The speaker of the video, Ryan McMaken, argues that the recent rise in prices is due to monetary inflation, which is the increase in the money supply. He criticizes the claim that greed is the cause of inflation, citing the fact that prices have been rising steadily for over a decade, even before the pandemic.

McMaken points out that the money supply has increased by 185% since 2009 and by 32% since early 2020. He argues that this increase in the money supply is the direct cause of rising prices.

He also criticizes the claim that there is not much inflation, citing the fact that food prices have increased by 26% in the past four years. He argues that the real cause of rising prices is the government’s policy of money printing.

McMaken concludes by calling on elected officials to stop printing money and to address the real cause of inflation.

Summary generated by Gemini.

The speaker of the video, Ryan McMaken, argues that the recent rise in prices is due to monetary inflation, which is the increase in the money supply. He criticizes the claim that greed is the cause of inflation, citing the fact that prices have been rising steadily for over a decade, even before the pandemic.

McMaken points out that the money supply has increased by 185% since 2009 and by 32% since early 2020. He argues that this increase in the money supply is the direct cause of rising prices.

He also criticizes the claim that there is not much inflation, citing the fact that food prices have increased by 26% in the past four years. He argues that the real cause of rising prices is the government’s policy of money printing.

McMaken concludes by calling on elected officials to stop printing money and to address the real cause of inflation.

Summary generated by Gemini.

Fortunately, Andaloro’s arrest was filmed and went viral, reviving an ongoing debate over squatters “rights,” under which trespassers can take over an unoccupied house or piece of land and attempt to establish legal ownership.

Not long after the Andaloro video surfaced, an immigrant TikToker with 500,000 followers posted a video encouraging other migrants to squat in private residences in the United States. The immigrant, Leonel Moreno, explained to potential squatters that under US law, “if a house is not inhabited, we can seize it.”

These videos have fueled increasing concern among property owners who have witnessed the explosion in the numbers of aggressive homeless residents in both central cities and suburbs. This, coupled with millions of new foreign nationals flooding into US cities in recent years, has further increased concerns about a sizable, rootless and impoverished population searching for opportunities to seize unoccupied homes.

These recent examples have prompted many Americans to wonder why squatter’s rights exist at all. Historically, there have been some arguably reasonable justifications for the practice, such as in times past when real estate records were far less precise and well preserved. In modern times, however, squatter’s rights have little purpose beyond redistributing property to favored interest groups. Moreover, squatter’s rights in modern settings bear less and less resemblance to the squatter’s rights of history.

Thanks to all this, it is becoming increasingly clear that squatter’s rights have outlived whatever usefulness they may once have had. The time has come to end squatter’s rights altogether.

Rationales For Squatter’s Rights

The idea of squatter’s rights—often known by the more technical term “adverse possession”—is not new and dates back centuries to a time when private ownership of land was often not nearly as clear-cut as it is now. As legal scholar Jeffrey Stake has noted “This was a time before deeds were recorded in county courthouses… In the absence of a good set of records, contests would turn on evidence of earlier enfeoffments.” For example, as historian Keith Wrightson has explained, in a period before extensive written records and contracts, evidence of longstanding agreements about land usage and ownership might boil down to testimony from local elderly residents who relied on memories about what Party A had negotiated with Party B decades earlier. In cases like these, current possession of a piece of real estate was some of the best evidence that possession had been legally transferred in the past.

It is partly for this reason that adverse possession has always included an element of time. Historically, in most jurisdictions, a squatter must reside on the property in question for a period of years—often twenty years or more—in order to claim ownership. It is assumed that if the previous owner was willing to tolerate the squatter for so long, the land may have been the squatter’s all along. Or, the previous owner may have effectively abandoned the property.

In short, adverse possession was often justified on the grounds that it helps deal with ambiguity in claims of ownership. Even today, real estate titles are not always crystal clear. A property’s chain of title can be “clouded” with unclear ownership in the past. (This is why people property owners buy title insurance.) Historically, judges and policymakers have found squatter’s rights to be useful in that they can “reset” ownership claims and “quiet” a clouded title. Adverse possession thus provided a means for settling potentially long-term disputes over the chain of title.

Other rationales for squatter’s rights are based on popular notions about proper use of real estate. For example, adverse possession has at times been supported as a means of forcing property owners to keep an eye on their property. If long absences encourage squatting, the thinking goes, then owners are more likely to ensure the property is in order. Similarly, squatter’s rights have been justified on the grounds that absent owners aren’t using the land as efficiently or as productively as they ought to be. By this thinking, it is better to have squatters on the land, using it and improving it, rather than to let the absentee owners “do nothing.” Some supporters of adverse possession—both historically and now—have believed that property owners who are not “using” the property in a visible fashion don’t deserve to own it.

Squatter’s Rights as Violations of Property Rights

Conceivably, one might conclude that adverse possession is acceptable when used as a means of settling disputes in cases where the true owner of real property is not clear.

Beyond this, however, adverse possession amounts to little more than a means of violating property rights.

For instance, the use of squatter’s rights to somehow make land use more efficient is wholly without merit if we value the protection of private property. After all, the idea that “society” can decide what constitutes “efficient” or “correct” use of land relies on the deeply misguided notion that there is some objectively proper use of land independent of the owner’s subjective preferences. A more sound view of property ownership, on the other hand, would recognize that a property owner ought to be free to determine for himself what constitutes efficient use. If a property owner’s preference is to let a field sit fallow or a building sit empty for a period, then the owner has determined that this is the most profitable course of action—whether profitable in terms of monetary gain or in terms of psychic profit. No government planner or judge can better determine how best to use property.

Other rationales for squatter’s rights, such as motivating a property owner to visit his land regularly, amounts to a form of extortion. In this case, the regime is essentially saying “do what we want or we’ll hand your property over to whatever random trespasser chooses to settle there.”

Moreover, claims that a lack of active use by owners constitutes abandonment are extremely suspect. It is unclear why a piece of real estate becomes “abandoned” simply because the owner has not been present for a time. This is all the more untenable in modern times in which the owner of a property is nearly always clearly indicated in official records. Murray Rothbard further contends that ownership via contract certainly does not “expire” simply because an owner is physically absent. Nor is this true in cases where a person has established ownership by homesteading, the process of homesteading need not be continuously renewed. On this, Rothbard writes:

The common law of adverse possession arbitrarily sets a time span of twenty years, after which the intruder [i.e., the squatter], despite his aggression against the property of another, retains absolute ownership of the land. But our libertarian theory holds that land needs only to be transformed once by man to pass into private ownership. Therefore, if [a potential squatter] comes upon land that in any way bears the mark of a former human use, it is his responsibility to assume that the land is owned by someone. Any intrusion upon his land, without further inquiry, must be done at the risk of the newcomer being an aggressor.

