Archive for the ‘Economy’ Category

FAT CHANCE!

Monday, June 30th, 2014

“No prison has higher walls nor thicker bars than old age and poverty.” –The Millionaire (1933)

Hey Americans, want to hear another losing proposition? Save for your old age.

With the federal government robbing savers via taxes and inflation, saving for old age has become a losing proposition. Guess what? It’s just the way the quasi-Marxists in academia, government, and the media want it.

“Not to worry!” they assure an increasingly indoctrinated, American youth. “Allow us to continue telling you what you want to hear. Look, with Social Security, Medicare, Food Stamps, and so on the government can and will take care of you. Humanism at its best.”

Consequence? An American public increasingly apathetic, passive, and dependent. Just the way the quasi-Marxists in academia, government, and the media want it.

Was this consequence the vision that the Founding Fathers had for America? Not likely.

How about an alternative? Government limited. Lawyerism abolished. Education effective. Medical delivery optimal.

Want more? Real capitalism with sound money. Savings encouraged and debt discouraged . . . both private and public. Victories not defeats. Individualism not collectivism.

In a context of satiation, as a nation too many Americans have come to want immediate gratification of their basest instincts at no cost to them but their liberty and their souls. For them, as the lyrics to the song say, “Freedom’s just another word for nothing left to lose.”

Well, folks, licentiousness is not just another word for liberty. They are not synonyms.

Also, licentiousness is rising as you may have noticed. Meanwhile, liberty is waning as you may not have noticed, especially be you young.

Forget for a moment how we prefer to see ourselves. How do others see us? After all, if you want to know the truth about yourself, don’t ask your friends . . . ask your enemies; they’ll be pleased to tell you.

The Chinese, for one, view America as a “nation in terminal decline”. If they’re right, and they seem to be, can we reverse the course?

Can we become a moral people promoting honesty, candor, individual responsibility . . . favoring savings over debt, victory over defeat, decency over degeneracy . . . seeking wisdom through knowledge and exploration? Yes, we can (www.inescapableconsequences.com).

Ah, but given current trends, shall we? Without a revolution in mind and spirit, fat chance!

Inescapable consequences, given current trends? Debt, defeat, degradation, and despair . . . oh, and don’t forget tyranny. Welcome to the New America, where saving for your old age in U.S. dollars has become a losing proposition, leaving the old to survive by financially devouring the young.

Mundus vult decipi, ergo decipiatur.” -Petronius (1st-century A.D.). Rephrased . . . If we Americans want to be deceived, we Americans shall be deceived.

THE USD

Monday, March 3rd, 2014

“Be not thou afraid when one waxeth rich, When the wealth of his house is increased; For when he dieth, he shall carry nothing away; His wealth shall not descend after him.” -Psalms 49:17

Commercially and economically, America has become a nation in which Big Government, Big Business, and Big Media conspire implicitly, if not explicitly, to reign supreme. A nation that punishes production while rewarding consumption. A nation that exports its own vital industrial base, sliding into a so-called service-economy with its citizens selling real estate and commercial paper to one another. A nation that issues a progressively debased currency printed in unending supply by a timid Federal Reserve Bank at the behest of power-hungry politicians buying votes with the voters’ own money. A nation indebted to and increasingly owned by foreigners who can force America to declare bankruptcy whenever doing do suits their own national interests.

Most politicians will do almost anything to confiscate the wealth of other people for the benefit of the government that serves not the citizens but the politicians and bureaucrats; including violating our own laws, others’ laws, and long-standing international standards recognizing national sovereignty. Confiscation of wealth is the reason that they oppose banking privacy so adamantly, labelling it “secrecy” with that adverse connotation. Worse, ending banking privacy has become an essential element in the current trend toward socialistic trans-nationalism, together with “harmonizing” tax-codes across borders and promoting fiat-currency.

Everything has its cost, however. The cost of this system has been the declining purchasing power of currencies worldwide, as a whole, and of some individual currencies against others. Few among each populace understand the system and its rules. Even fewer care. The underlying rationale is that, with a fiat-currency having no intrinsic value, a zero or two or three always can be deleted to restore its purchasing power per unit of denomination. After all, at one point Turkish lira had reached more than one million to one U.S. dollar (USD) before the Turkish government chopped off a few zeros by issuing a “new lira”. Life continued in Ankara and Istanbul as well as in London, New York, Shanghai, and Tokyo.

