Feb 15

Is work a four letter word?

Somehow, over time work seems to have become a nasty, four-letter word. Why?

If you were stranded on a desert island with a dozen people, you would all be better off if you worked together to survive. Skills would vary among you and so you would take advantage of specialization. Some individuals would be better at others at leadership and would help manage and organize tasks. Is there anything at all wrong with this?

So, what complaints do we commonly hear about work, the four letter word?

I hate my boss

In the desert island example above, would some “hate” the leader in the group? If so, what would the reason be? I suspect reasons will vary, but isn’t the most likely reason jealousy? If not, perhaps it’s just that two individuals don’t get along. This happens. But it could happen between peers also. But how is any of this a condemnation of work itself?

 

I’m not paid enough

What is “enough” and how should it be decided? This is a question that those clamoring for higher pay have no answer to. A given wage is just the price of labor just like the price of anything else. As long as humans are free to act voluntarily, the market does the job of setting prices just fine. How can it be argued otherwise when all actions are voluntary? I suspect the most common argument is that all behavior isn’t exactly voluntary. To this, I think there is some truth. For example, I may have retirement money locked up in a 401K at Bank of America. I may also have those funds invested in stocks and bonds. However, that may not be my preference. But we’ve all been steered that way by government policy, including the tax savings and low interest rates set by the federal reserve. I would love to see some competition in this space, but this is extremely difficult due to regulations. But is this a condemnation of the markets ability to set a wage price? It’s certainly not the market that makes it illegal for you to work below a minimum wage even if you wanted to.

 

Why should I have to work at all

Think this sounds silly? Well, apparently the White House thinks this is one way to deal with unemployment. Here we have Jay Carney stating:

Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families. At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams.

 

Karl Marx would be so proud. But how would this work out on our desert island? What if some individuals decided to just stop working to pursue their dreams? Does this problem somehow go away when there are millions of individuals instead of 12?

Many liberals and people in general state they have a right to certain things like health care. Sounds great! But if we spend a few moments thinking about it, what is the fallout of that statement? Various resources, including machines and people are required to provide health care. So isn’t this the same as saying you have the right to other peoples labor at no cost? Sounds like slavery to me (but with a smile and no physical abuse).

Work is, simply, people serving people. We work together to better our lives overall. But we have to realize that we all also have a natural want for leisure. And we also have a natural tendency toward human emotions that aren’t necessarily positive in nature, such as jealousy. If our desire is to improve our lives, it is voluntary behavior we should desire. We should desire to eliminate monopolies and coercion.

Jan 18

“Good Government” to the rescue!

Jeffrey Cavanaugh over at Mint Press news has some things to say about the Charleston, W. Va Chemical spill. Read the post and I think what you’ll find is that he is more interested in saying something about his progressive agenda and love of the government. The chem spill is just a convenient carrier of his bias Jeffrey puts on his cartoon-glasses and takes a “hard” look at the evidence (smirk, giggle).

As is my M.O., let’s take a harder look. First lets dig out the obvious bias:

The facility also, conveniently, sits just upriver of Charleston’s water-treatment plant, the largest in the Eastern United States. Instantly, via the magic of stupid industrial siting, 300,000 people found themselves without safe water.

 

Conveniently? So snarky! Oh my! How often do you see someone calling themselves a journalist using the word “stupid”? Do you suppose Cavanaugh has any knowledge of the history of this site development and why it was put there? He can’t even take the time to tell us that it is specifically the Kanawha Valley Treatment facility that was affected. I could continue trashing Cavanaugh’s writing, but that would be too easy. Instead I think it would be productive to do what Cavanaugh couldn’t bother to take the time to do – investigate. Keep in mind, my “investigation” will take me no more than an hour of digging. I fully admit it will not be much. But compared to Cavanaugh?

First, let’s take a look at the Kanawha Valley Treatment facility. The first thing Cavanaugh seems to misunderstand is that both water treatment and coal treatment facilities are necessarily built near rivers. I strongly suspect that if we viewed a map of a typical city, you would find that they are often built on or near rivers and that there are often many water treatment facilities and industrial sites nearby. Cavanaugh writes that these two were “stupidly” built near each other. He’s clueless. He may be interested to know that the Freedom chemical facility has been their since the 1930′s. The Kanawha water facility was built in 1972 and keep in mind, these facilities are always approved by government entities. So where does the blame for this “stupidity” fall?

Another interesting item regarding the Kanawha facility is it’s size. You can see in this map that the facility covers quite a large area. Even Cavanaugh mentions that it’s the largest plant not the east coast. But does it make sense to develop water treatment facilities this way? More typically, municipalities will build many small facilities. It doesn’t take a lot of thought to discover why this is a better arrangement. You don’t want a single point of failure for critical resources. So is there a reason for this? I found the following article that dug deeper into the Kanawha story. In this case, it appears we have us some good ol’ fashioned crony capitalism. I wonder why Gov. Tomblin seems to have taken sides with the coal industry here? What this clearly shows, and even a modest modicum of rational thinking will discover, is that politicians and capitalists are BOTH human beings. Cavanaugh doesn’t seem to understand this. To him, government is like a nice, warm blanky that helps him to sleep better at night. Well, sorry Jeffrey. It’s time to put on your big boy pants and wake up to reality.

