Tuesday, December 23, 2008
Exponential Theft
Tuesday, December 23, 2008 | 
Posted by
Chris Waner
Legend has it that a sixth century Asiatic sage and mathematician created a little game called Chaturanga, which consisted of a square board with 64 small squares (8 squares on the length and 8 on the width). This game caught on among the people and eventually found its way into the hands of the king. So enamored was the King with the game that he ordered that the sage be brought to him. The king praised the sage's accomplishment and offered the sage one gift of the sage's choosing. The sage refused, but the king persisted and demanded that the sage request a gift. The sage made a simple request: fill the first square on the game board with one grain of rice, the second square with two grains, the third square with 4 grains, the fourth with 8 grains, and so on until the board is full. The king marveled at such a modest gift and ordered that it be done as the sage requested. The first row of squares was filled, but as the second row began filling it it became obvious that the board would not hold all the rice. Bags were brought in, and as the 20th square was filled, the king was forced to give rice fields over to the sage. By the time the 30th square was filled all the rice in the land belonged to the sage. The king became furious and ordered the sage killed for his treachery and banned the game from the land. But the game only grew in popularity, and as it came to the west it became known by a different name, Chess. Had all 64 squares been filled, all the rice on earth for several decades would have belonged to the sage.As mathematician, Albert Bartlett, famously said:
The greatest shortcoming of the human race is our inability to understand the exponential function.
No truer statement was ever said. And our inability to perceive the exponential curve is used against us in a number of important ways. Lets create a simple example to examine the problem. Let's say the Government promises you a $100 raise per year for hard work. The first year you earn $100 dollars; the second year you earn $200 dollars; the third year, $300, and so on. The government informs you that it will keep inflation (the amount of money in the economy above and beyond assets--clothes, cars, houses, etc.) at a steady 2% increase per year, to keep the economy from getting out of control. This sounds pretty good and looks pretty good on paper too, at least for a while. However, something insidious has occurred. One quantity (income) has a linear growth while the other (inflation) has an exponential growth. The 2% inflation the first year will be $2 per $100; however, the second year it will be $2.40 per $100. What starts off as a very small increment becomes a big problem over time. Let's look what happens in this economy over 150 years. The red line on the chart below represents income while the green line represents the amount of newly printed money in the economy:
Each dollar in the economy that does not directly represent an asset (house, car, shoes, a company, whatever) in the economy makes every other dollar have less buying power (see my Inflation Tsunami article for a detailed explanation of this). The graph above, therefore, can also be viewed in another way. Instead, in our simple mock economy, the red line represents the rate that money comes into your account, and the green line represents the rate that money is leaving your account. If you've ever wondered why it seems that your standard of living is decreasing even as more and more money is coming in, you've discovered, intuitively, that your income is not keeping up with the cost of goods and services.
If this is what's happening in the economy in the US today, then why do we see that wages and inflation are more or less the same? How can I be experiencing these losses if the government statistics say that income is rising at the same rate as inflation (2.3% since 1967). The answer is that unlike our graph above everyone is not gaining at the same rate in the US. The rich are getting richer much fast than the poor are.
The rich are getting richer because they are exploiting the exponential system. They understand it and position themselves to benefit. How? By using what money they have to ensure that they get first access to the new money in the economy. If they spend the new money on investments, houses, cars, etc., then they are buying things at a lower price than you and me, who get the new money that they already spent. They build a house and pay a contractor, and the contractor pays me, the worker. The money is already aging. If you work at a retail shop or a restaurant, the money has already been filtered several times. By the time we get it, the market has adjusted and the prices are already higher.
The system is set up to make the rich richer and the poor saddled with more and more debt as they try to keep up with the increased cost of living. Who creates the money in this county? The banking and Federal Reserve System. This is yet another reason that it has to end.
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Saturday, December 13, 2008
The Fed Stranglehold: UPDATE
One aspect of the Federal Reserve system that I elected not to mention in my previous post is the role of Congress in the process of issuing new money. The reason for the omission is that in recent history the roll of the Congress has been largely for-show, as with the 4 trillion dollars in new bailout money this year.Technically, the Congress grants the Fed "permission" to print more money, usually for the purpose of funding some legislative spending that the congress doesn't want to levy as a tax (they don't want you having to worry your pretty little head about the details, and taxes draw too much attention).
This week a remarkable and I would have thought almost unthinkable thing happened. The Fed went before Congress to talk about the possibility of the Fed issuing its own debt. What does "issuing its own debt mean?" Traditionally, the treasury or other authorized institution issues a bond which the Fed purchases with money it prints out of thin air. This money then enters the economy, starting with the treasury or investment bank and then trickling down to the rest of us. Because the Fed is buying a bond, not just printing money, they charge us interest--see this article for a more detailed examination of this.
What the Fed now wants to do is issues its own bonds and then buy them with money printed out of nothing. What's the difference you may ask? A bid difference. Although the Fed previously was not accountable to the people directly, they were accountable to (though not willing to be audited by) the Congress, who is accountable to us. If the Congress gives the Fed the ability to issue its own debt, it is then finally no longer accountable to anyone whatsoever. The Fed would have full power to issue as much money as it wants any time it wants with no restrictions and no genuine oversight or ability to adequately measure the amount of money being pumped into the economy.
This is a takeover, folks. I urge everyone who reads this to go to this site, which guides you through the very simple process of emailing your congressional representative. All you have to do is pick which state you live in, enter your name and address, and copy and paste the message below into the form (Note: to copy simply select the message below and go to Edit/Copy then to paste simply click in the message portion of the form and go to Edit/Paste, that's it):
I am writing to express my opposition to the Federal Reserve's issuance of dept. I implore you to adhere to the strict limitations placed on the Federal Reserve in the 1913 Federal Reserve Act, which requires Congressional oversight of all issuance of currency. Allowing the Federal Reserve to issue its own dept represents a serious threat to the proper checks and balances laid out in the US Constitution in Article 1, Section 8, which states:
"The Congress shall have Power to . . . coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures . . . ."
I urge you to look carefully at the Federal Reserve's proposal before Congress and uphold your sworn duty to protect the US Constitution. These are the kinds of grave issues I carefully weigh when entering a vote for Representative for my state.
Thank you for your full consideration.
