Category Archives: political-economy

V-Stock

The Auto Bailout: the real loss is incalculable

The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That’s 15 percent higher than its previous forecast.

In a monthly report sent to Congress on Friday, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.

via Treasury: U.S. to lose $25 billion on auto bailout | The Detroit News | detroitnews.com.

I have to spend some space apologizing (in more than one sense) for posting about this. Because this is about the Obama Administration, some will think that I’m being partisan. If I try to ward this off by pointing out that Paul Ryan voted for this policy, then someone will call me a Paulbot.

In my opinion at this moment, politics is just useless. The only thing to do is to try to give people a chance to re-engage in reality. Hopefully this spreads and, amid the horrible political chaos and cultural destruction that is about to ensue, there will be enough of a memory of reality to start something new eventually that aligns with it.

In other words, this post is about economics and nothing more.

Because if we only had lost only $25 billion we would be far better off than we are now.

Or so I guess. I’m virtually certain we are worse off, but I have no way of figuring out an exact number.

So let me change the subject…

V-Stock

Awhile back the bookstore chain, Borders, went bankrupt and liquidated. This meant two bookstores in my area of Saint Louis vaporized. At about the same time, my local Barnes and Noble went out of business. Three empty big boxes and no cool bookstore anywhere near me.

I found this depressing. No pun intended.

It was partly my fault. I can’t afford to buy books. Mostly I just walked around Borders and inhaled the smell of a disposable income I wish I could have some day. I would take notes and look stuff up at the public library (see: living off of the taxpayers undermines commerce).  Other times, I’d go online and find a cheaper price. This was premeditated. I’ve used birthday money to pay for Amazon Prime, so I got free two-day shipping. That meant a discount on all books.

Hey, I would rather go to Borders and impulse-buy the way I used to to at BookStop and BookStar in Florida and then Nashville. But that was before I had children to support. Don’t judge me.

So no more places to go and sniff the pages and sit in the comfy chairs…

And then V-stock opened up for business in one of the ex-Borders locations.

All of a sudden, I had a place that, like Borders, sold music, videos, and books, but also sold games and game systems, comic books, and posters. And much more importantly, it sold these not only new but used, and would buy stuff from me and give me either cash or store credit!

I now own a hardback edition of Tim Powers’ The Anubis Gates! It was only $10 and in perfect condition, but I didn’t touch it until the store had their 3 for $10 hardback sale!

I have bought Wii games for the kids with nothing more than old DVD sets I got for past birthdays!

So what if Borders had been bailed out?

I would have still had my window-shopping museum. And everyone would praise the bureaucrats for saving jobs and propping up the commercial real estate market.

No one would know or care about the fact that V-stock wasn’t growing as fast. It wouldn’t be a blip on anyone’s screen.

And no one would care that I had fewer books or games in my house. As a consumer I wouldn’t matter at all.

We didn’t bail out “the auto industry.” We bailed out specific companies using scarce resources in ways that consumers don’t want. We will never know what would have happened if all that capital had been re-allocated by more efficient producers who were better able to meet consumer demand.

We didn’t just lose $25 billion (and I’m sure that’s a low figure anyway). We lost less expensive cars and other things that would have benefited the people. We would all be better off if the government had taken all those billions of dollars and just burned them and left us with the freedom to force inefficient businesses to stop and better businesses to form.

Political democracy has, once again, conquered economic democracy.

related

Are workers free “under” a free market?

Class consciousness could help

Scarcity is worse than abundance!

If this be materialism, then fire up the stake and chain me to it

I just returned from Musoma, Tanzania, a place that could stand for thousands of others such population centers in Africa, or millions if we include Asia.

I want people who are not trusting Jesus as Lord and Savior to do so, in the millions billions.

That is not all I want.

I want people to be able to turn on a spigot in their homes, instead of walking for hours a day with a heavy burden half that time. I want them to see water flow from that spigot that is perfectly safe to drink, not the poison that most of them presently consume.

I want their homes to be protected so that most insects are kept outside, or better, I want them to find a way to kill most of the insects around their homes.

I want their food to be kept off the ground when they prepare it and to have a clean place to eat it.

I want their roads to be smooth and wide to allow trade both ways.

I want them to have cheap and available transportation so they can both trade and work at the places that are most rewarding (which will be where their products and labor are needed the most, by the way).

