Archive for June, 2010

100% UNEMPLOYMENT

June 30, 2010

100% UNEMPLOYMENT

A few hundred years ago, workers rebelled against the competition of machinery. They feared loss of their jobs, and starvation.

Fast forward to 2010. The Japanese, fascinated with robots, are creating multipurpose robots in human form. They have highly automated warehouses where the only humans in sight are bemused spectators. The obvious trend is to fewer human workers and more machines/robots/computers.

Fast forward to 2410. Automated machines/robots/computers do all the work, unguided by human hand, with only a few people to tell them what to do, to make, to design, or to solve. What will people do with their time? More important; how will people earn a living?

Personally, I like to work, to solve problems, to meet challenges or even just work up a sweat. I get great satisfaction from the final success of my labors, mental or physical. So how do I get such satisfaction, now that I’m retired and don’t need to work for a living? Believe me, it’s easy. I’m as busy as ever, doing things I choose to do, setting my own goals. Until my mind crumbles, I won’t be bored.

So this might give us a clue as to how those people in the 25th century will earn a living. Somebody will have to invest in all that machinery. Only capitalists will have incomes. So they will all have to become capitalists. They will live on the returns from their investments. They will have plenty of free time to pursue their own interests. A technical type like me might devote his time to scientific research, to learn what makes the atoms and the universe tick.

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HEDGING AGAINST INFLATION

June 29, 2010

HEDGING AGAINST INFLATION

Behind each currency stands a central bank. Each central bank, guided by Keynesian economic theory, is inflating the currency. Money supplies in all countries are always increasing. As a result, prices increase as money loses value. That’s inflation. If you have any savings, the value of your savings is decreasing. What to do? How can you protect your savings from the erosion of inflation?

One answer is, don’t have savings. Go into debt. Spend as fast as you can to acquire real goods instead of bad money. Real goods will keep their real value. This is what our governments, also guided by Keynesian economic theory, encourage us to do. Keynes said that this is the road to prosperity.

Since the 1930s, in the USA, this has been good advice, if you’re borrowing to buy a home. The US government set out in the 1930s to make home-buying irresistible with subsidies, loan guarantees, and tax breaks. In the long run, for most people, a mortgage to buy a home has proven to be a good investment. Many of those who lost out in the recent housing bubble were those who bought a house they really couldn’t afford.

This happened because the government pressured the banks to lower their standards for credit worthiness. Others were caught out because of the euphoria of a boom. The oft-repeated statement “you can’t lose” was the consensus until the bubble broke. Home prices were much higher than the cost of building them. People paid such prices because they “knew they couldn’t lose”.

Of course the incentives to buy a home heaped on by the government pressured many to tie themselves down geographically. It limited their options to find new jobs in a recession, when it was harder to sell your home to move to a new job. Otherwise, the risk was small and the long-term gains were great because the government was subsidizing your purchase with loan guarantees, low interest rates, and tax breaks.

Supposedly, the zero risk option to escape the erosion of your savings by inflation was to buy US government bonds. You can believe that if you trust your government. But if the government decides to default on its debts, who can prevent it? And government has the option of repaying you with cheap money by inflating the currency.

In fact that is already happening. The debasement of the dollar by inflation is more than enough to wipe out the value of the interest that the bonds supposedly pay for the loan. You’ll lose a bit less than you might lose if you keep your money under your mattress. After all, this is the same government that stole all the gold that backed the dollar when we were on the gold standard back in 1930.

So what other options are there to escape the theft by inflation? Many investments can pay much higher interest than government bonds. The more interest an investment pays, the more risk of loss goes with it. Perhaps corporate bonds are the safest. The stock market can pay much more, but it takes expertise to know which stocks or bonds to buy.

I have twice invested small sums in mutual stock funds with fair success. For a modest fee (less than 2% per year) a specialist manages the fund for some goal: maximum earnings, maximum growth, minimum risk, etc. This is fairly safe in the long run (several years) and can pay with growth in excess of inflation. In the short term, the value of your fund will bounce around a bit. Just sit tight, ignore the daily static, and leave your fund to grow until you need the cash. Find a fund with a record of growth over many years, including bubbles and recessions.

Another safe long-term investment is in gold. This will show even more short-term static than stocks, but gold has inherent value and in the long run is a very good hedge against inflation. However, you earn no interest on gold, you may have to pay storage fees, and transaction fees when you buy and sell. And there’s always the chance that the government may confiscate it. They have done it before.

