In the Federalist Paper No. 12, Hamilton is arguing for the Constitution and the Union by discussing the benefits of the Union to raising revenue for the government. Quickly, Hamilton highlights something modern day socialists somehow forget, that through self interest, what they call greed, all members of society benefit.

Hamilton writes, “The prosperity of commerce is now perceived and acknowledged by all enlightened statesmen,” except for modern day socialists, “to be the most useful as well as the most productive source of national wealth, and has accordingly become a primary object of their political cares.” What Hamilton is saying is all enlightened (educated) men of this time period recognize that commerce (free trade) is the best way to build national wealth. Because this is known to be true, enabling free trade has become the object of their policy.

He continues, “By multiplying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enterprise, it serves to vivify and invigorate all channels of industry and to make them flow with greater activity and copiousness.” Here Hamilton is stating the government should encourage trade by “multiplying the means of gratification”. He talks about precious metals as “those darlings objects of human avarice and enterprise”. Basically, he is saying money and the want of more money (avarice or as socialist like to say, greed) drives people to work more and to produce more for society (enterprise).

“The assiduous merchant, the laborious husbandman, the active mechanic, and the industrious manufacturer – all orders of men look forward with eager expectation and growing alacrity to this pleasing reward of their toils.” What? You mean all these men look forward to earning profits? Those bastards! Hamilton recognizes that it is the reward of profits that causes the merchant, the farmer (husbandman), the mechanic, and the manufacturer to be productive, and the more reward the more productive they will be. He uses words such as assiduous (unrelenting) merchant, laborious (extreme effort) husbandman, active (involving physical effort)  mechanic, and industrious (working energetically) manufacturer.  He uses these words to emphasize it’s the profit motive that creates these behaviors. With no profit motive, you do not have the productiveness of these men.

Next Hamilton discusses how everyone benefits from the free market, even those who think they don’t. “The often-agitated question between agriculture and commerce (basically labor and businessmen) has from indubitable experience received a decision which has silenced the rivalship that once subsisted between them, and has proved, to the entire satisfaction of their friends, that their interests are intimately blended and interwoven.” Notice that Hamilton basically says that the interest of both labor and businessmen are interwoven. Government cannot benefit the laborers by punishing the businessman. In doing so, he also punishes labor.  He continues, “It has been found in various countries that in proportion as commerce has flourished land has risen in value. And how could it have happened otherwise? Could that which procures a freer vent of products of the earth, which furnishes new incitements to the cultivators of land, which is most powerful instruments in increasing the quantity of money in a state – could that, in fine, which is faithful handmaid of labor and industry in every shape fail to augment the value of that article, which is the prolific parent of far the greatest part of the objects upon which they are exerted? It is astonishing that so simple a truth should ever have had an adversary;” Apparently, it still has it’s adversary in modern day politicians, socialists, and labor unions, who believe that free markets don’t help everyone. But Hamilton explains, how could you increase the value of one without increasing the value of the other? You can’t increase the value of what labor produces without increasing the value of labor. Both parties benefit.

Lastly, “and it is one among a multitude of proofs how apt a spirit of ill-informed jealousy, or of too great abstractions and refinement, is to lead men astray from the plainest paths of reason and conviction.” Wow, Hamilton points out that jealousy leads men astray from reason and conviction. How true is this in modern society? While everyone truly knows that government produces nothing, many today still want the government to intervene in the free market because of jealousy. They are jealous of the rich. Because of their jealousy, they are blinded to reason which would highlight the errors of their ways. Does this remind you of the tax the rich argument? They need to pay their fair share! Who cares if they have benefited society more by creating jobs, services, products, etc. They don’t deserve that much more than the poor. Low and behold though, when government takes more of their money, they don’t create as many jobs, services, products, etc, and we are all worse off because of it. These are simple truths, but jealousy, as Hamilton points out, leads us astray from reason.

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.

Here is more proof of the idiocy of the Federal government. Because the congress has to show how much they care, they are going to drive these small toy makers out of business.

By LESLIE WAYNE | New York Times

October 30, 2009

For 35 years, William John Woods has made wooden toys for children. Each one of the 2,000 or so he makes each year passes through his hands at his shop in Ogunquit, Maine, and no child, he said, has ever been hurt by one of his small boats, cars, helicopters or rattles.

