Those Unpatriotic, Debt Free Americans

Posted by Jason | Posted in Economics | Posted on 23-10-2011


With the economy in the crapper and possibly heading into a double dip recession, the Wall Street Journal did some brilliant journalism this weekend pointing out who is at fault for this economic malaise.

American consumers’ long-running love affair with debt is on the rocks. And as they repent for their credit-driven Bacchanalia, the foundering U.S. economy is left to pick up the pieces.

Ah ha! The American consumer is repenting from their “credit-driven Bacchanalia”, and those bastards are destroying Obama and Bernanke’s economy.

I’m not the only one who had to Google Bacchanalia, am I?

Anita Bullock-Morley, a 36-year-old speech therapist in Atlanta, is one who talks about her old borrowing habits like a recovering drug addict: “My life is so much better not having that haunting debt.”

Well, we obviously know how selfish Anita is. That’s great your life is so much better Anita. What about the rest of America who is suffering because you won’t enslave yourself to the bankers.

Jason Jacobs and his wife Kathy Jacobs, at home in Richmond, Va., are among those who are reducing debt.

She used savings to help pay for her wedding last year. And after wiping out the balance on two dozen credit cards—and swearing off boutique-label purchases and fancy vacations—she is working her way through $50,000 in student loans and the $215,000 left on her mortgage. Ms. Bullock-Morley is among a generation of Americans who were taught the value of saving as children but had to learn the hard way how to spend wisely.

I guess her paying for her wedding from her savings doesn’t help the economy. It would have had she borrowed it though. As far as paying off $50,000 in student loans. She apparently didn’t go to school long enough. Maybe that’s why she is so ignorant about the benefits of borrowing.

Since the financial crisis erupted, millions of Americans have ditched their credit cards, accelerated mortgage payments and cut off credit lines that during the good times were used like a bottomless piggybank. Many have resorted to a practice once thought old-fashioned—delaying purchases until they have the cash.

I can’t believe these people are going back to the stone age. Next they’ll want to go back oral communications instead of texting.

As a result, total household debt—through payment or default—fell by $1.1 trillion, or 8.6%, from mid-2008 through the first half of 2011, according to the Federal Reserve Bank of New York. Auto loan and credit-card balances in August had their biggest drop since April 2010, the Federal Reserve said.

But doesn’t that mean as a society, we have actually become wealthier? I mean, if I’m trying to figure out my networth (wealth), I take my assets minus my liabilities. Doesn’t this mean that households have increased their networth $1.1 trillion in the positive direction? I would think that would be a good thing for the economy. Then again, that’s $1.1 trillion in future labor that the banks no longer get first dibs on. People will actually get the fruits of the labor.

The national belt-tightening, known as deleveraging, comes as the U.S. economy struggles to fend off a double-dip recession. Paying off bills slows consumer spending on appliances, travel and a slew of other products and services. Home sales, the engine of past economic recoveries, remain depressed.

Yes, but doesn’t it free up capital to be lent out elsewhere? If the problem is lack of credit being available, people paying off credit should free up credit for others to borrow. Also, it should lower interest rates, which in turn would increase borrowing. Of course, it’s hard to lower interest rates when the Fed has print so much money that interest rates are at historic lows.

Deleveraging should help the U.S. economy in the long-run, putting households on a sounder footing and easing the nation’s reliance on the savings of Chinese and other foreign nationals. But there are short-term dangers.

Yes, there are horrific dangers that Obama’s cronies over at Goldman Sachs will not have enough people enslaved to them. They won’t be able to earn the interest off money that was printed, given to the bank as bailouts, and then lent out to consumers to have to pay back through future earnings. This danger is almost as dangerous as the Iranians who have yet to start a war with anyone and all the sudden they are going to nuke us.

During the Great Depression, economist John Maynard Keynes warned of a so-called paradox of thrift: When everyone turns frugal, everyone suffers. Synchronized thrift slows the economy, according to Keynes, which hobbles income growth and makes people even stingier in a pernicious cycle.

Some experts worry that is happening now. Since the recession ended in mid-2009, the U.S. economy has expanded at a 2.5% annual rate, far slower than the average growth of 4.3% during the first two years of the previous four recoveries.

Let’s not even mention that the last four recoveries where no where near as bad as this one, which might explain why we’ve only had 2.5% annual growth. They aren’t calling it the Great Recession for nothing. I also don’t recall a world-wide collapse and debt crisis during the last four recessions.

No, let’s not mention any of that. No, let’s talk about John Maynard Keynes. I mean, who cares that the government was following Keynesian economics when this economic disaster occurred. Just ignore that and say, well what does Keynes say about this. If everyone turns frugal, what they are doing is saving. What happens when the banks are flush with savings? Do banks, especially under fractional reserve banking, like having everyone’s savings just sitting there? No. They want to lend it out, but if no one is borrowing (basically buying the banks goods) at the interest rate (price) the bank is offering, the banks will lower interest rates. Lower interest rates will eventually entice business investment and spending.

