Month: August 2011

We need to be clear about something: there is no plan being discussed seriously anywhere which anticipates a year or time when our Federal government only spends what it takes in in taxes. As I understand the matter, Paul Ryan’s plan takes 25 years to balance the budget, and it is being vigorously opposed as a big meany-head “grandma can just eat dogfood” GOP monstrosity.

25 years. To only spend what we earn. And it is STILL unacceptable.

Think about that. We are supposedly going to take in $3 trillion in taxes in 2016, and spend $3.5 trillion. Something like that. That is the projection. What if we only take in something like $2 trillion–our historical norm over recent history–and STILL spend $3.5 trillion? Much of the money being spent is more or less on autopilot, unless “tampered” with by Congress. You figure out peoples age and contributions, then checks for Social Security, and reimbursement of Medicare expenses go out automatically. Congress does not budget that money, as I understand it, although they have periodically voted in increases in payments for political purposes, money spent that was not contributed by the people getting it.

This is a train heading towards a bridge that is gone. The direction has been the same since FDR, and Obama is just accelerating.

Do we want to fail as a nation, or not? That is the question. In my view, not even Paul Ryan’s plan is serious. We will have suffered catastrophic financial problems in the next 25 years. Everything he does is based on baseline assumptions that in my view will prove wrong. The task he set himself was creating something that was politically palatable, but as we can plainly see, it isn’t, at least not to this crop of Democrats, who show no signs of disappearing. Hell, Obama still has a 40% approval rating. All the major networks except Fox are covering for him. They could ruin him in a week, but choose not to, for a variety of reasons, that presumably include primarily an inability to foresee the actual consequences of his policies on the poor, the downtrodden and the sick.

I will repeat: my plan, or something like it, is in my view the only viable way to protect this nation, and protect justice and freedom the world over.

When I see someone talking about managed hyperinflation, which self evidently will provoke strong reactions (hell everything that isn’t cookie cutter will piss somebody off, this is a fact of life and of no more concern than the fact that we have to eat to live; it is what it is), then I will know progress is possible.

Who are you?

A word of advice: learn economics top to bottom, to defend this. Particularly study the history of Weimar Germany, what the inflation accomplished, and how it was ended. My proposal goes beyond anything done anywhere, but it is in my view not only workable, but will lead in short order to global peace and prosperity. In any event, this is the zip code we need to be operating in, if we are serious about saving America.

Perhaps seemingly paradoxically, it is much easier to conceal obvious truths among mountains of accurate information than through deception. This is in fact a basic propaganda precept, as I understand the matter.

Since no one person can wade through all that is produced around the world every day–much less over a modern year or decade–you can always assume that what you want is out there somewhere. Quite often, though, it isn’t; or at least it is so obscure that for practical purposes it may as well not exist.

This is why I build my own analyses. I am impatient by nature, and have no desire to spend hours finding inferior versions of what I can create myself.

You can find hundreds of screaming headlines on the internet every day to do with the stock market, but very few people ask what its purpose is, and if it is optimally suited for that purpose.

The purpose of the stock market, in theory, is to capitalize companies. You reach a certain point of growth, and now you can either borrow money, issue bonds (not dealt with here), self capitalize, if you have enough money, or you can offer up ownership shares in the company in the form of stocks.

You find yourself an investment banker, who does all the legal-ey stuff, and poof, you have an Initial Public Offering. My god, that tall, regal looking CEO (or wonky uebernerd who still gets all the girls), and that impressive business plan, and men in fine suits travelling around talking the thing up, and you sell your stock well. You are selling 10,000 shares at an initial price of $15. By the time you have sold 1,000 the initial asking price has risen to $20, then $30. By the time all 10,000 are gone you have reached $50, with an average sale price of $25, netting you some $250,000.

As I understand the matter, this is all you get from this. If, as tended to happen in the dot.com boom, the stock rises to $72,000 a share because it’s rumored you might turn a profit in five years, you still only keep the initial capitalization. Once you launch your baby, it sinks and swims both because of your performance, and–importantly–because of the perception of investors of what the perception of other investors is going to be, which is only partly conditioned by–and sometimes wholly unrelated to–your actual profitability.