Squatter’s Rights as a Political Weapon

There are many times and places, however, in which pro-squatter groups rights do not even contend that ownership rights are ambiguous, or that the land would fall into disuse and mismanagement without the squatter’s taking over.

Rather, squatter’s rights have at times been used as political weapons and as a means of essentially buying votes or rewarding politically favored groups. In these cases, policymakers simply have determined that squatter’s rights are politically expedient.

For example, in the United States in the nineteenth century, squatting nearly became a sort of federally approved welfare program. As explained in detail in John Suval’s book Dangerous Ground: Squatters, Statemen, and the antebellum Rupture of American Democracy, Jacksonians and other factions of the Democratic party in Congress actively supported widespread squatting throughout the American frontier. At the time, squatting was employed as a means of stealing land from Indians, Mexicans, and any other group deemed undesirable by pro-squatter activists in Congress. In this way, squatting served as a type of social policy. When officials sided with squatters over the rightful owners, this would essentially transfer wealth from the out-of-favor group (i.e., Mexicans and Indians) to the favored group of Anglo Americans.

In other cases, the mechanism was slightly more complex. Often, the federal government would seize land from its rightful owners (i.e., Indians) first, and then auction the land off as a means of increasing revenue for the federal government. Pro-squatter policies, however, encouraged squatters to occupy the land illegally rather than pay for it at auction. Once the squatters were in place and refused to leave, Democrats in Congress would then pass bills handing this land over to the squatters permanently. This, of course, shifted federal revenue collection away from settlers—who got free land—and placed the revenue burden on others.

Democrat policymakers supported these squatters because it was assumed that upon receiving these political favors, the squatters would thereafter vote for pro-squatter Democrats as political payback.

Modern Urban Squatting

In the twentieth century, support for squatters came from typically leftwing activists who favored squatting as a means of providing housing for low-income individuals and households. During the Great Depression, of course, squatting became commonplace in many areas, although few of these squatters were able to establish true ownership via adverse possession proceedings in court.

Squatter activism again revived during the 1990s, as in the case of a standoff between city officials and squatters in the East Village in 1995. Again, in this case, squatters only ultimately won a temporary victory and were eventually evicted.

Today, squatter’s rights continue to be a perennial issue of contention, and it’s easy to see why cases like that of Adele Andaloro strike a chord with so many Americans. Even for law-abiding non-homeowners can imagine what a nightmare it would be to inherit a house from one’s dead parents only to have that house seized by trespassing squatters. Indeed, it is easy to see how a middle-class family, having lost use of a home in this fashion, could face immediate financial ruin.

It is notable that the squatter movements of the 1930s, the 1990s, and today are attempts at urban squatting in contrast to rural and agricultural squatting in times past.  Rural squatting tended to be lower-density, and property boundaries were less clear. Moreover, rural squatters in many cases tended to keep to less productive parcels of land, and the presence of squatters on one part of an owner’s land did not necessarily force the owner from the property overall.

Urban and suburban land is something else entirely. Urban and suburban squatters are more likely to impose a much larger and more immediate cost on the rightful owners. When urban and suburban squatters take over a home in these areas, the owner is typically unable to use the property at all, and the owner may be rendered homeless himself.

Moreover, when homeless trespassers attempt to take advantage of squatter’s rights in urban and suburban homes, there is no true confusion over ownership or over property lines. These squatters do not appear anywhere on the title, and were never long-term residents.

Even worse, some cities like New York City have greatly liberalized squatter’s rights to allow for trespassers to claim squatter’s rights on a much shorter timeline than what is historically known in cases of adverse possession. Or, in some jurisdictions, such as Atlanta, officials are unwilling or unable to evict trespassers in a timely fashion, and trespassers become de factor squatters within a period of weeks or months. Indeed, modern squatting in suburban and urban homes is increasingly unlike anything that would historically be described as true adverse possession.

Yet, squatter’s rights continue to enjoy support from several corners of the American political landscape. In modern contexts, pro-squatter activists tend to be anti-capitalists who seek to use adverse possession as a means of promoting “equity” and punishing property owners viewed as an oppressive rentier class. These activists know these squatters have no true claim to the property under traditional definitions of squatter’s rights. This is clear in the modern world where ownership of real property involves multiple layers of documentation.

In most cases, modern use of squatter’s rights amounts to nothing more than defrauding legitimate property owners and seizing their wealth.

Over the past year, economist Daniel Lacalle has repeatedly warned that the United States is in the midst of a “private sector recession” and that official GDP measures are being propped up by government spending. The latest GDP numbers from the federal government strongly suggest he is right.

Today, the federal government’s Bureau of Economic Analysis released its revised estimate for GDP growth in the fourth quarter of 2023. According to the report, total GDP increased $334.5 billion (quarter over quarter) during the fourth quarter. That’s down from the third quarter’s quarter-over-quarter increase of $547.1 billion, but is nonetheless an ostensibly robust rate of growth.

Yet, if we compare GDP growth during the fourth quarter to growth in the total national debt, we find that the numbers don’t look quite so robust after all. While GDP may have grown by $334 billion during the period, the national debt grew by more than twice as much: $834 billion. In other words, for every dollar of GDP growth, the national debt grew by 2.7 dollars.

Moreover, this is the third quarter in a row during which debt growth has substantially outpaced GDP growth. During the third quarter, the federal debt grew $1.5 dollars for every dollar of GDP growth. During the first quarter, the debt grew 3.5 dollars for every dollar of GDP growth.

The fact that this has now happened three quarters in a row is notable as well. Over the past fifty years, it is rare to find debt growth exceeding GDP growth for more than two quarters in a row except during periods of economic weakness when the federal government relies on monetary expansion and federal spending to “stimulate” economic growth. For example, we find a three-quarter streak during the Great Recession and the years immediately afterward—when job growth was extremely weak. The same can also be seen in the quarters following the 2001 recession.

This isn’t shocking. If the federal government is trying to boost GDP numbers through “stimulus” it will both spend freely and expand the money supply as the central bank purchases Treasuries to avoid a surge in interest rates. (See more on how the central bank enables deficit spending.) The current reliance on federal deficit spending to keep up the appearance of GDP growth further backs up Lacalle’s theory that the United States is in the midst of both a public-sector expansion and a private-sector contraction. That is, the private sector is experiencing many recessionary trends, such as falling real wages, a decline in manufacturing, and growing bankruptcies. Meanwhile, however, government spending is booming, so sectors of the economy that are closely tied to government spending continue to expand. In aggregate, total GDP numbers thus show an increase, even as the private sector stagnates.

After all, it’s important to keep in mind that GDP measures include government spending, and will also include the consumption that results from additional government spending on welfare programs, weapons manufacturing, and more. As the federal government spends its deficit-financed dollars, the recipients of these dollars consume more, thus pushing up current GDP.

The general problem with this trend can be seen if we apply it to a private firm. Imagine, for instance, that a private firm managed to increase its production by a million dollars, but at the same time took on an additional $2.5 million in debt to buy new sports cars for its least productive employees. Even worse, this new debt is in addition to a huge existing debt load.

