of a complex formulawith several risk-basedcapitalratiosthathavecertainthresholds.Aratiobelow the required threshold triggers progressivelymoreintrusiveactionsbyregulatorsthathelpidentifyinadequately capitalized insurers. In other words,abovetheratiothresholdthereis“no-action,”butasaninsurermovesbelowthethresholdthereisfirstthe“company action level,”followedbythe“regulatory action level,” then the “authorized control level,”and finally the “mandatory control level,” whichis the regulatory seizure of the company. Throughthis process regulators are able to detectfinanciallytroubledcompaniesmuchearlierandmovequicklytorehabilitatethem.

Beforewe discusswhat regulators actually do to afinanciallyimpairedinsureroncetheyfindone,therearetwootherimportanttestsorregulatoryrestrictionsplaced on life insurance companies that should bementionedintheinterestofassuringthereaderoftheinsurancesector’sfinancialsolidity.

Cash-Flow Testing and Dividend Restrictions

Lifeinsurancecompaniesarerequired,aspartoftheirstatutory filings, to model thousands of economicscenariostoensurethattheirassetsandfuturecash-flowsprovideenoughliquiditytoprovidepolicyholderobligations. These modeling scenarios also havemandatory cash-flow thresholds. Consequently,additional reserves will be required if they do notmeet these points of entry.Whenwehear and readthat the insurance companies had far fewer failuresthan commercial banks and other investment firmsevenduringtheGreatDepressionofthe1930s,thesecash flowmanagement efforts within the insuranceindustryexplainwhytheywereabletosurvivethesemajoreconomicdownturns.

More importantly, the states impose restrictions onanymoneytransfers,suchasdividends,totheirparentholding companies or other affiliates.Additionally,all the assets, reserves, and capital/surplusmust bemaintained by the life insurance subsidiary and becompletelyseparatedfromthegroup’sotherfundsandobligations.That’sanotherwayofsayingthatthereiseffectivelyawallbetweenalifeinsurancesubsidiary

and itsparentcompanyandaffiliates,whichmostlyoperateinthefederallyregulatedmarkets.Althoughmoney transfersarepermitted,state regulatorsmustapproveanymoneytransfersthatexceedcertainlimitsthatmaypotentiallydamagethefinancialstrengthofthelifecompany.ItisbecauseofthisregulationthatwecannowunderstandwhytheassetswithinAIG’slifeinsurancesubsidiariesremainedseparatedanddidnotrequiretaxpayerbailoutmoney.EveniftheAIGholdingcompanyandconglomeratehadbeenallowedto fail, the life insurance subsidiaries would havebeenfinanciallyinsulatedandsafe.Aspolicyholderswecouldnothaveabetterexampleof thefinancialfortitude and conservatism of the life insuranceindustry than AIG, whose temporary misfortuneoccurredinourowndayandtime.

The NAIC has several other important solvencysurveillance tools which we cannot cover in detailhere, but they include annual Audited Financial Statements, Financial Analysis Solvency Tools (FAST), Insurance Regulatory Information System (IRIS), Onsite Financial Examinations, Professional Third Party Oversight (including rating agencies),and several forms of Informal and Formal Actionsbyregulators,allofwhichserve toestablishproperincentives and safeguards to keep the number ofinsurerinsolvenciestoabareminimum.

Of course, long before the regulators have to stepin,managers running insurance companies know iftheir business is heading into financial trouble andtake voluntary action to reverse their course.Thesestepsmayincludesuchmeasuresasexpensecutting,selling pieces of their business, purchasing reliefreinsurance,exploringmergerpossibilitiesortryingtoselltheircompanytoanothermorefinanciallysoundenterprise. Fortunatelymany of these options do infactworkwithminimaldisruption topolicyholders.However, occasionally there is that one companythatslipsbeyondtherehabilitationstage.Inthepastsomeof these insurershavebeenhouseholdnames,butgenerally theyare small companies.Thecourseofactiontakenbyregulatorsagainsttheseinsolvententities represents for policyholders theworst-case scenarioorwhatwemaydescribeasthebottom line



toalifeinsurancecompanythatmustbeseizedanddismantled.

Liquidation— The Last Straw

Before assessing the outcome of this final phase,thereadershouldrealizethatalthoughtheinsuranceindustryishighlyregulated,itmustpassthe“markettest”onitsownmerits,incontrasttocommercialorinvestmentbanksthatcanlooktothe“lender of last resort,” (the Fed),when theymake poor decisions.TheFDICwhichprotectsbankdepositsstatesonitswebsitethatitisbackedbythefullfaithandcreditoftheU.S.Government.However,inlightoftherecentDodd-FrankAct this guaranty has been called intoquestion.Thepoint is that life insurancecompaniesmakenosuchclaimstothepublic.Stategovernmentsdonotprovideinsolventlifeinsurerstaxpayermoneyto solve their financial difficulties. Life companies,likeallothercorporationsontheopenmarket,operatein a competitive profit and loss environment. Theyhavetoprovidetheirownsafetynetstoprotecttheircustomers. But fromwhatwe have learned alreadyonhowlife insurancecompaniesareconservativelymanaged, even a failed insurer probably has moreassetstodistributeorsellthanyourtypicalfinanciallyinsolventcompany.Thismayultimatelyexplainwhytherecoverytopolicyholdersishistoricallyhighandthefailurerateissolow.

The authors of the American Bar Associationreference book used in the writing of this paperfelt comfortable enough to state that “the average policyholder is highly unlikely ever to be required to deal with the insolvency of a life insurer.”8 It istruethatthereareseveraloptionsandplentyofleadtimetoexitortransferoutofaninsurancecarrierifabsolutelynecessary.Butthoughtheymaybeminimal,unfortunately failures do occur. When it is foundinadvisable thatan insurer shouldbe rehabilitateda“conservation order,”9orliquidationorder,isgrantedtotheinsurancecommissionertomovethecompanytowardthefinalclosingofoperations.Theinsurancecommissioner,actinginasimilarroletoareceiverinbankruptcy,isgivenfulltitletothecompany’sassetsand makes final settlement of all obligations. The

followingdistribution priority ismandatoryby lawanditisexecutedaccordingly.

• Cost of Administration— first

• Employee Salaries— second

• Policyholder Claims

• All Other Creditors

• Shareholders —last (in the case of Stock Companies)

Whatisimportanttorecognizeinthisfinalstageisthatoncetheinsurancecommissionerbecomesinvolvedasareceiverhewillbefocusedintenselyonconservingassets on behalf of the policyholders. However,triggered simultaneously with the granting of thecommissioner’sconservationorderaretheGuaranty Associations.Thisisanindemnityorganizationthatfunctions in the same way the FDIC works withcommercial banks, but without federal governmentsupport.Financedwiththeassetsofthefailedinsurerandtheproceedsfromanassessmentsystemfundedbyothersolventlifeinsurers,theguarantyassociationbeginsimmediatelytoprovidecoverageandbenefitsto the policyholders of the failed company. Theywill also actively transfer policies to other insurersandgenerallyassumetheroleofanongoinginsureror theywill honor cash benefits to those that wantout.Although theguarantyassociationhasstatutoryindemnification limits, policyholders can alsomakea priority claim against the assets of the liquidatedinsurer for any claims not paid by the guarantyassociations.

“While these laws vary somewhat from state to state, most states provide for guaranty association payment amounts up to these limits:”10

Thereadershouldcheckfortheactuallimitsintheirownstatebecausesomeareactuallyhigher.

• $300,000inlifeinsurancedeathbenefits;

• $100,000 in cash surrender orwithdrawal valueforlifeinsurance;

• $100,000 in withdrawal and cash values forannuities;


BankNotes -NelsonNash’sMonthlyNewsletter-June2017• $100,000inhealthinsurancepolicybenefits

All52insuranceguarantyassociationsaremembersof the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA)11 andwork together to provide continued protection andsupportforpolicyholders.

Conclusion

The near invincibility and fortitude of the lifeinsuranceindustryhasbeenunderscoredrepeatedlyinthisarticlebecauseoftheimpressivesolvencyrecordit possesses. Commercial banks and investmentfirmshavenotbeenabletomatchthisperformance.The secret to the life insurance industry’s financialstrengthlies in theirconservativemanagementstylethat places such great emphasis on policy reserves.It’sasthoughtheyaremadetooperatewithabuilt-incapitalcushion.Forthisreasonfewinsurerseverfailandevenintherarecaseswhentheydo,recoveryto policyholders is substantial. That’s the goodnewsof thisarticleandwhymypersonalassetsareconcentratedintheinsurancesector.

However, putting a positive spin on an article thatultimately discusses what happens to policyholderswhenaninsureractuallyfailsisadmittedlydifficult.The truth is that when a policyholder’s insurancecompany actually fails, it makes no difference tohimorherhowimpressiveall thesestatisticsare.Afailedlifeinsurancecompanythathasone’sinsurancecoverage and benefits is going to be a problem nomatter how you look at it. Even though one maynot actually suffer a complete financial loss in theend, therewillbeuncertainty,delays,and justplainaggravations. None of these makes for a pleasantexperience.

Since failures in any competitive marketplace areinevitableweshouldsimplystressthatbuyersshouldbevigilantintheirinitialselectionofcarriers.Studycarefully the rating agency reports provided by thecompanyandcontractwithonlythebestrated.Itcanalsobewisetoplaceneededinsurancecoveragewithseveralinsurersinsteadofputtingallyoureggsinonebasket.Finally,bejustasvigilantintheselectionofyour agent.Choosequalifiedfinancial professionals

whowillprovideyouwiththefullrangeoffinancialadviceincludinganyearlywarningsandescaperoutesif financial problems with a carrier are imminent.This will add an additional layer of safety to yourinsurance purchase and relieve you of unnecessarystress. The Authorized IBC Practitioners listed atwww.infinitebanking.org/finder isanexcellentplacetostart.

