Tag: Money Management Mishaps

Chicago to Close More than 60 Indoctrination Centers

Woe is Chicago, their budget situation is forcing them to close over 60 indoctrination centers:

The city of Chicago plans to close more than 60 schools, in one of the largest mass school shutdowns in US history.

The move, which would affect about one in ten schools, is an effort to plug a $1bn (£659m) budget shortfall and address declining enrolment.

I know, everybody is screaming doom and gloom over this news but let’s be honest, the students weren’t using those schools anyways. When your city has a dropout rate of 40% your city can stand to close a few schools. It’s not like better alternatives don’t exist. Let’s face it, Chicago (along with most public education facilities) has been doing a poor job of educating children. With the 40% dropout rate we see that children aren’t falling for the bullshit and are leaving to pursue better options. Why continue to sink money into something that is ineffective and unwanted by students?

The Political Game of Sequestration

Those who had been paying attention to the world of politics know that this entire sequestration drama is nothing more than political theater. We’re told that sequestration will lead to massive layoffs and furloughs even though the “cuts” will increase the federal budget by $110 billion. A recently leaked document from the Agriculture Department shows just how much of a game sequestration really is:

A leaked email from an Agriculture Department field officer adds fuel to claims President Obama’s political strategy is to make the billions in recent federal budget cuts as painful as possible to win the public opinion battle against Republicans.

The email, circulated around Capitol Hill, was sent Monday by Charles Brown, a director at the agency’s Animal and Plant Health Inspection Service office in Raleigh, N.C. He appears to tell his regional team about a response to his recent question on the amount of latitude he has in making cuts.

According to the partially redacted email, the response came from the Agriculture Department’s budget office and in part states: “However you manage that reduction, you need to make sure you are not contradicting what we said the impact would be.”

In other words the doomsday scenarios described by Obama are to be carried out even if departments have no need to do so. I think this leaked document does a marvelous job of demonstrating how politics is nothing more than Kabuki.

It’s a Big Club

Most people still seem to believe that there is an ideological war between the Republican Party and the Democratic Party. Every political issue seems to be starkly divided between the Republicans and Democrats. We’re told that Republican support gun rights whereas the Democrats oppose them, Republicans oppose same-sex marriage whereas the Democrats support them, Republicans hate the poor whereas the Democrats love them, and Republicans are fiscal conservatives whereas the Democrats are big spenders. None of this is true, there is no ideological divide between the two parties, both parties are in total agreement that they want to take your shit and that doing so is easier if the populace is divided. This fact becomes more prevalent when things become difficult, as with the current budget debate:

Days before the March 1 deadline, Senate Republicans are circulating a draft bill that would cancel $85 billion in across-the-board spending cuts and instead turn over authority to President Barack Obama to achieve the same level of savings under a plan to be filed by March 8.

The five- page document, which has the tacit support of Senate GOP leaders, represents a remarkable shift for the party. Having railed against Senate Democrats for not passing a budget, Republicans are now proposing that Congress surrender an important piece of its Constitutional “power of the purse” for the last seven months of this fiscal year.

The Republicans are making a dictator out of the Democratic President (who is already a dictator is everything but name). If there really was an ideological divide you would think both parties would be working hard to ensure the other party doesn’t gain more power but the opposite is happening, both parties are working hard to ensure the other party gains more power.

This is why working in the political system will never change anything of importance. All of the major players, the actual decision makers, are best friends. They pretend to hate each other to create the illusion of choice but almost come to an agreement, and that agreement always ends with the state and its cronies getting more while the general populace gets less.

When do the Savings Begin

I wonder when the Affordable Care Act (ACA) will begin living up to its name:

In a final regulation issued Wednesday, the Internal Revenue Service (IRS) assumed that under Obamacare the cheapest health insurance plan available in 2016 for a family will cost $20,000 for the year.

There must be some kind of mistake, we were told the ACA was going to reduce the costs of health insurance!

Living Beyond Your Means

Fiscally conservative individuals spend a lot of time lambasting individuals who live beyond their means. In this case living beyond your means simply refers to spending more money than you have available. American consumers hold some $11.38 trillion of debt with the average household owing $15,418 on their credit cards. Obviously Americans are spending beyond their means if the above definition is followed. On the other hand spending beyond your means may actually be a smart investment strategy due to inflation.

