Author Archives: Quincy

The Need for Deflation

In a follow-up on Tarran’s excellent Primer on Money, I’d like to take the opportunity to bring the lessons to bear on our current financial situation.

Tarran correctly points out what has happened with the US Government and its ability to control the money supply:

Today, the United States government has engaged in massive amounts of spending. They are not getting this money through taxation. Rather they are borrowing it, and a good portion of what is being borrowed is money created by the Federal Reserve.

As Milton Friedman pointed out, inflation is always a monetary phenomenon. Here’s my quick and dirty example of inflation:

Imagine if you were in a poker game with four other people. You each put $50 in. That means there’s $250 on the table. Now, you’re playing with chips instead of cash. The banker makes sure each of you get the equivalent of $50 in chips. So far, so good, right?

After a while, the guy sitting to your left starts losing chips on some bad bets. He’s not wiped out yet, but he’s not doing great either. You start watching him more carefully as he continues to lose money. Suddenly, through the buzz you’ve got going after four beers, you realize that he should have run out of money two hands ago. He’s been adding chips to the game! Worse, they look identical to the chips used by the banker.

You call the guy on it, and the rest of you decide it’s time to cash out. There’s a problem, though, because now there are more chips than there is real money. In other words, your chip supply has been inflated beyond whatever value was backing it. So, to cash out of the game, you would have to adjust the value of the chips so that all the chips added together equals $250, now making each chip worth less than it was before.

In this example, by introducing more chips into the game, our cheat was able to steal a little bit of money from each of the other players in the game to continue his play after the point he should’ve been bust. His deliberate inflation of the chip supply was theft.

Now, take this example and apply it to what happens when the US Government demands freshly-printed money from the Federal Reserve for spending. All the other dollars in circulation lose a little value upon the creation of that new money. In other words, the US Government has gotten the Federal Reserve to steal a little bit of buying power from your wallet, bank accounts, and investments by forcing them to print new money. That’s theft!

It’s theft in reality, but because of the party committing the theft, we have a special name for it: a tax. So, in the case of the US Government, inflation is taxation.

But, that’s not all that’s been going on. » Read more

Bush ignores Congress…

…again. When Congress couldn’t come to terms on a bailout for the big three stooges, President Bush had to make sure it got done:

President George W. Bush’s decision to provide up to $17.4 billion in short-term loans should help General Motors Corp. and Chrysler LLC avoid a short-term cash crisis, but it will force them to dramatically change how they operate – or face bankruptcy.

No one should be surprised by this. The question is whether or not Obama will be inspired by this to continue the imperial presidency “for the good of the economy”. Your thoughts?

It’s the dollar, stupid

So, GWB and San Fran Nancy have been sniping at each other over the nation’s economic malaise. Who’s to blame? He says inaction by a Democratic congress is to blame, while she says his administration’s incompetence is to blame. Well, as entertaining as this tussle is, they’re both wrong.

Fabius Maximus has a good post about rising commodity prices, in which he reminds me about this truism from Milton Friedman:

Inflation is always and everywhere a monetary phenomenon.

Combine this thought with the following observation from Larry Kudlow:

Whether it’s energy, wheat, grain, corn, or whatever, since these raw materials are priced in dollars on global markets, a strong greenback will reduce commodity prices. And that, in turn, will lower both consumer and producer inflation. This would help corporate profits and would boost the purchasing power of wages.

In other words, a strong dollar would relieve gas prices and boost the economy. But so far as I know, the president never mentioned the dollar. And I don’t think any of the media people asked him about it.

The media has this recession exactly backwards. Every day, I hear the talking heads say that oil prices and food prices are driving inflation. They’re being driven by inflation, meaning they’re being driven by the likes of Bush, Pelosi, and every other big-government politician on Capitol Hill (a.k.a., the porkers).

The federal government has the absolute power to stop this recession. Do they have the discipline or will to do so?

The FBI Hyperlink Honeypot, and what you can do to stay safe

This post is intended to help internet users who make legitimate, non-criminal use of the internet avoid being caught by the FBI’s hyperlink honeypot. While there are methods that can be used to cover deliberate criminal activity on the internet, I will not post them here.

Declan McCullagh brings scary news of the latest tactics from the FBI (via Instapundit, via Classical Values):

The FBI has recently adopted a novel investigative technique: posting hyperlinks that purport to be illegal videos of minors having sex, and then raiding the homes of anyone willing to click on them.

Undercover FBI agents used this hyperlink-enticement technique, which directed Internet users to a clandestine government server, to stage armed raids of homes in Pennsylvania, New York, and Nevada last year. The supposed video files actually were gibberish and contained no illegal images.

This is serious stuff, and not for the reasons you may think. The FBI is operating from the assumption that one IP address equals one household. It’s also operating from the assumption that all HTTP requests are user initiated. Both are wrong.

First, with NAT routing and WiFi, one IP address could be several houses, or even a sizeable chunk of an apartment building. The way most homes are set up with broadband and wireless is pretty simple and extremely open to abuse. The broadband connection comes in the home and has a single IP address. The device closest to the connection is a modem, which acts as a bridge between the home network and the broadband provider. The device after that is a wireless router, which takes traffic from all devices that connect to it and channels it to the modem.

This means that, to anyone on the other side of the modem, like web sites, your ISP, or the FBI, all the traffic looks like it’s coming from a single source. Since someone has to pay for that broadband connection, all the traffic is automatically assumed to come from that person. So, as a user, it’s in your best interest to be in control of all the traffic going over your internet connection, which leads us to…

TIP #1: Lock down your wireless network with WPA

In a utopian world, free love and free WiFi might seem like wonderful things. With creeps running around and the FBI trailing after them, not so much. Since people are actually getting jailed for clicking on hyperlinks based on their IP address, it’s time to get serious about making sure only the people you want get on your network.

