Tag Archives: Economic

Electronic Cigarettes and the Peak Theory of Economics

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Posted by Anthony Martin on 10 October 2009 – 1:17 pm
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First of all, IANAE (I am not an economist). But I have been studying economics since the summer of 2007. Since that time, I have run across many economic views. The one that makes the most sense to me is the Austrian School of Economics.

In the most basic terms, the Peak Theory of Economics proposes that the price of something will rise until it doesn't. I know I have oversimplified it, in a free market the peak would probably coincide with the equilibrium of supply and demand. Peak prices are exaggerated by interference in the market. Where the price should stay static or fall slightly (in a free market), political interference causes the price to artificially rise for a time then fall more sharply than it would have if there weren't political interference.

To illustrate, let's look at electronic cigarettes (for example, Blu Electronic Cigarettes). The innovation of this product has emerged as a direct result of political interference. Taxes, and the threat of taxes, as well as bans on certain kinds of products has resulted in new market innovations (which was not the political goal). The economic factor of taxes makes alternatives surface. Prior to the artificial cost imposed by government, entrepreneurs had less incentive to investigate alternatives. But when taxes and bans came on the scene, entrepreneurs released investment into expensive alternatives which brought the price of those alternatives lower and lower.

So both taxes and artificially lower demand will probably affect the price of regular (combustion based) cigarettes. This will result in more political interference. What will the politicians do after that? Hard to say. Would they bail out the big tobacco companies? Unlikely. Will they start banning electronic cigarettes? I think that's more likely. Whatever they do, it will only exaggerate the problem and create more artificial peaks in prices, further perpetuating the Peak Theory of Economics.

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America: Just Needs More Socialism

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Posted by Anthony Martin on 19 August 2009 – 9:40 pm
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First, read this bit of fine propaganda (I added bold to each department/service provided by government):

This morning I was awoken by my alarm clock powered by electricity generated by the public power monopoly regulated by the US department of energy. I then took a shower in the clean water provided by the municipal water utility. After that, I turned on the TV to one of the FCC regulated channels to see what the national weather service of the national oceanographic and atmospheric administration determined the weather was going to be like using satellites designed, built, and launched by the national aeronautics and space administration. I watched this while eating my breakfast of US department of agriculture inspected food and taking the drugs which have been determined as safe by the food and drug administration.

At the appropriate time as regulated by the US congress and kept accurate by the national institute of standards and technology and the US naval observatory, I get into my national highway traffic safety administration approved automobile and set out to work on the roads build by the local, state, and federal departments of transportation, possibly stopping to purchase additional fuel of a quality level determined by the environmental protection agency, using legal tender issed by the federal reserve bank. On the way out the door I deposit any mail I have to be sent out via the US postal service and drop the kids off at the public school.

After spending another day not being maimed or killed at work thanks to the workplace regulations imposed by the department of labor and the occupational safety and health administration, enjoying another two meals which again do not kill me because of the USDA, I drive my NHTSA car back home on the DOT roads, to ny house which has not burned down in my absence because of the state and local building codes and fire marshal's inspection, and which has not been plundered of all it's valuables thanks to the local police department.

I then log on to the internet which was developed by the defense advanced research projects administration and post on freerepublic.com and fox news forums about how SOCIALISM in medicine is BAD because the government can't do anything right.

Source: Unknown Author

The obviously take-away from the above tripe is that government is our savior. Indeed, what's a little extra socialism on top of all the other socialism, right?

I always assert that government sucks at everything it does. That doesn't mean it can't do anything right. For example, NASA strives and usually archives for zero bugs in its software. Zero bugs in space software seems like a good idea, right? But how would you know if it wasn't? I know that might seem like a strange question, but stick with me.

First, a couple things in general. Some of the agencies above are actually not true government agencies in the strictest sense. The Federal Reserve, OSHA, and the US Postal Service are examples that do not have a true government charter. They are also not truly private organizations either. They are quasi-governmental entities, the epitome of fascism because they operate under special favored status.


Second, just because government can perform a duty does not imply that this job should be performed in the first place. I elude back to the zero bugs notion with NASA. It is wasteful to devote resources where they are not needed. To ignore this is to spend without consideration of limits. We like to think that wise people have weighed the benefit verses the cost, but how can they know the true cost?

Benefit vs. Cost

To do a true cost/benefit analysis, one must have a good understanding of the cost. Both cost and benefit are predictions, but cost is the most concrete. That's because benefit is more subjective than cost. Is it beneficial to plant corn or wheat? That's difficult to quantify with cardinal numbers. Can anyone say something is "five beneficial units" better than another? But if you ask what the cost is to plant corn or wheat, this can be expressed and quantified. Cost is concrete.

