Cafe Hayek: And Yet Another Open Letter to Commerce Secretary Wilbur Ross

Wilbur Ross, Secretary
United States Department of Commerce
Washington, DC

Sec. Ross:

In your recent Wall Street Journal op-ed (“Free-Trade is a Two-Way Street”) you complain that “When it comes to trade in goods, our deficits with China and the EU are $347 billion and $146.8 billion, respectively.”  Can you explain what on earth is the relevance of a deficit in our country’s “trade in goods”?  Why should we worry about such a thing?

MD: Probably for the same reason that if you make trading promises assuming X amount of income to delivery … and realize less than that amount of income … you’re going to default on your trading promises. That’s why!

Do you believe that a physician – who earns income by supplying an output classified as a service – suffers economically because, when it comes to trade in goods, he has a “deficit” with supermarkets, department stores, and hardware stores?

MD: Eventually those suppliers suffer … and you can be sure they’re going to try to get a pound of flesh out of him as a result.

Do you believe that a town that is home to many physicians suffers economically because, when it comes to trade in goods, that town has a “deficit” with towns that are home to lots of farmers, carpenters, and welders?

MD: All these questions without defining deficit? When it comes to individual traders we talk about defaults … not deficits. And defaults are bad. Deficits are defaults waiting to happen … but they do no damage until they become defaults.

Assuming that your answer to each question is “no,” why do you assume that the United States – which is overwhelmingly home to people with comparative advantages at service-sector tasks such as IT innovation, pharmaceutical research, higher education, and financial services – suffers economically because, when it comes to trade in goods, we have a “deficit” with countries that are home to people with comparative advantages at producing tangible items such as shoes, shirts, and roofing shingles?

MD: None of that means anything if it doesn’t trade for something. It’s like having a field full of bulldozers. If they’re not moving dirt, they’re not earning their keep.

Asked otherwise, can you tell me the difference between a dollar’s worth of IT innovation and a dollar’s worth of socks?

MD: Really none if both are sitting on the shelf.

When Americans produce and export a dollar’s worth of IT innovation and receive in exchange a dollar’s worth of socks, you must lament this reality because it increases our “deficit” in the trade of goods.

MD: Someone doesn’t understand trade. When you trade something, you get something of equal perceived value in return … done deal.

So would you be happier if Americans instead specialized more in producing socks and left it to others to specialize in IT innovation?

MD: If socks were selling and IT innovators were sitting twiddling their fingers, you bet!

Such a change in production patterns would, after all, result in America having, when it comes to trade in goods, a surplus!  Can you explain how we Americans would be better off with such an outcome than we are today with our “deficit” in the trade of goods?

MD: All macro accounting is fiction. The real accounting is for the traders themselves. Today I traded with the Chinese some dollars (my stored up trading surplus) for some amazing electronic circuits … at an amazingly friendly price. I couldn’t trade for those circuits in the USA. The government can go pound sand.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Deviant Investor: Raising the debt ceiling = inflation

Raising the Debt Ceiling = Inflation

Raising the Debt Ceiling = Inflation

MD: People agreeing with the principles presented at this site know: (1) Debt is an “in-process promise”. Money in a “proper” Medium of Exchange (MOE) process is created by traders. They make trading promises spanning time and space and get them certified by the process.  The money “issued” then circulates as the most common object in every simple barter exchange. As the trader delivers, he returns money and it is destroyed. When he has delivered completely all the money has been returned and destroyed. In the process, his “promise” circulates as money representing his “in-process promise to complete a trade”. It is obviously debt … but it does not result in inflation.

The operative relation is: INFLATION = DEFAULT – INTEREST.

Thus, inflation only results if there is a default that is not immediately recovered by an interest collection of like amount.

This article is implicitly addressing one particular type of trader. Specifically, that type is “government”. This particular government is the largest trader the world  has ever seen … and the biggest deadbeat. This trader, the USA government, has never delivered on a trade as promised. They just roll their promises over … and that is open “default”. Further, “interest” of like amount is not collected so the defaults result in inflation. The process is “counterfeiting”.  Note: The debt (trading promise) does not cause inflation. Only defaults can cause inflation … and only when they are not immediately mitigated by interest collections of like amount.

