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Will Bitcoin Ever Stabilize?

Bitcoin and other cryptocurrencies are notorious for their volatility. Their value fluctuates from time to time. There is always an air of uncertainty surrounding their value and future. But what exactly makes BTC price so volatile? Will BTC ever stabilize?

If BTC is to become a global currency, it must overcome its volatility. Despite its market capitalization growing to its current $60B mark, BTC is still struggling with uncertainty and volatility putting its potency as a global currency into question. So, let’s discuss what exactly makes cryptocurrencies that volatile and how can BTC become stable?

Why Cryptocurrencies Are Highly Volatile

1.   Cryptos Considered Store of Value and Not Value Transfer Media

One barrier that stands on a way of cryptos’ growth is the opinion of millions worldwide that cryptos are just a store of value. People don’t see them as a currency but as assets that will be valuable in the future. As such, they don’t freely exchange them but rather hold them waiting for their values to skyrocket.

Most holders of BTC don’t use their coins for daily transactions but rather stack them waiting for prices to hike before they sell them. This creates a precarious scenario where events and news massively affect the price of BTC because of mass actions of panic. For instance, if there is news of a government planning to ban BTC in a given country, all those holding BTC in that country will try to sell which will flood the market and cause a drop in the price of BTC.

If BTC is to be considered a global currency, then people need to freely use it to pay for goods and services. Simply put, people need to use the coin in their daily transactions. How often and willing people are to use a currency for their transactions is the true sign of a global currency.

2.   Security Concerns

Although fiat currencies have security concerns of their own, they are insignificant comparing to the issues that cryptocurrencies face on a regular basis. Cryptocurrencies have more security loopholes than fiat currencies. In 2019 alone, BTC and other cryptos lost more than $4.4Billion to scams and other security breaches.

These losses are a big part of the volatility experienced in cryptocurrencies. The more significant are the losses in cryptos, the lower the confidence that people have in them.

Unless cryptocurrencies fix their systematic security vulnerabilities, they will always be subject to volatility. Any high profile scams or losses will always have a ripple effect and affect the price of a cryptocurrency.

3.   Uncertainty

The lack of certainty regarding the future of cryptocurrencies leaves them open to season fluctuations. Not a single person is sure of what the future holds for cryptocurrencies, which leaves many people with a lot of questions concerning adopting the cryptocurrencies.

As it currently stands, too many factors affect the price of BTC. Government regulations, market factors, security breaches, ‘HODLing among many other factors. The lack of proper measures in place to ensure that the effects of all the aforementioned factors are mitigated leaves a cloud of uncertainty hanging over cryptocurrencies like BTC.

4.   Fluctuating Demand

BTC’s demand is always bouncy. Therefore, there is always a fluctuation in its price. Since BTC’s supply is almost constant. Moreover, just like the real gold becomes harder to mine with time, bitcoin halving makes it harder to mine the digital gold as the reward will be two times smaller.

At the same time, huge fluctuations in the demand will always have a ripple effect on the price. This makes BTC a bad choice for a global currency. There is just too much uncertainty in its price for people to gladly accept and use BTC.

So, Will BTC Ever Stabilize?

Having seen why cryptos are so unstable, let’s discuss what does the future hold for BTC? Will Bitcoin ever stabilize?

As the leading cryptocurrency in the world, BTC is expected to be the first digital coin the price of which will stabilize. If BTC is to be considered a true global cryptocurrency, it has to overcome its volatility.  But how can it achieve this?

Ways BTC Can Reduce Volatility

Increase Demand For BTC

Since there can only be 21 million BTC in existence, the community should work towards increasing the demand and usage of BTC to a global scale. Once the demand is on a global scale and its usage is frequent and ‘normal’, the fluctuation in the price will be lower and BTC will be deemed stable.

Address Security Breaches

Since BTC is open-source software, the community has the collective responsibility of ensuring that the platform is safe for public use. Loopholes in the network should be reported and any individuals engaging in unscrupulous deals should be permanently banned from using BTC. Once the whole ecosystem becomes safe for the use of all, the confidence levels will go up and more people will adopt BTC.

Mass Education

Although most people generally have an idea of what cryptocurrencies are, very few of them have proper knowledge of how to use BTC instead of fiat currencies. If the global usage of BTC is to increase, there is a need for proper mass education and sensitization programs. These programs will see an increased uptake of BTC and other cryptocurrencies.

Conclusion

BTC has a long way to go. Bitcoin is far from the point of long-lasting stability.  Its volatility is too high for it to be used on a global scale. However, cryptocurrency is still a young technology that will show a massive potential once the stakeholders will start work towards making it stable.

Market Corrections Inspire Dangerous Political Panic by Jeffrey A. Tucker

Some kinds of inflation people really hate, like when it affects food and gas. But now, with the whole of the American middle class heavily invested in stocks, there is another kind inflation people love and demand: share prices that increased forever.

Just as with real estate before 2008, people seem addicted to the idea that they should never go anywhere but up.

This is the reason that stock market corrections are so dangerous. The biggest danger is not economic. It is political. Such corrections push politicians and central bankers to undertake ever-more nutty political in do order to fix them.

To make the point, Donald Trump immediately blamed China, which has the temerity to sell Americans excellent products at low prices. Bernie Sanders blamed “free trade,” even though the United States is among the most protectionist in the world.

Nothing in this world is more guaranteed to worsen a correction that a trade war. But so far, that’s what’s been proposed.

Tolerance for Downturns

It was not always so. In the 1982 recession, the Reagan administration argued that it was best to let the market clear and grow calm. Once the recession cleaned up misallocations of resources, the economy would be well prepared for a growth path. Incredibly, the idea was sold to the American people, and it proved wise.

That was the last time in American history we’ve seen anything like a laissez-faire attitude prevail. After the 1990s dot com boom and bust, the Fed intervened in an effort to repeal gravity. After 9/11, the Fed intervened again, using floods of paper money to rebuild national pride. That created a gigantic housing bubble that exploded 7 years later.

By 2008, the idea of allowing markets to clear became intolerable, and so Congress spent hundreds of billions of dollars and the Fed created trillions in phony money, all to forestall what desperately needed to happen.

Now, with dramatic declines in stock markets around the world, we are seeing what happens when governments and central banks attempt to counter market forces.