It’s this “warm blanky” problem that won’t allow Cavanaugh to ever see the truth here. It’s too painful and Jeffrey might have to start sucking his thumb again. The truth is that, over time, tort reform has been drastically changed in the United States and crony capitalism is primarily responsible for this. If anyone from Charleston had been harmed by this chemical spill, do you think they’d have any luck suing for damages against either American Water or Freedom Industries? If not, why not? If you want to know the truth, or at least balance out the bias that is drilled into you endlessly, here is a good piece that summarizes the problem. The truth is that the history of tort reform in the United States has resulted in the erosion of private property rights. A citizen of Charleston will have problems suing over this chemical spill because, over the years, large business and government have gotten together and eroded our rights. Unlike Cavanaugh, most intelligent people understand that politicians have the same motivations as capitalists. When there is collusion between them, good things come to them: politicians fill their coffers with election money and big business protects their own interests, primarily from competition.

So it’s actually pretty funny that Cavanaugh has this to say in the end:

To do that, though, we would have to grant a degree of legitimate authority to government regulators and trust them, within limits, to serve as watchdogs of the public good. Indeed, once upon a time in America, we did exactly that. That was a long time ago, however.

It is comical that someone actually believes this. Anyone with the tiniest bit of knowledge of American history knows the above statement is lunacy. There has been nothing but an erosion of individual liberty in America since it’s original founding. Add to that, the size of government has done nothing but grow steadily, as you can clearly see here. Water treatment and energy, including coal, is already highly regulated. At the same time that regulation is always tilted in favor of large businesses over small. And it is invariably through small businesses and competition that we will see the most improvement in our standard of living.

As for Cavanaugh, he wouldn’t know the difference between a true entrepreneur and a crony capitalist if it hit him upside the head. Perhaps Cavanaugh should be asking the question “Why has the Freedom Industries sight not been inspected by regulators since 1991?”. You know, the regulators that help him sleep better at night. Let me provide the stock, progressive answer: “Regulators don’t have enough power and/or their budget is too small!”. Of course, that’s always the answer. And when will they have enough power and budget? I suppose the answer is when Government has taken over … completely. There’s only one small problem with that answer. A quick look at history, whether it be Russia, Italy, Germany, China or North Korea shows that has not worked.

Jan 12

Alaska Permanent Fund

I’m writing this as an off-shoot to my recent post on the return of Karl Marx at Rolling Stone magazine. I was so intrigued by this example of socialist corporatism, I decided it needed a separate post.

In a nutshell, the Alaska Permanent Fund siphons off oil (and other) profits and pays about 900$/year to 92% of Alaska residents. That’s the kind of politics that looks like a win-win all around, no? Politicians look good and get elected and everyone gets some spending money! This is about as far as the average voter (or Jesse A. Myerson) looks into these things. Let’s take a closer look:

The APFC, or Alaska Permanent Fund Corporation, is a state owned business that basically taxes “big oil” and uses it to fund investments. There is a 6 member board, 4 paid consultants and a 35 member staff. I took a look at their financial statement for June, 2013 which you can find here. The APFC manages about $45 billion in assets. However, their income statement shows that their annual operating expense was about $100 million. Wow! I’m trying to work the math on this and it’s a little troubling for me. This corporation basically administers a fund and needs to house and pay a staff of 35 plus 4 consultants. Where is $100 million dollars going to? They don’t break it down so I have no idea. Add to that the fact that you can’t find out how much the board or consultants is paid, and this frankly, smells bad.

So, what is the result of this corporatism? A whopping 900$ a year paid to the citizenry.

But it gets worse. The APFC does not even administer the payouts! That is left to another bureaucracy: introducing the PFDD or Permanent Fund Dividend Division. As near as I can tell, the APFC is the corporation managing the investments while the PFDD pays out the dividends. Here is the PDFF’s annual report. A few interesting components of this. First, despite the wikipedia article making the claim that most of the payout from this fund go toward the public dividend payout, you can see clearly in this annual report that over $30 million dollars went to public assistant and health care for the department of corrections. In addition, the PFDD spent over $8 million in administration. In this annual report the data has been sliced and diced a hundred different ways. You can find out number of applicants by zip code, birth state, gender, most common first name (really, no joke),  age ranges. You can find out how many applicants filed online or by paper, how many are in collections (improper payments), garnishments due to owing the government fines for various reasons, and on and on. You can even find the names of every single applicant! (weird) Well worth the $8 million right?!

But one thing you won’t find out, ever, is how much the people running this monstrosity make.

