Category Archives: Currency and Monetary Policy

Cost is NOT Price, and Neither Cost, nor Price, are Value

Prices Provide a Misleading Measure of Dollar Devaluation
Forbes Magazine Online – Keith Weiner

There’s not a human being alive who doesn’t know the dollar is falling. Everyone over 25 has stories of what prices were like, way back when (and younger people have heard them). I remember when gasoline was 60 cents a gallon, and my mom remembers when it was 20 cents.

Federal Reserve Chair Janet Yellen acknowledges the official objective to push the dollar down by 2 percent per year. This intention is behind the Fed’s ill-conceived loose money policy.

It’s important to measure each drop. This is not just to keep a scorecard on the Fed, but because a change in the dollar skews historical comparisons and distorts business decisions, like giving increases to workers and pensioners….

Read the whole piece, and then come back…

The thesis statement of the piece is correct, in that prices provide a misleading indicator of currency valuation (and that our weak dollar policy, as pursued by every administration since Bush 1 to some degree or another, is fundamentally wrong and destructive for that matter).

Unfortunately the author suggests that simply using a different price denomination and comparison (to gold) is a less misleading indicator… In this, he’s absolutely incorrect.

What you really want to compare is purchasing power parity (PPP) as measured by equivalent standard of living, expressed as a dollar cost in constant dollars normalized to average labor hour wage or compensation.

i.e. this item costs 5 minutes of average labor, this costs 8 hours, this costs 20 years; the cost to maintain this equivalent normalized standard of living across an aggregate population is 1940 hours of median labor wage etc… etc…

Note, this is NOT an expression of the fallacious labor theory of value, it is an explicit measure of purchasing power parity as actual cost, INCLUDING opportunity cost (in terms of time), not currency denomination.

The critical function isn’t price, and it isn’t wage… it’s cost, in this case expressed as a cost to value ratio as a normalized dollar (to make it easy to relate to wages and prices).

Cost is not price; it’s a totalized measure of inputs including resources, time, and opportunity.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Ron Paul: Bitcoin Skeptic

The virtual currency known as Bitcoin is beginning to become accepted by more and more businesses even beyond underground websites such as the recently shuttered Silkroad. Overstock.com is among the more ‘mainstream’ internet retailers to accept Bitcoin (Overstock.com sold $126k in merchandise in Bitcoin the first day of Bitcoin sales) and a few Las Vegas casinos have jumped on the bandwagon as well. No doubt there will be even more merchants participate in this experiment in 2014.

Many in the liberty movement are very bullish on what they believe is or will be an alternative to the dollar but there are a few notable skeptics within the movement. Among the high profile Bitcoin skeptics are Peter Schiff and Ron Paul.

Just over a month ago, Ron Paul expressed his skepticism of Bitcoin in his weekly podcast (Episode #43).

I’m suspicious. I don’t fall into the category and say ‘Hey, this is it. This is the solution. This is going to replace the dollar.’

One time somebody quoted me in the media saying ‘I believe that Bitcoin was going to destroy the dollar’ and that’s not quite my position. But the Bitcoin could be a participant in a process where the dollar destroys itself…or that is the Federal Reserve policy destroys the dollar. Then people have to leave the dollar and go into something else.

Ron Paul went on to say that he believes Bitcoin (along with any other medium of exchange) should be legal currency for those who wish to accept it as such but wondered out loud why the government hasn’t cracked down on Bitcoin in a significant way.

The reason I’m hesitant to say ‘Hey, this Bitcoin sounds like the answer’ is that it’s hard for anybody who knows a lot more about Bitcoins than I do to tell me what it really is. If I had to, and you had never heard of gold as money I could show you a gold coin and you could put it in your hand and you could feel it and then we could look at some history. That’s not the case with Bitcoin.

[…]

But right now the Fed hasn’t come down hard on Bitcoin so you wonder what’s going on. Why haven’t they? Because I am absolutely convinced that the federal government and our central bank does not permit, will not permit competition in currencies. They’re not going to let you and I mint some gold coins and put them out in circulation. You can go to jail for that. […] It must not seem at the moment to be a threat to the Federal Reserve and to our system.

Paul also expressed some doubts that Bitcoin could become a preferred medium of exchange with a crash of the dollar:

This is why Bitcoin is around is to offer an alternative [to a weak dollar]. […] I’m a skeptic on that but I certainly think it’s fascinating. I try to keep up with it the best I can but I would feel much better having some gold coins in my pocket than a little computer that I can carry around and recover my Bitcoin. I wouldn’t feel very secure doing that.

However one feels about Bitcoin, I think it’s important that Ron Paul’s views on the subject be reported accurately. I’m personally intrigued by Bitcoin and hope it turns out to be everything its supporters hope but I do think some skepticism is warranted (for the reasons Paul gave and more). I certainly wouldn’t put all my eggs in the Bitcoin basket but I wouldn’t worry about a little experimentation.

Defunding and Debt Limits and Shutdowns Oh My!

Welcome to the sideshow folks…

Step right up and enjoy the posturing, rhetoric, and antics of our congressional clown crew…

Over to your right you’ll see the amazing vocal endurance of Republican Senator from Texas Ted Cruz as he tosses red meat to the base…

… To be serious, there are a large group of people, who don’t understand why the rest of us consider what Ted Cruz did (a 21 hour “filibuster” of a motion in relation to items within a continuing resolution for funding the federal government for the next six months), both harmful to the country, and nothing more than grandstanding.

For them, it looks like Cruz was (in the composite words of many Americans on the right):

“Taking a brave and principled stand against the funding of a bad law that will harm our country.”

In reality, he was doing no such thing.

Cruz is being maligned by his own party because he was being a clown. This “filibuster” was nothing but a clown show.

It may be viscerally satisfying, but it’s idiotic. It will do absolutely NOTHING for the Republicans, of for those against Obamacare, except throw red meat to the stupider side of the base.

This is underpants gnomes strategy.

Step one: “Non-filibuster a piece of already passed legislation that I can’t stop by doing this… but that’s OK I wasn’t really trying to, really I was just trying to get media attention and attract donations from the less intelligent and aware side of my political base”.

Step two: … uh….

Step three: Electoral Victory?

“But, one brave man, standing up for what he believes in, can do amazing things. A small group of patriots can change the world, just look at the American revolution.”

