On Life and Liberty - Erik Voorhees

Bitcoins and the Separation of Money and State

2011-06-01T23:43:00.031+04:00

[This piece was originally written and published for "The Refinery," Silver Circle's official movie production blog.]

Fans of Silver Circle are well aware of the calamity that is the US dollar – a currency in the slow process of realizing its own death. The film explores a possible not-too-distant future where the dollar’s collapse begets an underground economy in which silver becomes the new money (not too outlandish, considering silver and gold used to be America’s money).

But, markets are often unpredictable things. Perhaps some medium of exchange other than precious metals could come to prominence in a post-dollar world. Perhaps an entirely new form of money may emerge, and perhaps that money is already here.

Enter Bitcoin.

What in the world is Bitcoin? Sounds nerdy.

Bitcoin IS nerdy, but so was the internet before it became sexy… and if you like money, Bitcoins are even sexier.

Broadly speaking, Bitcoin is a completely decentralized digital monetary system. The “coins” themselves are encrypted codes, and they exist on users’ physical computers stored in a “wallet” file. It’s like cash in your pocket.

But unlike cash, an owner of Bitcoins can literally send her coins to someone else anywhere, anytime, with no transaction cost, no “clearing house” that might freeze or impede the transfer, and total anonymity. Review that sentence again and you’ll understand why Bitcoin is a big deal.

There are a few caveats: “instant” really means “up to an hour,” and one may pay a small fee (much less than 1%) to have a transaction processed more quickly. Anonymity can be achieved with basic precautions, but is not fool
-
proof. Backing up one’s wallet is also recommended, as Bitcoins can be lost forever (again, like cash).

So Bitcoins are special codes that can be traded securely from one computer to another over the internet. But does that make it a “money?”

Bitcoins as Money

For something to be used as money, it must be valuable. Why are Bitcoins valuable? Why would anyone want them in the first place? The answer is simply that they possess the very attributes that make any medium effective as money, just as the attributes of gold and silver make them monetarily useful.

Just like gold and silver, Bitcoins are divisible (down to eight decimal places, actually), homogenous (every Bitcoin is equal), durable (they don’t decay), portable (extremely), identifiable (hard to counterfeit), and scarce. Unlike gold and silver, Bitcoins can be transferred across the world instantaneously and a zillion dollars-worth can fit in your pocket.

On the topic of scarcity, there will never be more than 21 million Bitcoins in the universe, 6 million of which exist currently. The mechanism by which they’re produced isn’t crucial for this introduction, but it’s important to understand that Bitcoins are produced on a predictable pattern of diminishing inflation (whereby inflation will end at zero percent). The USD and all fiat currencies, by comparison, are produced on an unpredictable pattern of increasing inflation (whereby the currency itself will end at zero value). Anyone who dislikes having their wealth stolen from them by a central bank may well be interested in this feature.

Enough econ talk, we understand that these nerdy Bitcoins can be effectively used as money, but who cares?

Governments will care, and this is where the idea gets interesting.

Bitcoins and Governments

You can be sure that Bitcoin will be impugned for enabling illicit activities. Drugs, gambling, prostitution – all these industries (and others that are actually bad) could benefit from using the new money. And yet, plastic baggies make the drug trade more efficient; playing cards enable gambling; discount hotels drop the transaction costs of prostitution – should the mere fact that a particular invention advances a distasteful industry make the invention itself distasteful?

Effective tools can be used for both good and bad behavior, and only a fool would try to ban the tool itself . We can thus expect that Congress will try to ban Bitcoin– sacrificing the good it will do for people and markets in order to reduce the harm to central banks and fiat currencies.

Yet fixating on the illicit uses distracts us from a more important discourse. To truly understand the revolutionary nature of Bitcoin, one’s focus should be squarely on its decentralization. There is no central organization keeping track of transactions. That important function is handled by the peer-to-peer network as a whole. This means the government may not stop Bitcoin usage without shutting down the entire internet (though it could certainly try to prosecute vendors who publicly accepted Bitcoins – and this is no minor concern in the U.S.S.A.).

This decentralization also means the government cannot inflate or otherwise “manage” the money supply. It cannot centrally control the most crucial part of an economy – its monetary system. In fact, the government can’t even determine who possesses Bitcoins, so long as the user is careful with her identity.

Bitcoin enables users to realize true monetary freedom and privacy, with all the benefits and concerns inherent in such a system. Free markets and free people (redundant terms) everywhere should rejoice.

Others will be less enthused.

Central planners will be infuriated by the crippling effect of Bitcoin on their authority and ability to control. Bernanke will complain at the sudden loss of the Fed’s economic hegemony. There will be YouTube videos of Geithner tilting his head forward and looking serious as he addresses Congress. Paul Krugman may throw a tantrum. His paper, the New York Times, will explore how Bitcoins hurt the children and kill old people. The pretty girls on Fox News won’t get it until Bitcoins arrive in the mail as credit cards. The banking cartels – perpetually in bed with the government – will not be pleased. The IRS? Let's just say its thievery will be more difficult.

One can imagine that every authoritative force in the world may bear down on Bitcoin if it grows in popularity. The countervailing power will be capitalism itself – the incessant need of men to produce and trade toward efficiency with effective and honest money.

The Real Impact of Bitcoins

In the same way that “a nation of laws” is preferable to a “nation of men,” an economy of lawful money is preferable to an economy of fiat. Lawfulness is here derived from a kind of natural law written into the coding of Bitcoin – and this natural law cannot be manipulated at the whim of anyone, no matter how benevolent and wise they perceive themselves to be.

With Bitcoin, a man in London can send his friend in China a payment at the click of a button and the exchange is between the two of them, administered by the entire peer-to-peer network. The full value sent by one is received immediately by the other. The exchange doesn’t pass through a bank, nor through PayPal. It doesn’t pass through border check points, nor the clutches of hungry and murderous governments. It’s not carried via courier nor armored truck. It is efficient.

Bitcoin enables a kind of global free market that has never been possible before, and it arrives at the twilight of the United States’ fiat dollar. That is why Bitcoin is so relevant.

Like all new and disruptive things, Bitcoin is more likely to fail than to succeed. There are a million reasons why it could fail. However, if it does succeed, the ramifications will be of the magnitude of the internet itself and if one understands money one realizes this is not an overstatement.

If the “separation of money and state” is a familiar concept to the next generation of schoolchildren, Bitcoin will have succeeded.

The More Important Question

2010-11-25T21:32:00.004+04:00

Half the nation is outraged at the Transportation Security Administration’s new policy of stopping terrorists by sexually assaulting airline passengers. My question is, what’s wrong with the other half?

Never mind the fact that since 9/11 the TSA has spent billions and delayed millions and caught not a single terrorist, the actors in the transportation security circus now fondle children, grope women, and embarrass the elderly who may have lingering memories of a time when an American’s body was still his own – yet half the nation bows down and bends over, with a smile on its face and a flag in its hand.

Perhaps this is explainable on the grounds that at least 1 in 2 hasn’t yet flown under such conditions, but I doubt that’s the reason. The real explanation is that the sheeple believe such procedures – while admittedly invasive – make us safer.

Whether the body scans or TSA grope-fests make us safer is not the point. Let us stop debating the effectiveness of such tools, for this detracts from a more important issue entirely.

Let’s assume these new “security” procedures work as intended. Let’s assume it could be proven that such tactics, invasive as they are, reduced the risk of terrorism by a significant degree. Is such invasion, such treason against the 4th Amendment, justified if it makes us safer? Is “effectiveness” the test of what makes a search and seizure “reasonable?” That is the real question, and that’s what the country needs to review with due haste.

For if the test of appropriate government intervention is whether or not we are thereby made safer, then should we not expect a steady kaleidoscope of new security transgressions deployed as threats continue? Should we not expect an endless parade of shiny security innovations, each conveniently rolled-out after the modest outrage from the former has subsided?

After all, safety can always be furthered by increasing restrictions on risky behavior. Can one not always be made safer by being locked in a sealed room? Is there not always some new place to put a camera? London is currently attempting to answer this very question – over a million security cameras and counting.

If the porno scanners make us safer at airports, then why on Earth do we not install them at train stations (already proposed by Big Sis)? Why are we not groped at malls; do we not spend more time there than in the sky? Why not strip down for daily entry into our large commercial towers; for do they not hold more people than a mere aircraft? And the schools! Our children should be protected, above all. We ought to grope them all to keep them safe, for why should this logic apply only at airports? And consider all the new TSA jobs we could create to help the economy!

Yet as troubling as the porno scanners and gropings may be (a choice nearly as worthless as selecting from the nation’s two wretched political parties), let’s consider the possibility that technology may improve. Imaging will get better. When the new scanners which see into every layer of skin are released on the market, and provide their images in full HD color – thus making the TSA more effective and efficient– would it not be foolishly imprudent to resist the installation?

If indeed safety is the litmus test of intervention, shall we not be overjoyed in 20 years to accept mind scanners at every busy intersection? Reading thoughts, or simply sensing motivations, would immensely help the police protect and serve.

Where does this line get drawn, or will it not be? And more importantly, why would we – a supposedly free people (does that mean anything anymore?) – allow such lines to be drawn by the largest, most intricate, convoluted, and powerful government ever hatched from the good intentions of well-mannered politicians? Are we so dim, so shortsighted, so naive as to see no problem with this? Only half the country is upset, and what percentage of these justified critics intends genuine resistance, I wonder?

Our nation has nurtured a gross and dangerous lack of resistance in the face of diktat – at best, we passionately grumble. What evidence is there that any future transgression will be resisted with any resolve? There is little. Answer this, has the government’s oversight ever shrunk? And what future may be reasonably foreseen under circumstances in which a government believes its role to be the reduction of risk, and half the citizenry cheers this coddling paternalism, while the other half does little more than moan at the television? Nineteen eighty-four does not suddenly happen on the first of January.

Response to Krugman – “The Angry Rich”

2010-09-23T05:12:00.008+04:00

Paul Krugman recently clawed an NYT piece entitled, “The Angry Rich.” In his puffy I-don’t-know-where-money-comes-from-so-I’ll-critique-it-in-order-to acquire-some-of-it-myself tone, the tyrannical pop culture Nobel Laureate advances the idea that wealthy people are entirely unjustified in their anger toward the government – anger arising from the “modestly higher taxes” which are headed their way.

The Princeton Prince assures us that the landed gentry is being much too noisy and wholly inappropriate, for in a proper society there should be no brouhaha coming from that direction – they go golfing, after all. Only the poor are justified in their complaints, because they are “underprivileged.” The woman who finds herself with a healthy bank account should bend over, drop the overpriced designer skirt, and take it for the collective.

In Krugman’s world, resources belong with those who don’t yet have them – so long as they’re Americans. If we discover a woman with a nice house and fancy car, and a man with torn jeans, a ’98 Taurus, and five children forced to share only one Xbox between the lot of them, Krugman will ensure that the privileged woman gives of herself freely… for she has much to give. If he’s lucky, maybe the man will then be blessed with a sixth child, and then have even further claim to the labors of others. To be fair, Krugman wouldn’t force the woman to strip down entirely – only 39% of her marginal assets need be removed. She can leave her Prada heels on, if she so pleases.

The right to property, whether speaking of one’s own body or the product thereof, is of no concern to Krugman. To people like him, property is rightly owned by the collective – again, so long as that collective is American. Of course, the property wasn’t produced by the collective, but that doesn’t seem to matter. From each according to her ability, to each according to his need… and there’s a lot of need.

But upon any academic examination of “need,” one will find the term to be almost meaningless. What is needed by humans? Some food, some water, some shelter, and an Xbox. Americans, even the poorest of them, already have these things. The strict needs of 99.99999% of Americans are met. The fact that, beyond these needs, many Americans don’t have the job they want, the car they want, or enough cash to spend both on movie nights and fresh vegetables from the fertile fields of Italy doesn’t make them “in need.” Rather, they are, like all humans both rich and poor, simply “in want” – a perpetual condition that no increase in marginal tax rates will alleviate.

If Krugman really cared for the poor, for those truly in “need,” he would be eyeing the comfy $30,000 made by blue-collar Americans. That kind of income is WAY more than anyone needs, but it’s not enough for what everyone wants – and that is what truly bothers Krugman. Indeed, there are starving children in Africa, and starving not in the sense that their Twinkies have run out, but starving in the sense that they’re dying and will soon be rotting in the streets (made even more tragic by the fact that they’re then unable to continue plowing the fields and sewing the blue collars for the “poor” Americans). Poor is relative, and anyone who has traveled even a week abroad knows that Americans are not poor – even the poor ones. Krugman is not advocating for those in poverty, he’s advocating for those in wealth… but those who just don’t have as much wealth as Krugman arbitrarily deems appropriate for his utopian hive.

Krugman’s festering antagonism towards those who produce vast quantities of valuable things –value being evidenced by the fact that others are willing to voluntarily exchange their own wealth in return – is, frankly, pathetic. Citing Oliver Wendell Holmes, Krugman asserts that “taxes are what we pay for civilized society.” I’ll cite myself here and suggest that forced servitude, aka taxation, is precisely anti-civil. A society is civilized to the extent that force is avoided. The very march of civilization has been a prolonged and noble struggle against force – it’s wrong to murder, it’s wrong to steal, it’s wrong to enslave… but it’s just fine to partially enslave so long as Oliver Wendell Holmes stamps it with approval? Force is the antithesis of civility, not its beacon.

Here’s a little hint for you, Krugman. Perhaps the rich aren’t angry just because their marginal tax rate is going from 37.5% to 39%. Perhaps they’re angry because they’re increasingly realizing that almost the entire 39% they’re forced at gunpoint to surrender to your preferred collectivist regime ends up not as the tuition for underprivileged youth, but as the piggy bank for the most wasteful, inefficient, lying, cheating, corrupt, militaristic empire that has ever existed in the history of the Earth. I’m sure the wealthy would gladly part with more of their income if they could hope to receive something of value in return. The fact that you have to wrest it from them under threat of imprisonment is indicative of the nature of your operation. Pizza Hut doesn’t have to point a gun to your head, because what they serve is good.

Yet, perhaps the rich do owe their pound of flesh to the hive… how ought we determine the proper amount of flesh? How much of herself must the wealthy woman surrender to you, Krugman, before you’re satisfied with her sacrifice? To how many hours of her day are you entitled? Why must she go without 39% of the product of her body, merely because a bunch of men in Washington deem it so? Is it because other people voted those men into power? Being in power, as they are, are they entitled perhaps to 50% of the woman’s efforts, so long as the majority – along with Oliver Wendell Holmes – agrees? What about 80%? And yes, slippery slope arguments are legitimate when you’re pushing people down a hill… so could, perhaps, the majority rightly vote away 100% of the lady’s efforts so long as it was “for a good cause?” Does any cause justify enslavement? Does the cause of alleviating starving cannibals justify the pushing of a fat, tasty man down a hill? No? What if the cannibals have hungry children and a mortgage?

And why is it that the wealthy be forced to give the product of their labor to the less wealthy in America, but the less wealthy in America need not be forced to hand over their goods to the truly poor in Mexico? And why should the Mexicans get cars when the Nigerians have no food? What right does the Nigerian have to three meals when the Chinese peasant hasn’t but two?

There are people suffering, are there not? Is there not someone in need who could send their child to school for the mere price of your laptop, Mr. Krugman? How many Somalis-worth does your apartment cost per month? That photo of you in the New York Times – what ludicrous sum was paid to the photographer? Is it really equitable to have such a pompous and wholly unnecessary visage printed when hundreds of children have starved to death in the time it takes to enduringly wade through your hypocritical editorial?

Your concern for the poor ends, Krugman, when you force others to be charitable in your place. It ends when you advocate the enslavement of those who produce more than they consume in order to coddle those who consume more than they produce. It ends when you decide it’s okay to point a gun at someone so long as they earn over 250,000 shreds of fiat toilet paper per year. It ends when you forget that anyone owning a house, a car, refrigeration, cable television, a cell phone, a waste disposal system, running water, soap, and an Xbox is living at some level of luxury, by any objective measure of humanity.

So long as you have food to spare, don’t steal it from your neighbor… and if you ever run out of food to spare, try producing something of value, for once, and then feel free to donate it to a deserving individual. I would praise you for that, for you would then be a man, instead of a shivering, lecherous coward crouched behind the force of government while waiving your transparent flag of feigned philanthropy.

A Troubling Affinity for Localism

2010-09-19T01:16:00.016+04:00

For a long time, the people with whom I most closely related on issues of economics and politics were those who understood and advocated free trade in every aspect of life. Free trade, we agreed, was not only legitimate for moral reasons (i.e. it’s wrong to point a gun at someone and force them not to exchange their labor or property with someone else), but also for economic reasons (i.e. more wealth tends to be produced under circumstances of freedom). Thus, my ideological comrades were very supportive of such things as outsourcing, international trade and finance, and multi-national corporations.

Yet, as I’ve become more involved with the liberty movement, I’m increasingly observing those who, for some reason, advocate free trade while at the same time encouraging each other to “buy local.” Go local, buy local, is the motto. This has concerned me, because such talk tends to come from the leftist hippie-commune types – those who ardently oppose international trade and capitalism – those anti-Wal-Mart crusaders who believe the proper role of business is to make as little profit as possible, hire as many people as seek to be hired, and grow only to the extent that their carbon footprint remains neutral. So, why are my uber-capitalist colleagues now advocating the “buy local” message right along with the hippies? What has happened?

To avoid broad generalizations, I’ll point out that those most likely to advocate localism tend to be those who promote precious metals as real money (a label I would happily affix to myself, if asked). Proof of this theory is even stamped on many of the AOCS silver coins – go local, buy local. Why is it that these unapologetic capitalists, who have come so far to understand the evils of fiat currency, suddenly about-face and stamp leftist rhetoric on the very foundation of freedom – sound money?

I don’t really have an answer to this question, but my guess is that these types of people have become acutely aware of the fact that the larger a company grows, the further it slides into bed with the state. This sentiment is certainly true… the lobbying, the special favors, the exemptions and privileged rules, the subsidies and the downright protectionism for incumbent organizations is a nasty blemish on what many still consider to be a capitalist country (how wrong they are). So I suppose, by association, that because the biggest companies are the most connected with government, and because government is the root of most evil, these radical capitalists have adopted the idea that large firms simply shouldn’t be supported, and that a prudent and principled free marketeer will choose instead to purchase from smaller, more local, less government-entwined companies. Thus, buying local becomes a pure expression of capitalist sentiment – a revolt against the corporatism pervading every modern nation.

So if that’s the reason that “buy local” is stamped on AOCS’ silver coins, then fine. I understand the reasoning. What if, however, localism is advocated, in part, due to the same “anti-bigness” ideology so emblematic of the left (except, unfortunately, when it comes to government).

Ayn Rand writes at length about this sentiment – that many people seem to simply despise “bigness,” and that this hostility arises from a combination of unacknowledged jealousy and the misunderstanding of the process by which wealth is created. For if, in a free market, money is earned only to the extent that one provides a marketable service to others, then the bigger a company gets, the more good it has done – the more wealth it has produced. However, to those who somehow believe that wealth is static and that it’s simply “distributed” amongst people, a large company would indeed represent a problem, for by being large it has by definition acquired wealth at the expense of those who lost it.

My hope is that my ideological allies don’t suffer from this “anti-bigness” ailment. I hope indeed that they’re able to appreciate the greatness in those people who, by their strength of will, their intelligence, and their creativity, are able to create massive organizations – organizations which manufacture wealth for their owners, employees, and customers. Yet, if that’s the case, then why buy from smaller, local firms?

Could this local advocacy arise instead from a misunderstanding of economics? This too, concerns me. For how can someone be so economically aware as to realize the fraud of central banking, yet be so economically ignorant as to believe that “keeping things local” is a wise course of action? These people don’t really believe that hoarding money in a certain geographical area will make them wealthier, do they? The sad fact is that some do. Today, I stumbled upon the website of the “Northern Colorado Community Barter” organization. Perhaps this is just some hippie-commune organization, but the fact that they promote AOCS coins means they’re running close to some very free-market circles; circles that are too close for comfort. Some of AOCS’ most popular coins are imprinted with the visages of Mises and Ron Paul, after all.

This community barter organization states the following:

“The benefits of keeping money in the community and patronizing local businesses are numerous. Locally spent money generates more local tax revenues leading to improved services. Local businesses employ more people, contribute to local charities, and bring unique character to their communities, making the community a great place to live and visit.”

My fears, it seems, are indeed true. Economic ignorance – just like that terrible feeling after eating a Happy Meal – is recurring, unyielding, and ever-present. How can it be that free-market advocates don’t understand the fallacy here? Perhaps the aforementioned organization shouldn’t be considered free-market, but then why are they promoting the usage of metals as currency, for in so doing they deprive the state of its ability to print money for the poor and underprivileged? If they’re not free-market, how can they advocate metals? If they are free-market, why in the world would they make a claim such as that quoted above?

I think what’s really going on here is yet another incidence of Bastiat’s “unseen” – the thrust of which suggests how people tend not to account for costs which are not visible. An easy example is the public sports stadium: people see the monolithic structure and praise the government for constructing it, yet the taxed wealth extracted from the city’s citizenry is now no longer able to be spent on other things – new companies, new ideas, new advances. These missing things are the “unseen” and so far as they are missing from public view, the public doesn’t realize they were lost. This fallacy pervades all public expenditures, sadly.

So how is localism related to the “unseen?” Simply this – by buying local, one is sacrificing either A) quality or B) price. This must be true, for if the local product was a higher quality, or a better price, then people would buy it naturally, and a call to “go local, buy local” would be wholly unnecessary. Indeed, such slogans are required only to the extent that a local product is inferior – superior goods require little such propaganda.

The “unseen” is thus the value lost by the consumer – it is that value or wealth which otherwise would’ve existed had the superior product been purchased in lieu of the local product. However, this is just half of the unseen, for when a foreign product is purchased, the compensation or revenue earned from the sale is sent to a faraway land. The benefits of that revenue to the producer are not seen by the consumer or his community, simply because they don’t live “over there.” The happy Chinese family – now with food on the table and a new pair of shoes – is not ever known, in any visceral sense, to the community in which the purchaser lives. This unseen wealth causes the purchaser to discount the reciprocating utility of his purchase, and makes him more sympathetic to those community organizations advocating localism.

But the honest observer should realize that by buying local, more benefit is “seen,” even though less benefit is created. In trade, every transaction creates value (for the most part), and by buying local one is cordoning that value into a smaller geographic area – an area more easily witnessed by one’s neighbors. Yet, by sacrificing price or quality for more “seen” value, the net effect must be negative relative to the consumer who seeks out superior products over those produced locally.

A critic here may direct my attention back to the quotation from the Northern Colorado Community Barter organization:

“Locally spent money generates more local tax revenues leading to improved services. Local businesses employ more people, contribute to local charities, and bring unique character to their communities, making the community a great place to live and visit.”

Personally, I don’t want more tax revenue to be generated at all, but that’s a separate issue. Assuming tax revenue is a good thing, the organization’s statement simply strengthens my point. It is because these benefits are seen in the local community that observers advocate localism. But unseen are the tax revenues, charities, and unique character of foreigners which will no longer be realized – even though the foreigner is producing the better product.

Once analyzed objectively, the issue betrays an embarrassing argument on the part of localists – that a certain community should benefit because it is nearby at the expense of a community further away producing superior work. Of course, we all want our own communities to thrive, but is it not a tad disingenuous, or even xenophobic, to advocate behavior which benefits our people at the expense of more deserving people further away? That shouldn’t sit right, especially with any “we love the world” leftists unfortunate enough to be reading this piece.

All things being equal, if the Chinese producer and the local producer create the same quality item at the same price, there is no reason not to give the business to your neighbor. It is an arbitrary decision, and a slight whim of deference towards those you know harms nobody at the margin. But alternatively, if the Chinese producer creates the superior product, then to give the business to your neighbor implies, at least tacitly, that he is more deserving that the Chinese. Why should that be the case? What’s more, the local supplier usually isn’t even one’s neighbor, but rather a stranger who happens to reside somewhat nearby. So to give the nearby stranger the business at the expense of the far away stranger who produces more effectively is to make some kind of value judgement that an ethical person may want to avoid.

So there is the moral problem with localism, but there is also a logical problem. If indeed we should buy local in order to support those communities which are closest to us, then why stop at the state or town level? Why should we not prefer to buy from our own neighborhood? Or, even better, let’s try to purchase only from those on our street. The most enlightened of us can purchase solely from our own household, and reaching localist nirvana would simply mean producing all goods oneself.

When focusing in closer than a state level, the absurdity of localism should become clear. Of course you shouldn’t try to produce everything yourself… you’d be inefficient at everything and, on net, be much poorer than if you specialized and traded with your neighbor. As this should be self-evident, then of course a community shouldn’t try to trade with itself, but rather should specialize and trade with other communities. A state should trade with other states, a nation with other nations, and indeed our world should trade with other worlds to the extent we can make such fortunate contact.

