Thursday, October 30, 2008

Soup to Nuts

In case you are not concerned about the fact that the government expropriates 7.5% of your income, expropriates an additional 7.5% from your employer, pisses the money down the federal government toilet also known as the Social Security Trust Fund which doesn't really exist since the government spends all the money, and then doesn't pay you interest, gives you no upside, and makes no guarantee that you will even get the money when your old depending on whatever definition of "old" will be in umpteen years - have I got a great idea for you....
House Democrat George Miller is calling for a soup-to-nuts re-examination of 401(k) plans in light of dramatic investment losses this year that could lead to a radical overhaul of the popular defined contribution plans.

One proposal under consideration would eliminate the tax-favored treatment of contributions to 401(k) plans and individual retirement accounts; instead, workers would receive a $600 tax credit that would offset contributions to a new mandatory guaranteed plan that would be managed and administered by the federal government. Another proposal would extend 401(k) plans to all workers.

“Maybe we are at a time where fiddling at the margins is not going to serve the American people,” Mr. Miller, D-Calif., said at a House Education and Labor Committee hearing in San Francisco on Oct. 22.

But, what does Mr. Miller really want to do with the money? Well, of course, just ask a professor at the "New School" about her plan based on the wildly successful plans in such countries as Latvia and Poland.

Mr. Miller said he wants to study a proposal to create so-called guaranteed retirement accounts advocated by Teresa Ghilarducci, a professor at the New School for Social Research, New York. The accounts are similar to defined contribution plans in Italy, Latvia, Poland and Sweden, as well as the giant TIAA-CREF system run for U.S. academics.

Under Ms. Ghilarducci's proposal, which was laid out in a briefing paper published late last year by the Economic Policy Institute, Washington, a liberal think tank, 5% of a worker's earnings would be placed in the plan each year, with workers and their employers each contributing half, except where an employer provides an equivalent or better defined benefit plan. Workers would receive a $600 annual tax credit for their contributions, and they could make additional after-tax contributions.

Ms. Ghilarducci said her proposal would apply to corporate and public DC plans.
The accounts would be administered by the Social Security Administration, and the funds would be managed by the federal government's Thrift Savings Plan or a similar governmental agency. Employees would receive a fixed guaranteed 3% real return. If actual investment returns exceed that level for a number of years, the surplus would be distributed to participants, although a reserve fund would be maintained for rocky financial periods.

Uh, so the government would expropriate your money and put it in a plan managed by uh, the government, which will "guarantee" you a return, blah, blah, blah. Don't we have a program like that already? Isn't it called Social Security?

The government does not own your money. People that earn their money own their money. It is their choice what to do with it. We should be figuring out how to phase out the disastrous and morally evil Social Security program which robs and destroys the savings of the productive and impairs capital formation which leads to lower productivity and lower real wages.

Note, that Mr. Miller does not even consider the moral principle involved related to private property not to mention the practical consequences of such a plan. Mr. Miller claims to be truly concerned about recent "losses" in the stock market - losses ironically that have been caused by government intervention in the economy such as Social Security which increases the federal budget deficit, leads to inflation, which causes boom-bust cycles including the latest meltdown. Despite that fact, shouldn't he be concerned with the fact that such a program would represent a 100% loss?

Wednesday, October 29, 2008

Obama Should Redistribute Electoral Votes

Do you think it is fair that Obama has more campaign funds than McCain? He might say that he worked harder to raise that money and had a better, more efficient campaign but it is his campaign laborers that did all the "real" work. Why should he benefit at the expense of not only his campaign proletariat but also his competitors in the McCain campaign? McCain can't help it if he is older and weaker than Obama. Also, since Palin belongs to a historically oppressed gender, surely it is unfair that all the money went to a younger, more articulate (code word for "male") candidate. Obama needs to spread the campaign wealth around. Shouldn't he immediately transfer or redistribute an amount such that both campaigns have equal amounts of funding in order to "level the playing field"? Certainly, on election day, if Obama receives more votes than McCain he should redistribute electoral votes to McCain in order to be fair. Why should one candidate get more votes than another just because people prefer one candidate over the other? Unfortunately, this is yet another example of Big Politicians squeezing out the little politicians. Soon, if this trend continues, one party will have a monopoly and then where will we be?

