Crony Capitalists paid their Friends in Government to Ban the Incandescent Lamp

Posted by PITHOCRATES - January 5th, 2014

Week in Review

Competition makes everything better.  For consumers.  That’s you and me.  For it’s that competition that makes business give us more for less.  To please us.  And to persuade us to give them our dollars for their products.  It’s a great system.  It prevents businesses from giving us shoddy goods at high prices.  For if they did they would lose their customers.  And go out of business.  So competition in free market capitalism gets businesses to choose to please their customers.  By giving them more for less.  Which allows them to stay in business.  Unless they have corrupt friends in government (see Industry, not environmentalists, killed traditional bulbs by TIMOTHY P. CARNEY posted 1/1/2014 on the Washington Examiner).

Say goodbye to the regular light bulb this New Year.

… Starting Jan. 1, the famous bulb is illegal to manufacture in the U.S., and it has become a fitting symbol for the collusion of big business and big government.

The 2007 Energy Bill, a stew of regulations and subsidies, set mandatory efficiency standards for most light bulbs. Any bulbs that couldn’t produce a given brightness at the specified energy input would be illegal. That meant the 25-cent bulbs most Americans used in nearly every socket of their home would be outlawed…

Competitive markets with low costs of entry have a characteristic that consumers love and businesses lament: very low profit margins. GE, Philips and Sylvania dominated the U.S. market in incandescents, but they couldn’t convert that dominance into price hikes. Because of light bulb’s low material and manufacturing costs, any big climb in prices would have invited new competitors to undercut the giants — and that new competitor would probably have won a distribution deal with Wal-Mart.

So, simply the threat of competition kept profit margins low on the traditional light bulb — that’s the magic of capitalism. GE and Sylvania searched for higher profits by improving the bulb — think of the GE Soft White bulb. These companies, with their giant research budgets, made advances with halogen, LED and fluorescent technologies, and even high-efficiency incandescents. They sold these bulbs at a much higher prices — but they couldn’t get many customers to buy them for those high prices. That’s the hard part about capitalism — consumers, not manufacturers, get to demand what something is worth.

Capitalism ruining their party, the bulb-makers turned to government. Philips teamed up with NRDC. GE leaned on its huge lobbying army — the largest in the nation — and soon they were able to ban the low-profit-margin bulbs.

When you have collusion between big business and big government you no longer have free market capitalism.  No.  Instead you have crony capitalism.  Where rich people both in business and government collude with each other to make themselves even richer.  While making consumers poorer.

The lamp manufacturers got new laws that forced consumers to pay the higher prices they wouldn’t without a law compelling them to do so.  Making the lamp manufacturers richer.  And the lobbyists poured lobbying money over their friends in government.  Who probably stripped naked and rolled around on it, rubbing that cash all over their naked bodies.  And said God bless global warming.

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Health Care is Expensive because the Government doesn’t pay their Bills in Full

Posted by PITHOCRATES - January 4th, 2014

Week in Review

Health care is expensive.  It’s why we have Obamacare.  To lower the cost of health care.  And give quality health care to everyone.  But why exactly is health care so costly?  And who’s to blame?  Well, let’s take a look at the cost of an appendectomy to get an idea (see Reddit User Posts $55,000 Hospital Bill for Appendectomy by SYDNEY LUPKIN, ABC News, posted 1/1/2014 on Yahoo! News).

When a 20-year-old man got over the pain of having his burst appendix removed in October, he got hit with a hospital bill he wasn’t expecting.

The bill from Sutter General Hospital in Sacramento, Calif., said the total charges were $55,029.31 but that the patient owed only $11,119.23 because his insurance had covered the rest.

Shocked, the patient took to Reddit to post the bill and vent his frustrations.

“I never truly understood how much health care in the U.S. costs until I got appendicitis in October,” he wrote on the social media site. “I’m a 20-year-old guy. Thought other people should see this to get a real idea of how much an unpreventable illness costs in the U.S…”

But the bill was not so unusual, given recent studies that showed how the cost of medical procedures could vary from hospital to hospital, said Timothy McBride, a professor and health policy analyst at Washington University in St. Louis….

Sutter General Hospital spokeswoman Nancy Turner said hospital billing is complicated, and that the hospital has people available to help patients navigate it. She said hospitals often serve many patients who don’t pay at all or don’t pay the actual cost of treatment because they are on Medicare or Medi-Cal, California’s version of Medicaid.

“Sutter Health agrees that an improved billing structure is needed, where published charges are more closely aligned with actual costs,” Turner said. “And a more straightforward pricing system is only possible when reimbursement from government-sponsored patients covers actual costs.”

How much did your television cost?  How much is your cable bill?  How much was your laptop?  Your tablet?  How much was your mobile device?  How much is your cable bill?  How much is your cellular bill?  People know these costs very well.  For they are very discerning shoppers.  And because they are manufacturers and providers bend over backwards to give their customers what they want at the lowest possible price.  This is free market capitalism at work.  Competition for our dollars makes businesses try to give us the highest quality at the lowest price.  But none of this happens in health care.  Because there are no free market forces in health care.