Consider when most Americans, in times long passed, grew up on farms and attended rural schools where teachers taught that saving and thrift are virtues. Today, avaricious, self-styled, financial gurus from Wall Street claim that those simple virtues have become archaic, inapplicable, historical remnants. They advise us that the modern “global economy” thrives as a consequence of free-flowing credit, consumerism, and debt. They say that to discard the new in favor of the old would be to plunge us into another Great Depression with a reduction in the standard of living worldwide.

Unbeknownst to them, they make an underlying point. Money knows no home. It seeks the highest return for the lowest risk. Would a return to a sound and stable USD bring bust or boom? Boom! Together with other necessary reforms, it would bring long-term prosperity and maintain the USD as the reserve-currency internationally.

At one time, the world used not a reserve-currency but a truly international currency, gold. In 1938, Adolf Hitler criminalized owning gold in Nazi-Germany, as Franklin D. Roosevelt previously had done in the United States of America in 1933. Both well understood that governments cannot manipulate an economy using a currency based on gold. Instead, in the USA, FDR substituted a paper-currency promising silver on demand, the Silver Certificate. Big Government, nevertheless, reneged on that promise.

Today, the USD represents nothing more than a promise on a promise — a promise to confer value via a promise to tax the populace. Government, thereby, freed itself to print as much paper-currency as the politicians demand in order to permit chronic, deficit-ridden spending financed by continuing, unlimited expansion of debt.

Seemingly paradoxically, in 1935 the U.S. Treasury stopped printing the highest denominations of notes — $500 and $1000, which, given the debasement of the USD today would equal $9000 and $18,000 respectively. Consider that today, the highest denomination is only $100, measly in comparison. Let’s pretend that the $100-note of today equals the $100-note of 1935 instead of the $5-note of 1935 that it actually equals.

The consequence of this farcical ruse?  Over the years, the purchasing power of the USD plummeted. Finally, in the early 1970’s, President Richard M. Nixon formally ended the pretense of inherent value by explicitly decoupling the USD from both gold and silver.

Ironically, many, if not most, economists cheered, decrying gold as a basis for issuing currency. In fact, despite a federal debt of $17-trillion, they continue to call gold the “barbaric relic”.  Moreover, they continue to ignore the fact that, during the 19th-century while on the gold-standard, the USD remained stable.

Meanwhile, many of these same economists continue to receive great benefit, directly or indirectly, from having abandoned gold. Economists’ bleating aside, there is another even more ominous aspect to creating currency and debt at will than its ultimate destruction. It is the destruction of “government by the people, for the people, and of the people”.

Biobehavioral science, which describes all behavior including economic, adheres to three, scientific guidelines — specificity, objectivity, and accountability. All three were discarded economically with the abandonment of the gold-standard; and, with their destruction, came the destruction of the economic rights and the economic liberty of every American citizen.

PART TWO

Specificity, Objectivity, and Accountability

Loss of specificity: Big Government now creates “entitlements” for the electorate without explicitly specifying the means by which it will fund those so-called entitlements.

Loss of objectivity: Big Government actually finances those so-called entitlements by continually creating disguised debt, often “off-budget”, surreptitiously stealing from the Social Security Trust Fund, and surreptitiously stealing from a largely submissive populace via the hidden tax of inflation.

Loss of accountability: Ironically and increasingly, Big Government finances itself and funds an increasingly dependent populace. Decreasingly, the populace funds the government.

Consequence?  The government need not derive its economic authority and power from the populace pursuant to the U.S. Constitution.

Instead, the government creates its own economic authority and power. It does do by financing itself via debt designed to be imposed upon the next generation. The mechanism? Creating fiat-money used to buy its own bonds … sort of a governmental version of sending love-letters to oneself. As does the lonely lover, however, ultimately the government and the populace discover to their dismay that that which they have created represents mere phantasy.

Is such a system one that the Founding Fathers had in mind when they created the Republic?  In abandoning gold, politicians created awful and accelerating instabilities — economic, political, and social.

