Hard Money versus Paper Money

Posted by PITHOCRATES - March 17th, 2014

Economics 101

(Originally published April 1st, 2013)

Money would have No Value if People with Talent didn’t Create things of Value

Money is a temporary storage of wealth.  We created it because of the high search costs of the barter system.  It took a lot of time for two people to find each other who each had what the other wanted.  And we started trading things to have things we couldn’t make efficiently for ourselves.  Someone may have been a superb potter but was a horrible farmer.  So, instead, the potter did what he did best.  And traded the pottery he made for the things he wanted that he was not good at making.  Or growing.  Before that we were self-sufficient.  Whatever you wanted you had to provide it yourself.

As we go back in time we learn why money is a temporary storage of wealth.  For it was the final piece in a growing and prosperous economy.  And at the beginning it was people with talent, each creating something of value.  Something of value that they could trade for something else of value.  It’s the creative talent of people that has value.  And we see that value in the goods and/or services they make or provide.  Money temporarily held that value.  So we could carry it with us easier to go to market to trade with other talented and creative people.  Who may not have wanted what we made or did.  But would gladly take our money.

So we took our goods to market.  People that wanted them traded for them.  They traded money for our goods.  Then we took that money and traded for what we wanted elsewhere in the market.  Trade grew.  With some people becoming professional traders.  By trading money for goods from distant lands.  Then trading these goods for money at the local market.  People who didn’t spend time creating anything.  But bought and sold the creative talent of others.  Who were able to do that because of money.  The creative talent came first.  Then the goods.  And then the money.  For money is a temporary storage of wealth.  Which has no value if no one is making anything of value.  Because if you can’t buy anything what good is having money?

There were no more Gold Certificates in Circulation than there was Gold in the Vault to Exchange them For

These early traders used a variety of things for money.  Pigs, tobacco, grain, oil, etc.  What we call commodity money.  Which was valuable by itself.  As people consumed these commodities.  Which is what gave them the ability to store value.  But because we could consume these they did not make the best money.  Also, they weren’t that portable.  And not easy to make change with.  Which is why we turned to specie.  Such as gold and silver.  Hard money.  It was durable.  Portable.  Divisible.  Fungible.  For example, all Spanish dollars were the same while all pigs weren’t.  One pig could weigh 30 pounds more than another.  So pigs weren’t fungible.  Or durable.  Portable.  And, though divisible, making change wasn’t easy.

So in time traders big and small turned to specie as the medium of exchange.  For all the reasons noted above.  If you worked hard to produce fine pottery you trusted in specie.  You would accept specie for your pottery goods.  Because you knew this hard money would hold its value.  And you could use it in the future to buy what you wanted.  No matter how long that may be.  Why?  Because the money supply remained relatively constant.  As it took a lot of work and great expense to mine and refine ore to make specie out of it.  So there was little inflation when using hard money.  Which meant if you saved for a rainy day that hard money would be there for you.

Gold and silver could be heavy to carry around.  Anyone struggling under the weight of their specie were targets for thieves.  Who wanted that money.  Without creating anything of value to bring to market.  So we found a way to improve a little on using gold and silver.  By locking our gold and silver in a vault.  And carrying around receipts for our gold and silver to use as money.  These gold certificates were promises to pay in gold.  People could continue to use them as money.  Or they could take these receipts back to the vault and exchange them for the gold inside.  These gold certificates were as good as gold.  And there were no more gold certificates in circulation than there was gold in the vault to exchange them for.

Governments Today use nothing but Paper Money because it gives them Privilege, Wealth and Power

Some saw advantages of expanding the money supply with paper currency.  Money that isn’t backed by gold or any other asset.  Money easy to print.  And easy to borrow.  Allowing rich people to borrow large sums of money to buy more assets.  And get richer.  Giving them more power.  And if you were the one printing and loaning that money it gave you great wealth and power.  So having a bank charter was a way to wealth and power.  You could make it easy for those who can help you to borrow money.  While making it difficult for those who oppose you to borrow money.  So there were those in business and in government that liked un-backed paper money.  Because a select few could borrow it cheaply and get rich and powerful.

While some liked these banks and that paper money there were others who bitterly opposed them.  Some who didn’t like to see so much power in so few hands.  And the hard money people.  Who wanted a money that held its value.  The common people.  People who couldn’t borrow large sums of cheap money.  But people who had to get by on less as the inflation from printing all those paper dollars raised prices.  Leaving them with less purchasing power.  Making it harder for them to get by.  Often having to turn to the hated banks to borrow money.  Again and again.  Such that the interest on their loans consumed even more of their limited funds.  Making life more tenuous.  And more bitter between the classes.  The rich who benefited from the cheap paper money.  And the common people who paid the price of all that inflation.

Rich people, on the other hand, loved that inflation.  It helped them make money.  When they bought something at a lower price and sold it at a higher price they made a lot of money.  The greater the inflation the greater the selling price.  And the more profit.  Also, the money they owed was easier to pay off with money that was worth less than when they borrowed it.  Allowing rich people to get even richer.  While the common people saw only higher prices.  And the value of their meager savings lose value.  So this cheap paper money fostered great class warfare.  The hard money people hated the paper money people.  Debtors hated creditors.  The middling classes hated the large landowners, merchants, manufacturers and, of course, the bankers.  And those who had talent to create things hated those who just made money with money.  The greater the inflation the greater the divide between the people.  And the greater wealth and power that select few acquired.  This is what paper money gave you.  Privilege.  Which is why most governments today use nothing but paper money.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Political Promises, Lies and the Advancement of an Political Agenda

Posted by PITHOCRATES - April 11th, 2013

Politics 101

Government Helps the Poor by Keeping them Poor so they Remain Dependent on Government

Politicians lie.  Everyone knows this.  It’s a running joke in comedy movies and television programs.  And a common plotline in dramas.  Because politicians will say and promise anything to get elected.  Which is their primary and only objective.  Winning an election.  And the needs and wants of the people are secondary.  Things they can easily brush aside once ascending to elected office.  Because they don’t really care about the people.  At least, they don’t care for them as much as they care for themselves.