Localism is one of those economic superstitions – like the broken window fallacy – that for some reason continues to trick people into irrationality. It is a great thing to support ones neighbor, but that greatness dwindles quickly when you account for the support no longer going to someone else’s neighbor – and in this day and age, probably a much more deserving, hardworking, and underprivileged neighbor in Asia.

While I have little hope for the Colorado Community Barter Organization, perhaps those kindred spirits who advocate liberty and sound money will realize their misguided affinity for localism.

Buy the best products at the best prices – give your business to that producer who is most deserving. If it’s your neighbor, buy from him… but don’t buy from him simply because he’s your neighbor.

On the Intrinsic Value of Precious Metals

2010-07-23T22:04:00.003+04:00

It is often said that precious metals have no intrinsic value, and thus the man who claims it as a safe asset and store of wealth has been mislead by superstition. Economists, financial advisors, and politicians of all stripes perpetuate this sentiment. Gold, they claim, is just like anything else – it’s only valuable to the extent to which it’s trusted by people. Yet, this is not quite accurate. Gold, silver, and other precious metals do indeed have intrinsic value, and it’s time for the source of this value to be understood. Certainly, financial experts have no excuse for ignorance on this subject.

To understand the value of precious metals, let’s first examine other commodities. Most commodities have an obvious intrinsic value. Lumber can be used to build houses and furniture, grain can be used as food, and oil for energy and a variety of industrial purposes. Spectators are quite able to see the intrinsic value in these things. No reasoned individual would claim that oil is simply a shiny goo, valuable only because people “have faith” in it. It is valuable because it can be turned to gasoline and, when combined with an automobile, is able to convey you and all your stuff across vast distances.

Likewise, it is not from mere faith that grain derives its value, nor from trust and international contract that lumber commands a price on the market. Value in these commodities is clear and demonstrable, and it summons no great mental effort to comprehend.

But where is the intrinsic value of gold? Or silver? One can’t build houses, nor eat, nor drive a car with these commodities – their value must come from elsewhere.

To be sure, gold is shiny and has long been used in the crafting of jewelry and ornamentation. It is always desired for these purposes. However, few wars have been fought over pearls, which also make lovely jewelry. No, it is neither the glimmering earrings nor necklaces which comprise the majority of gold’s intrinsic value. It is something else.

As to silver, we know it as a wonderful conductor of electricity. As such, the metal has intrinsic value in the production of circuits and electronics. Yet, this benefit was entirely irrelevant for most of man’s history, yet silver has always been precious. Like gold, the intrinsic value of silver must come from something other than these obvious societal uses.

So where do precious metals get their value? Their value derives from nothing less than their efficacy as a medium of exchange – as a money. It may sound weird at first, or perhaps tautological, to claim that gold is valuable because it can be used as value, but this is precisely the point. Precious metals, by their natural characteristics, are simply those commodities which are best suited to be used as money. A brief examination readily testifies the point.

Ponder, for a minute, what possible product on Earth could be used as money? Technically, anything could be used as money. We could all trade with cattle, or with sand, or with venti mocha lattés. But, what is it about these things which make them impractical as money? Cattle die, for starters, which is not ideal for savings. Sand is too plentiful… try to buy an ice cream cone with sand. You will need much of it. Venti mocha lattes are the most valuable per ounce, but they get cold, and will certainly expire with time. Continue this thought experiment with other items – you will come to realize that most things, while very useful for certain purposes, are lousy as money.

Eventually, you will stumble upon gold, and you will realize that it works beautifully as money. It is durable (it never rots or rusts), it is divisible and combinable (unlike diamonds), it is homogeneous (every ounce is the same as every other – unlike cigarettes, seashells, and birthday cakes), and it is scarce (unlike sand or grain). Silver mirrors these attributes, though it seems to be less scarce and thus less valuable per ounce.

It should then become apparent that gold has intrinsic value because of its natural properties and the circumstantial geological composition of the Earth. Perhaps on another planet, if gold extended forth from every hillside, it wouldn’t make a practical money, as truckloads would be required for the smallest of purchases. But we’re not on another planet, and thus gold and other precious metals have proven themselves, over thousands of years, as the most effective money. This is where their intrinsic value comes from.

How do we then consider these metals against fiat paper currencies (such as US Dollars), which have been the modus operandi since the gold standard was fully abandoned in the 1970’s? Well, there’s really only one important difference. Dollars can be, and are continually, printed at whim by governments that need to buy the votes of the public. Gold and silver do not suffer the same embarrassment.

So the next time you hear a commentator state that gold has no intrinsic value, remember what is being overlooked – its ultimate value as money itself.

Independence Day, 2010

2010-07-04T23:06:00.000+04:00

As the 234th 4th arrives and passes, a prudent and reflective people should consider the meaning of the date, ponder the ramifications of the events which took place, and examine with a certain tenacity whether the goals set forth in those days have been met and maintained.

Upon such reflection, of immediate and practical alarm is the terminology now used to refer to the occasion. “Independence Day,” as a moniker, is employed rarely, set aside in favor of the much more arbitrary and meaningless “4th of July.” Why should this be so? Christmas is not celebrated as “December 25th” and New Year’s not as “January 1st.” One does not hear of the “January 1st Weekend Holiday Sale.” Why, then, does a far more important date than those mentioned above – a date (amongst others) when men stood up to tyranny – become reduced to mere Gregorian arrangement?

Certainly, the explanation may be little more than circumstantial. Perhaps there is no good reason for the change in terminology other than that it “simply happened.” Such a position would be more defensible, however, if the citizens of America had upheld the principles of Independence Day elsewhere in their lives and in their government. Yet such principles have not been upheld, but in fact routinely and systematically marginalized, trodden upon, and lambasted to the point where all it takes to now be considered a treasonous extremist by both the government and the public is to carry a gun, protest taxation, and proclaim under the 1st Amendment that one is doing so. Indeed, the opinions espoused by Thomas Jefferson may have, in today’s America, put him in heady competition with bin Laden as enemy combatant number one.

The sad irony of today’s Independence Day is that one cannot, at the same moment, hold the Declaration of Independence in high regard while also holding in high regard the State under which Americans now trudge. One cannot maintain a straight and honest demeanor while advocating the principles of limited government – so clearly enshrined in the Declaration – while also saluting the leviathan empire of the modern Federal Government. It is no less than intellectual folly to simultaneously advance the principles of liberty while giving consent or credence to the overgrown brambles that suffocate that very concept in a pattern strikingly congruent with the election cycle. Put more simply, one cannot pledge allegiance to the flag without spitting on the very ideas that made those arbitrary colored stripes of cloth worthy of respect.

The United States of America has many fitting labels, yet the one Americans hold most dear – The Land of the Free – has not been appropriate for some time. Perhaps one can then understand the subtle change in terminology for this national holiday, as it betrays a tacit admission by the citizenry that independence is no longer found in sufficiency to warrant celebration, and instead the mere historical date of past men’s liberation has become adequate justification for the fireworks.

Happy Independence Day to those out there still fighting for freedom.

Response to “Pay Inequality”

2010-04-28T10:06:00.002+04:00

Almost every time I visit Digg.com to learn about interesting stories, I inevitably come across the most absurd and foolish articles regarding politics and/or the economy. I literally get a sick feeling, because I see these articles and read the comments – hundreds of readers cheering on ignorance with the vapid moral superiority and smugness of Gore & Co. So, I don’t often visit Digg anymore, but today I went back, only to find this: http://digg.com/d31OkJ3

The article is called, “Pay inequities hurt America.” The thesis, obviously, is that because CEO’s tend to make large multiples more than base-wage workers, the moral fabric of society is being torn asunder. The author suggests that it is unfair, morally wrong, and economically harmful for such CEO’s to take home so much money while the working man struggles beneath his Versace shoe.

First of all, let’s abolish this idea of “the working man.” This term is deceitful and absurd, for of all those who “go to work” it only refers to those who have been unsuccessful in their career advancement. Why is it that the most successful of working men suddenly are no longer able to assume that label? Put in too many hours? You’re no longer a working man. Design something brilliant and revolutionize an industry? You’re no longer a working man. Do something better than average? You won’t be a working man for long! To suggest that “those at the top” are not working – that they are not working men – is to begin the debate upon false pretenses. If this debate is to happen, let us at least employ honest terminology.

So, to the article, let’s address some key points:

“The ratio of CEO compensation to average worker pay rose from 24:1 in 1965 to 262:1 in 2005. This rapidly swelling pay divide certainly raises some serious concerns.”

I will not debate the statistics, as they are irrelevant (though it’s interesting the author excluded ’05-’09). It matters not whether CEOs make 2x the salary or 2,000,000x the salary because the money paid to CEOs is paid by a company’s Board of Directors. This Board is the elected body of representatives of the shareholders – the owners – of the organization. As the Board represents the owners, it has every right and certainly every responsibility to determine salaries. When the representatives of the company decide to pay X employee Y dollars, they are exercising their property rights. This should be the end of the story, but for some reason it’s not.

The same principle which permits the “working man” to spend money on the things he values is the exact same principle which, when upheld consistently, permits owners of a company to spend their money on those things which they value. In the case of CEO pay, the owners desire to compensate at a level according to their own discretion, just as a hungry shopper compensates the grocer for his bread and cheese at his own discretion. If the bread costs too much for the shopper, he will seek it elsewhere. If the CEO charges too much for his services, the owners will seek management talent elsewhere. The right to dispose of one’s property as one wishes must be upheld everywhere if it is to be upheld anywhere. To vilify a Board for paying too much for a worker is little different from vilifying a worker for paying too much for his supper.

It’s worth noting that if a Board is foolish with its resources, the prudent man will be quick to avoid investing in such a company. In a free society, mistakes made by one need not interfere with the more enlightened decisions of an intelligent neighbor.

“In the first place, pay disproportions of this magnitude may serve to undermine worker morale and motivation and thereby further America’s already growing decline in world competitiveness.”

If this assertion were true, would it not logically mean that the less a CEO was paid, the more motivated his subordinates would be? If all workers received equal compensation, might we expect a sudden surge in moral, because it would be “equitable?” Perhaps if pay was simply inverted – so that entry workers made the most and CEOs were paid minimum wage – that would usher in a new era of American economic dominance? I can imagine how empowered the staff would feel, knowing that every time they were promoted they’d have to move into a smaller apartment.

The author, concerned as he is for worker morale, should examine the money removed from each paycheck by Washington, which has conjured up an almost unlimited number of uses for that money over the past century. How much does the “working man” lose to Social Security taxes, to Medicare taxes, to income taxes? How much more does he subsequently lose to sales taxes, to property taxes, to state and local taxes? How much yet again does he lose to the hidden costs of regulation priced into the goods he buys? How much does he lose to the Federal Reserve, every time a new dollar is printed and his savings usurped? How much money never sees his paycheck because his employer suffers a similar burden and must reduce costs where he can? To be sure, the aforementioned costs are not created by greedy CEO’s, no matter how big their “pay multiple.” If one is concerned about the worker’s morale, one may want to point the finger at the man stealing such a portion from his paycheck, not at the man providing what’s left of it.

“Finally, since in many cases these senior executives have also been the ones who enact the layoffs of millions of American workers, this compensation unfairness spreads damage far beyond the walls of the individual firms involved.”

Nevermind that the same senior executives also created the jobs in the first place. Nevermind that these senior executives are bound by the same laws of scarcity which affect all human activity. Nevermind that the combined salaries of those laid off vastly exceed the salary of these executives, and therefore a drastic reduction in CEO compensation would do almost nothing to prevent the necessity of broader layoffs. Nevermind that these senior executives are determining the usage of their own resources, just as a family decides what to grow in its garden or how many televisions to keep in its house. Nevermind all that. What’s implied here is that somehow a CEO owes her fortune to any arbitrary worker whom she hires – that there is an indefinite responsibility to support subordinates.

Somehow, implicitly, the one who has agreed to trade money for services is alleged to be morally responsible to pay more money than the employment contract stipulates. Why should anyone be required to perpetuate a contract beyond its mutually agreed duration? If the baker in your town decides one day to close his shop, is there reason to chastise him, simply because you’re burdened to seek out a new source of bread? If the nice man shoveling your driveway after every snowstorm decides, after years of service, to move to Florida, is there cause for confrontation? It seems not the case. In any trade, the two parties are involved because both benefit. The moment one believes he is no longer benefiting is the moment the trade should end.

Upon inspection, an impartial arbiter of a labor severance will notice that neither party can be materially worse off than they were before the employment contract began. When an employee is terminated from employment, it would be difficult to claim that he’d been made worse off by the experience… for if he had been made worse off, he’d surely have terminated his own employment on an earlier day. So how much damage is caused when a firm fires an employee? Not enough damage to outdo the benefits earned while the employment was in progress. No real harm has therefore been done, and those claiming harm are exaggerating the short-term cost of separation and forgetting the long-term benefit of employment.

Just as the shopper may decide to forfeit the services of an expensive local tailor, so too may a business decide to forfeit the services of an expensive employee. Critics may claim, “a minimum wage job can’t be said to be expensive when the CEO makes millions!” To which, of course, the answer is that if the minimum wage employee were producing more than he cost, his termination is unlikely to have occurred. Similarly, if the CEO costs more than he produces, his termination will be imminent. The fact that a Board may not know correctly which is which is good reason to neither work nor invest in said company.

“Layoffs create a double taxpayer burden, since laid off workers are no longer able to contribute to, and must now be supported by, the tax base.”

Laid-off workers do contribute to the tax base so long as they’re buying things (sales tax plus the corporate income tax on the flip side of the transaction) or renting or owning property. However, the more important fallacy in the sentence is that ex-workers “must be supported by the tax base.” First of all, nowhere in the Constitution is the Federal Government authorized to support the unemployed. Again, it should end there, but for some reason it doesn’t. Critics may mention the “General Welfare” clause, to which the proper response is, “so does that mean anything which the Government believes to be for the general welfare is Constitutional?” If so, there would be no point in writing such a document in the first place. Every tyrant in history has abided by its own interpretation of the General Welfare Clause, has it not?

Furthermore, even if Constitutional, the Government does not have to pay the unemployed for their service of doing nothing. The Government chooses to engage in this transgression, but why should an unemployed individual have claim to the income of those still working? He certainly has the right to ask – to petition – his neighbors for help, but certainly not to demand it, certainly not to force it. The unemployed man certainly does not have the right to use the threat of violence to extract the income of those still working, does he? If not, then through what magic does he turn over that right to the Government to do the same on his behalf? It would seem that a right never held by a man could not be surrendered by him to a group of men.

The problem is that the laid-off worker is permitted to be a publicly-funded burden, not that he was laid off. If society is poisoned by his dereliction, then the means of poisoning should be addressed, not the distance from which he poisons.

“Thus the question arises whether these executives are increasing their corporate profits – and their own paychecks – at the expense of not just their own employees but also of all working taxpayers.”

To address this properly, one must look at the source of the income. The source of the income was not the firing of an employee, but rather the production and sale of a good. It is the expense of an employee which prevents the profits from otherwise being realized. Removing the expense permits the current owner of that wealth to keep it. The same is true for the “working man” who cuts his ties with the expensive local tailor. The man does not gain his income by ending the relationship; he simply keeps what already was his from a former transaction or would be his from a future transaction. Thus, profits can never be made by firing employees – profits previously earned can simply be retained.

It is therefore absurd to claim that a business owner is harming taxpayers by shrinking his payroll. On the contrary, the business owner no doubt helped that very group when he sold them his goods. The fact that he wishes to keep the wealth earned through selling such goods is his decision and in no way brings burden upon anyone else. Again, the burden now befalling the terminated worker must necessarily be less than the benefit received during employment, thus his individual burden is a moot point because, on net, benefit was the larger part of the equation.

Besides, one need not look far to find the real cause of taxpayer expense. It is not the business owner to whom the taxpayer surrenders his money; it is more accurately the politicians hiding behind a veneer of feigned legitimacy – the Federal Government.

“After all, aren’t these the same employees whose solid efforts and long hours created their corporations’ profits in the first place?”

The answer to this is… no. The profit was created through the organization of the resources of production. If it were true that the base employees created the profits, why are they giving them to the executives? Why don’t these same industrious workers head on home and make the same profit for their own family? The reason is that they don’t have the capital goods, nor the organizational resources, nor, frankly, the grand vision and strategy, to produce the same wealth at home as they do when they arrive at the office. By going to work, the employee is able to harness the capital goods and organizational structure to increase his output. Part of that increased output goes to him, in his paycheck, and part of that increased output goes to the company which provided the capital and organization. An employee can be rightly considered as leasing the capital goods and organizational structure from the shareholders of the company. As his efforts produce more than the cost of the lease, he is able to take home the remainder in the form of a salary.

Consider the workers in a Ford factory. Many believe that they are the ones who build the cars and produce the product, and Michael Moore clearly agrees with them. If true, these workers could certainly leave the treacherous Ford Motor Company and create their own cars, keeping the vast profits for themselves. Of course, they cannot do this because they lack the machines which permit their muscles to lift thousands of pounds. They lack the financing to purchase raw goods. They lack the knowledge of design and engineering. They lack the relationships with 10,000 suppliers of components. They lack the ability to convey the benefits of the product to a potential buyer. They lack the legal resources to navigate and comply with 100,000 pages of government regulations. All these resources are provided by Ford, and the workers are lucky enough to have the benefit – the great advantage – of having access to such resources, which amplifies the productive capacity of their labor and allows them to produce a surplus. Some of this surplus remains with the company and the remainder is taken home in salary.

Profits arise when one can produce and sell a good for more than its cost. So long as fraud was not involved, the profit is legitimate and the producer ought to own the profit outright. All free people are welcome to produce. No CEO has ever prevented his workers from leaving and creating profits elsewhere.

Final Thought

The issue of CEO pay is one of the great distractions to which people allow themselves to fall victim. Wealth gained by one does not come at the expense of another (so long as it’s honest), and thus one cannot portend that his neighbor’s Ferrari excluded the purchase of his own. Nobody has a right to claim the earnings of another. For the same reason that slavery was wrong – where the full amount of a man’s production was taken by force to feed another man – so too is any system which permits a partial amount of one’s production to be forcefully diverted into feeding another.

The “pay multiple” is perhaps an interesting piece of data, but in no way should this multiple cause concern nor should it warrant policy mandates among a free (i.e. capitalist) people.

The Myth of the Income Gap

2010-04-22T03:06:00.003+04:00

We are routinely subjected to the truism that there exists an “income gap” in America, and that this gap is perpetually growing as the forces of capitalism pry apart the “haves” from the “have-nots.” The income gap is of great concern to a great many people, if for no other reason than the vivid, chasmatic imagery it elicits. Politicians are prone to lament this gap at every opportunity, quickly following up the frightening metaphor with their intended strategy for narrowing this dastardly, gaping maw of monetary inequity. Too bad, then, that such a gap is nonexistent. It is a myth, and just as we don’t discuss federal unicorn tariff policy nor airport screening for tooth fairies, neither should the income gap merit time in the public discourse.

The income gap, as it’s generally considered, refers to the perceived distance between the middle class and the upper class of America in terms of what they earn (how one defines these alleged classes is an entertaining exercise in subjectivity). The impression, amidst many in the United States, is that there is a vast “working class” and “middle class” who are fraternally symbiotic in their race to pay the bills, while resting atop their blood, sweat, and character exist the rich, parasitic elite. The rich elite are somehow removed from humanity on account of their wealth, and they somehow exist as a separate society on the other side of the income gap, safely pent up in their gated communities, and using the poor, dried-up homeless as their preferred source of firewood. As the story goes, the rich get richer and the poor get poorer, and thus this fabled chasm grows more expansive year by year.

Where does this impression originate, I wonder? Likely, the vision of the wealthy as somehow “above” or “apart” from the peasantry has its roots in the monarchies, serfdoms, and aristocracies of the past. In those days, there indeed was a gap between very definable classes. Usually, this separation was legally upheld by the governments, who kept the plebeians in their place. Also likely is that Marxist ideology – which ironically arose just as class boundaries were becoming lenient and flexible during the industrial revolution – nurtured this centuries-old conception of the rich versus the poor. Fast forward to modern America and these ideas still hold firm amidst a poorly-educated populace, augmented by politicians all too eager to elicit support from those voting masses who can’t wait to get their hands on the bourgeoisie’s medical insurance.

So to back up the assertion that the income gap is a myth, it needs to be shown that no such gap exists. Income, while clearly not distributed equally (the idea that income is “distributed” is another fallacy), is in fact acquired by individuals along a relatively smooth curve. One need only review the U.S. Census Bureau’s HINC table, which lists the number of households receiving various levels of income, to see the inaccuracy of the fable. Here is 2006 as an example, but any year has a similar pattern:

Source: US Census Bureau. Table HINC-06

From this graph, you can see a smooth slope in income distribution. Notice that the spike above $100k is a result of the change in x-axis incrementation. The Census Bureau does not seem to provide a breakdown of the top two tiers, yet it should be quite clear that the pattern of distributional proportion does not change significantly along the x-axis. Readers are also welcome to examine the Census data above $200k, for it follows the same downward slope.

I challenge the reader to determine where one class ends, and the other begins. I would assert that any such categorization would be fairly arbitrary and not based on any obvious statistical grouping. The percent of households at any income level slops gradually downward to zero (zero percentage of households earn $100 billion in a fiscal year). So, where is the gap?

If there were an income gap, then you would see a large distributional divide somewhere between what is considered “middle class” and what is considered “upper class.” For example, if we consider households making $150k per year as “upper class,” then we would expect a void to exist so that a large group was earning under $100k and a large group was earning over $150k per year, but very few were earning incomes between these two levels. That would be an income gap, and that would signify that there was something structurally askew. No such gap exists.

The percentage of households earning income all along the income curve is quite remarkably very smooth. There is no vast distance between the “haves” and the “have-nots.” At any given level of income, there is a percentage of households which is roughly equivalent proportionally to the percentage of households on either side of it (though always sloping downwards). This signifies, quite clearly, that there are not two or three classes in America, as politicians, the media, and “academics” would have us believe. Rather, there are an essentially infinite number of classes, which is to say that “class” is a meaningless term. There is the “class” making $10-$20k per year, the class making $20-$30k per year, the class making $30-$40k per year, all the way up the income chain.

Critics will cite something like, “well, the top 1% makes 25% of the income.” This phenomenon does not represent a “gap,” for if you then examine the top 2%, then the top 3%, then 4%, then 5% and so on, you will see a relatively uniform curve of incomes. If one gets angry at the steepness of this curve, one likely has great hatred toward compound interest, which is akin to throwing a tantrum after learning that 3+3 tends to equal 6, or that water tends to run downhill. Regardless of one’s anger, it would be folly to legislate that water should run down hill more slowly.

Also, there is no structurally imposed “jump” in income levels that an individual must overcome to switch classes. There is no point at which one says, “alright, to get from my current socio-economic class to the next one, I’ll have to overcome a huge systemic obstacle. I’ll have to somehow jump the gap.” An individual may look out at the wealthy neighbor nearby and say, “That is where I want to be, he is clearly in the class above my own,” but this individual needs to remember that there are countless individuals at every income level between himself and the rich man in the house he envies.

Classes do not exist in America, in any definable way, because between every two classes exists another class of similar proportion. Those who would divide and categorize Americans into distinct classes are not only committing a statistical and empirical error, they are sowing the seeds for unwarranted tension between neighbors. Interestingly, these tend to be the same people brandishing “Peace” stickers on their cars.

The consequences of this fabricated divisiveness, while good for the politician who can leverage it, harms the cohesion of American society, turning every community into a jealous antagonist, bent on forcing closed a divide that doesn’t exist. Let us banish this term, “income gap,” to the magical fields of children’s fables, where it can frolic and dance with the unicorns and, over tea, discuss with the fairies their ordeals at the airport.

The Deceptive Debt Ratio

2010-04-14T07:15:00.004+04:00

The United States has a growing debt problem. It also has a problem measuring the same. The statistic normally used is the “Debt to GDP” ratio, referring to the amount of debt versus the nation’s sum total of transactions. As of Q1 2010, the US debt to GDP ratio was 87%. However, the Debt to GDP ratio should be ignored, because it is meaningless.

It is worse than meaningless, because it disguises the true problem and lulls us into a false sense of solvency. Why is Debt to GDP a poor metric? Because the debt must be paid off with the income from taxation. It cannot be paid off through some relative percentage of economic expenditure. This is an important distinction. The debt is not serviced from a portion of the economy’s activity as a whole; it is serviced from tax revenues. As such, the ability to repay debt is based on tax revenues, not on the GDP.

It cannot even be said that a growing GDP will necessarily assist in the payment of debt. Consider that when the Government spends money it increases the GDP side of the ratio, thereby helping to minimize the appearance of its own debt! In other words, if Washington spent four gazillion dollars, our Debt to GDP would only be about 100% (roughly 4 gazillion in debt and roughly 4 gazillion in GDP). This is only 13 percentage points higher than our current level. Greece could actually decrease its Debt to GDP ratio by spending 4 gazillion Euros – from its current 125% to a much more manageable 100%. Debt to GDP is a highly deceptive metric.