No one knows what their health care costs are.  Because they don’t pay the bill.  So they don’t know.  And they don’t care.  It’s so bad today that most couldn’t shop and pay for the own health care if they tried.  On the rare occasion they pay attention to their bill what do they do?  Blame the hospital for gouging on their bill.  But there is a reason they do this.  And it’s not because they’re greedy.  They do it because it’s the only way they can keep their doors open.  Thanks to the people who don’t pay their bills.  And the government who doesn’t pay all of their bills.  Leaving no choice for health care providers but to over-bill the insurance companies.  Who are the only people paying their bills in full and then some.

Obamacare will only make this worse.  By giving ‘free’ health care to more people.  Health care that the government won’t pay in full.  Which will force the health insurers to raise their premium prices further.  Until it is so expensive that no one will buy it anymore.  The so-called death spiral.  Opening the door for single-payer health care.  And Medicaid-quality health care for everyone.  Well, perhaps not quite Medicaid-quality health care.  With more people in the program wait times and rationing will be greater than they are currently in Medicaid.  So it will be worse than Medicaid.  The worse-quality health care currently available in the United States.

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FT200: “Only force can make people live in a world without choice.” —Old Pithy

Posted by PITHOCRATES - December 13th, 2013

Fundamental Truth

College Students and Hippies of Yesteryear have a Soft Spot for their Communist Heroes

The hippies in the Sixties saw a brotherhood of man.  They wanted to link arms and sing Kumbaya.  Live in their communes.  Get high.  Have unprotected sex with multiple partners who bathed infrequently.  While being one with nature.  And poop and pee in the great outdoors.  Like the animals.  Only with less grooming.  For they hated the Man.  And didn’t want anything to do with their parent’s generation.  They protested any figure of authority.  Protested the Vietnam War.  And protested against their government.  Speaking truth to power.  And yearned to bring the Marxist-Leninist revolution to America.

The hippies were rabid anti-capitalists.  Which is why they loved communism.  Where there were no possessions.  No religion.  Or greed or hunger.  Just imagine all the people sharing all the world.  Words from John Lennon’s song Imagine).  Former Beatle.  And one of the leaders of the counterrevolution.  Not to be confused with the other Lenin.  Vladimir Ilich Lenin.  Of Soviet Marxism-Leninism fame.  Or, rather, infamy.  One of many icons of the counterrevolution.  Along with Mao Zedong.  Ho Chi Minh.  Fidel Castro.  And, of course, Che Guevara.  Whose bearded and beret-wearing image adorns many a university dorm room wall and student t-shirt to this day.

College students today, just as the hippies of yesteryear, still have a soft spot for their communist heroes.  Thanks to many of these hippies of yesteryear having joined the establishment.  And are now teaching our kids in college the evils of capitalism and the goodness of government.  Despite their one-time fierce opposition to the Man.  Guess things change once you get money.  Like someone in the rock band The Who said when asked if he still hopes to die before he gets old (a line from My Generation-a song about youthful angry rebellion against their parent’s generation).  The reply was that being old wasn’t all that bad when you were rich.  Something the old hippies of the Sixties no doubt discovered.  And best of all they got rich by taking money from the capitalist pigs.  Their students’ rich parents.  Or the taxpayers who worked in that detested capitalist system.

Nations with the Marxist Brotherhood of Man with No Possessions have been the Worst Places to Live

It is ironic that without capitalism these communist-loving parasites could not be parasites.  For if no one was creating economic activity there would be no income to tax.  Or to pay for the one thing growing more expensive than health care.  College tuition.  Interestingly, there is no ‘Obamacare’ for our colleges and universities.  No.  They never label them greedy despite their being the greediest of them all.  But you know who they do label as greedy?  The taxpayers who oppose higher taxes to pay for the ever higher cost of higher education.  They’re the greedy ones.  Not the old hippies of the Sixties.  And their fellow anti-capitalists.

Another interesting thing about these anti-capitalists?  They yearn for one-party rule.  Which is why public education teaches our kids to distrust capitalism and to trust government.  And our colleges and universities teach our kids to be ashamed of their nation’s past.  And the importance of diversity.  Which is code for anything that isn’t American.  For America was founded by rich white slave-owners who stole the land from the Native Americans.  And America’s imperialist aggression is the only source of strife in the world today.  While ignoring the expanding communist revolution that was spreading out from the Soviet Union into the Eastern Europe, Asia, the Middle East, Africa and the Americas.  The one ideology that has killed more people than any other.  Through state oppression, wars and famine.

Yes, this brotherhood of man where there are no possessions have been in fact the worst places to live.  The Soviet Union, Eastern Europe, Mao’s Peoples Republic of China, North Korea, Vietnam, Cambodia, Cuba, etc.  These are all nations that had gulags or reeducation camps for political prisoners.  Those people who spoke—or thought—truth to power.  They all had police states where the people lived in fear of their government.  They suffered for the want of the most basic items (soap, toilet paper, etc.).  There was state censorship.  They persecuted anyone practicing any religion.  The people suffered from constant hunger.  And the occasional famine.  They killed anyone trying to escape their communist utopia.  Or sent them off to hard labor and torture.  If they escaped successfully then the state punished any family remaining behind.  To warn others what would happen if they escaped their communist utopia.

