Government kills

December 7, 2010

Britain is Freezing to Death

Dot Gibson, spokeswoman for pressure group the National Pensioners’ Convention, said: “Now that we have one of the coldest winters, older people are going to have to make the unenviable decision whether or not to put the heating on. The Government should guarantee that they won’t cut the winter fuel allowance.”

Governments and central planning kill.  This is a result of the global warming lie and attempts to regulate carbon emissions.  The government has forced Britons to endure misery in the name of socialist utopian dreams.

In a free market, entrepreneurs would surely have foreseen an increased demand, would have invested, and now would be able to provide the necessary heat.  Instead, they were prohibited from doing that and now the result is government sponsored death.

But the good news is that now, blanket and jacket manufacturers will see a stimulus!!

Living on borrowed dime

December 3, 2010

The government had finally crossed the threshold.  It is now living entirely as a fiction.  In other words, without fake money and debt, it would literally cease to exist.  And as much as that sounds wonderful, don’t get your hopes up just yet.

What is the situation: Table S-3 from the OMB Budget Summary Table

2010 Total Receipts – $2213 (billions)
2010 Total Mandatory Spending and Interest on the debt – $2245 (billions)

Mandatory spending (which is “mandatory”, required by law) and interest (which is mandatory, or they go into default) surpass all receipts to the government.

ALL discretionary spending, for the wars, roads, schools, trees, etc., EVERYTHING ELSE is borrowed or printed money.  Without that, the government would literally cease to exist.

The US government is living entirely on other people’s  money.  But, considering that so many millions of people are as well, it only makes sense.

A forgotten gem, couldn’t have been better written

November 18, 2010

In his wonderful short story “Boule de Suif“, Guy de Maupassant tells a story of ten travelers who’re evacuating from the oncoming Prussians in the Franco-Prussian War.  While his criticism is leveled at French society, this selection says all that needs to be said of war:

“Yes, madame, these Germans do nothing but eat potatoes and pork, and then pork and potatoes. And don’t imagine for a moment that they are clean! No, indeed! And if only you saw them drilling for hours, indeed for days, together; they all collect in a field, then they do nothing but march backward and forward, and wheel this way and that. If only they would cultivate the land, or remain at home and work on their high roads! Really, madame, these soldiers are of no earthly use! Poor people have to feed and keep them, only in order that they may learn how to kill! True, I am only an old woman with no education, but when I see them wearing themselves out marching about from morning till night, I say to myself: When there are people who make discoveries that are of use to people, why should others take so much trouble to do harm? Really, now, isn’t it a terrible thing to kill people, whether they are Prussians, or English, or Poles, or French? If we revenge ourselves on any one who injures us we do wrong, and are punished for it; but when our sons are shot down like partridges, that is all right, and decorations are given to the man who kills the most. No, indeed, I shall never be able to understand it.”

Cornudet raised his voice:

“War is a barbarous proceeding when we attack a peaceful neighbor, but it is a sacred duty when undertaken in defence of one’s country.”

The old woman looked down:

“Yes; it’s another matter when one acts in self-defence; but would it not be better to kill all the kings, seeing that they make war just to amuse themselves?”

Cornudet’s eyes kindled.

“Bravo, citizens!” he said.

Monsieur Carre-Lamadon was reflecting profoundly. Although an ardent admirer of great generals, the peasant woman’s sturdy common sense made him reflect on the wealth which might accrue to a country by the employment of so many idle hands now maintained at a great expense, of so much unproductive force, if they were employed in those great industrial enterprises which it will take centuries to complete.

I will have to investigate further whether de Muapassant was inlfuenced by Bastiat.  But no doubt, war is destruction, and let’s kill all the kings.  Sounds like a great start!!

Effects of QE2 already happening

November 14, 2010

Maybe it’s due to the first round, maybe the upcoming catastrophe, but I got this email which highlights perfectly the damage the fed has done.  For those of you who know, my love in life is fishing.  I buy (way too much!!!) fishing tackle online, and the retailers will send out promotional email.  It isn’t spam, as I signed up (I guess) when I ordered.  Anyways, here the latest email from them:


Here’s the situation: The Japanese Yen has increased in value by over 20% which means our cost for Megabass Lures has Gone Up almost 25%! This is not good. What was once almost affordable is now absurdly expensive. So we have stopped ordering Megabass for now. But, do we have a HUGE INVENTORY! What to do? Come on, you know the answer…..Let’s Have a SALE!!

