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Cronyism and the Wreckage of a Nation

Saturday, February 13th, 2016

cronyism_ftOne of the topics that comes up in conservative circles is the notion of “Crony Capitalism.” It’s a term that was re-introduced into the popular political vocabulary by Sarah Palin in the era of the Tea Party’s ascendancy, and with good reason: Too often, our politicians are for sale to the highest bidder. More often, the politicians actually use their influence as a sort of legalized protection racket. The powerful, very wealthy people and institutions are able to fork over large amounts of money to politicians as an obvious quid pro quo for the politician’s help, support or protection. Like anything else, however, I detest the misleading association between the two words: “Capitalism” and “Crony.” The problem is that the concept described by the term “Crony Capitalism” isn’t “capitalism” at all.  It’s just “cronyism.” Capitalism doesn’t operate this way. Cronyism does, so for my purposes, and for the purposes of discussion on this site, as a matter of justice to the concept of “Capitalism,” I’m no longer going to aggregate the two distinct words into a single term.  Capitalism is the greatest economic system ever conceived or practiced, because it requires respect for the individual rights of participants.  Cronyism knows no such boundaries, and is merely a form of graft and corruption disguised within and operating in the shadows of capitalism.  It’s time we make this distinction, but more, it’s time we consider both sides of Cronyism’s ledger.

Politicians who peddle influence and who use their position as a form of de facto protection racketeering are scoundrels of the highest order.  From the early Tammany Hall chicanery to the latest scandals in our modern era, the politicians should bear most of the blame, because upon their shoulders rests the highest moral culpability, for two basic reasons: One cannot purchase that which is not for sale, and the seller of influence/protection is the person who raised his or her hand to swear an oath to the Constitution.  The purchasers of influence/protection can only buy what is offered for sale, and they didn’t swear an oath to uphold the constitution or the laws enacted thereunder.  The fact that they are slightly less guilty does not let them off the hook, because they’re guilty of a serious moral breach: They’re cheating the system, and they’re undercutting the actual free-market process that is capitalism.

Let us consider the much-celebrated case of a theoretical businessman who offers the members constituting a controlling majority of a national government cash, kick-backs, and other material favors and/or prestige if they will support his latest venture.  There is no doubt but that every member of that controlling governmental majority who accepts such an offer should be placed behind bars, and never let loose again in elected office.  What of the businessman?  What should be done to him?  Should he be permitted to walk away Scot-free, to perpetrate the same crime over and over again?  Should he be held to account?  If so, by whom?  The same scoundrels with whom he conspired?  The truth is that in most cases, both parties, even caught and exposed, walk away mostly unscathed, which is why they continue to do so, over and again. Most often, the wrist-slapping goes to the purchaser of favors and protection while the seller abruptly retires from political office if the heat becomes too great. Most of the time, however, they get away with it.

Mark Levin has recently popularized the notion of using the Article V process to amend the constitution by action and amending conventions instigated by the states.  It’s still very early, and it will take a long time to bear fruit, but if the American people press it, it could become a movement that gains traction.  I think this is the natural process for amending the constitution to address the problem of cronyism.  The only way to stop cronyism, or even slow it substantially, will be to give the law really big, sharp fangs, and to make it more certain that the buyers and sellers of favors, influence and protection will be apprehended in a timely manner.

The mechanisms and triggers built into such an amendment would need to be very precise to limit prosecutorial abuses, and political misuse of the law. That’s always the difficult part, and it’s why such an amendment ought to be considered thoughtfully, but also at the soonest possible opportunity. In terms of the sanctions against offenders, I consider that to be the easy part:

  • Forfeiture of all property, money, of the individual and/or organization
  • Subject to the same individual, criminal sanctions as in treason, i.e., a capital offense

Who would administer such a law?  The Justice Department has proven to be wholly incapable of operating outside of political influence and chicanery. Leaving such powers under the umbrella of the Executive would be wholly unacceptable.  Leaving it under the control of the Legislative branch would be no more plausible, for the reasons already discussed. Lastly, placing it under the existing Judicial branch, that owes its continued funding to the Legislative branch and its appointments to the Executive seems no more fruitful. It might even require the establishment of a very limited fourth branch of government with the sole responsibility of investigating and prosecuting under the constructs of this single amendment. How we would get any of this accomplished in our current political system is questionable, and I make no claims to know the precise methodology for success, but something must be done in this vein.

Our entire political system is rife with corruption.  It extends from 1600 Pennsylvania Avenue all the way down to Anytown, USA. Most of us turn a blind eye to it, or simply shrug in helpless acknowledgement that we’re in serious trouble. A relative few of us participate in it, and that’s more the shame.  What we are witnessing with the widespread proliferation of cronyism, on both sides of its ledger, is the absolute destruction of our republic. Do you need an advantage over your competitors? Is there somebody or something you need to bulldoze? Simply beat a path to the controlling jurisdiction’s door and buy your advantage or demolish your target under cover of the law you’ve purchased. Do you need more money for your campaign coffers? Simply threaten legislation against an industry and watch them fill your coffers as a method of self-defense.  They’ll happily pay protection money for their interests.  The little guy, without deep pockets? He’s got no prayer.  He will either be steamrolled by the politicians whose influence he cannot afford, or bull-dozed by their customers, with whom he cannot financially compete.

There are most assuredly two sides to the cronyism coin.  It exists at all levels of government, in both parties, almost end-to-end. We have effectively lost our country to it, with no end in sight but for the demise of America as we had known it. Whether you’re black or white; man or woman; rich or poor; able or infirm, this system of cronyism is going to consume us all, one by one. Every one. No matter how big you think you are, there’s always somebody bigger.

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Posted in Business, Crony Capitalism, Cronyism, Election 2016, Featured, Law, News, Political Cronyism, Politics | Comments Closed

Support Firearms Companies Supporting Liberty

Sunday, February 24th, 2013

In 2003, Ronnie Barrett of Barrett Rifle fame sent a notice to California saying that he would no longer sell guns to government agencies in that state because that state prohibited sales of his company’s rifles to ordinary citizens.  Barrett has been an outspoken industry leader in the fight against gun control, and lately, his general tactic has been spreading through the industry, and this past week, he added the State of New York to the list of jurisdictions in which his company will no longer do business.  More and more companies are deciding that as a moral concern, they can no longer do business with institutions of government that are attempting to limit the rights of law abiding citizens to keep and bear arms.  This is a hopeful trend, but I’m afraid there’s more to this than a list of smaller companies making such pronouncements.  Few of the big players have gotten aboard, and it’s time for you to know about them.  Large firearms and ammunition manufacturers continue to rake in government dollars, many of them having large government contracts.  It’s time for ordinary citizens who purchase firearms to begin applying pressure by way of their wallets.

One website has actually created a form letter that can be used to send a message to firearms companies.  Naturally, the large companies like Winchester, Glock, Smith and Wesson, Glock, Remington, Colt and others comprises a vast majority of firearms sales throughout the country.  You can see a more complete list of the big outfits that haven’t joined in the boycott of sales to offending jurisdictions here.  It’s time the big manufacturers and sellers began to get the message, and it’s imperative that we begin to deliver it. In the current mad rush among many to acquire more firearms and related items, it’s high time to begin to temper this with some discerning examination of the nature of the companies with which we do business.   Large manufacturers are relying upon their name and contracts with government to sustain them against any backlash, and it’s for that reason that I would urge you to do business with companies that are openly adopting a policy to refuse to sell to governments seeking or enforcing encroachments on the Second Amendment. There is a more thorough list of those companies supporting your right to keep and bear arms as a matter of policy located at FreedomOutpost.

It’s high time that the large firearms manufacturers begin to get the message.  On that basis, it is my pledge (for what little it may be worth) that I will not do business with any company not appearing on the list of those interested in upholding the rights of ordinary citizens to keep and bear arms.  My next firearm will certainly come from somebody on this list.  It’s time we smarten up and realize that by feeding the beast, we’re making it stronger, and if large(r) firearms companies need to learn from whence their bread is buttered, so be it.  They need to feel the crush of a people who have realized that to do business with them is to support their own oppressors.  We who assert our Second Amendment guarantees of our natural right to keep and bear arms must begin to put our money where our mouths are on this issue, if we haven’t already.

In the article on FreedomOutpost, there was one interesting account from the owner of KISS Tactical, relating a story of how he dealt with the situation:

On Saturday I refused to sell a AR-15 rifle to a police officer from California. He came into my shop and wanted to buy his duty gun in AZ because the same gun in his home state would cost him more. I told him that I would not sell him the gun even though he had his department letter saying he was able to buy it. I told him that if the gun was not legal for law abiding men and women in CA I would not sell it to him. After he told me that “civilians don’t need them type of guns,” I asked to leave my shop. He stomped out mad.

I have made a decision to not sell to any gun to police department that are not legal for civilians. We build custom AR-15 and have sold more then a few to cops in a few states. I am not sure how this will effect us but as we grow and our name gets out there more we will not change this policy.

You see, it is the small(er) companies that understand that it is the principle of the matter that underlies all of our freedoms. It is one thing to say that one supports the Second Amendment, but it is entirely another to demonstrate the measure of that commitment by virtue of actions.  I am gratified to see larger or at least more prolific companies joining the list.  LaRue Tactical, from right here in Central Texas, has been among the stalwarts, and I really appreciate their bumper stickers.

We as consumers and advocates of freedom have a choice, and it’s a critical one.  We can simply buy from an unlimited list of manufacturers and sellers, or we can restrict our purchase decisions to the smaller list of companies that support our liberties.  Placed in this context, it becomes clear that we have only one rational choice, and that we must at long last begin to discern among our options with a sharper focus.  It’s also time to bring heat on those companies that are not committed to our liberties. If you’re in the market for a firearm or accessories,  it’s high time to begin looking closely at those with whom you will do business.  High quality firearms are available that will fulfill your needs while also supporting your moral position.  Reward those who understand the Second Amendment and who realize that their future is tied to the liberties we enjoy.

Note: In addition to the form submission available from the Firearms Policy Coalition, there is an editable letter you can customize and send to the large firearms manufacturers here, in Word format.

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Posted in Activism, Business, Ethics, Featured, Gun Rights, Law, News, Politics | 1 Comment »

Another Sign Atlas Is Shrugging

Wednesday, September 26th, 2012

Prophet?

Long time readers will know that I am a fan of Ayn Rand’s greatest work of fiction, Atlas Shrugged, first published in 1957.  The famed novel  has developed a following over the years because it describes a frighteningly similar world in which the global economy has collapsed, while America remains as the last enclave of a free market, also on its way to collapse under the dogmatic application of the statist doctrine of mass sacrifice.   Through the novel, readers are transported to a world in which the news media has become a lapdog for the statists, economic news is contrived and rigged to hide the onrushing collapse, while most people go about their lives with self-constructed blinders by which they are able to permit themselves not to know or even notice the facts of their increasingly dire situation.  Rand never intended the book to be prophetic, and yet with each passing day, the global economy and the financial markets provide daily reminders of her fictional work.  Economic conditions have grown steadily more awful, and yet we find the media is unwilling to show the American people more than a glimpse of the truth confronting them.  It’s as though Rand’s fifty-five year-old novel is being acted out in real life, in a modern setting wherein the technology has changed, but acts merely as another shady disguise behind which to conceal the operative laws of nature.  It now appears that Atlas is finally Shrugging.

Government has become an enormous bully, not concerned with improving the economic conditions, but instead with concealing them, and companies across the nation have been forced to collaborate in the deceit. Consider the case of Comcast.  The company announced on Tuesday that it would be closing all of its California-based call centers, reducing their number nationwide from thirteen to ten.  The original announcement mentioned that the reason the California centers were being closed was due to the extraordinarily high cost of doing business in that state. According to the Mercury News, Comcast spokesman Andrew Johnson said:

“We have concluded that the cost of doing business makes operations in California expensive and very difficult”

Scott Anderson, the chief economist with Bank of the West is quoted in the same article:

“The cost of doing business in California is a well-known problem across the country and among business owners in the United States. With the fiscal problems in California, these expenses will likely get higher. Tax rates may rise in California.”

As bad as that may be on its surface, the truth is far worse.  After pressure from the state’s Senate President Pro Tempore, Darrell Steinberg(D-Sacramento,) Comcast withdrew its earlier announcement, backing away from a statement that made clear the cause of the decision for the California closures. From the Belleville News Democrat:

“Instead, it said the California closures were needed for cost efficiencies and to consolidate its Western call centers from 13 to 10, based on customer needs, “rather than geography.” It noted that many customers rely on self-help and online tools to handle their service questions, which meant it doesn’t need as many call centers as in the past.”

I would direct my readers to consider what follows in the same article:

That turnaround was greeted warmly by the Governor’s Office.

“It is unfortunate that Comcast’s announcement to eliminate jobs in California inaccurately placed blame on the state, but I am pleased to see the executives at Comcast taking responsibility and correcting the statement,” said Mike Rossi, the governor’s senior adviser for jobs and business development, in a statement.

The governor’s involvement came after Steinberg issued a personal invitation to Comcast executives to meet “to outline their issues and discuss what my office and the Legislature might do to resolve their concerns.” Pending a meeting, he urged Comcast executives “to reconsider their actions.”

Steinberg said he was “puzzled and extremely disappointed” that Comcast representatives had not contacted his office, which represents the Natomas area, until after making its public announcement.

This is what the beleaguered people of California have as a state government:  A Governor who is more concerned with appearances and blame than with the facts.  Notice that Comcast is still going to close the centers, and more than 1,000 California workers are still going to lose their jobs, but the company’s official statements now reflect a more politically acceptable cause for the closures.  This is the sort of crime-boss mentality that now pervades government, from the Federal Government all the way down to State and local institutions of government.  They are no longer concerned with stopping the bleeding, but instead merely concealing it from your eyes, or in this case, merely causing you to believe they hadn’t been the cause.

Ladies and gentlemen, this is precisely the sort of thing that Rand described in her famous novel, and indeed, she even described a breakdown particularly in California, but she was no prophet, much as some might by now be convinced to the contrary.  Rand unflinchingly described the world as it is, and what happens when a people come to believe they have no further need to adhere to the laws of Nature, and that the technologies invented and built by others somehow insulate them the necessity to know the truth, or to somehow evade the objective reality that has been established by the laws of Nature.

At all levels, our governments now join in the gruesome spectacle of pretending that what matters is not what has happened or that will happen, but instead who will be blamed.  The mad rush of politicians to twist corporate arms is another small sign that we are well on our way to a national demise, and I expect that these instances will become more frequent as politicians try to disclaim and evade responsibility for their respective roles in the looming disaster.  Even now, our financial markets are beginning to realize the truth of QE3 (Quantitative Easing, round 3,) and as they do, the market will begin to lose its luster as a concealment for the impending collapse, and the banking industry will no longer be able to hide the truth of the looming collapse by effectively counterfeiting the value of collateral. As real household median income has fallen by 8.2% under President Obama, and as the shrinking number of jobs have caused the number of low-wage workers to increase by more than 30%, it is going to become increasingly difficult to maintain the illusion that “all is well.”

As bad as the government and media collusion in this deception may be, what may be more frightening is that as economic conditions worsen, ordinary Americans will become more polarized, divided into two general groups on either side of the gulf described by the bold line of truth:  Those who see what is and are no longer willing to conceal it for any cause or contrivance, and those who will avert their eyes lest they be forced to grasp the nature of the horrors their continuing silence will have enabled. It is questionable whether disaster may be averted, but it is certain that if the American people fail to recognize the danger, there can be no avoiding it.  It is therefore fitting that as we approach the release date of the second installment of Atlas Shrugged, the movie, and as we watch politicians scramble to avoid blame all while continuing their unrepentant war against us, it’s more important than ever that we refuse to accept the comforting lies they tell.  Their attempt to conceal their responsibility in the impending collapse should not serve as our excuse to conceal our own as Rand’s unintended prophecy continues to manifest around us.
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Note: For those interested, here’s the trailer for the upcoming release of Part II of the movie Atlas Shrugged

[youtube=http://www.youtube.com/watch?v=AF9QT43uDQU#!]

 

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Posted in Business, Conservatism, Economics, Featured, Government Reform, Media, News, Politics, Statism | 8 Comments »

Staring Down the Barrel of a Gun We Loaded

Saturday, September 15th, 2012

We Loaded It...