References1.1.DowngradingtheU.S.CreditRating,Wikipedia,TheFreeEncyclopedia,November22,2014http://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades

2. “Who’s Watching Your Back?” An Assessment of LifeInsurancePolicyholderProtectionsFollowingthepassageoftheBudgetControlActof2011,Article,byAtlasAdvisoryGroup,Who’sWatchingYourBack?-CarlsonHammond

3. InsuranceCommissioner,Wikipedia, the free encyclopedia,http://en.wikipedia.org/wiki/Insurance_commissioner

4.NationalAssociationofInsuranceCommissioners,Wikipedia,the Free Encyclopedia, http://en.wikipedia.org/wiki/National_Association_of_Insurance_Commissioners

5.TheAdvisor’sGuideToLifeInsurance,HaroldD.Skipper,PhDandWayneTonning,Copyright2011,MFinancialGroup,AmericanBarAssociation,Chapter4.Page70.

6.TheAdvisor’sGuideToLifeInsurance,Chapter4Page70

7. The Sensitivity of Life Insurance Firms To Interest RateChanges, Berends, McMenami, Plestis and Rosen, FederalReserve Bank of Chicago https://www.chicagofed.org/webpages/publications/economic_perspectives/2013/2q_berends_mcmenamin_plestis_rosen.cfm

8.TheAdvisor’sGuideToLifeInsurance,Chapter4,Page78

9.LifeInsurance,KennethBlackJr.,HaroldD.Skipper,KennethBlackIII,Copyright2014byLucretian,LLC,Chapter13,page309

10.LifeInsurance,Chapter13,page309

11.NationalOrganizationofLifeandHealthInsuranceGuarantyAssociations (NOLHGA),Wikipedia, The Free Encyclopediahttp://en.wikipedia.org/wiki/National_Organization_of_Life_and_Health_Insurance_Guaranty_Associations



whocontinuedtohomeschoolhisownthreechildrenwith no intention of sending them to the commonschoolshemandatedforothers.AsMann'sbiographer,JonathanMesserliwrites:

"Fromahundredplatforms,Mannhad lectured thattheneed forbetter schoolswaspredicatedupon theassumptionthatparentscouldnolongerbeentrustedtoperformtheirtraditionalrolesinmoraltrainingandthat a more systematic approach within the publicschoolwasnecessary.Nowasafather,hefellbackontheeducationalresponsibilitiesofthefamily,hopingtomakethefiresideachieveforhisownsonwhathewantedtheschoolstoaccomplishforothers."[4]

As mass schooling has expanded over the past165 years, parental empowerment has declinedprecipitously. Institutions have steadily replacedparents, with alarming consequences. Children aresweptintothemassschoolingsystematever-earlierages,mostrecentlywiththeexpansionofgovernment-funded preschool and early intervention programs.Mostyoungpeoplespendthemajorityoftheirdaysawayfromtheirfamiliesandinincreasinglyrestrictive,test-driven schooling environments. It is becomingmore widely acknowledged that these institutionalenvironments are damaging many children. BostonCollegepsychologyprofessor,Dr.PeterGray,writes:

"School is a placewhere children are compelled tobeandwhere theirfreedomisgreatlyrestricted--farmore restricted than most adults would tolerate intheir workplaces. In recent decades, we have beencompelling our children to spend ever more timein this kind of setting, and there is strong evidence(summarizedinmyrecentbook[FreeToLearn])thatthisiscausingseriouspsychologicaldamagetomanyofthem.”

For teenagers, the impactofmass schoolingcanbeevenmoresevere.Largelycutofffromtheauthenticadult world inwhich they are designed to interact,many adolescents rebelwithmaladaptive behaviorsranging from anger and angst to substance abuseand suicide. As Dr. Robert Epstein writes in hisbook,The Case Against Adolescence: Rediscovering the Adult in Every Teen: "Driven by evolutionary

The Devastating Rise of Mass SchoolingbyKerryMcDonald

For generations, children learned in their homes,fromtheirparents,andthroughouttheircommunities.Children were vital contributors to a homestead,becominginvolvedinhouseholdchoresandrhythmsfrom very early ages. They learned important,practical skills by observing and imitating theirparentsandneighbors--andbyengaginginhands-onapprenticeships as teens--and they learned literacyandnumeracyaroundthefireside.

In fact, the literacy rate in Massachusetts in 1850(just two years prior to passage of the country'sfirst compulsory school attendance law there) was97percent.[1]According to theNationalCenter forEducationStatistics,theMassachusettsadultliteracyratein2003wasonly90%.

In advocating for compulsory schooling statutes,HoraceMannandhis19thcenturyeducationreformcolleaguesweredeeplyfearfulofparentalauthority--particularlyas thepopulationbecamemorediverseand, in Massachusetts as elsewhere, Irish Catholicimmigrantschallengedexistingculturalandreligiousnorms."Thosenowpouringinuponus,inmassesofthousandsuponthousands,arewhollyofanotherkindinmoralsandintellect,"mournedtheMassachusettsstate legislature regarding the new Boston Irishimmigrants.[2]

In his book, Horace Mann's Troubling Legacy,University of Vermont professor, Bob PeppermanTaylor,elaboratesfurtheronthe19th-centurydistrustof parents, particularly immigrant parents, and itsroleincatalyzingcompulsoryschooling.PeppermanTaylorexplainsthat"thegroupreceivingthegreatestscolding from Mann is parents themselves. Hequestions the competence of a great many parents,but evenworse iswhat he takes to be the perversemoraleducationprovidedtochildrenbytheircorruptparents."[3] Forced schooling was then intendedas an antidote to those "corrupt parents," but not,presumably,formorallysuperiorparentslikeMann,


BankNotes -NelsonNash’sMonthlyNewsletter-June2017imperatives established thousands of years ago, themainneedateenagerhasistobecomeproductiveandindependent.After puberty, ifwe pretend our teensarestillchildren,wewillbeunabletomeettheirmostfundamental needs, and we will cause some teensgreatdistress.”[5]

Itistimetohandthereinsofeducationbacktoparentsandonceagainprioritizeauthenticlearningovermassschooling.Parentsknowbest.Theyshouldbeabletochoosefreelyfromawidevarietyofinnovative,agileeducationoptions,ratherthanrelyonaone-size-fits-allmassschoolingmodel.Bypositioningparentstotake back control of their children's education--toreclaim their rightful place as experts on their ownchildren--wecan fostermore educationoptions andbetteroutcomesforchildrenandsociety.[1]TotalMassachusettspopulationin1850was994,514;totalilliteracyrateinMassachusettsin1850was28,345

[2]Peterson,PaulE.SavingSchools:FromHoraceManntoVirtualLearning.Cambridge,Massachusetts:BelknapPress,2010,p.26.

[3]PeppermanTaylor,Bob.HoraceMann'sTroublingLegacy:TheEducationofDemocraticCitizens.Lawrence,KS:UniversityPressofKansas,2010,p.33.

[4]Messerli,Jonathan.HoraceMann:ABiography.NewYork:AlfredA.Knopf,1972,p.429.

[5]Epstein,Robert.TheCaseAgainstAdolescence:RediscoveringtheAdultinEveryTeen.Sanger,CA:QuillDriverBooks,2007,p.21.

RepublishedfromWholeFamilyLearning.

Nelson’s addition:

The most urgent necessity is, not that the State should teach, but that it should allow education. All monopolies are detestable, but the worst of all is the monopoly of education. —Frederic Bastiat

The Pope's Favorite Straw Man: "Individualism"byRyanMcMaken

Sincehiselectionin2013,PopeFrancishasrepeatedlyattackedwhathenowcallsthe"liberal-individualist"or"neoliberal"visionoftheworld.Withlastweek's

statement to the Pontifical Academy of SocialSciences,Francishasrenewedtheattack,but in theprocesshasexhibitedanumberofpoliticalbiasesanddemonstrablyfalseassumptions.

ThislineofattackbeganalmostassoonasFrancis'spontificatebegan.In2013,forexample,hedenounced“trickle-down theorieswhichassume that economicgrowth,encouragedbyafreemarket,willinevitablysucceed in bringing about greater justice andinclusivenessintheworld…"

The Pope has also repeatedly suggested that hebelievesfinancialmarketsareessentiallyunregulatedandthatmanyofthetheworld'sregimesarelaissez-faire minimalist states. Obviously, such claims caneasilybeshowntobeempiricallyfalse.Thefinancialsectorisoneofthemostheavilyregulatedworldwide,and the governments in the richest countries in theworld — the United States included — spendapproximatelyone-fifthoftotalGDPongovernmentwelfare programs alone. Indeed, when it comes togovernment spending on health care— not privatespending, mind you — the United States — thatsupposedbastionof"free-market"thinking—isthefourthhighestintheworld.

The Pope's Imaginary World

ThePopealsotendstoindulgeinavarietyofothereasily-disproved and empirically false claims. Heclaims,forexample,thattheworld'spooraregettingpoorer,whenall theavailabledatapoints inexactlythe opposite direction. Meanwhile, infant mortalityrates among theworld's poorest regions are falling,literacyratesareincreasing,andaccesstocleanwaterisincreasing.

AnygoodChristiancleric,ofcourse,willexhortthefaithful topayattention to thepoor,and toactwithradicalamountsofcharity.Inhisattemptstocatertocertainpoliticalideologies,however,thePopemerelybetraysadeepignoranceofthebasicfactssurroundingeconomictrendsintheworld.

Now,withhislatestattackonthe"liberal-individualist"view,thePopealsoappearstonotunderstandtheveryideology he attacks, and resorts to setting up straw



menaboutwhat ismosteasilydescribedas laissez-faireliberalism—orsimply"liberalism."

ThePopeimagines that libertarianismis immenselypopular,andthentrotsoutalltheusualaccusations:

Finally, I cannot but speak of the serious risksassociated with the invasion, at high levels ofculture and education in both universities and inschools,of positionsoflibertarian individualism.A common feature of this fallacious paradigm isthatitminimizesthecommongood,thatis,“livingwell,”a“goodlife”inthecommunityframework,andexaltstheselfishidealthatdeceptivelyproposesa“beautifullife.”Ifindividualismaffirmsthatitisonly the individualwhogivesvalue to thingsandinterpersonal relationships, and so it is only theindividualwhodecideswhatisgoodandwhatisbad,thenlibertarianism,todayinfashion,preachesthattoestablishfreedomandindividualresponsibility,itisnecessarytoresorttotheideaof“self-causation.”Thus libertarian individualism denies the validityof the common good because on the one hand itsupposesthattheveryideaof“common” impliestheconstrictionofatleastsomeindividuals,andtheotherthatthenotionof“good”deprivesfreedomofitsessence.

