I am not able rightly to apprehend the kind of confusion of ideas that could provoke the following question:

-Does USA need China more, or does China need USA more?

I am even more amazed and amused by the answer that is always given to this question by various TV personalities, so called 'economists' and politicians:

- Who else is going to buy their products, obviously China needs USA more!

I don't know if they are just saying this as part of propaganda or are they really this stuck in their thinking or are they just stupid, but consumption is a trivial consequence of production.

Chinese based companies export and make their money based on cheap Chinese labor force, but this labor force wouldn't be so cheap at this point, if Chinese government was not destroying Chinese currency - Yuan.

Chinese labor is very skilled and efficient, but it is not efficient because the Chinese swivel their hands faster or some such nonsense. Chinese labor is efficient because Chinese labor has all kinds of capital invested into it - the factories, the tools, the shipment lines, all of the infrastructure makes Chinese workers extremely efficient and the more productive a worker is, the more purchasing power he should be enjoying and they should be easily consuming all of those goods they are creating.

However Chinese government is destroying the Chinese purchasing power because they are printing Yuan to buy back all of those dollars, that exporting companies deposit into Chinese banks. Of-course USD is supposed to be reserve currency, so the more reserve one has, the more of his own currency one can print in principle, however in reality the US dollar is not backed by any production of its own and it's not backed by any gold reserves that can be used to get anything back for that dollar, so Chinese government debasing Yuan is the wrong thing to do, the reserve is not really a reserve.

Of-course currency debasement is inflation, and in China, which buys a lot of raw materials and energy for production the prices for all of those raw materials immediately goes up (which in should in principle increase the production capacity of this materials, but this takes time). So Chinese government decided to combat the problem of inflation, the problem that it itself creates with every new printed Yuan by raising interest rates - price of debt, which means that Chinese government will have to pay more for sovereign debt papers of its own.

But just how STUPID should one be, to do these two things simultaneously: to produce all of these consumer goods and to give them away for currencies that are not backed by any production, and thus are worthless paper, that is printed in huge quantities to sustain failing non-producing economies of the West, and at the same time to raise interest rates for Chinese government sovereign paper and money, which means this:

1. China is providing everybody outside of the country with free products.
2. China is giving an opportunity for any currency counterfeiting foreign central government and banks to place their counterfeit, un-productive currencies into Chinese debt and collect rent from the coupons for free from Chinese tax paying producing population?

This is height of insanity!

THIS IS MADNESS!

I cannot fully comprehend the Chinese government, maybe it is trying to put the entire world on heroin of free Chinese goods, which is causing the rest of the world to lose their manufacturing bases, and then stop supplying these goods to the world and not provide them with anything any longer, but what could possibly the reason for this? To have the entire world so mad at China that the world would start a war against it?

Just how blind are the Americans and British and French etc. to believe that they are necessary to Chinese for anything at this point? (China has trade deficit with Germany, so out of all others, Germans at least are able to supply their own products that Chinese want.)

China is giving away its products for FREE and it is lending money, to vendor finance this consumption and it is allowing anybody to get high interest, so this is preventing the Chinese from buying the products that they produced and they deserve to buy, and this will cause Chinese to owe all this debt to all these foreigners that they will have to pay for with higher taxes!

Obviously China has over 3 Trillion US dollars in reserves. They can just return that paper to all that debt, but what is the point of this insane game? Useless, worthless expenditure of human resources and production and the growing unhappiness among the Chinese population with its own government, not to forget the huge gender imbalance, also caused by the government's policy of 1 child per family. This is the only real product that other countries can export to China that China would really want to import - female population.

American women and more generally, women of the West, get ready. Your future husbands are not speaking the same language as you do, start learning Mandarin.

It's hard to understand all of the things that happen during a war and it's hard to understand a drug war. This is what drug war looks like.

USA does not have a choice, if it is ever going to do the right thing, this right thing must be done now. Ron Paul is the only candidate who promised to end the drug war. All other candidates will continue with it.

