Tuesday, February 03, 2009

Thursday, January 29, 2009

Chinese savings

This article covers a pretty worthwhile topic, and it deserves better understanding.
The new trend in finger-pointing is to blame the Chinese for saving too much and consuming too little. They are investing so much money in the U.S. that they are driving interest rates lower, which fueled the recent speculative bubbles.

I accept the premise that foreign investment can be a catlyst to speculative bubbles and the subsequent busts. I believe it was Murray Rothbard that argued that the Panic of 1819 was in part caused by an inflow of silver from Mexico. It wasn't the silver per se that caused the panic, it was the fact that the banks were able to print 5x the currency for every ounce of silver they brought in. This increase in the money supply fueled speculation which was corrected in the panic. Again, we can't really blame the Mexican silver, we have to blame the banks that were multiplying the silver by 5 times through credit.

There are two things that contributed to the boom: free coinage, and fractional reserve banking. Free coinage means that the silver was turned into currency. In the case of foreign investment, there is no free coinage. In order to invest in the U.S., you have to trade something for dollars. You can't invest Yuan in the American stock market, you can only invest dollars.

In our case, the Chinese are trading products for dollars. They give WalMart lots of cheap crap, and WalMart gives China billions of dollars. Since the American savings rate has dropped, and consumption of cheap Chinese crap has increased, we could say that Americans are giving the Chinese their savings, and the Chinese are giving us their products. So, from the outset, our relationship with the Chinese should be putting upward pressure on interest rates since we are depleting our savings to consume their products.

From there, the conventional wisdom is that the Chinese are taking those dollars and investing the money in T-bills and AAA-rated bonds. I don't believe either of these activities is inflationary. T-bills are turned into government consumption. So, we have American savings being turned into Chinese products which is transferred to the government for consumption; this may be a drain on private enterprise in America, and it may support the expansion of the government, and the government may have to inflate one day to pay it off, but it's not inflationary today.

What about the money the Chinese put in AAA-rated bonds like those offered by Fannie Mae and Freddie Mac? The fact that the Chinese may have participated in the housing boom, just like everyone else, doesn't mean that they caused or enabled the boom. The cause of the boom would still be the money manipulation that made the run-up in housing prices possible. The fact that the Chinese put their money in a "safe" place that happened to be a GSE engaged in wholesale fraud is not their fault, it's the fault of the Federal Reserve which supported the fraud. The Chinese put their wealth in Fannie Mae, just like a lot of Americans did through their 401K's. The problem was that Fannie Mae was also getting credit created by the Fed to fuel their investments. To say that the Chinese, or 401K's, or greedy investors caused the boom is like saying that Bernie Madoff's investors caused his pyramid scam. Bernie Madoff couldn't have gotten away with it for so long without gullible investors, but ultimately he is the one we should be putting in jail because he was the one running it.

If you want to blame someone for the housing fiasco, blame the Fed. If you want to find fault with the Chinese, you can blame them for outcompeting America. The United States has become bloated with waste and false activities as far as the market is concerned. We over-regulate and over-tax our businesses. Our government is draining our economy with wasteful spending and incredible borrowing to sustain an American lifestyle that is unsupportable. We discourage savings, we jerry-rig our market to allow ourselves to consume more than we produce, and we prop up investment schemes that attract money from all over the world only to implode in on themselves. We support too many lawyers because we have more laws than we need, too many accountants because of more taxes and more regulations than we need, and more investment bankers trying to make money on the great pyramid scam that is the Federal Reserve. America is ripe for the picking. The Chinese easily absorb the production we outsource, and when they've saved enough money, they will be able to purchase the companies that outsourced to them in the first place. When production has left the States, and IT has left the States, and customer service has left the States, it won't be long before middle management, finance, marketing, and eventually ownership all leave the States as well.

Our one saving grace is that the Chinese seem to be putting all their money in T-Bills and AAA-rated bonds. These so-called conservative investments are the biggest false activities of them all. When the U.S. defaults on its debt, the wealth that the Chinese have been accumulating in the States all these years will evaporate and return to Americans. Sucks for them, but it's fitting that anyone that invests in The Leviathan should lose the shirt off their back.

Thursday, January 22, 2009

Why I voted for Chuck Baldwin

Since when have Republicans argued against tax cuts?

Rep. Paul Ryan, the top Republican on the House Budget committee, argued that the main tax provision in the Democrats' plan -- cutting payroll taxes -- was not an effective way to jump-start the economy.

You can also check out some catastrophically bad economic analysis here:

Production of this aircraft is in jeopardy—and with it more than 95,000 American jobs, over $12 billion in national economic activity, and the superiority of America’s Air Force.

Don't get me wrong: I love air superiority. The problem is that our forces are already engaged in two theatres of war where our air force is almost totally useless. Whenever we use it, we turn the populations against us. If I learned anything from "Moment of Truth in Iraq", by Michael Yon, the only effective way to gain the trust of the general populace, and put an end to an insurgency, is to put troops on the ground with the civilian population. Effectively, putting troops in the most dangerous position possible. Air superiority does nothing.

I received the link to the aforementioned website from an e-mail from Townhall.com, a conservative news magazine. Supposedly, we're supposed to spend billions of dollars on fighter jets we don't use because we might go to war with the Chinese (according to the Townhall e-mail, not linked), and because spending this government money is funding "economic activity, including 95,000 American jobs. The fact that we are using 95,000 of our best and brightest and we are spending $12B to produce aircraft we don't use demonstrates what a tremendous drain on our productive resources the government really is.

Could the government employ these people to build schools, roads, and hospitals? Sure. Is that the best use of the money? No. The best use of the money, the people, and the resources would be to send them back into the free market to produce products that consumers are interested in purchasing.

The fact that our economy is struggling should not indicate that we should spend more money on frivolous activities; rather, it should indicate to us that we need all of the resources America has devoted to producing wealth, i.e. producing products that people want and are willing and able to buy. The more resources you devote to profitable activities, the faster the economy will correct itself. The more resources the government forces you to devote to frivolous activities, the longer the economy will stagnate.

Tuesday, January 13, 2009

Sunshine Patriots

"These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph."
-Thomas Paine, 1778

I hold a special disgust for those supposed free market patriots that have turned their backs on the free market in favor of government bailouts and stimulus packages. The market crucible has revealed them for what they are: water carriers for the corporate-government complex. I use the term Sunshine Patriot because the free market is synonymous with freedom, and those that protect freedom from tyranny are what we, in America, call patriots. So these so-called free market defenders are nothing more than sunshine patriots, they cave to government tyranny when freedom is most in need of defending. I cannot really say that they are inconsistent. They have consistently promoted the interests of big business and government largess. When they thought the free market supported their employers and their investments, they preached the virtues of the free market. Now that the market has revealed the unsoundness of their investments, they are crying for Big Brother's help.

"If any man builds on this foundation using gold, silver, costly stones, wood, hay or straw, his work will be shown for what it is, because the Day will bring it to light. It will be revealed with fire, and the fire will test the quality of each man's work."
-1 Corinthians 3:12-13

The free market is in the process of consuming the wood, hay, and straw that we have built our economy on in order to expose the foundation that has remained unshaken. This is a necessary and beneficial process that must be completed before we can begin to build our economy again.

Let me break this down for you again, so that no one can claim that I didn't make my voice heard.