 

Jan 12

Karl Marx, alive and kicking at Rolling Stone

An editorial over at Rolling Stone by one Jesse A. Myerson has once again tried to resurrect the ghost of Karl Marx. It could only be some wicked combination of desperation, ignorance and opportunism that could lead to such a piece. The proof that Marx was wrong is all around us. But let’s go thru Myerson’s five “fixes” for what ails us:

1. Guaranteed Work for Everybody

Unemployment blows. The easiest and most direct solution is for the government to guarantee that everyone who wants to contribute productively to society is able to earn a decent living in the public sector. There are millions of people who want to work, and there’s tons of work that needs doing – it’s a no-brainer. And this idea isn’t as radical as it might sound: It’s similar to what the federal Works Progress Administration made possible during Roosevelt’s New Deal.

 

This is a bit like a child critiquing Steven Hawking’s string theory using models built with popsicle sticks. There’s profound oversimplification and ignorance in the above words. First, Myerson appears to be ignorant of the fact that there are three million jobs open in the private sector right now. Second, regarding these created jobs, It seems clear that Myerson does not understand or care whether they are filling needs that people actually desire. In the real world, businesses have to prove they are providing a service that people desire. This is done by the profit & loss test. If an entrepreneur sells a product or service for more than the input costs, that entrepreneur has proven to have added value to society. Myerson, like Roosevelt with the New Deal, would simply ignore that and assume a bureaucrat can make that decision. Dig a hole and fill it up or, as Paul Krugman has suggested, perhaps an alien invasion threat  or more 9/11 like damage would do the trick. Regarding Roosevelt and the New Deal, a full on critique in this space is not possible. I would only encourage everyone to read history, study economics and decide for yourselves. My own conclusions are that Roosevelt was a myth. A grand figure full of wonderful rhetoric who inadvertently extended the great depression and prolonged the suffering of millions. I will only point out the most obvious and egregious flaw in Roosevelt’s programs: that he restricted the production of goods (including broad affects on farm production) at a time when people were struggling to find food to eat. For further reading on this, I would suggest this, this and this. More from Myerson:

 

Imagine a world where people could contribute the skills that inspire them – teaching, tutoring, urban farming, cleaning up the environment, painting murals – rather than telemarketing or whatever other stupid tasks bosses need done to supplement their millions. Sounds nice, doesn’t it?

It’s really incredibly ignorant to think that an economy can function by simply creating tens of millions of public jobs that “inspire”. How would this work? Would those millions fill out a form indicating what job they want, then a bureaucrat would somehow create that job? An economy simply cannot work this way. Teaching is a skill. There are open teaching jobs TODAY. Those on unemployment likely do not have that skill or are unwilling to fill that position. Urban farming: if this is viable, why doesn’t it happen now? Does it really make sense to try to farm on property that costs ten times as much as farm land? Isn’t the fact that our current economy hasn’t created these “inspirational” jobs proof that no one wants the outputs from those jobs? In the end, this would all come down to theft. The government would have to take from the productive and give to the unproductive.

2. Social Security for All

But let’s think even bigger. Because as much as unemployment blows, so do jobs. What if people didn’t have to work to survive?

I think we are getting to the heart of what Myerson is after now. Why should I have to work? Other’s are producing so much, I deserve a life of leisure. Myerson will have none of either unemployment OR employment. What Myerson fails to understand is that leisure is a form of consumption and leisure is desired by all. I’m truly sorry Mr. Myerson, but the world is not yet totally run autonomously by computers and robots. How would Myerson choose who gets to live this life of leisure? This second point from Myerson is quite frankly a joke. It really makes me wonder whether this post wasn’t written be a supporter of laissez faire capitalism to make socialists look bad.

 

3. Take Back The Land

Ever noticed how much landlords blow? They don’t really do anything to earn their money.

Myerson is off the deep end again. I know landlords personally. You know what blows, Mr. Myerson? Being a landlord. Try it once, you ignorant fool. (It’s especially fun when the government implements rent control which essentially destroys the value of the buildings).

 

4. Make Everything Owned by Everybody

Hoarders blow. Take, for instance, the infamous one percent, whose ownership of the capital stock of this country leads to such horrific inequality.

Mr. Myerson fails to understand a basic concept here. It is a complete an utter cartoonish fallacy that all the “capital stock” is owned by the one percent. The actual number is 36% as you can see here. Myerson also fails to understand that “hoarding” is basically a fallacy. I guess his vision is of rich people with safes filled with gold bars or something. Actually, rich people invest in capital that produces jobs. The exception to this is during times of uncertainty. You know, like now, in the aftermath of the destruction produced by government regulation, Fannie Mae, the federal reserve and corporatism).

What Myerson is suggesting here is that the government buys all the capital stock…. just like that…. just buy it. Simple. In fact, he says, it’s already being done in Alaska! Here Myerson references the Alaska Permanent Fund which I loved so much (sarc) I had to write another post about it! What I guess Myerson doesn’t understand is that the profits that payout the dividends for this fund come from investments in the private sector. You know, the one Myerson wants to eliminate.