Every single day that drug war continues, the stuff above will continue and if it is not easy to look at 2 people having their heads cut of with a chain saw and a knife, then it should be difficult to vote for more of the same.

Whether CIA funds some of its operations with the war on drugs.... I don't know, but that's what people say happens. So I imagine CIA would not be too happy if Ron Paul won the presidency. Of-course his policy that CIA is unconstitutional as it is spying on people inside the USA and it is used to change regimes all over the world, so instead of trading with countries, USA uses special forces and CIA to establish regimes, and it always has the blow back effect. From the Shah being established in Iran to Saddam Hussein, to Libya now, who knows what will happen there?

I don't know what other evidence you need to vote for the correct candidate on all fronts: economic, political and humanitarian, but I don't see anybody, except Ron Paul address these issues and all other candidates look like puppets, actors.

How does it feel having an 'actor' president (and I don't mean Reagan, though he was an actor before he came to the office and he became an actor while in it.) I mean - actor, as in he is put there to act for you, but not to make actual policy changes based on any ideology.

I don't see anything change for the better if yet another actor president is elected.

This topic comes up so often that it became necessary to write out the argument explaining in detail why SS is an unconstitutional ponzi scheme and why it is immoral and why it hurts the economy.
---

The text will be divided into following sections:

1. Constitutionality argument.
2. Ponzi scheme argument.
3. Economic argument.
4. Moral argument.
5. What are the alternatives?
6. Q&A

---------------------------------------------

1. Constitutionality argument.

SS was sold as an insurance program, thus payments were called 'premiums'. Of-course payments were called premiums in public, while in court government was very specific about the payments being made under general taxation power of Congress, as it would be impossible to push the SS taxes through legally if they were just premiums. First reason being that government cannot force a person to buy a specific product (and it was understood to be unconstitutional), secondly the direct property (income) transfer from an employer to an employee was also unconstitutional, and the 10th amendment wouldn't let that pass through, the government is basically not authorized to take money from person A to give it directly to person B.

The actual court case, that was decided in front of SCOTUS was:

Here is a bit more detail from it, that is very relevant:

There were four Justices: Pierce Butler, James Clark McReynolds, George Sutherland, and Willis Van Devanter who dissented on this case as well, declaring that the decision was giving Congress powers it was unauthorized to have.

Thus SS was never found to be Constitutional by SCOTUS, instead the issue was sidestepped, as the government lied to the court (and the court was complicit in buying this argument obviously, that the SS taxes were not earmarked for any particular purpose.)

It is difficult not to admit that saying that taxes are not earmarked is not the same as saying that taxes go into any specific fund, and obviously the SS money was used in the Space Race and in Cold and 'hot' Wars in ways that were just cavalier. There was never any asset that was bought with the money, the most that the government did was put government bonds into this so called fund, but that's just an accounting gimmick, because bonds cost nothing to print, while money can be spent.

------

2. Ponzi scheme argument.

Now to the question of SS being a ponzi scheme. Given that there was never a fund with money in it (as was argued by the government that there wouldn't be), let's look at the following evidence:

the first monthly payments were made to this lady - Ida May Fuller. She paid a total of $24.75 into SS and she got $22,888.92 back over her life time. That is quite an investment. If a private insurance tried to sell a product, which didn't have any assets in it, but promised a return of over 92480%, this 'insurance company' would have been (correctly) investigated for fraud and money embezzling as well as running a ponzi scheme.

Of-course eventually ponzi schemes have to end, because they basically run out of money as they run out of fools, but this is not a problem that applies to government ran ponzi schemes, as government ponzi schemes are mandatory, one cannot actually exist them and government can always change the rules, so that to make the scheme 'work' further by increasing the amount of payments that go into the scheme, while reducing the benefits that one gets out of it.

So for the first 2 decades after introduction, the employee paid 1% and employer paid 1% of taxes, and the tax cap was at $3000. However the self employed individuals, making over 3 times the national average earnings were excused from the program.

