Growing Your Government Business

To offer a real life example of how growing government reduces liberty and freedom I will simply put forward the local police dept of Scott City. Now I do not know the numbers of our local police dept. budget. However, in the last couple of years, the police dept. has built a new building and jail. Now this new building is far bigger and houses more prisoners. It has rooms for conferences.

Now what is interesting is that the size of Scott City's population has not increased. So if this government business is to increase its revenue to go along with its increase in expenses, the answer is obvious. The police dept must find more bad guys. How do we find more bad guys? We just declare more things illegal and/or go start handing out fines. Speeding tickets is a great source of revenue. But when people start obeying the speed limit because they don't want a ticket, do you think a government business can stay in business that way? No, it must find more lawbreakers.

Not to worry though. Kansas will soon be on the war path against the smoker as can be read in House bill 2221. You see, we simply create a culture that calls some particular act evil based upon thin air, and ta da, you have a culture that is willing to call that act a crime punishable by confiscating your money. Now we have created a new revenue source for our local police department.

We have seen this in certain counties that have banned watering the lawn because of water shortages. Did the company (the government) do what all companies have to do? Nope! They charge you more for less, the very thing our Local NYTimes Editor says shouldn't be done.

The beauty about all of this is that it can't be stopped by the normal free market system. The local police Dept may just keep growing itself simply because there are no normal economic restraints to stop it. How does one stop an inner city school that is failing? Competition? From where if government has the monopoly?

It is time to start thinking Libertarian and what the role of government actually is.

Central Planners On All Sides

In the Local NYTimes Scott City Newspaper, the local editor wrote about his opinion of the deficit issues.

The CCB would reduce government spending to levels not seen since 1966. Can you imagine living on the same income you had 45 years ago? 

The GOP loves it because it sounds good on paper. Government spending is being reduced by an unprecedented scale. Our deficit woes will disappear. Life couldn’t be better . . . except for those who must live with the consequences.

And of course what would those consequences be? Don't worry, he'll toilet to you every cliche and euphemism he is able to muster while assuming the company is not losing customers already. Nevermind the fact we are spending Trillions of Dollars we don't have. I wonder if his business has a printing press. He runs a Newspaper after all. But in this particular article he argues from the hypocrisy of the Political Right. How does this bolster his position? I have no idea. But here is an example of his argument.

Imagine, as an employee, if your company was to make the following offer.

The company is experiencing major financial issues and in order to bring costs under control, all employees will have to take a 25 percent cut in wages and benefits. 

Company spending would be reduced to the same level it was in 1966. 

And . . . here’s the best part . . . the cost of goods shipped to the company’s largest customers would be reduced by 10 percent because, as everyone knows, the company would be out of business if it weren’t for these customers who create jobs because they are the ones buying the product you make.

Then he asks,

How many employees do you think would be working for that company the next day, or the next week? How long could that company remain in business?

I'm not certain where this private business owner learned economics, but if a company is about to go out of business unless it cut costs, I guess in his world being jobless would be better. But hey, remember, for Leftist Central Planners, a government unemployment check is even better than having a job which cut 25% of your pay. Perhaps the company going out of business would be even better?

I guess in his Newspaper business world, if all of a sudden he lost 50% of his subscribers, his first move would be to hire more people and give everyone a raise? But the Local NYTimes Editor writes a truth when he stated,

When asked what government programs would be cut in order to balance the budget, Republicans have chosen to be vague.

So as far as I can see, he only proves that both the Right and the Left are Central Planners.

It doesn’t take an engineer, or a PhD, to understand that when you sharply reduce the flow of income, without reducing costs, an economic disaster is inevitable.

He makes this argument at least twice in the editorial. He equates government as a typical business. He also assumes government has a right to your money to provide you with services that it has no right to offer. The problem is that when the business of government increases, liberty decreases. Personally, I would like to see the government have its own going out of business auction and liberty be restored. But when in the same paper it is noted that the same conservative state of Kansas is going to attempt to make Kansas a "smoke free state" (as seen in this house bill), then the only thing proved is his love for bigger government.

I'll offer in my next post what I mean by this conclusion.