The Great Flaw of Socialism is being unable to Determine What is the Greater Good

Why did these communist states have police states and brutally oppress their people?  Because they had to.  When the communists built the Berlin Wall it wasn’t to keep people from West Berlin out of East Berlin.  It was to stop people escaping from East Berlin to West Berlin.  For the East Germans were suffering a terrific brain drain.  Capitalists believe in liberty.  The freedom to do what they want.  And to get paid for their services.  A highly skilled doctor expects a higher salary than a janitor.  And that just isn’t going to happen in a communist state.  You get what the state gives you.  No more.  Creating a heck of a free rider problem.  When your economic system works based on the Marxist premise from each according to ability to each according to need what you get is a lot of people showing little ability and a lot of need.  For the more ability you had the harder they forced you to work.  While the greater your need the more you got.  Such a system encourages people to do the minimum and not be extraordinary.  Which is why Sony, Samsung, Microsoft, Apple, The Beatles, etc., did not come from communist countries.

A communist state has a planned economy.  Instead of a free market economy.  Communist state planners manage the economy from top down.  Telling the raw material industry what materials to extract.  They tell what factories get these raw materials and what they are to build.  Etc.  Whereas in a free market economy the economy is driven bottom up by the consumers.  When consumers start buying a lot of one thing the price for that one thing rises.  Attracting other businesses into the market to meet that rising demand.  Who place orders with their wholesalers.  Who place orders with their manufacturers.  Who place orders with their industrial processors.  Who place orders with their raw material extractors.  Hundreds of thousands of decisions happen as this consumer demand travels up the stages of production in a free market economy.  Giving the people what they want.  And not what a state planner decides to give to the people.

This is why communist (and socialist) states are oppressive dictatorships.  Because state planners decide for the people.  Which must start with the supreme decision maker.  The Joseph Stalin, the Mao Zedong, the Ho Chi Minh, the Kim Jong Un, the Raul Castro, the Hugo Chávez, etc.  And these people don’t take polls or hold elections.  Well, at least elections that are legitimate.  Kim Jong Un continues the state policy of his predecessors.  No economic reform.  Money goes to the military first (especially for his nuclear toys) and whatever is left over may go to the people.  And anyone who disagrees with him or thinks wrong goes to the gulag.  Or is executed.  Like his uncle.  While the people suffer the want of the most basic things.  Like food.  North Korea to this day still suffers the occasional famine because of its economic policies.  But one problem the North Koreans don’t have?  Deciding where to go for lunch.

“Where do you want to eat?  I don’t know, where do you want to eat?”  This can go on until someone forceful makes the decision for the group.  Often making no one happy.  But it will end the endless “where do you want to eat?”  This is the great flaw of socialism.  Being unable to determine what is the greater good.  Because people rarely agree on what’s best for other people.  Just look at the recent budget agreement that made few people happy.  They were unhappy because they disagreed on what was the greater good.  People are different.  One size does not fit all.  You just can’t please all of the people all of the time.  So you have to force your will on the people.  The only mechanism that makes socialism work.  Force.  Because people can rarely agree on where to go to lunch let alone national policy.  And this is why all communist/socialist states end in brutal dictatorships.  Because only force can make people live in a world without choice.

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The Pilgrims and Thanksgiving

Posted by PITHOCRATES - December 3rd, 2013

History 101

Queen Elizabeth hated the Puritans more than the Catholics

The Pilgrims landing at Plymouth Rock were God-fearing people.  Who had left England to escape religious persecution.  The Pilgrims were members of the new Protestant faith.  Less than a century old at that time.  With Henry VIII, King of England, turning Catholic England Protestant in the 1530s.  Which didn’t go over well with England’s Catholics.  Becoming a thorn in Henry’s daughter’s side.  Queen Elizabeth.  (The first Queen Elizabeth.  Not the current one.)  Who she persecuted.  But they weren’t the only people she persecuted.

The Church of England swung between Catholicism and Protestantism through the years.  Trying to please both Catholic and Protestant.  In time becoming neither Catholic nor Protestant but something in between.  Pleasing neither Catholic nor Protestant.  Queen Elizabeth, the head of the Church of England, settled the matter.  By persecuting those dissatisfied with the Church of England.  The Catholics who said it was too Protestant.  And the Protestant ‘extremists’ who said the Protest Church of England was too Catholic.

It was these Protestant ‘extremists’ that really irked Elizabeth.  No, the Church of England wasn’t good enough for them.  Because it didn’t strip every last vestige of Catholicism from it.  It was impure.  Corrupted with Catholicism.  Vestments.  Icons.  Altars.  It was just downright obscene.  That’s why she turned on these ‘Puritans’ with a vengeance.  And persecuted them like Catholics.  Even worse at times.

The Pilgrims suffered Three Years of Poor Harvests and Famines because of Socialism

Things didn’t get any better under James I.  Who followed Elizabeth’s lead.  With the political climate turning against the ‘Puritans’ they skedaddled.  Leaving England.  And resettled in Leiden, Holland.  Where they had the freedom to worship as they pleased.  But the different language and culture became a problem for the congregation.  Their children were becoming less like their parents and more like the Dutch.  Who enjoyed the pleasures in life a little more freely than they thought proper for a ‘Puritan’.  If their children became Dutch it would ultimately mean the end of the congregation.  So they boarded a ship.  No, not that one.  They took the Speedwell to England.  Then boarded THAT ship.  The Mayflower.  Crossed the Atlantic Ocean.  And landed at Plymouth Rock.

