Tag: Not So Crazy Libertarian Ideals

Another Government Stimulus Failure

I honestly believe John Maynard Keynes’s theories on monetary policy have been some of the most dangerous ideas to come out in the last century. Trusting the government with the monetary system is a bad idea because it only encourages them to print money uncontrollably in order to spend on ill-fated projects. As governments are removed from market price feedback they have no way of knowing whether the money they’re spending is a good thing or a bad thing. This becomes all the more obvious when you look at the results of what they spend money one.

The most recent round of stimulus money was supposed to jumpstart the American economy by producing jobs for currently unemployed citizens. On top of that the stimulus money was also supposed to jumpstart government initiates such as the development affordable electric cars. Needless to say it’s not surprising to see the government spend over half a billion dollars on those goals and getting the exact opposite in return:

With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work.

I’m sure that Finnish plan is going to help a lot of American get jobs. At least it will lead to affordable electric cars right? Wrong:

Fisker is more than a year behind rolling out its $97,000 luxury vehicle bankrolled in part with DOE money.

At least I don’t think $97,000 can really be considered affordable to the average American. There you have it, yet another example of what happens when the government tries to interfere with the market to steer it towards specific goals.

Why the Federal Reserve is Evil

It’s impossible to miss all the anti-Federal Reserve propaganda floating around but many honestly do not know why the Fed is such a terrible organization. Thankfully Ron Paul wrote a very accessible and to the point article on the subject:

The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank’s creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.

[…]

The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West’s (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.

The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed’s monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed’s actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market’s neck.

If you’re unfamiliar with the subject of the Federal Reserve I highly urge you to read the entire article. I can say without any doubt that ending the Federal Reserve is the most important task we have as Americans. Without the Fed most of the other major ills perpetrated by our government would become impossible to continue and our economy would have the biggest barrier between it and recovered removed.

Bitcoin is Collapsing

Ars Technica has a nice writeup regarding the steady fall of Bitcoin’s value:

Unfortunately, the currency’s value hasn’t proven stable in practice. Several waves of media coverage between April and June pushed the currency’s value up from less than $1 to more than $30. Soon after it reached a peak, the currency had a series of PR disasters. One Bitcoin user claimed that a half-million dollars worth of Bitcoins were stolen from his PC; he may have fallen victim to Bitcoin-stealing malware. A few days later, the most popular Bitcoin exchange was hacked, forcing a multiday suspension of trading and generating another wave of bad press.

Trading resumed in late June at around $17, and the currency’s value has been steadily declining ever since. In August, one of the most popular Bitcoin “banks” claimed it had been hacked, and had lost hundreds of thousands of dollars worth of Bitcoins, triggering a fall in value to under $7. Bitcoin fell below $5 in September, and it is now worth less than $3.

So is Bitcoin doomed? The value of Bitcoins is (like any fiat currency) ultimately driven by supply and demand. With dollars, the supply is controlled by the Federal Reserve, and the demand is driven by the size of the US economy. The supply of Bitcoins grows automatically, asymptotically approaching 21 million, and the demand for Bitcoins is driven by the volume of Bitcoin-denominated transactions.

Many people in the libertarian movement have been excited about Bitcoin. I know some people who have invested quite heavily in the electronic currency and thus far have no real value to show for it. The surge of Bitcoin supporters in the libertarian movement confused me as most libertarians are proponents of commodity backed currencies. We support commodity backed currencies because it means there is real value tied to our money in the form of the commodity. For example silver is used in numerous industrial processes which makes it valuable. If you have silver you can easily state that it has value because it’s used to produce other things. Even if it isn’t chosen as money it can be traded to those who utilize it just as gold, gasoline, and food can be.

Bitcoin is backed by nothing, which makes it yet another fiat currency. The United States dollar is a fiat currency that enjoys commons use because other countries have chosen to back their fiat currency with dollars and because the federal government requiers you pay all taxes, fines, and payments to them in dollars. If you don’t have dollars you can literally go to prison come tax season. In essence the dollar has value because a gun is put to your head saying it does. Bitcoin doesn’t enjoy this benefit either so it’s really only worth what people are willing to pay for it.