Ah yes, libertarianism is sweeping the universitiesand schools! Every where we look, artists andintellectuals tell us of the virtues of libertarianism.The"Highlevelsofculture"areabsolutelysaturatedwithlibertarianideologues,Francistellsus.

It'sclearthatFrancisdoesn'texactlyhavehisfingeronthepulseofmodernacademia,andbuteventhoughheapparentlyknowslittleaboutwhereandwithwhomlibertarianism is popular, let's take a look at whatFrancisseemstobelievecharacterizestheideology.

Libertarianthought,Francissays,involvesarejectionof the common good, and strips human life of theidea that there is a "good life" outside the bare-bones human existence of the marketplace. Thereis no value in the "community framework" in thelibertarianmind,Francisclaims,since"theveryideaof'common'"mustberejectedbylibertariansbecauseitconstrictsthefreedomofatleastsomeindividuals.

Inallofthis,PopeFrancisrepeatedlymissesthemark.

The "Homo Economicus" and "Extreme Individualism" Straw Men

Inhiscritique,Francisappearstobemerelyrepeatingleft-wing talking points that have been around formany years and rely on creating a crude cartoonversion of libertarianism. Indeed, Francis is doingto liberalismwhatmanycriticsofChristianityhavebeendoingforcenturies.AsC.S.LewisoncenotedaboutsomecriticsofChristianity,"SuchpeopleputupaversionofChristianitysuitableforachildofsixandmake that theobjectof theirattack."Francis isemploying a similarmethod, albeitwith a differenttarget.

Here at mises.org, we've dealt with these claimsbefore, thanks toGeorgeMonbiot atTheGuardianwho has taken a special interest in attacking theliberal ideology for causing every ill under the sunwhetheritbepovertyorloneliness.Indeed,Monbiothasbeensomethingofamini-Francisinpromulgatingtheanti-liberalpartylineonhowliberalismdestroysallotherhumanvaluesandreduceshumanbeingstoa state of littlemore than profit-seeking, dead-eyedunits of capital.Much of this begins with the ideathat liberalism demands that our view of humanitybereducedtoseeingeveryoneasaprofitmaximizingmachine,knownas"homoeconomicus.”

Monbiotwrites:

Ourdominant ideology [liberalism] is basedon alie.A series of lies, in fact, but I’ll focus on justone.This is theclaim thatweare, aboveall else,self-interested—thatweseektoenhanceourownwealthandpowerwithlittleregardfortheimpactonothers.Someeconomistsuseatermtodescribethispresumedstateofbeing—Homoeconomicus,orself-maximisingman.Theconceptwasformulated,by J SMill and others, as a thought experiment.Soon itbecameamodelling tool.Then itbecameanideal.

Theonlyproblemhere—aproblemforbothMonbiotand Pope Francis — is that the idea of "homoeconomicus"asamodelforhumanshasalwaysbeen


BankNotes -NelsonNash’sMonthlyNewsletter-June2017astrawmanandhasnothingtodowithactualmarketsandliberalideology.

Not surprisingly, archliberal Ludwig von Misesunderstoodexactlythis,writinginHumanAction:

It was a fundamental mistake ... to interpreteconomicsasthecharacterizationofthebehaviorofanidealtype,thehomo oeconomicus.Accordingtothisdoctrinetraditionalororthodoxeconomicsdoesnotdealwiththebehaviorofmanashereallyisandacts,butwithafictitiousorhypotheticalimage.Itpicturesabeingdrivenexclusivelyby"economic"motives,i.e.,solelybytheintentionofmakingthegreatestpossiblematerialormonetaryprofit.Suchabeingdoesnothaveandneverdidacounterpartin reality; it is a phantomof a spurious armchairphilosophy.Nomanisexclusivelymotivatedbythedesiretobecomeasrichaspossible;manyarenotatallinfluencedbythismeancraving.Itisvaintorefertosuchanillusoryhomunculusindealingwithlifeandhistory.

Everyinsightfulliberaltheorist—Misesincluded—hasfullyacceptedthathumanbeingshavemotivationsand values outside the marketplace, and no one is—norshouldtheybe—motivatedstrictlybyprofitmaximization.

In reality, human society is extremely varied andcomplex.Culture,religion,ethnicidentity,language,andahostofothervariablesexistoutsideofmarkets,andnorespectableliberalclaimsthatmarketsorthepursuit of monetary profit should eclipse all theseotherfactorsthatinfluencehumanvalues.

Liberalismhasneverbeeninconflictwiththesefactsabouthumannatureandhumansociety.But,fortheanti-marketideologue,suchasMonbiotandFrancis,liberalism somehow dictates how everyone shouldlive their daily lives, and thusmakesus lonely anddespairingintheprocess.

Monbiotcontinues:

There are plenty of secondary reasons for this[loneliness], but it seems tome that the underlyingcause is everywhere the same: human beings, theultrasocial mammals, whose brains are wired to

respond to other people, are being peeled apart.Economic and technological change play a majorrole,butsodoes ideology.Thoughourwellbeing isinextricablylinkedtothelivesofothers,everywherewearetoldthatwewillprosperthroughcompetitiveself-interestandextremeindividualism.

ThisissimplyanotherwayofstatingFrancis’sthesisthatliberalismtrashestheideaofa“goodlife”outsideofthemarketactivity.

Again, this whole argument relies on the “extremeindividualism”caricatureofliberalism.

The very idea stems from a (possibly willful)misunderstanding of the difference betweenmethodological individualism and individualism inpractice.

ThisisespeciallyunforgivableforaCatholicclericlikeFrancis sinceCatholicphilosophersand theologianswerepioneers inemphasizingtheimportanceof theindividual. That is, Christian theology is closelyconnected to the idea of an individual’s personal relationshipwithGod,andthatapersonisresponsibleforhisownactionsandmoralchoices.

Many strains of liberalism— which draw heavilyonChristian ideasof individualismandmorality—employasimilarsortofmethodologicalindividualismin that only individuals make choices. Moreover,humanbeingsderivetheirrightsfromtheirstatusasindividual human beings and not as members of agroup,whetheranethnicgrouporastate.

Noneofthis,however,suggeststhatpeoplemustbeindividualisticinlifestyleorthathumanbeingsmustrejecttheideaoflivingincommunitywithothers.

After all, it is entirely consistent with the ideas ofliberalismto live ina largeextendedfamily, to joina commune, or live in a densely-populated urbansetting with others.All that liberals ask is that thedecisiontoliveacertainwayismadevoluntarilyandwithoutbeingcoerced.Apersoncommitsnoilliberalact when he gives away all his possessions to liveinamonasterysharedwithothers.There isnothingcontrarytoliberalisminofferingfreeroomandboardtostrangersorfamilymembers.Thereisnogroupor



Why Do People Become Communists, and Why Do They Stick With It? byJeffreyA.Tucker

For as long as I can remember, I’ve puzzled aboutwhy people become communists. I have no doubtaboutwhysomeonewouldstopbeingone.Afterall,wehaveacenturyofevidenceofthemurder,famine,andgeneraldestructioncausedbytheidea.Ignoringall this takes a special kind of willful blindness toreality.

Even the theoryof communism itself is a completemess. There is really no such thing as commonownership of goods that are obviously scarce inthe realworld.Theremust be some solution to theproblemofscarcitybeyondjustwishingrealityaway.Perhapsownershipandtrade?Slogansanddreamsarehardlyasuitablesubstituteforaworkableprogram.

Buthowcommunismwouldwork inpractice isnotsomethingtheywanttotalkabout.TheyjustimaginedthatsomemagicalHegelianshiftwouldtakeplaceinthecourseofhistorythatwouldworkitallout.

Soifthereisnorationalcaseforcommunismassuch,whydopeoplegoforthisstuff?

The Red Century

TheNewYorkTimeshasbeen exploring that issuein a series of remarkable reflections that they havelabelled Red Century. I can’t get enough, even theonesthatarewrittenbypeoplewhoare—howshallI say?—suspiciously sympathetic to communismasacause.

The most recent installment is written by VivianGornick. She reflects on how her childhood worldwasdominatedbycommunists.

The sociology of the progressive world wascomplex. At its center were full-time organizersfortheCommunistParty,attheperipheryleft-wingsympathizers, and at various points in betweeneverythingfromrank-and-filepartycardholderstorespectedfellowtravelers….

individual activity that is verboten by liberalism solongastheparticipantsarecooperatingfreely.

Infact,Mises—whohasbeenattackedbyMonbiotfor his “neoliberalism”—assumed that individualswould come together to achieve common goals. InHuman Action,Misesnotesthat“Everystepbywhichanindividualsubstitutesconcertedactionforisolatedaction results in an immediate and recognizableimprovementinhisconditions.”

Moreover,accordingtoMises,

Theadvantagesderivedfrompeacefulcooperation... are universal. They immediately benefit everygeneration...[f]orwhattheindividualmustsacrificeforthesakeofsocietyheisamplycompensatedbygreateradvantages.

Of course living cooperatively and seeking a“commongood”insolidaritywithothersbringsmanyadvantages, materially and otherwise. Virtually noonedeniesthisexceptsomeanti-socialmisanthropeswhocanhardlybeblamedonanyparticularideology.

So where is this liberalism-inspired rejection ofcommunity and the common good that Francisimagines exists out there sweeping the globe? Itdoesn’texist.

IfFrancisdoeswishtoidentifyinstitutionsthatbreedconflict,poverty,war,andsocialdisintegration,he’ddomuch good by turning his attention to states, tocentralbanks,andtotheglobalmachineryofcoercionandwarthatworksdailytoundothegreatprogressbeingmade every day thanks tomarkets and otherformsofpeacefulandvoluntarycooperation.