And once they’re in office the promises keep coming.  To help them win the next election.  And to keep the size of government growing.  As well as the amount of taxes they collect.  Which gives them wealth.  And power.  The ultimate goal in running for elected office.  That’s why they sneer at the concept of limited government.  And tax cuts.  Because the less government we have the less wealth and power they enjoy.  For if we really are the self-reliant people of the Founding what need do we have for an expanding government?

Of course the answer to that question is we would have little need for an expanding government.  For we can earn our pay and take care of ourselves.  And our families.  The way Americans did before Woodrow Wilson, FDR, LBJ and Barack Obama.  Men who do not like that independent spirit.  And will use a host of arguments to condemn it.  It’s not fair being their favorite.  Because who can argue against being fair?  So everything they do is about leveling the playing field.  To make sure the rich pay their fair share.  And to help the little guy.  By making him dependent on government.  And perpetually poor.  So they will remain dependent on government.  So they can keep taking care of these poor.

Government rarely chooses Tax-Cutting for Stimulus as Cutting Taxes doesn’t Increase the Size of Government

LBJ declared a War on Poverty.  Justifying a huge increase in federal spending starting the Sixties.  And after spending untold billions to eradicate poverty what did we get?  Not much.  We still have poverty.  And the government spends more with each passing year to alleviate the suffering of the impoverished.  But it never goes away.  Poverty.  And the government nurtures it.  Protects it.  By making it more attractive to stay on a meager government assistance instead of going to work.  And building a career.  Doing something you love.  While leaving your mark on the world.  Instead we get ever increasing federal spending.  And a permanent underclass the government can be savior to.  You see they don’t want to win the War on Poverty.  Because if they win it then we won’t need them anymore.

The greatest killer of poverty is a job.  People gainfully employed can provide themselves food, shelter, etc.  They can have clean drinking water.  And heat in the winter.  It’s only the unemployed who look at food, shelter and heat as sought after luxuries.  For people with jobs are those self-reliant people.  Who provide tax dollars instead of consuming them.  This is no secret.  So it would follow that the best thing to do during a recession is to make it as easy as possible to create jobs.  You do that by lowering taxes.  And cutting regulations.  Not by raising taxes.  Or adding regulatory costs.  And you sure don’t pass a quasi national health care plan like Obamacare.

Also, history has shown that Keynesian stimulus spending does not pull economies out of recession.  If it did Ronald Reagan would not have won in a landslide against Jimmy Carter.  And Europe would not be in a sovereign debt crisis.  Keynesians know this.  But they can’t pass up the opportunity to increase federal spending.  So they promise lower unemployment rates and higher GDP numbers if only Congress does the right thing and “pass this stimulus bill.”  And when it doesn’t work they have two predictable explanations.  They didn’t spend enough.  And that even they didn’t realize how bad their predecessor destroyed the economy.  Calling the recession du jour the worst since the Great Depression.  Covering their lies about ending the recession with statements like “things would have been worse if we didn’t act.”  And though they didn’t reduce unemployment they’ll make incredulous claims like “we saved 800,000 jobs with this bold action.”  Predictable.  For their primary objective isn’t to end any recession.  It is to exploit the crisis to advance their agenda.  Basically, increasing the size of government.  And we know this because there are two ways to put more money into people’s pockets to stimulate the economy.  You can cut taxes so they have more money to spend.  Or you can tax, borrow and print money so the government can spend more.  Very rarely do they ever choose the tax-cutting route.  Because the tax-cutting way works against their agenda of increasing the size of government.

Politicians Promise and Lie to the Young and Naïve to Advance a Political Agenda

And speaking of Obamacare President Obama promised the American people that if you liked your private health insurance plan you could keep it.  And the cost of that health care plan would go down.  Because they had a massive convoluted health care plan that was going to give health care to everyone.  Increase the quality of health care from what it is now.  And it was going to be less expensive.  Which was a lie.  Because you can’t have more of anything for less money.  Life just doesn’t work that way.  As they implement Obamacare its taxes and regulations are forcing business owners to push people from full-time to part-time.  So they aren’t forced into providing mandated health insurance plans.  Some even have no choice but to drop their health care coverage for all of their employees.  Because their health care costs went up.  Not down.  And they’re predicting doctor shortages.  Because the only cost savings they can get is by forcing people to work for less in the health care industry.  So they’re leaving.  Under Obamacare there will be higher costs, longer wait times, rationing, denial of services and lower quality.  Everything they promised wouldn’t happen.  And everything critics said would happen.  So are the proponents of Obamacare just so utterly ignorant?  Or were they lying through their teeth because they just wanted to take over one-sixth of the U.S. economy?  With an agenda to increase the size of government one has to go with lying through their teeth.

President Obama blamed George W. Bush for the world hating America.  When he became president he no longer projected American power.  Instead he wanted to talk to our enemies.  To negotiate with them.  He even dropped words from official usage.  Like the War on Terror.  To make our enemies like us.  Because people like people who aren’t bullies.  And that was what George W. Bush was.  A bully.  So President Obama warmed up to the Islamic world.  So the Islamic world would warm up to us.  Even announcing withdrawals from Iraq and Afghanistan early in his administration.  Ending the war on you-know-what.  So he could use that money for Obamacare.  Promising the American people the world would be a safer place.  Even passing on an opportunity to help overthrow the government in Iran.  America’s greatest enemy.  Instead, he helped people overthrow a couple of our allies.  Hosni Mubarak in Egypt.  And Muammar Gaddafi in Libya.  Who since the Iraq war had been an ally in the War on Terror.  And the thanks for this new Islam-friendly American policy?  They killed our ambassador in Benghazi along with three other Americans.  Al Qaeda is now in Libya.  And the Muslim Brotherhood is in Egypt.  And it looks like al Qaeda is now in Syria.  Another enemy of the United States the people were trying to overthrow that President Obama chose not to help.  The Middle East may burn now.  Making the world a more dangerous place.  But the president got what he wanted.  All that money we were spending overseas they can now spend at home.  Rewarding friends and campaign contributors.  As well as buying votes.