But now he and others like him — makers of small toys and owners of toy resale shops and boutique stores — say their livelihood is being threatened by federal legislation enacted in the last year to protect children from toxic toys through more extensive testing. Big toymakers, including those whose tainted imports from China led to the recall of 45 million toys and spurred Congress to take action, have more resources and are able to comply with the new law’s requirements.

“This is absurd,” said Mr. Woods, whose toys are made of maple, walnut and cherry and finished with walnut oil and beeswax from a local apiary. He estimates it would cost him $30,000 — a figure he calculated from having to pay $400 in required tests for each of the 80 or so different items he produces — to show that they are not toxic.

“I use beeswax,” Mr. Woods said. “The law was targeted at large toymakers using lead. There was no exclusion for benign products.”

via Federal Government Putting Small Toymakers Out of Business | Ron Paul 2012 | Campaign for Liberty at the Daily Paul.

This is just more proof that so called government protection is not only not necessary, but they are harmful to the little guy and all Americans. Without government intervention, 45 million toys were recalled for having traces of lead. Private businesses, in order to protect their reputation and customers, acted without coercion to remove these toys from the market. This is proof that you do not need all these government regulators and protection agencies in order to protect the public.

If there was no government agency to interfere in the free market, you would still have private watch dogs such as Consumer Reports. When they discovered lead in a toy, the media would be alerted, and the problem would be blasted out to the public, as it was when these toys were discovered to have led. Once the news breaks, in order to protect their future business, businesses will react to rectify the problem. All of this takes place without the need for government coercion. This all works efficiently with the least amount of cost to all parties involved.

But of course, the government decides they need to show they are looking out for “the people” (read my post about what the Federalist Papers say about this). In doing so, they drive up the cost on each toy produced. They drive the little guy out of business, despite the fact he uses nothing that could even contain lead. They drive up the price of toys for everyday Americans. In general they make it harder for the “little guy”.

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.

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

We may have the dumbest people in America running the country. Even most of the politicians pushing for the expanded Fed powers admit that the Fed caused the housing bubble. So, what is their fix? I think most rational people would say let’s take power away from the Fed. Oh no, not the geniuses sitting in the Capital. They want to give the Fed more power to screw up the economy. Apparently, this disaster isn’t bad enough yet. They want to see if the Fed can collapse the entire system.

By SUDEEP REDDY

WASHINGTON — Get ready for a fiery debate about the role of the Federal Reserve.

The latest financial-regulation legislation moving through Congress would give the Fed new oversight powers, including the authority to force large firms to shrink if their size threatens the broader economy.

The draft bill, released this week by House Financial Services Committee Chairman Barney Frank (D., Mass.) gives the central bank more direct authority than outlined in a proposal earlier this year.

The expansion of the Fed’s role is sure to become a flash point in the debate over the overhaul of financial regulations.

On one side are Mr. Frank and Treasury Secretary Timothy Geithner, who favor giving the Fed broad authority. On the other side are lawmakers who want power spread out among agencies. Many also charge that the Fed’s regulatory missteps helped to cause the financial crisis.

via Congress Weighs Scope of Fed’s Authority – WSJ.com.

In a great article on Reason.com, the view that the Fed caused our current crisis is highlighted in great detail. While the article focuses on the anti-Fed movement in general, you can see from the quotes and understanding of politicians and economists that the Fed is responsible for the housing boom.

Blame-the-Fed sentiment now stretches across the spectrum of economic thought, from Keynesians such as DeLong to monetarists (who generally want the bank to maintain a fixed rate of money supply growth). In October 2008, the monetarist Anna Schwartz, co-author with Milton Friedman of one of the most important books of monetary economics, A Monetary History of the United States, told The Wall Street Journal: “If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset. The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it’s so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object.”

While Anna Schwartz believes the Fed is neccessary, she admits that the Fed’s expansive monetary policy causes a boom in an asset market, the most recent being the housing market. The last one being the tech bubble.

Even the Obama administration has gotten into the act. “Monetary policy around the world was too loose too long,” Treasury Secretary Tim Geithner told PBS interviewer Charlie Rose in March. “And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful.”

Even Geithner, although he doesn’t blame Greenspan and the Fed directly, basically said the Fed’s low interest rate policies caused the spike in housing prices and encouraged the risk that politicians now blame on greed. Did Geithner forget he was on TV?