We are in this mess because have leveraged our current consumption against our future productivity. We have spent everything we had saved. When we ran out of savings, we borrowed from others in order to spend. When the nation ran out of savings, we borrowed from the Chinese and spent. When the Chinese ran out of savings, we printed money and spent. Had the free market been functioning properly, we would have been forced to stop consuming and borrowing against our future productivity when the national savings dwindled and interest rates sky-rocketed. But interest rates never sky-rocketed because our banks were able to create more savings out of thin air by lending out $9 for every $1 they kept in the vault. Once the banks were leveraged as far as they could be, they started selling their mortgages to Fannie Mae and Freddie Mac in order to lend even more.

Housing prices sky-rocketed on rampant speculation made possible through credit expansion. Americans ran up credit card debt, and went on installment plans to buy washer/dryer combos and granite countertops. Businesses expanded to keep up with the ever increasing demand.

Like a dry California forest in the hot summer sun, our economy was ready to burst into flames from the tiniest of sparks. Then it happened. Our debt finally caught up with us. Those that had leveraged their future on the hopes that their home values or their salaries would increase were stuck with interest payments they couldn't afford.

Market reality is sweeping across this nation like a wildfire, consuming the paper fortunes that Americans had amassed around them.

The market wildfire is consuming the waste, the unproductive industries, and the false activities.

Housing prices have inflated at a much faster pace than income to the point that affordable housing has all but disappeared. Unsold overpriced homes cover the country. The market is forcing down these prices so that Americans can once again afford to own a home.

Consumers have maxed out their credit cards and exhausted their savings buying washer/dryers on installment plans. The market is forcing companies that produce products that depend on long-term financing out of business. Only the companies that produce the best products at the best values stand a chance of staying in business because Americans can no longer afford to leverage their current consumption against their future productivity. The market is working by preventing America from producing or importing any more products that we can't afford.

Banks have committed fraud by loaning money they don't really have. Investment bankers have amassed paper fortunes by pushing around stocks and bonds and using credit to run up prices, only to find their fortunes consumed in the market fire. Lawyers charge hundreds of dollars per hour to help businesses navigate through miles of government red tape. Accountants are paid premiums to find tax shelters and make sure companies are abiding by the latest bureaucratic requirements. These are all wasteful, false, and fraudulent activities that add no value to our economy but consume billions of dollars worth of productivity. The market is already in the process of exposing and consuming the waste.

How long have we complained about unaffordable housing? How long have we complained about irresponsible borrowing, bankruptcies, and America's overconsumption compared to the rest of the world? How long have we complained that America has become a nation of lawyers, accountants, and bankers that add no real value to the global economy, and all of the productive manufacturing jobs have fled the country?

The market is answering our complaints.

Should we be afraid? Yes. But not of the market. We should be afraid that the U.S. Government has so overleveraged itself that it finds itself in an inflation trap: it can't allow the dollar to strengthen and the economy to deflate, because it won't be able to pay of the debt of today using the less valuable dollars of tomorrow, and it will default on its debt, which will create a tsuname which will obliterate the world's economy; but it can't devalue the dollar any further through inflation, because it risks the hyperinflation which would result. We should also be afraid that the U.S. economy has become one massive false activity, pushing global currencies and equities around and calling it productivity and profit. Ultimately, the free market demands that every person must produce if they expect to consume; if the U.S. economy continues to make a living in the largely fraudulent financial sector, the market may very well expose the entire economy as one massive false activity and liquidate it entirely.

How can we avoid such a terrible fate? Let the market do it's work. Inventory surpluses must be liquidated. Housing prices must come down. Washer & dryers must be sold at a discount. Labor prices must drop. The American auto industry, which stopped making money on cars and started making money on financing some time ago, can no longer exist in its present form. We must pay off our debt, and increase our savings. Our productive resources must be reallocated into the industries that are producing valuable products and services that the world desires and can afford. Will our standard of living decrease? Of course! As it should! Or previous standard of living was based on borrowing against our future. That kind of living can't be prolonged indefinitely. Jobs will be lost in some sectors, but they will be replaced by new ones in profitable industries. Wages will certainly fall, but so will the cost of living. America is the wealthiest nation in the world, not just in dollar terms, but in terms of intelligence and natural resources. We can put those resources to use, but their prices must drop until the market can afford to use them. The market will make room in the other industries, primarily those that sell necessities and certain luxuries that don't depend entirely on long-term financing to make money. The waste, the fraud, the false activities, and the products we can't afford will be liquidated.

The alternative is tyranny and misery.

We can raise unemployment compensation and the minimum wage, but that will only result in higher unemployment rates, reducing productivity and consumption, cutting off a massive swathe of the population from the workforce, and draining the rest of the economy. We can tax & spend a trillion dollars improving infrastructure, but this will only drain capital and jobs from those industries that are viable and profitable. We can print the money, but that will only steal value from the nations savings, this is just more shuffling of capital and resources towards wasteful unproductive enterprises. We can borrow the money, but that will again only siphon present capital from the private sector and future capital from the taxpayers.

We cannot borrow our way out of this, we are already overleveraged. We cannot steal from profitable industries to keep the wasteful industries afloat, that will only prolong the recession and most likely turn it into a depression. We cannot consume our way out of this. We have already produced and consumed all the H3's and double ovens we can afford.

The only way out of this is to allow the market to reallocate our productive resources into the profitable and productive industries that the nation still desires and can afford to consume.

Thursday, January 08, 2009

The Flat. Tax

The EPA has floated a proposal to tax cattle and pigs in an effort to ostensibly limit green house gases. Hugh Hewitt called this the Flat. Tax on his radio show (Flat. being an abbreviation for flatulent, pronounced flatch). For years conservatives have been trying to stress how small man's contribution of greenhouse gases is in comparison to the natural world, and they have often used cow flatulence as an example of just one of the many natural contributions that makes man's effect pale in comparison. Maybe some of these conservatives are wishing they had not opened their mouth. What would have been a tongue-in-cheek remark a year ago, "What are you going to do, put a tax on cow flatulence?" has now become a potential reality.

America has become a parody of itself.

What I find interesting is that the EPA has decided to kill all the cows, but has not offered any recommendations for draining the Florida wetlands. Wetlands produce more methane than cattle, and wetlands aren't a source of food or a significant business concern. But this isn't really a war against greenhouse gas emmission, it's a war against capitalism and the enemies of environmentalism. There are myriad reasons why greens would attack the cattle industry that have nothing to do with global warming, whereas the wetlands hold a near and dear place in the hearts of all good environmentalists.

I'm not saying we SHOULD drain the wetlands, I'm just saying that the global warming propogandists are not really interested in stopping global warming, they are using global warming as leverage for the broader agenda. We could put the whole nation on nuclear energy in a generation and stop the production of greenhouse gases related to electrical energy production in a generation, but this would not advance the broader environmental agenda, so it is not considered viable.

What makes me irate, however, is that while there is not really a consensus when it comes to global warming and how it is caused, there certainly is a consensus concerning what can be done to stop it: nothing. Unless, of course, you're willing to consider the eradication of the human race a viable option. The Kyoto Protocol, as damaging as it will be to the world economy, could only produce a statistically insignificant change in the earth's temperature, indistinguishable from statistical noise. Yet we are willing to cause widespread human suffering for this statistical noise.

I can only hope that God will step in again and confuse our speech, thus preventing us from completing this tower of human pride.

Tuesday, January 06, 2009

Where does the money come from?

Gary North really knows how to bring a brother down.

"The 401(k) programs are also Ponzi schemes. They depend, not on economic growth to provide wealth, but rather new investors in the stock market. Earnings are insufficient to provide the income required to provide a comfortable retirement. After deducting fund expenses, until 2008, earnings were zero or close to it. The dream of easy retirement always rested on the sale of shares to newcomers. This is Ponzi scheme financing."

Talking heads and radio ads like to tell you how well the stock market has performed in the last x decades, and assure us that this performance will continue indefinitely. We are not supposed to think about where the money comes from. But where does it come from?