No, they can’t. No guns involved in this one. No big foreign war distracting the occupying power. No actual fight going on among the actual fighters… just a series of bargaining and trading; while the rhetorical fight goes on among the spectators.

It may be emotionally satisfying rhetoric, but that’s all it is, rhetoric.

You are not a member of the patriotic few, bravely standing up against the despotic elite, risking all for freedom.

In fact, unless you support drug legalization, getting the state out of marriage…and almost everything else… giving up legislating morality and goodness entirely… You AREN’T EVEN ON THE GOOD GUYS SIDE.

You’re just another guy on the badguys side, who wants the badguys to tax the tea a little differently.

Oh and as “just another guy”, you actually aren’t on their side at all…

You’re a spectator rooting for your team from… not even the stands… from the comfort of your own home; with the game streamed lived via satellite into your living room.

“But what would you have us do? Just give up, let the Democrats run the country into the ground”

Nope… Not at all…

I’d have you stop assuming the rhetorical mantle of revolutionary patriot because it makes you feel good; and stop supporting things which reinforce that feeling, without actually DOING anything.

If you buy Ted Cruz’s stunt, you are perpetuating this crap.

If you want to actually do something… ACTUALLY DO SOMETHING. Get involved with your political party on a local level. Get onto policy committees. Become a subject matter expert for the party on something you know, and use that position to help steer the party, and the politicians in the party, in the right direction.

That’s actually doing something. This thing with Cruz? It’s just something you can say you supported so you can feel morally vindicated while not actually doing anything.

“You’ll see… Cruz was right, this is bad law and we must stop it. Cruz will be vindicated, time will tell”

Well of COURSE he’s RIGHT, we all know that… it’s AWFUL law… even Jon Stewart thinks it’s bad law… but that doesn’t mean he was doing any good… or even try to for that matter.

Vindicated how?

Sure he’s increasing his own fundraising, and certainly he’s right about Obama care… but to be vindicated you have to have done or said something substantive, and then been proven right later.

How has he done that?

He’s hurt the Republican party badly with the center, and provided yet another target for mockery and ridicule… and to scare those who think this sort of thing is either stupid or crazy…

Yes, he’s increased his own fundraising… and tripled that of everyone on the left.

This is not some brave heroic last stand. This was a foregone conclusion. Obamacare would never, under any circumstances, be defunded. This wasn’t a filibuster. This wasn’t moral courage.

If it was a serious attempt to stop Obamacare, fine, that would be great. Even if it were a futile attempt, if it were even structurally capable of stopping it, sure… it wasn’t and isn’t.

It wasn’t really even a symbolic gesture.

It was pandering, to the lowest common denominator. It was Ted Cruz setting himself up to be the poster boy for the low information voters of the right.

And he knew EXACTLY what he was doing… By all accounts Cruz is a brilliant man.

“It doesn’t matter if he was doomed to fail, it was the right thing to do anyway. Standing up for what’s right is never wrong”

If that’s what he was actually doing, I wouldn’t be so irritated by this.

I’m irritated because this is what they do instead of something useful. “I supported Ted Cruz’s filibuster but those nasty democrats and RINOs passed it anyway”

The people who believe this, don’t seem to understand that what Cruz did actually hurt us. Us being those of us who really fight against government overreach, and bad law.

It gave cover to the people who wanted to do nothing anyway, it encouraged a few whackjobs to make spectacles of themselves, and it INCREASED the morale and assumed moral authority of the other side.

Do you not realize how stupid and ridiculous this makes anti-obamacare people to the middle? How hysterical it makes them appear to the other sides donors? How this is a permanent harmful soundbite/video clip?

It’s idiots like this that made them able to paint Mitt Romney as an ultraconservative ultra right damn near American Taliban…

When in fact, he wasn’t conservative enough for a lot of people to bother even coming out, and they just stayed home rather than vote.

This is NOT a dedicated small group of principled people fighting against government overreach… That would be excellent.

This is the Republican equivalent of a college student “sticking it to the man” by wearing Che Guevara t-shirt an shouting about oppression and justice, out in front of the admin building.

“You don’t understand… Cruz is different… he’s the only one of the Republicans with the guts and the principle to stand up and do something”.

If he had actually done that, I would more than agree… I’d be cheering him on too.

But he didn’t.

If he were actually different… I’d be 100% behind him… Hell, I think he’s a good man, and in general he will probably be a good senator, though it’s a bit early to tell. If nothing else, he’s a LOT smarter than most Senators.

But really… other than that… he’s not much different than any other professional politician.

I’ve read the mans bio, read some of his speeches, hell I was even on a conference call with him and Marco Rubio at some party event during the campaign last year.

Yeah, he’s accomplished, and he’s got a hell of a back story (great family tale), but… what is it you think makes him so special?

He’s a smart guy, apparently a great legal mind, clerked for Rehnquist, editor of the Harvard law review… which are great things sure… but but I don’t see what you seem to see that makes him particularly exceptional among senators. He’s been a politician basically since law school; either full or part time.

He spent less than a year in private practice before going into an administration job, then less than 4 years out of the fedgov, where he ran for office twice, before going back to the fedgov.

He’s a professional politician.

I think he’s probably going to be a good senator (kinda hard to tell 9 months in), but I don’t see anything there that says anything other than professional politician… He’s a smart man and seemingly a good man… and those are great things… but he’s still a professional politician, and has never been anything but a professional politician.

I mean… he actually voted… in fact the senate voted unanimously 100-0… for the motion he was supposedly filibustering…

How can you even call it a filibuster if you’re going to vote for it?

So… In the next show, we have the “Government Shutdown”.

As of right now, the Republicans in congress have refused to sign any continuing appropriations bills that require the raising of the U.S. federal debt ceiling, and which fund Obamacare.

Therefore, the Republicans are trying to pull a repeat of 1996 and “shut down the government”; again to foster the illusion that they are taking a principled stand against excess spending and government waste etc… etc…

They aren’t.

“Why can’t they just balance the budget, instead of raising the debt ceiling again… That’s not a solution, that’s just making the problem worse?”

That’s the question of a well meaning, intelligent person, looking at this problem from a rational perspective…

So it’s completely irrelevant to anything they do in Washington of course.