 

5. A Public Bank in Every State

You know what else really blows? Wall Street. The whole point of a finance sector is supposed to be collecting the surplus that the whole economy has worked to produce, and channeling that surplus wealth toward its most socially valuable uses. It is difficult to overstate how completely awful our finance sector has been at accomplishing that basic goal. Let’s try to change that by allowing state governments into the banking game.

 

I barely know where to begin here. First of all, Myerson, in one fell swoop, has apparently made the claim that Wall Street IS banking, period. So I guess the credit union I belong to that gave me that car loan is made up of greedy “Wall Street” people. My guess is Myerson doesn’t have the faintest understanding of finance at all and certainly does not understand the difference between real banking and crony capitalist banking. In fact, Myerson seems to have chosen to skip over the real issue completely. I agree with him that the purpose of banking is to “collect the surplus … and channel it to valuable uses”. But is that what banking is today? NO IT IS NOT! The federal reserve has destroyed that by lowering interest artificially to the point where nobody is interested in saving. In other words, thanks to the Fed, the connection between surplus/saving and production has been COMPLETELY severed. And Myerson is going to solve this problem with more socialism. Sure, that will work.

Socialism can not work, period. The empirical evidence is all around us. China has become an economic powerhouse because they realized this decades ago and made adjustments. North Korea? Not so much. It’s really quite disheartening that Rolling Stone published this trash. It’s even more worrying that the public will “debate” this type of writing and most of the population will be on Myerson’s side. Why? The reason is actually pretty simple. It’s a combination of jealousy (over the financial success of others) and self preservation. Well, that and some good old-fashioned public school brain-washing (paid for in taxes, by the washed, no less!)

Dec 29

Hamilton gets it wrong, again

Over at Brietbart, a writer known as Hamilton has penned a piece that, admittedly, Hamilton himself would likely be proud of. Unfortunately that means it, like Hamilton, it is littered with economic illiteracy and flawed foreign policy ideas. It is also filled with scare tactic rhetoric expected from those supporting big, centralized government policies.

Hamiltons thinking here is typical of the cartoonish lens many see the world through. Indeed, it is a feature of our existence to “get thru the day” via these oversimplifications. After a read thru the following list of egocentric tendencies and I think most would have to admit we all fall victim to this. The question is not whether this occurs, but to what extent.

So where does this Hamilton’s post fall along the continuum from ignorant to enlightened here?

Let’s start with this:

plenty of American conflicts–including the War of 1812, the Spanish-American War, World War One, World War Two, and Vietnam–started with naval incidents.  So suppose we did end up in a war with China–maybe not today, but in five or 10 years. Who would win?

Think about what is written here. Like the remainder of the post, it never seems to question whether we should be considering war with China. It also does not consider that it is OUR warships that are within 200 miles of THEIR country, not the other way around. Hamilton seems only interested in who would “win” this war. But it is interesting that the more important questions are not even discussed.

Speaking of winning, it is also interesting that our view of who “wins” a war is itself narrow and oversimplified. It has been that way thru out history. Like kids in a bar fight, we claim that the guy on the floor bleeding is the loser. But, is this true? If you followed the history of all bar fights and tracked the implications of said fights, their affect on friendships and lives on an ongoing basis, who are winners and losers? Again, we oversimplify. So, lets take look at Hamilton’s examples:

War of 1812

First of all, the war of 1812 was completely unnecessary. It was an attempt to gain territory by force. Funny how this shows up as an example here in a post whose title is: IF YOU THINK BEING RULED BY OBAMA IS BAD, TRY BEING RULED BY THE CHINESE. Who is trying to do the ruling here?

Spanish American War

Again, I have to point out the irony of using an American war of conquest as an example in an article that supports our supposedly “defensive” actions in the South China sea. This war was claimed to have been fought in the name of the freedom of Cubans, but, somehow ended up in the annexation of Guam, the Marianas, and the Philippines. Hmmm.

Perhaps the root of the problem here is our belief that, surely, the Chinese are just as we are. They too, given a chance (and financial and military strength), would try to dominate the earth (as we have). Therefore, we must be the ones doing the ass-kicking. For surely, if not us, we will have our asses handed to us. But this reasoning is flawed. It fails to distinguish between aggression and defense. I would again remind readers of the location of the ships involved in the near miss in the South China sea.

But who is to say which would be a better world? Who are we to say that there is something inherently magical and benevolent about Americans that indicates we are the designated ones? Indeed, it is this idea of American Exceptionalism that leads us to these flawed policies, while at the same time justifies our territorial aggression.

But what conclusions does Hamilton come to as a resolution to all of this?…

More manufacturing in the United States

The flaw here is thinking that you can somehow push a button or turn a knob and more manufacturing will magically appear. The truth is that the free market determines where best to allocate resources. Any sort of artificial intervention will only deter from that happening. Neither Hamilton, or any other central planner, can determine on paper where best to allocate resources.