Government may be able to assert benefit without cost. It may say that we must perform a certain task regardless of the cost. It can say there is no price tag on a particular benefit because it is priceless. But this is a value that may or may not be shared by everyone. So usually, cost and benefit should go together.

Take a look at what Judge Napolitano thinks of every single one of the above agencies:

I don't know why they allow that guy on Fox News.

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Nationalistic Recovery Administration

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Posted by Anthony Martin on 18 August 2009 – 4:05 pm
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You should listen to the talk by Roger W. Garrison, who spoke at this year's Mises University. One of the things he mentions is this idea of a NRA. No, not the National Rifle Association. In 1933, the NRA was a program President Franklin Roosevelt established to deal with prices (among other things) in The Great Depression, and it stood for National Recovery Administration.

This NRA symbol was later banned to prevent misuse. That shows how powerful symbolism is. The Obama version is called Recovery.gov. History just repeats itself.

Garrison talks about how the Cash for Clunkers program was supposed to last until November, 2009. Congress originally allocated $1 billion, which was supposed to last that long. But the program was more popular than they realized.

As you recall, the bill requires that the cars be destroyed. No resale, no charity, no exports to foreign nations. Not even a moment’s consideration to whether the drive-train could be used by anyone, for anything, anywhere.

Garrison mentions the fact that Roosevelt had pigs slaughtered in the fields and left to rot, in a vane attempt to bring prosperity to all.

So an interesting comparison to the wastefulness of these programs, by Garrison's estimate, Roosevelt had 24 pigs killed for every car Obama destroys, up to the $1 billion point (adjusted for inflation). Garrison made that estimate back in late July of this year, so at the time, he didn't know it was going to be extended due to popularity.

To extrapolate, I think that means when Congress spends $3 billion on the revised version of the plan, the equivalent pigs slaughtered per car will become 8 to 1. Many countries in the EU have made their Cash for Clunkers program permanent, so how long before Obama will have crushed more cars than Roosevelt slaughtered pigs?

At the end of the MU talk, Garrison shows a public service announcement made in 1933 for support of Roosevelt's National Recovery Administration, urging employers to hire. Moe Howard from the Three Stooges appears as an exterminator, whom Jimmy Durante urges to hire more men.


Source: YouTube

I also highly recommend listening to the MU talk. It was given on July 31st, 2009. Amazing stuff. Just listen and look for the parallels to today.


?The Great Depression by Roger W. Garrison
Download now or listen on posterous

MU2009_Garrison2_07-29-2009.mp3 (13318 KB)


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Understanding the Voluntary Society

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Posted by Anthony Martin on 7 August 2009 – 8:08 pm
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Let's imagine I have extremely troublesome neighbors living next door to me.  And they're not just troublesome, they are downright rotten and they violate my private property with nuisances like noise, smells, occasional vandalism, and verbal threats.

If there was no government solution to everything, there would pretty much always be a voluntary market solution.  Government gives you one-size-fits-all, so that's why they can only think of these dumb ideas.  They also have no incentive to avoid waste since they take their resources by force.

The above simple answer is usually not enough for people, so a more detailed solution is as follows:

Protection (Insurance) Agency Example

In my scenario, since there is no government solution, I would hire a private insurance agency to deal with the problem neighbor matter.  I would agree to pay a monthly premium to the agency that they decide on after observing my situation.  They would have an interest in setting the premium to the right level depending on how the neighbors act when they do their inspection(s) before we sign the contract.

I may have a high premium because my neighbors are unusually difficult.  If I have a high premium, I might tolerate my neighbors until I feel I have evidence that they have sufficiently transgressed against my property.   When my neighbor transgresses against my property, I will make a claim and let my agency will decide how to handle it in the most effective manner.

So I don't have to personally think of ways of dealing with the problem because I have paid experts who have a financial incentive to get it done for my particular situation.

If my agency cannot deal with the problem, my contract stipulates that my agency will pay to move me to a new location, lock, stock, and barrel.  So they have a huge incentive to figure out a creative solution.  Either way, problem solved.

Arbitration Agency

I outlined that the contract was between me and my insurance agency. Let's assume this would be a reputable, well know insurance agency. If I have any disputes with them, we both agree to take our dispute to an arbitrator.  If either of us are unhappy with the decision, we can appeal the first arbitrator to a second.  If the first arbitrator is overturned, the first arbitrator pays, so they have an incentive to do it right the first time.  In fact, it would always be "loser pays" for any dispute.

If the loser cannot appeal and does not make the winner whole, they are financially ostracized, which can ruin a business and an individuals who want to make future contracts.  So civilized people would want to avoid it at all costs; they will abide by the arbitrators decision.

This is called a "voluntary society."  As opposed to a society that operates on coercive violence.

You may wonder if police still exist in this scenario, and I think they certainly could, as long as they keep to themselves when there is no calls out for them and when people have other arrangements.

