Category Archives: Monetary Issues

Sympathy for Paranoia

cat in the tin foil hat

The moon landing was faked by the U.S. government for propaganda purposes to win the Cold War. The terrorist attacks of 9/11 was actually an inside job as a pretext to go to war. Space aliens landed in Roswell, NM but the government has been covering it up. The Sandy Hook massacre was faked to increase support for new gun control laws; the “victims” were actually actors who are all alive and well today. The Illuminati is the secret entity which actually governs the whole world…

The natural response to these statements is to say “these people are mad barking moonbats” and to keep ourselves as distant as possible from the people making them. Those of us in the liberty movement who want to be taken seriously are very quick to renounce anyone who is within six degrees of Alex Jones or anyone else who states any of the above. It’s difficult enough to be taken seriously about legalizing drugs, the non-aggression principle, free markets, and freedom of association; the last thing we need is to be lumped in with “those people.”

While it is very important to defend the “brand” of the liberty movement, it’s also important to recognize the reasons why people believe some rather nutty things.

[W]hen I say virtually everyone is capable of paranoid thinking, I really do mean virtually everyone, including you, me, and the founding fathers. As the sixties scare about the radical Right demonstrates, it is even possible to be paranoid about paranoids. – Jesse Walker, The United States of Paranoia: A Conspiracy Theory, (p. 24) (Read my book review here)

Once one learns about some of the activities governments been proven to have been involved in, some conspiracy theories no longer seem as outlandish. I used to refer to conspiracy theories and wacky beliefs as “black helicopter” stories and I’m fairly certain that others used the same terminology. Once I learned that black unmarked helicopters were used in the assault by the FBI on the Branch Davidians in Waco, TX,(Napolitano, p.110) I stopped calling such ideas “black helicopter.”

Not everything that sounds crazy is.
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The Minimum Wage Lie

fast-food-workers-strike-may

When “progressives” say “the minimum wage hasn’t kept up with inflation”, they’re lying.

Not shading, the truth, exaggerating, or interpreting things differently… they are flat out lying.

… And what’s more, the ones who made up the lie in the first place, know they’re lying (the rest mostly just parrot what they’ve been told).

What exactly would “keeping up with inflation” mean?

The minimum wage has been $7.25 an hour since 2009.

In 1938, when the federal minimum wage was established, it was $0.25 an hour. In constant dollars (adjusted for inflation) that’s $4.19 as of 2014.

So, not only has the minimum wage kept up with inflation, it’s nearly doubled it.

Ok.. well what about more recently?

Minimum wage 15 years ago in 2000: $5.15, or $7.06 in constant dollars

Minimum wage 20 years ago in 1995: $4.25, or $6.59 in constant dollars.

Minimum wage 25 years ago in 1990: $3.80, or $6.87 in constant dollars.

Minimum wage 30 years ago in 1985: $3.30, or $7.25 in constant dollars.

Funny… that’s exactly what it is today… How shocking.

So, for 30 years, the minimum wage has not only kept up with inflation, for most of that time it’s been ahead of it.

So, how are they lying?

The way “progressives” claim minimum wage hasn’t been “keeping up with inflation”, is by comparing today, with the highest level it has ever been; almost 50 years ago, in 1968, when the minimum wage went to $1.60 an hour ($10.86 in constant dollars).

This was a statistical anomaly.

There’s a long and loathsome tradition of lying with statistical anomalies.

At $1.60 an hour, the minimum wage in 1968 was a huge 20% spike from what it had been just 3 years before in ’65, more than 40% above what it had been in 1960, and nearly double what it had been 12 years before in 1956 when politicians started throwing minimum wage increases faster and bigger (again, all in constant dollar terms. The minimum wage at the beginning of 1956 was about $6.30 in constant dollars)

In constant dollar terms, the minimum wage today, is about the same as it was in 1962 (and as I showed above, 1985).

It just so happens that from 1948 to 1968 we had the single largest wealth expansion over 20 years, seen in the history of the nation (about 5-8% annual growth)… Which then crashed hard starting at the end of ’68.

