Monopoly PDAs Would Not Form In A Stateless Society

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

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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

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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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I told ya

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

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I said back in this post that neocons shouldn’t be too excited about all the drone attacks, because eventually they’d be used on us. Well, seems it has begun.

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David Frum highlights his ignorance of economics

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

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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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Tomatoes on sale…well until the government drives prices up

Posted by Jason | Posted in Economics | Posted on 17-06-2010

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Apparently, grocery shoppers may actually see some prices going down. Wow, that would be a change.

Jeff Dolan’s tomatoes in San Joaquin Valley are ripening and ready to pick this week. But that puts him in a pickle.

In California, harvest time is arriving just as tomato growers in other parts of the U.S. are reeling from a sudden supply glut that is pushing the price for fresh tomatoes sharply lower. Florida farmers who fetched more than $30 a few months ago for a 25-pound box of round, fresh field-grown tomatoes, also known as slicer tomatoes, are now getting $5 or less.

The abundant crop is rooted in last winter’s cold weather in Florida, which delayed the development of tomato plants. The overdue harvest hit the market in May just as DiMare Co., where Mr. Dolan oversees California field operations, was picking tomatoes near Palm Springs

Well, you win some and you lose some. The farmers had a bad growing season, and now all the tomatoes have come on the market at once. That’s how business goes. Well, unless the government steps in.

The U.S. Agriculture Department estimates that wholesale tomato prices fell to 25 cents a pound in June, down 78% since March. The current price is “the lowest number that I can remember seeing,” says Gary Lucier, an agricultural economist and tomato expert at the USDA.

Worried about the impact of the plunge on farmers, the USDA is buying $6 million of tomatoes and distributing them to food banks. Agriculture Secretary Tom Vilsack said the purchase is designed to give Florida farmers “some relief.”

Would someone tell Tom Vilsack that consumers need some relief after the Fed has inflated prices sky high over the past decade. Here we go with the market prices reflecting what is really going on, and what does the government do? It steps in and starts handing out cash. Instead of letting consumer demand rise with the lower prices, the government steps in as a huge consumer and drives the prices up. While I’m sure it buys them big agriculture’s vote  and donations, it does not help “The People”.

January’s freeze in Florida destroyed about two-thirds of the tomato crop in one major growing region, according to the USDA, citing industry estimates. As supplies withered, prices spiked, and some of the increase was passed on to consumers. In the first quarter, U.S. average retail tomato prices rose 24% to $2 a pound.

via the WSJ Tomatoes Go From Shortage to Glut – WSJ.com.

So where was the government when the prices spiked? Did they step in to help the consumer? Of course not, nor should they have. This idea that farmers need “relief” is silly economics. If the price of tomatoes drop, more tomatoes will be bought. Yes, farmers will make less per tomato, but they can make up the difference with volume. It’s no different than the local store running a sale on some product that has been sitting on their shelves. The local store realizes that the price is too high, and at the current price the demand isn’t there. So, what do they do? They run a sale. While they don’t make the same amount per item, they make it up on volume and getting the products off the shelf where they are making no money.

The farmers know this is coming, and they should plan for it. And I don’t mean by lobbying local politicians for “relief”. No on gives relief to the local Kmart when they stock too much of an item nobody seems to want. Farmers can run sales as well. They will survive. Some may go out of business, just like every other industry. Then guess what happens? There is less tomatoes produced next time and prices go up. Then when the price go up, farmers will be incentivized to move back into growing more tomatoes.  The free market works, and it doesn’t require the government plundering everyone every time some crop doesn’t come in the way farmers would like at the price they’d like.

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Fannie and Freddie may cost tax payers $1 trillion

Posted by Jason | Posted in Miscellaneous | Posted on 16-06-2010

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I saw this article this morning on the Tribune Review. Just think about the amount of money that is going to go into these two government entities, and what the people actually get out of it.

