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


THE BIG BANG REVISITED

June 20, 2010

THE BIG BANG REVISITED

The Big Bang is super-ancient “history”, apparently some 13.7 billion years ago, give or take a few million years. The idea has appeared and grown to be an “accepted fact” in my lifetime. I’ve never quite accepted it. As the theory developed, I developed growing doubts.

I’m not at all qualified to challenge astrophysicists. I’m out of my field and out of my depth. But I wish that they would take another good look at one assumption which is essential to the whole big- bang theory.

The theory is based on the shifted color/frequency/wavelength of light from distant galaxies. The shift is always towards lower frequency and thus longer wavelength, red end of the color spectrum. Thus it is usually referred to as the red shift.

The amount of shift, at least for the “nearer” galaxies, is proportional to the distance from us. For very distant galaxies their distance is calculated from the measured shift of wavelength.

The shift of frequency is analogous to the shift we hear in a passing police siren or train whistle. It’s caused by the relative motion of the source of the sound and the observer. The phenomenon is known as the Doppler shift.

The big bang theory is totally dependant on this one assumption; the red shift observed from distant galaxies is Doppler shift; it is caused by the galaxies moving away from us. My question is this; is there any other phenomenon which might explain the red shift? If so, the galaxies may be at rest and there was no big bang.

Light has been studied intensively for a few hundred years. We certainly don’t understand it fully. It consists of tiny packets, photons, which are both particles and electromagnetic waves, as in radio and microwaves. It always travels at 300 million meters per second when measured by any observer. Supposedly it has no mass, yet it is deflected in its path by gravity.

Perhaps the red shift of light from other galaxies is Doppler shift, but are there any other possible explanations? All that is needed is some interaction with the environment through which it travels. It might interact with electric, magnetic, or gravitational fields in such a way as to lose energy to something in the space. It travels for billions of years before it reaches us. Is there dark matter between the galaxies, stealing energy from passing photons via gravitational, electric, or magnetic fields?

Personally, I’ve always felt uncomfortable with the big bang theory. As it developed, it grew in complexity. When they threw in inflation to make the numbers fit, it looked like a desperate effort to rescue the theory.

As I say, it’s all beyond my limited and outdated knowledge of physics, but I’d like to see some discussion of alternatives to Doppler shift and the big bang. Please comment.


HOW WE SUBSIDIZE THE POPULATION EXPLOSION

June 19, 2010

HOW WE SUBSIDIZE THE POPULATION EXPLOSION

Having children is not a random accident. It is the direct result of a deliberate act. Other animals, having more sense than humans, refrain from sex when times are bad. But people, in the worst of times and the worst of situations, go on reproducing. In fact, there is a very strong relation between wealth of parents and the size of their families; the poorest families produce the most children.

There are cultures which consider children as an old age pension. This is most common in the poorest areas of the world. In such a culture, there is a definite economic advantage to large families, but essentially, parents are breeding future slaves. That’s not a culture of freedom and as old cultural traditions die out, parents may find themselves abandoned in their old age.

In richer areas of the world, governments actually subsidize children. In the USA, children count as tax deductions. Public schools are supported out of general taxes so education is “free”. The cost is socialized. Public schools may provide free lunches. If you live on welfare, your income increases as you have more children. Dependent children will help to qualify you for food stamps.

In short, government, by trying to protect children from poverty, is subsidizing their parents, making it easier to breed and burdening the taxpayers with the results. This is, of course unfair to the taxpayers, and to the children.

So how many children should each family produce? In a system of freedom, parents should make that decision. But that decision should be made with the realization of full responsibility to prepare the children to become self- supporting adults.

The world is getting crowded. At some point, any additional population will reduce the living standards of everybody. If your thinking is authoritarian, you might call for forced limitation of family size, as China did for many years. If your thinking is inclined to individual freedom, you must accept the right of families to decide. But we shouldn’t tilt the families’ incentives by subsidizing their children. With freedom to choose comes responsibility for the choice.


FRACTIONAL RESERVE BANKING IS BLACK MAGIC

June 18, 2010

FRACTIONAL RESERVE BANKING IS BLACK MAGIC

I’m going to try to explain the hat trick by which money in banks appears out of nowhere.

This may seem crazy to non- economists, but this “pulling money out of thin air” is the cause of the business cycle, the boom and bust and depressions which make the supposedly free market fail and cause periodic misery for millions: companies that fail and the unemployment that scares us. Understanding the hat trick points the way to end that misery. And it’s not enough for the economists to understand it; unless we all understand it, we can’t muster enough political power to stop it.

The hat trick is built into the system all businesses use to keep track of their financial condition. It’s called “double entry bookkeeping”. Each money transaction is recorded in two columns, as either an asset or a liability. The columns are supposed to balance at all times.

When the bank lends me $1000, it opens a checking account in my name. It enters $1000 on the liability side of the ledger. The liability is the new checking account. The bank owes me $1000. I can write checks on my new account and the bank is obliged to redeem them right away.