The less we look to government solutions, the better off we'll be.

In this scenario I describe, it would be highly unusual to look to any kind of government judges after already agreeing to a private solution.  Someone who appeals to government after a getting a private arbitrator would also be ostracized.  They don't mix well unless all parties agree to mix them.  It's like using baseball rules in a game of cricket.

Take the SMS ban while driving.  That should most certainly be an insurance arrangement.  Your insurance company should ask if you intend to SMS while driving.  If you say yes, you should pay more.

The Altruistic Body

It might be hard to believe that it is never necessary to look to government for any reason.  Maybe you are looking for a wise, altruistic, disinterested body with unlimited resources that knows the likely outcomes of the great many schemes of man?

This person knows if you've been bad or good, right?  I think I have heard of him.  He wears a red coat and has a white beard, right? Rides a slay, I think.

Yeah, I stopped believing in Father Christmas a long time ago.

I joke.  But I don't.  I'm sorry if that seemed glib or condescending, but that's what I think of the "all seeing eye" of government.  It's fiction.  It's Santa Claus.

Yet I do believe there is a set of overarching laws that all market actors must follow without exception.  They can be boiled down to:

  1. All parties do what they agree to do.
  2. Non-aggression Principle is in play (which means do not initiate force).
  3. Failure to follow 1 or 2 will result in ostracization.

You may wonder if the above rules I set out require a governing authority.  I do not believe they do.  That's the point.  Enforcement turns completely on the idea of ostracization.

P.J. O'Rourke said, “When the legislature controls what is bought and sold the first thing that is bought and sold is legislators.”

Therefore it follows that if ostracization controls what is bought and sold the first thing that is bought and sold is ostracization.  Meaning you will do everything to protect against, and buy protection from, whatever limits you in the market place.  It becomes a commodity.

At Least Repeal Regulation

In America, Vice Presidente Dan Quayle once talked about how something like 100 or 100,000 regulations being eliminated in a particular government agency.  I can't remember the details.  But it resulted in a net savings of $20 or $25 billion for the businesses being deregulated.  How much do you think would have been saved if they just got rid of the whole ball of wax?

Regulations cost money to implement and enforce.  Obviously someone has to benefit or else why would regulations come about?  Government is one body that benefits.  But market competitors also benefit.  So they lobby to regulate their own industry.

Regulation is really just government backed "cartelization" (as in "to make a cartel").  A private cartel that has no government privileged to back it cannot last very long.  Someone in the cartel will lower their prices to take advantage of the other cartel members who made a pact to keep their prices high.  Once one member lowers his prices, the whole thing falls apart.

Government regulations have the same effect, but they are harder to bust than cartels because government regulation carry the "color of law."

For example, in Virgina, there's a town that requires professional photographers need get a special license.  Illegal photographers cannot advertise their business in the paper or the phone book. Regulation was supposed to improve the industry but all it did was increase the capital required to start.

Another example, in 1934, the last taxi license was issued in New York City for $10.  A fixed number of licenses traded back and forth from then on.  Now, those licenses trade for around $100,000.  So taxi drivers cannot start their own business without very heavy capital.The little guy has been excluded and the big guy likes this arrangement.

That's all regulation does.  It makes people feel good (a false sense of security) and gives the big guy a huge advantage.

I think private (for profit) certification is a better option instead.  We have the Better Business Bureaus and Consumer Reports, but their role is undermined by government regulations that overlap with them.  Ever hear of the UL?  That's the private body that tests and certifies electrical equipment.  The UL is successful *because* the government never really got into that field.  Many people think the UL *is* a government agency, but it's nothing of the sort.

The certification companies position their business so that they profit by their expert opinions.  They spend limited funds judiciously to test and certify.  If it turns out they fudged something, they are putting their name and business on the line.  Without regulation, someone is always ready to compete with them, just waiting for the smallest slip-up.

Child Molesters

You might ask, "Do I really think a voluntary society can deal with things like child molesters?"

I think the incentive to fix problems is there if you look and are free to innovate.  Remember, if I knew exactly how the free market would handle each opportunity, I could be dictator.  There are innovative solutions we could never dream of.  The way it might work is thusly:

Imagine there exists a child with only one parent and that parent is pretty much the only one who knows the child exists.  So for the most part, nobody cares if the child exists or not.  Then assume the child is abused by his or her parent.

Let's suppose a private protection agency is formed to seek out evidence to suggest children like this could exist.  Let's further suppose that this protection agency could put together evidence by using investigative technique like interviewing neighbors and going through people's garbage, etc.  These techniques are not aggressive techniques and therefore do not violate the non-initiation of force principle.  And *if* they are perceived by anyone as a violation, they can go to arbitration.