WASHINGTON — The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by taxpayers, have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, and Freddie in McLean, Va., own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

Fannie and Freddie account for 53% of the $10.7 trillion dollar residential mortgage market, which comes out to $5.35 trillion. If it costs $1 trillion to bail them out, that is 20% of the mortgages that they hold. Shouldn’t 1 and 10 home owners nation wide or 1 in 5 home owners that have a loan held by these two entities have a home free and clear? How about every home owner have their mortgages reduced by 10%? While I don’t really think that is a good idea, because the money will be either borrowed or printed, I don’t think it make sense for the American people to have to eat $1 trillion dollars in mortgages to keep these entities propped up. Let them go bankrupt. Other banks will pick up the pieces.

The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.

If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.

Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pa., said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.

“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.

Fannie and Freddie are deeply wired into the American and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Obama’s desk by July.

Deeply wired means there are very wealthy and powerful people who stand to lose a lot of money if they go under. They want the American people to subsidize their losses, and our government is all too willing to give them what they want.

Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.

“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.

With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative — cutting the federal lifeline and letting the companies default on their debts — would produce global economic tremors akin to the federal decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Conn., who helped create the S&P/Case-Shiller indexes of property values.

“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said. “We can’t let Fannie and Freddie go. We have to stand up for them.”

The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers at the same time private companies were gaining market share by pushing into subprime loans, Fannie and Freddie lowered their standards to take on high-risk mortgages.

Treasury Secretary Timothy F. Geithner has vowed to keep Fannie and Freddie operating.

“It’s very hard to judge what the scale of losses is,” Geithner told Congress in March.

One idea being weighed by the Obama administration involves reconstituting Fannie and Freddie into a “good bank” with performing loans and a “bad bank” to absorb the rest. That could cost taxpayers as much as $290 billion because of all the bad loans, according to a May estimate by Credit Suisse analysts.

Keeping Fannie, Freddie afloat might cost up to $1 trillion – Pittsburgh Tribune-Review.

Great idea Obama. One bank where his cronies can maintain their profits without risk and another bank where the tax payer can eat the losses. Awesome!

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Say Bye Bye To Your Secret Swiss Bank Account

Posted by Jason | Posted in Economics, Government | Posted on 15-06-2010

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Switzerland has been the home of off shore banking for a very long time. People who want to keep their money off shore, are doing it to protect their money from the modern day mafia, the US gov’t. Well, not for long. The Obama administration has vowed to go after those who believe their money is theirs, whether it is at home or over seas.

The Swiss were not giving in until just yesterday when their parliament approved a treaty with the US that would hand over files on their clients.

ZURICH—The Swiss Parliament Tuesday approved a treaty with the U.S. that will hand thousands of files on suspected tax cheats to U.S. authorities.

A majority of 81 to 61 lawmakers in Switzerland’s lower house have voted in favor of the government-backed deal. Fifty-three lawmakers abstained on the issue that has been portrayed as a nail in the coffin for Swiss banking secrecy.

Tuesday’s vote passed after the powerful Swiss People’s Party dropped its opposition. A first attempt last week to have parliament approve the treaty was blocked when the nationalist party and the left-wing Social Democrats voted “no.”

Technical details remain to be ironed out and the proposal may still be put to the Swiss public in a referendum before it finally becomes law.

Subjecting the bill to a referendum would likely mean that Switzerland would fail to meet the August deadline set in the pact with the U.S. because of the months it takes to hold a signature drive to launch a referendum in Switzerland.

The August 2009 settlement reached between Swiss and U.S. officials aims to resolve a conflict between Switzerland and the U.S. over data on wealthy Americans suspected of using hidden offshore accounts at UBS to avoid paying taxes.

OK, now two things are going on here. Number one is that the American government is so tyrannical that they will go after your money anywhere on the face of the earth. There is no such thing as personal property. There is no such thing as doing what is best for your money. They will chase you down literally to the edge of the earth. If that isn’t tyranny, I don’t know what is.

Second, the Swiss Parliament is completely screwing their people. If they turn over the files of wealthy Americans, what reason do wealthy Americans have in the future to put their savings into Swiss banks. They don’t. What will happen is savings will dry up in Switzerland. This means less capital for Swiss lending.