And now they are calling for tighter gun control measures.  Greater background checks.  And a national gun register.  To protect the kids they say.  So another Newtown massacre doesn’t happen.  Even though they themselves will admit that every measure they proposed thus far would not have stopped the shooter at Newton.  Aurora.  Tucson.  Virginia Tech.  Or any other shooting where some mentally unsound person killed random strangers.  These people didn’t kill because guns made them kill.  They killed because they were sick.  And we didn’t protect society by institutionalizing these people.  The only thing we could have done to stop them once they started shooting we didn’t do.  Having someone armed in these ‘gun-free’ zones.  For these sick people shoot unarmed innocents until someone with a gun arrives on the scene to shoot back.  So arming teachers may save children from another Newtown.  While everything they proposed thus far will do absolutely nothing to prevent a future Newton.  Yet they press for further restrictions on gun ownership.  And if it won’t make children safer one wonders why they want to exploit these shootings to advance their anti-gun-ownership agenda.  As they are interested in acquiring greater wealth and power one would have to assume it’s the power.  Perhaps making them feel more all-powerful if they can actually nullify the Second Amendment.

So politicians promise and lie to advance an agenda.  Which is why the young typically vote for those who promise and lie so much.  The liberal Democrats.  As the young are naïve and easy to lie to.  While older people tend to vote Republican.  For they are older.  They have heard all of the promises and lies before.  And they’re wiser.  Which comes with age.  Which is why the liberal Democrats get them while they’re young. For it’s hard to keep them once they gain knowledge and experience.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

The Politics of Jobs Data

Posted by PITHOCRATES - April 8th, 2013

Economics 101

The Party of the Working Man misrepresents the Jobs Data and Lies to the People

Figures don’t lie but liars figure.  Something Mark Twain is said to have said.  Mark Twain is, of course, Samuel Langhorne Clemens.  But we know him by his pen name.  Mark Twain.  And the author of The Adventures of Tom Sawyer and Adventures of Huckleberry Finn.  But he was also a science buff.  And close friend of Nikola Tesla.  The father of AC power.  And he thought that most Congress people were liars and thieves.  With personal agendas.  Who will lie about facts and figures to get what they want.  And what do people in government want?  What all people in governments throughout time have wanted.  Wealth.  And power.

Every king, noble and aristocrat has acted selfishly in history to acquire wealth and power.  The privileged few.  Or one.  They held the power.  Traded favors.   And worked together.  Landowners amassed great wealth thanks to peasants working their land.  The king maintained the system that limited land ownership to a privileged few.  And the privileged few paid back the king with a share of their wealth.  By working together they exploited the masses to amass wealth.  So they could live the good life.  Comfortable in their wealth.  With the power to do whatever they wanted.  And this hasn’t changed over time.  Well, it has in one respect.  With the advent of democracy it is a little more difficult to do what you want when in elected office.

Today no one leaves Congress poor.  They are set for life.  With a generous pension.  And benefits most workers never get while gainfully employed.  And how do they do this?  The same way that kings, nobles and aristocrats have always acquired wealth.  By using political power to exploit the masses.  And the key to this is growing government as large as possible.  To give them that power.  And the ability to grant favors.  Throwing a few handouts to the peasants to win their love and admiration.  Thus pleasing enough of the electorate to win elections.  But the policies they use to make this happen have a major drawback.  They are anti-business.  And kill jobs.  Putting people out of work.  Which can be a problem when you’re the party of the working man.  And working woman.  So you have to at times misrepresent the jobs data.  And lie to the people.

The United States and Kim Jong Un have an Obesity Problem while the North Korean People suffer Famine

History has shown that low taxes and limited government grow economies.  This is what made the United States the number one economic power in the world.  Which was able to happen because it happened before the era of Big Government in the United States.  Right now there are emerging economies in the world going through a similar phase.  And their stellar economic growth will sputter out once the size of their governments grow.  Just like they have in many advanced economies that have transitioned into a social democracy.  For there is nothing that stamps out economic growth like higher taxes and greater regulatory costs.  Which is why the Soviet Union, the countries behind the Iron Curtain in Eastern Europe, The People’s Republic of China (under Mao), North Korea, Cuba, etc., have never been great economic powers.  Instead these countries that practiced fairness and redistributive policies suffered some of the most abject poverty and the lowest standards of living.  Not to mention having some of the most brutal and oppressive police states to keep their people from fleeing their social utopias.

But when it came to economic production these nations all lied to their people.  If you listened to the Soviet propaganda machine communism had won.  There was no way free market capitalism could match the managed communist economy.  They were growing bumper crops.  Their factories were putting out more goods than they could use.  And life was just peachy in the Soviet police state.  A lot of people in the West believed this.  And fought to undermine capitalism so they, too, could install socialist utopias in the West.  But the people living in those socialist utopias had a little more trouble believing the lies.  For they were waiting hours in lines to buy soap and toilet paper.  They saw stores with empty shelves.  And stores with shelves full of things no one wanted to buy.  They had to wait years before it was their turn to buy a car.  Or get an apartment.  And forever speak in hushed tones for fear the secret police might hear them utter some dissatisfaction of the socialist system.  Lest they disappear to some reeducation camp in Siberia.