“Folks aren’t borrowing,” said Jim Ernest, executive vice president at Provident Credit Union in Redwood Shores, Calif. “They are paying down debt and continuing to save.” Since January, 12% of the credit union’s mortgage customers have made at least $1,500 in extra payments.

via Americans Debt Cutting Hampers Growth –

Well, as you can see, the American people are a bunch of unpatriotic idiots haplessly destroying the economy because they refuse to enslave themselves to lenders. If you are one of these Americans, quit being selfish. Go down to your local bank and borrow as much money as you can. Then go buy a house you can’t afford. It worked so well last time.

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But How Would They Get Their Mail

Posted by Jason | Posted in Economics, Government | Posted on 24-10-2010


The other week I was debating a guy on Facebook, who was telling me how government has to provide certain services. I’m pretty sure it began because of the Tennessee fire fighters watching a house burn down. Of course as most of these arguments go, the Postal Service was brought up.

The argument he was making was that the private sector would not deliver mail because it is not profitable for them. I mentioned that I used to work at UPS whenever they first went public (this was my first IT job). I specifically remembered that UPS wanted to get into mail delivery, but of course I was told I was just flat wrong. Apparently, my own memory, the reality I was living in, is just propaganda.

I was told I was wrong because UPS and Fedex could not profitably deliver mail to certain neighborhoods. Yeah, it would work out for most New Yorkers, but how about the little people in Alaska (his term not mine)? While, I’m sure he felt good that he was looking out for the “little people”, is he really? I asked why a person in Iowa should have to subsidize mail for someone who chooses to live in Alaska. Of course that fell on deaf ears. He then proceed to tell me those who live east of Pittsburgh (where I’m from) would be lucky to get mail twice a week if left to the free market. As you can tell, now it is not whether the free market would deliver mail. It’s whether it would deliver it as frequently as some anti-free market thinker believes it should be. This puts to bed the idea that the free market couldn’t deliver mail profitably. It obviously could. It’s just a matter of how it would do it.

For the sake of argument, let’s say that some areas would only get mail once a week. Oh the horror. Bills and bulk mail only once a week. I’m in! We could even say once every two weeks. The point is this is completely arbitrary and whatever is profitable is what makes sense for everyone. If it’s unprofitable in the free market to deliver mail 6 days a week, then it’s even more unprofitable when ran by the government, which has no competition. As I’ve pointed out in my blog about profits, profit is what directs resources to the most efficient use. If UPS or Fedex could not deliver mail everyday to certain areas, it’s because those residents don’t need the mail six days a week at the cost it would take to get it there. There is nothing evil about this. These are choices that people make. They chose where they live. They choose what they can afford and want given their scarce resources.

Of course with the government in control of mail delivery, they just force those who make better choices, as far as mail delivery goes, to subsidize those who do not. Instead of a person who can be delivered to profitably being able to get the most out of their hard earned resources, say paying half of what they do for mail and using the other half to buy something else, they are forced to hand it over for someone else’s choice to live in areas where it costs more to deliver. That other 50% of their resources would have given them more for their hard work, and it would have created new production in the economy.

If someone wants to have mail delivered to some outskirt six days a week, they should pay for it. Why is this considered evil? As with most government arguments, anti-free market thinkers see everything as static. If mail isn’t delivered six days a week to every mailbox in the US, the world would collapse. This just isn’t so. If mail wasn’t delivered six days a week to some places, those people would adapt. If they really needed something, they’d pay more to have it delivered. If they didn’t need something right away, they’d let it come at regular intervals, which would be when enough mail has accumulated to justify the resources.

Also, this is the age of the internet. Why should most mail be delivered six days a week. Talk about locking yourself into an old idea and wasting resources. If the free market were allowed to deliver mail, it would have already innovated well beyond our current system. There is a good chance much of it would be paid for by advertisers since they are the ones filling most mailboxes. As far as personal mail goes, most people  use email, Facebook, text and that new innovation called the telephone to communicate. If something needs delivered urgently or someone purchases a product, they already typically use UPS and Fedex. Why? There’s a reason Dell computers don’t come through the post office. Ever see the first Ace Ventura?

There is nothing sacrosanct about mail delivery or the postal service. It is an old idea, whose time has passed. It is not economical, and actually hinders our progress. Private companies can provide everything people want as far as delivery services go. There is no service that is unprofitable that is at the same time a necessity. Profits only reflect the demand of consumers, and if there is no demand, there is no need. Unprofitable just means unwanted. I guess the best argument again the Postal Service, since it is unprofitable the way it is currently delivered, is no one wants it. Why should they be forced to have it?

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Another Example Of The FDA Driving Up Drug Prices

Posted by Jason | Posted in Economics, Health Care | Posted on 23-10-2010


While everyone complains about the rising cost of health care, most Americans look to the government for the solution. It’s sort of like asking your dealer to help you kick your drug habit. All one needs to do is look at the daily examples where the government steps in and distorts the free market. This intervention is what drives up prices, and here is one of the millions of examples of how the government does this.

