Prices And Controls

When or anyone unilaterally decides how something should be priced, you are dictating to everyone what they can and can't do, what they can and can't buy, what they do, or do not want.

Labor and material cost are far from the only inputs into the price of something at any given place and time. What people are willing to pay tells manufacturers where and where not to invest and how much or how little of it to produce. Prices dictate profits and the potential for profits is the incentive for why a person or business makes something in the first place or looks for ways to make it better or cheaper.

Capitalism, in purely economic terms, is really just an acknowledgment that there is often an investment (capital) needed in order to make something or to offer a service for sale and that those who come with the investment (capital) should reap a reward for their investment.

Investment is simply savings, delaying current buying (consumption) in the expectation of having those savings work to give you more money in the future.

Free markets require the ability to invest, i.e. capitalism, but the reverse isn't necessarily true. Simply because you are allowed to invest, doesn't mean you are participating in a free market.

Free markets are what empowers people to create opportunities for themselves, not some super-governmental body dictating prices and products. Countries do not trade. People trade. Businesses trade. Stop trying to interfere with their ability to do so in the way that each one of them decides is best for *them*.

Trade And Tariffs

For most of the first 100 years of the US, the only two major financing methods the federal government used were tariffs and, to a lesser extent, taxes on liquor. Tariff rates were generally from 5 to 10%. Imports and exports stayed fairly equal since there wasn't much in the way of foreign investment in the US (which doesn't get accounted for in the way we figure trade “deficits” today). Far harder to invest and run a business on the other side of a huge ocean that still took quite a while and involved a significant level of actual danger to cross than it is today.

Tariffs were also explicitly used as a weapon against the South, to force them to buy goods from the North instead of imports. In fact, that was one of the major arguments that led to the succession of the South and the resultant Civil War. Sorry, but no, it wasn't *all* about slavery.

No single policy acts in a vacuum. We grew despite the tariffs that were in place, not because of them. We grew because of the low level of government interference in free markets. We grew because we didn't see business as some evil or dangerous mount that needed to be ridden with jack boots and spurs.

Free trade benefits the population as a whole. Yes, some individuals get hurt, but that happens all the time for many reasons other than trade as well, whether it's new technology or processes, businesses moving from one place in the country to another, or just the changing tastes of the general public.

Yet even though all of these non-international trade changes create far more total losses for the individual businesses and employees in the nation affected by whatever changes happen, we still recognize that the nation as a whole benefits and so don't demand government stop the changes from happening (although many states have become quite predatory or cronyist in offering government goodies to attract new or keep old companies in their state).

International trade is exactly the same thing. There is no economic difference to the nation as a whole what caused the change that creates the temporary business dislocation. When a less expensive way of making a good is found, more people benefit than are harmed, albeit that the losses are more localized and easy to see, while the benefits are more diffuse and harder to pinpoint.

The ideal situation is that our government not get involved at all. It doesn't matter to the workers or final consumers what another country's policies are. They are really unimportant to a truly free trade. If another country doesn't mind harming their own citizens for the benefit of their politically well connected, that's their problem, not ours. It is not our business, as a country, to decide how other countries are run.

Any artificial change in the price or supply of any good or service, such as tariffs, forced on the economy harms it as a whole. The current free market price of any given good or service is the always moving target of finding the most efficient way to produce the most supply of what is of the most value to the most consumers at the lowest possible price. That's really the bottom line of what drives everything that happens in a free market.

Prices people are willing to pay are used to inform producers of what consumers want at any given point in time. Desire for profits drives producers to find the most efficient way to meet those desires at the lowest cost. That process is what has created the incredible world we live in today, the explosion of possibilities never even dreamed of before, raising masses of people the Earth could never even have sustained before yet to an increasing standard of living, in an amount of time that's the merest fraction of the history of the human race.

This is what freedom creates and this is what is blocked when the force of government inserts itself between what free and peaceful people want to do and what they are allowed to do. It can do nothing *but* net harm to its citizens.

Read More https://mygauntlet.com/

Trade Wars

Do imports really hurt the American Economy?
 
95% of the people used to work on farms. Now it's 2%. Yes, there were periods of wrenching dislocations and plenty of individuals who were hurt. But does anyone really think it would be best to go back to 95% of the population spending their days in strenuous back-breaking labor in the fields?
 
Most of the manufacturing jobs we lost were due to mechanization and improving productivity, not lost to other countries, for all of the political pronouncements to the contrary. The unions had a heyday in the aftermath of WWII when most of the world's manufacturing had been destroyed – except ours. But that couldn't be expected to last. We even paid to help everyone else rebuild theirs while ours started to rust away.
 
It's always easy to point to the individual people hurt by a process … they're always there. But what do the poor do when prices for essentials start skyrocketing because of punitive tariff taxes. How much steel does it take to make a car, a refrigerator, or a washing machine? Those prices will be going up if either Trump or Clinton has their way. Prices go up, fewer bought, lower production, and lost jobs. They just aren't as obvious or concentrated as the ones we can directly point to.
 
Neither one of the candidates has been honest with us. They both pandered to fears and scare tactics and outright lies. In the end, the election isn't about who most people wanted in the Oval Office, it's who they fear the most moving in.

Currency and Inflation

So what is inflation? Where does it come from? What does it actually do?

Whether it’s paper currency (fiat currency, that isn’t directly backed by anything of value), digital or even physical clams, it’s what we use for trading with other people when the economy is too big to do direct trades of I have what you want and you have what I want. It also allows us to store earnings for later spending or investment. If the clamshells are pretty enough, you can even wear them as is. Which, incidentally, works for Gold and Silver too, but that’s a topic for a different post.