And while the people suffered those in power did not.  In socialism everyone was equal.  But like George Orwell said in Animal Farm, some were more equal than others.  North Korea suffers from recurring famine.  And depends on food imports to prevent future famines.  So your average North Korean is not going to have an obesity problem.  While the United States suffers an obesity crisis because their people eat too much food North Korea suffers through recurring famines where people starve to death.  But you know who isn’t starving to death?  Kim Jong Un.  The new ruler of North Korea.  Who not only appears to be well fed.  But even looks obese.  And this in a country that suffers from recurring famines.  And it’s been the same throughout history.  Those champions of the people always lived better than the people.  For those in the inner party in the Soviet Union went to the front of the line when it came to cars and apartments.

Kings, Nobles, Aristocrats and those in the Federal Government act Selfishly to acquire Wealth and Power

This is why people want political power.  Because it is a pathway to wealth.  Especially for those people who don’t have the ability to create wealth on their own.  Like a small business owner.  So they need to use political power.  Favor.  Privilege.  And deceit.  Which is an important tool for today’s politician’s in a democracy.  Deceit.  Such as when they figure with the economic figures.  The Obama administration has implemented some of the most business unfriendly policies that have just stamped out all economic growth.  Which is why we have been wallowing in a jobless recovery following the Great Recession.  While some would even say the Great Recession lingers on.  Despite what the economic data says.  For they have little faith in the numbers anymore.  For with every jobs report the Obama administration highlights the new jobs the economy created.  And how even though the numbers could be better we are definitely on the right path.  As the unemployment rate continues to fall.  Dropping below 8% just in time for the 2012 election.  As no president ever won reelection with an unemployment rate above 8%.  So it was rather convenient it fell just in time for the election.  Perhaps a little bit too convenient.  Especially when you look at the other economic numbers (see Table A-15. Alternative measures of labor underutilization and Labor Force Statistics from the Current Population Survey).

U3 U6 Civilian Labor Force

The U3 unemployment rate is the official unemployment rate.  Which fell to 7.6% in March.  Yet another improvement.  But the U3 unemployment rate doesn’t count everyone who can’t find a full time job.  The U6 unemployment rate counts more people who can’t find a full-time job.  And it fell to 13.8% in March.  Which is an improvement.  But the number of people who can’t find a full time job is still in double digits.  And has moved little from around 14%.  One thing both the U3 and the U6 numbers have in common is that they have changed little in the last 6 months.  While the number of people in the civilian labor force has changed.  A lot.  So one of these numbers doesn’t appear to agree with the other two.  For if the unemployment rate was steady one would think the number of people in the civilian labor force would be steady, too.  Which makes one question the accuracy of the official unemployment rate.  And the constant reports of how the economy is improving.  How it’s on the right path.  As they talk about all the new jobs their policies have created.  Despite the stubbornly high unemployment numbers.  But if we look at that job creation and the changes in the size of the civilian labor force we get a different picture of that improving economy (see Employment Situation Archived News Releases).

Jobs Added Change in Civilian Labor Force

The latest jobs report shows 88,000 new jobs added to the economy.  Less than projected.  And a bit of a disappointment to those in the ‘the economy is on the right path’ crowd.  But they still find solace in the fact that the economy added jobs.  Just as it has for the previous 5 months.  If you add this job creation up during this 6-month period it totals 953,000 new jobs.  That’s about 1 million new jobs.  Not a strong recovery.  But not too shabby.  But if we look at the change in the civilian labor force we don’t see 1 million new jobs.  Over the same 6-month period we see a net LOSS of 28,000 people from the civilian labor force.  Which agrees more with the reality of the current economy.  And the U6 unemployment rate.  It’s bad.  People can’t find a full-time job.  And it’s because of the anti-business policies of the Obama administration.  But for the past 4 years or so they have massaged the jobs data to lead us to believe that they were creating jobs when they were actually destroying jobs.  Why?  Because kings, nobles, aristocrats and those in the federal government act selfishly to acquire wealth and power.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Hard Money versus Paper Money

Posted by PITHOCRATES - April 1st, 2013

Economics 101

Money would have No Value if People with Talent didn’t Create things of Value

Money is a temporary storage of wealth.  We created it because of the high search costs of the barter system.  It took a lot of time for two people to find each other who each had what the other wanted.  And we started trading things to have things we couldn’t make efficiently for ourselves.  Someone may have been a superb potter but was a horrible farmer.  So, instead, the potter did what he did best.  And traded the pottery he made for the things he wanted that he was not good at making.  Or growing.  Before that we were self-sufficient.  Whatever you wanted you had to provide it yourself.

As we go back in time we learn why money is a temporary storage of wealth.  For it was the final piece in a growing and prosperous economy.  And at the beginning it was people with talent, each creating something of value.  Something of value that they could trade for something else of value.  It’s the creative talent of people that has value.  And we see that value in the goods and/or services they make or provide.  Money temporarily held that value.  So we could carry it with us easier to go to market to trade with other talented and creative people.  Who may not have wanted what we made or did.  But would gladly take our money.

So we took our goods to market.  People that wanted them traded for them.  They traded money for our goods.  Then we took that money and traded for what we wanted elsewhere in the market.  Trade grew.  With some people becoming professional traders.  By trading money for goods from distant lands.  Then trading these goods for money at the local market.  People who didn’t spend time creating anything.  But bought and sold the creative talent of others.  Who were able to do that because of money.  The creative talent came first.  Then the goods.  And then the money.  For money is a temporary storage of wealth.  Which has no value if no one is making anything of value.  Because if you can’t buy anything what good is having money?