Notice the key parts:  first the depreciation/debasement of the dollar has made imported goods much more expensive.  It’s not good?  No, it’s absolutely awful.  It hurts everyone.  And, they have stopped ordering Megabass lures directly as a result.

Now, a few things.  I’ve never used Megabass lures, they are for fishing I don’t do, and honestly, I would never spend that amount of money on lures.  But some do.  But now, because of the actions of the fed, they will have to pay far more, or worse, not be able to purchase.  And it will be felt in Japan as well.  No doubt, there are many other goods as well that US consumers won’t be able to purchase.  And no doubt as well, the Japanese government will see this (as well they should) as an attack on their economic well being.

This is policy driven economy its worst.  If anyone ever doubts just how destructive what the fed is doing really is, just read that email.

Catching up…

November 10, 2010

From the “I’ll believe when I see it” department:

The West is turning against big government – but what comes next?

The governments of what were the richest countries in the world may be broke, but what is interesting is their response to this: the plan is not to make themselves rich enough once again to do all the things that they used to do, but to rethink the whole enterprise so that government never again finds itself so extravagantly overextended.

On this side of the Atlantic, there is now a broad understanding that the social democratic project itself is unsustainable: that it has grown wildly beyond the principles of its inception and that the consequences of this are not only unaffordable, but positively damaging to national life and character…

If ordinary citizens are to be expected to take back more control and moral responsibility, then some pretty basic things will have to be on the table. First, they must be allowed to keep significantly more of what they earn. The lowering of taxes cannot be a vague intention or a pious hope. It is a sine qua non of a more self-reliant, independent, morally resourceful private life. (And, contrary to the androids’ argument, lower taxation does not conflict with cutting the deficit: in fact, lower rates of tax will increase growth and revenue.)

Note: it might be the case that tax cuts will enhance revenue, but that should NEVER be the argument for tax cuts.  I’d rather tax cuts dramatically reduce revenue, if for no other reason, than to force the shrinkage of leviathan.

And this is a perfect example of how ingrained statism is: “they must be allowed to keep”.  Seriously, “allowed to keep”, how about must not steal so much of their wealth?  That language implies that we’re allowed to keep more, as if the fundamental basic right of property, ownership of one’s self and product, is now a state privilege.  We’re allowed to keep more?  Gee, thanks.

And speaking of leviathan…

Boo hoo hoo, such a sad thing to read:

Thousands of Democrats to be jobless in Washington

Well, I wouldn’t call them “jobless”, as that implies the recently booted actually did something useful enough to be called a job.  I don’t think lording over us, imposing one’s will upon us, and harassing us with myriad of laws, taxes, and regulations, then enforcing such measures counts as a job.  In fact, peaceful removal from office sounds like getting off way too lightly.

And from the “This isn’t anything at all called capitalism department” (and the same article):

Former Clinton press secretary Joe Lockhart, who runs the Glover Park Group, was a bit more optimistic. In 1994, when the Democrats lost the House for the first time in 50 years – and the Senate as well – the lobbying and political strategy business was a lot smaller and foundations hardly had a presence. “The industry is much bigger than it was in 1994,” he said, and the “corporate footprint in town is bigger.” So each potential employer may not be filling many slots, he said, “but there are a lot more of them.”

So, there is a much larger footprint of rent seekers.  Not surprising as government has grown by leaps and bounds the past decade.  And, if nothing else, it disproves the spurious notion that somehow we’re a free market economy.  It certainly disproves without any doubt, that the last decade and a half was an unregulated, laissez faire, system.

On another note, let’s put to rest once and for all the myth that consumer spending drives an economy.  (I know, this data is simple, and easily accessible to even the most enlightened, credentialed, and honored.  I mean, I bet they even have internet access in the bowels of the NY Times.)