The rate of inflation reported by the federal government hovers around two percent at the moment. How inflation is calculated has changed over the years and if we go by the 1990’s calculation method we get a number hovering around five percent and if we go by the 1980’s calculation method we get a number hovering around nine percent. In other words the rate of inflation is notable, especially when you use older calculation methods (the federal government periodically has to change the method it uses to calculate inflation in order to make the numbers appear better than they are).

Inflation is an insidious beast. Monetary policy advocates claim that inflation is necessary in order to prevent individuals from hoarding cash. What inflation actually does is discourage savings, meaning real wealth isn’t preserved for later use. Ideally purchases requiring large amounts of wealth would be paid for through savings. In such a case real wealth is exchanged for a good or service. Inflation discourages such a practice and encourages the use of credit, which is currently nonexistent wealth that is promised at a future date. Knowing this, under conditions of inflation, one can argue that living beyond your means is actually an intelligent economic strategy.

Let’s say you make a dollar. If you spend that dollar immediately you can buy a widget but due to inflation that dollar will not buy you a widget at a later date. Obviously the widget isn’t devaluing at the same rate at the dollar since a dollar can buy one now but not later. In such a case converting that dollar to a widget makes economic sense, since you will be able to trade that widget for more dollars at a later date. Effectively the widget allows you to preserve wealth. Even if the widget devalues, that is to say it becomes worth less due to wear, tear, and obsoleteness, it may devalue at a slower rate than the dollar. Under such circumstances it would make sense to convert dollars to widgets just to preserve purchasing power.

Why would an individual stop there? Wouldn’t it be beneficial to use credit in order to convert future devalued dollars into current goods? If widgets don’t devalue it would be smart to obtain as many of them as possible immediately. Even if you have to buy them on credit it would make sense to do so so long as the devaluation of the dollar due to inflation is higher than the cost of interest. On top of that the dollars you use to pay back your debt will have devalued so you can use credit to purchase wealth preserving goods now and pay back the debt with dollars that are worth less. Even if the widgets devalue you may come out ahead if the rate of widget devaluation combined with the rate of interest on the credit is lower than than rate of dollar devaluation, especially when you consider that the credit will be paid back with those devaluing dollars.

We can add another wrench to this scenario by introducing debt forgiveness. Bankruptcy laws allow an individual to repudiate a great deal of their debt. Through the magic of bankruptcy an individual can buy a large number of wealth preserving widgets using nonexistent wealth then repudiate that debt. People will point out that repudiating your debt will damage your credit score, meaning you’ll have a more difficult time obtaining credit in the future. To that I would point out that any future credit would be worth less than current credit anyways. By converting dollars and available credit into wealth preserving widgets one is able to increase their purchasing power immediately, preserve it, and use it at a later date in lieu of credit. Bankruptcy laws don’t erase all credit, many government loans can’t be repudiated. This may not matter though. If one can erase enough of their debt to come out ahead in the end buying widgets on credit may be a smart decision economically.

The monetary system in the United States encourages living beyond your means. What incentive does an individual have to preserve cash when it’s constantly devaluing? If you spend money now you can buy more than if you waited. Furthermore if you take credit you can repudiate all or a portion of it through bankruptcy. Living beyond your means suddenly becomes a smart investment strategy because one can obtain actual goods and services for nonexistent wealth. Effectively you can get something for nothing.

Perhaps fiscal conservatives have been looking at things all wrong. Instead of saying that the economic problems we suffer under today are caused by individuals living beyond their means it may be smarter to place the blame on the constantly inflating currency and the ability to repudiate debt. An inflating currency encourages the use of credit instead of preserved wealth and the ability to repudiate debt encourages the use of credit that cannot be repaid.

It’s Over

I’m sorry to be the one to say this but when an organization built upon the idea of cars taking left turns for several hours receives a bailout there are too many special interests involved to ever fix the system:

Another entertainment industry break: $70 million for car racing, especially motor-heads who build raceways. Sorry, I mean “an extension of the 7-year cost recovery period for motorsports facilities.” I thought NASCAR was profitable.

How can one every hope to fix a system where an organization like NASCAR can become the receiver of stolen money? When so many people on the take there is no way that we’ll ever build up enough support to elect uncorrupt individuals into office. At this point the only sane option is to let the entire system collapse and build a stateless society on top of the rubble to prevent this kind of mess from happening again (at least until people lose their mind and start demanding a state again).