The protection agency has to take risks, but they have to also weigh the risk against losing settlements in arbitration.

The protection agency weighs the evidence and the risk against the incentive to put their reputation and livelihood on the line to break into the suspected house of a child abuser to rescue the child.  They then go to arbitration with hard evidence and an actual perpetrator in their custody.

For the initial incentive, we need to assume there is a standing bounty for child abusers in this voluntary society.  Voluntary charities can put up money and resources to give incentive to protection agencies.

The child will grow up and might eventually need protection agencies for him or herself.

This protection agency could be thinking of the long term goals of saving children in order to build a well known and successful brand, thereby offering service back to the children it saves.

This is just one isolated line of reasoning.  I think this line of reasoning can be adapted to a lot of different scenarios or even ignored and approached in a completely different, voluntary way.

No Utopia

I make no claim that any voluntary society would be utopia.  But wild-cards like serial killers would have to deal with an armed society.  And an armed society is a polite society, which would certainly be an improvement.  Neighbors would know each-other and look out for one another because they know they only have each-other and any mutual protection pacts they've developed.

I don't see how charity is Utopian.  Charity is something conservatives point to whenever they make arguments against high taxes.

I don't see how voluntaryism is Utopian.  Voluntary interaction is a very fundamental form of free association.  The notion of "unlimited contract" is just another way of talking about voluntary interaction.

There may in fact be situations where it's not lucrative to participate in a particular market.  That is called a wasteful enterprise.  Unfortunately, our current system keeps us in the dark about exactly which situations are lucrative and which ones aren't.  It's not a conspiracy, it's just how socialism works.

So if there's no money in belly-button-lint-removal, nobody should be trying to make a living doing it.  But if there's a government paying people to do it, they'll do it, even if it's wasteful, to the detriment of other tasks.  That's basically socialism.

Socialism distorts market signals.  Like right now, the cash-for-clunkers program is distorting market signals.  Car companies think there's demand for certain models, so they will move capital* to produce those models in order to meet the "demand."  But the demand is artificial.  If the distortion stops, the demand will fall.  It has nothing to do with real resources being traded.  It's all artificial.

* (Moving capital is a HUGE SERIOUS BIG deal.  Over time, it is where financial bubbles come from.  Moving capital, by definition, makes it hard to "go back" to another capital position.)

In a free society, it might not be lucrative to start a daisy-picking agency.  So if it's not lucrative, or if it's not mildly rewarding, it won't be pursued as a profession.  To suggest it should be perused by force for *any* reason, and force funds to be allocated to that pursue, is the very definition socialism.

So if catching a really smart serial killer is a wasteful enterprise, it shouldn't be anyone's profession.  Maybe it can be someone's hobby.

By the way, may I ask how police in our society, who are paid by force, can catch really smart serial killers who can not be caught in a voluntary society?

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God's Judgment on America?

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Posted by Anthony Martin on 17 November 2008 – 9:03 pm
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If you think God is judging America by appointing Obama and plunging her into financial ruin, you don't understand a few things.

America has just as many resources as ever.  The natural resources and human resources are abundant, it's the man-made financial turmoil that is making everyone wig out right now.  I know it's a big deal when my pastor tells everyone they're going to see hyperinflation which will ultimately herald the anti-christ.

And, Obama is not the anti-christ.  Or, if he is, I don't care.  I am a Christian and my job is to point to Jesus, not some anti-jesus behind every bush.

Nowhere are believers told to watch for the appearance of the anti-christ.  On the contrary, we are told to watch for Jesus Christ.  In Titus 2:13 Paul says we are to live "looking for the blessed hope and the appearing of the glory of our great God and Savior, Christ Jesus." Likewise, Peter urges us to "fix our hope completely on the grace to be brought to us at the revelation of Jesus Christ" (1 Peter 1:13).  John completes the apostolic chorus by similarly urging us to "fix our hope on Him" at His appearing (1 John 3:2-3).

God has not abandoned us.  He is right here in the midst of this, along side us.  Our Paraclete to the end.

There is a huge transfer of wealth going on, that is true.  But if we pay attention during the reconstruction, we can do some major good.  If we don't give up and we avoid acting like this is some kind of prophesy, we Christians can do a great amount of good for the glory of God.

It reminds me of the Northridge (California) Earthquake in 1994.  Back then, a wise man told me how God could use this earthquake to move people around.  It had the net effect of placing non-believers in the same house as believers where a lot of good could happen.  Hurricane Katrina has a similar effect.

This economic turmoil has been compared to a natural disaster by a great many people.  It has a lot of similarities.  People are being uprooted, resources are needed.  People need to be loved.  The fact that this turmoil has a human cause doesn't change the fact that there are innocents involved.  Very few of us will encounter anyone who caused this, so we should focus on the innocent.