This sort of debt should never be confused with good debt, which is debt taken on to fund new capital goods. That could potentially increase productivity later on. Government debit never good debt, however, because it is taken on for purposes of immediate consumption—usually on social welfare benefits or on bombing faraway countries.

Unfortunately, as we find debt growth repeatedly top GDP growth, we are likely to see more of this phenomenon moving forward. The federal debt is now larger than the entire GDP of the United States, and the gap between debt and GDP in each year has now widened to more than six trillion dollars. As this trend continues, expect to see deficit spending play a larger and larger role in GDP.

The latest idea from the city’s central planners is to pay out millions more via pre-paid debit cards—pre-paid, of course, by millions of people who actually work for a living. The city has already planned to spend at least $2.5 billion on the migrants in this way. An additional $53 million will go to grease the palms of bankers who will provide the cards.

This is just one story among many we’ve seen in recent years on how state, local, and federal policymakers have shoveled ever larger amounts of taxpayer funds to both legal and illegal immigrants. After all, there are at least 23 million foreign nationals residing in the United States—both legally and illegally—and both are subsidized by taxpayers to the tune of at least $150 billion per year. An additional $140 billion goes to immigrants who have been naturalized.

Clearly, governments across the United States are doing a lot to subsidize new immigration. It is well known by now that American cities and states—not to mention the federal government—offer “free” cash, housing, food, and more. Moreover, it is known that once the migrants get here, they can even hope for fast-tracked legal residency by claiming to be refugees. Then, once legal residency is established, it’s only a five year wait until the citizenship process can begin. At that point, one can apply for the full bevy of public benefits offered to citizens: endless access to Medicaid, food stamps, housing vouchers, and more. And, of course, these new citizens also get to vote.

Yet, most of the focus in the debate over immigration has been on the government doing too little to physically stop immigration. While Washington holds out a huge carrot to foreign nationals by handing out billions in social benefits, anti-immigration activists spend most of their time focusing on the “stick” of border control and deportation.  Occasionally, a politician might offer a half-hearted claim that “the border is not open.” The migrants, however, know what is really going on.

Unfortunately, a focus primarily on border control and deportations ignores the true root of the problem. So long as the “carrot” remains an enormous incentive, the “stick” will produce limited results.

The Carrot versus the Stick

Moreover, the anti-immigration lobby’s focus on border control and deportation is exactly how the pro-immigration activists like it, and their scheme is going according to plan. The scheme works like this: entice ever-increasing numbers of migrants to the border with ever-larger promises of social benefits. Then, once the migrants get to the border, portray any and all border control efforts as amounting to “kids in cages” or “whippings” by border patrol agents.

The full reality of the border situation is never covered in the media, of course. While the alleged “kids in cages”—or their current PR equivalent—are featured regularly in the officially approved organs of public communication, the exploited workers who pay for all this never seem to get a mention.  If the legacy media were to give a moment’s thought to who is paying for the endless “caravans” of future tax-eaters to the border, the media narrative would be different. The regime journalists would be running news stories about small business owners who are being forced to cough up ever larger sums in taxes—including, of course, the inflation tax—to pay for another 50,000 or 100,000 foreign nationals in any given month.

If the legacy media cared about context, they’d feature stories about plumbers and waitresses whose children are now in overcrowded classrooms filled by the children of migrants who have contributed nothing to the construction or maintenance of those schools. Meanwhile, of course, the longtime taxpayers are stuck with ever larger property taxes to pay for it all. The media would note how these working people have paid taxes in that jurisdiction for many years, just to be told they’d better pay more. Ordinary working people are handed an ever-growing tax bill by the graduate-schooled elites who, for whatever reason, have become obsessed with subsidizing immigration to the fullest extent they can get away with.

In other words, the current scheme is working perfectly: draw countless new migrants to the border with taxpayer money, and when any taxpayers object, call them fascists (or worse).

Moreover, so long as the pro-immigration lobby can keep the other side fixated on the “stick” rather than the “carrot,” the anti-immigration side ends up supporting policies the regime wants. For example, consider how the anti-immigration lobby favors police-state powers in the name of controlling immigration. These measures include “real ID,” “E-Verify,” and the execrable 100-mile deep “border zone” in which any American can be stopped and his “papers” demanded. All this is sold as a way of “preventing illegal immigration.” In practice, the regime is fine with all this since these measures end up greatly expanding federal surveillance and police power.

Subsidizing Border Crossings

Many anti-immigration activists like to focus on border controls and insist that theirs is the only feasible solution. “Good luck cutting welfare to migrants!” they say. They think they’re being clever, but one could just as easily ask them: “how are those mass deportations going for you? I’m sure they’ll begin any day now.” Or we might ask: “how’s that border wall coming? Congratulations, the state of Texas managed to close a tiny portion of the border near Eagle Pass. Good luck with closing the rest of it.”

Without addressing the lure of subsidized migration, “border control” will meet with limited success. After all, if it were easy to close the border—which runs 1,900 miles through mostly remote country—the United States would not be awash in illegal drugs imported from abroad. So long as there is a pile of easy cash waiting on the American side of the border, drug dealers and migrants will find a way to get to it.

Thus, the most sustainable and enforceable policy changes lie in cutting off access to taxpayer funded largesse for the foreign born—both legal and illegal—and in making citizenship more difficult to obtain. Given that legal immigrants collect taxpayer-funded social benefits even more than illegal aliens, there is no reason to draw the line simply at illegal aliens. So long as these benefits are available to any immigrants, the benefits will act as an incentive to migrants who can’t pay their own bills. Moreover, so long as citizenship remains a means of gaining access to welfare benefits, citizenship itself must be harder to obtain. The current requirement that legal residents wait five years to apply for citizenship is hardly a meaningful obstacle. This waiting period for citizenship ought to be closer to twenty years.

Ending the migration subsidies has an added benefit in that doing so does not violate property rights or empower the state. Rather, cutting off migrant welfare restricts state power while reducing the fiscal burden on the taxpayers. “Citizenship,” of course, is not a natural right or a property right. It’s an administrative status, which in the modern world mostly exists to grant access to the public purse.

Anti-Welfare, Not Anti-Immigrant

It is important to note that none of these changes are “anti-immigrant.” These policies merely oppose the immigrants that consume taxpayer-funded benefits. Indeed, current immigration policy is far too restrictive on the self-sufficient migrants, who are an economic boon.

Many companies and entrepreneurs, for example, encounter countless difficulties in hiring desirable immigrant workers because current policies have placed low ceilings on the number of visas issued to these workers. Moreover, many employers turn to immigrant laborers because the native-born population is too busy getting high to pass a drug test and show up for work. Yet, while hard-working business owners are legally barred from hiring the skilled the workers they need, unskilled workers pour across the border and receive cash payments—funded by those who actually work.

