Incoming Bailouts

All the major media outlets are talking about the “surprise” $2 billion loss reported by JPMorgan:

JPMorgan Chase, the biggest US bank, has revealed a surprise trading loss of $2bn (£1.2bn) on complex investments made by its traders.

Of course anybody who pays attention to the game recognize this play. JPMorgan is basically positioning itself to receive some government cash. It’s no secret that the state likes to give bankers tons of cash in the form of bailouts and the headlines are making sure to point out that JPMorgan is the biggest bank in the United States. If smaller banks qualified for bailouts you know the biggest bank in America is “too big to fail.”

Here’s how the game usually works. A private entity wants to get a large chunk of money from the state and the politicians want cushy jobs when they exit politics. This situation is mutually beneficial because the banks can offer cushy jobs to the politicians in exchange for huge chunks for state money. Politicians also want to maintain their power so they package up the handout in a manner they believe the public will support. In the case of large banks the package is one of economics, they will tell the public that the United States economy will suffer greatly if the bank fails. What the politicians neglect to mention is the fact capitalism requires bad businesses to fail because bad businesses have misallocated resources and those recourse must now be property allocated.

I’m predict JPMorgan will receive some kind of large handout from the state in the coming months. Perhaps they won’t be the only receivers either.

The Result of Attempting to Control the Economy

France is famous for Paris, wine, and interfering with business. If you wanted to start a business in France I would call you insane because the French government will punish you for daring to bring a little prosperity to their country. Some of the laws France has on the books are downright stupid but it’s good to see business owners have found ways around them:

Here’s a curious fact about the French economy: The country has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’ We have to review our labor code.”

If you’re a business owner and hire more than 50 employees you’re suddenly in for a world of hurt. Thankfully France hasn’t made it illegal for individuals to own more than one company although I’m sure such a law will be in the works soon since these “exploits” are being brought to life. Such a ban would be entirely pointless since business owners would find another way around the new law but it makes entrepreneurs less willing to start new businesses and therefore the economy continues to suffer greatly.

So it Shall be Written, So it Shall be Done

If you’re in Minnesota you likely know about the “vote” being taken by our “representatives” at the Capitol regarding the Vikings Stadium. I use the word vote in quotation marks because this isn’t a vote, it’s a formality. The bottom line is this stadium was ensured to be built the second Zygi Wilf, the owner of the Vikings, said he wanted the state to fork over a large part of the stadium’s cost. Zygi is a politically well-connected billionaire meaning anything Zygi wants Zygi will get, he merely needs to make the right deal. Apparently he made the right deal since the Minnesota House voted in favor of the stadium:

The Minnesota Vikings won a decisive and long-awaited political victory late Monday when the House passed a public subsidy package for a new stadium, sending the project marching toward final passage at the State Capitol.

When the final vote was announced, two dozen Vikings fans — most clad in team jerseys — cheered loudly outside the House chamber and sang the team’s fight song. Afterward, amid chants of “Build A Stadium, Save Our Team!” Minneapolis Mayor R.T. Rybak made his way through the crowd and was congratulated by smiling fans.

The final vote came after a day of high drama and a weekend of intense lobbying by Gov. Mark Dayton and the team, and produced a relatively easy 73-to-58 approval in the House. Though Republicans hold a majority in the House, DFLers did the heavy political lifting on the final vote, producing 40 of the 73 votes. The victory was also noteworthy because House Speaker Kurt Zellers — the leading Republican in the House — voted against the project.

There is much to be said about this entire fiasco. First let me address the rampant hypocrisy involved in this decision. Many people who are demanding the state pay a chunk of the stadium are also demanding the state tax the wealthy more. In fact the Democratic Farmer Labor Party (DFL) is usually the party working to increase taxes on the wealthy yet were the ones to vote most favorably towards a publicly funded stadium. The hypocrisy is almost palpable, they just voted to give a bunch of money to a billionaire. Perhaps they believe the state should tax the wealthy more but subsidize the super wealthy?

Outside of the hypocrisy a question must be asked: what do the Vikings have to offer the politicians? Deals like these must be mutually beneficially and therefore Zygi must offer something of value to get his subsidy. Unfortunately these deals are always performed behind closed doors and thus we never learn about them until after the fact. Beyond campaign contributions I believe another thing of value was likely offered, jobs. When things were looking bleak for the Vikings stadium deal the National Football League (NFL) entered the game. What does the NFL consistently try to do? Get public funding for stadiums. What do you need to get consistent public funding? Lobbyists. As a general rule politicians are often offered plush lobbying positions by large corporations for favorable legislation so I wouldn’t be surprised to see several prominent Minnesota “representatives” receive jobs with the NFL after they exit politics.