From the Bureau of Economic Analysis (government data, so it must be true!!) NIPA tables:

Table 1.1.5 GDP

Personal Consumption:

1999 6342.8
2000 6830.4
2001 7148.8
2002 7439.2
2003 7804
2004 8285.1
2005 8819
2006 9322.7
2007 9806.3
2008 10104.5
2009 10001.3

Gross Domestic Private Investment

1999 1641.5
2000 1772.2
2001 1661.9
2002 1647
2003 1729.7
2004 1968.6
2005 2172.2
2006 2327.2
2007 2295.2
2008 2096.7
2009 1589.2

Let’s put a few things into perspective.  In the last decade, consumer spending has increased by 37%.  And today, there are fewer people employed than a decade ago.  Unemployment is officially 9.6%, but the more accurate number, U6, shows over 17%.  And some estimates put it around 20% when one counts those that have dropped out completely.  2008-2009 saw a mere 1% drop in consumer spending, yet GDP (which is hardly the best measure of economic well being by the way) plummeted.  If spending drives an economy, then, this is hardly the data I’d want to sell that idea with.

Investment (and of course the malinvestment, but in a the wrong manner) drives an economy.  Jobs don’t magically appear with more consumer spending.  In fact, Austrians know that consumer spending is the last act in a long chain of events, the many and various stages of production, which results in satisfying consumer wants.  Investment declined precipitously, and that’s the problem.

It’s actually only half the problem, as much of the investment was of course monetary expansion, credit bubble induced, driving a boom which invariably busts.  But that’s already been covered here, and far better here.  It’s clear, and something even a nobel prize can’t change, that economic growth is driven by business investment.  Real investment, supported by real savings matching consumer time preferences, is the only way to improve economic well being and the standard of living.

Spend all you want, it won’t matter.  In fact, it’ll only make things worse.

On a final note, there’s three things the newly elected party in congress can do to convince me they are serious.

1) immediate vote on repeal of obamacare
2) end of baseline budgeting
3) across the board, 5% real reduction in spending on everything

Obviously, they’ll be fighting both the senate and the president.  But they can draw a line in the sand, so to speak.  And that’s far from all, but given the political reality and entrenched bureaucracy, it’ll at least be the first real step.

There’s much more to be done, for example:

-eliminate the departments of: commerce, education, energy, transportation, HHS, HUD, veterans affairs, interior, labor (this one HAS to go!!!), agriculture
-audit, then eventually eliminate, the Federal Reserve, and move towards once again a gold standard and 100% reserve system.  (Perhaps nothing at all, a system of free banking, but that’s an altogether more complicated and esoteric point, one I’m not willing to, nor qualified to, take a stand on.)
-repeal of legal tender laws
-eliminate the IRS
-eliminate the capital gains tax, corporate/business taxes
-require that any bill or spending program be constitutionally authorized (cf. Pelosi’s “are you serious?”)
-phase out all entitlement programs
-end the wars of empire.  I am not a “purist” libertarian, as I understand that sometimes defense and national security isn’t always black and white.  Sometimes, to quote Thucydides, “human nature being what it is”, not everyone is going to see non-aggression from the same point of view.  But unending wars and nation building, needs an abrupt end.

I’m sure there’s more.  But until they prove to me that they really are serious, I’m not holding out hope for change, or something like that.

You don’t say

November 5, 2010

Citing health overhaul, AARP hikes employee costs

AARP’s endorsement helped secure passage of President Barack Obama’s health care overhaul. Now the seniors’ lobby is telling its employees their insurance costs will rise partly as a result of the law.

In an e-mail to employees, AARP says health care premiums will increase by 8 percent to 13 percent next year because of rapidly rising medical costs.

And AARP adds that it’s changing copayments and deductibles to avoid a 40 percent tax on high-cost health plans that takes effect in 2018 under the law. Aerospace giant Boeing also has cited the tax in asking its workers to pay more. Shifting costs to employees lowers the value of a health care plan and acts like an escape hatch from the tax.

“Most plan co-pays and deductibles have been modified,” Jennifer Hodges, AARP’s director of compensation and benefits, wrote employees in an Oct. 25 e-mail. “Plan value changes were necessary not only from a cost management standpoint but also to ensure that AARP’s plans fall below the threshold for high-cost group plans under health care reform.”

Not that anyone could have predicted that.

Although the tax on so-called “Cadillac” health care plans doesn’t take effect for years, employers are already beginning to assess their potential exposure because it is hefty: at 40 percent of the value above $10,200 for individual coverage and $27,500 for a family plan. The tax is intended as a savings measure, to prod employers and workers into more cost-efficient plans.