I’ve written and re-written this piece a number of times, in part because I don’t wish to cause undo angst, but also in part because I don’t wish to cause too little.  You can blame Barack Obama, George W. Bush, Congresses past and present, or Ben Bernanke and his predecessors for all it matters, because in the context and scope of your life, it won’t make much difference.  We are headed for a complete collapse, and the collapse is no longer some vague notion in some nebulous, faraway universe of remote possibilities.  At least one analyst has concluded that by 2014, at the latest, this country is going to enter a period of economic turmoil that will make the Great Depression of the 1930s look like a garden party.  The media won’t tell you this, whether CNN or the New York Times; neither FoxNews nor the Wall Street Journal.  We are staring directly at the muzzle of a colossal gun, and it’s aimed at the heads of every American, but neither the current President nor the current Congress will tell you how bad it has become.  For two generations or more, the hand-writing has been on the wall, but unlike ordinary ink that will fade with the passage of time, this bit of script has become bolder, heavier and finally, indelible.  There will be no avoiding it.  There will be no escape.  This time, we will go down, and we may well never stage a comeback. The gun is aimed at our heads, and we loaded it.

To understand this will take a little time, although regular readers of this site will know most if not all of the gory details.  For a brief primer on what will soon confront us, please take a look at this report on Hyperinflation at John Williams’ Shadow Government Statistics website.  It’s lengthy, but it is information every American should learn and know, because while it is a bit of a reading chore, particularly for those whose eyes glaze over at the first hint of economic and financial terminology, it is nevertheless important information, and Williams does a remarkable job of not allowing the material to become overly dry. His report really doesn’t need any dressing-up or embellishment to be terrifying.

If you’ve been paying attention to the news beyond the international developments of the last few days, you will not have missed the fact that today, the US credit rating was again down-graded again by Egan Jones.  You should expect this trend to continue for some time, but this downgrade, like the last round of them a little more than one year ago, really doesn’t tell us anything we should not have known: Our currency is on the verge of collapse, and our ability to repay debt is becoming more challenged, but the fools in Washington DC don’t tell you about it because they’re afraid if you knew how bad it really is, you might react badly.  In the movies Armageddon and Deep Impact, the governments portrayed did their best to keep their respective impending disasters secret for as long as possible.  The thinking was: If it’s inevitable, such that all we can do is make things worse between now and the impact(s) by disclosing it in advance, we should say nothing until the last possible moment.  Another way of looking at this is the question I once posited:

“The government is spending like there’s no tomorrow. What if there isn’t?”

The fact is that we don’t need Hollywood or the Mayans to provide apocalyptic scenarios to fulfill this role in our immediate future.  Our Federal Reserve(hereafter, simply “the Fed”) in concert with our Federal government have created something nearly as disastrous, and potentially, every bit as deadly.  As Ben Bernanke uses his powers as Chairman of the Fed to undertake another round of quantitative easing.  As you’ll remember from previous rounds of this same tactic, this amounts to money printing, a way to inject more cash into the market in the attempt to stimulate lending and business activity.  The problem is that each time this is done, what actually happens is that the value of the dollar falls versus commodities such as oil, or other energy sources, and the cost of everything increases.  When this happens, it makes it harder for business to operate, harder for consumers to spend such cash as they may have, and otherwise has precisely the exact opposite effect, all while driving us closer to the brink.  Bernanke is trying to drive us away from a deflationary cycle that could result if the economy stalls too steeply, but the problem is that he’s going to cause what will be infinitely worse.

At the same time, our Congress and our President have added to the problem, because each time they borrow money, the Fed is printing it into existence.  In short, both our fiscal and monetary policies are rigged in favor of inflation, and with all the money-printing, it is only a matter of time before the dollar becomes completely worthless in the world market.  Any small displacement in the market could lead to our economic demise.  Williams’ report for 2012 goes so far as to suggest that you concentrate on bare survival strategies, and defending yourself in the face of complete political and social disintegration.

I know that you’ve been reading about a “financial cliff” somewhere in the distant and murky future, but what I’m telling you to do at this point is that the veil of fog is beginning to lift because that future is no longer distant.  Williams’ report explains thoroughly the main causes of our impending doom, and this isn’t some conspiracy nut.  When he published this update earlier this year, his warnings sounded eerily like my own, and also those of a few other people who have been sounding the alarm, including some in talk radio, in conservative media, and notably, Governor Palin.  At the time of the announcement of QE2, Gov. Palin did a rather bold thing:  She announced to the world the dangers and the certain results.  Naturally, since her evaluation was based on sound economic understanding, her conclusions might well have seemed prophetic in light of all that has happened since.  The truth is that she was merely telling you what must be based on the immutable laws of the universe: There are no free lunches…or anything.

I believe this is one of the reasons the Republican leadership in Congress has done nothing to substantially obstruct President Obama’s agenda.  It is true that they would have faced some political consequences, but what’s more the case is that they are every bit as aware of the impending collapse as anybody in the executive branch.  One might view Congress cynically, and suppose they are “getting while the getting’s good,” and there’s no doubt that some of that goes on, but it’s also true that the problem is so gargantuan that they do not see how they can correct it without throwing the country into complete chaos, and since that’s what’s coming anyway, they see no point in hurrying the matter.

Some have concluded that Bernanke is taking this up now in order to try to help Obama’s re-election, and while there may be some truth to it, the fact is that the situation has been and remains much worse than you’re being told by the media.  We have been in a bottom-bouncing depression since at least 2009, and nothing has animated us very far from the floor.  As I have written many times, they stimulate via the printing press and the deficit, and we get a brief improvement, but then the increased costs in the market come home to roost, and we’re set back to a place no better than before as the costs, driven in large measure by the inflationary effects of the stimulus that quickly act as a brake upon the alleged “recovery” that never materializes.

Elsewhere on Williams’ site, you can find a detailed examination of his treatment of unemployment, and the numbers will shock you.  Add to this the tidbits about the deficit and inflation, and you will begin to understand how you’ve been misled, not only by the media and the administration, but also by decades of shoulder-shrugging politicians in both parties.  By Williams’ assessment, it may be impossible to rescue our nation any longer.

Ladies and gentlemen, I have been urging you since the inception of this blog to make preparations to the best of your abilities.  I hope you’ve been diligent.  Check out Williams’ Hyperinflation report, and think it through carefully.  The evidence of your own daily lives has been telling you all of the happy-talk about “economic recovery” had been a farce.  Like the approach of a colossal asteroid, the government’s ability to hide the impending disaster or disguise the seriousness of our worsening situation has begun to fail.  That is really the only significant meaning of the latest downgrade.  They can’t hide it much longer.  The Piper will be paid.

Some are choosing to ignore all of this in the hope that a change of administration might give us one last chance at a way out, but irrespective of the outcome in November, the chances that our currency survives three more years in its current form is probably fewer than one in ten.  The possibility that we will survive as a nation may be somewhat less.  Fixing this problem will require the institution of spending cuts on a scale that may cause complete social collapse.  Do we expect John Boehner to take on such a monumental chore?  Even if the Republicans take the Senate, Mitch McConnell isn’t exactly the picture of courageous and vigorous leadership.

Saving our nation is no longer simply a political problem in the sense of replacing certain politicians.  It’s a cultural and economic crisis as well, and with all that is going on abroad, it may come down to a matter of literal survival.  It’s time that we begin to face up to this, because our politicians aren’t going to address the  problem until it no longer matters, at which point, they’ll do nothing, but we’ll pay the price.  We always do.  People have asked me what we could do to remedy the problem, but when I tell them, they look away, because they don’t want to face the implications that attend the proposed actions.

At present, we have an annual published deficit of around $1.3 Trillion.  As Mr. Williams’ report makes plain, if the government were forced to use GAAP(Generally Accepted Accounting Principles) in their accounting, the actual annual deficit is in the neighborhood of $5 Trillion. The added $3.7 Trillion consists of new future obligations that the government does not pay, but has promised at some future date.  Many refer to these as the “unfunded liabilities” of our government, but they add up to a staggering amount, in the range of $80 to $120 Trillion dollars in promises.  When one makes promises on this scale, it is sure to affect one’s creditworthiness, never mind one’s credit rating.

Consider the fact that our government collects approximately $2.5 Trillion in taxes, fees, and the like throughout the year, but that this is still well short of the $3.8 Trillion it spends, and then propose cuts in response.  Here’s a dirty, ugly secret the DC crowd won’t point out to you: If you cut everything that is not an entitlement program or debt service, you would still have a deficit.  That’s right, if you eliminated every bureaucrat, soldier, judge, roads project, education expenditure, and all of the other things that government does apart from pay interest on its debt or send payments to individuals through entitlement programs, you could not balance the budget.

What this makes clear is that the problem exists not on the “discretionary” line of the ledger, but entirely on the “non-discretionary” lines in the book.  Leftists will argue that the problem is the lack of revenues, but that’s an absurd hoax. Anything done to increase revenues at this point will actually cause them to decline.  Increased tax rates?  People will earn less to avoid the taxes.  Even those who want to earn more won’t be able to because there will be insufficient demand in the marketplace to provide the commerce needed to generate the revenues we have now.

The only answer to this problem is sharp cuts in government spending, combined with a cessation of Quantitative Easing.  The entitlement programs have become such a massive anchor on our economy that it cannot recover, and they have squeezed out all other spending.  This is why people look away when you explain to them the problem.  They know what it implies about all of our sacred cows in the entitlement sector of government.  As with the old lament, everybody is in favor of massive government cuts until we arrive at their favorite Federal program.  At that point, you are given a stack of excuses, complaints, and ultimately: “Never mind.”

I have news for you, and it’s not pleasant:  These programs will end.  Virtually all of them.  None of them will survive in their current form, if at all.  We are like Greece, only worse, and much larger.  The question our elected leaders have not faced is whether to break the news to us now, while there is some small hope of recovery, or whether they shall just “get while the getting’s good,” and make off in the dark of night after the collapse, leaving us to figure it out.  The fact is that I can’t blame them for opting toward the latter, because we will be worse than Greece in every dimension and measure, both in size, but also in degree, and I believe when a responsible politician ever tells this truth, he will be pilloried, at first in media, and then later by mobs.  Paul Ryan has had just the first taste of this.  Sarah Palin was mocked for such warnings to an extent I’ve never seen for simply stating the dangers of QE2 and all the money-printing.  She was right, naturally, as is Paul Ryan on the matter of entitlements.

The problem is now that it may be too late for any sort of remediation.  The problem has become too vast, and it is as late as that.  What we can do as individuals is to grasp the reality laid out before us.  We can prepare ourselves and our families.  We can vote accordingly.  We can make noise about it.  In the end, we may be forced to watch our nation slide back into the pre-industrial, pre-republican muck from which it emerged.  It’s been a long decline, and we’ve mostly done little but to urge it on as a people.  We’re peering down the loaded barrel, and it’s been our finger’s twitch upon which we are waiting.

One false move… A hiccough… One little lurch…

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Posted in Activism, Business, Capitalism, Civil Unrest, Conservatism, Economics, Featured, Federal Reserve, News, Politics, Welfare State | 12 Comments »

All The President’s Help

Tuesday, July 17th, 2012

Is this man drunk?

Listening to President Jack-Ass, one would think that nobody could create the first thing without the government standing there to help them.  I take offense at the notion, and more, I am willing to demonstrate how the biggest obstacles I have faced have been born of government regulation, idiotic laws, and crony-capitalism powered by criminal thugs like Barack Obama. As many of you will know by now, I am a horseman, in addition to the profession in which I work, and I have a small thoroughbred farm together with my wife. When we began this endeavor, there was no barn, no tractor, no fences, or horses or even running water. There was no electricity, there was no dwelling, and there wasn’t much at all but an empty field alongside a rural highway with a dozen or so trees scattered far and wide upon it. From the outset, there were problems, and almost all of them were induced by government, and our trials and tribulations have been exacerbated by that same entity, though not exclusively the federal ones. With “help” like his, I would think we’d have been better off on our own.

First, I’d like you to consider the words of the jack-ass-in-chief:

 


Apart from the fact that this maniacal leftist clearly views us all as his property, and all as the beneficiaries of his master plans, he also contends that nobody gets success on their own. In his America, that may be increasingly true, as to be successful, it often seems you must grease the palms of an inordinate number of politicians, both in Washington, and in your home state. Let me take you through a brief litany of how all of these dear helpers, these masterminds of distribution, have helped to hold my small farm down.

In 2004, the entirety of Texas began to fall under a drought that lasted and lasted. For those of us dependent upon feeds and hay, the costs were striking. We watched an ordinary round-bale of coastal Bermuda hay go from a price between $30-40 dollars up to over $110. Just when one thought it couldn’t possibly get worse, the government stepped in to “help.” If you happened to be a cattleman, it was fine help. The government was handing out drought relief, but the key qualification is that your crop had to be for food. Horses did not qualify, since their primary use is not down at the burger stand. Some of you might wonder if I’m not complaining merely because I didn’t get the cash, but I tell you that it was a horrible situation, and I didn’t want the cash, but what I really didn’t want was government deciding who would win and who would lose. You see, all of the cattlemen were now flush with cash, and they could go into the market and buy whatever scarce hay was in existence, and import it from other states too. We soon saw the price of a round-bale escalate from around $100 up to a high of over $170. Now, some of you might be asking: “Well, what if the government hadn’t given them the cash, how would they have fed their cows?” The answer is: They wouldn’t. They would have loaded them up and trucked them to the feedlots and sold them while they could get what they could for them. In short, the market would have responded appropriately. The price of beef would have dropped briefly before spiking upwards, and that would have brought higher prices for future beef that would have eased the pressure on the hay side of the market for everybody.

Of course, in 2005, as all of this was happening, I thought this was a temporary condition, and that the drought would end, and people would come to their senses, and I wouldn’t have need of drastic measures like selling my horses for meat. You see, in a market in which fuel prices were also spiking, and the disposable income of many people was suddenly thin, guess what wasn’t such a big seller any longer? That’s right: Horses. Now you would think that with the end of the drought, the troubles might begin to ease, but no, that wasn’t to be. Government had another nasty surprise: They effectively banned the funding of inspections of horses taken for slaughter. As you might well guess, I hadn’t intended to slaughter mine, but that’s hardly the point. Horse meat is a fine source of protein, much leaner than beef from cattle, and has fed people the world over for eons. In point of fact, long before man ever mounted a horse, he ate them. Some relatively small number of horses always went to slaughter, and much of the meat was exported, or fed large cats at the zoo. These animals shared one general characteristic: They were unfit for other uses, by and large.

What resulted when government decided to “help” again was a glut of unwanted horses, competing for and taking up resources that drove up the cost of maintaining every horse, market-wide. Worst of all, it had exactly the opposite effect of what had been advertised: Many horses were being abandoned, under-nourished, and dumped wherever and whenever their hard-pressed owners could dispense with them. Perhaps all the more ironic, a huge number began to be trucked over the Southern border into Mexican slaughter plants, where they don’t give a damn about humane conditions, never mind meat inspections. In many cases, the horses that did go to slaughter met a more gruesome fate than had they merely been slaughtered here. Meanwhile, the prices of horses was plummeting across the industry, as consumers were under all sorts of new pressures, and as the value of their homes and their money fell, buying a horse hit near rock-bottom on the priority list for many who had enjoyed them for decades. It got so bad, that late last year, Congress actually repealed the ban, although I don’t know if any domestic horse slaughter operations are back in business. The damage has been done.

Just these two federal actions might be enough to convince you of the obstacles government has put in the way of my family’s farm, but there is still a good deal to consider even at the state level, particularly here in Texas. You see, our state hasn’t participated in arrangements like its neighboring states. If you go to Louisiana, Oklahoma, Arkansas, or New Mexico, you will find state-bred programs that actually encourage the breeding of horses in those states. Texas has such a program too, though on principle, I do not participate because I see it as a socialistic subsidy. The difference is that in the adjoining states, they have permitted the expansion of gambling to include “video lottery terminals”(that look suspiciously like slot machines) but the deal struck in these states to allow for the enhanced gambling requires that they be placed at racetracks, and that a portion of the revenues be plowed back into purses for qualifying races limited to state-bred horses. Texas has opted to forgo this form of revenue, with pious-sounding legislators pretending they have been swayed by a moral concern over gambling. In truth, like anything in politics, what you must do is follow the money. Various estimates show that as much as $6 Billion leaves Texas for gambling venues in these adjoining states. There are bus-trips you can get on that will take you over to Louisiana from Houston, where you can sample those “video lottery terminals.” Even if the estimate were double the actual amount, it’s still a huge amount of cash that flows out of Texas into our neighboring states.