So if you were an entrepreneur, or you were rich, etc., you didn't have to pay into it. Of-course if these people were forced to pay into that program immediately, it would have been much more obvious to the people, that it is in fact not an insurance program at all. What do you need to insure for if you can definitely take care of yourself? Today even Warren Buffet pays into this. Even Bill Gates has to pay into this. So all of the pretenses of this being an 'insurance', have been dropped long time ago.

By the time Reagan had to 'fix' it, here is what he had to do:

In 1984 the payroll tax was raised from 10.8 to 11.4% and kept creeping up. They increased the amount of income subject to tax from 32400USD to 37800USD in one year (16.6%). So SS was raised in total by over 20% in one year. Also SS was originally (in 40s and 50s) paid by employees, not by self employed. However self employed didn't have to pay employer payroll portion of the tax. In 1983 they started collecting the "employer" payroll portion of the tax, so the SS tax went up from 6.8% to 14% 106% increase in one year. This + the SS tax increase of 16.6% described above, the effective rate of tax increase on self employed individuals was 140% tax hike in one year, and kept getting worse.

Reagan also imposed income taxes on SS benefits for higher earning individuals, which is means testing and reduction in benefits.

Reagan basically cut SS benefits for higher income people by applying income tax to SS benefits, while increasing taxes on higher income people by 140%.

This allowed the program to continue by pushing the problems further into the future, of-course over time these measures also became insufficient to continue the scheme going, soon the taxes will have to be raised further and the benefits will have to be cut again.

SS and Medicare trustees were interviewed and asked what is the difference between the way SS is funded and the way any ponzi scheme is funded:

-Charles Blahous (One of two public trustees for Social Security & Medicare)
-Andrew Biggs (Former principal deputy commissioner at the Social Security Administration )

Parts of interviews with both, Charles Blahous and Andrew Biggs, and full interview with Charles Blahous.

The answer from either of the above interviewees were basically these: Government mandates that people pay into these programs, thus these programs cannot end unlike private ponzi schemes and government increases the payments over time and decreases benefits, though they argue that the intent of the program is different from intent of any ponzi scheme, but the way SS/Medicare are funded is no different.

Of-course the effect of this entire situation, with government being able to force people into paying and having to increase amounts that are paid over time is that 17 Trillion dollars more was paid out by the programs so far than was taken in. So 17 Trillion dollars was transfered from workers (mostly from still current workers), to the recipients of the benefits. Of-course it's easy to understand how this works on the example given earlier of Ida May Fueler, who paid under 25 dollars, but received almost 23000 dollars back.

Nobody again will receive over 92480% return on their 'investment' into SS and Medicare.

------

3. Economic argument.

Now the other argument that this is an economic disaster beside being a mandatory ponzi scheme is the very fundamental nature of wealth transfer programs and the way they destroy economic activity and are a net drag on the economy.

Person A makes widgets. He sets up a shop, uses his savings, maybe takes loans, hires some people, buys some tools, rents a place and starts a business of making widgets. Market likes his widgets, so it buys them at a premium, that is enough to cover all of the costs, cover the corporate taxes (which are also causing the same economic problem as SS itself), and then some money is left over to be paid to the business owner as dividends or possibly as a salary, whatever.

Person A has spending habits that use 20% of his earnings, but the other 80% he can save and invest, and he does invest it, it doesn't go under the mattress, because obviously government creates inflation, and also it makes more sense to try and use the money to make more money. It's a natural thing, and if the person already has a business, it's likely he'll be able to invest into his own business to expand, or do something else entirely, maybe try and build an affordable space rocket, who knows?

So this is how person A earns his living - he provides useful widgets to the market, the market loves them, pays him, he pays salaries, workers are paying income taxes (also completely wrong economically and from POV of freedom), and he creates all sorts of economic activity.

There comes government and says: you must now give part of your money to us. We will spend it on whatever and we will give part of your money to this person B.

Person B is not wealthy at all, he is quite poor by the standards of the country. However person B is part of a majority in the voting block, so government likes to buy his votes with person A's money.

Now, person B does not produce widgets that market likes. He does not hire other people, who also pay taxes. He does not increase wealth. But he CAN spend the money on consumer goods.

