ZH: ”is whether or not MF Global was rehypothecating (there is that word again), or lending, or repoing, or whatever you want to call it, that one physical asset that it should not have been transferring ownership rights to under any circumstances.”

TF: “A lawsuit such as this one could easily bring about the total destruction of the Comex/LBMA-based, fractional bullion banking system”

Here is a suggestion, read the actual Interpleader Complaint for the facts:

1. Mr. Fane and MFGI entered into five COMEX gold contracts and three COMEX silver contracts relating to the Property. HSBC is the depository for the Property pursuant to a certain Gold Delivery Point Agreement and a certain Silver Delivery Point Agreement entered into between HSBC and the New York Mercantile Exchange, Inc.

2. By e-mail dated October 25, 2011, MFGI notified HSBC that “MF Global’s customer Mr. Fane would like to take possession of [the Property] and move [the Property] to his account at Brinks (sic). I have already canceled for load out. Customer will advise of date and time.”

3. Mr. Fane did not contact HSBC to request that the Property be transferred to his account at Brink’s prior to the Commencement Date.

4. By letter dated November 18, 2011, HSBC, through its undersigned counsel, notified the Trustee that it had possession of the Property. HSBC also notified the Trustee, in light of HSBC having received instructions from MFGI prior to the Commencement Date to transfer the property to Mr. Fane upon his request, that HSBC would act in accordance with MFGI’s prior instructions barring an injunction or contrary instructions from the Trustee.

5. By letter dated November 21, 2011, Mr. Fane requested that HSBC transfer the Property to his account at Brink’s.

6. By letter dated November 22, 2011, the Trustee, through his counsel, asserted to HSBC that the Property constitutes customer property under Part 190 Regulations of the Commodity Futures Trading Commission and that the treatment of the Property must be administered by the Trustee. The Trustee further instructed HSBC not to release the Property to Mr. Fane.

7. By letter dated November 22, 2011, HSBC notified Mr. Fane that the Trustee had instructed HSBC not to release the Property to him and that the Trustee asserted an interest in and claim to the Property.

Not being a lawyer, I read this as “before you went bankrupt, you said I could have my metal”, “yeah, well, you didn’t take it before I went bankrupt, so it is now part of the bankruptcy proceedings”.

So no rehypothecation or loaning, no “suing” by HSBC, no stealing or counterfeiting of the bars and certainly not the total destruction of bullion banking. Just another lesson in counterparty exposure and possession is nine tenths of the law.

To the extent that we’re merely rerouting trade, bypassing Dubai, this will impose no new stress on ports and airports in Pakistan. But to the extent that new trade is created – as I expect it will (and as argued above) – then new work will be required in Pakistan on enhancing the capacity of ports and airports. I would personally be surprised if the effects are not large.

In the intuition of economists, there is a gravity model in the affairs of men. Proximity and low transactions costs are incredibly important. The natural opportunity for India to grow international integration on all dimensions (goods, services, people, ideas, capital) lies in our immediate neighbourhood. India’s connections into the region are shockingly below those seen for all other large countries. Doing better on connections with Pakistan would be a nice step forward.

Consider a product like cement, which is ordinarily considered a non-tradeable. Transportation of cement is so hard, there isn’t a unified national market in India. There are a series of regional markets. But even in this, modifications of transportation have mattered greatly. E.g. when Gujarat Ambuja came up with the innovation (back in the mid 1990s) of sending cement from Saurashtra to Bombay, by sea, this was a very big deal. By that same logic, cement from the coast of Saurashtra can go to Pakistan (or vice versa, depending on who produces at a lower price).

We should not see trade in goods in isolation. All dimensions of globalisation are intimately connected to each other. To do more trade in goods and services, we need more movement of people. Ergo, the silly visa restrictions that both countries impose on each other need to be eased. Finance follows trade: So where trade in goods and services leads the way, bigger financial integration will inevitably follow with trade financing, cross-border banking, payments, purchases of information, operations of multinationals and FDI, INR/PKR currency risk management, and investment flows. More will need to be done on investment guarantees, export/import trade financing, etc.