“Debt to Tax Revenue” is a much better statistic for examining government debt (it is also much more accurately calculated). If the Government owes $1 trillion (wouldn’t that be nice?) and takes in half a trillion in tax revenue, then the Debt to Tax Revenue ratio would be 2:1, or 200%. Using all tax revenue to service the debt, it could be paid in 2 years (if, of course, all other government services were canceled for those two years).

Using this much more honest metric, how does the US fare? There exists currently about $12.7 trillion in national debt (this doesn’t include state debt nor unfunded future liabilities). The 2008 tax receipts were $2.5 trillion (2009 data is not yet available). Thus, the Debt to Tax Revenue ratio is roughly 12.7:2.5, or 508%. Put another way, it would take 5.08 years’ worth of taxes to pay off the debt assuming every single federal program was cancelled during that time. Not even the Washington accountants administering the debt payments would receive a paycheck. Soldiers in Iraq would receive neither pay nor ammo nor a plane ticket home. Everything would have to stop, and it would still take over half a decade to pay the debt. This is akin to an individual spending absolutely nothing for 5 years in order to pay off his credit cards. Within a few weeks he’d be dead of starvation.

Let’s compare with Greece. Greece currently has $405 billion in national debt, with the CIA estimating its most recent tax revenue at $108 billion. Greece therefore has a Debt to Revenue ratio of about 375%. Take California, the state everyone knows is already bankrupt – it had a debt in 2008 of $122 billion and 2008 revenue of $151 billion, creating a Debt to Revenue ratio of only 81%. Relative to tax revenue, both Greece and California are significantly better off than the US Federal Government. Yet, that’s not the impression people get when observing erroneous Debt to GDP figures.

Spending more of one’s money does not make one more credit worthy, yet that absurdity is propagated when we use the nation’s Debt to GDP ratio as our gauge of solvency. If every citizen went out and bought a car this year, the GDP would skyrocket, and suddenly the Government’s debt ratio would fall. Does anyone really believe that a better fiscal situation would have been attained? No. In fact, a much worse situation would exist, because Americans would be then less able to pay for other expenses – such as government debt – after purchasing the new car.

In short, we are currently measuring sovereign debt with an arguably deceitful statistic. Whether one believes that the Federal Government should increase or decrease spending, we should all agree that dishonest accounting is not a policy of prudence.

Debt to GDP examines debt based on a nation’s volume of transactions. It therefore suggests that debt burdens can be reduced to the extent we consume. How does that make any sense? Conversely, Debt to Tax Revenue examines debt based on a government’s ability to pay it back.

Which metric should the sincere accountant use? Which metric is more deserving of our attention?

The Alleged "Job Creation" - Quick Case Study

2009-11-12T17:55:00.004+04:00

We’ve been told that Government can and should spend vast sums of money in order to “create jobs.” Here’s an article about Oregon's success thus far:

http://seattletimes.nwsource.com/html/nationworld/2009552830_apusstimuluscountingjobs.html

To summarize the article, it seems that Oregon counts a job as “created” no matter how long it lasts, so a 6 hour ditch-digging is counted as one job created. A year-long construction manager position would also be one job created. They’ve claimed to create 3,236 jobs thus far with these standards. The article’s investigation finds that the average work-time for these “jobs” is actually just 35 hours each!!! If we re-calculated based on jobs being 1 year, full time, then the state has created just 54 jobs. The article further states that, if they continue at the current rate of job creation, they will create 688 full-time, year-long jobs.

Oregon's state program (separate from the Federal stimuli) has a cost of $176,000,000.

Thus, the Oregon State Government will have been able to create full-time, year-long jobs for as little as $255,813 each, assuming the program remains as effective as it has been. I would suggest that the marginal cost of each job will actually get higher, because those jobs which are easiest to create, and those most “shovel-ready” (an excellent moniker when one considers the economic grave-digging which is occurring), will be utilized first. It will become more difficult over time to effectively spend the funds… the easy, obvious programs will be exhausted.

A legitimate businessman creates jobs which produce more wealth than they cost. The state creates jobs which cost more than they produce. Businessmen have the incentive to produce. The state has the incentive to employ. This fundamental schism cannot be overstated. Politicians don’t worry, however, because they think wealth comes from the number of people employed, instead of the amount of production per person employed. It is no wonder they have this view… every job created is a vote.

As a final point, I would suggest that individual states are better able to efficiently allocate spending programs than the Federal Government. It is unlikely the Federal Government, with $787 billion to spend, will be more efficient per dollar than Oregon with its much more manageable $176 million. Continuing this line of reasoning, districts are likely to more effectively allocate resources than states, towns more effectively than districts, neighborhoods more effectively than towns, and, wait for it… individuals more effectively than neighborhoods. Case in point: it would not cost me a quarter million dollars to create a job. Yet, I must be missing something here, for if individuals could allocate their own resources, then hundreds of thousands of government jobs wouldn’t be necessary and the government has not suggested that such is the case.

On Spending and Keynesian Displacement

2009-11-12T17:34:00.011+04:00

Squeezed forth by the global financial crisis, certain detestable economic myths are bubbling through every legislative orifice. As the hand of retribution grips down on the world’s monetary system, a gooey slime of absurd premonitions have oozed out of a dormant consciousness and now run dripping down the sides of the grotesque political apparatus known as the United States Federal Government.

Among this unpleasant, problematic residue, something called the “Keynesian Multiplier,” a term more appropriate for intergalactic weaponry, has convinced a vast swath of society that not only will an unrelenting expenditure of wealth increase everyone’s prosperity, but it is in fact the best way to pull the world out of a debt-ridden depression. Virtually every political leader, save perhaps Czech’s prescient Vaclav Klaus, is enamored with spending. Why do politicians give credence to Keynesianism? Because it provides an intellectual veneer under which to usurp power, grant favors, and spend the wealth of the peasantry (benevolently preventing peasants the burden thereof).

The Keynes allegory suggests that heightened spending creates “demand,” which then allows companies to produce goods and make money, thereby enabling subsequent spending. The corollary is of course that without such spending, demand will plummet in a vicious cycle, leading presumably to a revisitation of the stone age economy.

What is overlooked (or more likely intentionally ignored for political purposes) is that spending necessarily involves an important opportunity cost – when you spend today, you can’t spend tomorrow. Whatever is purchased now not only comes at the expense of the money in your pocket, but more importantly at the expense of the future purchase otherwise made. It is not so much money that one surrenders to acquire the new television as it is next month’s potential patio furniture. There is thus an unseen – to gratefully utilize Bastiat’s term – cost in every expense: that of the future product which is never purchased because the means by which to purchase it have been depleted in the present. The future purchase is sacrificed in favor of the present purchase, so while the television producer is pleased with his increased sales today, the patio furniture factory will unknowingly have one less sale in the subsequent month.

This unavoidable mechanism of economics is why the concept of a “Keynesian Multiplier” is so absurd (unless one realizes the multiplier is likely less than 1). For by increasing demand in the present, one is necessarily decreasing demand in the future. The Keynesian Multiplier doesn’t provide a net gain in wealth and demand, it provides a transfer of wealth and demand from the future to the present. And when a wide array of future demand is transferred to the present, for example by the Federal Government, one should not be surprised to see macro indicators, such as GDP, increase. Such figures indicate present activity but do not account for the forgone activity in the future. The positive GDP figure appears on the front page of the paper, the public cheers, the politicians wave, bow, and then feign surprise at corporate earnings in subsequent quarters. Could any example be more perfect than the Cash for Clunkers program?

The Keynesian witch-doctors will retort that when a man spends now, it allows the next guy to spend, and then the next, and so on until finally someone down the line is able to buy from the first man. Well, ask yourself, has any wealth been created by this circular transaction? To the extent that some of those products are consumed after the trade, one is likely to find a net loss in wealth after all the trades have completed. This is because production did not occur, and when each man in the chain bought something from the next man, he sacrificed his ability to produce with that wealth. Unless enough of the men traded their wealth for some asset which allowed productivity to increase, a net loss will have occurred. For this reason, individuals can’t just spend money to make money. Intelligent investment must be accomplished, and this is not usually an easy or expedient challenge. One might suggest that when the government spends a trillion dollars, a great deal of that is unlikely to fall into the “intelligent investment” category… it would fall into the “consumption” category. While GDP figures will have increased, wealth will not have been created. If the government had any skill in investing, what need would there be for taxes?

Sacrificing future consumption in favor of present consumption should be at the discretion of individuals considering their own finances. Such sacrifices should not be forced upon the public through government spending diktats, euphemistically referred to as “stimulus.” One should not require unnatural prescience to take such a “stimulating” policy to its logical conclusion. By transferring future consumption to the present, the government can appear as the benevolent shepherd guiding its flock, but this illusory growth is of course temporary, for future spending will have been sacrificed. Further, the capital savings required for real investment will have been consumed; businesses will find it more difficult to acquire resources as those resources will already have been depleted.

Just as one man cannot spend his way out of debt, neither can two men, nor five. A small community could not spend its way out of debt, nor could a village, nor five. How many individuals must be added to the shopping spree before their collective wealth starts rising? How many times must a man trade money for goods with his neighbor before they both retire wealthy? Clearly, something more than a transaction is required for wealth to grow. That thing is production, a process tortuously suffocated in an environment of debt.

Keynesianism is a farce(akin, almost ironically, to alchemy) – yet its preeminence remains firmly endorsed by an organization desperately seeking any excuse to control the lives of its subjects, and its gaping fissures remain unexamined by a public inculcated in the very schools funded by the same organization.

Let us hope the average citizen becomes more aware of this charade. It is production and savings, not consumption and debt, that must nurture a despondent nation stricken with the dregs of statism.

Dear Serf - A Letter from the President, edited

2009-07-23T14:00:00.028+04:00

Dear Serf,

As you read this, we are closer than ever to passing comprehensive health insurance regulation that mandates important rules for American families, and American singles, and small businesses, and medium business, and large businesses. Despite all the discussion in the news right now, it is important to understand that such discussion is irrelevant and will not stand in the way of reform.

That's why I'm holding a finely-pruned press conference tonight at 8pm ET, and having one of my secretaries write this email to let everyone know where we claim to be, what we imagine is ahead, and why further health insurance regulation is so important.

Let me be clear: although Congress is still debating parts of the legislation, such as how to pay for it and whether it’s a good idea or not, we have pushed through a critical consensus using political pressure and imaginative statistics on several key areas:

If you already have health insurance: regardless of whether you’re happy with it, our new regulation will mandate more security and stability. It will limit your own out of pocket costs by subsidizing them with money from rich people and prevent your insurance company from adjusting its business model to ensure profitability. Nobody should make a profit on something as essential as healthcare. We’ll also force the rich to pay for affordable insurance options for you if you lose or change your job, which will become more likely as our spending policies adjust business competitiveness and the value of the dollar some have inequitably saved during this time of crucial consumption. Further, we’ll force the rich to pay for your preventive care like check-ups and mammograms so that you can enjoy your natural right to a premium cable TV football package.

If you don't have health insurance: regardless of the reason you have not purchased it, you will finally be compelled to register for guaranteed, fairly-rationed access to healthcare paid for by people you won’t have to confront, and because it’s a free country you can choose the plan that best suits your family's desires. No insurance company will be allowed to deny you coverage because of a pre-existing medical condition. They will be forced to pay for your problems, even though it will raise their costs and force alterations in others parts of their policies which we haven’t yet had the time to regulate. But don’t worry, because we’re already drafting legislation to cover the loopholes we may create.

Now, I realize that the last few miles of any race are the hardest to run, but we can't stop now, because my political reputation will suffer. There's no dispute about it: we cannot control our long-term fiscal health as a nation without health insurance reform. The dispute is only regarding how to do this, but such details are irrelevant and inhibitive to the change I promised on the campaign trail. Americans understand that the health insurance status quo, which has thankfully been extensively regulated by the actions of your former overlords, is still awash with problems. Using my wit, I’ve helped American businesses understand that it is American businesses which caused these problems. The stability and security that comes with knowing that you can get the treatment you want (as long as its approved) when you want it (as long as a quota-based appointment is available), is paramount to a fair system in which everyone can be first in line. Without reform, we are consigning our children to a future of skyrocketing premiums and crushing deficits. Contrary to some 3rd party economic analysis and historical precedent, the reform I’m mandating will not consign our children to such stresses. Anyone who says otherwise is just playing politics, and hates poor people.

We have to seize this opportunity and pass health insurance mandates this year, before the economic consequences of my ongoing central planning begin to cast doubts over my macrofinancial omniscience. You will do your duty by forwarding this email to your family and friends and letting them know what's at stake in this debate, namely my reputation and the axiom that governments allocate resources better than profit-seeking robber baron mega corporations.

Thank you,
Barack Obama

P.S. Tune in to tonight's press conference on health insurance reform at 8pm ET on WhiteHouse.gov so you can be reminded of my charisma and confidence.

The Record of the Federal Reserve

2009-07-22T21:11:00.016+04:00

Let’s talk about The Federal Reserve. Consider the following facts:

From 1776 to 1912 (136 years), the value of the dollar, relative to the Consumer Price Index, increased 11%. A dollar could buy 11% more goods in 1912 than in 1776. Thus, if in 1776, you sat on your savings pile of $1,000,000 for 136 years, it would then be worth $1,110,000 in purchasing power (it will have appreciated in value by 11%). A loaf of bread for Thomas Jefferson cost the same as a loaf of bread for Lincoln 50 years later and again the same for J.P. Morgan 50 years after that.

The United States Federal Reserve was created in 1913. The stated purpose of the Fed, by its own definition taken from its website, is to “conduct the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.” Note that “stable prices” is another way of saying “stable dollar,” they are two sides of the same coin (couldn’t resist the pun).

Then after The Fed’s creation, from 1913 to 2008 (95 years), the value of the dollar, relative to the Consumer Price Index, decreased by 95%. A dollar could buy 95% fewer goods in 2008 than in 1913. Thus, if in 1913, you sat on your savings pile of $1,000,000 for 95 years, it would then be worth only $50,000 in purchasing power (it will have depreciated in value by 95%). One would now need to pay about 20X more than J.P. Morgan for one’s bread. Ask my mother how much the price of milk has increase just in the last ten years alone.

In other words, the value of the dollar remained extremely stable for 150 years, then The Fed was created in order to “stabilize the value of the dollar” and the result has been a 95% devaluation of the dollar in less than 100 years following its creation. Below is a graph of this hisotry, which I’ve marked with the year 1913 so you can see the change. The graph is also marked with the years of decoupling from the gold standard, as no examination of dollar value would be sound without such mention.

While we all take inflation as a “given” – as something that “just happens” in the economy – we would do well to remember that this belief is utterly incorrect. Inflation, which is the loss of value in your saved dollars, is caused by The Federal Reserve through its management of the money supply. Next time you see Ben Bernanke on the television, telling you that they “will take the necessary steps” to help the country, consider their track record so far, and their dismal failure at their stated objective – preserving the value of America’s money.

Outrage doesn’t even begin to describe what Americans should feel in response to this. Yet, Americans aren’t very upset, and indeed the vast majority has no idea about any of this information. I would wager that this is because Americans are educated in Government schools, which barely teach basic accounting, let alone macroeconomic monetary theory. In public school I was forced to memorize the names of every country in Africa, yet never was there a discussion of the nature of money. Half the nations of Africa have been renamed since, but the economic principles which cause such political turmoil remain the same.

The Federal Reserve system is fraudulent. Whatever its stated purpose, its effective purpose is to create a mechanism of deficit spending by politicians, through the insidious invisible taxation of monetary debasement (aka inflation). With printed money, the Government can buy services for its voters before the effects of inflation are felt. It is then the voters whose money buys less the following year, as the new money has raised prices, and they are none the wiser.

Obama is now mandating that The Fed is to have more oversight, more authority and control over the markets of the United States. If we can learn anything from The Fed, it’s that the best way to succeed as a politician is to stretch one’s failure over a long enough period that people won’t remember it.

Response to Alec the Communist

2009-07-21T21:51:00.024+04:00

It so happens that a friend of one of my family members is a self-proclaimed communist. I applaud him for his honesty. In a couple of emails, Alec the Communist presented some arguments on the following topics:

1) Why it's okay to redistribute wealth
2) Why governments should spend our way out of recession
3) Why income taxes should be more progressive
4) Why the world would collapse without government programs
5) Why savings doesn't create growth
6) Why the rich will just keep on workin' if you tax them more

Needless to say, I took the opportunity to discuss with Mr. Communist why he is mistaken. The resulting document is about 20 pages long, and I would encourage anyone who must interact with statists of similar persuasions to read it. The discussion is annotated to make clear the two authors' points of view.

"I object on principle to calling those who take government jobs created by the stimulus as "immoral beggar mobs." Is he channeling Ayn Rand? I have never seen a more blatant example of classism in my life. It is grossly insensitive, incorrect, and itself immoral to refer to the unemployed that way. Poverty is not a moral failing." -Alec the Communist

Click here for the full discussion...

To begin, the dialogue starts off with a discussion of tax rates and the economic strength of America...

Alec 1. Our current tax rate for the rich and corporations is less than it was during the Clinton years which was the longest continual expansion in our economy in US history. Now I am not a Democrat and so I do not want to be drawn into defending Clinton or the Democrats generally because I do think their economic policies are generally terrible. The point is that empirically we had higher taxes and yet the economy did better. Also, doing cursory research on the competitiveness of global economies shows the US either in first place by a very small margin or somewhere near the bottom of the top ten. The other countries in the top ten are countries with significantly higher tax rates than the US. Any libertarian has to respond to the fact that even when rich people and corporations are taxed heavily the economy not only does well, it can flourish. I can already hear Jacques saying “but if the tax rate was 10% the economy would grow so much more quickly than the US during the Clinton years or Northern European countries,” but as Kristen has pointed out on multiple occasions, appeals to utopian hypothetical scenarios does not constitute an argument in favor of an economic system.

Erik’s Response:

This is a case of correlation and causation, and I’m sure Alec understands that the former doesn’t necessitate the later. The fact that taxes were higher under Clinton and that the economy was stronger under Clinton is not sufficient evidence on which to base the claim that higher taxes encourage economic activity. Likewise, the fact that other countries have better economic growth amidst higher taxes than the US is also not sufficient evidence on which to base the claim. There are billions of factors that influence a macro-economic environment, and to attribute either growth or loss simply to tax policy is naïve. If tax rates are high in a country and the economy is doing well, this is happening despite the tax rate, not because of it.

To suggest that taxation encourages economic growth is utterly preposterous. A similar suggestion would be that entrepreneurs do better under an environment with high borrowing costs. Another similar suggestion would be that businesses thrive to the extent that their profits are shrinking. Yet, another similar suggestion would be that joggers can run faster with lead weights tied to their ankles. For Alec’s claim to be true, the Government would have to be able to generate profits... and it isn’t. In theory it could encourage economic growth if the government invested the majority of tax revenue back into profitable ventures. However, A) this doesn’t occur and B) even if the Government tried to do this it would fail. If the Government could invest resources profitably it wouldn’t need to tax. The assertion that an individual working for Government can “out-invest” an individual in the private sector relies on the belief that Government employees are smarter than non-government employees. On what evidence does Alec base this? The Government cannot even run a mail service profitably (The Postal Service). The Government cannot even run a train profitably (Amtrak). The Government can’t even run itself profitably… every year the Government falls further into debt. Government is unable to generate sufficient revenue even to run its own activities, let alone those in the marketplace. This is not because those currently in office are ill-informed or insufficient for their jobs, rather it is because of the incentives which exist within governmental structures relative to the incentives which exist outside of it.

If Alec believes that taxation increases economic growth, then why do we not tax ourselves at 100% and all become wealthy overnight? Alec will surely respond that there is an “ideal equilibrium” point somewhere above 0% and below 100%. This is like saying the ideal number of lead weights for a jogger to drag behind him is something more than 0. Taxation removes wealth from those who produce it, and hands it to those who are less able to produce. Taxation is the extraction of wealth to be redistributed in some way, like on military expenses, farm subsidies, “promotion of the arts,” etc. One can make the argument that we should have taxes in order to have those services, but one cannot make the argument that we should have taxes in order to promote economic growth.

Finally, a 10% tax rate on the economy is not a “utopian hypothetical scenario,” A) it is not utopian because the tax rate is still much too high and B) it is not hypothetical because the US, for most of its history, had taxes lower than that. That someone would suggest that a 10% tax rate is some kind of “unreachable ideal,” and to be joking about the “ideal” part, is a tragic but not unexpected condemnation of the state of America’s citizenry. Has the nation moved so far from its ideals of liberty and limited government? Is a 10% tax rate so unbelievably low as to be laughable? If so, I should give up trying to fix the US and instead encourage industrious Americans to relocate to nations which respect their liberties and understand basic economics. Dubai, Singapore, and Hong Kong are well on their way, and have little competition to fear if Americans scoff at a 10% tax rate because it’s “unrealistically low.” I wonder if Alec can explain (or is even aware of?) the hundreds of US companies which have relocated here to Dubai over the past few years. Here’s a hint… it’s not for the sand.

Alec 2. I think Jacques overestimates the dampening effect taxes has on entrepreneurs and venture capitalists. In fact, I think his understanding of the situation is childish because his argument amounts to all these investors and business persons saying “I don't to share *humph* I am going home. You're mean!” He says people wont quit their day jobs to start a risky but potentially profitable enterprise or make a big investment in a risky but potentially profitable enterprise. I am highly skeptical that someone will give up a $50,000 a year for the potential to make two million but not to make one million. The amount of money a person would not make because it is taxed away is not enough to dissuade them from undertaking the enterprise in the first place. Also, a significant number of these types of people are not in it purely for the money. They engage in entrepreneurship and venture capitalism because it is what they like to do. Jacques implicit belief is that people always seek our the job that will give them the most money. That is a rather depressing and myopic view of humanity and human motivations. While it is true to some extent, people more commonly seek out the job that they like to do the best or makes them the happiest. Taxing these investors more wont prevent them from doing what they like to do.

Also, I suspect that people are more willing to make risky investments or quit their jobs to start a new business if there is a social safety net. People are more willing to take risks when failure does not mean death through starvation and exposure.

Erik’s Response:

I would emphasize that Jacques actually is an entrepreneur and can perhaps attest to their motivations. However, if anything, Jacques underestimates the dampening effect taxation has on individuals. When one judges the risk/reward ratio of a proposed venture, if the perceived reward doesn’t compensate for the perceived risk, the venture will not occur. Period. Taxation reduces the reward while the risk remains the same. Thus, in proportion to the tax rate, individuals’ interest in pursuing ventures declines. The investors aren’t being “childish.” On the contrary, they are being responsible adults. They are making rational decisions about their property, just as Alec does when he decides to take out a loan, buy groceries, or start a business. Raising the tax rate will certainly not cause all economic activity to stop, but what is important is to look at the “marginal effect.” What is the net marginal effect of taxing an activity? The answer is that is reduces profitability, and thus reduces the incentive to pursue it. To not understand behavioral changes in response to incentives at the margins is to not understand economics.

Alec continues: “The amount of money a person would not make because it is taxed away is not enough to dissuade them from undertaking the enterprise in the first place.” The question is… at what point does the dissuasion occur? It is different for each individual. If Alec thinks that moving corporate tax rates from 25% to 30% won’t dissuade economic activity, then he has little understanding of the profit margins that companies generally make. I wonder what profit margin Alec believes that Shell, routinely labeled as accruing “windfall profits,” actually enjoys? Would he be surprised that last year when Shell made “record profits” from surging oil prices its profit rate was 7.9%? I wonder if Alec knows that the US government gets substantially more profit per gallon of gasoline than any oil company (meanwhile they berate oil companies for “gouging the consumer”)? Alec should realize that a 5% increase in taxes can very easily mean the difference between profitability and loss for many companies. Even the very possibility that tax rates will increase tomorrow or in ten years dissuades ventures from ever occurring because, simply, the perceived risk is higher than the perceived reward. Again, it is not that everyone stops producing when tax rates increase, rather it is that some do- those at the margins. The extent of the tax burden is the extent of the marginal change in behavior.

Further, Alec seems to think that capitalists will continue producing despite incessant taxation because “that is what they like to do.” Well, many of them indeed love their jobs. They love producing, they love being creative and problem solving, they love the infinite challenge of growing a business. But capitalists also like… capital. Is this a “sad view of humanity?” Not unless one believes money to be evil, and if this is the case one is welcome to surrender it to the Government at one’s own expense. Alec forgets that while capitalists may love their jobs, they’ll love their jobs even more if they get paid. Thus, those companies which offer to pay the highest salaries will likely get their services. Thus… the most profitable companies, in the regions where taxation is lowest (Dubai again?), will more easily attract the capitalists over time. Additionally on this point, all investments require risk, and whether an investor “loves investing” or not, he will simply not risk his assets if the reward is not high enough. No investor invests simply because he sadistically loves putting his money in danger.

