The (insert you favorite here) Government Reform

A common and very dangerous misapprehension is that money is wealth. A moment's reflection should reveal the error of this way of thinking; just consider the Yen vs. the uS Dollar. Today, one uS Dollar is the same as 88 Yen, so is Japan 88 times as wealthy as the uS because they have 88 times as much money? Of course not. If we multiplied the number of uS Dollars by a factor of 88, would we be any richer? Well, whoever got the new money first would be, but as a whole, no.
Wealth is the goods you can buy with your labor, and the monetary unit is irrelevant in that respect. Zimbabwe is very poor because a day's labor will barely keep one alive for another day. The uS is relatively rich because a day's labor will feed a family of 4 for about a week. Goods are wealth, and the more excess of goods that are produced in a society vs. being consumed and destroyed, the wealthier that society can be.
Government produces no goods, because everything they have must first be taken from someone who produced that wealth. Government can only take and consume goods and so destroy wealth.
The so-called "Reforms" we are inundated with these days are nothing more than huge increases in the size of government, which as I said is a net destroyer of wealth in any society.
When it comes time to vote next year (if you are so inclined), remember that Bigger Government = More Poverty and vote accordingly.

Slavery

During the seven years of famine in ancient Egypt, Joseph kept the people alive by first selling the stored grain to them. Then when their money ran out, he sold them food in exchange for their livestock. Finally when the people had nothing left but their bodies and their land, they sold their lands to Pharaoh and themselves into slavery in order to survive. Joseph then allowed the people to remain in their land and to grow food there and to pay 20% of all they produced to Pharaoh who owned them and their land.
When the people of the united States pay more than double that percentage in homage to Augustus with little complaint, what does that tell us about the "Land of the Free"?

Hypocrisy

The gap between what we say and what we do is hypocrisy. As human beings, we are prone to inconsistencies such as these, but the correct way to deal with our own hypocrisy is to always keep the gap as close to zero as possible. As every child knows, true beliefs are reflected in actions, not in words, so when we discover that our actions diverge from our declarations, we must listen to the more convincing voice of action.
We must first know the truth, then act on that knowledge without compromise. If we then discover a gap, we must either confess our error of belief or our error of action. This is not perfection, but it is integrity.
The world watches carefully.

Government creates poverty

No government has never made a society more wealthy without stealing that wealth from another country. Within its own jurisdiction, it steals from one group and gives to another then charges everyone for the "service". Any society must be poorer in direct proportion to the size of its government. That is unless they start a war in order to steal the wealth of a weaker country.

Producers and consumers

The natural state of the world is that societies consist of producers and consumers. Producers are those who are net creators of goods that are desirable and for which people will trade their own labor or rightfully owned goods. Consumers are those that on net, produce fewer goods than they consume. I say that this is the natural state of the world because each person necessarily progresses through life by first being a net consumer as a child, then hopefully a net producer during his or her working life and finally a net consumer again in old age.

We have advanced as a civilization because millions of people have produced more than they have consumed for many centuries. But in recent centuries, humanity has encountered a troubling new trend in government encouraged consumption. Around the world, governments have learned to tax their people not only through direct collections, but also through systematic and intentional debasement of paper currencies. The proceeds of this debasement are then wasted on agressive wars (enriching the preferred military hardware providers), welfare (encouraging net consomption and guaranteeing re-election of certain politicians) and corporatism (enriching banks and other large corporations by protecting them from competition and also insuring large donations for politicians).

So government everywhere has gone from being a consumer of goods, which is bad enough, to being a destructive parasite on the the productive society. Have you ever seen a 1000 pound horse infested with 100 pounds of ticks? Why not? We instinctively know that when parasites reach a certain size in relation to the host, death for both soon follows.

Presently in the uSA, government consumption is over 40% of GDP. This is equivalent to a 1000 pound horse with about 700 pounds of ticks. How fast could that horse run? How long could it live?

Smaller government is not just a party platform, or the dream of pie-in-the-sky libertarians, it's a matter of economic life and death.

Statistics and Christianity

It has been said that there is no significant statistical difference between the Christians and non-Christians. As with any statistics, this doesn't really tell us much. As Mark Twain said "There are three kinds of lies: lies, damned lies, and statistics." I think he meant that numbers can be persuasive, but they are not always reliable.

Still, statistically Christians should look different from the society in general. Consider the following:

IF real Christians are defined by faith in Christ AND

IF faith in Christ produces tangible changes (such as obedience to His commands)

THEN somehow Christians should be statistically different from non-Christians.

