The Truth about Income Inequality
There has been a lot of hoopla, lately, about the gap between rich and poor, how it’s growing, and how we need to give government more power to get rid of that income disparity. It’s actually been shrinking for the past four years, but it’s still larger in the US than most countries.
Some people say that it’s proof capitalism doesn’t work and needs to be banned, or at least that we need more income redistribution. Otherwise, the masses may revolt, like they’re doing in Greece and eventually take everything, therefore the ruling class have to choose between being violently overthrown, or surrendering their wealth.
But this all begs the question of why we’re talking about income inequality in the first place. The real question is whether we should be talking about differences between people, or overall quality of life for everyone.
Should We Care about the Wealth Gap?
Bolivia, Haiti, and Congo have very low income gaps, but equally low standards of living.
Which would be better:
- A society where the wealthiest earn a certain amount per year, and others earn about 50% that much.
- A society where the wealthiest earn a certain amount per year, and others earn only 5% of that much.
If you answered either way, you’ve blown a test of basic logic; You have no way of knowing which is better, unless you know how well the poor are doing in real-world terms.
For example, let’s say you answered that (1) is better, where the wealthy earn only twice as much as the poor, instead of twenty times as much.
But it turns out that, in the two examples:
- The wealthiest earn $20,000 per year, and the others $10,000
- The wealthiest earn $1,000,000 per year, and others earn $50,000
Would you REALLY prefer that the poor only get $10,000 per year, instead of $50,000 (in dollars with the same buying power), just because the income gap is smaller?
Not if you have any real-world experience. I’m sure a few kids who’ve never had to live on their own, or guilt-ridden trust fund brats convinced that everyone being poor is better than some being really rich, but the rest of us know better.
And when people talk about The Gap Between the Rich and Poor in the US, claiming income disparity is a horrible thing that needs to be fixed, this is exactly the kind of foolish, self-destructive position they’re taking.
Socialism vs Capitalism
Who, but guilt-ridden trust fund brats, seriously would prefer for the poor to live with less, just so the rich would have FAR less?
In fact, as the above examples show, what matters can’t be the “gap”, but the actual quality of life of people in the society.
Take Communist China, for example:
- When China was much more socialist, redistributing wealth and regulating the economy with “social justice” the way the “income inequality” people want things to be, most people in the country were miserably poor…but equally so. They struggled just to subsist, living on dirt floors, literally millions dying from lack of resources that should have been readily available…but there was almost no wealth gap, at all.
- When the government realized that socialism doesn’t work, and began deregulating the economy, the gap between rich and poor exploded. It’s now hundreds, maybe thousands of times “worse” than it was…but almost everyone in China the less-regulated parts of China is better off than they were, although some are now MUCH poorer than the wealthiest.
The decline of socialism has led to a better life for many of the poor, and an increasing wealth gap, purely because some of the poor, themselves, are becoming much wealthier.
It is not income disparity that matters, but actual standards of living.
Far fewer people in China are now dying of hunger. Many of those who lived in huts with dirt floors and delivered their babies standing up in the kitchen now have modern homes and medical care…because of the very mechanisms that are making income disparity greater.
What we really need to be concerned with is quality of life, not exploiting jealousy and greed by focusing on “inequality”.
Rising Living Standards
When people claim that something forceful needs to be done about people they describe as poor, they make it sound like those people are victims of capitalism, now reduced to poverty.
The more we have, the more we want…we shouldn’t let that translate into jealousy and greed against those who have more
For example, think of people who complain that, thanks to the Roaring Twenties, one third of all Americans at the time had no electricity, indoor plumbing, access to automobiles, et cetera…but, of course, a decade earlier even fewer people had electricity, indoor plumbing, or automobiles.
In fact, just a few years earlier dirt floors were normal in the US, just like China. The very idea of what is “ill-clothed, ill-housed, and ill-fed” had shot up in standard purely a as result of the “unfettered capitalism” of the 1920s.
If not for that period of economic freedom, dirt floors and cheap, crappy clothing, and malnutrition would have still been considered normal and adequate.
Likewise, you can find people talking about protests over living standards in China, now, where they focus about the slums around the big cities, how people don’t have gas heat, live in cramped conditions, et cetera.
But, of course, just a few years ago, most of those people were peasants living in dirt-floored huts, eking out miserable lives wading in rice paddies, barely growing enough to feed themselves after the government confiscated most of their product of labor, and living on barter.
They moved to those slums because, as in Industrial Age America’s “sweat shops” it’s an improvement over what they had before. If China continues to deregulate, their living standards will continue to get better, even as their idea of how they should live increases faster, making them complain more.
One of the greatest political scientists in history, Joseph Schumpeter (with a name like Schumpeter, he had to be good) actually thought that the doom of Capitalism might simply be that it caused things to get so good that people’s idea of what they deserved would outpace how much better things were actually getting, so that they would always turn to massive government intervention to “fix” it, causing the economy to fail.
This is what happened with Herbert Hoover’s massive spending increases and regulation causing the Great Depression, and is happening now.
Some Wealthy Did NOT Earn their Money, and Need to Lose It!
But it’s true that things are unfair, today. There are many people who do not deserve the wealth they have. They did not earn it themselves, but used bailouts, “stimulus”, corporate welfare, and other coercion to steal money confiscated from others. Their corruption and inefficiency has been preserved, like a limb with gangrene, and is killing the body of the economy…like a limb with gangrene. And that needs to end, yet both dominant political parties are actually defending and increasing this economic injustice.
Instead of obsessing with the jealousy and greed of class hate, comparing who has what and trying to take away from those who produce more, we need to increase the very conditions that cause “income inequality”, to allow the poor to increase their own well-being, even if the rich increase theirs even faster…but stop actively rewarding the wealthy through government fiat, when they haven’t earned it.
We should let bad companies and people fail, therefore increasing social justice, if not income equality.
BONUS FEATURE:
Here is the original article from the Site of the Sentient, written in 1996: Income Disparity: The Gap Between the Rich and the Poor
Why the End Does Not Justify the Means
Why don't we torture accused criminals in order to find who is guilty? Because the end does not justify the means.
It has become clear that many politicians and lawyers, and a few real people, don’t understand what is meant by The End Does Not Justify the Means.
They act like people are saying the desire to have pancakes cannot justify making batter. But this is more specific. It’s about good versus evil. In their unfortunate perspective, caring about what is right must seem insane.
But the truth is that this phrase sums up one of the most important principles of ethics and morality:
It means that there are certain fundamental principles that are “right”, “good”, et cetera, that are essential to those conditions…and you cannot justify violating them because you have some “right” or “good” goal in mind.
For example, you cannot have justice, unless you adhere to the principles of justice; It’s not OK to do unjust things to people simply because you have a just goal in mind.
This is a basic philosophical rule that is ignored or denied by almost all evil people you will find out there, and supported by almost all good ones. Marxists coined the modern use of the phrase “the end justifies the means”, and naturally they and their socialist spinoffs were responsible for the vast majority of all great evils, for the past century.
Evil Men
Joseph Stalin, for example, justified the deaths of tens of millions of his own people, by saying that the population was too large for (relatively inefficient) Communism to support. The mass death left Soviet society more sustainable. Did the betterment of millions of peoples’ lives justify the murder of millions of other people? According to Consequentialist socialists; yes.
Previously, the Dominican order of Catholicism was an advocate of the idea that the end justifies the means (in spirit), and it just so happens that they went on to conduct, among other great evils, the Inquisition. It was literally claimed that you may be saving the soul of the man you tortured or murdered in the name of God, so it was OK. All the ways the current Pope is less popular than his predecessor appear to center around his being of that Dominican mindset. In fact, the position he held before becoming pontiff was the Head of the Office of Inquisition, I kid you not…it had simply changed its name for PR reasons.
Likewise, when Machiavelli used that phrase in his satirical indictment of the evils and abuses of Feudal government, The Prince, he succeeded in hitting the nail on the head as to what is most wrong and unjust.