First thing, the whole “Defund Obamacare” spiel is, and always has been, a sham. It’s more redmeat for the base. It’s not going to stop Obamacare, never was going to, never could; and even if it could, the republicans couldn’t get it past the senate, or a presidential veto, or an override etc… etc…

It’s just PR.

The Republicans saw what happened to Mitt Romney. They know that a large portion of the electorate doesn’t think they’re conservative enough and so won’t bother to vote for them… This is how they’re trying to address that issue. Nothing more substantive than that.

This still leaves the debt ceiling issue… and of course, incurring yet more federal debt is a bad thing. We are already at more than 105% of GDP (of course, that’s far lower than most other nations, but it’s still quite bad).

However, since it is quite literally impossible for any continuing appropriation to be passed that doesn’t require increasing the debt ceiling… In fact, even without a continuing appropriation the debt ceiling will need to be increased (because of credit payments, entitlements, and other already legislated spending); the debt ceiling is GOING to be raised.

Either that, or an accounting trick will be used to do the same thing.

It’s not a solution. It’s a requirement of the circumstances.

Balancing the budget… that’s a joke; given that we haven’t actually PASSED a budget or OPERATED under a budget , since 1997. From 1998, the government hasn’t been funded with a passed budget, it’s been funded with omnibus spending and special appropropriation bills, and continuing resolutions.

In fact, since Obama was elected, we haven’t even managed to pass an omnibus spending bill, and have exclusively funded the government with special appropriations and continuing resolutions.

The reality of the “debt ceiling” is, the U.S. is NOT going to default on its credit payments, under any circumstances.

In the first place, a U.S. credit default would trigger a world wide economic collapse and long term depression the likes of which have not been dreamed of outside of dystopian fiction.

So yeah… that’s bad… let’s not do that.

Even if that weren’t true, the politicians in this country are not going to let people miss entitlement payments… which is the whole reason why we don’t have a budget in the first place…

Every politician in America knows that if they get blamed for their constituents missing a social security check, they are done… dead… never to be elected to anything, even dog catcher, again.

So, any threat not to raise the debt ceiling, or to have a true and complete government shutdown, really is just grandstanding.

Until we make serious cuts to entitlements, we are not going to have anything close to a balanced budget. No politician in this country who has actually managed to get elected and wants to be re-elected is going to EVER under any circumstances, vote to cut entitlements. Therefore we are never going to have a balanced budget again… or at least not until there is a real unavoidable crisis, where they can cover themselves by saying “we had to do it to save the country”, and their opponents can only look like irresponsible liars if they try to say otherwise…

Of course, if this country weren’t filled with economically and politically ignorant “citizens”, then perhaps the electorate as a whole would understand that we’ve long past the point at which such a crisis could be avoided, and that something really needs to be done right now…

Unfortunately, what looked like it was going to be the first major group of voters working for entitlement cuts in this country, the “tea party”; was quickly overrun by a huge number of these idiots who, completely un-self aware were saying, with complete sincerity “get the government out of healthcare and welfare… but don’t touch my social security and medicare”.

The politicians noticed this… Particularly the smart ones… Like, say, Ted Cruz.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Margaret Thatcher Defends her Record and Capitalism Itself

In marking the passing of one of the staunchest defenders of capitalism who held high office, I thought it would be appropriate to post this video of Margaret Thatcher in which she defended her record against her Labour Party critics. In this video, her political opponents thought the income gap grew too much under her leadership. Listen to her answer. This is the sort of unapologetic defence of capitalism we need in leadership on this side of the pond.

Another interesting part of this video was her warnings against the idea of a central European bank and currency. It seems that she was quite prescient given the problems of the Euro.

More Than One Class of Parasite

The welfare state is a problem in America, there’s no question about it. When you have a country were nearly 49 million people are dependent on food stamps as of this writing, that is a problem. We libertarians as well as conservatives lament the growing welfare state because of what it is doing to the economic health of this country and the negative incentives (i.e. the moral hazard) to discourage people from working when it’s easier to get a check from the government. That being said, I think we libertarians could do a better job with the messaging on this particular issue.

Today’s episode of the Neal Boortz show is a perfect example of what I’m referring to. Boortz’s personality is that of a curmudgeon. Over the years he has referred to himself as the “High Priest of the Church of the Painful Truth.” I usually enjoy his blunt, non-P.C. style but sometimes I think he goes a little overboard when he calls people who are on one type of welfare or another “parasites” regardless of their individual circumstances. I missed the first part of his show (which is normal) but I tuned in about the time a caller who said the only government assistance he was receiving was food stamps called in. He went on to explain that he worked 3 minimum wage jobs at about 120 hours a week to support his 5 kids (I think that was the right number). After explaining his circumstances, he asked Boortz: “Do you think that I am a parasite?” Boortz responded “yes.” Boortz went on to criticize the man for having children he couldn’t afford to support and told him that perhaps since he still couldn’t support his children on his three jobs that perhaps he should give them up.

Taking the caller’s word at face value that he works 120 hours a week, I have to disagree somewhat on Boortz’s characterization that the man is a parasite. I also think that telling someone who really is trying to support his children but still coming up short and supplementing his income with food stamps to give up his kids is an unreasonable suggestion. How much would it cost taxpayers if every person who struggled with supporting their children put their children in the foster care system or an orphanage? We hear all the time from conservatives – especially social conservatives* that the ideal situation for raising children is a household with a mother and a father. I have heard some social conservatives say that the reason the state shouldn’t recognize gay marriage or civil unions is that the purpose of marriage is procreation. They also argue for the child tax credit and favorable tax treatment for married couples to encourage more people to have families**.

I don’t know to what extent Boortz agrees with these notions as he doesn’t seem to talk about these issues much. I do think there is something to say about children growing up in a stable environment, however. I haven’t done much research at all about the foster care system but from what I understand, it’s far from ideal. How many children in the foster care system find themselves in the criminal justice system whether on probation or incarceration versus those who are raised by at least one loving biological parent? I don’t happen to know the answer but I suspect that there are more of the former than the latter. Again I ask, how much would this man giving up his children possibly cost the taxpayers? I suspect it would be more than whatever he is getting in food stamps.