ViroPharma Inc. said U.S. drug regulators declined to approve an expansion of the company’s manufacturing of the drug Cinryze, which treats a hereditary disease, as the agency asked for more information.

Cinryze was approved by the Food and Drug Administration in 2008 to treat hereditary angioedema, or HAE, a rare genetic disease involving potentially deadly swelling of various parts of the body.

ViroPharma, of Exton, Pa., has sought to more than double the supply of Cinryze. Earlier this year, the company applied for FDA clearance to commercialize Cinryze manufactured using a certain industrial-scale process that’s different from the current process.

ViroPharma had expected to receive FDA approval of the industrial-scale product by the end of this year, helping sales beginning in 2011.

But the company disclosed Friday that the FDA sent a so-called complete response letter, requesting additional details about the technical process and ViroPharma responses to “quality observations” from an FDA inspection.

“The questions raised in this complete response letter are answerable in a timely manner,” ViroPharma Chief Executive Vincent Milano said on a conference call with analysts. ViroPharma plans to schedule a meeting with FDA officials as soon as possible, but Mr. Milano said it was too soon to provide a more specific timeline for next steps.

Mr. Milano said ViroPharma would proceed with plans to begin manufacturing industrial-scale lots “at risk” in the first quarter of 2011, with the hope inventory will be ready for shipment soon after FDA approval.

ViroPharma’s currently approved manufacturing process alone yields up to 60,000 doses of Cinryze annually. The industrial-scale process would add another 100,000 doses.

Cinryze generated sales of about $75 million for the first half of 2010, or about 38% of total company revenue.

via FDA Rejects Expansion Of ViroPharma Drug –

I would sure hate to be inflicted with this disease, because you just got screwed by the government. The company, in pursuit of more profits, wanted to more than double the supply. In case there are any bureaucrats on here, let’s revisit our trusty Supply and Demand curves again. What happens when supply is increased without the demand curve changing? Prices go down. So with this government action alone, prices will not be driven down, which is what would have been the result of the company’s actions.

No, instead our benevolent dictators decided those inflicted do not need the extra doses at a lower cost. I’m sure they think they have their reasons. After all, this red tape is there to protect us (or strangle us). So, now not only does this extra supply not make it to the market, but ViroPharma has had to have the extra cost of paying off the mafia in hopes of doing business. Sorry, I meant the government, not the mafia. Do you think they are going to just eat that extra cost? Of course not. It’s going to be passed on to the consumer.

This example doesn’t even take into account the original FDA process that drug manufacturers have to go through to bring their drugs to market. If we had no FDA, that supply curve would shift dramatically, lowering prices.

On top of that, who knows how many people are going to die now that the extra supply won’t make it to the market. Oh well. The government has to get its cut. If someone’s got to die, then someone’s got to die.

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Fannie and Freddie Tab Could Hit $363 Billion

Posted by Jason | Posted in Economics, Government | Posted on 21-10-2010


According to the Wall Street Journal, the tax payer may be looking at another $363 billion bailout, but this time just for Fannie and Freddie.

Fannie Mae and Freddie Mac’s regulator said Thursday that the companies could end up costing the government $363 billion as they absorb losses from bad mortgages.

Fannie Mae and Freddie Mac’s regulator said Thursday that the companies could end up costing the government $363 billion.

The Federal Housing Finance Agency ran stress tests under varying scenarios. The best case, with improving housing prices, saw the government-sponsored mortgage operators drawing a cumulative $221 billion in taxpayer money. If house prices drop, the bill would hit $363 billion.

“These are not predictions; the results reflect the potential effects of a limited set of hypothetical changes in house prices, a key variable driving credit losses for the enterprises,” said FHFA Acting Director Edward DeMarco.

To date, Fannie and Freddie have drawn $148 billion from the Treasury Department under the Preferred Stock Purchase Agreements program. The government took over the two enterprises in September 2008 as they faced a financial crunch.

via Fannie, Freddie Tab Could Hit $363 Billion –

Why are tax payers on the hook? If these GSEs wanted to act like businesses with their profits and their million dollar pay packages for the executives, then they should be handled like the rest of the private sector, where you go bankrupt if you run your business into the ground. Of course, that won’t happen. The reason that won’t happen is the other banks, you know the ones that surround Obama, use Fannie and Freddie to sell off their crappy mortgages. They want their profits now, and they want the tax payer to take the long term risk. Add to that, the amount of money being made by those who are in government one day and running these GSEs the next, making millions of dollars a  year in the process, and it’s no wonder they won’t let these criminal institutions go under.

Does the media explain it to you that way? Of course not. They make it seem like something has to be done to save these GSEs, and they just pass the government propaganda along to the public. Jefferson was right. If I had to choose a government with no press or press with no government, I’d choose the latter. We currently have the former, so can we give the latter a shot now?

