Apparently, some libertarians and former Ron Paul supporters are switching to McCain because of his choice of Palin. If McCain wins, they will regret their foolish decision.

While McCain made a clever move in picking Palin, he is still....well...John McCain. He shows no sign of abandoning his disdain for the Bill of Rights and, most importantly, his recklessness in foreign policy. By every indication, this decision has nothing to do with a change of heart on a single issue.

The best comparision would be to 1976 when Ronald Reagan picked Richard Schweiker, probably the most pro-big-government Republican in the Senate, as his veep. It was purely a political decision in his case; just like this one.

An interesting letter from a reader opens by quoting an article she mistakenly attributes to me. The article/blog post in question is Support Your Local Rape Gang by William N. Grigg on the Pro Libertate blog. The confusion arose because the post ends with the note, Thanks to Wendy McElroy and "CLS" at Classically Liberal for their work on this story -- in short, my name was the first one the reader saw at the end of the piece. (BTW, I thank Grigg in return for his impassioned and in-depth analysis of the story upon which I commented on August 11th in the post Teach Children to Fear the Police.)

The news story in question dealt with an 18-year-old high school student who was brought into a detention center in Kentucky on traffic charges. Three deputies teased the teenager about his physical appearance and, then, broke procedure by housing him with violent criminals who proceeded to rape him repeatedly over a period of hours. Some accounts state that the 3 deputies solicited the assault upon the boy. Certainly, the deputies and their co-workers would have been aware of the boy's screams for help through the night. Reports were falsified to cover the incident.

That's the background. Here's the letter I received from a mother who had a less dramatic but chilling story to tell about her young son's run-in with the police state. One of the reasons her story is chilling, BTW, is because I think it is more typical and far more common than the jailhouse rape. Two key differences: her son's brutalization by the system is stretched out over years, and no one will be held accountable for the boy's nightmares.

K. writes...

I recently read your article on the prison guards in KY where you said...

Living down to every cinematic stereotype of the dim-witted, in-bred rural prison guard (stereotypes have to come from somewhere, I suppose), the deputies told the young boy he'd make a good"girlfriend" for some of the other inmates. [Note: the quote is from Grigg. The photos of the deputies that Grigg posts at the head of his article, however, do look like the nightmare trio from a rough roadhouse bar...They look like the type that casting agents would send up for dumb thug roles.]

This has bothered me since I read it because it is so absolutely true.

There is something desperately wrong in Kentucky. I am a Buckeye from XXX living in KY due to being rendered homeless by foreclosure.

Please let me tell you about my 14 year old son. I will try to summarize so please bear with me.

Last Sept. two 17 year old boys climbed over a fence and entered the swimming pool which sits right beside the skate park in a tiny little KY town called West Liberty. Once they got in, they opened a gate and 5 younger boys also went in. My son who was 13 then was one of them. The boys engaged in what boils down to vandalism or possibly criminal trespass. They drew on the walls and unrolled toilet paper took down the mirrors and put them outside. They did not to my knowledge steal anything or cause any major damage. I am not sure how the police found out who the older boys were but when they questioned them they admitted what they had done and gave them the names of the younger ones.

The next day my son was walking down the street and was stopped by the police and questioned. He was told if he did not tell them what they all did they would take him to jail. He was forced to write a statement -word for word - what they told him to write or once again they would take him to jail. He was not allowed to contact me or offered the opportunity to speak to a lawyer. Just forced to write. He has had no prior dealings with the police so needless to say he was very scared.

When he came home that night he told me about his encounter. I had him try to write down exactly what he wrote for them. Once he told me his part in this which was"I helped carry a mirror out" I saw a completely different story on paper. I knew something was wrong.

A week later a cop called me and wanted his SS number. He then told me 6 of the 7 boys were being charged with Felony 3 Burglary -mine was one of them. When I asked why such a serious charge he said"Because all of their stories match".

I guess they would all match since they were all forced to write the same thing. So FF to court. None of the boys could afford a 'real' lawyer so all were processed by a public defender - all 6 boys had the same one because there is only one! 4 of the 6 plead guilty very early on and one I was told got a deal to testify against anyone who they needed him to. Only me and another Mom held out and asked for trial because we both knew our kids rights had been violated. When I told the public defender I would not let my son plead guilty he got pretty angry. He told me he would not be allowed to represent my son unless he plead guilty. I would have to pay someone else.