To some degree***, this man is a parasite but certainly not to the extent some people I have met are. There are the single dads who have too many children to too many baby mamas who don’t take responsibility for their children and have no shame about going on the dole. There are also far too many single moms out there who have made some very bad choices who basically marry the government. If anything, the caller is probably receiving less government support because he is working so many hours. Slacking is rewarded while trying to better oneself is punished – this in of itself is a major part of the problem, I think.

While I agree with Boortz in principle that one man’s need does not mean he has a claim on another’s money, there are more classes of parasites I think are even more offensive than poor people on welfare. I am much more offended by the corporate welfare and the welfare for the rich. I’m not talking about tax cuts or anything like that but subsidies. I’m talking about billionaire sports franchise owners who have their stadiums built by taxpayer dollars so they can pay millions more to their millionaire athletes. I’m talking about TARP, the auto bailouts, QE 1, QE2, QE 3 and other policies the Federal Reserve has used to make our dollars worth less and less every day. I’m talking about corporate lobbyists who write regulations in their favor to make it difficult for competitors to enter the market place. I’m talking about lawyers.

Yes there are more than one class of parasite bringing our economy down. When it comes to going after those who are using taxpayer money for their benefit, I think it’s high time we libertarians say women and children last.

Point of Clarification: It wasn’t fair to lump all lawyers together as parasites. Lawyers are necessary in our system to take out some of the parasites I mentioned above (the white blood cells, if you will). Like any profession, there are bad apples. When I think of parasitic lawyers, I think of the likes of John Edwards and the ambulance chasers on late night TV. There are plenty of heroic lawyers who truly fight for liberty and justice such as those at the Institute for Justice and The Innocence Project. I’m sure we can count fellow Liberty Papers contributor Doug Mataconis among them as well (though I know nothing about his work as an attorney, he’s a good person and I’m sure that’s reflected in his profession as well).

» Read more

Your Incredibly Stupid Progressive Economic Propaganda for the Day

There is so much economic ignorance/stupidity in this video (below), I wouldn’t even know where to begin. John Maynard Keynes himself would probably be embarrassed by this video courtesy of the California* Federation of Teachers and narrated by the great economist of our time Ed Asner.

I don’t have much else to say about this video right now, it’s too easy (though feel free to rip it apart here…or defend it). Actually, I am in the planning stages of writing a book that challenges this sort of mentality (I’m shooting for a release date about May 2013). I’m hoping Liberty Papers readers will buy it; I will have discounts for Liberty Papers readers.

And now for your, um…enjoyment[?]: Tax the Rich: An animated fairy tale**

WARNING: This is 7 minutes and 50 seconds of your life you will never get back.

*Oh yes, the state of California which is being run by people with this kind of mentality! Yeah, their economic policies have been working great, haven’t they?

**Fairy tale is actually a very good description.

Atlas Shrugged Part II in Theaters This Weekend

Atlas Shrugged Part II is opening this weekend. Want to check it out? Follow this link to find a theater near you.

And now, the official Atlas Shrugged Part II trailer:

Ron Paul Will Never Be President But He HAS Made a Difference

Those who support the establishment of the Republican Party tend to be irritated that Ron Paul’s supporters kept trying to put his name up for nomination against Mitt Romney at the convention in Tampa even though Paul had no realistic chance of winning. Even very early in the campaign, establishment whores such as Hugh Hewitt were arguing that Ron Paul along with Herman Cain and Gary Johnson should be “exiled” from the debates because they didn’t have “a prayer of winning” the nomination. But are political campaigns, especially presidential campaigns, only about winning the nomination and ultimately, the presidency?

As someone who supported Ron Paul in the primary, I believed his winning the nomination would be the greatest upset in political history to say nothing about becoming the next president. When Terry Moran asked Paul the question: “When you lay your head on your pillow at night, do you see yourself in the Oval Office?” Paul replied “not really.” This is not a typical response of someone who is making a serious run for president.

This isn’t to say in any way that Ron Paul was not making a serious run for president, I think he was. Paul made three unsuccessful runs for the presidency but has succeeded in changing the political conversation. He advanced the ball in ways that he otherwise would not have had he not made these runs for the White House.

The most obvious example of how Paul has changed the political debate would be his call for a full audit of the Federal Reserve. As recently as 2006, the following was written about the Federal Reserve in a book by Richard Brookhiser entitled What Would the Founders Do (Our Questions, Their Answers)*

Everyone likes the Federal Reserve System these days, partly because it seems to work so well. (Not one person in a thousand ever thinks of it, a rough definition of working well.) But suspicion of public banks could revive at any time, for the same reasons that many of the founders were suspicious of them — most people (the founders included) do not understand banks or banking, and some bankers are in fact crooks. (p.92)

Back when this paragraph was written, I don’t think the Federal Reserve was even on my radar and I don’t think I was alone. Maybe the Fed isn’t the top issue for the average voter even now but I do think it’s safe to say more people are skeptical of the Fed especially in the era of bailouts and quantitative easing (i.e. printing money out of thin air). The mere mention of Ben Bernake or the Fed, especially at Ron Paul or liberty oriented rallies bring about boos and chants of “End the Fed!” “End the Fed!” This in of itself isn’t that big of a deal; these are true believers. What is a big deal, however; is that language to audit the Fed has made its way into the 2012 Republican Party Platform. Even more importantly, Paul’s Audit the Fed bill passed the House by an overwhelming 327-98 vote margin. Every single Republican but one supported the legislation along with 89 Democrats.

The bill wasn’t brought to a vote in the Senate but pressure will mount on Harry Reid if the Democrats maintain control to schedule a vote. If the Republicans take the Senate, a vote is even more likely to happen and Audit the Fed would be more likely to pass. If it gets to the president’s desk, the president – be it Obama or Romney will sign the bill, I believe.

A bipartisan bill authored by Ron Paul – who would have thought?

Ron Paul, one man who prior to the 2008 campaign wasn’t a household name, has changed the conversation within the G.O.P. concerning the Fed, spending, constitutional government, taxation, and civil liberties. Though his delegates were mistreated in Tampa, the RNC saw fit to at least try to mollify them with this tribute to the congressman’s career.

Missing from the tribute video was Paul’s anti-war/anti-interventionist views that he has espoused throughout his political career. Paul challenged people to do their own research concerning American foreign policy, particularly in the Middle East. He openly challenged the notion that policing the world trying to “make the world safe for democracy” and nation building was in America’s national security interest. Though the Neocons and war hawks are still firmly in control of the G.O.P., more voices in the party are challenging the prevailing view and cautioning Americans about blowback – a term invented by the C.I.A. but popularized by the Texas congressman.