Rush Doesn't Hear His Own Answer

As I was listening to Rush' show today, I heard him answer his own question again, and yet I still don;t think he heard it. Here is a quote from the program:

I know exactly how you feel.  This is what we expect to happen every time our side wins elections, and they don't do it, and so we say, why, and we end up ticked off. You and I know that we hold the cards here.  We know that Obama couldn't get elected if the election were today.  We don't need to act like losers.  So what's the answer to this?  The answer is the DC establishment wants higher taxes, they want more spending, they want bigger government, and they want it redistributed.  And the DC establishment consists of people who call themselves Republicans but aren't, people who call themselves Democrats but aren't.  They just call themselves that.  They are just statists, ruling class people, they just decide which party they're gonna belong to, all to keep us thinking in a certain way.  It's what all this illustrates. 

So the issue is not whether or not someone is a Democrat or a Republican. The issue is political power, either from the Democrat viewpoint or Republican viewpoint, but both are Central Planners. For example, this weeks' Weekly Standard's Newsletter states this about potential Republican nominee, Rick Perry:

Rick Perry may seem to be an attractive candidate, but he's unlikely to withstand scrutiny: The three-term governor of Texas is to the right of many Republican voters and has a record with just as many misses (the Trans-Texas Corridor, the HPV vaccine mandate) as hits.

Exactly! A Republican that acts like a Republican is somehow not a true Republican? Both parties dictate and force unjust laws upon the American people. It just depends on which side you are standing. One side wants to force the oxymoron of Gay Marriage, health care, what foods you must eat down everyone's throats. While the other side wants a police state to come in to your home and make certain you didn't purchase any of that unpasteurized milk or perhaps stop you from listening to any of that Devil's music and of course the modern Prohibition, the bogus drug war (of course there's much more one could list).

No one speaks about liberty from a consistent standpoint. Although I personally struggle with the use of the military in certain situations due to the fact by playing the isolationists we were forced into World Wars I & II, I see Ron Paul as the only one who is truly willing to deal with this issue in a fashion NO Republican will. Rush may not like Ron Paul due to the fact that he's a Libertarian, but doesn't Rush have Walter Williams on his program as a substitute?

You may watch Ron Paul on this video at Real Clear Politics for the answer to our economic problems.

A Call To Arms, Do Not Regret!

My brother, Jim Fisher, posted a comment on Facebook earlier today. Without his permission I am copy/pasting it here.

Aye, fight and you may die, run and you may live. At least a while. And dying in your beds many years from now, would you be willing to trade all the days, from this day to that, for one chance, just one chance, to tell our Enemies that they can take our lives, but they may never take OUR FREEDOM!

Watching one of my favorite movies last night "Braveheart", after Mels pre-battle speech I couldn't help think about what it was that is so appealing about these words. And my wife pointed it out. It appeals to one of our most important emotions. That is "Regret".

As we listen to our two parties debate our debt ceiling extension, each one of us knows down deep that they couldn't care less what the actual result is. So long as they come out appearing to be the winner in the voters eyes, that is all they care about, their next election.

The news is tallying points as if they are covering a sports game. While the actual Problem, that is this massive expansion of government and the tyranny being placed on the people has forced us into the worst economic collapse in US history. The Fed is stealing Trillions of dollars from us while they print money from thin air, and your children will be asking what we did while the fight for ideas was happening.

What regrets will you have? What will you tell them when they ask, "Why didn't you understand how we strayed so far from our constitution? Why didn't you know your founders history or how to understand real market economics and liberty?" Will you tell them you were busy watching TMZ or GLEE? Will you be filled with regret while sefdom has become a way of life for your children? Or will you fight now?

We are lucky enough that we can still do this without guns and weapons. We can fight and win on the battlefield of ideas. But you need to get into the fight. It's not about Republican or Democrat. It's about freedom and personal responsibility. Refuse to take anything from the government. Be willing to leave your social security and Medicare on the table and become accountable for yourself. You don't need the state. They are like a weight that we drag along with us. Learn about Libertarianism and about economics.

Do you think Thomas Jefferson preferred reading Adam Smith over relaxation and entertainment?