The style of the exposition suggests, at times, that Deidre may not suffer fools gladly (or has a wicked sense of humour): ‘If someone claims that foreign trade made possible, say, economies of scale in cotton textiles or shipping services she owes it to her readers (as I have already said twice: I wish you would pay attention) to explain why the gains on the swings are not lost on the roundabouts. Why do not the industries made smaller by the large extension of British foreign trade end up on the negative side of the account?’ (p 221).

If we place the ongoing “purist”-”pragmatist” conflict within the libertarian movement under a metaphorical microscope, it immediately becomes apparent that what we’re looking at is not one conflict, but rather a bundle of conflicts composed of numerous intertwined disputes with overlapping intra-movement constituencies for particular outcomes. While the movement can be reasonably viewed as split between overall “purist” and “pragmatist” camps, the vast “No Man’s Land” between them is a constantly swirling milieu in which it’s not always perfectly clear who is shooting at whom — or why. Various constituencies raise their flags over specific coordinates and give battle, hoping to temporarily claim some patch of territory for their concern of the moment or, perhaps, to extend the lines of some larger alliance to encompass more of the disputed field.

The hill upon which I intend to raise my flag — the banner of the “purist” faction, broadly defined — in this paper encompasses the notion of “incrementalism.” Whoever controls that hill in turn overlooks, and may exploit, a key route across the plain of “realpolitik.”

May, I say, or might: The incrementalist high ground has been occupied, for some time and without substantial opposition, by “pragmatist” forces which have declined to actually sally forth versus the state, preferring instead to simply occupy it, hold a few grandiose parades on its slopes, and deny its use to “purists” who might actually use it as a base from which to strike real blows for liberty.

However, it’s come to my attention of late that the hill is only weakly occupied:

- Its garrison’s composition greatly resembles that of a Confederate “home guard” militia regiment during the Late Unpleasantness, as described by an inspecting general: “3 field officers, 4 staff officers, 10 captains, 30 lieutenants, and 1 private with a misery in his bowels.” To put it bluntly, for all their guff about holding the heights over the plain of realpolitik, the “pragmatists” have thus far proven themselves signally unsuccessful, to an even greater degree than the “purists” they disdain, at achieving political victories.

- The “pragmatist” garrison — which had at its disposal the heavy artillery of genuine incrementalism had it cared to use it — chose to mothball that formidable weapon and instead field a lighter piece, of shorter range and minimal power — one more suited to twirling, slapping and shouldering at ceremonies held for the purpose of congratulating themselves on their superior political acumen than for actual use in battle. The popgun I refer to is, of course, “compromise.”

The hill is, in other words, ripe for a bayonet charge. It is occupied by troops who are not interested in fighting, and who, if forced to, have at their disposal a weapon guaranteed to fizzle half the time and explode in its firer’s face the other half. It is the “purists” — unabashed and uncompromising libertarians who may differ on how far to go but who know which way they’re going — who have a rightful claim to, and know how best to exploit the advantages of, an incremental approach.

Forward, march.

THE FIGHT THAT NEVER WAS: INCREMENTALISM VERSUS ABOLITIONISM

Things are not always what they seem. For years, “pragmatist” reformers in the libertarian movement have exercised a virtual monopoly on advocacy of incrementalism, caricaturing “purist” abolitionism as its mutually exclusive opposite. Even a cursory examination of the two concepts, however, reveals that this is not necessarily the case.

Incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in one’s chosen direction. Incrementalism is a proposed means.

Abolitionism is the notion that wrongs should be abolished rather than simply minimized (and, at the abstract anarchist extreme — no insult intended, that happens to be where I live myself — that all wrongs must be abolished in order for the abolitionist to claim victory). Abolition is a proposed end or set of ends.

It is certainly possible to conclude (and some “purists” do) that limiting issues advocacy to abolition, and only abolition, is an appropriate means (perhaps even the only appropriate means) to achieve abolitionist ends.

“Pragmatists,” in turn, have exploited the possibility of such a reification of abstract end into concrete means. By encouraging the erroneous conclusion that that reification is universal within and necessary to “purism,” they create two useful and reciprocally dependent misimpressions:

1) That incrementalist means are not available to “purists;” and

2) That incrementalist means are therefore only available to “pragmatists.”

