Friday, December 31, 2010

The War on Logic - Tax Cuts Don't "COST" the Government Anything

Earlier last week, a collection of Ivy League Professors from Yale and Cornell University established a site to have "Americans who have the means should collectively give back our Bush tax cuts" to some charity or philanthropy.

It's hard to identify where to start this critique of such an absurd line of reasoning from those who hail from such prestigious institutions of academia. The initial premise of any "tax cut" is especially fallacious considering tax rates were being held constant on income were they not?

One must have a solid understanding and theory of property rights in order to first argue anything related to taxes. Individuals own the rights to their body and more importantly to the labor they employ to live the life they choose so long as such employment of using one's labor does not HARM others in the process.

When individuals employ the use of their labor to produce/transform material into goods or services, one can conclude individuals have inherent property rights to said goods based on the prerequisite the exchange and acquisition of property was voluntarily made and considered just (without theft or obtained through nefarious means).

The government, however, cannot acquire anything without first TAKING from sovereign individuals through taxation, borrowing from future taxation, or devaluing the monetary medium of exchange (otherwise known as inflation).

As Murray Rothbard correctly stated:
Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects. (The Ethics of Liberty, p.162)

A "tax" for all intents and purposes is always destructive since it much come from the productive and private sector.  Taxation (especially taxation on one's income) is a coercive act executed by the government whereby already earned income of productive individuals is seized.

Thus, what the government chooses to SPEND through its various outlays is the only real COST the government need concern itself. If the tax revenue coercively taken by government fell by 50% and spending was cut by 50% (assuming a balanced budget), would the government NET have any budgetary issues? Of course not!

Yet, we are presented with the universal canard that income and property earned by private individuals first belongs to the government. Shame on those in positions of influence who continue to propagate such lies which are a direct threat to the individual/economic liberty and prosperity of free people.

Thursday, September 30, 2010

Why is Gold at $1300? ... Money in One Lesson

Bob Murphy, a brilliant Austrian economist, has a great article highlighting the fundamentals of what money is and has been throughout history without government intervention.  This is relevant to today's price of gold which recently topped $1300 earlier this week. 

Why is this important?  Because the value of the dollar continues to erode as people around the world are waking up to reality of the fiat-money empire. 

Please read and share with others.

Wednesday, September 22, 2010

Illustrating laws of marginal productivity via the Daily Show

Here's a funny bit from the Daily Show featuring Aasif Mandvi.

The story/bit/skit is very instructive and illustrates the laws of economics behind how/why marginal workers are hired and/or why they are fired. It also illustrates that compensation of labor depends largely on the scarcity and skill level of each piece of "additional" (or marginal) capital added to production. If a business wants to add another factory to its operations, it must calculate the "marginal" productivity that piece of capital (the physical plant) will provide to expanding its capacity. That is, if company X wants to add one more worker, it must determine the effect that worker has on production.

This applies also to the marginal productivity of labor as well. Why are engineers, doctors, architects paid more than cashiers, janitors, or retail sales people? Why are their wages disparate if the "minimum wage" allows them all to be paid the same? Marginal productivity differentiates labor since everyone accepts a wage rate voluntarily rather than through coercible force to work dictated by State mandate.

In a nutshell, raising the wage requirements/work rules/mandated benefits for what employers MUST provide to their labor (especially marginally skilled workers) simply creates more unemployment than what would otherwise exist. Artificially raising the marginal COSTS of each element of capital (which is labor in this scenario) simply stifles and discourages where labor can move.

All natural unemployment should be voluntary since "involuntary unemployment" is a figment of government's intervention and erection of barriers to entry (i.e. minimum wage laws). If a stay at home mom wants to make some extra money and be paid $4/hour to watch other parent's children, should the state mandate that the parents MUST pay the woman $8.50 (or whatever the minimum wage is)? No! It should be up to the employer and the employee to negotiate the compensation and work agreement.

Bravo Daily Show!

Monday, September 20, 2010

The End Goal is NOT Jobs

Many folks are up in arms about the miserable failure of Keynesian stimulus.  The latest uproar comes from California with its report card on the empirical proof of the failure.

While I agree with the analysis, I have a different take about the focus being placed on JOBS.