In this time of political ferment, Stephen Axilrod, a longtime Federal Reserve staff director and monetary policy guru, has issued a memoir from MIT Press titled Inside the Fed. Axilrod admits that Fed interest rate actions precipitated the crisis without letting that fact dent either his admiration for the institution or his belief in its necessity. Still, Axilrod notes something that should encourage Fed skeptics of all varieties: that “a country’s monetary policy is almost necessarily limited by conditions generated from the political, philosophic, and social ethos of the time.”

Here former Federal Reserve, and lover of the Fed, admits the Fed’s actions caused the housing bubble. He then says the Fed is only as powerful as political, philosophical, and social conditions permit.

But the Fed doesn’t have a stellar track record of timing monetary shifts with scientific precision, and any actions that rein in inflation, thereby cutting off the short-term stimulative effect that governments love, are bound to be politically dangerous both to the Fed and to the president who appoints its overseers. As Bernanke admitted at his televised town hall meeting in July, the Fed can maintain its independence only if it can “show that we are producing good results,” and while he added lip service to independence, the people he must show those results to are Congress and the administration. Though he was appointed to a new four-year term in August, if he flubs inflation, Bernanke will be facing a whole new wave of political attacks.

Bernanke states here that the Fed must show results to Congress and the Administration, which highlights the biggest problem with the Fed. While we have plenty of confirmation that the Fed caused the housing bubble, we still have politicians that want it to exsit. Why?

Because they want the Fed to, as Bernanke said, “produce good results.” What are good results? Was all Americans owning a home a good result? Was refinancing your equity away to drive up consumer spending a good result? Was as Austrian economist show, driving up unwarranted business investments a good result?

This is at the heart of the problem for any government institution. While the Fed claims its independence, it is swayed by politics.  The market delivers based what billions and billions of individual transactions say. It is fine tuned by every transaction made. Government on the other hand tries anticipating what the market needs, and it is always wrong. This is why communism was an abject failure. Government cannot conceive of the circumstances and motivations of billions of transactions. There is no difference in the ability of communist dictators trying to decide the right amount of light bulbs to be produced, and the Fed trying to decide what interest rates should be. Both of them are trying to decide for the market what they believe should be over what would normally be decided by millions of individuals acting in their own interest.  It has never worked, and it will never work. It eventually led to the collapse of the Soviet Union. Now let’s hope it leads to tearing down the wall of the Fed.

Treating the productive job creators of our society like criminals, the IRS is creating a new group to see if they can confiscate more money from the rich. Obama wants jobs so bad, he thinks if he can steal more money from the rich, they’ll decide they need to hire more accounts.

By MARTIN VAUGHAN

WASHINGTON — A new Internal Revenue Service enforcement unit targeting the very wealthy will help the tax agency decode partnerships, offshore trusts and other complex techniques used to hide income, IRS Commissioner Doug Shulman said Monday.

Dubbed the Global High Wealth Industry group, the unit will launch “a small number” of audits of individuals with assets or income in the tens of millions of dollars, Mr. Shulman told an accountants’ trade group. An IRS official said the group would begin work on these initial audits in the next month.

The high-wealth group, housed in the IRS’s large- and medium-sized business division, marks a sharpening of the IRS approach to auditing the very wealthy. Its creation is a response to the complex web of entities and transactions many high-net-worth individuals use to manage their financial affairs.

“You cannot assess compliance among the nation’s wealthiest individuals by looking only at their 1040s [tax returns],” Mr. Shulman said. “Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise.”

Wealth advisers questioned how much the new IRS approach adds, since in some cases, even under the old structure, an audit of a high-net-worth person may have looked across multiple income sources and asset classes.

However, “audits can sometimes be quite insular and silo-like,” said Ronald Aucutt, a partner at the law firm of McGuire Woods. In particular, gift-tax audits and income-tax audits are usually not coordinated, he said.

The reorganization is part of a multifront IRS effort to crack down on tax evasion by wealthy Americans. The agency is now sifting through the results of a partial amnesty program that netted 7,500 disclosures by Americans who held offshore accounts.

Write to Martin Vaughan at martin.vaughan@dowjones.com

via IRS Brings New Focus to Auditing the Rich – WSJ.com.

What is it that makes the government believe they have a right to every red cent you have? I find it funny the article says the IRS has a hard time deconstructing the complex structures the rich setup. Have you ever looked at your damn tax code? Talk about complex structures. Money goes where it is treated best. The quicker our government learns that the more we can bring it back home.