Let’s face it. We are powerless against the total power of government. We are their only means of support, and they will take it from us , somehow.

FAKE FOOD IS SAD (STANDARD AMERICAN DIET)

June 28, 2010

FAKE FOOD IS SAD (STANDARD AMERICAN DIET)

No, I’m not complaining about fast food, whatever that means. The thing that makes the standard American Diet so sad has mainly to do with shelf life: foods sitting on the supermarket shelf with an expiration date 5 years hence. That means that in 5 years, it will still be nearly as nutritious as it was when shipped from the food factory.

How can that be? Well, most of the nutrition is already gone when it was shipped from the food factory.

First, canned foods; if you cook something in a can until you’re absolutely certain there’s not a single surviving bacteria, you have also destroyed much of the nutrition that initially went into the can.

Second, refined foods; refined sugar doesn’t spoil. It is so rich that it kills bacteria on contact. It takes a bit longer to kill us, but it will, eventually. Refined grains, similarly, are almost pure starch, which converts into sugar as you chew that delicious bread or white rice. It’s equivalent to eating candy. Think diabetes, obesity, cardiovascular disease, and cancer. That’s worse than no nutrition at all

Your supermarket offers a wide variety of vegetable oils, all refined with the single exception of extra virgin olive oil. The rest of them come mostly from seeds with a balance of two oils, called omega-3 and omega-6 fatty acids. These are classed as essential fatty acids, meaning that we must have them in our diet; our bodies cannot make them from other materials.

The important thing about these 2 fats is that they should be balanced in roughly equal proportions for our health. Omega-6 fatty acids alone cause inflammation, as in cardiovascular disease. So guess which oil is removed in the refining process. Right, they remove the omega 3 fatty acid, leaving pure omega 6. The fact is that the vast majority of Americans suffer from a serious deficiency of omega-3 fatty acids.

That’s the principal culprit behind our #1 killer- Cardiovascular disease. But the refined vegetable oil can sit on the shelf for many months without spoiling, because the omega-3 fatty acid, which spoils quickly, has been removed.

Third, packaged foods; Read the label: 5 or 10 or 20 ingredients, mostly sounding very technical, some unpronounceable. What purpose do they serve?: Long shelf life, attractive appearance, convenient texture, quick preparation. Many of these foods contain some form of glutamate. (Remember MSG; a deadly brain toxin). These come, disguised under a dozen names, to “enhance flavor”. Doesn’t “natural flavoring” sound innocent? Avoid them all like the plague they cause.

In summary, these foods retain what nutrition they have because they have very little real nutrition to begin with.

So let’s move through the supermarket to the stuff that’s refrigerated. Perhaps that will be closer to nature and more nutritious. Milk, long touted as the best nutrition for growing children and everybody. Away back in the 1800s, Louis Pasteur invented pasteurization – for wine, or was it for beer? Anyway it stopped the fermentation process and provided longer shelf life. Just a little heat to kill most of whatever provided the fermentation.

But when you do this with milk, the heat will ruin its nutritional value. Some people can digest it and some can’t. Millions of colicky bottle babies live in misery until they start on solid foods. Pasteurization is required by law. It extends shelf life, and permits dairy farmers to be a bit careless about hygiene, but it isn’t nutritious for most of us. Raw, unpasteurized milk, even after it sours, is better food than pasteurized milk.

Now surely the meat we buy fresh in the market is as nature made it? No, it isn’t. For perhaps a million years our ancestors hunted animals, mostly ruminants: cattle of all kinds. Ruminants have a complicated digestive designed to digest grass and various green leaves.

Ruminants can even survive on the brown stubble, hay or straw, when the growing season ends. But they were not designed to eat anything as rich as grain. Fed on grain, beef cattle get fat and produce tender, juicy beef, but it makes them unhealthy. And the meat isn’t nutritious.

I’ll guess that 95% of the beef produced in America comes from feed lots. Cattle spend their first 18 months eating green grass and the next 18 months in a feedlot, where they grow to a size which would take 3 years in a pasture. They are fed growth hormones to speed growth, grain that fattens them quickly, and antibiotics to prevent the epidemics that would naturally sweep through a herd of unhealthy cattle, crammed together in a feedlot. The cattle are unhealthy because of their unnatural diet.