Nelson added: Most of the harm in the world is done by good people, and not by accident, lapse, or omission. It is the result of their deliberate actions, long persevered in, which they hold to be motivated by high ideals toward virtuous ends. — Isabel Paterson


BankNotes -NelsonNash’sMonthlyNewsletter-June2017When these people sat down to talk, Politics satdownwiththem,Ideassatdownwiththem;aboveall,History sat downwith them.They spoke andthought within a context that lifted them out ofthe nameless, faceless obscurity into which theyhadbeenborn,andgave themtheconviction thattheyhad rights aswell as obligations.Theywerenotsimplythedisinheritedoftheearth,theywereproletarianswithafoundingmythoftheirown(theRussian Revolution) and a civilizing worldview(Marxism).

WhileitistruethatthousandsofpeoplejoinedtheCommunistPartyinthoseyearsbecausetheyweremembersofthehardscrabbleworkingclass(garmentdistrictJews,WestVirginiaminers,Californiafruitpickers),itwaseventruerthatmanymorethousandsin the educatedmiddle class (teachers, scientists,writers) joined because for them, too, the partywaspossessedofamoralauthoritythatlentshapeandsubstance,throughitspassionforstructureandtheeloquenceofitsrhetoric,toanurgentsenseofsocialinjustice….

TheMarxistvisionofworldsolidarityastranslatedby the Communist Party induced in the mostordinaryofmenandwomenasenseofone’sownhumanitythatrandeep,madelifefeellarge;largeandclarified.Itwastothisclarityofinnerbeingthatsomany became not only attached, but addicted.No reward of life, no love nor fame nor wealth,couldcompetewiththeexperience.Itwasthisall-in-allnessofworldandselfthat,alltoooften,madeof the Communists true believers who could notfaceuptothepolicestatecorruptionattheheartoftheirfaith.

Sounds fascinating, if bonkers (Marxism is hardlya “civilizing worldview”). It sounds less like anintellectual salonof ideas andmore like a religiousdelusion. Those too can be well intentioned. Thekey here is a dogmatic ideology,which serves as akindofsubstituteforreligion.Ithasavisionofhell(workers and peasants exploited by private-capitalwieldingcapitalistelite),avisionofheaven(aworldof universal and equal prosperity andpeace), and ameans of getting from one to the other (revolution

frombelow,asledbythevanguardoftheproletariat).

Once you accept such an ideology, anythingintellectualbecomespossible.Nothingcanshakeyoufromit.Okay,that’snotentirelytrue.Onethingcanshakeyouofit:whentheleaderofthecultrepudiatesthethingyoubelieveinmoststrongly.

Khrushchev's Heresy

Shewas20yearsoldin1956,whenNikitaKhrushchevspoke to the Soviet Communist Party about thecrimesofStalin.Apparentlytheunrelentingreportsoffamine,persecution,andmassdeath, fromtheearlyyearsofBolshevikrule–andeventherevelationoftheHitler-Stalinpact–wouldhavedemoralizedthemearlier.Butno:

The20thCongressreportbroughtwithitpoliticaldevastationfortheorganizedleftaroundtheworld.Withinweeksof itspublication,30,000people inthis country quit the party, andwithin the year itwasasithadbeeninits1919beginnings:asmallsectontheAmericanpoliticalmap.

Amazing.

The Early Reds

Andspeakingofthissmall1919sect,I’mremindedofoneofmyfavoritemovies:Reds (1981). Icouldwatchitanother20times.ItexploresthelivesoftheAmericancommunistsoftheturnofthe20thcentury,theirloves,longings,andaspirations.ThefocusisonfierybutdeludedJackReed,butitincludesportraitsofapassionateLouiseBryant,thegentileMaxEastman,anedgyEugeneO’Neill,andtheeverinspiringEmmaGoldman.

These people weren’t the Progressives of themainstreamthathistorycreditswithhavingsomuchinfluenceoverpolicy in thosedays.Thesewere thereal deal: the Communists that were the source ofnationalfrenzyduringtheRedScareofthe1920s.

Themovieportraysthemnotasmonstersbutidealists.Theywereallverytalented,artistic,mostlyprivilegedin upbringing, andwhat drew them to communismwas not bloodlust for genocide but somevery highideals.



They felt apassion for justice.Theywanted to endwar. They opposed exploitation. They longed foruniversal freedomandmaximumcivil liberty.Theydespised theentrenchedhierarchiesof theoldorderandhopedforanewsocietyinwhicheveryonehadanequalchance.

Allofthatsoundsreasonableuntilyougettothedetails.Thecommunistshadacuriousunderstandingofeachof these concepts. Freedom meant freedom frommaterial want. Justicemeant a planned distributionofgoods.Theendofwarmeantanewformofwaragainstthecapitalistswhotheybelievedcreatedwar.Thehierarchiestheywantedtobeabolishedwerenotjust state-privilegednoblesbutalso themeritocraticelites of industrial capitalism, and even small landowners,nomatterhowsmalltheplot.

Whybeacommunistratherthanjustasolidliberaloftheoldschool?Inthewaythemovieportraysit,theproblemwasnotsomuchin theirgoalsbut in theirmistakenmeans.Theyhatedthestateasitexistedbutimaginedthatanew“dictatorshipoftheproletariat”could become a transition mechanism to usher intheirclasslesssociety.ThatledthemtocheerontheBolshevikRevolutioninitsearlystages,andworkforthesamethingtohappenintheUnitedStates.

The Dream Dies

Watchingtheirone-by-onedemoralizationispainful.Goldman sees the betrayal immediately. Reedbecomes an apologist for genocide. Bryant forgetspretendingtobepoliticalandbelievinginfreelove,marriesReed,andtendstohismedicalneedsbeforehisdeath.O’Neilljustbecomesafull-timecynic(anddrunk).IttookMaxEastmanlongertolosethefaithbutheeventuallybecameananti-socialistandwroteforFEE.

The initial demoralization of the early Americancommunistscameinthe1920s.Theycametorealizethat all thewarning against thiswicked ideology –havingbeenwrittenabout formanycenturiesprior,evenbacktotheancientworld–weretrue.

Eastman,forexample,realizedthathewasseekingtoliberatepeoplebytakingfromthemthethreethings

peoplelovemostinlife:theirfamilies,theirreligion,andtheirproperty.Insteadofcreatinganewheavenon earth, they had become apologists for a killingmachine.

Stunnedandembarrassed,theymovedonwithlife.

Butthehistorydidn’tendthere.Therewerestillmorerecruitsbeingaddedtotheranks,generationsofthem.The same thing happened after 1989. Some peoplelostthefaith,othersdecidedthatsocialismneedsyetanotherchancetostrutitsstuff.

It’sstillgoingontoday.

As for theCommunist Party inAmerica,most left-Progressives of theAntifa school regard the Partyas an embarrassing sellout, wholly owned by thecapitalist elite. And when we see their spokesmenappearontelevisioneveryfouryears,theysoundnotunlikepunditsweseeonTVeverynight.

Itwouldbeniceifanyarticlewrittenaboutcommunismwerepurelyretrospective.That,sadly,isnotthecase.There seem to be new brands of Marxian thoughtcodifiedevery fewyears,andstillmoreversionsofits Hegelian roots that take on ever more complexideologicaliterations(thealt-rightisanexample).

Whydopeoplebecomecommunists?Becausehumanbeingsarecapableofbelievinginallsortsofillusions,andwearecapableofworkinglongandhardtoturnthemintonightmares.Oncewe’veinvestedthetimeand energy into something, however destructive, itcantakeaverylongtimetowakeusup.It’shardtothinkofagranderexampleofthesunk-costfallacy.

Jeffrey Tucker is Director of Content for theFoundationforEconomicEducation.

Nelson added: Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation. This is the seductive lure of socialism. And I repeat: these two uses of the law are in direct contradiction to each other. — Frederic Bastiat 1800-1850



Raise an American AdultByBenSasse

Weallknowthenounadult.ButIwasperplexedlastyear tohear thenewverb toadult. Insocialmedia,especiallyonTwitterandInstagram,itbirthedanewhashtag:#adulting.Asin:“Justpaidthismonth’sbillson time #adulting,” or “Decided I couldn’t watchNetflix8hoursstraightandwenttothegrocerystoreinstead#adulting.”ItevengotanominationfromtheAmericanDialectSocietyforthemostcreativewordof2015.

“Adulting”isanironicwaytodescribeengaginginadultbehaviors,likepayingtaxesordoingchores—thesortofmundanetasksthatresponsibilitydemands.To a growing number of Americans, acting like agrown-upseemslikeakindofrole-playing,amodeofbehaviorrequiringhumorousdetachment.

Letme be clear:This isn’t an oldman’s harrumphabout “kids these days.” I still remember DocAndersonstandinginthestreetin1988,yellingatmetoslowdownasIdrovethroughhisneighborhoodinoursmallNebraskatown.Iwas16andcouldn’tstandthatguy.Yearslater,whenIhadchildrenofmyown,Ireturnedtothankhim.Maturation.

What’s new today is the drift toward perpetual adolescence. What’s new is seeing so much lessdifference now between 10-year-olds and youngadultsintheirlateteensandearly20s.

Asmanyparentscanattest,independentadulthoodisnolongerthenormforthisgeneration.DatafromthePewResearchCentershowthatwecrossedahistoricthreshold lastyear: “For thefirst time inmore than130 years, adults ages 18 to 34were slightlymorelikely to be living in their parents’ home than theyweretobelivingwithaspouseorpartnerintheirownhousehold.”Fullyone-quarterofAmericansbetween25 and 29 livewith a parent—comparedwith only18%justoveradecadeago.

A greatmany factors have contributed to this shifttoward perpetual adolescence. The economy hassomething to do with it, of course—but social andcultural developments do too. The list of culprits

includes our incredible wealth and the creaturecomforts towhichourchildrenareaccustomed;ourreluctancetoexposeyoungpeopletothedemandsofrealwork;andthehostage-takingholdthatcomputersandmobiledeviceshaveonadolescentattention.