How much money do you suppose is spent lobbying legislators in this state to continue to uphold their firm “moral” stance against expanded gambling in Texas? That’s right, for all their posturing, many of the legislators in question are merely taking cash in order to vote against something that would provide large revenues to the state that is now merely bleeding out across our borders. Every other year, in our biennial legislative session, somebody brings a bill up, and in short order, it is killed. It’s brought up because it’s like ringing an alarm, to which all the lobbyists respond, and their answer is always in cash. Suddenly, all these legislators concerned about the evils of gambling are able to jump up and make strong statements against expanded gambling, while no small number of them have their palms greased.

Now you might say that because I don’t participate in the State-bred program anyway, it shouldn’t be of concern to me, but it is, and the reason is clear. What has happened is that while the purses in adjoining states have grown in proportion to their VLT revenues, they have stagnated or even shrunk in Texas. At this competitive disadvantage, how do you suppose Texas-bred horses now sell? Even if you were inclined to participate, the ROI isn’t there. Austin has a proposed track license, with the Austin Jockey Club. That license may never be exercised because the industry is suffering so badly in Texas under this scheme. Lone Star Park in Grand Prairie filed for bankruptcy protection. Other tracks are operating on the edge of solvency. The legislators don’t care because they’re getting positive press for their “moral stand” against gambling, while the competing-state lobbyists pile on the dough. That, my friends, is crony capitalism disguised as the moral majority.

Locally, it’s getting harder and harder for a farm to do business. In addition to the mountains of regulations rolling downhill from the EPA, local water control boards are making life difficult even for long-established farms. Oh well, more palms to be greased, I suppose. Of course, then you have the cities that now annex as much as the law allows every chance they get, and if they keep on at this pace, you will soon be able to remain with the boundaries of some municipality or other all the way from Oklahoma to Laredo.

Barack Obama goes to great pains to say that all of us are the beneficiary of some form of government help. That’s his implication, hidden behind a more acceptable-sounding notion that none of us get anywhere on our own, implying everything from the parents who brought us into this world to the teacher who may or may not have taught us the first thing in school. What my wife and I have experienced is something quite remarkably different, and it is that at every turn, it has been some governmental nonsense impeding us, obstructing us, or otherwise prohibiting us from making a go of it. You would think from listening to him that a brigade of his Obama-bots had accompanied us across the blazing hot pasture in July, driving t-posts into the scorched soil until the point of heat exhaustion, but I don’t remember any help. The wife and I, and our daughter a little bit, doing what Americans had always done: Building something where there had been nothing.

We never asked for any of this infernal “help,” and given its nature, we’d be just as happy if government stopped lending its “helping hands” and simply got the hell out of our way. We know how to choose good breeding stock, and we know all the important aspects of good animal husbandry, and I know my way around farm equipment and all the ordinary construction techniques we employ. I’m fairly certain that wasn’t Michelle Obama I lifted onto the skin of the barn’s roof to screw panels down as they were slid into place. I know for certain it wasn’t Barack who was running that welder. That was me. When we stretched thousands of feet of field fencing tight across all those newly planted posts, neither Secretary Clinton nor Sebelius were anywhere in sight, and neither was Harry Reid nor Nancy Pelosi, and not even a soul who had ever seen their offices.

Of course, when it came time to put up the mailbox, there was the guy from the Highway department to tell us how many feet it must be from the road’s edge, and what sort of super-duper break-away mount it must use, lest some weaving drunkard hit something much too firm alongside the road and do himself unnecessary harm. When we wanted to place our driveway, we were told what sort of culvert we must build, if we could build one at all, and so expensive was it that we simply opted to scatter a smattering of gravel across the ditch, and simply put some new gravel down each season. No culvert? No problem. There was the problem of bringing electricity to our homestead, and all of the government rules the electric company must follow, and how this all determined the siting of our home, rather than logic, and what we damn-well pleased. Yes, I am familiar with all the little helpers we’ve had along the way, and to be quite blunt about it, I hope they’ll all line up to help Barack Obama too. The problem is that it won’t bother him at all, because he doesn’t build anything, and he’s never accomplished anything on his own.

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Posted in Barack Obama, Business, Capitalism, Featured, Horses, News, Politics | 5 Comments »

Blowing the Lid Off the Obama Bail-outs: B of A Hiding the Damage?

Wednesday, March 14th, 2012

Where His Bread Is Buttered?

Bank of America has come under fire, and there is now a class-action lawsuit by borrowers who feel as though they are being cheated by the banking giant, and perhaps on behalf of a political agenda.  As has now become plain, Bank of America is using its internal bureaucracy to slow down the wheels long enough for Barack Obama to be re-elected, before the full scope of tax-payer liability is revealed in the whole bank bail-out scheme and mortgage modification scam put forward by the Obama administration.  Borrowers are complaining that they have brought their accounts current under the new modifications to their mortgages, but that the banking giant is keeping them in limbo in order to hide the truly damaging scope of the bail-outs.

You see, the deal isn’t done until each mortgage modification has made its way through the paper-shuffle at the Bank of America, but this is causing trouble for borrowers who have long since gotten their financial house in order and need to secure loans on such things as new cars.  They’re finding out that their credit reports still show the mortgages as overdue, despite the fact that they’ve complied with their agreements on the modifications to their mortgages, some of them longer than two years ago.  Why is it taking Bank of America so long to square things away?  The answer is simple, and political, and it comes down to more subterfuge on behalf of their favorite politicians.  You see, when these deals are finalized, they’ll show a loss, and it will be huge, and they want to be sure to minimize damage until after the November elections.

In the mean time, their now-current mortgage-holders are simply in limbo, and while we can argue that they might deserve a hit on their credit, they would get one anyway, but the truth is that these mortgage holders may have been only a month or two behind, and made the agreement as a stop-gap since so many were recently unemployed at the time.  They didn’t think this would drag on, or that two years later, their credit reports would show them as non-payers on their mortgages for more than two years.  Worse, Bank of America is in receipt of funds for this purpose under the Home Affordable Modification Program(HAMP)

In one case, the complaint against Bank Of America alleges:

“[Bank of America] has serially strung out, delayed, and otherwise hindered the modification processes,” leaving thousands of borrowers “often worse off than they were before they sought a modification.”

This is quite the enterprise.  Bank of America took $25 Billion from the US government in order to facilitate these modifications, and to date, they’ve actually sat on most of that money while tying up the loan modifications in red tape.  Worse, the longer this goes on, the worse the position of those now in limbo.  You might ask why they’d be interested in doing all of this, since they could simply modify the mortgages and move on, but that might be a sticky matter.  Bank of America would have to report large losses that would demonstrate the failure of TARP.  As long as all of these modifications are in limbo, they are neither losses nor does BofA need to disburse any of the $25 billion.  that makes a whale of a difference on balance sheets as reported to investors.

Another reason Bank of America may be keeping this “in process” is that the elections of 2012 are just around the corner, and BofA has made significant investments in the political arena.  A trip to OpenSecrets.org reveals that in 2008 alone, Barack Obama cashed in to the tune of nearly $400,000 from BofA contributors.  In 2012, Mitt Romney has received a fair amount of cash, as has Obama, from Bank of America-related sources.  Coincidence?  Possibly, but Bank of America has so many ties to so many high-ranking politicians, including our previous President that it’s hard to pin this down on a partisan basis.  It looks more like a ruling-class benefit, looking at the objects of political giving associated with Bank of America.

On Tuesday, a tweet came in from none other than Ann Barnhardt with a link to another story about Bank of America, and what the author over at market-ticker thinks of the institution, along with a track-back to what Matt Taibbi, an Occupy Wall Street member has to say about all of this.  At least in this context, Mr. Taibbi is correct:  Bank of America should be allowed to fail.  It’s been propped up and supported and kept afloat with your future tax dollars.  Worse, with politicians of both parties in its hip pocket, there seems to be no end in sight.  It makes it easier to understand how characters like Barack Obama, an anti-capitalist, and Mitt Romney, a self-described “capitalist” both supported TARP, an astonishingly anti-capitalist idea.  It also explains why we, the tax-payers, keep getting placed on the hook for the failures of these firms.

Unless and until we start paying closer attention to whom it is that funds our politicians, we are likely to see this same trend continue unabated.  What does it say about what we’ve let become of capitalism that these large institutions are able to purchase so much influence in our political system?  I don’t have a problem with donations, and I think they should be unlimited, but we voters are going to need to pay attention to the flip-side of that:  We will need to pay attention to the disclosures, and vote accordingly.  As I’ve reported previously, Bank of America along with Chase have moved some risky Euro-based derivatives into coverage by the FDIC.

This needs to cease, and I’m concerned that if we elect Mitt Romney, this will continue like a hand-off from George W. Bush to Barack Obama to Mitt Romney, and that it will continue unabated.  The large banks that are failing need to fail, and the American taxpayer has every reason to expect its government to be good stewards of their money, instead of putting good money after bad.  Here we have a company that has abused its customers in order to take money from the Federal government in order to assist them.  Whatever you may think of the HAMP program philosophically, it was implemented in law, and to see this sort of abuse continue is ridiculous, but to see it continued even longer to allow some politicians cover is a scandal about which we should all be concerned.

 

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Posted in Bail-Outs, Barack Obama, Business, Crony Capitalism, Media, Mitt Romney, News, Politics | 3 Comments »

Bill O’Reilly’s Economic Idiocy Almost as Bad as Obama’s

Friday, March 9th, 2012

Bloviator-in-Chief

I seldom watch Bill O’Reilly, because if I want to listen to somebody pontificate on subjects about which s/he knows little, I can simply re-run Joe Biden’s most recent speech…in any time-frame.  Thursday evening, O’Reilly was on when I came through the door, but since he seemed to be talking sensibly about the Fluke Fiasco, I listened briefly with interest, but in the very next segment, he went on to discuss the price of oil, demonstrating he’s at least as ignorant as Barack Obama pretends to be on the subject. Part of it is driven by the fact that O’Reilly is a panderer who tries to placate ‘the folks’ while serving his masters in the establishment.  His oft-mentioned Harvard degree clearly isn’t in economics.  As usual, O’Reilly failed to identify the actual causes of the high energy prices accurately.

Naturally, being a  panderer, he talked about “speculators,” but he failed to mention even one valid reason that makes up the bulk of the increased prices we’re experiencing at the pumps.  Since O’Reilly did such a masterfully incompetent job of explaining the issue, I feel duty-bound to correct the record, or at least explain it.  There are really five major factors controlling the prices you pay at the pump, and while speculation might be a distant sixth in importance, it really has little to do with what you pay most of the time. Rather than lead you in circles of pompous pandering, let me try to make it a good deal more clear.

By far, the biggest factor in the price of the fuel you buy at the pumps is the price of crude oil itself.  As the amount of oil being supplied to the market contracts, or the quantity of oil being demanded increases, you can expect a corresponding movement in the price you pay.  When producers get together as a cartel(OPEC) in an attempt to restrict production, this will necessarily constrain the supply, and you will generally see higher prices, unless you have some manner by which to throw a significant monkey-wrench in the mechanism, for instance being able to increase your own domestic production, or by augmenting the supply to the market from a reserve.  This should seem simple enough to most people who studied basic economics in High School, never mind earning a degree from that institution of fame we might call “Hahvaad.” The available supply versus the quantity demanded will always dominate the basic calculation.

Another factor that is nearly as important to consumers in a given country is the relative value of their currency in the world oil markets.  The US has enjoyed the distinction of possessing what had been (and still remains, barely) the world’s reserve currency and the currency in which oil trades are made.  Unfortunately, as our Federal Reserve has printed more dollars out of thin air in order to bail out the banks, and Europe, but also loan to our Federal Government to feed it’s insatiable hunger for dollars, we have seen the value of our dollar fall dramatically in the last few years.  This means that no matter what commodity you buy, it will take more dollars to buy one unit as compared to before.  In late 2010, when the Federal Reserve announced QE2(Quantitative Easing, Round2 – a.k.a printing vast sums of cash,)  Sarah Palin, the former Alaska Governor, took to the podium to warn Americans that all of this money-printing by the Fed would result in higher food and energy prices.

Some people, mostly jerks like Paul Krugman of the New York Times actually mocked the Governor for that prediction, and even Fed Chairman Ben Bernanke got in on the act.  After all, what would a former governor of Alaska know about it?  As you probably know by now, she was right on every count.  Everything she said came to pass with respect to the inflationary effects of “Quantitative Easing.”  Score another one for the lady who knows how to take down an elk, but also a pompous commentator.  She understands the energy markets, meaning she knew how the monetary policy of the Federal Reserve and the unrestrained borrowing of the Federal government would wind up effecting the general economy, but particularly the energy sector.

The next thing that affects the price of oil is the availability of substitutes.  For instance, a fair amount of the electricity generated in the US comes from petroleum distillates and residual products from the refining process.  There are just a few commercial alternatives, and apart from nuclear power, the vast bulk are fossil fuels, including oil, but also natural gas and coal.  The grand total of wind and solar energy production nationwide doesn’t provide what one nuclear plant does, so let’s call that source negligible in any commercial sense.  Coal accounted for more than half of all electric generation in the US prior to Obama’s arrival in Washington, but due to regulations being slapped on the energy producers, coal-fired plants are rapidly going extinct.  As this happens, plants that use other fuels are necessarily being forced to pick up the slack, running at closer to 100% capability, and some of those plants use…oil and its byproducts.  So you see, as you reduce the use of substitutes, it necessarily will cause an increase in the price of oil.  Like in any market where substitutes are available, the reduction of the availability(or use) of one will cause a corresponding increase in reliance upon another.  If beef prices go up, before long, people will shift to pork and chicken, and then the prices of these substitutes will move up also.

The fourth big factor affecting the price of fuel at the pumps is government taxation.  If you live in a state like mine, where we pay a federal and state excise tax by the gallon, it’s bad enough when the Feds increase the taxes, but if you live in a state where the tax is a percentage, you really get blistered by any upward movement in fuel prices, because not only do you pay more in fuel, but you also pay a good deal more in taxes on it.

There is another factor that comes to mind, and it has to do with the distribution of the product, and how temporary displacements and shortages like we saw in 2005 with Hurricans Katrina and Rita caused trouble depending upon where you were and what the distribution chain that feeds it looks like, but those sorts of problems are a result of what happens when Just In Time inventory management tries to contend with the unexpected that Mother Nature throws our way.

We currently do not find ourselves under that sort of instability in the distribution chain, and this only goes somewhat further in explaining why the fuel price spikes we saw under George W. Bush bear little resemblance to the structural causes of the high prices we face today.  Four dollars for a gallon of gasoline may not be entirely new, but resulting from something other than an ongoing distribution chain problem as a result of natural disaster, it is most certainly unprecedented in the 21st century. Today’s  closest analog occurred under the administration of Jimmy Carter, if that tells you anything.

Together, these five factors have much more to do with the price of fuels than anything Bill O’Reilly mentioned. Speculators play a role, but by the time you add up the five factors I’ve mentioned, what you discover is that while speculators can drive things a little in one direction or the other, most who trade in commodity futures wind up losing, at least according to the statistics.  Besides, they are an important part of the market too, and to pretend they have no other function but to somehow cheat consumers is a laughable bit of Marxist theory often pushed by panderers in both parties. Realize that listening to economic analysis from Bill O’Reilly is roughly analogous to getting investment advice from a fortune cookie:  It contains only meaningless platitudes that will gain you little more than a moment’s amusement, but will reveal no cosmic truths.

Now, think of Joe Biden speaking.  See my point?

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Posted in Business, Economics, Energy, Featured, Media, News, Politics, Sarah Palin | 7 Comments »

Carbonite Pays a Price for Dropping Limbaugh

Wednesday, March 7th, 2012

(Click to enlarge)

The Daily Caller is reporting that Carbonite has taken a significant stock price hit since CEO David Friend came out on Saturday to dump advertising on Rush Limbaugh’s show.  Call it bad luck, or call it “El Rushbo’s Revenge,” but whatever you call it, it’s a well-deserved smack-down for cowardice by a sponsor.  Of course, as it has turned out, Sandra Fluke is a hardcore leftist activist, and more and more, this is looking like a plot into which Limbaugh stepped, perhaps as the unintended target.

From the Daily Caller article:

However, it hasn’t done much to contribute to his company’s stock price. Since the market opened on Monday through its close today, Carbonite stock (NASDAQ:CARB) has plummeted nearly 12 percent, outpacing the drop of the NASDAQ index in that same time period by nine-and-a-half points. It was also one of the biggest decliners on the NASDAQ on Tuesday.