Now the Pilgrims landing at Plymouth Rock were God-fearing people.  But they had a little in common with the hippies of the Sixties.  Not the sex and drugs.  But how they lived.  For the Pilgrims lived like the hippies wanted to live.  As communists.  The Pilgrims worked but didn’t own anything.  Everything they produced belonged to everyone.  Produced by those according to ability.  And taken by those according to need.  The perfect communist society.  And truly authentic to the yet unknown communist philosophy.  Right down to the recurring famines.

The harvest of 1620 was poor.  Making the first winter hard.  And there was famine.  It was so bad that half of them died.  The Indians then taught them how to grow corn.  Things were looking up.  They celebrated the first Thanksgiving.  But the harvest of 1621 was just as bad as the harvest of 1620.  And they suffered another famine.  Another poor harvest followed in 1622.  And another famine.  Why?  Because people were lazy.  The most able-bodied of them did not want to work according to their ability.  Just so the lazy could enjoy the fruit of their labors.  And draw from the common stores according to their need.  Without contributing anything to the common stores.  Because they had better things to do than work.  Besides, it was easier just to steal what others grew than working hard in the fields.

All of the Things that made America Great were born in Plymouth Colony

Jamestown was suffering the same fate.  The socialist utopia of living in a commune just didn’t work.  The most able-bodied men refused to work according to their ability to support other men’s wives and children.  For they had their own wives and children to support.  So those with ability did the minimum.  Because doing any more didn’t help them in any way.  Or their families.  It was like asking people to work an extra two hours at work for free.  So others with large families to support could work two hours less and go home early.  So one group of workers work 10 hours for 8 hours of wages.  While another group work for 6 hours for 8 hours of wages.  Which is socialism.  Redistribution.  From those according to ability to those according to need.  It was this economic philosophy many settlements used.  Giving them poor harvests.  And famines.

But that all changed in 1623 for the Pilgrims at Plymouth Colony.  William Bradford, governor of the colony, changed the economic system.  He abolished socialism.  And replaced it with free market capitalism.  He parceled out the common land.  Giving each household a parcel of land.  Saying it was their property.  It belonged to them.  As did anything they grew on it.  Which meant the more they grew the more they could eat.  Or trade for other things they needed.  Which unleashed the energies in the able-bodied.  And they worked their behinds off.  Growing as much as they possibly could.  Soon the harvests everywhere they implemented free market capitalism were bountiful.  Even in Jamestown.  And there was no famine in Plymouth Colony following the 1623 harvest.  Things were different.  And never would be the same again.

Finally the Pilgrims had a reason to be thankful.  Free markets.  The best medicine there is for famine.  Thanks to free market capitalism the colonies prospered.  And a new nation arose.  This economic liberty would go on to make the United States the greatest nation in the world.  Religious freedom.  Private property.  Limited government.  All of those things that made America great were born there in Plymouth Colony.  Thanks to William Bradford.  Who saw the futility of socialism.  And abolished it.  Things were difficult in the beginning.  But their decision to leave England ultimately provided the better life they were seeking.  And as it turned out they got out when the getting was good.  For the religious climate didn’t improve in England.  As the conflict between Catholics and Protestants would lead to civil war in 1642.  And it wasn’t pleasant.  Missing the horror of that gave the Pilgrims another thing to be thankful for.

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Division of Labor

Posted by PITHOCRATES - November 4th, 2013

Economics 101

(Originally published October 24th, 2011)

The Division of Labor gives us our Houses, Food, Cars, Televisions, Smartphones, Laptops and the Internet

We can’t do everything ourselves.  It’s not efficient.  And most times not even possible.  We don’t build our own houses.  Grow our own food.  Build our own cars.  Manufacture our own high-definition televisions.  Smartphones.  Laptops.  And we don’t build our own Internet.  No.  Instead, people everywhere across the economy specialize in one thing (i.e., work for a living).  And together these specialists fit into the big economic picture.  Which gives us our houses, food, cars, televisions, smartphones, laptops and the Internet.

It started with the most basic division of labor.  Prehistoric women raised their young.  While prehistoric man hunted.  Which was necessary for the propagation of the species.  And us.  For if they all hunted and no one nursed the young the young would have died.  And with them the species of man.  For there was no formula back then.

The next great leap forward on the civilization timeline was the indispensible plough.  The prime mover of civilization.  With the food problem managed, famines were more the exception than the rule.  And with fewer people needed to produce a food surplus, people could do other things.  And they did.

The Division of Labor let us Create Surpluses in Food, Ploughs, Shoes, Tools, Harnesses, Etc.

The division of labor gave rise to artisans.  The first skilled trades.  Made possible by a food surplus.  As other people grew the food the artisans made the tools and crafts the farmers used.  They specialized in plough making and designed and built better and better ploughs.  Lots of them.  Shoemakers made shoes.  Lots of them.  Metal workers made tools.  Lots of them.  Leatherworkers made harnesses.  Lots of them.  See the pattern?

The food surplus gave us surpluses in ploughs, shoes, tools, harnesses, etc.  The division of labor let us create these surpluses.  Specialists made continual improvements in their areas of specialization.  Producing better things.  And more of them.  Which led to another key to the advanced civilization.  Trade.