Fiscal Cliff Deal Increases Government Spending

If you’ve been following the latest episode of Politics: The Reality Television Show for Suckers you’ve likely heard that Congress has agreed to a deal to avert this country’s falling off of the so-called fiscal cliff. We’re lead to believe that the deal included tax increases and spending cuts the truth, as usual, is different than the propaganda we’re being fed. While the deal does include tax increases it doesn’t include spending cuts. In fact the deal includes spending increases:

The “fiscal cliff” deal that was designed to save money actually includes $330.3 billion in new spending over the next decade, according to the official estimate the Congressional Budget Office released Tuesday afternoon.

CBO said the bill contains about $25.1 billion in new cuts, but those are swamped by the new spending on extended unemployment benefits for the long-term jobless and other new refundable tax credits that President Obama fought for.

Of those cuts, only $2 billion are scheduled to take effect in 2013.

I doubt anybody expected otherwise. The state is a machine to enact wealth redistribution. It expropriates wealth from the general populace and gives it to those who wield political power. This is why we’ll likely never see any real tax cuts or spending decreases. Tax cuts would really mean a reduction of the rate of expropriation and spending cuts would really mean a decrease in the money transfered from the general populace to those with political power. In other words tax cuts and spending decreases are the antithesis of the state and therefore almost impossible to attain through political means. When this so-called fiscal cliff deal is over you can be assured that more wealth will be stolen from you and me and more money will be give to those with political influence. This entire fiscal cliff nonsense is nothing more than a production put on by the state in order to get the people to agree to having more of their wealth stolen.

We’re Already Over the Fiscal Cliff

The current story arc of Politics: The Reality Television Show for Suckers deals with the so-called fiscal cliff. Republicans and Democrats are trying to rally support for the causes of spending cuts and tax increases respectively. Anybody who has watched Politics for any length of time knows that these arguments are illusionary and that the Republicans and Democrats are working together to soak the people for more tax money without truly entertaining any idea of spending cuts:

Mr Obama meets business leaders at the White House on Tuesday and members of middle-class families on Wednesday.

He wants Republicans to accept tax increases on the wealthy, while extending tax cuts for families earning $250,000 (£155,000) or less.

[…]

John Boehner, the top Republican in Congress, has said he would consider increasing tax revenue by closing loopholes, though he remains opposed to raising taxes.

“Closing loopholes” is merely a fancy term for curtailing freedoms and, ultimately, an insidious way to increase taxes without technically increasing taxes. Effectively John Boehner has stated a willingness to cooperate with Obama but is using language that perpetuates the myth that the Republicans and Democrats oppose one another.

This is nothing new. What is worth discussing though is the idea of the fiscal cliff. The fiscal cliff, like the Republican-Democrat opposition, is a mirage created by the state. When politicians discuss the fiscal cliff they are actually talking about measures placed in the Budget Control Act of 2011 taking effect, which include supposed spending cuts and tax increases. The Budget Control Act, like the fiscal cliff, is also a mirage created by the state. It was supposed to be a compromise between the Republicans and Democrats to resolve budgetary issues facing the federal government. These budgetary issues can be boiled down to the fact the federal government spends far more than it bring in. Put into actual terms the federal government is insolvent.

Insolvency is the real issue facing the federal government and it won’t go away even with the most audacious tax increases. America has two options before it. Either spending must be slashed or the debt must be repudiated… again:

Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840s, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called “internal improvements”), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830s. Most of these securities were financed by British and Dutch investors.

During the deflationary 1840s succeeding the panics, state governments faced repayment of their debt in dollars that were now more valuable than the ones they had borrowed. Many states, now largely in Democratic hands, met the crisis by repudiating these debts, either totally or partially by scaling down the amount in “readjustments.” Specifically, of the 28 American states in the 1840s, 9 were in the glorious position of having no public debt, and 1 (Missouri’s) was negligible; of the 18 remaining, 9 paid the interest on their public debt without interruption, while another 9 (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states.

[…]

The next great wave of state debt repudiation came in the South after the blight of Northern occupation and Reconstruction had been lifted from them. Eight Southern states (Alabama, Arkansas, Florida, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia) proceeded, during the late 1870s and early 1880s under Democratic regimes, to repudiate the debt foisted upon their taxpayers by the corrupt and wasteful carpetbag Radical Republican governments under Reconstruction.