Question:

What really happened to that money?

Answer:

That money became a net negative for the economy.

Question:

Why?

Answer:

That money was going to be used as an investment, which could increase the wealth in the economy, possibly create more widgets (any kind of widgets), that society likes to consume.

Instead that money was used WITHOUT being part of that circle of being used to create widgets, so it wasn't paid as part of a salary to anybody, it was instead taken out of the investment circulation and used to buy a consumer good.

Question:

Doesn't this increase economic activity, there was something bought?

Answer:

No, because whatever was bought, was bought with a unit of currency, that otherwise would have gone through production cycle once again, before being used for consumption or for further production cycle.

Question:

So why is that bad?

Answer:

It is bad, because people do not trade for pieces of paper. People trade for comparative advantage of being able to buy goods that they do not produce, but they exchange goods that they do produce for goods that somebody else produces.

In this case, the goods that were produced were exchanged not for goods that somebody created, but they were exchanged for an amount of money that was extracted from production without doing that production.

Generally this is the problem with all income taxes. Taxing income is against human freedoms, but it's also destructive to the economy. But this is not just taxing, this is also spending by giving it to somebody who is not producing, which is doubly bad.

When government says: a dollar we spend in government has a "multiplier effect" - the answer is yes, of-course, it's a net negative effect for the economy and it's multiplied by that dollar being denied as an investment and being used to spend on consumption without production happening first.

------

4. Moral argument.

From point of view of morality, SS taxes are wrong. Robbing Peter to pay Paul is always wrong, especially when it's done by politicians to gain power and when it's done by majority of voters to oppress a minority (employers vs employees), in a system that is supposed to be protective of minorities and thus specifically not being a direct mobocracy - democracy, but rather being a republic.

It is also wrong morally because it eventually by its very nature ends up being bankrupt, as all ponzi schemes do. Money is transfered from future generations to the past generations, and it was not future generations who voted for this system, it was past generation, and future generations end up holding the bill (in this case 17 Trillion dollars that were transfered and spent already, and a bad economy, which is a result of government, that was able to grow based on this money and to take on more and more powers based on using the recipients of the SS benefits as a single voting block).

------

5. What are the alternatives?

There are better alternatives to SS, which are economically sound, moral and are not ponzi schemes, and cannot be used to grow government power and do not put all of the eggs into one proverbial basket for all people. It's done by private investment and it's possible to do if no income is stolen from the citizens. Chinese don't have SS, they save and invest their own money.

US citizens used to do so as well, and in 19 century, before all this nonsense, USA was growing economically, became the biggest creditor nation, producing cheap, high quality consumer goods.

------

6. Q&A

Question:

Answer:

-absolutely agree.

This has nothing to do with government, the best time for middle class is when the government does the least amount of damage to undermine the economy and when businesses are allowed to compete on merit of market vote and not on any preferential treatment by the power of government intervention.

Question:

Answer:

- this is not a good description of what makes economy work.

Money 'circulating' around is worthless without context. Context must be production. Without production economies do not work. You can have all sorts of money circulation, but if nothing is produced, because the governments prevents production via regulations, laws, subsidies, taxes, then economy will not do anything.

Zimbabwe and USSR also had all sorts of circulation and you can argue that USSR had a middle class of some sort. It may be a 'middle class', but the entire graph was very very low, so an engineer could afford a car if he saved all of his money maybe for 20 years, but then he couldn't afford anything else.

Question:

Answer:

-Agree. However the economy basically depends on some people who do become richer from what they do, because they fill the important niches of market.

Government on the other hand cannot create any wealth, it can confiscate it and dissipate it to buy power, but it does so while destroying investment and economy and while growing. Any amount of money that government receives, is the amount of money that brings that economy just much closer to destruction.

Question:

Answer:

- That's what taxing should be about.

That's the only sound and correct and moral way to have a government at all - by taxing consumption.

A person doesn't want to invest and create some jobs in your country, he wants to buy a BMW? Well that's when you tax him. You put an excise, an import tax on that. USA economy was funded by alcohol prior to 1913. 50% of all taxes came from alcohol sales in saloons. The other 50% was excise taxes.