SO, in regard to behavior touching on the morality and ethical behavior taught by Christ,

IF there is no statistical difference between the visible Christian church and the rest of the culture,

THEN within statistical error, there are about as many real Christians in the visible Church as there are in the rest of the culture.

Stated another way, there is about the same proportion of non-believers in the visible church as there is in the general society. A sobering thought.

Economic Theory

John Maynard Keynes economic theories, which are so dominant in the present economic crisis, make some assumptions about government that are interesting to examine. In Keynes estimation, the business cycle is caused by the animal spirits of fear and greed and the cure for these fluctuation is for government to overspend when animal spirits turn toward fear (the bust) and for government to underspend during the boom. The bureaucrats of today hear the first advice and love it because it means that government will always go from growth to growth. They ignore the second advice because that would mean a shrinking of government during the boom. From their perspective, smaller government can never be good.

Austrian economic theories also make some assumptions about government: their intervention into the free market is the very cause of the business cycle and nothing they undertake will make things better. In times of economic crisis, the government should tax less, spend less and never prop up losers or inhibit the market from reallocating resources away from the failures and toward others more likely to succeed in satisfying the wants of consumers. Then without government intervention in the bust, there will be no unsustainable boom and the market will only swing due to natural factors such as innovations, weather, etc. not because of interventions by government.

In the simplest terms, which of these seems more likely to be true? And which one is the most self serving?

Economic theory has profound consequences, just look at the 100+ million dead because of the theories of Karl Marx. Today, the world is suffering the results of almost 100 years of the bad economic theory that government intervention is the cure for the business cycle.

The FED's new tactic

My first inclination is always to believe that the FED (and all of government for that matter) is incompetent, not that they can't do anything, but that everything they do eventually turns out to be more trouble than it's worth. But what could go wrong with the latest tactic by the FED of paying interest on the excess reserves of member banks held at the FED? It's not hard to figure out what this policy accomplishes in the present situation, banks will leave excess reserves deposited at the FED rather than lend. This nullifies the fractional reserve multiplier by preventing the banks from lending to the extent that they normally would. It might surprise you, but the FED is pursuing policies that inhibit banks' desires to lend. At the moment, lending is not very safe or profitable, but to the extent that banks might consider lending, the FED will pay them not to do so.

So what will be the longer term effects of the FED's newfound magic policy that allows them to flood the banks with fiat money while avoiding the usual effects of the fractional reserve banking money multiplier? At the moment, this policy is working to calm the stock market and has not caused an equivalent level of price inflation. However, a plausible scenario for the future is as follows:

1. The FED creates an expectation of inflation by creating massive amounts of new money as they purchase RMBS and CMBS securities to prevent the failure of large banks.

2. Pressure to increase the interest on long term treasury securities mounts as the FED continues its buying program to keep their interest rates low.

(This is where we are now.)

3. The FED intervention (by money creation) needed to keep interest rates at very low rates mounts. Eventually, the FED must abandon this policy or risk triple digit price inflation.

4. As interest rates begin to rise, banks begin to lend since rates look more profitable, and they reduce their excess reserves. As they do so the money supply increases dramatically due to the fractional reserve lending money multilier.

5. The FED increases the interest on excess reserves in an effort to reduce their loss.

6. The FED increases the discount rate in an effort stem the fractional reserve lending.

7. The FED increases the reserve ratio in an effort stem the fractional reserve lending.

8. The FED ends the TALF and TARP programs repatriating the devalued securities to their original owners. However, this can only be done to the extent that it does not threaten the survival of the big banks and the FED will be left with the worst of the lot.

8. As price inflation expectations increase, the FED begins to sell assets into the market to reduce the money supply, but finds that the assets they own (even treasury securities) have lost value and are not worth what they paid for them. Consequently not all of the excess money can be removed.

Beyond that point, the future is even less certain. The FED, the Treasury, the Congress and the President will certainly intervene to save the economy and as usual will make the future from that point even worse than it would have been otherwise. Avoiding the crack-up boom does not seem possible at the moment, but we can always hope that at some point government will realize that further interventions only take us closer to the day of reckoning, and abandon those policies.