The theory implied by these misimpressions disintegrates on examination. I could fill a book with the documentary evidence of that disintegration, but I don’t have to: Even one example of a theory’s failure invalidates the theory. I’ll provide two:

- I consider the claim that Alan R. Weiss is a “purist” and an “abolitionist” to be indisputable. He describes himself as an “anarcho-libertarian,” he writes for “purist” publications including Rational Review and The Libertarian Enterprise, and he has a long record of continuous association with “purist” associations and projects. In 2002, Weiss was elected to the Northwest Austin (Texas) #1 Municipal Utility Board. During his tenure on that board, he led a successful effort to reduce taxes associated with its operations by 50%, and then resigned. In other words, he used incremental means (seeking and gaining electoral office) to accomplish an incremental objective (cutting a particular tax rather than eliminating that tax or all all taxation), even though his strong preference would have been, and his ultimate goal is, the elimination of both the board to which he was elected and the retention by government of that board’s powers.

- If you don’t think I’m a “purist” and an “abolitionist,” then you haven’t been paying attention. I have personally engaged in incremental political action numerous times. I’d like to eliminate the US government. Having so far been unable to figure out a way to do so, I serve as an appointed member of a federal board so that I can affect its operations in a pro-freedom way. I’d like to eliminate my city’s government. Having so far been unable to figure out a way to do so, I have personally managed two (winning) campaigns to keep one of its public offices (city marshal) elected rather than appointed, and another (winning) campaign to elect a person (Tamara Millay) to serve in that office who discharged the duties of that office in a more liberty-friendly way than others might have been expected to.

QED, incrementalist means are not only available to “purists” and “abolitionists,” but used by them, and are therefore not available only to “pragmatists.”

Sadly, this issue should never have required the current argument. The de facto “pragmatist” monopoly on incrementalism, and their use of it as an anti-”purist” cudgel, has been made possible only by an inexplicable “purist” reticence toward contesting the matter. Nearly 30 years ago (at the latest!), “purist” icon Murray N. Rothbard — the bogeyman of the “pragmatists” — was already explicitly endorsing incrementalism:

[I]t is legitimate and proper to advocate transition demands as way-stations along the road to victory, provided that the ultimate goal of victory is always kept in mind and held aloft. In this way the ultimate goal is clear and not lost sight of and the pressure is kept on so that transitional or partial victories will feed on themselves rather than appease or weaken the ultimate drive of the movement. — “Strategies for a Libertarian Victory,” Libertarian Review, 1978

Must the libertarian necessarily confine himself to advocating immediate abolition? Are transitional demands, steps toward liberty in practice, therefore illegitimate? Surely not, since realistically there would then be no hope of achieving the final goal. It is therefore incumbent upon the libertarian, eager to achieve his goal as rapidly as possible, to push the polity ever further in the direction of that goal. Clearly, such a course is difficult, for the danger always exists of losing sight of, or even undercutting, the ultimate goal of liberty. But such a course, given the state of the world in the past, present, and foreseeable future, is vital if the victory of liberty is ever to be achieved. — The Ethics of Liberty, Part V: “Toward A Theory of Strategy For Liberty,” 1982

Not only do “purists” have a rightful claim to incrementalist means but, as we shall see next, “pragmatists” have severely undermined their own claim to those means by attempting to smuggle other, unsupportable, means into play under the rubric of incrementalism.

COMPROMISE: THE POVERTY OF PRAGMATISM

As we’ve previously seen, there is no real, defensible “pragmatist” monopoly on incrementalism. That the “pragmatists” have postured as the possessors of such a monopoly raises the question of why they are so interested in controlling the term and denying its use to “purists.”

The obvious answer is that incrementalism is a visibly worthy political tool. Insofar as the “pragmatist”-”purist” feud manifests itself in demonstrations (or at least protestations) of efficacy and success with the intent of recruiting libertarian newcomers to one side or the other, the side which can (even falsely) claim sole possession of such a tool benefits.

That there are less obvious answers is, well, less obvious. However, there’s good reason to believe that less obvious answers exist.

Assertion of a monopoly on incrementalism is simply not strictly necessary for the purpose of demonstrating efficacy and success. Such a purpose could be more effectively fulfilled by using incrementalism to build a record of electing public officials, winning referendum votes, etc., and then stacking up the results versus those achieved by the allegedly incrementalism-deprived “purists” for comparison. The “pragmatists” have avoided any such comparison — not only because it would explode their pretensions to a monopoly on incrementalism but because it would explode their implicit claim that they use incrementalism effectively, or for that matter at all.