The Monetary Function of Government

Monetarily, the function of government should be maintaining a sound and stable currency while allowing the marketplace to regulate the economy. Some years, there will be inflation, which is not necessarily good … contrary to the bleating of governmental economists and their supporters. Some years, there will be deflation, which is not necessarily bad … contrary to the bleating of governmental economists and their supporters. Over the long term, however, the rate of change will average approximately zero, meaning that politicians cannot get themselves reëlected by buying votes through reckless spending of a progressively devalued USD.

A sound and stable currency with economic regulation by the marketplace? That which America has had since the establishment of the Federal Reserve Bank in 1913 has been the opposite. Despite their consistent faulty analyses and incorrect predictions, governmental economists have manipulated the supply of money and rates of interest, most recently to promote inflation and consumerism. By doing so, they claim that they are maintaining production and preventing economic reversal.

That which they say might be true in the short term, but is it true in the long term?  What are the long-term consequences of inflation to the individual, productive citizen?

Say inflation equals 2%, a rate now promoted by governmental economists and their supporters. Compounded over twenty years, every USD will have lost approximately half its purchasing power. In constant terms, $1 will be worth only $½. Consequence? Spending not saving; thereby, decreasing the pool of domestic capital available for investment in production.

Wait! Do not most people also earn interest on their savings via banks and bonds; at least in the past? The real question, however, is, What is the real rate of interest — not the nominal, or stated, rate?  Historically, the greater the rate of inflation, the greater the net loss to the saver.

Why? Say that the nominal rate of interest = 2% and that the inflationary rate = 2%. The rate of real return = 0.

The saver doesn’t break even, however. Due to inflation there is no real income, only nominal, phantom-income. With income-tax, the government punishes the saver by levying a direct tax on the phantom-income of that nominal interest. If those direct taxes — federal, state, and local — average 25%, the saver suffers a net loss each year of one-quarter of his 2%; or ½% of his money. Over twenty years, the saver loses in purchasing power twenty times that ½%, compounded.

The politicians engage in this legalized theft through a combination of taxes, direct via income-tax and indirect via inflation; thereby, punishing savers for saving. The consequence of their pursuing such policies is financial loss to savers and financial gain to government. Meanwhile, the politicians and their bureaucratic economists cry crocodile-tears at the low rate of savings in America.

PART THREE

Solution: A Beginning

One might ask,  “If not the gold-standard, what?”

A true and valid solution, scientifically-based and scientifically-driven, begins with a sound, stable, and respected national currency. It begins with restoration of a sound and stable value of every denomination. It begins with a currency that reflects primarily the constructive, limited requirements of the productive not self-serving, unlimited demands of the unproductive.

America currently has an unsound and unstable national currency — the USD. Merchants no longer give change to the nearest penny, sometimes only to the nearest quarter or even the nearest dollar. Such debasement generates contempt for the currency and for the economy that it represents. The solution begins with restoration of a sound and stable value to every denomination of the currency, even the penny.

Restoration? How? Reverting to the historical, begin with issuing a new, revalued currency with a zero lopped off the end of each denomination and dividing the denomination by two.  The $100-dollar bill of today will be the “Five New Dollars” of tomorrow.  The $20-dollar bill will be the “One New Dollar”.  One can fade out the “New” over time.

To do so merely would be to return the value of the currency to where it was before the Federal Reserve Bank came into its misbegotten existence and began its relentless debasing of the USD.  It would reëstablish respect for every denomination.

As have citizens of many other countries, Americans would exchange the old, de-based currency for the new, re-based one.  Prices of goods and services would follow accordingly.  Essentially, nothing would change except each denomination of currency carrying real value. Doing so would regenerate respect for the USD and the nation for which it stands.

What stops the politicians from doing it? What stops the productive electorate from demanding it?

Apprehension about the consequences. The nation would admit the truth. Generally, people would prefer a pleasant lie to the unpleasant truth. Ultimately, reality always wins, however.

One now might ask, “Apprehension aside, a new, sound, stable, and respected currency may be all well and good, but how to keep it so? There must be other steps required, mustn’t there?”