There was also the matter of restitution. When I asked how much, he got annoyed with me and said no one had came up with a dollar amount -yet. I knew this was a lie because this was now JULY. The pool was repaired and had been open since May. Let me add that the pool is owned by the Kiwanis- who just happen to be all the men who own and run the town including the court system and including the one and only prosecutor. A special prosecutor had to be brought in from another county.

So, on Aug XX, I was forced to allow my son to plead guilty. The other mother too. Both boys received 30 days in Juvenile Detention - 23 were suspended. They have to serve 3 weekends. After your story on the guards I seriously considered fleeing the state but I am quite sure they would issue a warrant for me because restitution has not been paid. Restitution has been determined to be $4200.00 which is laughable. My son's (my) share is $710.00. I guess they bought the expensive paint.

Here is the best part. My child is on probation until he is 18. I have met with the probation officer the same day. During our first visit she informed my son that if she comes to our house someone better open the door because she would come with the cops. She said if she felt like it she would come into our home and flip the beds over if we were sleeping. This woman has threatened 3 times now to"take him away for a year if he does anything wrong" She goes to the school and talks to him alone and the principal must report any problems to her. He has 8 pm curfew which is fine - he is never out anywhere without me anyhow. He is on voice monitoring which is a automated phone call to check and make sure he is at home. If he is not going to be home he has to call her long distance ahead of time, which is ridiculous.

My son has done 2 of his 3 weekends so far. This past weekend he spent his time listening to a 16 year old girl tell him how she and some others robbed and murdered a old man. She gave him all the details too. The other boy did one weekend and then missed a day of school so when he returned he was arrested and got 30 days.

The young man in your article who was raped should have never even been taken to jail. Come on - it was traffic and he was 18 years old. In KY people have NO RIGHTS - Its do as you are told -or else. Schools are the same way. There is no rewards for the positive just punishment for negative. People are taught not to BACK TALK. My kids are afraid to ask for a pack of ketchup at McDonald's these days. Roadblocks are set up just to try to catch people driving with no license. God help anyone who is dumb enough to try that -you automatically go to jail. Where you are placed in a life threatening situation where you are helpless. Especially children.

The young man in your article who was raped should have never even been taken to jail. Come on - it was traffic and he was 18 years old. In KY people have NO RIGHTS - Its do as you are told -or else. Schools are the same way. There is no rewards for the positive just punishment for negative. People are taught not to BACK TALK. My kids are afraid to ask for a pack of ketchup at McDonald's these days. Roadblocks are set up just to try to catch people driving with no license. God help anyone who is dumb enough to try that -you automatically go to jail. Where you are placed in a life threatening situation where you are helpless. Especially children.

Your comment on the stereotype is driving me insane because it did come from somewhere and it is so obvious to those who do not belong here. I am forced to turn my son over to people who I swear look just like the 3 guards. There is something very wrong here, something very evil. I want to say - its all about the money... but it is more than that.

The Democratic National Convention began last night, providing a few high moments for the party faithful. But I got a few chuckles while catching up on my reading last night.

Michael Moore tells the New York Daily News:"At this point, we need to try anything---and Obama is anything. And if he doesn't do the job we can throw the bum out in four years." (Just don't forget the old maxim: the job of the new president is to make the last president look good. Granted, a President Obama would have to go a long way to achieving that goal.)

Oh, and in a very interesting NY Times magazine article on"Advanced Obamanomics," David Leonhardt calls Obama a"free-market loving, big-spending, fiscally conservative, wealth redistributionist." A study in contradiction. What else is new? The article contains this classic howler:

The government has deregulated industries, opened the economy more to market forces and, above all, cut income taxes. Much good has come of this---the end of 1970s stagflation, infrequent and relatively mild recessions, faster growth than that of the more regulated economies of Europe. Yet, laissez-faire capitalism hasn't delivered nearly what its proponents promised. It has created big budget deficits, the most pronounced income inequality since the 1920s and the current financial crisis.

Laissez-faire capitalism? Laissez-faire capitalism?

It's a fairly typical exercise by contemporary political pundits; every so often, just"free-up" the mixture of regulation and market forces in the everyday see-saw of mixed economic policies and then blame laissez-faire capitalism for the mess.

Anyway, after some truly rousing Olympics in Beijing, the real political Olympics have only begun; pass the popcorn.

Cross-posted to Notablog.

The first photo is of the El Paso police from 1917 in front of their paddy wagon and the second is a modern SWAT Team.

As the first photo shows, it was once standard practice for police officers to wear long jackets to cover up their guns, apparently lest they offend civilians. The cop of the beat in just about any Hollywood movie in the 1930s dressed similarly. Apparently, this was a vestige of an anti-militarist tradition. Now, of course, the police seem to proudly brandish their guns in public at every opportunity.