Migrants who don’t need social benefits—of whom there are many—would benefit from policies cutting immigrants off from taxpayer funds. After all, the productive migrants end up paying to subsidize social benefits for others.  Only immigrants on the dole would suffer from being cut off. Until that happens, don’t expect the flood of subsidized migration to ease any time soon.

About the Author

Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor’s degree in economics and a master’s degree in public policy, finance, and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

The press release from the FOMC was largely unchanged from previous recent meetings and contained the usual language about the state of the economy and the Fed’s ability to manage it:

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated. … The U.S. banking system is sound and resilient. … the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.

This rosy and orderly picture of the situation relies on cherry-picking which indicators on which to base an assessment of the overall economy, and in his post-meeting press conference, Fed Chair Jerome Powell repeated the usual stock language the committee routinely provides on how present high labor demand proves there is no economic turbulence on the horizon. This reliance on current jobs data deliberately hides a larger and more accurate assessment of the economy. Nonetheless, in his comments at the press conference, Powell stated some undeniable facts:

Inflation remains well above our longer-run goal of 2 percent—4 percent over the 12 months ending in August—and that, excluding the volatile food and energy categories, core PCE prices rose 3.9 percent. Inflation has moderated somewhat since the middle of last year … Nevertheless, the progress—the process of getting inflation sustainably down to 2 percent has a long way to go.

This meeting of the FOMC was described as “hawkish” by Wall Street observers and pundits, mainly because the FOMC’s Summary of Economic Projections (SEP) suggested that the target inflation rate will remain at 5.5 percent—or even slightly higher—throughout the rest of the year. As Powell noted:

If the economy evolves as projected the median participant projects that the appropriate level of the federal-funds rate will be 5.6 percent at the end of this year, 5.1 percent at the end of 2024, and 3.9 percent at the end of 2025. Compared with our June Summary of Economic Projections, the median projection is unrevised for the end of this year but is moved up by a half percentage point at the end of the next two years.

If we read between the lines, it is apparent that the Fed is hoping that price inflation will fall to politically acceptable levels without any additional tightening, and without a recession.  But “hope” is all the Fed has. The FOMC voting members have no idea what comes next. But, the members apparently still fear politically damaging price inflation isn’t going away as evidenced by most members’ admission that the target rate is unlikely to fall much before the end of 2024. This is notable because the FOMC members tend to strenuously avoid any predictions that rates might tighten further.

A look at the past three years of SEPs shows very little upward movement in target rates. Moreover, in 2021, Fed personnel were insisting with the utmost confidence that the target rate would not increase at all until late 2023. In reality, the Fed was forced to raise rates in 2022 as price inflation soared to 40-year highs. The Fed’s misplaced confidence in 2021 that low rates would endure all relied on a false narrative that price inflation would be either nonexistent or—at most—would be transitory. Fed economists were either lying or were utterly wrong about the state of price inflation.  So, if Fed personnel have failed so miserably at predicting price inflation in recent years is there reason to now believe that the Fed now has the situation in hand? No.

The Fed Forced Rates to Ultra-Low Levels for a Very Long Time

Nonetheless, the current narrative about the “hawkish” Fed is that it has slayed the price-inflation beast and that the Fed has allowed interest rates to rise to the “correct” level.  Some even claim that the target rate is too high.

Much has been said of how the target federal funds rate is now at the highest it’s been since 2001. Yet, it is important to consider the cumulative effects of ultra-low-interest rate policy that proceeded the recent rate-hiking schedule. The fact is that beginning in late 2007, the Federal Reserve began a policy of forcing down interest rates for a very prolonged period that lasted until 2018. During this period, the target policy interest rate was consistently well below the CPI inflation rate. This produced a negative-value “gap” between the target interest rate and the CPI inflation rate. Then, from 2020 to 2023, this gap was driven deep into negative territory to levels not seen since the mid-1970s.

Indeed, the only period rivaling this post-2008 easy-money policy is the period of the mid-1970s which ended in the historical periods of high inflation experienced during the late 1970s and early 1980s.

The current target rate must be interpreted in light of the long duration of the easy-money years that came before today’s rate-raising trend given. During this period, easy-money fueled bubbles and malinvestments grew for fifteen years. Such immense amounts of monetary inflation cannot be “fixed” with a few months of 5-to-6 percent interest rates.

The long period of ultra-low rates we’ve seen over the past 15 years is a clear historical aberration and the product of a central bank seeking to force down interest rates again and again. Evidence of this can be seen in the Fed’s turn toward purchasing trillions of dollars worth of government debt and mortgage-backed securities (MBS) since 2008. The effect has been to drive down interest on Treasurys and create artificial demand for MBS to prop up commercial banks. An enormous bubble in asset prices—i.e., asset-price inflation—has been one result.

After so long a period, a “cure” for such enormous imbalances in the economy will not be engineered with a “soft landing.”

The claim that interest rates are “high,” of course, are unsupportable so long as the central bank replaces market interest rates with artificial central-bank-manipulated interest rates. The Fed has no idea what the “natural interest rate” is or what market interest rates would be in the absence of the central bank’s incessant interventions. So, it is impossible to say what the “correct” target rate is. Of course, it is safe to assume market rates would be higher than the current policy rate. If market rates would be actually lower than the current target policy rate, then there would be no “need”—”need” as perceived by central bankers—for the FOMC to manipulate rates downward as it is clearly trying to do.

At the First Sign of Trouble, Rates Will Head Down Again

The FOMC’s SEP shows that the target interest rate will remain above 5 percent, even to the end of 2024. There is no telling if the polled FOMC members actually believe this, but it is extremely unlikely that the target rate will remain anywhere near five percent if the employment situation worsens to the point it becomes a political liability for the current regime.

Over the past 30-plus years, the central bank has consistently forced interest rates downward every time high unemployment and recession become evident to the public.  Thus, it is likely the FOMC has already maxed out its target rate for this cycle. Yes, the FOMC has only “paused” the rate hikes, meaning it could conceivably move them higher in the near future.  For cynical veteran Fed watchers, however, the pause immediately raises the question of whether or not the pause will be followed in, say, six months by a drop in the target interest rate. After all, historical experience shows that when the Fed “pauses” it rarely goes back to any sort of sustained period of monetary tightening.

Over the past thirty years, there have only been a few occasions during which the Fed paused for more than a single month, and then went back to allowing the target rate to move upward again. This occurred briefly in 2017, and in 1996 and 1997. In the quantitative tightening period between the Dot-com Bust and the Great Recession, however, the Fed never “paused” longer than a single month. If the Fed fails to allow rates to climb again next month, we’ll have good reason to suspect that the Fed is done with this current round of rate hikes.