To Alec’s last point regarding safety nets… capitalists don’t assume the government will be there to help them (although that may change with Obama bailing the failure out). They also don’t generally “bet the farm” in order to get returns. Generally, they are well-off individuals who are at no risk of starving, even if all their bets go south, because they don’t make bets which are, as previously mentioned, too risky! Safety nets for the least productive are of little concern to the most productive (yet of course they’re the ones who are forced to pay for it all).

Alec 3. Why is taxing people at 10% not stealing when anything higher is stealing? Or is it simply that any taxation is stealing (hello Ayn Rand!) but a limited amount of stealing is alright so the government can run. If it is the first explanation, then that is the most ludicrously arbitrary and ad hoc double standard I have ever seen. There is absolutely no reason to think that 10% is the dividing line between stealing and not stealing. If it was, why not 20% or 50%? I suspect that Jacques is more likely to defend the second explanation, that some stealing is justified. If that is the case then Jacques should check himself because he is a lot more utilitarian and socialist then he realizes. If a limited amount of “stealing” (and I do not concede the point that taxation is stealing) is justified for practical, empirical concerns then really our debate boils down to a disagreement over what amount of stealing is practical. At this point I have already won the debate because Jacques is not respecting property rights like a good libertarian ought to. But because I like debating anyway, I will continue...

Erik’s Response:

Taxing people at 10% is stealing, but it is not as bad as taxing at 15%, so I’d be in favor of any legislation which moved us in that direction. A step in the right direction is good, even if the result is not good enough to subsequently justify complacency. So Alec doesn’t need to worry about a “ludicrously arbitrary and ad hoc double standard.” On the contrary, libertarians tend to be the most consistent in their beliefs. We believe in freedom on every issue. I’d guess Alec supports free association between people when it comes to personal relationships, but not when it comes to the trading of property? One might call that an arbitrary double standard. I’d guess Alec claims to support free speech, though he would willingly promote legislation which mandates that the media should treat news in a “balanced” way. One might call that an arbitrary double standard. Alec likely believes that a man working for Government should be allowed to own a gun, though a man not working for the government should be prevented from the same. One might call that an arbitrary double standard. Alec’s also made it clear that the poor shouldn’t pay taxes but the rich should. One might call that an arbitrary double standard. I’m sure on some issues Alec supports the concept of private property (does one own his clothing?), though when it comes to “big business” I know he’d like to give unions special privileges, thereby undermining the property rights of the company’s owners. One might call that an arbitrary double standard. I’d suppose Alec defends the rights of minorities, but when it comes to the most vulnerable minority – the individual – his defense is absent. One might call that an arbitrary double standard.

Any taxation is legalized theft, so of course by definition it isn’t technically theft. However, labeling taxation as theft can be legitimate because they are both wrong by the same moral reasoning, and they both cause a similar effect. It does not matter if your neighbor across the street robs you, or if several guys from across town rob you, or if a whole mob with uniforms promising to provide “services” robs you… if legitimate property is removed by force, it is immoral. Now, if Alec thinks that no property is legitimate because he’s a communist, then that’s his opinion, and we must leave it as a fundamental disagreement on the rights of man.

Alec 4. Diminishing returns. An extra 100 million for someone who already has 500 million is essentially meaningless. That person does not need that money. And since we all agree that we can take money when it is empirically expedient to do so, I suggest we take it. Jacques suggests we let them keep it because they will spend it (increasing some businesses profitability meaning they can hire more people) or invest it (giving a business more money to work with and so increasing jobs) or saving it (giving a bank more money to lend to people who need houses or want to start a business). Ultimately these are less than ideal ways of using that money.

Spending it will ultimately have a negligible effect. This is true for a couple reasons. The first is that consumer spending is not directly correlated with wealth levels. The vast majority of consumer spending is not done by those with the vast majority of the wealth. It is done by the middle class and the upper-middle class. That means that letting them keep the money isn't going to be directly going into that part of the economy which is the most important. Secondly, the types of things they will be buying with all that extra money will not benefit anyone else. Buying Brazilian hardwood floors instead of the laminated crap the rest of us have will not create any more jobs. Getting $500 dinners, buying expensive jewelry, or fancy imported German cars instead of a Subaru will not lead to a creation of more jobs. And even if it does, there are much more efficient ways to create those jobs.

So what if they invest it? The reason 'trickle down economics' is such a good metaphor is because you start with a gallon at the top and by the time it reaches the huddled masses yearning to breathe it is but a few precious drops. Even if they invest it in American companies so the benefits stay here, it will still be less of a benefit than if it had been given to the poorest in the form of government sponsored jobs, education, health care, ect. This problem is also subject to the problem of diminishing returns. These people are already investing millions. Why would I want to give them another million to invest when I could give several others a college education, healthy food, or a home with that money? Those benefits are not only more needed but more immediate.

Finally, Jacques says they could save it. I am glad he admits this is an option because this is what most people do with they money when they are given tax cuts. Saving it in the bank does absolutely nothing to stimulate the economy and can actually lead to a slowdown by creating unexpected contractions in the money supply. Putting it in the bank does not increase loans. Banks, in 99% of circumstances, have plenty of money to lend out (they are required to have plenty of cash on hand by federal law). Moreover, the amount of lending banks engage in is only tangentially affected by how much money they have saved in their accounts. Much more relevant factors are, for example, the state of the economy and economic forecasts. When the economic contracts because everyone is stashing away their money rather than spending it businesses will in fact loan less.

Erik’s Response:

Okay, now things are getting ridiculous and I’m going to need to just list bullet points of refutations, else my keyboard will crack and I’ll be forced to ask the government to subsidize a new laptop. I apologize for resorting to bullet points.

An extra 100 million for someone who already has 500 million is not meaningless for the millionaire. It’s clearly meaningless to Alec, because it’s not his money, and he doesn’t feel the pain of having the product of his life’s work ripped away from him to pay for government programs he neither advocates nor supports. I will simply suggest to Alec that he speak with someone who is that wealthy and get their opinion on the subject. No matter how much property one man has, if he got it legitimately then it is his to do with as he so pleases. Even if the money were “meaningless” to that person (if Alec can find someone to whom 100 million dollars is meaningless I will concede the point), the fact remains that the money is owned by that individual and thus no other person has the right to force him to surrender it. Again, if Alec thinks property rights are illegitimate than we must simply disagree here.
The vaporous, indefinable concept of “need” does not give a man a blank check to enslave another man. No matter how much a man “needs” something, it does not give him the right to take it by force from someone else. If a man needs something, then by all means help him out!!! Or, convince others to help him out without resorting to government force . It is incredible that some people have no moral qualms about holding a gun to someone’s head and forcing them to pay for their “charities.” Robbing from one man to give to another is no different than robbing from one man to give to yourself, contrary to what Disney movies teach us. A man in need is entitled to exactly the amount which others are voluntarily willing to provide. I’d also like Alec to define “need,” an exercise which quickly becomes absurd once attempted.
Jacques is not suggesting that we let the wealthy keep their wealth because they “spend” it. He will be the first to tell you that spending doesn’t necessarily create growth. Rather, he is suggesting that rich people invest which is altogether different than spending (Obama is struggling hard with this concept). Here’s the difference: I’m consuming when I buy a computer to play games on, I’m investing when I buy a computer to manage my business. The former creates no net increase in my productive capacity, the later does. Successful investing creates net gains in the productive capacity of capital. By so doing, the wealthy make labor more productive and it is the poor, not the rich, who benefit most relative to their effort and expense. What kind of living can a basic worker make today? What kind of living could he make before capital was developed over the past few hundred years? Investments in capital are what brought society from a life of subsistence agriculture to a life of surplus. Alec is welcome to return to the subsistence agriculture in many parts of the world, but he is not welcome to take me there and it is unfortunate that he advocates policies which would return vast swaths of mankind to that state of living.
Buying Brazilian hardwood floors does create jobs (and eliminates jobs in competing industries). If Alec disagrees, he’s welcome to inform the Brazilian hardwood workers that they’ve been swindled. I’m sure they’ll be grateful to be released from the delusion. Alec can start with these guys: http://www.brazilianhardwood.com/
Everything that we have today, which seems like a “necessity,” used to be a luxury. One’s bread was once a rare commodity. One’s toaster used to be in the category of hardwood floors. One’s Xbox used to be a pipe dream. One’s car would’ve been killed-for by the wealthiest kings only 150 years ago. Who is Alec to mandate that certain luxuries are okay for people to buy, and others are not? Again, one might call that an arbitrary double standard.
If Alec knows “much more efficient ways to create jobs,” all he needs to do is put a business plan together and perhaps I’ll invest in it. Then he can make lots of money and donate it to all the charities which he supports.
Unfortunately, Alec doesn’t understand that “creating jobs” is not the goal of economic innovation. He has it backwards. In fact, “destroying jobs” is the goal of economic innovation. Weird huh? This is why all the spear hunters went out of business. This is why the typewriter union no longer exists. This is why the Pony Express workers were all fired. This is why chainmail and battleaxe artisans are no longer paid what they used to be. Economic progress is about producing more, with fewer inputs. Until Alec comprehends this he will be eternally under the delusion that everyone should try to “create jobs.” This does not mean companies should necessarily fire people in order to grow, of course. It simply means that whenever an increase in efficiency allows a company to let someone go, real economic growth has occurred.
Alec states, “Why would I want to give them another million to invest when I could give several others a college education, healthy food, or a home with that money? Those benefits are not only more needed but more immediate.” Here Alec seems to be arguing that he wouldn’t give his own money to rich people because there are better uses for his own money. That’s his right to make that choice. Alec can do what he wants with his own money, but he shouldn’t force me to do what he wants with my money. Why is that so hard to understand??
Alec states, “Saving it in the bank does absolutely nothing to stimulate the economy and can actually lead to a slowdown by creating unexpected contractions in the money supply.” He must be joking, but in case he’s not here’s Banking 101: Alec, banks loan money based on their reserves (among other things). When they have more reserves, they can loan more money. This is managed through the mechanism of “interest rates” which fluctuate relative to a bank’s reserves. When a bank has no money, its interest rates rise. When a bank is flush with cash, its interest rates can fall. As interest rates fall, more people can borrow for their projects, and any borrowing which increases the productivity of capital (ie new businesses) will subsequently “stimulate” the economy and produce profits. If Alec needs some evidence of this very basic mechanism… Here in Dubai when the credit crisis hit, people from all over the world took their money out of Dubai banks and brought it back home (understandably, they wanted to be more safe during the crisis). This caused huge shortfalls in the banks’ capital levels, and interest rates here skyrocketed. A home loan last summer could be had for about a 5% interest rate. In January of this year, banks couldn’t even loan and the very few loans that did occur paid around 11-13% in interest. As a real estate company, this hit us hard. Because people couldn’t get loans they weren’t buying property, and thus we had to fire over 300 people. As the economy seems to be through the worst (according to some people), tons of money is flooding back into Dubai banks and, guess what, interest rates on a home loan are now around 7%. Just as I wouldn’t argue chemistry before learning what a “periodic table” was, so should Alec perhaps learn about interest rates and banking before debating economics.
As a final point in this bullet list, regarding “trickle down economics,” Alec- who do you think pours the “gallon at the top?” Have you ever pondered where that gallon came from?

Alec 5. Jacques also argues that if the income tax was reduced to a 10% flat tax and corporate taxes eliminated that economic expansion would be so rapid that the government would actually take in more money in the long run. This argument demonstrates a reckless misunderstanding of economic and tax policy. In order for the government to actually see a net increase in tax revenues people's wages would have to rise to something like 6, 8, 10 times their current levels. Such rapid wage increase would lead to incredibly high inflation that would destroy any economic improvement and offset and gains in tax revenue. There is no way that reducing taxes to the level Jacques recommends would actually boost revenue.

Erik’s Response:

First of all, Alec may be surprised to learn that no matter what the top marginal tax rate has been in the US, over the past 55 years government tax revenues hover around 19.5% of GDP, regardless. This is known as Hauser’s Law. Consider this for a moment… no matter the top tax bracket, tax revenue remains at 19.5% of the economy’s output. Assuming this “law” is accurate, a rational person may suggest that a government which seeks to increase tax revenues should do everything possible to grow the GDP of the economy. A great way to do this is to lower tax rates. I’m sure Alec will be extremely confused at how Hauser’s Law can be true, given his assumption that wealthy people will “just keep on goin’” no matter their tax burden. He’s welcome to try and refute half a century of data below. Actually, he might suggest that the top tax bracket is only a minority of the total tax revenue and thus the graph is misleading. I would then remind him that the top 5% of income earners (those in the top tax bracket) pay 60% of the government’s tax revenue.

I think it would further surprise Alec if he found out that we could eliminate income tax in America altogether, and the Federal budget would have to shrink down to the size of... the mid 1990’s. That’s how much government has grown in just over a decade. The entire income tax, 20-30% of the entire nation’s work effort during the year, could be returned to them forever, if we just shrank government all the way back to where it was under Clinton. From what I remember, Americans were just fine when the government was so “small” 15 years ago. Whatever additional improvement we’ve gotten in the last 15 years from new Government “services” is certainly not worth 20-30% of EVERYONE’s salary. So, when I advocate the abolition of income tax, Alec need not be frightened that bridges would collapse and the police would disappear.

Regarding Alec’s “6, 8, or 10x” assumptions… how does he get these figures? If tax rates fell from 30% to 10%, then a $100,000 salary which yielded $30,000 for the Government will now only yield $10,000. In order to beat the previous tax revenue, the salary needs to rise to $300,000 (times 10% = $30,000) which is an increase of 3X… not 6,8, or 10. Salaries of $14,000 or $752 have the exact same dynamics. Salaries must increase by 3X to make up for a tax rate 1/3 as large. Furthermore, and more importantly, Alec is forgetting the millions of ways that revenue is sheltered, hidden, mis-reported, and moved off-shore, so it’s only the “taxable amount” which needs to increase by 3X, not the actual salary. Taxable amounts could increase by 3X without any increase in the actual salary. Also, people would be encouraged to move back to the US and work there (like myself), if the tax was lowered. Businesses would likewise return to the US. It is not hard to imagine 3X taxable revenues if the tax rates lowered to 1/3 of their present level. It wouldn’t happen in the same year, but 10 years later the government would be raking in substantially more if it reduced its income taxes to 1/3 of their current level. Any Big Government proponent should vehemently defend lowering marginal tax rates, because it will yield more income for government in the long term. Unfortunately politicians don’t much care for the long term, as they likely won’t be in office, and the sheeple that ironically call themselves “citizens of a free nation” are inexcusably ignorant when it comes to financial understanding (ask a random person the difference between APR and APY).

Regarding wage increases and inflation: wages could all go up substantially without any price increases at all (inflation is different than price increases). Don’t believe me? All it requires is for production to match consumption. If 20% more goods were produced, and salaries were 20% higher (allowing people to consume 20% more), the price of goods would not increase, because they wouldn’t be any scarcer. Inflation is an increase in money supply, not prices (although almost every politician gets the term confused).

Alec stated that Jacques had a “reckless misunderstanding of economic and tax policy.” This is the claim I would make about Alec. One of us is wrong.

Alec 6. Another reason such an approach would be folly is because, even if it worked in the abstract (and I am not even admitting that), it does not work in the real world. A government which slashed taxes and along with them nearly every regulatory oversight and every social program would utterly crush business confidence, consumer confidence, and consumer spending. The abrupt shift in policy alone would be enough to send most businesses and investors diving for cover, especially considering most benefit from government programs that make it easier and cheaper for them to offer their employees health care coverage or to start a new business. The absence of any social programs at all would mean the vast majority of people would start stashing their money under their mattresses rather than spending it for fear of the inevitable rainy day when they will have no assistance from the government. That decrease in spending means a decrease in business revenue which leads to a decrease in employment which leads to a decrease in spending and so on and so forth in an ever increasing spiral of economic decline that will go unabated because the libertarians just took away all of the government's fiscal policy tools.

Importantly, such a strict libertarian policy with no social programs necessarily means condemning millions to die each year. Even with full employment, there will still be 2-3% of the population unemployed. These are people not jobless because of any moral failing on their part or because they are lazy or anything, its because even the best of economies cannot employ everyone. The unemployed in Jacques', Kristen's, and Erik's ideal world will be condemned to die of preventable, treatable, and curable illnesses, of malnutrition, of exposure, and of starvation. There will be absolutely no safety net to support them and they will die. Now I can already hear Kristen saying that there will be private charities to support these people but that is ultimately not enough. Contrary to what Kristen claims, Americans only give about $250-$300 billion a year, significantly less than what the government spends in all its social programs. Worse, charity donations dip during recessions, exactly when they are needed most and exactly when the government can increase its spending. Private charities absolutely do not provide enough of a safety net and would do nothing to abate to reverse the spiraling economic decline that would result from any decrease in consumer spending.

Erik’s Response:

Again, to Alec, we could eliminate the entire income tax and have all the great services and benefits that we enjoyed in the 1990’s. This isn’t exactly “slashing nearly every regulatory oversight and every social program,” as he claims. And to suggest that “business and consumer confidence” would be “utterly crushed” because tax rates were lowered... which businesses and consumers does Alec hang out with??? I would love to meet a business owner who would feel “utterly crushed” when his tax burden was lifted. As a consumer myself, I would be overjoyed! I would save more money, I would spend more money, I would invest more money, and I would donate more money to the causes I support. If Alec thinks the problem is that rapid policy changes can be destabilizing, he’s being prudent… so let’s reduce taxes slowly! I’m not against that.

Alec says, “the absence of any social programs at all would mean the vast majority of people would start stashing their money under their mattresses rather than spending it.” Well, Alec is speculating here, but I know in Dubai there are almost no social programs at all… MANY fewer than existed in the US during the mid 1990’s… and people don’t stash money in mattresses. What do they do? They rely on themselves, their friends, and their family for support instead of resorting to coercion. People here don’t force others to make sacrifices for them. There is also much lower unemployment and almost nobody out on the street. All people should have the right to ask for assistance, but no person should have the right to force it.

Alec’s presumed never-ending spiral of death and destruction is not based on reality, but I can understand why he’s a communist if he thinks that’s what occurs when government gets out of the way. I wonder how, during the 1800’s, the US went from a rural nation of farmers to one of the most powerful industrial economies on the planet, surpassing nations that had existed for hundreds or thousands of years, without any income tax and without any corporate tax? How did mankind survive, let alone thrive, without social security and medicare? By 1900 the US was the envy of the entire world, and it all happened in an environment where the government was a tiny tiny fraction of what it is today. A popular joke in the early 1900’s was that the only time they ever were aware of the Federal Government was when they went to the Post Office. Just 100 years later the Federal Government claims a third of our income. How times have changed.

Regarding the lack of social safety nets for the “millions who would die every year without government,” he mentions private charity is around $300 billion per year. The stats on government “social program” spending put its number around $1-1.3 trillion. So, it appears government spends about 4x as much as private individuals. Two questions are immediately crucial. Is each government dollar as effective as each private dollar given to charity? And, if people weren’t forced to pay the government, would they not A) have more money to donate to charity and B) feel more responsible for helping the poor, since Government didn’t claim to do it for them. I think any academic analysis of these questions would suggest that if Government weren’t involved in charity, the private sectors would, at the very least, be close to matching the effectiveness. This though is a conservative answer, for the more likely result would be A) more money in aggregate going to charity and B) that money being better spent. This is of course just an assumption on my part. Also you can bet that a good chunk of the Government’s “social spending” goes to projects which are “disagreeable” to put it nicely. With private charity, I have a choice of what I support. With Government controlled charity, I don’t; I’m forced to pay for programs which I think damage the very people they claim to help. I’m thus forced to be an accomplice in funding harm upon others. I don’t sleep well with that on my mind. However, even if private charity didn’t match the effectiveness of government charity, it still wouldn’t give one man the right to force charity upon the public. No man has the right to force servitude on another, if no crime has been committed. As stated before, need is not a legitimate claim with which to enslave, in full or in part, another human being. Shall we discuss how often southern plantation owners claimed they “needed” slaves for their livelihood? “Need” is not justification for aggression.

Is human suffering terrible? Yes. So help those who warrant it and encourage others to do the same. Ridicule, lambaste, and ostracize anyone who is more selfish than you deem appropriate. But, don’t throw people in cages, or hold a gun to their head, for not agreeing with your idea of what’s best for society.

Alec 7. Furthermore, giving people jobs is actually the less expensive solution to the problem. If these people do not have jobs now then they will be forced to collect unemployment benefits and welfare and medicade. They money they receive from these programs plus the bureaucracy needed to run them would be more than it would cost to pay them to build a road in the first place. Additionally, since poverty is cyclical their children, instead of going to college, will get poor paying jobs with terrible job security and will most likely be collecting government benefits as well. All of this is to say nothing of how large the recession will become if the government does absolutely nothing about it. Paying someone to build a road or repair a bridge nips the problem in the bud and prevents it from becoming a much larger and more expensive problem.

Erik’s Response:

Alec is welcome to provide people jobs at his expense, not at mine. The fact that if someone is unable to find a job (ie has no skill demanded in the labor market at his desired price) he will attempt to collect government unemployment benefits and welfare is not a legitimate moral reason to take my money and create a job for that person. If unemployed will cost “society” more money, then perhaps one shouldn’t force “society” to pay the unemployed, no?

Alec 8.

(1)Erik says that anyone who believes they have the right to the labor of another is part of the immoral looter mobs. To him I pose the question of whether or not he has ever ridden the Summit Stage? Even attended public school? Gotten government subsidized student loans? Used the post office? Benefited from the protection of the US military? Have you ever benefited from the protection of the local policy or fire department? Why should I pay taxes for your public transportation? Why should I pay taxes for you to attend school? Why should I pay taxes for you to get to send letters at a cheaper than market rate? Why should I pay for you to be protected? Erik, you have absolutely demanded the right to other people's labor and you do it every single day. The only way to make your position consistent is to advocate that all taxes be voluntary (as Ayn Rand believed). Anything less is nothing more than hypocrisy beneath a thinly coated hatred for the poor.

(2) If you do believe that all taxes should be voluntary (unlike Jacques who believes that stealing 10% of our money is alright) then please say so. That is a whole other can of worms I would be delighted to debate you on.

(3) Erik says that public school's are a joke and that instead people should have their money given back to them so they can spend it as they please. But what about the family that only makes $20,000 and already loses almost nothing to taxes? There is absolutely no way they can afford private school? What about the family now making $10,000 a year because the minimum wage has been abolished? What about the women makes 50 cents on the dollar because fair wage statues have been abolished because they were seen as intrusive government regulation and bureaucracy?

(4) Erik says that under his system that people are not forced to pay for things they don't support. The problem is that such a world is not possible, people will always be forced to pay (in one way or another) for something they do not disagree with. Under your proposals I would be unable to go to college because I would not have any student loans from the government. Under your proposal I would not have health care because I get insurance through my parents from their employer and they would be unable to offer health care to employees anymore. Under your system I would be unable to go to work or...anywhere because I rely on public transportation to get where I am going and if I paid the actual cost of what a bus ride costs I would unable to afford it. I absolutely have to pay to support your opinions; I am absolutely forced to support them. Frankly, I don't care if you have to pay for things that you don't support Everyone has to put up with policies they don't approve of, that is the necessary cost of living under a government, in a society. The alternative of trying to create the impossible system where no one has to support anything they disagree with creates much more significant harms than the status quo has.

(5) Ultimately, I believe Rawl's was right when he said that policies should be judged by how they help the least advantaged among us. I am entirely uninterested in the impact that economic and tax policies have on millionaires and billionaires. These people already have enough advantages, enough power, and enough people looking out for them. We do not need to rush to the defense of the richest people in the world. I am entirely interested in the impact that economic and tax policies have on the poorest people in America. In fact, I think that the impact on the poorest people is the only thing we should worry about. Only once everyone has access to food, water, shelter, and essential medical care should we worry about the property rights of billionaires.

Erik’s Response (numbered according to the above paragraphs from Alec):

1. Yes I have ridden the Summit Stage, that does not mean I support it as an institution. If I could snap my fingers and abolish it I would, and I would be happy to live with the consequences of not having that transportation option. My parents, living in Summit for over 20 years, have had to pay taxes that fund that damn bus. They’re forced to subsidize the transportation costs of others, and it’s absurdly immoral. A small piece of every day that my father works is taken from him, by force, and given to someone so they can have free bus travel. Does the Stage help the economy of Summit, allowing easier transport for skiers? Well, probably. But most ski tourists would (and should) pay for the bus if it ran like any other legitimate business. Those who couldn’t pay for the bus travel aren’t exactly contributing much to the economy, I’d imagine. Regardless, even if the Stage did wonders for the economy, it wouldn’t give the right to usurp wealth from the residents to pay for it. I could think of a hundred programs which could claim to bolster the economy… does that give me the right to take everyone’s money to prove so? It does not.