When savings are built up in banks, banks, in order to make profits, lend out that money. They lend it out to businesses, who then will look to grow the economy. In this short sighted attempt to appease the US regime, the Swiss will be giving up those savings, and they will be giving up the economic growth that that savings would have stimulated. In short, they are screwing their citizens, because the US regime wants to screw it’s citizens.

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Is Obama’s Demand For A BP Fund Just A Way To Limit Liability?

Posted by Jason | Posted in Government, Miscellaneous | Posted on 14-06-2010

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There is no doubt BP has bungled the handling of this oil spill. What is even more bungled is the government’s back and forth trying to act like they are or even can do something about this that will actually help. Most recently, Obama is now calling for a fund to be setup to pay claims.

From the Wall Street Journal:

The Obama administration, facing growing public anger over the Gulf of Mexico oil spill, plans to ask BP PLC to establish an independently administered fund for reimbursing victims—in effect, taking some of the compensation decisions out of the company’s hands.

White House officials on Sunday said they wanted BP to put “substantial” funds into an escrow account to cover claims by Gulf Coast businesses and residents affected by the spill.

President Barack Obama plans to bring up the idea at a White House meeting Wednesday with top BP executives, including Chairman Carl-Henric Svanberg.

The call was echoed by congressional leaders and state officials. In a June 10 letter to BP released on Sunday, Senate Majority Leader Harry Reid (D., Nev.) and other Democrats asked BP to establish a $20 billion account, administered by an independent trustee, that would be used to pay the damages and clean-up costs associated with the spill. Florida Governor Charlie Crist and other officials in the Gulf Coast region joined the chorus.

It remained unclear how any such funds would be supervised, in particular who would oversee the compensation decisions. Administration officials on Sunday didn’t comment on the size of the escrow account they will seek, or on where money might come from. Nor did officials detail the legal status of the proposal.

Such a fund would provide a measure of security, proponents argue, for people concerned BP might file for bankruptcy protection or otherwise stop paying claims at some point in the future. It also has the potential to give the government or its designees control of distributing a significant pool of relief money.

OK, so the fund does not sound like a bad idea other than the “It remained unclear how any such funds would be supervised…”. That sure sounds like a nice slush fund for someone.

While not opposed to the idea of the fund, BP objects to the implication that if it isn’t required to set money aside, it might try to avoid paying it in full, according to a person familiar with the company’s position. BP insists it has the financial muscle to settle the final bill for the clean-up, as well as pay its dividend.

From BP’s side, maybe they do have the means to pay the bill. If there is no fund setup all at once, BP will be able to handle claims as they come, which will help cash flow. If the government tells them to setup a fund, and it’s required to be funded all at once, that could really harm BP’s chances of recovering from this. Cash is king, and if cash flow runs out, BP may be too tarred and feathered to raise capital.

Legal experts struggled to come up with a precedent for such a move. Examples of government-run funds exist, but they differ from the proposal facing BP.

Are we trying to act like our government cares about the law now?

In the early 1980s the government passed Superfund legislation that would create a fund to pay for the cleanup of hazardous-waste dump sites.

Through the law, the Environmental Protection Agency can compel the polluter to clean up the site or pay for it through the Superfund and sue for reimbursement.

Around the same time, the first of about 40 trust funds were set up with court approval by Johns Manville Corp. and later other companies with asbestos liability to alleviate some of the problems of lengthy asbestos-related litigation. But their creation stemmed from bankruptcy proceedings for Johns Manville. The trusts now oversee about $20 billion in assets, a sum that has nearly tripled since 2005, consultants say.

What they don’t say is this huge fund created an industry of lawyers looking to make millions off these claims. Instead of settling suites for those effected by asbestos, it was really a pay off to the trial lawyers.

Typically, corporations fund such victims accounts to settle class action lawsuits, although there have been a few examples of legislatively mandated funds such as the 9/11 victims fund, according to Howard Erichson, a law professor at Fordham University. “If the idea is to get BP to do this voluntarily, the question is what’s in it for them? Is there some liability protection in it for them?” Mr. Erichson said.