Blowhards Blow Money For Their Own Profit

So today CNN Money reports more of the Blowhards blowing harder. Now, not only are the politicians such President Obama commanding the private sector to do something, now GE Chairman and CEO Jeffrey Immelt blow the command as part of the President's Jobs Council.

"The people who are part of the business sector, the people in this room, have got to stop complaining about government and get some action underway," he told the group. "There's no excuse today for lack of leadership. The truth is we all need to be part of the solution."

So if you want to do electrical work or sell oranges on your front lawn but some "old" regulations such as being unionized or FDA bureaucrats are holding you back, well quit complaining and don't worry. They'll recommend that those regulations be fixed or something or whatever. SOON...Right?

The truth is, businesses don't exist or do things simply because some almighty government official says, "Go do something." Only Central Planners think this way.

He said the group has made a number of recommendations for changes in government policies that should be able to help job creation, such as the executive order announced Monday asking independent agencies to rid their books of old and outdated regulations.

So I guess we will see bureaucracies getting off their porn sites long enough to figure out which regulations to throw away. Shall I hold my breath? I mean, President Obama and his laser likeness on the economy will certainly get right to it.

It certainly is wonderful that the CEO of GE could share his brilliant insight on how to get businesses to get going. Simply command like the President and all will be well. Of course if we all got printed money, perhaps we would do well to?

Of course we are told that printing money helps the economy because we all buy more tooth paste and the tooth paste assembler gets a pay check. Just read here.

All has not been well at GE, however. Since 2002, the company has laid off around 20 percent of its work force in the U.S., while expanding its overseas operations. And the company’s financing arm, GE Capital, sustained massive losses and had to be bailed out by the federal government:

OOOps. Did all of that printed money save those jobs? I guess we need to ask those 20% that got laid off. As we know from studying the truth about the guy with the printing press. He only tells you he is helping the little guy when in fact printing money makes the rich richer, Central Bankers, politicians etc..

I think the Libertarians have got it right. This is "soft fascism". Command and control. Central Planning with Central Banking. While you stand in the welfare line (formerly known as the "bread lines" under Soviet Rule & our very own Great Depression).

Welcome to the New Normal Central Planners Planned For You

I just love this kind of stuff. Here you have a government that is purposely destroying the economy, and you have their Left leaning Media playing right along as if nothing could possibly be done about it. Yahoo News reports Geithner:

Geithner tells NBC's "Meet the Press" that it's a very tough economy. He says that for a lot of people "it's going to feel very hard, harder than anything they've experienced in their lifetime now, for a long time to come."

So now we are just to accept their false premise. Oh well, I guess the experts who broke the system can't fix it because of Evil President Bush. So let's print Trillions of dollars to save the economy. Yes. I said what I just said. These idiots really believe they saved the economy by printing Trillions of dollars that we don't have.

He says President Barack Obama rescued the United States from a second Great Depression and will keep working to strengthen the economy. But Geithner says will be some time before many people feel like the country is recovering.

So now we should slap ourselves for ever doubting our Savior, President Barrack Hussein Obama. Never mind the fact that it was Roosevelt's policies that kept the United States in the Great Depression for much longer than needed. Since Obama is following in the same foot steps, the Left-Wing Press must find ways to get the American public to accept their destruction.

We all know what the answer is. The question now remains before us. Will we vote for a Ron Paul, or will we continue on this madness? I've got the feeling that if Republicans don't get a move on, Tea Party candidates will soon be nominated under an official party.

Welcome to the new normal.

Theft of Inflation - Part 1

I have been studying Austrian economics for about the past year. I accomplish this in the 3 hours per day I spend in my car commuting back and forth to work. I listen to books and lectures from some brilliant economists and libertarians. The reason I decided to write this post is because through this period of learning I have come across what I now know to be one of leading root cause of our economic problems in America, if not the root cause. That is the serious damage the Fed is doing to the citizens.