What’s done is done. I am merely a commentator and thus have no power to influence the game, but I do have the ability to make some predictions. It’s no secret that the economy is getting worse, which would make an intelligent person ask why the Vikings want to build a new stadium now. With a crumbling economy won’t people become less willing to buy tickets to see a game? Of course. Does it matter to the Vikings? Absolutely not. Why? Because the same arguments they use to get public funding for a new stadium can be used to get ticket prices subsidized.

Zygi Wilf isn’t an idiot and thus has likely already come up with the same idea I’m about to present. Throughout this entire stadium fiasco the primary argument used by proponents of public funding for the stadium have been based on supposed economic benefits brought by the Vikings. The beauty of such arguments is they can be used to justify almost any subsidy. Let’s step ahead several years where further economic failures have caused ticket sales at Vikings games to falter. Zygi, seeing his profits plument, has decided he needs another subsidy. How can he sell it? Easy. All it has to do is tell the politicians that he will sell off the Vikings if they fail to be profitable. Such a sale would cause them to move elsewhere and thus deprive Minnesota of the economic benefit the team supposedly brings. Since the Minnesota economy is already at a very vulnerable point the loss of the Vikings will cause complete collapse and therefore the economy of Minnesota depends on subsidized ticket prices from the state. Using this argument the politicians will vote to subsidize some arbitrarily chosen percentage of ticket prices so more fans can enjoy the games and the Vikings can remain profitable. It’s all for the greater good after all.

Many people reading that likely scoffed and rolled their eyes but I believe my prediction is pretty sound. We must only wait and see (and if it does happen I’m going to be doing the biggest “I told you so” dance anybody has ever seen).

My Predictions for France

France, like the rest of the world, is facing economic ruin. The government has been doling out money so long that they’ve racked up a debt they can never hope to pay off and unemployment continues to creep up. To solve this problem the French have elected a socialist.

Think about that.

Due to economic failures the French elected a socialist. That’s like having a convicted repeat child molester babysit your children. Either way the new president of France, Francois Hollande, is calling for a 75 percent tax rate on those who earn more than 1 million euros a year:

“Above 1m euros [£847,000; $1.3m], the tax rate should be 75% because it’s not possible to have that level of income,” he said.


Mr Hollande himself renewed his call on Tuesday, saying the 75% rate on people earning more than one million euros a year was “a patriotic act”.

“It’s a signal that has been sent, a message of social cohesion, there is an effort to be made,” he explained.

“It is patriotic to agree to pay a supplementary tax to get the country back on its feet.”

Did you get that? It’s patriotic to have 75 percent of your wealth stolen! This idea isn’t going to fly as history has demonstrated. What most people who demand the rich be taxed don’t stop to consider is that the rich are wealthy enough to leave a country at will. The United States doesn’t have anywhere near a 75 percent income tax and many wealthy individuals are still renouncing their citizenships over the high taxation:

This year almost 1,800 people renounced their American citizenship and Green Cards as published in the Federal Register, thanks to a costly and timely tax requirement.

So here are my predictions for France, most of which are torn from the pages of Pictures of a Socialistic Future [PDF] (a great book written in the 1800s that successfully predicted what conditions in socialist countries would be like).

Upon the 75 percent tax rate becoming law many of the wealthiest in France are going to abandon the country and renounce their citizenships. After enough people start fleeing France the government will implement Soviet-esque border controls and prevent those with means from leaving unless they leave something behind as a hostage collateral. From there things will only get more draconian since the massively jacked up tax rate won’t actually improve economic conditions but will do quite the opposite. Not wanting to face the prospects of being successful people in France will cease any attempt at real entrepreneurship or turn entirely to the black market. As a last resort France may turn to issuing their own money again, which will be printed so fast hyperinflation will be guaranteed.

Basically France is fucked if they continue down their current economic road.

Butt Hurt Krugman

Paul Krugman is a little butt hurt after his debate with Ron Paul and has taken a little time to blog about it:

Think about it: you approach what is, in the end, a somewhat technical subject in a format in which no data can be presented, in which there’s no opportunity to check facts (everything Paul said about growth after World War II was wrong, but who will ever call him on it?).