Thursday, December 11, 2008
The Fed Stranglehold
Over the last 95 years the Federal Reserve's power over the economy has become virtually absolute. Once we have a basic understanding of the Fed's fraud against the American people, see this article, we can begin to examine how this power is becoming increasingly complete.The US economy was one of the most vibrant and complex in the world. As of the turn of the 20th century, our economy was riding high on the gold standard. Gold is a commodity that has remained relatively fixed in price to the inflation-adjusted dollar for quite some time, at least since the early 19th century. So long as the dollar is pinned to a commodity like gold, the value and quantity of dollars in the market remains relatively stable.
This is a serious problem for the central bankers who want to make large sums of money by controlling the currency. Under a gold standard or, even better, a mixed commodity standard: copper, nickel, silver, gold, and platinum, the bankers must have the majority of the world's supply of these metals in order to have a major influence over the value of the dollar. This is difficult in the extreme--infinitely more difficult than issuing paper currency because fixing the value of the currency under a commodity standard requires limiting the supply. The Fed and the international bankers have worked hard to avoid a gold standard and especially a mixed commodity standard. And in 1933 they succeeded when FDR, at the behest of the Fed, took us off the gold standard and put us on a fiat currency--a currency which has value because the government says you must use it.
When this happened, the value of the dollar was no longer controlled by a commodity resistant to mass production--like gold or silver, but was now purely controlled by the quantity of paper money and the demand for that money. FDR made domestic demand for the paper dollar 100% when he made it illegal to use anything but the dollar as money.
The result is that now the only factor which determines the value of the dollar is the quantity of dollars in the market. And who is in absolute control of the quantity of money? The Fed and the international bankers controlling the Fed. Truly, the fewer factors that influence the value of money, the easier it is to control. And the other factors have been systematically eliminated.
The only remaining factors working against the Fed's absolute control is an informed public watching the economic statistics. Please don't get bogged down in these terms; I'm including the definitions because they might help clarify their importance. There are many economic/monetary indicators, but three of the biggest are the Consumer Price Index, the M3, and the Money of Zero Maturity. The Consumer Price Index (CPI) is a survey of products compared over time to determine whether monetary inflation is occurring--to determine if the buying power of the dollar is dropping. The M3 indicates how much money the Fed has directed into the economy (printed) because this stat includes long term capital investment holdings like bank reserves, derivatives, money held in foreign banks, and large donation ($100,000 or more)--it keeps track of what the big money players like bankers are doing with their money. The Money of Zero Maturity (MZM) is money immediately or almost immediately available for withdrawal, like checking and savings accounts, mutual funds, etc.
Now even these available statistics are under attack. As of March 23, 2006 the Fed/US government has stopped publishing the M3 numbers, claiming that it is largely irrelevant. If they are irrelevant, then why not publish them and let the public decide how relevant they are. In my opinion something fishy is going on here.
Walter Williams, economics professor at George Mason University, has documented proof that the Fed and the US government are cooking the books with regard to CPI (and other key indicators for that matter, including unemployment numbers) by subtly changing the year by year product comparisons; the CPI is becoming increasingly irrelevant because year by year comparisons are no longer comparing apples to apples but apples to oranges [source].
I have no proof that the MZM has been tampered with, and by all measures it is a better indicator of inflation than CPI; but Bernanke, the Fed chairman, has said under oath before Congress that the Fed will take no monetary inflation indicator into account except for the CPI, and as I just mentioned the government is actively cooking those books.
I don't know how to put this softly; we're in trouble. Our monetary system is outside the control of the people and largely even the federal government. The Fed has a stranglehold on the quantity of money, and the government won't allow competitive currencies into the market. The dollar is forced on us, and now even the information about the dollar that is supposed to be available to the public and make everyone accountable is becoming contaminated, ignored, or removed all together. It's time to get educated. Tell people around you what's happening. Point them to good sources of information. Get them interested. Compel them to take an active roll. Contact your Congress person. Make your voices heard. Something's going down, so keep your eyes open.
Wednesday, December 10, 2008
Good Government is a Myth, Part 2: Government Employment
This week Obama again emphasized his goal to stimulate the economy. His plan, simply put, is job creation. How does he plan to get people back to work? By implementing two techniques: job training and public works projects.No one denies the value of education in promoting long-term employment; but as a short term goal, it makes little sense for most people. The job lost today is needed today, but training takes not only time but also money. Foregoing employment puts a great stress on families of the unemployed, especially when the cost of education is so outrageously high. For most people, education means less money coming in and also going into debt to pay for it. Americans are already strapped with debt. To help, Obama is promising tax relief.
Tax relief is an unbelievable claim given part two of his get-back-to-work initiative: public works projects, which can only properly be paid for with taxes. Obama plans to employ workers on the Federal, State, and local level in various infrastructure projects like laying roads, building bridges and schools, as well as beautification projects. Where will all the money for this come from?
Surely, one of the great myths about government is that it can employ people for the betterment of the economy or in this way help the economy through tough times. Henry Hazlitt perhaps said it best:
Every dollar of government spending must be raised through a dollar of taxation . . . the bridge has to be paid out of taxes . . . Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else . . . All that has happened, at best, is that there has been a diversion of jobs because of the project. [source]
The government cannot spend a single dollar which does not have some negative effect on the economy. Truly, we put up with much in the hope that everyone will be better off, but such faith is largely misplaced. I've said before, using tax dollars to pay workers is like eating your stomach to stave off starvation; it's shortsighted and ruinous. In addition to the chronic inefficiency (see this article), the taxation and/or printing of money to expand public works sends damaging waves through the economy.
Money pulled out of the free and open market means that you and I, and the companies we own or work for, have less money to work with. And these public works projects are particularly bad because they inevitably go over budget, which requires money that was not budgeted for. That volatility in the market is horrible for business because companies are forced to be cautious as they see an ever-increasing number of unknown variables in the market--variables like confiscatory tax rates, government competition for what would normally be private sector jobs, and, as we'll see, the prospect of inflation.
The worst part of it is that, in truth, Obama has no intention of significantly raising taxes to pay for education or for paying workers to carry out public works projects. He plans on letting Congress issue treasury bonds so that the Fed will simply print the money needed. If it can be imagined, this is worse than taxation. Unlike taxation, which is somewhat out-in-the-open (even if much of the taxation is designed to be subtle, the information about the tax is readily available if one cares to look), the Fed promotes a largely invisible "inflation" tax that occurs when too much money floods the market, making each dollar worth less. The money printed from nothing is inefficiently used, sends false signals into the economy because the money isn't "real," and causes inflation.
