Tuesday, December 31, 2013

Global Warming Scientists Stuck in Antarctic Summer Ice

It's a funny irony that a boat carrying global warming scientists is stuck in summer ice in Antarctica. That's right, it's the summer in Antarctic.   Scientists went to Antarctica to prove that Antarctic ice is melting but ended up "stuck in their own experiment."   I am being a bit unfair as ice does shift in Antarctic, but the irony is delicious.

None of the major media outlets have mentioned the mission of ship and it's climate research passengers---except Fox News.  More MEDIA FAIL!

I'm in favor of continued research in global climate, by anyone with a hypothesis, but it's pretty clear from the evidence that the Antarctic ice extent and thickness is stable.  Antarctic ice might even be expanding.  See my blog "Global Warming Made Easy.


Friday, December 27, 2013

Businesses Export Jobs Because of High US Corporate Tax Rates

Giving US businesses an incentive to re-locate operations and jobs overseas is the last thing that we need.  That would have the effect of exporting jobs.  But this is exactly what has been happening for years due to high marginal US corporate tax rates of over 38% -- the highest in the world.

The problem is that other countries have been lowering their corporate tax rates for years, leaving the US with the highest rate.  The US now has the highest corporate tax rate in the world.  Even Japan is set to lower it's tax rates.  And, for a decade or more, jobs have been streaming overseas to Ireland, Asia and the rest of the OECD!   And you wander why the US economy has chronic anemia?  This is the answer to that question.  See the following charts from Tax Foundation:

 


Japan is Considering Lowering Their Corporate Tax Rates Leaving US Corporate Tax Rates an Outlier

It's true the "effective" US corporate tax rate is quite low at 13.4%, but this is because businesses have already relocated overseas.  Companies have effectively taken advantage of the prevailing tax codes.   The effective foreign tax rate on US company's overseas subsidiaries is about 14%.   The US tax code also does not require companies to pay US taxes on profits until that money is repatriated.  This means that 100s of billions of dollars are accumulating overseas and benefiting overseas locations---not the US.  It stays there because it's treated better than in the USA.

FYI, here's the chart of world-wide effective corporate tax rates:
 

If you want to remove an incentive for US business to locate overseas and to encourage repatriation of jobs from Asia and other locations, then lower the US corporate tax rates and reform the tax code.  It's the most obvious thing in the world but our government is frozen in inaction.  A new rate of 14 to 15% would be similar to the corporate tax rate in prosperous countries like Singapore and, up until recently, Ireland to name a few.

Add high corporate tax rates to the 1001 reasons that our economy and job growth is anemic.

Tuesday, December 24, 2013

Mr. Obama, It's Your JOB to Negotiate!

The next debt ceiling is already looming.  And here we go again.

From Townhall
Treasury Secretary Jacob Lew is telling Congress that he will have only a few weeks after Feb. 7 to avoid an unprecedented default on the nation's debt. He says Congress should act quickly next year to raise the borrowing limit.  Lew said the president will not negotiate over raising the debt limit.
Apparently, ordinary politics of the Presidency overwhelm our intellectually lightweight White House "occupant."   I hate to tell our slacker-in-chief, but it's HIS JOB to negotiate just like every other occupant of the post WWII White House.

Like I said in my previous blog on this topic,
Going back decades, the debt ceiling bills have been linked to campaign-finance reform, Social Security, ending the bombing in Cambodia, voluntary school prayer, banning bussing to achieve integration, and proposing a nuclear freeze. Way back in 1982, then-Senate Majority Leader Howard Baker unleashed a free for all, allowing 1,400 non-germane amendments to the debt ceiling legislation.   Obama himself, when he was a Senator, voted against a debt limit increase for budgetary reasons.  From WP,  then-Senator Obama refused to approve a debt-limit increase in 2006 if there was not a plan to reduce the deficit.
Asking Congress to just rubber stamp debt limits extensions when our nation is careening toward $20 Trillion of public debt is unacceptable.  I personally think that NO debt limit increase should EVER be given to stop the runaway freight train called the federal government.   Such a step would require balanced budgets starting right away and no Constitutional amendment!  Sounds good to me!  Cutting the current spending by 4 percent of GDP is relatively small potatoes compared to cuts in government spending after WWII and after the Korean War.

Just say no.  No more debt.  After all, what part of the term "debt limit" does O-blah blah not understand?

Our 'New Normal' Economy

This is a good "sign" as to the "new normal" USA economy:  Flipping burgers or flipping houses.  From ZeroHedge.


Saturday, December 21, 2013

Political Correctness Is Speech Censorship

There's a saying that "in the heart of every progressive liberal, a totalitarian is trying to get out." A&E network is a good example of that. Their actions regarding Phil Robertson are totalitarian.  Perhaps it's because his comments were a double whammy against Liberal causes?  Phil's comments were based in Christianity and the Bible and they were anti-gay.  After all, Liberals shun and pooh-pooh Christianity and champion gay rights.  Their violent reaction was clearly notable.