The shoemaker didn’t have to grow food.  He could trade shoes for food.  Ditto for the plough maker.  The metal worker.  The leatherworker.  And the farmers didn’t have to make any of these things because they could trade food for them.  So we became traders.  We created the market.  And traders took their goods and/or services to these markets to trade for other goods and/or services.  First by foot.  Then by animal.  Then by boat.  Then by train.  Then by truck.  Then by airplane.  Artisans (i.e., workers) traded their specialization for the product and/or services of another’s specialization.  Then.  And now.

The Division of Labor made the Complex Simple and our Lives Rather Comfortable and Fun

The division of labor gave rise to the artisan.  The skilled trade worker.  The middle class.  People who can specialize in one thing.  And trade that one thing for the other things he or she wants.  Whether it be a skilled blacksmith hammering out farming tools.  A tool and die maker working in a factory.  An accountant.  Or a software engineer.  We have a skill.  Our human capital.  And we trade that skill to get the other things we’re not skilled in.  The end result is a modern, bustling, free market economy.  An advanced civilization.  And a high standard of living.

All thanks to the division of labor.  Which made the complex simple.  And our lives rather comfortable.  And fun.  Unlike prehistoric man.  Who knew of no such things as iPhones.  Indoor flush toilets.  Movie theaters.  Or restaurants.  No, he didn’t do much other than survive.  Which was no easy thing.  But he did.  And for that we are grateful.

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The Greatest Threat to an Oppressive Dictatorship is Free Market Capitalism

Posted by PITHOCRATES - September 22nd, 2013

Week in Review

When people enter economic exchanges voluntarily everybody wins.  For example, let’s say one person has a hundred dollars of spare cash.  And another person owns a mountain bicycle that sells for $350 new.  The one with the money wants to buy a mountain bicycle.  The one with the mountain bicycle needs cash and wants to sell the bike. These two people meet.  And exchange the $100 for the bicycle.  And both walk away with something they valued more.  The person originally with the $100 valued the bicycle more than the $100.  And the person originally with the bicycle valued the $100 more than the bicycle.  Each person wins in this voluntary economic exchange.

Now contrast that to a managed economy.  Where a few decide for everyone else.  Such as in socialism.  Or communism.  Say, in the former Soviet Union.  Where the economic planners decide to make more tractor parts and less toilet paper and laundry detergent.  Resulting in shelves full of tractor parts no one wanted to buy.  And empty shelves where there was once toilet paper and laundry detergent.  As you can see, when you have forced economic exchanges no one wins.

Countries with economic systems based on free market capitalism where people enter economic exchanges voluntarily have historically had the highest standards of living.  Whereas countries with managed economic systems have had the lowest standards of living.  Liberty and prosperity are synonymous with the United Kingdom, the United States, Canada, Australia and Hong Kong.  Which were once all part of the British Empire.  Which ruled the world and kept the peace for a hundred years or so.  The Pax Britannica.  She was able to do this because of her wealth.  Generated from free market capitalism.  The rule of law.  Representative government.  Sound money.  And free trade.  Things that today give these nations immigration problems.  Because everyone wants to go to these nations for a better life.

In capitalist nations people live better because there is a profit incentive.  Whereas the countries these immigrants left typically put people before profits.  Where instead of letting market forces set prices and allocate limited resources that have alternative uses the government decides.  Like they did in the former Soviet Union.  And the more government interferes with these market forces the more these economic decisions become political.  Where friends of the ruling power get those limited resources first and at favorable prices.  Allowing them and the ruling powers to profit handsomely from this political favoritism.  At the expense of the people who have to do with less.

The profit incentive puts people first.  Because in free market capitalism market forces are the people.  Hundreds of millions of people coming together to make voluntary economic exchanges.  Where each individual person looks out for his or her best interests.  But when a ‘caring’ government manages the economy to put the people first that government interferes with those market forces.  And goes against the will of the people.  Making the people worse off.  Which is why immigration is always from a country where there is less free market capitalism to a country where there is more free market capitalism.  Because the quality of life increases with increasing amounts of capitalism.  So we should be careful what we ask for when we ask to put people first.  Even when the Pope joins the ‘put the people first’ choir (see Pope condemns idolatry of cash in capitalism by Lizzy Davies posted 9/22/2013 on theguardian).

Pope Francis has called for a global economic system that puts people and not “an idol called money” at its heart, drawing on the hardship of his immigrant family as he sympathised with unemployed workers in a part of Italy that has suffered greatly from the recession…

“Where there is no work, there is no dignity,” he said, in ad-libbed remarks after listening to three locals, including an unemployed worker who spoke of how joblessness “weakens the spirit”. But the problem went far beyond the Italian island, said Francis, who has called for wholesale reform of the financial system…

Sardinia, one of Italy’s autonomous regions with a population of 1.6 million, has suffered particularly badly during the economic crisis, with an unemployment rate of 20%, eight points higher than the national average, and youth unemployment of 51%.

Last summer the island’s hardship became national news when Stefano Meletti, a 49-year-old miner, slashed his wrists on television during a protest aimed at keeping the Carbosulcis coal mine open.

There was one other thing these nations born of the British Empire shared.  Judeo-Christian values.  They lived by the Ten Commandments.  And the Golden Rule.  The good Christians of the British Empire followed the teachings of Christ.  “Do unto others as you would have them do unto you.”  These Judeo-Christian values went hand-in-hand with free market capitalism.  It’s what made us choose to live by the rule of law.  To honor the contracts we made with one another.  To voluntarily enter economic exchanges instead of just stealing and pillaging our neighbors.