Government takes my wealth, and the wealth of everyone else (everyone who produces wealth, that is) regardless of whether we use the services or not. So, is Alec suggesting that I stop using the services I’ve been forced to pay for? If I was forced to pay for satellite TV, one can bet I would subsequently sit down to watch it from time to time. This does not mean I support it, or condone it, or that it’s legitimate. The fact that I use something I’ve been forced to work for doesn’t mean that thing has my sanction. Only a fool wouldn’t use something he’s already been forced to pay for. If I stole Alec’s wallet, bought Das Kapital, and then gave it to him, should he throw the book away? Well, he should, but for a different reason.

Regarding the Post Office… I’ve used it because the Government prevents competitors from entering the market. Government doesn’t even allow competition in basic mail delivery! Why is this so? The Government sues Microsoft billions for being an alleged monopoly (even though it isn’t) and yet it runs its own monopoly in the mail service (amongst countless other concurrent coercive monopolies). One pays FedEx every day that one uses it. One pays the Post Office every day that one doesn’t use it, and then also on those days when one does.

Regarding the military… I don’t necessarily disapprove of all military spending. There is a lot of room for discussion on this point, although I think the military’s general strategy of policing the world makes me less safe, not more safe. There’s a reason the terrorists didn’t crash a plane into Zurich on September 11.

Regarding Alec’s questions on “why should he pay taxes for my…fill in the blank” He shouldn’t!!! He shouldn’t pay for my mail, he should pay for my transportation, he shouldn’t pay for my school, why does he? Because he’s forced.

And let’s get one thing straight, I do not “demand the right to other peoples’ labor.” This is a fallacy I can’t let slide. It is not me condoning policies which force sacrifice on others. One has no right to other peoples’ life nor labour; this is consistently my thesis. The fact that the government forces everyone to pay, and then doles out services at its whim, doesn’t mean I am responsible for such treachery. Every vote I’ve cast, and every word I’ve written, has occurred with the explicit intention of reducing the state in every possible way, or in other words, reducing the burden that any man may place on any other.

2. Yes, I would like all taxes to be voluntary, though I acknowledge it may not work. The government would have to be much much smaller than it is, and that is exactly what I want. Since voluntary funding would require a miniscule government, the US Gov has kindly provided me a list of those agencies I’d like to discuss eliminating: http://www.usa.gov/Agencies/Federal/All_Agencies/index.shtml

You can bet that I’d donate to the US government if its role was limited to the protection of life and property. Ultimately, if we got to such a situation of voluntary taxation and it simply didn’t work – as in there simply were not enough voluntary donations to form a government which protected domestic life and property – then I’d be open to discussing alternatives. We can debate this later, but let’s focus on the issues at hand first.

3. Public schools are a joke, and I say this because American students are taught garbage, and everyone is forced to pay for this garbage. Does Alec think US public schools have done a good job? While there are certainly some public schools that are enviable, they are the minority. The majority are incompetent. Many public schools still debate whether to teach “evolution” or “intelligent design,” as if those two concepts belong in the same classroom. Basic literacy has fallen over the past hundred years. Literacy!! Let alone advanced education. I recommend this article for Alec: http://www.learninginfo.org/illiteracy-statistics.htm

Some highlights:

- “After edging upward for apparently more than a century, the reading, writing, and mathematical skills of American students from elementary school through college are now in a prolonged and broad scale decline unequaled in history. The downward spiral, which affects many other subject areas as well, began abruptly in the mid-1960s and now shows no signs of bottoming out.”

- A study in 1985 found that “only 5% of the 17-year-olds tested had advanced reading skills – the kind needed to understand complex ideas found in professional or technical journals and textbooks.”

- A study in 1993 found that “25% [of adults surveyed] were plainly unable to read, period.”

- “Reading levels of young Americans fell so low in the 1970’s that the Army was forced to rewrite its operating manuals in comic fashion.”

- “For the first hundred years of its existence, a college like Harvard would not graduate a student without a knowledge of Hebrew. Now the point is approaching when one can be graduated without a knowledge of English.”

- “Sunday Times reported in 1997 that the standards of education are so low in the U.S. that black Americans are returning to Kenya to get better schooling.”

Now, it’s widely believed that US literacy rates are actually wonderful, at around 99%. This figure is of course taught in… Government schools. But this figure is very basic literacy, and is thus very misleading. The more important definition is “functional literacy.” I wouldn’t expect most Americans to understand the difference between “literacy” and “functional literacy” because they aren’t, ironically, functionally literate. From our wonderful Government’s own data, here is the breakdown in 2003, which was the last National Assessment of Adult Literacy (NAAL). Notice that a whopping 13% of US adults are considered “proficient” in “functional literacy” by the US Gov. (whose standards aren’t exactly Dartmouth level)

Only 13% of The Public is categorized as “functionally literate,” yet they vote on policies which affect the trajectory of international economics! When education is a joke, democracy is a joke. Here’s some more information from Wikipedia (and I know Wikipedia isn’t omniscient), if Alec’s still not convinced that public education is a joke: http://en.wikipedia.org/wiki/Literacy_in_the_United_States

Perhaps the most telling quotation from this page, “They [the CIA, who reports the official US literacy levels] also considered individuals literate if they simply stated that they could read and write, and made the assumption that anyone with a fifth grade education had at least an 80% chance of being literate.”

Public education is making people more stupid, but hey at least it’s making the poor stupid equally, right? It’s a shame that I’m forced to pay for the organization which dumbs down those most in need.

Americans should get their education from competing institutions, just like they get food from competing grocery stores, and computers from competing manufacturers. I know Alec distrusts the free market, because the all-knowing and never-motivationally-biased Politburo isn’t in control, but how difficult is it to see the dismal failure that is American public education? And with our nation’s childlike intellectual state, is it any wonder that “The Public” votes in politicians who promise free candy?

So what about the family that only makes $10,000? Well, in a free market there will be very cheap private schools (there are already). If parents still don’t make enough to get their children very cheap basic education then they shouldn’t have children. Alec probably thinks this is cold and cruel, but I think it’s cold and cruel to bring a child into the world if you can’t support it, and it is definitely cruel to force others to pay for one’s bundle of joy. Do parents have a right to have children? Yes (or more specifically they have the right to pursue it), but they don’t have a right to take other peoples’ wealth to pay for it. Just like if a family can’t afford food, they shouldn’t have children! Does Alec think I should be forced to pay for the food of a couple who wishes to have a child? Clearly he does, I guess. We don’t centrally control food just because it’s “important,” and actually the fact that it’s important is precisely why it should not be handled by a coercive, politically motivated monopoly.

The bottom line is this – in a free market there would be cheap schools, just like there are cheap foods and cheap cars in the market. If a family can’t afford a child with their income, they ought not have a child. Fornication doesn’t create a legitimate claim on upon the work efforts of other people who had no part in the fornication.

Finally, if we lived in a free society, and there were families asking for financial help with their children, I would sure as hell try to help them, but only to the extent I believed them to be responsible and deserving… a criteria absent in forced Government handouts.

4. On point 4, Alec is suggesting that he has a right to my money to pay for his education. How is that not stealing? On health care, it shouldn’t come from his parents’ employer anyway. Why don’t companies pay car insurance? Life insurance? Property insurance? Is he saying his parents don’t have those because their employer doesn’t provide it for them? This is important for Alec to understand – employers pay healthcare because it isn’t taxed as income to the employee, whereas if employees buy their own healthcare, they are taxed on the money first. Not complicated. Again, this is a government-created distortion. Regarding public transportation… perhaps if gas wasn’t taxed, and cars weren’t taxed, and Alec’s salary wasn’t taxed (does he have a salary?), and the companies who make cars and gasoline weren’t taxed, and the companies who provide those companies with their supplies weren’t taxed, Alec might have a better chance of paying for his own transportation, instead of forcing others to do so. Alec thinks he has a right to be moved around the world at others’ expense… how is that not slavery?

Alec is honest, at least, when stating, “frankly, I don’t care if you have to pay for things that you don’t support.” The true morality of communism emerges.

5) On point 5, let’s assume for a moment that Rawls was a moral man. If we ought to judge policies by how they help the least “advantaged” among us, then we ought to judge centralized control of production as an enemy to be resisted at every opportunity. Welfare does not help the poor, it perpetuates poverty. Minimum wages do not help the poor, they prevent employment. Public education does not help the poor, it keeps them ignorant. Taxes on the rich do not help the poor, they stifle production and wealth creation. However, what all these “social” programs do is to help those who feel guilty for living in a nation of builders, those who think wealth is evil, those who think trade is immoral, those who think thought and reason are crimes against the needy, those who think that by building a business, they are robbing the resources of their customers (and therefore prefer to hire the government for that purpose), those who think that by enjoying their bread, they are preventing others from eating… it is these people whom the “social” programs help, not the poor.

The poor are helped when you allow producers to produce and trade amongst the populace, but this is not the main reason to allow production and trade. These activities should be allowed because all men deserve to be free, whether poor or rich, and we can thank the natural mechanism of economics for the result that all people tend to be improved when each person is allowed the right to his own life. If you want to help the poor, either do it yourself, or get out of the way so that the world can be built for them.

Response to Alec’s follow-up, “Crystallizing important points”:

Alec:
Jacques says that he supports a social safety net and also a government 10% its current size. I assume 10% of its current size means collecting 10% of its current taxes, not 10% of the current spending or number of programs because that would mean the death of a social safety net. So the only way he could have a government with a safety net but 10% of the taxes is the belief that elimination 90% of taxes would result in such a large increase in tax revenue that it would offset the 90% loss. If cutting taxes by 90% does not yield a net tax increase then Jacques will either have to abandon his support for a social safety net or his support for libertarianism.

Erik’s Response:
As mentioned in my former diatribe, we could eliminate the entire income tax and have the size and services of 1990’s government. Quite clearly we could eliminate 90% of the income tax and Jacques will not have to abandon his support for social safety nets nor libertarianism. If such a miracle were to happen, the US economy would surge and Jacques’ safety nets would be ever more secure.

Alec:
My argument was that in order for net tax revenue to increase after a 90% cut in taxation that wages would have to rise dramatically. That dramatic rise in wages would cause an increase in inflation and would result in a decrease in actual purchasing power for individuals and the government. Jacques says that inflation is caused by the government expanding the money supply by printing more money. This is incomplete because there are other causes of inflation.

Erik’s Response:

This is discussed also in my diatribe. Only “taxable income” needs to increase, which is very different from income. See diatribe for details.

Regarding inflation, there are other ways for money supplies (m1, m2, m3, etc) to be inflated, but they are generally self-correcting and temporary. These ways involve the actions of commercial banks, and the actions are self-correcting so long as interest rates are allowed to move freely. Again, as mentioned, incomes can increase without any inflationary effects (price increases) so long as production keeps pace. Production would keep pace if taxes were lifted.

Alec:
Jacques says that since the richest pay most of the taxes only the richest have to see an increase in their salary in order for the government to see a net increase in tax revenue. So his argument is that only the super rich need to, and will, experience a dramatic increase in wages. Awesome, the government will have a net increase in tax revenue because millionaires will become billionaires and billionaires will become trillionaires all the while everyone else sees no increase in wages. Increasing the salary of the richest 1% tenfold while there is absolutely no increase in the salary of the poorest Americans, or any other Americans for that matter, is hardly a good argument for an economic policy.

Erik’s Response:

The top 5% pay 60% of the nation’s income tax. This means that 1 in 20 people pay the cost of all government services for about 11 of the other people. How much more does Alec think is just to tax them?

Alec is twisting Jacques argument severely. Jacques is not saying that only the rich will see wage increases, he is saying only the rich need to see wage increases for government revenue to increase. Big difference.

Alec says that it is bad policy to “increase the salary of the richest 1%” I agree! Policy should not dictate salaries, although Alec thinks it should when it comes to certain peoples’ wages. Is this another arbitrary double standard, or did I already cover this?

Alec:

Additionally, Jacques is living in the land of gumdrops and lollipops if he thinks the country can experience that kind of massive increase in wages and not see any inflation. If millionaires and billionaires are now making 10 times more than that money will have to come from somewhere. Either the money supply will increase to adjust for the massive increase amount of money they are being paid or that money will have to be taken from somewhere else. That means either there will be inflation or regular workers and the poorest will have their wages cut The bottom line is that the necessary increase in wages to result in a net increase in tax revenue would either mean a dramatic increase in inflation which would cripple the economy or a dramatic decrease in everyone else's wages. Either way it would to a decrease in the real purchasing power of almost everyone else.

Erik’s Response:

Once again, price increases are only inevitable if production doesn’t keep up. More money chasing more goods won’t increase prices. Prices increase when more money chases the same or fewer goods (which is the current course Obama is speeding down).

Now, if we lived in a truly free market (the kind which the world is claiming has “failed” even though it never existed), then what would occur is that wages may rise or fall nominally, but the cost of goods would tend to fall across the economy over time, so purchasing power would increase. All of Alec’s concerns are a great argument in favor of a commodity backed monetary standard, but this would prevent prolonged federal budget deficits, something Alec would support in Bush’s case but not in Obama’s… another arbitrary double-standard!

Alec:
Not only is such a dramatic increase in wages inherently undesirable but it is incredibly unlikely. The tenfold increase in executive wages would not only be very unlikely but would not be indicative of and proportional to an increase in the productivity and profitability of the company they work for. Additionally, the majority of tax profits come from corporate taxes rather than income taxes on individuals. In order for individual income to increase enough to offset the loss in tax revenue from the elimination of corporate taxes the income of the richest 1% would have to increase by more than tenfold. it would have to increase fifty fold or one hundred fold, or more. The bottom line is that it is utter fantasy to expect a net increase in tax revenue after a 90% cut in income taxes and the elimination of the corporate tax. There is absolutely no way for that to happen and for Jacques to both support a social safety net and a libertarian tax policy is inconsistent. He must abandon one or the other.

Erik’s Response:

I believe Alec is pulling his numbers out of, as he called it, “the land of gumdrops and lollipops.” He states, “the majority of tax profits (the Government doesn’t make profit, fyi) come from corporate taxes rather than income taxes on individuals.” So, how does Alec explain this chart from the Congressional Budget Office for Federal Taxes in fiscal year 2008:

I guess technically he is correct (although I have a feeling he was referring to just corporate income tax, in which case he’s somewhat exaggerating). 48% of the above revenue comes from Payroll + Corp Income taxes, and only 45% comes from individual income tax. Alec says, “In order for individual income to increase enough to offset the loss in tax revenue from the elimination of corporate taxes the income of the richest 1% would have to increase by more than tenfold. It would have to increase fifty fold or one hundred fold, or more.” Let’s do the math, shall we?

Disclaimer: ignore all laws of economics which would suggest that treasury income may increase when tax rates decrease. Let’s assume for the below analysis that when rates decrease, income decreases proportionately, even though that’s preposterous.

If we eliminate the corporate taxes (income and payroll) then the tax revenue will have lost 48% of its former total. Since the income of the richest 1% pays for 35% of the IRS’ personal income tax revenue (http://www.ncpa.org/sub/dpd/index.php?Article_ID=13984), that means they pay 15% of the entire federal budget (.35 x .45 = .15). Since we lost 48% of the budget, the richest 1% will need to pay an additional 3X on top of their current payment to make up for it. If all factors are held constant, that means the salaries of the top 1% need to increase by 300%, or “three fold”… not fifty fold or one hundred fold or more, as Alec asserts. If the top 1% had a salary increase of 100 fold, that would mean the Federal Revenue would grow about 15 times larger! (100fold x 15% of federal budget = 15 federal budgets) The land of gumdrops and lollipops, indeed.

If we cut 90% of the personal income tax, and the entire corporate income tax, the federal budget would be 4.5% income + 36% payroll + 4% other + 3% excise = 47.5% So, if we shrank government by just over half, we could eliminate 90% of the personal income tax and the entire corporate income tax… pretty incredible. And, as according to the disclaimer above, this all assumes that the economy wouldn’t grow under conditions of lower taxation, which is of course preposterous.

Alec then claims… “There is absolutely no way for that to happen and for Jacques to both support a social safety net and a libertarian tax policy is inconsistent. He must abandon one or the other.” Well… I think a government 47.5% as large as the one in 2008 would be able to provide a few safety nets, at least, so Jacques is being utterly reasonable.

Yet, I fear this isn’t a fair critique of Alec’s philosophy, because communism and math have never mixed very well.

Alec:
Jacques also claims that I do know know what the Laffer Curve is. This is both the uncharitable interpretation of my argument and slightly insulting. Of course I know what the Laffer Curve is. My point is that we are on the opposite of the curve that Jacques believes we are. I believe that it is possible to raise taxes and still raise net tax income. Our disagreement is in many ways which side of the curve we are on and to simply accuse me of not understanding what it is in the first place entirely sidesteps the issue.

Erik’s Response:

Alec is allowed to believe whatever he wants regarding where we are on Laffer’s Curve. However, if he’d read anything recently about the thousands of millionaires who are moving their money out of the US, then perhaps he’d alter his opinion. If he’d read anything recently about companies relocating to tax-friendly nations like the UAE, then perhaps he’d alter his opinion. If he’d read anything recently about the relocation of jobs and divisions to subsidiary outsource companies that aren’t subject to US taxation, then perhaps he’d alter his opinion. If he’d ever earned a good income, or run a business, and felt the relentless sting of taxation poisoning his efforts every quarter, then perhaps he’d alter his opinion.

Alec:
Jacques also claims that there were a number of other factors that lead to the expansion in the economy during the Clinton administration. This is fair enough, I am not making claims about what causes the economic expansion during the Clinton administration. My argument is that low taxes are not a necessary part of economic expansion. My argument is that the economy can expand and become more competitive even when taxes are high and that is empirically true. Since that is the case, low taxes are not a necessary component of economic expansion and high taxes do not necessarily lead to economic contraction. This is the final nail in the coffin of Jacques position. His libertarianism is not based in principle, only expediency. So unlike most other libertarians, he should actually be forced to abandon his position if it is shown that it does not or cannot work. The empirics are not on his side. The economy has expanded when taxes are high. The economy has retracted when taxes were low. There is no way for there to be a net increase in governmental revenue when taxes are cut by 90%. There is no principle that supports his tax policy, there are no empirics to justify such a policy.

Erik’s Response:

Alec is correct that “low taxes are not a necessary part of economic expansion.” Economies can expand under high taxation (the US is evidence of this). The crucial idea here, however, is that high taxation suffocates/limits/restricts growth, so that even though a nation can grow under taxation, it would grow faster without such burdens. And, because the poor are most easily helped the richer a nation is, anyone who advocates help for the poor should do everything they can to unshackle the economy.

It comes down to a question of short-term and long-term. Short-term, it may help some families to give them free __________, but long-term it is much better to allow the economy to surge ahead. Every child Alec feels good about helping in the present is helped at the cost of being less able to help children in the future. I suppose that’s a personal judgment, except that it’s not because Alec forces me to abide by his short-term philanthropic strategy.

Regarding the “final nail in the coffin of Jacques’ position”… I fail to see how the statement “high taxes do not necessarily lead to economic contraction” is a nail in any coffin. High taxes, if other factors aren’t held equal, may not visibly cause the economy to contract. However, high taxes, if other factors are held equal, will prevent the economy from growing as quickly as it otherwise would, and if they’re high enough they’ll cause the economy to indeed contract. An increase in taxation will virtually always stifle, to some degree, economic growth (though it doesn’t necessarily make it contract), and so the only “nails in the coffin” must be for the poor who would have otherwise been helped, had the economy been just marginally stronger.

Jacques also never claimed that his libertarian ideology was based on principle. I believe he is a libertarian for pragmatic, rational, and utilitarian reasons. The empirics are on his side, though Alec disagrees. Not only is it possible for there to be a net increase in governmental revenue when taxes are cut by 90%, it’s just a question of how long it would take (1 year? 10 years?). The principle that supports Jacques’ tax policy is called the principle of “economics,” and there are numerous empirics to justify such a policy.

I encourage Alec to attempt refutation on any of the above.

Some final thoughts for Alec…

Take two identical countries, and hold all factors equal except the size of government. In one country keep the government small. In the other country, let the government grow (and let it provide any and all services). Then, let’s make a bet on which country will have the highest standard of living at the end of 100 years. I’ll bet that the small government country will win, and you’ll bet that the large government country will win.

Unfortunately, because you’re a statist, you’ll also force me to bet on your country. You won’t give me a choice, whereas I would never make you bet on my country. This is the difference between us. You force other people, through government, to accept your opinion, whereas I do not. I respect your right to bet on whatever you want. You not extend the same respect to me. Statists force others to agree with them, libertarians do not. So even if your bet happened to be correct (!), and your country was better off after 100 years, the libertarians would still have the moral upper ground, because they didn’t hold a gun to anyone’s head and force them to surrender their property for the experiment.

-Erik

On Lifeboats and Redistribution

2009-06-28T12:18:00.004+04:00

Justification for wealth redistribution rests on the presumption that resources are finite in number and, being finite, should not be horded by any one person or group. Consider the useful example of a lifeboat, with a set ration of resources aboard and a suffering manifest of starving, apprehensive passengers. Indeed, if there were a fixed quantity of resources in the world, it may be most ethical to distribute it evenly amongst the populace. If we lived in a world in which one man could only gain by another’s loss, in which one passenger’s dinner came at the exclusion of another passenger’s breakfast, then it may well be most ethical to “redistribute” resources evenly, ensuring no person enjoyed two dinners before all had enjoyed their first. Fortunately, this is not the world in which we live. Our world is not a lifeboat and it ought not to be considered as such.

Our world, most thankfully, is one in which wealth is created by man. Wealth is not finite. If one requires compelling evidence of this assertion, one may simply look at the material benefits enjoyed by man 50,000 years ago. These benefits included sticks, rocks, some meat and pelts, and the occasional cave. Fast forward to 2,000 B.C. and material goods have increased dramatically – the average human then owning pots and pans, bronze tools, musical instruments, styled garments, spices, various types of food (bread and butter!) and usually a hovel of humble standard. All these new goods were not “discovered” in the forests, they were created by man’s effort and traded amongst men, each trade benefiting both traders. All this new wealth existed for the average person, despite the fact that the human population had increased substantially. There were more goods for more people. The lifeboat analogy is thus an inadequate representation of reality.

Fast forward again, to 2000 A.D., and once again an incalculable amount of new material wealth exists for a vastly larger population. Stereos, advanced medicines, Teflon-coated cooking pots! The average family (in the freest parts of the world) owns all these things and much more. Cars, microwaves, sonic toothbrushes and the cappuccino – the material goods enjoyed by people today are unimaginably greater than those which existed only a few hundred years ago. Again, the wealth was not found in the forests… it was created by man, and not created by man as a group but by individual men and women, each working in their own self-interest; each seeking profit and plentitude. The new wealth is created and traded amongst those who combine the proper skills and resources, which in turn originated from still other producers, engineers, and organizers. Wealth is not found, and the vast majority of wealth was never consciously “distributed” in the first place. Wealth is created just as songs, poetry, and paintings are created, and it would make little sense to “redistribute” these items, though some may claim to suffer from an art deficiency. Should vast sums of art be usurped from the current owners and presented to anyone in need of a Monet? This is a preposterous question.

It should thus be apparent that goods tend to increase in number – that the “pie” (a terrible metaphor itself) expands – and that this occurs as the result of man’s efforts and industry. To deny that wealth increases is to deny the computer screen upon which this sentence is written. Understanding this concept – that wealth is created – is fundamental to any argument against “redistribution,” because by redistributing goods, one is changing the incentives which produced those very goods in the first place. Whenever goods are redistributed, it alters the mechanism by which they originate. If wealth grew on trees, it would be ill-advised to harm the tress, and it is similarly imprudent to harm productive individuals. Those people who tend to produce the most wealth are, in our society, typically labeled the “rich,” and it is these people whose incentives change when the product of their life and work are taken from them by force and given to someone else. The result, as one should expect, is for less production to occur in aggregate. When the rich have less to trade, less trade will occur, and society as a whole will suffer for it.

Society suffers because every dollar in the millionaire’s bank account represents more than one dollar of benefit gained by whoever gave him that dollar. When one sees a man with a million dollars, one should be thankful to him, because he has likely provided over a million dollars worth of gain to other people, for to obtain that money legally he is required to produce and trade. His million wasn’t “taken” from someone else; his dinner came at the expense of nobody’s breakfast. One could relatively easily audit the rich man’s bank account, highlight the deposits, call the depositors, and ask whether they received more in value than the amount of their deposit. The answer is likely to be… “yes.”

The rich man didn’t produce and trade to be generous; his sole intention was to help himself, just as the people with whom he traded were helping themselves. So long as theft and fraud are avoided, when people are permitted to help themselves, one can expect that people will tend to be helped. People will tend to be better off, because they are trying to that end; they are producing for that result. This, of course, was Adam Smith’s central argument; this was his revolutionary idea, as he famously suggested, “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” As such, it can be expected that by discouraging the self-interest of the butcher, brewer, and baker – by punishing them in the form of taxation levied upon their work – one is likely to discourage someone’s dinner, or someone’s breakfast, from appearing at the table.