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Another REASON Bill Maher Is An Idiot, Profits

Posted by Jason | Posted in Economics | Posted on 13-10-2010


Always wanting to hear the viewpoints of those who disagree with me, I always watch Bill Maher’s show when I get a chance. Typically, I end up asking myself the same question every time, “Why the hell am I even watching this?”  The reason I get so frustrated is Bill Maher states his opinions as if they have only reasoning behind them. You know, Bill Maher, the guy who says people that believe in God are idiots and don’t believe in reason. As most free market advocates would point out, Bill Maher too has a religion. That religion is statism, and it is based on faith, not reason.

Here is an example from this weeks round table discussion, which had a NY Times columnist, Andrew Ross Sorkin, conservative, S.E. Cup, and libertarian, P.J. O’Rourke (Am I using too many commas?) when discussing the Tennessee firemen standing watching a guy’s house burn down.

It’s crazy that we have for-profit healthcare. As crazy as it would be if we had for-profit fire departments or for-profit police departments. I didn’t expect people to take that and go the other way and make the fire departments for-profit. I’m saying none of them should be for-profit. – Bill Maher

I thought this was a t-ball for O’Rourke. Surely an intellectual libertarian like O’Rourke would hit this one out of the park. He’d explain how profits benefit society, they aren’t a bad word, and every government service should work “for-profit”. Not even close. O’Rourke seemed more like he had tourettes, shouting out stupid statements in an attempt to be funny. Unfortunately for him and his fellow libertarians, he wasn’t even funny, as the weird looks by the other panelists pointed out.

So what is it that Bill Maher doesn’t seem to get about profits? I mean, he’s obviously such a logical guy since he’s an atheist. He just goes where logic, proof and reasoning take him. Well, let’s lay out the proof and reasoning. Obviously, Bill Maher won’t be reading my little ole’ blog, so we’ll just do it for grins and giggles.

As I’ve stated in a previous post, the Tennessee fiasco had nothing to do with the free market. It was still government run, and the government could care less about profits. They don’t need no stinkin profits. They got the guns.

Next let’s analyze the common criticism of all lefties, profits. Aaaahhhh, profits! What is it about profits that are so evil, and why do liberals not get that profits are what drive our civilization forward?

Profits are nothing more than what results from trading one item for another freely, where both parties agree that the item they are getting is more profitable to them. For example, if I produce a bag full of apples in my back yard, but I can only eat a quarter of the bag, it would be profitable for me to trade them. Another person may have made flour, but can only eat so much bread. They would find it profitable to trade some flour for my apples. We both then can make apple pies. It was profitable to both of us.

As every economics book will tell you, this is how trade begins, but it gets very difficult to trade when you have to track down people all the time that want apples or flour. Instead, you trade them for money. Money is no different than the other commodity in the previous example, except it is accepted by everyone.  The reason I traded some apples for the flour is I more highly valued the flour than I did the apples. The other side valued the items the opposite way. This does not change when money is introduced. Say I sell my apples for a dollar each. I obviously value that dollar more than my apples. The person buying the apples values the apple more than his dollar. We both profited.

Now that we’ve laid out what profits are, what role do they play in an economy? Profits are what tell entrepreneurs what society wants and needs. They basically tell entrepreneurs, “Hey, we need more resources on this demand, and we are willing to reward you for it.” Let’s say I’m producing my apples and I decide to trade them. It cost’s me 25 cents to produce each apple. When I take it to the market, I find the going price is $1.  Obviously, that is a pretty good margin. Society is telling me that they demand more apples, and they are willing to reward me quite handsomely for it. Now, because I have unlimited wants, what am I going to do with a return like that? I am going to direct my resources at producing more apples. Other competitors will see those profits and start making apples in order to get in on the action. After all, society obviously wants more apples.

What happens next? Eventually more supply is brought on the market, which decreases what society is willing to pay for the apples. Unless something increases demand at the same rate as supply, prices will drop. If the cost to produce the apple remains the same, then the profits will decline as well. What is this decrease in profits telling the producers? It’s telling them that they are approaching the point where they are making enough of what society is demanding in regards to apples at the given price. Eventually, if they don’t change something and prices continue to fall, profits will work their way to zero and then turn into losses. What is the loss telling the producers? It’s telling the producers that the given product is being produced too much at the given price. Society would rather he direct his resources elsewhere to provide them with what they value more than apples.

The entrepreneur then does one of two things. They will either try to lower their costs, which will increase their profits and give them more market share, or they will move into another product or service, where the profits are larger, which tells them people want resources directed there.