No, more than that. I want a near generation in Musoma to have the ability to allow their young adult kids to go on a road trip to the West Coast to see the Atlantic without having any serious concerns about the safety involved.

Sooner, I’d like people to be able to travel at night without making special arrangements for a policeman with an AK-47 to accompany them.

I want them to be rich. Understand? I want them to be so wealthy that they no more remember what life is like for them now than we remember what it was like to live in cities in the late 19th and early 20th century when epidemics due to bad water and sanitation were still killing thousands.

I want their babies to live to grow up.

I want someone to see the chlorinator, that uses salt and a car battery to make water safe, and say “I can make that better and cheaper.” I want him to find a way to mass market it and sell it to millions of people in Africa and Asia. And if he gets filthy rich in the process, while he saves the lives of tens of millions, that if fine with me.

I want Westerners to actually see Africa and Asia as an amazing opportunity rather than a charity case that keeps them in death and darkness while lining the pockets of NGOs. Africa is to the Charity Industry what Mars is to NASA. A golden goose.

I want Western governments to realize that poor, corrupt nations are not in our best interests even if it allows us to make them do what we want them to. Rather, a planet full of wealthy nations will bring incredible riches to the West, rather than a planet dominated by poverty.

I want a refrigerator and a freezer in virtually every home.

And yeah, to make this more pointed: We pray for this every time we say, “Thy Kingdom Come.” God wants us to thrive, not linger in death.

A pragmatic answer to the pirate’s accusation

Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea, he answered with bold pride, “What you mean by seizing the whole earth; but because I do it with a petty ship, I am called a robber, while you who does it with a great fleet are styled emperor.“

via The biggest pirate of all.

Thus wrote Augustine of Hippo in his City of God.

What is the difference between a pirate and an emperor? The emperor can offer safe passage over the sea. An emperor can get income from both the originating and the destination port cities and so be motivated to not discourage ocean trade. The pirate can only take as much as he can get at the moment. He has no long term basis for income beyond what he is able to hunt down.

Is it “worth it”? I have no idea how anyone can calculate that. God has allowed empires to arise, and not always (or exclusively) as punishments on the people under them.

We might think about modern republican forms of government where office holders only possess a position of power temporarily and have no authority to dictate their successor. Are such people, only able to benefit in the short term from their decisions, going to behave more like an emperor or king who hope to pass on a thriving inheritance to an heir, or like a pirate getting what he can when he can?

In World War I, the American government worked to destroy Christian empires and dethrone royal dynasties. One might ask if we have essentially criminalized family businesses and replace them with publicly traded companies as the only allowable form of corporation.

The results may not be sustainable.

American Empire: The problem is not simply the Bible

Eventually, anyone who reads the Bible, will realize that “Empire” is not a word that always describes something evil.

Nevertheless, American Christians find something unsavory about the idea of their government functioning as an empire. The debate is usually over the question of fact: an empire is considered evil and what is denied is that America is one.

I, for one, think that the Bible shows us empires that bring progress in human history. But the problem that lurks in the background, never to be explicitly addressed, is the issue of legality. American Christians typically see government as an entity that depends on legality, rather than an area of anarchy. They hear how Constantine (or Solomon?) had to kill a bunch of relatives and think that cannot possibly be Christian.

But the legal framework in the United States, whether best or not, simply does not allow for an empire. And the move toward it has been through actions on the part of government that warp the division of powers beyond recognition. The President is both war initiator and legislator.

So in my judgment, the antipathy to empire is not Biblically naive, even if the explanations for it are. It derives mainly from the Christian instinct to conserve the law what order is already present in society.

Empire may promise power and order abroad, but even if it could possibly deliver on such promises, it can only mean revolutionary regime change at home. And that is all it has meant at home.

My opinion of Obama’s remarks about success and “the village”

There are a lot of wealthy, successful Americans who agree with me, because they want to give something back.  They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business. you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.  There are some things, just like fighting fires, we don’t do on our own.  I mean, imagine if everybody had their own fire service.  That would be a hard way to organize fighting fires.

So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together.  That’s how we funded the GI Bill.  That’s how we created the middle class.  That’s how we built the Golden Gate Bridge or the Hoover Dam.  That’s how we invented the Internet.  That’s how we sent a man to the moon.  We rise or fall together as one nation and as one people, and that’s the reason I’m running for President — because I still believe in that idea.  You’re not on your own, we’re in this together.”

via Did Obama Say “If You’ve Got a Business, You Didn’t Build That?” – ABC News.