Question:

Answer:

- when a person decides to give his money to a poor person, that's because he is charitable and also that's because he does not feel that he needs this money for investment. Not all rich people will invest, some do charity. Most rich people do some or other type of charity already.

70% of taxes are paid by higher earners. A person who has a company may already be taxed near 50% before he spends a single dime.

Warren Buffet owns his company, any amount of corporate taxes come out directly out of his pocket, because he is the largest shareholder, so that's his dividends. He pays whatever in corporate taxes (I hear he is not paying full 35% though, and is fighting IRS about it), and then he pays 15% dividend tax. So if he did pay 35% corporate, that's a total tax of 44.5% BEFORE he spends a single dime, which then means he pays more taxes, like other people: property, gas, sales, excise, import.

AFAIC anybody who pays income tax, any amount, one single cent, one single percent is already overtaxed. Any one single cent that goes to government out of people's incomes - is too much and it ends up growing the government and destroys the economy.

AFAIC, in order to have a working economy, government must not receive any income taxes and it must not be allowed to print money, to set interest rates, to regulate business, to subsidize businesses or people.

--

Hopefully this demystifies the entire subject.

(this came about because of the recent story on /., which drew plenty of interest on this subject.)

This article says it's "unusual", but there is nothing unusual about Fed printing more money.

This is the Fed's statement with my comments:

- obviously. Printing money doesn't improve the economy, if it did, there was plenty of time to show that this works by now by many countries, including USA.

- and will continue to remain elevated and it will continue to worsen with every new printed dollar.

- and the Fed should be the last to be surprised by it with all the money printing. People are trying to pay out some of the debts and they pay more for everything, from gas to food due to inflation, so obviously they can't spend on anything more than that, and those things are not in gov't CPI numbers.

- as it should be. It should be going down lower, that's the bubble that needs to deflate, you are not letting it with all the money printing.

- "inflation appears" to have moderated? You are the catalyst for it. As to business in equipment and software - this is the last bubble that was building up in social media stuff, people can't buy Face Book shares so they want anything that is similar, so there are plenty of opportunists there to provide them with these products. Too bad it's all transitory and is also a bubble.

- The Fed failed miserably for 100 years at these. Price stability by the Fed - this is a great oxymoron. Employment is not going to increase until government debt is gone, because the Fed and government won't let the interest rates to go up, where they belong, so it makes no sense to save and invest.

- blah blah blah. Worthless.

- oh please. It won't decline at all. Not unless the government will actually hire everybody who is unemployed and Fed would print the worthless currency to do that too. But by printing worthless currency the act of hiring and paying them in it is an act of enslaving that person, because the currency will buy nothing.

- which you are causing.

- is 11% inflation rate that is the real inflation today 'consistent' with Fed's dual mandate? Nixon engaged into wage and price controls when inflation was 4%. If inflation is counted the same way they counted it during Nixon's time, it's over 11% today. Not that wage and price controls are any good, but they knew that inflation was bad.

Commodity prices are increasing as a RESULT of inflation, they are not causing inflation, Fed is.

- what a sentence!

- so they finally find themselves in a hole.

Nobody wants to buy the 6-30 year bonds anymore obviously, who in their right mind wants to lend money to US government? Chinese are holding t-bills, if not rolled over, those mature in 3-6 months for example and USA has to return the money.

- So because nobody is buying long term bonds, the Fed wants to exchange its t-bills for bonds, to hold the bonds, to try and control the long term interest rate, to push long term interest down.

Are they feeling the pressure of long term interest going up? It must be. As to doing this thing by the "end of June 2012"... well... this just means they are going to issue $400 Billion check to US Treasury right now, so that's just $400 Billion that is going to be created now and given to the government.

When June of 2012 comes around, they may come up with another round of purchasing, this doesn't mean they will then start getting rid of their short term t-bills right now. They will hold on to those for a year.