So let’s set up a simple example. You have 100 people with an average of $100 each that have, on average, $95 worth of stuff (physical goods, services, etc) to sell. That works out pretty well. Everyone can pretty much get what they want with something left over for saving or investing in increased future productivity. But two of the people, let’s call them the Freds, realize that they can set up a printing press and get more money to spend without having to actually work for it or take it directly from the other 98. So off they go, and before you know it they’ve printed an additional $1000 worth of bills that you can’t tell from the original. Now they get to go on a buying spree.

Of course, the amount of stuff available for sale hasn’t increased, or at least not by nearly as much as the money supply. Next thing you know people can’t get what they want because the Freds already bought it with all of their “extra” inflationary money. So the next time around, they realize if they want something they’re going to have to be willing to pay more for it. The prices start to go up. And up. Those who sell for more have more money to buy with though, so they’re not too bad off. Eventually, it all settles out to where the prices and dollars available equal back out. Ah, but those Freds still have their printing presses.

Now, let’s look at something interesting. At first glance, it seems that it all comes out in the wash and nothing really changes. But that’s not what happens in reality because of the time it takes for that money to work it’s way through.  Who really benefits the most from the inflated money supply? The Freds, of course. They got to do their buying at the pre-inflation prices. The people they bought from (usually big business) get the extra money when the prices haven’t gone up nearly as much as they eventually will. The big losers? The average Joe has to pay the inflated prices long before the extra money cycles through the economy enough times to get to him. So the poor get poorer and the rich get richer.

Politicians – Yuck!!!

John Stossel, in today’s column, reminded me of a quote from economist Walter Williams that I particularly resonated with so I thought I’d share it today …

“I respect ordinary thieves more than I respect politicians. Ordinary thieves take my money without pretense. (They don’t) insult my intelligence by proclaiming that they’ll use the money that they steal from me to make my life better.”

So true 🙂

Don’t Count On Social Security Benefits

The Ponzi scheme known as the Social Security Benefit system is running out of steam.

When it was first created, it was promoted as a supplement to regular retirement savings for a few well-defined groups of people. Life expectancy was 63 and full benefits didn’t kick in until 65. During its first 40 or 50 years, for those who lived long enough to collect on it, it was the best and “safest” return on your money for retirement there was.

Far more money went into the so-called trust fund than was paid out. That “excess” was “invested” in “special” Treasury notes are, in essence, IOUs from the government to itself. That money then went into the general fund and was spent like all the rest. Since it was an internal debt it doesn’t even show up on the balance sheets or get counted as part of the debt.

Over the years, more and more people have been added and benefits increased to where many people expect Social Security benefits to take care of their minimum retirement needs. Life expectancy increased to 65, 67, 70, 72 years old, or more. More people getting more money for a longer time with fewer and fewer people paying into the system. There was a major “patch” made in the ’80s when the age for full retirement was boosted up and tax (excuse me, “contribution”) rates shot up.

As the demographics kept changing, there was less and less “excess” to tap. External borrowing had to take its place. Deficits began skyrocketing up.

Not one penny was paid out on those “securities” until just a few years ago.

It was all just funny money on cooked books. Nothing was being cashed in. Nothing taken out of revenues, only more put into the general fund and replaced by those IOUs. Treasuries are only as safe as the government’s power to take money from current taxpayers.

The Court has already ruled that you have no legal claim to Social Security benefits. There is absolutely NOTHING that guarantees that the retirement payments you expect will continue to be made or at what level or at what retirement age or with what COLA formula (if any) or any other change they want to make, after all, it’s just another law.

One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge — even to ourselves — that we’ve been so credulous. (So the old bamboozles tend to persist as the new bamboozles rise.) – Carl Sagan

Time To Get Out The Vote … For NOTA

With primary elections underway across the country, I thought I’d throw in my two cents worth on the question of voting.

 

I urge everyone to go and vote, even if there’s only one issue or person you consider worth voting for. The fact that someone or something is on a ballot doesn’t mean you have to vote for or against that person or issue. Don’t vote the lesser of two evils.

Do Electric Cars Really Help The Environment?

Like many other environmental saviors, the electric car is supposed to be a great way to help produce less CO2 and cause less pollution. However the facts of the matter turn out to be quite different when you look at the total lifetime costs in both CO2 and air pollution.

In this video by Bjorn Lomborg, he looks at all the parts that aren’t obvious when looking at only what comes out of the tailpipe and discovers that they really don’t help that much and may even cost more lives than they save.

What Does Free Mean Anyway

Free to try, free to succeed, and even free to fail. Your choices, your responsibility … unless you’re talking about free pizza for dinner. Just let me know when and where :).

I Am Charlie

On Wednesday morning, Jan 7, 2015, in Paris, two jihadist terrorists stormed into the offices of a satirical magazine called Charlie Hebdo. They were armed with AK-47s, a shotgun and even an RPG. In short order they killed 12 people and wounded 11 others. Why? In their words “We have avenged the Prophet Muhammad. We have killed Charlie Hebdo!” The magazine had previously republished the Danish cartoons from 2005 that depicted Mohammed (http://en.wikipedia.org/wiki/Jyllands-Posten_Muhammad_cartoons_controversy), had put out an issue that was supposedly edited by him, another with a cartoon of him on the cover and other like pieces.

Lest you think that it’s an anti-Islam magazine, they did plenty of irreverent pieces on Christianity and Judaism as well as other cultural taboos. If I was a cartoonist I’d do a couple of other offensive cartoons (I was thinking Jesus reading Origin of Species and Moses breaking off the 11th commandment (don’t get caught) from the bottom of the tablet) and grab one of the funniest Danish ones. If someone reads this and can draw the cartoons or something similar I’d be glad to put them up, with or without attribution as you choose.

The pen may be mightier than the sword … in the long run. 20+ people just paid the short-run price.