See, here’s the pay off to BP. While the government is trying to make it seem like it’s coming down hard, they will really setup an escape route for BP. They will put in liability protection for BP.

What I would like to know is why are we pushing to have a fund setup now? Did we not know there are risks involved in what they were doing, and shouldn’t we have planned accordingly? Of course, they didn’t because instead of focusing on liability they focused on buying off the government regulators. In a free market with private property protection, companies would buy insurance for liability protection. Insurance is the fund that would pay claims. Why is there not drilling rig insurance that pays out when something like this happens? My guess is there is no need for an insurance company to provide insurance like this, because government is used as the insurance.

Let’s just think about how this should work. If I’m BP, and I’m proposing to drill one mile below the ocean. One of the first things I should be thinking about is how will I pay claims if this goes bad? I better get insurance. Then the project should be submitted to an insurance company. The insurance company would have the expertise to evaluate the riskiness of the project. Then based on that, they would say, “BP, we are willing to issue a policy on this project for X number of dollars. Here are the things that we would require to issue this policy. 1.) You must use this latest technology. 2.) You must have this expertise on site at all times. 3.) We will inspect the rig weekly…..”. You get the picture.

Now, the insurance company is basically saying we are taking the risk off BP, and to do this BP will pay them so much money and meet certain criteria. The insurance company now must limit it’s chances of having to pay out claims. That is how they make money, and YES, this is a good thing. Insurance provide a valuable service to society, so quit letting the government smear insurance companies.

Anyway, so the insurance company will take actions to limit their chances of being liable. How will they do that? They will first take actions, such as inspections, to make sure that the rig is up to the highest standards. Also, they will develop clean up plans ahead of time, so they can quickly take action and limit their losses before the problem gets out of control. If they don’t, they run the risk of losing money on this policy.

So as you can see, this is how a true market works, when there is real private property protections in place. Instead, we have a government regulated market, where there were laws on the books capping the oil companies’ liability at $75 million. Why buy insurance or why provide insurance, when the government already said what your cap is? Oh sure, Obama is grandstanding and trying to make it seem like he’s coming down hard on BP. The truth is they will setup a way for BP to limit it’s liability. They will protect big oil. Even if BP doesn’t make it through this, the billionaires at the top have already put into place a way to limit their losses. Entities, government created of course, will be moved around, gobbled up, etc, but make no mistake about it. The government is and will protect their rich masters, instead of doing the one simple thing a just government is supposed to do, protect property rights.

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Newspapers, iPads and Horse Carriages

Posted by Jason | Posted in Economics, Government | Posted on 04-06-2010

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In a free market, when people do not want a product, businesses have to adapt their products to deliver something that is wanted. If they do not, they will go out of business. This is a good thing, because it keeps what is produced aligned with what is demanded. For example, when automobiles came out, eventually no one wanted horse carriages anymore. Companies that didn’t adapt went out of business. You wouldn’t keep producing horse carriages when no one had horses and were driving around in cars.

Well, in modern day America this isn’t how it works. In the modern day United States of America, you just lobby the government to force citizens at gun point to pay for your product even when they don’t want it and you don’t even provide it.  Take for example the newspapers. Here is a business model that has been collapsing for years. The internet has changed the way people get their news. People can get articles from many different sources instead of just their local paper. This isn’t something that just started happening. The writing has been on the wall for a long time. So instead of adapting to deliver what people are demanding, what are the news papers doing?

The U.S. government has some creative ideas to “save journalism” or more aptly to save newspapers. Among their feel-good suggestions to help preserve the free press (paper) is to institute a 5 percent tax on all consumer electronics.

The U.S. Federal Trade Commission has submitted a multi-faceted proposal to President Obama and Congress. The FTC insists the proposal is “solely for the purposes of discussion”, though it expects aspects of it could work their way in to legislation.