When one grasps these concepts, the notion of redistribution quickly becomes preposterous. For the best way to help the poor is to allow the producers to produce, to their fullest and greatest capacity. By so doing, more wealth will come into being, and over time (though not necessarily over the time of a political term) the standard of living of people will tend to rise. Most importantly, living standards will rise justly and morally because they happened through the voluntary actions of individuals, instead of through the violent force of Government.

By engaging in redistribution, by handing Bob a welfare check, Government helps Bob at the expense of at least two other people: the unwilling wealthy man who provided the money, and the unknowing poor man with whom the former will no longer be transacting, for he has now been robbed of the wealth and the motivation to do so. Unfortunately, people see Bob smiling with his new check, and see the rich man who can certainly still afford dinner, and they rest easily believing that “the poor” have been helped by their forceful intervention and that the rich man resists only because he is selfish and uncaring. The other poor man, Bastiat’s crucial “unseen,” is the tragic victim who goes unnoticed as his business sells one fewer goods the next day. You can perhaps understand that he may be the next man in line at the welfare office – a second welfare check then required. And so it continues.

For anyone who values individual liberty (each man’s right to live his life as he sees fit so long as he respects the same right of others), the only compatible political system is one which gets out of the way so that unbridled production and trade may occur. For anyone who values charity (helping others who warrant assistance), the only compatible political system is likewise one which gets out of the way so that unbridled production and trade may occur. It is wonderfully fortunate for those who fall into both categories, like the author, that the solution to both concerns is the same. It is woefully unfortunate that society prevents the solution from occurring, believing us all to be stuck in a lifeboat with ever-dwindling rations. The irony is that the lifeboat is becoming increasingly applicable to our situation.

The Morality of Progressive Taxation

2009-06-14T19:48:00.015+04:00

To suggest that one man should be given the property of another requires the implication of a right. The claim that the poor have a right to the wealth of the rich is perhaps the most pernicious fallacy in our society, for by what right can this be so? In America, a man is alleged to have a right of property. This was one of, if not the most, fundamental assertions in the founding of the nation. This was the great breakthrough of America, that man owns himself and thus his property, and that he is free to do with either so long as he extends the same respect to other men. This is the very principle of “America,” that each man is free from theft and violence, regardless of whether the intrusion originates from other men or from the “State” which is, of course, just more men. Because of this simple principle, America became the great nation that it was (note the dismayed usage of past tense), with capitalism the inevitable social result and practical implementation of freedom and property rights.

Today, somehow, we’ve turned into a country where this prime principle of America’s founding is all but completely inverted. Today, a man only has a right to his property until a politician wishes to expropriate it. This means that no right exists in the first place. Rights today are an illusory relic from America’s past. Americans, now, do not own property by right but instead by permission from whatever administration happens to be in charge that year. Whatever a man earns, whatever he produces and saves, is no longer his. Instead, he merely is permitted to use it until it’s required “for the benefit of society.” Society is just a collection of individuals, so Americans must now surrender their earnings, the product of their life’s work on Earth, to other individuals at the sole discretion of Washington, or in other words, at the sole discretion of still other individuals. This is utterly antagonistic to the concept of America and will lead not to a “progressive” era of universal prosperity, but instead to a regressive era of universal mediocrity, at best. Wealth redistribution is not the policy of a nation of free men, but of slaves – each man to everyone else.

The question of “how much redistribution is appropriate?” is only applicable after society has decided that “redistribution” itself is morally legitimate. Clearly, today, the Government and most Americans believe that redistribution is indeed morally legitimate. However, it does not matter if 1% or 99% of a populace believe something if that something in question is supposed to be an inalienable right of man. If 99% of the nation votes that one man must give up his property to another, that does not make it legitimate. Men’s property, like their lives, are not supposed to be up for popular vote. Rights cannot be voted away, and in fact this is their defining attribute. When a man is taxed, he is working (he is spending his life) for the benefit of the recipient of those taxes. This is no different than slavery in principle, it is only a question of extent. 99% of the nation should not be able to vote a man into slavery. For the same reason, 99% should not be able to vote a man’s life into servitude through taxation. What is man’s by right is his by right, not by permission of his neighbors.

If private property is not a right of man, if America wishes to alter its founding principles, then let it proclaim loud and clear to the rest of the world that such is the case. If America does not value freedom, then let it proclaim as such. As politicians usurp men’s liberties, let them at least be honest about their activity. The nation has already implicitly and explicitly denounced capitalism, which is simply the combination of freedom and legal property rights, so why does America still hide behind the false pretense of liberty? America has become a nation of a fraudulent philosophy, proclaiming to be the beacon of freedom, though resting atop the same socialist tyranny that exists elsewhere in the world. When Russian newspapers condemn America’s policies as “overtly Marxist,” what further indication of impending tyranny is needed?

If some salaries are too high in this country, then denounce them as such and convince the men paying those salaries that they’re bargaining incorrectly. But do not legislate against other peoples’ right to trade their property as they wish, for you have no right to do so. If some people who are unable to help themselves are rotting under bridges, then organize charities to help them. But do not legislate the confiscation of one man’s wealth for the sake of those upon whom you personally take pity, for you have no right to do so. If the Government is so effective at allocating resources, then by all means hand yours over to them as an investment and convince others to do the same voluntarily. But do not assume that all people agree with your assessment of the fiduciary finesse of Government, and do not legislate that others must agree and submit to your investment strategy, for you have no right to do so.

By what justification does one man have the right to enjoy life at the expense of another man, if that other man has committed no crime? It is slavery, partial but in fact. If slavery is immoral in principle, so too is wealth redistribution, and for the very same reason. If wealth redistribution is moral in principle, then so too is slavery, and any argument against slavery must be made on the basis of degree, not of principle. Slaves must surrender 100% of their work to their master. Should slaves be freed because they simply endure “too much servitude” and all that’s needed to remedy the injustice is to tax them at a lower rate, something less than 100%? Or, should slaves be freed because men, by their nature, should be free? If a 50% tax is moral, but a 100% tax is not, then at what tax rate does the morality invert? Is it simply a matter to be left to popular vote? And if so, can America please openly proclaim as such, so that those still clinging to delusions of liberty don’t waste their breath in vein?

After all the taxes, today’s American must surrender 40-60% of the product of his work to other individuals at the discretion of still other individuals voted into power by the former. So I must wonder, is America supposed to be a nation where nobody is a full slave but everyone half so?

On Job Creation

2009-06-11T16:06:00.005+04:00

Obama’s plan to create jobs is very interesting and unexpected!

Let’s analyze this plan a bit… after all, important issues warrant analysis.

Each Federal Department seems to have the task of “creating jobs.” For example, quoting from Biden’s “Road Map”:

-The Department of Education will fund 135,000 education jobs
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways
-The Department of Justice will hire or maintain 5,000 law enforcement officers.

If we want to be honest with ourselves, we will acknowledge that there are the benefits of the job creation AND the negatives of the cost of the jobs. It’s fair to calculate the costs of a program, right?

For each department’s initiative, let’s just add one simple phrase to more accurately account for this cost:
-The Department of Education will fund 135,000 education jobs at the expense of the taxpayers.
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways at the expense of the taxpayers.
-The Department of Justice will hire or maintain 5,000 law enforcement officers at the expense of the taxpayers.

There’s a reason Obama leaves “at the expense of the taxpayers” off of his sentences, but let’s continue. In America, because of “progressive tax rates” the wealthy are forced to pay much much much more than everyone else. The top 5% of income earners (making about $150k or more) pay 60% of the nation’s tax revenue, or in other words, they pay the majority. The wealthiest 5% pay the majority of the taxes in America.

So we can rewrite this job creation plan more accurately still:
-The Department of Education will fund 135,000 education jobs at the expense primarily of the wealthiest 5%.
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways at the expense primarily of the wealthiest 5%.
-The Department of Justice will hire or maintain 5,000 law enforcement officers at the expense primarily of the wealthiest 5%.

We could actual abstract this plan to all government programs in the US as follows:
-The Department of ____________ will _____________ at the expense primarily of the wealthiest 5%.

Is it any wonder that politicians operate in this manner? All they must do is tax a very small minority and in return give “benefits” to 95% of Americans. Quite an obvious and intelligent tactic for anyone whose career requires popular support.

Is this a just society? If so, which principle of morality makes it just? If not, why do we allow it to continue? I understand why immoral mobs of beggars allow it, for they are receiving the handouts at the expense of 5% of their neighbors.

But, why do the 5%?

The Timeliness of the Broken Window

2009-06-10T16:58:00.003+04:00

Below is an excerpt from the Wikipedia article on the Parable of the Broken Window, Bastiat’s crucial principle which most of the world does not understand. Next time Government discusses “job creation,” consider the following ideas (GE’s life-support is equally applicable):

Some claim that war is a benefactor, since historically it often has focused the use of resources and triggered advances in technology and other areas. The increased production and employment associated with war often leads some to claim that "war is good for the economy." However, this is an example of the broken window fallacy. The money spent on the war effort, for example, is money that cannot be spent on food, clothing, health care, consumer electronics or other areas. The stimulus felt in one sector of the economy comes at a direct—but hidden—cost to other sectors.

More importantly, war destroys property and lives. The economic stimulus to the defense sector is offset not only by immediate opportunity costs, but also by the costs of the damage and devastation of war. This forms the basis of a second application of the broken window fallacy: rebuilding what war destroys stimulates the economy, particularly the construction sector. However, immense resources are spent merely to restore pre-war conditions. After a war, there is only a rebuilt city. Without a war, there are opportunities for the same resources to be applied to more fruitful purposes. Instead of rebuilding a destroyed city, the resources could have been used to build a second city or add improvements.
….
Special interests request money from the government (in the form of subsidies, grants, etc.), and the government then forces the taxpayer to provide the funds. The recipients certainly do benefit, so the government action is often regarded by the people as benefitting everyone. But the people are failing to consider the hidden costs: the taxpayers are now poorer by exactly that much money. The food, clothing or other items they might have purchased with that money will now not be purchased—but since there is no way to count "non-purchases," this is a hidden cost, sometimes called opportunity cost. Bastiat referred to this in his essay as "what is not seen". Because the costs are hidden, there is an illusion that the benefits cost nothing. Hazlitt summarized the principle by saying, "Everything we get, outside the free gifts of nature, must in some way be paid for."

http://en.wikipedia.org/wiki/Parable_of_the_broken_window

As examples of the popular prevalence of this absurdity in those who drive the opinions of America:
- Keynes famously suggested that, at times, it would be a good idea for the government to build completely useless pyramids so as to employ workers and get money flowing.
- More recently, Keynes’ lovechild Paul Krugman suggested that the destruction of the World Trade Center may benefit the American economy because “rebuilding will generate at least some increase in business spending.”

Keynes and Krugman are Nobel-winning economists. We really do still live in the dark ages of popular economic understanding. Llewellyn H. Rockwell, Jr., of the Mises Economics Blog, states it well, "[The Broken Window Fallacy] sounds like an unexceptional claim. But herein rests the core case against everything the government does. Perhaps, then, we can see why the allegory is not better known. If we took it seriously, we would dismantle the whole apparatus of American economic intervention."

For more comment, read an excellent article from Mr. Rockwell here: http://www.mises.org/story/2868

Big Credit and Big Government

2009-05-09T19:28:00.006+04:00

"Send me a bill that stops credit card companies from taking advantage of consumers, and do it by month's end, President Barack Obama is demanding of Congress" - AP

http://finance.yahoo.com/news/Obama-Send-me-credit-card-apf-15192120.html?sec=topStories&pos=main&asset=&ccode=

Yet again, the US Government is regulating voluntary actions between individuals through the use of coercive force. And, yet again, it is doing so under the false and self-defeating pretenses of "protection" and "fairness." Obama has taken it upon himself to protect every American by relinquishing them of their adult responsibilities and is in fact punishing credit providers for an offense his own organization is much more guilty of committing.

The purpose of Obama's regulation du jour is to prevent Americans from "being scammed" or "tricked" by manipulative credit card companies (I'm still awaiting the imminent moniker "Big Credit" to spew out of some populist Senator's mouth). Surely, nobody wants to be tricked, and for this reason it is likely Obama's scheme will have substantial support. After all, who wouldn't want to be absolved of their obligations to fulfill burdensome credit card contracts?

Let me first say this: If the credit card companies are actually tricking or manipulating their customers, then let the victims bring suit against these fraudulent actions. This is the way a lawful society works... upon breach of a law, the victim has the right to claim reparation.

Instead, Obama - with the full faith and encouragement of the US population, no doubt - is deciding that adults are not capable of being responsible for themselves because they have the possibility of misreading their mail and misunderstanding advertisements. I wonder if this will become a precedent for new avenues of Government intervention. I wonder if the same argument will soon be used to legislate peoples' mortgage contracts (given the recent issues associated with mortgage repayment). I wonder if Obama will be surprised when these policies make debt more expensive for the consumer (and the lender) and thus more burdensome and costly for society in aggregate.

Obama continues...
"Americans know that they have a responsibility to live within their means and pay what they owe, but they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees that have become all too common."

From this statement, Obama clearly wants to uphold the illusion of personal responsibility while in the very same breath demolishing the concept completely.

Further Obama states...
"You shouldn't have to fear that any new credit card is going to come with strings attached..."

What is an "attached string?" Could that refer to a "term" or a "condition?"
Translation: you shouldn't have to understand finance in order to obtain it.

Apparently, Obama has now mandated that Americans have the right to avoid "unfair penalties." Of course, one might consider that having 40% of his wealth seized from him by the IRS is an unfair penalty on his earned income, but it is unlikely Obama will include that obvious injustice within the scope of this new legislation.

Continuing...
"nor should you need a magnifying class and a reference book to read a credit card application."

How can Obama bash credit card companies for their complicated contracts when the US Tax Code is by far the most convoluted document in all of existence (is this an exaggeration?). Most people can understand credit card contracts if they actually read them. Most people cannot understand the Tax Code, if for no other reason than that its intricacies have required volumes of books to detail and its practice has become a full-time profession for thousands of people throughout the country. An entire industry has sprung up to help people navigate the tax code (or are they just profiteering?). The same cannot be said of credit card contracts. Now, it is true that these contracts may require some "thinking," but if one can't understand them, one doesn't have to sign up for the card in the first place. The same cannot be said of the tax code.

Obama is thus going to punish credit card companies for a crime that his own organization is most guilty of committing. The outlawing of "sudden rate hikes, unfair penalties, and hidden fees," is almost criminally ironic, for this description is utterly more applicable to US tax policy.

What is the real scam? Who is a bigger threat to Americans- credit card companies or the Internal Revenue Service? Who siphons off more money? Who provides a better service for the debts? Whose policy is easier to understand? Who's subjected to the competitive marketplace and who hides behind a coercive monopoly? Most importantly, whose service is voluntary?

All Americans are coercively forced to pay income taxes, subjected perpetually to sudden rate hikes, unfair penalties, and hidden fees. All Americans have the choice to take advantage of debt from credit card companies, subjected only to rate hikes, penalties, and fees which were stipulated upfront in their contracts (failing this the individual is entitled to sue).

So, really, is Obama’s latest cry for change directed at the right thing?

Paul Krugman is Smarter than You

2009-01-28T22:11:00.007+04:00

On January the 25th, 2009, Mr. Paul Krugman graced the world with a brilliant op-ed piece published (appropriately) in The New York Times. This piece is a "refutation" of the critics of Obama's massive government spending plan. I'd call it a "New Deal" plan but of course there is nothing new about it - logarithmic spending increase is the standard practice in Washington. When Obama speaks of "change," the size of government is certainly not up for consideration.

Paul Krugman is a very famous columnist, and recently he won the "Nobel Memorial Prize in Economic Sciences," an award just slightly more worthless than the US dollar would be if he were to be President. Fortunately for him, Obama will enact just about every policy Krugman lusts after, so maybe his next Nobel prize can cost-effectively be written on an actual dollar bill.

This article is called "Bad Faith Economics," which I think is a completely accurate title. The essence of the article is Krugman introducing arguments made by "conservatives," who are "reaching for any stick they can find with which to beat proposals for increased government spending." Making their job easier, however, Krugman provides a sufficiently large stick with which to beat himself. Whether conservatives choose to exploit the opportunity or not, I figure I'll take the first swing at the pinata.

So, let's analyze his article bit by bit. First paragraph:

"Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”

I'm not going to comment on Boehner's criticism, (the money shouldn't be spent period, regardless of whether it's buying condoms or a 5-month bankruptcy referral for GM) but understand how Krugman sets up his first point. First of all, he mentions that Obama's spending program is going to "rebuild infrastructure." Well, might one ask why, if government is so effective at everything, is the infrastructure in need of repair? Why do our roads need rebuilding? Why do bridges need new steel replacement? Why does the powergrid suffer? Interesting that the organization which has allowed infrastructure to decay is now being granted almost a trillion dollars to continue managing it. Second, Krugman speculates that the money will "sustain essential services." What services is he talking about? Roads? Electricity? Bridges? Weren't those covered in his previous remark about infrastructure? He must be referring to different services, like subsidization programs, wealth redistribution programs, pet-projects for the politically-connected, and school monopoly rackets. Whatever he's referring to as "essential services," if they were really essential then people would pay for them and no bailout would be needed. Krugman is, of course, referring to extremely expensive programs which, in a liberty-oriented, market-based society, would probably not exist. Whether or not one supports these programs, they are the kinds of non-profitable endeavors which sap wealth out of society. I wonder why Krugman then seeks to spend money on them in a time of "economic crisis." The reason is that Krugman, and most other incompetents in Washington, believe that a group of people can consume their way out of a recession. Perhaps I'm not smart enough to understand how a nation can spend it's way out of debt. But, Krugman won a Nobel prize! Well, so did Milton Friedman a long time ago. One of them is wrong.

Krugman's next paragraph has little substance, except for this great recommendation, "any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack." Does that sound like an intellectually honest, truth-seeking, scientific economist? This sounds similar to what the religious do... whenever someone disagrees with them, they write them off to hell.

Moving along, Krugman has one legitimate point:

"First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.
It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)"

Well done, Krugman, you can do math better than the Republican spin-doctor who crafted that misinterpreted statistic. Now you've convinced me that spending $800 billion of other people's money on roads, healthcare, and schools which your beloved monopoly has crippled beyond repair is legitimate and proper. And nice manipulation of children and their lunch money to pretend that you're actually helping people.

Now let's get to the REAL absurdities of the article:

"The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts."

Why is this absurd? Because Krugman is saying that a $100,000 price tag is actually only $60,000 because the government expects to be able to steal most of that money back again by re-taxing it. Of course, the real cost of the $100,000 is borne by the taxpayer, and when the mystical $40,000 is recuperated, not a penny will be going back into their hands. So, yes Krugman, the real price tag IS $100,000 and even if the price were just $10,000, I'd rather keep my money and hire an employee at my own company. What Krugman, and so many others, just don't get is that what the government gives, it must first take away. Maybe Obama can create thousands of jobs, but the wealth paying for those jobs was removed from somewhere else and the jobs that would've been created naturally will never exist.

Here we go again:

"Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money."

Write me off, Krugman! I understand that putting my money into ANY sort of savings account will bring me better yields than sacrificing it to the jaws of "Social Security." The fact that Krugman openly states that bureaucrats spend peoples' money better than themselves is appalling, but completely telling of why American is in such a mess.

But wait... it gets better:

"Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens."

Okay, this is the portion of Krugman's article that compelled me to write this essay. What Krugman is saying is that, if the government wasn't here to set up airport watchtowers, all the airplanes would crash into each other and we'd all die. Planes would just run into each other because government wouldn't be here to tell them not to!! How unbelievable is this guy!?!? Did he not consider the more likely scenario in which privately run airports would organize their own watchtowers??? Are private individuals so incompetant as to spend a billion dollars on an airport, billions on airplanes, billions on logistics, and then not build a watchtower and traffic control system to ensure those billions don't collide in midair? This guy is a Nobel Prize winner!!!

Feel free to read the remainder of Krugman's article, it attempts to counter a couple more paltry arguments against Obama's massive spending. This may be the best Krugman can muster to defend the government, and to be honest I think it falls short.

Rob from the rich and give to the fat

2008-11-24T21:25:00.004+04:00

Everywhere one looks, one can see the socialists engaging in the redistribution of property. It is not a new phenomenon, and it grows more extensive with every incoming freshman class. However, I was sent an article that makes me look once again at the absurd course the world is taking.

Article Link Here - Reuters

This article describes how The Supreme Court of Canada has ruled that "obese individuals have the right to two airline tickets for the price of one on domestic flights." Pause for a moment and re-read that statement if you must. This is not some peculiar, local district court ruling or some scribbled platform of a fringe advocacy group... this is a ruling from Canada's Supreme Court. It is now ILLEGAL for an airline company to charge the price of two seats when those two seats happen to be filled by one individual.

The thought of someone being so fat that they required two seats to fly is almost as disgusting as forcing the person in the third seat to ponder the fact that he is actually subsidizing the presence of the huge monstrosity next to him. Not only is the person in the third seat unable to go to the restroom when he pleases, due to the blockade, but he is also unable to spend $X on something else he desired, because a tiny portion of his ticket price will reflect the loss the airline must endure in light of the Supreme Court's decision.

Because, you see, by giving a fat person two seats for the price of one, that's the same as selling two tickets at half price. Halving the revenue of two seats will actually cost the airline more than it makes, because less than half of one full ticket price constitutes profit (few industries in the world can claim a 50% profit rate). The airline will thus be selling the fat man his tickets at a loss... which is the same as the airline paying to fly the fat man to his desired destination. An airline is just a group of people, so really this means that a group of people is being forced to fly the fat man to his destination.

Further, because the fat man can choose to fly whenever he so chooses, and because the group of shareholders must pay for his flight (either through direct loss, or opportunity costs, or slowed business due to budget restraints, etc), Canada's Supreme Court has essentially given the fat man the right to steal property from the shareholders. And the Supreme Court states it as a right! The Court proclaims the fat man has a right to the half-priced seats... so he thus has a right, a god-given right, to usurp wealth from those he desires service from.

Let there be no delusions that what is going on is in any way a just, moral, voluntary transaction. The price at which the airline is willing to sell the seat is not the price being paid, yet they are still forced to make the sale.

There is no fundamental difference between this scenario and one in which a man offers to sell an apple at a certain price, only to be forced to sell it at half that price. Can it honestly be claimed that a man owns an item of property if he has not the authority to set the price at which he is content to part with it? Can it honestly be claimed that shareholders really own an airline if their ability to set the price of its seats is not honored? What defines property if not the ability to utilize or sell as desired? Why, exactly, would one buy something he did not have the right to sell?

If private property is no longer honored, let society stand up and truthfully pronounce it. If the age of ownership is over, let the history books record this transition with integrity. If it is truely moral and just to take, by force, from those who have in order to give to those who have not, purely for the sake of ensuring the two groups are drawn ever closer together, then why all this meandering about? Why all this scribbling outside of the lines? Why all this pretending that property rights still have a place in society?

This is an issue of ownership over one's property. Do we, as a society, respect private property? It doesn't seem to be the case. It should not matter whether legislating the rights of an individual or a group of individuals, the pillar of private property is essential to any society that can be considered just and good by order of being voluntary. A society that abandons property must fall ever into the darkness of force and violence, and any Court that advocates violence in order to alleviate the lives of fat people is no Court to be respected.

There is nothing new about socialists or "egalitarians" trying to bolster the situations of the underprivileged. It is noble to care about the downtrodden, and real charity is always to be commended. However, the problem with socialists is that they do not provide charity, rather they "help" the downtrodden by downtrodding upon others. They give to one person by taking away from another. They steal, or "redistribute," property from Group A to Group B, thereby patching up the wounds of one by inflicting wounds on the other. Why this is not real charity is a question for another essay. Needless to say, socialists accomplish their moral goals with immoral acts and this is made frighteningly stark in Canada's ruling.

Richard Fuld and the Crooks

2008-10-27T22:09:00.006+04:00

On Oct. 7th 2008, amidst falling financial markets and looming global recession, I found this photo. After looking at the photo for several minutes, I’ve gotten angry.

For those who aren’t sure what this is a photo of… it is the CEO of Lehman Brothers, Richard Fuld, as he exists a congressional hearing that took place on Monday Oct. 6, 2008. I watched much of this hearing from my living room in Dubai as it was broadcast live on CNBC. He was called before the congressional hearing because congress will be investigating the months leading up to the collapse of Lehman Brothers (the company filed for bankruptcy last week). As is apparent in the photo, Mr. Fuld is being heckled by some angry and passionate individuals. The one pink paper slip in the background sums up the sentiment perfectly… CROOK.

So what am I upset about? Here it goes…. Richard Fuld, a man who has spent his entire life working for Lehman Brothers, a man who has worked his way up through the ranks of the company over decades, a man who, presiding as CEO, led the company through the greatest growth it had ever experienced, a man who had more invested in Lehman Brothers, both financially and emotionally, than perhaps any other individual, is now being racked against the boards. He is being punished, ridiculed, berated, embarrassed, tarred, feathered, and chastised for what has occurred, not just to Lehman Brothers, but to numerous financial institutions and markets around the world.