Because of the antibiotics, feedlots are a source of trillions of antibiotic-resistant bacteria which move on, airborne or in water supplies, to infect us. That is a growing epidemic today- infections which won’t yield to the usual antibiotics and are progressively becoming resistant to more and more of the newer antibiotics.

But back to nutrition. Grass-fed beef provides the animal versions of omega-3 and omega-6 essential fatty acids, in an ideal balance. Grain-fed cattle provide only the omega-6 fatty acids, which, without the omega-3 Fatty acids in balance, cause inflammation in the cardiovascular system.

OK, so the beef is unsafe. Surely the answer is fish, right? Well, wild fish do provide an excellent source of omega-3 fatty acids. But there aren’t enough fish in the sea to feed 7 billion people. The fish from fish-farms, fed on grains, lack the all-important omega-3 oils. There’s another hazard with fish- they accumulate highly toxic mercury. Bigger fish, eating smaller fish, concentrate the mercury. Smaller, wild, cold water fish are your safest source of omega-3 fatty acids with the least mercury. Wild salmon is a good source, and sardines, despite being canned and cooked are a good, cheap source.

My solution? I get grass-fed meats, shipped frozen, from http://www.texasgrassfedbeef.com. I eat canned sardines and frozen wild salmon, and fresh and frozen organic vegetables and fruits. Will I live to 120? I’ll let you know when I get there.

BYPASS GOVERNMENT

June 27, 2010

BYPASS GOVERNMENT

As I said in a previous blog, it’s not impossible to reform the government, but very unlikely. The parasites, the politicians and bureaucrats, who benefit from the current statist system, have a great stake in its continuance and expansion. They will strongly resist any reform.

There are ways, however, that we can bypass some of the burdens of government by employing competing free market substitutes. We might find enough support for freedom in Congress to prevent interference with the competing services. I’m thinking in terms of private schools, private arbitration courts, and private police,

Our justice system is very costly. Its only aim is to “bring the criminal to justice” with no attempt to bring justice to the victim. Arbitration courts are much cheaper. A victim would prefer arbitration, because he can claim compensation for his loss. A criminal might prefer arbitration because he can avoid imprisonment, and instead earn the money, to pay compensation to the victim, in relative freedom.

We already have private schools. We would have many more of them, and many more students attending private schools, if their parents were relieved of the tax burden of supporting public schools as well as paying tuition to private schools. Home schooling or private schooling would enable parents to choose the values to be taught to their children.

The chief obstacle to competition with government agencies and services is the inclination of government to claim or grant monopoly privilege. For many years private shipping companies have competed successfully with the US post office, with the single exception of letters. The post office survives today only by virtue of the remaining monopoly for delivering letters.

Perhaps you can think of other government functions that could be supplanted by private enterprise.

COMPETITION VS SECURITY

June 26, 2010

COMPETITION VS SECURITY

The free market provides us with ever more clever goods at ever decreasing cost. This seems to please each of us, as a consumer. Like everything though, this comes with a cost; it requires each of us to compete, as a producer.

Many try to game the system by shutting out competition. It often doesn’t work, but whether it works or not, it requires coercion. 100 years ago, the unions used violence, coercion, and intimidation to organize workers and force employers to negotiate for wages and working conditions. Police and governments turned a blind eye to this blatantly illegal coercion.

In the course of the 20th century, governments passed laws empowering unions to organize and forcing employers to negotiate. However, by the end of the 20th century, American workers, feeling that competition suited them better had largely lost interest in unions. What union power remained was mostly in unions of government employees.

Individualism and meritocracy are fundamental to the American culture. Many immigrants chose to come here because individualism was in their nature.

Other lands have other cultures. A Japanese worker traditionally has worked for one employer all of his working life. Employment is like joining a family for life, and loyalty and security replace the competition of US workers. I believe adaption of American attitudes is causing a lot of cultural stress in Japan.

Many Asian cultures tend to be more communal in nature than European cultures. In deed, European cultures tend to be more communal than the American culture. There should be opportunity everywhere, but especially in America, for people with all sorts of cultural attitudes to exist and cooperate.

Economics is about individuals doing what they can, within their means, to satisfy their particular wants. Their ultimate goal is not goods, but satisfaction or happiness. If they are happier living without the stress of having to compete, they should be free to do so, so long as they don’t resort to coercion (including coercion by government).