The last decade has shown us that the Fed clings to a bias very much in favor of ramming down interest rates again and again. This is what happened in the ten years of near-zero rates that followed the 2008 financial crisis. Every month, the FOMC would come out and say that the economy was “growing” and was showing “strength” yet repeatedly refused to raise rates. In our current predicament, the Fed is afraid of price inflation, but is also afraid to raise rates even further, even as the August CPI data showed rates ticked upward again. Political expedience demands that the Fed do what it can to rein in price inflation without triggering sizable increases in unemployment. The Fed is holding the current rate steady because politics demands it.

Read More:  “Yes, the Fed Really Is Holding Down Interest Rates” by Joseph Salerno. 

About the Author

Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor’s degree in economics and a master’s degree in public policy and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

Durham shows that the investigation had been pushed forward largely by FBI agent Peter Strzok, a man known to be politically hostile to candidate Trump. Durham also notes a curious difference between the FBI’s enthusiasm for investigating Trump, and the agency’s more cautious procedures used in investigating the Hillary Clinton campaign:

The speed and manner in which the FBI opened and investigated Crossfire Hurricane during the presidential election season based on raw, unanalyzed, and uncorroborated intelligence also reflected a noticeable departure from how it approached prior matters involving possible attempted foreign election interference plans aimed at the Clinton campaign.

Durham went on to conclude that

An objective and honest assessment of these strands of information should have caused the FBI to question not only the predication for Crossfire Hurricane, but also to reflect on whether the FBI was being manipulated for political or other purposes. Unfortunately, it did not.

Rather, the FBI engaged in a “lack of analytical rigor, apparent confirmation bias, and an over-willingness to rely on information from individuals connected to political opponents.”

All in all, the Durham report paints a picture of a highly unprofessional FBI that apparently greenlights investigations based on agents’ political agendas and on politically convenient rumors. Durham sums it up: The FBI and Justice Department “failed to uphold their mission of strict fidelity to the law.”

The report was so damning that even CNN’s Jake Tapper admitted it is “devastating to the FBI,” and that the report’s conclusions serve as additional reminders that FBI agents—including many in leadership—played key roles in promoting the “Russiagate” myth. This was the false narrative that the Trump administration had worked with the Russian regime to rig the 2016 election. The myth fueled years of Congressional investigations. The media used the FBI investigation as justification for years of speculative attacks on the Trump administration. The debunked Russiagate story even earned some reporters a Pulitzer prize.

The whole affair has helped illustrate how FBI agents—like central bankers, CDC bureaucrats and Pentagon generals—are highly political technocrats, and hardly dispassionate “public servants” slavishly devoted to professionalism and accuracy. Maintaining this façade, however, has long been an important aspect of FBI training and policy. Durham himself takes as a given that the FBI should act to “reduc[e] the risk of reputational damage” to the FBI. Not surprisingly, then, one aspect of Durhams condemnation of the FBI is the “severe reputational harm” done of the bureau as a result of its participation in promoting the myth of Trump-Russia collusion.

Let’s hope Durham is correct. Severe reputation damage for the FBI is just what is needed since the FBI generally enjoys a high degree of public approval that is wholly unjustified. It is well past time for a more realistic assessment of the FBI for what it is: an unnecessary, unconstitutional, and incompetent agency. Moreover, FBI agents have long displayed a contempt for basic human rights, and instead function as a partisan federal “secret police” designed to protect the powerful at the expense of ordinary Americans. This organization should be decentralized, defunded, stripped of its powers, and ultimately abolished. There is nothing the FBI does that military intelligence and state and local police cannot do on their own.

The FBI: A Long Record of Criminality and Failure

The long FBI tradition of disregarding the law to get the “bad guys” provides far too many examples to fully recount here. James Bovard, however, in his article, “The FBI’s Forgotten Criminal Record” reminds us of many shameful FBI efforts from arresting dissenters during wars, to burning women and children to death at Waco. There was also, of course the illegal FBI efforts against peace activists under COINTELPRO and countless cases of blackmail, intimidation, and illegal spying.

Bovard has also cataloged how the FBI routinely ignores the law in its own investigations, and instead employs tactics long used by organizations we could accurately describe as “secret police.” He writes:

According to Politifact, the FBI is not a “secret police agency” because “the FBI is run by laws, not by whim.” But we learned five years ago that the FBI explicitly teaches its agents that “the FBI has the ability to bend or suspend the law to impinge on the freedom of others.” No FBI official was fired or punished when that factoid leaked out because this has been the Bureau’s tacit code for eons. Similarly, an FBI academy ethics course taught new agents that subjects of FBI investigations have “forfeited their right to the truth.”

Arguably even worse than the FBI’s routine casual relationship with the law is the FBI’s record of failure against real criminals. Most notable, of course, is how the FBI botched investigations of Al-Qaida. In his book Enemies of Intelligence: Knowledge and Power in American National Security, Richard K. Betts notes that the CIA had a central role in the federal government’s failure to prevent 9/11, yet the FBI’s incompetence was perhaps the most extensive. He writes:

FBI fell down the most. … FBI failed to mount a full investigation of [al-Qaeda member and 9/11 conspirator] Zacarias Moussaoui, a student at a Minnesota flight school. Agents found that he had jihadist beliefs, a large amount of money in the bank, and a suspicious record of travel in and around Pakistan. …Nevertheless, FBI agents did not obtain a warrant to conduct a search of Moussaoui’s computer because they could not find probable cause sufficient to meet what they thought were required legal standards. Their understanding of legal limitations were later revealed to be incorrect.

Not only does the FBI disregard the law when the law stands in the way of blackmailing law-abiding citizens, but the FBI doesn’t even know the law when it comes to investigating actual terrorists.  Compare this lackadaisical attitude toward Moussaoui with the alacrity and gusto with which the FBI went after the non-terrorists in Waco, or how the FBI has gone after small-time trespassers and vandals who participated in the January 6 riot.

Not much has improved at the FBI in the 20-plus years since 9/11. The FBI never took any responsibility for its 9/11 failures, and its ineffectiveness and incompetence was rewarded with larger budgets and more power. The FBI now spends its time targeting parents who express political views to school boards in a way the FBI doesn’t like. The FBI also spies on Catholic parishes deemed to be engaging in various thought crimes.

Not satisfied with its own lack of accountability and corruption, the FBI also provides means for local police forces to skirt the law. In recent decades many local governments have attempted to enhance police accountability by putting limits on police immunity and requiring the use of devices such as body cams.  The FBI, however, provides local police with a way of getting around these laws. The Federal government has invented “joint task forces” which deputize local police to work with the FBI and other federal agencies. Simone Weichselbaum notes how these de facto federal agents need not use body cams and employ a lower standard in the use of force. It’s also a cash cow for local bureaucrats, as USAToday has shown:

the nation’s more than 1,100 joint task forces include thousands of police officers, sheriff’s deputies and state troopers cross-deputized as federal agents who collaborate with federal officers. Local and state officers who serve on federal task forces are still on their employing agency’s payroll but can easily earn overtime paid by the federal government.