There were no more Gold Certificates in Circulation than there was Gold in the Vault to Exchange them For

These early traders used a variety of things for money.  Pigs, tobacco, grain, oil, etc.  What we call commodity money.  Which was valuable by itself.  As people consumed these commodities.  Which is what gave them the ability to store value.  But because we could consume these they did not make the best money.  Also, they weren’t that portable.  And not easy to make change with.  Which is why we turned to specie.  Such as gold and silver.  Hard money.  It was durable.  Portable.  Divisible.  Fungible.  For example, all Spanish dollars were the same while all pigs weren’t.  One pig could weigh 30 pounds more than another.  So pigs weren’t fungible.  Or durable.  Portable.  And, though divisible, making change wasn’t easy.

So in time traders big and small turned to specie as the medium of exchange.  For all the reasons noted above.  If you worked hard to produce fine pottery you trusted in specie.  You would accept specie for your pottery goods.  Because you knew this hard money would hold its value.  And you could use it in the future to buy what you wanted.  No matter how long that may be.  Why?  Because the money supply remained relatively constant.  As it took a lot of work and great expense to mine and refine ore to make specie out of it.  So there was little inflation when using hard money.  Which meant if you saved for a rainy day that hard money would be there for you.

Gold and silver could be heavy to carry around.  Anyone struggling under the weight of their specie were targets for thieves.  Who wanted that money.  Without creating anything of value to bring to market.  So we found a way to improve a little on using gold and silver.  By locking our gold and silver in a vault.  And carrying around receipts for our gold and silver to use as money.  These gold certificates were promises to pay in gold.  People could continue to use them as money.  Or they could take these receipts back to the vault and exchange them for the gold inside.  These gold certificates were as good as gold.  And there were no more gold certificates in circulation than there was gold in the vault to exchange them for.

Governments Today use nothing but Paper Money because it gives them Privilege, Wealth and Power

Some saw advantages of expanding the money supply with paper currency.  Money that isn’t backed by gold or any other asset.  Money easy to print.  And easy to borrow.  Allowing rich people to borrow large sums of money to buy more assets.  And get richer.  Giving them more power.  And if you were the one printing and loaning that money it gave you great wealth and power.  So having a bank charter was a way to wealth and power.  You could make it easy for those who can help you to borrow money.  While making it difficult for those who oppose you to borrow money.  So there were those in business and in government that liked un-backed paper money.  Because a select few could borrow it cheaply and get rich and powerful.

While some liked these banks and that paper money there were others who bitterly opposed them.  Some who didn’t like to see so much power in so few hands.  And the hard money people.  Who wanted a money that held its value.  The common people.  People who couldn’t borrow large sums of cheap money.  But people who had to get by on less as the inflation from printing all those paper dollars raised prices.  Leaving them with less purchasing power.  Making it harder for them to get by.  Often having to turn to the hated banks to borrow money.  Again and again.  Such that the interest on their loans consumed even more of their limited funds.  Making life more tenuous.  And more bitter between the classes.  The rich who benefited from the cheap paper money.  And the common people who paid the price of all that inflation.

Rich people, on the other hand, loved that inflation.  It helped them make money.  When they bought something at a lower price and sold it at a higher price they made a lot of money.  The greater the inflation the greater the selling price.  And the more profit.  Also, the money they owed was easier to pay off with money that was worth less than when they borrowed it.  Allowing rich people to get even richer.  While the common people saw only higher prices.  And the value of their meager savings lose value.  So this cheap paper money fostered great class warfare.  The hard money people hated the paper money people.  Debtors hated creditors.  The middling classes hated the large landowners, merchants, manufacturers and, of course, the bankers.  And those who had talent to create things hated those who just made money with money.  The greater the inflation the greater the divide between the people.  And the greater wealth and power that select few acquired.  This is what paper money gave you.  Privilege.  Which is why most governments today use nothing but paper money.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Animal Power, Waterwheel, Ship Transport, Steam Engine, Railroad, Steel Industry, Robotics, Rust Belt and Minimills

Posted by PITHOCRATES - November 14th, 2012

Technology 101

Rent-Seeking Captains of Industry and Commerce give Capitalism a Bad Name

Once upon a time you lived, worked and died all within a short walk from each other.  In feudalism people owned land and lived well.  The landed aristocracy.  And other people (the peasants) worked the land.  But did not live as well as those who owned it.  For it was back-breaking work for long hours with no respite except in death.  For those who worked the land belonged to the land.  Just as the trees and fields and rivers did.  Peasants belonged to the land and the land belonged to the landowner.  The peasants couldn’t leave.  And they couldn’t work hard to provide a better life for their children.  For they were bond to the land as their patents were.  With no choice but to work the land like their parents did.

This was how life was before we started to use power to make our work easier.  We had long been using animal power to do things we didn’t have the strength or the endurance to do.  Such as pulling a plow.  Or a wagon full of goods.  Or to travel great distances more quickly than we could by walking.  Harnessing the power of moving water changed all of that.  For a river moves constantly.  And when you place a waterwheel in moving water you can convert the linear motion of the water into rotational motion.  This rotational motion could turn a main shaft running though a factory.  Belts and pulleys could transfer this power to workstations throughout the factory floor.  And these powered workstations could do far more work than a person could.  Lumberjacks could transport logs down a river to a lumber mill.  Where a waterwheel could spin a saw that made lumber out of those logs at such a rate that great cities could arise around these mills.  Cities with other factories powered by waterwheels.  And homes.

So it’s no surprise that our early cities grew up on rivers.  Both for water power.  And the ability to use them to ship bulk goods.  Ship transport.  Something even animals weren’t good at.  It is in these cities that wealth and political power grew.  Centers of industry and commerce.  Creating great wealth for those who controlled the resources that made all of that possible.  So another aristocracy grew.  Rent-seeking captains of industry and commerce.  Who give capitalism a bad name.  Who use their political power to maximize their profits.  And buy favors from those in power to protect their particular interests.  Such as using the power of government to create monopolies for themselves.  But advancing technology made that harder to do.  Especially the steam engine.  And the railroad.