If you think sub-prime caused this mess, you are mistaken.  Sub-prime was the proverbial "canary in the coal mine."  The human heart was the cause of this mess.  We are experiencing the natural consequence of unbridled greed.  That greed lead to unlimited liquidity, which lead to this mess.

Another cause of this mess is lethargy.  In that way, We The People are to blame.  Although there were people who purposefully directed us into these problems, we sat back and expected Superman or Batman or Ron Paul to step in and fix it.  They are not going to do that.  They can't.

Then again, maybe I think I see lethargy because I don't have a $300k retirement account that went to $250k, then $175k.  That would be pretty stressful to watch if it was happening to me, and I most certainly wouldn't be lethargic.

Even Ron Paul knows the only way out is by active participation of the people in their government.  We have to take an active role and educate ourselves.  Instead, we have let the government go unchecked.  We have to fix that.  If we expect one person or a group of people to take care of us, we'll be right back here in no time.

The only exception to what I said about not expecting one man to fix everything is Jesus.  When Jesus comes back to judge the living and the dead, all bets are off.  I have put my faith in that one man and I have no doubt He'll come through.  But until then, we have a role to play in taking back our life, liberty, and private property.  Join me.

By the way, a lot of people are confused by this rapture event.  It's related to Jesus coming back to judge the living and the dead, but probably not what a lot of you've been taught.  Here's a quick explanation of the rapture in less than two minutes:

Learn more ...

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UnFair Tax

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Posted by Anthony Martin on 11 November 2008 – 8:56 pm
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If you have trouble with long articles, please at least read the bold parts.

For once, I'll just come right out and tell you what I think about something: I'm against the Fair Tax proposal.  Not that there's any danger of it coming up for a vote any time soon.

Usually I like to be obtuse and not come right out and say what I think, opting to embed my position in the article so you have to read it in full to try to figure out my position on the matter.  I don't like thinking for others, but I find that this angers some people to no end.

Instead, I'll tell you what to think.  I don't know why people like that approach better, but they do.

The Fair Tax

So what is the Fair Tax?  It's a proposed national sales tax that would replace the Income Tax and abolish the IRS.  The tax rate is 23% or 30% depending on how you figure.

Inclusively: $123 = $100.00 * 23% + $100.00
Exclusively: $123 =  $94.62 * 30% +  $94.62

I think it's rather silly to calculate the tax exclusively, but some people do in order to make the percentage look more scary.  Either way in my example, you pay $123.  If you'd like a more complete explanation, see the PDF below.

None of the above is why I'm against the Fair Tax.  In fact, I believe the biggest selling point of the Fair Tax, which is that the "embedded" price of good and services will go down, so this 23% or 30% percentage truly doesn't matter, as long as it doesn't change.

The Fair Tax relies heavily on Trickle Down Economics.  I'm a big supporter of the this theory.  In a nut-shell, trickle-down theory says that if you lower the price of doing business, by reducing or eliminating taxes for example, the lower price is passed along to the consumer.

If the price of labor goes down, the prices of goods and services that rely upon labor go down in lock step.  That's the theory, anyway.  I think there's plenty of evidence for this, but that's a topic for another article.

So after the Fair Tax removes the tax on labor, it places a tax on the final consumer goods and services at the point of sale.  From Apples to Zigzags, if it's new, you pay the tax.

The Fair Tax was explicitly designed not to cut spending.  The proposal was designed not to eliminate funding for entitlements like Social Security and Medicare.  This approach is meant to allow all parties to support the change without objection.  This is considered a feature, not a bug.

I believe the Fair Tax just hides the threat of violence entirely in the corporate layer of the monetary base because at least under the IRS, I have the "option" not to file.  It's not every good option and not one I have personally taken yet.  But it's there.  We can opt out.  If the Fair Tax is implemented, there is no way to opt out.

You might say that buying used goods is a form of opting out, sorry, it's not.  I'll go into that below.

Constitutionality

Does the Fair Tax pass constitutionality tests?  I think in some ways it does and in some ways it does not.  I'm not going to analyze that aspect in this article.  There are plenty of reasons to be against the Fair Tax without getting into questions of the Constitution, especially since our so-called "representatives" mostly don't.  I'll go into it another time.

Unintended Consequences

All pro-government solutions have unintended consequences.  Anything that makes the government bigger (or stay the same size) will have unintended consequences.  Since the Fair Tax won't make the government smaller, it will also have unintended consequences.

The main way government causes unintended consequences is through price manipulation.  Any interference in supply and demand will result in unintended consequences.  This is true for rent control, cap and trade, as well as taxes.  Even a tax like Fair Tax, which removed the embedded tax of goods, will cause interference in supply and demand.

For the moment, let's assume the Fair Tax is simply 23% of the base price.  So if $100 is the base, the total comes to $123.

