“Should We Abandon Capitalism?”

Interesting social media posts being shared about accompanied with an article to the gist of “Should We Abandon Capitalism?”

Drives the exact point of how intellectually dishonest we have become as a society. Capitalism is dependent on free markets and free markets are dependent on voluntary transactions at voluntary terms – which have not existed now for decades. Hence we have not had capitalism in decades. Be it through ignorance or intentionally attempting to deceive people – when you must create fictional straw men in order to make your point a very logical conclusion is that you do not have a point what so ever.

Of course these people have no point – but by creating fiction they attempt to show that what they are proposing is superior to the fiction that they have created. A great deal of our troubles root back to people feeling the need to create fictional straw men in order to make what they are proposing appear good, better and rational. Of course what they are proposing is not good, better or rational – that is why they must generate fiction as comparables!

Be aware of reality – evil prospers through lies. If you cannot tell the difference then perhaps the wise course is to hold off on forming an opinion until you can tell the difference.

Become Wealthy By Serving Your Fellow Man

“Prior to capitalism, the way people amassed great wealth was by looting, plundering and enslaving their fellow man. Capitalism made it possible to become wealthy by serving your fellow man.” – Walter Williams

“As a dog returns to its vomit, so fools repeat their folly.” – Proverbs 26:11

Looting, plundering and enslaving certainly seems to be the desired direction of many people and ironically under the guise of making it ‘fair.’ “Healthcare is a right!” is the cry while ignoring the correlation – that if healthcare is a ‘right’ then healthcare workers are essentially slaves to be plundered and looted. Why aren’t donuts a right then as well and then we can enslave the bakers too?

The endgame to all this will be fewer doctors, nurses, therapist and technicians – and hence less healthcare. To the socialist the truth that there will be less healthcare is irrelevant. For the doctors, who wants to spend all of that money to acquire an education and then enter a profession that is essentially slavery? Very few. But wait – the socialist have an answer to that as well – enslave everyone to the same degree. Is that not the end result? Of course it is.

So yes bakers are already slaves to others ‘rights’ – “Bake the cake!” – as are a plethora of other professions and occupations in this country. Let’s face it – if you can force someone in the United States to violate their conscience and their deepest held religious beliefs – if you agree with them or not – in order to perform labor for someone else then is slavery not what you have embraced? Of course it is.

How fortuitous that the people calling for the destruction of statues because of racist history are the same people calling out for the modern enslavement of doctors, nurses, bakers – the irony is completely lost on them.

Lost on them for now.

The irony never remains lost for very long because the delusion that ‘other’ people will be forced to do what they do not desire- but not you! – will come to a quick bitter end. Once society starts down this track there is no logical pause to it – in fact the farther society goes the steeper the decline and the greater the acceleration into misery, poverty and death.

For those of you who may advocate for “Healthcare for all” in the Bernie Sanders mode and making bakers “Bake the cake!” – enjoy the vomit. You won’t be getting the rest of us to eat it – we worked too hard getting rid of it to return to it. We would rather get wealthy serving people than create poverty by enslaving them.

Root Cause

“Entitlements and other mandatory spending alone is projected to reach $2.566 trillion or 63% of total FY 2018 outlays. Another $307 billion will be required for interest on the nation’s $20 trillion public debt, while upwards of half the $1.22 trillion for so-called “discretionary” or appropriated programs also reflects funds appropriated years ago. Altogether, $3.5 trillion, or 85% of outlays, will be essentially baked into the cake before a single Congressional vote is taken on anything regarding the FY 2018 budget. The Federal spending machine is almost entirely on autopilot and heading for disaster owing to ballooning populations and debt. Ten years from now the combined cost of mandatory programs and debt service will reach $5.12 trillion compared to just $2.87 trillion during FY 2018.” – David Stockman, former congressman and former Director of the Office of Management and Budget

“Rational people recognize this $20 trillion for the supernatural scale of obligation it represents, and understand that it will never be paid back, so, what the hell? Why not just drop the pretense, but keep on working this racket of the government borrowing as much money as it wants, and the Federal Reserve creating that money (or “money”) on its computers to infinity. Seems to work so far. Rational people would also suspect that at some point, something might have to give.” – James Kunstler

Meanwhile the Census Bureau reports that real inflation-adjusted earnings for men are less than they were in 1973. Earnings for males are basically unchanged from what they were in 1968. In other words, on an apples-to-apples basis, i.e. real inflation-adjusted earnings for men, we have been static now for decades.

We have failed as voters to grasp how deceit, war, debt, net wealth and wages are connected. Here is a short history of how we accelerated into disaster (and why wages have been stagnant for 45 years!): JFK and LBJ created more dollars than the United States had gold to cover. France accumulated an immense number of physical dollars. After Nixon was elected, France having accumulated all of these dollars, demanded to exchange their dollars for gold (as they were entitled to do). The United States, not having the gold reserves to cover the dollars that had been printed, left the gold standard in 1971 in order to avoid insolvency in not being able to redeem the dollars that France held.