The fact is that this recession is the best thing for the economy. The natural laws of free-market economics are in the process of correcting the current financial disaster, putting the unemployed in jobs that are actually needed in the economy, readjusting all the mal-investment, encouraging savings instead of run-away consumer debt. The medicine doesn't necessarily taste good, nor does it work immediately, but it does begin working immediately, and, honestly, it's the only thing that will actually fix the problem.
Monday, December 8, 2008
The Federal Reserve Scam Made Simple
The Federal Reserve (Fed) is the source of all money in the United States. However, don't be mistaken. The Fed is not a federal government institution; rather, it is privately owned bank whose primary shareholders are the London Rothschild family, Warburg family, Rockefeller family, Morgan family, Harriman family, Kuhn and Loeb families, the Lehman family, and the Schiff family. Neither does the Fed simply issue money into the economy; they loan money to us at interest. Where does the Fed get the money to fund the entire US economy? They simply print it out of thin air. Each dollar in your pocket is a dollar of debt to the Fed; the quantity of the debt is not only the value of the dollar but also the additional interest to be paid to these bankers for the trouble they go through in turning on a printing press.Here's how the scam works. The government or certified dealer, like an investment bank, issues a bond. The Fed buys the bond not with money it has in reserve, but with money it prints from nothing. This money is deposited into the bank account of the institution that issued the bond.
The commercial or investment bank that now has this newly printed money as a deposit on its books uses what is called Fractional Reserve Banking, simply the ability to loan out more money than you have, to create 100 times as much money in the form of loans or debt in the US economy. I can't make this process clear enough. It is crucial that each person understand the process: the Fed prints money out of thin air to buy bonds. The new money is deposited into the account of the person who sold the Fed the bond. Then the bank that has the Fed's new money loans out up to 100 times that amount of money to private citizens.
Lets look at a simple example. A bank issues a $1000 dollar bond. The Fed buys that bond for $1000 with money it printed out of thin air. Since that $1000 dollars was purchased from a bank, that money now exists in the banks holdings as a deposit. Now the bank loans out 100 times as much money as it has in reserve, which is $1000. So the bank loans to private citizens $100,000 for every $1000 that it has on hand. (Note: This is a slightly more complicated process that I'll cover in detail in an upcoming article about the 1/10 reserve requirement and the 9/10th deposit loan requirement).
The money from these bank loans go to fund private purchases like houses and cars as well as businesses and business expenses. It eventually works its way into everyone's pockets.
But it comes at a price. The international bankers require interest for the money they printed out of nothing and loaned to us. How do we pay for it? Are you ready for this? Our Federal Income Tax. That's right, your income taxes are not paying for roads or schools; it's not going to the poor or for Medicare or Medicaid; it's not helping out with Social Security or investing in clean energy or anything else beneficial to the American citizens. No, a report ordered by President Reagan in 1984 declared the unbelievable truth. Not a single cent of our income tax goes to anything at all except paying interest to the international bankers who own the Federal Reserve, and they didn't even loan us their own money; they just printed it, counterfeited it. And we pay through the nose at a staggering rate of more that $36,000,000 per hour.
Our money is debt, plain and simple--debt to the Fed and the international bankers. Can we every pay off the debt? If we gave every cent and sold or gave everything we own to them, we would likely only cover the principle and still owe much or all of the interest. The answer is, no. To do so would be bankruptcy and poverty for every man, woman, and child. Every dollar we have is a dollar plus interest of debt to first the commercial and investment bankers and then to the Fed.
This is the grandest fraud in the history of the world, and we're the ones who are the victims. History will look shamefully on us, and rightfully so. And it continues for two reasons. The first reason is that American citizens remain ignorant. If the average citizen knew the awful truth, knew that they and their children were being sold into slavery as a debtor nation, there would be revolt. Indeed, education is exactly why I'm writing this article. The second reason, is that Congress loves having a virtually unlimited supply of money because they can content their constituents with subsidies, goodies, entitlements, and handouts that the people don't pay for in taxes. Congress' ability to contribute public works without raising taxes is what keeps many of them in power.
Make no mistake about it. Congressional power is a puppet power of the real power that is the Federal Reserve and the international bankers. Congress is selling us into slavery for their own benefit. Some don't know the truth and only understand how to work the system. Others work the system because they know how the system works. Each American citizen, and, in fact, people all over the world need to know how the worldwide network of reserve banks is destroying lives for their own gain.
The true irony is that it could all be stopped tomorrow. The congress with one stroke could abolish the Fed and the Sixteenth Amendment, which allowed for the Federal Income Tax, and simply cancel the debt to the Fed. The money they loaned was not their money to begin with. And we could begin building a system based on sound, debt free money.
Share this article with others or point them to the information they need to make sound judgments. Write your congress person and senators, and encourage others to do the same. Let's abolish the Fed together. It's time to make a difference.
Wednesday, December 3, 2008
The General Welfare Clause Made Powerless
Since the ratification of the US Constitution, one of the most-used and misrepresented clauses has been the General Welfare Clause, found in Article 1, Section 8 of the US Constitution:The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States. . .
The rest of Article 1, Section 8 goes on to innumerate the specific powers granted to the legislative branch of the Federal government, and I encourage you to read it in its entirety here. It remains truly unfortunate for the American people that this clause remains in the law of the land because of the widespread potential for misinterpretation. And misinterpreted it has most surely been.
Many of the most egregious violations of the Constitution and the American people have been born out of the fundamental misunderstanding of this clause, not the least of which are the departments of Health, Homeland Security, Housing, Labor, Interior, and Transportation; agencies such as the FCC, EPA, FDA, and the FAA, and laws and programs such as welfare, social security, minimum wage, medicare, medicaid, etc. I could continue at some length. Each of these have used this clause in some way to springboard to a position of full Federal control--all in the name of "general welfare."
Such government expansion has not gone unchallenged either in Congress or in common discourse among American citizens. I have been in many conversations where the general welfare clause has been used to bolster the argument in favor of government expansion. I have argued that the aforementioned interpretation of that clause is not in keeping with the intentions of the founders. To which , almost to a fault, I receive the droning sound of the subjectivist's mantra: it is impossible to determine the original intent of the founders.
As much as many would like to believe that the Constitution is best interpreted by post-modern deconstructionists and philosophical relativists, original intent in the Constitution can be known because the original intent was explicitly spelled out in the Federalist and Anti-Federalist Papers.
