GM is Heading Towards Bankruptcy Yet Again

The state spent billions of tax victim dollars to keep General Motors (GM) from filing bankruptcy and it appears, unsurprisingly, that GM is heading for bankruptcy yet again:

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

This is why bailouts are such a joke, they reward companies that misallocate resources. When a company allocates resources towards fulfilling the desires of consumers that business is rewarded with more resource, which are voluntarily given to them by consumers. When a company misallocates resources by putting them towards producing goods and services consumers don’t want that company doesn’t receive further resources and eventually fails. When you insert government into the mix you destroy the market feedback mechanism as companies are given additional resources even though they’ve failed to provide for consumer wants. If GM gets another bailout there will be even less motivation for them to fulfill consumer desires as they would be rewarded twice for failing to do so, and the government seems more than happy to deliver GM another bailout less it be embarrassed by the dismal failure that the bailout programs have been.

What Sowing Subsidies Reaps

When the state give subsidies to a business they are sending a market signal: the businesses failure to make a profit is rewarded. Amtrak is a company that can’t operate on its own, it requires government money to stay afloat. Needless to say since they’re receiving government money they have no motivation to find ways to actually make money:

Taxpayers lost $833 million over the last decade on the food and beverages supplied by Amtrak, which managed to spend $1.70 for every dollar that received in revenue.

“Over the last ten years, these losses have amounted to a staggering $833.8 million,” said Rep.John Mica, R-Fla., in a statement previewing a House hearing today. “It costs passengers $9.50 to buy a cheeseburger on Amtrak, but the cost to taxpayers is $16.15. Riders pay $2.00 for a Pepsi, but each of these sodas costs the U.S. Treasury $3.40.”

If you can’t make a profit off of selling hamburgers at $9.50 you don’t deserve to be in business. I can go to my local butcher and get a pound of ground beef for $4.00 to $5.00 and if I buy a cow directly from a farmer and pay to have him butcher it I can get the entire animal for roughly $3.00 a pound. Since most hamburgers are usually between a quarter pound and half of a pound of ground beef Amtrak is seriously screwing up either procurement or preparation.

Why should they change though? The government keeps transferring money from individuals to Amtrak. Every tax victim is, in essence, a forced customer of Amtrak. Until the subsidies are taken away from Amtrak there is absolutely no motivation for them to offer a product people want at a price they’re willing to pay. Because of their inability to make a profit they will continue to get more government subsidies. Subsidies are a reward for failing, they tell producers that making products consumers want is unnecessary and may actually be detrimental (why risk making $1 million in profit when you’re guaranteed $100 million in subsidies).

They’re Falling Like Dominos

A third California city has declared bankruptcy:

The California city of San Bernardino has filed for bankruptcy protection amid a $46m (£30m) budget deficit and ongoing criminal investigations.

The city listed assets and debts of over $1bn, court documents show, and becomes the third in the state to go bust in just over one month.

When the previous California city declared bankruptcy I was expecting more to follow (although not quite this soon). This is the only possible result of following Keynesian economic ideas. One cannot spent themselves back to prosperity.

Savings are resources that have been set aside for future use. What’s being spent today isn’t actual savings, we’re not spending saved up resources, we’re spending nonexistent resources. One of the failures of Keynesianism is believing savings are bad for the economy. When somebody saves they are foregoing current consumption for future consumption. A city may save in order to buildup enough resources to construct a community center or a road. The key is that resources need to be available in order to do either, something debt spending doesn’t do. Eventually the shortage of resources, that is the misallocation of resources, catches up and people quickly find out that they don’t have enough resources to complete projects. Towns find themselves unable to afford finishing the new community center or road.

We will see more and more stories like this as more and more municipalities collide head on with the reality that there aren’t enough available resources to continue existing projects.

The State, Protecting the Politically Connected from Competition Since Inception

People often mistake the United States for a free market economy, it’s not. The United States economy can best be described as fascist, where the difference between private business and the state is practically nonexistent.

This protection racket often targets individuals who want to start businesses that require very little initial capital, such as food carts:

In Holland, Michigan, a 13-year-old entrepreneur thought he would be able to sell hot dogs and financially help his disabled parents with the purchase of a food cart. Unfortunately, city zoning officials have shut down his business, based on an ordinance that prohibits competition to brick-and-mortar restaurants from mobile food vendors.