Ournationisinthemidstofacollectivecoming-of-age crisis. Too many of our children simply don’tknowwhatanadultisanymore—orhowtobecomeone. Perhaps more problematic, older generationshave forgotten thatwe need to teach them. It’s ourfaultmorethanit’stheirs.

My wife, Melissa, and I have three children, ages6 to 15.We don’t have any magic bullets to helpthemmake the transition from dependence to self-sustainingadulthood—becausetherearen’tany.Andwe have zero desire to set our own family up as amodel.Westumbleandfalleveryday.

Butwehaveasharedtheoryofwhatwe’reaimingtoaccomplish:Wewantourkidstoarriveatadulthoodasfullyformed,vivacious,appealing,resilient,self-reliant,problem-solvingsoulswhoseethemselvesascalledtoloveandservetheirneighbors.Ourapproachisorganizedaroundfivebroadthemes.

Resist consumption. Although we often fail at it,MelissaandIaimtoimprintinourchildrenthefactthat need and want are words with particular anddistinct meanings.When our 6-year-old son pointstoatoyatTargetandsays,“Ineedthat,”welethimknowthat“need”actuallyhasnothingtodowithit.Hissurvivaldoesn’tdependonsecuringthattoy.

In a 2009 study called “Souls inTransition,”NotreDamesociologistChristianSmithandhiscolleaguesfocused on the spiritual attitudes andmoral beliefsof18- to23-year-old“emergingadults.”Theyweredistressedbywhattheydiscovered,especiallyaboutthe centrality of consumption in the lives of youngpeople.Welloverhalfagreed that their“well-beingcanbemeasuredbywhattheyown,thatbuyingmorethingswouldmake them happier, and that they geta lot of pleasure simply from shopping and buyingthings.”

‘Maturity requires imagining life without material



wealth.’

Butconsumptionisnoroutetolong-termhappiness,asaraftofstudiesbypsychologists,neuroscientistsandsociologistsdemonstrate.Partoflearningtobeanadultisfiguringoutthatourrealneedscanbeseparatedfromtheinsistentcallofourwants.Maturityrequiresimagining life without material wealth, resolvingthatwecouldbehappyinsuchastate,andactuallyexperiencingmilddeprivationfromtimetotime.

Parents can impart such lessons many ways. Theoccasional camping trip, off the grid, can teach thebasicdefinitionofshelter—andmakethecomfortsofhome look like the luxuries they are.Youcan shopdifferently too. One of our daughters is a seriousrunner,sowepurchasehigh-qualityshoestoprotectherdevelopingbones—butmostofherotherclothescomefromhand-me-downsandsecondhandshops.

We want our children to learn the habit of findingpleasureintheessentialsoflifeandfeelinggratitudeforthem.We’dliketothinkthat,whentheystrikeouton theirownsomeday, they’llhaveaclearsenseofwhattheyreallyneed.

Embrace the pain of work.Manyofthesamesocialscientistshighlightingtheemptinessofconsumptionpointtoaverydifferentkeytohappiness:meaningfulwork. Over the years, I’ve found that just abouteveryoneinterestingI’veevermetpossessesastrongworkethic,focusedondoingevenhumblejobswell,andtheytypicallylearneditearlyinlife.Theyusuallyhaveapassionateanswertothequestion:“Whatwasthefirstreallyhardworkyoudidasakid?”

‘Charactercomesbeforecredentials.’

Suggesting that our children should have similarexperiences seemscountercultural today.Strenuous,unpleasant work seems harsh, potentially scarring.Worse, formiddle-class parents hoping to get theirchildrenintoselectivecolleges,itmightinterferewiththe “enrichment” activities that impress admissionscommittees.Butcharactercomesbeforecredentials.Ifourchildrenaretobecomerealadults,theyneedtoknowthatdifficulttasksarethingstobeconquered,notavoided.

Last year, we sent one daughter to spend a monthworkingonacattleranch.Shewas14andsurprisinglyeager to get her hands dirty.We left herwith littleadviceotherthantomakeusproudbyworkinghard,toaskforcoachingandnevertoletherbosseshearhercomplain.

Once she settled in, she would send regular textmessages about what she’d done that day. It wassmelly,wet,demandingwork,but she reveled in it:Gotanorphanedbabygirl to takeherwholebottle.(Alsogottonsofnoseslime&snotonmyjeans.)

Idon’tmeantosuggestthattherearenohardworkersamong young people now. But “work” is morethan advancement in school. Our children need toappreciatenot just theprivilege theyenjoy inbeingfree from thedemandsofphysical laborbut also—especially—theirowncapacitytofixthemessesthatlifewillthrowatthem.

Startyoung:Sendyour2-year-oldtogetyoursockseverymorning.Itcreatesarhythmandpatternthatcanbeeasilyupgradedtomorecomplicatedand“adult”tasks. Re-evaluate every service you’re paying forathomeandaskifyourchildrencoulddoitinstead.Mowingisagoodexample;householdrepairscounttoo. Babysit together. Make your children learn tochangediapers.

Connect across generations. Today, youngpeople’s lives are driven by one predominant fact:birthyear. Inpersonandonline, teenagershangoutoverwhelmingly with friends of the same year inschool.Correspondingly,seniorcitizensliveouttheiryears in nursing homes where they interact mainlywiththeiragepeers.

A 2014 Boston Globe article neatly summarizedmuch of the recent research on this question. Onestudy found that, among Americans 60 and older,onlyaquarterhaddiscussedanythingimportantwithanyone under 36 in the previous six months. Andwhenrelativesareexcluded,thepercentagedropstojust6%.

‘Adolescentsacquirevitalsocialskillsbyinteractingwithpeopleoutsidetheirpeerbubble.’


BankNotes -NelsonNash’sMonthlyNewsletter-June2017This isolation isnoway to raise responsibleadults.The anthropologist Alice Schlegel, co-author of aclassicstudyof186preindustrialcultures,concludedthat age segregation is correlated “to antisocialbehavior and to socialization for competitivenessand aggressiveness.” Social science confirms whatparents know fromwatchingolder siblings care foryoungerones:Adolescentsacquirevitalsocialskillsbyinteractingwithpeopleoutsidetheirpeerbubble.

Therearemanywaystomaketheseconnections.Thesimplest are activities like taking your children tobakecookieswithanelderlyneighbororvolunteeringat a senior center. But the occasional visit isn’tenough.Weneedtoencourageourchildrentobuildlastingconnections—somedegreeof friendshipandfamiliarity—with older peoplewho aren’tmembersofthefamily.

Perspective is invaluable: It lets your children hearabout previous eras, including thosefirst hard jobs,and gives them a longer view of what it means tostrugglewithhardshipsandpersevere.

Travel meaningfully. Decades ago, the historianDanielBoorstindrewadistinctionbetweenthenobilityoftravelandwhathesawastheboredomoftouring,withitslargegroupsandcontrolleditineraries.Whathecalled“thelostartoftravel”involvedgoingout“insearchofpeople,ofadventure,ofexperience.”

When we travel this way, we subject ourselvesto the vertigo that accompanies leaving familiarsurroundings, customs, language and food. It’sespeciallyvaluableforadolescents.Likehardwork,it makes them appreciate not just the comfort oftheir own lives but the satisfaction of trying newanddifficultthings.Italsoforcesthemtolookatthematerialnatureoftheirlives.DoIreallyneedsomuchstuffwhenIfeelfreerawayfromit?

Children will obviously not all have the sameexperiences as they learn about travel. Some of uscome from more outdoorsy families; others comefromwealthierfamiliesthatcanaffordtheairfaretofly overseas. “Where” isn’t nearly as important ashow.

Thekeyisputtingchildrenintosituationsoutsidetheircomfortzone,seeingthingstheydon’tordinarilysee.Andwhenyou’redonewithyourtrip,don’tjustreturnimmediatelytoeverydaylife.Pausetosummarizetheexperienceandreflectonit.

Become truly literate. Reading done well is notapassiveactivity likesitting in frontofascreen. Itrequiresattention,engagementandactivequestioning.Unfortunately, according to the Bureau of LaborStatistics, the averageAmericannow reads only 19minutesaday—andtheyoungeryouare,thelessyouread.

Thatouryoungpeopletakesolittleinterestinreadingissad,butnotjustforthem.Italsokeepsthemfromgrowingintothesortofengaged,responsiblecitizensour republic needs.America’s founders understoodliteracy as a prerequisite for freedom and self-government, andwe are paying the price today forfailingtotakethattruthseriously.

Thefirststepistoencouragethemtobecomequantityreaders. A friend introduced Melissa and me to achallengecalled“TheCenturyClub.”Tobeamember,youmustread100booksinayear.Quiteafewpeoplecanreadtwosolidbooksinaweek,butknockingoutalmosttwoaweekforanentireyearisdaunting.

Withchildren,youhavetostartwithlightbookstosetthemonthepathto100.Butastheydevelopthehabitofreading,youcanaddmorechallengingtitles.Ourchildrenhaven’tyethitahundredinayear,butithasbecomeahealthy,behavior-shapinggoal.

Quantityisimportant,butqualityisthebigger,long-termgoal.Whenourgirlswerenotyetteens,weletthempickjustoverhalfofthebooksintheirsequence.Nowwehave themproposeahandfulofbooks forus to select from, and if the books aren’t rigorousenough,weintervenemoreaggressively.

Mr. Sasse, a former college president, is the juniorU.S. senator from Nebraska. This essay is adaptedfromhisnewbook,“TheVanishingAmericanAdult:OurComing-of-AgeCrisis—andHow toRebuild aCultureofSelf-Reliance,”whichwillbepublishedonMay16bySt.Martin’sPress.



This Machine Sustains the Good LifeJeffreyA.Tucker

Isabel Paterson (1886–1961) was one of the mosteruditeandwidelyeducatedthinkerstoevergracetheworldoflibertarianideas.God of the Machineishermasterwork. Its contents have not been sufficientlyabsorbedintothecurrentintellectualworld.Itisoneofthoselosttreasures,abookthatyoubeginandyourwholeworld stops. It iswise. It isprophetic. Ithasstoodthetestoftime.