Required by Good
In reality, the end does not justify the means, in part because the long-term outcome of ignoring principles in order to buy short-term results is a failure of your own goals.
The idea that the wise principles override the short-sighted goal (a form of Deontology, if you like them thar fancified words) is why courts will overturn convictions on technicalities, one of the few good and just things remaining in the US legal system. Any honest — or as close as they get –prosecutor will tell you that the reason they hate that condition is how it keeps them from breaking rules and simply gambling punishment, in order to convict people they think are guilty. They are restrained from unjust acts, by this absolute enforcement of the principles of justice, even though it may let a guilty man walk in the short term.
When you have a principle, like “do not violate someone else’s property”, it cannot be overridden because you have some end in mind like “but the wealth I steal from his safe will benefit several other people who deserve it more”.
Like setting aside money for bills and emergencies instead of partying all of your paycheck away, sticking to the principles of what is good, right, and just produces the best outcome in the long run. You are investing in your ultimate goal by sticking to it when the going gets tough. When you panic and abandon your principles for a short-term benefit, you end up making things worse in the end.
THAT is why the end does not justify the means.
…Then Why Did They Hate Bush and McCain?
I am puzzled by those few remaining people who defend Obama adamantly…because most of them claimed to hate Bush.
And yet, of course, in policy Obama is just Bush III:
Bush = Obama
- Bush had a massive “stimulus package” that used Keynesian/socialist theory to try to “help” the economy. McCain voted for it.
- Obama voted for it. Obama followed up with a second “stimulus package” of his own.
- Bush expanded the war in Iraq with a Surge, while gradually drawing things down in Afghanistan, pretending they were getting better. McCain supported him.
- Obama is expanding the war in Afghanistan with a Surge, while gradually drawing things down in Iraq, pretending they are getting better.
- Bush expanded socialized health care entitlements more than ever before in US history, with the prescription drug benefit. McCain voted for it.
- Obama is trying to expand socialized health care entitlements more than ever before in US history.
- Bush responded to each natural disaster by throwing money at it.
- Obama is responding to each natural disaster by throwing money at it.
- Bush bailed out the banks, and expanded regulations on them.
- Obama bailed out the banks, and is expanding regulations on them, using the Bush plan.
- Bush protected the unions while the car companies were trying to file bankruptcy, including a massive bailout.
- Obama protected the unions while the car companies filed bankruptcy, after including a massive bailout.
- Bush kept Guantanamo open, and “tried” people held for a year or more without trial, in secret military tribunals.
- Obama is keeping Guantanamo open, and is “trying” people held for a year or more without trial during his own administration, in secret military tribunals.
- Bush passed the USA PATRIOT Act to grant himself police-state powers in violation of the Constitution
- Obama refused to rescind, or allow to expire, the USA PATRIOT Act police state powers that violate the Constitution
McCain = Obama
- McCain proposed a trillion-dollar global warming tax/trade scheme in 2007
- Obama proposed a trillion-dollar global warming cap / trade scheme in 2009
- McCain opposed drilling in the Antarctic and off the coast of Florida in 2007
- Obama opposed drilling in the Antarctic and off the coast of Florida, in 2007 and today.
- McCain censored political speech in the name of “campaign reform” with McCain/Feingold
- Obama is fighting to censor political speech in the name of “campaign reform” against the the Supreme Court
- McCain supports amnesty for illegal aliens
- Obama supports amnesty for illegal aliens
- McCain promised to never overturn Roe v Wade
- Obama promises to never overturn Roe v Wade
- McCain wanted to undo the Bush “tax cuts”
- Obama wants to undo the Bush “tax cuts”
- McCain voted for massive new penalties and liabilities for tobacco companies
- Obama wants massive new penalties and liabilities for tobacco companies
- McCain voted for massive new penalties and liabilities for gun companies, and restrictions on gun shows
- Obama wants massive new penalties and liabilities for gun companies, and restrictions on gun shows
What on earth was their problem with Bush and McCain?
Maybe they’re just racist against white people…
America Already HAS Death Panels and Waiting Lists
Next time you see someone mocking the idea that America could have health care waiting lists and death panels, point out that we already do.
There is one domain of medical treatment that is mandated socialism-only, by the Federal government.
And, unsurprisingly, this system has a waiting list of over 100,000 people at a time.
You usually have to wait at least 1,000 days…nearly three years…for treatment.
In fact, you usually die before you get treated.
Why?
Big government types have heartlessly condemned thousands to death, by banning compensation to organ donors
1,000 Day Waiting List
Because it’s illegal to compensate people for donating their organs.
That’s right, you can’t pay someone for a kidney, whether they’re alive and donating one, or they just died and are a good organ donor whose family desperately needs the money.
Because of this, out of the 2,000,000 Americans who die every year, only 5,000 donate their organs. The vast majority of potential organ donors do not…but, obviously, more would if they had the hope of helping their own families deal financially with their death.
And so, with this socialized organ donation system, there is a waiting list of over one hundred thousand people, and you will probably die during the average of 1,000 days you will wait for an organ.
Imagine how many more people would sign their donor cards, put that in their living wills, et cetera, if they could hope that they could at least help support their family, if they did die.
Consider how many families, left destitute because the bread-winner unexpectedly died without life insurance, could at least have the hope of compensation because he was an organ donor. In fact, 35% of all people who did sign an organ donor card fail to donate because their family refuses consent after they died. How many might have chosen otherwise, if they could be compensated for the emotional sacrifice?
It’s even possible for people to choose to donate some organs while alive. The kidney waiting list, in some parts of the country, is ten years. That’s 3,650 days waiting for a kidney, on a dialysis machine that slowly kills you. Yet people could choose to donate a kidney any time, even when alive and healthy. Frankly, I’d never do that for money, but other people should be free to disagree with me.
As dramatized on a popular TV show, Gregory House on his way to a modern-day organ death panel, which rejects his patient, condemning her to death
Actual Death Panels
And let’s be clear: Because there is such a waiting list, there are actual panels of people who decide where each donated organ will go. They pronounce who gets them first, and who will not be allowed to have one at all, because it’d be a “waste”.
If you need an organ transplant, a panel will actually weigh how old you are, what shape you’re in, even what your lifestyle is, and then decide not only where to place you on the list, but even whether to just let you die. That’s right, if they don’t approve of how you live, they can pass you over to die.
Older people are actually passed over, because they’ve lived longer, and more “deserving” people moved ahead of them even after they’ve waited on the list.
There are already panels of people who will literally decide to let your grandmother die untreated, because she’s lived long enough.
It not only could happen in the US, it already does.
Do we really think, given the chance, that this won’t expand into every other part of health care that becomes socialized?
Criminal Transplants
It is a far greater crime when the government causes a death, because it is using supposedly legitimate authority to do so
Like Canadians and Brits sneaking to the US when their governments put them on endless waiting lists for life-threatening or painful conditions, Americans condemned to die by the socialized organ transplant system in America end up flying overseas, to obtain transplants, if they can afford to do so. Therefore the socialist prohibition actually ends up linking wealth to survival even more, not less as intended…only wealthier Americans can afford to fly a foreign country and pay for a transplant out-of-pocket. What’s more, it’s far more dangerous than an American transplant, since the US has the best surgery outcome rate of any nation on earth.
Meanwhile, avoiding questions of whether people really want to sell their organs, or are doing it for money, actually produces an even more dangerous system of commercial organ transplants, that of black market organs. There really is a question of whether an organ obtained this way was gotten from a consenting patient…and yet such a system exists only because it’s illegal to do so openly, with safe documentation.
Fix Transplants, Don’t Break Everything Else
Hope and/or pray that the US transplant system is de-socialized before you end up needing an organ, so that you won’t have to wait for years, and probably die without treatment.
And, as important, fight to keep the rest of the American health care system from ending up in the same, deadly, condition.