The Steel and Heavy Manufacturing Industries required a Massive Infrastructure and Regionally Located Raw Materials

Control of rivers, ports and harbors provided a great opportunity to amass wealth at other people’s expense.  For when economic activity centered on water it made land around that water very valuable.  Which concentrated wealth and power on the rivers.  Until the steam engine replaced the waterwheel.  And the railroad provided a way to transport people and goods inland.  So not only did cities grow up along the waterways they grew up along the rail lines.  Those controlling these resources still had great wealth and power.  But they also offered competition.  And more economic liberty.  For while there can only be one Tennessee River flowing through Chattanooga, Tennessee, there can be more than one railroad running through Chattanooga.  Which made Chattanooga an important city to hold during the American Civil War.  For there was a great rail junction in that city.  Giving anyone who controlled the city access to any part of the Confederacy.

While the steam engine and railroad allowed industries to grow anywhere in the country some industries still clustered in regional areas.  Such as the steel industry.  It required three ingredients to make steel.  Iron ore, coke (coal cooked into hard charcoal briquettes) and limestone.  To make steel you use 6 parts iron ore, 2 parts coke and 1 part limestone.  Iron ore was plentiful around Lake Superior.  Because it takes a lot of iron ore and a lot of iron ore is located around Lake Superior the steel makers built their mills long the Great Lakes.  In Milwaukee.  Chicago.  Gary.  Detroit.  Toledo.  Cleveland.  Or in places like Pittsburgh where coal and iron ore deposits surround the city.  These cities made up the Manufacturing Belt.  Places with access to bulk ore shipping (on Great Lakes freighter or river barge).  And where the steel mills arose so did heavy industry that built things from that steel.  From structural steel.  To automobiles.

For a while these new industries dominated the economic landscape.  Big, heavy industries that couldn’t move.  Concentrating money and political power.  Giving rise to organized labor.  Who took advantage of the fact that these heavy industries could not move.  Negotiating lucrative union contracts.  With generous pay and benefits.  Raising the price of steel and the things we made from steel.  Like automobiles.  Making the rank and file like rent-seekers of old.  Looking to personally benefit from their near-monopoly conditions.  Like those early captains of industry and commerce.  Life was good for awhile for the rank and file.  Who lived very well.  And better than most American workers.  Thanks to those monopoly-like conditions in these steel and heavy manufacturing industries.  Allowing them to charge high prices for their goods to pay for those generous pay and benefits.  As there was no competition.  For the steel and heavy manufacturing industries required a massive infrastructure and an abundant supply of regionally located raw materials, making it very difficult for a new competitor to open for business.  At least, in the United States.

High Costs and Low Efficiencies have shuttered most of America’s Steel Making Past

Foreign competition changed all that.  And large ocean-going ships.  So new industries in other countries with lower labor costs could manufacture these goods and ship them to the United States.  And did.  Challenging the monopoly-like conditions of the rent-seeking steel and heavy manufacturing industries.  So the rent-seekers turned to government for protection.  And got it.  Import tariffs.  Which raised the price of those imported goods to the higher price level of the domestic goods.  Which did two things.  Insulated the domestic manufacturers from market pressures allowing them to continue with the status quo.  And forced the foreign manufacturers to find less costly and more efficient ways to make their goods to counter those import tariffs.

So what happened?  Technology advanced in these industries overseas while they stagnated in the US.  The US didn’t invest in new technologies like they did in the previous century to find better ways to do things.  Because they didn’t have to.  While the foreign competitors worked harder to find better ways to do things.  Because they had to.  As they weren’t insulated from market forces.  The Japanese invested in robotics.  Transforming their auto industry.  Improving quality and lowering costs.  Making their cars as good if not better than the Americans did.  And selling them at a competitive price even with those import protections.  So what did these US actions to protect the domestic manufacturers do?  Changed the Manufacturing Belt to the Rust Belt.

The big steel cities in America are no more.  High costs and low efficiencies have shuttered most of America’s steel making past.  Gone is the era of the sprawling steel mill.  Today it’s the minimill and continuous casting.  Small and efficient steel mills with small labor forces that can make small batches.  Thanks to their electric arc furnaces that are easy to turn on and off.  Unlike the big blast furnaces that took a while to reach operating temperatures and when they did they didn’t shut them down for years.  Making it difficult to adjust to falling demand.  Like the minimills could.  Which helped save the steel industry by finally adopted technology that allowed it to sell at market prices.  Making it harder for the rent-seekers these days.  But better for consumers.  Because of this relentless march of technology.  That allows us to continuously find better ways to do things.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Liberal (lĭb’ər-əl), n., One who adheres to the social and political philosophy of (neo) liberalism.

Posted by PITHOCRATES - October 27th, 2011

Politics 101

The Single Goal of Liberalism is to Transfer as much Wealth and Power from the Private Sector

The Founding Fathers were liberals.  They believed in individual liberty.  Personal responsibility.  The Rule of Law.  And limited government.  Very limited government.  Very, very limited government.  Not something you associate with liberals today.  Which is why we must call the Founding Fathers classical liberals.  Because liberalism today isn’t our Founding Fathers’ liberalism.  In fact, it’s what they rebelled against.  Privilege.

Liberals today are a small sliver of the population.  About 20%.  And they’ve been around forever.  They’ve just had different names.  The nobility.  The aristocracy.  The planter elite.  Those born of privilege.  And who live off of the wealth created by others.  Through inheritance.  Through land ownership.  Or via taxation.  This privileged class does not work.  No.  They get others to create wealth for them.  And their tool is class warfare.

Their single goal is to make government as large as possible.  For the larger it is the more wealth and power they can transfer from the private sector.  And there is nothing more effective for growing government than pitting one group of people against another.  Rich against poor.  Employees against employers.  Labor against capital.  Consumers against corporations.  And, of course, racism, sexism, ageism, whateverism.  Whoever you are they’ll find someone who has discriminated against you.  And they’ll use that to their advantage.  To legislate a new law in Congress.  Or from the bench in the judiciary.

