An article on CNNMoney.com highlights that for the $3 billion we spend on Cash for Clunkers, we only got an additional 125,000 additional car sales over what we would have got without C4C. That comes out to tax payers paying $24,000 per car.

NEW YORK (CNNMoney.com) — A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site Edmunds.com.

via Cash for Clunkers costs taxpayers $24,000 per car – Oct. 28, 2009.

While this shows how stupid our government officials are in and of itself, it doesn’t even talk about what opportunity costs we bared. Everything has an opportunity cost. For example, if I have $25 to take my wife out on a date (I know she’s a lucky lady) and we decide to go to the movies, there is an opportunity cost to that. Those costs related to what we gave up in order to go to the movies. We could have went to eat, seen a play (maybe at the local high school), or stayed home. If the benefit of going to the movies was less than the benefit of the passed up opportunities, we made a bad decision. While my example is subjective, because going to the movies that night might have been what brought us the most happiness, C4C is not as subjective.

The $3 billion dollars had to be pulled out of our private sector in order to pay for this program. By taking it out of the private sector, what opportunities were passed up? The free market allocates resources, in this case capital, to its most efficient use. Most efficient use means benefits are maximized for the resources used. For example, I might have the resources of a lawn mower, gas, and labor. The most efficient use of those resources would be to get my lawn cut. It would not be to have the laborer hand pick the grass, so he could use the gas for something else. The lost time the laborer would incur would not justify the savings of the gas. Government on the other hand diverts capital away from what would other wise be the most efficient use of that capital. By definition, the opportunities that were passed up would have had higher benefits.

As you can see, we did not get a good deal on the increased sales at $24,000 per car. Also, this was a one time program that now has come and gone like all government stimulus. No one is hiring now for a program that is over.

Also, how are we better off as a society? We destroyed cars that were in most cases perfectly functioning vehicles. We replaced one automobile for another. This does not add to the wealth of society. If it did, we should just trash our cars once a month.  If that $3 billion was left to the private sector to create new products, it would have improved the wealth of our society. For example, it may have produced the next medical treatment, a faster computer or the next innovation that advances society in general.

What politicians don’t understand is they cannot guess centrally what is best for the economy. Only the fine tweaking of millions or private transactions can do that.

Great video I came across on Youtube.

The one thing about Halloween that highlights the inherent nature of the free market is the trading of candy to maximize your benefit. This is done by children with no training and no coercion. Of course as all good thoughts that pop into my head, someone else already thought it and wrote about it way more eloquently than I could have. Here is a great piece from the Mises Institute blog discussing this.

What children truly adore about Halloween is what takes place after the candy has been brought back to home base: the trading. Here is where the excitement begins.

No child can fully control what he or she is given, so it is up to that child to make exchanges with others in order to obtain what he or she really wants, and to do so in a strategic manner so that overall wealth is enhanced.

Read the full article at  Halloween and its Candy Economy – Jeffrey A. Tucker – Mises Institute.

Ron Paul, who seems to be the only politician with a clue, writes in Forbes about how the Fed is the cause of our current crisis, and how they are doing the same thing now that they did to create this crisis. Many talk about our current crisis as the result of building the housing boom out of house of cards. What happens when you find out your entire currency and banking system is built out of the same cards?

Be Prepared for the Worst

Ron Paul, 10.29.09, 09:20 AM EDT

Forbes Magazine dated November 16, 2009

The large-scale government intervention in the economy is going to end badly.

Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.

A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.

via Be Prepared for the Worst – Forbes.com.

In the International Business Times’ article on the coming inflation, they talk about government debt being at record levels. This is true, and I’ve already talked about how we are enslaving our children with with ever increasing debt. The paragraphs below also mentions how much we are already robbing ourselves. In 2008, the government paid $451 billion in interest on the debt. How much production was eaten up by that $451 billion? How much would that have stimulated our economy? This was before the massive almost $2 trillion deficit Obama is running in 2009. Instead of benefiting from our production, we will be paying for yesterday’s waste. We’ll be robbing ourselves to pay for the bailouts of yesteryear. The bailouts that benefited none of us. They only benefited Geithner and Paulson’s buddies at Goldman Sachs. Couldn’t this classify as modern day enslavement by the rich and politically connected?

2: GOVERNMENT DEBT IS AT RECORD LEVELS

Canada’s budget surplus has turned into a multi-billion dollar deficit as a result of the credit crisis. But Canada’s problems pale in comparison to those of its neighbour to the south. The richest country in the world is drowning in debt.

Let’s examine for a moment the sorry state of US indebtedness. Due to ongoing bailouts and stimulus packages, the US will experience a record $1.75 trillion deficit in 2009. US debt (accumulated deficits), as tracked by the famous US National Debt Clock in Manhattan, stands at a staggering $11.8 trillion and counting. In 2008 alone, the government paid a staggering $451 billion in interest, according to the government’s own website, TreasuryDirect.gov. And that number is expected to rise substantially in 2009.

