[guest post by JVW]

The once-and-future Next President of the United States, Hillary! Rodham Clinton, apologized for choosing to use a private email server and non-government account during her tenure as Secretary of State. Apparently her pollsters have concluded that her earlier insistence that she did nothing wrong coupled with her breezy insouciance in the face of potentially criminal acts are political poison (a judgement confirmed by having lost nearly one-third of her support among Democrats since April).

So just as The New York Times told us over the weekend that Hillary! will once again re-launch herself as just another aw-shucks down-to-earth grandmother who totally relates to the average wage slave, a contrite and (slightly more) humble Hillary! went on ABC News earlier today to apologize for her email fiasco:

“I do think I could have and should have done a better job answering questions earlier. I really didn’t perhaps appreciate the need to do that,” the democratic presidential candidate told Muir in an exclusive interview in New York City. “What I had done was allowed, it was above board. But in retrospect, as I look back at it now, even though it was allowed, I should have used two accounts. One for personal, one for work-related emails. That was a mistake. I’m sorry about that. I take responsibility.”

Do you think they are starting to panic in Chappaqua?

– JVW

UPDATE BY PATTERICO: Hillary! on Facebook:

I wanted you to hear this directly from me:

Yes, I should have used two email addresses, one for personal matters and one for my work at the State Department. Not doing so was a mistake. I’m sorry about it, and I take full responsibility.

It’s important for you to know a few key facts. My use of a personal email account was aboveboard and allowed under the State Department’s rules. Everyone I communicated with in government was aware of it. And nothing I ever sent or received was marked classified at the time.

As this process proceeds, I want to be as transparent as possible. That’s why I’ve provided all of my work emails to the government to be released to the public, and why I’ll be testifying in public in front of the Benghazi Committee later next month.

I know this is a complex story. I could have—and should have—done a better job answering questions earlier. I’m grateful for your support, and I’m not taking anything for granted.

I understand that you may have more questions, and I am going to work to keep answering them. If you want to read more, including my emails themselves, please go here:

https://www.hillaryclinton.com/emails/

Thank you,
Hillary

Phony and scripted. Here’s the real Hillary: smug and dismissive.

With a cloth?

Yeah, but what would they know about it? NYT:

WASHINGTON — A special intelligence review of two emails that Hillary Rodham Clinton received as secretary of state on her personal account — including one about North Korea’s nuclear weapons program — has endorsed a finding by the inspector general for the intelligence agencies that the emails contained highly classified information when Mrs. Clinton received them, senior intelligence officials said.

Mrs. Clinton’s presidential campaign and the State Department disputed the inspector general’s finding last month and questioned whether the emails had been overclassified by an arbitrary process. But the special review — by the Central Intelligence Agency and the National Geospatial-Intelligence Agency — concluded that the emails were “Top Secret,” the highest classification of government intelligence, when they were sent to Mrs. Clinton in 2009 and 2011.

One could almost get the impression that she’s lying.

WSJ:

The 2016 presidential campaign is coming to the jailhouse steps in Kentucky Tuesday, as GOP contender Ted Cruz is travelling there to visit Kim Davis, the clerk who has been jailed for refusing to issue marriage licenses to same-sex couples.

Also travelling to the scene Tuesday is former Arkansas Gov. Mike Huckabee, who is holding a rally to show solidarity for Ms. Davis, the Rowan County clerk who was jailed for contempt by a federal judge after she repeatedly defied his order to issue marriage licenses to gay and straight couples.

Both the Cruz and Huckabee campaigns have been courting religious conservatives, many of whom have been outraged by Ms. Davis’s case. They believe her treatment confirms fears that the Supreme Court’s recent decision upholding gay marriage threatens the religious liberty of people who oppose same-sex marriage because of their faith.

Explaining Mr. Cruz’s plan to visit Ms. Davis in jail Tuesday, his campaign spokeswoman Catherine Frazier said, “It is important to Sen. Cruz that Kim Davis and all Americans understand his commitment to defending their first amendment rights to religious liberty. The First Amendment is foundational to all other freedoms we enjoy and it is tragic that in America today, our own citizens would have to worry about being targeted or arrested for merely living out their religious convictions. Sen. Cruz will continue doing everything in his power to defend Kim Davis and ensure that no other Americans are further targeted for their religious beliefs.”

Meanwhile, Ms. Davis has filed an appeal from the court’s decision. Most of the fire appears to be directed at the Democratic governor.

UPDATE: Davis has been ordered released from jail. But her lawyer says she will continue to order that licenses not be issued to same-sex couples, so she’ll likely be back in custody in short order.