If they find a way to lower their costs, say by inventing a machine or improving their production techniques, they will lower the cost of production. This will drive out competitors who aren’t as productive, because they won’t be able to lower prices as low as our innovative entrepreneur without taking losses. They will then leave and go into a more profitable business given their resources. The profits or the lack their of, told this business that society doesn’t want what it’s offering at this price and instead would prefer them to use their resources where they can be more efficient than they were at producing apples. Society is basically saying, “Look if you want us to reward you, you have to produce something else.” Now think about this, and you’ll see how this creates prosperity. One entrepreneur innovates, which allows him to lower price and maintain profits. The other cannot, so slowly the innovators takes more market share. Society still gets the apples they want at the given price, but as the less efficient apple producer moves into producing something else, they are now getting apples plus the new product or service. If price was driven down to 25 cents, which forces one producer to lower production cost and another out of the production of apples, society now is then getting one apple plus 75 cents of another product for the same dollar they originally spent on apples.

Now, if they can’t lower cost, they will not be able to continue producing the same level of apples. This is a good thing. Society is telling them, “We don’t need more apples given the cost to produce them.”  They will instead direct resources to where society wants as our less competitive producer above had to do. They may continue to produce apples but only to the point of it being profitable. Their excess resources will be diverted to a more profitable venture. Society is telling this entrepreneur, “Look, we want apples, but we don’t want all these apples given the cost. Please give us other products.”

I’m getting a little long here, and hopefully not being too confusing, but now ask yourself how does this take place without profits, which means the government takes it over.  The government has no competition to drive down price or encourage innovation. It has nothing to tell it that it is using it’s resources efficiently, or to tell it what society really wants at a given price. This is what leads to the proverbial $600 toilet seat and Big Dig boondoggles.

Now, as one pro-government advocate told me, resources are never really wasted. Really? What does this $600 toilet seat really mean? Remember our example of apples and flour. $600 would constitute $600 worth of production, in our example apples. That $600 of production, what many people are given for their entire week of production (their paycheck), is exchanged for a toilet seat instead of being exchange for $10 worth of production, which is more along the lines of what it should cost. Is this wasteful? Of course. It would be like me trading 600 apples (if apples are $1/each) for a toilet seat that should only cost 10 apples. Instead of being able to buy other products totaling $590 in production, meaning another $590 in production took place, I only got $10 in production.  Does this sound like resources are being put to their best use to increase the amount of production in an economy? It is production that makes prosperity, and it is PROFITS that direct producers to produce what society wants, what society deems best for society, not our corrupt overlords.

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John Lennon debunks Malthus’s centuries-old myth in seconds

Posted by Jason | Posted in Economics, Technology | Posted on 10-10-2010


Thanks to some great friends on Facebook, I came across this video of John Lennon addressing overpopulation, which was posted as a tribute to Lennon on his 70th birthday on the Blog.

What I love is Lennon’s simplicity of explaining this. I don’t know whether he is familiar with the originator of this idea, Thomas Malthus, or not, but he pretty much explained why Malthus and modern day environmental disciples were wrong about over population.

In the late 1700s, Thomas Malthus published Essays on the Principles of Population, in which he argued that population would grow exponentially resulting in food supplies not being able to sustain it. What Malthus and modern day environuts miss is the human minds ability innovate.

When free markets are not hindered by government dictates, the economics of scarcity spurs the entrepreneur to address these concerns with solutions such as better farming techniques in Malthus’s day or living on the moon as Lennon so nonchalantly puts it. With that little quip, Lennon highlights the entire problem with Malthus’s thesis. Technological advances push back the day of Malthus’s catastrophe.

Because current generations cannot anticipate what future innovations will come, it would be completely immoral for them to decide they must do something now in the current generation to prevent population growth of the future.

The whole premise of this catastrophe prescribes government action as the solution, which would be the exact opposite of what you would want. What you would want to avoid this catastrophe is a free market, where capitalistic profits could direct resources to the most pressing needs.

Let’s say we are approaching the the supposed malthusian catastrophe. As this approaches, what would happen? The demand for food or whatever resource we are talking about would steadily out pace supply. What happens when demand rises while supplies decrease or stay the same? Prices climb. Now, there are two things that would cause the price to rise. 1) The amount of production taking place isn’t sufficient. The total cost of production is unchanged, but the amount of production isn’t keeping up with the growing demand. In this case, profits would rise. As profits rise, competitors would enter the food production business, bringing more food to market. The other scenario 2) is that production is taking place at the highest level with the given resources and profits have shrank to the point of leaving only the most efficient producers. Now, this sounds horrible, but what way could an intelligent entrepreneur increase his profits? He could innovate. He could develop a new way of producing food that would lower his cost of production. Keep in mind that some outsider could produce this innovation as well in hopes of reaping profits when he sells his idea to food producers.

So what happens when this new cost lowering innovation is put into place? Profits rise! What happens when profits rise? More product is produced either by the current producer or competitors looking to get in on the action. All result in more food for the masses, pushing Malthus’s catastrophe further out into the future when another free market entrepreneur can save mankind.