Certner said AARP’s plans are currently under the threshold for the tax. “We intend to stay below those thresholds,” he said. “It’s not in anybody’s interest to move above those thresholds, not the employees’ nor the employer’s.”

Well of course they do.  As would any business.  This perfectly highlights the problem with all policy driven economy, in that it assumes that people will act them same regardless.

One of the most basic fundamentals in economics (yeah, I know, those pesky fundamentals.  Things like scarcity, which, so we’re told, only exists in normal times, not depressions!!) is that people respond to incentives.  As the benefits for one activity increase, people will do more of it.  The opposite is true as well. If the cost of one activity rises, people will do less of it.

Or, as Homer Simpson likes to say, “DOH!!”.

This is exactly what the critics of obamacare said would happen.

Who teaches these people?

November 5, 2010

Peter Beinart claims the biggest loser in Tuesday’s election was Keynesianism.  Instead of being thankful, he is distraught:

The real loser is Keynesianism: The idea that when businesses and individuals stop spending, government must. That idea will not rebound; it’s over for this period in economic history. First Britain, and now the United States, are responding to the worst economic contraction in 75 years by contracting government, despite the fact that the world’s best economists are screaming that it’s exactly the wrong thing to do. As Virginia Thomas might say, “Have a good day!”

Actually the world’s best economists!!! say otherwise.  Even many non-Austrians have been saying the exact same thing.  Heck, there’s even a few Nobel laureates in there too.

In retrospect, maybe the greatest blame lies with America’s pre-recession policies.

Yes, 110% correct.  He gets it.

Um, not by a mile.

In retrospect, maybe the greatest blame lies with America’s pre-recession policies. For years, green-eyeshade types had been warning that America needed an economic surplus to prepare for the huge entitlement costs imposed by the baby boom retirement. Instead, George W. Bush—with a boost from Alan Greenspan—spent the surplus on war, tax cuts and expanding entitlements, leaving Americans anxious about debt even before the economic meltdown. Had America’s government done something about its long-term fiscal problems while times were good, perhaps America’s people would be more tolerant of the short-term spike in debt required by Keynesian stimulus. Instead, debt—even necessary debt–has become a metaphor for governmental irresponsibility and national decline. Fiscal restraint is to the anti-Obama Republicans what sexual restraint was to the anti-Clinton Republicans: the ultimate character test.

One, to create this so called “surplus” is technically impossible.  The government cannot save money, just sock it away for the future.  It must by default spend all it takes in.  (Yes, by necessity, to maintain the state, it must spend far more, but that’s another issue.)  If for instance, it was to actually “save”, let’s just say it took $100 billion out of the economy through taxation and just sealed it away in some vault.  (Of course, why should it when it can just print to its heart’s content.  And, true savings would have to be in the form of some solid, real, tangible currency.  A good possibility would be gold, but then again, that’s never been tried before.  Gold as money?  Are you kidding me?)

So, now the government (assuming no actual increase in the money supply) simply continues to extract such wealth from the economy.  In very short order, one would see massive contraction and the very same individuals (like Mr. Beinart) calling for releasing the reserves.

Two, the entire entitlement system is an unsustainable ponzi scheme.  There is simply no means to fix it, salvage it, or fund it.  Anyone who would argue such is a fool, or a liar.  Or, writer for the NY Times.

Debt is always destruction, as is inflation.  What caused this mess was the massive expansion of the money supply, the classic boom/bust cycle.  What Mr. Beinart has no understanding of is the causes, and real solutions, to the problem.  What is needed is far less taxing and spending, as little interference in the economy so it can liquidate the malinvestment and return to a savings backed, real investment driven growth model.  The latest attempts by the fed to inflate the economy are only going to delay real recovery and exacerbate the problems.

But Mr. Beinart ought to at least admit the utter failure of the bailouts, takeovers, spending, printing, debt, regulations, as well as the stunting power of regime uncertainty. At least the American people do.

Mr. Beinart is supposed to reflect the reasonable center-left, and as such, is taken to be a serious commentator and influential voice outside the usual partisan hackery.  Here, he shows no such acumen.

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