So what do we learn from these writings? What we find is that, remarkably, there is unanimous agreement from both the Federalists and the Anti-Federalists. Their views are summarized in a speech given by Shawn O'Connor of the Free Enterprise Society:
Hamilton and Madison . . . re-state that if the general welfare clause conveyed absolute power to the government, why would they go on to list the specific powers they were going to grant the government. That wouldn't make any sense at all if they were going to give absolute power to the government. It was finally conceded by all at the convention that the general welfare clause conveyed absolutely no power to the government.
In other words, not even Hamilton, the staunchest of big-government proponents, viewed the general welfare clause to be anything other than an introductory statement to Section 8, later to be clarified and defined by the subsequent clauses in that Section.
We know original intent because original intent is explicitly stated in the Federalist and Anti-Federalist Papers, written by the very hands which inserted the general welfare clause into the US Constitution. We are forced to conclude, therefore, that the founders' intent was not to present an opportunity for government to expand by means a general and ill-defined clause, but rather that the general welfare of American citizens is best served when the strict limits in Article 1, Section 8 are placed on government. Objective readers must conclude that the general welfare clause cannot be used to defend the current size and scope of the Federal government. Further, if no Constitutional provision can be provided in support of far-reaching jurisdiction, then the government, as it stands today, is over-reaching and is in violation of the law of the land.
Monday, December 1, 2008
Good Government is a Myth, Part 1: Efficiency
I will take as a given that the private sector, even with excessive government intervention by way of subsidies, price controls, taxes, and tariffs, is more efficient than government could ever dream of being. Not only do I consider government inefficiency to be generally agreed upon by most Americans, but when I encounter individuals who disagree with this premise, I'm usually completely satisfied in proving the point by asking him or her to simply name any government department or agency that they believe stands as a model of efficiency. Indeed, Social Security is bankrupt, Medicare and Medicaid are vastly overextended along with the other entitlement programs, our public education system slips further behind the rest of the world every year; not even the IRS can claim success as literally billions of dollars go uncollected each year (though I can't think of a better use of inefficiency than that).Surely, if only the government would contract private industry they could be a slick, modern institution of efficiency. Well, not so fast. The numbers are in, and they don't look good. Since Bush took office in 2001, governmental private sector contracts for everything from mowing the lawn to missile defense have more than doubled. Surely, efficiency in those areas has also doubled, right? Not even close. In fact, representative for the US Government Accountability Office, Schinasi says,
[Officials] can't answer the most basic questions about what the companies are doing--including how many contractors have done a good job or bad job, and whether or not they have saved taxpayers' money. [Source]
How can this be? The efficiencies of the private sector should translate into greater efficiencies in government as well. Unfortunately for Ronald Reagan (the ardent promoter of private government contracts), Bill Clinton (who raised the bar by claiming that the era of big government was over), and George W. Bush (who has all but perfected the art) the situation is not that simple.
During the 2008 presidential campaign we repeatedly heard Obama talk about giving more aide to programs that are succeeding and getting rid of those that don't work. We should look extremely skeptically on such claims, not because they are insincere, but because there is no rational measuring stick for efficiency except that which arises naturally out of the competitive free market, where prices are determined based on the relationship between the scarcity of the good or service and the industry-wide demand for that good or service. I cannot emphasize this point clearly enough. No one anywhere, no matter how brilliant or well educated can accurately determine the price of anything. The only means of determining the price is by comparing how plentiful something is with how in-demand it is. And the only system that can accomplish this task is the free market. This is not a matter of opinion, it is an immutable law, like gravity. Every other measure of price, no matter how well intended or informed, is arbitrary and, therefore, inefficient by its very nature.
The truth is that government is the sixth toe on the global foot, adding very little but is usually an eyesore and, more often than not, gets in the way. Economies thrive as competition forces companies to produce the highest quality product at the lowest possible price in order to win the largest sector of the consumer market. Government faces no competition, however, so all other proceeding considerations quickly become irrelevant. As a consequence, private contractors go unsupervised, invoices go unchecked, results go un-analyzed, and the problems further explode as sweetheart deals are given to friends, family, and associates of government officials.
How does Obama plan to fix the problem? By promising to and eventually reducing the number of private contracts.[Source] This swings the pendulum the other way, but it fails once again to address the fundamental issue: that true efficiency can only be attained in the free and open market.
If government left to itself is utterly inefficient and government in cooperation with the private sector is equally inefficient, what should be done? How about we follow the Constitution. There is no provision whatsoever in the US Constitution that provides for the departments of Agriculture, Commerce, Education, Energy, Homeland Security, Housing, Health, Interior, Labor, Mining, Transportation, or any of their myriad agencies including the IRS monster. The following departments should be left standing: Defense, Justice, State, and Treasury. The evaporation and privatization of all of these departments and associated agencies would leave the government only one fifth its current size. [Source]
The privatization would be a boon to free enterprise, be subject to market competition, and be more efficient as the incentive to provide the highest quality product or service at the lowest possible price drove down operating costs while maximizing the so called bang-for-the-buck. Further, smaller government would require fewer taxes or possibly no taxes at all. Look for proof of this claim in an upcoming article. Even if taxes were merely reduced, the extra money in the hands of consumers would benefit nearly every person in the country.
We are forced to conclude that efficiency and government are incompatible terms. Every government action is an unnatural imposition on progress. The most efficient government, therefore, is the smallest government.
Sunday, November 30, 2008
Geithner, Summers, and Volcker: Change We Can Believe In?
Let's quickly summarize our economic situation. The Federal Reserve, riding on the back of the fractional reserve banking system, has managed to print out of thin air enough money to allow US banks to explode to sizes that are "simply too big to fail." The loans that these banks issue are backed by nothing more than a promise to be paid back at a later date. This money, which is not backed by any asset or commodity value, has facilitated unsustainable investment in energy, then technology, and now housing. This mal-investment has produced economic havoc in the form of bankruptcies, foreclosures, bailouts, probable recession, and, thereby, almost certain inflation and monetary collapse. Don't worry everyone, Obama's on the case. He has new people with new plans. Who are these new people? Enter Timothy Geithner, Lawrence Summers, and Paul Volcker. Have you heard these names before. The Obama administration is counting on the fact that you haven't. So who are they?
The most familiar name on the list is Paul Volcker, former Chairman of the Federal Reserve, conservative Keyensian, and promoter of the US's money-as-debt system. His record is well known, and you can find it here.