Imagine a closed economy with a hard currency and 100% reserve banking. The only money that is available to stock-brokers is the money that they are given by investers. There is only so much money in the economy, and of that money, only so much of it is saved or invested. It should be generally true then that there is only so much money in the stock market, and in order for one share to increase there must be some sort of equal and opposite reaction to allow for it. The most likely answers would be: a) that some share was sold, thus lowering the value so that some other share could be purchased, thus raising the value, or b) consumption decreased in order to allow for the increased savings/investment. Of course, we don't live in a closed economy, we don't have a hard currency, and our banks only hold 10% reserves. In that case, we have a few more options: a) the money needed to purchase the additional share could be the result of printing new money (ie inflation), thus lowering the value of the dollar, or b) the money could have been lended to the investor by a bank, which is generally the same thing as inflation, or c) the money could have come from overseas, thus increasing the wealth of the U.S. at the expense of some other nation.

Now, there's also the question of the velocity of money through the economy, but I would wager that this applies more to consumption than to savings/investment. The dollar you have in your pocket may change hands hundreds of times in a year. The more the dollar changes hands, the higher our consumption, and the higher prices could hypothetically go. But monetary velocity applies more to consumption than to savings/investment. And like all things in the economy, it has a natural tendency to find an equilibrium. Monetary velocity can't increase multiplicatively indefinitely in order to generate returns.

So what does all this mean? The diversified buy-and-hold strategy that depends on increasing share values doesn't really make sense. It shouldn't be anything more than protection against inflation, which can only be caused by increased fractional lending or money printing. Theoretically, the only way to make money in the stock market would be to pick stocks that are growing at the expense of mature or shrinking stocks, or to put money into companies that pay dividends, which is a way of getting your hands on the monetary velocity of the consumption sector of the economy.

If Gary North is right, then those of us that have 401K's or investments in general need to be much more aware of the business cycle. It will be generally true that the stock market will expand due to money-printing and credit expansion, only to contract such that share values return to their original values + inflation. Money can still be made in the stock market. But it's important not to be fooled into believing that share values will increase at the same rate indefinitely. You have to know when to get in and when to get out.

Tuesday, December 30, 2008

That's What I'm Talking About

Mike Rozeff wrote an article that articulated exactly the point I made here. Rozeff one-ups me by describing how the process inevitably progresses. Government funding leads to widespread fraud. This is an inevitable part of the human experience. We are all fallen. We are all prone to all sorts of evil. If someone puts $100 on a park bench with a note that says, "Take this $100 only if you REALLY need it, and use it for what you need," do you think that $100 will be taken by someone truly impoverished? If so, do you think it will be used for food or shelter? Of course not.

I said in a previous post that Economics is the study of how man copes with the fall. Life is tough, and work is hard. We toil against the soil which resists us, so we take advantage of every possible advantage. We do not, by nature, take the righteous path over the path of least resistance. So, if the government puts money towards some program, or some industry, without any controls, it will fall victim to fraud and waste. People, being people, will take advantage of the lack of controls, and use the money for their own personal gain. Once the fraud and waste is discovered, the government will have 2 options in order to correct the problem: withdraw the money, or increase the control mechanisms. In my opinion, it is much more likely that government will increase the control mechanisms. Depending on the extent of the controls, and the relationship between the government and the industry, the result will either be fascism (public private partnerships) or socialism (full public control).

Controls are not a bad thing. The question is, who determines them? Free people making free decisions, or the government? The question should be rhetorical. The free market is far and away a better system of controls. It is more ethical and it serves the desires of the people more efficiently. Government control is funded through extortion and, being made up of fallen people, is predisposed to service itself and special interests, any attempts to service the desires of the people come after the desires of the bureaucrats and the politically connected.

Friday, December 26, 2008

Freedom isn't Free

That some so-called conservatives are now backing away from the free market because it doesn't seem to be working right now is not a blemish on the free market, it is the result of a trial by fire which has brought to the surface the lack of character of those that espouse the free market when their portfolios are rising.

For the record: the free market doesn't fail.

That's like saying love failed, or freedom failed, or justice failed.

Is the free market perfect?

Define perfect.

Freedom is it's own goal. Freedom is not a means to an end. The objective of the free market is not to make people wealthy. The objective of the free market is not to grow the economy. The objective of the free market is not to improve people's standards of living.

The purpose of the free market is to be free.

There are, of course, indirect costs and benefits to freedom. The benefits are numerous and obvious. Freedom is the surest path towards the greatest prosperity.

Those that believe that the free market failed are suffering from their own failure to understand the merits of freedom and the reality of the world in which we live.

The reality is that we are not even living in a free market. I grant that freedom will produce casualties, just like any other tactic used by man to cope with the fall (the study of which I like to call economics). Freedom does not undo the damage caused by the fruit of the tree of knowledge of good and evil. However, I will not accept the premise that America is a free market.

Society in America is heavily regulated. Freedom is fenced in on all sides. We are free to do, to produce, and to purchase whatever we wish, so long as we abide by certain rules and regulations. Many of these rules and regulations are forms of social engineering and socialism meant to try to fix the problems with the free market.

The attempts to create an ownership society, an attempt to undo the fall rather than cope with it, have instead produced an impoverished society. The attempts to artificially stimulate growth have produced a recession.

The free market continued to operate to some extent, within it's neat little framework. It did exactly as it would be expected to do, and it met it's objective of being as free as it can within the constraints.

It is the meddlers who failed. It was their goal to rig the system to produce a society that is safer, wealthier, more equal, and more prosperous. It is they who have failed, and the reasons are obvious. The world is too complex a place to be governed by bureaucrats. It is only free people living in a free society that can cope with the complexities and the difficulties that have resulted from the fall.

Is it perfect? Again, I ask you to define perfect? If you are unable, then I will give you my definition. Perfect freedom will occur when all people make perfectly free choices with perfect knowledge that do not infringe upon the freedoms of others. When this perfect freedom is combined with perfect justice, perfect mercy, and perfect love, you will have a perfect society.

If this is the perfection you seek, then you will only find it in the Kingdom of God.

Monday, December 22, 2008

Supply & Demand

The last time I checked, resources were still finite, and human desire is still insatiable. Since that is the case, for what reason do we believe that the market will be unable to reallocate the liquidated assets of the Big 3 U.S. automakers?

The Big 3 is going bankrupt, but people still want to buy cars, and we still have the resources to build cars. The problem we have today is that the Big 3 are spending too much money to build cars that people either don't want or aren't willing to pay for given the alternatives. This is not an "end of the world" kind of problem like if we just sucked the last drop of oil out of the earth. This is about allocating our vast resources to properly satisfy our seemingly infinite demand for stuff. The real danger here is not what will happen if the Big 3 goes under, the real danger is the fact that the Big 3 is wasting our precious finite resources, and bailing them out will only prolong the waste.

As long as people still want things that they don't have there will always be something productive for people to do. If the Big 3 are wasting our time, talents, and resources building cars that don't serve the wants of the people, then it is appropriate that they be liquidated so that the labor, talents, skills, and resources can be put to use making things that people want more.

The only thing that stands in the way is government bailouts and unemployment benefits. The market will always reallocate resources to put them to productive use, but the market is hamstrung when the government prints money to pay people to stay home. This printed money is worthless, but since we all use it, every dollar they print to keep the Big 3 in business or pay for workers to stay home steals wealth from every other dollar in the economy. So our savings is worth less and less in terms of real goods that can be purchased with it and all we get in return are crappy cars that nobody wants.

