Government Is Force

This is the essence of a free market – it is voluntary – it is not the government making you (or the government empowering some other entity to make you) buy or sell or determine the price at which you must buy or sell or punishing you if you do not do what the government (or a government sanctioned entity) wishes for you to do.

This is called freedom and this is called a free market.

All other economic/political/social systems in which the government requires you to buy, sell or determines at what price you will buy or sell, or punishes you for not engaging in commerce which the government sanctions is not a free market.

The adherents of Bernie Sanders and Elizabeth Warren are not going to come out in their campaign propaganda and say “We will use the force and power of the government to make you buy, make you sell and control the price at which you buy and sell and punish you if you do not do what we wish” but that is exactly what their policies will do.

Using the power of government to make you buy, make you sell, determine the price at which you must buy or sell and punish you if you decline to participate is what their entire political platforms are based on. They hire very bright people to decorate this idea of using government force to compel you to enrich the private entities that donate to their campaigns – using words such as ‘fair’ and ‘justice’ – but at the end of the day it is simply using government force to transfer your wealth to their supporters. End of story.

You have two choices here – you can choose a free market in which each individual is equal, no one can compel you to engage in commerce which you do not wish to engage in, and no one will use government force to take your wealth and transfer it to their cronies – or you can choose a system in which some politician will decide what is equal, the government will compel you to engage in commerce, the government will determine what commerce at what price and in what quantity you must engage, the government will use force to take your wealth and give it to their supporters, and freedom continues to die.

Choose wisely.

Metrics And The Mandates Of The Federal Reserve

Over the last twenty years businesses have increasingly relied on metrics in order to evaluate performance. Metrics are usually objective measurements which people perceive to be critical to their business success.

Here is what tends to happen when companies use metrics to evaluate their performance: people tend to excel at the items they are being measured on and slack off or ignore the things they are not being measured on.  I have been part of those conversations when companies say “Why did we fail, our metrics were excellent…” and of course the reason is human nature. If people are being measured on a certain thing then that is where the time and effort goes, things they are not being measured on not so much even though those other things are also critically important to business success.

Let us look at that same dynamic in regard to the Federal Reserve. Humphrey-Hawkins requires the Federal Reserve to be measured on two criteria: inflation and unemployment.

Right now we have inflation at a sub-2% rate and less than 5% unemployment.  Success right? The metrics are outstanding, right?

Now lets look at the success of the entire enterprise, i.e. the United States.

·      Real year over year wages have declined for nine straight years

·      We have lost about 9 million full time private sector jobs the last nine years

·      Labor participation rate is at its lowest since 1975

·      Home ownership rate is at the lowest rate ever

·      The last nine years the average middle class family has lost 29% of their net wealth

·      The last nine years the average poor family has lost 45% of their net wealth

·      The last nine years the middle class and poor have lost $15trillion in net wealth while about $15trillion in net wealth has been added to the top 7%

·      Billionaires the last nine years have, on average, doubled their net wealth

·      The bottom 93% have lost 9% of their wages the last nine years

·      The bottom 90% have lost 37% of their net wealth the last nine years

In order to accomplish this miserable result we have increased debt at a rate three and a half times that of actual economic growth., debt which either has to be paid back or defaulted on.

Is there any serious argument against rethinking the Federal Reserve and their mandates? I would hope not, yet the politicians we repeatedly re-elect seem just fine with the mandates as they are.

Making Good Decisions

I do not give investment advice and you should not be investing based on anything on this page. What I do is attempt to give you news and data that goes beyond the headlines on the financial web sites and try to inform you as to different schools of thought on these issues.

I attempt to give you a more holistic and complete picture of what is happening in your world. I also try to give you the data needed to separate the wheat from the chaff; among the many promises made by politicians, bankers, muckety mucks of all types that are within the realm of possibility, which are more likely and which are just totally bogus.

No body knows the future, period. However some things are more predictable than others. For example my dog, as sweet as she is, will not be getting a PhD in Physics just as socialism will not be producing fairness, happiness and prosperity no matter how badly socialist wish that was true.

Giving power and control over your life to another entity, be it government or private, will not result in prosperity, fairness or happiness no matter how much one may wish that was true. It does not do that now, it never has and it never will. Let us throw that one out of the realm of possibility.

Within the realm of what is possible there are different schools of thought. One of the major conflicts these different schools of thought produce is inflation/deflation. There are very smart people who have opinions I respect on both side of this debate. That QE, ZIRP, NIRP, et al. will produce an ultimate bad effect is not really debatable. What that bad effect will be is very debatable.

I tend to fall on the deflation side of this because I believe we are living in the greatest credit bubble ever created and when that credit bubble pops it will of necessity be deflationary. However I could be wrong. People smarter than I draw exactly the opposite conclusion that I draw.