Most important of all, Ron Paul is leaving a legacy behind him as he retires from congress. What will become of the rEVOLution in his absence? A small but growing number of individuals are being elected to the House and the Senate who share many of Paul’s small government/pro-liberty views. Ron Paul’s son Sen. Rand Paul along with Sen. Mike Lee, Sen. Mark Kirk, Rep. Justin Amash among others will lead the movement into the future. If the Paul activists continue to fight the establishment from inside** the G.O.P., there is at least a chance that the party will actually live up to its more small government ideals it purports to stand for.

*Basic Books, New York.

**While I understand why some Paul supporters might be tempted to leave the party due to how they have been treated by the party establishment, I would advise against this. The G.O.P. is ripe for a hostile takeover BUT the establishment isn’t going to give up control so easy. If you drop out, you are allowing them to win; this is precisely what they want you to do. Don’t give them the satisfaction. Focus on the Senate, House, and races at the state and local levels and vote your conscience for president (the wonderful thing about voting is that you don’t have to tell anyone who you voted for). After this election, regroup and continue to fight for liberty.

Walking Dead Economics

My wife and kids got me hooked on a series some of you may have heard of called The Walking Dead (and like the rest of the Walking Dead fans out there, I have to wait until October for the next season to begin as the characters have been left in quite a precarious situation) For those who haven’t heard of this series, basically Atlanta, GA (and as far as we know, the rest of the world) has been taken over by zombies (called “walkers” by most people who inhabit this world). While the series does have many of the elements of the zombie genre, the story and the characters in the story are quite a bit more complex.The story isn’t so much about the walkers as it is about the characters who not only have to survive this zombie apocalypse, but also manage to survive the other survivors and live with very limited resources.

One thing that becomes very clear at the beginning of this series is that many of the societal rules quickly go out the window when under constant threat of flesh eating walkers. Paper money is of no practical use (other than to start a fire perhaps). Debit cards and credit cards are even less valuable as there is no way to access your worthless money.

One other thing I noticed is that gold isn’t even a commodity that is of much use in this world.

It so happens that I have been reading Dave Ramsey’s book The Total Money Makeover as my wife and I are trying to apply his system to get our financial house in order (I highly recommend this book to anyone who wants to get out of debt). In the book I ran across the following passage in which Ramsey explains why he does not believe gold is a good investment, even as a hedge against a total economic collapse:

It is important to remember that gold is not used when economies fail. History shows that when an economy completely collapses, the first thing that appears is a black-market barter system in which people trade items for other items or services. In a primitive culture, items of utility often become the medium of exchange, and the same is temporarily true in a failed economy. A skill, a pair of blue jeans, or a tank of gas becomes very valuable, but not gold coins or nuggets. Usually a new government rises from the ashes, and new paper money or coinage is established. Gold will, at best, play a minor role, and the gold investor will be left with the sick feeling that real estate, canned soup, or knowledge would have been a better hedge against a failing economy. – The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey (Thomas Nelson, 2003, 2007) p. 55.

I don’t know that I fully agree with Ramsey here though I’m by no means an expert on the history of gold or monetary policy. It seems to me that as a new civilization emerges from economic collapse, gold (and other commodities) would play a much greater role before people would accept any new fiat money. He seems to have a legitimate point, however; with regard to a collapsing or fully collapsed economy.

This is certainly the case in The Walking Dead. The resources most necessary to survive in this world are water, food, shelter, firearms, ammunition, medicine, fuel, spare parts, etc. Without these items, you aren’t going to survive for very long. Under these circumstances, who would trade a shotgun and ammunition for a bar of gold? I sure wouldn’t. I might trade a shotgun, assuming I already have enough firearms to hold the flesh eaters at bay, for some food and water. Better yet, I might offer to provide security for a few nights in exchange for food, water, and a temporary place to stay. This arrangement would continue as long as both parties agree.

In the course of the series, these are the kinds of arrangements that are worked out. Security is a major concern because, despite apparent efforts by the federal government to impose martial law, the government failed* and the law of the jungle is now in full effect. Many resources such as firearms, water, auto parts, food, fuel, etc. are scavenged from those who were either killed or simply abandoned their property (finders’ keepers).

Earlier in this season, the main characters find themselves at a dead end on the interstate as thousands of abandoned cars litter the road. Though on one hand this is very bad news, on the other, it’s an opportunity to scavenge whatever resources were left behind. At another point, a couple of the survivors make their way into an abandoned small town where they hit the jackpot in finding an abandoned pharmacy with a decent supply of prescription drugs. At the very end of this last season, the camera pans out to a prison near where the remaining surviving characters are camped out. What, if anything, can these refugees benefit from the prison? (I’m very interested to see where the story goes from here with the prison).

“What about silver bullets, do they have any value?” you ask. Silver bullets are needed to kill ware wolves, not walkers. Ware wolves? Seriously, ware wolves? Now that would be ridiculous.

*Or did it? Perhaps all the “important” people have been relocated to a secret and secure location while the citizens are left to fend for themselves.

Ron Paul at His Very Best Confronting Ben Bernake

If Rep. Ron Paul has accomplished anything in his 2008 and 2012 presidential campaigns it would be the way he has educated the American public about monetary policy and the Federal Reserve. I’ve listened to on line lectures from the Cato Institute and read about monetary policy but more often than not its either over my head or bores me to tears. Paul manages translate the Fed’s policy and put into language people like me can understand and keep it interesting.

Today’s hearing where Paul questioned Federal Reserve Chairman Ben Bernake is a case-in-point. My favorite part is when he asks Bernake if he does his own grocery shopping driving home the point about how his inflationary policies impact average people where it matters most (cost of groceries and fuel doesn’t go into determining the rate of inflation).

Book Review: Slackernomics, by Dale Franks

Those of you that have been around the libertarian blogosphere for any length of time will recognize the name Dale Franks. His main writing gig is over at QandO, where he spends the bulk of his time writing about the economy. In addition, he’s a bit of a gunblogger, and runs a separate blog for motorcycles.