Failure puts downward pressure on prices (making our savings worth more and more), which makes purchasing the liquidated assets in order to put them to more productive use cheaper and cheaper. Propping up failing enterprises makes recovery more expensive and it eats away at our savings, therefore making recovery twice as difficult. Allowing these enterprises to go under makes the recovery process cheaper and it strengthens existing savings, therefore making recovery twice as easy.

Thursday, December 18, 2008

Juries

Let's say you get called for jury duty. Let's also say that the accused was arrested for evangelising in a public place without a license. A law was recently passed which restricted proselytizing on public property without a permit, and the accused was found to be handing out fliers and asking people if they wished to take spiritual surveys.

You are shocked to learn that such a law even existed and believe that it is terribly unfair and is in direct contradiction with the 1st Amendment, but when it is your turn to be interviewed, the judge asks you the following question, "If it is demonstrated that the accused was indeed handing out fliers of a religious nature and asking people to take surveys, also of a religious nature, and that the accused was doing so without a permit as required by law, would you be prepared to render a guilty verdict and sentence the man to the minimum 12 months in prison?" What would you say? What would you be thinking?

Let's say that you answer, "Yes, I would be willing to render a guilty verdict," and you are put on the jury. During the trial you are instructed by the judge that your job is to render a verdict on the facts only, that it is your job to determine whether or not the accused was evangelising, and whether or not he was doing so without a permit, and that it is not your job to determine whether the law is just or fair, it is only to determine whether the law as it is written was broken.

Based on the witnesses and the writing of the law it is clear that the accused was in direct violation of the law against evangelising. What would you do? Would you follow the judges direction? After all, you were specifically instructed that your only role in this matter is to determine the facts, and the facts are obvious: the law is written plainly, and the accused was clearly in violation of the law. Would you return a guilty verdict?

The case I just described is pretty similar to a the case brought against William Penn for preaching a Quaker sermon before an assembly in the street. The judge in the case attempted to force the jury to render a guilty verdict without even hearing the defense. When the jury refused, they were sequestered several nights in jail cells where they were told to rethink their verdict. The jury stood firm, and refused to render a guilty verdict even though the law was clear, and William Penn had plainly and openly violated the law.

This process is called jury nullification, and it's built into the jury system, although most jurors don't realize it. Since the judge cannot force a juror to render a particular verdict, and cannot punish a juror for how the verdict was determined, a juror is able to render a verdict of "not guilty" for pretty much any reason they find acceptable.

Aside from William Penn's case, jury nullification was also commonly used to nullify the Fugitive Slave Act. Enough Northerners thought the law was an abomination that it was very difficult to get a conviction. There were enough citizens of conscience that even when slaves were caught, and those harboring them were brought before the court, the juries would not convict them.

Unfortunately, jury nullification has fallen out of favor in the U.S. Juries are selected based on whether they will apply the law as it is written, regardless of whether they agree with it or not, jurors discovered to be intent on practicing their power of nullification are often removed, and defense attorneys are often prevented from informing juries of their nullification powers or imploring them to exercise their power.

It had never occurred to me that jurors had this ability. I had always operated under the assumption that juries "have" to render a verdict based on the facts, and it is up to the judges to determine whether the law is just or not. But the reality is that the courts cannot force the juries to abide by any particular instruction, and once a "not guilty" verdict has been rendered the question cannot be raised again. So juries certainly have the power, although many judges may attempt to remove those jurors intent on exercising that power.

I would also argue that jurors have the right to exercise their power of nullification, that they have the moral obligation to do so when the law is repugnant, and that a jury cannot be considered "impartial" if it is screened for jurors that may not agree with the law in question.

Wednesday, December 17, 2008

What's the Fed to do?

The Fed has cut rates to .25%. About as close to zero as you can get. If this doesn't work, the Fed won't have too many more cards to play, outside of coordinating printing money with the Treasury. The Japanese had a similar problem in the 80's and 90's. They dropped rates to 0%, but it didn't work, and then they found that there was nothing else they could do to try to stimulate growth. None of the bureaucrats clever schemes were able to lift Japan out of their economic malaise. Why do we think it will work here?

Once again, the problem is that we are malinvested. We have put too much money into enterprises that are not profitable, and the entire economy is overextended in terms of debt. Putting ourselves deeper into debt is not going to help. Destroying the U.S. Dollar is not going to help either.

The Fed is in a bind because they are pumping as much money into the economy as they possibly can in order to get banks to start lending again, but if the banks start lending again, the multiplicative effect of the reserve system will cause hyperinflation. Doesn't make sense? Here's the long explanation. Banks typically only hold 1 dollar for every 10 they lend. This is called the reserve requirement. In good times, banks extend themselves to the limit because they are experiencing good returns on their money. When things turn south, banks contract, they hold more in reserves in order to prevent failure. This is why oil has come down and the dollar has strengthened, even though the treasury has committed to flooding the market with trillions of dollars and the Fed rate is near zero. Analysts are perplexed, because they can't understand how printing money can result in a stronger dollar. The answer lies in the banking system. Banks are lending less, which shrinks the money supply.

So, what happens when things start to turn around, and banks start lending again? BOOM! When banks multiply the amount of money in the economy by a factor of 10, economic activity will explode, but so will prices. This may be great for hedge fund managers in the short-term, but ultimately a much worse recession will follow because the marginal increase in activity is not supportable or desirable because ultimately when people try to retrieve the money in their banks in order to pay for all these new goods and services, they will find that their money isn't there.

Remember, the stated goal all along has been to get housing prices back up, right? The market has already determined that running up the price of housing was a huge mistake, and 2 bedroom condo's are not really worth a $200,000. Rather than allowing the housing market to return to some sane level that will actually allow renters to purchase a home, the powers that be are making great efforts to try to help speculaters and home-owners make a killing on their homes. For some reason our elected officials think that it is good if home values double every 5 years and completely ignore the massive portion of the population that will not be able to afford these inflated prices. Somehow they are able to wring their hands about making houses affordable for the less fortunate and get away with it, which is beyond me.

The real solution is as plain as the nose on your face. Reduce the government's meddlesome influence on our economy. Fix reserve requirements at 100% and return honesty and integrity to the financial system. There is no other solution. Throwing paper at the problem will not work. It defies logic to believe that printing little green slips of paper is going to resurrect our economy.

Monday, December 15, 2008

Bailouts lead to socialism

I liked this article, I especially liked the graphic.

Here's one of the often overlooked problems with socialism: there is no diversity. When citizens are expected to save for their own retirement, some make good decisions, and some make bad decisions. When bureaucrats decide that the government should take the citizens money and save it for them, there is no diversity. If the government is responsible, everyone wins. If the government squanders the money, everyone loses. Since the government is not known for being responsible, it should not be surprising that everyone will most likely lose.

Here's a hypothetical. Let's say the government has socialized health care. The bureaucrats realize they are spending lots of money on treatment for breast cancer. Being smart bureaucrats, they know that early detection is the best way to fight breast cancer, so they mandate that every woman over 35 must get a mammogram every year. That way they will be able to catch breast cancer early, and treatments will be less expensive. So, every woman in the U.S. over 35 gets a mammogram every year, and the breast cancer rate surges. What happened? Well, some researchers are now linking mammograms to breast cancer. Since there is no diversity, the wrong decisions of the bureaucrats negatively impact everyone.

It is also inevitable that the government will be more intrusive when it is more financially invested in our lives. If the government is paying for insulin for diabetics they will try to stop people from drinking soda and eating fast food. Some bureaucrats may try a patriarchal approach to nudge you in the right direction, and others may try heavy handed approaches. But it is an unavoidable reality that the more the government controls, the more financially invested they are in our decisions, the more the government will want to control or limit our decision-making. They might want to control our decisions to reduce costs, to save the environment, to help the poor, or to get into better shape. Almost all of it will have good intentions, but if the ends do not justify the means, then certainly the pursuit of the ends shouldn't justify the means either.