Now, your stock price will affect your other borrowing, it will affect the perception of your business, and of course your ego. But fundamentally it does not represent–at least as I understand the matter–an actual asset. You can’t sell it: you already have. Someone else owns it, not you.

What a stock is SUPPOSED to be is an instrument for the receipt of dividends. Have you heard of dividends? Me either. They seem to be hiding somewhere.

Theoretically, though–and this is I think how things more or less actually did operate at some point in our history–all owners in a profitable company get some share of the profit. This is obvious enough in small businesses: they run their year-end, then what is left is distributed among the owners as Christmas money for their families and themselves.

In stocks, you are supposed to get periodic payments, which are supposed to be sharing the wealth. This is what is supposed to motivate stock buying.

In theory, investors who are looking for dividends will invest primarily in profitable, stable companies. Given this, why invest in risky companies? Well, this calculus is wholly different. Venture Capitalists keep a large share of any profit made, so they are more or less betting moderate odds horses to win.

But stock investors, more often than not, will wait years to see a dividend, if ever. If the company goes belly-up, the other creditors will likely eat up whatever insignificant net worth remains.

Their motivation is the belief that other people will want to buy the stock–regardless of its underlying value, and capacity to pay dividends some day–because they can make fat money NOW. Buy at $10, sell at $20 and you doubled your money just like that. If the company goes belly up six months later, you could care less. The only reason you would care is if you still held shares in it.

The net of this logic is that the stock market has lost, if it ever had, any reason to be viewed as a rational judge of inherent value. As many have pointed out, there are many synchronizing signals that investors use, that are utterly divorced from dispassionate financial analysis. If a company lays people off, the stock goes up, since profit is certain in at least the short and medium term, as their costs have dropped. It is also certain that other people will be thinking the same thing, so you try to buy before they do, then sell after they do, making a quick profit. If, after the layoffs, their sales at some point drop as well, then you will have cashed out and moved on by then. You really don’t care if the company is well run or not. To a distressing degree, neither do they in many cases, especially if they think they can cash out their stock options before the shit hits the fan. There are laws and procedures to guard against this, but there are also ways around it.

As things stand, the stock market does not function as a useful integrator of information, as I believe it should. These supposed high speed trading computers are merely a logical extrapolation of the basic dynamic of buying low and selling high without regard to why a price may be low or high.

Now, for some, the impulse for some is to ban things they don’t want. I’m not like that. In my view the carrot is much more attractive than the stick, for all concerned.

Let me therefore propose this: for all stocks you as an individual, bank or investing group hold for one year, you get a 20% reduction in your Capital Gains tax. If you hold it three years, you get another 20%, and if you hold it five years, another 25%.

What we need is more rationality and order, and less chaos oriented around profit-making and taking that adds NOTHING to the economic opportunities and capabilities of Americans.

I had thought maybe we could ban stock selling outright, and insist on bond issues; but that is too draconian, and anti-Liberal. Moreover, if they are going to pay dividends, the stock system is much more flexible than bonds, which demand the same amount no matter how the company is doing. The goal in economic growth is to make it easy to get money to expand.

As things stand, I should note, I think most companies feel little to no need to pay very large dividends, since they know as well as everyone else that the money being made is on exchanging the stocks themselves. This is a feeling that may be wrong, but I suspect I am more right than wrong.

I had also thought that maybe we could enact a law to require all stocks to be sold at the same price, but the problem with that is that one of the reasons the IPO’s sell through is the hope of investors that the stock will rise. Absent that incentive, far less capitalization would take place.

Anyway, these are a few musings of someone watching the ping pong ball on Wall Street, and wondering yet again at how much stupidity there is in all elements of our political, social, and financial institutions. And we do better than most others.

Perhaps I could borrow from Churchill and note that America is the worst of all countries to live in, until you consider the alternatives.

This is where you want to be protesting. Capitalism works fine, if the goal is improving the living conditions of everyone. If you attack “Capitalism”, per se, in its role as an effective system for wealth creation, you create poverty. This should be clear enough.