Given the special treatment that FBI agents enjoy, it’s not a shock that it turns out many FBI agents are straight-up thieves. For example, the FBI seized an estimated $86 million in cash from hundreds of safe deposit boxes at U.S. Private Vaults in a March 2021 raid.  Court documents now show that in order to get the warrant to pull of this heist, the FBI lied to the judge who issued the warrant. Moreover, the FBI “omitted from their warrant request a central part of the FBI’s plan: Permanent confiscation of everything inside every box containing at least $5,000 in cash or goods, a senior FBI agent recently testified.” It is unclear whether anyone was actually charged with any real crimes as a result of this mass seizure of property.  This enthusiasm for seizing private property without any criminal conviction is not rare. The FBI has been central to the Federal government’s seizure of $50 of private property from private citizens, most of it with no judicial oversight.

When it’s not stealing cremated ashes and family heirlooms, the FBI is busy pushing crackpot theories such as “911 call analysis.” The FBI has spent years hosting “trainings” for local police officers in which police personnel are taught that 911 calls can analyzed to determine the guilt of people who call to report the deaths of loved ones. There is zero research or science behind this FBI-endorsed fad.

Of course, if you’re concerned about real criminals, don’t expect any help from the FBI. The FBI has recently settled with families and victims of the 2018 Parkland, Florida shootings following the FBI’s failure to follow up on tips about the gunman. The FBI admits it didn’t follow its own protocols. Perhaps most notorious in recent years is the FBI refusal to investigate Larry Nassar, the man now serving 100 years in prison for sexually assaulting underage girls. The FBI ignored pleas to investigate for two years, and victims are now suing for $130 million in damages.

In response to all this, the FBI is always full of excuses about how they are reforming things, and putting new “policies” into place that will fix everything. Senior officials, however, are virtually never fired or disciplined, and the FBI enjoys growing budgets year after year. The true record, however, is of an unresponsive agency that ignores real crime and focuses on politically expedient and politically rewarding non-crimes such as “seditious conspiracy.”

This is all the more distressing because the FBI is so thoroughly unnecessary and pointless. Even if we ignore the fact that there is no provision in the US constitution for a federal police force, it is nonetheless apparent that the FBI, which now bills itself primarily as an intelligence organization, is simply duplicating the work of countless other organizations in this respect. There are at least 18 intelligence organizations current being funded by US taxpayers.

Further, prosecuting any real crime does not require an additional layer of federal law. Fraud, theft, murder, and assault are all already illegal in every single US state. If a huge continent-spanning police force is necessary to keep law and order, how is it that Europe somehow manages to survive without a Europe-wide police? Data sharing organizations like INTERPOL—which is staffed by agents with no power to arrest or launch their own investigations—somehow manage to work. The FBI will no doubt argue that it brings valuable resources to cash-strapped police forces when more resources are needed. The FBI only has access to these resources, however, because the federal government extracts more than $10 billion dollars from state and local taxpayers first, and then hands it over to the FBI to “help” the locals.

The Durham report is only the latest indication that the true nature of the FBI.  In a 2020 essay, Angelo Codevilla examined the rot at the core of the FBI. He goes far too easy on the FBI in early decades, but he was right enough when it came to the present state of the agency. He wrote:

Thus FBI officers became standard bureaucrats who learned to operate on the assumption that all Americans were equally likely as not to be proper targets of investigation. They replaced the distinctions by which they had previously operated with the classic bureaucratic imperative: look out for yourselves by making sure to please the powerful.

This assessment is now more correct than ever.

About the Author

Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor’s degree in economics and a master’s degree in public policy and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

Article cross-posted from Mises.

According to new employment data released by the Bureau of Labor Statistics on Friday, the current population survey shows 328,000 fewer people were employed in October than in September, seasonally adjusted.

This continues a seven-month trend in which the total number of employed persons has moved sideways. From March 2022 to October, total employed persons has only increased by 150,000 people, rising from about 158.45 million to 158.6 million. With October’s drop, this also puts total employment in October below the peak of 158.8 million in February 2020. In other words, the household survey shows there are fewer employed people now than before the Covid Panic.

Moreover, the household survey also showed that the total number of unemployed workers increased by approximately 250,000 people from September to October. That’s an 8-month high.

The decline in total employed was driven by a fall in full-time workers. The survey shows that in October full-time workers dropped by 433,000 while part-time workers increased by 164,000.

Yet, the headlines in the business press today told us that “U.S. payrolls grew by 261,000 October” and that “total employment” is now 800,000 jobs above the February 2020 peak.

Those numbers come from the “establishment survey” which differs from the household survey in that the establishment survey measures jobs. The household survey measures workers. Historically, the two numbers often track together, but there is a sizable gap between the two numbers in recent months. That is, since January, total jobs has grown considerably—showing an increase of 3.5 million jobs. Yet over that same time, the household survey has shown an increase of only 1.4 million employed persons. In other words, the two surveys together suggest much more growth in jobs than actual workers with jobs.

One conclusion we can draw here is that more people are working second jobs to make ends meet. This would make sense given what other information we have about the state of household finances at the moment.

For example, according to the bureau of economic analysis, disposable income is lower now than it was before the Covid Panic, coming in at $15,130. That sum was $15,232 during February of 2020. Meanwhile, the personal savings rate in September fell to 3.1 percent. That’s the second-lowest level since 2007. Credit card debt, in contrast, reached new highs in September, and is now well above its previous 2020 peak.

Workers and consumers are likely spending down whatever savings they have because wages, in spite of what the allegedly “robust” establishment-survey jobs numbers say, are not keeping up with price inflation. Since April 2021, CPI inflation has repeatedly outpaced growth in average hourly earnings, year-over-year. In September, wages grew by 5.12 percent, but the CPI grew by 8.2 percent (year over year). The latest jobs numbers show these hourly earnings are up by 4.86, but price inflation is going to have to come down a very long way for real wage growth to materialize again.

All of this combines to suggest that households are facing some real struggles in terms of dealing with rising expenses, and the need for more income. For example, CNBC reported last month that more Americans are living paycheck to paycheck:

As rising prices continue to outpace wage gains, families are finding less cushion in their monthly budget.

As of September, 63% of Americans were living paycheck to paycheck, according to a recent LendingClub report — near the 64% historic high hit in March. A year ago, the number of adults who felt strained was closer to 57%. …

“Being employed is no longer enough for the everyday American,” [Anuj] Nayar said. “Wage growth has been inadequate, leaving more consumers than ever with little to nothing left over after managing monthly expenses.

A recent study from Moody’s analytics also concludes that the average American household paid $445 more for basic goods and services in September, compared to September of last year.

Nor is the news likely to get much better. There is growing evidence that the United States—if not already in recession—is headed toward one. For one, the first two quarters of 2022 showed negative growth. The third quarter showed some growth, but that was largely driven by a one-time narrowing in the trade deficit and by government spending. Even with reports of third-quarter growth, CNBC admits that a recession is coming with economist Paul Ashworth concluding “Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates.”