Notice that Krugman is complaining about the useless nature of face-to-face debates because it doesn’t give the debaters an opportunity to present data or perform fact checking. I’ve seen plenty of debates between people who have presented a great deal of data to back their claims and given citations for their sources so people can check what they’ve said afterwards but I’m going to give Krugman this point for one reason… he shoots himself in the foot.

First he complains about his inability to present data or verify facts presented by Ron Paul then he states what Ron Paul said about growth after World War II was false but doesn’t actually provide any proof of his statement. It’s a damned blog post Krugman, you have plenty of opportunity to make your argument and present your facts since you’re not under the pressure of an opposing debater. If you’re going to complain about face-to-face debates because they don’t give an opportunity to check facts then criticize the person you debated you should actually present some data that backs your statement. You have a platform to make your argument and you totally blow it.

If Ron Paul got on TV and said “Gah gah goo goo debasement! theft!” — which is a rough summary of what he actually did say — his supporters would say that he won the debate hands down; I don’t think my supporters are quite the same, but opinions may differ.

Actually, if you watch the debate, Ron Paul was a little more elegant than “Gah gah goo goo debasement! theft!” Once again I will point out that Krugman has plenty of opportunity to backup his statement on his blog article but totally ignores it. I also like the fact that Krugman believes his supporters are different than Ron Paul’s supporters as far as reactionary positions are concerned. I guess Krugman loves a little conformational bias in his statements.

So why did I do it? Because I’m trying to publicize my book, which does have lots of data and facts — but those data and facts don’t matter unless I get enough people to read it.

I’ll give Krugman a point for honesty and admitting he just did the debate to publicize his book but take away points for failing to publicize his book. A debate would have been the perfect place to cite his new book for arguments. He could have said, “As I’ve written in my new book your statement about growth after World War II is false. You see…” and he could have presented his argument from there.

Krugman basically entered a debate to publicize his book, failed to publicize his book, failed to make any valid points during his discussion and then proceded to write a blog post about how pointless debates are without actually taking an opportunity to demonstrate his argument by presenting facts to backup his claims. I think this guy is the poster child for the meaningless nature of Nobel Prizes (which Krugman won one of in the field of economics).

Smashing Windows isn’t Justifiable Regardless of Property Rights

One of the core differences between libertarian philosophies and socialist philosophies has to deal with property rights. Namely libertarianism recognizes private property while socialism does not. This difference leads to a massive schism between the two philosophies that extends beyond simple disagreement. When socialist anarchists protest there are often shards of broken glass in their wake, which has lead many to believe anarchists just like breaking shit. The truth is more complicated and has to do with a complete lack of recognizing property rights and holding the belief that all forms of hierarchy are violent. First I want to address the reason socialist anarchists find the smashing of windows acceptable and then I want to present an argument against smashing windows outside of recognizing property rights.

If you’re ever looking for comments from socialist anarchists you can always rely on /r/anarchism on Reddit. I think this comment by 2paradoxes sums up the philosophy concisely:

But in principal, a window does not have some intrinsic right to not be smashed. If I bought a window and smashed it in my backyard, you would not accuse me of window abuse. So window smashing is not wrong in and of itself (this should come as a shock to no one)

As anarchists, property is not our thing (I’m assuming that’s your opinion, it’s the prevailing one around here). So it doesn’t make sense to say that breaking a window is property damage so it’s wrong.

Yet I do agree that window smashing can be wrong. I would say it is only wrong to the extent that it causes harm. Harm to a person. People have rights, windows don’t have rights. Break a window on a house and someone freezes, you have committed murder. Break a window in the front of a bank, they have to close down for a day and I lose zero sleep over it. banks actively harm people, and if you need to break some glass to stop it more power to you.

Since windows themselves lack rights and they don’t believe in property rights the smashing of windows is justified. The only time some socialist anarchists believe breaking a windows is wrong is when it physically harms another person. Personally I find such justification extremely convoluted. I’m sure you’re familiar with the phrase, “This is why we can’t have nice things.” If nobody recognizes property rights in any form (either collective or private) you really can’t have nice things because they will be destroyed.