Tuesday, October 21, 2008

Brook at National Press Club

Dr. Yaron Brook will be speaking at the National Press Club in Washington D.C. on Wednesday October 22. His talk is entitled "Capitalism Without Guilt: The Moral Case for Freedom" and is the inaugural lecture celebrating the launch of the Ayn Rand Center for Individual Rights in Washington D.C. (details can be found at the link). This is an exciting development and another major front in the battle for freedom. Go to their events, donate money, etc. This is a chance to support a consistent moral defense of capitalism.

Monday, October 20, 2008

The Road to Fascism

Press release from the ARC

The Road to Fascism
October 16, 2008

Washington, D.C.--The government has announced that it plans to use $250 billion to buy ownership stakes in various U.S. financial institutions. According to the New York Times, nine major U.S. banks have already been forced into the program. “The chief executives of the nine largest banks in the United States . . . were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left. . . . ‘It was a take it or take it offer,’ said one person who was briefed on the meeting, speaking on condition of anonymity because the discussions were private. ‘Everyone knew there was only one answer’”--even though at least one institution, the relatively healthy Wells Fargo, wanted to say no.

According to Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “In herding banking executives into a room and making them an offer they couldn’t refuse, the Paulson regime took its latest and most disturbing step yet on the path to state control of the economy.

“If fascism means coercive state control over nominally private property, then there is no more chilling sign of creeping fascism in America than government’s encroachment on the lifeblood of the U.S. economy--its financial institutions. While the government assures us it will be a ‘passive investor,’ merely funneling cash into the banking system rather than dictating how banks function, this is a lie. Not only does the money come with strings attached--such as restrictions on executive compensation, dividend payments, and the types of investments banks can make--but politicians are already promising a web of further controls. As John McCain recently noted, ‘We will not merely inject billions of dollars into companies and walk away hoping for the best. We will require that those companies be reformed and restructured until they are sound assets again, and can be sold at no loss--or perhaps even a profit--to the taxpayers of America.’

“The Paulson shakedown is the latest in a rapid-fire series of government bailouts and interventions over the last several months. Our leaders claim that this virtual takeover of markets is economically necessary. But it was government control of financial markets that spawned the financial meltdown in the first place: an inflationary boom brought on by the Fed’s easy-money policies, a campaign to promote home ownership that encouraged risky loans, regulations that pushed banks to become dangerously over-leveraged, etc., etc. The response to the crisis should be to restore freedom and to disentangle government from the economy. Instead, the same mentality and the same central planners that created the financial crisis are being given far wider reign to manipulate and distort markets. We must tell our government to reverse this fascist course--now.

Sunday, October 19, 2008

Anti-Anti-Communists

In a recent op-ed by Paul Kengor titled "Why Obama's Communist Connections Are Not Headlines", the author states:
There's a lot of frustration among conservatives over how Barack Obama's radical past seems to be making no impact whatsoever among the American public. His connection to communists in particular, from communist-terrorists like Bill Ayers to the communist agitator-journalist Frank Marshall Davis to fellow travelers like Saul Alinsky, has simply failed to resonate beyond the political right. Quite the contrary, the more information that becomes available on Obama's radical associations, the more he seems to widen his lead over John McCain, a man who was tortured by communists in Vietnam.
Although Kengor is absolutely right in expressing frustration and confusion over the lack of public outrage and hostility to Communism, he does not understand the root cause of this fact.
I have seen for quite some time that although we won the Cold War -- and defeated the Soviet communist empire -- America is vulnerable to varying degrees of collectivism, wealth redistribution, "creeping socialism" (Ronald Reagan's phrase), class-warfare rhetoric, and generally milder, more palatable (but still dangerous) forms of disguised Marxism. Why? How? The answer is simple: The history and truth about communism is not taught by our educators.

Although he is right that lack of education is critical, this fact is a symptom of the underlying problem not the primary cause. He does make the following observation in regard to the Leftist academics' reaction to his lectures in which he cites historical facts regarding the mass murder and atrocities commited by communists.
These professors glare at me as if the ghost of Joe McCarthy has flown into the room and leapt inside of my body. In fact, that's the essence of their criticism: It is not so much that these professors approve of communism as much as they disapprove of -- actually, utterly despise -- anti-communism. They are anti-anti-communist more so than pro-communist. Conservatives need to understand this, so as to avoid broad-brushing and losing credibility. Sure, a lot of professors are Marxists, and many more share the utopian goals of Marxism, but the vast majority are simply leftists.