As it sits now there is a chicken and egg problem with Bitcoin. Bitcoin can only be valuable if people accept it in payment for actual goods and services but nobody wants to go through the hassle of accepting it until enough customers want to pay for their goods and services in Bitcoins. There is no intrinsic value in Bitcoins as they are nothing more than bits on harddrives and networks so the system doesn’t enjoy the benefits of commodity backed currencies.

I believed from the beginning that Bitcoin was an interesting experiment that could, eventually, lead to greater things but will likely peter out in its current form. Part of the reason I predict doom and gloom for Bitcoin isn’t just the fact that it’s a fiat currency but also because the government has a knack for shutting down any potential competition for the Federal Reserve dollar. Reading the news of Bitcoin’s downward value slide it appears as though the government won’t need to resort to legislation to put Bitcoin down.

Ron Paul, Our Only Hope of Defeating the Threat of the Federal Deficit

While other presidential candidates talk about spending cuts Ron Paul actually puts forth a comprehensive plant to reduce the federal budget but a notable amount:

GOP presidential candidate Rep. Ron Paul will unveil his economic plan Monday afternoon, calling for a lower corporate tax rate, cutting spending by $1 trillion during his first year in office and eliminating five cabinet-level agencies, including the Education Department, according to excerpts released to Washington Wire.

A candidate that actually has a plan to reduce the size of government and thus knock down our deficit by an amount that matters? Count me in, hell give this man a raise when he gets into the White House. Wait? He’s willing to take a massive salary cut as well?

But Mr. Paul does get specific when he calls for a 10% reduction in the federal work force, while pledging to limit his presidential salary to $39,336, which his campaign says is “approximately equal to the median personal income of the American worker.” The current pay rate for commander in chief is $400,000 a year.

So Ron Paul has a real plan to reduce the size and cost of government for less money than the other candidates? It appears as though Ron Paul is the embodiment of the free market in action. Regardless of your view on Dr. Paul’s foreign policy you need to understand that the primary threat our country is facing isn’t Iran, Al-Qaeda, or communism; it’s the massive federal deficit. Unless we real in the government’s exorbitant spending we will find the “full faith and credit of the United States” to be a worthless world “commodity” and our economy will collapse fully leaving us in a situation far worse than the Great Depression.

The Obama Campaign Blame Game Continues

Members of the Obama Campaign really love to use the three year-old tactic of blaming somebody else for their failures. Take for instance Jesse Jackson’s latest rant:

“President Obama tends to idealize — and rightfully so — Abraham Lincoln, who looked at states in rebellion and he made a judgment that the government of the United States, while the states are in rebellion, still had an obligation to function,” Jackson told TheDC at his Capitol Hill office on Wednesday.

“Jackson added that his $804 billion stimulus plan is the only way to solve the unemployment crisis. “I support the jobs plan. I support the president’s re-election. I support Barack Obama,” he said. “But at this hour, we need a plan that meets the size and scope of the problem to put the American people to work.”

No Jackson, the only way to solve the unemployment crisis is to get the government out of the economy. Starting immediately the government needs to repeal every rule, regulation, and control they’ve placed on economic actors and let them prosper. The Federal Reserve needs to be dismantled and this country needs to return to sound money chosen by the free market. Anybody who believes the government can produce jobs desperately needs to read Economics in One Lesson by Henry Hazlitt.

“We’ve got to go further. I support what [Obama] does. Clearly, Republicans are not going to be for it but if the administration can handle administratively what can be done, we should pursue it. And if there are extra-constitutional opportunities that allow the president administratively to put the people to work, he should pursue every single one of them,” Jackson suggested.

President Obama’s jobs bill was defeated in the Democratic-controlled Senate on Tuesday and has not been voted on in the Republican-controlled House.

Emphasis mine. Yes it’s obviously the Republican’s fault that the jobs bill failed to pass in the Democrat controlled Senate. I’m sure it had nothing to do with Democrat Harry Reid blocking the vote either.

Misdirected Outrage

A common theme at the various occupy events seems to be misdirected outrage. While many attendees are properly directing their rage the enabler of both out-of-control corporations and bankers a majority I’ve talked to seem to direct their rage simply at the corporations and bankers. Neither large corporations or the bankers could have gotten away with what they did unless the government granted them immunity and bailed out their failures with taxpayer money.