The entry on the asset side of the ledger is my IOU to the bank. I have promised to pay back the $1000 in 1 year (with interest, but let’s ignore that). So now the balance sheets show additions of $1000 debit and $1000 credit. The book balances, right? Not really. The amounts balance, but the reality doesn’t.

$1000 cash in hand is not at all equal a $1000 IOU to be paid in one year. I can spend the $1000 now. The bank can’t spend my IOU. I assure you that my word is as good as gold, but you can’t know that. So nobody but the bank will accept the IOU as money

The bottom line is that the bank has converted my IOU into temporary cash, $1000 for 1 year. At the end of the year I’ll pay my debt. The $1000 will disappear by way of a pair of entries in the bank’s books, and the interest I pay will be added to the bank’s assets.

Bankers are convinced that this is open, honest, and above board. It’s all down in the book, for anyone to see. It just doesn’t mention that the $1000 asset won’t be a real asset until next year. So for the next year, an extra $1000 will be added to the supply of money in circulation.

Honest or not, it’s a time honored tradition of banking. It’s legal. OK, it’s a gamble. If I spend the borrowed money and then die penniless, it’s a dead loss for the bank. That’s partly what the interest is for, to compensate for such risk. If one out of 20 such loans fails, the bank will still be earning 5% interest on all of the money they pulled out of the hat.

Someone has said that double-entry bookkeeping is one of the greatest inventions. I’ve always found it confusing enough to make me suspect smoke and mirrors- a hat trick.

But– what the banks give, the banks can take away. Aside from the banks making money out of their hat trick, they cause the amount of money in circulation to rise and fall, causing the distorting oscillations of the business cycle.

Why get excited about this hat trick? Practiced by many banks, coordinated by the Federal Reserve, and protected by deposit insurance, the practice of fractional reserve banking gives us a sick dollar, with alternate fever and chills, and most painfully, periodic mass unemployment.

The hat trick causes the humps and hollows in the economy, such as the frenzy of the stock market boom and crash of the 1920s, the depression of the 1930s & 1940s, the stagflation of the 1970s and the Housing bubble and plunge into depression of 2008. And each time, we have spells of unemployment. That’s serious business.

100 years ago, very few people had bank accounts. Workers received their pay in cash or checks. They promptly cashed them at a bank or currency exchange. Banks worked for years to gain our trust, so now nearly everyone has a bank account. We trust the banks and the dollar. It’s only because of that trust that we can be so easily fleeced by the banks and government. The banks need our money in their bank accounts as a base for a pyramid of temporary money called credit. For every dollar that we keep in a bank account, banks can maintain $10 of temporary money (credit), earning interest.

This is all legal. Some judge long ago decided that your deposits in a bank are not deposits for safekeeping, but a loan. If the bank gets in trouble and can’t pay you back, that’s just your tough luck.

The rules of honest banking wouldn’t allow this. Every dollar in a deposit account (Payment on demand) should be backed by a dollar of cash in the vault.


REFORM THE GOVERNMENT

June 15, 2010

REFORM THE GOVERNMENT

If it is possible for any people, in any country, to regain their freedom, it should be possible in the USA. This is because our country was founded for freedom, and everyone, and every politician, at least gives lip service to freedom. It should be possible to shame our congressmen, senators, and president into reversing the trend to Federal control of every facet of our lives.

In 2008 Ron Paul ran for the Republican nomination for president. His program was smaller government with a return of our freedoms and a sound dollar. His record in Congress showed that his program was for real. In debate with the other candidates he won every round. Yet, the media ignored him and the public didn’t understand his “End the Fed” message, so he lost the nomination

Since then, back in Congress, Ron Paul has entered several bills to halt the theft of our freedom. Each bill was blocked by tactics to see that none of these bills could ever come to a vote. Freedom is not on the agenda for either the Republicans or the Democrats, but neither are they willing to be seen to vote against freedom. The News media are almost completely dedicated to a welfare-statist, anti-freedom program. And the voters aren’t even interested.

This means that regaining our freedom is a long-haul task: a complete re-education of 2 or 3 generations of voters, so they can force the politicians to re-build the system and return to a Constitutional government.

This requires many things:

The voters must understand and care about freedom. Many don’t realize how much freedom we have lost, and many don’t care. If we can’t convince the voters how much freedom they have lost, where the trend is taking us, and how important it is, freedom is lost. I’m afraid apathy is the greatest threat to achieving the goal of freedom.

The voters must be informed enough to understand why and how we are losing our freedom, so they can engage intelligently in the process of reversing the trend.

Voters must think critically enough to see through politicians’ waffling and promises and lies, and discount the bias of the media and pundits.
Voters must be focused enough on the issue of liberty to abandon party affiliation and bogus issues to vote for candidates who will focus on freedom.

Members of the Supreme Court who ignore the Constitution in their decisions must be impeached. This court is the last bastion of freedom in the government. Test cases should be devised to reverse old decisions which violated the Constitution and stole our freedom.