One of the big selling points of the Fair Tax is that the tax is only applied once.  Basically, if you buy used property (be they used shoes or used houses), you don't pay the Fair Tax.  So if you're interested in a new house, you pay an extra 23%, but if you buy a used house, you don't pay an extra 23% tax.

The Fair Tax supporters say that the house will cost less to build because the materials won't be taxed until the house is sold.  The "embedded" tax will be removed, making the 23% not as bad as it sounds.  I believe this part of the proposal, and it's important.  The embedded tax is a real, so removing it will make things cheaper.  The Fair Tax relies upon removing 23% from embedded taxes then adding 23% at the point of sale.

So far so good, right?  Does that mean if you manage to always buy used, you don't pay any tax?  Not so fast, Buba.

What does that do to supply and demand?  Wouldn't the possibility of buying property tax free increase the demand on such property?

The increased demand for used, tax-free goods will drive the price of these items up.  These tax-free, used goods will become more expensive and in short supply, mark my words.

In fact, I think the price increase will be pegged roughly to whatever the tax is.  If the Fair Tax ever changes up or down, tax-free, used goods will follow because their demand would be pegged indirectly to the Fair Tax.

The Prebate Is A Lie!  The Prebate Is A Lie!  The Prebate Is A Lie!

The prebate is probably the most popular part of the Fair Tax.  It is a refund of all taxes paid into the national program up to the poverty line, whether or not you pay the tax.  This part of the proposal is intended to answer the objection of the poor.  It is assumed that the poor cannot afford the tax, so this prebate pays them back all of the money they spend based on a highly reliable government formula (the formula itself is based on the highly reliable Consumer Price Index, which itself doesn't take into account food or energy prices).

The prebate is issued to every man, woman, and child in the US (I assume only citizens), regardless of their income.

So how is this a lie?  Well, let's imagine the Fair Tax is signed into law and everyone starts getting a prebate.  Lawmakers want to issue debit cards instead of cutting checks.  Back when the Fair Tax was being written, there was some question as to whether or not a check could be issued.  Now that we've had a stimulus check under our belts, they know this is a piece of cake (but we all know that cake is a lie).  In order to make it even easier, they'll want to use debit cards.

So everyone will have a debit card.  Likely, they'll allow "head of household" and "joint" cards to simplify things so children won't need cards issued until they are 18, unless they want them.  It's all about flexibility and choice, right?

So how is this a lie?  Well, let's further imagine the initial amount of the prebate is $250 for each person, each month.

$250 x 303,824,640 = $75,956,160,000
$75,284,986,750 x 12 = $911,473,920,000

The US population is 301,139,947 as of the July 2008 estimate.  So let's just imagine the prebate paid out on a yearly basis is a cool trillion.  And where do you think the prebate trillion comes from?  If you guessed the money comes from the proceeds of the national sales tax, I'd agree with you.  It's a solvent system, after all.

So how is this a lie?  Read your history books.  Was Social Security solvent when it was first proposed and implemented?  Was Medicare solvent?  Are they solvent now?

The prebate will start out solvent but then become an entitlement just like Social Security and Medicare.  That's why it's a lie.

How will this happen?  The same way it always happens, Pinky.  Congress will raid the fund.  They always have, they always will.  They're treacherous crooks!  They won't let a cool trillion just sit there.  They'll use it for something else, then pay the prebate out of credit which we'll have to pay interest on.  The prebate will become another entitlement, mark my words.

In fact, it'll be the worst entitlement ever.  If you think Social Security and Medicare are ponzie schemes, you ain't seen nothin' yet.

Tweaks and Trojans

I cite the 1913 version of the Federal Reserve Act as originally proposed.  It was proposed in such a way that the teeth of the bill had been removed.  Although it was a bad bill in the first place, there were many good amendments that made it easier for the critics to accept.

The banking industry even pretended to be opposed to the amended bill.  But after it was signed into law, the Federal Reserve Act has been amended to become what it was originally supposed to be: The Creature From Jekyll Island.

The Federal Reserve Act got through Congress as a trojan horse.  The Fair Tax is also a trojan horse that will be tweaked and tweaked until it's true purpose is implemented.

The IRS was created in much the same way.  Originally, it would only apply to the highest income earners.  Do you really think it would have passed as its being implemented now?  Hell no!

So the Fair Tax will go through the same tweaks.  Everything you like about the Fair Tax will be minimized and everything you hate about it will be maximized, mark my words.  For example, the percentage of the sales tax will probably go up, and those qualifying for the rebate will go down.

A quick flick of pen and pork will change it.

Sir Gives-a-lot

I have no doubt the rebate will be used to reward voters.  If you vote a certain way, you'll get money.  As I explained above, the logistics for getting the money to the voter can be very simple.  A few strokes on the prebate computer and the prebate can go up instantly, it's the American way.