Markets win. Every time. But somehow it doesn’t matter anymore. There’s no more science, no more rationality, no more concern for the long term, so far as the Fed is concerned. The Fed is maniacally focused on its member banks’ balance sheets. They must live and thrive no matter what. And the Fed is in the perfect position now to use public sentiment to bolster its policies.

The Right and Wrong Question 

In the event of a large crash, the public discussion going forward will be: What can be done to re-boost stock prices? This is the wrong question. The right question should be: What were the conditions that led to the unsustainable boom in the first place? This is the intelligent way to address a global meltdown. Sadly, intelligence is in short supply when people are panicked about losing their retirement funds they believed were secure.

Back when people thought about such things, the great economic Gottfried von Haberler was tapped by the League of Nations to write a book that covered the whole field of business cycle theory as it then existed. Prosperity and Depressioncame out in 1936 and was republished in 1941. It is a beautiful book, rooted in rationality and the desire to know.

The book covers six core theories: purely monetary (now called Chicago), overinvestment (now called Austrian), sudden changes in cost (related to what is now called Real Business Cycle), underconsumption (now called Keynesian), psychological (popular in the financial press), and agricultural theories (very old fashioned).

Each one is described. The author then turns to solutions and their viability, assessing each. The treatise leans toward the view that permitting the recession (or downturn or depression) run its course is a better alternative than any large policy prescription applied with the goal of countering the cycle.

Haberler is careful to say that there is not likely one explanation that applies to all cycles in all times and in all places. There are too many factors at work in the real world to provide such an explanation, and no author has ever attempted to provide one. All we can really do is look for the primary causes and the factors that are mostly likely to induce recurring depressions and recoveries.

He likened the business cycle a rocking chair. It can be still. It can rock slowly. Or an outside force can come along to cause it to rock more violently and at greater speed. Detangling the structural factors from the external factors is a major challenge for any economist. But it must be done lest policy authorities make matters worse rather than better.

The monetary theory posits that the quantity of money is the key factoring in generating booms and busts. The more money that flows into an economy via the credit system, the more production increases alongside consumption. This policy leads to inflation. The pullback of the credit machine induces the recession.

The “overinvestment” theory of the cycle focuses on the misallocation of resources that upsets the careful balance between production and consumer. Within the production structure in normal times, there is a focus on viability in light of consumer decisions. But when more credit is made available, the flow of resources is toward the capital sector, which is characterized by a multiplicity of purposes. The entire production sector mixes various time commitments and purposes. Each of them corresponds with an expectation of consumer behavior.

Haberler calls this an overinvestment theory because the main result is an inflation of capital over consumption. The misallocation is both horizontal and vertical. When the consumer resources are insufficient to realize the plans of the capitalists, the result is a series of bankruptcies and an ensuing recession.

Price Control by Central Banks

A feature of this theory is to distinguish between the real rate of interest and the money rate of interest. When monetary authorities push down rates, they are engaged in a form of price control, inducing a boom in one sector of the production structure. This theory today is most often identified with the Austrian school, but in Haberler’s times, it was probably the dominant theory among serious specialists throughout the world.

In describing the underconsumption theory of the cycle, Haberler can hardly hide his disdain. In this view, all cycles result from too much hoarding and insufficient debt. If consumer were spend to their maximum extent, without regard to issues of viability, producers would feel inspired to produce, and the entire economy could run off a feeling of good will.

Habeler finds this view ridiculous, based in part on the implied policy prescription: endlessly inflate the money supply, keep running up debts, and lower interest rates to zero. The irony is that this is the precisely the prescription of John Maynard Keynes, and his whole theory was rooted in a 200-year old fallacy that economic growth is based on consumption and not production. Little did Haberler know, writing in the early 1930s, that this theory would become the dominant one in the world, and the one most promoted by governments and for obvious reasons.

The psychological theory of the cycle observes the people are overly optimistic in a boom and overly pessimistic in the bust. More than that, the people who push this view regard these states of mind as causative of economic trends. They both begin and end the boom.

Haberler does not deny that such states of mind are important and contributing elements to making the the cycle more exaggerated, but it is foolish to believe that thinking alone can bring about systematic changes in the macroeconomic structure. This school of thought seizes on a grain of truth, and pushes that grain too far to the exclusion of real factory. Interestingly, Haberler identifies Keynes by name in his critique of this view.

Haberler’s treatise is the soul of fairness but the reader is left with no question about where his investigation led him. There are many and varied causes of business cycles, and the best explanations trace the problem to credit interventions and monetary expansions that upset the delicate balance of production and consumption in the international market economy.

Large-scale attempts by government to correct for these cycles can result in making matters worse, because it has no control over the secondary factors that brought about the crisis in the first place. The best possible policy is to eliminate barriers to market clearing — that is to say, let the market work.

The Fed is the Elephant in the Room

And so it should be in our time. For seven years, the Fed, which controls the world reserve currency, has held down interest rates to zero in an effort to forestall a real recession and recreate the boom. The results have been unimpressive. In the midst of the greatest technological revolution in history, economic growth has been pathetic.

There is a reason for this, and it is not only about foolish monetary policy. It is about regulation that inhibits business creation and economic adaptability. It’s about taxation that pillages the rewards of success and pours the bounty into public waste. It is about a huge debt overhang that results from the declaration that all governments are too big to fail.

Whether a correction is needed now or later or never is not for policymakers to decide. The existence of the business cycle is the market’s way of humbling those who claim to have the power and intelligence to outwit its awesome and immutable forces.

Jeffrey A. Tucker
Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook.

The Slow-Motion Financial Suicide of the Roman Empire by Lawrence W. Reed & Marc Hyden

More than 2,000 years before America’s bailouts and entitlement programs, the ancient Romans experimented with similar schemes. The Roman government rescued failing institutions, canceled personal debts, and spent huge sums on welfare programs. The result wasn’t pretty.

Roman politicians picked winners and losers, generally favoring the politically well connected — a practice that’s central to the welfare state of modern times, too. As numerous writers have noted, these expensive rob-Peter-to-pay-Paul efforts were major factors in bankrupting Roman society. They inevitably led to even more destructive interventions. Rome wasn’t built in a day, as the old saying goes — and it took a while to tear it down as well. Eventually, when the republic faded into an imperial autocracy, the emperors attempted to control the entire economy.