Why don’t teenagers have jobs anymore? Because every time they attempt to get a job or show some entrepreneurial spirit they’re blocked by the state. Established businesses don’t want to compete with teenagers who have very low expenses (they generally live at home and don’t have to pay food, water, electricity, or cable bills) and are usually very skilled at operating on small budgets. In a free market the established businesses would have to suck it up and deal with the fact teenagers could open shop and provide goods and services to customers. In the fascist economy of the United States an established business need only petition the state and ask it to prohibit competition in some way.

We Didn’t Get Here on Our Own

Obama gave a political speech and you know what that means? It means the Internet is abuzz with his supporters cheering his speech and his opponents decrying his speech. His opponents have been brining up a part of his speech that strongly mirrors that famous one given by Elizabeth Warren some time ago. Basically Obama is trying to explain how all successful people became successful because of the government:

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

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life.

This part of his speech is true, nobody became successful by themselves. One needs consumers to buy their products or services before they can become successful. Unfortunately, as is common for Obama, his grain of truth is used to create a bucket of lies:

Somebody helped to create this unbelievable American system that we have that allowed you to thrive.

Is this the same unbelievable American system that diverts ungodly amounts of money into the construction of drones, aircraft carriers, and submarines so we can trot around the world and kill people who aren’t like us? Is this the same unbelievable American system that protects the interests of favored businesses from competition? Is this the same unbelievable American system that will murder you if you disobey one of its decrees?

The one thing our unbelievable American system hasn’t done is allow us to thrive… unless you’re one of the state’s cronies of course.

Somebody invested in roads and bridges.

I think he mean somebody paid for the roads and bridges at gunpoint because the state has claimed a monopoly on the construction of transportation infrastructure. People didn’t invest in those roads and bridges, they paid for them because they were forced to, they were threatened with kidnapping and detainment in a cage if they didn’t “invest” in the state monopoly.

If you’ve got a business — you didn’t build that.

Obama is correct, most businesses were physically built by private construction companies. The success of those businesses was made possible by consumers. An entrepreneur came up with the idea and figured out how to execute it. In fact the only real hinderance was the state that demanded a huge portion of the business owner’s wealth in exchange for “protection” from itself.

Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

OK, here is where I raise a giant middle finger. The state didn’t create the Internet “so that all companies could make money off of the Internet.” Do you know why the state created the technology that lead to the Internet? Because the United States government was having the biggest dick measuring competition in the history of the human race with Soviet Russia. Realizing that a centralized communication system would be rendered entirely inoperable by a Soviet nuclear strike the United States government moved to develop a more decentralized communication network. It had nothing to do with helping companies make money, it had everything with that silly little competition that almost ended life on this planet as we know it.

The last thing the United States government had on its mind with the predecessor to the Interent was economic gains, they just wanted to survive the stupid little war they managed to get every man, woman, and child living within its borders involved in. No member of the state can claim any kind of moral high ground when it comes to the Internet.

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

Yeah, imagine if everybody was able to voluntarily decide whether or not they even wanted fire service. As it sits right now fire departments are funded by stolen money and you know what? I still see firefighters standing in the middle of busy intersections with boots begging for even more money. Are they underfunded? Perhaps, but as they don’t have to compete on a free market against other fire departments we can’t be sure. For all we know the local fire departments are merely inefficient and frivolously throwing money away.

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

I like how he continues to purposely confuse the idea of people working together and people being forced into actions they may not want to take at the point of the state’s gun. He’s also shown a complete lack of historical knowledge, by his definition of people working together (that is the federal government doing it with stolen money) it didn’t happen “since the founding of this country” because the Articles of Confederation didn’t grant Congress the power to tax. Instead the Congress was relegated to begging the individual states for money, which meant the states were actually in control but that we never did things together, by his definition, until the ratification of the Constitution.

His claim that we rise and fall together as one nation is also patently false. As it currently stands the state’s cronies are rising while everybody else is falling. In fact the average American family income has been falling for the last ten or so years while corporate profits are hitting all time highs. It appears as though we aren’t all rising and falling together as a nation.

The speech continues on but that section summed it up well. According to Obama nothing would every get accomplished if it wasn’t for the all powerful state forcing people to surrender an ever-increasing portion of their wealth. Individuals in Obama’s world of delusion are entirely incapable of working together.

Working for the Man

How many hours of your peasant life are spent working for the feudal lords? A lot:

This year, Americans have to work until July 15 to pay for the burden of government, more than six months.