From 1968 to 1984, the U.S. had 16 years of the worst inflation we ever saw, and the purchasing power of ALL wages fell significantly, as wages failed to come even close to keeping up with inflation (we saw 13.5% inflation in 1980 alone, which is about what we see every 4 years today).

It took until 1988 for real wages to climb back to their 1968 constant dollar level, because we were in a 20 year long inflationary recession, complicated by two oil shocks and a stock market crash (actually a couple, but ’87 was the biggest one since ’29).

However, the minimum wage was boosted significantly in that time period, far more than other wages rose, and stayed above the 1962 water mark until the end of that high inflationary period in 1984, declining slightly until 1992, then spiking and declining again until 1997 etc… etc…

By the by… household income in 1968? appx. $7,700, which is about the same as today in constant dollar terms… About $51,0000 (about 8% more than it was in 1967, at $47k). Which is almost exactly what it was in 1988 as well. Household income peaked in 1999 and 2007 at around $55,000, and troughed in 1975 at around $45,000

Of course, income was on a massive upswing from 1948 to 1968 (and in fact had been on a massive upswing overall since 1896 with the exception of 1929 through 1936). In 1941 household income was about $1500 ($24,000 constant), in 1948 $3,800 ($37,000 constant).

Like I said, it was the single greatest expansion in real income and wealth over a 20 year period, in American history.

1968 was a ridiculous historical anomaly… Not a baseline expectation.

So, From 1964 to 1984, the minimum wage was jacked artificially high (proportionally far above median wage levels), and “progressives” chose to cherry pick the absolute peak in 1968 from that part of the dataset, in order to sell the lie.

A living wage?

As to the minimum wage not being a living wage… No, of course its not. It never was, its not supposed to be, and it never should be.

The minimum wage is intended to be for part time, seasonal workers, entry level workers, and working students.

Only about 4% of all workers earn the minimum wage, and less than 2% of full time workers earn the minimum wage.

Minimum wage is what you pay people whose labor isn’t worth more than that. Otherwise everyone would make minimum wage. But since 98% of full time workers can get more than minimum wage, they do so.

What should the minimum wage be?

Zero.

Wait, won’t everyone become poor suddenly?

No, of course not. Literally 98% of full time workers already get more than minimum wage. If we abolished the minimum wage, most of them wouldn’t suddenly be paid nothing.

Wages should be whatever someone is willing to work for. If you’re willing to work for $1, and someone else isn’t, you get the job. On the other hand, if an employer is offering $10 and no-one is willing to take the job for that, they need to offer $11, or $12, or whatever minimum wage someone is willing to take.

If you don’t want to work for $7.25 an hour, don’t take the job. If nobody offers you more than that, too bad, but that’s all your labor is worth.

If you are willing to work for someone for $7.00, and they’re willing to pay you $7.00, what right does some “progressive” have to tell either of you, that you can’t work for that much?

No-one is “exploiting the workers”, if those workers took the jobs voluntarily, and show up for work voluntarily… If all you can find is a job for less than what you want to work for, you’re not being exploited, THAT’S ALL YOUR LABOR IS WORTH TO THOSE EMPLOYERS.

You may think your labor worth more, but things aren’t worth what you want them to be worth, they’re only worth what someone else is willing to pay for them.

But let’s be generous…

All that said, I don’t think we’ll be able to eliminate the minimum wage any time soon.

So, to those “progressives” who would say “let’s make the minimum wage keep up with inflation”, I agree wholeheartedly… Let’s make it $4.19.

Oh and if you don’t believe me on these numbers, they come from the department of labor, the department of commerce, and the census. If I’m lying to you, it’s with the governments own numbers… the same ones “progressives” are lying to you with. 

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

Russia’s Ruble Problem is Temporary… And not Just THEIR Problem

Vladimir_Putin-6

Russia’s been in something of a spot of bother lately. The decision by OPEC to continue elevated levels of oil production (in order to deliberately suppress oil prices, and drive higher production cost competitors out of the market), in addition to American sanctions, have caused the Russian ruble to plummet against the American dollar. Steps taken by Russian President Vladimir Putin and the Central Bank of Russia to halt this decline have not been effective, causing Putin to call what’s happening a “catastrophe”.