Debt forgiveness in ancient Rome was a contentious issue that was enacted multiple times. One of the earliest Roman populist reformers, the tribune Licinius Stolo, passed a bill that was essentially a moratorium on debt around 367 BC, a time of economic uncertainty. The legislation enabled debtors to subtract the interest paid from the principal owed if the remainder was paid off within a three-year window. By 352 BC, the financial situation in Rome was still bleak, and the state treasury paid many defaulted private debts owed to the unfortunate lenders. It was assumed that the debtors would eventually repay the state, but if you think they did, then you probably think Greece is a good credit risk today.

In 357 BC, the maximum permissible interest rate on loans was roughly 8 percent. Ten years later, this was considered insufficient, so Roman administrators lowered the cap to 4 percent. By 342, the successive reductions apparently failed to mollify the debtors or satisfactorily ease economic tensions, so interest on loans was abolished altogether. To no one’s surprise, creditors began to refuse to loan money. The law banning interest became completely ignored in time.

By 133 BC, the up-and-coming politician Tiberius Gracchus decided that Licinius’s measures were not enough. Tiberius passed a bill granting free tracts of state-owned farmland to the poor. Additionally, the government funded the erection of their new homes and the purchase of their faming tools. It’s been estimated that 75,000 families received free land because of this legislation. This was a government program that provided complimentary land, housing, and even a small business, all likely charged to the taxpayers or plundered from newly conquered nations. However, as soon as it was permissible, many settlers thanklessly sold their farms and returned to the city. Tiberius didn’t live to see these beneficiaries reject Roman generosity, because a group of senators murdered him in 133 BC, but his younger brother Gaius Gracchus took up his populist mantle and furthered his reforms.

Tiberius, incidentally, also passed Rome’s first subsidized food program, which provided discounted grain to many citizens. Initially, Romans dedicated to the ideal of self-reliance were shocked at the concept of mandated welfare, but before long, tens of thousands were receiving subsidized food, and not just the needy. Any Roman citizen who stood in the grain lines was entitled to assistance. One rich consul named Piso, who opposed the grain dole, was spotted waiting for the discounted food. He stated that if his wealth was going to be redistributed, then he intended on getting his share of grain.

By the third century AD, the food program had been amended multiple times. Discounted grain was replaced with entirely free grain, and at its peak, a third of Rome took advantage of the program. It became a hereditary privilege, passed down from parent to child. Other foodstuffs, including olive oil, pork, and salt, were regularly incorporated into the dole. The program ballooned until it was the second-largest expenditure in the imperial budget, behind the military.It failed to serve as a temporary safety net; like many government programs, it became perpetual assistance for a permanent constituency who felt entitled to its benefits.

In 88 BC, Rome was reeling from the Social War, a debilitating conflict with its former allies in the Italian peninsula. One victorious commander was a man named Sulla, who that year became consul (the top political position in the days of the republic) and later ruled as a dictator. To ease the economic catastrophe,Sulla canceled portions of citizens’ private debt, perhaps up to 10 percent,leaving lenders in a difficult position. He also revived and enforced a maximum interest rate on loans, likely similar to the law of 357 BC. The crisis continually worsened, and to address the situation in 86 BC, a measure was passed that reduced private debts by another 75 percent under the consulships of Cinna and Marius.

Less than two decades after Sulla, Catiline, the infamous populist radical and foe of Cicero, campaigned for the consulship on a platform of total debt forgiveness. Somehow, he was defeated, likely with bankers and Romans who actually repaid their debts opposing his candidacy. His life ended shortly thereafter in a failed coup attempt.

In 60 BC, the rising patrician Julius Caesar was elected consul, and he continued the policies of many of his populist predecessors with a few innovations of his own. Once again, Rome was in the midst of a crisis. In this period, private contractors called tax farmers collected taxes owed to the state. These tax collectors would bid on tax-farming contracts and were permitted to keep any surplus over the contract price as payment. In 59 BC, the tax-farmer industry was on the brink of collapse. Caesar forgave as much as one-third of their debt to the state. The bailout of the tax-farming market must have greatly affected Roman budgets and perhaps even taxpayers, but the catalyst for the relief measure was that Caesar and his crony Crassus had heavily invested in the struggling sector.

In 33 AD, half a century after the collapse of the republic, Emperor Tiberius faced a panic in the banking industry. He responded by providing a massive bailout of interest-free loans to bankers in an attempt to stabilize the market. Over 80 years later, Emperor Hadrian unilaterally forgave 225 million denarii in back taxes for many Romans, fostering resentment among others who had painstakingly paid their tax burdens in full.

Emperor Trajan conquered Dacia (modern Romania) early in the second century AD, flooding state coffers with booty. With this treasure trove, he funded a social program, the alimenta, which competed with private banking institutions by providing low-interest loans to landowners while the interest benefited underprivileged children. Trajan’s successors continued this program until the devaluation of the denarius, the Roman currency, rendered the alimenta defunct.

By 301 AD, while Emperor Diocletian was restructuring the government, the military, and the economy, he issued the famous Edict of Maximum Prices. Rome had become a totalitarian state that blamed many of its economic woes on supposed greedy profiteers. The edict defined the maximum prices and wages for goods and services. Failure to obey was punishable by death. Again, to no one’s surprise, many vendors refused to sell their goods at the set prices, and within a few years, Romans were ignoring the edict.

Enormous entitlement programs also became the norm in old Rome. At its height, the largest state expenditure was an army of 300,000–600,000 legionaries. The soldiers realized their role and necessity in Roman politics, and consequently their demands increased. They required exorbitant retirement packages in the form of free tracts of farmland or large bonuses of gold equal to more than a decade’s worth of their salary. They also expected enormous and periodic bonuses in order to prevent uprisings.

The Roman experience teaches important lessons. As the 20th-century economist Howard Kershner put it, “When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.” Putting one’s livelihood in the hands of vote-buying politicians compromises not just one’s personal independence, but the financial integrity of society as well. The welfare state, once begun, is difficult to reverse and never ends well.