Does anyone know any of research on when and why the shift from the old tradition of covering up guns? Who pushed the change and who, if anyone, opposed it?

A second assumption in Tyler's scenario is that what happens to U.S. Treasuries and what happens to the dollar are inextricably intertwined. It is true that fiat money makes it harder than would a gold standard to separate the fate of a government's money from that of its debt; but it is certainly not impossible to do so. Treasury securities are second-order claims to central bank-issued dollars. Although both may be ultimately backed by the government's power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution the U.S. repudiated its paper money and yet successfully honored its debt (in gold). What in theory prevents it from doing the reverse in the future?

That the U.S. in fact would do the reverse is implied by some of the observations (with which I generally agree) that Tyler has made about the recent record of the Fed and other central banks. Seigniorage has become a trivial source of revenue in developed countries with widespread fractional reserve banking. Yet Tyler seems to blithely assume that a major fiscal crisis would lead the U.S. government to resort to inflationary finance. If the double-digit inflation experienced by the U.S. during the 1970s covered no more than 2 percent of central government expenditures, imagine the hyperinflation that would be necessary to cover even a two-thirds increase in total federal expenditures, a conservative projection of what current Social Security and Medicare benefits would require over the next half century. Central bank independence, moreover, permits the Fed to isolate the dollar from such a fiscal crisis. And given a choice between only default on its debt, and both default on its debt and collapse of its currency, I expect the Treasury and the Congress would gratefully acquiesce.

But my major disagreement with Tyler and Arnold is that I believe that a U.S. government default, rather than being "the end of the world," could possibly be a good thing. I even advocated repudiating the national debt in a 1981 issue of CALIBER (the newsletter of the California Libertarian Party), long before predicting a default. My arguments were moral, economic, and political, and I would only soften them slightly today.

The moral argument for repudiation is easiest to follow although by itself says nothing about the practical results. Treasury securities represent a stream of future tax revenues, and investors have no more just claim to those returns than to any investment in a criminal enterprise. I favor total repudiation of all government debt for the same reason I favor abolition of slavery without compensation to slaveholders.

The economic argument depends on whether Ricardian Equivalence holds. Repudiating government debt eliminates future tax liabilities. To the extent that people correctly anticipate those liabilities, the value of private assets (including human capital) should rise over the long run by the same amount that the value of government securities falls. Thus, people will gain or lose depending how closely their wealth is associated with the State. If on the other hand, people underestimate their future tax liabilities, they suffer from a fiscal or "bond illusion" in which Treasury securities make them feel wealthier than they actually are. Debt repudiation will bring their expectations into closer alignment with reality, which should increase saving.

When I survey students in my classes, most of them claim to have no realistic expectation that social security will be there for them when they retire. If they are being honest, and they act on this belief as they earn income, then Ricardian Equivalence should hold for those liabilities, making any default less painful. These of course are all long-run effects, and the current market hysteria about the subprime crisis leaves me far less sanguine than I once was about the short-run financial turmoil following a Treasury default.

The political consequences are the trickiest to analyze. A government default is certainly a balanced-budget amendment with real teeth. Moreover, government defaults in the past, when not obviated by bailouts from other governments, seem to have had positive political consequences. Compare the widespread defaults of American state governments in the 1830s, with their cascading benefits--reluctance of states to set up government-owned railroads the way they had government-owned canals, balanced-budget constitutional amendments at the state level which even today impose lingering constraints, a general state retrenchment in a period of increasing laissez faire, among others--with the baleful consequences of the failure to repudiate the Revolutionary War debt, the most notorious of which was replacement of the Articles of the Confederation with the U.S. Constitution. During the late 1830s, President Martin Van Buren blocked any national bailout of the states, and yet the world did not end, and indeed the U.S. continued on the path of sustained growth that it had only recently started down. Unfortunately nowadays, with the U.S. and assorted international agencies stepping in to stave off sovereign defaults, we don't have good recent comparisons.

The greatest potential political benefit of a future government default would be the end of the democratic welfare state. In fact, nearly all the social democracies seem to be approaching similar fiscal crises at the same time. Even though the U.S. started its pay-as-you-go social insurance later than most of the rest, it has caught up with them because, rather than rationing medical services with national health care, it subsidizes medical services. Nor is it likely that the U.S. government will be able to turn to any combination of explicit taxes and siegniorage to stave off the crisis. I've already explained the futility of relying exclusively on seigniorage. Federal taxes as a percent of GDP have been roughly constant since 1960, bumping up against 20 percent. That is an astonishing statistic when you think about it. There have been numerous tax changes over what is nearly half a century, with rates sometimes rising and sometimes falling, and still the total bite out of the economy has not changed much. The chances that Americans would put up with a doubling of that bite strikes me as close to nil. Look at the problems Governor Arnold Schwarzenegger faces with only a minor tax increase in the face of California's fiscal straits.