I don't care much of what Phil Robertson thinks about gay people. He's entitled to his own opinions. I happen to think, in this case, that he's making a mistake to rely on a few passages in the Bible to base any opinion about any sexual matter or women's issues. That's not it's 'purpose.'  But I wouldn't be surprised if Phil Robertson would defend my right to speak my opinion!   That's more than a Liberal would do.  Liberals don't believe in free speech if you disagree with them. 

The issue here (obviously) is free speech and a very pervasive attempt by liberals and liberal media to "enforce" political correctness (as defined by liberals of course) and thereby stifle free speech and opinion. The effort is to propagate "narratives" and "talking points" of what liberals believe. I guess it's natural that they do it, but it's done in a sneaky way.   Liberal news and media, a powerful mouthpiece, has the "veneer" of truth-seeking and fact-checking but I constantly find that the "real truth"and "actual story" is missed or suppressed. Shoddy scholarship and shoddy work is also widely evident except in select alternative media. Nearly all of the major media people are themselves liberal arts majors who are indoctrinated by other liberal arts academics and Marxists. None of these media types have degrees in engineering, business, science, law or history. Their major is always journalism, and that major and the lack of expertise and diverse viewpoints is obviously inadequate.

The lynching of Paula Dean was another example of a political correctness censorship attack.  Paula Dean was denied her livelihood by the "political correctness police." Her crime? She spoke frankly and truthfully about her past use of politically incorrect terminology.  The term "nigger" is insensitive given history, but so is the media's failing to report the outrageous and despicable crime wave in this country committed by blacks.  Black crime is an epidemic. See here, here and here.  Our prisons are not big enough. But don't expect it to get reported correctly--it's not!!

Oh, and black people are equal intellectually to whites, right?  Wrong.

That Barack Obama is in the White House is itself the result of a choreographed campaign by liberal media: 1) never ask him a difficult or pointed question, 2) overlook his unremarkable CV and 3) never ask about his GPA in any school program despite the fact that academic degrees are the only thing on his resume. 4) Aide and abet the smear campaign against Romney, 5) Smear anyone on the Right. 6) smear anyone who disagrees with the Left.

But the liberal agenda extends even further. Barack Obama was a professional student, who never had to any real work thanks to (liberal) affirmative action programs and promotion without merit. He basked comfortably (and lazily) within the Liberal academic community who formed him and indoctrinated him in incorrect and discredited (Liberal) ideology. The results speak for themselves. Now the rest of us have to tolerate the folly, the incompetence, the stagnation and the ignorance of Obama and the Loony Left.

Intelligence Explains So Much; US Blacks Are Not Intellectually Equal

Academic intelligence is not everything but it has an exaggerated importance in modern society. Yes, we are all born equal in the eyes of the Lord, but black Americans score significantly lower in IQ and other standardized academic tests. Remember, we are talking about academic intelligence here and nothing else.

From the book "The Bell Curve" and other sources, the African Americans median IQ score is 85 with a standard deviation of 13. This data is confirmed by SAT, GMAT and every other standardized test. (Incidentally, no one argued about the raw data in this book, only the interpretation of the data.)  Yes, the scores vary by family income and socioeconomic status, but the 1.2 standard deviation "gap" persists even there and for all the data and the various tests.  The 1.2 standard deviation gap has also persisted and held steady even after 40 years of affirmative action for African Americans.  It's entirely possible that over 100s or 1000s of years it can change, so nothing is 'etched in stone.'

In the meantime, everyone has a talent and it's up to every individual to find their "gift" and pursue that.  But we shouldn't try to create false expectations or expect equal outcomes for persons with significantly lower average intelligence quotients.

What does a population with an IQ median of 85 and a standard deviation of 13 mean?


You would not expect persons below 85 IQ to graduate from High School.  One half of US blacks are below 85 (the definition of median). This means that you would NOT expect that 1/2 of the black population to graduate high school.  And the data confirm that about 50% of US blacks do not complete high school.  But the relevant point is that, for blacks, the 50% who do not graduate high school, about 35% of those people are in jail.   ( I wonder how many don't finish high because they are in prison?)   So, what do we do about that?

87.5% of blacks score lower than the white average median IQ of 100. That's nearly 90%. This is not opinion, only the math of statistics. 

An IQ of 75 is considered borderline 'mentally retarded'  You would expect persons with IQs less than 75 to be qualified for only menial or unskilled jobs. These folks would have difficulty surviving independently.  But 22% of US blacks fall into this category compared to only 4.8% of whites.  Why do you think so many US black males are in prison?  As a society, we are not dealing with these facts realistically. For example, we should be creating vocational high schools to teach trades and skills for the kids who are not able to graduate high school.  Kids with IQs less than 80 should probably be routed to a vocational high school if they want it.