In a new report, Americans for Tax Reform (ATR) has calculated that Americans will spend a total of 197 days toiling to pay for the cost of government.

[…]

The report, Cost of Government Day, shows that Americans will work 88 days to pay for federal spending; 40 days for state and local spending; and 69 days for total regulatory costs.

Six months of your life next year will be spent working to give a violent agency that’s spending every dollar it can get ahold of to further cement its power in order to steal even more from you. Feudalism never left, we’re the peasants while the state is the manor lord. We’re allowed to keep a portion of what we make for subsistence only because dead people don’t generate wealth that can be stolen.

Fun with Socialists

You know what my favorite thing about socialists is? The amount of cognitive dissonance required in order to continue supporting the socialist ideal. Proponents claim socialism will bring in a new wave of freedom, plenty, and prosperity but history has demonstrated that it brings war, famine, and totalitarian rule. I should stop here and bring up the fact that I’m referring specifically to socialism and not communism, which has never really appeared.

Communism, although I don’t believe it will work either, is different than socialism in that there is no state. Socialism, in the eyes of many communist proponents like Marx, was a means to an end, which was communism. According to Marxists socialism, that is the dictatorship of the proletariat where the state completely controls all means of production, would eventually lead to the withering away of the state and birth true communism. The problem with this theory is that is relies on the all powerful state to eventually ceded its power, something that is almost entirely unprecedented in human history. Needless to say I respect anarcho-communists far more than socialists because the anarcho-communists are least acknowledge the fact that an all powerful state is unlikely to cede power and thus the socialist stepping stone will ensure communism never appears.

Why do I bring this up? Because it’s relatively important information for the opinion letter I’m going to rip apart:

I agree with Milos Forman that the word “socialism” is almost invariably misused (“Americans shouldn’t fling the ‘socialist’ label so casually,” July 13). President Obama is far from being a genuine socialist, and Obamacare is the furthest thing from socialism.

I agree with the author here, Obama isn’t a socialist nor is Obamacare socialistic healthcare. Obama and his healthcare strategy are fascist, that is to say it’s a marriage between the state and its favored corporations. A socialistic healthcare system would be one akin go that implemented in the Soviet Union and various European countries where the state has total control. Obama’s system mandates that everybody purchase health insurance from various insurance companies. Under the Obamacare system everybody is forced to do business with health insurance companies whereas a socialistic system forced everybody to do business with the state (instead of paying premiums to a private business you have to pay taxes to the state).

Unfortunately the author’s letter goes downhill from there as he needs to do some hand waving in order to make excuses for the previous failures of socialism:

However, Forman’s portrayal is also off-base. He was a victim of Stalinism in his native Czechoslovakia, so one can understand his rancor. However, to equate the regimes that existed in the USSR and Eastern Europe with genuine socialism is a travesty.

Socialism has quite the body count as pointed out by R. J. Rummel in his book Death by Government. His book demonstrates that there is a positive correlation between state power and people killed by the state. One cannot claim the history of socialism in this world was merely a victim of Stalinism since Stalin only ruled in one country and nothing really changed in that country after his rule. For example, North Korea was never ruled by Stalin but their regime is certainly as lethal as Stalin’s was. Cambodia is another example as the Khumer Rouge regime ruled by Pol Pot ended up wiping out anywhere between 1/5 and 1/3 of the entire population of Cambodia.

The author continues in his quest to dispel criticisms of socialism but defining “real” socialism:

Genuine socialism — as espoused by Marx, Engels, Lenin and Trotsky — is about genuine political and economic freedom and democracy.

Interesting, I wonder what definition of freedom the author uses. Socialism, by definition, lacks political and economic freedom because the entire economy is lead by a dictatorship of the proletariat. It should be noted that dictatorship, in this case, isn’t used in the traditional sense. When proponents of socialism, such as Marx, say the dictatorship of the proletariat they mean that the entire political system is controlled by the proletariat and that all members have say democratically. Unfortunately, democracies are not bastions of freedom but tyrannies of the majority. With democracies everything, including your supposed rights, becomes conditional. If a majority of the people vote one way then that’s the way things will be, even if their vote is to sieze your property. Freedom cannot exist if everything in society becomes conditionally based on majority rule because the minority will always be oppressed.