Timothy Geithner began his career working for the Treasury Department starting in 1988. Yes, the same Treasury Department that bailed out the savings and loan industry because of (sound familiar?) poor real-estate investments and the subsequent collapse of the FSLIC (the Savings and Loan version of the FDIC). "In 1999 he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers [source]," whom we'll meet shortly. Geithner was again around just in time to enjoy the ".COM" bubble burst. His latest exploits include work for the Council on Foreign Relations (proponents of the North American Union), the International Monetary Fund (the tool of the US Treasury to bailout any country whose corrupt economy threatens to leave their Keynesian dreamland in shambles), and lastly the President of the New York Federal Reserve.
Finally, Summers was one of the prominent spokesmen for the "Commodity Futures Modernization Act, which allowed many derivatives--like the credit default swaps that have rocked markets this fall--to go unregulated." Summers fought hard for the $750 billion dollar bailout and continues to fight hard for another round of bailouts of undetermined size, but certainly in the hundreds of billions. Economist Dean Baker says of Mr. Summers, "the policies he promoted as Treasury Secretary and in his subsequent writings led to the economic disaster that we now face." [Source]
Does this list of appointees sound like a change we can believe in? Does it even sound like a change at all? These men aren't going to rescue our economic situation; these are the men that created our economic situation. One or another of these men have been in active economic or governance rolls for every major economic disaster of the last 40 years.
One could make the argument, "whom could Obama have appointed, who also has the economic credentials to advise a US president and at the same time was not a participant in the calamity? I'm glad you asked. How about picking the gentleman who repeatedly predicted the chaos over and over again, was repeatedly shunned and ridiculed by the media and the so-called economic experts that were, themselves, responsible for the mess. I refer to none other than Peter Schiff. Need proof of his credentials and sheer economic genius? Watch this YouTube video and join me in encouraging Obama to choose the people who predicted the problems not produced the problems:
Friday, November 28, 2008
Milton Friedman's Three Equalities
Like many liberty-minded individuals, I cut my teeth on the work of monetarist, Milton Friedman and specifically his seminal work, "Free to Choose." One of the principle assertions in the book is that of the Three Equalities. Friedman believed that through the course of US history the idea of equality has been anything but static; rather, it is in a constant state of redefinition. As Friedman writes:In the early decades of the Republic, equality meant before God; liberty meant the liberty to shape one's own life. The obvious conflict between the Declaration of Independence and the institution of slavery occupied the center of the stage. That conflict was finally resolved by the Civil War. The debate then moved to a different level. Equality came more and more to be interpreted as "equality of opportunity" in the sense that no one should be prevented by arbitrary obstacles from using his capacities to pursue his own objectives. That is still its dominant meaning to most citizens today. . .
. . . A very different meaning of quality has emerged in the United States in recent decades--equality of outcome. Everyone should have the same level of living or of income, should finish the race at the same time. Equality of outcome is in clear conflict with liberty. The attempt to promote it has been a major source of bigger and bigger government, and of government-imposed restrictions on our liberty.
The persistence of Marxist equality of outcome in modern American thinking is shocking given the repeatedly catastrophic results of this idea on society itself. The list of communist countries who, in one way or another, drove the citizens toward outcome equality in the twentieth century read like a who's who of human rights violators: Albania, Bulgaria, China, Cuba, Czechoslovakia, East Germany, Hungary, Laos, Mongolia, North Korea, Poland, Romania, U.S.S.R., Vietnam, and Yugoslavia. Such is the hubris of mankind: surely it has failed in the past because I was not the one in charge of it, but this time it will be different.
Each decade the failure rate of countries adopting the idea of outcome equality grows. In fact, of the list of fifteen countries in the last paragraph only five remain communist to this day, and the success of China cannot be divorced from it's largely capitalistic economic structure. Two questions remain glaring, however; why does "equality of outcome" persist with such vigor, and why, with so many dedicated to its success, does it continually fail? Surely, a lifetime of scholarship could precede the answers to those two questions; however, the general principle could be resident already in Friedman's initial assertion. If we take each of the three equalities and examine it individually, a potential hypothesis becomes apparent.
Let us suppose that in the first case only transcendent equality exists--equality in the eyes of God or from our birthright, our humanity. If a society were constructed with sole respect to this type of equality, which type of societal model would best fit it? Likely the anarchist or anarcho-capitalist model would best fit (note I'm using anarchist in the academic sense not the colloquial sense). The positivist idea that rights derive from the State would have no place whatsoever, and the logical conclusion would be a society driven by laws enforced, prosecuted, and adjudicated by private enterprise--the free choice of citizens to pay for and trust in objective third-party arbitration. And the so called third-party arbitrator would survive as a business based on the quality of its objectivity and lack of shadowy backdoor dealings, less it be replaced with a more upstanding institution.
On the other hand, let us examine the society that might best fit the adherence to the idea of equality of opportunity. Note Friedman's phrase "arbitrary obstacles" in his description of equality of opportunity. The implication is that there might well be some natural or systemic obstacles. Natural obstacles, as Friedman later points out, might be, for example, that one child is born blind while another has sight. Systemic obstacles might be a tax levied for national defense, a service that benefits all equally but, at the same time, unlike a progressive tax or social welfare mechanism which disproportionately benefits some and not others. Surely natural obstacles, as previously noted, would affect a society based purely on transcendent equality, but certainly no systemic obstacles would exist in a true anarchist or anarcho-capitalist society. So perhaps a system well suited to opportunity equality might be minarchism--very limited government for the sole purpose of protecting citizens from force, violence, and coercion.
We find, therefore, many similarities and overlaps between societies strictly adhering to transcendent and opportunity equality. Both seem to suggest that rights are largely existential but absolute and in no way subjective. However, unlike the natural evolution evident in transcendent and opportunity equality, outcome equality not only promotes but demands intervention from another party. It is without question a different breed, which Friedman makes clear. Socialistic and Communistic systems both have their root in outcome equality. Marx was clear that each gives according to his ability, and each takes according to his need. Abilities may vary among individuals, but unlike human "wants," human "needs" remain of a relatively fixed order. In the best possible case, none go without as long as all give. But those who cannot give ensure that none go for very long with much.
Ardent supporters of outcome equality point to the necessity and perceived moral high ground of benevolence and social responsibility as a means of dealing with the ills brought about by natural and systemic obstacles to equality. Social ills, they claim, require social solutions and society-wide initiatives. The truth, however, is often lost in the language and the implications lost in the details. Ultimately, they provide no apparatus by which society can be induced to participate in any macro-political rescue without first diminishing or removing outright transcendent and opportunity equality. In other words, outcome equality is gained at the expense of individual liberty, is implemented by force, violence, and coercion, and remains, therefore, an ideology so unlike and utterly separate from both transcendent and opportunity equality as to deny that society itself is nothing more than a voluntary cooperation of free individuals. Society, from the "outcome equality" standpoint, is not something that grows but something that is invented, not something alive, but something dead; and we find that death wherever it is implemented.