They may find that this means settling for less in material wealth. This is what economics is all about, setting priorities and living within your means. I don’t expect civilization to evolve into one “best” culture, but rather into one world where many different cultures can freely mingle and cooperate in trade together.

Personally, I have taken the individualist, competitive approach in my work. I have worked for many employers, given each one my best efforts, but stayed within the type of work I could truly enjoy. I acquired a breadth of experience far greater than I could have found with one employer, and found that each time I left a job, I was qualified for a greater choice of jobs than the time before. In an inflationary economy, I have twice taken significant pay cuts to move to a new job. Each time I felt that I would be happier with the move, and I was.

In a free market, there is a place for each individual. Now, where can I find a truly free market?

ECONOMICS IN ONE LESSON

June 25, 2010

ECONOMICS IN ONE LESSON

The best book I know of to learn the essentials of free market (Austrian) economics is: “Economics in one lesson” by Henry Hazlitt. It is written in plain English without jargon, graphs, charts, statistics or math. Even I can understand it. I believe it is essential that we all understand economics, for it is in this battlefield that governments rob us of our income, wealth, and freedom. The book is available at http://mises.org/store/ for $12

The book teaches simply that to understand any economic choice, it is necessary to consider all effects on all people, both short-term and long-term. This is not much of a problem for you and me in our own individual economies; we generally do it automatically. The problem arises in macroeconomics, when government intervenes with some law or ruling which affects many people. Most such interventions are driven by pressure from lobbyists for special interest groups who hope to benefit from a change.

Here are some government policy fallacies exposed and explained in the book:
Public works to relieve unemployment.
Taxes that discourage production.
Cheap Credit that diverts production.
Spread-the-work schemes.
Protective tariffs.
Mercantilism.
Saving the X industry.
Commodity price stabilization.
Price controls.
Rent Control.
Minimum wage law.
Inflation.
The assault on saving.

INTERVENTION

June 24, 2010

INTERVENTION

Why does our Government insist on tinkering with the free market economy? Don’t they trust us to handle our own affairs? Or is it just lust for power and wealth? Politicians have certainly increased their power through the years, ignoring all the limitations on Government power written into the U.S. Constitution. Politicians are also under pressure from lobbyists, pressure groups, and campaign contributors to intervene in the economy in their favor, or to support their pet projects.

But Government has really botched all interventions intended to improve our economic affairs. First, what they do to the economy violates our freedoms. Moreover, they never succeed in achieving their stated purpose. And, worse yet, they cause disastrous, unforeseen problems. But worst of all, with each failure, and each resulting problem, instead of backing off, Government blames the free market, and adds more interventions in a vain attempt to fix the problems that the earlier interventions have caused.

The free market gives each person the opportunity to achieve the maximum satisfaction with the means at his disposal. In the free market, every exchange involves two people, and each of them profits by the exchange. Each one has acquired something he wants more than what he gave up.

Any interference with the free market can only inflict a loss on one or both people, either by preventing the exchange, or by forcing it to be made on terms that harm one or both people involved in the trade. Government intervention can only reduce the satisfaction of the people affected.

When intervention blocks people from their own priorities, they will seek other ways to achieve their goals. People are ingenious at solving problems, and many will find unforeseen ways to get around these interventions, or to use the interventions in unforeseen ways to their own advantage. Many others will soon follow suit. Unfortunately, those who try to control the destiny of others always fail to foresee this. They always underestimate the ingenuity of man.

WHY FREEDOM?

June 23, 2010

WHY FREEDOM?

Here’s a philosophical question I’d like you to consider; we each tend to make judgments on the basis of several more or less fundamental philosophies. Which is most fundamental with you?

My list includes the following:
Religious law, the rules of your religion.
Cultural law: the rules and traditions of your cultural group.
Egalitarianism: Does everybody get “fair” or “equal” treatment?
Libertarianism: Maximum freedom for each person.
Utilitarianism: The greatest good for the greatest number.
The golden rule: Do unto others as you would have them do unto you. Live and let live.
If you have a philosophy that differs from all of these, please contribute a comment.

These fundamental philosophies tend to overlap more than they conflict. Of course, each person has his own interpretation of each of them. And it seems that many religions initially were dogmatic and claimed precedence over any philosophy.