Now, keeping that in mind, lets read the article and expose and dissect the delusion.

Guest Post from Stefan Gleason, Originally Published on
Money Metals Exchange


The dramatic failure of the U.S. Senate’s last-ditch Obamacare repeal effort leaves Republicans so far without a major legislative win since Donald Trump took office. No healthcare reform. No tax reform. No monetary reform. No budgetary reform.

MD: When it comes to government, doing nothing “always” is better than their doing something. What’s not to like about this “dramatic failure”?

The more things change in Washington… the more they stay the same.

Despite an unconventional outsider in the White House, it’s business as usual for entrenched incumbents of both parties. The next major order of business for the bipartisan establishment is to raise the debt ceiling above $20 trillion.

MD: I.e. legitimize their total counterfeiting up to $20 trillion. Since they “always” raise this limit, it “is” no limit. Counterfeiting is how “all” governments sustain themselves. It is their very existence.

Since March, the Treasury Department has been relying on “extraordinary measures” to pay the government’s bills without breaching the statutory debt limit.

By October, according to Treasury officials, the government could begin defaulting on debt if Congress doesn’t approve additional borrowing authority.

MD: Could “begin” defaulting on debt? Government “always” defaults on its trading promise … i.e. its debt. A “rollover” is a default … plain and simple!

Treasury Secretary Steven Mnuchin wants Congress to pass a “clean” debt limit increase. That would entail just signing off on more debt without putting any restraints whatsoever on government spending.

Fiscal conservatives hope to tie the debt ceiling hike to at least some budgetary reforms. But even relatively minor spending concessions will be difficult to obtain from the bipartisan establishment.

MD: A budget is just a financial novel. It does nothing … just as we know a debt ceiling does nothing. The only thing that will stop governments … and the money changers that institute them is a competing MOE process. Articles like this that are deluded by what is actually going on just shield the government from such competition. They inhibit instituting a “proper” MOE process.

Democrats and a few left-leaning Republicans together have an effective majority in the U.S. Senate. They wielded their legislative might by defeating the GOP’s watered-down Obamacare repeal bill, with the decisive “no” vote cast by ailing Republican John McCain.

It was exactly the sort of media spotlight moment Senator McCain has craved throughout his long political career.

The narcissistic Senator’s shtick is to posture as a selfless crusader for noble causes that his fellow Republicans just aren’t high-minded enough to get behind.

Yet for all his sanctimony, McCain is just as politically opportunistic and just as hypocritical as many of his Senate colleagues. The Senator from Arizona ran for re-election last time around on repealing Obamacare. Yet when given the opportunity, he voted to keep it in place.

MD: Why do the people of Arizona keep returning McCain to the Senate? Because democracy involving more than 50 people does not work. It just reduces to a big expensive “ugly” contest. That too needs to change.

He campaigns as a conservative when it suits his political needs and portrays himself as a maverick when he wants media accolades. He legislates as neither a conservative nor a maverick but as an entrenched establishment incumbent. That can also be said of other big-name Republicans.

Trump’s Budget Cut Proposals Declared “Dead on Arrival” by Spending-Drunk Congress

When President Trump’s Budget Director Mick Mulvaney unveiled a proposed budget that, for the first time in decades, asked Congress to make tough cuts to an array of spending programs, establishment Republicans joined Democrats in branding it “dead on arrival.”

Congress didn’t even consider the idea of spending cuts to be on the table for negotiation. That’s how entrenched deep state loyalties are in Congress.

Instead of working with Trump’s budget, the Republican-controlled Congress promptly began hammering out a spending bill that added billions to what the administration requested – $4.6 billion more for agriculture, $4.3 billion more for interior and environmental programs, $8.6 billion more for the departments of Transportation and Housing and Urban Development.

No cuts to refugee and foreign aid programs. Even the much-maligned National Endowment for the Arts made it through the House Appropriations Committee unscathed.