Better tax treatment for productive capital

Speaking of over simplification! Good grief, what does “better” mean? More taxes, less taxes? What is “productive” vs “non-productive” capital? The bottom line is that government intervention and high taxes are hurting us economically, and if you take a quick glance at government expenditures vs GDP, you might start to wonder if there is any end in sight. Since Hamilton here was unable to provide specifics, I will add my 2 cents. I would advocate the total separation of business and state – the abolishment of the commerce clause (or it’s return to it’s true meaning). The sole purpose of the federal government should be the defense of our nation and management and enforcement of certain legal frameworks. I see no reason why this “government spend to GDP” ratio could not be reduced to something more reasonable, perhaps 10-15%. This would imply NO TAXES on productive capital. Why on earth would we want to tax something that is at the heart of our own success?

More STEM education

Again, we’re a bit vague here aren’t we? How would Hamilton do this? To ask the question is to answer it. “Hamilton” would use the long arm of government and large, heavy boots to do this. There isn’t time or space here to get into all the negative affects that government has had on education over the last few decades. Suffice it to say, any government intervention with STEM, such as here, and here, is likely to have negative consequences just like common core and no-child-left-behind has. Perhaps kids are fully capable of making up their own minds regarding their career choices? Certainly more so than out-of-to-touch bureaucrats and wannabe Hamiltonian journalists.

I would wrap this up by proposing readers look at this question another way. Do the Chinese not have as much right to make the following statement:

IF YOU THINK BEING RULED BY Xi Jinping IS BAD, TRY BEING RULED BY THE AMERICANS

Dec 15

Central Planning is Doomed to Failure

President Obama is a leader, in a long line of such leaders, who have fallen into the trap of believing that central planning is the best way to solve problems. Marx and Lenin favored central planning while Lenin did not. However, these men were strong on theory and weak on delivery. In the end, all forms of socialism have been centrally planned.  However, despite what libertarians and conservatives may think of socialist leaders, these are men who possessed forms of greatness. I see them as proof of the fragility of the human mind. In the modern world, our technological achievements deceive us into believing we possess greatness. But man is still evolving regarding our understanding of societies and economics. In fact, in some ways we have devolved. Ancient Greeks discovered the idea of philosophy, and in doing so, applied the concepts religiously. Today, for the most part, those who truly seek the truth are all but unknown. Instead we have gatekeepers or intellectuals as Rothbard called them. Their ideas are largely driven by combinations of guilt, fear and greed.

But let’s look specifically at central planning and why it is doomed to failure. To do that, we should compare this to a non-centrally planned economy. In free markets, you have many independently working organizations. There are over 18 million businesses in the United States with 85% of them having less than 10 employees. Half of these businesses will fail in the first four years. Perhaps the problem is that we are confused by the negative term failure here, but this constant turnover, experimentation and competition is no doubt a good thing.

Now, imagine that, instead of the above, we decide we will centrally plan something like health care. Does it really make sense to “roll the dice” this way and hope that we succeed this time? The idea is ridiculous on the face of it.

But it gets worse. What kind of person, in general, signs up for such a centrally planned mission? I work in information technology. Among that group, working for the government is considered a long standing joke. You would only do it if you had to. The result is the talent pool is problematic. This is what happened to the healthcare.gov web site. The best and brightest will want nothing to do with large, bureaucrat projects like this.

Because of these problems, central planning is doomed to failure. It can’t work, never has worked and never will.

Dec 07

Bitcoin as Money

There’s a pretty good debate raging between Paul Rosenberg and Gary North over whether bitcoin is (or can be) money. Paul has written here and here. For Gary, this seems to have become a bit of an obsession, with posts here, here, here, here and here. I would like to point out a few things that have been overlooked in this debate.

First of all, Neither Gary or Paul gets to decide whether bitcoin will be money. Only the users of bitcoin, all of them, can do that. I think both know this, but it needs to be pointed out. What is really happening here is that Paul (and many other libertarians) very much hope that bitcoin will be money. This is because they have a strong vested interest in destroying the fiat dollar. I think this bias has clouded their thinking somewhat. Gary on the other hand, is a scholar and holds to his interpretation of Austrian economics to the end. I commend Gary for this, and he may be correct. Or he may not.