That figure – $11.8 trillion – is a mindboggling amount of money. But it represents only a part of America’s total liabilities. If Social Security and Medicare obligations are included (which they should be), obligations rise to over $106 trillion dollars, according to the US Treasury.

None of this money has been set aside, but has instead been borrowed by the government for its own use. When combined with the debt of nearly $11.8 trillion, total debt soars to an astonishing $118.6 trillion, or nearly ten times total GDP, or $300,000 per person.

via The Next Crisis: Spiralling Inflation – Part 1 – International Business Times -.

Just to be clear to populist liberals, government will not solve this. The government is the means of the enslavement, so they cannot be expected to set us free.

The International Business Times has a great article on the coming inflation. They highlight below how the government has distorted the true inflation we have experienced since 1983. If the government doesn’t like something, they just redefine it to get the results they want. All Americans know though how much food, energy and housing have increased despite governments claim of low inflation.

3: THE CPI INFLATION INDEX DOES NOT REFLECT TRUE INFLATION

In both Canada and the US, inflation is hurting our pocketbooks, but you wouldn’t know it from the Consumer Price Index (CPI). That’s because the CPI is understated by as much as 7 percent per year according to economist John Williams, who has been tracking US CPI for many years (see Figure 2). In addition, North American investors and consumers seldom hear the “headline” inflation number. Instead, the financial media usually report only the “core” inflation number, which excludes food and energy. This was done, ostensibly, to remove volatility from the CPI. But food and energy account for about 23 percent of consumer spending, so how can they be ignored? Governments have a major incentive to understate CPI because trillions of dollars’ worth of pension funds, health benefits and wage increases for public sector employees are indexed to it.

Today’s CPI is substantially understated because it is calculated using a complex re-weighting formula that is riddled with substitutions, exclusions, hedonic adjustments and geometric weighting. If we were to recreate the CPI using the original 1983 formula, we would discover that even though we have experienced asset depreciation following the credit crisis, price inflation for goods and services has not gone away. And if the monetary authorities had decided to factor home prices into the CPI, the bubble would have been far more obvious from the beginning.

via The Next Crisis: Spiralling Inflation – Part 1 – International Business Times -.

I picked this up from Hotair, and in my opinion this is why Romney has no chance in 2012, and why I’m glad he didn’t get the nomination in 2008. Don’t claim to be a free market conservative when you implemented one of the country’s only state run health insurance programs that is now blowing up in their face. Now he’s claiming it wasn’t meant to bring down cost. Well, if you were a free market guy, you would have realized providing insurance to all only drives up costs, and the costs are what make complain about health care.

This election I will have a litmus test. Do you believe in the free market, as in no government intervention at all, or do you believe government should intervene and so called protect “the people”. If you answer the latter, you don’t know what the free market is, and you lost my vote. Hopefully other free market folks will do the same.

Hot Air » Blog Archive » Video: RomneyCare was never about lowering costs, says Mitt.

Last night, Ron Paul was on Larry King after Michael Moore. Ron Paul, who seems to be the only congressman who understands economics, rightfully explains that Michael Moore doesn’t seem to know what the free market is. He’s mixing corporatism with capitalism. As I’ve always said, if you listen to liberals talk about capitalism, they are never talking about capitalism. They are talking about whatever they put before capitalism. How many times have you heard crony capitalism, corporate capitalism, greedy capitalism, etc? Their complaint is not about capitalism. Their complaint is with cronyism, corporatism, and greed. None of them are synonymous with capitalism. They are more closely synonymous with government, the very solution that they then propose. Anyway, here’s Ron Paul.

http://www.dailypaul.com/node/112628

Ron Paul to Geithner: Fed as Lender of Last Resort Contributes to

Many anti-fed economists have been predicting massive inflation with the way the Fed has grown the money supply in order to deal with this current crisis. With all their warnings, I decided to look at GDP, growth of the monetary base, and inflation to see how historically they related to each other. To make it simple, I took it by decade, but there is always a delay. The averages may not show for the decade, but there is definitely a correlation over the long term.

As you can see, inflation is always very close to growth in the monetary base minus the growth in GDP. If you take the averages of all years from 1960 to 2006, you can see the historical correllation. Keep in mind this includes the inflation of the 70s and early 80s, and it still works out. You will notice over the long haul, inflation equals growth in the monetary base minus growth in GDP (7% – 3% = 4%).

Now, let’s look at what has happened from 2007 to today.

So, as you can see the monetary base has grown an average of 38%. Most of that growth has taken place in the past year with the monetary base growing at 100%

If the history of how these three indicators correlate with each other is correct, you better invest in an inflation hedge. It’s going to get ugly.