The other big factor pointing toward recession is the yield curve, which has now inverted, pointing to a coming recession. In fact, inversions in the yield curve have a perfect record of predicting recessions in recent decades. As of last week, the spread between the 10-year and the 3-month Treasurys is now negative. The same thing happened in May of 2019, July of 2006, and July of 2000. There can be a lag of six months or more in these cases, but the result has been the same: recession.

The Biden Administration and the Federal Reserve both continue to cling to jobs data as evidence that the economy is “strong.” As we’ve seen, though, most of the employment data actually points to stagnation or even losses in terms of employed persons. So, the the-economy-is-great crowd clings to the small slice of the employment data that is the establishment survey suggesting that all is well. If there is an upside to this, it’s that the job-growth-is-strong narrative has provided some cover to the Federal Reserve which is far, far behind the curve on ending its inflationary easy-money policies. Thanks to the Fed’s refusal to reverse course on its ultra-low interest rate policy until the economy was already clearly headed toward 40-year highs in price inflation, the Fed now faces a stagflationary crisis if it cannot get price inflation down before a recession becomes obvious. After all, as the jobs data becomes worse, this will increasingly trigger an avalanche of political pressure to “pivot” and start “stimulating” the economy once again.

There’s no telling at this point if the Fed has the stomach for actually bringing price inflation down and truly abandoning its 13-year long era of ultra-easy money and so-called unconventional monetary policy. It’s far more likely that the Fed will return to suppressing interest rates just as soon as it can claim any sort of “victory” over price inflation, no matter how minor. This aborted retreat from the Fed’s ongoing inflationary experiments would likely send the US toward something at least as bad as 1970’s-style stagflation.

About the Author

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

Image by www_slon_pics from Pixabay. Article cross-posted from Mises.

For Mearsheimer the answer to this question is related to the question of why the Iraqis didn’t just accept the US’s occupation of their country. Why did so many Iraqis refuse to embrace the promised “freedom” and “democracy” the US regime said would flow from American conquest?

The answer for Mearsheimer—as he outlines in his book on “liberal hegemony”—can be explained larger by nationalism. As Mearsheimer puts it,

I believe that nationalism is the most powerful political ideology in the world. I believe it is no accident that the world is populated with nation-states. I think the United States is a thoroughly nationalist country. …when you hear Americans talk about American exceptionalism, American exceptionalism is American nationalism at play.”

When Mearsheimer says that nationalism is a driving force behind the US’s conflicts with places like Russia or Iraq, he’s not just talking about Russian nationalism or Iraqi nationalism. He’s talking about American nationalism as well. American multilateralism and internationalism is really just American nationalism.

He’s right, and this reality extends far beyond US, Russia, and Iraq. The overwhelming majority of human beings on earth today are nationalists to one degree or another. One’s nationalism can be held with varying degrees of enthusiasm, of course, but the fact is the notion remains exceptionally popular. Its popularity explains in part why national states continue to be the dominant means of organizing polities on earth today.

It doesn’t have to be this way. There are other ways of organizing society and other ways of thinking of ourselves and how we fit into the world. The idea of nations and nation-states as we now conceive of them is a relatively modern idea that would once have seemed bizarre and alien to most human beings 400 years ago. For now, though, nationalism continues to be one of the defining ideologies of our time, and it may be helpful to examine its history and how nationalism became so important.

Where Does Nationalism Come From?

Nationalism has proven to be a concept that is difficult to define although it clearly is something that exists and affects the world around us. Nonetheless, we can make observations about nationalism that provide us with a better understanding.

The first is that nationalism is an ideology. That is, it is a set of ideas that forms our own notions about membership in a community shared with other human beings. According to the ideology known as nationalism, we share common interests and ways of living with other people in our national group. Very often, this national group coincides very closely with a particular state. This we often call a “nation-state.”

This sense of national belonging is not to be confused with a mere sense of community. People in face-to-face societies naturally enjoy a sense of community with the other people in their cities or villages. People in city-states and tribal societies, for example, encounter this on a daily basis. Tribal communities may number only in the hundreds or low thousands and very often city-states—the Republic of Florence, for example—had inhabitants numbering only in the tens of thousands. Bonds through kinship, proximity, daily encounters, and economic interest are common in societies of this sort. Feelings of nationalism, however, suggest something on a larger scale and with fewer organic bonds.

The influential historian of nationalism Benedict Anderson has therefore described national groups as “imagined communities” because they rely on “invented” bonds that are far less self-evident than the bonds of in-person shared activities and extended family connections. Or, as Anderson is careful to note, nationalism is not naturally occurring, and ”[n]ationalism is not the awakening of nations to self-consciousness: it invents nations.”1 [emphasis in the original] Anderson continues:

Consequently, the members of even the smallest nation will never know most of their fellow-members, meet them, or even hear of them, yet in the minds of each lives the image of their communion.2

Another important aspect of nationalism is that it is limited and never universalist. By definition, nationalism limits who is included in the imagined community, and expressly defines most human beings as “outside.” That is, as Anderson puts it, “[n]o nation imagines itself coterminous with mankind.”3

This can be contrasted with other concepts that define a polity or community. For example, the ideology underpinning empires—such as the Roman Empire—posits that human communities outside the empire are simply people who have not been conquered yet and incorporated into the Empire. Their inclusion within the empire does not depend on a conquered people speaking any particular language or practicing any particular cultural practices. They need not join a Roman “nation.” They need not “assimilate.” They need only pay tribute and submit themselves to Roman rule. Conversely, these people outside the empire are not thought of as being part of another nation. They’re simply potential subjects who do not yet enjoy the benefits of being subjugated by the Emperor.

Nationalism is also quite different from the two major organizing principles that existed before nationalism: the dynastic realm and the religious community.

In modern times membership in a national group is thought to generally trump religious bonds, but it was not always so. In 2022, a Catholic Frenchman and a Catholic Italian may experience some solidarity with each other, but rarely to the degree that the two feel solidary with other French and Italians, respectively. On the other hand, societies can be—and certainly have been—organized along the lines of religious practices so that membership in a religion is what primarily determines feelings of community with others.4 Consequently, in the fourteenth century the idea that an Italian priest and a Catholic in England were separated by “national” differences would have been meaningless to most people.5 Certainly, an English merchant or prince in that time might have found many reasons to oppose a particular Italian bishop—the Pope, perhaps—but national identity was not among them. Moreover, Christian institutions were, in the words of Hendrik Spruyt, “translocal” in that their authority transcended feelings of local identity.6

A second dominant method of organizing society before nationalism was along the lines of the dynastic realm.7 For modern people so inculcated into the idea of national groups, this is a difficult concept to even imagine. One key here is understanding that dynastic rule was not closely connected to any particular territory or population. In fact, as Bishai notes, within an ideological framework of dynastic rule, polities “had no meaning independent of the various princes who used them to extend their power.”8 Van Creveld emphasizes this as well in his discussion of pre-state polities such as empires and tribes headed by powerful chiefs. These regimes were identified with the specific rulers and their close family members. There was no “people” or “nation” with which these princes were to be identified.9 For example, William the Conqueror, a king of England, was not an English king. Nor did this fact imperil his claim to the throne. It was common for chiefs, monarchs, and emperors to not even know the language of their subjects. Forming a language bond of this sort was simply not viewed as necessary or important. The legitimacy of the regime was based on the effective exercise of power and claims of divine right to rule—although cynics have always been far more impressed by brute power than supposed mandates from heaven.