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Geithner Wants Americans To Pay More At The Store

Posted by Jason | Posted in Economics, Foreign Policy | Posted on 07-10-2010


Timothy is apparently asking China to make it even harder on Americans. He’s calling on China to increase the value of the Yaun, which would make Chinese products more expensive for Americans. Doesn’t he realize this is what has helped Americans live the standard of living they currently do. With the Fed destroying the value of the dollar, if China increases the value of their currency, working class and poor Americans will be in for a shock when they hit the local Walmart.

WASHINGTON—The U.S. and China stepped up their confrontation over the valuation of Beijing’s currency, prompted by fears that competing foreign-exchange policies could hamper the global economic recovery.

First, let’s quit worrying about the so called global recovery and instead worry about what’s right for the American public. If China wants to devalue their currency, it only helps Americans. Who is Geithner really worrying about?

In a surprisingly blunt speech, U.S. Treasury Secretary Timothy Geithner took China to task for maintaining what the U.S. considers a deliberately undervalued exchange rate aimed at helping China’s export industries.

By undervaluing their exchange, Americans can get products for less than they would otherwise. With the savings, Americans can acquire even more products that they would have otherwise been unable to afford had China not undervalued their exchange rate. If anyone should be complaining about this, it should be the Chinese workers as their buying power is being eaten away.

“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same,” said Mr. Geithner, using language that referred directly to China, in an address at the Brookings Institution, a Washington think tank. “This sets off a dangerous dynamic” as nations compete to keep their currencies undervalued.

It encourages other countries to do the same because their leaders are as intelligent as a bunch of monkeys. It sounds more like the old monkey see monkey do than it sounds like intelligent economic policy. Geithner is basically saying “Look China is taxing their citizens wealth away with inflation. We better do the same thing.” Of course, the Fed does plenty of this already.

In Brussels, before Mr. Geithner spoke, Chinese Premier Wen Jiabao asked European Union business and political leaders to tone down their attacks on Beijing. “If the yuan is not stable, it will bring disaster to China and the world,” he said. “If we increase the yuan by 20% or 40%, as some people are calling for, many of our factories will shut down and society will be in turmoil.”

What this basically means is if China did as the other idiotic leaders called on them to do, prices of Chinese goods would go up by 20% to 40%. How’s that inflation sound to you? Because Americans would buy less of their goods, Chinese workers would also be harmed with layoffs.

The broadsides came as leaders prepare to gather in Washington for meetings at the International Monetary Fund, followed by two sessions of the Group of 20 industrialized and developing nations. The increasingly exasperated rhetoric suggests participants are losing patience with a multilateral approach to currency issues.

Indeed, Mr. Geithner warned China that the U.S. support for a bigger role for Beijing in the IMF depends on Beijing showing “more progress” in pursuing “market-oriented exchange-rate policies.” Fred Bergsten, director of the Peterson Institute for International Economics said that U.S. was saying to Beijing, “We’ll only support your game if you play by the rules.”

Geithner playing the ugly American. Go figure. Unfortunately, China holds all the cards and they know it. Wait it gets better.

To the U.S., China is pursuing a mercantilist strategy that favors its industries at the expense of competitors in the U.S., Europe and Asia. China sees itself as pursuing its national interest and a strategy that has turned the country from an impoverished also-ran into a powerhouse.

You got that. China is mercantilist, but the US is what? We put tariffs on steel why? We put tariffs on sugar why? We subsidize our farmers why? You get the point.

Mr. Geithner hasn’t named a target for Chinese currency appreciation that the U.S. would find satisfactory. But he has often spoken favorably of the 20% rise in the yuan from 2006 to 2008.

Now could you imagine having a 20% rise in the dollar? Aren’t we always told deflation is so horrible. A little inflation is good, but you never want deflation. Well what the hell do they think a 20% rise in the yaun valuation will bring for the Chinese?

No worries though. Geithner has a solution. Cartels.

In his speech, Mr. Geithner suggested countries with undervalued currencies could cooperate on kind of joint currency appreciation. In that way, China need not worry that Asian competitors such as Malaysia and Vietnam will gain an edge if the yuan rises in value.

U.S., China Deepen Spat Over Yuan –

I thought Cartels were bad. Oh, I forgot. Many things that are bad for individuals and private business are righteous when the government does them.

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Monopoly PDAs Would Not Form In A Stateless Society

Posted by Jason | Posted in Economics, Government | Posted on 12-09-2010


If there is one trump card our overlords use when we freemarket peasants demand a freer market, it has to be monopolies. We’ve all heard the arguments. If the benevolent state wasn’t there to stop it, greedy businessmen would collude to monopolize every industry. We would all suffer by having to pay the excessive prices they demand for inferior services and products. Of course, we have to address this charge when it comes to PDAs, private defense agencies, on two different levels. The first level is a natural monopoly, and the second is a coercive monopoly.