What you need to be attacking is actual parasitism. Even JP Morgan Chase at least makes loans and capitalizes job-producing business expansions. Only central bankers produce nothing. Their whole mission is to cover up the lies told by bankers to the public. If by some unforeseeable miracle you could bankrupt JP Morgan Chase tomorrow, or Wall Street generally, all you would get is an increase in human misery, one whose epicenter will be among normal, struggling, working class Americans. The rich, being rich, suffer much less in economic downturns. Maybe they can’t afford that new yacht, but they have a whole different set of problems from people who were already struggling to pay their rent.

In fact, on balance, most economic downturns work to consolidate wealth. Formerly viable small business go belly-up, and get absorbed by larger corporations. Firms that have an unlimited expense account at the Fed can outsurvive companies which pay cash money.

If you want to target injustice, target the central bankers.

Again, my rationale is here: http://www.goodnessmovement.com/Page14.html

Marxian economic analysis was plainly wrong, but his basic idea that some super rich were and are abusing the system was spot-on.

http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html

This link is interesting. I have had too much to drink to determine what aim the left-leaning Bloomberg folks are pursuing, but what needs to be pointed out is that all the “loans” in question were of money created for the purpose, in the act of writing the proverbial checks.

The Fed solves, and can only solve, problems created by our fractional reserve system. You can’t get into cashflow problems if you never lend money you don’t have.

Lord, please help me to be the sort of person I will need to have been. Amen.

This is wonderful and true:

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

Joan Robinson, as quoted in Peter Bauer’s “Equality, the Third World, and Economic Delusion.”

I think many of us have this fuzzy, but comforting, tendency to lump economists in with mathematicians and by extension the “hard” side of university life. They are not reading poetry; they are not out in the wild participating in peyote ceremonies; they are not making pottery. No, they do MATH, and MATH IS REAL.

Thus when an economist pronounces something, people tend to take them seriously.

But the naked fact is that economics cannot, intrinsically, by definition, be divorced from politics. If you want to regulate, as an example, the stock market to achieve an economic end–market stability, for example–you intrinsically have to support a strong enough, intrusive enough police power of the State to make it happen.

Or take Keynes Fascist idea that the government should be able regulate all prices, and all capital flows in and out of the country: you have to have a very strong government in place to do that.

As I have said many times in many ways, there are essentially two types of economists, in my view: those who describe cause and effect relationships based upon historical experiments and logical analysis; and those who describe how things OUGHT to work, and who extrapolate backwards from their desired end point, in narratives which never touch the practical in any way.

Can economists be corrupted by political ends? Of course. Just look at the ubiquity of support for the plainly counter-scientific narrative of Anthropogenic Global Warming. There is no reason to dispute that many, many scientists find themselves in the position of publicly supporting this intellectually offensive attack on the very foundations of the scientific method. Nor is there any reason to grant such farcical ideas any credence because methods of incentivization and disincentivization have been used to effectively and widely for so long. Science is not a popularity contest.

Thus when I use terms like “Fabian”, I have actual referents in mind. It is an unassailable fact that large swathes of the men and women educating our children want one world government, and Socialists running it. This is easily enough documented–for example, in books like David Horowitz’s “The ProFessors”.

Such people breed tendencies in people who go into broadcast journalism, newspaper journalism, and ECONOMICS. Paul Krugman is not stupid: he is an advocate of policies designed to end America’s dominant, peace-keeping role in the world, which in the Never-Never land these fairies live in will result in the improvement in the lots of unspecified humans somewhere.

Laying this idea next to the actual history of such ideas, of course, plainly shows that where such ideas are proposed and idiocy is not present, evil is.

How many of you have heard of this? I have mentioned it a time or two, but my focus remains on domestic economics.

It was the idea, as I recall, of John Maynard Keynes, Hjalmar Schacht (“Hitler’s Financier”, I believe was one of his nicknames), and, if memory serves, Montagu Norman, the President of the Bank of England for some time, and a likely participant in the dollar inflation whose end brought on the stock market crash of 1929. Google, of course, no longer readily pops up the pages I’m looking for. Why they apparently feel so little shame interfering in the free exhange of opinion and information, I have no idea. Sometimes it seems as if the accumulation of great wealth, especially when combined with recalling the methods used, creates crises of conscience for which no remedy short of working tirelessly to force other people to give up their wealth will do.

Or perhaps they are merely ignorant of basic economics and history. They will not have learned them in most American universities.