Under dynastic rule, frontiers between dynastic lands were routinely moved, and the people near them might often find themselves as subjects of various kings and princes within their lifetimes. This lack of any stable territory naturally placed obstacles in the way of the development of any particular national group tied to a particular place or culture. Moreover, as Bishai concludes, the “acquisition of territory prior to this time was not an act which created or destroyed national identities. Legitimacy was inherited or patronized. The people were largely irrelevant.”10 The relationship between ruler in subject in imperial Rome was certainly not one of national solidarity. Nor was such a thing hoped for. In the case of feudalism in Europe, the relationship between lord and vassal was one of personal reciprocal oaths and quasi-contractual agreements. There was no citizenship, no volonté nationale.

The elites, of course were relevant, but they were more closely tied to a network that was “international” in scope—for lack of a better term. They were concerned with fellow elites rather than with local populations. This was encouraged for centuries by the fact communications among elites took place in non-vernacular languages. This was Greek in the east, or whatever sacred and imperial languages provided the dominant means of communication among elites in other parts of the world. In western Europe, of course, this language was Latin, and those who communicated in Latin formed “a single community of literacy throughout European centers of learning. Although vernaculars continued to flourish, amongst the intelligentsia there was a cross-cultural, cross-temporal dialogue.” Before widespread literacy, there “was no medium for the development of regional identities,” and this further suppressed the development of nationalism.11

When Did the Rise of Nationalism Occur?

Eventually, the ideologies behind religious communities and dynastic rule as organizing principles faded. Perhaps the earliest signs of nationalism as a replacement ideology appeared in England, where a sense of “national identity”—a precursor to full-blown nationalism—was unusually well developed. As historian John Merriman notes

British national identity … is formed precociously early in European history, arguably in the seventeenth century and for elites perhaps even before.12

Part of this is due to the fact that in the seventeenth century, the idea of “England” became divorced from the dynasties that ruled over it. First came the English Civil War in which “the people” executed their king, and replaced him with a commoner. Then, even after the monarchy was restored, Parliament—supposedly a body representing a significant portion of  “the people”—saw fit to replace one king with another in the so-called Glorious Revolution of 1688. The idea of “England” was becoming something that was not synonymous with the monarch himself.

But most of Europe was well behind England in developing ideologies of nationhood.

According to Merriman it is not until the time of the Seven Years’ War in 1756 that the elites in France clearly begin to think in terms of a French people. Moreover, they begin to think of a French people that can be betrayed by a monarch.13 It is not a coincidence that many historians date the real birth of nationalism to the time of the French Revolution. This is when the idea of “the nation” exploded onto the European scene.

But it would several decades more for the idea to spread into much of Europe. By the 1840s, the Hungarians would begin to press hard for national self-rule in the Austro-Hungarian empire. Even in the 1840s, the Hungarians were relatively early to party, as far as central Europe was concerned. Elsewhere in the empire, Merriman notes a mass embrace of the idea of national identity did not reach a critical point until after 1880:

there was no sense of national identity, of being Slovene, of being Czech, of being Croat, of being Bulgarian, of being Ukrainian or Ruthenian — the two are essentially the same — until quite late in the nineteenth century.14

By the mid twentieth century, however, nationalism had become the dominant ideology in terms of defining how people organized themselves socially and politically. Gone were the days of personal loyalty to a monarch, or the days of overriding religious solidarity. “I am French” had long since replaced “I am Catholic”. The use a state-endorsed local vernacular had long since replaced international sacral languages. The nation-states had replaced the ethnically indeterminate empires. Nor could Marxism provide an alternative. The Sino-Soviet split and the Sino-Vietnam war of 1979 illustrated Marxism’s inability to replace “bourgeois” nationalism with international communism.

At this point Anderson would remind us that these new ideas of national identity and solidarity were not “revealed” or “discovered.” They were not ideas somehow “written on our hearts” like divine law in Christian theology. No, the idea of national bonds with countless strangers is an invented idea that has created many imagined communities. But this does not mean that nationalism is not a powerful ideology that strongly influences the actions of billions of human beings. It is, as Mearsheimer contends, an exceptionally powerful ideology that can even impel some people to kill and die for reasons of “national honor” or the “national interest.”

Once this idea is secured, it is only a small step to the acceptance of the idea of a nation-state and territorial national “fatherlands” and “motherlands” tied to a specific national group.

Yes, the idea is relatively modern, and history has made it clear that national identity is not the only way of organizing human society. Yet, at this point in history, it is clear that nationalism remains popular. In spite of countless attempts by global elites in recent decades at supplanting nationalist sentiment, few human beings have shown much willingness to abandon their ideas of national identity. The fact that the idea seems so natural  to most of us—in spite of being so novel, recent, and modern—illustrates just how much the idea has influenced our thinking.

Moreover, as the slow rise of nationalism has shown, sea changes in ideology and self-identity can take centuries to occur. Even if we can find evidence that nationalism is in decline—and there is some evidence to suggest this—nationalism still appears to have a lot of life left in it. For now.

1. Benedict Anderson, Imagined Communities: Reflections on the Origin and Spread of Nationalism (London: Verso, 1983), p. 6.
2. Ibid.
3. Ibid., p. 7.
4. Anderson, p. 12.
5. Martin Van Creveld, The Rise and Decline of the Sate (Cambridge: Cambridge University Press, 1999) p. 64.
6. Hendrik Spruyt, The Sovereiegn State and Its Competitors (Princeton, NJ: Princeton University Press, 1994) p. 44.
7. Ibid., p. 19.
8. Linda S. Bishai, Forgetting Ourselves: Secession and the (Im)possibility of Territorial Identity (Lanham, MD: Rowman and Littlefield, 2004), p. 65.
9. Van Creveld, p. 14.
10. Bishai, pp. 63-64.
11. Ibid., p. 65.
12. John Merriman, “Lecture 13, Nationalism”, HIST 202: European Civilization, 1648-1945, from Yale Open Courses, accessed online: https://oyc.yale.edu/history/hist-202/lecture-13
13. Ibid.
14. Ibid.

About the Author

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

Article cross-posted from Mises.