Some will consider this justice, but frankly, I think it should serve as a lesson.  Even publicly traded companies ought to be careful about dumping ads from the most popular talk-show in the land, and certainly not in the angry tone that David Friend used in his statement Saturday.  I think that the fact that he did so while acknowledging that Limbaugh had already apologized probably explains it.  Nobody likes to see that sort of ridiculous, overbearing reaction. It gives the impression of putting on a show.

 

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Posted in Business, Media, News, Politics | 6 Comments »

The Economy and the Price of Gas

Thursday, February 16th, 2012

The Costs of Bad Policy

Most have noted with disgust the rising price of fuel.  In most places around the country, the price per gallon of regular unleaded is creeping up on $4.00.  There has been some talk about an improving economy, but that’s mostly fluff.  The truth is that our economy is in miserable condition, and as I’ve previously reported, the price of energy has the most immediate deleterious effect on our growth.  As you look at the numbers for housing starts, as fuel ratchets up over $3.50, it begins to retard growth and investment.  This happens because it affects every stop along the production chain, from the raw materials to final distribution, delivery or retail sales.  Now that the price of fuels is driving markedly upward again, it is important to note the causes.  The first is the inflationary policies of our government, and the second is a whole host of worries over the world supply of oil, now threatened by an increasingly hostile and vociferous Iran.  These two factors threaten to drive prices over six dollars by summer’s end.

This would collapse our economy completely, and the only thing leveraging against it is that as prices soar, more projects will be canceled, and new construction will not commence, leading to a balancing reduction in demand.  This natural signaling would not be so bad if it weren’t for the fact that our economy is already flat-lined.  Anything that would cause a serious price spike at this juncture would likely ruin our economy for the immediate future, and might even push us off the economic cliff.

At present, the Obama administration is claiming unemployment numbers that are plainly rigged.  What they have done is to discount people who have expended their unemployment benefits, but who still have no job, and they consider them to have disappeared from the job market.  More, they’re started lop off people who have attained a certain age, and now consider them retired, thus removing them from the work force.  In short, they’re rigging the outcome of the quotient by reducing the number of people in the job market in statistics only, as many of the people they have excluded are still actively seeking work.

If the current rise in energy prices continues, it will put a downward pressure on economic activity.  As we’ve seen in each previous instance when this administration has claimed the economy was in recovery, the rise in fuel prices will tend to knock down the recovery.  An economy cannot grow with a shrinking pool of energy resources, and this president knows it, or should.  This is why such actions as the denial of the construction of the Keystone XL Pipeline was so astonishing.  The construction alone would have provided tens of thousands of jobs with decent wages, and it wouldn’t have been very long before we would be receiving the Canadian oil at the distant end, proposed to have terminated in Texas, in the refining centers along the Gulf Coast.

The presumably short-sighted thinking of this administration is so baffling that many have begun to conclude this is all by design.  What is clear is that we will not truly begin a recovery until energy prices are brought down by the government standing aside as the primary obstacle to energy development.  The federal government under this president has been pushing various “green jobs” initiatives that promise much, but have delivered very little, either in the way of job, or in the production of energy.  The scale of the problem is gargantuan, and no collection of windmills or solar panels is going to do much about it, but worse, since these are still not economically viable models, they actually waste money.

The immediate future of American energy production is weak, because we have a president hostile to the various forms of energy most Americans for the near-term future will employ, in the forms of coal, gas, and oil.   The problem is that these still represent the bulk of American energy production, with coal-fired power plants still accounting for at least half of all electric generation in the country.  Worst of all, Obama’s EPA is shutting down coal-fired plants, as three more plants are scheduled to be shut down this year in Texas.  Texas may see a summer of rolling black-outs that will have been the product of these mandates, and there is no way to build an economic recovery in that environment.

Be prepared to see fuels to continue their uphill climb through the spring, and as they do, you will see a repeat of the pattern we have seen numerous times over the last four years.  As energy prices increase, any alleged recovery will falter. It’s the unavoidable result of a policy that has set us up for repeated failure.  With the monetary problems in Europe, however, it threatens to be much worse.

 

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Posted in Barack Obama, Business, Economics, Federal Reserve, News, Politics | 9 Comments »

The Business of Government Differs From Private Sector

Sunday, February 5th, 2012

I am certain that we have all heard at least one-dozen times or more how Mitt Romney’s private sector experience will pay off in cleaning up government.  It’s the thing he stresses relentlessly, and his campaign generally can’t wait to get to that subject.  Naturally, any candidate will seek to push his virtues, and downplay his weaknesses, and so it is with Romney or any of the other candidates in this race for the GOP nomination.  As discerning voters, however, it is incumbent upon us to examine their complete records, and not simply cherry-pick which parts we like or dislike.  We must consider the bad with the good, and part of this process includes deciding what parts of their records are relevant.  The Romney campaign loves to talk about his business experience, but during this primary, they’re mostly avoiding his record as Governor of Massachusetts, and this is an important sleight-of-hand we ought not overlook, because it is the relevant part of his record that will be most important in this election.

We all like to imagine that if we could somehow bring the work ethic of the private sector to government, we could some how improve its efficiency.  This stems in large measure from our natural observations of how wasteful our government is with abundant resources we provide it, that still never seem to be enough.  Who among us wouldn’t like to see government become more efficient in this regard?  Four-hundred dollar hammers and six-hundred dollar toilet seats are just two of the historical examples we can identify in an endless sea of waste.  Unfortunately, however, businesses waste money too, and in many of the same ways.  Walmart wastes tens of millions in accepted returns they ought not to have permitted, because it’s easier than making a scene.  Taking back six-months used shoes on the basis that “they don’t fit quite right” is probably a sure way to eventually hurt your business. Of course, businesses do things far more wasteful than this, but my point to you is merely that business is only presumed to be less wasteful in most respects, but in the facts, it isn’t always this way.

Another problem is that government really doesn’t function like business, and you wouldn’t want it to do so.  In business, there is a profit and pay-seeking motive that militates in the direction of preserving capital, and that motive generally works to make the company stronger.  In contrast, government turns no profit, and you wouldn’t want it to seek one.  If so, it would stop making medicare payments and simply cut off social security.  After all, there’s no profit in those programs.  “Death Panels,” anyone?

Consider your own local government, and how often its policing seems more thoroughly motivated by writing traffic tickets in the name of revenue than in apprehending criminals who are rampaging through your streets, committing theft and burglary and other property crimes.  They would expend a good deal of money investigating such crimes but they wouldn’t generate any revenue.  On the other hand, writing speeding tickets is relatively easier work, and it brings in revenues to cash-strapped municipalities and their courts.   Do you really want your police motivated by the profitability of their particular crime-fighting?

Realizing that government doesn’t and shouldn’t seek profits, it is therefore much more important to consider Governor Romney’s experiences in that capacity.  When he ran a state, what was his record, and how did he perform in that office?  Did he cut spending, or expand it?  By any measure of which I am aware, it must be the latter, as his health-care program alone is costing the state of Massachusetts a fortune it does not have.  In business, it would be normal to expand operations to provide new products or services, but is that what government should do?  At least 65% of Americans don’t want their federal government taking over health insurance, but we’re well on our way to having done so with Obamacare.  Yet this is precisely what Romney did in his own state.

Another important difference between government and business is that business is forbidden a captive clientele. If it doesn’t serve you to  your satisfaction, you need only find one of its competitors.  This competitive nature in free markets tends toward keeping businesses more honest.  Obviously, government has no such restrictions or competition.  The closest we get to that is the differences between the local, state and federal levels, but in recent decades, the federal government has all but erased the differences.  What had once been the best check against overpowering government authority is mostly gone, and in its place, a network of co-dependent and cooperating layer-cake of government that simply acts without reference to any constitutional restraints.  There is no longer any healthy competition, but instead mere delegation among the levels.  In this sense, government has taken on a corporate structure.

So where does Mitt Romney’s private sector experience fit into this picture?  At Bain, or any other company, the CEO effectively acts day to day as a dictator of sorts.  Of course, that’s natural enough, much as in your own castle, you are King. The problem comes in when you take this theory over to government, and find that you are not and must not be a dictator in that office.  You have a Congress to contend with, and courts that will countermand your dictates from time to time, and the response we’ve seen from Obama is probably not unlike that which Romney would offer: “How can I circumvent these constitutional checks on my directives?”

When he was governor of Massachusetts, he implemented programs without input from that state’s legislative branch, for instance in the area of environmental concerns and regulation.  This hints strongly that in the most important ways, he is likely to make the same sort of power-plays as Obama.  Do you want who is merely another anti-constitutional politician with an “R” next to his name rather than a “D?”

When we view Romney’s records, it isn’t his alleged “job creation” we should examine, because that has very few applications in government, except as Obama has practiced them, whereby he merely created new departments and staffed them, calling this “job creation” while you and I are now left to pay for these too.  Remembering that the growth of a business is constrained only by its revenues in many cases, what sort of business would it be that had revenues as large as it could dictate at gunpoint?

I don’t think we need a businessman for President, but instead a statesman who understands the real nature of government, and what its limits ought to be.  I don’t think anything in Mitt Romney’s resume demonstrates that sort of suitability, and obscuring this fact won’t make our government any better, and threatens only to make it worse.

 

 

 

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Posted in Barack Obama, Business, Campaigns, Economics, Election 2012, Media, Mitt Romney, News, Politics | 3 Comments »

Mitt Romney Is Anti-Capitalist

Friday, February 3rd, 2012

Another "Mastermind"

Something is wrong with Mitt Romney, and it’s fundamental to his understanding of capitalism.  Here we have a man who governed what is arguably the most liberal state in the union, and he surely didn’t do so as a conservative, but now he’s demonstrating why liberal Republicans like him cannot win, and it comes down to the simplest of economics.  Thursday, Mitt Romney explained how he would index the minimum wage to automatically keep pace with inflation, proving that he has no Main street experience, but worse, that his alleged business sense is more about making deals than understanding economics.  Mitt Romney is no conservative, and by this pronouncement, we now know that neither is he a capitalist.

While it may appeal to some of the more ignorant in the electorate, and to the leftist intelligentsia, the simple truth is that a conservative who understands capitalism would be talking about eliminating the minimum wage laws.  Proving his expressions of Wednesday were statements of his true beliefs – that he is “not concerned about the very poor” – Romney advocates a system of wage controls that is economically inefficient, and immoral, but most importantly, in the context of his remarks Wednesday, actually disadvantages the poor, condemning them to perpetual poverty. Before you break out the torches and pitchforks to occupy my front porch in anger, let me explain to you the truth of the matter, and why it is that a minimum wage actually punishes the poor, but setting up a system to perpetually raise it guarantees increased unemployment and corresponding poverty.

In a free market unhampered by government mandates, wages are determined by negotiations between employers and employees.  That which sets the price is their mutual agreement to mutual advantage: Each believes he is getting the better of the deal.  In fact, in a free market, this is how all exchange is characterized, and it is the best determining factor available, because everybody walks away happy provided that the conditions on both sides of the deal are satisfied.  This requires no government involvement, and it requires no government coercion.  More, it is morally correct because it permits each party choice.

You might argue that the employer always wins, since he controls the purse strings.  I contend that this is not so, and cannot be, so long as men are free to choose.  If an employer makes unreasonable offers in payment for labor, he will be refused, and refused again, and this acts as the market’s signal to him.  If he does not respond, the labor will go undone, and he will lose the profit he might have made.  Since he is doubtless working for a customer, the impetus will be to complete the job to satisfy the deal he’s made with somebody else, and eventually, he will raise the wage he’s offering to get sufficient labor to fulfill his customer’s demand.

You might say “but he will only raise it enough to get a warm body,” and this could happen, but if it does, it may cost him more in the long run, because the labor will be poorly done, and perhaps have need to be re-done, or it might not be completed on time, or some variation on this general theme.  This too will act as a signal that higher wages are needed, and the under-performing employee will be dismissed and a higher wage paid to his replacement.  Notice that in this whole process, nobody has been coerced.  This is the moral superiority of the free market.

What Mitt Romney and the statist, anti-capitalist phalanx demands is a short-circuiting of this natural process.  What he contends more than anything is that you should not have the right to negotiate your own contracts in labor at a price you are willing to pay, or a wage you are willing to accept.  Imagine Newt Gingrich’s example of the kids who are paid a trivial wage for trivial chores at a school rather than to a full-time janitor at a much-inflated union wage.  That sort of thing mustn’t be ignored, because the janitor who is likely over-paid by the education bureaucracy in many jurisdictions probably produces less actual labor than the aggregate labor of the squad of wage-seeking children would accomplish in the same period.

Once upon a time, in a universe far away, as a young teenager, I got my father to co-sign with me on a contract.  It was my first crack at entrepreneurship, and it was with the local home-owners’ association to mow grass around the facilities made available to the residents by annual subscription fee.  Basketball courts, tennis courts, a baseball diamond, and a swimming pool, along with a fishing pond were all surrounded by acres of grass.  The bids were solicited on a per-cutting basis, with the President of the association to monitor and decide the frequency of the cuttings.  I came in at a bid that was a gold-mine to me, but far below any competitors.

Doing the math on how many hours it took me to complete a cutting, it was clear I was beneath the minimum wage even in that day.  Had they been forced to pay the minimum wage on an hourly basis, I would not have been able to compete, but because it was a per-job basis, I was able to bid what I thought was the minimum I could accept for my time.  I won the bidding, and that year I cut grass as my legs and arms and back muscles grew stronger under the beating sun. Mitt Romney wouldn’t understand this by any measure, but applying the minimum wage to that situation would have driven me out, because if you have to pay a minimum wage, who’s going to hire a fourteen year old rather than an adult?  One of the few virtues I had to offer apart from my eagerness had been that my low price allowed them to take a risk that at a higher price they could not have taken.

Under a minimum wage, the employee isn’t permitted to accept a lower wage so that the employer will take a risk on an inexperience though perhaps eager worker. This is the flip-side of the argument Frederic Bastiat would have called “that which is not seen.”  I don’t believe it is any government’s right to prescribe the upper limit of what I may earn, or the lower limit of what I will accept in payment for my labor.  That’s none of government’s business, and they ought to get out of it.

It has been shown repeatedly that a minimum wage increases unemployment by the process of making it too expensive for employers to try out new employees with little or no experience, or to take them on in a capacity to effectively serve as apprentices or trainees, but this is the leg up millions of Americans had used to obtain skills, prove workplace diligence and reliability, and otherwise promote themselves in an act of economic self-efficacy that fueled the growth of our nation.

These facts are well-known to economists, and well-known to all students of capitalism, and yet somewhere along the way, Mitt Romney has managed never to learn them, and I will tell you that it springs from the same place as his desire to “reform and strengthen the safety net:” A sense of collectivized charity rather than the honest desire to promote dignity of people in lifting themselves out of poverty.  The Club for Growth has taken on Romney’s suggested auto-indexing of the minimum wage on much the same basis.

The idea that Romney claims to be a capitalist has now been proven false. A capitalist would know that the minimum wage does more damage than good, and that the longterm result is inflationary pressure combined with increased unemployment among the young and the disadvantaged. Frankly, Romney should be ashamed of this pandering, but he needn’t fear because so many people suffer in economic ignorance that his tyrannical, big government idea will be seen as “compassionate” as it sentences more people to perpetual reliance upon the safety net he’s much too willing to strengthen.  Romney isn’t a capitalist, or a conservative, and he’s actually no better than Obama, and in some ways worse, because while I expect this sort of thing from a man who is not so ashamed to be tagged as a socialist, it is unforgivable from a man who claims he is not.

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Posted in Anti-Capitalists, Barack Obama, Business, Economics, Election 2012, Mitt Romney, News, Politics, Welfare State | 22 Comments »

The Coming Facebook Initial Public Offering – How Many Pols Will Profit?

Tuesday, January 31st, 2012

The Financial Times has put up an article about the coming initial public offering of Facebook stock, and as I read it, I wondered: “How many politicians will get fat[ter] on this IPO when it happens?  Going as far back as the early 1990s, I remember stories of how then Speaker of the House, Tom Foley, managed to get in on an unusually large number of IPOs.  It looked very strange, since getting in on initial offerings of stock is a highly lucrative segment of the market, but it’s harder than you might think, yet somehow, I think politicians must have an edge.

Of course, as Peter Schweizer has described in his book Throw Them All Out, we can easily guess that it has very little to do with luck.  Politicians seem to have an edge in virtually every department, but what we should realize about this is that they’re simply adept at working the system.  The insider information in which they trade enables them to make money in ways you and I cannot, and what’s worse is that if you and I behave as they do, it’s huge fines and jail for us little people.