Equality of outcome persists, therefore, in an ooze of simultaneous disdain for natural obstacles and a willful disregard for any ethical or moral hierarchy--any sense that we are in fact not liberated as we become equal, but that we are equal as we become liberated. We find it good and honorable to help those in need, to give of ourselves for others. But this goal becomes darkened when we must force and coerce others to that end. Rather than rely on compulsion to achieve our goals, we must persuade in open dialogue others to our opinions, using the strength of our arguments. Compulsion from external entities must end and be replaced with an impulse from within. This is the goal of liberty. This is the only true road to equality.
Wednesday, November 26, 2008
Gay Marriage Wins By Losing the Prop. 8 Battle
Over the last several weeks gay-rights proponents have been staging protests and rallies in opposition to the outcome of Prop. 8, the California constitutional amendment banning gay-marriage; these protests, from my standpoint, border on incomprehensible. Rather than protesting the outcome of the Proposition 8 vote, gay-rights activists should be dancing in the streets, and so called traditional married couples should be petitioning for their emancipation.On the surface Prop. 8 appears to simply limit the rights of gay couples to marry; however, from another perspective the Prop. 8 vote in California actually limits the government's power of licensure, hindering its ability to extend marriage licenses. Keep in mind that the legal definition of a license is:
The permission granted by competent authority to exercise a certain privilege that, without such authority, would constitute an illegal act.
In other words, marriage in all fifty states is illegal unless the State grants its permission.
The truth is that the State and Federal government have gone mad with the power of requisite licensing. Without a license citizens of the US cannot fish, hunt, marry, drive, provide health services (even non-medical), or practice law; they cannot manufacture products, build structures, provide retail or wholesale goods, start a business, trade, or be a travel or real-estate agent; in some states even selling flowers, selling your services as an interior designer, or running a public pinball machine are strictly prohibited without a State issued license. The ugly truth is that in many cases licensure is a hidden tax on consumers and a boon to government at the citizens' expense; indeed, marriage licensure alone is a $100,000,000 a year industry--with 2.2+ million marriages per year at an average cost of $44 per license.
And what does the government provide in return? Two things: firstly, it provides the chaos which naturally arises as the state attempts to define the nature of a legally binding contract that it did not initiate but requires by law. And second, it provides subsidies in the form of tax breaks and benefits to married couples. The latter might sound good, but the details are troubling. These tax breaks and benefits are a form of wealth redistribution doled out according to the policy objectives of the State and Federal government and is paid for by everyone while directly benefiting only those who are married.
Further, a state marriage license embroils citizens in undue contractual relationships with the State and sometimes the Federal government. One of the best anti-licensure arguments that I've read comes from a rather unlikely source; Pastor Matt Trewhella writes in a thorough and well-thought-out article addressed specifically to Christians:
When you marry with a marriage license, you grant the State jurisdiction over your marriage. When you marry with a marriage license, your marriage is a creature of the State. It is a corporation of the State! Therefore, they have jurisdiction over your marriage including the fruit of your marriage. What is the fruit of marriage? Your children and every piece of property you own. There is plenty of case law in American jurisprudence which declares this to be true. [source]
Truly, nothing gives the State the right to make illegal the consensual contract of marriage, except for that which the citizens of the states allow. For this reason Prop. 8 was an overwhelming success. It rightfully limited the government's too-often-abused power of licensure.
If there was any problem with Prop. 8, it was that it did not go far enough. Certainly, another amendment is needed in California, and all states for that matter, that would deprive the State of the power to prohibit marriage without its consent. The right of contract is one that ought to belong to the free citizens and to no other. To the gay-rights activists I say, take to the streets, though not in protest, but in celebration; and thank the "traditional" married couples and religious organizations that funded the Vote Yes campaign, for there in lies your protection from overreaching State power.
Monday, November 24, 2008
Is the Stock Market Losing Money or Points?
Much talk is circulating in the press and on the Hill about the trillions of dollars lost in the stock market. However, this statement is not entirely accurate. I don't mean to belittle in any way the depletion of funds in peoples' portfolios, retirement accounts, etc. Indeed, the money, which many Americans were counting on is gone. But to say that it is a dollar loss is misleading and casts the stock market in a light that it simply can't live up to.The truth is that the stock market is almost always a moderate to high risk investment--a gamble, and losses are the tail's side of the coin. The question is not so much whether investors are losing, it's what are they losing?
If we are really losing money--losing cash, then where is all the money going?
The money isn't going to greedy CEOs or your broker; it's not sitting in someone else's account somewhere. Nor has it been returned to the Fed. So where is it?
The fact of the matter is that the profits investors thought they had were imaginary. As long as investor's profits were in stocks, the profit could not be adequately measured in dollars, but, rather, only in the ability to sell the stock--nothing more than the willingness of someone else to buy the stock at the going rate in dollars at a fleeting moment in time. Further, tangible dollars are not lost until the stock value drops below the initial inflation adjusted purchase price.
Historically, the market has performed very well. Maybe too well, and therein lies the problem. Years of shabby financial decisions by the Federal Government has flooded the market with pseudo-capital, which has driven prices to unsustainable levels. The market is pulling back in order to correct the fallacious investment. It is likely to overshoot on the low end as well before settling to a true market rate, and even then only if the government will get out of the way.
Saturday, November 22, 2008
Government Waste
I received a "Notice of Hearing" in the mail today for citizens of Westchester County, NY--just north of New York City. The topic of concern is the $234.7 million dollars in additional spending this year for several coastal towns, spending which the county did not vote to enact, is not budgeted for, and as of this point represents nothing less than debt for the county if the Board cannot raise the funding.How did Westchester acquire this debt? In 1998, the States of New York and Connecticut entered into an agreement with the Environmental Protection Agency. This agreement requires the reduction of nitrogen from sewage treatment plants. Westchester County has repeatedly objected to the unfunded expenditures, but the Federal Government maintains that the agreement is binding and that there will be no Federal aid for the mandate.
According to Westchester County representatives, the only solution to the problem is to begin a Bond initiative in order to woo investors. If the Bond initiative fails, however, Westchester County will face millions of dollars in State and Federal fines and still be forced to comply with the EPA regulations.