An IQ score below 70 is actually considered a disability.  12.5% of US blacks have an IQ below 70 and are therefore mentally "disabled."  About 2.2% of whites are mentally disabled by this definition. So, out of the US black population of 38.8 million, 4.8 million US blacks would be considered mentally disabled or about.  For whites, it's also works out to about 4.8 millon persons.  So, what are we going to do about it, huh?  I don't exactly know, but don't you think it's important to understand the facts and discuss this?  I'm trying to be constructive.  Should be guarantee a minimum income for these persons?  There is something to that idea. The vocational high school idea is a good one.

Are we to continue to pretend that everyone is intellectually equal??

Persons with an IQ above 130 are "Gifted" and would be expected to attend the top US Graduate Professional Schools.  But only 0.027% of US black population would have this IQ  whereas 2.3% of whites would be gifted.   There are very few gifted blacks. For example, in Texas there are about 1.8 million persons of college age (aged 20 to 24) and about 13% of those are black.  Therefore about 234,000 persons in TX are black and of college age.  But only 63 blacks of college age in Texas would have a gifted IQExtrapolating this data for the entire US means that only 693 blacks youths (aged 20 to 24) would be considered gifted.  In contrast, there are about 1.27 million white kids of college age in Texas and 34,500 would be considered gifted.  Texas is about 1/10th of the US population. You can quickly see that, based on IQ only, there is no room for ANY black kid in the top professional schools.  There are only so many slots available at the Princeton's and Harvard's.  

Most people, understandably, want to discount this information but it goes a long way in explaining the achievement, income, drop-out rate and even probability of criminal activity that we see in the US African American community.   IQ explains nearly everything even though it's a measure of academic intelligence.

The real questions are what to do about it: do we guarantee a minium income for intellectually disabled?  Can we better deal with those high school aged persons in a vocational high school?

Thursday, December 19, 2013

Menendez Says 'No Way' to US Oil Exports: Shows His Ass

I could have named this blog entry "A Man Has Got To Know His Limitations"

We live in a time when ignorant (and arrogant) people are making rules where they have no knowledge and/or understanding--i.e., our politicians are dumb asses.   Not only do these people not know what they are doing, but they are not smart enough to get out of the way of people who do know best. 

Take Robert Menendez 's D-NJ comments:  "Lifting the ban on crude-oil exports would benefit major oil companies and hurt Americans."  Robert Menendez doesn't know what he's talking about and he should have the wisdom to step aside.  Menendez is on the Senate Foreign Relations Committee and he should stick to what he knows.

In Washington: Arrogant Big Government Officials Are the Problem.

I don't know much about the ban, but it was started in the 1970s when we were facing oil shortages.  Now we have a time of abundance in oil production and it's happening rapidly under the nose of Malthusian politicians who said that it couldn't happen (hint, O-blah-blah).  The US is already exporting 3 million barrels per day of gasoline and other refined products right now.  This is because US gasoline demand is down and we have excess refinery capacity.   So, we import about 9 million barrels of crude, process and re-export 3 million barrels of gasoline.  That's how free markets work.

Another example is Alaskan Prudhoe bay production.  It has probably always been more economic to ship that crude oil to Japanese or Korean refineries.  They could in turn, ship gasoline to the USA. (There was always a refinery capacity constraint on the US West Coast.)   Companies would chose this option only if it's a lower cost option.  Lower costs are passed onto the consumer.  This is how free markets work.

Another example, it's entirely possible that it's more economic for companies to send crude from Pennsylvania to European refineries.  Let the company's involved decide!  They will do the most cost-effective thing, keeping costs as low as possible.  This is the way free markets work.  It's too bad more people don't know that. 

The simple truth is that there is one very large, world-wide, crude oil market.  All crude oil production is priced the same (but price-adjusted for quality and impurities) all over the world.  The same is true for gasoline.  There is no local markets that need protection.  Prices for these commodities are basically the same all over the world.   So Menendez's comments are ignorant.  And he needs to recognize his own limitations.  Let the markets work!  Geeez!  He is a Democrat, so that should be instructive.  They are nearly all economic idiots! 

Another other problem out of Washington is that programs, rules or laws, whose purpose is long forgotten, continue without end, without review and without oversight.  End the export ban if oil companies advise that it's best to do so.

Wednesday, December 18, 2013

Arrogance of Big Government Officials Is The Problem

Hubris of public officials is the bane of our existence now.  The problem, to quote Clint Eastwood, is that  "A man has got to know his limitations."


Let's survey the landscape.

You have Kathleen Sebelius, a long time government bureaucrat, trying to tackle one of the most over-reaching IT projects ever with far too little technical or managerial expertise.  She's either incredibly naive or incredibly arrogant.  And the results speak for themselves.  Not only that, she's wrong about everything:  1) the probability of a successful completion of an over-reaching IT project, 2) the wisdom of over-reaching Federal government programs and 3)  her understanding of the insurance market, insurance reform and what people want to buy.

