Thursday, June 14, 2012

The Reason That Government Agencies Are Difficult To Deal With

Ever notice that almost every trip to the Post Office, Department Of Motor Vehicles, Public Library, Local Courthouse, or Police Station results in long wait times and terrible customer service?  The reason for this is that the government does not operate the same way that a private sector business does.   The private sector uses a profit motive as a guiding force.  For example, if a private sector business is deciding whether or not to embark on the development of a new product line, they will typically conduct market research to see if the long term gains justify the short term sacrifice involved in creating a new product.  Bad planning causes losses, and strong planning creates profits.  Poorly run businesses will eventually fold.  Only the strong businesses survive.

There is no profit motive in a government run operation.  If for example, the local Post Office is taking losses year after year, it doesn't matter because it has a base of tax payers who are forced to financially support its poor business practices.  If a citizen doesn't pay their taxes, their property is confiscated.  The citizens also risk being fined or imprisoned if they neglect to pay their taxes.  People don't like to go to prison, so the Post Office continues to operate like a black hole where reason and logic do not apply.

Here in the USA, we have the (temporary) privilege of being able to print our own currency in any amount needed at any time.  If the tax base cannot support their local Post Office, there is always the Federal Government and the printing press available as a last resort to come and bail out the Post Office with currency created out of thin air.

There are of course long term consequences of using the printing press to support failing government operations.  See also: Greece, Spain, Italy etc.  The consequences of currency printing have been discussed on this blog in previous posts.  Sooner or later the consequences will show and it will not be fun.


Monday, March 26, 2012

Why Government Is

Government is the collective manifestation of our individual fears.  Government is a belief system that is dependent upon fear.  Fear of people and cultures that we have never visited.  Fear of taking responsibility for our own actions. 

In order for government to grow, the level of fear in the society that it controls must also grow.  Government has incentive to promote fear (either real or conjured) in order to justify its own existence.  This is why the nightly news is so bleak and difficult to stomach.

Bill Hicks had it right when he told us that life is a simple choice between fear and love.  Remember, its just a ride.

Thursday, March 1, 2012

A Ponzi Crash Course

We will let the videos do all of the explaining.  The key thing to note about a ponzi is that money comes in the front door under the guise that it will be invested some place, but in reality the money goes out the back door to satisfy the requirements of a person who is leaving the ponzi.   Ponzi schemes always end suddenly without warning, with the end being triggered by a flood of sellers that outweighs the number of incoming buyers.  The ponzi ends when there are no fools left to fool.

Monday, January 9, 2012

The Unseen Effects Of Minimum Wage Laws

The purpose of minimum wage laws (or so we are told) is to increase the standard of living for the worker who is receiving wages, reduce poverty, and to make sure that workers are being payed a "fair" wage for their labor. Without bringing in a slew of charts or numbers into the argument, let us think about this logically for a moment. One question that comes to mind is, what about those workers whose labor does not meet the minimum wage? What happens to these people? We have to assume that these people will not be employed, which essentially means that they were put into poverty due to such a mandate, have a reduced standard of living due to not being paid, and have not earned a "fair" wage for a labor or service that they could have provided. Unfortunately, "fair" in the sense of wages is not determined by the voluntary agreement between the business owner and worker but instead by the outside party that mandates such a wage. How this outside party ever comes up with such a number, we will never know, but while we are all left wondering, many people will be left without a job and we will also never get to know what jobs could have existed.

Remember the days of full service gas stations? One could argue that minimum wage laws could have something to do with these services going away for good (other then where full services gas stations are forced to provide such services by law; New Jersey for example). Today, Pennsylvania's minimum wage is $7.25 per hour. Think about it; what gas station would pay a young teenager, for example, $7.25 per hour to wash car windows or check the fluids in your car? It's a service that many people miss and would not mind to see come back but again, no business owner would risk being fined or shut down because they paid an employee less then the mandated wage. If we think logically about this law, it breaks down almost immediately into arbitrary nonsense that never ends up helping anyone, especially those who could be employed had this barrier to entry in the labor market never existed.

Wednesday, December 28, 2011

The Implications Of Owing Interest On Our Own Money Supply

Our monetary system is debt based.  It is unsustainable by design.  At the root of the problem is this simple fact:  Every dollar in existence, either paper or digital, is created by the Fed.  The Fed has monopoly power over money creation.  When a dollar is created, the Fed creates it from thin air.  The Fed hands the dollars to the US Treasury. The US Treasury in exchange for this dollar gives the Fed a U.S. bond for representing 1 dollar of debt PLUS INTEREST.

And the "plus interest" is the kicker.  That's where the insanity resides.  Every year the goverment pays the Fed interest owed on the money supply.  Think of it as a minimum payment on a credit card balance.  A portion of all taxes collected annually goes right to the Fed for the priviledge of letting us use the Fed's paper money.  So when you boil it down, the Fed gives us paper to use, and we give them in return our labor, our "money".  Basically a portion of our lives in return.  Like it or not we are enslaved.