Under such circumstances further government involvement is the last thing anybody should be calling for:

Even Hessel denounces that lobbyists have overtaken government in “the highest spheres.” Nevertheless, he seems to believe that if government were to have more control over industries, corruption would not do its harmful work. In other words, for Hessel, if politicians and bureaucrats had more power than they currently have, the system would be less corrupt. History, however, shows that Lord Acton was right: the more power there is in the hands of the rulers the more corrupt the system becomes. The greatest failure of socialism was not that it brought about economic misery to the masses it was supposed to help but that it created a class system more violent and rigid than anything the Western world had ever seen. The central maxim of socialism — namely, equality — was betrayed as soon as the revolutionary leaders consolidated their power over the state. The new elite created a two-class system that rested on systematic coercion: on the one hand there were the party leaders and their friends who lived like kings enjoying all sort of luxuries, many of them imported from the capitalist world; and on the other hand there was everyone else, fighting for survival.

The quote by Acton references in this paragraph was, “power corrupts and absolute power corrupts absolutely.” A government by definition has absolute power because they enforce their rules at the point of a gun. Giving the goons in government more power is only going to allow them to strangle you harder while gifting your money and belongings to their friends. The former Soviet Union demonstrates this fact well as members of the Communist Party enjoyed lives of luxury compared to the average citizen living with its borders. Likewise the bankers couldn’t have pulled off what they did if the government had not given them the ability to print money via the Federal Reserve:

Regarding the “dictatorship” of the financial elites, denounced by Hessel and movements such as Occupy Wall Street, this is again mainly the product of government. We have a banking system that can only work the way it does because it is based on fiat currency and is supported by a central bank — that is to say, a government-created agency of monetary central planning. Central banks provide private banks with liquidity, allowing them to expand the money supply in a coordinated fashion, thereby creating financial and real-estate bubbles. But more importantly, banks take the money given at artificially low interest rates by the central bank and use it to speculate. The dramatic rise in the price of raw materials and agricultural commodities since 2008 is basically the result of the inflation created by central banks. The most perverse consequence of this government-induced inflationary process is that it redistributes wealth from the middle class and the poor to the rich financial elites and governments, for whom inflation works as a hidden tax.

The poor aren’t getting poorer because of actions taken by “the corporations” (I put the term in quotes because many people blaming corporations don’t even know what the term really means and instead believe it to simply mean big businesses). Your money is able to buy less and less every day because the Federal Reserve is able to print money. When you inject more money into an economy each monetary unit becomes less valuable (its purchasing power is reduced). Likewise stop blaming the rich who obtained their wealth by providing better goods and services to you and me:

Bill Gates for instance, for a long time the richest man in the world, has improved the lives of all of us with his inventions. We have freely decided to buy Microsoft products because they are useful; thus everyone has benefited. In the same manner, when we go to the baker next door and buy some bread, both parties to the transaction are benefiting: the baker because he has money to buy other goods and services he needs for himself and his family, and we who now have delicious bread to eat. It does not make any difference if this baker becomes a millionaire by selling his bread. Actually, it would mean that he is good at his job, so he expands his business in order to satisfy the demand. Why should we be outraged if he becomes rich in the process? We should celebrate the fact that he was prosperous. His prosperity means more jobs and more bread for more people. From every point of view, the millionaire baker is performing a social function. In the same fashion, Bill Gates’s inventions increased productivity, bringing millions of people over the poverty line around the world.

Just because somebody has a great deal of money doesn’t mean that they’re evil. I would go so far as to say a majority of those who are wealth obtained their wealth legitimately and should be celebrated for serving society so well. Steve Jobs, Bill Gates, and Henry Ford didn’t obtain their wealth by using the government’s monopoly on violence, they obtained it by providing a good or service that a large number of people wanted. So when you decide to tweet about your hatred of “corporations” from your iPhone 4S stop to think for a second and realize Twitter and Apple have done you no wrong. You should be outraged at your government who stole money from you and gave it to the likes of General Motors, Chrysler, and many of the largest banks who you voted to fail by purchasing their competitors’ products. Unless the government decrees otherwise you have a choice in what companies you do business with so vote with your dollar, you don’t have a choice in what government services you wish to partake in though and that’s what you should be pissed off about.