Money doesn’t have value.  It’s a temporary storage of value.  It is our human capital that has value.  Our ability to create things that have value.  Things that other people will voluntarily enter into economic exchanges to trade for with things of value they created.  Whether it be a physical good.  Or money from a paycheck they earned creating value for an employer who uses it to produce a service or good.

Capitalists don’t worship money.  For money only makes those economic exchanges more efficient.  By eliminating the search costs of the barter system.  It’s human capital that capitalists are interested in.  This is what they worship.  People.  Unlocking the latent talent in all of us.  To bring incredible things into existence.  Sanitation.  Waste water treatment plants.  New farming advancements.  Coal-fired power plants.  Things that allowed greater groups of people to live together in growing cities.  Where we have food, clean water and shelter.  Things we take for granted in capitalists nations.  Things that are luxuries in North Korea.  An anti-capitalist country that puts people before profits.  Where people worship the ruling dictator (primarily to avoid imprisonment, torture and death).  And the only people that do well are those close to the ruling power.

We don’t need a new financial system.  We just need to return to what it was before governments intervened into the free market economy to put people first.  Before we completely forget the Ten Commandments.  And the Golden Rule.  For once we use the power of government to nullify contracts to help their crony friends we no longer have a nation of laws.  But one of political favors.  Where the friends of power do well.  While those with no power live at the mercy of those in power.

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Like Greece Japan looks forward to the Economic Stimulus from Hosting the Olympics

Posted by PITHOCRATES - September 15th, 2013

Week in Review

During the Eighties Japan was an economic powerhouse.  The government partnered with business.  Creating what became known as Japan Inc.  It was the way of the future.  Way better than free market capitalism.  Because smart government people were tweaking the free market.  Making it better.  Or so they thought.  All that tweaking came in the form of a credit expansion.  Which created a huge asset bubble.  And when it burst Japan fell into a deflationary spiral.  Through their Lost Decade.  The Nineties.  And beyond.

Tired of sluggish economic growth since their Lost Decade their prime minister, Shinzō Abe, returned to the ways of their past.  And starting pumping yen into the economy like there is no tomorrow.  And the economy has turned.  Of course, the economy was going gangbusters before it collapsed into its deflationary spiral. So this spurt of economic activity may be nothing but that.  A spurt.  And sluggish economic growth will return.  With more inflation to wring out of the economy.  And this will probably not make things better (see Hopes Japan’s win to host Olympics could kickstart the economy by Bill Birtles posted 9/10/2013 on Radio Australia).

Japan could get an economic boost from hosting the 2020 Olympics in Tokyo…

As Japan begins its largest project in 42 years in preparation for the Olympics, there is still plenty left to do.

Just last week, Abe’s government pledged $US500 million to fix Fukushima.

In addition, Japan faces the problem of massive debt and an ageing population.

Prime Minister Shinzo Abe will also need to take a call on raising the country’s sales tax.

The Chief Economist at RBS Securities, Junko Nishioka, says for now though, keeping spending under control will be a priority for the country of about 130 million.

Greece was talking the same way in the run-up to the 2004 Summer Games.  Where Greece went on an expansionary binge.  Then came the Great Recession.  Greek economic activity fell.  As did their tax revenue.  All the while they had a new boatload of debt on the books from the Olympics.  They had to borrow money to pay for what their tax revenue did not.  Borrowing more and more increased their debt.  And their borrowing costs.  Until they could borrow no more. Kicking off the Eurozone sovereign debt crisis.  And an economic malaise that continues to this day.

So with Japan’s past history and Greece’s past history a surge in more spending to get ready for the Olympics is not likely to solve any problems.  Or bring back Japan Inc.  As this kind of spending has a history of causing problems more than solving problems.

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Vietnamese Coffee Industry suffers because Communist Vietnam puts People before Profits

Posted by PITHOCRATES - August 17th, 2013

Week in Review

The American left wants more government intervention into the free market.  Because they hate and don’t trust corporations.  Because they are motivated by profit.  Even putting profits before people.  Whereas government puts people before profits.  So everything is better when government intervenes.  Which is why the left loved Hugo Chávez in Venezuela.  They love Cuba.  They loved the former Soviet Union.  Because they were all socialist utopias.  Where they put people before profits.  Of course, people are robbing women of their hair in Venezuelan streets.  Cubans have risked their lives crossing the ocean to reach Florida on just about anything that floats.  And the Soviet Union is no more.  Because they couldn’t provide for their people.  Despite putting their people before profits.

Another communist country the left likes is Vietnam.  Especially since the communists got the Americans to give up and go home.  Vietnam is still communist.  But like China they add a sprinkling of capitalism to the communist stew.  A sort of state-capitalism.  Capitalism with the heavy hand of the government involved.  The way the American left likes it.  And how are things there?  Well, they are having quite the problem in their coffee industry (see Crippling debts brew a coffee crisis in Vietnam by Nguyen Phuong Linh, Ho Binh Minh and Lewa Pardomuan posted 8/15/2013 on The Globe and Mail).