Wednesday, December 10, 2008

Corruption

The Governor of Illinois, Rod R. Blagojevich, was recently arrested. The most brazen and craven amongst the Governor's alleged acts of avarice were as follows:


-He attempted to stop the flow of funds to Children's Memorial Hospital because he did not receive a contribution of $50,000 to his campaign fund from the CEO of CMH.


-The Tribune Company has been trying to sell the Chicago Cubs, but Wrigley Field is in poor shape and would need to be renovated, which is slowing down the sale because it's a considerable financial obligation and renovation is really the only option that Cub fans will accept; replacement is not an option. The Tribune Co. approached the state in an attempt to sell the stadium, and Blagojevich used that potential purchase as leverage to try to get several editorialists that were outspoken in their criticism of the governor fired.


-Governor Blagojevich has the sole responsbility for finding a replacement for President Elect Barak Obama's vacated Senate seat. This has been the number one news item in Illinois for the past several weeks, and according to prosecutors, Gov. Blagojevich was trying to auction off the Senate seat to the highest bidder behind the scenes.


The big question on everyone's lips and minds the last few days has been: how can we stop corruption? When will it end? What can we do? What is the solution?


To be perfectly honest, the solution is obvious, but very few people are really willing to address the issue at the core. Most pundits and editorialists are talking about ousting the entrenched and corrupt politicians that always seem to be at the root of scandals. Some are talking about oversight. Others are talking about campaign finance reform. While these are all reasonable ideas, they are all superficial attempts to fight the symptoms of a much larger problem: the government has too much power.


The whole premise behind government corruption is that the power and the authority of the government is being bought at a price by special interests, the powerful, and the privileged. Reduce the government's ability to reward friends and penalize enemies and corruption will diminish.

The problem with Blagojevich and the rest of the stinking cesspool of Illinois politics is that our leaders are willing to put their power on the auction block and sell it to the highest bidder. Instead of trying to stop the auction, we should focus on taking away their power. The less power that politicians have, the less they will be able to sell it. Any other "solutions" will be vain attempts like trying to keep water from flowing downhill.

Friday, November 21, 2008

The Culture War - Illegal Immigration

If you read my first two parts on the culture war, then I you probably know exactly what I'm about to write. You probably know so well that you could write the article yourself.


After "the economy", and "the war on terror", illegal immigration is often cited as the most important issue on voters minds. As always, there are various groups that are interested in this issue for different reasons, they have different concerns, different solutions, or different reasons for the same solutions.


There are basically two issues being debated. How "open" should our borders be? What should we do with people that broke the law to get here?


I include this to the list of issues related to the "culture war" because many believe that American culture and traditions are at stake. Many claim that those that are immigrating here are not learning our language or our customs and are forcing American culture to adjust to their presence.


Again, I believe this divisive issue is further aggravated by the government's role in our culture.

If you are vehemently opposed to illegal immigration, let me ask you this: How would you feel about illegal immigration if every person who came here illegally were barred from sending their kids to public schools, and had to pay out of pocket for their health expenses?

The reason that so many people harbor such animosity towards illegal immigrants is because they are taking advantage of all sorts of government services and benefits that the American Taxpayer is paying for. I also believe that this is one of the reasons America (and other Western countries) are so attractive to people from emerging economies. Not only are there jobs in America, there are also free schools and free health services.

It's not surprising that this creates hostility. American workers are taxed to pay for schools, roads, hospitals, medicare, the military, and everything else. They can't afford to charge lower labor rates because they have to pay for America's government infrastructure. Illegal immigrants can afford to charge less because they are often times avoiding these additional costs. So, it should not be surprising that Americans can be found to be upset that not only are they paying for services for illegal immigrants, they are also losing their jobs to them because illegal immigrants can undercut their prices.

The "problem", however, is not the immigrants that are searching for a better life. The problem is that we have made a number of resources "public goods", and this has resulted in over-consumption. Not only is the American taxpayer over-consuming, we are also attracting outsiders to the feeding trough.

The problem is free-riding, and it's not a cultural problem, it's an economic problem. The solution is to get rid of all government services as well as income taxes. Then all workers will be competing on an equal playing field. It is unlikely that those that don't want to learn the language or assimilate into the culture will find many opportunities here, because their competitive advantage (lower labor prices) will have evaporated. Those that still wish to come here and succeed will not be met with the same resentment because they will not be viewed as free-riders.

Is this solution palatable to American culture? Of course not, but it's still valuable to know what the real problem is, who is at fault, and what the real solution is. Once again, the problem relates to market distortions caused by the government which have resulted in cultural conflicts, and the solution is removing the governments influence.

Tuesday, November 18, 2008

Culture War - the Marriage Debate

It is undeniable that a national dialogue (I hate that word so much) is taking place concerning the definition of marriage. Of course, I shouldn't really call it a dialogue, because there isn't really much dialogue going on. There is a lot of monologuing. There is a lot of yelling. There is a lot of spending (like $70+ million trying to pass / defeat proposition 8 in California).


Why is this? Why are we committing such tremendous resources on both sides of this issue? Those on the left may say that they are fighting for a homosexuals right to marry the person they love. Those on the right may say they are fighting to protect the traditional definition of marriage. They are both lying.


There are thousands of churches around the country that would be happy to perform a marriage ceremony for a homosexual couple. There are no protests outside these churches (at least not that make the news). Homosexuals are not blocked from the marriage ceremony, and those that are supposedly opposing "same-sex marriage" make no effort to try to stop them. The battle is not over the culture. There are sub-cultures on both sides of this divisive issue that co-exist in peace. While there are always those that would wish to blot all other sub-cultures from the face of the earth, the reality is that we get along fairly well.


If not for the government.


The battle is not so much over the culture as it is over control of the state's power apparatus. Changing the state's position on this issue will have major repercussions throughout the culture.

There are two valid claims in this debate. There are those that want a same-sex relationship to have the same recognition, rights, responsibilities, and benefits as a traditional relationship. There argument is that they are forced to support an legal institution that they have no access to. Then there are those that do not want to recognize same-sex marriage because of the potential impact that will have on the rest of the governments involvement in culture. For instance, a Catholic charity operating in New England was forced to close its doors because they refused to offer their adoption services to same-sex partners. Legal recognition of marriage is viewed by many to be a stepping stone towards enacting and enforcing anti-discrimination laws that would prevent a massive portion of our society from living and acting according to their values and religious beliefs.

The problem here is that since the government has taken it upon itself to provide countless benefits and services, and through regulation is constantly involved in social engineering, the idea of protecting "Civil Rights" has become a zero-sum equation that usually involves giving one person a "right" to some service or benefit, by taking away another person's right to their property. We no longer consider rights something that need to be protected; rather, we use the term to also refer to various privileges that we believe are important. It is one thing to protect a man's cupboard from being emptied in a robbery, it is another thing entirely to fill his cupboard by robbing someone else's.