Rome fell to invaders in 476 AD, but who the real barbarians were is an open question. The Roman people who supported the welfare state and the politicians who administered it so weakened society that the Western Roman Empire fell like a ripe plum that year. Maybe the real barbarians were those Romans who had effectively committed a slow-motion financial suicide.

Lawrence W. Reed

Lawrence W. Reed

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s.

Clinton’s Startup Tax Will Crush New Businesses by Dan Gelernter

Hillary Clinton has announced that she will, if elected, raise the capital-gains tax to a maximum that equals the highest income tax bracket. She hopes to promote long-term investments by penalizing short-term ones with a tax rate that gets lower the longer an investment is held, reaching the current 20% rate only after six years.

This, Ms. Clinton says, would allow a CEO to focus on the company’s true interests rather than just making the next quarter. It is, unfortunately, exactly the sort of plan you would expect from someone who has never started a company — and who doesn’t seem to know anyone who has.

The CEO of a startup is unlike the CEO of an established business. He is not the head of a chain of command: he is the spokesman or agent of a few colleagues, entrusted for the moment to represent them. The startup CEO has one primary job, which is raising money. It is the hardest thing a young company has to do — and it is an unending process.

Most germinal startups never raise any money at all. The ones that get seed funding are already breathing rarified air, and can afford perhaps a day of celebration before they start pursuing the next round.

The picture is especially tough for tech startups. A startup that builds software doesn’t have any machinery or physical supplies to auction off if the company fails. This means that banks won’t make the kind of secured business loans of the sort small companies traditionally get.

As a result, tech startups are wholly reliant on a relatively small number of investors who are looking for something more exciting than the establishment choices and are willing to take a big gamble in the hope of a big, short-term payoff. Though Ms. Clinton’s proposal would only affect those in the top income bracket, she may be surprised to learn that those are the only people who can afford to make such investments.

Professional investors think in terms of risk: they balance the likelihood of a startup’s failure against the potential payoff of its success. Increasing the tax rate reduces the effective payoff, which increases risk. Investors can lower that risk by reducing the valuation at which they are willing to invest, which means they take a larger share of the company — a straightforward transfer of risk from investors to entrepreneurs.

Ms. Clinton’s tax therefore will not be borne by wealthy investors: it comes out of the entrepreneur’s payday. The increased tax rate means a risk-equivalent decrease in the percentage of the company the entrepreneur gets to keep. And that’s just the best-case scenario.

The other option is that the tax doesn’t get paid at all, because the investor decides the increased risk isn’t worth it — the startup can’t attract funding and dies.

That sounds melodramatic, but it is no exaggeration. A startup company never has more offers than it needs; it never raises money with time spare. Even a slight change in the risk-return balance — say, the 3.8% which Obamacare quietly laid on top of the current capital-gains — kills companies, as investors and entrepreneurs see the potential upside finally shaved past the tipping point.

A tech startup has short-term potential. That is a major part of the attraction to investors, and that makes Ms. Clinton’s proposal especially damaging. In the tech world, we all hope we’ll be the next Facebook or Twitter, but you can’t pitch that to an investor. A good tech startup takes a small, simple idea and implements it beautifully.

The most direct success scenario is an acquisition by a larger company. In the app world — and this is the upside to not having physical limitations on distribution — the timescale is remarkably accelerated. A recent benchmark example was Mailbox, purchased by Dropbox just two months after it launched.

Giving investors an incentive to not to sell will hurt entrepreneurs yet again, postponing the day their sweat equity finally has tangible value, and encouraging decisions that make tax-sense rather than business-sense.

If Hillary Clinton really wants to help entrepreneurs, she should talk to some and find out what they actually want. A lower capital-gains tax — or no capital-gains tax — would be an excellent start.

Dan Gelernter

Dan Gelernter is CEO of the technology startup Dittach.

Paul Krugman Is Even Wrong about What Paul Krugman Thought by Steve H. Hanke

Paul Krugman, “Killing the European Project”, NY Times, July 12, 2015:

The European project — a project I have always praised and supported — has just been dealt a terrible, perhaps fatal blow. And whatever you think of Syriza, or Greece, it wasn’t the Greeks who did it.

Paul Krugman has always praised and supported the European project? Really? Here’s Prof. Krugman in his own words on the centerpiece of the European project, the euro:

  • Paul Krugman, “The Euro: Beware Of What You Wish For”, Fortune, December 1998: “But EMU wasn’t designed to make everyone happy. It was designed to keep Germany happy — to provide the kind of stern anti-inflationary discipline that everyone knew Germany had always wanted and would always want in future.So what if the Germans have changed their mind, and realized that they — along with all the other major governments — are more worried about deflation than inflation, that they would very much like the central bankers to print some more money? Sorry, too late: the system is already on autopilot, and no course changes are permitted.”
  • Paul Krugman, “Can Europe Be Saved?”, NY Times, January 12, 2011: “The tragedy of the Euromess is that the creation of the euro was supposed to be the finest moment in a grand and noble undertaking: the generations-long effort to bring peace, democracy and shared prosperity to a once and frequently war-torn continent.But the architects of the euro, caught up in their project’s sweep and romance, chose to ignore the mundane difficulties a shared currency would predictably encounter — to ignore warnings, which were issued right from the beginning, that Europe lacked the institutions needed to make a common currency workable. Instead, they engaged in magical thinking, acting as if the nobility of their mission transcended such concerns.”
  •  Paul Krugman, “Greece Over The Brink”, NY Times, June 29, 2015: “It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency…”
  • Paul Krugman, “Europe’s Many Economic Disasters”, NY Times, July 3, 2015: “What all of these economies have in common, however, is that by joining the eurozone they put themselves into an economic straitjacket.Finland had a very severe economic crisis at the end of the 1980s — much worse, at the beginning, than what it’s going through now. But it was able to engineer a fairly quick recovery in large part by sharply devaluing its currency, making its exports more competitive. This time, unfortunately, it had no currency to devalue. And the same goes for Europe’s other trouble spots. Does this mean that creating the euro was a mistake? Well, yes.”

When reading Prof. Krugman’s works, it’s prudent to fact check. Prof. Krugman has always been in the Eurosceptic camp. Indeed, the essence of many of his pronouncements can be found in declarations from a wide range of Eurosceptic parties.

This post first appeared at Cato.org.


Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

“Green Banks” Will Drown in the Red by Jonathan Bydlak

Why does federal spending matter? There are many reasons, but perhaps the most fundamental is that free markets allocate resources better than governments because markets rely on price instead of politics. Many industries show this observation to be true, but the emerging field of “green banks” offers perhaps one of the clearest recent examples.

A green bank is a “public or quasi-public financing institution that provides low-cost, long-term financing support to clean, low-carbon projects by leveraging public funds…to attract private investment.” Right now, only a handful of green banks are scattered across Connecticut, California, New York, Rhode Island, and Hawaii.

Free marketers rightly doubt whether public funds should be used to finance private startups. But regardless of where one stands in that debate, the states’ struggles serve as a valuable testing ground for future investments.

The State of Connecticut operates under a fairly significant budget deficit. California has been calculating its budgets without taking unfunded pension liabilities into account, and it’s gambling with its ability to service its debt. New York continues to live beyond its means. Rhode Island’s newest budget does little to rehabilitate its deficit spending addiction, and, despite having a balanced budget clause in its state constitution, Hawaii has a pattern of operating at a deficit.

In fact, a state solvency report released by the Mercatus Center has each of these five states ranked in the bottom third of the country, with their solvency described as either “low” or “poor.”

This all raises the question of whether these governments are able to find sound investment opportunities in the first place. Rhode Island couldn’t even identify a bad investment when baseball legend Curt Schilling wanted $75 million to make video games about something other than baseball!

Recently, though, there have been calls to extend the struggling green banking system to the federal level. Mark Muro and Reed Hundt at the Brookings Institute argued in favor of federal action in support of green banks. Somewhat paradoxically, they assert that demand for green banking institutions and the types of companies they finance is so strong that the existing state-based green banks cannot muster enough capital to meet demand.

Wherever there is potential for profit and a sound business plan, lending institutions are likely to be found, willing to relinquish a little capital for a consistent and reasonable rate of return. So where are the private lenders and other investment firms who have taken notice and are competing for the opportunity to provide loans to such highly sought-after companies and products?

Even assuming that there is demand for green banking services, recent experience shows that a federally-subsidized system would likely lead to inefficiency, favor trading, and failure. For instance, the Department of Energy Loan Program is designed to facilitate and aid clean energy startup companies. Its portfolio exceeds $30 billion, but following a series of bad investments like Solyndra, Inc., new loan guarantees have been few and far between. The program has already lost over $700 million.

Even the rosiest measurements do not show particularly exciting returns from this system. The Department of Energy itself estimates that over the lifetime of the loans it’s guaranteed, there exists the potential to see $5 billion in profit. However, those estimates also depend on the peculiar accounting methods the DoE itself employs.

This problem is apparent in other government sectors. For instance, determining how much profit the federal government makes off of student loans depends on who is asked. Some say none, while others say it’s in the billions. Gauging the economic impact or solvency of government programs is notoriously difficult, and different methods can yield what look like very different results. Add to that the consistently uncertain nature of the energy market, and profits are hardly guaranteed.

Examples abound of wasteful federal spending, and the growing green technology and renewable energy industry is no exception. The DoE Loan Program has already faced issues that go well beyond Solyndra: Abound Solar, a Colorado-based solar panel manufacturer, was given a $400 million DoE loan guarantee, only to later file for bankruptcy, potentially costing taxpayers $60 million. The Ivanpah Solar Electric Generating System, a 175,000 unit heliostat array in California, received a $1.6 billion federal loan and, because it failed to produce the amount of power estimated, was forced to later request more than$500 million in federal grants from the Treasury Department. A recent Taxpayers Protection Alliance study showed that risky investments in heavily subsidized solar energy could even lead to a bubble similar to the disastrous 2008 housing bubble.

Those who want to expand the government’s role in green banking likely want to see more clean and renewable energy reach the consumer market, and a lot of people probably applaud that goal — but the real question is whether the proposed means can reliably achieve that end. A wise manager with a solid business plan can find investors who will willingly take a chance. Considering the struggles of several states, trusting the federal government to build an even bigger system would exponentially increase that risk.

In contrast, the market offers opportunity to entrepreneurs in the green technology and renewable energy industries. For instance, GreatPoint Energy, a company specializing in clean coal, successfully went the route that other companies do: Design a product or service, find investors, and compete in the marketplace.

SolarCity, a California-based and publicly traded corporation of over 2,500 employees, entered the industry before many government loan programs were established. Thanks to a sound business model and subsequent horizontal and vertical expansion, it has become a leader in the industry. SolarCity’s success, however, cannot be touted by the Department of Energy’s Loan Program, which declined to invest in the company, leading SolarCity to try — and succeed — in finding private investment.

If GreatPoint or SolarCity had failed, only those who willingly participated in the startup would suffer the consequences. The issue with green banking — and indeed government “investments” more generally — is that taxpayers are not party to the negotiations but are the ones ultimately on the hook for failures.

In absolute terms, these billions of dollars are a lot of money. But in the grand scheme of government spending, the amount of money invested in green banks and renewable energy production is relatively small. If Social Security is the Atlantic Ocean, and wasteful defense appropriations are the Mediterranean, then green energy investments fall somewhere in the range of the Y-40 pool: easily measurable but certainly not insignificant.

Your odds of drowning may be smaller in the pool than the ocean, but that doesn’t make the drowning itself any more pleasant. The federal government is already under water; adding new liabilities on the hope that politicians can guess the future of energy is merely a step towards the deep end, not the ladder out.


Jonathan Bydlak

Jonathan Bydlak is the founder and president of the Institute to Reduce Spending and the Coalition to Reduce Spending.

What Greek “Austerity”? by Steve H. Hanke

greek president

Greek Prime Minister Alexis Tsipras

It’s hard to find anything written or spoken about Greece that doesn’t contain a great deal of hand-wringing about the alleged austerity — brutal fiscal austerity — that the Greek government has been forced to endure at the hands of the so-called troika (the European Central Bank, the European Commission, and the International Monetary Fund).

This is Alice in Wonderland economics. It supports my 95% rule: 95% of what you read about economics and finance is either wrong or irrelevant.

The following chart contains the facts courtesy of Eurostat.