The premise that the GOAL should be to create jobs as a cure to our economic ills is the real fallacy and myth.

The goal of an economy is not to necessarily create jobs. The goal is to create and accumulate capital and wealth to raise the standard of living.  The embedded goal for all individuals is to maximize consumption while minimizing the effort required to achieve this end.  In essence, we "work" (produce) so we can play  (consume).

Wouldn't it be a grand goal to take a vacation 11 months out of the year with only having to work for a mere 31 days?  Wouldn't we all like to have a 3 hour work day and enjoy the other 21 hours to do as we please?  Naturally, this is true.

Thus, jobs are simply a means to a purposeful end ..... but not the goal. We all do not consume so we can produce. We produce so that we can consume. Several hundred years ago, societies had to work around the clock just to put enough food on their table, cloth themselves, and provide for themselves. Unemployment didn't exist because everyone HAD to work in order to live and no busy bodies existed to lecture people.

The Soviet Bloc had full employment, yet no one would argue it to be a prosperous, productive, or wealthy society. Hence, the government could (and should) abolish the minimum wage laws tomorrow along with any and all (tax funded) unemployment insurance and millions of jobs would be available and necessary that are not today (since both minimum wage laws and tax payer unemployment benefits are disincentives for marginal workers).

Every rational and sound economic policy to allow for a necessary (yet extremely harsh) liquidation of malinvestment has been ignored in favor of pleasing people in the short run.  Politicians always calculate based on the short run to enact policies where they like to kick the can on down the road.

To believe ggovernment knows best and it is wise to mortgage future production (through taxes and/or inflating the money supply) in order to INVEST it into the most productive uses is to also believe central planning worked in Statist/Communist/Fascist countries.

Investment comes from accrued savings manifested through productive work and the purposeful employment of capital (both human capital and physical capital). Economic growth and entrepreneurship comes from business calculating short run and long run investments based on the laws of scarcity and consumer wants/needs.

Government operates as a giant transfer mechanism by taking resources from certain groups to give to others. For Republicans it is typically big business, military, and other interest groups who beg for subsidies. For Democrats it is typically labor unions, lawyers, and those on the welfare dole.  This is the modern day "Welfare-Warefare State" that is eating our economy to death.

If you want to read a good article about how to end the unemployment problem, here is what can be done - authored by Lew Rockwell.

Wealth creation, capital accumulation, and a rising standard of living should be the goal and not full employment for everyone.

Sunday, August 22, 2010

Glenn Jacobs Speech - Free State Project

Glenn Jacobs (otherwise known as “Kane” in the WWE world) delivered a fantastic speech in New Hampshire back in 2009 at the New Hampshire Liberty Forum sponsored by the Free State Project.

The depth and breath of Jacobs' grasp of epistemology, ethics, and Austrian economics is amazingly impressive.  This goes to show how important places like the Mises Institute and are to educating people on the importance of sound reasoning, logic, history, and economics.

I cannot urge enough people to watch this video in its entirety and share it with others.  It is well worth your time.

[Update]: Glenn Jacobs is considering a run for U.S. Senate against GOP incumbent Lamar Alexander.  While I think politics itself is a waste of time, I wholeheartedly believe Glenn Jacobs would make a huge impact if given the chance to speak to others and communicate the ideas of liberty, economics, and ethics as effectively as he did at the New Hampshire Liberty Forum.


[this post has been updated]

Tuesday, June 29, 2010

Santelli is Right, Liesman is Wrong

I heart Rick Santelli. It's embarrasing when someone like Steve LIESman (and almost any other "financial guru") on a the popular financial channel doesn't know a lick about Austrian economics and the science of human action. The Keynesian dead-end is fastly approaching and these folks are scared to death their ivory tower will meet the same fate as the Tower of Babel.

Tuesday, March 23, 2010

Health Care Wedge Effect 2010

On March 23, 2010, President Obama signed the Senate Bill into law that was passed by the House of Representatives. While the Senate may or may not approve the reconciliation amendments of the bill, the health care bill is law. Obviously, many pundits, reporters, academics, and partisan folks will argue back and forth how great or detrimental the bill is to the American people. This blog post will analyze the economics of the health care bill which are not partisan, rather focused on sound economic fundamentals and human action of free people. The premise of my analysis is based on the following economic factors.