Liberals get us Accustomed to Living on the ‘Kindness’ of Government and Terrified of Losing the Government Way of Life

Liberals don’t see individuals.  They see the group the individual belongs to.  And how they can use one group to agitate another.  To advance their agenda.  To increase taxation.  And regulation.  To grow government.  To extend their power and influence over the private sector.  So secure their position of privilege.

They once called themselves the ruling elite.  And ruled accordingly.  Until the inconvenience of elections.  Representative government.   And a Constitution that limits their power.  Now they have to be stealthier.  And hide who they are.  What they truly believe.  And use the courts to make law that they can’t legislate in Congress.  How do they do this?  By dumbing down our public education.  Changing the meaning of words.  And by fooling us.  By hiding in a ‘benevolent’ Big Government.  A government that protects the poor.  The disadvantaged.  The little guy.  When in fact they use the poor, the disadvantaged and the little guy to secure their position of privilege.  For if they actually helped these people their work would be done.  And that’s the last thing they want.  To lose their expanding powers to regulate and tax.

So they extend their power and control over us.  While telling us it’s for our own good.  And make as many of us dependent on them as possible.  By providing generous welfare programs.  Social Security.  Medicare.  And now Obamacare.  Getting us accustomed to living on the ‘kindness’ of government.  And making us terrified of losing our government way of life.

Liberals Consume Tax Dollars and Benefit from a Growing Government that Increases Taxes and Regulations

Liberals consume tax dollars.  They don’t pay tax dollars.  The private sector taxpayers pay the salary and benefits of all politicians.  Public sector employees.  Public school teachers.  And college professors.  Via ever escalating tuition prices that no liberal ever objects to.  (Unlike rising prices in the private sector.)  Either paid for by rich parents.  Or student loans.  Once backed by the government.  Now issued by the government.

Liberals enjoy generous pay and benefit packages courtesy of the taxpayer.  In return liberals in education advance the liberal agenda.  (Ask a kid to explain global warming and capitalism and guess which one he or she will be able to explain).  Liberals in unions repay that government kindness (such as favorable legislation that restricts competition) through generous contributions from their union dues.  And agitate, organize and vote for the liberal agenda.  To keep the spigot of that government kindness open.

And then you have the guilty-rich.  People who try to assuage their guilt of inheriting their wealth.  Those who made it rich in the movies.  In music.  In sports.  As an author.  Anyone who got obscenely wealthy.  But doesn’t want to be attacked for being obscenely wealthy.  Like those on Wall Street.  And those corporate CEOs.  So they, too, advance the liberal agenda.  While sheltering their wealth from the greedy hands of government.

Then there’re the pseudo-intellectuals.  Those who advance the liberal agenda to sound smart.  Or to be included in the inner circle of the elite.  Those in the mainstream media.  And celebrities.  Who cry out desperately for affirmation.  That they are more than just someone pretending to be someone else.  Or simply someone reporting on the exciting lives of others.

Finally the young.  The uneducated.  Or poorly educated.  Who don’t understand capitalism, economics, history or public policy.  And they don’t care.  As long as they get something.  Government benefits.  Or fun.  Whether it be sex and drugs.  Or the thrill of protesting.  Anything to escape living in the real world.  Those who just don’t want to grow up.  And become responsible adults.  Like their parents.  Until they start raising a family.  Then they are exactly like their parents.  So the liberals have to get them while they’re young.  And keep them woefully ignorant about the real world for as long as possible.

The Liberal Social and Political Philosophy has the Simple Goal of Securing their Position of Privilege

The liberal social and political philosophy is simple.  Everything they believe, everything they do, has but one goal.  Securing their position of privilege.  Which explains a record of contradiction and failure.  Such as ‘working hard’ to create jobs while the economy wallows in recession due to an unfriendly job-creating environment.  Because of their high taxes.  Costly regulations.  And the great uncertainty of what will come next.

But when you understand their goal it makes perfect sense.  High taxes and regulation extends their control over the private sector.  And recession sets the stage for Keynesian stimulus spending.  Which creates more government programs.  Paid for by higher taxes.  Which is more wealth transferred from the private sector.  Further extending their control over the private sector.

Liberal policy, then, makes perfect sense.  When you understand its goal is to expand their control over the private sector.  To secure their position of privilege.  Because when you do you’ll see that this policy has never been contradictory.  And it has never failed.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

LESSONS LEARNED #77: “Liberals only call for bipartisan compromise when they’ve lost majority power and can no longer dictate policy.” -Old Pithy

Posted by PITHOCRATES - August 4th, 2011

The Liberal Ruling Class hails from the Ivy League

Liberals hail from the Ivy League.  Where they’re taught important life skills.  Arrogance.  Conceit.  And condescension.  It is here at these universities that they learn to hold everyone in contempt.  Yes, there are some out there with true liberal bona fides that didn’t go to the Ivy League, but they are the exception.  Not the rule.  These people may bleat the liberal line as well as the Ivy Leaguer, but they are not going to ascend to the Ruling Class.  And though they won’t admit it, the Ruling Class holds most of these liberals in contempt, too.

Amassing wealth and power in a few, elite hands is nothing new.  Even in early America.  The Planter Elite of the Deep South were a small minority of the population.  But they held the wealth and power in the Deep South.  And they wielded it during the Philadelphia Convention.  They held the founding of the new nation hostage.  Unless the land where all men were created equal had slavery there would be no new nation.  So there was slavery.  And the Ruling Class of the Deep South gave themselves extra political clout in the new federal government.  Thanks to the Three-Fifths Compromise.  The minority planter elite were able to inflate their numbers by counting 3/5 of each slave.  Thus inflating their numbers in the House of Representatives.