Understand what happened.

Additionally and of no less significance – LBJ increased Federal spending via launching the Great Society at the same time he was fighting the Viet Nam War. LBJ fully intended to run for re-election in 1968 and the deficits and increases to the Federal debt that sourced in the war and the Great Society was bound to be an election issue in 1968. LBJ in true LBJ fashion simply ordered the Federal government to abandon Generally Accepted Accounting Principles (GAAP). In other words, LBJ directed the Federal government to only count the financial burdens that LBJ found politically convenient and ignore those that would be a detriment to his re-election efforts.

Let me summarize where we are in this history lesson – by 1968 JFK and LBJ had gone on a printing spree to artificially goose the economy and printed far more dollars than the United States had gold to redeem. LBJ also stopped the United States Federal government from using Generally Accepted Accounting Practices. Nixon then took us off of the gold standard.Notice the wage growth in the male inflation-adjusted earnings has been stagnant since 1973 – that it is not a coincidence! But wait – there is more!

In 1971 Nixon removed the United States from the gold standard due to there being more dollars than gold to redeem the dollars. The United States moved to a fiat currency – but more importantly the United States moved to fiat credit. The volume of credit that could be introduced was no longer tied to and limited by gold and savings. Those of you old enough to recall may remember the 1970’s stagflation that was the immediate result of these events. In response to the stagflation congress passed Humphrey-Hawkins in 1978. This legislation basically outsourced congress’s job to the Federal Reserve. It provided the Federal Reserve with the twin mandates of controlling inflation and stimulating full employment – in a fiat credit environment. See the problem here? The United States congress made the disastrous decision to manage employment and inflation via monetary policy – not fiscal policy.

The only tools the Federal Reserve possesses in order to achieve the twin mandates are manipulating interest rates and introducing additional credit – in other words creating financial bubbles, That is what they do for a living.

What is more, when Nixon took the United States off of the gold standard it presented the potential problem of why anyone would purchase fiat credit from the United States in the volume needed to support the deficits being generated by the Great Society programs plus the additional government programs that Nixon introduced.. The solution devised by Nixon and Kissinger was the petrodollar system. Simply put the petrodollar system is an agreement by many of the worlds leading oil-producing nations that they will only accept U.S. dollars in exchange for oil exports. By only accepting U.S. dollars for oil, the nations that purchase the oil must have U.S. dollars on hand to pay for the oil. The easiest method to acquire U.S. dollars is by purchasing United States debt – hence our ability to continue to borrow is primarily dependent on the oil production of middle-east nations – and their demanding only U.S. dollars for oil. In exchange the United States provides military and political security to these nations – this is the primary reason that we have the worlds largest defense budget and most powerful military and why we are constantly militarily engaged defending these regimes in the middle-east.

Understand how all of this is tied together.

Now let us return to LBJ removing us from Generally Accepted Accounting Principles. The obligations that LBJ removed from being counted as part of the official deficit and the debt were primarily entitlement obligations. No President since LBJ has seen fit to return to GAAP. It is simply too politically inconvenient to have honest accounting. However the Congressional Budget Office has calculated the actual Federal debt using Generally Accepted Accounting Principles and the debt number the CBO arrived at is not the $20 trillion that has been in the headlines the last few days – but $210 trillion. The actual debt is ten and half times greater than the debt the Federal government officially claims.

Let us quickly review – the United States left the gold standard shortly after the Federal government ceased calculating the actual debt. In order to replace the discipline that should have been inflicted by the gold standard (but that JFK and LBJ failed to adhere to) the petrodollar and then Humphrey-Hawkins were put in place. These actions had a profound effect on how the United States operated. Prior to LBJ credit was a limited and valuable resource to be provided primarily in situations that would result in increased productivity and consequently increased profits that fed into a growing economy – and an improved standard of living and wage growth. Understand how these are connected – by market incentive.

In the previous model credit was regulated by the amount of savings on hand and the volume of gold in possession – hence it was limited and only provided in the most profitable of situations.

In the current system we have fiat credit – there are no limits on how much credit is available and consequently credit is nearly valueless in terms of only being provided in the most profitable of situations. Previously the only means that creditors had to make money was if the borrower paid back the loan – hence creditors were invested in the success of their borrowers be it with a home mortgage, a business expansion or a business start-up. In the current system the collateralization of the debt is much more profitable than an individual debt being repaid. Grasp that fact and you will understand much in regard to why wages are stagnant and why we have such sub-par growth and most importantly why we have ever expanding gaps in net wealth between the many and the few.