But its coffee industry is now in crisis, plagued by tax evasion, mismanagement, insolvency, high interest rates and a credit squeeze. Many coffee operators are trapped with crippling debt and banks are reluctant to lend them more money.

Vietnam’s credit crunch is blamed largely on state-owned enterprises that borrowed big during the economic boom of the past decade and squandered cash on failed investments, which has left banks crippled by one of Asia’s highest bad-debt ratios…

Few coffee exporters are willing to talk about their financial problems. In communist Vietnam, people are often reluctant to speak publicly about politics and business, especially to foreign media…

Vietnam’s 2013-2014 coffee crop is forecast to be a bumper harvest, around 17 million to 29.5 million 60-kg bags, based on a Reuters poll. This will add to a global oversupply and pressure coffee prices which have lost about 10 per cent since October…

A government assessment of the coffee industry paints a bleak picture. The value of non-performing loans or debts in the sector likely to go unpaid stands at 8 trillion dong ($379-million), or 60 per cent of all coffee industry loans, said a July circular signed by the Deputy Agriculture Minister Vu Van Tam…

Unscrupulous middlemen have also played a part in the crisis, cheating exporters by selling them weighted coffee bags and inferior beans which are difficult to sell or fetch lower prices.

“What I found out is the market there is quite dirty. Middlemen often sell poor beans to exporters. They even put metal bolts in the bags to outweigh them,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

You don’t have middlemen putting bolts into bags to make them heavier in free market capitalism.  For any inferior product in a free market doesn’t remain long in a free market.  As people will simply stop buying an inferior product.  And it could take years for a company to rebuild its tarnished image.  If they ever can.  This is what happens when you put profits before people.  People win.

So who caused the credit crunch?  State-owned enterprises.  As people in government are horrible at business.  For if they were good at it they would be in it.  But they’re not so they regulate it.  Or run a state-owned business.  Not because of their business acumen.  But because they had friends in higher places in government than anyone else.

Loans are important in any agricultural business.  Because all of your expenses come long before you can sell anything.  So they take on big debts at the beginning of the season.  That they plan on repaying after the harvest.  As long as prices don’t fall because there is a bumper crop.  But if they do they may not be able to earn enough to repay their bank loans.  Which is why 60% of all coffee industry loans will likely go unpaid.  And why bankers don’t want to loan them any more money.  Or charge a really high interest rate when they do.  For if a banker knows that every other loan he or she writes will never be repaid it makes a banker very reluctant to loan any money.  And what they do loan has to have such high interest rates to cover the loans that are never paid back.

This is why governments should not interfere with free markets.  For when they do they just make everything worse.  Because they’re just not good at it.  Unlike oppressing their people.  That they’re very good at.  Which is why people are “reluctant to speak publicly about politics and business, especially to foreign media.”  Something unheard of in free market economies.  But quite common in these socialist utopias.  Yet the left still favors them over free market capitalism.  Go figure.

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Rand Paul says Milton Friedman would oppose the Fed’s Bond Buying Program

Posted by PITHOCRATES - August 17th, 2013

Week in Review

What’s the difference between hard money (gold, silver, etc.) and paper money?  You can’t print hard money.  Which is why big-spending governments hate hard money.  And love paper money.  They use lofty economic explanations like having the money supply grow at a rate to support an expanding economy.  But the real reason they love paper money is because there is no limit on what they can spend.

This is why some people would prefer bringing back the gold standard.  To make the government as responsible as the rest of us.  Governments and their liberal friends hate this kind of talk.  And try to dismiss it with all-knowing condescension.  Because they sound so learned in their defense of their monetary policies despite a long record of failure they get to keep trying the same failed policies of the past.

Now it’s Rand Paul talking about the gold standard.  Invoking the name of Milton Friedman.  A monetarist.  And receiving the expected criticism (see Rand Paul is dead wrong about Milton Friedman by James Pethokoukis posted 8/13/2013 on the guardian).

Friedman understood the power of monetary policy, for both good and ill. He would almost certainly have been aghast that the Fed blew it again in 2008 by its tight money policies that possibly turned a modest downturn into the Great Recession. And he almost certainly would have been appalled at Republicans pushing for tight money – or, heaven help us, a return to the gold standard – with the economy barely growing and inflation low. It is certainly inconvenient for Paul that Friedman – a libertarian, Nobel-laureate economist – would have little use for the senator’s supposedly Hayekian take on the Fed or monetary policy.

Although the Bernanke Fed has imperfectly executed its QE programs, they are a big reason why the US is growing and adding jobs – despite President’s Obama’s regulatory onslaught and tax hikes – and the EU (and the inflation hawk ECB) is back in recession. Paul is wrong on Friedman and wrong on the Fed. It’s not even close.

One of Friedman’s criticisms of the gold standard is that to maintain the international price of gold—and price stability—governments would have to give up control of their domestic policies.  As a gold standard would prevent them from expanding the money supply at will.  So they couldn’t print money and devalue their currency to increase government spending.  To give themselves an unfair trade advantage.  And to monetize their debt from past irresponsible government spending.  But governments being governments they will do these things even with a gold standard.  As Richard Nixon and the US government did in the 1970s.  Rapidly devaluing the dollar.  Causing a great outflow of gold from the US as our trading partners preferred to hold onto gold instead of devalued US dollars.