These reduced oil prices of course have many benefits to the US, beyond schadenfreude at Russias predicament. Fuel prices are the lowest they’ve been in almost ten years; which has had a positive effect on consumer prices overall, travel, and holiday spending during retail’s heaviest season.

So with prices at the pump going lower, and Putin struggling, everything’s all good, right??

Not really.

Here are a few reasons why we should be concerned at what’s happening right now:

* There’s a lot of arm-twisting going on both inside and outside OPEC – What’s really happening, is Saudi Arabia is effectively in a staring contest with weaker members of OPEC, and no one has the strength to end the standoff. These low prices are harming oil producers everywhere. The price can only be so low, for so long, before there’s so much pressure (both internally, and from other oil producing nations); that the Saudis will cut production, and allow the price of oil to rise.

* We’re due for an energy market correction – As I said above, this action isn’t just hurting Russia. It’s hurting Venezuela, Mexico, Norway, and all other oil-exporting countries, and it’s not sustainable. Speculation, aggregate demand increases, and softening of the Saudi position, are likely to bring the price back up within a few months, which benefits Russia in the long term.

* Vladimir Putin’s support is, and will remain, solid – Breathless articles in the Western press about Putin’s “challenge” possibly leading to his downfall are vastly overblown at best. For one, Putin knows who his key allies are, and they – the oligarchs in Russia – will be taken care of first. Furthermore, he is virtually synonymous with the once again powerful Orthodox Church, and his domestic policies (which basically amount to keeping the buses running on time and eradicating homosexuals) are still extremely popular. If push comes to shove, the Russian people will stick with him; partly because he’s their best chance against the west (and more importantly, China), and partly because if they do protest, they stand a good chance of not making it home (Putin’s history is clear in this). It’s just as well, because…

* There are no legitimate alternatives to Putin – Simply put, Russia’s liberals (and in fact all political factions other than Putin, and those even more hardline) are broken; either irrelevant and ineffectual, or small, hardcore sects, that hold little appeal for a nation that still remembers bread lines. Financial transparency? Human rights? These are things which, in the mind of a hardened nation, don’t pay the bills; and in the opinion of many Russians, may not be desirable, as they would benefit currently disfavored people (such as gays, and those of religions other than Russian Orthodox).

* When you poke the bear… – Russia has shown that they will act with violence when it suits their desires; ask Georgia, Chechnya and the Ukraine about that… if they can pick their heads up long enough to speak. I’m not entirely sure we want to see the Russians become desperate, or feel truly threatened, economically or politically. At best, many lives may be lost or destroyed in small scale conflict, and the disruption of that inevitably comes with it. At worst we could see war with Russia and “the west” (under whatever pretext or theater in which it may begin); perhaps including support from China, splinter eastern Europeans, “enemy-of-my-enemy” Islamic groups; and governments around the world, who would have to pick a side in a war between the United States, and “anyone other than the United States”.

That’s a wild scenario, but not wild enough to be completely discounted.

In the end, I predict that Russia will ride this out, and wait for mutual interests in the oil industry to start wearing down the U.S. and Saudi Arabia. There could be some retaliation, leading some to guess at a second Cold War. However, ultimately, Russia doesn’t have sufficient economic clout to meaningfully damage the United States and its allies, without also causing greater damage to themselves.

Enjoy the gas prices (and laughing at Putin) for now, but understand that, most likely; prices (and the ruble) will swing back closer to their recent medians, by the end of February (March at the latest), with little or no long-term damage to Putin.

Christopher Bowen covered the video games industry for eight years before moving onto politics and general interest. He is the Editor in Chief of Gaming Bus, and has worked for Diehard GameFan, Daily Games News, TalkingAboutGames.com and has freelanced elsewhere. He is a “liberaltarian” – a liberal libertarian. A network engineer by trade, he lives in Derby CT.

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.

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