WPA stands for Wireless Protected Access, and it is the only secure way to prevent access to your wireless network. WPA works using a pre-shared key (PSK) of up to 63 characters to encrypt network traffic. This means that any device must have the key before any traffic can be sent or received on the wireless network.

(Don’t confuse this with WEP, which is so-called Wired Equivalent Protection. WEP has been thoroughly broken and can be cracked in less than 5 minutes.)

If you need a good, strong password, I highly recommend visiting GRC’s Perfect Passwords page. This page provides extremely secure pseudo-random passwords that make password attacks almost impossible.

If the FBI can’t tell what behind an IP address accessed a given URL, they probably can’t tell whether the user initiated the access or whether the machine did automatically. In addition to making sure that there aren’t machines on your network doing things out of your control, you have to make sure there aren’t things on your machine doing things outside your control. This brings us three more tips…

TIP #2: Scan your system for viruses and malware

Any software on your system can request any web address at any time. Well-behaved programs only do so at the user’s command. Malware, however, doesn’t. Most malware running today exists to use compromised machines as a platform to run the creator’s software on a mammoth scale, usually to generate spam. (You didn’t think there were actual people typing up those ads for Vi4g00, did ya?)

A piece of malware could very well access a honeypot link and get you, the user, into trouble. So, install that anti-virus software and run it, often.

For those who don’t want to load down their (Windows) systems with bloated software like Norton or McAfee, I personally recommend Avast‘s free anti-virus. It’s lightweight and does a good job of catching crud.

Also, no matter what anti-virus you use, be sure and keep your software up to date. Anti-virus software works best when it has the latest virus definitions.

TIP #3: Turn off the preview pane in your e-mail program.

This one’s an inconvenience, but it’s important. If your e-mail program is rendering e-mail without your specific instruction, it’s accessing addresses without your specific instruction.

Every time an e-mail has an image or other embedded content, your e-mail program has to fetch it from the internet. If the FBI were using a JPEG image as the honey pot, all it would take your e-mail program rendering an HTML e-mail with the image in it to make it look like an attempted access.

Once the preview pane is turned off, it’s still your responsibility to delete suspicious messages without opening them. (Hey, sometimes it’s tough to do. Personally, I’m always open to a little chuckle from the latest generic drug scams and variations on the always classic Nigerian money scam. Now, I’m going to behave myself.)

TIP #4: Turn off link prefetching

If you use Mozilla Firefox, iCab, or Google Web Accelerator, your computer is accessing links without your knowledge. This feature is called link prefetching. In a perfect world, this would be a good thing for the user. Not so when a person can be arrested for being associated with the IP that accessed a link.

Here are the directions for turning off link prefetching in Firefox. Google Web Accelerator should be completely uninstalled to prevent prefetching.

These are just the things I can come up with for preventing accidental ensnarement in this despicable FBI trap. I’d appreciate any more tips and tricks for preventing you might have.

Also, for those with a larger interest in security, I highly recommend Security Now! with Steve Gibson and Leo Laporte. It’s a weekly podcast that deals solely with security, and the archives are a wealth of information.

(If you have a few minutes, please come by and check out the new blog at http://pith-n-vinegar.blogspot.com/)

Thank you, Mr. Governor

An open letter to Gov. Schwarzenegger:

Mr. Governor,

I thank you for making my life harder. By allowing a minimum wage increase, you are ensuring that my money, as well as the money of every other Californian, will buy me less. Fortunately, I don’t have to worry about much, since I’m not in the unenviable position of deciding between food, rent, and medicine. There are many in California who are in that position. You’ve just made their lives harder as well. You’ve made their food more expensive. You’ve made their medicine more expensive.

You are probably wondering how you’ve done this, aren’t you? Well, by capriciously deciding that the labor of minimum wage earners should be worth more, you’re sending ripples throughout the entire economy. You’ve forced business to pay more for the same thing. Who will bear the cost of this? Business, you say? Where is business going to get the money to pay for this? You don’t know, do you? You think that they’re just going to make less profit? As we all know from listening to the media, every business has plenty of extra profits to just spread around. Well Governor, I thought you’d be a little smarter than the second-rate socialists masquerading as our State Senators and Representitives. Apparently, you’re not.

Or, maybe you are smarter than they, and you do know that the citizens of California will end up paying for this, but you think that appeasing the left is worth the price. Either way, please open your eyes. You say you will stand up for the working people of California. Then do so. Stand up for us by not making us pay the price for feel good measures like minimum wage increases. Don’t make them pay more for food, medicine, gasoline, and everything else. You see, we are the ones who will pay this new minimum wage. Not businesses. We, the working Californians, are the reason most of the businesses here exist. They serve us because we pay them to. Now we will be paying more for their services. Can we look forward to another ten cents a gallon, another dollar per movie ticket, another quarter per loaf of bread because of this abomination? Absolutely.

The economy, as much as it can be viewed as a single entity, is a vast matrix of transactions based on worth. If you distort some of those decisions through the force of law, the people making other decisions will make them differently in reaction. The supermarket owner who has to pay employees $1.25 per hour more will raise the prices of his products to adjust, or he might fire an employee. Either way, the effects of this decision will ripple through the matrix and the whole will find a balance acceptable to those making the decisions. The force of law is not enough to overpower the judgement of millions of people acting in their own interests; it will never be.

Please, Governor, let your own judgement and your observation of reality be your guide. Rise above petty partisan games, and don’t repeat the same mistakes of your lamentable predicessor. If you can’t, we will all be worse off.

~A Concerned Californian~

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