At one point a few years ago I had noticed a link to a book Dale has written called Slackernomics: Basic Economics for People Who Think Economics is Boring. Given that I’m not the type who thinks economics is boring, but had enjoyed his blogging, I wanted to get a chance to read it. At that time, the book was only available in print at a price above $20. It took a spot on my “buy when I get around to it list”, and sat there for quite some time, but I never pulled the trigger. Then, more recently, it became avaiable for the Kindle at only $2.99 — I no longer had an excuse not to buy it. So onto the Kindle it went, and after several long months of sitting there taking up space, I’ve finally gotten around to reading it.

Slackernomics is a primer on basic economic theory that, as the title suggests, is written for people who think economics is boring. It’s written in a convivial tone, and the illustrative examples that Dale uses reminds one more of Freakonomics than of Adam Smith. Don’t let that fool you, though — the book is not a “sideshow” like Freakonomics — it gets to the heart of the matter. I liken it to be similar to Henry Hazlitt’s “Economics in one Lesson”, but written for people who may not be interested in the more formal writing style of Hazlitt. In addition, having been written many decades after Hazlitt’s book, it’s obviously much more up to date.

The book covers everything from price theory, minimum wage & rent control to monetary theory and the business cycle, Keynesianism, taxes / deficit spending, savings & investment, and economic statistics. He continues with a great defense of free trade and a bit of entrance into politics (touching a tad on public choice theory). In all, for being a relatively short book, he hits all the major notes that anyone looking for an introduction to economic thought would need to learn.

But the big question, for readers of this blog, is whether it’s worth it to buy. “Am I going to learn anything new?” And I can honestly say that despite the fact that I read economic books & blogs for leisure, and that I’ve blogged a fair bit about economics myself, I learned some new things from Slackernomics. Dale’s fourth chapter, unwinding the mess of the myriad of economic reports and statistics he’s constantly posting on Twitter, Google+, and at QandO, was wonderful. I’ve looked at many of these reports merely reading analysts *reaction* to the numbers (Higher jobless claims? How unexpected!), but rarely understood which group (public or private) was putting out certain reports nor how they all fit together. For me, a layman who is conversant on a lot of economic theory but not as perhaps on the technical reports, I have never seen an explanation of the reports that come out each week and each month as simple and readable as that chapter. That was more than worth it for my $2.99.

So my recommendation is simple: at $2.99, if you have a Kindle (or a device with a Kindle app), it’s hard to pass it up. You’re almost assured to get your money’s worth from the book. Even further, if you know someone in high school or college that may not have received good schooling in economics (which is, unfortunately, most of them), and who isn’t exactly about to tackle The Wealth of Nations, find a way to get them a copy of Slackernomics. Dale’s writing style will keep them interested.

All in all, it’s a book that lives up to its title, and goes well beyond.

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 3 of 3)

Part 1
Part 2

The challenge of creating an economically sound, simpler, and more just tax code, be it the existing code, 9-9-9, a flat tax, or a sales tax will remain an impossibility if tax revenues is the only focus of any reform. The problem that dwarfs any notion of how tax policy is implemented is how the money is spent by the government.

As I write this, the national debt is approaching $15 trillion. That’s $47,810 per citizen or $132,927 per tax payer.

Even more staggering, the sum total unfunded liabilities for Social Security and Medicare is just over $116 trillion. The prescription drug part of Medicare is over $20 trillion by itself!

Other than the Federal Reserve creating money out of thin air, what tax policy can possibly begin to support this kind of spending? It seems stupid to even pose the question.

Yet the only answer the Obama administration seems to have to pay down the debt or turn the economy around is to raise taxes on the wealthy and continue the reckless spending. The Republicans for their part offer modest tax cuts and modest spending cuts that will have no noticeable impact on the debt.

It’s high time that we as citizens tell our public servants that the out of control spending has to stop. We must demand serious structural reforms to entitlement programs or phase them out over time.

We must also recognize the difference between military spending and true national defense spending. We can no longer afford to police the world. It’s time to tell Iraq, Afghanistan, South Korea, Japan, and others that they are now responsible for their own national defense and domestic security.

That’s just a start; there’s a great deal more spending that should be cut. But before any significant cuts can be made, we need to decide just how much government we want in our lives and what we are each willing to pay. For those who believe that individuals who make under a certain income level should be spared from paying any taxes at all (i.e. too small to tax) maybe it is you who should be out front in demanding a whole lot less government.

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 2 of 3)

Part 1

Is an economically sound, simpler, and more just tax code even possible?

The truth of the matter is that there are too many people on the Left and the Right who do not want a simpler tax code that treats everyone equally.
It’s probably not because the defenders of the existing system necessarily think the existing code is good economic policy nor does a better job funding the federal government. The most likely reasons why there is so much resistance have to do with political pandering, vote buying/special interests, and social engineering.

It’s not too difficult to figure out why the Left panders to the working poor because the poor always outnumber the wealthy regardless of how well the economy is doing overall. What would happen if there was such a tax code where everyone paid the same rate without any tax credits or loopholes and without any hidden or embedded taxes? I’m guessing it would be more difficult to raise taxes on the evil rich if it meant that everyone received the same percentage tax hike. When it comes to the tax code, equality is the very last thing the Left wants.

If there is anything I agree with the Occupy Wall Street crowd or the Left more generally it’s the special treatment politically connected individuals and businesses receive via the tax code and/or subsidies. So you say you want to get money out of politics or do something about the role of corporate lobbyists in Washington?

I do too.

The simple answer IMO is to eliminate all taxes on business and all subsidies that benefit business. If there are no taxes or subsidies, there is no reason for businesses to lobby for special tax treatment or subsidies; the main reason most industries send lobbyists to Washington in the first place. If we would like to go any further in limiting influence of special business interests, maybe just maybe we should get the government out of regulating just about every aspect of business* and restrict the government to its limited constitutional powers. What a novel concept!

Finally there’s the social engineering aspect of the tax code. Frankly, I’m not sure if those on the Left or the Right are worse when it comes to using the tax code as a tool to encourage the American people to engage in particular activities. Even with Perry’s flat tax plans, there are a handful of deductions that are sacred cows. The home interest, charitable giving, and state and local taxes are preserved for those who earn up to $500K. Those who earn under $50K can choose not to file under the 20% rate with a $12,500 per family member deduction (which would eliminate all if not most tax liability under the existing rate for those in this tax bracket). With these deductions as part of the plan, the Perry plan can hardly be called a flat tax.