Economic freedom is another thing that doesn’t exist under socialism as all means of production are controlled by the state. One cannot build a factory, hire locals as employees, and begin selling products in a socialist system because the state will come and sieze the factory. In the Soviet Union members acting under market principle were labeled speculators and, well

All these data show that the workers of Petrograd are monstrously inactive. The Petrograd workers and soldiers must understand that they have no one to look to but themselves. The facts of abuse are glaring, the speculation, monstrous; but what have the mass of soldiers and workers done about it? You cannot do anything without rousing the masses to action. A plenary meeting of the Soviet must be called to decide on mass searches in Petrograd and the goods stations. To carry out these searches, each factory and company must form contingents, not on a voluntary basis: it must be the duty of everyone to take part in these searches under the threat of being deprived of his bread card. We can’t expect to get anywhere unless we resort to terrorism: speculators must be shot on the spot. Moreover, bandits must be dealt with just as resolutely: they must be shot on the spot.

Emphasis mine. Those were words penned by Lenin, who the author claims is a “real” socialist by the way. Not only was Lenin advocating that speculators be shot on sight, but he also demanded anybody unwilling to help with searches be deprived of their food. When the state controls the means of production, and thus food distribution, they can coerce you into actions you don’t wish to take by threatening you starvation. The author’s claim that political and economic freedom exists under “real” socialism is laughable.

What is socialism, according to the author, truly about? Mostly free shit:

It is about full employment; universal health care and education; a shorter workweek; safe, affordable housing, and infrastructure. The only thing standing between a world of plenty and the world of misery and inequality we live in today are the enormous profits of the billionaires — the 1 percent.

In this paragraph the author shows his true economic ignorance. According to the author the only thing standing between us and all that free shit he mentioned are those wealthy bastards. Using the author’s logic removing the “1 percent” would mean every natural resource would become infinitely abundant. At least that’s the only way one can reconcile what the author said as one cannot have plenty unless we live in the Garden of Eden, for almost all wants of humanity derive from one form of natural resource or another. Computers require silicon, copper, steel, plastic, etc. to build. In order to produce food one needs arable land, seeds, fertilizer, water, etc. Although I accept the fact that I could be wrong, I don’t believe there are actually an infinite amount of resources available. Is there really a conspiracy amongst the “1 percent” to hold the infinite amount of resources from the people? If so, where are they putting those infinite resources? Perhaps they’re hiding them one their infinite land located in their strange pocket of time/space where time (which is a scares resource in itself) is also infinite.

That’s the issue most socialists and communists have, they claim there will be a new wave of plenty if we can merely get rid of the bourgeois but seem to miss the fact that all resources are limited. There is also the issue of the economic calculation problem brought up by Ludwig von Mises. How could a socialist paradise ensure plenty? To ensure plenty one must know what people will want in the future and direct scarce resources towards fulfilling those wants. What happens when a majority of agriculture is put into wheat production but a majority of people want soy?

We also have the issue of labor, something socialist rarely address. How could one have universal healthcare if there aren’t enough people willing to work in the healthcare industry? Under socialism all are supposedly equal, which means paying somebody more for one job than another person for a differing job leads to problems. Why be a doctor if being an auto-mechanism pays the same but requires far less time investment? Who is going to maintain sewage processing systems? Let’s be honest, nobody really wants to do that job but they do it because the economic reward is high:

I’ll bet you never thought that a job existed for landfill divers. It does. The salary is around $3,500-4,000 a month. Not bad.

Socialists have never really addressed the issue of getting undesirable jobs done when there is no benefit. Usually they claim that people will do such jobs out of realizing the social necessity but in practice they usually do such jobs because the state has a gun to their head. Let’s move on:

People are increasingly dissatisfied with the status quo and long for a more rational way of organizing society. This explains the growing interest in the ideas of socialism and Marxism. As a supporter of the Workers International League, based right here in Minneapolis, I invite my friends and neighbors to learn more about what these ideas truly represent, and to make up their own minds at www.socialistappeal.org. After all, if socialism is “dead and buried,” why expend so much energy “disproving” and misrepresenting it?

JOHN PETERSON, MINNEAPOLIS

A society where everything is conditional based upon the desire of the majority and economic freedom isn’t allowed to exist is more rational? I’m not entirely sure what the author’s definition of rational is but it certainly doesn’t match mine. I also wonder if the author’s claim that interest in socialism and Marxism is actually growing. The few socialist gatherings I’ve seen here in the Twin Cities have been more sparsely populated than local Libertarian Party meetings (which is saying a lot). In all honesty, most people in the United States don’t fall into the socialist or individualist category, they fall into the Republican or Democrat category. Most people realize they’re being screwed but don’t understand the why and how so they look for answers with one of the two major political parties. The only proponents of communistic ideals with any number of members in the Twin Cities that I’m aware of are the anarcho-syndicalists and anarcho-communists, neither of which support socialism.