Being on the left entails many strange contradictions and political pathologies, one of which is this bizarre revulsion toward anti-communists. These leftists -- to their credit -- despise fascism, and will preach anti-fascism until they're blue in the face. They are as appalled by fascism as conservatives are by communism. But while conservatives detest both communism and fascism, liberals only detest one of the two.

Keep in mind, that the Left is not opposed to murder, torture and repression. They are opposed to murder, torture, and repression for the wrong reasons by the wrong people. Properly, both fascism and communism should be understood and rejected as being two variants of the same underlying philosophy of collectivism. That is, both fascism and communism deny individual rights and subjugate the individual to the group. Under Hitler's version of fascism, the group was based on race. Under communism, the group is based on class. (In a theocracy, the individual is subjugated to God.) The methods of fascism might be marginally different in that there are nominal property rights although this is meaningless as the state reserves the right to tell you what to do with it. Under communism, the idea of property rights are overtly rejected. However, these details are insignificant considering both ideologies endorse the wholesale abrogation of individual freedom which in practice has led to death and misery on an unprecedented scale (over one hundred million in the 20th century) through "its purges, mass famines, show trials, killing fields, concentration camps" as Kengor points out.

However, the Left does not oppose this outcome per se. They reject fascism because they connect its underlying philosophy to racism which they rightly oppose. Importantly, they do not oppose fascism because it denies individual freedom and/or property rights nor do they uphold individual freedom or property rights. Communism rejects private property and free markets based upon Marx's economic theories which hold that capitalism is necessarily exploitative to workers or the proletariat - a theory entirely accepted by the academic left. They do not accept that rejection of individual rights contradicts man's fundamental nature which necessitates freedom in order to live properly nor do they see the connection between this fact and the historical fact that, in practice, communism leads to chaos, oppression and death. In their view, communism is well-intentioned. They take the morality of altruism or self-sacrifice seriously. If a few hundred million people need to be killed to obtain a utopia then so be it.

The more modern twist on this phenonmena is the idea that these Leftists are more opposed to anti-communists than they are in favor of actual communism. As Kengor states, they are in a sense "anti-anti communists." They save their most vitriolic attacks for those who overtly oppose communism on principle and dismiss them as right wing wackos or smear them as McCarthyites. This has to do with modern philosophy's attack on reason and therefore any philosophic system that leads to some purported political conclusion. In other words, modern philosophy has taught these intellectuals that there are no black and whites and that no one can known anything for sure. Therefore, in their mind, the idea of a systematic, logical refutation of communism could only be undertaken by uneducated rubes unaware of the nuances of the modern dialectic.

One might ask, if they reject philosophic systems and therefore ideology as such, then how can they endorse communism? Well, they do not endorse any specific system. However, very few take their ideological void to its logical conclusion and sit in a white rubber room all day. By default, they accept the cultures prevailing ethos that altruism or self sacrifice is morally virtuous and extend this politically by upholding the redistribution of wealth from rich to poor which they deem to be a form of "social justice." Therefore, to them, any system which undertakes to affect such an outcome is an end which justifies the means - even if it entails violence which any theft must. If that system is communism than so be it. If the system is a mixed economy as exists in America currently then so be it. The modern leftist does not agitate for a particular "system" only political outcomes which are consistent with their desire to redistribute wealth from rich to poor. So, in combining sympathy with the underlying premises of communism with hostility to the notion that any ideology is truly valid, we obtain a pathetically modern perversion: the anti-anti-communist. The antidote is a philosophy that is overtly and boldly pro-reason, pro-individual rights, and pro-capitalism.

Von Mises Excerpt on Gold

I enjoyed this excerpt from Human Action by Ludwig Von Mises linked here. Here is an excerpt from the excerpt:
The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the fact that it was an international standard as required by international trade and the transactions of the international money and capital market. [29] It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization into the remotest parts of the earth’s surface, everywhere destroying the fetters of age-old prejudices and superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating riches unheard of before. It accompanied the triumphal unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another.