Why Workers Dislike Unions
We’re told by teachers, politicians, and the media that unions are the best thing ever to happen to people who work. Without them, we’d all be working 80 hour weeks, for pennies per hour, and dying by 30 from how dangerous the conditions are.
And yet, for some reason, most people not only don’t belong to unions, are not even thinking about forming unions, but wouldn’t even want their industry unionized, if they had the chance. In fact, unions are dying out. The odds are that if you don’t more or less inherit a union career because you’re locked into a Company Town situation, you will never join one.
As Americans have gained more freedom to leave unions, they have mostly chosen independence
In the 1940s, 35% of American workers belonged to trade unions. Today in the private sector, membership is less than 7%. It is even lower in states that protect your right to have a specific job without joining a union.
Why?
Because, in reality, a union takes more freedom away from a worker, than from anyone else.
Pay is Important
It’s not fun, negotiating with an employer for your compensation. Well, not unless you’re really in demand. Then it can be joyful agony, trying to decide which offer is best, and what to require you be paid…but, the rest of the time, it’s unpleasant.
But the joy and pain are both because of how completely important your pay for your work really is. Your entire lifestyle depends on that set of decisions.
Not just how much you’ll be paid, but in what form. Do you want more cash, or would you prefer more days off? Are you better off putting up with a company insurance plan, that is cheaper but less responsive and lacking in choices, or more money and save up for your own checkups? Do you want paid lunch and breaks, or more money and come home sooner?
The problem with a union is that it strips away any control you have over that life-changing question.
You don’t even get to choose when, or how, to negotiate. Union management takes all power away from you, and you have to cross your fingers, praying whatever they think is best happens to be something you can tolerate.
Even under the best circumstances, they’ll be negotiating for the lowest common denominator. What the average worker is worth, and the union will gain from getting. The problem is that in the real world, almost nobody’s average. A good compromise, famously, is one where everyone goes away equally unhappy. With a union, you don’t just have to compromise with an employer, but also with all of the other workers.
You Become a Cog
With a union, you must settle for:
What the average worker is worth…
Diluted by what benefits the union management and corporate management negotiate.
You also lose the power to be paid for your effort, quality, ideas, and unique traits.
Right to work states protect your choice to not join a union, even if there is one at the company where you work
For example, you may be willing to work extra-hard to make more money, or have more job security. You may not even need to work hard; there may be some special part of your occupation you’re particularly good at.
But most unions avoid the idea of being paid for how well you do the job, replacing it with being paid for how many years you’ve worked. What could be a worse system of payment than this?
Of course it’s bad for the customers, because quality falls by the way-side…and therefore is bad for the company, as its profit depends on that quality. But it’s also bad for you, the worker, whose efforts become meaningless…just hang on to the job for as long as you can, that’s the only way you can make more money.
Likewise, no amount of effort can protect you from being laid off during the slow or hard times, with a typical union contract. You could be the very best at your job, but if you’ve only been there a few years, you’re out the door.
The Worst Kind of Middleman
It’s bad enough that unions harm companies, consumers, and society by causing unemployment, playing insider favoritism, price increases, inefficiency, low quality, reducing non-union worker pay, and other means, plus all the above disadvantages to union members, but what do you gain, in return for this?
- The right to be forced to pay union dues, whether you find them worthwhile or not.
- The privilege to have part of that hefty fee spent to bribe government officials with policies you probably don’t actually like, and be punished if you object.
- The fortune of having some of the rest divvied up among the secretive, corrupt union management and their cronies and masters, for no apparent reason whatsoever.
- Oh, and the joy of having yet another Tyranny of the Majority government ruling over you, in the form of that union’s quasi-elected crony management.
You have a right to set your own standards, not depend on a bullying middleman
It’s no surprise that unions actually reduce real household income.
Not a Number, but a Free Man
The reason most of us eschew labor unions like they’re a porcupine who recently attacked a skunk’s posterior, is that we really are better off as free people, than as vassals of a collective, whose real function seems to be the profit of its “leaders”.
In other words, I’d rather protect my right to earn pay based on what I’m worth, not my seniority, and not be given useless token “compensation” that sucks part of it away, like hourly coffee breaks and a dubious promise of unreasonably high, distant retirement pay, I probably won’t see, once the union bankrupts my employer.
Wouldn’t you?
Words of the Sentient:
Unionism seldom, if ever, uses such power as it has to insure better work; almost always it devotes a large part of that power to safeguarding bad work.
– H. L. Mencken
– Henry George
The Tyranny of the Majority, vs the Unanimity of Liberty
T
he Founding Fathers despised democracy. They called the idea of 51% voting to impose its will the “violence of majority faction“. Poor Thomas Jefferson spent a great deal of effort and political capital proving he wasn’t a closet democrat. When writing Democracy in America, French philosopher Alexis DeToqueville coined the phrase Tyranny of the Majority referring to an idea from Plato’s Republic.
Majority rule imposes the will of a mere half of the population, plus one vote, upon minorities in each issue.
It is just as wrong to violate someone else's rights, even if you outnumber them and have a vote
You need only to look at how this impacted blacks in the US to understand how evil majority rule over the minority is.
The Founders sought to solve this problem, by banning democracy in America, setting up a Republic where the majority could never legally vote to violate the natural rights of the minority. The only powers allowed to the Federal government were those listed in the Constitution, with the 9th and 10th articles of the Bill of Rights banning it from doing anything else, even if the majority voted for it.
Majority as Consensus
Of course the Federal government has been corrupted enough to overstep its legitimate authority, but that’s another article.
The modern apologists for majority rule, who unfortunately have managed to get the word “democracy” spun into a positive thing in public schools, defend their tyranny over minorities by saying “hey, at least we can be sure that there isn’t a larger group who opposes a vote, than the group who supports it”.
Advocates of liberty, though, object that you still should not violate the will of ANY people, in a free society. They say that you have no more authority to violate the rights of another because you are a large group, than if you are one man trying to impose your will on your neighbor. At least not legitimately.
Of course, the obvious retort is “hey, the only way to solve the problem of having minorities on issues is to have a unanimous vote…and that’s impossible! If we depended on unanimity, then nothing would ever get accomplished at all!”
But this isn’t true:
Unanimous Self-Government
A free market is based, purely, on unanimity.
This is because the fundamental principle of liberty is private property:
Each person is a government of one, over his rightful possessions, starting with his own body.
But if someone wanted a vote on what everyone in the country is going to have for supper tonight, the odds are that he would not be able to get everyone to agree on the same thing. So if this were a power of the government, up to half of the population, minus one vote, would have their right to choose what to eat violated.
Of course that’s if there are only two options…which is a sort of farce of an election in the first place. With a real selection of all things people might reasonably desire for supper, probably more than 99% of people will be forced to eat something they would not have chosen.
And, let’s face it, with how goofy people are, you’re almost always going to end up being forced to eat something you don’t even like, much less want for tonight.
Eccentric sitcom character Mrs. Slocombe used to emphasize a decision by saying "and I am unanimous in that!"
On the other hand, if each man governs his own life, as in a free market, then you may choose not only exactly what to eat, but even when to eat it.
Every time you are hungry, there is a vote, and you are unanimous. Sure, it’s limited to what you can afford, but what better way to determine what a meal is worth than that? Imagine if the majority were always voting themselves caviar and steak, bankrupting society.
With majority rule, you only get rare input at all, and only one option is selected, with most people being losers in the process.
But with the free market, you vote every instant, of every day, and are able to reverse yourself at will.
Of course, this also applies to groups, not just individuals, because their membership is purely voluntary, unlike an authoritarian government:
Sure, your chess club or paintball team may have majority votes, but your participation in them is purely consensual. Each moment of your life, you are free to leave, and if you stay you are voting unanimously for your own membership.
If you leave an organization in a free society, they are not going to blockade your house until you’re forced to fire on them, and then claim you started a hostilities, invade, and conquer you.