Proponents of socialism seem to believe the solution to a corrupt all-powerful state is to replace it with another corrupt all-powerful state. This belief likely stems from the fact that the new all-powerful government would have their socialistic views in mind (for a very short while, until the next Stalin gains power). As a general rule any philosophy built upon the idea of granting complete power over individuals by other individuals is doomed to fail (unless the intended goal is achieving power and nothing more). Socialists suffer from an inability to learn from history.

The State Protecting Big Tobacco Interets

One of the things that amazes me are people who cite regulations against big cigarette companies as an example of regulations working well. They believe that the state’s actions against big tobacco companies that required printing warning labels on cigarette packs, taxing cigarettes, and restring the smoking at to 18 years is undeniable proof that the state wants to protect us against companies that peddle poison. In actuality big tobacco companies, like all other businesses, receive a great deal of protection from the state. Take the recent passage of legislations that taxes owners of roll-your-own cigarette machines the same as cigarette manufacturers, it basically destroys the roll-your-own market and further protects the interests of large tobacco companies:

But a few paragraphs added to the transportation bill changed the definition of a cigarette manufacturer to cover thousands of roll-your-own operations nationwide. The move, backed by major tobacco companies, is aimed at boosting tax revenues.

Faced with regulation costs that could run to hundreds of thousands of dollars, RYO machine owners nationwide are shutting down more than 1,000 of the $36,000 machines.

Not surprisingly Philip Morris backed this legislation:

“I feel it’s kind of shaky,” Wiessen said. “The man who pushed for this bill is Sen. (Max) Baucus from Montana, and he received donations from Altria, a parent company of Philip Morris. Interestingly enough, there are also no RYO machines in the state of Montana. It really makes me question the morals and values of our elected speakers.”

It’s obvious why Philip Morris supported this bill. Large cigarette manufacturers can easily soak up the cost of additional taxes but small shops cannot. While the large cigarette companies have to pay more in taxes, which negatively affects their profits, they also don’t have to deal with many of their former competitors, which greatly increases their profits as customers of those small operations are forced to move to the larger competitors. The state giveth and the state taketh away. While they hurt the interests of large tobacco companies in some ways they’ve also moved to protect those same companies from competition on a free market.

In other words the state doesn’t care if you smoke so long as you’re buying their crony’s stuff.

Bankrupting the World

If something doesn’t work we just need to try it again harder, right? That must be what the United Nations (UN) is thinking because the globe is in an economic recession and so far taxing the wealthy hasn’t managed to pull us out of it:

The United Nations on Thursday called for a tax on billionaires to help raise more than $400 billion a year for poor countries.

An annual lump sum payment by the super-rich is one of a host of measures including a tax on carbon dioxide emissions, currency exchanges or financial transactions proposed in a UN report that accuses wealthy nations of breaking promises to step up aid for the less fortunate.

The annual World Economic and Social Survey says it is critical to find new ways to help the world’s poor as pledged cash fails to flow.

The report estimates that the number of people around the globe worth at least $1 billion rose to 1,226 in 2012.

It’s bad enough that crackpot economists are giving every country on the planet bad advice, we really don’t need a global organization of government advocating for the same kind of insanity. At least the various country governments can claim they provide useful goods and services with the money they steal, what is the UN’s justification? Do they need more money to wage wars… yeah.

The Effects of Subsidies

It touched briefly on subsidies in my earlier post today but I came across a story that demonstrates my point all too well:

Every day some 3,000 Indian children die from illnesses related to malnutrition, and yet countless heaps of rodent-infested wheat and rice are rotting in fields across the north of their own country.

It is an extraordinary paradox created by a rigid regime of subsidies for grain farmers, a woeful lack of storage facilities and an inefficient, corruption-plagued public distribution system that fails millions of impoverished people.

Once again the state not only allows thousands of downtrodden individual to die but they actively increase the number of starving by artificially increasing the price of foodstuff. Why doesn’t the state just give the unused grain to the starving? Simple, the receivers of the grain may being to trade it in exchange of other needed goods. This trade would increase the supply which would decrease the price. As the price decreases the farmers make less and therefore have less for the state to take.