...The significance of the fact that the gold standard makes the increase in the supply of gold depend upon the profitability of producing gold is, of course, that it limits the government’s power to resort to inflation. The gold standard makes the determination of money’s purchasing power independent of the changing ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence. Every method of manipulating purchasing power is by necessity arbitrary. All methods recommended for the discovery of an allegedly objective and "scientific" yardstick for monetary manipulation are based on the illusion that changes in purchasing power can be "measured." The gold standard removes the determination of cash-induced changes in purchasing power from the political arena. Its general acceptance requires the acknowledgment of the truth that one cannot make all people richer by printing money. The abhorrence of the gold standard is inspired by the superstition that omnipotent governments can create wealth out of little scraps of paper.

Friday, October 17, 2008

If this is punishment, I don't want to be rewarded

Apparently, Hamas Prime Minister Ismail Haniyeh said Friday that the current economic turmoil in the US is "divine punishment" allegedly for our "support of the Israeli-led blockade imposed on Gaza."

If the "turmoil" in America today is "punishment" from God what has He been doing to the Middle Eastern muslims for the last five hundred years? They really need to give a shout out to God for all He has done for them. Personally, I'll take the punishment.

Thursday, October 16, 2008

Bar Stool Economics

I enjoyed the following which I received in an email from a friend.

Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings). T
he ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia

Wednesday, October 8, 2008

Treasury Supplements and Maiden Lanes

This blog post from EconoBrowser is very interesting. It traces the recent moves by the Federal Reserve by analyzing changes in it's balance sheet. What's interesting is the recent additions to the balance sheet on the asset side under various acronyms pertaining to recent "credit facilities" (cash loans to banks against their crappy assets) as well as their investment in Bear Stearns under the name "Maiden Lane".

The author asks, how could the Fed "buy" all this stuff without a corresponding increase in "currency in circulation" or in "reserves"? The Fed created a line item in their balance sheet called "Treasury Supplement" following an obscure press release quoted in the post. The upshot is that the Treasury is effectively placing cash with the Fed obtained in a "supplemental" auction of T-Bills with which the Fed turns around and loans this cash against "private assets", i.e., the crappy debt discussed above. This allows the Fed to explode its balance sheet without having to "create" money immediately. I imagine that if the markets stabilize they will quietly unwind this and if it doesn't they will "monetize" it by creating money to cover losses.

Basically, this is yet another example of how through complicated mechanisms, the Federal Reserve and the Treasury operate to redistribute risk and losses (through inflation) to the people who least deserve it: American taxpayers who pay their bills.

Friday, October 3, 2008

Embarrassing

I have to admit that I turned on the VP debate for about two minutes last night. I watched enough to hear Palin stumble through a claim about fighting the "greed" of the oil companies in Alaska, and I then listened to Biden (whose face, I believe, is literally made of ham) utter words about something having to do with something.

The current crop of candidates is a soaring testament to the state of our culture. They are unprincipled but not just in an opportunistic or populist sense. They are metaphysically unprincipled. In other words, I don't believe their minds grasp that fundamentally nature is causal, i.e., that an entity acts in accordance with its nature. Such a mentality is not able to reason properly, i.e., derive abstract principles from facts. Their ideas are a grab bag of contradictions and meaningless bromides designed not to actually demonstrate some truth or connect facts and principles but to affect an emotional reaction on behalf of the viewer. Palin's handlers no doubt wanted her to appear "credible" not to actually make sense. The Ham, although not suffering Palin's need to prove her ability to articulate a sentence in the national spotlight, in subtance is equally inane.

Note that the talking heads completely accept this state. They do not discuss the logic or meaning of candidates' claims. They discuss how the debate will "play" with the voters, i.e., how people will emotionally react to what they perceived. If you want to understand why we don't have better candidates this is the reason. We are living in a society that has been philosophically disarmed, i.e., a culture thorougly immersed in the lessons of their professors that the mind is impotent to understand reality, that there are no valid principles, no right and wrong, no black and white. The state of the economy and the candidates before us are reality's payback for holding ideas not consistent with it.

Wednesday, October 1, 2008

Marx's Comeback

I enjoyed this op-ed by Martin Masse. Here is an excerpt:
In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

Also, the Ayn Rand Center for Individual Rights has a page up on the financial crisis here.