If the majority of your local town council votes to condemn your perfectly sound family home, just to put up a strip mall that will bring them more tax money and campaign contributions, it does this in violation of the unanimity of private property rights, and you can’t simply withdraw your membership.
Don’t worry; in two years you’ll be allowed to cast a single vote against at least one of those politicians who stole your home…if you still live in town, and at a legal residence, not in a cardboard box.
You might even try to get 51% of all voters in your city to set aside all other issues and vote for the single challenger to each of those bad politicians.
Of course, if your private property rights were protected as they should be, you wouldn’t be in this predicament. Maybe you should just push for laws protecting those rights in general, so such things couldn’t happen in the first place.
While majority rule imposes tyranny over minorities, capitalism, through private property rights, protects even the smallest minority, that of the individual, with unanimity.
Words of the Sentient:
The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate.
— Milton Friedman, The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine
Measures are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority
— James Madison, Federalist Papers #10
Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There was never a democracy yet that did not commit suicide.
Check out the Worker’s Rights Manifesto
You and I, as a workers, have certain rights that are naturally ours, and that nobody should be allowed to violate. These rights are choices we are free to make, unless the powerful try to steal them.
The right to work for the amount we choose.
What we earn should be a matter between ourselves and our employers, not something controlled or approved by some government…more
The right to work for whom we choose.
Where we work should be a matter of which job offer we accept, not controlled by some law or.…more
The right to keep the product of our labor, and do with it as we choose.
The product of our labour is the amount we agree to sell our services to an employer for. It is ours by right, and any authority who takes it from us for their own purposes is wrong.…more
The right to decide how we work.
What if we don’t want three weeks off, but would like a little extra pay, instead? What if we want to buy health insurance with a huge deductible for two hundred bucks a year, instead of paying two hundred bucks per month for full insurance, because we have a lot saved up in the bank in case we get sick? Nobody should be able to.…more
The right to work the way we choose.
We have a right to decide what is “safe”, for ourselves, instead of.…more
The right to become owners / management, and be proud of it.
If we work hard, and make the sacrifice of saving our rightful income (product of labor), or work in our own time to create a great new idea, we have a right to invest it to create new wealth.…more
Where’s the Hyperinflation?
When the unaccountable, secretive arm of the banking industry known as the Federal Reserve started lending itself (the banking industry) billions of newly invented dollars, late last year, responsible people all over America were horrified.
Some of the soundest economic minds even started predicting “hyperinflation”.
Well, it’s been three quarters, now…soon it’ll be a year.
“Where,” other people are saying, “oh where is that oh-so-scary hyperinflation?”
The answer comes in several parts:
What is Hyperinflation? Hyperinflation is a specific thing. It’s not the three percent inflation we normally “enjoy”, any more than it’s a flavor of cream pie. We must define what it is, in order to know if it happens.
What Causes Hyperinflation? Having defined it, we need to know if the things that cause it are happening. The Fed has printed new money for nearly 100 years, never with hyperinflation. Is what happened recently sufficient to change that?
How Long Would it Take? Is it too late? It’s been nine months; are we safe?
Well, Let’s See
What is hyperinflation?
(caption: An actually hyperinflated currency; the Zimbabwe dollar was so weak that this is a single note for one hundred TRILLION. At the rate it printed money for two months last fall, the Fed would still need over eight years just to print enough to equal this one scrap of paper)
Well, “inflation” is when you increase the amount of money, or the supply of it compared to the demand for goods in society…but when non-economists say “inflation”, they usually mean “prices go up”.
And so “hyperinflation” is just “prices going up really, really fast”. The amount necessary to count is generally said to be “100% per year for three years”, for long-term hyperinflation, or else “50% per month” for short-term hyperinflation.
The most inflation we’ve ever suffered, in the 1970s, was less than 14% per year. Normally, it’s between 2% and 3%.
Right now, prices are going DOWN most months, not up. There isn’t even price stability now, much less price inflation.
But why would prices be going up OR down, in an unhealthy way?
Super-quick history:
Almost exactly 100 years ago, in 1907, the US suffered yet another in a long series of destructive depressions and panics, generally caused by money shortages creating runs on banks, price failures, stock market crashes, et cetera.
But this one was stopped dead in its tracks by a group of wealthy entrepreneurs who made very short-term loans to various financial groups, allowing banks to pay off depositors, et cetera. The result was the downturn cut short, never becoming a full-blown depression.
A brilliant lesson was about to be learned, but unfortunately government prevented that. Instead of a newish industry of short-term finance lenders/insurers springing up, the Federal Government announced it was going to act in that role, from now on. It created the Federal Reserve, which would use its coercive power to print imaginary new money to lend to financial institutions in times of crisis.
(Sadly, it did the opposite; it lent out newly minted money in good times, but tended to cut it off whenever there was a financial panic, which was the only time it was supposed to lend in the first place…this is part of what triggered the start of the Great Depression in 1929)
Well, the Fed is a whole other discussion, of course, so we’re going to skip ahead, now
Today:
So instead of lending out money during a crisis, the Federal Reserve increases the amount of money a few percent per year, lending it out in good times. This is part of why we have (usually moderate) inflation…the amount of money increases faster than the demand for goods, so there’s more money to spend than stuff to buy, and prices increase.
But from 2004 through 2008, the Fed did something it hadn’t done since 1938 when we went off the Gold Standard: It started DECREASING money supply:
(caption: Notice that M1, paper money and electronic money in US banks, shrinks (goes below 0 growth) from 2004-2008)
Notice that the most important line, the red M1, goes below zero (to shrinking money), and stays negative longer than it had been at any but one time in fifty years. And currency (actual paper money) falls lower than ANY time in that span.
This is because M3, which includes money in foreign banks, was going up so quickly: Money was fleeing the US because of our wars, and the 700% inflated oil prices, and our billions in new foreign aid. We would buy oil that should have cost a few hundred billion, but instead cost us trillions, and send the money for that oil to Saudi Arabia, and other foreign countries.
Over the course of four years, this added up to a shortfall of between two and three trillion dollars in the domestic US economy. That money was all overseas.
Here comes deflation
(caption: The Fed's monopoly could never work better than any other monopoly, and now it's produced deflation)
This didn’t even leave enough money to pay for our normal goods, much less allow the economy to grow…plus, of course, the cost of making things was shooting up from the high oil prices, as all things require energy, while there was LESS money to cover that universal new expense.
The result? Deflation, and therefore a money shortage, that led to the economic depression starting in 2008. There was not enough money to run the economy, so prices began FALLING, the US suffering what appeared to be a “loss” of about three trillion dollars. This was simply the change in prices to represent the trillions missing because of M1 shrinking for four years.
The Federal Reserve’s response? It actually CUT its offered money supply in 2008, by refusing to lend to banks suffering financial trauma…once again failing to act in its sole official role of “lender of last resort” as in 1907.
But it couldn’t keep that up, because deflation destroys a market economy.
So, once this cutting off of emergency money caused the banks to start failing, the Fed belatedly loosened its purse strings: It lend out over two trillion dollars to financial institutions, in just a few months.
Is It Enough to be Hyper?
Now if the Fed did this all the time, lending out a trillion dollars each month when the economy was just fine, we might really have hyperinflation.
But, instead, the Fed did this ONE TIME, starting from a money deficit of three trillion dollars.
So, in fact, what it did was produce enough new money to, hopefully, make up for the money shortage.
Being down trillions of dollars, then adding two trillion, could not make prices double every year. Or even once.
Even if there had been no shortage, two trillion is not enough to increase prices by 50% every month, nor 100% every year, because it is a fraction of the many trillions of dollars in our economy, and only happened one time. Hyperinflation requires more money to be printed even as prices are going through the roof, so that people come to expect it and overprice things ahead of time.
But, even if it had been enough to cause hyperinflation, there’s one last big factor:
Time delay.