Social security spending as a percentage of GDP in Greece is clearly bloated relative to the average European Union country — even more so if you only consider the 16 countries that joined the EU after the Maastricht Treaty was signed in 1993.*

To bring the government in Athens into line with Europe, a serious diet would be necessary — much more serious than anything prescribed by the troika.

* Ed. note: The treaty created the EU and the euro and also obligated EU members to keep “sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP.” Ha!

Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

Greeks Prepare to Be Pillaged by Jeffrey A. Tucker

In the world of banking, a “holiday” means you can’t get your money. It’s been a few years since we’ve seen that happen in any developed world economy, but that is exactly what the Greek government is doing, starting now, to stop a massive bank run.

Greece owes the International Monetary Fund a payment of $1.5 billion, due tomorrow, from the last time the government was bailed out. But, of course, governments can’t make wealth, and the money didn’t just magically materialize. They have to beg, borrow, and steal to get it, and Greece has finally found those limits.

Athens had hoped that it could once against tap the European Commission. But drained and fed up, other governments refused to extend yet another loan to Greece unless they agreed to reform their bloated and corrupt welfare state.

Unfortunately for Greeks, the ruling coalition in Greece swept into power in January on the platform of stopping “austerity” and rolling back budget cuts. They balked at the EU’s (and especially Germany’s) conditions for the next round of bailout money.

As a result, Athens has really and truly run out of money, and they will default on their debts starting tomorrow — and the European Central Bank has said it will cut off emergency credit to Greek banks if the government fails to pay its debts.

The news that no deal would be reached sent bank depositors into a panic, and thousands have been lined up at ATMs all over the country since Friday.

Prime Minister Alexis Tsipras announced that he was closing all banks for at least a week as a way to stem the tide. Many ATMs are empty; the rest, by government order, will only dispense €60 per person per day. The government is now imposing capital controls to stop cash from leaving the country.

One thing needs to be said about this frantic authoritarian approach: It never works. Bank closings add to the atmosphere of panic. They are often followed by an announcement that the government is going to devalue or outright steal people’s money. Whatever trust remains in the system is drained away along with the value of the currency.

But there’s another factor in play, for the first time. People are looking at Bitcoin as a way to store and move money.

There is now a Bitcoin ATM in Athens that is reportedly doing a brisk business. Redditors are sharing tips. And, of course, the exchange rate of Bitcoin is on the move again.

This past week, I was out of touch of the news entirely because I was at the New Hampshire liberty retreat, Porcfest. There you can buy almost anything with Bitcoin, so I was checking the price often. I noticed the upward price pressure, and I had an intuition that something serious was happening.

Sure enough, this morning I was awakened by a call from Russia Today. They wanted me on a two-hour segment today to talk about the meltdown in Greece. I turned them down because I haven’t followed it closely enough (though that doesn’t usually stop most commentators!).

But when I looked into it, I suddenly understood: Sure enough, Bitcoin is on the move for a reason.

Many price watchers are predicting another spike in the exchange rate if Greece actually defaults and leaves the euro. Maybe, maybe not. It actually doesn’t matter. The exchange rate can be anything; it doesn’t affect the utility of having access to a global currency and payment system that is outside regional banking systems — one that can’t be closed, controlled, confiscated, or devalued at the whim of desperate regimes.

Cryptocurrency is here to stay. It is the world’s new safe haven, displacing the role that gold once played. The reasons are rather obvious: Bitcoin is more liquid than gold. It takes up no space, weighs nothing, and is more secure. Once you are an owner, nothing can take away what you own — and you don’t have to rely on a third party such as a gold warehouse or a bank (or a government) to take care of your money.

Given all of this, there is supreme irony in the announcement made by the Greek central bank last year that consumers should be wary of Bitcoin. Bitcoin is vastly more safe and reliable than any national currency, including the euro and the dollar.

There is no government anywhere that would decline to shut the banks if their ruling class feared financial meltdown. That’s what’s happening in Greece. That could happen in any European country, and it could happen (and has happened) in the United States, too.

In the end, government regards itself as the ultimate owner of all a nation’s currency and the wealth it carries.

It’s wise to have another option, and people have long known that. The question is: What is that option? Today, not for the first time, and not for the last, Bitcoin is here to save the day.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

Driverless Money by George Selgin

Last week I was contemplating a post having to do with driverless cars when, wouldn’t you know it, I received word that the Bank of England had just started a new blog called Bank Underground, and the first substantive post on it had to do with — you guessed it — driverless cars.

As it turned out, I needn’t have worried that Bank Underground had stolen my fire. The post, you see, was written by some employees in the Bank of England’s General Insurance Supervision Division, whose concern was that driverless cars might be bad news for the insurance industry.

The problem, as the Bank of England’s experts see it, is that cars like the ones that Google plans to introduce in 2020 are much better drivers than we humans happen to be — so much better, according to research cited in the post, that “the entire basis of motor insurance, which mainly exists because people crash, could … be upended.”

Driverless cars, therefore, threaten to “wipe out traditional motor insurance.”

It is, of course, a great relief to know that the Bank of England’s experts are keeping a sharp eye out for such threats to the insurance industry. (I suppose they must be working as we speak on some plan for addressing the dire possibility — let us hope it never comes to this — that cancer and other diseases will eventually be eradicated.)

But my own interest in driverless cars is rather different. So far as I’m concerned, the advent of such cars should have us all wondering, not about the future of the insurance industry, but about the future of…the Bank of England, or rather of it and all other central banks.

If driverless cars can upend “the entire basis of motor insurance,” then surely, I should think, an automatic or “driverless” monetary system ought to be capable of upending “the entire basis of monetary policy,” as such policy is presently conducted.

And that, so far as I’m concerned, would be a jolly good thing.

Am I drifting into science fiction? Let’s put matters in perspective. Although experiments involving driverless or “autonomous” cars have been going on for decades, until as recently as one decade ago, the suggestion that such cars would soon be, not only safe enough to replace conventional ones, but far safer, would have struck many people as fantastic.

Consider for a moment the vast array of contingencies such a vehicle must be capable of taking into account in order to avoid accidents and get passengers to some desired destination. Besides having to determine correct routes, follow their many twists and turns, obey traffic signals, and parallel park, they have to be capable of evading all sorts of unpredictable hazards, including other errant vehicles, not to mention jaywalkers and such.