Itfirstappearedin1943asthebookthatwentagainsteverything that the politics of the timewere tellingpeopletobelieve.Wehadbeenthroughmorethanadecadeoftheplanningstate,withgovernmentrobbingpeopleinordertohelpthem.Thiswastheperiodofhistorythatpreparedthewayforthepredatorypoliticsthatdefinedailylifetoday.TheexperienceoftheNewDealpreparedthewayforwartimeplanninginwaysthatpeopletodaydonotunderstand.ButPatersondid.

The Guillotine

Thephrasethatthisworkcontributedtothelexiconsums up her thesis: the humanitarian with theguillotine.The phrase condemns the use of a goodandrightimpulseinourhearts–towishforthewellbeingofall–tosupportwhatisaviolentandpillagingpoliticalsystemthatsubjugatestheindividualintheinterestofthegroup.

The state assured the public that it had their bestinterestsatheart.Itwoulddeliverjobs,food,security,progress and all wonderful things.And the masseswere happy, for a time.But the economic recoverynevercame.Yearswentby.TheNewDealersbegansearching for some way to cover their incrediblefailure and distract the population from the reality.Theanswerpresenteditselfintheformofthedraft,

thewar, thewreckingof family and community—and,finally,massbloodshedonallsides.

The God of the Machine blew the whistle on thatentire trajectory and celebrated individualism as noone else had yet done.Albert JayNock consideredthis book to be the greatest thus far on the subjectofAmerican liberty.Youcansee in thesepages theforeshadowingofwhatwouldlaterbecomearobustintellectualtraditionintheUnitedStates.Itis,inmanyways,afoundingdocumentoftheentirelaissez-faireperspectiveinmodernAmerica.

The influence onAynRand,MurrayRothbard, andsomanyothers,isobvioustoanyoneattentivetotheintellectualhistoriographyofthetime.

Rereadingthisbookinpreparationforrelease,Ifoundmyself stopping every few passages in delight andamazementatPaterson’sproseandinsights.Shewasclearlyageniusandawomanofenormouscourage.

Howcouldthismasterpiecehavedroppedfrompublicconsciousness?Idon’thaveananswertothatmystery.Perhaps thepublicwasnotreadyfor itsmessage in1943.Andafterthewar,awholegenerationofwritersandbooksdroppeddownthememoryhole tomakewayforthenewandreconstructedscionsofthestatistpostwarculture.

Whatatragedy,butonethatisbeingrectified.Ihavea great sense of joy to be involved in presenting itthroughFEEtoanewgeneration.

Comment by R. Nelson Nash — Thanks, Jeffrey, for bringing this great lady to our attention. Several years ago I read God Of The Machine by Isabel Paterson, Atlas Shrugged by Ayn Rand, and The Discovery of Freedom by Rose Wilder Lane in succession. What a mind-blowing experience that was!

Forananswer toyourquestion inyournext to lastparagraph(above)pleaseseethequotationbelowbyIsabel.Ithinkitisbecauseourpoliticallycontrolled“educationalsystem”doesn’twantpeopletoknow!

Every politically controlled educational system will inculcate the doctrine of state supremacy sooner or later....Once that doctrine has been accepted, it becomes an almost superhuman task to break the

Comment by R. Nelson Nash — What a powerful — and essential message Senator Sasse has given us! Our world would be greatly enriched if every parent memorized this article. This is a beacon of light in a very dark world!



Don't Fall Into the Low-Growth TrapbyJohnTamny

RuchirSharmaisthelatesteconomisttoembracethepopularnotionthatwe–andtherestoftheworld–areunable togrowasweoncedid.Supposedly the"global economy has changed in ways that reducegrowth," and because of the changes, subduedeconomicactivitywillbe the structuralnormgoingforward.That'sthebadnewsforthecongenitalcynicsdesperatelyseekingvalidationoftheirpessimism.

But before we get to the good news, it's worthtaking the time tounpack thewhybehindSharma'spessimism.Specifically, hebelieves that in thepast(betweenWWII'sendand2008)"theglobaleconomywas supercharged by explosive population growth,a debt boom that fueled investment and boostedproductivity, and an astonishing increase in cross-border flows of goods,money and people."He gotoneoutofthreeright.

Before the Boom

Sharma errs given his typically Keynesianpresumption that the"debtboom"justhappened,asopposedtoithavinglogicallybeingdrivenbyasurgeofproduction.Backtoreality,people,businesses,andgovernments (sadly) only borrowmoney insofar astheycanexchangeit forrealresourcesof the truck,tractor, computer, desk, chair, and human laborvariety.

Sharma's commentary leaves out somethingsubstantial;thatthe"debtboom"wasmerelyaneffectofaproductionboomthatresultedinabundantmarketaccesstogoodsandservices.Onlytheprivatesectorcancreatecreditthroughincreasedproduction.

Sharma also laments that "banks are not expandingtheirlending."Ok,butthenbanksareanincreasinglyirrelevant source of credit. Most lending occurswell away from the anachronistic banking sector,particularly in theU.S.More important,bankshaveneverbeenverydynamic,bydesign.

Figure that they lend out money in return for anincome stream.They have no equity. Because theydon't, and because their margins are very narrow,banksgenerallydirect their funds toward the stableand known. That's all well and good, but surgingeconomicgrowthisdrivenbysurprise,bycompaniesthat arepromising,but that alsohavegoododdsoffailing.

Banks generally can't lend toward the conceptspreviously described, but as evidenced by all theeconomic activity in Silicon Valley, there's lotsof non-bank finance focused on what's intrepid.And that's some good news that goes unmentionedby Sharma, that a reduction in bank lending hasoccurredinconcertwithgrowthinnon-bankfinance.Furthermore,andaswillbeexplainedinabit,there'snoeconomiclawthatsaysproductionwillforeverbesubduedsuchthatlendingalwayswillbe.

Depopulation and Immigration

Asforthe"depopulation"thathasSharmaallworkedup (in his defense, birthrates inform future doomamongeconomistsinthewaythatearthtemperatureshave long fed world-is-ending gloom amongscientists),there'snothingtohisargument.It'sempty.Highbirthratesdon'tsignalprosperityanymorethanlowratessignaleconomicdesperation.

Indeed,alookatthelistofthefifteencountrieswiththe highest rates of fertility has zero economicallypowerfulnotables,butincludesslow-growthnationslike Nigeria, the Democratic Republic of Congo,Uganda, andMalawi.Yet among thebottomfifteencountrieswith the lowest fertilityratesonecanfindGermany,Singapore,HongKongandSouthKorea,amongothers.Again,there'snothingtothebirthratestory. At best, high fertility correlates with slowgrowth.

stranglehold of the political power over the life of the citizen. It has had his body, property and mind in its clutches from infancy. An octopus would sooner release its prey. A tax-supported, compulsory educational system is the complete model of the totalitarian state. — Isabel Paterson



Sharmadoes,however,haveapointwithhislamentabout reduced trade and immigration. Immigration,wherebythemostimportantformofcapital(human)migratestowhereitsproductivitywillbemaximized,iscrucialtoeconomicgrowth.Theproblemtodayisthatmoreandmorecountrieswanttolimittheinflowof strivers who've exited countries that suffocatedtheirtalents.Thislogicallysubduesgrowthasdoesalackofopentrade.

Opentradeiscrucialtoeconomicgrowthforitgivesworkers a raise every single day, but of greatestimportance, aglobalizeddivisionof labor increasestheoddsoftheindividualspecializationthatpowersproductivityandrampantgrowth.Whenwe'reallowedto trade freely, the odds of us doing the work thatelevatesourskillsthemostincreasesexponentially.

So,totheextentthatglobalmigrationandexchangehavebeenslowedbygovernments,thesedevelopmentswouldlogicallybeasourceofstagnation.Atthesametime, Sharma perhaps forgets that the ongoing riseofautomation– thinkrobotsandother labor-savingtechnologies–willdofortheworldwhatimmigrationand cross-border trade used to. Figure that robotswill increasinglyspareprecioushumancapitalfromwastedlaborinfavorofmuchmoreproductivework.

Asforimmigrationlimits,thecomputerandinternetincreasingly make it possible for a computerprogrammerinSausalitotoworkalongsideasimilartalent in Shanghai. Eventually we'll all be tradingtogether,andworking together.Robots,automation,computers, and WiFi signal this beautiful future.Sharma is right about trade and immigration, buthis pessimismblindshim tohowmarket forces areworkingaroundridiculousgovernmentbarriers.

Limits on What We Can Produce

Beyondcapitalflows,Sharma'sbroadargumentisn'tverycompelling.Banksrepresent15%of totalU.S.credit, and the number is falling. Of much greaterimportance,realcreditdynamismoccursawayfrombanks.Andthenbirthratesjustdon'tmatter.Sorry,butthe'newnormal'isanythingbut.Boomingeconomicgrowthistheperpetuallynormalstateforfreepeople,andassuchtheonlybarrierstogrowtharethosethat

limitourindividualfreedomtoproduce.

Of course, it'swhenwe focus on thatwhich limitsindividual production thatwe see the sourceof ourstagnation.Atthesametime,weseejusthowsimpleit will be to attain stupendous growth. Just reducethe barriers to individual endeavor. In that case,incometaxespenalizework.Theyshouldbelowered.Investment is the driver of increased individualproductivity,sozerooutthecapitalgainstax.

Government spending extracts precious resourcesfromtheconstantlyexperimentingprivatesector,soreduce it. Regulation is the obnoxious conceit thatsays thosewhodidn't rate jobs in certain industriescanpolicethosesameindustries,allthewhilesensinglooming trouble spots before anyone else. In short,we're asking the impossible of regulators. If theycoulddowhatthey'rechargedwithdoing,they'dbeearning billions as private investors. Regulationsshrinkproductionwithoutdoinganythingtoenhancemarkets.

Money's sole purpose is as a measure facilitatingexchange and investment. Nothing else. If everypieceofpapercurrencyintheworldwerevaporizedtoday,nothingabouttheworld'swealthstatuswouldbe different tomorrow. Cheap, unstable money hasmodernly reduced the trade that informs all of ourwork, along with the investment that boosts ourproductivity.