As you watch Facebook go public someday soon, you might stop and wonder as you click through the pages which politicians are getting richer as you browse through those pages.

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Posted in Business, Congress, Crony Capitalism, Media, News, Politics | 4 Comments »

On Health-Care Rationing

Friday, January 27th, 2012

Including Death Panels

As a fellow who is a student of economics, one  of my pet peeves is the confusion that often arises when economic concepts are misused out of context to justify political ends.  In the discussion and debate leading up to the passage of Obama-care, it was famously noted by Sarah Palin that “death panels” are a feature of that plan.  In short, the death panels would make “ethical decisions” based not on what was ethical with respect to individuals, but with respect to what was ethical in choosing on behalf of society at large, i.e, the government. The supporters of the Obama-care program maintained that “there were already death panels” imposed by insurers, and that in any event, rationing would always take place as a matter of economics.  In this last point, they were correct in the strictest terms, but they were wrong to compare government actions to the actions of individuals and private businesses in the free market.  This is one example of the abuse of economics by politicians, so let us examine it more closely.

In economics, everything is rationed, because it is assumed that there is a basic unlimited demand for all goods and services.  Since there exists no infinite supply of anything, it is necessarily true that all things are rationed in some fashion.  Gasoline is rationed.  It’s happening right this moment.  Food is rationed.  Housing is rationed.  There is no good or service that isn’t rationed, and the primary instrument for determining the allocation of the limited supply in a free market is money.  The smaller the supply of a thing, relative to the quantity demanded by the market, the greater will be the price.  This is the manner in which everything is rationed:  There is a only so much money, and he who possesses enough of it can tap into the limited supply.  This form of rationing is natural, or free market-based, meaning that this happens organically with or without formal rules, and always has, even before the notion of money as a medium of exchange had occurred to primitive cultures and barter systems still dominated commerce and trade.  Strictly speaking, in economic terms, it is true to say that all things are rationed somehow. This is how we reconcile the basic premise underlying modern economics as the study of an unlimited wishes in pursuit of finite supplies.

The question then arises whether natural allocation(or rationing) is “fair.”  Since fairness is a wholly subjective term, it cannot be answered in the realm of economics, but instead becomes a matter of politics.  This is where the trouble begins, because what politicians most frequently do is to apply their own subjective notions of what is fair in place of the much more objective standard of a natural market.   They concoct these notions to satisfy political constituencies, but the twist and turn in order to define the question as a matter of economics.  Inevitably, they do so by reducing the question to the subjective grounds of a particular individual, or group, and ask whether it is “fair” that so-and-so cannot afford such-and-such.  In this sense, the economics they are discussing are applicable to small groups, but not to the whole market.

What government schemers for socialized medicine have done is to insert government coercion into the place of the natural market allocation.  If you say to me, “It is sad that Johnny cannot get his surgery because he has not the money,” if my answer is based on the free market, I must say “it may be sad, but it is fair because he could have obtained the money by previous work, insurance, charity, or even credit.”  The fact that Johnny hadn’t the money for the surgery is not a justification to disclaim the objective fairness of the free market system, but sadly, that is how it is used by politicians.  Enter the statist, and he will proclaim that he can reintroduce “human fairness” or “social justice” or some such enfeebling concept by virtue of government coercion.  If Johnny hasn’t the money, the politician will take it from somebody else at gunpoint to pay for Johnny’s surgery, provided Johnny meets any requirements they may have enacted.

Perhaps the surgery Johnny needs is a kidney transplant, but rather than expend the resources, since Johnny is also a wheelchair-bound, elderly man, the government may say “You’re not worth saving.”  Worse, if the government denies Johnny the ability to obtain his own health-care by his own means outside the government system, what the government is doing is to pronounce a sentence of death on Johnny.  If Johnny happens to be a recent college graduate in his twenties, in otherwise good health, the government will view it as a good investment in many cases since he will pay much more in taxes over his expected lifetime than the surgery may cost.  Notice that the decision criteria is entirely social, and based on the economics of government expenditures, which actually means: Political considerations.  It is also the reason that every system of socialized medicine ultimately leads to many more people dying prematurely as they are denied treatments of which they would have availed themselves in an open market. If this were not true, we would not see so many from around the socialized world flocking here to pay cash for treatments they cannot obtain by any means in their home countries.

You might contend, as the leftists do, that this is done by private insurers routinely.  There is some truth to this, but it is also substantially dishonest.  As a participant in a free market system, you are free to choose an insurer and pay such premiums as you are willing and able, to cover everything to some gargantuan limit, or you may choose a policy less expensive, but also less thorough.  In this manner, the rationing occurs because you have enough money, or you don’t, but that is up to your own resourcefulness and diligence and all the factors that frequently make the difference between relative poverty and relative affluence.  You might decide at this point to take me back to the argument of the “unfairness of money,” but as I’ve already explained, in a free market, fairness is measured differently than in your subjective wishes.

If it was my choice as to which system I would endure, I would prefer to take my chances in the free market system, because I believe I can manage to afford the coverage I might need, but in a government system, no matter how diligent and efficacious had been my own labors, I might be told “sorry, you’re outside the limits established for this procedure,” and be denied treatment irrespective of my ability to pay.  I would always choose this latter option, because it affords me the greater measure of freedom, and if it winds up that I was unable to provide the coverage I actually wound up needing, at least I will have nobody else to blame. That’s where the politicians come in, again.

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Posted in Anti-Capitalists, Business, Capitalism, Economics, News | 5 Comments »

PIPA and SOPA: What’s The Problem?

Tuesday, January 24th, 2012

Intellectual Dishonesty?

I know a fair number of people are upset with the proposed Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Propery Act(PIPA) and Stop Online Piracy Act(SOPA) that have been under consideration in Congress, and I recognize there are reasons to stop this legislation, but I also know that there is good reason to believe that steps must be taken to arrest piracy of intellectual property.  It’s easy to get caught up in the public outcry, but it’s a different matter to admit the scope of the problem.  This has been an issue going back to the file-sharing sites that became popular in the late 1990s.  There can be no right to the intellectual property of others, and we have a generation composed of many young people who think they ought to be able to have whatever they want without paying for it.  It’s a mistake to indulge thieves, and to the degree people of this description are part of the outcry, I reject the idea that nothing should be done.  PIPA and SOPA  are probably not the correct legislative answers, but it remains essential that we enforce the law with respect to intellectual property rights.

Let me state from the outset that as a professional in the field of networks and network management, I am opposed to the idea of any authority being given to government to disrupt domain name resolution.  I don’t think that’s anything more than a band-aid, and I don’t suspect it will be effective once file-sharing services begin to change how they link material.  I don’t think the only effective way to deal with this is to find those whose sites are effectively clearing houses for what are stolen intellectual properties, issue cease and desist orders, and prosecute them under existing law.  We know this can be done already, as has been demonstrated by the case of MegaUpload.  The FBI went after this outfit because they were effectively trafficking in copyrighted materials, to the tune of a one-half billion dollars or more, and making a tidy haul of nearly two-hundred million.

There are those who have come to believe that this is fine, and that because they’ve now been deprived of a source for illegally copied materials, they have every right to whine, but I think the federal government should do something else in such cases: In addition to going after the file-sharing site, they should back-track via the ISPs every person who downloaded materials and prosecute them too.  This entire thing grew out of hand in the late 1990s when kids (and no small number of adults) began downloading illegal copies of music in the popular MP3 format from file-sharing sites all over the Internet, ignoring the entire concept of the property rights of the artists and publishers and all the others who would ordinarily gain their rightful profits from selling their property.  As available bandwidth has soared in many areas(but sadly, not in mine,) the same thing has happened with movies and videos and even operating systems.

I would like to talk about this aspect, because I want to remove any ambiguity from the discussion: What we’re discussing here is theft. We’re talking about aiding and abetting theft. We’re talking about scofflaws involved in the wholesale theft of the ideas, musical works, published and copyrighted material, and all manner of things by people who prefer not to pay for their own entertainment.  The fact that PIPA and SOPA may well go too far in the pursuit of this, or give the government an inappropriately excessive level of control and authority beyond what many think is already too much control is a good reason to write better laws, but this is not an excuse to simply ignore the issue to the extensive detriment of every creator of original materials on the planet, whether individual or corporate.

I realize that we have now a generation that has expectations of instant(and free) gratification of their entertainment desires, but the truth is that they too need to grow up.  There is every reason to believe that an unrestrained traffic in pirated materials will ultimately harm the creation of more, because after all, nobody can be expected to produce for free those things that in former generations you would otherwise have had to purchase.  Property rights is a concept that is the cornerstone of our free market, and while PIPA and SOPA may be the wrong vehicles for addressing this issue, it is nevertheless true that it must be addressed.  Pouting like spoiled brats because we could not get our free downloads of some pirated movies or music merely suggests that the problem lies with us.

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Posted in Anti-Capitalists, Business, Capitalism, Crime, Culture, Law, News, Politics | 5 Comments »

Get Ready For More Inflation

Saturday, January 14th, 2012

What Will It Buy You?

There’s a new report by CNBC that the Federal Reserve is considering some more “quantitative easing,” also known as “firing up the printing presses.” They’re going to make money cheaper again, and when it’s cheaper, it’s necessarily worth less.  For those of you who don’t really follow how all of this works, let me remind you of a few things I’m sure you’ve heard, but which you may not pay much ongoing attention.  The idea is to try to stimulate the economic activity by putting more cash into circulation, theoretically making it easier for banks to loan money for new home construction, businesses, and all manner of things.  The notion is that with more cash flowing, more economic activity will result, and more jobs will be created.  That’s the theory, and it sounds simple enough until you recognize some complicating factors.

First, every time the Federal Reserve follows this procedure, what’s really happening is that for all intents and purposes, they’re flooding the economy with new money.  There’s really no new value being added to the system, so what this effectively accomplishes is to devalue all existing money by some amount.  What this causes in turn is a diminution of your money’s purchasing power.  A loaf of bread costs $1.20 instead of $1.10, or a gallon of gasoline goes from $3.50 up to $4.00, or a 2″x4″ down at the home improvement store goes up in price, but the total effect is that money is less valuable.

Back when QE2(Quantitative Easing, Round 2) was announced, back in late 2010, Sarah Palin came out and warned against it, and was scoffed at by the geniuses who push this inflationary policy upon us. Of course, with predictable regularity, she was right about it, as we who pay attention knew would be the case, so now the Federal Reserve is considering more of the same. As with last time, most of the inflation has been hidden by the fact that amazingly, energy and food are not counted in the CPI(Consumer Price Index) but of course, that’s an absurdity since it’s where much of our spending is concentrated.  This helps the politicians and the Federal Reserve shield from your eyes the true cost of their stimulus, but what you should know is that it amounts only to a delaying tactic.  What they’re hoping is to buy time until the economy can somehow catch up, but the problem is that the policy they’ve undertaken ultimately leverages against that end, since it will take ever more dollars for you to fund your energy and food costs, and those aren’t things on which you can really do substantial trimming if you intend to go to work each day.

The whole thing is a colossal fraud, and it’s one of the reasons I agree with Ron Paul that we need to re-examine the role of the Federal Reserve.  It’s become obvious that they’re just as willing as most politicians to lie to you about the end result of their policies.

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Posted in Business, Capitalism, Economics, Federal Reserve, News, Politics | 13 Comments »

GOP Commits Political Suicide By Mitt

Saturday, January 14th, 2012

2012: GOP Commits Political Suicide?

Most of you will be familiar with the concept of “Suicide by Cop,” the practice by which somebody who is unwilling to do the deed themselves, instead puts themselves a position to be threatening, thereby drawing fire from police.  In the same way, the Republican Party now seems poised to commit political suicide by nominating Mitt Romney.  It really wouldn’t take a great deal of explanation were all of my countrymen versed in the principles of capitalism.  Sadly, they are not, so let us make them plain:  Mitt Romney is not a capitalist, but he will be attacked as one.  Just like his false conservatism will lead to attacks on our philosophy, so  too will capitalism come under attack even though neither he nor we any longer practices it.

Many people have defended Mitt Romney over the last several days when he was attacked by Gingrich and Perry on the basis that his work at Bain harmed workers and destroyed jobs.  Others were quick to point out that this sounded very much like an attack on capitalism, in almost the same manner that the left attacks it.  For my part, I pointed out that Romney has enough baggage that you could easily assail his record without seeming to attack capitalism, and I offered up a few specifics.  The problem is that much of this is complicated information, and most people simply don’t have the time or patience to sort through all the details.  I find that frustrating, because we cannot render just opinions on the matter of Romney’s qualifications for the office of President if we’re not willing to chase this all the way into the weeds.

One of the concerns about Bain Capital that hasn’t been mentioned much is how it has relied upon corporate welfare to improve its profitability.  Consider the case of Steel Dynamics, which was provided various incentives and breaks in order to locate in DeKalb, Indiana, a company in which Bain was the largest domestic equity holder.  The state and county provided $37 million in incentives, and even levied a new county income tax in order to get the plant located there.  While this sort of thing isn’t all that uncommon, what it reveals is how thoroughly involved in wringing money out of tax-payers Bain’s operations had really been.

From the same LA Times article:

“This is corporate welfare,” said Tad DeHaven, a budget analyst with the Washington-based Cato Institute, which encourages free-market economic policies. DeHaven, who is familiar with corporate tax subsidies in Indiana and other states, called the incentives Steel Dynamics received “an example of the government stepping into the marketplace, picking winners and losers, providing profits to business owners and leaving taxpayers stuck with the bill.”

That’s a shocking disclosure about a man who has claimed to work in “free enterprise.”  The people of DeKalb County aren’t free, as they’re undoubtedly still paying off the debt they incurred as a result.  Some will point out that this isn’t uncommon, and I agree, but I’m not sure that’s a valid argument for doing it.  Still, the larger point in all of this is that Romney and his company were the beneficiaries of this, and that it wasn’t all “free market.”

Of course, Steel Dynamics was one of the companies that went into the total of his preposterous claim of 100,000 net jobs created, and of course we now know that this too had been smoke and mirrors.  Of course, this is just a sample of his private sector experience, but what you come to learn about Romney during his term as Massachusetts Governor is much more frightening.  While having a president with private sector experience would certainly be useful, Romney’s really not the sort of private sector person we need.  We need a person who understands Main Street, and knows what it is to make a payroll in a business with a few doen employees.  Those are the kinds of enterprises that aren’t being established in this economy, and they’re the sorts hardest hit by the ridiculous big government regulatory regime under which the economy now suffers.

Small businesses are the ones that don’t get tax breaks, and they’re the sort on which we have depended for most job creation over the last fifty years.  They’re also the kind of endeavor that provide slim profit margins, are often held together on a wing and a prayer, and are completely devastated by programs like Romneycare.

What the GOP establishment doesn’t understand is that by going along with Mitt Romney, what will be accomplished is to institutionalize the very sort of government that will destroy the economic growth we so desperately need to climb out of the gargantuan debt pit into which Obama has heaved our nation.  At Bain Capital, Romney could turn to a bankruptcy court for a company that didn’t make it, and at the state level, he could turn to the federal government for grants and similar when Romneycare ran the state short of funds, but as the President of the United States, to whom can you turn?  The Chinese? Even they have had enough of our easy-money policies.

A Romney nomination threatens to destroy the GOP, because if he fails to defeat Obama, or perhaps worse, defeats him but then goes on to govern the nation like he did the State of Massachusetts, there will be no coming back from it.   We haven’t been practicing capitalism for some time, but instead muddling through what is known as a “mixed economy,” meaning one that is neither fully dominated by the state, nor by the free market.  What we allow with Romney is the continuation of the lie that we are a capitalist nation, and yet it will be for all the flaws of statism that capitalism will take the blame. It’s little different from the phenomenon by which George Bush claimed to be a “compassionate conservative” while practicing his own nuanced form of statism.  It had been these government programs and initiatives where government failed worst under Bush, and it was in these that conservatism took the blame.

Conservatives would not implement socialist prescription drug programs.  Conservatives would not further empower a federal education establishment.  Conservatives would not resort to a government takeover of airport security on a permanent basis, and then extend that security to all manner of places as has happened with the TSA.  A Conservative would not have borrowed and spent as George Bush did for the two terms he held office, and certainly wouldn’t have closed out that administration with a program like TARP(which Romney approves.)   All of these things were done by an allegedly conservative president, so are you surprised that by 2006, conservatism was taking the blame?