It is popular to advocate for a return to Glass–Steagall in order to address this situation. That is not only impractical at this point but it would simply provide a band aid on the gushing of a severed artery. Glass–Steagall does nothing to address the root cause of why we are bleeding to death. There are many people, notably Trump and Sanders supporters, who advocate for a return to policies of the 1950’s that favored labor and favored manufacturing and all of that. Once again, you cannot have that or anything resembling that if you do not fix the root problem.

The root cause is that with endless fiat credit it can be rolled into a bundle and subject to collateralization and there is no longer an incentive to grow any part of the economy other than the financial sector. Fiat credit with collateralization is being able to create free wealth via the mere introduction of credit. Those who are in a position to introduce the credit or invest in the credit grow wealthy for nothing more than a few keystrokes on a computer – while producing nothing. These people at the top receive the wealth from the credit and the rest of us receive the debt. This is the root cause of the $15 trillion net wealth transfer from the bottom 93% to the top 7% that occurred during the Obama years. What people do not want to grasp is that every government program introduced is funded with credit – hence every Obamaphone and every person receiving government healthcare amounts to a wealth transfer to the wealthy. Do you not ever wonder why the wealthy are overwhelmingly in favor of larger and larger government acquiring more and more debt? This is why.

“If socialist understood economics they wouldn’t be socialist.” – Hayek

That these government programs lead to the enriching of the few and the impoverishing of the many is the root cause of the failure of the -ism’s. I have attempted to explain in this post why that is and what decisions caused us to reach this disaster. At this point people typically argue to raise taxes in order to not have to borrow more money. Using GAAP accounting the Federal government is running a deficit of $5.5 trillion or more. If you were to tax everyone making more than $200K a year at 100% you would raise about $750 billion – so still $4.75 trillion short. If you took every asset everyone making $200K a year had you would raise another $750 billion – so still $4 trillion short.

In other words there are simply not enough tax dollars out there to even approach covering what the United States is on the hook for today – let alone increasing those obligations. In order to balance you would have to tax everyone making $20K a year at 100%. You could only do that once though – after that no one would bother to make more than $20K ever again. What is the point?

When you hear Bernie Sanders argue for Medicare For All – understand that knowingly or not he is arguing for wealth transfers to the 1%. That is the net result of that plan. Furthermore let me connect the dots for you – Medicare (and every other government program) is funded by debt, that debt is dependent on the petrodollar, the petrodollar is dependent on United States military engagement in the middle-east. Not to put too fine a point on it – but innocent people will be killed in other countries in order for you to have that government benefit. I understand that society has abstracted the connection in such a convoluted manner that most people are obtuse about this – but that is the ugly truth. You might want to recall this fact the next time you argue for a government benefit – and leave your moral superiority complex in the dumpster where it belongs.

This model we have moved to the past fifty years has a logical end – aside from the fact that other countries are getting fed up with our willingness to kill innocent people with brown skin so the government can provide Obamaphone’s. If we reach that logical end it will be painful beyond what any of us has ever experienced. Is there time to avoid that pain? Perhaps, each passing day reduces the chances of avoiding the pain. However our real enemy is that we ignore this problem in favor of whatever the talking heads, social media and politicians tell us we should care about today. That is not to say that there are not ten thousand other things that happened the last fifty years to contribute to our predicament – there are. However those things are not the root cause of our disaster but rather unintended consequences and reactions to the problem.

This is our most serious problem and it is a lethal problem.

“But but but statues…”

“Sometimes societies just collectively go insane.” – James Kunstler

Free Market Capitalism

Basic economics: for most items the demand exceeds the supply. In other words, people will almost always ‘want’ more than is available – or than they can afford. Gasoline, homes, automobiles, crayons, ice cream – you name it. A question every society must answer is how these items will be rationed. In a free market it is rationed via voluntary transactions with voluntary price agreement, i.e. no price setting and no requirements for how much you can or cannot purchase- and no one making you purchase the product or denying you the opportunity to purchase the product.

The regulating factor in this model is price – which is dependent on supply and demand. The system is regulated by the opportunity to undersell the competition. In this model the entry into business is not artificially elevated by taxes, regulations, fees and legislation – hence the motivation and opportunity exist to enter a market and underprice the incumbent players. This controls the price. This is why free market capitalism is the only model whereby you make money by serving others rather than by pillaging them. You offer a better value than the competition and the competition must improve or go under – and the new opportunities for competition are endless in this model because government is not interfering to protect the market share of incumbent enterprises.

The system we have today is not free market capitalism but corporatism – the government exist primarily to pass taxes, regulations, fees and legislation that protects incumbent businesses and raises the bar to new competition entering the market and underpricing the incumbent players. In the current model the government explicitly interferes to protect incumbent business enterprises – and it is often tied to the financial future of the politicians. Most often this interference is sold as a ‘benefit’ to the public when the end result is the removal of choice in the market place and either public dollars being shoveled into the corporation or a legal requirement that the citizen must give his dollars to the corporation or face the wrath of government.