The “pragmatists” have effectively used incrementalism as an advocacy cudgel in intra-movement disputes, but evidence that they’ve used it in, um, “real politics” is sorely lacking. The “pragmatist” case for primacy in the libertarian movement is a hodge-podge of horror stories about “purist” failure and grandiose projects of future victories which can be achieved only after the “purists” have been swept aside. What’s missing from that case is a portfolio of “pragmatist” successes: “We did this, and it worked.”

Why would a movement faction assert a (fake) monopoly on a tool it doesn’t even use? Why would it insist, contrary to fact and evidence, that its opponents don’t have that tool in their kit, even though those opponents have visibly and successfully used the tool numerous times? And why would it refuse to take that tool out of its own kit and visibly use it to tighten some bolts or drive some nails?

The answer is that the “pragmatist” version of incrementalism is a counterfeit tool. Its dark silhouette against the bottom of the toolbox drawer looks, in form, like the genuine article. But when pulled out and examined closely, it turns out to be a “drop-forged in Pakistan” fake. Deep down inside (in their pockets, next to the receipt for $4.95), the “pragmatists” know that their tool — compromise — won’t turn a bolt. And they know that if they pull out their shoddy instrument and hold it up next to the “purist” version, nobody who wants to turn a bolt will select theirs.

As defined above, incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in the right direction.

Compromise, on the other hand, involves trading steps in the wrong direction for other steps in the right direction.

When pressed, many “pragmatists” argue that incrementalism and compromise are not only not mutually exclusive, but that they are actually indispensable one to the other. Suspicion on this point is natural, however, given the lengths of obfuscation to which the “pragmatists” have gone in order to avoid reaching the issue.

That suspicion is well-founded — for, as I shall demonstrate below, compromise destroys, rather than augments, the utility of incrementalism. To put a finer point on it, the inclusion of compromise as a means in libertarian strategy requires a radical and un-quantifiable re-definition of ends.

COMPROMISE’S CALCULATION PROBLEM

In the larger libertarian movement, the difficult question of end-states is a constant topic of discussion. Anarchist and minarchist factions do daily battle over the propriety of particular and general long-term goals. As a practical matter, however, the discussion has been framed in terms of “how to deal with a problem we’ll have to deal with later.”

The anarchist who wants to abolish the state entirely may disagree with the minarchist who wants to retain an ultra-minimal “night watchman” state, but they are able to co-exist beneath the “libertarian umbrella” because their goals are, for the most part, commensurable. While the minarchist might only cut government’s size, scope or power in a particular area by 80%, where the anarchist would cut it by 100%, both agree that pretty much every function of government should be slashed significantly.

Even if we posit a bigger “libertarian umbrella” under which other, additional groups might cluster, that commensurability is present. The geolibertarian and the constitutionalist may make exceptions in that which they subject to “libertarian measurement,” but those exceptions are defined exceptions. The constitutionalist may advocate a specific level of taxation for the specific purpose of “providing for the common defense.” The geolibertarian may argue that a community “ground rent” is not taxation as normally defined. And so on, and so forth.

These kinds of exceptions may be problematic, and they may raise questions as to which groups truly belong under the metaphorical umbrella or just exactly which piece of ground falls or should fall under that umbrella’s shade. What they don’t do, however, is make it impossible to answer those questions.

When compromise is introduced into a libertarian strategy, however, the quality of commensurability disappears, and with it the ability to define any particular end, let alone any end-state, as compatible or incompatible with libertarianism per se. More specifically, the “pragmatist” justification for compromise relies on the adoption of non-measurable or non-quantifiable goals.

While pro-compromise “pragmatists” are understandably shy about explaining their reasons for advocating something they don’t want to admit they are advocating, some cues and clues are available.
When “pragmatist” Brian Holtz states that he stands for “minimizing the overall incidence of coercion” or implicitly characterizes himself, in contrast to someone else, as advocating “the policies and tactics that have the highest expected value in terms of minimizing the net amount of aggression suffered by humanity,” we should pay close attention to exactly what he’s saying.