Property rights, ultimately, are an attempt at creating a peaceful system to divide scarce resources. Reality is harsh and dictates that two people cannot use the same thing at the same time. Furthermore many things are one-time use such as food and water. Private property divides resources amongst individuals while communal property rights divide resources based on the whims of a community (they may be divided based on votes for example). A problem arrises when a proponent of communal property doesn’t recognize private property. In a case where an individual lays claim of ownership over a windows somebody who doesn’t recognize private property will smash it and claim their action was justified because of their lack of recognizing private property. This brings us to another fact, all forms of property rights are ultimately backed with the threat of violence.

Property rights only serve their purpose if they are recognized. When the system breaks down then the only option to continue protesting property is through force. Followers of the non-aggression principle state a violation of one’s property right is an initiation of violence and thus defending property is an act of self-defense. Under private property rights I have a right to use force to prevent you from burning down my home. Communal property is not different. Let’s say we have a cooperative where each worker owns an equal share of the business and somebody decides they are going to burn the business to the ground. What are the workers to do? They can either watch their business go up in flames or they can use force to prevent the individual from burning their business down. Opponents of private property are always quick to claim that private property can only be maintained through violence but the same is true of communal property rights.

If property rights are not recognized or backed up with the threat of violence then there is no point in having anything. Who is going to build a store if they know it’s going to be burned to the ground by a random thug? Let’s say somebody does build a store, what happens when the random thug shows up and the owner is unable to justly defend the store? Based on the statement I linked to above the thug would not be committing an act of violence so long as the store owner wasn’t physically harmed. Economically this leads to complete breakdown.

Economics when boiled down is nothing more than the study of human interaction, namely as it relates to cooperation. Whether you live in a capitalist society or a socialism society cooperation occurs. In a capitalist society that cooperation is based self-interest where both parties enter a transaction because they feel they will come out ahead. If you want bread but have eggs and your neighbor wants eggs but has bread you can trade eggs for bread so each person has what they want. Socialism is based on alturism. If your neighbor wants eggs and you have eggs you give him the eggs. No matter how you look at it these transactions breakdown entirely if you have no recognition of property rights.

Let’s assume you want to bake bread. You’ll gather the raw ingredients and equipment needed for the baking process then you’ll put the ingredients together and bake them. If you’re exceedingly good at baking bread you may decide to give some of your bread to others either in exchange for other goods or out of pure altruism… unless your ownership of the ingredients of equipment are not recognized. Would you tell people you have the raw ingredients and equipment needed to bake bread if it means they would simply be taken from you? Let’s expand on this idea, would you bother building a home or store if it was just going to be destroyed? In both cases the majority are likely to answer in the negative. At this point we end up having a complete breakdown in society. There is no longer any reason to come together with other people since any interaction with another is likely to lead to your stuff being taken or destroyed. Humans came together in societies to take advantage of division of labor. Hunting a wooly mammoth and carrying back to your cave is much easier when you have help after all.

Of course I’ve ignored the “harming others” aspect mentioned by the linked comment. Harm can be very subjective and thus actions of theft or destruction can be easily justified as not harmful. In the case of the bread maker above one could say stealing his raw ingredients and equipment wasn’t harmful because he also has potatoes growing and thus can eat. Burning a home to the ground can be justified as not harming the home owner if he has a tent or other source of shelter. It’s trivial to make justifications based solely on whether or not an action harmed a person or not. That leads to a subjective system and subjective systems lack stability of any sort. Once again somebody is unlikely to build a store even if they know it won’t be burned down now if the rules are entirely subjective. Just because the store won’t be burned down now doesn’t mean the rules won’t subjectively change later after all.

Returning to the beginning of this post smashing windows isn’t good for anybody either. Socialists are often proponents of workers seizing the means of production from capitalists. If you smash a bunch of windows in a capitalist owned factory the workers will have to replace them if they take control. Many socialist anarchists also believe and complete abolition of money and therefore believe banks cannot legitimately exist. For the sake of argument let’s assume a society free of money rises from the ashes of a worker revolution, what will happen to the unneeded bank? A smart society would repurpose it. Banks are merely buildings and like any building they can be used for things other than being banks. Perhaps a group of workers want to open a bicycle repair shop, if the bank is now unoccupied it would make a perfect place for the operation. Yet if the windows are smashed the workers will have to replace them before doing business. Ultimately smashing windows isn’t good for anybody because they must be replaced. This is why Frédéric Bastiat developed the broken window fallacy.