Nearly everyone understands that the current system sucks. It holds wages down and it encourages non-productive debt and redistributes trillions of dollars from the many to the few – because it is based consumerism and corruption that works for the corporations and not on investing in new enterprises that in return would raise wages and expand opportunity.

Some people think they prefer socialism where the rationing, pricing and supply of products is determined by government – and the demand is artificial and the result of the government use of force. This model is nothing more than corporatism writ large. There is a delusion that somehow the people who would be making these decisions of who gets what and how much at what price would some how be capable of making wise decisions and making it ‘fair’ – and not continue to work at the behest of the corporations.

There is absolutely nothing in all of human history to support that concept – and it does not matter if one looks back one hour into history of a hundred years. Allowing a select group to make these decisions is just foolish. They cannot possibly know what the demand will be for product next year- and the failures are always excused with propaganda and force while always benefiting the few. Just the truth.

One Person At A Time

I had a conversation with a fellow this past week that went like this –

He is in his 30’s, professional, accomplished and works for a well-known corporation. He told me that he is leaning toward socialism.

I ask him why and he responded that capitalism is immoral and undercutting people.

I responded that we have not had capitalism in this country in a very long time if you define capitalism as free markets, i.e. transactions and prices are voluntary and no one can prevent or force you to buy something or set the price at which you must purchase something.

He said that he had to agree.

I further added that what we have is corporatism, cronyism – that each of these laws, taxes and regulations are intended to work to the favor of the corporations in that they snuff out choice and raise the bar in order to eliminate or prevent competition.

He thought about it and again said that he had to agree.

I finished my point by stating the obvious – socialism is simply more laws, taxes and regulations that snuff out choice and competition and, no matter how much you tax the corporations, socialism simply guarantees the corporations a market and a profit – which the corporations are all for.

Again he agreed.

He then thanked me for having the conversation and told me he had never thought of it in the terms I explained.

One person at a time.

The Proper Role Of Taxes In A Free Country

The Proper Role of Taxes in a Free Country

Randy Schaffer


The America 101 Project

Until everyone understands the proper role of taxes in a free country, we cannot have a free country, nor do we deserve one.

The only proper tax in a free country is the only tax that we do not have and that is a tax in the form of an itemized bill for government services rendered.  Nothing more and nothing less.  Your tax bill should look very similar to what your bill looks like when you get your receipt from the cashier at the grocery store, listing exactly where every penny you spent has gone.  This allows you to hold the government, who after all are your employees, accountable, and if you don’t like the way your money is being spent, or how much you are being charged, you can take part in the process of firing your employees and hiring new ones, who hopefully will do a better job for you.  This would also allow us to replace the IRS with a much smaller agency whose job it is to audit the government and not the people.

Here is a list of some of our current taxes and why they do not belong in a free country:

1.)  Property Taxes-  One of the basic principles of a free country is the right to private property ownership and to be secure in that property.  If you pay property taxes, that necessarily means that you do not own your land, nor do you own anything you build on it.  In fact, it means that you are leasing your property from the government and it also means that the government can change the terms of that lease anytime it sees fit to choose and in some cases can even terminate that lease, whether you like it or not.

2.)  Income Taxes-  Freedom dictates several things, among them is the fact that it is none of the governments business how much money you make or how you spend your own hard earned money.  Because of that, an income tax is not possible in a free country.

3.)  Sales Tax-  A sales tax is an income tax, only it is even worse, because a sales tax is an income tax on anyone who owns a business, without it being an income tax on those who choose to work as someone else’s employee.  One of the things that freedom dictates is that I am not worth one bit more, nor one bit less than you are, in the eyes of the government and in the eyes of the law, no matter who I am and no matter who you are.

4.)  Taxation without representation, Part 1-  Some locales are finding that their voters are very hesitant to vote to raise their own taxes and have been known to defeat incumbents who vote for tax increases.  They have come up with a unique solution, and that is to raise taxes, only on those who are not allowed to vote in that city or town.  The tax increase looks something like this:  A property tax increase only on rental properties and businesses, but not on homes that the owner actually lives in.  This makes it fairly easy for voters to pass as no one who is voting for the tax increase will have their own taxes increased.

5.)  Taxation without representation, Pt 2-  We now have almost as many people in this country who do not pay income taxes as we have people who do pay income taxes.  It is fairly easy for those who pay no income taxes to vote for elected officials who promise to raise taxes on those who do pay income taxes.  We will never be a free country as long as I am able to vote myself money out of your wallet.  Think about it!

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