Many areas will overlap, but let’s take natural monopolies first. First, defense is not a single commodity as Murray Rothbard said about police protection. It is made up of different services, ranging from car theft protection to protection from belligerent states (is belligerent state redundant?). It includes technology from pad locks to satellites and human capital from the local bouncer to the most brilliant military mind of a strategic think tank. It can be provided by one’s self or outsourced to a service provider. It can even be divided up so that some parts are self provided and some are outsourced with variations changing between each person in the free society.

Now in order for a natural monopoly to occur in the defense industry, a single provider would have to have a strategic advantage over every aspect of this highly diverse industry. It would have to be able to provide every service society demands in defense more efficiently than any other current or potential competitor including the customers themselves. This would be impossible. Even under our current system, we don’t have a single provider. We have local township police, mall cops, and military special forces. Government can monopolize much of the industry, because they can point their guns inward on the citizens, but they cannot even provide all defense. They cannot anticipate and provide all defense demanded and provided by the private market, such as casino or home security. If the government cannot monopolize the entire defense industry with all it’s guns and ability to openly slaughter at will, how would a private defense agency possibly pull it off?

Alright, maybe there wouldn’t be a natural monopoly, but could there not be a coercive monopoly?. One company would become so large that it would use its size and force of arms to dominate the market and drive other competitors out. Even if a monopoly by a single company did not emerge, couldn’t they form a cartel and have the effect of a virtual monopoly? Without government, PDAs would get together and collude against the public by establishing a cartel. Before arguing against either of these, let’s first point out the absurdity of those whose concern it is that without government, PDAs would become coercive monopolies or a cartel, and to avoid this they pre-emptively want to live under or establish a coercive monopoly by way of a state.

First of all, as we mentioned under the natural monopoly section, defense would probably be provided in various layers. For a company to become large enough to become a coercive monopoly, prior to becoming coercive, they’d have to monopolize many of these layers first. As we’ve already shown, this is impossible even for a coercive monopoly like the state.

In addition to monopolizing most of the layers of defense prior to becoming coercive, they would have to avoid detection from their biggest consumer, insurance companies. If you think about it, they’d have to monopolize the insurance industry as well. After all, who will it harm if they become coercive? It will harm the insurance companies. The insurance companies would have an incentive to prevent monopoly. One, their costs would be driven up, and two, their competitors could highlight to potential customers that insurance company A is using a PDA who is attempting to monopolize the market and is using the force of arms to do it. This is driving up their clients’ premiums.  Insurance company B could even start their own PDA as a competitive advantage against insurance company A, who is beholden to this coercive monopoly PDA.

To take it one step further, companies that provide defense services would not be the same companies that produce arms or defense technology. A monopoly PDA would have to monopolize this area of defense as well. If not, the producers of arms and defense technology wold only have one shot at a sale. Either the monopoly buys their products or they go out of business. If they developed some new technology, they might even setup your own PDA, because their technology gives them an advantage against the monopoly PDA. Technology advances always poses a threat to an inefficient monopoly.

Lastly, the monopoly PDA would basically have to become the state where they were able to exclude themselves from the law. If not, they’d have no means to enforce their monopoly powers on the people. If they attempted to corner the market and harm the consumers, society would be able to always say to hell with this. I’m going to defend myself. I’m going to create a voluntary militia to defend my neighborhood. Soon, companies that develop arms would focus on those individuals who want to protect themselves. This would in effect break up the monopoly as well.

So, maybe you would not have a natural or a coercive monopoly company. That doesn’t mean you couldn’t have in effect a monopoly by the way of a cartel. As, Rodrick T. Long points out, “if we assume that they (those forming the cartel) formed the cartel out of their own economic self-interest, then this economic self-interest is precisely what leads to the undermining” the cartel. Murray Rothbard gives historical examples to this effect by way of the railroads in the late 19th century. As Rothbard states, “In every case, the attempt to increase profits – by cutting sales with a quota system – and thereby raise prices or rates, collapsed quickly from internal competition within the cartel and from external competition by new competitors eager to undercut the cartel.” Also, because defense would more than likely have many layers, specializations, include services as well as arms and heavily be intertwined with the insurance industry, you are talking about many players within this cartel. Obviously the more players, the more likely members of the cartel would cheat.

While monopolies are great to scare the masses into state submission, it’s quite obvious the chance of a monopoly, let alone a coercive monopoly, is about as likely as a peaceful and just state.

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How long should someone be allowed to receive unemployment assistance?

Posted by Jason | Posted in Economics, Government | Posted on 21-07-2010


This morning on FaceBook, Dimitri Vassilaros, a local reporter in Pittsburgh, posted his question of the day, which was “How long should someone be allowed to receive unemployment assistance?”

Of course, there were the typical stories of someone that was laid off, and then there were the all caring liberals who love to say they care. The one commenter said they should receive unemployment until they find employment. Wow, that sounds caring. How motivated is someone going to be if they know they will receive free money for as long as it takes. I’m ready to get laid off just at the thought of it.