While I’m critical of keeping these deductions in place (he probably could get by with a smaller rate without the deductions), it’s not difficult to figure out why Gov. Perry keeps them in place. Voters would raise all sorts of hell at the thought these deductions would go away. Maybe there’s a good argument to make that charitable giving should be deducted since these funds help people who might otherwise be on government assistance.

But the home interest deduction? Why is that held sacred? Is there some sort of right for homeowners to get a break because they choose to buy a home rather than rent? I suspect that the realtor and home building lobbies and those in government who truly believe that every person should buy a home perpetuate this notion to a point to where now home owners think they are entitled to this special treatment.

Perhaps the most sacred cow of all of the deductions is the child tax credit. This deduction is a feature of every tax reform I mentioned in part 1 (even the Fair Tax prebate is based on family size). In the last presidential debate, Rick Santorum said in so many words that the federal government should promote families via the tax code.

Is this really the sort of thing the government should be concerned with? Should the amount of taxes an individual pays have anything to do with marital status or number of dependents s/he is supporting? Is it fair to make a single person pay more taxes because s/he doesn’t have dependents?

I don’t think there is an answer that will satisfy everyone.

Part 3
» Read more

Peter Schiff to OWS: “I Am the 1% Let’s Talk”

Here’s a very fascinating video taken at New York’s Zuccotti Park where Peter Schiff has a dialogue with some of the Occupy Wall Street protesters. Schiff brought a sign that read “I Am the 1% Let’s Talk,” and talk they did.

One of the things that occurred to me watching this was how little true discussion is going on between the OWS movement and their critics. Notice how some of the protesters say things like “you rich people” or “you Republicans” etc. Just as its unfair for these protesters to lump everyone into these groups is a mistake, I think it’s also a mistake to assume that all of these protesters are clueless and don’t have some legitimate grievances.

Kudos to Peter Schiff for going out among the protesters and having this much needed conversation. There seems to be some common ground concerning these grievances; the real differences are what the solutions should be.

Ron Paul Unveils “Restore America” Plan

LAS VEGAS – Republican presidential candidate Rep. Ron Paul unveiled his economic “Plan to Restore America” in Las Vegas Monday afternoon, calling for a lower corporate tax rate, a cut in spending by $1 trillion during his first year in office and the elimination of five cabinet-level agencies.”

[…]

Paul does get specific when he calls for a 10 percent reduction in the federal work force, while pledging to limit his presidential salary to $39,336, which his campaign says is “approximately equal to the median personal income of the American worker.” The current pay rate for commander in chief is $400,000 a year.

Based on Dr. Paul’s speech, there’s not a whole lot not to like. Cutting $1 trillion of government spending in the first year would be a very good thing IMO.

As a Gary Johnson supporter, I can’t help but get more than a little annoyed each time one of Paul’s supporters, member of his campaign staff, or the congressman himself makes the claim that Dr. Paul is the only candidate in the race who would balance the budget. Gov. Johnson has promised a balanced budget, not merely in his first term but in his first budget in virtually every debate, interview, and speech he has given since he announced his candidacy.

That criticism aside, I hope this plan is given serious consideration by the primary voters and debated among the candidates.

Herman Cain is Either a Liar or Has a Very Short Memory

Just when I was starting to give Herman Cain another look, he lies to Rep. Paul’s face in last night’s debate concerning comments he made concerning the need to audit the Federal Reserve.

Yeah, there goes crazy Uncle Ron again with these crazy misquotes he picked up off the internet!

I’m not sure if the crowd was laughing at Cain or Paul at this point but it wasn’t that difficult to find audio of his “misquotes” on YouTube from when he was guest hosting The Neal Boortz Show.

But this wasn’t the first time Cain has been busted on a flip-flop followed by an accusation that he was misquoted or received “misinformation”. The next example: Cain changes his mind as to whether the president can target an American citizen for assassination without due process.

The Flip:

The Flop:

I never said that [President Obama] should not have ordered [the killing]. I don’t recall saying that. I think you’ve got some misinformation. Keep in mind that there are a lot of people out there trying to make me sound as if I am indecisive.

I don’t know all of the compelling evidence that the intelligence agencies and the military had. I’m convinced — I’m convinced that they have enough intelligence information that said he’s a threat to the United States of America. You don’t try to prosecute or capture him simply because he’s a United States citizen.

What will he say when he is confronted with these audio and video clips? Would he have us believe that these were imposters?

If Cain would have said on either of these issues “You know, I after thinking about it a little more, I was wrong…” I might be able to respect that. But to accuse people who challenge him of misquoting him when it’s so easy to prove otherwise is disturbing to say the least.

Gary Johnson and Ron Paul CPAC Speeches

The 2012 G.O.P. candidates each gave speeches at CPAC following the debates. Below are the speeches from Gary Johnson and Ron Paul. The first video is Johnson’s presentation before perhaps the largest audience he has had in awhile. Johnson spends a good part of his presentation introducing himself before giving an overview of his proposals. In the second video, Dr. Paul who is no stranger to CPAC, gets right into his prescriptions for fixing the economy and restoring lost liberty.

SP Lowers the U.S. Debt Rating

The Standards and Poor rating service has downgraded the U.S. Federal Government’s bonds to AA+ status. This action long overdue does not go far enough.

To understand the meaning of this, we should first understand the meaning of the S&P ratings.

The ratings indicate several things:
1) The likelihood of a default – the debtor failing to make interest payments owed to the people who purchased the bonds.

2) The likelihood that the bond holders will recover some of their losses after a default.

3) How quickly the debtor’s financial condition could deteriorate causing them to slide into default.

In the pdf explaining their rating system, S&P has a very interesting table showing the default rate associated with organizations based on their classification. As one would expect, in the past thirty years no AAA organization has defaulted, nor has any organization that is rated AA+.

In their press release explaining the downgrade, S&P makes the following points:

• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.
• The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case
• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short ofwhat, in our view, would be necessary to stabilize the government’smedium-term debt dynamics.
• More broadly, the downgrade reflects our view that the effectiveness,stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned anegative outlook to the rating on April 18, 2011.
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.
• The outlook on the long-term rating is negative. We could lower thelong-term rating to ‘AA’ within the next two years if we see that lessr eduction in spending than agreed to, higher interest rates, or newfiscal pressures during the period result in a higher general governmentdebt trajectory than we currently assume in our base case.