Like Obama, she is a wrecking ball for our economy-- because they don't acknowledge their own limitations. 

It is stunningly obvious that her and Obama know nothing about health insurance or insurance reform.  They don't even know the real purpose of insurance (or lowest-cost insurance).  Insurance is supposed to cover unexpected and unlikely costs that would be a shock to your finances.  If insurance covers all things, then it's more expensive because it adds insurance company overhead costs to the things covered.  Most people know this, but not our arrogant masters!!  Check out my blog HHS Head Sebelius Doesn't Understand Insurance.

Both Sebelius and Obama are running around now saying that people, who are finding their coverage cancelled, never had "good" insurance anyway.  What??  People don't know what they were buying??  Obama has the gall to claim that the victims of his own ineptitude really had 2nd rate policies.   It's Obama that doesn't know anything!

Worse, ObamaCare policies have very high deductibles and out-of-pocket maximums but cost much more than comparable private policies!  The folly is to expect anyone to buy these policies except very desperate people!  It would have been cheaper just to help the desperate persons rather distort the entire healthcare industry!    

This is why there was an American Revolution: to prevent being subject to the damage of one man rule.  Obama wouldn't know about this either.

ObamaCare Policies Are NOT a Good Product as Obama Asserts  


Worse, ObamaCare policies are not a "good product" as the President has claimed. They are much more expensive then comparable private insurance.  It's more expensive because it forces you to buy coverage that you don't want and it also tries to act as a tool of income redistribution.  There is an intended re-distribution from young healthy "subjects" to older or sicker persons.

For me, ObamaCare doubles the cost of comparable private sector policies (ie., those policies without all the required bells and whistles mandated by the Federal Govt).

In Texas, Aetna is able to extend non-ACA compliant policies through 2014.  Aetna offered to continue my $5,500 deductible policy for $280 per month (up 10% in cost this year alone).  From Aetna, that same policy but with all the additional coverages required by ObamaCare (that I don't want) would cost $500 per month.  The out-of-pocket limits are the same.

In sum: Non-ACA compliant cost:  $280 per month.  ACA compliant policy cost: $500 per month.  Both are the same high deductible and high out-of-pocket policies, but one covers a bunch of stuff that I don't want or need!!   And I don't have a choice unless I want to pay a big fine! 

Comprehensive 'Anything' Out of Washington is a Failure--Liberals Never Learn


I was listening to Larry Kudlow on CNBC last night and he had a black "strategist" who, predictably, supports Obama and ObamaCare.  This same commentator repeated the Democratic 'talking point' that the Republicans never had a "plan" for health insurance reform.  The free market guest replied that Republicans always have had ideas for insurance reform but nothing over-arching or comprehensive.  The black guy smugly smiled as if he had proved his point.

But the black commentator, as is typical, missed the big point entirely.  The point is that anything "comprehensive" out of Washington is going to be a flop.  That is the point!!   ObamaCare is the greatest example.  Get this: this liberal commentator left the show with no further understanding of how he was wrong.  It's so typical!!  Liberals never seem to "get it."


More Hubris From the Federal Reserve Academics


You have academics at the Federal Reserve manipulating stock and bond market pricing with extremely incomplete information about the unintended consequences or an exit strategy.  Things are so perverse that is our Federal Reserve's stated policy to cause more inflation when it's already 1.7%!  They've even taken credit for the good performance of the stock market!  Imagine that, we now have a Federal Reserve who is using the stock market as a policy tool!   How insane is that?  It is far from the original mandate of the Federal Reserve Act!

Worse, the effect of the current bunch at the Federal Reserve is to try to devalue the US dollar, transfer wealth from average people to the top 0.1% and hurt savers with more inflation and zero interest rates.  They are creating bubbles from here all the way to China and SE Asia.  They don't seem to understand that paper money is not wealth and increasing paper money doesn't create wealth.  There is no substitute for sound money.   Doesn't anyone know that anymore??

So, in summary, we're left with an extraordinarily unqualified President trying to "pretend" that he's competent and that he knows more than he does.  I think he really believes that he knows something!   You have an incompetent HHS head completely over her head.  You have a bunch of academics conducting monetary policy way outside of any historical norms or common sense.  We have nothing but low-information, low-capability, and/or ideologically-driven bureaucrats working in Washington, all with exaggerated assessments of their own capabilites.  The hubris of leaders from Obama to Ben Bernanke is striking.

A man has got to know his limitations.

Monday, December 16, 2013

Eerie Google Robots Reminiscent of Terminator Movies

Take a look at the video of Google's BigDog robot going through it's paces.  It's fascinating but it's also a chilling reminder of the robots in the Terminator movies.


Also check out the Cheetah robot running at 28 miles per hour or faster than Usain Bolt:



Lastly, check out a variation on the "BigDog" robot being developed by Boston Dynamics:


Is "SkyNet"coming?