The answer? “There are.”

PART FOUR

Securing a sound, stable, and respected currency unquestionably requires a constitutional amendment. It might read as the following:

Constitutional Amendment

In the matter of financial debt incurred by the federal government, the following hereby is enacted:

Section 1.

Neither the President nor Congress shall coin new money or issue new financial derivatives thereof unless explicitly requested to do so by a bank or other financial institution duly licensed by a state or the federal government. The creating of new money or new financial derivatives shall be for purposes only of private, commercial production not of personal consumption.

Section 2.

The federal government, including its central bank should one exist, shall not itself establish interest-rates for governmental notes, leaving the setting of said rates to the freedom of the marketplace.

Section 3.

Neither the President nor Congress shall enter into financial debt of any kind except as noted herein.

The only exception to the hereinabove would be under conditions of a formal Declaration of War by the Congress. In such case, upon termination of said Declaration of War or cessation of military conflict related thereto, any accrued debt must be repaid in a maximum of ten, annual installments, equally divided, beginning the following fiscal year even should a new Declaration of War occur.

Currency-Manipulation

Even with a sound, stable, and respected currency, would not the problem of “currency-manipulation” by China and others still exist? Indeed, it might.

“Beggar-thy-neighbor” goes back a long way. Solution? If China or others indirectly subsidizes its exports via currency-manipulation, the USA would consider its doing so a violation of the principle of free trade.

The remedy would be clear. Calculate the amount of the subsidy and apply it as a tariff to those exports with the monies collected reducing the rate of federal taxation.

Prior to making demands upon other nations, however, America must clean up her own act; otherwise, she becomes the nun who treads the primrose path (www.inescapableconsequences.com).

-End-

RELIGION & ECONOMICS

Monday, December 16th, 2013

NOTE (17DEC2013): The following was deleted yesterday as a Comment by Financial Times but was carried by The Wall Street Journal with a number of recommendations.

Note (23DEC2013): Proper analysis of societal behaviors (i.e., governmental, legal, educational, and medical) demands description of context. Behavior is a function of its consequences in a given context. Societally, culture is a critical element in context. This posting addresses that issue and, given its importance, will run another week. Visitors also might wish to peruse a recent, related  article elsewhere. (1)

Reference

1. Epstein, J: “The Late, Great American Wasp”. The Wall Street Journal, 21DEC2013, page C1.

Although it is unfashionable these days to raise the issue of the racial, ethnic, or religious backgrounds of those who try to direct our collective destiny, it was not always so in the past. Max Weber emphasized the powerful influence of Protestants, particularly Calvinists, on the development of capitalism through that which he termed the “Protestant Ethic”.

The Protestant Ethic itself reflects, to some extent, the teachings of the Hebrew Bible (Old Testament); however, it was Protestantism not Judaism, Catholicism, Mohammedanism or any other religion that served as the cultural-religious foundation of capitalism. Where is the Protestant Ethic today in directing our collective destiny? For that matter, where are the Protestants?

What, for example, does Ben Bernanke have in common with Alan Greenspan, Larry Summers, Peter Orzag, Jack Lew, Janet Yellen, and Stanley Fischer? They all are economists. They all have substantial control over the American economy. They all are Jewish.

The point is not so much that they are Jewish, but that they are not Protestant. More importantly, their actions do not reflect the Protestant Ethic that built America and Western Europe. Their speech does not reflect the importance of culture, including religion, as the context for economic behaviors. They speak only of money … paper currency, at that, with no intrinsic value but that which its holders bestow upon it versus the value of food, steel, electricity, medicines, etc.

Why did Germany and Japan, with few natural resources, become economic powerhouses; whereas, Mexico with abundant natural resources has been an economic basket-case since the Aztecs. The answer is culture, including religion, not unscientific theories about the manipulation of money.

The Greenspans, Bernakes, and Yellens of the world never will reverse the downward spiral of America and Western Europe with their emphasis upon money … its volume, velocity, etc. Who can, then?