Destruction of in-use products of labor isn’t productive because those products will need to be replaced. If you’re trying to bring on the workers’ revolution then you must realize any windows you break will have to be replaced and if the capitalist that owns the window doesn’t do it then the workers will have to do it after they’ve seized control. Even if you don’t recognize private property rights smashing windows must be recognized as a negative action because labor must be expended to replace the window, labor that could have been more productively used elsewhere. It’s a net loss to the store owner and society as Bastiat pointed out. Sure, you may have robbed a capitalist of one window. Since the capitalist has to expend resources to replace that window he can no longer use those resources to buy food at the local cooperative (and many capitalist do shop at cooperatives). Effectively money has been robbed from the worker/owners of the cooperative who are usually held as the darling children of socialist movements.

It’s a no-win situation that can only be justified by short sightedness.

Government Monopolies are Malinvestments

Since the turn of the century it has become common practice for the state to use its monopoly on force to expand its monopoly on natural resources. Canada and Norway both maintain a monopoly on minerals through state ownership of extraction companies and required licensing for any extraction by third-parties. Even the State of Minnesota has maintained mineral rights on most property sold after the state of the 20th century. Unfortunately the state, lacking the market feedback system, is unable to extract resources efficiently and usually squander any monetary gains from resource extraction on nonproductive uses such as expanding bureaucracy, maintaining a powerful military, and giving handouts to cronies. In fact many countries with abundant natural resources end up in worse positions than countries without such resources, a happening so common the term resource curse was coined to describe it.

Peru is a perfect example of this. During the 1840s an island off of Peru was discovered than held a great deal of guano:

In 1839, Peru was a devastated nation. Debt and destruction in the aftermath of both the War of the Confederation (1836–1839) and the War of Independence (1822–1825), a crushing debt default in 1826, and several hundred years as a Spanish colony had left its economy small and craft dominated, without even a banking system.

But in the early 1840s, explorers made an exciting discovery. Due to an uncharacteristic lack of rainfall and the unique variety of birds nesting there, Peru’s Chincha Islands were found to be covered by mountains of bird excrement several hundred feet high in places, which had accumulated over many centuries. They were thought to be the most enormous guano deposits in the world — and of a particularly high quality — at a time when guano was used worldwide for fertilizer. So, out of nowhere, a valuable natural resource was found, one which promised — if managed properly — to produce wealth that could “stagger the dreams of Oriental imagination,” possibly ushering in a new era of development and progress.

At the time guano was almost like gold since it was used by almost everybody as fertilizer. Guano was so valuable that the United States passed the Guano Islands Act:

Whenever any citizen of the United States discovers a deposit of guano on any island, rock, or key, not within the lawful jurisdiction of any other Government, and not occupied by the citizens of any other Government, and takes peaceable possession thereof, and occupies the same, such island, rock, or key may, at the discretion of the President, be considered as appertaining to the United States.

The act was used by the United States to lay claim to some 100 islands, so this wasn’t a law used sparingly to claim one or two islands. Needless to say with guano being such a valuable resource at the time the Peruvian government decided to law monopoly claim to their newly discovered treasure trove. Money made from selling the guano was used as money obtained by a state is usually used, for mostly frivolous projects:

Public works and private prebends remade the city … with stately museums, parks, plazas, academies, boulevards, mansions, and theaters, not to mention the latest in potable water systems and Italian opera. Imports — everything from workaday textiles to lavish accessories and vintage French wines [arrived in the city].

Since the state doesn’t have to concern itself with market feedback it is always apt to dump great deals of money into unwanted projects. How useful is a museum, mansion, or theater in a country where a majority of the population live in poverty? No very useful, which is noted by the fact no entrepreneur invested money in any of those enterprises. Unfortunately the more of those things a country has the longer its political dick is and countries love political dick measure competitions.

As these investments never return any profit they lead to economic ruin. We see this in the United States today with all the spending on Medicare, Medicaid, offense defense, bailouts, etc. have failed to return any profit and are leading to the slow collapse of our sham economy. When you keep dumping money into failed enterprises the only possible outcome is total failure, something Peru experienced when that state’s meddling in the guano market lead to other sources of fertilizer being sought out. At some point all resources become more expensive than people are willing to pay and at those times alternatives are researched by individuals wanting a piece of the pie from currently disgruntled consumers. When you can pay $5.00 for a pound of fertilizer or $50.00 for a pound of fertilize the choice of which one to choose becomes obvious:

The European crisis hammered the Peruvian economy in two ways: first, because the Peruvian government had incrementally (and with disregard for competitive substitutions) increased guano prices so much, stricken farmers turned to other, lower-priced fertilizers; demand for shipments from the Chincha Islands dried up. Second, with London money and commodity markets frozen, lenders had little appetite for extending additional credit to once-again-debt-encumbered Peru.