How Long?
We can’t guarantee that there will be NO backlash from this infusion of money, until about 18 months have passed. Historically, changes in money supply take between 6 and 18 months to hit prices in an economy. It has to gradually spread throughout the system, being spent, invested, and saved over and again, until its full impact is felt and absorbed.
So we have until mid 2010 to see whether there are SOME effects from the unhealthy throwing of two trillion unearned dollars at our socialized banking institutions.
What About Government Spending?
For better or worse, it is actually impossible for government spending to “stimulate” an economy, at all. And since the current “stimulus packages” are financed by bonds and deficit, not the printing of money, they are actually DE-Flationary. Read the above link, to understand exactly why these things are so.
Sorry, Not Even Close
But, ultimately, whatever backlash there is, it cannot be hyperinflation. With an economy of, depending on how you count, eight to twelve trillion dollars, you can’t make prices jump even 50%, even for ONE month (and it must keep happening, to be hyper), by printing two trillion new dollars. Not even if there were not already deflation to counter.
The great danger, to this day, is deflation, not inflation, which can produce a long-term spiral of economic depression. What's worse, is that the Consumer Price Index, adjusted to compensate for annual cycles like Christmas spending and winter energy prices, showed deflation six months earlier than this chart.
Why Stimulus Spending Depresses the Economy
There is a good reason why Bush’s “economic stimulus” plans helped land us in economic depression, and why Obama following that precedent with bigger, badder stimulus plans will do even more harm.
It is the same reason why Japan’s “stimulus plans”, upon which ours were partially based, kept them in an economic depression for a decade, and did the same thing in Sweden.
Here’s How
- Lost Money: Every penny spent is taken from the private sector: whether through taxes; or by borrowing that robs from private investment, so nothing is gained. Then that money is wasted before it’s spent, because of the cost of bureaucracy, red tape, political motivation, and the lack of any control over the benefit of what it’s spent on.
- Crowding Out: The government spending competes with private spending, but has no checks or balances, no responsibility, so that it can crush the private competition out of the market, causing more economic harm instead of helping. It hires away workers and managers with large budgets, yet contributes less. It draws away research and investment from the private sector, et cetera.
- Chilling Effect: Healthy private investment and behavior is seen as punished, as unconditional public spending displaces it. Government spending tends to reward failure, and not to create wealth, while private spending depends upon productivity and success to expand. Bad companies, which do not contribute enough to society to justify their existence, have their ineffective ways perpetuated, instead of being excised and replaced with new competition.
Lost Money
Your Neighbors
Your neighbors are planning to upgrade all of their crappy single-pane, wooden windows to nice thermal-pane replacement windows.
(Don’t ask how I know, just work with me, here…)
Your neighbors, therefore, shall cause the full employment of a team of six carpenters/installers, for one week. And those workers will, in turn, use their pay in ways that end up rewarding others, by spending or investing.
Of course they’ll also be profiting the company that sells windows, which in turn will reward its suppliers by ordering more, et cetera.
Your neighbors will, too, have nicer windows. Their house will be more comfortable. They will save money on their energy bills. And, if they are Global Warming True Believers, they will also feel very good about their effort to save the earth.
All of this benefits society and the economy. Even the feel-good parts.
Big Brother
But perhaps your neighbors will be prevented from doing this, by Big Brotherment.
Maybe their taxes are, or will be, high enough that they won’t be able to afford to buy those thermal replacement windows.
Perhaps, in fact, the amount necessary to upgrade their house will, in fact, be spent on a Stimulus Package, funded by their taxes.
That tax money, instead of being spent on their house, will instead filter through the government bureaucracy. The majority of it will actually be paid to bureaucrats, who produce nothing but paperwork and rules.
What’s left, in theory, will go to some union contractors in Iowa, to finance a Corn Museum. Never mind that Corn makes more money for its producers than any other crop, the government is financing this to “stimulate” the economy.
So a team of three union carpenters will get paid for about five days, based on your neighbor’s tax money. Three, because a majority of the money was lost to red tape, and only five days, because the union monopoly dominating the government contract in question is overpaid.
Better still, once their hourly coffee breaks and four mandatory half-hour breaks are deducted, and you take into consideration the bizarre “safety” rules in their contract, that leave them standing around more often than working, what you will actually get is about the amount of work one carpenter’s could do in five days.
And it will be dedicated to building the 23rd corn museum in the United States.
So the options are:
Free Market
- Your neighbors get a house full of thermal windows.
- Six carpenters get fully employed for a week.
- A window company is rewarded for improving the lives of your neighbors.
- Money is saved on energy.
- The planet is no longer doomed.
Government Stimulus
- Iowa gets 0.01% of a corn museum.
- Three carpenters get employed for five days, to do the work of one carpenter.
- People may, if the project is ever finished using other people’s tax money, get to save an hour over driving to the privately funded corn museum next door in Illinois.
Now a government bureaucrat will, in defense of his precious Pork budget, say “but we can’t be sure your neighbor will buy thermal replacement windows!”
But, quite frankly, we can be just about 100% certain that they will spend it on something they value. I’m not entirely clear on how even pet rocks and full body massages would be any less of a contribution to the economy than another corn museum.
And, seriously, much of the government’s spending benefits society less than corn museums, too.
Bridges to nowhere, two thousand dollar toilet seats, military equipment the generals said they didn’t want, but some senator insisted on funding because it is built in his state, methadone for junkies that is more addictive and toxic than the heroin it is replacing, free benefits for illegal aliens…
Face it, the corn museum was actually an optimistic example of government benefiting society.
Ultimately, each dollar the government spends must come from a dollar ALREADY taken from your pocket, directly or indirectly. There is no stimulation, because it’s just the same dollar. And, worse, YOU would have bought something you felt was beneficial, not wasted it on some bureaucratic make-work project.
Crowding Out
(caption: Buying stuff on closeout from a bankrupt company helps the economy far more than a government check, regardless of whether it saves the bankrupt company)
And let’s not forget that the government’s spending competes with private spending. There is a pressure against private industry, when it’s forced to compete with a government that can forcibly finance a project without any standards for success.
Workers
As noted above, if you are a carpenter, you can get a job where you are paid for what you accomplish, in the private sector, or you can get a job in a government contract where a union monopoly guarantees you more pay, for less work, a coffee break every single hour, and you’re not actually expected to even succeed, or do good work.
With government spending, therefore, one ends up with fewer skilled workers in the private sector.
Research
Better an easy government research job with no results required except regular publication of results, than private sector research, that must actually prove some contribution to society.
This is why things like cancer research and alternative energy research have produced only insanely expensive, ineffective results.
Business
Why build a privately financed corn museum, when there is a public one planned nearby? The free market depends on the pressure of demands, which can be supplied because of the reward of profit, fame, et cetera. All of which is quashed by public competition…producing LESS economic activity, prolonging, or even creating, economic downturn.
Investment
This is even true of investment. Why risk money buying stocks, or investing in any other resource that actually helps create wealth and grow the economy, if the government is issuing trillions in bonds that it can guarantee, at gunpoint, it will be able to afford to pay off?
This is part of why the US stock market is below where it was a dozen years ago; the past nine years of massive growth in government spending have crowded out even investment, depressing economic growth and the availability of money for business and individual use.
Chilling Effect
Capitalism helps society prosper, in part, by requiring that businesses be efficient and useful, or else be displaced by other, better, more efficient competition. Government “stimulus” spending helps bad behaviors and inefficient companies survive, preventing the openings for new, better ways.
Reward Failure
Government spending, too, has to reward failure and punish success, directly. Not just by bailing out failures, but with its own agencies: It would be irresponsible to expand the budget of a project that was already coming in ahead of schedule and under budget. What a waste of taxpayer dollars! Instead, if the agency wants to expand its budget, it must fail. It must show how it is over budget and behind schedule, and how natural this is, how more money and power will help it achieve its goals.