I’m libertarian, but I try to justify liberty as the best solution to the requirements of all other philosophies. Is this necessary? Can liberty stand alone, fully justified without reference to any other measure of right or wrong? I’ll give it a try

Liberty, like the golden rule, is not imposed from above, but is a simple rule each individual imposes on himself; “I will not violate another person’s liberty”. Perhaps this is the foundation of common law. It is the self government which makes anarchy workable.

Within liberty, each person is free to belong to any group, religion, or culture, and free to give up some liberty to live by the rules of the group. However, he is still bound by the rule of liberty; he shall not violate the liberty of any other person.

Trade is essential to our survival if we are to sustain our present population. Within liberty, all trade is free, within groups, and between members of different groups. Liberty is the only framework which assures that all groups, cultures, and religions can live together in peace and prosperity.

MICRO VS MACRO ECONOMICS

June 22, 2010

MICRO VS MACRO ECONOMICS

Microeconomics is what you and I practice every day. We live within our means. We earn what money we can with our skills and effort. We try to spend it wisely on our most important wants. We save for a rainy day, to put the kids through college, and to build a retirement fund.

Macroeconomics is about the bigger picture: the sum total of the microeconomics of all the people and businesses in a city, county, state, or nation, or the whole world. It is only important as a guide for governments in their interventions into our microeconomics.

The interventions which affect our personal microeconomics are taxes, subsidies, money supply, credit supply, international trade agreements and embargos. All of these interventions shackle the free market, reducing the satisfaction of people’s wants.

The intervention with the most far-reaching consequences is the control of the supply of money and credit; it affects every sale and every purchase, and every choice between present wants and savings for the future. It is the cause of the business cycle with its eternal sequence of boom, bust, depression, and recovery.

If we had real money, we would have no more business cycles. We could save for the future with confidence that our nest-egg wouldn’t evaporate in inflation.

If we abandoned all the other interventions as well, there would be no need for macroeconomics. If then we each live within our means, the total amounts of balance of trade, exchange rates, and such would be unimportant. Prices would give us all the information we need to direct our efforts to provide our most urgent needs most efficiently.

DEMOCRACY ISN’T FREEDOM

June 21, 2010

DEMOCRACY ISN’T FREEDOM

We frequently hear the terms, democracy and freedom, used as if they were inseparable, or even synonymous. Certainly, democracy is a step away from monarchy. But remember, Adolph Hitler was democratically elected to run Germany. Democracy is no guarantee of freedom.

Freedom is minimal restraint on your choice to do anything you want in any way you want. The minimal restraint prohibits using theft, fraud, or violence against others, to assure maximum and equal freedom for all.

Democracy is a means of governing a group. Decisions are made by majority vote of the voters, which may or may not include all members of the group. Democracy can give a majority the power to tyrannize the minority. Unless all members are voters, a minority of members can tyrannize all others in the group.

To quote once again Ludwig Von Mises; “Government is the negation of freedom”.

Under freedom, voluntary members of a group may practice democracy. Within a democracy, freedom lives or dies at the whim of the voters.

So what is the best form of government? There are good arguments in favor of monarchy. So long as there is a real likelihood that dissatisfied subjects may depose the king, he will feel the need to allow maximum freedom to his subjects. Kings have learned that contented subjects are the best source of taxes to support the monarchy.

However, a king, wanting to secure his power, can do so by building a loyal power base, by granting lands (and peasants or serfs) to a hierarchy of loyal lords, and by granting monopolies (Guilds) to merchants, bankers, and tradesmen. Soon, instead of just the royal family to support, the king’s subjects are groaning under the burden of supporting a huge aristocracy and greedy guilds.
A dictator may be voted into power, but then his first priority will be to perpetuate that power. That’s why it’s not good enough to choose good men to rule us; power not only corrupts, but it is also addictive.

Let’s face it; government is the negation of freedom. Government is the enemy of freedom. If we want freedom, we must either invent a form of government which has no power, or abandon government altogether. We must seriously think about anarchy, how to establish it, and how to make it work.

For those who do not want liberty, for whatever reason, and feel that some form of government, or some set of laws, or some enlightened rulers can build a utopia, nirvana, or paradise on earth, by all means subject yourself to such a government. But leave the rest of us free; don’t try to rule over or tax us or our land or property. We’re busy making freedom work. But first, we must find ways to escape from existing governments