This is just another $400 Billion stimulus - plain and simple. Eat it and weep. Your currency is just being printed right from under your nose.

- except that interest rates need to go HIGHER and NOT lower for the investments to be made.

Savings are discouraged by low interest rates. I wonder if this has anything to do with the coming elections, this next $400 Billion boost? Nooo, couldn't be? :)

- Ha, right here. They will keep t-bills rolling over and, get this, they are going to buy more mortgage based securities.

We all know that Fed's balance sheet is meaningless, since they are no longer returning gold for the Federal reserve notes (you know, banknotes, greenbacks, so called 'dollars', which they are not.)

The Fed's balance sheet has all of the issued Federal reserve notes as liability and all of its Treasury debt and other purchases as assets. But these are mortgage backed securities! Surely they will not be marking them to market, if they are going to sell them to the Fed! This is crazy, the Fed has changed their policy a few month ago, about how they do accounting, so all losses of the Fed are really Treasury liabilities!

You now are going to own more mortgage debt, but who is selling it to the Fed? Banks of-course! This is another round of bank bail outs!

- wooohoooo - low interest rates, so more and more inflation, more profits for banks.

- we are government, and we are here to help.

- remember the names of these criminals. They are destroying your economy one step at a time by destroying your currency and savings.

- interesting.

So to recoup:

More currency counterfeiting.
More inflation.
More bank bailouts.
More interest rate manipulation.

This is more of the same Keynesian charlatanism - print more money, it will help, when it doesn't help, it means you didn't print enough.

This is not economics, this is a religion.

Ron Paul won the California straw poll at the California Republican Party fall convention in downtown Los Angeles Saturday.

Congressman Ron Paul (374, 44.9%)
Governor Rick Perry (244, 29.3%)
Mitt Romney (74, 8.8%)
Congresswoman Michele Bachmann (64, 7.7%)
Jon Huntsman (17, 2.0%)
Herman Cain (15, 1.8%)
Newt Gingrich (14, 1.7%)
Thad McCotter (7, 0.8%)
Rick Santorum (7, 0.8%)
Gary Johnson (2, 0.2%)
Fred Karger (1, 0.1%)
Write-ins (15, 1.8%)

---

Ron Paul is winning the popular vote, at least the people know who is on their side and everybody knows that in reality there is no politician, R or D, who is not a corporatist/militarist/big government robot.

Whether you are an R or a D in USA today, your best bet is to go with the guy who actually has principles and who does not change his values based on polls and popularity.

Earlier it was reported that $2 Billion was lost in some shady trading transactions by Kweku Adoboli, a UBS trader. This of-course ran all sorts of alarm bells, having worked in banking it's difficult to imagine that it would be possible for a single trader to be able to trade with so much money without anybody noticing. It's much more likely that there is higher management involved in this and the poor sap, who will be set up for this will receive a few years of jail time, just like Jerome Kerviel of Societe Generale, who supposedly singlehandedly lost 4.9 Billion Euro in unauthorized transactions. Well, Jerome is serving a 3 year sentence, and it's unclear what will happen to Kweku, but what is clear is that what is being reported is just not the reality.

A bank does not just allow a trader to lose billions of Euro or Dollars. The most likely scenario is a robbery, likely done with knowledge (or at initiative of) one or more of banks' managers. I believe we are coming to a point, where it will become more dangerous to hold one's money at a bank, we are at a point in time that has never been tested before in history of human civilization, where all of the countries are on fiat currencies that are being devalued all at the same time. Anybody with real bank deposits (gold and otherwise), may want to think what is the most likely scenario that is going to play out when the proverbial fecal matter hits the rotary impeller device. It's likely that people closest to the funds will simply dump them into a truck and skip town, that is my contention.

Another interesting point to mention: in the same comment from 15 September, 2011, it is noted that 4 national banks (US Fed, UK, Swiss and Japanese national banks), have announced that they will devalue their currencies further to buy all sorts of short term sovereign debt (mostly 3-month US bills), and as was mentioned, DOW went up on these inflationary news, while the monetary commodities (gold/silver) took a sharp dive. As was explained, the commodities were most likely depressed on that day based on selling related to margin calls and leveraged trading, so it was predicted that the prices of these monetary metals are now going to go up higher on these bullish news (bullish for real money), and now the results are clear: gold and silver are sharply up. Obviously the traders realize what is in the bag - more inflation.