Gary has an interesting writing style. I personally like it. But, it has a tendency to wander and in doing so create straw man opportunities. Paul takes full advantage of this. However, I think it’s pretty clear that Gary’s main argument against bitcoin is Mengers regression theorem. Robert Murphy does a great job of explaining Menger’s position in that post, and it’s worth a read. As a side note, I suspect that if more people understood Menger here, they would be much less likely to accept fiat currency. However, the real question for bitcoin is whether it meets Menger’s conditions. (I suppose you could also argue that Menger was wrong, but I’m not going there). That involves two points of discussion:

First, how does bitcoin compare to other forms of money in it’s salability. This term reflects how easy it is to sell something. For example, a multi-million dollar house or a used space shuttle is very hard to sell. However fresh food is easy to sell. Menger argues that it is this problem that created the need for Gold and other commodities as money. There are a few things that affect bitcoin’s salability:

  1. It takes several minutes to confirm a transaction. This can be a problem for merchants. I suspect this could be one reason for bitcoin’s downfall. However, new crypto currencies will likely solve this problem.
  2. Government regulation is evolving and fraud controls are not really in place. As these things come into play more, the price of transactions will go up. Bitcoin advocates like to believe that these things will not be necessary because they are willing to accept bitcoins current ecosystem. However, most people are not.
  3. Many people may not be willing to accept that their money is just sitting “somewhere”, at least not in large quantities. But, time and technology will likely mitigate this issue.

However, at the moment, bitcoin is quite salable. The web sites supporting bitcoin are pretty good. It can be difficult to convert between bitcoin and fiat currencies. But is this an argument against bitcoin? No, it is really more of a reflection of problems with existing payment systems.

Note: I predict that bitcoin will change payment as we know it regardless of whether it succeeds or not. We have grown accustomed to the archaic nature of current payment systems. But bitcoin has exposed their flaws. People will not want to loose those advantages once they have them. In doing so, current payment systems will adapt some of bitcoin’s advantages, which will then undermine bitcoin to an extent (this, adding to the debate!)

Another issue for bitcoin is the low number of merchants that accept it. However, the trend toward acceptance is growing rapidly, so we can’t really state this as an argument against bitcoin. After all, we are trying to predict the future, not make a statement about what bitcoin is now . 

Second, did bitcoin come into existence in a way that satisfies Menger’s discussion. On this point, at least at the moment, I have to side with Gary North. Try to imagine you are a farmer or merchant 1000 years ago. Imagine dealing with the difficulty of trade. Over time, as gold is found and used, most likely initially for decoration, you find that it helps tremendously with the issue of salability described by Menger. But how much gold do you trade for, say, a horse? There are two factors in deciding this. One, how rare is gold. In other words, a money commodity must have rarity. Two, how much does one desire gold in and of itself compared to the horse. So gold must have some intrinsic value.

Bitcoin itself does have a limited supply, so it does meet this criteria. However, there is a slight twist on this. There are actually dozens of alternative cryptocurrencies. They can be created very easily, perhaps too easily. Granted, you can make an analogy that their are many metals that could become money. However, I think it’s a question of how easy it is to create this commodity. In some ways, it is difficult, in the sense it is hard to get a community to accept a new cryptocurrency. In the end, I don’t have the answer. This is a question that millions of people will decide as a community.

Note: I think one of the really cool things about bitcoin is that it does show how spontaneous order can come about. I think on this point Gary has erred. Yes, there are issues, but I’m amazed at how the bitcoin community has reacted to this. It really is a story to behold and shows that libertarians are correct that centralized, monopoly control is not necessary. Give bitcoin time, and many of the issues will be solved without government intervention.

But, int the end, lack of intrinsic value for bitcoin is a real problem and could be it’s downfall. Is there an analogy you can draw comparing a man trading a horse for gold? Can you imagine yourself “holding a bitcoin” and asking “Hmmm, do I value this more than a pair of shoes?”. I think to ask the question is to answer it. No, you can’t. This is why bitcoin is so volatile and will always be volatile. Rosenberg and other libertarians want to believe that people are using bitcoin for trade and not for speculation. But just look at a bitcoin chart, and I think you can see the truth. Bitcoin is speculation. In fact, it is pure gambling. This may change. But people will decide, not Gary or Paul.

Good luck bitcoin.

Dec 01

Are you qualified to have an informed opinion on the Health Care debate?

I see quite a few people out there with opinions about the ACA (aka Obamacare). I have my doubts whether most know much about the subject. So, I thought I’d provide a short list of things you should have some knowledge of before you write your next article or blog post or otherwise participate in the debate:

  1. Understand some basic economics. Learn about the supply and demand curve and how prices are set. Know the affect of artificially controlling supply, demand or prices.
  2. Understand the impact that lack of price transparency has on an industry.
  3. Learn the basic history of health care and health insurance, including the most important government regulations and their impact. This includes some basic knowledge of the economics of health care prior to health insurance and government regulation.
  4. Learn the basics of how health insurance works. Know the risk that both the insurer and insured takes and what an actuarial does.
  5. Understand who and what the AMA (American Medical Association) does and the impact they have on the economics of health care.
  6. Have a consistent philosophy of property rights.
  7. Learn the truth about the health care differences between various countries like the United States, Canada, France and the UK. This will take some work, as much of this information is propaganda, including anything coming out of the World Health Association.
  8. Compare and contrast health care services in regulated vs unregulated markets in the United States.
  9. Understand why providers often choose not to accept medicare patients

Once you’ve done that and can still support a Health Care system that is highly regulated at the Federal Government level, I would love to see your arguments. Really, give it a shot. I’ll wait.