Black American Trainwreck Part 2

The Black American trainwreck has quite literally hit home at my condo building. This blog follows my blog: Black American Train Wreck Reaches the White House.

Over this past weekend, I was taking out my garbage early one evening and heard a black man, sounding like he had an IQ of about 60, yelling loudly at my black neighbor.  I remember thinking, "at least it hasn't escalated."   But it did escalate.  As I was walking back, I heard crashing and loud noises from the front of my building.  My neighbors were running up the stairs to their unit and came back out again running---both carrying knives. 

The guy had tried to kill them by trying to run them over with his car.

The idiot-criminal had crash-driven his car up along a sidewalk and grassy area and had crashed into a tree trying to kill my neighbor.  He also side-swiped my friend's SUV tearing off the front fender and messed up the front landscaping.  No one was hurt.  Before the attempted murder, he had also bashed-in the front and back windows of my neighbor's BMW doing some serious damage.

This an example of the trainwreck that emerges from numbskull and idiotic actions of the intellectually deficient. These people lack impulse control and logical capabilities, and end up committing crimes out of stupidity.  Since there is such a preponderance of black idiots, the entire black community, the good and bad, are engulfed by the black cultural trainwreck. 

Incidentally, my two black neighbors are transsexuals, which I don't have a problem with.  However, since I know their landlord, I know that the state of Texas pays their entire rent of $750 per month.  These "girls" are able bodied and driving a 700 series BMW.  This is an example of how political correctness ends up with stupid and inappropriate policies.

Friday, December 13, 2013

South Carolina To Outlaw ObamaCare

Wow, this is a twist that I didn't anticipate.  South Carolina is about to pass a law to prohibit the implementation of ObamaCare in that state.

From LibertyBlitzkreig:
The bill’s main component prohibits agencies, officers and employees of the state of South Carolina from implementing any provisions of the Affordable Care Act, leaving implementation of the national health-care law entirely in the hands of a federal government that lacks the resources or personnel to carry out the programs it mandates.

This provision, according to Davis, comes from the anti-commandeering doctrine established in case law that says feds can’t compel states to enforce federal laws.

Additional provisions of H3101 further neuter the Affordable Care Act by outlawing state exchanges, issuing tax deductions to individuals equal to the tax penalties levied by the federal government, and directing the state attorney general to sue over whimsical enforcement of the law.  Taken together, the provisions effectively repeal the federal law for the people of South Carolina.
 It'll be interesting to see which other states follow suit.  It'll also be interesting to see how our current totalitarian Federal government responds.  Unless things change in the next administration, I think that the States will gradually refuse Federal dollars to avoid excessive intrusion into State 'business.'

Opponents of this effort in South Carolina are being labeled racist.  Hmmm. 

Remember, South Carolina was the first to succeed from the Union.  Is this another first shot in a new civil war against excessive US government power? 

Houston vs Chicago: What a Difference!

Here's an interesting graph comparing Houston and Chicago from Zero Hedge

(Click to enlarge)

Thursday, December 12, 2013

Top 40% Pays ALL the Taxes

A few years ago I wrote a blog to counteract the fact-free demagoguery of politicians like Obama who claim that the rich don't pay their fair share.

The rich pay more than than their fare share.  They always have.  Obama, as usual, doesn't know shit.

In fact, the top 40% of income earners pay ALL of the income taxes and then some.  They pay 109% of the taxes!  The bottom 60% gets a refund amounting to 9% of their income-A NEGATIVE TAX!. They receive a "gift" of 9% of their income from the top 40%.

Take a look at the following graph showing income distribution, taxes and transfer payments; this informtion from the CBO and from Mish's Global Economics Analysis


Income and Distributions and Federal Taxes in 2010


The richer Americans are earning much more in the past 20 years than everyone else, but they are paying more in taxes.  It's the top 1% that are paying more, everyone else is paying the same or less.

Here's a history from my blog entry Income Tax Demagoguery: Who Pays US Income Taxes:

Tax Share By Income from 1979 to 1996

Saturday, December 7, 2013

Slacker Obama Met With Sebelius One Time In 3 1/2 Years

I've contended that Obama is and always has been a slacker.  He's admitted that he wasn't a good student.  And I believe it!  His academic records are sealed no doubt because these records would confirm this fact.  And his alleged academic "credentials" were just about the only thing on this guy's resume other than a 1/2 term in the Senate with minimal contributions.  So let's be clear, this country elected a charlatan by throwing aside all good sense, falling unquestioningly for liberal media's "narratives"and "hype" to elect him---just because he was a somewhat intelligent (sounding) black man.

I say that this is a magnificent example of the 'madness of crowds' that the electoral system was supposed to prevent (but didn't).

If you want confirmation of how much a slacker he remains, just consider that the "President" met with Kathleen Sebelius just one time in 3 1/2 years to discuss progress on the implementation of ObamaCare.  So, let's get this straight, the President wasn't interested at all in the progress, or lack of progress, in the implementation his only legislative "accomplishment?"   Yep.