  1. Central economic planning and distribution of health care goods and services will lead to disruptions in allocating goods based on the laws of scarcity (finite medical resources) and the unlimited needs of consumers.
  2. The law will further create a "wedge" between the consumer and supplier of medical goods and services since the third party payer system will be expanded which will further distort prices and allocation of resources.
  3. The unintended consequences at the "margins" of this law are will damage the health care system as well as the financial health of the nation.
  4. Guaranteeing health care insurance does not equate access to unrestricted health care goods or services.

Central Economic Planning of Medical Care
While this law has been debated for more than a year, many people fail to understand that the government already controls 29% of health care (SCHIP, Medicaid, Medicare, Veterans Affairs). Many flummoxed individuals seem to think there is a "free market" in health care. In reality, a single payer government system (government programs mentioned above) is competing with a flawed private third party payer system with managed care style as the primary insurance product.  An expansion of both systems added together yields massive distortions, intervention, price controls, rationing, and misallocation of medical resources. A free market in health care would require free exchange of goods between voluntary providers and consumers, private property rights, and prices to help allocate scarcity with needs. Centrally planned, state run markets always fail based on economic calculation problem postulated by Mises and Hayek.  As health care insurance providers are transformed from private entities into wards of the state as health care utilities, government expansion into the private sector will be complete when the system is 100% operational in 2014.

Economic Wedge
The economic wedge in health care (third party payer) is one of the main distortions in the health care market.  When the consumer and producer are separated further and further away from directly exchanging with each other, the greater the wedge effect distorts economic reality. The wedge is increased dramatically with the huge expansion of subsidies. Subsidies will increase demand for services while not adequately covering the increased costs brought on by the new demand. Up until 1943, consumers paid directly out of pocket with cash or check for most if not all standard medical care products and services. The bill signed into law will significantly enlarge the wedge rather than reduce it.

Unintended Consequences At The Margin
The bill will induce huge constraints, regulations, and mandates on medical providers such as specialists and the primary care providers. Many doctors and providers have already declared that they will either quit or retire from practicing medicine when the law enacted starts. With the expansion of Medicaid and the baby boomers quickly entering Medicare, many doctors and providers will stop accepting those patients since reimbursement rates are lower than the physical cost of delivering direct health care. Increasing the constraints and rules for practicing medicine, decreasing the incentives for people to enter the health care industry, and adding 30 million more patients to the medical system may create an enormous amount of chaos due to inadequate supply to cover the exploding demand for care.

Prepaid Medicine Is Not Health Insurance
The entire debate about health care reform has focused on health care insurance instead of improving the quality of care, decreasing cost, and increasing health care availability to the largest number of people. Insurance simply is not health care. Insurance is a product used to share and price risk against an unlikely event.  Medicare, Medicaid, and HMO laws transformed medical insurance from indemnity style insurance into prepaid medical care. So, instead a health care market where individuals pay for most services and only use insurance for unlikely medical events, individual now use medical insurance for virtually every single medical service with a majority of the liability resting on the 3rd party payer.  Thus, prices of insurance premiums must go up to compensate for the the added risk and benefits demanded. When premium receipts are not enough to cover all of the medical services promised, the insurer/payer must decide how to effectively ration care or increase the costs beyond affordability. Thus, giving individuals "insurance" does not guarantee limitless or even flexible benefits when the policy holder is not paying for the insurance or determining the type of coverage the consumer requires. The type of "insurance" that will result from the health care bill will not be "insurance" as much as it will be an entitlement and government subsidized prepaid medicine.

Thursday, March 11, 2010

War...What Is It Good For?

Our country finds itself in difficult times. The financial mess is far from over no matter what the rubes or financial gurus tell us. The economy is broken and may actually be much sicker than it was back in 2007. The unemployment rate is incredibly high in addition to the "under"-employment rate. The banks still possess billions if not trillions of dollars of toxic assets on their balance sheets which serve as a ball and chain around the feet of these major financial institutions. Congress’s game of playing “who can propose the most destructive form of intervention in the market” is the equivalent of someone doused in kerosene accelerant running around a campfire.