In essence, the S&P rating agency is implying that since the recent debate about raising the debt ceiling was immaturely handled, they are now more pessimistic than they were this spring. This strikes me as and excuse to give plausible deniability to the accusation that for years they have been rating the U.S. government much more favorably than is appropriate by any objective manner.

The fact is that over the past few decades, the U.S. government’s long-term fiscal condition has been steadily eroding, and the legislature has shown no willingness to seriously tackle the issue.  Unsurprisingly any legislator who broaches the topic of reducing any of the major sources of spending, medicare, social security, millitary spending,  corporate subsidies, etc risks being voted out of office by an electorate whipped into a frenzy about an attack on the elderly, the poor, our allies, etc.

The rating agencies, having been granted a monopoly on ratings by the U.S. government, have been loath to bite the hand that feeds them, to risk the wrath of the legislature by frankly describing the terrible financial outlook for the U.S. government. At this point the AAA rating has become a joke; there is no way that the U.S. government can pay back the loans. There is no ideological chasm between the Republicans and the Democrats.  Both parties support massive welfare spending, high taxes, and massive plundering of the productive bits of the economy.  I am increasingly of the opinion that the debt fight was a kabuki theatre engaged in by the Democrats and the Republican leadership in order to end the Tea Party threat to the metastasizing state.  The Teaparty were the grownups announcing that the party has to stop, and the political parties’ leadership were the petulant teenagers plotting to keep things going a little longer.

At this point U.S. government bonds are a very bad thing to buy. The interest the U.S. government is offering is pathetically low.  Inevitably, to attract buyers, the government will have to raise the interest rate. Once they do this, prices in the secondary market for the older low-yield bonds will collapse.  The interest payments needed to service the outstanding debt will increase, and the U.S. government will be in even worse financial shape.  It’s possible that the Federal Reserve will buy the bonds itself, using newly printed dollars, much like the central bank of Zimbabwe.

Unfortunately too many retirees have invested in U.S. government bonds, expecting that the income from the bonds would provide a reliable, dependable source of income. Either they will be screwed by the inevitable default, or they will find their income’s purchasing power destroyed by inflation.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

A Brief Constitutional Lesson for Congresscritters… Particularly those from Kentucky…

United States Constitution
Article 1, Section 7


All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The issuance of debt is a revenue raising measure. The “debt ceiling” is, in fact, legislation initiated in the House of Representatives, which authorizes the executive branch to issue debt through the treasury (and by extension the federal reserve), up to a specific limit.

This “debt ceiling” and authorization of debt issuance; allows the executive branch to raise revenue in a constitutionally legitimate way; because the revenue is raised under the auspices of specific authorization by the house or representatives.

Neither the Senate, nor the House, acting separately or together; has the authority or ability to delegate this exclusive power of the house, to any other entity, including the president. In fact, it would be a clear violation of the principle of separation of powers to do so.

That is all.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

How To Deal With A Stalled Economy

I’ve been spending an inordinate amount of time reading 74 pages of forum posts on an pilot’s message board discussing the crash of Air France flight 447 several years ago. Fascinating stuff. It’s the tale of pilots faced with a situation of mechanical failure, but even worse, a situation which they misdiagnosed and thus took the exact wrong course of action. The basics:

It was at this point, after autopilot turned off and they worked to change their course, that a stall warning sounded, meaning that the airplane wasn’t generating enough lift. The report notes the co-pilot grabbed the controls and lifted the plane, which, according to aviation experts is contrary to normal procedure during a stall, when the nose should in fact be lowered. During the lift, the speed sensors plunged then spiked in an apparent malfunction, the report shows. “So, we’ve lost the speeds,” the co-pilot noted.

For nearly a minute, as the speed sensors jumped, the pilot was not present in the cockpit. By the time the pilot returned, the plane had started to fall at 10,000 feet per minute while violently rolling from side to side. But the BEA notes the crew acted in accordance with all procedures, frantically attempting to command the plane as it pitched and rolled in the sky. The plane’s speed sensors never regained normal functionality as the plane began its three-and-a-half minute freefall.

The report shows the flight remained stalled throughout the drop, with its nose pointed up 15 degrees in response to the pilots’ attempt to generate lift. The flight plunged into the Atlantic nose-up, killing all 228 on board.

Granted, those 74 pages of pilot posts suggest that there are likely some very reasonable explanations for why the situation was misdiagnosed. But key is that it doesn’t appear [from what has been released to date] that the pilots understood — at the point it became critical — that the aircraft was stalled and thus did the exact wrong thing. What they did seems (to non-pilots) to be an intuitive response; if you’re quickly losing altitude, you should try to climb. But this is exactly the wrong approach to a stall. In a stall, your airplane is behaving like an expensive rock, not an airplane. Despite losing altitude you must point nose down until you get enough airspeed over your wings for the airplane to become an airplane again. I’m not a pilot, and I understand enough about aviation to know that.

So why am I posting about such things on a political blog? Simple. Our economy isn’t behaving like an economy, it’s behaving like a rock. We’re stalled. Yet our politicians are trying to do the same thing the pilots of AF447 did to get us out of it: pull back on the yoke [subsidies & intervention] and goose the throttle [monetary and fiscal stimulus]. We’ve got inexperienced pilots at the controls, who know more about flying a plane in Keynesian theory than in Austrian reality.

What happened? Well, previous rounds of throttle [low interest rates / shoddy lending standards of Fed & banks during Bush administration] and pitch [national housing bubble] put our economy up in the realm of “coffin corner”, where seemingly minor changes in AoA or airspeed cause an aircraft to exceed its flight envelope in rapid fashion. I can’t claim that the Obama administration was handed a very easy situation. But that doesn’t begin to excuse them for adopting the exact wrong strategies to dealing with it.

America’s economy is stalled and not responding to your stimulus. It’s rapidly heading groundward and yet everyone in charge can’t seem to explain why pulling the nose up with fancy rhetoric isn’t fixing the problem. The answer is not for the government to try to fix the problem. It’s for the government to stop worsening the stall, get the hell out of the way, and let the economy start behaving like an economy again.

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