So what's the problem? Municipal Bond initiatives remain a mainstay in improvement projects around the country and throughout US history. The issue in this case is the compulsory nature of the regulation. Westchester residents did not rise up in opposition to elevated nitrogen levels and set out to pressure sewage treatment plants to shape up. Rather this is the result of the cart-before-horse environmental lobby standing on the shoulders of the Federal Clean Water Act in order to pass through what they refer to as "much needed" reforms for the preservation of marine wildlife on the Long Island Sound [source].
The truth is that one of the most persistent arguments against free market capitalism in recent decades has been the disincentive for corporations to behave in ways deemed enviornmentally friendly when that behavior runs opposite to the corporation's financial interests. This argument remains so ubiquitous that it almost always goes completely unchallenged. This is a shame given the strength of the opposing argument. Further, I relish the opportunity to address the free market approach with a system as complex as water treatment, because unlike many other industries, you can't just start new sewage treatment plants overnight.
The beauty of the free market argument is that it does not require the lobbyists to find a new line of work, but rather simply change those whom they lobby. Let us suppose, for the sake of argument, that the environmental lobby (EL) is completely accurate when it claims that increased nitrogen levels in the water can be traced primarily to sewage treatment and that it is harmful to marine life. But now let us imagine that the Federal Government behaved according to the strict limits placed on it by the US Constitution. The EL could not count on the the Federal government to tell states and businesses how to run operations. So the EL would be forced to do what it should be doing in the first place, that is rely on the strength of their argument and the persuasive power of their beliefs to convince the people of Westchester County that it is in the best interest of everyone and everything that sewage treatment plants reduce nitrogen levels. If the EL was successful, the people of that state could either vote and budget for the appropriate changes or entrepreneurs could immediately begin working on more economical methods of nitrogen reduction, or both.
The advantage in either case is that the from-the-ground-up approach adequately budgets and creates the means of solving the problem. At worst it is publicly agreed upon and reluctantly funded, and at best it creates new jobs, industry, money, and solves the problem economically for the treatment plants. The top-down approach, however, does none of those things, and, in fact, does the exact opposite. When the Federal Government comes in with a regulation of this kind, the funding is no where in sight; the technology available to reduce the nitrogen is immature and therefore very expensive, and absolutely no jobs are created. As a matter of fact, jobs are likely lost. Why? Because Westchester county must now create a Bond initiative to take on private investment which could be going to fund butchers, and bakers, and, yes, candlestick makers; and, instead, is now funneling those funds to an unexpected, unsupported, and previously funded pit. The reduced nitrogen levels could have been a net gain for Westchester, but instead will be a net loss.
But the marine wildlife is saved either way, right? Perhaps, but it is time to realize the wisdom of the grass-roots approach to activism. Is it better to save the wildlife at the expense of the citizens or to save the wildlife and benefit the citizens? Yes, but what if the citizens decided not to fund the nitrogen reduction? At least with the top-down Federal fiat, the states are forced to adhere and the fish are still saved. My answer, be careful what you wish for. The next Federal government will be voted into power by the people you hurt, not the fish you saved.
Friday, November 21, 2008
The Inflation Tsunami
On December 26, 2004 a magnitude 9.3 earthquake shook the subduction zone along the India and Burma plates in the Indian Ocean, sending multiple walls of water--some as high as a hundred feet--racing toward Sumatra, Indonesia at a rate of nearly 600 miles per hour. The tsunami, which struck land, took the lives of more than 225,000 people and caused still-inestimable economic damage to the region. Survivors interviewed following the disaster almost unanimously relayed the same grim tale: minutes before the tsunami hit the animals were spooked and flighty and the beach water receded dramatically. Ignorantly, many people treated the receding waters as a spectacle and looked at the situation as an opportunity to venture out and collect stranded fish and shells. They were to learn too late the awesome gravity of the situation.And yet, unbeknownst to many, an even more devastating tsunami might well be building. And like many in Indonesia the warning signs are now becoming evident, but do we understand what we are seeing, or are we treating it as a boon; are we walking out to collect fish and shells?
Economic Tectonics
Deep beneath the surface of the US economy there is a seismic fault where the Federal Reserve meets the fractional reserve banking system. Unlike sound banking where each dollar loaned is a dollar deposited in the bank in a fixed term maturing account like a CD, this system uses initial capital investments and deposits to pyramid a hundred fold expansion of money in the US economy--essentially printing out of thin air $100,000 for every $1000 of productive money on reserve. The new money is given as loans to individuals and businesses to be paid back with interest at a future date. The Federal Reserve (the Fed) aggressively price fixes interest rates (the cost of immediate access to money) to further embolden citizens to take out these loans.
When a business person, for example, takes out a loan from a bank to build a new facility, s/he signs a contract with the bank to repay the loan with interest after a period of time. As unbelievable as it might sound, the bank from whom s/he burrows the money does not actually have the money to loan. One might ask where the money comes from. With a few keystrokes in the bank computer, the banker types in that the business person now has the money in his or her account. The money, as the banks will reluctantly tell you, is nothing more than the promise of paying it back. The new loan money then is used for architects, engineers, contractors, laborers, suppliers, etc. Once this money is in the hands of this second tier, some money is exchanged further for goods and services and some money is saved or invested in, say, mutual funds, stocks, retirement accounts, etc. This money in the form of currency, savings, and investments makes up what is called M1 and M2. It further becomes a part of the MZM (Money of Zero Maturity)--money immediately available for withdrawal.
The Nature of Inflation
Monetary inflation begins at the precise moment that more money has entered the economy than there are assets in the market. It might be easy to think that if everyone in the US were suddenly one million dollars richer, everyone could buy a million dollars worth of stuff and be better off. As nice as it sounds, this is simply not true. No, if everyone were a million dollars richer, Cars, boats, big screen TVs, etc. would immediately fly off the shelves (so to speak), producers wouldn't be able to keep up with the increased demand for those products, and prices would skyrocket as demand for precious few resources increased. After a short time prices would reflect the influx of new money and everyone would be exactly where they were before the million dollar pay day--only now the purchasing power of a dollar would be greatly decreased.