All of the issues addressed above are significant "domestic" threats to liberty, freedom, & our property rights derived from Lockean "natural law" doctrine. Our “natural rights”, Locke postulated, are not man made, but rather derived from our humanity and our birthright. Thus, we possess the right to our own life, the right to our liberty, and the right to our property. Locke wrote in his Second Treatises of Government about a "social contract" to "voluntarily" elect a government to PROTECT and SECURE these natural rights through the state provide some form of social order.

The reason I focus on natural rights relates to the primary role the government is called to execute: to protect and serve LIBERTY and not to protect us from ourselves or keep us safe. If we are safe but not free, liberty dies and tyranny will spread like a virus and manifest an ever growing state. If a government transforms into a police state with a limitless degree of surveillance, the likelihood of a "safer" condition would obviously be more likely, but at what expense to liberty?

The founding fathers knew the threats war posed to liberty and erected a deliberate framework of safeguards to prevent against such an intrusive form of government. One of the safeguards is the procedure for declaring war in Article I Section 8 of the Constitution, an enumerated power left only to the Legislature and not the Executive. Knowing the lessons of history, the founders knew all too well the temptation Monarchs and Kings had exercised in past who used this power to stir trouble with other nations at the expense of their own economy and their citizens’ liberties. Therefore, the founders left explicit powers to the Legislature to issue a formal declaration of war, which evoked the consent of the governed (through their representatives) to speak on their behalf after honestly debating the merits for and against said military action against another nation. To finance Wars, inflationary monetary policy was commonly used, which robbed citizens of their purchasing power and acted as indirect confiscation of one's property through the devaluation of the currency.

The U.S. has been fighting two [undeclared and unconstitutional] wars for what seems like an eternity in Iraq and Afghanistan. The conflict in Afghanistan has endured twice as long as WWII. Yet, we do not appear to see when the conflict will end. Furthermore, the current Presidency has adopted a basic nation building mission without any clear objective of how to end the conflict or determine what grievances must be met to declare victory. Americans are all too familiar with the typical Wilsonian foreign policy strategy of spinning the use of military force to keep the world safe for Democracy through intervention in a region that has come to be known as the "Graveyard of Empires" after every other occupying force in history there has met defeat.

Our empire is magnanimous to say the least in its naiveté of thinking wars do not come at the expense of unintended consequences, the devastation of wealth, and diminishing of their citizens’ prosperity. The U.S. economy is rotting from within after its refusal to address the systemic financial lesions, which require deep and painful treatment for a real cure. To acknowledge our domestic problems without admitting the faults and foolishness of our foreign policy interventionism is both unfair and arrogant. Is it taboo to think American believes she is impervious to financial ruin? Or, is it just history repeating itself from reluctance and egotism comparable to what the Soviet Union experienced? We as honest citizens much face the reality of our problems and address them honestly with real solutions to undo what has been done before the day of reckoning comes to our doorstep.

Sunday, March 7, 2010

Reactivating Liberty: Natural Law vs. Positive Law

Over the past few years, I've immersed myself in the books on history, our founding fathers, Austrian economics, and theories of political economy which have helped me understand causes of why this country has drifted away from the ideals those revolutionary heroes fought and died for in the late 1700s. One of these fine men was John Locke. John Locke was one of the founding philosophers of "liberalism." Now, this concept of "liberalism" is a far cry from what we consider to be modern day liberalism which is more in line with early 20th Century "Progressivism."

The concepts of liberalism relate to the rights of the individual through natural law that posits the existence of laws set through nature that manifest universal truths and "unalienable rights."  Natural law follows the idea that humans are born with certain rights given to us through our humanity: the right to one's own life and individual sovereignty, the right to one's liberty, and the right to one's property attained through the use of one's labor.  Individuals may recognize these rights as defined in the Declaration of Independence, which is one of the greatest natural law documents in history.  These rights are derived through the ability of humans to use logic and reason.