The HHS department has claimed that Obama worked closely with Sebelius on the healthcare law's implementation.   From Breitbart,
If, as HHS spokesperson Joanne Peters claimed late Friday, Obama had “dozens” of one-on-one working meetings with Sebelius, why did he promise in his roundly criticized November 14 press conference he was unaware of the serious problems with healthcare.gov that contractors had warned Sebelius of for months?
He was unaware alright.  He's been completely AWOL.  He's worse than a "I don't know" pseudo-president, he's a lying, I-don't-know "White House occupant."

So, now we know that everything out of this administration is lies, gross incompetence and negligence.  The President was AWOL during the 8 hour gunfight in Benghazi too (that started mid-afternoon Washington time).  

America, you are in the hands of fools, idiots and charlatans.  Is it any wonder why everything out of this administration is complete failure?  Nope, not to this author.

Friday, December 6, 2013

Good Money (Gold) Versus Credit Money

A great article from Charles Hughes Smith at OfTwoMinds Blog:

When the U.S. removed gold and silver coins from circulation in the 1930’s and 1960’s and replaced paper gold certificates and silver certificates with Federal Reserve notes, the paper money looked very much the same. But the thing that the paper money represented changed dramatically. The paper money now represents units of credit money that have no guaranteed relationship with the prices of gold or silver or anything else.

Definitions: A gold or silver coin is a physical object that has weight, volume and physical characteristics. Credit money is a record of the existence of a debt. Credit money exists in the intangible world of information and human relationships. Where Mr. A owes Mr. B a specified unit of money, and where that debt is recorded on paper or another recording medium, and where the record of that debt passes from one person’s possession to another as a medium of exchange, you have credit money.

The Difference Between Good Money (Gold for instance) and Bad (Credit) Money


Gold coins are minted; debts are recorded. The two forms of money could hardly be more dissimilar. Metallic money has been used by people for about 2,600 years. It has been used sporadically and in certain places. Credit money has been used for at least 5,000 years, when people first started recording debts on clay tablets, pieces of wood or ivory, etc., and trading those IOU’s as money. Before debts were recorded in writing, they were, in prehistoric times, discussed verbally, remembered, and sometimes traded in verbal transactions. This is how very primitive people still trade using debt today.

Anyone who has no intention of paying back his debt, such as the Federal government, can potentially issue debt in infinite amounts.   To create a gold coin, someone has to first mine the gold from the earth, refine it, mill it, stamp it into circular shapes and then stamp the governmental pattern on it. To create a piece of credit money, a debt has to be created and then a piece of paper printed or a record created on a computer. There is an issue of whether that debt is worth anything, however.

A gold coin that is legal tender will always be accepted as money. With credit money, some of it is good and some of it is bad. In recent years Zimbabwe’s credit money went bad. Before that, the Weimar Republic’s credit money became worthless. All circulating debt has a mixture of good and bad. When a lot of it goes bad at the same time, it causes a crisis, where the “toxic debt” must be guaranteed or purchased by government or else banks and other financial institutions will go bankrupt.

Credit money has the quality that there is a continuing flow of interest payments away from the users of money in the general population and toward creditors.  Most debt specifies interest payments as part of the loan agreement. The Federal Reserve notes we use as money are claims on interest-bearing debt owned by the Federal Reserve. With a gold money system, there is no such continued flow of wealth from debtors to creditors in a gold money system.

Because interest payments are constantly flowing out from families, businesses and communities to financial centers and wealthy creditors, credit money results in economic sluggishness unless there is a constant expansion of the supply of credit money. Under a gold money system, people can function much better with a constant money supply because there is no leakage of interest payments. Each community can continue to circulate its own holdings of gold money without having to pay any of it out in the form of interest payments.

In order to keep a credit money economy going, more debt must be continually created. Government and financial leaders who do not want to be blamed for a downward spiral of slowing economic activity must see to it that more debt is constantly being created. Under a gold money system, there is no pressure to constantly increase the burden of debt.

The fractional reserve method of banking encourages asset bubbles because new money is created as borrowers take out new loans. When people borrow money to buy bubble assets (e.g., houses 1981-2006), it creates enormous amounts of new money to feed the asset bubble. Many asset bubbles were also created during the gold money era due to fractional reserve banking, but where the unit of currency is guaranteed by government to be equal to a fixed weight in gold, the inflation threat is taken out of the picture and that restrains bubble creation somewhat.

Thursday, December 5, 2013

The Democrat's Alternate Universe

Democrats have a proud history of leading in the areas of organized labor and the popular safety nets of Social Security and Medicare dating back many decades ago. They also were more committed to racial reform once black revolts in the South raised popular consciousness of the subject. 