If you’re outraged by current economic conditions don’t demand the government step in to intervene, demand the government get the hell out of the way.

Debt Free Living

WizardPC has been writing a very good series on his website called Debt Free Living. I’m very fortunate to have the father I do because he began his own business with nothing and now has the most successful auto shop in his town. While he had to take business loans periodically to establish and expand his business he’s always paid them off far ahead of their due date and has never accumulated debt via credit cards of other frivolous expenditures. Although I’m not the smartest man on the planet I’m very capable of learning from those who are incredibly smart and thus I’ve always been a close manager of my money.

Unfortunately many people in this country (and elsewhere in the world) are not so careful with their finances. WizardPC’s guide explains important things that you need to consider when trying to get out of debt. The most important of these lessons is creating and sticking to a budget and eliminating your current debt and the interest that must be paid on it as soon as possible.

Sadly as government policies continue to cause ever increasing inflation it’s difficult to create a sustainable budget while your purchasing power is reduced on a daily basis. While the interest in my money market account used to be notable it’s now so pathetically low that it’s like having no interest at all. Thankfully I’m a man who diversifies a bit and have been able to maintain much of my purchasing power through investments in precious metals. I think an important lesson for getting out of debt is understanding that you not only have to eliminate your current debt to forgo paying eternal interest but also because your money is becoming more worthless every day (thanks government) and thus you’re going to need more of it in the future to cover basic living expenses such as food and water (especially if you’re not getting periodic raises to offset the effects of devaluing money).

A man without debt is truly beholden to nobody (well except the government because they still have guns to your head). Instead of working for your financer, work for yourself. Once you’ve eliminated your current debt then all money made by you goes to you (and the government who will ultimately shoot you if you refuse to pay their demanded pizzo).

This is What You Pay Bureaucrats to Do

Bureaucrats exist for one reason and one reason only; they exist to suck money out of the economy that could have otherwise been put to productive use. For instance a bunch of bureaucrats decided that an umbrella is simply a mechanism to keep one’s self dry during a rain storm… unless you put it on the ground and sit under it, then your umbrella is a structure:

This evening, Seattle police notified the 70 or so hearty souls sleeping downtown that if they weren’t actually holding their umbrellas then they couldn’t lay or sit underneath them.

Because to the city, an unattended umbrella is technically a “structure.” And structures, like the tents that were taken down earlier in the week, aren’t allowed in city parks.

This type of absurd decision is similar to the one in Minneapolis that state you can seek shelter under a tarp during a rainstorm unless that tarp is tied to something or otherwise propped up, then it’s a structure. What’s most offensive about this decision though is that taxpayer money was used to pay these assholes while they debated this absolutely pointless topic.

Seriously, who the fuck even cares? I understand why many people don’t want tents being pitched in public areas but does it matter if somebody decides to sit under their umbrella? By Thor in Valhalla how have we allowed our society to degrade to such a point that we’re willing to pay some asshole in a suit large amounts of money to decide these minor and pointless things?

The Failure of Consensus

One of the common events taking place at the various occupations throughout the country are general assemblies. These general assemblies are basically a collectivist’s wet dream come true. As an individualist I look at them as completely unproductive wastes of time and after sitting through a couple I still hold that belief. Apparently I’m not the only one:

For the past three hours the crowd had been debating the creation of a new working group called Urban Youth. The process was laborious: While the facilitator had a microphone, it didn’t carry far, and each comment had to be repeated through Occupy’s elaborate Human Microphone system. The process was reminiscent of New England bureaucracy and legislative officialdom, procedures I’ve often panned as a local. Things were said like: “We need to see everyone’s hands in the air, because if we don’t have a quorum of people voting it won’t be considered consensus.”

At one point it looked like a decision was about to be reached. After hours of legislative meandering, the facilitator’s excitement was palpable. “Are there any points of information? No points of information. How about strong objections? I’m not seeing any strong objections. Are there any friendly amendments?” There was a long pause. An individual raised his hand, which indicated an amendment proposal. A moan rumbled through the crowd. The facilitator chuckled. “This is democracy,” he said. “Everyone has a voice.” The crowd began to cheer. “This is why we do this. Because we all have a voice!” You could feel the sense of frustration, of fatigue giving way to elation. I thought: Perhaps the essence of democracy is somehow entwined with the procedural humdrum of a Cambridge zoning board.