Terms like “conservative” or “capitalist” are only good as short-cuts to understanding when we deny their use from labeling the things they are not.  In permitting George Bush to stand before us claiming to be both a capitalist, and a conservative, we damned both when he turned out to be neither, in fact.  Labeling McCain with these labels was ineffective because for the party’s base, they clearly weren’t true, and the labels now held a negative connotation in much of the electorate because they had been associated falsely.  It’s the reason McCain had to bring in Sarah Palin, because he had to restore credibility to the terms.  Mitt Romney will fare no better than McCain, and perhaps worse, because Obama will be able to blame conservatism and capitalism for the failings of his own ideology.  Again.  If Republicans permit this to happen again, they’re foolish, and there’s to be no going back.  Even on the slim chance that Romney is elected, he won’t save the country because his solutions are merely a slower implementation of the same statist ideas. It will throw the GOP into a banishment that may turn out to be permanent.  If the Republican party wants to commit political suicide, Mitt Romney is 2012’s perfect and perhaps final solution.

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Posted in Business, Capitalism, Conservatism, Election 2012, GOP Candidates, GOP Establishment, Mitt Romney, News, Politics | 16 Comments »

Why Government Isn’t Like Business

Wednesday, January 11th, 2012

Why Is Government Constituted?

Like most people, I’ve changed my thinking on a number of things over the course of my life, and one of them is the idea that government ought to function as a business.  I once believed that if government could only function with the efficiency of corporations, it would be phenomenal, and make much more sense.  I hear or read this proposition raised from time to time, mostly by people who are discouraged by the wastefulness of governments, and I share their frustrations though I now differ with their conclusions.   Many things have helped shape my opinion, but over the course of time, nothing has done more to change my thinking on this than seeing government in action, up close and in person.  My first experience with that was as a soldier, of course, and along the way to where I am now, I’ve held a temporary position in federal government employ and what I learned there, and since, has made me decide I had been wrong.  It’s not that government can’t be made more efficient, or more careful with our money, but that government is not a business, and if it were to operate like one, we would all shortly regret it.

Imagine a government that can flow into new endeavors by shifting its focus by direction from the top.  Businesses do this very thing all the time, and frequently to the inestimable benefit of employees and investors.  Even if an institution of government could behave this way, would you want it to do so?   Various statists will argue that such a government would be a grand institution, and return much value to its investors, also known as “tax-payers.”  The problem with this is that no company gets to decide the size of investors’ stakes in the business. No company is empowered in law to dictate greater investments, but at least a company has paying customers.  Government has a few who pay various fees of little consequence, but it cannot rightly be said that government has customers, since theirs is a captive market.

Companies try to obtain greater and greater shares of the market, in order to increase their investors’ profits, but governments with such an imperative would soon overrun every boundary we had previously imposed upon its growth.  In fact, our government is already squeezing out private enterprise, and the fact is that with a captive market, government can squeeze out as much as it is institutionally and politically able.  The last dozen years give witness to the fact that the proportion of the total economy the government dominates is increasingly oppressive.  Government already has a legal monopoly on coercion, and it lends that monopoly power to various enterprises on a continuous basis.  Some of these enterprises are government-owned, or formed, and a few more are simply companies that have figured out how to get their fingers in the government’s pie, but in any event, what results is not the sort of government most Americans would want.  It’s plain to see that a nation like Cuba has a governmental monopoly on everything, and Michael Moore’s panting endorsements of Cuban health-care notwithstanding, I think it’s fairly clear this is not a model we should follow.

Of course, there are those who argue that rather than at this very fundamental level, we could simply use common business practices to make government more efficient.  I wonder what efficiencies people seek in government?  Do you want them to become more efficient at tracking you?  Do you want it to become more effective at regulating you?  Do you want it to be more aggressive in taxing you?  I think not.  It is true to say, and I am certain that you will agree, that we can do things to make government accomplish more with less, and to likewise spend less altogether, but what that means is the ability to strictly limit the stake of the so-called “investors.”  Therein lies the problem:  All too often, those who bring business management experience to government see a vast ocean of potential revenue, and notice that unlike in the businesses to which they’re accustomed, the only limitation on their expenditure is their periodic requirement to stand for re-election.

Let us be circumspect in suggesting that we want government to function like business.  They have entirely different imperatives in a society such as ours.  Government exists for the purposes of defending the nation, minting the money, policing the criminals, and preventing commercial and civil conflict from becoming violent ones by the administration of an objectively moral law.  There is damned little else government should do, and can do effectively, and yet it is in this manner that we are told we must extend government’s power to encompass functions over which it has no just claim.  You might tell me some vaunted majority wants this or that, but does this legitimize the claim?  Can an orderly vote by wolves legitimize their consumption of the sheep, if they happen to be the more numerous?

This illustrates the most fundamental reason government must not function like a business:  Business is a voluntary endeavor, and it is business that must seek the agreement of others, and must find those who will purchase its products and services by choice.  Of all our founders, the one who might well have understood this more thoroughly than any was George Washington, and while it is in dispute as to whether he said this, it is nevertheless true, and whomever its actual source, it is a worthy idea:

“Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.”

Imbuing such an entity with the purpose of business is as great a danger as I can imagine.  For those who argue that government should function like business, I wish you’d reconsider as have I.  I realize most think of this premise in terms of the tendency of government to be so wasteful, and the desire for greater efficiency, but we do not ever gain these efficiencies, and government grows only more powerful.  The government we now have all too often mimics the aspects of business that when empowered with monopoly and coercive power to implement its will, becomes a grave threat to its stakeholders.  Imitations of business practices do not make of government a business, and we must bear in mind its actual constitutional role, and limit it to those duties with great fervor.

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Posted in Business, Conservatism, Government Reform, Law, News, Politics | 6 Comments »

A Challenge to Gingrich, Perry, Romney

Tuesday, January 10th, 2012

Attacking or Governing Like Libs

A number of Republican candidates have begun to assail Mitt Romney on the basis of his time with Bain Capital, notably Newt Gingrich and Rick Perry, but the criticisms they level miss the mark in most respects, and worse, play upon the very worst arguments of leftists who say capitalism is inherently evil because it seeks profit and will occasionally lead to short-term job losses.  I have no problem criticizing Mitt Romney when it’s deserved, as these pages witness, but I have definite problems with this approach to attacking Romney.  It’s not that he’s immune to attack, and as I have covered, not everything ever done under the banner of Bain is beyond reproach, but this idea that buying companies, and subsequently liquidating them to turn a profit is a bad thing is quite obviously not one of them.

I have some pointed advice for former Speaker Newt Gingrich, and my own Governor, Rick Perry of Texas:  If you want to criticize Mitt Romney, stick to those parts of his record where he actually did something wrong.  Don’t berate him with the same things Obama will use to appeal to  his base, but instead concentrate on those things that appeal to the conservative base.  In short, focus on how Mitt Romney governed.

It’s amazing when even Ron Paul defends Romney on this point, while Gingrich and Perry attack.  None but the ignorant who live in a capitalist nation should have a problem with the aspects of capitalism that seek profit, sometimes by liquidating assets.  That’s not altogether unlike you having a garage sale and getting rid of things you aren’t using, or that are not up to snuff any longer, trying to recover some of their value before they become effectively worthless.  The money you re-capture by such a sale certainly helps you to pay other bills, or buy new items that more fully suit one’s purposes.  You can take the cash and invest it in a completely new venture.  This is an important function in any market, including in business, and to besmirch it as somehow wrong is a terrible disservice to the entire notion of capitalism.

I can name a number of things that Mitt Romney has done while governor of Massachusetts that deserve more than a little derision.  The problem is that neither Gingrich nor Perry are apt to say much about them, since they’ve advocated or  implemented similar.   Gingrich formerly favored healthcare mandates, and while he’s reversed his position on that, it’s hard for him to take pot-shots at Romney on this basis without somebody pulling out the label “hypocrite.”  Perry pushed for his Gardasil vaccine, and that too is a mandate, though of a different character and scale, but both speak to the same basic problem Romney has, and it’s worthwhile to note that where Gingrich and Romney differ on the healthcare insurance mandate is this:  Only Mitt ever actually imposed one.

I have addressed Romney’s imposition of health-care mandates and the various other programs of a socialist nature he imposed while governor of Massachusetts, and it’s true that in terms of what he has actually enacted, he is certainly the most socialistic big-government-inclined politician of the bunch.  He is definitely the candidate the media will attack most vigorously for both his vices and his virtues, but it is disappointing to see Gingrich and Perry attack on this basis.  If they’re smart, they’ll stop it, but part of the problem is that they’re falling into a well-laid trap set by the mainstream media:  The media is left-biased in the extreme, so what Gingrich and Perry are doing is to pick up the criticisms that will travel farthest in the media.  The media loves these attacks, and will revisit them many times over if Romney gets the nomination, but the attacks conservative Republicans should be aiming at Mitt Romney are not things the overwhelmingly liberal media wants to attack.

Falling for this is a terrible mistake, because it will not be the liberal media that chooses the Republicans’ nominee.  Gingrich is right to point out that Romney’s Massachusetts healthcare plan is a terrible leftist disaster, and that Obamacare had been largely modeled after it.  Perry would be right to raise Mitt’s “Welfare Wheels” program, or any of the other big government ideas that advanced while Romney was governor there.  Either would make perfect sense explaining how Romney was a friend of Teddy Kennedy’s legislative agenda, or how Romney was the beneficiary of crony capitalism on a few occasions.  Nobody on the conservative side would be offended by that.  The problem is that both of them are vulnerable on similar issues, and while perhaps to lesser degrees, they still have some explaining to do.  The problem is that it’s all the easier to simply attack Romney from a point of view more appealing to leftists in part because the media will transmit that message more willingly, but also in part because they believe they will get away with it.

I’d issue this challenge to Governor Perry and Speaker Gingrich:  Tell us the things about Mitt Romney’s record that condemn him as a big-government statist, and those things that mitigate the timber in your own eyes on these issues, and we’ll get along famously.  I’d issue a further challenged to Governor Romney:  Be prepared to explain in some sensible terms why tyranny imposed at the Federal level is bad, but at the state level, it’s no problem at all.  His pathetic “federalism” excuse for  Romney-care doesn’t cut it, and never has.   Governor Romney can impress the hell out of me by explaining to the American people why capitalism is good, but then he’s going to need to explain why he undertook so many programs and laws as the governor of Massachusetts that did nothing but undermine it.

This has been the sick irony of this insufficient field. It’s why 58% of Republicans don’t really like any of these candidates.  Gingrich and Perry had better drop the politically expedient attacks that are merely anti-capitalist rants, and instead hammer on Romney for those things that were egregiously offensive to liberty, and they’d better prepare when questions are raised about their own big-government reflexes.  Otherwise, voters just might get wise to this whole sad game, and walk away from the party this fall. After all, what is worse?  A nominee like Romney who would effectively govern like Obama, or a nominee who relies upon Obama’s tired class-warfare and anti-capitalist rhetoric?  Neither do I want a nominee who subverts capitalism in governing, nor do I want one who assails it in the press.  We need a president who will undertake to restore capitalism, and I don’t see much evidence that any of these three will do so.

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Posted in Business, Capitalism, Election 2012, Media, Mitt Romney, News, Newt Gingrich, Politics, Rick Perry, Ron Paul | 9 Comments »

2012: Anti-Climax or Armageddon?

Tuesday, December 27th, 2011

2012 Looms

Let’s dispense with Mayan calendars from the outset. Neither do I have any interest in misinterpreted antiquities made into modern hoaxes, nor do my readers have any interest in debunking them.  If you came expecting that, please move back over to the MUFON website and carry on in peace, or “Live Long and Prosper,” or wait to be beamed up, or whatever it is you do.  The coming year promises a great number of possibilities, but an accumulating body of evidence suggests that many of them are decidedly bad, at least to the greatest numbers of the American people.  We face many challenges in the coming year, but they need not be apocalyptic. Rather than engage in a load of useless, fear-mongering hyperbole that will be all too common over the next week or so, let’s take a look at the real threats that we face, and conduct an honest assessment of our ability to mitigate them, both from the standpoint of individuals, and also as a nation.

Of course, the possibilities are endless, even discounting Mayan Calendars and the lot, but I think we can group these easily into three major categories, since there’s no real way to predict natural disasters despite the insistence of some who should have by now departed for MUFON. Let us consider our worst threats what they almost always really are: “Man-caused disasters” of one form or another, and that they fall into three major categories we I will list as economic, military and political.  Carl Von Clausewitz would have argued that the latter pair are merely different forms of the same thing, but in this context, I’d like to confine them to their separate definitions.

Let us begin with the category most likely to bear rotten fruit:  The economy is in a horrible condition, and despite the trickery of an administration using rigged numbers to make a case for re-election, it’s clear that we’re in serious trouble.  Perhaps worse is the fact that in Europe and around the globe, the problem of sovereign debt is now choking off economic growth.  The European Union teeters on the verge of collapse, and yet they continue the dishonest and immoral policy of putting good money after bad.  Worse for we Americans, our own Federal Government and Federal Reserve have joined in the delaying tactic.  All they really hope to accomplish at this point is to stall the inevitable long enough to cross the finish line in November.  The question now becomes: Can they?

While the banking and financial  segments remain in global turmoil, the larger domestic issue of immediate importance is the dramatic and persistently horrendous unemployment numbers.  The most reliably consistent numbers from perhaps the most thorough analysis tell us that total unemployment now stands around 23%, despite the rosy picture created by the U3 numbers reported by the Bureau of Labor Statistics.  That is a dangerous number, because it implies certain sociological results that will tend toward violent crime and general civil unrest.  Worse, despite the fact that the U3 number will probably continue downward with even greater seasonal adjustments now being implemented as the administration continues to tinker with the numbers, there’s another problem to consider:  The US is far from the only country seeing this sort of problem, as France is now reporting unemployment levels not seen since the Great Depression.

All of  this paints a frightening economic portrait, but it pales when measured next to the potentially devastating effects of a collapse of the US Dollar.  Nobody alive in the United States really has any sense of what hyperinflation looks like, but here’s a primer on the subject.  The problem is that such a collapse is now increasingly likely, since our own currency has been so thoroughly intermingled with the Euro.  It’s likely that if the Euro goes, our dollar will soon after follow, and we now find that the US Treasury has permitted large institutions with large positions in European derivatives to seek shelter under the umbrella of the FDIC.  This effectively puts US taxpayers on the hook if these things fail, and you can bet that if the Euro falls as it now seems is inevitable, we’re in for a rude awakening.

The military situation is becoming increasingly grim in the Middle East and Southwest Asia.   Having pulled out of Iraq less than one week ago, we are already seeing an increase in violence in that country.  Obama may have managed to pull us out of Iraq, but history may well record he had done nothing but to snatch defeat from the jaws of victory.  Whether you favored the Iraq war, and the occupation that has persisted for most of a decade, it goes without saying that it is the height of foolishness to have spent so much in blood and treasure only to walk away when victory was close at hand.  It might have taken years more to stabilize Iraq completely, but it is doubtful that it will be able to stave off Iranian intervention.

Iran is now flexing its muscles in the Persian Gulf, and is threatening to close off shipping.  That would become an instant crisis, and might well start a round of hyperinflation as fuel prices would likely soar to levels scarcely imagined.  War in any form in the Middle East threatens our security, and threatens to cripple our economy, so that a foreign policy of the sort we’re now witnessing threatens to undermine the future of the United States.

Israel continues to be isolated, and it’s unlikely they’ll see any substantial relief while Barack Obama persists in office. More, leftist elements continue to work to undermine Israel by working in concert with a number of radical Islamic groups.  Israel must now concern itself with an increasingly antagonistic Egypt, and this suggests a scenario in which Israel may have little alternative to at some point make a vigorous defense either by preemptive strikes, particularly against Iran, but also perhaps against other states that continue to have designs on their nation.  This remains true for the so-called “Palestineans,” as well, and there are numerous scenarios by which this could rapidly escalate into full scale war.  Any such war is apt to have profound repercussions here at home, but also globally.

The next area of concern is the political realm.  We have a President that is quite happy ruling in a manner contrary to the will of the people, and he’s content to watch things collapse as he does so.  Worst, his overarching policy is one of bailing out the Europeans to no avail, and in supporting our historical adversaries around the globe.  Still, even with all of this agitating against his re-election, he is thought to have good prospects if only because the sheer number of dollars he has raised and will continue to raise will present a serious obstacle to any opponent.