Ben Bernanke, the current Fed Chairman is known in the political world as a leading economist. I feel it important to discuss Bernanke because like his predecessor Alan Greenspan, he has a serious misunderstanding of market economy and its cause and effects. Bernanke has grown his reputation from being a head economic professor at Princeton and his doctoral thesis that was written on the great depression. He spent considerable time studying the great depression and is considered one of the foremost experts on the economics of that era. The problem with this is that Bernanke just has it all wrong. Sounds easy to say I know. I am right and he’s wrong. What I have learned is that when it comes to studying economics, you must ask the epistemological question of economics itself. This is something that the Main stream economists like Ben do not address and hence why they can deem themselves experts and really know little to nothing of the truth of economics. Before you decide who you will learn economics from and what it can teach you, you must ask the epistemological question of how do we know what we know about economics.

This is something that Keynes (Keynes general theory is what most main stream economics is based on) never addresses. Since economics is a social science, this is extremely important. This is what brought me to study the Austrian prospective. The father of Austrian economics, Ludwig Von Mises answers these questions in his book “The epistemological problems of economics”. He stated that economics can not be studied in the same way that natural sciences can. Since you can not perform verification or falsification in economics as you can in natural sciences, economics must deductive. It is A Priori Science. Meaning we must come up with its truths through contemplation and cannot through empirical evidence. Intention, purpose, means, ends, satisfaction and dissatisfaction are key terms when studying economics, yet how do you put precise measurement on them? How does one empirically prove ones satisfaction?. This is the main reason why Main stream and Keynesian economists refute it. Yet they never deal with the epistemological questions of how applying math and equations to economics actually works. Austrians do not believe in using equations (for the most part) in economics for this reason. What equation would you use to help define what “Purpose” a man or group has? Or would you suppose that understanding a mans “purpose” is not important when studying economics? I am here to tell you that purpose is extremely important if you want to study economics.

Ludwig Von Mises used Praxeology. That is the study of “Human Action”. It is not psychology, and it is important to understand the difference. Psychology is the study of mental processes and how it affects behavior. Praxeology is the study of human action outright.

Mr. Bernanke doesn’t even know the term praxeology let alone believe you must understand human action to understand economics. Mises states that economics is one part of Praxeology. Before you accept Bernanke as an authority over economics, just listen to him speak and ask yourself if your listening to someone using scientific method when it comes to economics. Here are some goodies from his public performances:

"House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."

"Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."

"The Federal Reserve is not currently forecasting a recession."

"The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities."

(Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) "They will make it through the storm."

"We’ve been very, very clear that we will not allow inflation to rise above 2 percent."

(June 10, 2008) "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

"Not all information is beneficial."

(October 4, 2006) "If current trends continue, the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account."

This last quote is about as dumb as it comes. Lets all make our kids pay for us because after all,….they will be richer than us. In short, Mainstream economist have no frigging idea. When things are good, they always predict that things will stay good. If you look at the all recessions, the mainstreamers were saying it was the end of economic worry forever right up until it hits. Yet in 1928, one year before the great depression, Mises was warning about inflation and the boom and bust cycle coming to the end of its boom.

So back to my point. I apologize for the long preface to explain this point, but it is important. The number one reason for our economic down turn and most of them for the past 100 years is the Fed printing money. When the Fed prints money, they are literally stealing your money. Bernanke, Greespan and all the other chairman of the Fed have the power to do only one thing. That is print more money. That printed money does not come for free. It is directly proportional to the value being removed from circulation. (circulation means the physical money you and everyone else owns). So if there is a total of $100 in circulation and the Fed prints 10 new dollars, they have devalued your money by 10%. This is because they have printed money without any actual production of goods to back it. Printing money can and does have an effect of stimulation to the economy. One of the problems with stimulating the economy artificially this way is that it creates bubbles in particular industries which are almost impossible to predict. Many people blame the housing bubble on different things. Some blame the actual free market itself (which is beyond silly). Some blame the Community reinvestment Act of 1977 which was reinforced in the 1990’s. Some blame the Frank/Dodd and Dems from blocking regulation back in 2003 to regulate Fannie and Freddie. Quote from Frank in 2003

"The more people exaggerate a threat of safety and soundness [at Freddie Mac and Fannie Mae], the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially."