State debt has been repudiated in the United States before and it can be done again. Many people will claim that repudiating the debt would lead to catastrophe but that wasn’t the outcome of the above mentioned cases:

Rothbard’s History demonstrates how the repudiations of the 1830s and ’40s did not cause the sky to fall. In fact, the return to sound money coupled with a liberalization of the economy spurred a tremendous amount of growth. Rothbard explains:

It is evident, then, that the 1839–1843 [monetary] contraction was healthful for the economy in liquidating unsound investments, debts, and banks, including the pernicious Bank of the United States. But didn’t the massive deflation have catastrophic effects — on production, trade, and employment, as we have been led to believe? In a fascinating analysis and comparison with the deflation of 1929–1933 a century later, Professor Temin shows that the percentage of deflation over the comparable four years (1839–1843 and 1929–1933) was almost the same. Yet the effects on real production of the two deflations were very different. Whereas in 1929–1933, real gross investment fell catastrophically by 91 percent, real consumption by 19 percent, and real GNP by 30 percent; in 1839–1843, investment fell by 23 percent, but real consumption increased by 21 percent and real GNP by 16 percent. (p. 103)

Repudiating the debt had the opposite effect that most people would lead to you believe, it actually caused economic boon instead of of bust. Iceland, which recently repudiated its debt, is now experiencing economic growth as well.

It’s obvious that the federal government isn’t going to cut spending and it can’t tax its way out of the fiscal hole it has dug, which means the only other option is bankruptcy.

How the State Reduces the Cost of Making Bad Decisions

I’ve explained how the state reduces the cost of committing violent act but that’s not the only thing the state reduces the cost of. The state greatly reduces the cost of making bad decisions. Consider the state’s actions after hurricane Katrina. New Orleans, a city left devastated after Katrina, was constructed below sea level next to the sea. Normally a series of levies kept the city from flooding during natural disasters but those levies broke and the city was hammered. One might ask why building a city below sea level next to the sea is a good idea. Considering the expense of rebuilding the city and building new hopefully better levies it may not make sense. If the residents of New Orleans were forced to front the entire cost of rebuilding they may choose to relocate to a more sensible reasons. To help residents of that area avoid having to deal with the consequences of building there the federal government has chosen to sink a great deal of money into rebuilding.

After hurricane Sandy the federal government is swooping in again to help relieve people from the consequences of their bad decisions. Dauphin Island, a small speck of land in the ocean, has been destroyed by hurricanes before and Sandy didn’t show the island any special treatment. The federal government is providing funds to rebuild the island:

The western end of this Gulf Coast island has proved to be one of the most hazardous places in the country for waterfront property. Since 1979, nearly a dozen hurricanes and large storms have rolled in and knocked down houses, chewed up sewers and water pipes and hurled sand onto the roads.

Yet time and again, checks from Washington have allowed the town to put itself back together.

Across the nation, tens of billions of tax dollars have been spent on subsidizing coastal reconstruction in the aftermath of storms, usually with little consideration of whether it actually makes sense to keep rebuilding in disaster-prone areas. If history is any guide, a large fraction of the federal money allotted to New York, New Jersey and other states recovering from Hurricane Sandy — an amount that could exceed $30 billion — will be used the same way.

The state distorts reality. When common sense would lead most people to abandon dangerous property instead of constantly rebuilding it the state provides funding to alleviate people’s suffering from their bad decisions. Consequences that once seemed far too expensive to repeat the cause become bearable when the state foots a portion of the bill. This leads people to repeat the same mistakes again and again knowing that they will not be forced to deal with the entirety of consequences.

Funding the GOP Stupid Train

The Republican Party has decided to dump their money into their stupid train. Remember Mourdock? He’s the Republican candidate who said pregnancies resulting from rape were gifts from God. After making an incredibly idiotic statement like that you would think the Republican Party would have separated themselves from the man faster than they separated themselves from Todd “women seldom become pregnant from legitimate rate” Akins (of course Rand Paul swooped in to help Akin’s campaign). Instead they’re dumping millions into the man’s campaign:

Republicans are spending big to salvage Richard Mourdock’s candidacy in the aftermath of his comments on rape and pregnancy that have imperiled GOP hopes of taking back the Senate majority.

About $4 million is being spent across the airwaves in the final week of the campaign to bolster Mourdock, from the likes of well-known Republican groups like American Crossroads, the National Republican Senatorial Committee and the Club for Growth. And that comes as both sides acknowledge that Mourdock has taken a hit in the polls since his comments. Democrats are now more confident than ever that their candidate, Rep. Joe Donnelly, is poised to pull off one of the biggest upsets of the cycle.

Why is the Republican Party wasting its money on this guy? Oh, that’s right, it’s because they’re piss poor money managers. If the Republican Party had a brain it would withhold any further money from Mourdock as a lesson to the rest of its candidates to keep their offensives statements to themselves during campaign season.