 

Nov 28

Liberals Very Confused About Capitalism

Over at Salon, I came across a post titled Libertarians Very Confused About Capitalism which I thought I’d give a read. I was curious how the author came to the conclusion that libertarians should support redistribution. The article is pretty typical of the type of class warfare writing you find in the liberal media today. So, let’s take a closer look:

If one defines capitalism as a system designed by and for the interests of those who hold capital (what it is), capitalism is what the United States has today.

Not exactly. Mr. Davis wants us to believe that capitalism equals libertarianism. But the primary goal of libertarians is to eliminate coercion. That is, libertarians wish to allow people to engage in voluntary behavior including trade. If you asked Ron Paul what he would do if given a choice between a world without “capitalism” and a world without coercion, clearly Paul would choose the latter. Additionally, the above statement is nonsense from the outset. For example, I could make the same statement about North Korea. After all, the only difference is the capital is held by the state rather than the evil “private” individuals.

It is a system based not on principles of freedom and liberty and justice for all, but the accumulation of wealth for people called “capitalists.” It entails structuring an economy in such a way that natural resources are exploited for private gain and land is parceled off into mortgage-backed securities. It means rich people using their money to buy power and shape economic relations to their advantage, which makes them more money

Now that I’ve dismissed libertarianism from this discussion, let’s get to the authors real beef: capitalism. The primary problem with these type of statements is that they ignore the fact that free market capitalism has raised the world out of poverty. However, the author here makes it difficult to respond because he provides no details whatsoever and paints with such broad brush strokes. Is the concern of poverty within capitalist countries or is the concern over world poverty? If it’s within capitalist countries, has the author taken a look at what poverty looked like, say in Europe, prior to the industrial revolution? If it is a concern over world poverty, has the author considered that poverty in third world countries exists precisely because they do not have a form of free market capitalism? Very few serious economists today argue that capitalism is a bad thing. True, the author claims his main point is that we should have more redistribution. But, in reading this piece, it’s seems he is more interested in ranting against the rich than helping the poor or determining what the proper reforms are of our current model of Capitalism. I think that is clear in the following statement:

I am told this does not exist today, “the free market,” and I agree, but I suspect it doesn’t exist now – a capitalism based on rigid notions of private property but not systemic violence that manifests itself in a massive transfer of wealth to an already wealthy elite – for the same reason human babies aren’t born to alligators: because it’s impossible and goes against everything we know about our world.

I grew up poor and among both conservative and liberal family members. I had the same disdain for the rich, mistrust of management and “the boss” that many young people do. I did not come to understand and accept libertarianism easily. It took quite a lot of reading and thought. And, even today, I refuse to allow myself to become close minded about it. In other words, you won’t find me writing much about human babies being born to alligators.

The author has this one backward, and I believe history proves it. It is socialism that is an impossibility.  Ludwig von Mises an Austrian economist, wrote of the calculation problem in 1920 that is inherent in all socialist economies. And since then, Mises has been proven correct. You can see the results of this clearly in countries like North Korea and China. China is an especially interesting example since liberalization in the country has improved their economy situation in the last few decades. In fact, you can find many failed experiments of socialism thru out history, including early colonial settlements in America.

We know that money buys power, for instance. And we know that rich people are not typically concerned with sainthood when it comes to their pursuit of money. When enormous wealth is allowed to accumulate in the hands of a small fraction of the population, then, that minority can use that wealth to manipulate economic outcomes – and they don’t care if they violate every principle known to the Paul family. That is why some oppose this concentration of wealth no matter whether it comes from “good” or “bad” capitalism.

Rich people are not typically concerned with sainthood? It appears to me that the authors real agenda is showing here. Again and again he makes the same mistake: to lump people into broad categories. This should come as no surprise as progressives, and really politicians and other coercers in general, must do this to accomplish their goals. If you recognize the individual and wide variations you have in humanity, you lose the power to easily pass coercive legislation against these made up categories of people. It’s also pretty clear the author has a real problem with “the rich”. But “the rich” that I know started small businesses without the help of lobbyists. They are nothing like the kind of “evil” people this author imagines them to be.

But lets focus on the last sentence in the above quotation. It appears to me that the author is saying that, since some rich people are extremely rich and most likely unsaintly, that we must oppose concentrations of wealth in general. This is a non-sequitor. But it is a pretty common line of reasoning for socialists. Maybe it stems from those days in school when the teacher would punish the whole class until the perpetrator revealed himself. But in the grown up world, it makes little sense to paint with such broad strokes. The author seems to be saying “some rich people are bad, therefore I oppose all wealth”. Using this line of reasoning, I could oppose literally anything because bad people are everywhere. In addition, who would decide what concentrations or too much? And can we trust someone with this kind of power?

Libertarians need not agree that the accumulation of enormous sums of wealth is immoral and unhelpful when it comes to the preservation of freedom, even though it is.