Ditto when Carl Milsted, head of the Libertarian Reform Caucus, asks “Why should I never endorse an action that employing [sic] aggression even it results in a substantial net reduction in aggression?”
For the sake of uniformity, I’ll refer to the goal which Mr. Holtz and Dr. Milsted implicitly hold out for adoption as “reduced overall net aggression.” It’s a fine-sounding goal, and one to which an approach of compromise lends itself well. Unfortunately, it’s also utterly impossible in most cases to determine whether, or to what degree, such a goal has been achieved.

Mr. Holtz, Dr. Milsted, meet Dr. Mises:

Judgments of value do not measure; they merely establish grades and scales. Even Robinson Crusoe, when he has to make a decision where no ready judgment of value appears and where he has to construct one upon the basis of a more or less exact estimate, cannot operate solely with subjective use value, but must take into consideration the intersubstitutability of goods on the basis of which he can then form his estimates. In such circumstances it will be impossible for him to refer all things back to one unit. Rather will he, so far as he can, refer all the elements which have to be taken into account in forming his estimate to those economic goods which can be apprehended by an obvious judgment of value — that is to say, to goods of a lower order and to pain-cost. That this is only possible in very simple conditions is obvious. In the case of more complicated and more lengthy processes of production it will, plainly, not answer. — Ludwig von Mises, Economic Calculation in the Socialist Commonwealth, 1920

The notion of “reduced overall net aggression” requires a system for classifying all of aggression’s varying forms into commensurable units. It’s relatively non-controversial to assert that picking a pocket is less onerous than assault, which is in turn less onerous than murder, but unitizing these forms of aggression for bulk comparison is a different story entirely.

Does it take 2.5 armed robberies to equal a rape, or 3.1?

Is the prevention of two murders a fair trade for 100 unreasonable searches?

Even when aggression is nominally measurable in known units, it’s not necessarily true that the factor of aggression itself will be perceived or valued in terms of those units.
If I can reduce the taxes of Person A by two dollars in trade for raising the taxes of Person B by only one dollar, is that a net reduction in overall aggression? What if Person A’s two dollars would otherwise have been spent on country club initiation fees while Person B’s one dollar would have otherwise been spent buying food for his starving child? Would the decrease in aggression versus Person A truly be commensurate with the increase in aggression versus Person B?

The value of a dollar may be uniform for certain purposes, but it is highly subjective for most. Most people would agree that stealing a piece of 18 holes on the golf course is less onerous than stealing a baby’s bottle of milk, even if the dollar values of the two say otherwise.

Even leaving such questions aside, precisely why should Person A accept an obligation to be aggressed against more, so that Person B will be aggressed against less, specious “overall net” claims notwithstanding? Under what moral calculus should anyone be considered fair game for aggression in any amount?

The unitization problem only grows worse on a political scale: For not only is it impossible to quantify the “amount” of Aggression X versus that of Aggression Y on an individual basis, but American polity deals with wholesale decisions which affect a population of 300 million individuals (excluding those outside US borders, who may also be affected).

The idea that some central “Pragmatic Libertarian Planning Board” could accurately forecast aggregate increases and reductions in the various forms of aggression spawned by particular policy compromises and compare them to reveal which actions would produce “reduced overall net aggression” is pure … well … I was going to say “science fiction,” but no science fiction author I know would touch the idea with a ten-foot pole. Sapient space-faring beer-drinking anarchist squid are one thing, but there’s a limit to the suspension of disbelief.

The commensurable characteristic which unifies libertarianism, however narrowly or broadly defined, is opposition to — not redistribution of — aggression. Assuming the burden of aggression redistribution would rip the fabric of the “libertarian umbrella.” Treating aggression as a commensurable, tradeable commodity would mean that some factions would be required to accept increased aggression on issues dear to them in order to “pay for” decreased aggression in areas held dear by other factions. No libertarian coalition could hold together under such stresses — it would fall to pieces as soon as the compromisers “traded” an increase in the top tax rate for legalization of marijuana, or vice versa, or whatever.

A single focus on institutionalized aggression, i.e. the aggression of the state, and a proposed solution of reducing — never in any case increasing — the ability of the state to aggress, are indispensable to the success (nay, the survival) of any broad-based libertarian political movement.

“Pragmatism” is popularly defined as an emphasis on that which “works.” Compromise does not, and cannot, work in the context of a libertarian political movement.