Peru’s gravy train came to a screeching halt. All of the sudden the worthless investments being made by the state became impossible to continue as money was drying up. What’s a state to do in such a situation? The only thing a state knows how to do, use violence in an attempt to maintain its monopoly:

In response to the economic crisis, in 1875, Pardo — now president of Peru — ordered the military to seize the southern nitrate fields on the border with Chile in an effort to offset the decline of the guano business with another source of fertilizer revenues. Even though the state hastily expropriated land and facilities from private investors, it was too little too late. Work on the railroad projects halted in August of 1875. Over the next few months, a variety of other government projects defaulted amid a widening financial contagion culminating in January 1876, as Peru defaulted on its sovereign debt for the second time in a century: mountains of loans from European banks in stark juxtaposition against diminished avian dung heaps.

This should be a familiar formula for anybody who pays attention to foreign affairs. Saddam Hussein ordered the invasion of Kuwait because their cheap oil flooded the market and challenge Iraq’s primary source of income. The United States has a history of invading or otherwise intervening in countries with vast natural resources including Iran, Iraq, Afghanistan. In fact the British and United States lead overthrow of the Iranian government in 1953 happened shortly after the country nationalized its oil resources (which was previously controlled by Anglo-Iranian Oil Company, a British owned company). Peru demonstrates such tactics are nothing new, the state has a long history of military invasions to seize natural resources.

Meanwhile the free market allows for peaceful distribution of natural resources to productive uses, since entities that invest resources into unproductive uses face insolvency in a hurry. On top of that the threat of insolvency prevents private entities from squandering resources on massive frivolous endeavors. The state, being free of market feedback, has no such worries and thus ends up dumping massive amounts of money into enriching itself:

In hindsight, “guano … proved a great ‘lost opportunity’ for [Peruvian] development … [as] state investments stymied possibilities for national entrepreneurs, diversification, and gains in domestic productivity.” In roughly four decades, under the supervision and at the direction of the government, between 11 and 12 million tons of excrement fertilizer were shipped, earning $500 million in revenues. (Another estimate holds the number at more than 20 million tons shipped and $2 billion in revenue.) But in the end, 53 percent of all of the guano revenue was spent on expanding the bureaucracy and the military, 12 percent on direct transfer payments, and 7 percent on reducing tributary impositions. Twenty percent had been spent on railroads.

Peru’s politicians spent 53 percent of all guano revenues on enriching themselves, creating more dependency on the state, and enhancing the military so they could steal other country’s stuff. None of these things are valuable for anybody besides the state and its cronies. That’s what states do and we should keep it in mind. It doesn’t matter where the money comes from either. Whether the state gets money from a monopoly on resources, taxation, or tariffs it will be spent mostly on worthless things. If we listen to those demanding the rich be taxed heavier where do you think that additional money will go? It won’t be Medicare, Medicaid, or Social Security; it’ll go to funding the military, hiring more government employees, and lining the pockets of state cronies.

When the state gets money it’s lose/lose unless you’re tied to the state. This is because any money obtained by the state is stolen. In the case of Peru’s claim of the guano filled island the property was stolen from individuals who could have put the guano to productive uses in the free market.

Tales of the Bloody Obvious

In order to get people to believe the state is wise they were trying to make us believe the bailouts were a great idea because they would make the United States money. Guess what? They lied (shocking, I know):

US taxpayers are unlikely to get all their money back from a $700bn (£432bn) bailout of the country’s stricken banking and automotive sectors, according to a report.


The Office of the Special Inspector General for Tarp has published its latest report to Congress.

It said: “After three-and-a-half years, the Tarp continues to be an active and significant part of the Government’s response to the financial crisis.

“It is a widely held misconception that Tarp will make a profit. The most recent cost estimate for Tarp is a loss of $60bn. Taxpayers are still owed $118.5bn.”