The idea of monetarism was to have something similar like a gold standard while having the ability to expand the money supply to keep up with the growth in GDP.  And this would work if responsible people were in charge.  Who would resist the urge to print money.  Like Ronald Reagan.  Under the advice from none other than Milton Friedman.  Who served on the President Reagan’s Economic Policy Advisory Board.  Reagan shared Friedman’s economic views.  Believed in a limited government that left the free market alone.  So Reagan cut taxes, reduced government spending (other than defense) and deregulated an overregulated free market wherever he could.  All things Friedman endorsed.

It is unlikely that Friedman would endorse any quantitative easing.  Because a lack of credit is not causing our economic woes.  It’s a complicated tax code.  High tax rates.  And way too much governmental regulation and interference into the free market.  Especially Obamacare.  That has frozen all new hiring.  And pushed full-time workers into part-time positions.  Or out of a job entirely.  More money in the economy is not going to fix this anti-business climate of the Obama administration.  In fact, the only people making any money now are rich people.  Who are using all that new money to make more money in the stock market.  And when the government shuts off the quantitative easing tap those rich people are going to bail out of the stock market.  To lock in their profits.  Causing the stock market to crash.  And putting an end to the phony illusion of an economic recovery.  And the worst economic recovery since that following the Great Depression will get worse.

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Keynesian Economics Destroyed Good Lending Practices at our Banks and gave us the Subprime Mortgage Crisis

Posted by PITHOCRATES - August 11th, 2013

Week in Review

In the days of classical economics, before Keynesian economics, people put their money into a bank to earn interest.  The banks gathered all of these deposits together and created a pool of investment capital.  People and businesses then went to the banks to borrow this capital to invest into something.  A house to start a new family in.  Or a factory.  And the more people saved the more money there was to loan to investors.  Which kept the cost of borrowing that money reasonable.  And created booming economic activity.

It was a beautiful system.  And one that worked so well it made the United States the number one economic power in the world.  Then John Maynard Keynes came along and ruined that proven system.  By telling governments that they should intervene into their economies.  That they should manipulate the interest rates.  By printing money.  Which changed the banking system forever (see The Housing Market Is Still Missing a Backbone by GRETCHEN MORGENSON posted 8/10/2013 on The New York Times).

Yet with the government backing or financing nine out of 10 residential mortgages today, it is crucial to lure back private capital, with no government guarantees, to the home loan market. Mr. Obama contended that “private lending should be the backbone” of the market, but he provided no specifics on how to make that happen.

This is a huge, complex problem. In fact, there are many reasons for the reluctance of banks and private investors to fund residential mortgages without government backing.

For starters, banks have grown accustomed to earning fees for making mortgages that they sell to Fannie and Freddie. Generating fee income while placing the long-term credit or interest rate risk on the government’s balance sheet is a win-win for the banks.

A coming shift by the Federal Reserve in its quantitative easing program may also be curbing banks’ appetite for mortgage loans they keep on their own books. These institutions are hesitant to make 30-year, fixed-rate loans before the Fed shifts its stance and rates climb. For a bank, the value of such loans falls when rates rise. This process has already begun — rates on 30-year fixed-rate mortgages were 4.4 percent last week, up from 3.35 percent in early May. This is painful for banks that actually hold older, lower-rate mortgages.

In other words, the federal government’s intervention into the private sector economy caused the subprime mortgage crisis.  And the Great Recession.  By removing all risk from the banking industry by transferring it to the taxpayer.  This created an environment that encouraged lenders to adopt poor lending standards.  Because they made their money on loan initiation fees.  No matter how risky those loans were.  And not by managing a portfolio of performing mortgages.  Which kept the bank honest when writing a loan.  As they would feel the pain if the borrower did not make his or her loan payments.  But if they sold those loans and broomed them off of their balance sheets what would they care if these people ever serviced their loans?

This is what you get with government intervention into the free market.  Distortions of the free market.  Keynesian economics was supposed to get rid of recessions.  By cutting away half of the business cycle.  And just keeping the inflationary side of it.  Trading permanent inflation for no recessions ever.  But since the Keynesians began intervening we’ve had a Great Depression.  A subprime mortgage crisis.  And a Great Recession.  All because they tried to improve the free market.  Which also, coincidentally, enabled Big Government.  The ultimate goal of Keynesian economics.  To get smart government planners in control of our lives.  Just like they were in the former Soviet Union.  But revolutions are messy.  So the government planners bided their time.  And slow-walked their way to power.  First they took control of the banks.  And now they have health care.  Which they will destroy.  Just as they destroyed good lending practices.  Which have given us the worst economic recovery since that following the Great Depression.

Anytime you move away from capitalism things get worse.  When this nation embraced free market capitalism we became the number one economic power in the world.  And the destination for oppressed people everywhere in the world.  For the better life that was available in America.  While the nations that chose the state planning of socialism and communism became those places oppressed people wanted to flee.  And life in those nations only got better with a move towards capitalism.  China may soon become the world’s number one economic power.  But they’re not doing this by adhering strictly to their state-planning ways of Mao’s China.  No.  They are doing this by moving away from the state-planning of Mao’s China.  To something called state-capitalism.  Pseudo-capitalism.  Just hints and traces of capitalism simmering in state-planning stew.  Where communist planners still control the people’s lives.  A direction America is slow-walking itself to.  Slowly.  But surely.

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