My immediate reactions, in no particular order:

  • There are a lot of wealthy, successful Americans who agree with Obama because they know they got their wealth by paying him off or someone like him to given them a monopoly source of income at public expense.
  • There are a lot of wealthy, successful Americans who agree with Obama because they know his policies will allow them to keep prospering at the expense of the public in the name of helping them. Virtually everyone involved in college and university education, for example, is a source of garbage about “helping keep college affordable” while advocating policies to try to extend the life of an unsustainable bubble.
  • Why is “the Golden Gate Bridge” looked on as a shiny example of justice and collective power, and not a misallocation of resources? Pharaoh could claim that the pyramids could only be built by us working together. NASA still sings that song. Try this: they are the 1%.
  • “If you were successful, somebody along the line gave you some help.” Absolutely, someone trying to be successful. Not their enemy and antithesis, a politician. Obama thinks his point leads to socialism. But it actually proves the opposite.
  • In a free market where people trade with each other without threatening violence to gain their stuff, the only way anyone can succeed is by trading what he has with others who are willing to trade with him or her. You can’t succeed unless you are “giving back to the community” from the beginning; and you will never stay successful unless you continue to do so.
  • Obama wants a society where it is easier to receive bribes and give kickbacks. There is a whole society of wealthy people who know how this game is played and who back him. They also back Romney. We are screwed. But let us at least know it for what it is rather than endure this disgusting and hypocritical moralizing.
  • Obama is going to create a society that is destroyed by its political class and its dupes. It is inherently destabilizing.
  • The idea that going to the moon was some kind of triumph is an amazing one. No Pharaoh  was ever able to convince the slaves that they wanted to build the pyramids. It is truly breathtaking that the State hucksters are able to appeal to this and everyone believes it.
  • Obama is very confident that private roads and fire protection services won’t work. But I have had free market road service twice now for about the quarter of the price I paid for one incident when the government cronies raided my wrecked car and “helped” me without my consent. They, of course, had a much nicer tow truck and had plaques on the wall of their “business” from the local police force thanking them for their contributions for the Corruptocratic Cover du jour. I’m not going to take Obama’s word that these things couldn’t be arranged better by the private sector.
  • Private protection, for example, would never randomly enrage people by sending expensive drones to murder at random overseas. It takes a state to invent that sort humanitarian and economic insanity. (And, by the way, government contractors are not the private sector).
  • There are a lot of smart people out there. I hope we see more of them. They watch Russia Today on the internet and vote for Ron Paul. And they are smarter than me; they would never waste time responding to this garbage from Obama.
  • The fact that “people” help you doesn’t mean you owe Obama–or his government, his military, or his cronies–one cent. Even if you actually robbed people to get your success, how can you pay them back by giving more wealth to people who want to rob them more?
  • People think that Obama sounds vaguely like Jesus. He does. Jesus spoke of how people owed God, who created, sustains, and controls all things, and should help the poor. Obama replaces God with the State, taking credit for all things, and says that we must give more to It, and trust It to help all those people.
corp-jet

When private ownership is not private ownership

Hoping to be nominated federal judge, Burton starts passing on major clients to Nick. The CEO they start with makes merger negotiations excruciating because of his selfish hidden agenda concerning a company jet. Jake proves his social skills can be valuable.

via The Guardian (2001) – Episodes – IMDb.

I’m watching this on Netflix during down time. It is a pretty interesting show. Much of it is typical melodrama, but sometimes you get insight from it.

This episode was one of those times. Nick is supposed to arrange the acquisition of a specific company for the CEO of another company. The amount the CEO is willing for his company to pay is challenging, but Nick brings it off by getting the target company to agree to sell off non-essential assets. His client is livid about this.

Nick is clueless but finds out from his boss/father what is going on. The entire real motive for acquiring the company was to acquire the company jet.

“If he wants the jet, why doesn’t he just buy it?”

“Son, he is a CEO! He’s not rich. He can’t afford it.”

So perhaps you never realized that CEO’s are poor, but they seem to be aware of it.