The relevant variables are, in fact, innumerable. Yet using a combination of devices tech wizards have managed to overcome almost every hurdle, and will soon have overcome the few that remain.

All of this would be impressive enough even if human beings were excellent drivers. In fact, they are often very poor drivers indeed, which means that driverless cars are capable, not only of being just as good, but of being far better —  90 percent better, to be precise, since that’s the percentage of all car accidents attributable to human error.

Human beings are bad drivers for all sorts of reasons. They have to perform other tasks that take their mind off the road; their vision is sometimes impaired; they misjudge their own driving capabilities or the workings of their machines; some are sometimes inclined to show off, while others are dangerously timid. Occasionally, instead of relying on their wits, they drive “under the influence.”

Central bankers, being human, suffer from similar human foibles. They are distracted by the back-seat ululations of commercial bankers, exporters, finance ministers, and union leaders, among others. Their vision is at the same time both cloudy and subject to myopia.

Finally, few if any are able to escape altogether the disorienting influence of politics. The history of central banking is, by and large, a history of accidents, if not of tragic accidents, stemming from these and other sorts of human error.

It should not be so difficult, then, to imagine that a “driverless” monetary system might spare humanity such accidents, by guiding monetary policy more responsibly than human beings are capable of doing.

How complicated a challenge is this? Is it really more complicated than that involved in, say, driving from San Francisco to New York? Central bankers themselves like to think so, of course — just as most of us still like to believe that we are better drivers than any computer.

But let’s be reasonable. At bottom central bankers, in their monetary policy deliberations, have to make a decision concerning one thing, and one thing only: should they acquire or sell assets, and how many, or should they do neither?

Unlike a car, which has numerous controls — a steering wheel, signal lights, brakes, and an accelerator — a central bank has basically one, consisting of the instrument with which it adjusts the rate at which assets flow into or out of its balance sheet. Pretty simple.

And the flow itself? Here, to be sure, things get more complicated. What “target” should the central bank have in mind in determining the flow? Should it consist of a single variable, like the inflation rate, or of two or more variables, like inflation and unemployment? But the apparent complexity is, in my humble opinion, a result of confusion on monetary economists’ part, rather than of any genuine trade-offs central bankers face.

As Scott Sumner has been indefatigably arguing for some years now (and as I myself have long maintained), sound monetary policy isn’t a matter of having either a constant rate of inflation or any particular level of either employment or real output. It’s a matter of securing a stable flow of spending, or Nominal GNP, while leaving it to the marketplace to determine how that flow breaks down into separate real output and inflation-rate components.

Scott would have NGDP grow at an annual rate of 4-5 percent; I would be more comfortable with a rate of 2-3 percent. But this number is far less important to the achievement of macroeconomic stability than a commitment to keeping the rate — whatever it happens to be — stable and, therefore, predictable.

So: one goal, and one control. That’s much simpler than driving from San Francisco to New York. Heck, it’s simpler than managing the twists and turns of San Franscisco’s Lombard Street.

And the technology? In principle, one could program a computer to manage the necessary asset purchases or sales. That idea itself is an old one, Milton Friedman having contemplated it almost forty years ago, when computers were still relatively rare.

What Friedman could not have imagined then was a protocol like the one that controls the supply of bitcoins, which has the distinct advantage of being, not only automatic, but tamper-proof: once set going, no-one can easily alter it. The advantage of a bitcoin-style driverless monetary system is that it is, not only capable of steering itself, but incapable of being hijacked.

The bitcoin protocol itself allows the stock of bitcoins to grow at a predetermined and ever-diminishing rate, so that the stock of bitcoins will cease to grow as it approaches a limit of 21 million coins.

But all sorts of protocols may be possible, including ones that would adjust a currency’s supply growth according to its velocity — that is, the rate at which the currency is being spent — so as to maintain a steady flow of spending, à la Sumner. The growth rate could even be made to depend on market-based indicators of the likely future value of NGDP.

This isn’t to say that there aren’t any challenges yet to be overcome in designing a reliable “driverless money.” For one thing, the monetary system as a whole has to be functioning properly: just as a driverless car won’t work if the steering linkage is broken, a driverless monetary system won’t work if it’s so badly tuned that banks end up just sitting on any fresh reserves that come their way.

My point is rather that there’s no good reason for supposing that such challenges are any more insuperable than those against which the designers of driverless cars have prevailed. If driverless car technology has managed to take on San Francisco’s Lombard Street, I see no reason why driverless money technology couldn’t eventually tackle London’s.

What’s more, there is every reason to believe that driverless money would, if given a chance, prove to be far more beneficial to mankind than driverless cars ever will.

For although bad drivers cause plenty of accidents, none has yet managed to wreck an entire economy, as reckless central bankers have sometimes done. If driverless monetary systems merely served to avoid the worst macroeconomic pileups, that alone would be reason enough to favor them.

But they can surely do much better than that. Who knows: perhaps the day will come when, thanks to improvements in driverless monetary technology, central bankers will find themselves with nothing better to do than worry about the future of the hedge fund industry.

Cross-posted from Alt-M.org and Cato.org.

George Selgin

Rome: Money, Mischief, and Minted Crises by Marc Hyden & Lawrence W. Reed

Ancient Rome wasn’t built in a day, the old adage goes. It wasn’t torn down in a day either, but a good measure of its long decline to oblivion was the government’s bad habit of chipping away at the value of its own currency.

In this essay we refer to “inflation,” but in its classical sense — an increase in the supply of money in excess of the demand for money. The modern-day subversion of the term to mean rising prices, which are one key effect of inflation but not the inflation itself, only confuses the matter and points away from the real culprit, the powers in charge of the money supply.

In Rome’s day, before the invention of the printing press, money was gold and silver coin. When Roman emperors needed revenue, they did more than just tax a lot; like most governments today, they also debased the money. Think of the major difference between Federal Reserve inflation and ancient Roman inflation this way: We print, they mint(ed). The long-term effects were the same—higher prices, erosion of savings and confidence, booms and busts, and more. Here’s the Roman story.