Things really have changed.  Labor did more than their share in chasing jobs out of the country and became coercive and corrupt.  The social safety nets are in a demographic crisis with a collapse of the worker-to-beneficiary ratio and Democrats in utter denial.  So much in denial that, despite $1 Trillion deficits, they passed (by tricks and subterfuge) ObamaCare; a vast entitlement expansion and wealth redistribution program where nearly 60% of the population is promised subsidies.  Who's going to pay for all of that?? The other 40%??  Blacks are in worse condition now than ever with the collapse of the family, criminality and corruption.

What's good became bad. 

When I watch documentaries and read about Harry Truman and John F. Kennedy, I come away with the obvious conclusion that these wise Democrats were very conservative compared to the current batch of Dems. In their time, they were hardly different than the Republicans.  Both parties were center to right-of-center.  That's why ALL major social legislation was passed in a bipartisan manner.  This remained true even in Reagan's time.  Reagan was able to rely on relatively conservative Blue Dog Democrats in the South at a minimum.

My goodness have things changed.  I'm afraid that the current Democrats are on the verge of becoming the "Looney Left" in their misreading of history, liberal indoctrination, denial of facts and twisting of truth.  Afterall, Obama is the poster child for twisting the truth and outright lies. 

If you need more evidence of the distance that Democrats are from reality and the political mainstream, just have a look at the results of an IBS/TIPP poll:
  • Regarding the direction of the country,  64% of the public says the country is headed in the wrong direction — 71% of independents say this. But those who identify themselves as Democrats, two-thirds, are perfectly satisfied with the country's direction
  • Nor are Democrats willing to entertain any doubts about Obama. Overall, his approval rating is just 40% — just 31% of independents give him a thumbs-up.  But a ridiculously high 80% of Democrats like the job Obama's doing. [Heads in the sand!]
  • Regarding Obama's Honesty and Trustworthiness, only 42% of independents, and just 15% of Republicans, think Obama is honest and trustworthy — a perfectly reasonable result given his blatant lies about ObamaCare — 93% of Democrats still believe in him.
  •  Regarding the ObamaCare launch, just 27% of Democrats are willing to say he bungled it, in contrast with 97% of Republicans and 70% of independents
  • 61% of the public wants a smaller government with fewer services — among independents,
    68% want this — but 59% of Democrats want a bigger government and more services. 
  • And while 57% of independents and 88% of Republicans want to repeal ObamaCare, only 13% of Democrats want ObamaCare killed.
  • Only 28% of independents and 8% of Republicans say the government can be trusted to run the health care system successfully. Nearly two-thirds of Democrats (64%) put their trust in the government.
What planet are these people on??   And why are they unable to learn anything??

I'd say that the Democrats are listening too much to the liberal arts journalism majors who inhabit all of the important information media. Never has it been so clear that these academic journalism programs, and their graduates, are grossly inadequate for reporting on the issues of our day.  Where are the majors in science, engineering, economics and business to write and report in the media??  There aren't any!!! 

Journalists, just like everyone in the current administration, are just a bunch of liberal arts academics who have been indoctrinated in Liberal viewpoints by other career liberal arts academics.  They seemingly know nothing of economics, business, or even the recent history of their own party (Kennedy and Truman for example).  If they did, they would know about this country's overwhelmingly center-right heritage and how far left we've shifted. They literally know nothing!

I hear Democratic talking heads try to defend the un-defendable on responsible shows such as Larry Kudlow.  There is a serious intellectual deficiency in this administration, in their supporters and in the media talking heads who are all overwhelmingly are Democratic----and not in a good way.

The nation really is on the wrong track. 

Wednesday, December 4, 2013

Ron Paul: No Substitute for Sound Money

The sad thing is that sane people like Ron Paul are literally a dying breed.  Ron Paul, although a physician by training, is just about the only person in this country who is economically literate enough to speak with authority about sound money, the dangers of money printing, and the gold standard.  Only someone of Ron Paul's age remembers first hand the relative stability of the gold standard---ultimately abandoned entirely in 1971 when the Bretton Woods accord was abandoned.  The subsequent 40 years is a story of inflation and economic instability.   

Now, we've entered the next-to-final stage of this race to debase our currency by setting the money printing presses into high speed.  The final stage is the acceleration of money printing to "ludicrous speed."   As a result of money printing, our financial system and economy is set to become even more unstable. 

One day, after the current monetary insanity finally ends in a smoldering heap, and it will eventually, people will once again look to the "best imperfect monetary system" of them all:  gold backed money.

Here's some myths about paper money versus sound, gold-backed money from a Ron Paul article at the Daily Reckoning and partially re-printed in ZeroHedge:

Myth #1: Paper Money is Wealth 
"The proponents of big government [Liberals] oppose honest money for a very specific reason. Inflation, the creation of new money, is used to finance government programs not generally endorsed by the producing members of society. It is a deceptive tool whereby a “tax” is levied without the people as a whole being aware of it. Since the recipients of the newly created money, as well as the politicians, whose only concern is the next election, benefit from this practice, it’s in their interest to perpetuate it.  [have you noticed that liberals are deceptive about everything these days?]