So, if we take a classic view of our civil rights, what can we conclude regarding same-sex marriage? Regarding the protections that marriage offers, I see no reason why any person, whether they desire to enter into a same-sex marriage or a traditional marriage, should be denied the legal protections that a contract allows. If two people want to establish co-ownership of their property, they should be free to do so. If two people want to establish co-guardianship over any children, be they biological or adopted, they should be free to do so. If two people want to will their possessions to the other and establish one another as executors of their estates with power of attorney and the power to make decisions in the case of one of the people being put on life-support, then they should be free to do that. I see no reason why this contract should have a different name for homosexuals than it does for heterosexuals. However, when it comes to benefits, the government really has no right to establish benefits for those that are married, be they heterosexual or homosexual, to be paid for by those that are not. The government also has no right to force businesses, churches, or private organizations to treat married or unmarried people a certain way, whether they be homosexual or heterosexual. That means that no business or health insurance provider should be forced to offer benefits to people based entirely on their relationship, legal or otherwise, to the customer/employee. If you want to buy health insurance for a spouse, a child, a sibling, a friend, or a stranger, you should be entitled to do so, but you should not be entitled to receive some kind of discount.

Once again, we see that the problem is not that the culture is at war. The problem is that the government is actively involved in robbing and oppressing us, and that we are all pitted one against the other to determine who is the one that is robbed and who is the one that receives the spoils, who is the one that is oppressed and who is the oppressor. We are all faced with a decision: either we allow ourselves to be oppressed, or we fight to become an oppressor. Unfortunately, it seems that the government knows no other way.

Culture War

I have come to the conclusion that the culture war exists because of the government. You can add this to the already lengthy list of things I blame on the government.


The reality is, however, that it's not for malicious reasons that the government is provoking the culture war. In most cases the government is just trying to do what they can to make life a little bit better in the U.S. In this case, the voting public has decided that it is in the so-called public interest for everyone to receive an education up to age 16. Certainly, everyone would agree that education is a good thing, and a well-educated society will be better in many respects, although I do not agree with the education ideologues that believe that through proper education we will somehow be able to cleanse the world of all it's woes. The problem is that the voting public left it up to the government to do the educating. This is, of course, the natural course of things. The government is naturally predisposed to assume more and more control. After all, if they are paying for it, certainly the government should have a say in what the curriculum is, what standards are used, etc., etc. Ultimately, the government assumes complete control of any system it is expected to subsidize, which is why I am generally opposed to government subsidies of all the things I like. This is where the culture war begins. What curriculum will the government teach that will please all the parents? What will the discipline standards be? What will be the methods?


While the free market can be extraordinarily flexible in meeting the demands of parents, primarily by creating more schools that cater to specific demographics. The government seems pre-disposed to provide a one-size-fits-all solution with only subtle deviations. Add to this the inflexibility which results from various court cases, referendums, and certain interpretations of the constitution, and you have an extraordinarily rigid structure that can only be controlled from the top down. So, if a parent is displeased with the curriculum, or the discipline standards, they hire the ACLU or the ADF (depending on your cultural and political background) to represent them in a court battle to change the entire national public school system. Does that seem a little heavy-handed? I think so, too. But what other choice does the parent have? Talk to the school board, they will probably tell them that they are legally obliged to follow xyz federal requirements, and they are helpless to assist the parent. So, while the parent has other options (like move, send the kid to a private school, or homeschool), the only way to change the school that your child is already attending in any meaningful way is to change the whole system.


It is because the government runs the schools that we have such heated debates over whether or not prayer should be allowed, or any mention of God, or sex education classes, or courses on global warming, or evolution. The reality is, that many people are engaged in the so-called culture war because they do not feel like they have the option to send their kid someplace else.


Of course, there are others that simply don't like the current state of things. These people are always determined to ramrod (this is one of my favorite words, an oldie but a goodie) their beliefs down everyone's throat regardless how the anyone else feels about it. These people exist on the left and the right in seemingly equal proportions. While these little tyrants and fascists are certainly a problem, the surest way to strike a death blow against them is to remove the apparatus they most often use against the cause of liberty: the government.

Tuesday, November 11, 2008

Republicans should move left? Or is it right?

Here were my promises from the previous post:

"Next post I'll talk about why the GOP should return to some of its Goldwater roots. I'll also explain why I think this will win some independents, some Democrats, and how this will resonate, in some respects, with many evangelicals. I will also explain how the GOP can spin this to the evangelical base in order to retain it, and why the evangelical base should embrace the move as more in keeping with their commissions as followers of Christ."

Wow. Did I promise all that. Alright, here goes:

By "Goldwater Roots", I mean small unintrusive government. In a nutshell: libertarianism. Every conservative would rally behind a Republican candidate that really supported fiscal discipline (lower taxes and less spending), so I'm not going to go into that. The question is, how would the country respond to a GOP that moved left (or is it right?) on social issues? Especially since this has been the GOP's bread and butter as of late.

When it comes to the culture war, I believe that conservatives are primarily motivated by one thing: they want to be left to live as they see fit and raise their children as they see fit. If, however, the government is intent on running their lives and raising their children, then it darn well better do it the same way they would. For example, If parents can't afford to send their children to Christian schools because they are already paying thousands of dollars a year to fund the sub-par public school, then that public school better be teaching them in a way that is consistent with their beliefs.

I believe that conservatives are proponents of "either/or" when it comes to politics. "Either you let me live my life as I see fit, or you bend the system to suit my preferences". Since the government is determined to provide a one-size-fits-all government sponsored solution to all of life's problems, then conservatives will always be forced to fight so that "one-size" fits their beliefs.

The GOP ought to be the party that seeks to empower the individual. While I do not think that the GOP should change it's positioning on the issue of abortion (since this would still be considered an issue of personal freedom on behalf of the unborn), there are a number of issues where the GOP is unnecessarily cornering itself: homosexual marriage, pornography, drug use, flag burning, prostitution, public school curriculum, and capital punishment. I believe that a lot of conservatives would be willing to concede on some of these issues if the government reduced its role in the lives of Americans and made them free and responsible unto themselves. In this way I do not believe that the GOP would necessarily lose its base, so long as it aggressively pursued the cause of freedom and reduced the size and scope of government interference.

I think it is obvious that the GOP would also pick up more self-described libertarians that currently call themselves independents or Democrats.

On to the last point: evangelical Christians. I believe that more evangelicals ought to be putting their hope and faith in Christ and the church, and not in the United States Government. The only tool the US Government has at it's disposal is the sword. It's revenues are supplied through extortion. It's laws are carried out through violence. If it is unacceptable for the church to pursue it's ends through violence and extortion, why is it deemed acceptable to outsource it to the government. If the church cannot convince enough congregants to donate to a food drive, and it is not acceptable to hire goons to break kneecaps in order to cover the shortfall, why would it be acceptable for Christians to support the U.S. Government to do the same? It would be universally condemned if Presbyterians tried to restrain Episcopals from blessing same-sex marriages, so why is it acceptable to try to restrain a judge from issuing a civil union? Isn't a marriage proclaimed in God's name more important than a marriage proclaimed in the name of the state? The duty, as I see it, of the church, is to offer the Kingdom of God as a spiritual alternative to the present authorities of this world, not to ramrod our beliefs down the throats of the public using the present authorities.

Obviously, I'm not able to explain a position on every contentious issue in America's culture war with a couple of rhetorical questions. Each would require a post in and of itself. However, I will say that as Christians I believe we should pursue the course of freedom whenever and wherever possible lest we give the state the very power which they one day use to restrain us. It would be better, in my opinion, to champion the cause of freedom, to uphold the virtues of Christ, and lose the culture war than it would be to win the culture war using the sword of the state. The sword of the state ought to be reserved for administering justice, for protecting freedom and property, for preventing harm, and for punishing those that have harmed others. To put it simply, the state ought to enforce the negative aspect of the Golden Rule: "Do not do unto others as you would not have them do unto you". The role of the church is to carry out the positive aspect of the Golden Rule ("Do unto others as you would have them do unto you") while obeying the negative.