We must impeach the president every time he exceeds his Constitutional powers. In the past century, they have all done it. Now it is routine.

Once we have enough freedom minded men in office, Congress should repeal thousands of laws which have chipped away at our freedom through the last 200+ years. This will mean shutting down scores of Federal Bureaus.

Easy? No. Impossible? No. But not this year, nor even this decade. Possibly we could achieve it in a century, with some really dedicated people spreading the word, and inspiring the populace.

Such is the route to reforming our government. Truthfully, I doubt we’ll ever achieve it, because of voter apathy, and the very nature of government. Power corrupts. Deceiving apathetic voters is easy.


RENT CONTROL

June 14, 2010

RENT CONTROL

Rent control is just one example of price controls. My experience with rent control in Chicago, after World War 2, amply demonstrated the results: the resulting shortage and the makeshift adaptations of the market which provided housing of sorts. That’s economics; people act to provide their wants within their means.

During WW2 housing shortages developed in Chicago. Rent controls, installed during the war, remained in force for years after the war. My wife and I, newlyweds, spent 5 months trying to find a rental within our budget. Rents were frozen on existing housing. New apartments were being built out in the suburbs, but charging much higher rents. With inflation, and frozen rent, existing apartments became relatively cheap, if you could find a vacant one. The only one we found was teeming with cockroaches. We passed that by.

Furnished apartments were not rent controlled. What qualified as a furnished apartment was pretty bad. The furniture was mostly cast-off junk. The “apartment” was usually 1 room with a hot plate for a stove, share the bathroom. One “furnished apartment” had its own bathroom because it was a bathroom, with bunk beds and a tiny table built in.

One “apartment” was a corner of a basement partitioned off by hanging bed sheets. When we arrived, there were 50 couples waiting to be interviewed by the owner. To qualify for that, you had to own a car and provide the owner 24/7 taxi service. We didn’t have a car.

What we finally took was one room with a couch which folded down to a bed. We had our own sink, a tiny gas stove, a small table and chairs, and a small closet, share the bathroom. When the bed was open, there was no room to walk around it.

We lived in 3 more furnished rooms in the next few years until we finally got lucky. A waitress in a café took pity on us, phoned a friend who had a friend who knew of an available place: a vacant, unfurnished apartment with a controlled rent.. We snapped it up.

The apartment, a third floor walk-up, was scorching hot in summer and freezing cold in winter. The steam heat would rattle in the pipes, and then shut down just as it reached our radiators. I went down to the owner’s apartment to explain this to him. Then I found out: he and his wife were freezing too; the rent they collected was barely enough to pay for the oil for heating the building. It left absolutely nothing for maintenance. Rent controls and inflation had destroyed the economic viability of the apartment building, which was to be their retirement pension plan.

Moving with my job, we moved to a far-out suburb, and found an apartment with uncontrolled rent, at more than twice the rent we’d been paying.

My next job took us to Los Angeles. There were no rent controls, and plenty of available apartments. We took a nice one bedroom apartment at half the rent of our last one, and little more than what we had paid for any of those makeshift furnished rooms.

My conclusion from those 6 years of house hunting; a rent freeze, rather than making cheaper rentals available, simply produce a shortage of rentals. Like all price controls, and all government interventions, it solves no problems but instead creates more problems. But makeshift though it was, the market, not the government, at least gave us somewhere to sleep and eat. When government creates problems, the market provides solutions.


ISLAM VS FREEDOM

June 13, 2010

ISLAM VS FREEDOM

One thing I cannot tolerate is intolerance. I can confidently say that the USA has done a good job of teaching people how to mingle and do business with people of other beliefs, religions, and cultures. I grew up immersed in this culture of tolerance. I see a lot of common fundamental values among different cultures and religions. The common bond among Americans is the desire for freedom and equal rights for all.

There is one way that we can reject this freedom and those rights to people, by denying certain groups the status of human beings. We all do this to children, because they are incapable of independent survival. The matter of the change of status from child to adult is a gray area perhaps never to be fully resolved.

Slavery of Blacks in America was justified in this way. People had to think of them as subhuman in order to live with their slavery. Slavery for millennia before that was justified simply by: “You lost the war; you are the spoils of war and my property”.

Women have been denied equal rights for millennia among many different cultures. Giving women the vote and the right to hold leadership positions is relatively recent in most cultures. Yet I find the status of women in Islam to be beyond toleration.

Under Islam a girl is born the property of her father until he sells her to her husband. She is the property of her husband until he dies or casts her off. She has no choice in this, no freedom at any time, and no more rights than any inanimate object that he owns. Her owner can freely subject her to any kind of abuse. She can be executed if she tries to escape.

I haven’t read a word of the Koran. My information is all second hand, although I did observe the selling off of daughters by a Pakistani family, a neighbor when I lived in Scotland. If you think I’ve got it wrong, please post a comment.

I don’t think it’s my business, or the business of my country, to try to change this, unless it happens within our country. But we should be ready to offer refuge to any woman who dares to escape from such bondage.