Although government was the reason the bubble was in the housing market and not some other market, but that is truly all irrelevant. If it was not the housing market, it would have been some industry. Why? Its because the money was there, and it should not have been. When the fed prints money, the end point where it gets into circulation is through the banks in the form of loans. The interest rate drops below its natural rate. The natural rate is where the amount of money available and the amount of people that want to borrow money balance each other to result in some interest rate charged by banks (it is the interest rate that makes the borrowers demand = the amount of money available to lend. If more people want to borrow than the bank has to loan the interest rate rises until peoples time preferences change enough that less people want to borrow. (at 5% interest perhaps 10 people want to borrow $100, at 10% interest, maybe only 6 of those 10 people are still interested). It also goes for the money side. If a bank has $100 to loan out they charge 10% interest and there will be exactly enough people that will borrow the full $100. If they have $200 to loan out, they will have to drop the interest rate to 7% to get more people interested. It is supply and demand plain and simple. The more money a bank has to loan out, the less the interest rate. The more demand there is to borrow the higher the interest rate.

So now lets say the Fed wants to print money and get it into circulation. The banks will now have more money to lend so the interest rate falls below whatever its previous natural rate was. This changes peoples time preference. A time preference is what entrepreneurs believe is the time it will take them to make a certain percentage of money. If someone has an idea for a business, lets say they want to build and sell houses. They think they can make 11% each year on their money by buying land and building a house and selling it. If the natural interest rate is 10%, most of these entrepreneurs may think it is too risky and hold off. 1% profit just isn’t enough for the risk and work involved. If the housing market goes up and they think they can make 13% maybe they jump in and start building houses. If the housing market slows and they can only make 10.5%, more entrepreneurs stay out. But if the Fed prints money and the interest rate drops to 5%, guess what? No one sees any risk and everyone jumps in to the housing market. Banks are not only lending to the entrepreneurs but also have so much money they need to lend that they are also lending to home buyers. Many of whom are not even qualified to buy, but what risk is there? If they fail to pay back, the bank will get the house and it will be worth even more than they originally loaned for it.

You can see the vicious cycle. Abnks lending mooney to buys of homes and to builders. They all have distorted time preferences due to artificially low interest rates. All of which is sparked by the Fed printing money and artificially lowering the interest rate below the markets natural rate. The result is an artificial bubble. Eventually the market saturates (no more buyers left) and you get the boom. This is the basic explanation of Von Mises’s “Boom and bust” cycle.

Meanwhile valuable resources have been pulled from other industries. People left their manufacturing jobs to become carpenters (because the demand was higher so the pay was higher). People left other industries to become real estate agents (why manage a restaurant when you can make so much money selling homes). So other industries suffer while the boom is in housing. Then the bust hits and not only do you have a dead industry, but a dead industry with too many people work in it that were supposed to be in other industries.

The good news is that according to Austrian theory, deflation comes with the depression. Deflation is when prices fall due to lack of demand. People are out of work and have no money so all industries prices fall drastically. Since prices fall, so do wages. Sounds bad right? Prices fall, wages fall, cant be good right? The good news comes from the fact the deflation actually starts the repair process because deflation also changes the entrepreneur’s time preference. There are entrepreneurs in all other industries that during the time of inflation and high prices could not make their idea work (regardless of interest rate). Now goods are cheap and wages are cheap. What better time to start a new business! Those who do have capital love to invest during a period of deflation. It’s when they get the biggest bang for their buck. So they start investing and creating new jobs for all those people in the housing bubble.

Now here is the bad news and I must bring Mr. Bernanke back into the picture. Mr. Bernanke doesn’t understand the Austrian business cycle. He has been taught his whole career from other Keynesian and Mainstream economists that deflation is bad. He must do anything to avoid it! So whenever he sees a sign of deflation what does he do? He starts up the printing press and gets inflation going again. So now he hasn’t let deflation do its good work of repairing the economy and he is already starting the next bubble with his printing press. Mainstreamers are very afraid of deflation. Austrians embrace deflation. What it comes down to is Austrians would do nothing. Let the deflation hit. Let the Entrepreneurs get their good deals while creating jobs and recession is gone. Bernanke thinks he cant let deflation hit. He is worried it is some black hole we cant get out of. Yes we will all make lower wages. But the price of goods falls as well and that money you saved up in the bank becomes more valuable and can buy more. You might just open that business you have always wanted and create a few jobs along the way.

I have more to say, but Austrian theory has a lot more to it than one post can hold.