In any event, look at a recent report:

We need to build improved resolution regimes within jurisdictions and create agreements across them. And we need to continue building a regulatory perimeter that is sufficiently robust and extensive to encompass every institution that acts like a bank.

Who are these people? I don’t have time to do exhaustive research, but let me submit one idea, and another idea which was the original point of this post.

This group is an organization of Central Bankers, which is apparently quite literally working on redesigning our international financial system with no feedback from any of the sovereign governments involved.

Ben Bernanke, for example, went to Basel II, and he can sign what he wants, because he does not have to ask for Congressional approval for ANYTHING. Other than hyperventilate, there was nothing any member of Congress, the President, or the Supreme Court could have done to stop Bernanke from his money printing schemes that, unless I miss my mark, went almost exclusively overseas, to people and parts unknown. As I point out often, THIS IS INSANITY.

But consider the even greater insulation from the opinions of those whose lives they are affecting profoundly–if invisibly–of a GROUP of people like Ben Bernanke. I don’t know how most central banks work, but I suspect many of them are much like the Fed, largely insulated from “political pressure”, which is to say accountability. These people, who stay in the best hotels, drink the best wine, and chase the finest hookers, are literally writing our financial destiny without even asking us.

The main point I wanted to make is that the only concrete detail from the Basel II meetings that I understood was that bank reserve ratios will be raised, starting about 2016, if memory serves. This is one of those things where you announce it, but it is so far out nobody squeaks about it, then it comes, and they can point out with justice that we were warned.

Let’s return to my favorite tax table.

What will be happening in 2016, according to Obama’s people? We will be taking in $3 trillion and spending $3.5 trillion, in inflation adjusted dollars. Put another way, tax receipts are scheduled to increase by 50% over 2011 (1.9 trillion) in five years. How does this happen? PFM: pure fucking magic.

This is patent nonsense. We are not going to raise tax revenues that much without causing major economic dislocation in the process, which in turn will horribly impede the economic growth that HAS to happen to increase the tax base that much. No possible tax increases on the “rich” could amount to more than a small fraction of what will be needed.

So what will we have to do? Borrow, borrow, borrow. So we have on the one hand the largest economy on the planet sitting in the corner with a duncecap on, and begging for money, and we have the international financial system engaging in DEFLATIONARY policies.

For those who don’t read much, the inflation/deflation cycles is the most basic form of economic assault. It was plainly the cause of the Great Depression, which was simply used by FDR, in sustained acts of amoral political cynicism, to engineer a political order and propaganda regime that got him elected 4 times, despite assiduously pursuing over long periods of time economically ruinous ideas, and causing thereby unprecedented suffering.

No conspiracy theory is needed to point out that policy is being made without the input of our elected representatives.

The BIS, the IMF, the World Bank: we have to end them all.

The relationship between the rejection of self pity and meaning is that the first enables the formation of the second. There is no linear connection, but there IS between feeling self pity and being UNABLE to form a useful meaning system. Rejecting self pity creates the possibility of success, whereas failing to do so ensures failure. All one can do is create fertile soil, and work regularly to find suitable seeds to plant and nourish.

I am going to quote from Viktor Frankl’s excellent “Man’s Search for Meaning” (page 86 in a very old paperback addition):

And there were always choices to be made. Every day, every hour, offered the opportunity to make a decision, a decision that determined whether you would or would not submit to those power which threatened to rob you of your very self, your inner freedom, which determined whether or not you would become the plaything of circumstance, renouncing freedom and dignity to become molded into the form of the typical inmate.

Seen from this point of view, the mental reactions of the inmates of a concentration camp must be seen as more to us than the mere expression of certain physical and sociological conditions. Even though such conditions as lack of sleep, insufficient food and various mental stresses may suggest that the inmates were bound to react in certain ways, in the final analysis it became clear that the sort of person the prisoner became was the result of an inner decision, and not the result of camp influences alone. Fundamentally, therefore, any man can, even in such circumstances, decide what shall become of him, mentally and spiritually. He may retain his human dignity even in a concentration camp. Dostoevsky once said: “there is only one thing I dread: not to be worthy of my sufferings.”