This is Part 12 of a 17-part series of posts summarizing Bob Murphy’s indispensable book Choice: Cooperation, Enterprise, and Human Action. Murphy’s book is itself is a summary of Ludwig von Mises’s classic treatise “Human Action.” Like previous posts, this post is a summary of a summary.

The purpose of these posts is to popularize and spread the word about Austrian economics and educate the public. Rather than list all the previous parts, I have created a category for all these posts, called “Human Action and Choice,” so that all these posts can be read (in reverse order) with a single click. Note well: any errors in these summaries are mine and not Murphy’s.

Murphy says of chapter 12: “The material in this chapter is the most technical of the present book.” But it will make the explanation of the business cycle in post 14 more understandable, so it’s worth it.

We begin with some definitions. We have already discussed commodity money (such as gold, for example) and how it emerged on the market. A money substitute is a trusted alternate form of money that can be redeemed for the commodity money on demand. “Money in the broader sense” encompasses both the substitute and the commodity money (“money in the narrower sense”). When the issuer suspends redemption for the commodity, but people believe the suspension is temporary, the medium of exchange is credit money. Once the suspension is understood to be permanent, we have fiat money. (Recall from past chapters that Mises believed all fiat money necessarily originated with a commodity money — and logically had to emerge in that manner, or its purchasing power could never be determined.)

Commodity money allows new producers to produce money, while fiat money must of necessity be issued by a monopoly (a government). No single firm (such as a private mint) can monopolize commodity money, because the firm is not creating money, it is ensuring the authenticity of existing money.

As noted, in addition to money (whether it be commodity money or fiat money), there are also money substitutes, which fall into two broad categories. One is a money certificate, in which the issuer has set aside the money to back it. Another is fiduciary media, in which the issuer does not retain the commodity in reserve. In fractional reserve banking, a guy named Eugene might deposit $1000 of actual money — dollar bills — into an account. The bank might loan $900 of Eugene’s money, but still allow Eugene to withdraw the full $1000. Eugene’s bank balance consists of $100 of money certificates and $900 of fiduciary media. Fiduciary media in a gold standard setting could also include token money — coins that don’t have the requisite amount of gold, for which the government did not retain a 100% reserve of gold to back up the nominal face value.

To sum up, money in the narrower sense could include commodity money, credit money, or fiat money. Money substitutes could include money certificates or fiduciary media (uncovered bank deposits or token money). Money in the broader sense encompasses money in the narrower sense plus money substitutes.

A sneak peek of the relevance of all this: as banks create new money by creating fiduciary media (uncovered bank deposits created when loans are made), the quantity of money in the broader sense increases. As we saw in post 11, an increase in the money supply will tend to lead to a drop in money’s purchasing power or value, through the basic law of supply and demand (due to the lower marginal utility of extra units of money out of the total stock). Such a credit expansion (accomplished through the creation of new fiduciary media) tends to force banks to lower interest rates to encourage borrowing.

In other words: credit expansion tends to lead to higher prices and lower interest rates, while credit contraction leads to the opposite.

At this point Murphy pauses to delineate the two distinct functions of banks: 1) to serve as a safe place to keep money, and 2) to serve as a credit intermediary. Murphy explains that a bank can serve the latter role, even while keeping 100% reserves on demand deposits (deposits that can be withdrawn immediately at any time) — by lending out only funds obtained from depositors who purchase certificates of deposit, or make time deposits. (In either situation, the bank customer has made a deposit in which the customer’s right of withdrawal is limited by contract.) While lending and 100% reserves for demand deposits are not mutually exclusive, many Austrian economists differ on whether fractional reserve banking is desirable or legitimate.

Murphy next turns to Mises’s view of free banking: banking without government regulation. Mises believed that only free banking could prevent dangerous credit expansion, because banks that overissue fiduciary media would be forced to settle accounts with other banks, and the expanding bank would see its reserves dwindle. To avoid insolvency, the expanding bank would have to contract credit to strengthen its reserves. This is all a function of the interbank check clearing process. When customers of bank A write checks to customers of bank B, bank B comes to bank A and demands the money. Bank A must hand over the cash, or it will lose its reputation for being a sound bank. If bank A has overexpanded its issuance of fiduciary media, bank B (and bank C, and bank D, and so on) will come knocking, asking for their cash, at some point. So when each bank has only a small percentage of the population as its clients, “any attempt to expand credit will lead to a quick drain on its reserves.”

By contrast, government intervention allows all the banks to expand credit together. When the inflation takes place in all banks, you don’t see cash reserves accumulating in conservative banks and leaving inflationary banks. Having a central bank allows cartelization, which in turn allows a general expansion of the money supply . . . which governments love.

This is why governments want to have a central bank. Not to protect people. To have a mechanism to allow endless inflation.

Next, we’ll look at capital, time preference, and the theory of interest.