Private property and free trade works because it is in people’s best interests to serve the interests of others. I find it hard to understand how our current arrangement of “publicly owned” and traded companies can possibly count as private property. If you have thousands of shares, how much is the owner of some of those shares really an owner?

What we have are a series of institutions that are “owned” piecemeal by a group of people with no long term state in the value of these entities. As long as they jump ship in time and move to another stock, they are fine. And then they are run by people with no long term interest in the future of these entities.

This is not a formula for long term prosperity; and it is arguably not a system of private property.

Understanding Economic Justice and Logic


Justice

You hire ten people for $10/hour. This means, the average wage is now $10/hour among your employees.

This seems too low to a some people who gain political control. So they make a law that forbids you from hiring anyone for less than $12.50/hour. You do the math and realize that you can probably make do with only eight employees if you are forced to do so, but you simply can’t afford to lose the extra, $25/hour.

So you fire two of your employees. This means that the average pay of your workers is now 25% higher than before. This is trumpeted in the news as a major government success story. When the rise in unemployment is reported, it is presented as a new problem to be solved by a comptent government, not the results of unjust government tyranny.

Injustice

You pay ten employees $10/hour but realize they don’t have time to do all the work. You think about hiring one more person, but then realize that the time is mostly consumed in tasks that don’t require skilled labor. So instead of hiring one person you higher two students who still live at home and didn’t graduate from High School for $5/hour (pretend we don’t have a minimum wage law that makes it illegal to hire people at that rate, forcing them to remain unemployed).

This means you are a harsh and unjust business. You are now paying 12 employees collectively $110/hour. That means the average pay per hour has gone from $10/hour to less than $9.17/hour. This fact is reported in the news media as if you have lowered the pay of all of your employees.

You are evil and are going to go to hell.

(In the meantime, with our present minimum wage laws, those non-graduates never get a job and never learn skills and opportunities that come from being employed. They are stuck at the bottom of the ladder with all the rungs they could reach kicked out from above them.)

Wisdom, Faith, and Militarism

n Deuteronomy 17:14-17, Moses indicates that Israel would eventually grow up to the point when they would have a king. This progress in the life of the nation would indicate a maturity beyond their priestly childhood into a kingly adolescence. The king would rule not only by use of the law of Moses but also by application of that law with wisdom, a knowledge of good and evil. In Deuteronomy 17, Moses outlines three commands specifically for the coming king in his rule over the nation: don’t multiply 1) horses, 2) wives or, 3) gold (16-17).

I recognize that the nation of Israel had a very specific and special role in the world at that particular point of history, which placed particular and peculiar requirements on them in fulfilling that role. I also recognize that the requirements upon that nation are not necessarily paradigmatic of civil rule for all time. Nonetheless, those requirements can be instructive to civil rulers today who desire to emulate biblical wisdom in their policies.

Israel got her king a generation too early due to her impatience to acquire and exercise a knowledge of good and evil before God’s time. Saul, though initially righteous, turned out to be a disaster. Yet, with the coming of David, in God’s providence, Israel was ready for a king. With the coming of David, Israel’s borders became established and secure. Her internal enemies were suppressed. Worship was set up in Jerusalem. And the nation became unanimously unified around that worship and the ruler God had placed there.

via Practicing the Kingdom: Walls Not Horses: Wise National Defense.

Haven’t had time to blog in awhile and still don’t. However, I have been thinking about a post on national defense. Thankfully, some great work is already done. Please read the whole post at Practicing the Kingdom.

Confused and contradictory laws are a strategy, not a mistake

“Did you really think we want those laws observed?” said Dr. Ferris. “We want them to be broken. You’d better get it straight that it’s not a bunch of boy scouts you’re up against… We’re after power and we mean it… There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What’s there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced or objectively interpreted – and you create a nation of law-breakers – and then you cash in on guilt. Now that’s the system, Mr. Reardon, that’s the game, and once you understand it, you’ll be much easier to deal with.” (Ayn Rand, Atlas Shrugged‘ 1957)

“Say what you will about the Ten Commandments, you must always come back to the pleasant fact that there are only ten of them.” — H. L. Mencken

How printing money can lead to deflation

Debasing currency is a form of fraud. God doesn’t like it. It makes things that are worth something lose their value. But, for a while, it goes undetected so that the first spender gets to defraud the first buyer.