Tear Down that Barrier

Stabilizemoney andwatch production soar. Lastly,Sharmaisrightabouttheflowofgoodsandpeople,particularly so longas technologydoesn't surmountthem. So get rid of the barriers to exchange, alongwiththeonesthatlimithumanmigration.Theyinjurethe people who aren't allowed to maximize theirtalents,alongwiththecountriesthatwouldotherwisebenefitfromthistalentmaximization.

Andhavingremovedthevariousbarriers,watchhowproduction surges.With an increase in production,watch how lending goes skyward to reflect thestaggering increase in goods and services on offer.Economics is blindingly easy, and the irony is that


BankNotes -NelsonNash’sMonthlyNewsletter-June2017the only barrier to economic growth is economistswhocan'tseethat individualfreedomisalwaysandeverywherethedriverofraginggrowth.

CountRuchirSharmaas thelatesteconomist tofallinto themythical 'lowgrowth' trap.There'snosuchthing.Freepeoplegrow.Period.WeneedlessSharmasandmorefreedom.Freedomequalsgrowth.Always.

ReprintedfromRealClearMarkets.

Comment by R. Nelson Nash — Regulations are nothing more than another form of taxation. They are written by bureaucrats — who are not elected — and are thoroughly imbued with the “little god syndrome.”

Birth Rates are at Historic Lows and Here's a Major ReasonJeffreyA.Tucker

For 100 years, the US government has tracked thebirthrate.Itisnowathistoriclows.Therearemanyreasons,butonehastodowiththedramaticchangeinthewaysocietyregardstheeconomicvalueofkids.

Toillustratethepoint,let’sreflectonthecontinuingpopularityofAnne of Green Gables, the1908bookbyCanadianwriterLucyM.Montgomery.Yes, it ischarming, and ridiculously so. It’s beyondmewhythenewNetflixrendering(AnnewithanE)isgettingbadreviews.It’sprobablybecausesomanypeopleareattachedtothebookandthemyriadpreviouscinematicrenderings.Still,Ifindthenewonedelightfulineveryway,andI’vebeenthinkingonpreciselywhy.

Beyondthesolidactingandtimelessstoryofabrilliantorphangrowingupandfindingherwayintheworld,theshowintroducesusintoatimegoneby.It isseton PrinceEdward Island sometime in the late 19thcentury,beforecars,phones,andindoortemperaturecontrol.So,sure, that’sdifferent.Sois thelanguageandculturalmores.

The Status of Kids

That’s not what truly strikes us, however. Whatis dazzling to watch is the completely differentrelationshipbetweenkidsandadultsthatexistedthen.

Thestatusofkidsinsocietywasunliketoday.

They were aspiring adults and given as manyresponsibilities as they could handle within theirrangeof competence,whichwas always shifting inthedirectionofmoreandmore.

TherewasnoDepartmentofLaborandDepartmentofHumanResourcesto"protect"themfromlivingfulllives.Kids in thosedayswere regardedasvaluablebecausetheyweretangiblyproductive.Theyworked,gained skills, and produced for their families orotherwiseworkedforbusinesseshereandthere.Theywere assets.As theygained skills, discipline, and awork ethic, they could become evermore valuabletotheircustodiansandcommunities.Thisisamajorreasonwhypeoplewantedthem.Andthekids,inturn,were socialized to be grateful to their benefactorswhetherathomeorwork.

AndnoticefromthestoryofAnnethatamainjobofkidsinthosedayswastocareforpeopleintheiragingyears.Sokidswerevaluableonbothendsofthelifespectrum:asco-workerswhenthekidsareyoungandthenashelpersastheircustodiansage.

What’s different today? Now kids are mostly afinancial cost anddefinedas such,because the law,educational system, and welfare state make it thatway.Ohsure,peoplestilllovetheirkids.Emotionallyand spiritually,we speakpiously andbeautifully oftheinfinitevalueoftheirlives.

And, of course, everyone agrees. There is a socialstatusthatcomeswithhavingkidsandtheycanbeanentrywaytonewfriendnetworks.

And yet. Let’s talk dollars and cents. Whenconsideringwhether tohavekids,peopleknowthattheywillcontributelittletohouseholdmanagement,andnothingpositivetothebottomline,andthentheymustconsiderhowmuchtheywillhavetospend.Youcanlookitupononlinecostcalculators.Forexample,ifyouaremarriedandwanttwokidsintheAmericanSouth, you are going to spend $732K. That’s adauntingfigure, and that’s before you start shellingoutforcollege.

In return forwhich, theyoffer...the infinitevalueof



theirveryexistence.

Is it any wonder that the birthrate has fallen to itslowest level inmore than100years?Yes, thereareotherreasonshavingtodowithtechnologyandgreatereconomic certainty. Still, if you forcibly reduce thevalueofanything,andpeoplehaveanychoiceoverit,theywillproducelessandlessofit.Thisispreciselywhathashappenedtothestatusofchildrenoverthelastcentury.

Why Would You Want to Be Anne?

Howdidthishappen?Let’slookatthestoryofAnne.

Anne is13yearsoldwhen thestorystarts.Shehaslivedaveryhardlifeduetocircumstancesbeyondhercontrol.Shehaslivedintheorphanagebutgetsanewstartwhenafamilyadoptsher,inordertogetaobtainaworkerwhoonlyneedsroomandboard.Thefamilyasked for a boy from the orphanage but there wassomemixupandtheysentagirl.Theadoptivefamily(anagingbrotherandsister)reluctantlyagreetokeepheronlyafter shecharms themandproves that shecanbringproductivity to thehousehold.She showsoff her skills, among which include her incredibleerudition.

It was a much poorer world, obviously, and onlythe richkids could afford to be in school full time.Annewasmostly self taughtbut she loved reading,dreaming,fantasizing,imagining.Shereadwhenevershe could, by candlelight, exhausted at the end oftheday.Andshewasbrilliant,evenwithoutfocusorbeinginstitutionalized.

A reason this story has riveted children for somany generations comes down to the challenges,opportunities,tragedies,andtriumphssheexperiencesinanexciting,varied,interestinglife–whichistosay,alifeinaneconomicallyfreesociety.Shewasachildinaworldthataspiredforhertobecomeanadult,anddealwithactualadult-liketasksandresponsibilities.Yes,thatinvolvedschoolingbutthiswasnotforcedanditwasnottheonlypurposeofherlife.Shecouldevendrinkwine!

Back then, kidswere not nationalized by the state,their every move controlled by public institutions,

andforbiddenfromworkingbythegovernment.Theywerechallengedwithasmanyadult responsibilitiesastheycouldhandle.ThatAnneworkshard,candoanythingaboycando,picksupvastskills,andherpathoflearningislargelyunscriptedisarealsourceofdelightforreadersandviewers.Sheprovesherselfuptothetask.

What Changed?

Soon after the book was written, public policyconcerning kids began to change. Public schoolingwasmade nearly universal in the developedworld.Privateschoolingbeganitslongpathofdeclinetothepoint thatbymid-century theywereoperatedeitherbychurchesoronlyavailabletotherich.Thesepublicschoolsenteredonthetrajectoryofeverygovernmentproject:planned,managedfromthetop,treatingeverystudent as an unindividuated unit of an aggregate,soldiersina.kidarmy,eachputthroughthepacesfortwelveyears.

ThenschoolwasmadecompulsoryintheProgressiveEra.Familiesandkidshadnochoice.Insuchaworld,wouldAnnehavebeenadopted?Whywouldshebe?Insteadof realizinghervalue,shewouldhavebeenstuffed intoaholdingcell for twelveyears,andhercaretakers would have been fiduciarily responsibleforprovidingroomandboardwithnocompensation.Therewouldhavebeennomarketforherpersonatall.

A couple of decades later, public policy went thefull way. During the NewDeal, “Child labor” wascompletely banned. It remains so today, with rareexceptions(youcanbeachildactorandyoucanworkfor your family business). Mostly kids are deniedtheir inherent human rights to work and preventedfrombeingvaluabletoothersaccordingtotheirownskillsanddesires.

The law books say you can work from 14 but thelimitsaretoostrictandthepaperworktoolong.Evenat16, thereare jobsyoucanhaveand jobsyouareallowedtoaccept.Youaren’treallyfreetoearnmoneyservingothersuntilyouare18,bywhichtimekidsaresocializedtowanttodoanythingbutthat.


BankNotes -NelsonNash’sMonthlyNewsletter-June2017Andallofthisisdonefortheirwellbeing.

ThengovernmentsinstitutedSocialSecurity,medicalcarefortheaged,andpubliclyfundedhomesforthe“retired.”That letskidscompletelyoffthehookfortakingcareoftheirparents.Theinversealsobecomestrue:theyarelessvaluabletoparentsbecausetheyarenolongernecessaryforend-of-lifecare.

The upshot is that public policy killed the value ofkids in the world, denying their rights to choose,work, and serve others. Society literally decided todevaluethemtothepointthattheyareallcostwhenyoungandunnecessarywhentheircaretakersareold.

It’s even worse. Kids today are corralled intocollectivesdefinedbyage,givenanauthorityfiguretolordoverthemandlecturethemfor12years,andtheonlyjobtheyareallowedtohaveistocoughbacktheinformationtheteachertellsthem,sittingindesks,dayafterdayforthewholeoftheirgrowingup.

When we discover that the kids are bored andmisbehave,westuffthemfullofdrugs,belittlethem,jail themformisbehavior,andfinally turn themoutinto theworldat theageof18withnoskills,workethic, or knowledge of what it means actually tosucceedinlife.

Wenolongerliveinanagriculturalorevenindustrialagethatwasphysicallygrueling(thegreatexcuseforwhywestopallowing themremunerativework). Indigitaltimes,therearewholeworldsofsafeworkthatkidscoulddowhilelearningandenjoyinglife.Kidswouldhavesuchbetterlives.Wejustdon’tallowit.