So for the first 50 years or so of the new nation the new federal government spoke with a decidedly southern accent.  And often dictated policy in the new nation.  And for those 50 or so years the Deep South was happy to be part of the union.  Because they sort of ran the show.  Then all that immigration into the north started to change the balance of power in the House of Representatives.  Which left the presidency (where they did whatever they could to make sure the president would be sympathetic to southern views and willing to compromise to save the union).  And the Senate.  And to maintain power in the Senate they had to hold on to slavery. 

The Planter Elite used Slavery to Concentrate Wealth and Power in their Hands

The Ruling Class, the Planter Elite (approximately 5% of the Southern population), used slavery to concentrate wealth and power in their hands.  It was truly an old-school aristocracy in the Deep South.  The ‘landed aristocracy’ in these states owned these states.  And up to the mid 19th century they took this disproportionate power to Congress.  They advanced and blocked legislation to protect their slaveholding interests.  To maintain their minority rule.  Their power.  And their wealth.

As immigration began to tip the balance of power away from them they turned their focus to the Senate.  Each state got two senators.  Population numbers didn’t matter.  What mattered was that there wasn’t more ‘free’ states than ‘slave’ states.  And that there was no prevailing antislavery sentiment.  As there was throughout the northern states at the time.  Not only did they eschew slavery, they weren’t even returning runaway slaves to their rightful owners.  So while they could the Planter Elite would use the power of the federal government to override any state law they felt counterproductive to their interests.  And dictate policy to these recalcitrant northern states.

For you see, slavery is a lot like socialism.  It doesn’t work well when those trapped in it can escape it.  And that was a problem for the Deep South.  Their slaves were escaping to these northern states.  And these uppity northern state governments refused to return this southern ‘property’.  Not only were they taking a financial loss on these runaway slaves, but this northern sanctuary was encouraging more slaves to run away.  This would not do.  So they passed the Fugitive Slave Act of 1850 compelling them to return these slaves to bondage.  Or be fined and/or jailed.  This did not go over well in the North.  And it placed the country on the road to civil war.

The Civil War was a Battle between Privileged Aristocracy and the Equality of Self-Government

All during the run up to the Civil War, the Ruling Class, the planter elite of the Deep South, participated in the democratic process.  Because for a long time they were free to dictate a lot of U.S. policy.  From a stacked deck (thanks to the Three-Fifths Compromise).  And repeated threats of secession if they didn’t get their way.  Politicians on both sides of the slavery issue made compromise after compromise to keep the union together.  But that all changed with the election of Abraham Lincoln.  A Republican.   Which was the party taking a moral stance on the issue of slavery.  This did not bode well for the Ruling Class. 

South Carolina seceded first.  Then the rest followed.  The planter elite in these states led their states out of the union.  And into civil war.  Arguing that Lincoln’s federal government was going to infringe on their states’ rights (in particular their right to continue the institution of slavery).  They called it the War of Northern Aggression even though they fired the first shot at Fort Sumter in Charleston Harbor.  And they told their brave soldiers to fight these Yankee invaders to protect their country (i.e., state), their families and their way of life.  And they did.  Some 300,000 dying in the process.  But not to maintain the institution of slavery.  For 95% of all Southerners didn’t own any slaves.  They fought to protect their country, their families and their way of life.  Most of which was a life of backbreaking labor on a small patch of land they called the family farm.  That was in no way threatened by the North.  But the Ruling Class lied.  To protect their interests.  Their wealth.  And sacrificed a generation of their own people.  Because to them, they were as expendable as the slaves on their plantations.  Actually, they were more expendable.  For Confederate soldiers didn’t show up on their balance sheets.  But slaves did.

The Confederate soldier fought valiantly.  But lost.  In what was a battle between the Old World.  And the New World.  Between the privilege of aristocracy.  And the equality of self-government.  Between the Ruling Class.  And ordinary Americans.  The balance of power shifted.  Away from the Deep South.  But, alas, not to the people.  Instead, to the North East.  To the Ivy League.  Where another Ruling Class would rise.  And take over the reins of government.  Keeping class warfare alive and well in the United States.

Tea Party Republicans are Decidedly Anti-Ruling Class

The players may change but the Ruling Class lives on.  Those who feel entitled to an elevated position because of their birthright.  Or wealth.  Most often both.  Which is what you need to get into the Ivy League.  And you have to think correctly.  Which isn’t too much of a problem for they make sure you do so in their curriculum.  Which is heavy on liberal progressivism.  And light on staying out of other people’s business.

Case in point, Obamacare.  Universal health care.  The holy grail of liberalism.  The people didn’t want it.  Based on the polling.  And the town hall meetings.  They didn’t want the government intruding into their health care.  But they had both houses of Congress.  So they could do just about anything they wanted.  Dictate policy.  And sneak things through in the dead of night.  Which they did to make Obamacare law.  Strictly along pure partisan party lines.  Some of their members paid the ultimate price and lost in the following election.  But they take care of their own.  The Ruling Class.  Though out of office, they’re never out of power.

That is until a bunch of uppity freshmen Republicans descended on Congress.  Tea Party Republicans we call them.  And decidedly anti-Ruling Class.  And they’ve become a problem.  For they won’t accept the established order.  They can’t be bought.  And they don’t care if they get reelected.  The boobs.  All they care about is keeping their campaign promises.  Which is anathema to the Ruling Class.

And soon the shoe was on the other foot.  The Ruling Class lost the House in the 2010 midterm election.  And had to deal with obstructionism.  And by obstructionism I mean responsible governing.  Per the will of the people.  From that contemptible Tea Party.  For they are interfering with the natural order of things.  That is, letting liberals do whatever they want.  So now the liberals cry foul.  And demand bipartisan compromise.  Until they can dictate policy again.  They way it should be.  According to the Ruling Class.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,