Though the sums of the loans are different and the number and distribution of the debtors are unevenly dispersed, banks are, indeed, engaged in precisely this practice. With all of this extra money floating around, however, should we not already see massive inflation? The Fed is quick to point out that the CPI (consumer price index) shows that inflation is rather stable, at about 2% per year. Herein lies the insidious nature of the Federal Reserve system. Although money flows like water and appears to be of unlimited supply, natural resources, goods, and workers are not of unlimited supply. The extra money in the economy promotes expansion and investment in areas that are not necessarily sustainable in terms of assets and supply and demand. Nevertheless, so long as consumer and business spending increase with the influx of money and companies can continue to produce at elevated levels, inflation is held at bay. What happens, however, if spending and production drop off?
The answer is that we get serious problems like those found in the current housing market. Massive and unsustainable investment was pumped into the housing market with unending credit expansion and government loan guarantees on both loan principle and interest. As long as consumers were buying homes, building and loaning could continue. However, eventually something occurred which no Keynesian economist appeared to think possible: housing supply exceeded demand, and the market simply dried up.
The housing bubble, however, was just the side effect of an easy-money-credit-crises-earthquake deep below the surface of the economy. And the economy soon began its tumult: unsustainable businesses produced by years of easy-money investments began closing; unemployment began rising; home owners were going into foreclosure; bankers were stuck with houses that no one wanted; eventually banks failed; bailouts ensued and with it a new influx of debt--money printed out of thin air, and the inflation tsunami was on its way.
The Warning Signs
But what are the warning signs of an inflation tsunami? Ironically, the most visible manifestation might well be sudden and sharp deflation coupled with a sharp increase in the strength of the dollar. In other words, look for the water to recede from shore and the height of the water off the horizon to rise. Why might this be? As consumers pull back on spending and burrowing, retailers also pull back with the fear of holding more product supply than product demand. Wholesalers perceive this pull back and retreat. Manufacturers see the retreat and stop burrowing for expansion projects and cut back on production. Parts suppliers see the cut back and then demand reduced quantities of raw materials--iron, steel, coal, oil, etc. along with other commodities. Finally when even raw materials drop production the waters might well be close to nadir.
This Week In the Headlines
"Prices Record Largest-ever Fall from Precious Month" -WSJ
"US Producer Prices Fell Sharply Last Month" -WSJ
"US Steel Layoffs" -WSJ
"Giant Mines Scramble to Cut Output" -WSJ
As industry pulls back, all the talk turns toward deflation. Some even mention the boon of the decreased prices and head out to collect fish and shells. Indeed, if deflation was slow and steady and money was pinned to a commodity like gold, deflation might well be a boon for the economy. But the deflation on this economic beach is more sinister. The printed money, mal-investment, frozen credit markets, foreign debt, and bailout cash is ballooning, pulling money away from the tangible production/consumption markets. The money is still out there though, and it has to go somewhere.
Suddenly, the Fed finds itself in a precarious conflict of interest; it is logical and appropriate for the Fed to sell securities, take money out of the market--thereby raising interest rates, but with no money to loan, the credit markets further freeze up, businesses fail, unemployment rises, and the chain of chaos continues. So instead, the Fed does not raise but, rather, lowers interest rates and money moves into the banking system. Hilsenroth and Evans of the Wall Street Journal spell this out cearly:
...but the mere risk [of deflation] puts added pressure on Congress and the incoming Obama administration to quickly advance a large fiscal stimulus plan. It also increases the likelihood that the Federal Reserve will take steps--such as pushing interest rates lower--to boost sagging consumer and business demand.
John Hilsenroth and Kelly Evans. Prices Post Rare Fall; A New Test for the Fed. Wall Street Journal November 20, 2008.
Because the money starts with bankers, those who now qualify for increasingly stringent loan requirements--the rich--will get the first grab at the new money. For them the purchasing power of the dollar will remain essentially unchanged. However, as that money--which does not represent an increase in asset production because of the economic pull back--enters the market, the disparity between the volume of money and hard assets grows. Further, because new production is low, new jobs are not being created as quickly as the money is increasing. Those citizens who are overextended in their personal finances, including the poor and lower middle class and those on fixed incomes, begin liquidating the MZM. And the tsunami grows as it approaches land.
The result is that the dollar will likely crash and flood the consumer market and the inflation will grow as the money volume increasingly exceeds assets. The buying power of the dollar will plummet, and those close to the water--those holding the dollar--will be washed away.
The Size and Scope of the Inflation Tsunami
The big question at this point is how big will this inflation tsunami be? This question depends largely on the liquidation of M1 and M2 money. When inflation is examined in terms of the MZM for 2008 rather than the CPI, we find that the actual inflation rate could be as high as 20%. If liquidation was total, inflation could be this high or higher in terms of the CPI. This would be catastrophic, but a total liquidation might not be realistic. Perhaps 15% might be though. To make matters worse the Fed and the US Treasury might continue to pump money into the economy, creating aftershocks and undermining consumer and business confidence.
Where should you be when the inflation tsunami hits? The answer, as far away from the dollar as possible. My vote is the hard commodities, specifically precious metals--gold, silver, and platinum. As the purchasing power of the dollar plummets, the demand for, let's say, gold will increase, driving up the price to its current inflation adjusted market value price, which is likely about $2,250 per ounce (some project it lower and some much higher depending on where and when you begin measuring).
Even these investments are not without perils; specifically, world governments have resorted to price fixing for precious metals and even confiscation in exchange for fiat dollars, as happened in the US in the 1930s.
Can the Tsunami Be Stopped?
Simply put, there is no stopping the tsunami once it is started. However, to a limited degree, it can be pushed back. Right now the US Treasury and the Fed are moving earth, sky, and sea to avoid an economic meltdown. If credit markets were to miraculously reinvigorate and consumers and business owners were able to devise only productive businesses with sound supply/demand principles, hire unemployed workers, and do it all before the tsunami hit, they might be able to push off the collapse. If the Fed then burnt billions upon billions of dollars and the congress outlawed the fractional reserve banking system, the power of the tsunami might be somewhat mitigated though not removed. Will this happen? No.
Truly the best solution to this problem is one outlined over 80 years ago, and remarkably it remains virtually unchanged no matter how progressed the ill. Ludwig von Mises accurately predicted the boom bust cycle and has been right all along--reduce government spending, lower or eliminate taxation on individuals and businesses, return to sound money based on gold or silver, end the Fed and fractional reserve banking system, pay off debt, save money, invest with true capital, grow the economy without the fetters of egalitarian price controls, subsidies, taxes, and tariffs, and trade freely. Even if we adopted these policies immediately, there would still be a price to pay, but the sooner we turn around, the sooner we find our way to higher ground.
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