We think Anne’s orphanage was cruel. But sheescaped because an adoptive family saw her value.Shefoundhergroove.Atleastshedidn’tgrowupintoday’s regimented, regulated, exclusionary worldfromwhichthereisnoescapeforanykids,ever.

Bring Back Green Gables

Myowntheoryofwhywelovethisbookandcan’tgetenoughofthemoviesaboutastorysofarbackintimeissimple:kids in thosedayswereregardedbysocietyasrealhumanbeingswithrightsanddignityandopportunity.Theycouldlivefullandwonderfullives.Theylivedreallivesaspartofreallife.

VISIONByLeonardE.Read

Note - Frequent readers of BANKNOTES are aware of my relationship with Leonard E. Read and my admiration for his works during his lifetime. In the following issues I will be sharing his book, VISION, one chapter per month. It was written in 1978. What a privilege it was for me to know this great man! –R.NelsonNash

Chapter24

OUTOFEVIL:GOOD!

Try to find the good in the bad.The good is always there.-RUDOLPHSTEINER

Ichoosetobeanoptimistratherthanapessimist,asrelated to our present politico-economic decline—anditisnotbecauseIamunawareofthedecline.Mystanceisbasedonaseriesofexercisesbegun20yearsago, Steiner’s formula for self-improvement. Thisrequiresfiveminutesofconcentrationeverydayforsixmonths—eachmonthanewexercise.1

Inthefourthmonthonemustcontemplateadifferentbadthingeachdayuntilhefindssomethinggoodinit.Interestingandencouraging,thegoodisalwaysthere!Andfiveminutesissufficient.Oneamongcountless

Their rightswerenot systematicallyviolatedby thelaw in the nameof helping them.TheProgressivescamealonganddeployedtheviolenceofthestatetomaketheirlivesbetter,andherewearetoday.

Isitanywonderthatwearenostalgicaboutthelifeofkidsinthosedays?Andisitanywonderthatpeoplehave to think very carefully about producing themtoday?

Comment by R. Nelson Nash — There should never have been a Department of Labor and Department of Human Resources. Activity of this kind is nothing more than bureaucratic meddling in peoples lives. They create a problem in people’s minds and then produce a “solution” to the problem they created. When will people catch on to their nonsense?



examples: The starling is a messy bird—bad! Onedayhundredsofthemmovedacrossourlawnpickingfrom the soil the grubs of Japanese beetles; theirdestructionended—good!

Now to thegood that is coming to light as a resultof the present decline into socialism. As HoraceobservedinRomeabout2,000yearsago:

Adversityhastheeffectofelicitingtalentswhichintimesofprosperitywouldhavelaindormant.

Hereismywayofparaphrasingtheaboveasrelatedtothisthesis:

Bad notions have the effect of eliciting goodideas which, were all serene and to everyone’ssatisfaction,wouldstimulatebutlittleifanymentalactivity.Dormancy!

Ever since the conclusion of those exercises twodecades ago, I have been able to identify countlessgoodandelevatingideasthatwouldhavelaindormanthad it not been for the bad notions responsible forourdecline.While I have featured this discovery—Steiner’s, not mine—in all of my lectures onmethodology,theinspirationforthisessayisaletterjustreceivedfromanAustralianfriend.

Somewhat unbelievably, Australia is in a steeperdecline than the U.S.A.Wrote my friend, “One of the good things about our present political mess is an increasing opportunity for me to discuss the ideas of liberty.” Wereeverythingsereneandtomostpeople’ssatisfactioninthatcountry,therewouldbenothingtoevokehissplendidideas.Werethereprosperity,theywouldhavelaindormant!

Toputthisthesisintofocus,todemonstratehowthereisalwayssomethinggoodineverythingbad,imagineamanbornatthebeginningoflifeonearth,andstillliving!Byreasonof sucha lifespan,his frequencyperceptionwoulddifferfromours.Touseafigureofspeech,hewouldseeonlytheforestandnotthetrees,whereas,weseethetreesandnottheforest.

LetWaltDisneyexplainwhat Imeanby frequencyperception.Hefocusedhiscameraonaroselanting,flickingamotionpicturefilmeverydayorso.Whentheplanthadgrownandtherosehadbloomed,heput

thisphenomenon—filmedovermanyweeks—onthescreensothatviewersmightwitnessthedevelopmentintwoorthreeminutes.Thatwasadramaticchangeinfrequencyperception.

Ourimaginaryman’sfrequencyperceptionwouldbevastlydifferentfromours.About35millenniaago,hewouldhaveobserveda levelofhumanityknownasCro-Magnonman.Fromthatancienttimeuntilnowhewouldhaveseenonlytheemergenceofhumanityand none of the detail—just the forest and not thetrees.Symbolized,itwouldlooksomethinglikethis:

To dramatize the point, put a powerfulmagnifyingglassonthis lineandhavealookat its interior: thedetail, the trees in the forest, a look atwhat a fewindividuals have seen during the past. The interiorwouldshowevolutionanddevolutioninasequence,evolutioninchingaheadoverthemillennia:

That X is to symbolize the present devolutionaryposition,notonlyintheU.S.A.butworldwide—noexception!It’sthemesswe’rein—thebad.

Thisraisesthequestion:Howpossiblycananygoodbespawnedfromourpresentdevolutionarysituation?Itissobad—soevil—thatmanyindividualswholove


BankNotes -NelsonNash’sMonthlyNewsletter-June2017libertydonotseeorevenlookforthegood.Instead,they indulge in combative tactics—name calling,smearing and the like. Not an iota of constructivethinking! Or, if not so indulging, they give up theghost, throw in the sponge.There isnohope;all islost—sotheyerroneouslyconclude.

Parenthetically,combativenessisabelligerentratherthanapeacefultactic.Theveryessenceoffreedomisapeacefulwayoflifeandso must the tactic be,thatis,ifwearetobeblestbyareturntofreedom.

A peaceful tactic that works like magic? It is, asSteinertaught,tofindthegoodinthebad.Itisalwaysthere—abeliefforwhichthereareproofsgalore.

Here is one among numerous reasons why I knowthere is always something good in everything bad.ThedemandforFEESeminarsisincreasingbeyondourabilitytoaccommodate.

During the past year, we have conducted 23 fromeast to west—Georgia to Hawaii and in between.Aside from the Seminars at FEE, all have beensought by those interested in learning the freedomphilosophy,notonepromotedbyus.Whatstimulatesthisyearningforlearning?Nothinglessthanthebadweareexperiencing! It is thecurrent socialism thatinspiresadesireforunderstandingthefreedomwayoflife,thebadthatcausesasearchforthegood—on the part of a few.

A few? Devolutionary slumps have quite a recordof creating anti-agents—always an infinitesimalminority.Butnotethis:Oneachoccasion,ithasbeenandwillcontinuetobeamatterofleadership.Ineveryinstance,oneortwoamongtheanti-agentswillbeuptopside,“attheheadoftheclass,”aswesay.

ChristianitywasledbythePerfectExemplar.HehadadozenDisciples—anti-agents—spawnedbythebadthatwasrampantatthattimeinhistory.Theturnaboutin England following the Napoleonic Wars—frommercantilism to the Industrial Revolution—was ledby Richard Cobden and John Bright. They had asmall number of coworkers: anti-agents. The samecanbesaidabouttheAmericanMiracle.AfewofourFoundingFathersledthewaytothemostmiraculous

politico-economicturnaboutinallhistory!

Instead of lamenting the present devolutionaryposition, I applaud it. Why such an unorthodoxattitude? Merely have a look at the devolutionary-evolutionary sequence. Each devolutionary slumpserves as a springboard—an inspiration—that leadsto the next evolutionary attainment. For proof, nomoreisrequiredthanalookatthehistoricalrecord.Its instruction tous?Evolution,emergence,growth,awareness, perception, consciousness inching aheadastimegoeson!Wereitnotforthestimulustofindthegoodwhichthebadevokes,humanitywouldstillbeattheCro-Magnonlevel!

BacktotheSeminarsandtheirparticipants.Whyaretheypresent?It’sthebadthat’sontherampage!Theyhavebecomeanti-agents, searching for thegoodbyreasonoftheevil.

A point that should be emphasized: Suppose youwere in charge of the Cosmic Design. Would youpap feed the population— “money or favors frompoliticaloffice”—orwouldyougive themobstaclestoovercome?Obviously,youwouldchoosethelatter,forit isanobservedfactthattheactofovercomingleads to the art of becoming! Life has no higherpurpose than rising to one’s intellectual,moral andspiritualpotential—becoming!

Anotherappropriatesuggestiontoparticipants:Pleasenotewhat’sgoingonaboveyourshouldersthatwouldlie dormant were all serene and satisfying. Yournewborn activity is a heavenly blessing emanatingfromourcurrentdevolutionaryposition.Sowhynotjoininapplaudingthissocialisticmessforyourownsakeandforfreedom’ssake?Ithasmadeananti-agentof you against the know nothings who would runourlives.Thusareyouinspiredtohelpachievethatgloriousidealinwhicheachisabletoactcreativelyashepleases!

Finally, a thoughtworth repeating:Our present-dayantiagentsaregrowinginanunderstandingoffreedomand its supportingvirtues. It is thiskindofgrowth,and this only, that energizes the magnetism whichcausesotherstoseekone’stutorship.Onlythosewhoseek enlightenment can become enlightened! Thus,



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“It is no coincidence that the century of total warcoincided with the century of central banking.”–RonPaul,End the Fed

“Thebudgetshouldbebalanced,thetreasuryshouldberefilled,publicdebtshouldbereduced,thearroganceof officialdom should be tempered and controlled,andtheassistancetoforeignlandsshouldbecurtailedlestRomebecomebankrupt.Peoplemustagainlearntowork,insteadoflivingonpublicassistance.”—Cicero,55B.C.

Dred Scott’s RevengebyJudgeAndrewP.Napolitano

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thosewhoseethetrulygoodspawnedbythepresentbadareresponsibleformoreandmoreanti-agents,allofwhomgracemankindandbyreasonoftheirloveofliberty!

1 See my Elements of Libertarian Leadership, pp. 156-58.

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