Punish Success
Meanwhile, responsible, productive businesses are punished for their contribution to society.
What if Ford ends up the weakest of the three automakers, because it didn’t take the thirty billion taxpayer dollars and declare bankruptcy? What does this tell companies in other industries, when they’re considering whether to be productive, or else squander money and go crying to the stimulus committees for bailouts?
Government Gangrene
There are hundreds of billion dollars in bad investments, loans, et cetera, that need to simply fail, because they cannot ever be productive. Right now they are gangrene on society’s body, just burdening our health and slowly spreading…but the stimulus/bailout money keeps them from being removed, and even helps them expand, quashing healthy alternatives.
The Solution
In each case, around the world in history, the only way to get out of economic depression was for the government to STOP killing the economy with its fake “stimulus” packages.
Examples
It took Japan and Sweden ten years to figure this out. Some other countries never have, and still are suffering for it.
Even in the US, the government constantly expanded spending to “stimulate” from 1929 through 1938, and only truly enjoyed healthy economic growth when spending and regulation were massively cut in the late forties and fifties.
The opposite of this was the depression of 1920-21, where banks failed, commodity prices plummeted (like housing prices now), the stock market crashed…and the US government did virtually nothing.
That lack of “stimulus” resulted in a depression less than two years long, unlike the decade of the other examples.
Check out the extensive history of economic downturns in the US, for more.
Self-Transfusion?
Ultimately, government spending actually sucks the life out of the economy, increasing and prolonging economic depression, because it must take private money in order to “spend” the public money…as if you gave yourself a blood transfusion by taking blood your left arm and putting it in your right…with the stress of the transfusion actually leaving you weaker than when you started.
Hypocritical Car Dealers’ Whining…
(caption: This car dealer whines about how a car company should not be allowed to lay him off, and then talks about how he laid off 35 employees)
Oh no, the bankrupt automobile manufacturers are ending their association with two thousand car dealerships!
This is unacceptable, because bankrupt companies should never cut costs, nor do anything else to become efficient and remain in business. They should keep all of their employees, business associations, et cetera, even if it means continuing to lose money and vanish entirely within the year.
On the other hand, why are these hypocrite car dealers not doing the same thing?
The ones pandering to a grandstanding Congressional panel today complained that they — the dealers themselves — had to lay off dozens of employees.
One of them said something like “I have been turned into a glorified used car dealer, which…[sob]…cost thirty-five of our loyal employees their jobs! [whimper]”
But…but…why on earth did he not simply keep all 35 of those employees, the way he’s demanding the automaker be forced to keep his dealership?
Every single explanation he might give, if asked this, would translate into an argument for why the automaker needed to get rid of extra dealerships.
Of course, the automakers could have kept more dealerships, if the Obama administration were not undermining their ability to get out of insane contracts with the UAW monopoly.
But, either way, the automakers are SUPPOSED to cut costs, at the cost of jobs and associations.
Or else the car dealerships should not be laying off employees, just because they lost their new car contracts.
And now we see another consequence of the Bush/Obama nationalization of industries...
Fowl-Weather Conservatives?
Beware the Republicans in Name Only, who adopt Conservative jargon only when safely out of power, but believe in socialism.
Listening to all the “Obama is a socialist, someone save us from the fascist state” hubbub going on now from the neocon pundits and politicians, you wouldn’t guess that, for six to eight years, the Liberal/Neocon wing of the Republican party controlled all important aspects of government, and acted almost exactly like Obama is now…if anything, worse.
Where were these frauds, when Bush was the one nationalizing banks, passing huge bailouts, expanding regulations to record size, socializing health care, et cetera?
Why are fake Republican pundits suddenly talking Conservative now, when they were talking Liberal then?
Because now they’re out of power. Impotent, they feel safe arguing for the liberty they despise, simply to get back into power…at which point, history says, they would simply expand government faster than the Democrats.
This happened when Nixon replaced Lyndon Johnson. He signed more Great Society bills into law than his predecessor.
The same thing happened with Bush following Clinton; he expanded domestic spending more in any ONE YEAR than Clinton did in an entire four-year term.
His solution to the Katrina disaster? Throw money at the problem, even when the corrupt Louisiana and New Orleans governments had already been given, for a decade, more Corps of Engineers money per year than the rest of the nation, combined.
When recession hit, or years later depression, both times their “stimulus” packages were Keynesian socialism, even the fake “tax cuts” mostly being socialist tax credits and semi-annual welfare payments disguised as meaningless “rebates” that did not change economic behavior at all.
When Bush crippled our economy with huge new regulatory schemes in health care, shipping, and insurance, these faux-Conservative talking heads were silent, defended him, or even bragged on it.
When he expanded socialized health care more than ever before in US history, with the prescription drug “coverage” that inevitably caused the price of prescription drugs to explode, why were they not screaming “socialism”?
When Bush said that he was banning guns in occupied Baghdad NOT to repress the resistance fighters, but only to “reduce violent crime”, parroting Liberal gun control freaks’ excuses, why did they not scream in horror? Obama has actually spoken more in DEFENSE of the second amendment than either Bush or McCain, and yet they claim he’s trying to confiscate all guns.
Let’s face it, the neocon Liberals in the Republican party leadership, and much of the “Conservative Media”, including talk shows and Fox News, don’t believe a word of what they are now saying. They are, if anything, worse than the Liberal Media…their advocacy expanded government and attacked liberty far more successfully than the Democrats have.
Let’s not get sucked in by their “rebranding” scam.
Like super-Liberal RiNO Bob Dole said, when opposed by all true Conservatives in his 1996 run for the presidency, “if you want a Reagan, Bob Dole can be a Reagan”…to them, it’s all a game of packaging and playing at what true Conservative supporters of liberty believe.
Stop Blaming Capitalism: for Socialism’s Failures
New, Permanent Home!
This article has garnered such overwhelming response, that it has been given a permanent place, here.
The page below is now only a quick summary, with the details and citations moved to the real page.
HMOs, the health care crisis, strip mining, robber barons, deforestation, SUVs, “global warming”, world hunger, unemployment, inflation, periodic recession/depression…what all have in common is that Big Government is the cause, but your economic freedom is blamed.
Politicians tend to force bad government programs on us, which then have destructive side-effects, usually the opposite of what’s intended, and then saying the effects were caused by whatever freedom of choice is left over, and trying to take that away.
Included in the list of such failures:
- HMOs
- The Housing Market / Sub-prime Mortgage Bubble:
- SUVs
- The Savings and Loan Bailout
- Bailouts
- Robber barons, Strip Mining, Deforestation
- Corporations
- Monopolies and oligopolies
- Oil / Gas Prices
- Energy Prices
- Hunger
- Automaker Bankrupcy
- Alternative Energy
An entire group founded around this topic, including extensive discussion of it, can be found at Stop Blaming Capitalism, for Socialism’s Failures
(It's amazing how many things government forces on us, which are then blamed on our freedom)
Unemployment Benefits INCREASE Unemployment
The recent increases in unemployment benefits, rather than helping fight unemployment, have actually increased unemployment dramatically
Subsidies Cause Surplus
If you wanted to have too many apples, you could simply get the government to pay billions of dollars to apple growers. You can do this with almost anything; it’s called a subsidy.
Aside from the many problems intentional subsidies always cause, there are many “unintentional” subsidies. Perhaps the worst of these is the unemployment subsidy.
When you give people money for each apple you grow, more people choose to grow apples, and apple growers choose to make more. It creates an imbalance, producing more apples than the society really finds worthwhile.
When you give people money based on how unemployed they are, you likewise cause more people to be unemployed, and people to be unemployed longer. I don’t even need to go into how that creates an imbalance, as (unlike apples) more unemployment is obviously, universally, bad.
Some people, mostly those who have little real-life experience (like a Kennedy or Bush family member) might say “But nobody would CHOOSE to stay unemployed, just for benefits”.