The bottom line is that there will be no spending restraint in Washington, and therefore no way out of the coming debt crisis. The Congressional Budget Office projects that publicly held federal debt as a percentage of the economy will soon surge past all previous wartime spikes.

MD: Actually we should just get out of the way and let the thing explode as quickly as it naturally will. And quit paying “all” taxes. If just one or two of us quit, we go to jail and they take everything we have. But if we “all” quit, they can’t do anything about it. That’s the only chance we will ever have … and we have always had it

And go to the link to see the missing image below. I’m too lazy to copy it over.

National Debt (Publicly Held) as a Percentage of GDP

Source: Congressional Budget Office

The official national debt of nearly $20 trillion is just the tip of the iceberg. It represents a small proportion of the total unfunded liabilities the political class has racked up over the past few decades (pointedly, after President Richard Nixon repealed the last remnants of gold redeemability for the U.S. dollar and replaced it with pure fiat).

MD: The Deviant Investor is a site brought to you by gold bugs. They claim gold is “honest” money … as if traders promises are not honest. Let’s run the numbers here. Let’s say an ounce of gold is worth $2,000 (costs that much to create a new one).  Divided by say 150 million USA tax payers, that $20 trillion debt comes to $133 per taxpayer. Since there is only 1oz of gold per person in the world, that uses up about 7% of their share of gold. That other 93% has to go for the promises they have in their house, their car, their savings, their checking accounts, their in-process credit card purchases and balances … and on and on and on. If gold was money, the USA taxpayer would quickly find he has no way to obtain the gold he needs to carry on these trading transactions. And of course that puts the “Deviant Investors” who presumably have more than their fair share of gold … it puts them in the cat bird’s seat doesn’t it!

Taxpayers are on the hook for perhaps $100 trillion more in unfunded entitlement and pension IOUs.

MD: Ooops …. that’s 5 times the 7% … that takes each USA taxpayer to 42% of his share of all the gold in the world!

Plus, state and local government pensions are underfunded by several trillion dollars. They haven’t blown up yet because the rising stock market and steady bond market seen over the past several years has enabled pension fund administrators to kick the can further down the road. They are projecting unrealistically high market returns into the future – and still coming up short.

MD: A financial novel is a financial fiction … novels are fictions.

Federal Reserve Makes It All Possible


Trillions upon trillions of dollars have been promised that simply won’t exist… unless the Federal Reserve creates them out of nothing. The Fed’s unlimited power to expand the currency supply enables politicians to commit acts of fiscal malfeasance with political impunity.

MD: And if the dollars won’t exist, any gold that might have been backing them … or being used instead of them … wouldn’t exist either … would it??? It’s not about creating something out of nothing … all traders do that when they create money. It’s about counterfeiting … it’s about defaulting … it’s about breaking trading promises. That’s a whole different ball game. You and I don’t do that. That’s “all” governments do … i.e. default.

A legislator might get voted out of office for raising taxes, but probably not for adding to the budget deficit. Most voters don’t perceive any immediate consequences to a rising national debt or the expansion of the currency supply. That’s why “borrow and print” is a politically convenient way for lawmakers to stealthily raise taxes.

MD: What do you expect from this thing they’re passing off as democracy … which is just a pitiful “ugly” contest. It can’t work with more than 50 people involved … and at the level of our most representative representative, there are over 500,000 people involved.

Government spending extracts resources from the economy regardless of whether that spending is paid for through taxes or through the deceit of borrow and print.

MD: Now that is nonsense. Making trading promises does not extract resources. If anything, it adds them. And it makes a huge difference whether the promise is delivered or defaulted with no mitigating interest collection to recover it. Taxes, if they went to delivering on government trading promises, “would” have zero effect on resources. But we know taxes just go to the money changers for their demanded tribute. They cleverly refer to that as interest.

What excessive borrowing today does is set up political demand for massive inflation of the currency supply down the road. The inflation tax can be just as devastating to a person’s wealth as any tax collected by the IRS.

MD: Poor Stefan. He just doesn’t get it!

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.