The most controversial part of the proposal is to tax all digital electronics, including, but not limited to — iPads, iPods, iPhones, laptops, desktop PCs, Macs, netbooks, Zunes, Sansas, Creative MP3 players, digital cameras, video cameras, Android smart phones, Nintendo DS's, PSP Go's, Xbox 360s, Wiis, and the PS3.

The 5 percent federal tax, along with applicable state taxes, would bump total tax on these items to 10 percent or more in many states.

The proposal would suck in $25 per $500 spent on electronics goodness. The government would “redistribute” the $4B USD it hopes to haul in from the proposal to struggling print news businesses, who have seen their ad revenue drop 40 percent in the last decade as advertising has made the leap to the internet.

The full recommendation is available here [PDF]. Feel free to contact your Senators and Representatives and give them your thoughts.

Even if the government can’t find a way to enact a consumer electronics tax, state governments should help pick up the slack. Nationwide there's a wealth of measures looking to tax digital downloads such as iTunes tracks, video game downloads from Valve, and more. Critics say the laws will drive people to piracy, but advocates say they will allow the government to harvest much needed funds to pay for roads, schools, and police forces.

via DailyTech – FTC Discusses 5 Percent Federal Tax on Computers, Phones, and Consoles.

There you have it. Stick a gun to everyone’s head and  make them pay for newspapers, when they neither want nor get a damn newspaper. Instead of the person, who will have to pay this tax, being able to spend that money on something they want and that will generate new business, they are having it stolen from them to give to another business, which will not provide a product in return. Think about that.

Say you have $525 to spend. You decide you want to buy an iPad for $500. Under this tax, you’d have to pay $25 for newspapers. Do you get a newspaper. No you do not. The newspaper gets your money without providing a product. Does this stimulate business in any way? They are basically selling their products at inflated prices, but the difference between what their real customers pays and what the real price is is what the rest of society has to pay.  Nothing more is produced. There is no economic gain here. The consumer lost out on the enjoyment of whatever labor it took him to earn that $25, and the business is being reward for producing what people do not want.

Now if this consumer had the same $525 to spend as he pleases, he would buy his iPad for $500. Then he would have his $25 to encourage businesses to produce what he demands. He would actually get the enjoyment that he earned through his labor. That $25 may go to online media, which has adapted to the new business models. Who knows. When the money is spent, a product would actually be delivered and be produced. The economy would benefit. The consumer would get the benefit of his labor. The producer that was intelligent enough to produce something people want would be rewarded, and quality of life is improved. Price signals would do their job. The newspaper would then have to charge more money to stay in business. Consumers obviously wouldn’t want what they are producing, since they don’t want it at the current lower prices. The newspaper businesses would consolidate, change and adapt to survive. This is how the free market works, and the government should let it work. If we did this years ago, we’d all have horse carriages sitting in our driveways next to our automobiles.

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Buffett Defends Moody’s

Posted by Jason | Posted in Miscellaneous | Posted on 03-06-2010

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Warren Buffett was defending Moody’s by saying it was caught up in the biggest bubble he’s seen in his lifetime. Can you imagine any other watch dog group saying they were caught up in something that the group they were supposed to watch was involved in? Imagine if the FDA was promoting crack (I know. This wouldn’t be a stretch.), and then was like “We just got all caught up in the crack epidemic. It’s the biggest drug craze we’ve seen in our lifetime.”

Anyways, then Buffett says something I agree with.

But the Berkshire Hathaway Inc. chief executive expressed doubts that even radical changes to the credit-ratings industry, such as creating a government-appointed board to select rating firms, would improve the quality and accuracy of ratings.

via Buffett Defends Moody’s Management – WSJ.com.

Of course, this is always the solution from government. Give them more power. Is this just corruption in the making or what? Instead of rating agencies being chosen based on the quality of their past ratings, they will be chosen by whoever spends the most money lobbying. Look at BP and the MMS fiasco.

Only the free market can fix the rating agency system. Let the market decide which agencies are best. Large investors will not want to use corrupt rating agencies, and Moody’s will lose it’s clients. The government is not a solution here. The government will be used to keep out real competition and prevent trust worthy ratings.

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