We are at the moment in American history where the debt in proportion to all taxes collected is about to "hockey stick" if you were looking at a graph, and consume an exponentially increasing portion of the Federal Budget.  What does this mean for us?  Less money for entitlements.  Less money for social security.  Less money for medicaid.  Less money to repair roads and bridges.  At some point the total taxes collected number will be overtaken by the minimum payment amount owed.  No amount of money printing can stop this process.  In fact, the faster money is printed, the faster we approach the point where the entire thing falls apart in an inflationary spiral that cannot be escaped. 

My final analysis is that the US dollar will die a death from inflation combined with a total loss of confidence from the general public in the dollar.  Noone knows when, but it is mathematically provable that the dollar will die in this manner.  It has to.  It was born to do this, and only this.  Google search "Modern Money Mechanics".  This creation was the origin of our current monetary system.  "Modern Money Mechanics" is a genius and diabolical method of silently transferring wealth and control from the masses to the very most wealthy. 

The average life span of a fiat currency system is 40 years.  Fiat meaning, money that is not redeemable for a commodity. Nixon cut all ties between the dollar and metal in 1971.  We are in our 40th year of fiat here in the United States.  Conclude from this what you will.

Tuesday, December 27, 2011

Questioning The Idea That Large Corporations Are Evil, And That We Should Only Support Mom-N-Pop Shops To Restore Economomic Prosperity In America

The current, popular economic myth goes something like this: In order to thwart large corporations such as Wal-Mart, consumers should band together and go out of their way to purchase goods and services from small local businesses rather than larger business such as Wal-Mart for example.  The idea is that large corporations are somehow degrading America and that consumers making local purchases with Mom-N-Pop stores will starve the beast by the act taking their business to small businesses.
The problem with this belief is really very simple.  In most cases Mom-N-Pop stores cannot compete with the lower prices of the larger, more efficient corporations offer.  If Mom-N-Pop are able to offer the exact same product at the same price level (or lower) than Wal-Mart, then by all means it makes sense to support them. 

This usually isnt the case however.  Take note: In this example we need to assume that the customer service and politeness of both the staff at Wal-Mart and the staff the local Mom-N-Pop shop are identical.  If this is the case, and identical widgets are being purchased, there is no logical reason throw charity at an inefficient business.  Here is why...

When a consumer goes out of his or her way to purhcase goods from the more expensive Mom-N-Pop option, it means that the consumer's wallet will be emptied faster.  Money saved at Wal-Mart can be spent ELSEWHERE in the economy.  It could also be saved and put to use by a person with an idea who needs credit.  The point is that when everyone receives the highest quality widget for the least amount of money in exchange, the economy has been optimized. 

The topic we are discussing is a classic example of what Henry Hazlitt would call "Broken Window Fallacy".  To break it down, "Broken Window Fallacy" implies that its best advised to destroy something intentionally because the person who repairs the damage will benefit.  This type of behavior is not capitalism.  Its a form of protectionism.  Other examples of "Broken Window Fallacy" are as follows:

-Bombing a foreign country, then using war spending reconstruction efforts to stimulate GDP numbers

-Enacting tariffs on imported goods to protect domestic manufacturing at the expense of the domestic consumers

-Burning crops during the Great Depression to keep certain groups of farmers in business at the expense of every person who needs to eat

Common sense says that these above examples are an overall loss for the human race yet we
hear examples very similar to these items on the nightly news as if they were unquestionable economic miracle cures for depression.  These strategies always fail in the long term because in a "Broken Window Fallacy", the massses always suffer at the expense of the few who are protected.

Saturday, December 24, 2011

A Response To Paul Krugman's Understanding Of Austrian Economic Theory

The above link contains a few responses from Peter Schiff about some of his inflation predictions for 2010, back in 2009 during an interview. Krugman gives his response to Schiff and appears to be confused about two things; Schiff's definition of inflation and also, his understanding of Austrian Economic Theory in regards to the relationship between an increase in the supply of money and the effect it has on prices.

The following link contains a graph of the True Money Supply, up until 2011, which clearly shows that there was in fact inflation.

Krugman's comment in regards to his knowledge on Austrian Theory was, "In their version of reality, it really isn’t possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that’s not only possible but what the model predicts in a liquidity trap."

This is false. Nowhere in Austrian Theory is an attempt made to say exactly when prices will be effected and also what prices will be effected, due to an increase in the supply of money. When new money is created, it is impossible to know which sectors will obtain this new money and when. One thing that Austrian Economic Theory does mention is that when this money finally does make its way to a specific sector, then yes, prices in that given sector will increase. But it must be understood that the theory does not make an attempt at saying when and where the money will go to have this effect.