Monday, November 10, 2008

Only Elitists use Latin Phrases

I think this idea is double plus good.

Republicanism is broken

As evidenced by the last two elections, Republicanism is broken. It should come as no surprise that the conservative elements of the American public did not rally around the elephant these last two election cycles. They have nothing to offer independents and moderates other than, "We're not as crazy as the Democrats," and they have completely let down their base by setting back the conservative agenda of smaller government by several decades. Many conservatives, including myself, have been asking the question, "Are they really interested in the kind of radical reform this country needs?" I don't think so. The problem with the Republican Party from the perspective of the base is that they aren't willing to do anything more than tinker with the system, whereas the base is looking for a complete overhaul. Considering the increase in the total dollars spent by the government, the increase in the percentage of GDP that government spending represents, and the increases in legislation that are passed every year, tinkering is not a solution to the rampant increase in the government's drain on society (in terms of economics, culture, and freedom).

Obviously, those in favor of an increase in the role of the government in our daily lives will find nothing attractive about the GOP, other than the fact that they don't really live up to their stated values. Of course, when the GOP does pass measures that would generally be considered "liberal", the Democratic base takes no notice because, like most people, they are prone to ignore the faults of their own and the strengths of their opponents.

The GOP is like luke warm water these days, and it is a forgone conclusion that the American voter will spit them out. So, what can they do?

Next post I'll talk about why the GOP should return to some of its Goldwater roots. I'll also explain why I think this will win some independents, some Democrats, and how this will resonate, in some respects, with many evangelicals. I will also explain how the GOP can spin this to the evangelical base in order to retain it, and why the evangelical base should embrace the move as more in keeping with their commissions as followers of Christ.

Friday, November 07, 2008

Carbon Dioxide a dangerous pollutant?

I don't know how I missed this, but I scarcely have words to describe what I'm thinking right now.

The first thing that came to mind was "The Hitchhikers Guide to the Galaxy". Actually, I'm thinking of the second book in the series, "The Restaurant at the End of the Universe". After using an unguided teleporter Ford Prefect and Arthur Dent end up stranded on prehistoric Earth with a group of alien settlers, the Golgofrinchans. These particular Golgafrinchans were exiled on planet Earth by their fellow Golgafrinchans back home because of their utter uselessness to society. Upon landing on planet Earth, instead of focusing on the essentials for survival, they spend their time making war on uninhabited continents and trying to find a hot spring and a soap mine so that their leader can take a hot bath. The pinnacle of their acheivements, however, have to do with their monetary policies. By establishing the leaf as their currency they all become very rich, but this wealth is quickly tempered by a bit of an inflation problem. Since the inflation problem is caused by the seemingly endless supply of leaves, they decide to reduce the supply of leaves by burning down all the forests.

A dangerous pollutant? Really? Are we really going to make war on the air that the plants and trees breathe?

While I can understand the concern (although I believe it's an unfounded concern) that increased CO2 levels are warming our planet, I think it's important to retain at least some semblence of sanity in how we address this problem. Declaring a compound that is critical to the preservation of life on this planet a "dangerous pollutant", is not an example of retaining sanity.

I haven't even MENTIONED the massive increase in potential government power this is. Can you imagine the potential for bullying and for favoring certain special interests by changing the CO2 regulations particular to that industry or even that singular organization? Whoever controls the bureaucracy that monitors and enforces CO2 regulations rules the world.

In my continued efforts to keep a positive non-partisan attitude, I will wait and see whether President Elect Obama is serious, or just pandering to his radical base.

Thursday, November 06, 2008

The Fairness Doctrine

Of all the things that Obama could do in his administration, I honestly think the one that would make me the most visibly angry is the reanimation of "The Fairness Doctrine". If for no other reason it will ruin my commute.

Like most Americans, I commute to and from work every day. It takes me about 40 minutes to get to work, and about 40 minutes to get back. I spend most of that time listening to news talk radio. It's the only thing that makes my commute bareable.

If the fairness doctrine were reinstituted, the massive influx of lawsuits again CBS, NBC, ABC, Clear Channel, and Salem Radio Network would all but illiminate any interesting discussion on talk radio and make my commute totally unbareable. I would be forced to by a satellite radio, and write obnoxious letters to Senator Dick Durbin every single day, reminding him of how terrible my drive home is, and how the 80 minutes a day I spend getting angry at traffic and the government is only succeeding in ruining my physical and mental health.

The fact that some 47% of Americans actually support this travesty against free speech is a massive disappointment to me. The fact that our country has been so duped into letting go of personal freedom without receiving anything in return other than the temporary satisfaction that they "stuck it to Rush" appalls me, but unfortunately it doesn't really surprise me.

That the supposed party of civil rights would so overwhelmingly support this authoritarian control over the most basic and critical right to speak one's mind without fear of retribution is also appalling, but again, not altogether surprising.

For me, the primary problem with the fairness doctrine is not in how it is implemented, but the mere fact that the government would be given such significant power that can be so easily abused. Do we really trust our government's various beauracracies to decide what is fair and what is not? Do we really trust our government not to attempt to expand that power to protect its own interests? Do we trust the government to limit itself to political discourse? What would stop the FCC from forcing Christian radio stations to offer equal air time to opposing religious theologies? What would stop the FCC from demanding that "sleezy" talk shows give equal time to moralists to condemn immoral behavior and remind the audience of the negative consequences that can result from irresponsible behavior? Even if such checks and balances are in place today, what guarantee do we have that they will remain in place? It seems to me that the only genuine response is, "I don't think they would never do that," which is not enough reassurance for me.

If the reason for reanimating the Fairness Doctrine is the fear that the consolidation of corporate power will result in a loss of free discourse, how can a further consolidation of power in the hands of the government be the solution? I presume that few people see how the one hand washes the other in this case. The Fairness Doctrine not only stifles free speech, it stifles competition. It protects the entrenched corporate interests, which is really the only thing that the government seems to do well. If all radio stations are effectively the same, then it is impossible to enter the marketplace with something different, because different has been effectively outlawed.

If the government wanted to do something about freeing up discourse on the air waves, it should examine whether current regulation protects established inerests or not. Lowering the barriers to entry is a far better way to promote free discourse on the air waves. Reducing protectionist legislation and corporate welfare is a far better way to reduce the consolidation of corporate power.

Here's my last point. While corporate power can be tyrannical, it is much more difficult for corporate entities to exercise full control over an entire medium than it is for the government. The government responds to the tyranny of democracy. If 51% of the public demand that Rush Limbaugh be driven off the airwaves, then he very well may be driven off. When it comes to the marketplace, however, 10% of the market share is all it takes (if not a good deal less) to make opposing viewpoints heard. The marketplace does not have to cater to the majority at the expense of the minority. The government, however, is much more easily bound by the tyranny of the majority.

Wednesday, November 05, 2008

What should Obama do?

While Obama has talked a good game about universal health care and spreading the wealth and a number of other things, none of that is really possible right now. With what money is he going to expand Medicare? The economy is in shambles and the government is totally insolvent. There is a halfway decent chance that we will default on Social Security, and there's a halfway decent chance that states around the country may default on their pension programs. So how, exactly, will we also be able to afford all this "change" when that's pretty much all we have left: spare change.


So, my advice to Obama is to forget all this socialist nonsense he learned on the South Side and focus on the following:

1) Cut spending. By drastically reducing the size of the Federal Government we will be freeing up all sorts of capital that will then be available to private enterprises that provide goods and services that people want.

2) Cut taxes. While a complete overall of the tax system is in order (I would probably favor an income/sales tax split). A good start would be to get rid of those taxes that discourage savings (which we are in desperate need of): capital gains tax, corporate taxes, and estate taxes.