Thanks to Stefan Gleason

Gary Christenson

The Deviant Investor


Amazon over valued (draft)

The Amazon Con: Bulls May Be Crying A River One Of These Days




About:, Inc. (AMZN), COST, HD, TGT

Special situations, growth at reasonable price, value, micro-cap


AMZN is a stock one has to believe in to justify its price, yet current quarter results are improbably bad once again.

MD: Anyone who has used Amazon’s services is likely to be a believer. What the richest person in the world is a big holder in the company, doesn’t that say something about “his” belief in the company?

Its acquisition of Whole Foods is a case of a 200X P/E stock buying a 30X P/E stock, showing the former stock is overvalued.

The entire move from mail order (or e-mail order) delivery to stores was done 90 years ago, but there is no first-mover advantage now for AMZN.

MD: Now that is abject nonsense. Amazon began by making it easier and more efficient for buyers to find sellers and vice versa. It was just a “classified advertising” implementation on the WWW … and it wasn’t the only one. Bezos sees business as three days: day one it develops; day two it rides the wave; day three it dies. Bezos will never leave day one if he can help it.

As competition ramps in e-commerce, with big box chains with the advantage of pick up in store, AMZN may see worsening losses in its core retail division.

MD: Pretty amazing someone can see the big box chains with the advantage. “Pick up in store” is no enticement for me. Save me the trip is my enticement. I think there is a middle ground. Deliver to my nearby convenience store and I’ll pick up there … and enjoy lower shipping cost of course.

Thus, while timing is impossible and there are no certainties, risk-reward for AMZN looks poor, while many other stocks trade normally and are therefore priced for positive returns.

MD: This guy would have thought Standard Oil looked poor … and of course Microsoft and Apple and Oracle (both of which were on the ropes at one time) and Google.

Introduction – rationale for another bearish article

When the facts change, I change my mind (per Keynes). But when the facts get stronger, I carry on with a bullish or bearish thesis, and that’s the case in my humble opinion with’s (AMZN) stock price. This article happens to propound a bearish hypothesis, but as an example of sticking with a bullish hypothesis that is not working, on September 15, 2015, Seeking Alpha published my final Apple (AAPL) article. The stock was going nowhere, hanging around a pitiful $100, yet the title of the article was a straightforward:

Mr. Market Errs: Apple Is Unlikely To Be Stopped In Its Rise To Further Heights

In the bullet points, I argued that:

  • … facts suggest that the iPhone (and therefore Apple) may in fact be on the verge of a major, historic victory.
  • Even if that does not occur, AAPL remains an undervalued stock with strong total return potential for patient investors.”

As it happened, 8 months later, AAPL was down another 10%, and as late as July, it was below $100: but look at it now. So – I was early but (so far) basically correct.

MD: I wouldn’t touch Apple with a long stick. How in the world can they compete with a Linux based system? How can they compete with Open Source? They have to keep innovating … or they are killed by commodity providers.

I look at AMZN that way, in reverse. Timing things like this even to the year is impossible. (And, of course, sometimes I am simply wrong.)

MD: I wonder what he thinks about BitCoin. That who concept is laughably wrong on its face … the the price of a BitCoin continues to go up exponentially.

Next, a few introductory clarifications. First, the “con” referred to in the article is about the stock price, more specifically the resurrection of the 1997-2000 con game that eyeballs, or in AMZN’s case, eyeballs plus sales at near-zero profit margins, mattered to the exclusion of earnings.

MD: If you pour all your earnings into building infrastructure, are you creating a worthless company? If you expense everything instead of capitalizing it, are you creating a worthless company? If you only had to look at earnings, a financial statement would be just one line instead of may pages and many many lines.

I’ll end my comments here. This guy is going nowhere! You can read the rest of the article by going to the link at the top … repeated here.



This Money Delusions site is about removing delusions about money … what it is … how it works … how people are deluded about it.

Investopedia is a source of information on money and finance … an authoritative encyclopedia so-to-speak.

It turns out that Investopedia, by describing “what is” rather than “what should be” becomes an excellent platform for the process of removing delusions. What better place to begin removing delusions about money than with the “keeper of the delusions”.