How long the unemployed should receive unemployment payments should be obvious by the name of the program, Unemployment Insurance. It is insurance, and as such should be no different than any other insurance. If I buy life insurance and I die, my family doesn’t have the amount raised just because my death may cause more hardship than I was willing to provide for. Why would unemployment insurance be any different? If you bought unemployment insurance that provides 26 weeks of unemployment benefits in the event of losing your job, then you should get 26 weeks, no more no less.

Of course unemployment is different than other insurance in that it’s ran by the government, which means it’s all political. When there is no restraint on how much money you can steal via taxation or inflation, you can buy off the unemployed with bribes of continuing unemployment. What these all caring liberals do not understand is that nothing is free. Just because you feel all warm inside when you say you want to help take care of someone who’s out of work doesn’t mean you aren’t harming someone else to do it.

To start, insurance rates, including unemployment insurance, are based on the chances of a person becoming unemployed and the length of unemployment benefits that will be paid. If you you arbitrarily, as the government does, change the terms after the fact, the money that was paid in isn’t enough to cover what is being paid out. Then who pays it? Well, everyone else in the country who is working and paying taxes and everyone else including children and those not born yet through the form of debt. Truth be told all of the money is paid by borrowing tomorrow production in the form of debt. In the future, the next generation and the current will have to work, not to reap the rewards of their labor and investment, but to pay for the non-productive time of those who were not working in the past. Is this really caring? Is it caring to enslave someone who has no say in their enslavement?

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David Frum highlights his ignorance of economics

Posted by Jason | Posted in Economics | Posted on 07-07-2010


Business Insider has a post about David Frum acting as a complete tool for those who love big government and planned economics.
One of the problems is that the anti-Keynesian arguments are simplistic (and probably wrong). The most common critique of Krugman’s “spend spend spend!” strategy is that America will go the way of Greece, but this argument isn’t all that robust, and the existence of Japan makes this argument tougher.
You can always quickly tell when someone doesn’t want to debate with an idea that is just common sense. The first thing they pull out is it’s too simplistic, and then they’ll tell you how complicated the world is now. Do they really expect to win an argument that says the world is so complicated now that central planners are better at planning now than when it was less complicated?

Here’s a better critique of Krugman: How will spending “fix” the economy? Yes, we understand all that stuff about putting people to work (not wholly illegitimate) and how there’s all kinds of slack in the system, but how will government spending actually make the economy more robust? Or more specifically, where does Krugman actually see the economy in two or three years, such that we can take off the training wheels?

That question is almost never answered.

It’s never answered because they don’t want to answer it. Keynes answered it best when he said “in the long run, we’re all dead”. Unfortunately, Krugman is living in Keynes long run.

Now it’s true you could ask the same, too, of the free-market, anti-Keynesians.

In fact, that’s exactly what conservative columnist David Frum does in a recent piece up at The Week. He critiques Krugman, but wonders what, exactly, the GOP proposes to jumpstart the economy.

Is anyone else tired of hearing “conservative” David Frum’s name being brought up in order to bash everything that is truly conservative? The GOP probably is proposing the wrong solutions, because they are probably proposing more tax cuts with no spending cuts. So how does that hurt what free market economists say? The GOP is not synonymous with free market economics as George Bush blatantly proved.

The question is kind of fair, but then, it’s a contradiction to talk about a “free-market” plan for fixing the economy. Small government conservatives are supposed to believe in spontaneous order, and the ability of private actors to produce growth without some brilliant guidance from intellectuals.

The fact that Frum is concerned about the lack of a free-market plan might be, more than anything else, an indication of his well-known ambivalence towards conservatism.

Of course Frum is ambivalent towards conservatism. He is a neocon. He is not a free market thinker, he is not a small government thinker, and he is not a conservative. A free market thinker would not be questioning what the plan is from free market economists. The free market doesn’t have a plan. The fact that Frum is asking what the free market plan is either shows his complete ignorance of the subject or his lack of honesty when discussing it.

So ignore the doom talk about how we’re the next Greece, which isn’t analogous, and isn’t helpful, and instead try to figure out how more and more spending will do anything to improve the functioning of the economy, and whether there’s actually plausible end game to the Keynsian madness.

Read more:  Do The Krugmanites Have ANY Serious Ideas For Fixing The Economy?.

Ignore the doom talk about how we’re the next Greece? This sounds like a bad idea as well. Maybe we should be thinking about what happens in “civilized” America when the government either inflates it’s way out of it’s obligations or finally comes clean and tells Americans it can’t afford all the lies they’ve promised. Maybe we should look at how quickly we’d have rioting in the streets.

Earlier in the article the author mentions Japan as if that’s proof that acting like Greece will not lead to the same result as Greece. The problem is the US is not Japan. Japan actually produces goods, while the US has lost most of its manufacturing. We’ve relied heavily on low cost manufacturing in China, but with China depegging their currency, that will quickly come to an end.

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