Our natural rights have consistently been threatened by the expansion of positive law.  Positive law is the opposite of natural law.  Positive law holds that a government or state authority in power has the sole ability to decide what is lawful and what is not.  Positive law is run by the whims of the majority while discarding the concerns of the minority.  If 51% of the people of in a State want to ban cell phones while driving, ban Christianity or Judaism, ban smoking, or ban alcohol; these laws will be legally binding as long as the legislature was democratically elected. [1]

The distinction between natural law and positive law is critically relevant today. The trend of an ever expansionary government has used the means of positive law to erode liberty in favor of more government control. While many citizens today, regardless of political ideology, have noticed the power grab by both the Obama and Bush administrations, the centralization of power and movement away from natural rights can be traced clear back to the Civil War and the Progressive movement in the early 1900s.

In order for American to return to greatness and the belief in the individual, she must dig deep and recognize what "Liberty" means. We must first understand and believe in the theory of natural law. Sadly, in today's modern times, Liberty is a foreign concept as opposed to entitlements, subsidies, redistribution of wealth through positive law which are the accepted norms our country. Liberty has virtually been erased from our DNA and now only exists as a dormant gene yet to be reactivated. American must find the will and desire to replace her authoritarian, collective, and positive law ideologies and replace them with the belief in individual sovereignty, Lockean liberalism, and the reverence to natural law.

[1] ideas for this paragraph found in Constitutional Chaos, Andrew P. Napolitano

Wednesday, March 3, 2010

Cash for Appliances = Another Broken Window

"Cash for Appliances" (shockingly) had exactly the same result as the failed "Cash for Clunkers" program.  People lined up to essentially receive a subsidy handout for a good or service.  Here's a quote:
"Expected to last for two weeks, Cash for Appliances ran out of money in just seven hours. That's all it took for Iowans to grab their share of $2.7 million in federal funding. Many Iowans were greeted with a busy signal or a failed connection when they tried to get a deal on Energy Star-certified appliances. By 3:00, the website said the fund had already run dry."
The evidence as stated above is an example of what happens when the government (through central planning policies) tries to allocate resources and "stimulate" demand.  What the "laymen" should understand and focus on is the law of unintended consequences.  The program cost $2.7 million dollars.  What taxes will need to be raised in order to fund people buying such products they would not buy if the products were not subsidized by someone else?  What future economic growth will be impaired to give people a quote "free lunch?"  What will happens to the supply chain allocation or distribution when the subsidies run out?

These are the REAL issues that people should focus their attention.  Instead, we will be told what a "success" the program has been since it ran out in less than a day.  Everyone will focus on the so-called "stimulus" effect of demand that was created.  Yet, we know this gimmicky corporate/social welfare and free-lunch subsidy to the appliance manufacturers and consumers is not sustainable and will do MORE harm than good according to the law of economics known in many circles as "the broken window fallacy."  We are ignoring the essence of opportunity cost and buying into this Keynesian nonsense of stimulating aggregate demand by throwing a rock at the window of one sector of the economy (present/future) to reward or give a handout to another.  This creates no net gain, prosperity, or wealth production for the macro economy other than propping one industry at the expense of one to many other industries, tax payers, or economic sectors.

Wednesday, February 17, 2010

Dear Government - Breaking Windows Won't Work

With all due respect to the President and his economic egg-heads, these academic block heads have made things have only made matters worse and prolonged the inevitable. I beg and plead any of them to examine the great works by Henry Hazlitt, and especially his first few chapters of Economics in One Lesson. Maybe the New York Times can resurrect his works from when Hazlitt used to write for them, seeing as it would probably bump up their circulation (can't get any worse).

The President is surrounded by Keynesians academics who don't understand how capital theory works, how/why an economy expands, or even what actually creates asset bubbles that eventually pop through monetary policy. But, since they are not familiar with the Austrian Business Cycle Theory, these faux cconomists and bureaucrats will continue to spin lies about saving or creating jobs.

Essentially, they believe in breaking windows and pointing to the glazier who will be getting more business because of their window breaking policies. The present day "stimulus" is the exact application of the broken window parable and the logic behind it tells us why it won't work. You cannot take from one part of the economy in order to prop up another. You cannot have the government destroy or crowd out capital and then wonder why the private sector capital formation dissolves or goes somewhere else. I encourage folks to read about the “Broken Window Fallacy” made famous by Henry Hazlitt and Frederich Bastiat. The government is just breaking windows in order to “stimulate” the economy. It won’t work and never has.