Speaking of his opponents, all that have materialized thus far have serious problems that will likely make them less than thoroughly effective by way of opposition.  Romney will be obliterated on his flip-flops, and it will be shown that he is more like Obama than Obama himself.  Meanwhile, the strategy Obama is broadcasting is to run against Congress, specifically the House of Representatives now controlled by the Republicans, and they’re bending over backward at every opportunity to make deals with him and Harry Reid over in the Senate.  What neither Boehner nor any of the other establishment Republicans understand is that each time they make deals with Obama, they’re cutting their own throats.  Of course, RINOs like Senator Dick Lugar, (R-IN,) insist otherwise as he now prepares to face a primary challenge of his own.

Add to this the uncertainty about the future of Occupy Wall Street, and what role they’re apt to play in the coming elections, and what you have is a recipe for disaster, particularly if any of the economic or military possibilities discussed herein come to fruition.  I wonder when it comes down to it, and an angry mob packs the mall in Washington DC, whether Barack Obama will stand by the principle underlying his earlier declaration that “Mubarak must go.”   After all, what will happen when the American people are demanding he must go?  My bet is that such would be viewed differently, somehow.

The inevitable question I receive after such a posting is: “What can I do about it?”  The simple answer is “I don’t know.”  The more complete answer is “I can tell you what I am doing,” and leave you to judge for yourself.  You must prepare a few things, and those must include supplies of necessities such as food and medicine.  You must be ready to live without fuel.  You must be prepared to barter when necessary. You must absolutely be prepared to defend yourself, your home, and your family.  You must prepare your family to defend themselves in your absence.  Again, most of these things are measures prudent people should prepare for in all seasons, because one never knows what will happen, from natural disaster to war to almost any possibility. Maybe it’s the soldier in me, but I believe in preparedness, and whatever happens, I will always bet on those who prepare over those who don’t.  It’s really that simple.

On the political front, I will say this much: Americans must become engaged like never before, and here I am speaking specifically to Tea Party patriots, constitutional conservatives, and anybody else who wants to see the nation put back on a course that will promote prosperity.  We must demand that our elected representatives, our Senators, our state and local officials, and yes, our candidates for the nomination all set forth specific objectives for slashing expenditures, reforming government, and holding their feet to the fire.  We must be discerning and vigilant, and not be tempted to fall for what appear to be quick and easy solutions to problems that will not be resolved by half-measures.   Unless and until we the people make enough noise, politicians will pander but make no substantive change, because much like our President, they are in a perpetual delay tactic, every trying to stave off your discovery of how poorly they have done as stewards of your government.

On the bright side, we might just make it through, but if so, it will only be because we had done all we were able, and the sooner people recognize that this will take their direct involvement, the more likely we are to avoid disaster.  Part of what I learned as a young man in the Army is that to prepare is also to repair, because you will inevitably discover things in your preparations that will help you make the scenarios for which you prepare less likely.

It’s much like Y2K at the end of 1999, for which governments and businesses spent untold billions to prepare for a disaster that never substantially materialized.  Many talking heads have assumed that it didn’t occur because it could never occur, but this is dishonest.  The truth is that our preparations largely prevented catastrophe, but history records no catastrophe, so it’s hard to demonstrate.  All those preparations were not “for nothing,” because in truth what they did was prevent the disaster.  That’s the best reason to prepare. It always has been. As we lurch toward a new year full of frightening possibilities, it’s also a year of substantial hope.

 

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Posted in Arab Spring, Barack Obama, Business, Economics, Election 2012, Military Affairs, News, Politics, War | 4 Comments »

IMF: Global Economy Threatened

Monday, December 26th, 2011

Another Day, Another Euro

This has to be one of the most ridiculous pronouncements made by a governmental body in some time, not because it is inaccurate, but because they’ve apparently just now taken notice.  YahooNews is reporting that the IMF’s worried about the global economy, and it’s new head, Christine Lagarde is pointing out the problem as a “crisis in confidence in public debt.”  No, really, she said this.  (For her next trick, Lagarde will likely tell you the sky is blue and that the sun rises in the East, while she’s giving out revolutionary information.) What Lagarde doesn’t mention is the IMF’s role in all of this, and the fact that the grotesque amounts of public debt have been augmented by loans from the IMF itself, in propping up all of these nations.  This is much in keeping with the failed policies that have threatened the world economy, but rather than re-think the strategy that has only deepened our troubles, Lagarde criticized nations that seek to shore up their own economies and financial markets, and while she didn’t name names, it’s clear that she’s talking primarily about the British.  She offered this:

Part of the problem, she said, has been national calls for protectionism, making it “difficult to put in place international coalition strategies against it.”

Lagarde added: “National parliaments grumble at using public money or the guarantee of their state to support other countries. Protectionism is in the debate, and everyone for themselves is winning ground.”

Let me translated Lagarde’s lament:  Politicians in much of the world (excepting perhaps only the US) are beginning to heed the voices of their people, who are beginning to demand that their politicians begin to look out for their own nations first, before worrying about the sovereign debt crises of others.  So Britain, for instance, that is doing the smart thing and walking back its relations with the European Union and its failing currency is a bad country, while we in the US who continue to shovel dollars into the IMF via the Federal Reserve are “smart” and “thoughtful,” and the rest of that patronizing tripe that only works on liberals and statists.  Meanwhile, those of us who live in Realityville, USA, are beginning to understand that this crisis is largely the result of bad ideas promulgated by statists the likes of Christine Lagarde.

This announcement is an insult to every thinking person on the globe, and it show just how far these people will go in order to prop up a lousy idea, or a whole play-book full of them.  As if this wasn’t bad enough on its face, Lagarde offers still worse advice by way of a warning:

Emerging countries, which had been growth engines for the world economy before the crisis, have also been affected, said Lagarde, citing China, Brazil and Russia.

“These countries, which were the engines, will suffer from instability factors,” she told the newspaper.

In other words, these countries that have all seen burgeoning exports are now beginning to contract because general consumer demand is down in the importing nations, including the US and the EU. In short, Lagarde doesn’t want you to notice that she’s making an admission about the future prospect of the EU, with its currency in turmoil, and the US, where currency in large amounts has been sent to prop up this entire mess.  What she doesn’t say directly, and dares not admit, is that the coming collapse is already beginning in a more serious way, measured in the GDP of what had been the leading growth engines prior to the onset of the financial crisis.

In short, Lagarde is asking, or even chiding countries to continue a policy that is nothing short of suicidal, all on the basis of the proposal that the IMF be provided more money to loan to nations already deeply indebted. This is both the financial and moral equivalent of urging the family with twice their annual income in short term debt to apply for another credit card or two.  What she is pretending is that the situation can be repaired by some notion of restored confidence among investors and consumers who now [rightly] fear that nothing but collapse lays along this road.

They’re right to doubt, and the people of Britain and every other nation are right to worry as what Lagarde seems to be suggesting to European politicians, but indeed politicians everywhere, is that they should take one for the team, not as politicians, but as sovereign nations.  Britain would be right to reject her words as the ravings of a con artist, selling the same old Ponzi scheme again and again.  We in the US could only improve our position by following the British lead away from the EU, and the Euro, but our current financial and political leadership is instead tying us more closely to it.

It’s time to face reality:  The Euro was a doomed currency from the outset, and inviting in those nations with questionable currency and dishonest fiscal policies was never going to make anything but a disaster, but the people of Europe were suckered into it, and now the US is going along.  Their shrill warnings of dire collapses if we don’t go along are merely a postponement of a greater crisis with each subsequent delay.  It’s time to face the music, and as the old saying goes, we must refuse to put even more good money after bad.  So bad is it now that it would be more accurate to say that we are putting bad money after even worse.

The only way to prevent a global collapse is to cut our losses now. Stern fiscal policies must prevail, and money must grow tighter.  At this very moment, at the US Treasury and the Federal Reserve, they’re concocting plans to export your future wealth to Europe in order to buttress a currency that won’t be saved, and each dollar they pour into the effort only devalues the ones in your pockets.  It’s time to put a stop to all of this, and if we’re to save our country, we must start here, and we must start now, and short-run extensions of payroll tax-cuts won’t get it done.  We need real, drastic spending cuts that sharply curtail our budget deficit, something on the order of what Ron Paul is proposing, in the realm of one trillion dollars or more in spending cuts immediately.  If you want sound currency, it has to start at home, and whatever else you may think of Ron Paul, he’s right about this.

 

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Posted in Business, Economics, European Union, Federal Reserve, News, Ron Paul | 20 Comments »

Eurozone Downgrades Looming – Markets Brace for Panics

Sunday, December 18th, 2011

This Time, Europe...

Santa Claus may be visiting Paris this Christmas, but it looks as though he’ll be dropping a lump of coal in President Sarkozy’s stocking, as reports are now widely circulating that Standard & Poors may issue a credit downgrade for the government of France in time for Christmas.  In truth, this is no laughing matter, and it certainly portends ill tidings for the season, as the financial markets, already in turmoil over sovereign debt issues, and the imminent collapse of the Euro are on the verge of panic.  Much like the downgrade that was issued for US government credit-worthiness, this seems to be bound to the failure to create a workable solution to the budgetary woes and general unsoundness of the fiscal policy of Eurozone member states.

In a report in the American Thinker on Friday, the details of the failure to attain a workable agreement for consolidation of fiscal policy among member states is outlined.  According to that report, the rating agency Fitch is now considering downgrading Germany and other Eurozone members as they look at the increasing probability that no fiscal order will be brought into this situation.

This sets the stage for a new phase of the Eurozone crisis, where we may see the beginning of one-wide collapse.  As I have reported in recent weeks, the looming catastrophe will have been due to two primary causes, and they are nearly impossible to overcome at this late date:  The nations of Europe that created the single currency overstated the value of some of the previous currencies to an outrageous extent, meaning that the Euro was destined from the outset for failure. At the same time, there was no consolidation or enforcement of a unified fiscal policy for member states, so that those countries with already high debt ratios and generous welfare state benefits as well as remorselessly unconscionable retirement programs for government employees virtually guaranteed that there would be a collapse in some form.  As with all such situations, government officials always seek one more postponement of the inevitable, but such a piper will not go unpaid.

What makes any and all of this relevant to we Americans is that our government and our Federal Reserve have tied us to the Euro to an extent that threatens to take us down with them.  If the Euro goes, we will face some sort of financial calamity, and because some Euro derivatives have now been backed by FDIC, it places the American taxpayer on the hook should this all go belly-up.  Add to this the trillions of dollars already loaned under the auspices of TARP and other bail-out programs administered by the Fed, and what you have is a scenario by which we are dragged down, cannibalized on behalf of our friends in Europe.

Our other increasing similarity to debt-ridden Europe is our debt-to-GDP ratio, all in the furtherance of the growing welfare state.  During Barack Obama’s thirty-five months in office, we have added to our cumulative National Debt by something in the neighborhood of $4.5 trillion.   For the first time in our nation’s history, debt now exceeds GDP.  At this rate, we will soon exceed the likes of Italy, that has now a debt of more than 120% of GDP.  At this point, the Obama administration in concert with the Federal Reserve is fighting the same sort of delaying tactic that the Eurozone is now employing: Prop everything up through just one more election.  This is ever the tactic of politicians, who seek to maintain power in the face of calamities they have created.  None of these heads of state are telling their people the truth, or preparing them for hardships that now loom in a very uncertain future. In part, they will offer that they do not wish to create undue panic, but in truth, they do not want to face their electorates’ anger.

Governments ought to have some responsibility to tell their people the truth, even when that truth is terrible and threatening.  The actions of the Eurozone leaders are despicable to me for precisely this reason, because they are telling their people that it will be worked out, somehow, but by now, I think most people have begun to catch on, both in Europe and here at home. What politicians fear most is having to tell their electorate “no,” or worse, “no more.” Politicians rightly understand that through their relentless building of massive welfare states, they have created monsters that will soon threaten their creators.  There’s a history of reprisals in Europe, and one can only hope it doesn’t come to that.

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Posted in Barack Obama, Business, Economics, European Union, Federal Reserve, News, Politics | 2 Comments »

Britain Isolated From Europe

Monday, December 12th, 2011

Should Britain Feel Left Out?

Reuters is reporting that the EU has effectively isolated Britain, and they way they tell it, it’s a disaster for Britain.  From my point of view, it may lead to that country’s salvation.  Insofar as I can determine, what happened  may look like a British set-back according to Reuters, but for the life of me, I cannot see how.  If British Prime Minister David Cameron were smart, he’d play this up, and seek to withdraw entirely from the Union.  As the Reuters article makes clear, Britain has never been fully accepted by other EU members because they’ve neither joined the common currency nor accepted the Schengen Treaty that provides open borders between signatory nations.   The assessment is that Cameron had been “constrained by domestic politics,” but I view that as a victory for the people of Britain.  Rather than getting drawn even deeper into the quagmire of the EU, Britain may yet find itself able to maintain its sovereignty.

This is part of the problem the US faces with its Euro-entanglements.  Also mentioned in the Reuters piece is the fact that US Treasury Secretary Tim Geithner was making his presence known during the flurry of meetings and negotiations happening across Europe throughout the week:

U.S. Treasury Secretary Timothy Geithner had spent several days in Europe before the summit. The United States, like all of Europe’s trade partners, had been watching the accelerating debt crisis with profound concern, worried for their own economies and banks.

No! This is the thing about which I have been warning you for some time, with the Euro currency teetering on the brink of total collapse: The United States has extended itself to cover Eurozone banks to an extent that is reckless and dangerous.  Geithner was on hand to try to lend his assistance in shepherding the process along.  In the end, what came out of it was what Sarkozy had wanted all along.  There will be a new intergovernmental agreement among nations of the Eurozone as a sidebar to the main EU treaty.  This effectively cuts Britain out, but it also gives Britain every justification in breaking all bonds with Brussels.

What is at stake is the notion of tying the budgets of EU nations to some sort of formal, centralized process, by means of which they hope to get control of the staggering debt.  They have extended and leveraged and borrowed in every conceivable fashion, and yet they still look to do more.  The single currency has been a problem even before its official beginning, since the manner in which it was created was based on some rather generous calculations of the value of the original members’ currencies, and because no budget discipline was installed at the time.  Think of this as an incremental approach to a single central government for the entire zone.

In meetings with the head of the ECB, Mario Draghi, and euro zone finance ministers the conversation was all about the two-year-old debt crisis and how to resolve it. The issues: the role of the ECB, how far should or would it stand behind countries to buy them breathing space, the scale of the euro zone’s rescue fund, the part to be played by the IMF, and should the EU let private bondholders off the hook.

This should cause further concerns for Americans, because the IMF will get much of its funding from the US Federal Reserve, drawing the US even further into the Euro-debacle.

On Monday, Nicolas Sarkozy insisted that Britain is needed as part of the Eurozone trading bloc, but it’s hard to imagine how this remains that case, and Sarkozy admits as much, in stating:

“We did everything, the chancellor and I, to allow the British to take part in the agreement. But there are now clearly two Europes,” Sarkozy said in an interview with the French daily Le Monde.

This is a typically continental view of the issue, but it’s clear to me that Angela Merkel and Germany will bear the brunt of the strain.  Nevertheless, it’s my view that as dire as some would like to make this out to be for Britain’s sake, I’m unmoved by their insistence that Prime Minister Cameron has made a mistake:

“I think that’s a shame because we need our British friends in Europe,” he said, arguing that Cameron’s centre-left predecessors Tony Blair and Gordon Brown would not have made “the same mistake”.

I think it was a terrible mistake for Britain to tie their nation to this mess in the first place, and I think that was true of Germany as well, but while the British have maintained some independence, the Germans have not, and now they will pay.  If this all goes as badly as it seems that it may, Merkel and Sarkozy may be looking for non-extradition countries to which they can flee.

Apparently, I’m not alone in my dim view of the Euro, as one Telegraph writer points out the real reason for the Europeans’ anger toward Britain:

No, they aren’t really angry with us for opposing the new Treaty for Fiscal Union. The reason our brother and sister Europeans are so chronically enraged with the British is that we have been proved completely right about the euro. For more than 20 years, British ministers have been coming out to Brussels and saying that they just love all this single-market stuff, but that they doubt the wisdom of trying to create a monetary union. And for more than 20 years, some of us have been saying that the reason a monetary union won’t work is that you can’t do it without a political union – and that a political union is not democratically possible.

We warned that you would need a kind of central Euro-government to control national budgets and taxation, and that the peoples of Europe wouldn’t wear it. Now look. It wasn’t the Anglo-Saxon bankers who caused the trouble in the eurozone, Sarkozy mon ami. It was the utter failure of the eurozone countries – starting with France, incidentally – to observe the Maastricht rules. It was the refusal of the Greeks to control their spending or to reform their social security systems. In Greece and Italy, the democratic leaders have been effectively deposed in the hope of appeasing the markets and saving the euro; and what makes the leaders of the eurozone countries even more furious is that it doesn’t seem to be working.