Richard Fuld is a man who, until now, had been utterly successful, utterly deliberate, and utterly passionate about his business. He is what some consider a Great Man, a mover and shaker, a player in the game of industry. He was someone who, simply put, is a man better than many others, because he accomplished more than many others. He achieved more than many others. He pulled the world forward as only real leaders are able. He made his fortune, not by theft or deceit, not by violence or coercion, but by organizing and leading others through the noise of the modern world.

However great he was, however, his success came to an end. Whether it was his choices that led Lehman over a cliff or actions of others he could neither control nor was not aware of, the company collapsed and he, as CEO, can rightly be blamed (at least in part) for its demise. However, the anger and ridicule Richard Fuld is facing has little to do with his strategic decisions, with his leadership skills, or with his incorrect assessment of the inherent risk in credit derivatives and default swaps.

The members of the panel in the congressional hearing were not condemning Fuld’s management (of course, the market does this without “help” from the Government). Rather, they were condemning him for being wealthy while others are poor. They were condemning him for having much while others have little. The man was being torn apart from one side by covetous vultures and from the other side, a gang of thieves. These people, who do not even understand the financial industry enough to legitimately criticize Mr. Fuld, ripped him limb from limb in front of the entire world.

Mr. Fuld is being lambasted because he has money, because he stands taller than those sniveling commoners who, unable to generate their own wealth, spend their lives writhing in the mud of jealousy, leeching off the producers of the world. He is being torn apart because politicians, not satisfied with the billions of dollars in taxes they have wrested from the involuntary pockets of Lehman Brothers, its employees, its stockholders, and Mr. Fuld himself, are now, in the form of an inquisition, demanding that he explain to America why he still has millions of dollars while 20,000 employees have lost their jobs (the same jobs which upper management produced, of course), as if he has stolen something from both society and his own employees. How is it, I wonder, that Mr. Fuld is justly derided for the salary that was voluntarily given to him by the owners of the company, the owners of that salary before it was transferred to him, yet the Government – which seized through force of imprisonment – billions in taxes from the company, takes no blame for the collapse? How can this be?

However much money Richard Fuld brought home as legitimate compensation for his work, exponentially more was illegitimately wrested from Lehman Brothers by the Government. For every dollar that Fuld took home, the Government took a hundred. And while Fuld earned and worked for his dollar, the Government simply claimed a hundred as their own, expecting payment else threatening imprisonment. Yet, it was Fuld that was the criminal?!? How dare the politicians sit around in their counterfeit thrones and condemn the man who led one of the very organizations which paid for the gavel being slammed down upon him.

The Government cloaks its own purveying of misery and economic suffocation behind the fines and condemnation it slaps on others. It steals the earned money of men and then howls at them for earning it.

This tearing apart of a great individual, not for valid reasons of managerial disagreement, but for jealousy and deception, is why this photo makes me angry. As Richard Fuld leaves the stone pillars of the courthouse, no doubt manufactured and engineered by the genius of private industry and paid for with the stolen profits of business leaders before him, it appalls me to see Fuld being labeled the crook while he’s dragged down the steps of an organization that funds itself at the point of a gun… while the rest of America watches and spits on him- not even close to realizing who the real villains are.

Hadron Collider

2008-09-18T19:49:00.002+04:00

http://edition.cnn.com/2008/TECH/09/10/lhc.collider/index.html

While this article makes me all excited about science and the future of mankind, apparently most people think this whole thing was a big waste of money and instead that money should’ve been spent on food for starving people.

The comments below the article are so utterly depressing and misguided as to make me think that the creation of a spontaneous black hole here on Earth would be a wonderful development if only to consume those ignorant, pretentious hippies with a MacBook and a Fair Trade coffee sitting around doing nothing but contributing these ridiculous opinions. If they think more money should be given to the poor, they are well within their rights to go make some money and donate it! Trading in their VW and Birkenstocks would be a good way to get some seed capital…

Comment example one: “Huge waste of time and money. The big bang has never been proven, it is a theory ONLY. How can you have nothing and then it blows up. Get a life.” – Charlie

Comment example two: “This much of money can be diverted to uplift backward African nations who are dying of hunger and famine. Moreover the scientists should have read THE HOLY BIBLE to know how excatly the creation started and what exactly the matter is.” – Prem Kanchi

Ugh! This is why I increasingly despise democracy.

Of course, on the issue of funding, to the extent that this was funded by Governments is the extent to which I don’t think it should’ve been funded. But damn is it cool!

Tax Shelters and Senators

2008-07-20T19:35:00.028+04:00

GENEVA (AP) --A U.S. Senate subcommittee accused banks in Switzerland and Liechtenstein of helping wealthy Americans evade billions in taxes each year, and urged the establishment of tougher laws to combat offshore tax havens around the world. -July 20 2008

http://www.usatoday.com/money/economy/2008-07-17-3298944891_x.htm

The above article discusses the U.S. Senate's outrage over banking practices in several infamous European banking centers, notably Switzerland and Lichtenstein. The real tragedy in this story isn’t that money is being sheltered, but rather that so much more money isn’t able to be protected. The real culprit is the IRS, not the private individuals who are brave enough to resist taxation of their wealth.

Some of the claims made and terminology used by the Senators should be profoundly disturbing to anyone who values the right of people to keep what they earn. In the article, the Senate subcommittee states that, "offshore abuses cost U.S. taxpayers about $100 billion a year." This is a false statement. By holding one's own money, without ever agreeing to surrender it, Mr. Levin is incorrect to claim that this withholding causes a loss for others. No money has been lost. On the contrary, the tax shelter prevented money from being lost. The tax shelter saved money for the taxpayer. One party, however, did suffer a loss, and that was the US Government.

Sen. Carl Levin suggests that, "tax havens are engaged in economic warfare against the United States and the honest, hardworking American taxpayer is losing." This is essentially the opposite of what is occurring. It is the US Government which is engaged in economic warfare against the foreign banks. The banks have hurt no one. The banks have stolen from no one. The banks, in fact, do everything they can to avoid confrontation. They are indeed being punished for their very remoteness. The IRS, on the other hand, has at its disposal all manner of economic weaponry, including the full force of the US Government and the tremendous economic pressure it is able to assert. The IRS has its economic guns blazing; the European banks haven’t fired a shot. If warfare is occurring, only one side is able to use force.

Sen. Norm Coleman of Minnesota stipulates, "It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the burden." Are the private bank accounts of wealthy individuals forcing working families to shoulder their burden? Or, is it the US Government which is forcing working families to shoulder the burden? Is it UBS causing the average American to work four or five months out of the year for the State? Or, is it the US Government? Is the “honest, hardworking American taxpayer” losing? Yes, he is losing because he is being taxed, and it is certainly not the Swiss banks which have levied the taxes.

Suppose Switzerland decided to suddenly hand over $100 billion in sheltered tax money from its clients' accounts, would that $100 billion be returned to the U.S. Taxpayer, thereby alleviating the "burden" placed on hardworking Americans? No, of course not. The $100 billion would be given to the U.S. Government and would be promptly spent elsewhere. No matter how much money UBS surrenders to the IRS, the burden on American taxpayers will not decrease. On the contrary, the burden on those taxpayers who were attempting to protect their property will greatly increase to the extent they are unable to protect it. There is a net increase in aggregate taxpayer burden for every dollar obtained by the IRS. There is conversely a net decrease in aggregate taxpayer burden for every dollar shielded from the IRS. If the Senators wished to protect taxpayers, they would encourage capital flight overseas. Clearly, it is not the taxpayers whom they wish to protect, it is their dear ability to spend.

The Senate subcommittee, through its rhetoric, has managed to swap the Taxpayer and the Government, making the Taxpayer look like the victim when in fact the Taxpayer is a victim only after the Government successfully taxes him. In other words, taxpayers are victims because they are being taxed by the Government, not because a few of the taxpayers are able to figure out how to avoid the crimes being committed against them.

Consider a metaphor – say there are ten people walking down an alleyway late at night, going about their business and trying to get home to their families. Then, two men with guns ambush them and demand their money (15% to 45% of it, depending on how much they made that day). Nine of the people willingly hand over their money, scared to resist, but the tenth person is able to hide during the confusion and get away from the thieves. For the thieves to then turn around and say to the victims, "hey, one guy didn't pay us, which will cost you another 100 bucks!" sounds pretty unfair and distorted. Yet, for the victims to then believe the thief, and willingly hand over their money whilst placing blame with the one guy that got away? That is absurd, but that is what’s happening.

Another metaphor – if a women gets robbed, but the thief is unable to break into her neighbor's home, does she curse the thief or does she curse the neighbor? This tax shelter article describes the thief cursing the neighbor, and then blaming the neighbor for robbing the woman! Unfortunately, the press and the American public tend to side with the thief.

We would all do well to remember that it is not the taxpayers as a group who lose out when certain individuals among them hide their money, it is the Government. When one shelters his money, it is the Government that loses revenue, not one’s fellow taxpayers. It is through the deliberate confusion of the two that U.S. Officials are able to convince the public that tax dodgers are evil criminals. Swiss banks don't cause taxpayers to lose $100 billion per year, rather, they allow them to retain $100 billion per year, preventing it from being lost in the perpetual circus that is Government “service.”

Hiding the money that one earns is not unethical. It is not wrong, immoral, or in any way malicious. The fact that protecting one’s property is illegal is indicative of the sad state of the Union. Those individuals evading taxes should not be vilified; rather they should be applauded for standing up to the thieves.

Article Excerpt from Time.com

2008-03-17T22:35:00.005+04:00

-----------------------
Do Americans Care About Big Brother?
Friday, Mar. 14, 2008 By MASSIMO CALABRESI/WASHINGTON

Pity America's poor civil libertarians. In recent weeks, the papers have been full of stories about the warehousing of information on Americans by the National Security Agency, the interception of financial information by the CIA, the stripping of authority from a civilian intelligence oversight board by the White House, and the compilation of suspicious activity reports from banks by the Treasury Department. On Thursday, Justice Department Inspector General Glenn Fine released a report documenting continuing misuse of Patriot Act powers by the FBI. And to judge from the reaction in the country, nobody cares.
-----------------------

Must it come to another revolution in the future? Seems this is the case. -Erik

We better get ourselves out of it.

2008-03-17T22:15:00.007+04:00

…Democrats accused Bush of not doing enough to relieve the situation.
"Now we are in the soup and we better get ourselves out of it before the consequences get drastic," Democratic presidential contender Hillary Rodham Clinton told reporters.
http://biz.yahoo.com/ap/080317/fed_credit_crisis.html [excerpt from AP]

The above was recently stated by Hillary in response to the incredible market turbulence we’ve seen this past week (most recently triggered by the Bear Stearns collapse). So I wanted to analyze the statement a bit just as I did with Obama in a previous post.

The soup Hillary is referring to is the “credit crisis” or “subprime mortgage meltdown,” which both refer to a destructive phenomenon in US markets that started last summer. To explain it briefly, for several years now banks and other lenders have been lending money at increasingly attractive rates and terms. As you know, when you go to a bank to get a loan the bank takes your information and decides what terms to give you based on your “risk factors.” If you have lots of debt, low income, or a history of late payments, you will not get as much money or as good of terms as someone like my mother, who keeps track of money perfectly and always pays bills on time. So, banks had been steadily “lowering the bar” when it came to the individuals they would choose to provide loans to. Suddenly, this past summer, the banks started realizing they had lowered the bar too low, and too many individuals were defaulting (not paying back) on their loans. Banks can always handle some degree of non-payers, but these “sub-prime” defaulters were growing in number and the banks started to lose (lots of) money. Instead of making money on subprime loans they were now losing money, because they had set the bar too low- lending to people that they ought not to lend.

Thus, we have the “mortgage meltdown.” The effects and subsequent collapse of financial institutions, which were leveraged increasingly on subprime mortgages, has been occurring ever since, and nobody really knows how bad it is or will get. This is why the stock market has been so volatile during the last 8 months… every piece of good news makes investors think the subprime crisis isn’t so bad and every piece of bad news sends investors into remorse.
Hillary Clinton, when she refers to “the soup,” is trying to address this crisis and obviously blames the Bush Administration (because Bush is a Republican and she’s a Communist). She may also soon blame Obama. So let’s examine the quotation above… "Now we are in the soup and we better get ourselves out of it before the consequences get drastic."

First of all, what is her thesis? What is her helpful message behind the rhetorical metaphor? Her message, I think, is, “Americans are all drowning in a broken economy mismanaged by the Republicans and us Democrats know exactly how to fix it.” But who, exactly, is actually harmed by this so-called “crisis?” By the way, the founding fathers of America should have stipulated that politicians never be permitted usage of the word “crisis,” for it is slung about much too frequently and is always followed by the suggestion of new government programs and regulations. Never will you hear a politician use “crisis” to describe the actual government (other than Ron Paul)… though that is perhaps the only legitimate usage of the word. Anyway, who is harmed by the subprime crisis? Is it every American? Is it only certain Americans?

Fortunately, there is a super easy way to find out who is harmed by it… and that is to look at individuals that were exposed to certain types of financial risk (namely those related to the housing or stock markets). Those people that were exposed to the housing and stock markets are the ones who are “in the soup.” For many people, the subprime “crisis” will hardly affect them at all. For example, if you are a normal American that rents a home or apartment and does not have equity in the stock market… I don’t think you’re much affected by this “crisis.” Likewise, if you are a homeowner that got a mortgage on terms you could actually afford… I don’t think you’re much affected by this “crisis.” Who is most affected? Banks, who exposed themselves voluntarily to tremendous risk and stock equity owners, who did the same. Or, if you are an idiot that took out a mortgage for more than you can afford, and suddenly your rate skyrockets because the bank wakes up and realizes you are risky… you are likewise in big trouble right now.

The point is this: the only people really swimming in the soup are those that dared to walk around the outside of the pan, either out of ignorance or profit seeking. Sure, many Americans will be indirectly affected (as in any interconnected market) because of this subprime phenomenon, but the only ones really in trouble are those who accepted certain risks. That’s what risk is… RISK! And unfortunately, she’s not really suggesting “we get ourselves out of it” but rather that the Government does this for us. Am I misreading her?

So what do I think should be done to get people out of the soup? Nothing. Nothing on the part of the Government, at least. The people that made bad decisions should make better ones… can’t we leave it at that, please?? Must the Government always act when someone is having a bad day? Is that its proper role? Some banks made mistakes and they’re paying (heavily) for it. Some individuals made mistakes and they’re likewise paying for it. End of story. Be responsible.

Hillary sees some people suffering (resulting from their own actions), slaps the label of “crisis” on it, applies it to all of “America,” and then leverages the resulting heap of smoldering, rhetorical garbage to propel herself into office with golden promises of remedy.

Shame on you, Hillary.

Currencies and Indians

2008-03-16T21:44:00.004+04:00

Below are two interesting, interrelated articles about globalization and the macroeconomics of Dubai.

http://edition.cnn.com/2008/BUSINESS/03/14/federal.crunch/index.html
http://edition.cnn.com/2008/BUSINESS/03/14/labor.mme/index.html

I believe both articles are actually good news for me, living over here. The first one describes how, because of the falling dollar and UAE’s currency peg to the dollar, the UAE is actually suffering from America’s falling currency. Why is this good for me? Because I believe that in 6-18 months the UAE government will un-peg the Dirham from the Dollar (the government has been meeting about this very issue recently, and it’s all over the newspapers here). Upon this event, the Dirham should shoot up, because it’s being artificially held down by the Dollar. Suddenly, instead of having $10,000 worth of Dirhams in the bank I’ll overnight have perhaps $11,000 worth. As the Dirham appreciates relative to the dollar I will continue to benefit, especially if I decide to move back to the US at some point in the future. The second article discusses the rising costs of labor along with cement and steel. This is obviously happening because of the construction boom not only in Dubai but throughout the GCC. This will cause A) fewer buildings to be constructed because the profit margins will be lower and B) demand for housing will further outpace supply, meaning my apartment will appreciate! At the very least this should help delay any housing “bust” that some have predicted in this part of the world (I don’t buy it). To all you economists out there… am I making any incorrect claims here?

What I love about all this is watching (relatively)free-market capitalism in action. The boom over here, fueled by low taxes and trade combined with capital-rich wealthy people, has put heavy demand on labor. This first provided jobs to hundreds of thousands of Indians and now it will mandate that their salaries are increased as construction companies have to bid up their offerings to meet demand. So, from several thousand wealthy people we now see hundreds of thousands of poor Indians getting what they consider to be great opportunities. The money they remit back to India (as most of them do) will in turn help develop their poverty-stricken villages back home. Maybe now they can have bread that is a little less moldy and water that is a little less bacteria-ridden. All this resulting from self-interest and a bunch of greedy bastards that want nothing more than the latest Ferrari… it’s beautiful. Too bad so many Westerners see the Indians working for less than they themselves think appropriate, and dismiss the successes over here as some abhorrent, immoral mixture of “oil and slaves.”

Unfortunately, however, the government here has just decided to put a price cap on several basic food items throughout Dubai. I know, I fainted also! Further to my horror, a number of letters to the editor of Gulf News hailed this move as “smart and necessary.” I hope this is an isolated hiccup in an otherwise enlightened economic policy. If the Arabs start becoming communist, I don’t know where I’ll go! Maybe Richard Branson has a private, undersea society that I can join?

That frond is not yours...

2008-02-18T22:52:00.008+04:00

From what I've read in numerous places online, there seems to be rampant American disgruntledness (is that a word?) regarding Dubai's exorbitant wealth in specific and the decadence of certain Gulf societal segments in general. I first noticed it a little over a year ago when a certain email was forwarded to me. This was one of those emails that is of such interest to people that it is forwarded thousands of times and makes its way seemingly around the entire internet. As proof of its popularity, I have received the same email (with slight variations) about half a dozen times since then, from contacts that have just now seen it and are continuing to forward it on.

Anyway, the email I am referring to is about the Dubai megaprojects. All the big poster-projects that have put Dubai on the map are listed in this email, including The Palms, The World, Dubailand, Burj Al-Arab, Burj Dubai, The Waterfront, Ski Dubai, etc etc etc. For each project, there is a picture (usually an artists rendition) and a small caption detailing the hype and fascinating statistics of the project depicted above it. So, as you read through the email you get a taste for the stunning things going on in Dubai and the projects are indeed so ambitious and impressive that the result, I believe, on many people is to make them... jealous. When certain Americans see these amazing things being built not in the great United States but rather in some unheard of "emirate" in the Middle East, there is a notable component of jealousy in their reaction.

At the bottom of the email, after one reads about and sees all the incredible projects in Dubai, is always some commentary. This commentary is very sarcastic and elitist, and reads something to the effect of, "you're paying $3 per gallon so the Arabs can ski in the desert!" While this snide remark is obviously made in jest, the inference is that the only reason all these amazing projects are happening is because THE AMERICANS are spending so much money on oil.

This allows the jealous Americans to feel that they are still somewhat responsible for the blossoming oasis that is Dubai. By tying all of Dubai's success to oil profits, it removes credit from the numerous individuals and corporations that actually built the projects and gives credit back to the Americans. It lessens the guilt Americans feel for not building these megaprojects themselves (to understand why America is not building great things, read my other posts). Whenever a new skyscraper goes up in Dubai, Americans waive it off by pretending its really their own money with which it was constructed. Every floor of the latest 110-floor tower equates directly to the last several refills at the pump. One can almost point to a specific frond on The Palm Jumeirah and claim, "that's the one I paid for!"

Well I hate to break it to you, America, but you didn't pay for that frond. You paid for a barrel of petroleum. You bought a product, a gallon of gasoline refined from oil, and you paid a specified price to obtain it. The deal ended there. You got your gasoline, the refinery made some profit (as did the gas station and a thousand others in the supply chain) and thus the deal concludes. All you can claim credit for is the gasoline you acquired and the resulting benefits you derived from it.

Credit for the megaprojects in Dubai should be given where credit is due. The investors who risked millions on crazy ideas, the entrepreneurs who opened up new avenues of business, the artists and architects who designed the projects, and the Government in Dubai which has realized - more than the American Government - that open trade results in great things.

So, Americans, keep enjoying your Dubai megaproject emails. Sit back in your comfortable mediocrity, keep allowing the US Government to rob you of your wealth, and keep pretending it will move you forward. Meanwhile, places like Dubai, which increasingly allow markets to operate without the interference of the misguided democracy, will simply pass you by as Obama coaxes you into serfdom. The frond is not yours.

American Wahhabism

2008-02-12T20:51:00.000+04:00

The term "Wahhabism" refers to a sect of intensely strict Islam, most famously practiced in Saudi Arabia (although it is not isolated to that one country). Wahhabism was founded by Muhammad ibn Abd-al-Wahhab, who preached against "moral decline and political weakness." The result is that in places like Saudi Arabia there is a governmental "Committee for the Propagation of Virtue and the Prevention of Vice." The name well describes the purpose.

So, in light of the above, I was reading an article on CNN's World edition about how this Virtue and Vice committee bans Valentine's Day in Saudi Arabia. Not only is it illegal to celebrate the holiday, but it is illegal to sell any red or pink Valentine's items (such as cards, balloons, flowers, candy, etc.) Non-marital "love" is seen as wrong, and thus the Saudi Virtue Committee bans any symbols of love for Valentine's. Pretty crazy, huh? Realize that this is not just a case of the Government not recognizing a holiday, but rather SENDING TO JAIL those who celebrate the holiday in any way, no matter how discreetly and privately.

Now, you probably think it is absolutely absurd that the Saudi government has made the celebration of Valentine's day illegal. And, if you are thinking this, you are correct! It is completely absurd and utterly immoral. But ask yourself, why do you think it's absurd? Why is it wrong for the Saudi government to criminalize Valentine's Day, pink balloons, and love cards? Think about the answer to this question for a minute before proceeding.

The reason that I personally think Valentine's persecution is wrong and absurd is because I don't believe the Government, any Government, has a right to enforce morality on people. At first, most Americans would agree with me. But unfortunately, most Americans also support an American Government that is engaged in the EXACT SAME ABSURDITIES as the Committee for the Propagation of Virtue and the Prevention of Vice.

While America calls itself a "free country" and chastizes Saudi Arabia for enforcing moral codes, the reality is that the American Government enforces numerous moral codes itself. It is hypocritcal for Americans to condemn the Saudis for moral policing when, in America, it is illegal to swear on the radio, it is illegal to study stem cells, it is illegal to clone humans, it is illegal to smoke marijuana, it is illegal for women to walk around topless in public, it is illegal for gays to get married, it is illegal to eat trans fats in New York City, and even the very currency states that it is "In God" which Americans trust. All these rules and standards are nothing more than moral codes enforced upon the public by the Government, just as in Saudi Arabia.

Perhaps it is a majority of people who support these American rules and thus what right do I have to decry them? Well... perhaps a majority of Saudi's support the banning of Valentine's day and the stoning of women who commit adultery? The assertion that rules are valid simply because a majority of people support them is ludicrous. Certainly the majority of "bad" rules throughout history had popular support at one point or another. Was slavery ethical simply because most people voted that way?

The only ethical standard by which "right" and "wrong" should be judged is the extent to which involuntary exchange has (or has not) taken place. Whenever there is an involuntary exchange, there is a crime. The extent of the involuntary exchange should dictate the extent of the punishment. Voluntary exchanges are not crimes, because no person has been harmed by anyone except, perhaps, by themselves... and no person has the right to punish another for damage they do against themselves.

For example, stabbing someone should be a crime because the victim was involuntarily forced to give up his health. Stabbing yourself should not be a crime, however, because the loss of health was voluntary. Rape should be a crime because the victim is involuntarily forced to give up part of their body. Stealing gasoline should be a crime because the exchange of goods is not voluntary. Buying gasoline should not be a crime, however, because the exchange was agreed upon by both parties.

Judging by this standard, none of the above American rules should be considered crimes and thus they are simply "moral codes" being enforced by the Government (funded, ironically, by involuntary exchanges in the form of taxation). Likewise celebrating Valentine's Day in Saudi Arabia should not be a crime, either.

Whether a Government is forcing citizens to not marry if they're gay or not buy pink balloons because they're not married, it's difficult to deny that both are simply the enforcement of moral codes upon the population. When gays marry, no involuntary exchange has taken place. Likewise, when pink balloons are purchased, no involuntary exchange has taken place. No crime has been committed in either situation, yet the Governments of America and Saudi Arabia insist on regulating the activities.

If you oppose the jailing of pink balloon salesmen and the stoning of Saudi women, in order to be logically consistent with yourself you must also oppose the jailing of marijuana salesmen and the censorship of radio language. It may be uncomfortable to realize this, but hypocrisy is uncomfortable for a reason. Both America and Saudi Arabia have a Committee for the Propagation of Virtue and the Prevention of Vice. Both America and Saudi Arabia practice their own form of Wahhabism.