The style of this site is to begin with copies of articles and essays and present them complete and with full attribution. I peel off lots of the gook, but I leave the meat. I then annotate the work “in-line”. This removes any chance of my misstating what they are writing … I show you what they are writing. It removes any chance of my taking something out of context … I show you their context. But it does open me to attack for plagiarism.

If you think I’m plagiarizing your work, just let me know. I’ll address the issue with you. Otherwise, I know of no better or fairer way to approach this controversial subject.

Don Boudreaux quoting his St. James Buchanan

Re: 2017/07/31:

Don Boudreaux seems to be a Mises Monk. He, and the other acolytes, have gone apoplectic over comments by a Nancy MacLean that evidently wrote a book that took some shots at one of their saints … a James Buchanan.

This quote is typical of the type presentations you get from these people. Saint James Buchanan is said to have written:

The abiding genius of Karl Marx lies precisely here, in his acute understanding of the possible reaction of the ignorant intellectual to the workings of the capitalist or market order.

Now there is nothing mystical about a capitalist. A capitalist is easily defined as “two years”. That’s what it takes for a person with elite connections, and thus privileged under banking laws granting them 10x leverage, to double the “capital” they put into a bank … assuming they make a conservative 4% spread (which x10 is 40%/year on “their” money) on the so-called “loans” they make.

After that, they can take “their” money off the table, and leave the other half to ride forever. In a 30 year career, their con of compound interest turns their money into over 24,000 times what they “put in” for just that “two years”. It’s infinite when you consider they had zero capital at risk over the other 28 years.

Pretty slick deal isn’t it. What’s not to like about capitalism. And of course, anyone who takes a shot at capitalism must be a “communist”. That’s the only other alternative, right? That’s what they would have you believe, yet they repeatedly qualify their “capitalism” with the adjective “crony” when they don’t think it’s pure … i.e. when it is mostly communism and corruption and what they like to call “corporatism” (they never seem to run out of “isms”) as it is in the USA … and everywhere else capitalism is claimed to be found.

Here at Money Delusions, we talk about “traderism”. We know and we prove that “money” is created only by traders ( … oh, and of course counterfeiters … these being easily and quickly mitigated in a proper process). Money is “not” created by banks. It is “not” created by the governments banks institute to protect their con.

So, putting so-called capitalism aside for now (i.e. ignoring everything we read about it herein), let’s keep our eye on their other subject … that being “market order” … something we here know at MD is not “order-able” … it is free to do what it pleases … and if not, it is “rigged” and is not a market at all. Of course all markets are rigged because money is rigged.

Just keep that in mind as you read these annotated excerpts of some of Don Boudreaux’s nonsense:

From Bourreaux’s Essay/

… is from page 167 of Vol. 19 (Ideas, Persons, and Events [2001]) of The Collected Works of James M. Buchanan; specifically, it’s from Jim’s 1986 paper “Liberty, Market and the State”:

The abiding genius of Karl Marx lies precisely here, in his acute understanding of the possible reaction of the ignorant intellectual to the workings of the capitalist or market order.

DBx: Fancying themselves to be unusually insightful, thoughtful, and knowledgeable, a great many intellectuals are, in fact, mindless pack animals.


MD: When challenged to disprove the definition and proof of what money is as given by this MD site (see side panel), Boudreaux responded like a “mindless pack animal”. He said he doesn’t feel compelled to address my “unorthadox” treatment of the subject. I reminded him that Columbus and Copernicus also presented unorthodox views on subjects we take today as being obvious.

And here’s some more of the Boudreaux pot calling the kettle black:

They mistake their slogans – which sound fine to the ears of intelligent second-graders – for insight and knowledge.  Never bothering to learn economics, and also never bothering to think realistically about politics or to study history with care, they criticize without careful reflection, condemn without sound judgment, and propose without information, insight, or wisdom.

MD: Now, I have not found a single economist that knows what money is. How in the world can you teach a subject like economics without knowing what money is? So anyone who has “never bothered to learn economics” really has a leg up on those who have. They don’t have to unlearn any of that nonsense.