A depression has NOT been averted, but rather postponed. The asset bubbles form through excessive drinking or getting hammered on monetary booze and alcohol. Then, the bust/recession/depression comes in the form of an economic hangover which is comparable to someone puking when they cannot continue drinking. What the President and the Keynesians economists advisors (Christina Romer, Jared Berstein, Larry Summer, Tim Geithner, et al) have done is try to cure us with “the hair of the dog” and keep us drunk instead of going through the necessary dehydration/withdrawal symptoms necessary to put us on firm footing. “Malinvestments” are still rampant in our economy and the bad debt has not been liquidated.

A second type of depression like we saw in the 1930s might have actually be more pleasant than what is coming our way. I believe our government has planted and even fertilized the seeds for a possible hyper-inflation or hyper-depression (high inflation with negative growth). That is possibly the most frightening thing of all. Will the President be honest if and when that event occurs or will it be more window breaking that our Keynesians turn to for help? You decide.

Sunday, February 7, 2010

Truth About Medicare, Social Security, and Retirement

Thank you Gary North for your efforts to wake people up. It's raining and everyone needs to find an umbrella. Please watch this important video and forward it to others.

Sunday, January 17, 2010

A Natural Law Take on "Avatar"

James Cameron recently released his multi-million dollar blockbuster Avatar. I went to see the film (with my dad in tow) despite sub-zero-freezing-cold weather. Although we risked our health by going out in the crummy weather, Avatar was well worth the price of admission as we both gave each other that "wow" while exiting the theater. Rarely, have I had a reaction to film as I did with Avatar. My reaction, however, was not directly attributed to the amazing 3-D technology. Rather, the film illustrated three simple self-evident principles we as a nation have lost sight of in this country: property, liberty, and the right to be self-sufficient.

To give you a little background, the film takes place on the planet, "Pandora", where a human coalition (multi-national corporation with paid military contractors) undertakes a mission to harvest a precious and rare mineral called Unobtanium. The coalition's contractors appear to be paid mercenaries who were former Marines, such as the main character, Jake Sully. The apparent reason for ex-military personnel is to protect the miners from the natives on the planet, known as the Na'vi. The Na'vi are categorized as "hostile" and threaten the basic logistics of the mining operation. The coalition also hires engineers and scientists who have developed Na'vi-like bodies, ("Avatars"), grown from human DNA and alien-Na'vi DNA. Each Avatar is specific to the originating DNA of the human that can drive said Avatar. The purpose of the Avatars is to be pseudo-Ambassadors to establish some type of treaty or exchanges of goods or services for the mineral rights where the main Na'vi tribe's habitat ("Home Tree") rests.

Right To Property

One of the founding principles of our country is the theory of natural law or the law of nature. Natural law follows the belief that our rights do not come from governments or from other men/women; rather, our rights come naturally from our humanity through our birthright. Many great thinkers from St. Thomas Aquinas to John Locke have written compelling treatises on the theory of natural law. Locke's belief in natural rights exists in the text within the Declaration of Independence which states: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." While "the pursuit of Happiness" exists now, the original phrase in this epic line was actually "property", but was removed since the founders did not want it to be mistaken as a mandate for perpetual slavery (considered property at the time). So, we can equally assume the right to property as being just as "self evident" as any other natural right.

Why is this important? Well, on the planet of Pandora, the Na'vi seem consummately aware of natural law (or the law of nature). They know they possess these rights I've discussed, including the right to property. The Na'vi are fully sentient of their ownership of "Home Tree" as their unequivocal property as understood by the homestead principle. While many other places on the planet might arguably be considered public land or fair game for other parties (foreign or domestic) to explore and lay claim, "Home Tree" is not one of them. 

For this reason, any attempt to violate the rights of the Na'vi's property is immoral, unlawful, and the equivalent of outright theft. Absolutely no justification exists to think any other party has rights to someone else property, such as "Home Tree" in this case. We know this to be true since the Na'vi are clearly able to reason and use logic and determine good from evil. Thus, the natural law and natural rights we as humans understand is no different than how the Na'vi practice and live their lives.