3) Reduce government regulation and interference in the economy. It costs money to abide by legislation, getting rid of unproductive legislation and regulations are a great way to streamline the economy.

4) Sign more free trade agreements. We import more than we export, and that includes raw materials to be used in the production of finished goods in the U.S. Tariff's benefit labor unions with established contracts at the expense of employment and the standard of living of the rest of the country.

Will President Elect Obama follow any of this advice? I'm not sure. While it seems unlikely that a Democratic President, Senate, and House of Representatives would entertain cutting spending and cutting taxes, it's not out of the realm of possibility. For all the hot rhetoric coming from the Democratic Party these past 8 years, how much of it was really honest, and how much of it was stalling so that they could pass the same measure with a different name once they took control so that they could take credit for it? That's the reality of the two-party system. They call a free trade agreement a travesty against the American work force when "W" presents it, then they call it genius when Obama presents it. They say that Social Security is bankrupt, then they say it's fine. They say we don't have enough troops, then they say more troops is an escalation. It's not as much about the policy as it is who is in charge.

So, who knows what will happen? I can only say this: those that intentionally run the country into the ground just so they can take credit for passing the same measures to fix the country they once opposed deserve a special place in hell. That being said, I will make every effort to put aside my general disgust for the Democratic Party and get behind Obama & Co if they propose any legislation that I think will promote greater freedom and prosperity in this nation or the world.

Wednesday, October 22, 2008

A Dollar Bubble?

This is never explained in depth in the media because 99% of the population doesn't understand how this works. I don't fully understand how it works, but I know enough to be dangerous.


This past week the dollar has been making a huge rally. You can always tell when the dollar is making a rally because gas prices go down. The question that is plaguing many market experts is, "How?" The Fed has dropped interest rates, bought bad debt, and injected cash into the financial sector. All of this spells inflation, which always leads to a weak dollar. So why is the dollar so bullish?


In the first place, stocks are in the crapper, commodities are sliding, and the only safe place to put your savings is in a shoebox under the mattress, or government bonds. Foreign governments are also concerned about their investments, because the purchasing power of the United States drives their export business. Many governments intentionally keep their own currencies undervalued and invest in dollars in order to prop up U.S. purchasing power. When U.S. consumers are buying, their factories are working overtime. For some reason they don't think this will catch up with them. That's what's happening today. The printing presses of the world are running in order purchase U.S. Dollars (our printing presses are running to keep up with the demand) so that these nations can buy government bonds. In case you weren't aware, I don't believe you can buy government bonds in Euros. You can only buy them in dollars.


So, in these troubled times, the only safe place to put your nest egg seems to be in U.S. Government Bonds, and the only way to buy those bonds is to convert your own currency for dollars. Additionally, the only way to keep the factories running, is to increase the purchasing power of the dollar, which means buying more dollars and purchasing more government bonds.


It's crazy, isn't it? It can't possibly work, can it? If you're thinking this is a global Ponzi scheme, you're right. There is a great video on YouTube that explains how this works.

So when will the proverbial "other shoe" drop? Well, it might happen when all of this new money is spent in the U.S., or it might happen when all of this debt is due. It might be both. We may experience a rather painful correction in the next year when all of this new money floods the market, creating more bad investments & speculation and running up the price of gas. With all that behind us we may still find that the worst is yet to come when the U.S. government has to come up with $10 trillion dollars (or whatever ungodly amount it will eventually be) to pay off all of the foreign debt it owes.

Monday, October 20, 2008

Joe the "Plumber"

Oh, no! He doesn't have a license? What's this?! He owes property taxes? This scurge against humanity ought to be thrown in prison and never let out.

I love Rockwell's take on this: requiring a license to be a plumber is a violation of free association, and taxing property is a violation private property rights.

Wednesday, October 15, 2008

Can you hear that sucking sound?

A week ago, I posted an article about Larry Burkett, who was a very sound Christian financial counselor who was criticised for going overboard on Y2K. This week I'm posting an article by economist Gary North, another Christian who many consider to be a little too preoccupied with the end of the world. North runs a website, garynorth.com, where he allows access to his daily articles for $14.95 a month. His site focuses on a few main areas of interest: 1) How world governments are royally screwing up the economy, 2) financial advice, 3) opinions in support of a generally more libertarian / free market government, 4) biblical defenses of the free market (ie freedom). While he has written in other venues about the end of the world, I don't see much of it on his site. Many Christians and non-Christians would find his ideas about the end of the world very controversial, but I have not read anything he has to say on the subject and I am not particularly interested in his theories on that subject, so I can't and won't comment on them. I will only say that I find his opinions on the economy and the free market to be very reasonable.

The quote I wanted to highlight in the linked article is this:

"The coordinated big bank bailout programs do not solve the carry trade problem. They are designed to get banks lending to businesses. But in a worldwide recession, why would banks want to lend money to businesses? They would prefer to lend money to governments. Politicians like this. They can spend more money this way.

This transfers liquid capital from the private sector to the public sector. It subsidizes government bureaucracies at the expense of productivity. But it is a rational response to recession when the government offers guarantees against bankruptcy. The guarantees are a major source of asset allocation from the private sector to the public sector."

The purpose of the bailout is to unfreeze the credit market and get banks lending to banks and businesses again. The method being used to acheive this goal is to borrow from the private market in order to lend to struggling businesses. This will necessarily drain the market of the very liquid capital that it needs to unfreeze itself. If the government really wanted to get banks to start lending again, it would dramatically reduce spending, and thereby decrease the number of government bonds that they sell. Drying up the supply of government bonds would force banks to put their money back into the free market in order to make a profit, by increasing spending we are increasing the amount of liquid capital that is being sucked out of the free market. "Ah-ha", you may say, "But by offering banks a guaranteed interest rate, we are encouraging them to lend the money that they would have otherwise tucked under the proverbial mattress so that the government can lend the money to the businesses that need it. The government acting as a broker of sorts, guaranteeing the investment, and facilitating the flow of money." At what cost? The government cannot guarantee results. No matter how powerful the government thinks it is, it cannot guarantee that the money that it lends out will turn any kind of profit. It can only guarantee that it will print money to pay back the lender if the venture fails. Ultimately, the government is lending money to unhealthy businesses at the expense of healthy ones. Solvent banks and solvent businesses will not receive support from the government. Troubled banks and investment firms will receive the lion's share of the bailout. This money is much more likely to be sunk into the same non-performing investments that are plaguing our economy that need to be liquidated.

By borrowing money we are draining the private market of it's accumulated wealth and making it more difficult for profitable businesses to borrow money needed for expansion. By putting this money into non-performing assets we are delaying the liquidation of these same assets which have locked up more of the much needed liquid capital needed by our economy to expand. By guaranteeing the ROI for lenders that buy bonds we will be forced to print money to pay back these loans which will lead to inflation.

Many economists have discouraged liquidation of capital because selling some asset at a loss puts downward pressure on all the other assets being held, which reduces the amount of capital in the economy. For example, if I'm a bank with a number of customers facing foreclosure, by selling these homes for a loss I am putting downward pressure on the market, which reduces the value of the rest of the houses in the community which reduces the value of the assets that my bank is holding. So, after selling off a dozen homes, my financial situation may be worse off than it was before, forcing me to sell more foreclosed homes at an even steeper discount. I contend that the latter (selling homes) is preferable to the former (holding onto homes), because our economy needs liquid capital, not homes that are worth $500K on paper but not in the real world. It's the difference between real capital and fake capital. We think that we can fix our economy with fake capital. We cannot. It will take the real stuff to get our economy moving again.