Also, as explained above, the government now has experience with stimulus packages.  It makes perfect sense that the two would be combined.  Instead of having two separate systems to distribute stimulus and prebates, just combine them.

I imagine a stimulus czar will be appointed.  I've named him Sir Gives-a-lot.  He'll probably have a white beard and a red hat and be featured prominently during the holidays.  When the population is burdened by the next business cycle, Sir Gives-a-lot will swoop in and adjust the prebate up for some and down for others.  Sir Gives-a-lot will be a very popular man, mark my words.

In fact, he will eventually be as powerful over consumer spending as the Federal Reserve Chairman is perceived to be over the financial sector.  "Will the Fed key interest rate go down while the prebate goes up?"  That's the question the talking heads and pundits will ask.

How To Sell It To Me

Having said all of the above, there's only one way to sell the Fair Tax to me.  Even if I'm right and the Fair Tax is even worse than I've explained in this article, one thing would sell me on the proposal.  If the Fair Tax proposal includes a constitutional amendment to repeal the 16th Amendment (the same mechanism where the 21st Amendment repealed the 18th Amendment), I would then shout support for the Fair Tax from the hilltops (for all the good that'll do).

But in order for me to support this amendment, the new amendment would have to be free of any and all strings.  The amendment to repeal the 16th Amendment cannot itself introduce a new tax or anything else.  There's no need.  Just repeal the 16th Amendment and I'll be happy, but not before.

By the way, my full position on the 16th Amendment can be found on my previous blog.  To summarize, regardless of the 16th Amendment's status as to its legitimacy, people think the 16th Amendment authorizes a tax on labor.  We should repeal it no matter what, but especially if we're moving on to a national sales tax.  I cannot and will not support a national sales tax while the 16th Amendment is in the US Constitution.  Letting both on the books means one day we'll have both, mark my words.  A sunset condition on the Fair Tax is not good enough.  You think I was born yesterday?  See Tweaks and Trojans (above).  How do we know the sunset condition won't just be removed if repealing the 16th Amendment fails?

And if you think our so-called "representatives" will listen to anything we have to say, remember the Emergency Economic Stabilization Act of 2008, commonly referred to as the 'bailout' or 'rescue' bill of the U.S. financial system?  The support for that unpopular bill was split 50/50: 50% said no, 50% said hell no.

If they won't listen to us regarding a matter of $700,000,000,000 (our money), what makes you think they'll listen to us for anything about keeping the Fair Tax from becoming yet another taxing and entitlement monstrosity?

My Solution

What's my solution to this mess?  Here it is: A five year emergency moratorium on all but constitutionally authorized federal activity.  Congress can meet to play backgammon during legislative sessions and that's it (to fulfill US Constitution Article 1, Section 4, Clause 2).  Then, after five years, we'll see how much better off we are and start officially removing the stinking rotting carcass we call the Federal Government.

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Calculation and Socialism

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Posted by Anthony Martin on 4 November 2008 – 1:34 pm
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Ludwig von Mises is one of my new heroes, but I realize he is just espousing a theory against socialism based on his own capitalistic presuppositions on the subject.  Yet it's so simple, it must be true.  This lecture will help anyone trying to understand why socialism can't work on the macroeconomic scale.

So often, those of us in favor of the free market just espouse the mantra that socialism doesn't work without an understanding of why.  As one of my father's collage professors would say, "It really isn't enough to know how, one must also know why."  When you know why, your understanding becomes more principled.  It's really simple to understand why sound money is also vital to the free market by listening to this lecture.

Calculation And Socialism by Joseph T. Salerno  
Download now or listen on posterous
12_Salerno.mp3 (13510 KB)

Source: Mises Institute Media , recorded 29 July 2008 at the Ludwig von Mises Institute; Auburn, Alabama.

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Tax/Lend Insanity

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Posted by Anthony Martin on 29 October 2008 – 6:29 am
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Albert Einstein probably said:
 

The definition of insanity is doing the same thing over and over again and expecting different results.

 
First, I'd like to introduce the underpants gnomes:

As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy.  It is in a strengthened institution's best financial interest to increase lending once it has received government funding.

- Source: White House tells banks to stop hoarding money

Got that?  Here are the steps:

  1. Government "supports" banks by taking $2,000 from every man, woman, and child in America.
  2. Government urges banks to increase lending to "support" every man, woman, and child in America by lending the money they just taxed back to them.
  3. Profit!!

Here's an analogy from the underpants gnomes when they only planned corporations and before they figured out what step 2 was:

By the time they figured out step 2, the underpants gnomes had moved on to planning governments instead of just planning corporations.