Right To Liberty

John Stewart Mill in his work, On Liberty identified the difference between liberty as the freedom to act and liberty as the absence of coercion. Clearly, the Na'vi understand these concepts and embody the very essence of liberty. If we recognize the Na'vi have the right to their property and liberty, we can also conclude that they have the right to defend these values from those who wish to steal or plunder. 

One of the most understood Amendments in the Bill of Rights is the the Second Amendment: the right to bear arms. Ironically, the Second Amendment (I argue) is absolutely required for preserving and protecting all of the other rights bestowed to us by our Creator. The Second Amendment is derives from the basics of self defense which a free and sovereign individual possesses in order to prevent others from infringing on their right to their life. The Na'vi, like Americans, also have this right for all of the reasons I've listed. The Na'vi take to arms not because they are terrorists or brutal barbarians motivated by a lust for carnage. They are motivated because they are sovereign and free people who have the right to live their lives and protect what is rightfully their own. 


The Na'vi have been blessed by an abundance of plants, life, and unlimited natural ecology that allows their tribe to be totally self sustaining and self-sufficient. They are able to use their natural abilities to harvest the necessary resources around them to live the life they want to live. They are true stewards of their natural surroundings and are even able to manifest special powers over horse-like creatures as well as giant-flying-lizards.

Now, despite the offers from human coalition to provide several types of "public goods" (roads, schools, etc) in exchange for the necessary mineral rights of the Na'vi, the Na'vi decline. While it may be inexplicable to the humans in the film why the Na'vi would turn down these items as an equitable barter items, the Na'vi are 100% self-sufficient and have all of the resources they need to sustain their chosen way of life. Certainly, the Na'vi civilization and economy is rather primitive, simple and agrarian, yet no one is forcing or coercing them to retain this standard of living. It is a personal choice based on traditions the tribe believe in, which is the essence of individual liberty.

Self-Defensive Non-Intervention vs. Aggression

In closing, Avatar is a very diverse film that made me think outside of the box. Naturally, some critics of the film are obsessed with the allegorical military references which critics subsequently present as evidence James Cameron "hates the troops." Honestly, I think the topic is a red herring and a distraction from the other more important concepts in the film I've already discussed. This natural reaction of negativity towards a film or director seems common place these days whenever the plot or sub-plot of the film involves the use of force by our military or casts our troops in a bad light.

While James Cameron may or may not "hate the troops", I personally do not care and do not think it matters. So many Americans (even James Cameron perhaps) have forgotten the true purpose WHY the national defense was established in the first place after the Second Continental Congress. The Constitutional calls for the establishment of a "National Defense" to defend the sovereignty, liberty, and property rights of our country. Whether its composition is made up of national guard units, local militia, a navy, marine corps, or any other military division, the purpose remains the same, and that is for self defense. The national defense was NOT intended to be a blank check to apply aggression or police the world as a internationalist arbiter of justice. This is why in Article I Section 8, the Congress has the power to declare war and not the Executive branch. This power was instituted after the founding fathers saw repeated times in history where kings and monarchs would stir up trouble by engaging in wars all over the world at the expense of the citizens who would be conscripted into service and levied with taxes to fund the war effort. The result always yielded terrible consequences to the economies and impoverished the people in the name of safety and security. As Randolph Bourne (a progressive statist) once said, "War is the health of the state" for a reason.

If anything, Avatar IS patriotic and very pro-national defense. The film is a lesson of how a just war should be declared as shown by the Na'vi taking to arms and unifying their people for the sake of moral self defense. Maybe we can learn something from this film from a national defense standpoint by examining the constructs of what just war really means. I love our military brothers in arms who serve and risk their lives. My father is a Veteran and he is my personal hero. I have many friends who serve in the military and they possess all the respect and admiration I can offer. When we ask them to sacrifice their lives, honor, and time away from their families, I would hope it would be only when Congress uses its powers under Article I Section 8 to unleash the fires of hell after declaring war as a matter of self defense. To do otherwise would be wasting our precious blood and treasure as an act of aggression which would never be in the best interest of our proud country.