Second, they’re wrong…but I’ll get back to that.
First
FIRST, it doesn’t matter if nobody does it on purpose. When the Fed raises interest rates just 0.25%, fewer people buy houses. Not one human being actually says “I am not buying this house, because the Fed raised rates by a fraction of one percent”. It isn’t even raising home loan rates (it has no control over those), just the rate at which it lends to banks. Yet the trickle-down effect is fewer homes bought, in part because home loan rates creep up a tiny bit.
The same is true of unemployment. There is a trickle-down impact, over the span of 300,000,000 people, where some stay unemployed longer, and more BECOME unemployed, because unemployment is subsidized. As even a tiny increase in home loan interest rates invisibly pushes a few people over to the side of not buying a house, an increase in unemployment subsidy pushes a few people over into being unemployed.
Over the span of hundreds of millions of people, that is dramatic, in both cases.
And now we can get back to “second”:
Second
The ivory tower “nobody would choose to stay unemployed” people are wrong.
People DO choose not to work because they know they have an unemployment buffer.
They choose not to work as hard or otherwise volunteer to be the one laid off, choose not search as hard, pass up jobs they would otherwise take, and even actively stay unemployed, because of the unemployment benefits.
We who have real-life experience probably ALL, right now, know people who are doing this. Many of you, in fact, probably have done it. I am a consultant, so I don’t get unemployment benefits, but I’m sure it would influence me if I did.
I certainly have friends who actively cite the unemployment benefits as allowing them to take their time working. I even know someone who says they are glad the benefits have been extended, as they will be able to go for a year without looking for a job, now.
Sure, most states have some sort of fake attempt to require people to look for and take jobs. But there’s no way to actually make this work. It would cost more than unemployment benefits provide, to actually verify all the claims people make on their “looked for a job” forms. And any cheaper means of proving it would be draconian against all the people who were honest.
The Unemployment Subsidy
So yes, that’s exactly what the Liberals’ unemployment extension has done:
Increase unemployment, by subsidizing it.
We will have higher unemployment rates, and suffer this depression longer, because of the benefit increases. Yet another example of government’s coercive “help” making the problems they attack worse, instead of better.
Attacking AIG-style Bonuses Will Cause MORE Companies to Fail
Recently, I wrote an article about how Golden Parachutes are important for our economy, instead of bad.
And yet now we have people objecting to AIG fulfilling its contractual obligations to people who might otherwise have abandoned the company to collapse years ago.
This needs to be re-explained, in simpler, clearer terms:
- If a company is struggling, it needs the best people it can get, in order to TRY to save itself.
- If you are the best man for the job, then you don’t need to work for a struggling company. You are almost certainly going to choose a healthy, growing company where your job is secure.
- In order to obtain your services, a struggling company must either:
- Offer you far more money up front, which it probably can’t afford to do, or
- Offer you protection against the company failing, like a bonus that you will get even if, or only if, something goes wrong despite your best efforts
- In order for struggling companies to have a chance to survive, benefiting the entire economy and all of we who are in it, you must therefore have:
- The power to offer bonuses in case the company fails despite a manager’s best efforts
- enforcement of that bonus contract, so the potential managers trust it’ll get paid, and
- freedom from punishment for receiving such a bonus
The problem, here, is not AIG honoring a style of contract that is absolutely necessary for the health of our economy.
The real problem here is the same that we face whenever there is government intervention with our taxpayer money:
This form of socialism will always cause conflicts of interest, that will harm the recipient, the taxpayer, and the economy ever more, in a snowball effect.
Think of how people were trapped on welfare, from the 1970s through 1990s.
The government bailed out people in need, but then had to punish them if they ever made any progress in getting out of poverty, because it would be irresponsible to keep paying them the same amount of welfare, when they got even a little of their own income.
Likewise, many state governments violate your freedom of choice on health-related issues, on the premise that those states are paying for some people’s health care. They impose gigantic taxes on tobacco, alcohol, even convenient food, claiming that people who use them are raising government health care costs.
In all three cases, the freedom of private people is violated as a natural domino cascade starting with government taking your taxpayer money, and bailing people out with it.
Our response to this obvious conflict of interest, between bailouts and people’s free choices, should be to legislate against bailouts, not liberty.
Super-Sizing Sour Grapes
What Americans have, even in the midst of an economic depression, is an embarrassment of riches.
When the citizens of other countries complain that Americas eat too much, what they are really saying is “We are jealous of America’s plentiful food”; Despite (or because of) all their redistributive, anti-choice socialist programs, the typical European has less access to food, in diversity or amount, than even the poorest fifth of Americans. Maybe nobody in Europe goes hungry, but they don’t really prosper, either. (facebook readers beware; the rest of the article is after the picture, don’t ask me why that happens)
A Fox found a bunch of grapes, on a vine over a lofty branch. Turning round with a One, Two, Three, he jumped up, but with no success. At last he had to give it up, and walked away with his nose in the air, saying: "I am sure they are sour, anyway." MORAL: It is easy to despise what you cannot get.
And when they say “Americans are too fat”, what they mean is “Americans are more affluent”. Americans don’t need to walk as much, or otherwise engage in as much involuntary physical labor. Even poor Americans have more comfortable homes, more access to cars, more video games and computers, infinitely better television, more leisure, even without the Europeans’ governments forcing them to suffer the pay cut imposed by a mandatory six week vacation every year.
Of course their response to this being pointed out is “more leisure? More entertainment? More living space? Bah! What kind of horrible way of measuring quality of life! People must be equal, not happy, you dirty materialist!” And yet, of course, everything about socialism is materialistic, an endless class war of envy and hate, worrying about who has more than whom, redistributing wealth, controlling our choices. That is the reason Marxists called it the Materialist Dialectic.
But it turns out that socialism traps people in stagnancy and perpetual shortages, while freedom allows people to have many more things. So, naturally, the actual materialists had to turn around and claim that prosperity is “decadent”, and “greedy”. How it can be more greedy than wanting to redistribute other people’s money for oneself, I don’t know.
Americans have a tendency to be hard workers. They are, statistically, the most productive society on the planet…but people, in general, who have access to more food and more leisure have to learn how to balance that with the need to choose to maintain physical fitness. Even if Americans, as a society, do learn that, the percentage of individuals who do not will still drag down the “average”.
An embarrassment of riches is a wonderful problem to have. “Oh no, too many people want to date me!” “Oh woe, I’ve grown so many tomatoes, I must give them away!” “Pitty me: now that I’ve won the lottery, people keep asking me for money!”
Who would seriously choose a life of more hunger, less choice, and more involuntary struggle over one where they need to choose to struggle a bit to stay in good physical condition?
In tests, lab animals that go somewhat hungry live longer. This probably is true of people as well…but what benefit is the added life, if it’s a result of being forced to do with less?
We’re better off being faced with the need to control how much to work out, to watch our diet, et cetera, than being lean because we haven’t the chance to be flappy even if we were irresponsible. To be free to choose whether to life short, fat, comfortable lives, or strive for longer, healthier lives.
Some of us will chose wrong…but that isn’t necessarily limited to the ones who choose leisure.
For some people, the effort may make life less worthwhile. For others, the working to “stay fit” might actually be more fun, as well as healthier.
Americans are free to choose, whereas the victims of socialism in the rest of the world have what is supposedly best forced upon them “for your own good”, in a one-size-fits-all solution. People are better off being free to determine their own size.
That’s why even the most enlightened, economically and socially homogeneous European country still has more citizens wishing to become Americans, than Americans (despite our larger population) wishing to move to that country.
The price of choice, is the risk of mistakes. Even life-altering ones. But, overall, the benefit far outweighs the cost.
Americans can be proud to have the freedom that allows us the prosperity to choose whether to supersize their meals. The reason the rest of the world complains, ultimately, is that they are deprived of even the option. They have super-sized Sour Grapes.