So when the default occurs, I expect it to happen very fast, much like the sudden collapse of the Soviet Union. While the Social Security and Hospital Insurance trust funds only provide the verisimilitude of full funding, that is enough to create a seeming firewall between the Treasury debt and social insurance obligations. All that is required for investors to change their expectations is some signal that the firewall is an illusion, such as Congress dipping into general revenues to finance Social Security or Hospital Insurance. (The other parts of Medicare are already financed partly out of general revenues.) Suddenly investors will realize that the enormous $70 trillion unfunded liability (Kotlikoff's estimate) does affect the Treasury's ability to honor its debt. Once a default risk premium appears on Treasuries, with the need to constantly roll over of the debt, things will be over quickly. The Fed won't have the time, much less the ability, to inflate the Treasury out of its problems, even if it wanted to.

The social-democratic welfare State will come to end, just as socialism came to an end. Socialism was doomed by the calculation problem identified by Mises and Hayek. Mises also argued that the mixed economy was unstable, and the dynamics of intervention would inevitably drive it towards socialism or laissez faire. But in this case, he was mistaken; a century of experience has taught us that the client-oriented, power-broker State is the gravity well toward which public choice drives both command and market economies. What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above political reproach and beyond economic salvation. Fully funded systems could have survived, but politicians had little incentive to enact fully funded systems, and much less incentive to impose the huge costs of converting from pay-as-you-go.

Whether the inevitable collapse of social democracies will be a good or bad thing depends on what replaces them. The travails of post-Communist countries can be a source of either optimism or pessimism, depending on where you look. But the lesson libertarians should take away from all this is to stop wasting their time on social insurance reforms that have no chance of implementation and small chance of working, even if implemented. Most of them are half-way measures that reduce only a portion of the unfunded liability with tax increases or benefit decreases, and try to cover the remainder with either smoke-and-mirror cuts in other government programs or hand-waving about higher growth rates. Libertarians instead should be helping people to accept the inevitable by explaining why government intervention dooms social insurance and why only voluntary alternatives are viable over the long run. This is the best way to ensure that what comes after the democratic welfare State is something better.

For example, commercial and industrial loans at all commercial banks were $1,503.6 billion as of June 1, 2008. This loan volume is almost 19 percent greater than it had been a year earlier, 34 percent greater than two years earlier, and 53 percent greater than three years earlier.

Or consider real estate loans at all commercial banks, which were $3,644.9 billion as of June 1, 2008. This loan volume is 5.5 percent greater than it had been a year earlier, 17 percent greater than two years ago, and 33 percent greater than three years ago.

Or consider total consumer credit outstanding , which was $2,586.3 billion as of June 30, 2008. This loan volume is 5.6 percent greater than it had been a year earlier, 10.9 percent greater than two years earlier, and 15.2 percent greater than three years earlier.

Moreover, as elementary economic theory shows us, a fall in the real interest rate (for some securities, as I’ve reported, to approximately zero), at the same time that the volume of funds being lent has increased, can result only from an increase in the supply schedule of loanable funds relative to the demand schedule.

So, I repeat: the economy is awash in loanable funds, and the unprecedented volume of such funds now being supplied appears to be the obvious explanation for why real interest rates are so low in so many financial markets. To be sure, the least qualified would-be borrowers are not being served as readily as they were two to five years ago. Good. People who present nothing more than a warm body with a pulse should not be viewed as well qualified to receive unsecured loans; nor should they be given loans premised on the foolish expectation that all real estate will appreciate forever.

As for those funky derivatives, the institutions and individuals who invested in them ought to have learned a valuable lesson: do not trust some guy with a Ph.D. from MIT to tell you what a security is worth; insist on seeing actual market values. If no such values exist, don’t be a fool by investing in something you don’t understand and can’t rely on. I agree that all these crappy securities still sitting on certain firms’ balance sheets (or lurking off to the side) pose a big problem for those firms. Fortunately for them, and unfortunately for us poor taxpaying peons, many of these firms have friends in high places at the Fed and the Treasury. The bailouts have already begun, and more of them are almost certain to follow