You should be acquainted with the different schools of thought. You should be acquainted with the data. You should understand the realm of what is possible and what is not possible in order to make good decisions; from the voting booth to your employment future to where you invest or if you invest at all.

Ultimately my hope from doing this is that people will engage their own mind in discovering these things, doing their own research, reaching their own conclusions that will lead to better decisions based on the realm of the possible and not political promises of the impossible.

Quite a few people would like nothing more than to separate you from your money. Some of those people are in politics, some are in the media, some are in non-profits and some are in business.

You need to acquire the knowledge and data to understand what is happening; which is typically very different than what politicians, media types, non-profits and businesses may be telling you is happening.

I am here to spur you on in acquiring that knowledge and data and drawing your own conclusions.

We Can Only Absorb Stupid For So Long

“When governments find themselves in financial trouble because of the stupid decisions that they’ve made, their first response is to award themselves even more power to make even stupider decisions.” – Simon Black

“It was the most memorable time of my life. It was a touching moment because I never thought this day would ever happen. I won’t have to worry about putting gas in my car. I won’t have to worry about paying my mortgage. You know, if I help him, he’s gonna help me.” — Obama supporter Peggy Joseph

“Things always become obvious after the fact” – Nassim Nicholas Taleb

We can trace the stupid financial decisions of the United States back a long way. We can trace it back to our first Progressive President, Teddy Roosevelt, giving JP Morgan $25,000,000 with which to bail out a bank that a friend of TR was invested in (by the way JPM did not bail out the bank, he just kept the twenty five million. TR did not have the courage to ask for the taxpayers money to be returned). We can trace it to our next Progressive President, Woodrow Wilson, creating the IRS and the Federal Reserve and subsequently also creating the first Federal Reserve generated monetary bubble. We can trace it to Franklin Roosevelt believing that the proper course was to imitate Mussolini and Italian Fascism, even to the point of inviting Italian Fascist to come to Washington and to help draft legislation and regulations for the New Dealers. We can trace it to Lyndon Johnson and LBJ’s burning desire to ‘complete’ the New Deal and finish what FDR could not with all of the accompanying deceit and fraud of government finances that LBJ engineered. We can trace it to Nixon deciding that a never ending expansion of government agencies, government control and government financial engineering would solve all of the problems that he inherited from LBJ. We can trace it to Bill Clinton deregulating the entire banking system except the FDIC. I suppose we could then draw the well known correlation between the millions of dollars Clinton received from the Wall Street banks after leaving the White House and his deregulation of these same banks. We can trace it to the profligate spending of George W Bush and the complete absence of adult supervision of the Federal Reserve on his watch. We can certainly trace it to Obama taking all of the dysfunctional fiscal and monetary policies of the W era and then putting them on steroids while deciding to centrally plan and control nearly every aspect of American economic life.

In other words, there is plenty of stupid to go around, Democrat and Republican, for decades.

It is in the nature of human beings who have acquired some degree of power to attempt to expand that power, especially when they have failed. We have now had generations of Presidents and congresses who have repeatedly awarded themselves even more power to compensate for stupid decisions and consequently used that power to make even more stupid decisions.

We have a meaningful number of voters who believe they can and will get a free lunch.  We have politicians always willing to rationalize their bad decisions by claiming they just provided that free lunch.

This is a disaster in the making and someday in retrospect in will be obvious. We can only absorb stupid for so long.

The Wealth Effect

The Wealth Effect is the premise that when the value of portfolios rises due to escalating prices, investors feel more comfortable and secure about their wealth, causing them to spend more. The theory goes that investors spending more will invigorate the economy thereby increasing production, jobs and economic activity.

The Wealth Effect theory is the rationale that the Federal government and Federal Reserve have been using the last seventeen years in order to justify the activist approach to fiscal and monetary policy they both have taken.

Because the liquidity the Federal Reserve and Federal government has injected into the economy has never made it out of Wall Street onto Main Street the Wealth Effect has been limited to a very few people the last nine years.

For the few connected enough to access these funds it has been government provided free wealth. For the bottom 90% it has meant increasing poverty, less income, less wealth and ever more debt.

You can draw one of three conclusions about this situation:

·       The folks at the Federal Reserve and in the government are so clueless they have no idea this is going on.

·       The folks at the Federal Reserve and in the government intended this to be the outcome.

·       The folks at the Federal Reserve and in the government did not intend this as an outcome, the policies have failed but they are unwilling to say, “We are sorry, we were wrong.”

Whichever conclusion you wish to draw the next conclusion has to be that these folks ought not be doing the jobs they were given.

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