…An active life serves the purpose of giving man an opportunity to realize values in creative work, while a passive life of enjoyment affords him the opportunity to obtain fulfillment in experiencing beauty, art, or nature. But there is also purpose in that life which is almost barren of both creation and enjoyment, and which admits of but one possibility of high moral behavior: namely in man’s attitude to his existence, an existence restricted by external forces. A creative life and a life of enjoyment are banned to him. But not only creativeness and enjoyment are meaningful. If there is meaning in life at all, then there must be a meaning in suffering. Suffering is an ineradicable part of life, even as fate and death. Without suffering and death human life cannot be complete.

Between them, Fannie Mae and Freddie Mac control 90% of the mortgages in this country. According to Answers.com there are some 44.4 mortgages in the United States. This means that the FEDERAL GOVERNMENT OWNS OR HAS LEGAL CLAIM to some 40 million homes. Let me repeat that: they own or have legal claim to some 40 million homes.

Again, according to Answers.com there are about 130 million housing units in the us.

This means that our government, at this moment, owns or controls just under one third of the homes in the US.

Further, they own in inventory some 242,000 foreclosed homes.

Now, we need to ask how exactly they got these homes. If you or I buy a house, we have to pay real money. However, the government can, in many cases, print money to achieve real claims on real property.

As an example, the Federal Reserve can purchase stock in Fannie Mae or Freddie Mac through Open Market Operations. We the American people of course don’t know when this happens, since the Fed is utterly unaccountable–or at least largely unaccountable, with some mild improvements having been made by the Finance Reform Act or whatever the recent attack on “Wall Street”, which of course is practically to say the small fry–was called. Provisions to audit the Fed, to a limited extent, are already showing up huge irregularities–things that make no sense if the Fed is to viewed as tasked exclusively with protecting the American economy–like sending huge amounts of American dollars abroad to foreign owned banks.

Consider this: what if the government, rather than trying to sell or rent the homes in its inventory, simply allowed people to live there for free? They themselves don’t have mortgages to pay. However they “financed” it, it was either put on the balance sheet of the American taxpayer, or in effect gifted to them. You could gift homes to your supporters, the ideologically compliant. You have a raffle. If there is no purchase price, it’s hard to see how that would depress home prices.

Would this not be perfectly consistent with the aims of Socialism? Framed another way, why is the Federal Government pretending to be interested in market forces?

The reality is that none of the socialists who concocted Fannie Mae and Freddie Mac as examples of the “semi-autonomous bodies within the State” Keynes dreamed of in his Fascist (Mussolini called it Fascist, and who am I to argue with the man who coined the term and invented the philosophy?) tract “The End of Laissez-Faire” want the reality of their subversion to be clear. They want to act like private sector landlords for exactly the same reason that Obama wants to call the expansion of the Federal government “investment”. This is an Orwellian term, used, as all such terms are, cynically.

Let me quote from Keynes a bit more: “I believe that in many cases the ideal size for the unit of control and organization lies somewhere between the individual and the modern State. I suggest, therefore, that progress lies in the growth and recognition of semi-autonomous bodies with the State–bodies whose criterion of action within their own field is solely the public good as they understand it, and from whose deliberations motives of private advantage are excluded.” (Chapter 4, paragraph 4).

What is he really talking about? Governmentally sanctioned bureaucracies, which have the power to make laws, but not to answer regularly to the citizenry though either elections, or direct and regular control by Congress.

There was a time when Fannie Mae and Freddie Mac were tied only indirectly the the government, by using the credit of our government–and that of the American people, who foolishly allowed this to happen–but not actual cash.

Well, they underwrote far too many loans that should never have been originated, and they failed. This has meant that many billions HAVE in fact flowed from our pockets to theirs. It also means they ARE the government, once again.

I would argue, though, that the Social Security Administration meets this criteria as well. They were set up to be outside the normal appropriations process, as I understand it. They collect their own taxes, ahandle their own paperwork, and send out their own checks. All of this happens largely without any Congressional intervention. They do periodically borrow money from the Treasury Dept., but that is not something, as I understand the matter, that goes through Congress. Congress–which to be clear is in theory supposed to best represent the will of the people, and to be the paramount authority in all domestic matters–has been removed. Medicare and Medicaid would likely meet this criteria as well, as would of course, the “investment bank” that Obama is apparently set to propose soon. That is a New Deal idea through and through. The goal is to buy political patronage, and spend money uselessly, bringing us yet closer to the brink and eventually reality, of disaster.