We can if we have the will … the will to return to the Protestant Ethic, even be we Catholic or Jewish, and the will to re-invigorate true capitalism with, not economics, but true biobehavioral science; thereby, promoting a real Scientific Capitalism whereby creation and production, the consequences of hard work, perseverance, self-reliance, and moderation control the economy and determine the coining of money not the unscientific theories of so-called economists, especially those who ignore the fundamental importance of culture as context (www.inescapableconsequences.com).

THE TAX-BANDITS RIDE AGAIN

Monday, June 10th, 2013

“An error lurking in the roots of a system of thought does not become truth simply by being evolved.” – John Frederick Peifer

The recent scandals concerning the Internal Revenue Service (IRS) raise the question whether reform represents a reasonable solution. If not, why not?

History

In 1914, the first American tax-return was one page in length. The highest marginal rate was 7%. In the dollar of today, that highest marginal rate translates into a taxable income of $11-million. By 1917, the highest marginal rate had accelerated to 75%; later to more than 90%.

Consequences and Human Efficiency

Have the consequences of establishing taxes on incomes increased human efficiency, decreased it, or had no effect? From a scientific point of view, increasing human efficiency is right; decreasing it is wrong (See “Categories/Uncategorized/‘Science and Human Purpose and Meaning’.”).

That concept isn’t as cold and calculating as, at first, it might seem to some. In fact, not only is the concept the opposite of cold and calculating, it’s in harmony with Nature and with the cosmos itself. Denying reality, especially long-term consequences, as we humans are wont to do, usually ends in destructive suffering; recognizing reality often ends in constructive well-being.

The Income-Tax

The consequences of ratifying the Sixteenth Amendment, if indeed it really ever was ratified as claimed, have included the creation of a terrifying tax-policing authority, a horde of parasitic lawyers and accountants, and a gargantuan amount of counter-productive paperwork for a citizenry at the mercy of the former. The recent scandal implicating the IRS testifies to the tyrannical arrogance of the “Service”, as it affectionately is called by those who profit from it.

Plainly put, taxing income, corporate or personal, is counter-productive, inefficient, and punitive; thereby, it is wrong. It carries a high response-cost and employs negative control.

The system allows bureaucrats to terrorize the productive populace, even to the point of seizing a citizen’s financial assets without due process even before a hearing let alone a trial. Eliciting such terror is the opposite of traditional American ideals.

“Where the people fear the government, you have tyranny. Where the government fears the people, you have liberty.” -John Basil Barnhill (1914).

So, if taxing income, corporate or personal, is wrong, what’s right? Consider the following:

Analysis

Context: The Sixteenth Amendment creating an income-tax with no constitutional limitations on federal debt and few on those who administrate the system.The Sixteenth Amendment creating an income-tax with no constitutional limitations on federal debt and few on those who administrate the system.

Antecedent: Insatiable, governmental demands for funding, much of which is misused for self-serving, political gain.

Behavior: Among taxpayers, paying as little tax as possible, including diverting monies into less creative and less productive but less taxable uses.

Consequences: Avoidance of penalties imposed by an expanding IRS with a decline in national economic efficiency and overall well-being for America.

Solution

Problem: Excess of taxing behavior employing negative control.

Goal: To have a just and fair system of minimal taxation . . . one sufficient to meet only the financial demands on the government to fulfill its stated, constitutional obligations.

Plan: To exchange the current system of taxation for one scientifically-based and scientifically-driven.

Measurement: Calculation of Gross Domestic Product, including the subtraction of all debts from all surpluses.

Conclusion

So, who are the villains? Those taxed or those taxing?

Today, tax-related persecution and prosecution have reached the point where corporations and individuals lawfully minimizing their taxes are becoming the targets of damaging slander and libel by Big Government and its handmaiden, Big Media. The fact is that tax-avoidance is not tax-evasion. Tax avoidance is legal, established by the tax-bandits themselves.

Now, to answer the opening question. Can the federal income-tax be reformed to enhance creativity, productivity, and overall human efficiency? No.

What is the remedy? Abolish the federal income-tax by repealing the Sixteenth Amendment and, instead, charge the now-established IRS with the responsibility to operate a simple, fair, and just system of minimal taxation in keeping with traditional American ideals (www.inescapableconsequences.com).

The likelihood of doing so? Given that 50% of Americans currently pay no federal income-tax, what’s your guess?