The biggest failures of general assemblies is the fact everything must be decided, and I mean everything. Each general assembly I viewed started with a discussion on how votes were going to be handled for that general assembly. I shit you not, an hour was spent discussing a vote on how voting was going to be done. These discussions usually revolved around whether or not 99% agreement was truly consensus or if 100% of the people present had to agree on everything.

Have you ever been in a meeting where 100% of the participants had to agree on something? If you have then you understand the impossibility of such a requirement. Have you ever stopped to wonder why a huge majority of businesses usually have a set hierarchy of power and why the military doesn’t both worrying about getting consensus of soldiers? It’s because getting such consensus takes for-fucking-ever.

Even apparently minor topics of discussion can take hours to debate before consensus within the group is reached. Ask a group of friends where you should go to eat sometimes, you won’t be out the door for an hour in all likelihood. The requirement of consensus is what ultimately paralyzes collectivist movements. Those of us who are individualists have it much easier because we simply say, “Hey I’m going to go do this, if you want to join me you’re welcome to and if you don’t that’s fine.” The only opinion an individualist worries about is his or her own and that’s why they can get things done (you can bet Albert Einstein, Henry Ford, Steve Jobs, Bill Gates, and most other successful people never asked for consensus of those they were working with before doing their thing).

During the general assemblies I bore witness to you could see fatigue spreading throughout the attendees fairly quickly. Consensus was often reach simply because those who opposed whatever measure was being put forth were sick of debating and wanted to move on so they voted in favor. While the organizers and collectivists praised this democracy in action my friends and I simply stood there with small smiles as we watched the biggest failure of collectivism in action. After all if we wanted to do something we never worry about group consensus, we just go do whatever the Hell we want to go do.

Thankfully there is no way to make people abide by the decisions of those general assemblies. If everybody had to abide by the decisions of the entire group nothing would get done.

Top Ten Reasons Why the Mafia is Better Than the State

I often compare the state to the mafia but as this document [PDF] written by Emily Sandblad points out, the mafia is actually better than the state:

Reason Number 10: The Mafia has a sense of honor. If they say that they will do something, they stick to it. Nobody in the government has a clue what a sense of honor is. If they say that they will do something, you can count on it only if you’re getting screwed.

Reason Number 9: The Mafia code of conduct is simple and clear, and unfettered by legal doublespeak and millions of regulations.

Reason Number 8: When competing Mafia families go to war, they don’t kill hundreds of thousands of civilians as “collateral damage.” War is the health of the state, but for the Mafia, it’s bad for business.

Reason Number 7: Instead of conducting the war on drugs and the American people, the Mafia is perfectly happy to peacefully provide high-quality products to those who desire them.

Reason Number 6: When you buy protection from the Mafia, you get protection. The Mafia has a good track record for limiting violent crime in the areas that they protect. When you buy protection from the state, you can dial 911 and die.

Reason Number 5: The Mafia’s protection is much less expensive than the state’s. The Mafia wants ten or fifteen percent of your profits, while the various levels of government will try to snatch at least 40 to 50 percent of your profits.

Reason Number 4: Unlike the state, the Mafia wants your business to succeed. They know that ruining your business means that you can’t pay for protection. The Mafia imposes almost no regulatory overhead, nor do they require that you waste your time filling out zillions of self-incriminating tax forms.

Reason Number 3: The Mafia won’t keep you from having a gun to protect yourself and your property. The state prefers that you be disarmed. The Mafia will gladly sell you the means to protect yourself and they won’t bother with a Brady check, either.

Reason Number 2: The state wants to regulate what you do in your bedroom. The Mafia not only does not want to regulate what you do in your bedroom, they will gladly sell you whatever you need to enhance your enjoyment.

And the number one reason why the Mafia should replace the state:

Members of the Mafia have a great sense of style, dress far better than government bureaucrats, and are much easier on the eyes.

So there you have it. The next time that somebody argues that anarchy results in an increase in organized crime, smile sweetly and tell that person it would be a real improvement over the state.

Heh.