Why Deflation is Bad…for You, Private Property, and Capitalism
Politicians and journalists are worried, right now, about a downward spiral of deflation, of the type that normally comes in an economic depression.
They are pointing to two signs we are having bad deflation…first, the falling price of commodities like oil, and the disappearance of money in this economic failure causing demand to plunge. One of those is actually good, the other is very bad.
When prices go down naturally, because of an increase in efficiency or improvement in technology, it is good for everyone.
For example:
- Improved efficiency makes the manufacture of computers cheaper, while more advanced computers make the old versions cost less.
- Food used to take up most of humanity’s effort, therefore most of a family’s cost of living, but has declined to third or fourth place as technology and efficiency allowed us to grow more with less.
The decline in oil prices, returning to only double their normal level, will cause a good kind of global price decline, because most prices are effected by the cost of the energy required to create and deliver products and services.
But, again, those specific cost reductions are not deflation.
What Are Real Deflation and Inflation?
When money deflates, people choose to just hold onto it, starving the marketplace and causing a spiral of ever more deflation
In real economic terms, inflation and deflation happen when the ratio of money to economic wealth changes. If the amount of money becomes greater, in comparison to the economy, then you get inflation. Because the most common result of this is for prices to increase, we confuse the terms and call general price increases “inflation”, but actually it’s the change in ratio that is inflation.
The eleven trillion-plus dollars of capital that have purportedly vanished in the past few months represent a huge decline in money supply, causing actual deflation. This failure was caused by the inability of central authority to manage money any better in the US than it could provide shoes and food in the Soviet Union.
Prices Can Increase Without Inflation, Too
Prices can actually increase for other reasons, and that’s not really inflation. For example, when oil increased 600% in price, it drove up the cost of production, without regard for the number of dollars in the economy. This general price increase was NOT inflation.
And when prices decrease for other reasons, it’s not deflation.
Inflation is Harmful
We all know that when the ratio of money to wealth increases, causing inflation, it is bad for the economy, and especially for the poor and middle classes. This is because it usually drives up prices, and the poorer you are, the more of your wealth and well-being is in cash.
Poorer people depend on cash they have in a bank, or other savings. They are paid by employers who give them only a set rate, plus raises for special reasons like increased skill.
Wealthier people tend to have more of their wealth in assets like, stocks and real estate, that will simply increase in price, sheltering them from some of the effect if inflation. They get cost of living increases in salary every year, on top of any other raises.
Deflation is Harmful, too
But the opposite kind of damage occurs if you have deflation, and is compounded by a new problem.
First, deflation artificially drives down prices. To a person with no real assets or investments, this sounds good, because “stuff costs less”.
But it comes at a horrible price.
Deflation punishes investments that can raise people from poverty, both personal investments, and business growth
For example, the decline in prices includes wages. Deflation is universal, with a shortage of money everywhere, so that your income will decline, along with the price you pay for things. What good is cheaper stuff, if you also have less money?
So people with fewer assets and no investments will more or less end up breaking even. But they still lose out in the end, because they become blocked from gaining assets, trapping them in relative poverty.
For example:
How Deflation Traps the Poor and Middle Class
Imagine you’re buying a house. Not on a sub-prime loan, but one where your income is perfectly fit for the home you’re getting.
It’s probably a thirty year loan. So you’re going to be stuck paying on the original price of your house, for thirty years, at the original size of house payment.
Now remember that your income (in dollars) is getting smaller every year. That’s deflation.
And the price of your house, too. Each year, its is worth fewer dollars, yet your original debt is the same. And so are your payments.
Within just a few years, you are making far less money, but are stuck with the same size house payment you always had.
While you still have to pay the same percentage of of your paycheck income for food, electricity, and so on, your house payment takes up a higher percentage of that money every year.
Soon, your income has shrunken to the point where you cannot make your house payment at all. Not even if you paid your whole check to the bank every week.
And worse, you can’t simply sell his house to get out of it. The price of your house has also declined every year. Selling it now that the payment is too high won’t even pay off your remaining house debt.
Of course people would quickly learn this, and that they simply cannot buy houses, unless they are so incredibly wealthy that they can save up enough to pay cash.
But even those wealthy people who can pay cash for a house now face the situation where buying a house is a horrible investment, because the house’s value will decline, in dollars.
It would actually be better to leave the money in a vault, and rent monthly, even for a billionaire, because the money’s value increases, while the house’s price declines. One thousand dollars will be worth more next year, if you simply stick it in your mattress, than one thousand dollars worth of house will be worth in that same year.
In fact, owning land becomes a losing proposition. With even the wealthy better-off renting, who’s going to actually be the landlord?
Deflation Attacks Economic Freedom
In fact, ALL property ownership becomes punished!
With deflation, anything you buy does not just depreciate with use and age, but declines in value every year with prices, compared to if you’d simply kept the money.
Today, you could buy that console game, or car, or collectible, and then sell it on eBay a few years from now and recoup part of the cost. But with deflation, the price you recoup is even farther from if you’d kept the cash in the first place.
Deflation Destroys Capitalism
Deflation punishes investment and property ownership, attacking capitalism at its roots
In fact (and this is where the entire economy implodes from deflation), simply holding on to your money is rewarded versus ANY investment, in a deflationary economy. If you put your money in a big ol’ vault, removing it from the economy entirely, it grows in value every year. But if, instead, you buy stocks, or invest in commodities, then your money is gone, replaced with an asset that becomes worth less every year, in dollar terms.
The growth of every business, in fact, would be undone by the rate of deflation. Now from the company’s standpoint, that is fine, because its expenses decline every year by the same amount.
But from an investor’s standpoint, a company growing at 2% per year during 3% deflation would mean you lose 1% over just stuffing your money in a safe. And yet you also risk, when investing money.
Why bother investing even in a company you think might grow at 5%, when you could have a 100% safe 3% investment in a vault under your mattress? So, really, the company facing deflation is NOT fine, because it discovers that it’s far harder to get investors. In fact, the entrepreneur who would have started that company is 3% punished each year for the effort, making him that much less likely to even bother.
With investors discouraged because of deflation, it becomes harder to create wealth. Capitalism, in fact, becomes almost impossible:
- An entrepreneur can’t get investors for his new project.
- There’s less reason to buy stocks, so companies can’t raise capital.
- You can’t get a loan to start a business, because your company’s income would decline every year, yet the loan payment would stay as large as ever.
With deflation, the very engines of capitalism all die out.
Speculation Defines Capitalism
It is the uncertain investment on the wild new idea that makes capitalism superior to central planning. Anyone can decide to invest in a “sure thing”: if that were good enough, socialism would work, because a government bureaucrat could declare money for the obvious solution. It’s diverse people choosing to risk money on many different wild ideas that lets the best solutions rise to the top.
But that very kind of capital investment, in a deflationary economy, is punished, because you get such a good deal by not investing in anything at all, but holding your money in a vault.
All of this, by the way, is aside from the additional destruction caused by the lack of downward price elasticity on many commodities and time-based investments. That’s much more arcane, but a key source of economic depression, that I’ll get into some other time.
For now, it’s enough to realize that prices being FORCED downward by deflation includes your pay, and the value of any investments you make, so that private property ownership, borrowing, and investing, in fact all capitalism, is crippled under deflation.
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This site has its origins before the word “Blog” existed. Back then its owner, Kaz, was simply thought of as having a website that published socio-political articles with regularity…But the only real difference was that the RSS/XML protocals were not yet used this way.
The website was known as Site of the Sentient, a reference to the famous Words of the Sentient, that Kaz had been editing for years previously.
When some random portal site hijacked the domain siteofthesentient.com, it was a dark time for the human knowledge quest. Fortunately, But Now You Know is striving to take up the slack, and even has some revamped versions of the original articles, for example Conscription, is it Slavery, and How to Get Out of Jury Duty, and be a hero instead of a bad citizen.
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