Monday, January 4, 2010

"Helicopter Ben" Is An Asset Bubble That Should Be Popped

My old pal, Benjamin. This entry, as they say, is a great "teachable moment". Now, please let me share a disclaimer that my title does not mean any physical harm whatsoever on the distinguished Federal Reserve Chairman. To say the least, the man should most definitely be replaced by someone who is not a Keynesian/Monetarist sycophant. Rather, if anyone
 should be re-elected to this post (if we must have one), the role should reside with someone who actually knows how business, capital, production, profit, and savings coexist in the private sector. Oh, and another requirement for employment would be that he/she was not born in a think tank.

Ben Bernanke today played the "it wasn't me, it was the lack of regulations" excuse in a purely political and distasteful speech. His reluctance for taking any type of personal responsibility for not monitoring, overseeing, and recognizing the obvious housing (asset) bubble that formed throughout both Bernanke and Greenspan's tenure is just simply astounding. One could even call this act cowardly. The Fed's easy money actions despite numerous forms of empirical evidence that an obvious "carry trade" was taking place is the epitome of dishonesty.

I have numerous problems with Bernanke's policies, economic reasoning, and monetary theory; but this notion that the fault lies with not enough regulations really infuriates me to the bone. Can someone as intelligent (from an IQ standpoint) as Bernanke honestly say with a straight face that ultra low interest rates will not generate cheap capital into sectors of the market that would not otherwise be possible? That dog just won't hunt. When you throw cheap money out of the air from your helicopter, Ben, the money is going to find somewhere to land and collect and it usually goes into places that it should not.

That is the equivalent of saying a bartender (Bernanke) offering an unlimited amount free beer and liquor all night to patrons of his watering hole could NOT have known or even foreseen how people would get wasted or even cause bodily harm to themselves or others when they walk out of the bar and drive home in their car. Any person with an ounce of sanity knows that this would cause (at minimum) some sort of binge drinking reaction and at worst some folks getting really sauced and going on a drunk driving rampage. I guess Bernanke's solution to avoid and prevent this scenario would be to keep the beer/liquor flowing, but to just install a bouncer or two to check the patron's id's to make sure they are of the right drinking age. We all know it's a moral hazard of bad things that are going to happen no matter how many bouncers you hire and what age limit you set for those who can drink. As Senator Bunning mentioned a month or so back: "You, Ben, are the moral hazard."

Easy money is by definition a recipe for creating an asset bubble somewhere. The only question is when and where and how will the bubbles form. As with the current housing bubble, the GSE's Fannie and Freddie were the primary buyers of mortgages (both prime and sub-prime) on the other end that led to the bubbles growing larger and larger. If we were to compare it to the bartender article... the Fannie and Freddie institutions are comparable to the tavern itself providing "get out of jail free cards" after everyone leaves so as to exonerate any of the actions from the drunk patrons who may get into mischief. Then, all of the patrons are basically risk adverse to any harm that may become of them. This is the role we see with Fannie and Freddie. But, there are only so many cards and there is only so many free drinks available. The party has to stop sometime. This is when the party crashes and proverbial bubble bursts.

This boom/bust cycle of creating and then popping bubbles is the very essence of how harmful the Federal Reserve can be to the economy dating back to 1913. This is not to say that without the Fed we would never have asset bubbles. But, the very institution of the Fed and it's modus operandi of central planning monetary policy by artificially setting interest rates, the money supply, and supply of credit to all banking institutions is a detriment to our nation and the free market.

We can already see now the effects of new carry trade plays with the cheap dollar in gold, bonds, equities, and other commodities. The most obvious carry trade going on today seems almost intentional by the Federal Reserve. The Fed has set the Federal Funds Rate/Discount Window price to between 0 & 25 basis points (0% to 0.25%) and the 10 year Treasury increasing to as high as 3.8%. So, at virtually no risk, the banks can borrow money from the Fed at 0% and turn around to lend that money to the Treasury at 2% (5-year bond), you have a carry trade asset bubble in bonds.

If Bernanke wants to really understand how to avoid asset bubbles in the future, re-regulation or more restrictive central planning of key economic sectors is the exact opposite way of averting disaster. His flawed ideas of interventionist monetary policy "pump priming", monetizing debt, and dumping billions of dollars from his helicopter could very well plunge our country into another a very dangerous stagflationary situation the likes of which the world has never seen. I hope that we can avert this and bring back sound economic and monetary sanity before it is too late.