These are a few scattered thoughts I have not organized fully. Hopefully they are coherent enough to be useful to someone.

I wanted to make a few points here. The overarching point is this: Ron Paul is the only candidate who cannot be sorted neatly into a box that is consistent with our dominant narratives.

Look at this table: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

From 1980 to the present the expenditures of the Federal government have increased, with the sole exceptions of 1986-87, 1992-93, and 2009-10 (which was anomalous, since spending in 2009 jumped by $470 billion, then dropped back to a number that was still $300 billion more than 2008).

There is this implied but wrong idea that the expenditures of the Federal Government should rise pari passu with economic and population growth. This argument only holds if we believe that the Federal government has functions other than protecting this nation, regulating relations between States, and handling foreign policy.

Given genuinely Liberal policies, those oriented around checking the power of the Federal power through the 10th Amendment–as our Founders plainly intended, being well able to foresee the mess we now find ourselves in–the percentage of Federal spending as it relates to our GDP should have been steadily shrinking.

In point of fact, spending has kept pace with economic growth over the last 71 years, and in spite of that growth, we have managed to add to our national debt in 59 of the last 71 years. In every year but one, Reagan added to our national debt. If we count his tenure as 1953-1961, Eisenhower added to our debt in 5 of 8 years. 2001-2007, with a Republican President and Congress, 2001 was the only year the national debt did not increase, and that was clearly the legacy of a moderate Democrat working with a Republican Congress, combined with the explosive economic growth of the 1990’s.

The history, then, of elected Republicans being fiscally responsible is not good.

And we need to understand that an intelligent Fabian strategy could easily consist in nothing other than making sure that, one way or another, the size of the Federal government in the national economy increases year after year, and that more is spent than taken in. It really doesn’t matter if it is Reagan building up our national defense, or Johnson greatly increasing government share-the-wealth programs. With such a strategy, you can bet equally on both parties, and alter the dominant narrative from time to time from helping the poor, to protecting America, and back again. The details don’t matter.

The task, in boiling the frog, is getting people used to annual debt, such that the total can become enormous slowly, over time, and at some point unmanageable.

Look at the Obama numbers. Look at the gap between revenues and expenditures: -10 for 2009, -8.9 for 2010, -10.9 for 2011, and projected at -7 for 2012. Beyond that is BS, since we don’t know what the economy will do, or who the next President will be.

In order to find a -7 you have to go back to 1946. 1945 was -21.5, but we had a rather large war going on at the time.

What I would like to suggest is this: Obama is not a radical; he is, rather, merely the apotheosis of the last 70 years. He is the culmination of long term policies which have acted year after year after year to make us weaker as a nation. He is our “habit” made large. He is our enervated spirit incarnated, and shown on a large screen.

If we look at history, NO ONE will make much of a difference, if they keep doing what everyone since Herbert Hoover has done.

At the present moment our most pressing national security threat is our debt. You cannot fight this with Marines, aircraft carriers, or the latest technology. Victories in Afghanistan and Iraq will not shelter us from this threat. On the contrary, national bankruptcy and economic decline will not only destroy us domestically, but prevent us from even waging those wars.

In some respects we deserve Barack Obama. We have been asleep at the wheel constitutionally since the time of FDR.

Ron Paul, as I see it, is the only one sufficiently “nutty”–by which I mean individualistic enough to get branded with validity an outsider–to do the sorts of things which need to be done to prevent an inevitable national decline.

Yes, we need jobs. Yes, we need limited government. But we need to look at the big picture. What is it our brave soldiers and Marines and airmen will come home to, if we can’t avoid collapse? Would it not make more sense to bring most of them home, and start paying our bills?

I am increasingly inclined to believe yes. Rome was destroyed by civil wars. We are being destroyed by simple stupidity, and that applies both to those who fail to grasp the consequences of our policies, and those who are consciously articulating them in the hope of American decline.

I have more to say on Iran and Cuba, but will have to get to it later.