Ahmed Al-Omran, a university student and blogger in Riyadh, in response to the Valentine's article, told CNN:

"I think what they are doing is ridiculous," said Al-Omran, "What the conservatives in this country need to learn is something called 'tolerance.' If they don't see the permissibility of celebrating such an occasion, then fine -- they should not celebrate it. But they have to know they have no right to impose their point of view on others."

Brilliantly stated, Al-Omran. Unfortunate that it is so hard for people, both in Saudi Arabia and in America, to accept it.

Rhetoric and Meaningless Blathering

2008-02-05T10:53:00.000+04:00

As we head into Super Tuesday, all candidates are campaigning in full force (force is a fitting word to use when discussing politicians). In New Jersey, on Monday, Obama was making an appearance for this very reason. Here is a quote from this appearance, taken from CNN.com:

"I have said repeatedly that this campaign is about bringing people together. And for me to be able to bring a Patriots fan to the Meadowlands the day after the Super Bowl is like bringing the lion and the lamb together," Obama said. "We can bridge all gaps and all divisions in this country."

Now, I understand that this was probably said during a lighthearted introduction, helping Obama break the ice whereafter he followed up with meaningful discourse. But, come on! His campaign is about "bringing people together???" And this is something he says repeatedly? Is this one of his platforms... bringing people together?? What a bunch of mindless rhetorical garbage. And what does that mean, to bring people together? Does it mean that Obama has helped individuals who used to have differing opinions to now unite under one set of specific policies? Or, does it simply mean that Obama is so vague in his platforms that few people can honestly say they disagree with anything he says. I don't predict that Obama will ever be able to "bridge the gap" that I feel with him and all the other politicians who yearn to "help" me precisely because they want to use force, not voluntary choice, to do rediculous things like "bring people together."

Obama, of course, is not alone in this type of meaningless feel-good slurry. All the politicians do it to some extent (Ron Paul least of all). Obama and Hillary are the worst on the Dems side and Romney the worst on the Reps side. Interesting that those candidates are also the frontrunners. I guess the public just wants to feel good when they listen to politicians. They want vague, comfortable messages that are uncontroversial and friendly-sounding. Oh, and let's follow up the "bringing people together" line with a Super Bowl referrence to back up our point! You can't argue with the Super Bowl.

When half of our wealth is forcefully confiscated by the Government, the fact that people sit around smiling contently as they listen to comforting rhetoric from charismatic politicians is just disgusting to me. It's easy to tell a group of your fans that you're bringing people together. But it's the politician that tells me he'll leave me alone that will get my vote.

Wal-Mart Thoughts

2008-02-04T23:43:00.001+04:00

This poster should read:

-PROPAGANDA-

"Hippies pretend it's bad but can't wait to use it themselves"

To properly discuss the dynamics and impacts of Wal-Mart, much more than a blog post is required. But I wanted to at least write down my fundamental contentions with those who spend their time hating, what is essentially, capitalism. Wal-Mart has become an icon for everything people want to hate about capitalism and the more successful Wal-Mart becomes, the easier it is for disgruntled individuals to despise everything it does.

To those unfamiliar with the battle raging over Wal-Mart, there are two major branch issues. In this post I will just be addressing the first one.

1) It destroys small town-life and puts “Mom & Pop” stores out of business.
2) It treats its employees so poorly that outrage is required.

The story goes that first Wal-Mart gets it’s greedy sights on a new town. It then moves in, taking up a huge lot, and within months it puts numerous stores out of business because they cannot compete. Then, the workers at those closed shops must now find new jobs, and the only company hiring is Wal-Mart, so they are forced to work there in close to slave conditions. In this way, Wal-Mart destroys the town, putting family businesses out of work and then paying the population close to nothing.

It’s a sad tale, to be sure. It was also a sad tale when all the ancient cave diggers were put out of business by the humans who started building houses. Likewise, when big butter conglomerates came along, all those poor family-run butter-churn producers were forced to look for work elsewhere. It was sad when coal miners lost their jobs as machines took over and it was sad when whalers lost their jobs when new lamps no longer used whale oil. It was sad when the medieval scribes lost their jobs due to the printing press, it was sad when the typewriter factory was shut down, and it was sad when giant IKEA undercut all the local furniture stores in Europe. Perhaps you’ve also noticed how sad it is that 99% of the farm families have lost their jobs to mega-corporations. Almost everyone used to have a nice, cushy farm job until efficiency and innovation eliminated those jobs as well…

Look, competition is cruel and harsh. It forces everyone to be constantly afraid of losing their jobs and their customers. The result of this over time? Innovation, efficiency, quality, options, and WEALTH. The world is made wealthier every time someone loses their job due to a competitor undercutting them. When Wal-Mart comes into a town and puts everyone else out of business (because consumers choose to shop there, I might add) we should cheer and celebrate. It means the town has become more efficient as it is now able to deliver more goods, at lower prices, with fewer people working.

When more wealth is created in society, through innovation and efficiency increases, investment capital becomes available. Entrepreneurs seek out the capital and start entirely new businesses, hiring people to help them build further wealth. For each job lost to efficiency, two more are gained somewhere else. Remember the Earth now has over six billion people, and unemployment in developed, capitalistic societies is generally quite low. Almost everyone that wants a job has a job, regardless of the fact that huge megacorporation are out there undercutting everyone and putting them out of business all the time! In reality, it is in fact DUE to the megacorporations’ ruthless greed that our growing society is able to keep creating more jobs and more wealth seemingly out of thin air. We should all take a moment to thank Wal-Mart, for the economic blessings it provides to society… and all through voluntary interactions (which is more than any “benevolent” Government program can claim).

This brings me to my final and most important point:

If you don’t like Wal-Mart, don’t shop there. It is their choice to offer their product at any price they see fit and likewise it is your choice to purchase or avoid it. If you want Wal-Mart out of your town, perhaps you should take your picket signs over to your neighbor’s house and explain to her that you’d prefer she pay more for her products and spent more of her time running errands. I promise, Wal-Mart will stay out of your town if the population doesn’t ask it to stay.

2008-02-04T23:07:00.000+04:00

[Subject: National ID/Real ID - Political email sent to family 23.01.08, written within context of illegal immigration issues]

---------------

Koert, Kristen, and others,

Regarding a National ID card, it is one of those things that sound so appealing on the surface, but then if you project into the future how such a thing may be used it becomes increasingly frightening. All in all, if there were a National ID card and it was OPTIONAL/VOLUNTARY, then I wouldn’t be very upset about it. It may help a lot of people and could be a good thing for society. This is true so long as the card STAYS optional. But the purpose of the National ID card when speaking about immigration is totally void if the card is optional. So, you can either have a mandatory National ID card that will help control immigration or you can have an optional National ID card that won’t help immigration issues at all. Usually, the card is spoken of when discussing immigration… so I see little possibility that, if introduced, it would be optional. After all, how many government programs are really optional?

To get into it a bit more philosophically:

The reason the card sounds so good upfront is that as a law-abiding citizen, with “nothing to hide,” there couldn’t possibly be any problem with the Government keeping tabs on you. Hell, if it saves one life, right? The problem is this- If the Card is instituted, and mandatory, then it will grow and grow in the amount of services and situations in which it is used. This is not paranoid “evil-Government” talk. The Card WILL grow and will contain more and more personal information on it. Ever heard of a Social Security number? This number, when introduced, was PURELY to keep track of social security benefits (as the name suggests). However, as with ALL government programs, the SS number grew in importance and was used by more and more government agencies to keep track of more and more information. There was no evil, sinister stuff going on here… just many consecutive advances and probably always with noble intentions. Now, in today’s world, you MUST have an SS number to get a job, a drivers license, a bank account, health insurance, car insurance, home insurance, cable television, online payment accounts, eBay accounts, etc etc etc. I think I even had to provide my SS for a Blockbuster movie rental account. Does anyone think these uses were even contemplated back when SS was introduced??? If you had told people back then that this would happen, they would laugh at you and call you a crazy conspiracy nut.

A National ID card is not so much a perfected drivers license, but rather a perfected Social Security number. It is a perfected method for keeping track of every person. It will start with a name and phone number, maybe some medical information, then it will contain your bank account information, your income information (wouldn’t want anyone cheating the IRS!!), your family history, your purchasing habits (better not buy too many books about terrorism on Amazon… watch out anyone interested in learning anything!) The card will contain more and more and more. Each time a new piece of information is added, it will swiftly pass through congress because “if you aren’t doing anything bad, what harm will it do?” You know what… some day you may do something that is illegal but you may do it for a good reason, or because you think the law is immoral, or because the LAWS CHANGE! Just because you think our laws are fine and dandy now doesn’t mean they will stay that way. For God’s Sake… trans-fats are illegal in New York City now!!!

What WILL happen with a National ID card is this: The Federal Government will end up having essentially limitless information on every person in the nation. They will be able to keep track of your movement, your behavior, your purchases, your interests, your everything. The technology doesn’t even need to get better for this to be a reality. And above all, if the Federal Government saw you as contrary to its intentions in some way, it could simply push a button and erase your entire life. No more bank account, no more house, no credit cards, no cell phone, no internet, no way to prove who you are. In our digital age, it is just that easy. And as the Government grows (which it undeniably will) and we get closer to the Orwellian totalitarian situation, those who finally start waking up and trying to resist will simply be erased from the grid. All because they entrusted their entire life to the Government, one small, well-intentioned step at a time.

If you think I’m being paranoid, take a step back and follow the logic. If you support the idea that you have a right to make your own decisions, so long as you don’t hurt anyone else, then you CANNOT be in favor of a National ID card, not matter how pretty the package is in which it’s delivered. Unfortunately, the National ID card looks like a great idea at first… and most people won’t bother with a thought beyond that.

-Erik

PS to Koert-> If you despise scarves and window tint so much, you should consider the amount of evil done behind closed doors. Should we all get rid of doors as well? Many people have tinted car windows to prevent thieves from seeing valuables within. Anonymity is simply a tool for protection and like all tools it can be used for good or bad purposes.

Wikipedia Article - Real ID Act: http://en.wikipedia.org/wiki/Real_ID_Act

On Global Warming Hysteria

2008-02-02T18:03:00.001+04:00

First of all, check out this screenshot I took to the right. Be sure to open it in a new window so you can read the relevant text. The irony, of course, is that this is a CNN article about the worst blizzard in China and they have a banner ad for their "oh no Greenland is melting" article.

More and more people are accepting Global Warming as a reality and, more importantly, as a GLOBAL CRISIS OF EPIC PROPORTIONS! While it is unfortunate that anyone who questions the mainstream theory on global warming is labelled an "ignorant conservative," I must state my current opinion on the issue. I have not yet been convinced that Global Warming is a threat at all, let alone a CRISIS warranting Government intervention, and here's why:

The MOST imporant element of this issue is that there are actually several different questions that must be addressed. One can find evidence to support both sides of any of these three questions (though that doesn't mean the evidence is always evenly balanced).

Question A) Is the Earth getting warmer?

Question B) Is MAN the primary cause of the increasing temperature?

Question C) Is a warming Earth a bad thing?

The problem with the global warming "debate" is that people don't discuss one of these issues at a time, but rather mash them all up together and spew out whatever statistics sound scary. For example, Pundit A will have evidence showing that the Earth is indeed getting warmer (Question A) and yet Pundit B will respond with evidence showing that Man has little to do with warming (Question B). What needs to happen is for there to be a debate about Question A and ONLY Question A. Once that is resolved, we as a society can move on to Question B, and then Question C only when Question B is resolved. I do NOT want to see another Newsweek cover about the global warming CRISIS until there is first a cover dedicated solely to Question A.

I used to believe that Question A had, in fact, been answered. The scientific consensus seemed to be that the Earth was indeed warming. I had already moved on to Question B, regarding Man's role. However, NOW it seems that there is evidence showing that the Earth has been COOLING since 1998 or so!!! While Al Gore uses statistics showing that the average temperature has increased since 1900, within those same statistics the average temperature is DECREASING since 1998 (though Gore fails to mention this discrepancy). So now I'm back at Question A and will continue to listen to both sides of the argument.

My thesis, if I have one here, is that the world is NOWHERE NEAR ready to be making Governmental policy decisions about global warming. For the Government to take tax money and regulate the world for the sake of "global warming" it must first show, beyond a reasonable doubt, that all three Questions are answered with a "yes." Until then... I don't want to hear any more B.S. about the U.S. not signing the Kyoto Protocol or about fuel standards. The fact that public figures, pundits, and politicians do not discern these very separate questions is why I despise the global warming issue. Only after all three Questions can be answered in the affirmative should we discuss what to do about the "problem," if there even is one.

By the way, to throw in some meaningless anecdotes, Dubai has been quite cold and China is of course having it's worst snow storm in memory. There seems to be plenty of cold in the world... but I'm sure once the snow starts melting in China the Al Gore's of the world will be quick to point out that GLOBAL WARMING must be melting the snow!!!

Global COOLING?!?! AHHHH!!! - http://ibdeditorial.com/IBDArticles.aspx?id=287279412587175

-Erik

So far in Dubai… Update I (day one)

2008-01-12T13:28:00.000+04:00

To all friends and family,

So let's start at the beginning. Michelle and I left Denver on Friday the 28th of December 2007 and arrived in Dubai International Airport late on Saturday night. Our first obstacle had been packing our luggage and checking it on the airplane. After I was informed in Denver that I would have to pay $500 in fees due to my overweight luggage, I simply bought another bag at the airport shop and filled it up, thus rendering all my bags under 50 lbs. We checked six bags in total and had two each for carry-on… so ten bags to keep track of.

After a somber and heartfelt good-bye, with my mother holding back her tears only slightly better than the Iraqi army held back Shock & Awe, we got on our flight to Washington D.C. That flight was nothing new, but our next flight was on Qatar Airways and we were actually heading to Qatar. This is where we first really understood what we were doing.

Almost everyone on that flight looked different from us- different races, ethnicities, religions, manners of dress, and, of course, smells. Apparently, deodorant has not yet been discovered in India (Rahul, you've always smelled nice, of course). This was truly an international flight, and people heading to all corners of the world were sitting right next to us. What really got our attention, however, was how nice the plane was! As Americans, we consider ourselves to be at the pinnacle of modernity, luxury, and status. Yet, this airplane, from a Middle Eastern nation most people haven't even heard of, politely, and with a brand-embroidered silk napkin, slapped us across the face. United, Continental, Frontier, American Airlines… these airlines are all utter crap compared to Qatar Airways. This plane was brand new, shiny, and full of fun features. The crew was prettier, better dressed, and actually slender enough to fit through the aisles (or perhaps the aisles were just wider… either way, my point is made). Every seat had its own TV, with entertainment software and a control that allowed us to access movies and shows from a library large enough to compete with a small neighborhood video store. I could watch the entire Bourne Identity trilogy, I could watch Lord of the Rings, I could watch any of the five Harry Potter movies. I could watch shows and documentaries. I could even play video games. All for free. If we had to spend 13 hours on a plane, this was the one on which to do so.

An inspiring and enlightening thing happened on that flight to Qatar. In the airport terminal I had decided to purchase a new book to read during the long journey, entitled "The Kite Runner." The book is a NYT best-selling novel about a young Afghanistan boy and his experiences growing up in Afghanistan in the early 1970's. I bought it to give me a taste and some context for the exotic region of the world that I was about to make my home. I am increasingly interested in the people and history of the Middle East, and this book seemed an enjoyable first step. As the plane was taking off and I settled into my seat, I started reading the first pages. Just then, I looked across the aisle to the two Indian men sitting in the seat across from me. They were very Indian- very dark skin, very coarse "English," and also had yet to discover deodorant. And as I'm sitting in my seat reading about Afghanistan, I see the two of them- one reading a Ken Follet novel and the other reading the Financial Times. Suddenly, all that college talk about globalization, all the headlines about the world shrinking, and of course Thomas Friedman's bestseller "The World is Flat," all became real. I was moving to Dubai and reading about Afghanistan and these two Indians were enjoying an American novelist and catching up on the U.S. financial markets. For one brief moment as we were taking off, two opposite sides of the world were exactly the same.

After many hours/screaming babies, we landed in Doha, the capital city of Qatar. The airport was modern, clean, and comfortable and had more designer watches and perfumes per square foot than I'd ever seen. We had a couple hours until our connecting flight, so we walked around, had some food, and pretended we actually had enough money to buy some of the products on sale around the airport. As I was walking down one particular hallway, I noticed a sign which read, "Female Prayer Room" and then, "Male Prayer Room." I thought to myself, "So, here starts the Muslim segregation!" A little further down the hallway I saw a sign reading, "Female Restroom" and then one reading "Male Restroom." Perhaps it was my lack of sleep, but there were then about 30 seconds in which I was thinking, "damn, they even segregate the restrooms in this part of the world!!!" I thought that was quite backwards, quite politically incorrect, until I realized that of course we segregate restrooms here in the U.S. as well! I had an embarrassing internal chuckle and wondered if there was any cultural understanding I could gain from that delirious oversight.

After taking off from Doha I had barely enough time to eat my in-flight snacks before we started our descent. The flight from Doha to Dubai was only about 50 minutes. It was night-time (at least according to any objective time-measuring device) and as we approached our new city we began to see city lights popping up all over the blackness. We approached Dubai from over the Persian Gulf and the lights were very beautiful indeed. I tried desperately to pick out the areas of Dubai I had become familiar with, especially the Marina, which is where I would shortly be living. I soon realized that I had gotten completely disoriented. The Dubai coast, which I thought we were flying alongside, was actually the coast of the Palm Jumeirah, the first (and smallest) of three man-made palm tree-shaped artificial island mega-constructs which Dubai has become famous for. So quickly confusing Mother Nature and Mankind was an honest and wonderful introduction to Dubai.

My smiles ended there, however, as we now had to land and get through immigration, customs, and baggage claim before finding our way to our hotel. Thankfully, immigration and customs were a breeze, though I KNEW KNEW KNEW that the airlines would lose some of our luggage. There just doesn't exist anywhere in the world an airline competent enough to deliver our bags as promised. So I was expecting it… but then when we actually arrived at Baggage Terminal X and waited for 45min watching the carousel spin perpetually empty-handed, I got angry. The airline had lost ALL SIX of our checked bags. Then, when we tried to speak with the baggage claim people at the airport, I got even more angry… because they were completely incompetent. Indeed, the only thing worse than their English was their usefulness. As we filled out two tedious claim reports (in which they asked us to detail every item that was in the bags, as if knowledge of the contents would help in the locating of them) I just thought to myself, "what utter awfulness this is… what an uncalled for inconvenience," but with significantly more very-called-for, utterly awful language thrown in for good measure. The fact that the airline didn't even know where our luggage was located didn't help, either. For all we knew, 80% of our material assets had just become 100% lost in the Atlantic Ocean.

So by this time, late Saturday night Dubai time and late/early Friday/Saturday day/night our time, Michelle and I were cranky, tired, and asset-less. We found our way out of the airport and got in line for a taxi outside. At the taxi pick-up point outside the airport, there is a "controlled" chaos of taxis, tourists, and whistle-blowing taxi-herders. "Transportation Administrators" would be the best euphemism I can muster, but they blow on their whistles, it seems, whenever any thought passes through their mind. They whistle to signal a taxi, they whistle to signal a pedestrian, they whistle when they're hungry or tired, they whistle whenever they breathe in and then follow it up with a whistle when they breathe out. Unlike Snow White's seven dwarfs, these guys don't just whistle while they work, they whistle FOR their work, and it was driving us crazy!

Several thousand whistles later we got in a cab. We told the driver our hotel and, just like any foreign cabbie, he seemed to know exactly where it was, though I was pretty sure he had no idea. One thing which I'm sure I'll report on later is the sheer recklessness and rudeness of drivers here in Dubai, which we got to first experience in our state of exhausted baggage-less frustration. The drivers here cut everyone off and then honk at everyone that cuts them off (exactly like in L.A., if you've ever had the privilege of driving with one of the locals in that city). But forget the driving for now; just like my airline baggage intuition, I was right to suspect the driver's knowledge (or lack thereof) about our hotel location. We got out, as he assured us we were in the right place, and went into the lobby. There, they kindly informed us that there are two hotels with the same name (similar to a Marriot and a Marriot Courtyard). Fortunately, our real hotel was just down the street and we were able to walk… thank goodness we didn't have any luggage (save our carry-ons)!

Our room was actually nicer than we expected. We had opted for one of the cheapest hotels we could find on Hotels.com, yet the room we got was a suite and it was very comfortable and relatively clean. We think they upgraded us to their best available room because we checked in so late. We passed out quickly and slept with the deepness of the Atlantic ocean- the same deep ocean which, I feared, may be hosting our luggage at that very same moment.

We woke up around 10am and ate the complimentary breakfast at our hotel. I took a shower and that is what I must comment on now... Perhaps the best things about Dubai are the showers because there is no law mandating water "efficiency" standards. In the United States, the government tells us how many gallons per second of water we are allowed to pour on ourselves using our shower. In Dubai, there is no such nonsense and showers feel wonderful!!! It is like swimming upstream in a Jacuzzi of cotton candy and soft down comforters. As long as I pay for the water, why shouldn't I be allowed to use as much of it as I wish? Many people will say, "because water is a limited resource!," which, of course, is utter nonsense. We have more water on this planet than we could ever use because gravity keeps it stuck here. There is just as much water as there was before man invented the bathtub. What is limited is CLEAN water and, thankfully, in places like Dubai you can take a shower so wonderfully relaxing that your mind can't help but wander until it thinks up something like desalination… which is where Dubai gets all its fresh water. This could be done in America also, if people just had the courage to politely ask the government to get out of the water business…

Anyway, water marketization aside, Michelle and I left our hotel in search of our apartment. We first had to stop at our real estate company's office, located in downtown Dubai. After seeing downtown Dubai, one would understand what all the construction fuss is about. The buildings in the downtown area are stunning, to say the least. Beautiful, modern, shiny, accented with colored glass and designed by architects who must take great pride in their work, these towers are, in many ways, why I came to Dubai. So upon seeing them, one can understand why people throw around those amazing construction statistics about the building boom going on here. That is, until one realizes that the construction taking place in Dubai isn't even occurring in the downtown area at all! Downtown is but a small fingernail of the projects here, and it must be one of the most beautiful fingernails in the world.

The main project occurring in the downtown area, however, is none other than the BURJ DUBAI. This building warrants capital letters any time it is written and a booming baritone voice every time it is spoken of. The BURJ DUBAI is currently the tallest structure in the entire world. It is taller than the CN Tower in Canada, taller than the Sears Tower in Chicago, and taller than the Taipei 101 in... Taipei. It is even taller than the KVLY-TV mast in North Dakota which, until this BURJ came along, was the tallest structure on the planet. Furthermore, the BURJ DUBAI is not even finished yet and it already holds these records. It currently stands at 158 floors and still has another 50-60 floors to go. It will be over 2,600 ft tall when it is finished (the final height has not yet been released to the public…)

After getting all the paperwork signed with Vakson (our real estate company), we took a taxi to the Dubai Marina, the area of Dubai in which our apartment building, Marina Crown, resides. As we travelled along Sheik Zayed Road (the 12-lane freeway that runs through the entire Emirate), we saw all sorts of wonderful western-oriented advertising. Indeed, the sides of entire skyscrapers have enormous 40-story advertisements printed on the glass. Some of these advertise new multi-tower construction projects and some advertise basic $200 digital cameras. If the entire world has become one marketplace, then Dubai has become its billboard.

As we approached the Marina, we passed 20-30 more skyscrapers being built along the highway like roadside convenience stores. The Marina itself is the world's largest man-made marina. It consists of an inlet channel that cuts into the land, turns 45 degrees, travels about 2 miles down the coast, then turns 45 degrees again and goes back out to sea. There are 200 towers built around it, ranging from 15 to 120 floors. These are at all stages of completion, from empty lots to finished gleaming buildings. There are cranes and construction equipment everywhere for about 2 square miles. Across the highway is Jumeirah Lake Towers, which has another 80 towers going up. At the north end of the Marina is the entrance to the enormous man-made Palm Jumeirah island, billed as the eighth wonder of the world. On this palm there is room for about 200,000 people to live permanently. I believe the Marina itself will house about 100,000 people.

Who is going to buy all these apartments, you ask? Well, there are very few that haven't been bought already and those are only in the towers that haven't yet started construction. In every tower that's at least one floor off the ground, every single apartment has been bought from the developer. Many of these buyers are speculators, of course, but the fact that our apartment had three different owners before us illustrates the kind of real estate market this is (and we're the first of all the owners to live here!). Most of the buildings have about 20-50% occupancy levels and this number has been steadily increasing over the past year as the Marina fills with residents who bought their brand new apartment second, third, or seventh hand.

Finally arriving at our tower, which looked incredible but was hard to fully appreciate when there were 20 other incredible towers right next to it, I took a moment to appreciate the situation. This was my new home. It was in a strange place, on the other side of the world, with strangely-colored people walking all around and Arabic written over the entrance, but damn were the windows shiny! Before stepping a foot in the door, I knew I would have no problem making this my home for a while…

-Erik
{end of Update I}