Somehow, we can tax and lend ourselves to prosperity.  Does anyone else still think this is a good idea?  I'd really like to know!

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Bush's Bogus Bailout Blunder

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Posted by Anthony Martin on 11 October 2008 – 9:19 pm
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After the bailout was passed (October 3rd), the Dow fell 400 points by the end of the day. Now, it has fallen by greater than 2000 points since the bailout was passed. By my calculations, the Dow has lost at least $1.4 trillion, and they haven't even spent the $700 billion yet.

Since cheap credit and over stimulation caused this financial meltdown, then obviously we need more cheap credit and more stimulation to fix it. Even after the bill was passed, articles were popping up that hinted it wasn't enough. Well no wonder.

Yet our bailout money will be recouped, at least? We got it straight from the horses mouth when President Bush said (emphasis mine):

As the banking sector and the market for troubled assets recover, the government will begin to recoup some of the taxpayers' funds invested in the recovery. In other words, some of these assets that were taken are at a depressed value. Home ownership -- homeowners -- home prices are down, the value of the assets are down. Eventually, we expect that much, if not all, of the tax dollars will be recouped.

Source: White House

So the President flat out disagrees with Jim Rogers (skip to time index 5:19, if you don't have time to watch the whole thing):

Which person do you think is more well informed on the subject? Jim Rogers, who has been right more often than the Fed Chairman himself, or all the President's men?

Another odd statement from the President:

Every American knows the burden of taxes. During the tough economic time, that burden falls especially hard. A lot of people are wondering whether or not their taxes are going to go up. One of the interesting things about the package I signed is that it does prevent the Alternative Minimum Tax from kicking in, which would have cost 26 million Americans $2,200 apiece. During this economic uncertainty, we don't need to be raising taxes.

Source: White House

The President did not need this bill to prevent the Alternative Minimum Tax from kicking in. The President has distorted the truth again. In fact, it was illegal for the Senate to attach this tax revision to a previous bill in this manner. Illegal, kind-of like when the House authorized the President to go to war with Iraq. We have checks and balances for a reason. If not, why have them? The rule of law means nothing to our illustrious government.

By the way, if you don't know what the Alternative Minimum Tax is, and you are in favor of the Fair Tax, shame on you! That's one of your platforms!

I wish I could snap my fingers and make what happened stop. But that's not the way it works. And I told you, I made a decision that is really opposite of my philosophy. I basically believe if people make bad decisions in the marketplace, they ought to fail. The problem is, in this case, failure would have cost you. What appeared to be something that might have been isolated in New York, would have cost you the job. And that was unacceptable to me.

Source: White House

Seems like the same dilemma Andrew Jackson faced during the banking crisis of his day. Jackson made the right choice, Bush made the wrong choice. Bush totally blundered. How do I know? Because Bush ignored the Constitution. He ignored his oath to protect life, liberty, and private property. More people will suffer from his decision than if he had pulled the plug on the economy himself.

Now see if you can decode this "question" from one of the people who attended:

I mean, just to give you some quick numbers. We're a $3.5 million dollar company, and we rely on a $500,000 home credit line to support our business, which means we have to roll this money over six, seven times a year. That's how much we need this credit. And now the -- we've got a notice or a letter from a bank -- or from the bank that runs our credit line -- that says home values are going down a little bit, and if you pay down your principle a little, we're not going to give you quite as much back. And so our strategy is don't pay it down, to keep it maxed out all the time.

... to continue ...

And so we're comfortable now, and we're able to take care of our business by doing this. But it's so important for you to emphasize the need that small businesses have for the use of that credit. And I thank you so much. You're really working hard --

Bush's response:

Thanks for hanging in there.

That is totally sick. This business is operating in a perpetual half-million-dollar hole, and the president just thanks him for hanging in there? I feel bad for people who are in this mess, but even if it was me, I wouldn't expect the government to bail out my bad decisions. Up until now, we seem to have thought it was perfectly normal for a giant percentage of businesses to be in debt. This is why easy credit is bad. It distorts our thinking and the free market.

By the way, this entire discussion smacks of being completely scripted from beginning to end, especially the Q-and-"A". How's that for bogus? All to sell us on a bill that was passed using fraud, bribery, and threats of violence.

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Den Of Vipers

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Posted by Anthony Martin on 27 September 2008 – 5:02 pm
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President Andrew Jackson said in 1836, during the banking crisis of his day:

Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.

There are a lot of similarities in this small paragraph with our current situation.  Jackson doesn't blame speculation alone, but they do today.  He identifies the privatized profits and socialized losses.  If only Bush could have taken this approach with the Federal Reserve System.  Instead, he is a willing accomplice.  Jackson did something that was unpopular to the ten thousand families, but it was the moral thing to do.  He got rid of the central bank of his day, we must do the same in ours.

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