I have to admit, I’m a bit lost with this statement. What is the connection between accumulation of wealth and the loss of freedom? Freedom is the lack of coercion. However, I suspect the authors definition is different. Most progressives definition of freedom includes positive rights which are essentially another way of saying they support redistribution. As a libertarian, I’m frankly not concerned with accumulation of wealth, per se. This misses the problem completely. The real problem runs a bit deeper than this shallow salon post. Instead we should have an open mind and ask important questions and seek answers;

  • Why is the wealth gap growing? 
  • Is poverty really getting worse and if so, why?
  • Have current income redistribution schemes improved things or made them worse?
  • Is there really difference between the power wielded by an elected official and power wielded by an elite rich? Can we really put more trust in one over the other?

 

As of 2012, the average CEO at a top American firm now makes 273 times as much as the average employee, up from a ratio of 20-1 in 1965. Few libertarians would say the market today is freer than the market then. So why don’t we hear anything about any grand, liberty-minded plans for the radical redistribution of wealth? When you change a system but keep the results of systemic injustice in place, you are not really changing anything. Who cares about “freedom” when the only difference between that and oppressive Big Government is that an absentee landlord now relies on a private security firm to kick you out of your home instead of the cops?

I believe one should look at this objectively and with a clear head. This is something that is difficult to do when your getting your “hate the rich” on like this Salon post. First, why has this occurred? Is it due to the free market, or is it crony capitalism? The author seems unconcerned and, in fact, I don’t think he cares a twit. This is class warfare pure and simple. To the author, there’s no need for economic analysis. It’s simple. The ratio was 20-1 and now it’s 273-1 so lets pass laws to make it 20-1 again. This is extremely naive and childish. The last sentence from the above is bordering on ridiculous. There is so much to unwind in that one statement, I don’t know where to begin. It’s pretty clear this author has no interest in the truth, since the answer is already predetermined: more redistribution! First of all, it was this progressives big government, along with the federal reserve and crony Wall Street firms that  was primarily responsible for the bubble in 2007 that resulted in much of the housing problems over the last 5 years. The author does not say why this person was kicked out of his house. He does not say why he is concerned that this was performed by a private security firm. However, I do think the author’s real agenda has peeked in again, as apparently he, given a choice between a society of freedom with private security firms and a society with tyranny and public police would choose the latter.

At this point, this post has gone on long enough. I see no point in commenting on the rest of this nonsense. If the author of this post would like to have a serious debate on this, I’d be happy to do that. I can be found on debate.org under the handle ax123man.

Nov 24

Al Qaeda in Yemen, Frontline, a Review

The great thing about being an independent blogger is that I can choose any topic I wish at any time. I have some good memories of PBS’s Frontline from the past, but had heard the program had become another propaganda tool. I actually hadn’t watched any of their documentaries in awhile, so I thought I’d take look. Al Qaeda in Yemen is a Frontline documentary from May 29, 2012. The following is an audio only timeline. I provide no context in the following comments. You will need to follow along with the video.

1:42 Watch this closely as they get stuck in the sand. It seems pretty clear this is fake, I assume for dramatic affect.

2:32 Help arrives! What the heck? Al Qaeda fighters? Looks more like a local farmers truck. Why no close up shot?

2:34 “The didn’t want their faces shown” (as they cover up the camera, which apparently has no off switch). And, yet here and thru out the rest of the film, their faces are shown.

2:52 Wait a minute. Look at both the interior and exterior of this truck. It’s the same vehicle as the one from the start of the film that was stuck in the sand! (see 0:35 & 0:59)

3:48 “Ghaith, we need you to be sure and tie Ansar al-Sharia to Al Qaeda, hmmm-kay?” Here, we have some footage for you to insert to prove it: see 3:51. See, we want to be sure Americans see the Middle East painted sort of like a batman comic book: good vs evil. From wikipedia:

On 4 October 2012, the United States State Department amended its list of Foreign Terrorist Organizations to designate Ansar al-Sharia in Yemen as an alias for Al-Qaeda in the Arabian Peninsula, rather than listing it as a separate organisation.

Notice the narrators words in this segment “Ghaith found they operated as one and the same”. Apparently the narrator is on board with the state department. But the truth is more complicated.

4:17 As if the previous information wasn’t enough, Ghaith has to make a direct, on camera statement: “We saw how clearly they identified themselves as Al Qaeda…”. Yes, we get it. The stage for the comic gook story has been set!

I have to admit, the rest of this documentary actually seemed pretty good, except for this statement at the very end:

Here Yemens future and America’s security is being defended by tribesman one shot at a time.

Yet, if you watch the documentary and listen closely and accept reality, a different picture emerges. This is simply a civil war, a fight for power and control. We have no business there and in fact, we are surely at more risk from these people due to our intervention. Why would those who’s real desire is for power, or sharia law in Yemen have any desire to harm people 7000 miles and an ocean away?