Wealth comes from production. There’s no other way to create it.  Duplicating paper money units creates no wealth whatsoever, it distorts the economy, and it steals wealth from savers. It acts as capital in the early stages of inflation only because it steals real wealth from those who hold dollars or have loaned them to someone.  The ultimate inflation steals purchasing power from everyone---especially those with no inflation hedges.

From Ludwig Von Mises (1929):  "By its very nature, a government decree that “it be” cannot create anything that has not been created before. Only the naive inflationists could believe that government can create anything; its orders cannot even evict anything from the world of reality, but they can evict from the world of the permissible. Government cannot make man richer, but it can make man poorer."

Paper money managers and proponents of government intervention believe that money itself — especially if created out of thin air — is wealth.  A close corollary of this myth — which they also believe — is that money supply growth is required for economic growth."

Myth #2: Growth of Paper Money Is Required for Economic Growth
"Instead of economic growth being dependent on money growth as the paper money advocates claim, great economic harm comes from central banks creating new money out of thin air. This leads to the sort of economic stagnation and economic decline that we are experiencing today. Inflation — increasing the supply of paper money — is the cause of mal-investment and the business cycle, and literally destroys the capital needed for economic growth and stability. The formation of capital through savings is discouraged or eliminated by a paper money system. Instead of paper money producing economic growth, it has accomplished the opposite. If money growth were necessary for economic growth, the 1970’s would have been a great decade. During this period of time the Federal Reserve nearly tripled the total money supply but the economy grew only 37 percent."

Myth #3: Easy (Paper) Money Lowers Interest Rates
Our current orthodoxy is that the Federal Reserve is "saving the day" by it's money printing and it's forcing interest rates lower.  It's been true for several years, but this only works for a finite amount of time.  From Ron Paul:

"Before the people are aware of the depreciation of their currency and do not yet anticipate higher prices, the law of supply and demand serves to lower “cost” of money and interest rates fall. But when the people become aware of the depreciation of the dollar’s value and anticipate future loss of purchasing power, this prompts higher interest rates due to inflationary expectations. [Worse, the people who first receive the newly created money benefit---bankers and financiers--benefit from this largesse and of course get the inflation "signal" well ahead of ordinary citizens. They 'hedge' and even benefit against general inflation. Money printing is creating wealth inequality and is unfair!!]

This expectation of future inflation and higher risk is determined subjectively by all borrowers and lenders and not by an objective calculation of money supply increases. These increases in the money supply certainly are important and contribute to the setting of the interest rates, but they are not the entire story.

Money printing ultimately results in higher interest rates, not lower." [Just ask the people of Argentina and Venezuela if they are better off now that inflation rates are 50% per annum.]

Myth #4:  There is Not Enough Gold to Establish the Gold Standard
"Misconceptions are promulgated about the “merits” of paper money and the “demerits” of gold. Some of the myths are promoted deliberately, but many times they are a result of convenient rationalizations and ignorance.

Although the gold supply under a gold standard would in all probability increase at the rate of 2 to 3 percent per year, this growth is not a requirement for gold to function as a sound currency. This natural or market increase in the money supply easily accommodates population growth and economic growth as long as prices are freely adjusting.

If population or economic growth presents a need for “more” purchasing media, prices merely adjust downward if the money supply is not growing. In the latter part of the nineteenth century this occurred. Wholesale prices dropped 47 percent from 1879 to 1900 and economic growth averaged nearly four percent per year.  Obviously, although prices were decreasing, there was no depression."

Myth #5:  Falling Prices (Deflation) Are Bad
Falling prices are a good thing.  Notice that we're talking about falling prices after a government-caused economic depressions or panic.  Falling prices after a Fed-induced bubble/bust is NOT a good thing.  Remember that the monetary authorities, the Federal Reserve, CAUSED the bubble(s) in the first place.

Falling prices due to a finite money supply is a good thing.  Don't you want prices to drop??  Isn't it great that flat screen TVs are falling in price?  Don't you want medical costs to decline?   Aren't you glad when computer prices decline?  Isn't it a good thing that lower home prices make them affordable for subsequent generations?  The inflationistas will argue that wages will eventually"catch up." Yeah, but not everyone's wages catch up.  What if you're retired and wiped out?

Steady or slowly declining prices, cause interest rates to decline too.  In that environment, holding cash, even with a zero interest rate, pays you. That's a good thing.  Not like today when holding cash in your bank account causes you a loss of purchasing power.   The Federal Reserve's brainiacs are targeting 2% inflation with Zero interest rates; meaning the balances in your checking account and CDs lose 2% per annum.  The government is literally stealing from you to prop up the banks and the top 0.1%.  How fair is that?  I see the misery worsening too.