In a fiat currency system it is hard to understand how mere paper can be debased. But when more money is printed it has the same effect. The new money is spent by the government and the people closest to the Federal Reserve system before most of the rest of the economic actors have realized that there is more money available.

So if you are selling pies in Flyover Country somewhere, and suddenly notice that more people are buying your pies, you think that you are becoming successful. Consumers preferences have shifted and they now like your pies more than they used to.

Of course, you have to raise the prices on your pies or else you would run out.

But you also realize you could hire another baker and produce more pies for more people at a slightly lower cost and so come out ahead of where you used to be while providing for more happy consumers.

It all seems great until you start noticing that everyone else’s prices are rising. You aren’t actually making more profit. The dollars and cents are just worth less. You were fooled. Your prices are going to have to stay high so you can pay your employers more and keep buying the more expensive supplies. You can’t afford another kitchen worker.

So that is the basic outline of how paper money or fiat currency works.

In that temporary moment when military contractors and bankers have new money they get to spend it on new things, and by the time the prices go up it hits the lower and middle and working classes as they see their cost of living rise.

But there are a couple of other factors to keep in mind.

If our banker overlord Ben Bernanke decided to print off a trillion dollars, not tell anyone, hide it in a vault somewhere, and then burn it ten years later, there would effectively be zero price disruption. In order to be “money” it has to reach some level of circulation.

On the other hand, people (if they aren’t stupid) normally try to hold cash reserves (this is rare now with zero interest rates and the fraud that “net worth” is more important than cash on hand having trained us to spend and borrow rather than save). Our overlords have decided in many cases to see cash reserves as “deflationary” and try to discourage them in favor of immediate consumption to “keep the economy going.” But cash reserves are something that, normally, consumers value as a safety net–as a market good. Companies want that safety as well and view it as a means of keeping the company going. So, to say that money in cash reserves is not “circulating” is a superficial observation. It is money used to meet a real demand.

This complicates the issues of monetary inflation and deflation related to price levels. If everyone prefers doubling their cash reserves to buying new cars, that will show up in most economic charts as price deflation. But it is not. It just means consumers are making choices about what to do with circulating money.

Now, I think sometimes printing money can lead to deflation. How does that happen? Hopefully you see now that the process of bringing new money into circulation is not simply a matter of printing it. It also has to be used. The bankers and military contractors are all partners in the inflation process.

And that process dramatically elevated since 2001.

The Federal Reserve kept lowering and lowering interest rates. This discouraged savings, encouraged stock market speculation as an alternative to saving (aka “investing”), and caused inflation. Under the system of Fractional Reserve Banking, all the debt was converted into leverage for more money. People took out mortgages that were converted into “investments” that were then used as collateral for more debt and spending.

Then the housing collapse started.

It never finished. The government has done everything it can think of to stop the decline in the housing market and then “stimulate” the economy by negative interest rates and bailouts and new money.”

So we started to hear about “quantitative easing” as the term of choice for new money printing.

At this point, people are sitting in houses in which they owe more than the house is now worth because of the price collapse. Banks are holding these mortgages as “assets” when they are in reality black holes of liability. They can only hope somehow the home “owners” will keep paying money and they won’t have to acknowledge these holdings as losses. Our banker overlord at the Federal Reserve thinks that printing new money will restart the housing bubble.

So the new money comes into circulation. What happens?

Banks, knowing that they are really bankrupt, use it as cash holdings! This is a real form of inflation since it keeps a bunch of useless financial corporations afloat that should be closed down so that the economy can heal. They are perpetual sores on the economy that we are told we must embrace. But that inflation isn’t perceived as the kind of inflation that people want. It doesn’t start a new bubble that allows us the illusion of thinking our net worth is increasing.

But not all the money goes into this cul-de-sac. Other money gets into the economy in food prices and energy prices. Suddenly the price of gas goes up.

And this is where the deflation might hit. Because all these people now massively underemployed are sitting in houses they can barely afford to keep. Rising energy costs and food costs are exactly what will “stimulate” more defaults and force more foreclosures. At that point, the new money that raised household expenses will further destroy the money dependent on housing values. Housing will plummet further and the net result will be further price deflation even if we are paying more at the pump.

Remember, prices vary comparatively all the time. Price deflation is when all prices taken together in an average are lower. It doesn’t mean every single price of a good on the market is lower.