This was the only possible outcome. In the business world failing is a sign that the business was not fulfilling the wants of enough individuals. When this happens there are only two options: change the business or face insolvency. At least in a free market those are the only two options, when the state gets involved there is the third option of receiving stolen money. That third option removes responsibilities from politically well-connected entities. They know failure isn’t a big deal because their friends in the political body will merely hand out some money and all will continue… for a while. Eventually the house of cards collapses as the number of bad decision makers increase and the state is no longer able to shovel enough money to keep their friends afloat.

When a company fails it’s time for it to go away. If it looks possible to turn around a failing business then investors will enter the game, if it doesn’t look possible then investors will stay out of the game. Investors, unlike the state, earn their money by giving capital to those who look like capable money makers so they’re more careful who they invest in. Sometimes they make bad investments and, like any other service provider, when they make too many bad decisions they have to exit the capital market when their money runs out.

It’s too bad the same conditions don’t apply to the state. If the state had to go away when it ran out of money we’d have rid ourselves of the federal government ages ago (and quite a few individual state governments as well).

According to Krugman We Need More Inflation

Paul Krugman decided to make a fool of himself again by claiming we don’t have enough inflation. The man is an idiot but I repeat myself. Thankfully the boys over at the Mises Institute website called Krugman out on his idiotic rambling:

In an Austrian framework, as in a natural-rate-of-unemployment model, monetary expansion and a low (relative to the natural rate) interest rate may increase employment; the policy may appear to succeed. But, as Hayek and Mises emphasized long before the development of modern macroeconomics, the employment created by stimulus, whether monetary or fiscal, and whether implemented when an economy is near full employment or initiated at a point where significant unemployed resources are available (Hayek 1939 and Ravier 2011) is unstable. Such employment, if it is to be maintained, will require ever-increasing distortions to the spending stream. A policy that uses inflation to generate employment hence contains the seeds of a return to stagflation, and if continually attempted every time unemployment begins to increase, ultimately, to the choice whether to end the inflation or move forward on a wrong path to a eventual crack-up boom.


More inflation now would just repeat the mistake, trading some lower unemployment now for more unemployment and more inflation in the future. To avoid holding a tiger by the tail avoid inflation now. The crisis and slow recovery should not be an excuse to revive failed Keynesian policies but instead to examine critically a denationalization of money.

Krugman continues to be the idiots’ goto person for economic advice. Mind you the man has been wrong about almost everything he’s stated.

Let’s consider inflation for a moment. Very few people ever take the time to analyze what inflation is, they usually just accept it as a natural thing that happens and is unavoidable. Inflation is theft performed by the state, plain and simple. Scarce goods have a tendency to be worth more than abundant goods and money is no different. If there exists only 100 ounces of gold in the world then each ounce is going to be valued extremely high whereas if gold was as abundant as water nobody would give it much thought. The United States dollar is similar, when the state prints more of them each dollar becomes less valuable as they are now more abundant. The inflation of the United States dollar is directly controlled by the state who could choose never to expand the supply and thus save those holding dollars from having that holding constantly devalued. Instead the state prints money willy nilly, which devalues the value of dollars and thus punishes those who hold them.

Why does the state do this? Easy, their cronies don’t suffer the affects of inflation. Inflation of the dollar doesn’t kick in until those dollars begin to circulate. The first receiver of newly printed dollars actually has more purchasing power since the supply hasn’t increased as those dollars haven’t begun circulating. Once the first receiver spends those newly printed dollars they being entering circulation and that is when they devalue already circulating dollars. Basically, if you’re the first receiver of newly printed dollars you have a tremendous advantage and the first receivers are those politically well-connected. It’s a corrupt little system where politicians can exchange purchasing power for whatever it is they desire at the expense of everybody else.

This is why it’s smart to convert your dollars into something valuable. Every day you hold a dollar its purchasing power is reduced. Keynesian economists like Krugman claim constant devaluation of money urges people to spend it more quickly and that somehow is better for the economy. What those idiots don’t see is that inflation discourages individuals from saving money to be invested in larger projects down the road. Instead of relying on debt individuals would have the option to save their money unti they have enough to make a big purchase such as a home or factory.

When Krugman says we need more inflation he really means we need more theft. What he advocates is stealing purchasing power from individuals who hold savings of any amount. Policies like this encourage debt spending. Why save money to purchase a television if that money is constantly going to be worth less and less? Why not just put that purchase on a television and repay the debt over time with constantly devaluing money? Keynesian ideas are what got us into our current economic mess and if we continue following those ideas we’ll be in complete economic collapse before we know it.