It all begins with knowing what money is. At this site we will repeatedly bring up their confusion and shine light on it. Remember … Boudreaux says the obvious truths explained here are “unorthodox” … what a properly religious term he uses to explain his own behavior.

What is money?


Definition: Money is an “in-process promise to complete a trade over time and space”


Examine trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

In simple barter exchange in the “here-and-now”, (2) and (3) happen simultaneously, on the spot. Any exchange of “value for value” (e.g.corn for piglets;  gold or gold backed exchange for other stuff; etc.) is in this category and does not involve money.

Money enables simple barter exchange over time and space. Thus, money is obviously “a promise to deliver”. It can be nothing else. It doesn’t exist before the promise is made nor after delivery is made”.

Money is only created by traders (like you and me buying things over time). It is not created by banks nor the governments they institute. In fact, “all” governments are just traders. But unlike you and me, they never deliver on their trading promises which create money. They just roll them over. And that is DEFAULT. And purposeful DEFAULT is COUNTERFEITING.

Banks sustain themselves on tribute collections (and all your tax payments go to the banks as tribute collections). Governments sustain themselves on counterfeiting. You give them sustenance through the INFLATION their counterfeiting generates.

We have never had a proper Medium of Exchange (MOE) process. But it is trivial to institute one. And anyone, or any group of traders, can create a “proper” MOE process. And multiple processes can co-exist and compete (by minimizing costs).


The trader sees clear to make a trade over time and space and chooses to create “money” to effect the trade. For example, you or I choose to trade 360 monthly payments for a house, which we can take possession of and live in now and over the whole term of the promise and beyond.

The trader gets his promise “certified” (now bankers make you come hat-in-hand begging for what they fictitiously call a loan “of their capital” … that’s the scam). “Certification” means the trader’s identity and the terms of his promise are recorded and performance on the promise are transparently displayed to all lookers.

The certificates … first in the form of a simple ledger entry that creates the money and then transfers it to the seller … then circulate as the most common object in “virtually” every simple barter exchange. We know it as money (it may be a ledger entry; coin; or currency … but only one at a time).

The dollars we use everyday come from a “nearly proper” MOE process run by the banks and their “association”, the Federal Reserve. It has a leakage goal (i.e. INFLATION) of 2% and delivers 4% INFLATION on average. It gives it’s members privilege to create 10x as much money as they have … earning 4%x10 or 40% annual return … doubling “their” money in less than two years. Thus “a capitalist is simply two years”.

“A proper” process monitors performance on the promise (e.g.: did the trader make his monthly payment). If he did, all is well in paradise. If he didn’t, the process “immediately” makes an INTEREST collection of an amount equal to his DEFAULT … reclaiming the money as if he paid it back.  This guarantees perpetual perfect balance of the supply and demand for the money … it guarantees perpetual zero INFLATION.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero.

Who pays the interest? Non-responsible traders do.  An existing well known model is the Mutual Casualty Insurance Company. Here INCOME = PREMIUMS – CLAIMS = zero. The money is made on the investment income and works to reduce premiums actuarially. Another distinction with the money process is that “all” members of the insurance group pay PREMIUMS. With a proper MOE process, responsible traders  (i.e. traders like you and me who never DEFAULT) experience zero INTEREST load over the duration of their promise.

Note: For any given money creating trade, no money exists “before” the trading promise is certified, nor “after” final delivery (delivery returning the money which is then destroyed). And since “all” money is created in this way, “all” money in circulation is an “in-process promise to complete a trade over time and space”.

With a “proper” MOE process, banks are “competed” out of existence. A “proper” MOE process could be instituted right now (unless the governments they institute outlaw it) and banks would have to change or go out of business. And since INFLATION is perpetually zero, the governments “must” sustain themselves only on tax and fee collections. They cannot counterfeit. Irresponsible traders are drummed out of the marketplace.

What could be simpler and more obvious?

What hoax could be larger than that leveled on virtually all of us by the banks and the governments they institute?

Why did WTC7 fall down?