Boris Johnson is absolutely right about this.  It’s damned-well time somebody said it.  Britain shouldn’t fear being cut out of Europe at this point.  They should call it “Independence Day” and celebrate.  In my view, the sooner they can dis-entangle themselves from the entire fiasco, the greater their chances of avoiding at least some of the calamity that will ruin the continent.  I only wish our own leaders here in the US would do the same.

Note: In the US, by mid-afternoon Monday, the Dow was off more than 200 points, or roughly 1.7%, on fears about the continuing European crisis.

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Posted in Business, Economics, European Union, News, Politics | Comments Closed

Does Money Corrupt Politics?

Saturday, December 10th, 2011

Which is Corrupted: Money or Politics?

Many people believe that money corrupts politics.  It’s certainly an easy conclusion to draw from the evidence if you consider only the superficial aspects of the problem, but my argument is a bit different.  I don’t believe that money corrupts politics nearly so much as politics corrupts money.  Money is merely a symbol of value. It’s a token we use in place of a barter system, since it’s far easier to exchange.  When you work, you’re creating value, but it’s difficult to exchange the value of that work directly to those from whom you would like to purchase, so the people to whom you sell your labor pay you in money, and then you take that money to all the places you would like to spend it.  This is the nature of money.  It’s an efficient system of exchange and it works quite well, right up until the moment you insert politics.  Rather than spend our time on a question I think misses the mark, let us now examine how politics corrupts money.

If you earn your money by honest labor, whether by manual or mental exertions, you are creating new wealth.  If you consider a block of wood, and you carve it into something fantastic, whether practical or artistic, if somebody will pay you more than it had cost you in materials and energy, that net payment is both an assessment of the value of your time and therefore also your profit.  Some of us are able to turn very little time into huge profits, while others of us are able to make only minimal profits on our time and exertions because what we are producing is not so valuable to others.  That is natural, and normal, and must always be the case.  The maker of candles will never be rewarded as highly as the person who invents a light bulb or the electric generation system to power it.  The reason is simple:  Almost anybody can make a candle.  Workers who can do this are numerous.  The mind that can imagine a light bulb or a generator are rarer, and therefore, their efforts are more valuable. It is the market in which you sell that labor that decides its worth.

Here is where politics enters to corrupt money:  Because candle-makers are more plentiful than inventors, they have many more votes.   They can turn to the political class and demand laws to make their candle-making unnaturally more valuable.  Politicians can follow a number of courses in response to the demands of the numerous candle-makers:

  • They can enact a law making candle-making more valuable than it is in fact
  • They can enact a law making inventors’ efforts less valuable than they are in fact
  • They can steal money from the inventor and give it to the candle-maker
  • They can say “No, property is property, you have yours, and the inventor has his!”

Which of these do you suppose the politicians is least likely to do, since it will not satisfy all his candle-making constituents, and thus will lose him his next re-election?  Of course, this situation becomes a good bit more complicated when we add competing inventors.  Suppose somebody comes along with an invention to replace the ordinary light bulb. Let us imagine that unlike compact florescent bulbs, it has no toxic mercury, and it’s much more efficient at the same brightness. If it’s also less expensive than the ordinary light bulb, and is in all measures a superior product, the market will answer by making it the new leader, and it will become the new ordinary light bulb in short order.  Now, the manufacturers of the older style light bulb will descend on politicians to demand protection of their market.  Politicians can respond in a number of ways:

  • They can enact a law outlawing the new style light bulb
  • They can enact a law requiring the use of the old style light bulb
  • They can add extra taxes to the manufacturer of the new style light bulb, driving up its cost
  • They can give a tax break to the manufacturer of the old style light bulb, driving down its cost
  • They can do nothing at all, and ignore contributions from the manufacturers of the old style bulb

Which of these options is the politician unlikely to choose?  Now let us imagine that the new light bulb is actually a terrible idea.  Let us imagine that it is filled with toxic mercury, and that in the long run, you’ll have EPA hazards created in your home if one breaks, and that while they are slightly more efficient, they are also annoying, and the light is actually modulating at a very high rate, and while barely perceptible to you, your eyes lead you to constant headaches, and besides the high frequency buzzing drives your pets insane, because they can hear frequencies you cannot.  Let us now imagine what politicians might do, not on behalf of the old style bulb manufacturers, but on behalf of the new ones:

  • They can enact a law outlawing the old style bulb
  • They can give tax credits to purchasers of the new style bulb
  • They can do nothing and let the market decide and skip the opportunity of contributions

Which of these have politicians actually done?

Now some will tell me this is all well and good, and merely proves their point, in that the money offered to politicians corrupted them.  Instead, I will tell you this is a lie, and now I will be happy to explain it if you missed what has really happened over the course of this post: The law was used as an instrument of enrichment by already corrupt  politicians.  They had no money apart from their salaries and immediate benefits, but in order to have more money, either in their own pockets, or in their campaign war chests, they used the law, your law, in each and every case to skim money from the system for their own purposes.  What this has the effect of doing is to change the market, and to change what people do in the market.  That means you are changing the value of the labor and the value therefore of money irrespective of what the market might prefer.  What you have done is to use politics to corrupt money.

There is an economic law, “Say’s law,” that tells us something about natural economic function, and it is that a supply creates its own demand.  The inverse and equally true corollary of this law tells us that without a supply, there can be no demand.  (Demand as an economic term, but not as a human behavior.)  What does this mean in the question of politics and money?  It means simply that you cannot purchase that which is not for sale.  No candle-maker, no light-bulb inventor, and no manufacturer of any sort can purchase influence that is not first offered for sale.  This is not a question of corruption by money, but of money.  When the politician uses his position and his legislation to influence the markets, whether he takes payment from a player in the market, or instead merely profits directly by his previous purchases in the market, this is not a matter of money corrupting politics.  It is the much more deadly issue of politics being used to corrupt money.

In every way, this upsets the natural order of the market.  Things that the market would find worthless are suddenly made precious, by law, and things that had been precious are made worthless, or even illegal to possess.  Any such action commits a fraud on all holders of money everywhere and at once.  What else could be the meaning of a law that imposes on you the purchase of compact florescent bulbs, that cost many times their traditional competitor, the incandescent bulb?  Do you have any doubt that most of the politicians who supported this law did so in order to profit in some way from the law, your law?  Notice, however, the ordering of cause and effect, and this will tell you which has corrupted the other, money or politics:  Which came first?  The political action, or the monetary result?  How many of these elected thieves had invested in GE or other CFL producers, before the enactment of the law, knowing what gains their investments would see once they made a law banning the good old incandescent bulb?

I am sympathetic to those who believe, innocently, that money corrupts politics, but the truth is something else:  Politics is being used to corrupt money.  When people make money by graft, it is the money that is corrupted.  It is a form of counterfeiting money, and since money is just an expression of value, what you must see if you’re to have any hope of reversing the trend is that the reason our system is so corrupt is not because of money, but because of those who use the law, and the power of government to extort, coerce, and otherwise gain money they haven’t really earned.  This is because government is involved in far too many things, and I’d ask you to consider Bastiat’s view of plunder to understand it.  If you want to solve the problem, don’t seek to get the money out of politics, but instead get politics and politicians out of money and markets.  That’s a real reform that could save our country.

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Posted in Business, Congress, Crime, Crony Capitalism, Economics, Law, News, Politics | 3 Comments »

Reality Check: Horses and Slaughter

Wednesday, November 30th, 2011

It's Time to Face Reality

I’ve had horses for a long time.  I love horses.  It’s fair to say that I know a good deal about them, and have successfully bred and raised them, and also taken mercy on horses by relieving them of undue suffering.  It’s also fair to say that one of the things I have learned in all my time with horses is that some people, most of whom have never owned a horse, have no idea what is entailed in the ownership, maintenance, and medical demands of a horse.  Too many people have a “happy-talk” view of horses that does not match reality.  Too many people believe that they shouldn’t ever be slaughtered, because it’s a fate too cruel to contemplate as some of the same people wolf down hamburgers or buckets of chicken.

The Congress has finally lifted an effective ban enacted five years ago on the slaughter of horses for human consumption here in the US, and the lifting  of this folly in law will finally permit some hope for an industry that has suffered grave harm because some in government have been listening to the well-meaning, but uninformed folks who believe that horses should be exempt from the same fate as other livestock.  Some of you are going to hate me after this post, but so be it.  If you’ve not yet tackled this truth, today is your day.  The truth is that with the glut of unwanted horses now flooding the market, all horses are suffering as a result.  More are being abandoned, and more are slowly starving, because owners have been deprived of one method of disposal because some people don’t like it.

People talk about the cruelty of horse slaughter, as if it is any more cruel for a horse than for a cow, pig, or sheep.  Newsflash:  It’s no different.  If you like bacon dressing your plate of eggs and hash, you’d better grip reality.  Slaughter is what it is.  I make no excuses for it, because it is necessary.  If you’re one of those “vegans” who believe that eating all meat is bad, congratulations on your philosophical consistency, but at the same time, I offer you my condolences since growing children need meat proteins and if you’re not providing them to children in your care because of your beliefs on slaughter or meat, I think you’re a blooming idiot.  The simple fact of the matter is that humans need meat in their diets.  You can murmur and whine all you like, and you can call me names until you’re blue in the face, but our nature is not that of a herbivore. Nature didn’t give you incisors to slice through veggies.  Deal with it.

Now as to the particulars of horses, let’s get something straight:  Long before mankind saddled up on horseback, early man was rubbing his belly after a fine meal of horse meat.  Horse is leaner than beef from cattle, and is every bit as nutritious.  In World War I, when most of the world still fought wars on foot and on horseback, the United States sent more than a million head of horse to Europe to fight the war.  None came home.  Most of the surviving horses went to feed a starving continent in the aftermath of that war, and millions of Frenchmen and Germans, among others, owed their survival to a diet of horse stew.  This was less than one-hundred years ago, meaning there are many still around who remember those days.  Check in with them before condemning horse slaughter.  It wasn’t only the meat that the Europeans used.  As in any such calamitous circumstance, almost every part of the horse was used, including the coats, from which winter clothing was made.  My wife still has a coat passed down to her through generations that finds its origin in that period.  She doesn’t wear it, but it remains as a reminder of her heritage and how her family like so many in Europe were forced to survive.

Having covered the purely practical questions, let’s move on to the economic ones.  Horse slaughter fulfills a vital function in the horse industry:  It puts to good use animals that would otherwise be dumped in landfills or buried in massive pits.  As it stands, we have a surplus of horses since the prohibition on federal funding of inspections of horses slaughtered for human consumption enacted through Congress five years ago.  It has long been true that excess horses found their way to slaughter because only the most useful animals are kept.  There are a few organizations that run horse rescue operations, but the truth is that those subsist almost entirely on charity, and in these hard economic times, they’ve been suffering, and a few have even gotten themselves into trouble, unable to feed or care for the growing number of discarded horses.  Too many people have come to the irrational view of horses as pets, but this is a nonsensical view that cannot be sustained in the real world.  Horses are livestock, and when treated as such in the market, the market handles the problems associated.

In days gone by, but thankfully perhaps now returning, horses past their usefulness went to “the glue factory,” as the euphemism promised.  Only the rare horse, perhaps famous for racing or other equestrian endeavor managed to avoid this fate.  The reason is simple enough to understand, and I know a thing or two about it:  Horses are expensive to maintain, feed, and pasture or stable, and because they are no longer a necessity of our culture, the demand for them comes only from entertainment, sports, and yes, that practice of slaughter for food and other byproducts. As a matter of economics, the lack of slaughter has devalued all  horses, because we now have a glut of unwanted horses too infirm from old injuries and old age to ever be of use other than as pasture ornaments.  Let’s conduct an economic exercise:  When slaughter was legal, we saw prices of nearly $0.60/lb. for horse on the hoof.  This meant that a 1000lb. horse could be expected to bring six-hundred dollars.  While that’s not a great deal of money, if the horse is fit for no other use, that’s the most the horse is worth.  You can attempt to attach non-market emotional value to the horse, but that’s a matter of subjective considerations that has nothing to do with the market.  Now, let’s take that same horse, and rather than slaughter, let’s euthanize the horse.  Depending on the veterinarian, that may cost anywhere from $100 to $300, or more.  Then you must dispose of the carcass.  Yes, horses go somewhere, and most of them end up in a landfill.  You can expect to pay between $200 and $300 for that.  Let’s stay on the cheap side of this argument. Let’s assume you euthanize and dispose of the horse for a grand total of $300.  As compared to taking that same horse to slaughter, you’re out $900.  Math is hard.  Nature is harder.

Let’s imagine that this animal is going to be kept as a pasture ornament.  Let’s just say we’re going to keep the animal around indefinitely.  You will spend an average of $1500 annually on veterinary care, and another $600 on farriers’ services, and you will feed the horse hay and some sort of bulk protein in the form of grain or pelletized feed products.  The average one-thousand pound horse is going to consume $40 in hay and $20 in feed for a week.  Do the math.  You’re going to spend a load of money on a horse that isn’t doing anything else.  It’s not at all difficult to suggest that with the average horse, even bargain-shopping on all the necessities, you’re going to spend $5000 per year to maintain the existence of the animal.   At present, the average healthy young horse does not fetch $1000 at a sale in my home state.  I want you to think about that reality: On average, in my state, if you can give a horse away, you’re doing well.  Texas has some particular problems in its horse market brought about by politicians, but nationwide, the industry has suffered from this horse slaughter ban.  Too many unfit, infirm animals are taking up too many resources, because for the last five years, we have been prevented from slaughtering the excess.  While horses haven’t been going to slaughter, many horse farms have been killed off, because they can no longer sell their product at a profit for all the useless animals stacking up all over the country.

Now, before some PETA-minded “animals have rights too” whack-job starts in on me, no, I have never personally shipped a horse to slaughter.  Every horse we’ve ever had that became seriously injured or sick was euthanized.  Yes, I paid the freight to haul off their carcasses, but understand that in all but one hopeless case, we tried to save the horse first, meaning its meat was unfit for human consumption anyway due to the medications that were used in the animal’s treatment.  With perhaps all but one of them, if I had known that the treatments would have been futile, and that they were going to die irrespective of our veterinary efforts, I would rather they had gone to slaughter than spend untold thousands on treatments that were ultimately followed by euthanasia and disposal.  At least that way, some good would have come of them.

I realize that seems harsh to some people.  Part of this sense is born of the fact that some people mistake livestock for pets.  Pets live indoors. Pets are generally in some manner housebroken.  If you’ve managed that with an equine, you’ve one serious horse-whisperer.  The simple fact is that the bias in favor of horses on the part of some resides purely in their minds, much like any other bias.  I mentioned “all but one of them,” and that was such a case, where my bias in favor of the horse would have caused me to expend a good deal more if the veterinarians had not convinced me it would be fruitless.  It had nothing to do with the horse’s market worth, but his worth to me personally, but the fact that one particular horse was especially valuable to me doesn’t change the fact that horses are livestock.

I also think with the shape of things in our world, the time is quickly coming when we will have no room for purely sentimental legislation that effectively leads to asinine bans on the slaughter of horses for human consumption.  The simple truth that none of the do-gooders ever address is that horses will die. All horses will die.  How they will die comes down in many cases to human choice, but the only end accomplished by slaughter bans is to deny to horse owners a residual, token amount for the tens of thousands of dollars they will have spent over the life of a horse, and to make those owners slaves to animals long beyond their use.  You can call me a mean and ruthless bastard if you like, but the truth of the matter is something else entirely.

I love horses, but  I know that the only way we will preserve them is that if they are maintained as private property.  A thing is defined as property in part by the right of its owner to use and dispose of it.  If the argument of the anti-slaughter advocates is that I should be denied the use and disposal of my property, they are merely communists acting under another claim of “the public interest,” or “the public good.”  If I knew who inserted that provision into the bill that eliminated the ban, I would give them a big sloppy kiss and $100 toward their re-election.  So would most others in the horse husbandry business.   It’s not that any of us in the horse industry seek to slaughter horses, but we know so long as they exist, this will be necessary, if unpleasant.

Follow-up: A Note to Horsemen

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Posted in Anti-Capitalists, Business, Culture, Economics, Law, News, Politics, Reader Favorites | 38 Comments »

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