“Taxes are expropriation”

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Below is an English translation of Professor Hoppe’s interview by “Wirtschaftswoche”, Germany’s leading business-weekly.

“Taxes are expropriation”

by Malte Fischer

The anarcho-libertarian economist Hans-Hermann Hoppe argues for a state-free society. Where government has, for example, no right to compel the citizens to pay taxes to finance armed forces.

http://www.wiwo.de/politik/konjunktur/hans-hermann-hoppe-steuern-sind-enteignung-seite-all/9282336-all.html

Business Week:

Professor Hoppe, We currently have booming state intervention in both the economy and in society again. Many citizens want more government and less market. How do you explain that?

Hoppe:

History shows that crises promote the growth of the state. This is particularly evident in wars and terrorist attacks. Governments use such crises in order to pose as crisis-solvers. This also applies to the financial crisis. It has provided the governments and central banks with a welcome opportunity to intervene even more in the economy and society. Government representatives have managed to lay the blame for the crisis on capitalism, the markets and greed.

Without the intervention of central banks and governments in the form of liquidity injections and stimulus programs, wouldn’t the world have been thrown into a deep depression like in the 1930s? 

There is a misconception that governments and central banks can aid the economy with programs to help it bounce back. Even in the 1930s in the USA there were economic stimulus programs. But the Great Depression did not end until after the Second World War. In prior years, the U.S. unemployment never fell below 15 percent. The banks were hoarding the central bank money, instead of using it to lend.

The current circumstances are similar. The money is not getting into the goods markets, therefore the prices of commodities barely rise. But that does not mean that there is no inflation. You just have to look at how the stock markets are developing to identify where the money is going. Inflation is taking place on the asset markets.

The boom in the stock markets is also a consequence of negative real interest rates that make saving unattractive …

. .. and endanger our prosperity. An economy can only grow if people save more and consume less. Without savings, there are no viable investments.

Why?

I’ll give you a simple example. Imagine Robinson Crusoe and Friday on their desert island. If Robinson catches fish and consumes some of them, but not all, he can lend those to Friday who can eat them for a few days, and invest his time in the construction of a fishing net of his own. With this net he can catch so many fish that he can feed himself and to give Robinson the borrowed fish back. Both are doing even better than before. But what happens if Robinson does not save, but eats all the fish himself and gives Friday only a certificate that can be exchanged for this fish? If Friday wants to go to Robinson to redeem the certificate, he finds that no fish is there. Friday must therefore quickly obtain food himself and has no time to finish the net. It remains an abandoned project. The standard of living of Friday and Robinson drops.

What does that have to do with our present situation?

A similar thing is happening in our modern economies. The credit creation out of nothing pushes interest rates artificially down and triggers investments, for which no corresponding savings exist to cover. Given the low interest rates hardly anything is saved, and we consume all the more. Just as Robinson’s fish are not saved, but eaten by him. The increased consumption withdraws resources from investments, projects cannot be completed, the banks cut the loans, the projects are liquidated, the economy plunges into crisis.

Does that mean the next crash is coming soon?

The central banks are trying to end the crisis with even more credit and money, even though this was caused by too much money and credit. Therefore, the next crash will be even more severe than the previous.

The monetary authorities promise to dry-up liquidity in time, before the going gets tough.

Theoretically, this may be possible. Central banks could reduce the money supply by selling government bonds. Only that’s never happened in practice. Because it contradicts the strategy of the central banks to keep interest rates as low as possible …

… and to produce inflation?

The central banks are trying to save the paper money system by any means. I’m afraid the next step is to eliminate the remaining currency competition through a centralization of money and banking. At the end there might be a kind of global central bank, with a global single currency, into which the dollar, euro and yen are merged. Freed from competition with other currencies, this central bank would then have even more room for inflation. The crisis would not be over, but would return with a vengeance on the global level.

Some economists call for the gold standard in order to tie the hands of the central banks.

Governments and central banks will resist it. As a state monopoly money distributor, central banks have no interest in losing their power. I consider a voluntary return to the gold standard to be unrealistic.

What about China, the country wants to establish the yuan as a reserve currency.

For China, it would be a clever move to back the yuan by gold to push the dollar from the global dominance. With a gold-backed yuan, the days of America’s economic dominance and the dollar would be numbered. The West will therefore do everything possible to prevent China from doing this.

In Europe, governments and central bank have ignored the law and acted above the law, in the wake of the euro rescue. And there was no public outcry in Germany against this.

The Germans allow themselves to be dictated by America as to what they can do and what they must do. America has a vital interest in ensuring that the euro survives because for the dollar it’s a more convenient competitor than 17 national currencies. America only has to turn to one central bank, namely the ECB, in order to enforce its interests with political pressure.

The Euro-bailout and the increasing shift of powers to Brussels cause unease in the population. Have the political elites overstrained the preparedness of citizens for further integration?

States generally have the tendency to centralize their power. In Europe, powers are transferred to Brussels to eliminate competition among countries. The dream of the statists is a world state with uniform taxes and regulations, which robs the citizens of any opportunity to improve their lives by emigrating. Citizens recognize that basically the European Union is a huge redistribution apparatus. This fuels discontent and incites the envy of nations among themselves.

What can we do about it?  

For the cause of freedom it would be best if Europe were to fall apart into as many micro-states as possible. This applies to Germany as well. The smaller the spatial extent of a State, the easier it is to emigrate and the nicer the state must be to its citizens in order to retain the productive people.

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