Augustus (reigned 27 BC – 14 AD), Rome’s first real emperor, worked to establish a standardized system of coinage for the empire, building off of the Roman Republic’s policies. The silver denarius became the “link coin” to which other baser and fractional coins could be exchanged and measured. Augustus set the weight of the denarius at 84 coins to the pound and around 98 percent silver. Coins, which had only been sporadically used to pay for state expenditures in the earlier Republic, became the currency for everyday citizens and accepted as payment for commerce and even taxation in the later Republic and into the imperial period.

Historian Max Shapiro, in his 1980 book, The Penniless Billionaires, pieces various sources together to conclude that “the volume of money he (Augustus) issued in the two decades between 27 BC and 6 AD was more than ten times the amount issued by his predecessors in the twenty years before.” The easy money stimulated a temporary boom, leading inevitably to price hikes and eventual retrenchment. Wheat and pork prices doubled, real estate rose at first by more than 150 percent. When money creation was slowed (late in Augustus’s reign and even more for a time under that of his successor, Tiberius), the house of cards came tumbling down. Prices stabilized but at the cost of recession and unemployment.

The integrity of the monetary system would remain intact until the reign of Emperor Nero (54-68 AD). He is better known for murdering his mother, preferring the arts to civic administration, and persecuting the Christians, but he was also the first to debase the standard set by Augustus. By 64 AD, he drained the Roman reserves because of the Great Fire of Rome and his profligate spending (including a gaudy palace). He reduced the weight of the denarius to 96 coins per pound and its silver content to 93 percent, which was the first debasement of this magnitude in over 250 years. This led to inflation and temporarily shook the confidence of the Roman citizenry.

Many successive emperors incrementally lowered the denarius’s silver content until the philosopher-emperor, Marcus Aurelius (reigned 161-180 AD), further debased the denarius to 79 percent silver to pay for constant wars and increased expenses. This was the most impure standard set for the denarius up to this point in Roman history, but the trend would continue. Aurelius’ son Commodus(reigned 177-192 AD), a gladiatorial wannabe, was likewise a spendthrift. He followed the footsteps of his forebears and reduced the denarius to 104 coins to the pound and only 74 percent silver.

Every debasement pushed prices higher and gradually chipped away at the public faith in the Roman monetary system. The degradation of the money and increased minting of coins provided short-term relief for the state until merchants, legionaries, and market forces realized what had happened. Under Emperor Septimius Severus’ administration (reigned 193-211 AD), more soldiers began demanding bonuses to be paid in gold or in commodities to circumvent the increasingly diminished denarius. Severus’ son, Caracalla (reigned 198-217 AD), while remembered for his bloody massacres, killing his brother, and being assassinated while relieving himself, advanced the policy of debasement until he lowered the denarius to nearly 50 percent silver to pay for the Roman war machine and his grand building projects.

Other emperors, including Pertinax and Macrinus, attempted to put Rome back on solid footing by increasing the silver content or by reforming the system, but often when one emperor improved the denarius, a competitor would outbid them for the army’s loyalty, destroying any progress and often replacing the emperor. Eventually, the sun set on the silver denarius as Rome’s youngest sole emperor, Gordian III (238-244 AD), essentially replaced it with its competitor, the antoninianus.

However, by the reign of the barbarian-born Emperor Claudius II (reigned 268-270 AD), remembered for his military prowess and punching a horse’s teeth out, the antoninianus was reduced to a lighter coin that was less than two percent silver. The aurelianianus eventually replaced the antoninianus, and the nummus replaced the aurelianianus. By 341 AD, Emperor Constans I (reigned 337-350 AD) diminished the nummus to only 0.4 percent silver and 196 coins per pound. The Roman monetary system had long crashed and price inflation had been spiraling out of control for generations.

Attempts were made to create new coins similar to the Neronian standard in smaller quantities and to devise a new monetary system, but the public confidence was shattered. Emperor Diocletian (reigned 284-305 AD) is widely known for conducting the largest Roman persecution of Christians, but he also reformed the military, government, and monetary system. He expanded and standardized a program, the annona militaris, which essentially bypassed the state currency. Many Romans were now taxed and legionaries paid in-kind (with commodities).

Increasingly, Romans bartered in the marketplace instead of exchanging state coins. Some communities even created a “ghost currency,” a nonexistent medium to accurately describe the cost and worth of a product because of runaway inflation and the volatility of worthless money. Diocletian approved a policy which led to the gold standard replacing the silver standard. This process progressed into the reign of Rome’s first Christian emperor, Constantine (reigned 306-337 AD), until Roman currency began to temporarily resemble stability.

But Diocletian did something else, and it yielded widespread ruin from which the Empire never fully recovered. In the year 301 AD, to combat the soaring hyperinflation in prices, he issued his famous “Edict of 301,” which imposed comprehensive wage and price controls under penalty of death. The system of production, already assaulted by confiscatory taxes and harsh regulations as well as the derangement of the currency, collapsed. When a successor abandoned the controls a decade or so later, the Roman economy was in tatters.

The two largest expenditures in the Roman Empire were the army, which peaked at between 300,000-600,000 soldiers, and subsidized grain for around 1/3 of the city of Rome. The empire’s costs gradually increased over time as did the need for bribing political enemies, granting donatives to appease the army, purchasing allies through tributes, and the extravagance of Roman emperors. Revenues declined in part because many mines were exhausted, wars brought less booty into the empire, and farming decreased due to barbarian incursions, wars, and increased taxation. To meet these demands Roman leaders repeatedly debased the silver coins, increasingly minted more money, and raised taxes at the same time.

In a period of about 370 years, the denarius and its successors were debased incrementally from 98 percent to less than one percent silver. The massive spending of the welfare/warfare state exacted a terrible toll in the name of either “helping” Romans or making war on non-Romans. Financial and military crises mixed with poor leadership, expediency, and a clear misunderstanding of economic principles led to the destruction Rome’s monetary system.

Honest and transparent policies could have saved the Romans from centuries of economic hardships. The question future historians will answer when they look back on our period is, “What did the Americans learn from the Roman experience?”

(For more on lessons from ancient Rome, visit www.fee.org/rome).

Marc Hyden is a political activist and an amateur Roman historian. Lawrence W. Reed is President of the Foundation for Economic Education.

Marc Hyden

Marc Hyden is a conservative political activist and an amateur Roman historian.

Lawrence W. Reed

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s.