The Velocity of Money

The esoteric concept of money velocity is useless. The velocity of money is calculated by dividing the GNP by the money supply. OK, Let's take a peek at GNP: what is it? The Gross National Product is the total money value (price) of all final goods and services produced for consumption in a country during a particular time period. This definition suffers from several deficiencies. First, it is expressed in terms of the monetary unit, however if goods are traded directly in barter, they do not contribute to the GNP. Nor do goods and services sold which are not in view of the government accountants, such as illegal drugs, prostitution, smuggling, illegal gambling, volunteer activities, etc. So the actual GNP is somewhat larger in terms of goods produced than the figure reported. But in any case the GNP is reported in the monetary unit per year. Money supply has its own problems between M1, M2, MZM, etc. The most pertinent money supply number in this context is M1, which is the paper money and coins in circulation plus the demand deposits (checking account balances) in banks. So if we take the monetary value of all goods produced per year and divide by the total money in circulation, what are the units of our result? For example, in the uSA, Dollars / year (GNP) divided by Dollars (M1) gives units of ? / year. What does this mean? Apparently, it does not signify the average number of times the monetary unit changed hands during the year. That quantity would have units something like dollars per year per person. Yet nowhere does the number of people enter into the equation, and the actual monetary unit is irrelevant because it is cancelled out. This answer is similar to taking your vehicle speed and dividing by the distance you plan to travel. 70 miles per hour divided by 35 miles gives an answer of 2 / mile. 2 what? The answer is meaningless and tells you nothing.

The velocity of money is meaningless, but the demand for money means a lot. Money is a commodity and so is subject to the laws of supply and demand. People hold money as a store of value for future use, so if the supply of money is stable, the demand for money will also remain pretty stable fluctuating only when people's plans or perceptions change and they desire to hold more or less of this commodity for future use. The demand is for the value stored, not the unit itself, so if a society has a larger quantity of circulating money, the people in that society will tend to demand more of the monetary unit to be able to have the same value on hand and of course, that value is in the goods that the monetary unit can buy. But a problem occurs when the quantity of money in circulation fluctuates. If the money supply drops and its value increases, people actually need less money to satisfy their need for stored value, but they might tend to see money as a more desirable good and tend to hold more of it because of its increasing value. This would be especially important if they became concerned about future economic stability or employment. More ominously, when the quantity of money increases and its value begins to drop, people will at first hold more money in order to retain their ability to meet future needs, but at some point will begin to demand much less, or zero money, when it becomes obvious that the monetary unit has become useless as a store of future value. Forget velocity. Think demand, and the ability of money to perform its function as a store of value.

Political Solutions

The President says he wants a political solution to the health care problem in the united States. What does he mean by that?

Franz Oppenheimer said there are two means for people to obtain their needs. The economic means involves benefiting from voluntary trade with another person or group, and since it's voluntary, the other person or group benefits as well. Everyone is better off in voluntary trade, because both parties are, in their own estimation, receiving more than they are giving up. For example, if Mary enters into a voluntary agreement to buys Jane's purse for $50.00 then Mary wants the purse more than the $50.00 and Jane wants the $50.00 more than she wants the purse. As a result of this transaction, both Jane and Mary are happier than they were before the transaction occurred.

The other means for people to satisfy their needs is the political means. Using the political means requires coercion by at least one party in the transaction. If Mary steals Jane's purse, then Mary is better off, but Jane is worse off as a result of the theft.

So going back to the President, he wants a political solution, meaning he wants to take goods from one group, give part of it to another group and keep a cut for the State. This is true of every political solution. Not everyone will be better off as a result, but the politicians are always better off.

So politicians could be defined as those who direct the coercive taking from one group to give to another group for their own profit. Wouldn't we be much better off with an economic solution to the health care problem?

Don't look for that idea to come from politicians though; that's not how they think.

Taxation

For a person to take from another person something they would not freely give without compulsion is theft.

For a group to do the taking or a group to be taken from, is still theft.

Government is a person or group of people.

Taxation is the compulsory taking by the government from a group of people.

Therefore taxation is theft and it cannot possibly be made otherwise.

Government - Man-Made Disaster

Government – Man-Made Disaster

Let’s consider a man who sows a food crop on his farm. If he’s any good at farming, he will cultivate and tend his crop regularly, working many long hours to be sure he has something to show for his labor. Let’s say that he has done his job well and has an excellent harvest in sight when a violent storm occurs and destroys half of his crop. That’s a disaster for him – it’s a natural disaster.

But if the same man avoids the storm and sells his crop at the market price, but then has to pay half of his rightful profit in government taxes, that is not a natural disaster, it’s a man-made disaster.