All of this combined together with more "weaker than expected" news on employment (who are these so called 'economists', that can never expect what is so obvious?), is yet another indication and proof that the fiat money based economies, and especially vendor financed economies are moving closer to the edge of the proverbial cliff.

Watch out and watch those banks, if you have real deposits, don't leave them there thinking that they are going to be safe.

Ron Paul was asked on CNN after the Tampa debate to talk about the response that he had on the question, "Do you let a healthy 30 year old die, if he is in an accident"? He was asked to provide the answer for himself and also for the audience.

He was also asked about the question a young man asked of the candidates, "how much money do I deserve to keep of what I earn?"

My take on these questions:

1. On the health care: You do not base the policy on corner cases.

In a free market economy, the unemployment is very low, anybody with a job can afford * health care and insurance, because those services are very cheap, just like they were prior to 1965 **.

For somebody in their 30s, not to have money to pay forï their care AND not to have insurance is a corner case.

You don't base policy on corner cases. In a free market economy there is enough money left to the people that they do charity on their own, this includes hospitals.

2. In a free society, a person deserves to keep 100% of his earnings. However he does not deserve anything if he is not willing to protect his earnings. The only way that a person deserves to keep 100% of his earnings is by him participating in the voting process and voting only for his liberties and always against any government intervention against his liberties.

--
* On topic whether free market system allows a person to earn a decent wage.

In 1914 Henry Ford increased the productivity of his workers by spending enough capital to set up an assembly line that allowed him to produce more cars than anybody with least amount of labor

a businessman without any unions, did the following for his employees due to market regulation that came in form of high turnover:

1. Paid them 5USD/hour with 5x 8 hour days. This means he paid them 25USD/week. The price of gold was just over 19USD/ounce, that means he was paying 1.25 ounces of gold. At current gold prices of 1853/ounce, that's 2316 USD/week. That's 120,445USD/year.

2. Without income taxes to pay, Ford's workers were taking home over 120K in current money, and that's without income taxes. So in today's equivalent and given the fact that health insurance was about $5/year per person and doctor's visits were paid out of pocket and so was education and pension savings, because all of those things didn't have gov't involvement and so they were very affordable, today's equivalent would have to be at least 2.5 times that much, over 300,000USD.

--
** Now on topic of health care and insurance before it was usurped by government intervention.

EH.NET: Health Insurance in the United States

this is a good primer on this, the article comes to erroneous conclusions about the reasons for low medical and insurance costs (they see the reasons being that state of medical technology was rudimentary, which is nonsense, as it was state of the art for the time and prices were falling, just like prices on all and any electronics constantly drop in current market), but regardless, they can't do anything about the facts, they are as always stubborn.

... then they had more erroneous conclustions that it was insurance companies unwilling to provide health insurance. This is an erroneous conclusion because they contradict it immediately with this:

- well OBVIOUSLY if there is no demand, nobody would be providing the product. It makes perfect sense, but the authors miss it due to their preconceived notions and ideology. But they have good data.

So they understand that costs increase due to more demand, as health care is a normal good, it's not magical in any way. As the incomes of people grew, so did demand for health care. Of-course they fail to understand that incomes grew due to government inflation, more than anything else.

- $6/year insurance for 21 days in hospital. Done privately.

THEN the DISASTER struck:

- this was the beginning of real gov't intervention. You know, to 'reduce price competition'.

You see, price competition had a role, as it always does, in hospital care. This was designed to destroy competition. Immediately the destruction of private market has began:

this caused more havoc and collusion in the market in form of physicians fixing their prices:

more collusion:

initially plans were cheap:

there was plenty of competition in insurance market then, as the demand materialized:

and commercial private insurance won against the public 'non-profit' insurance in terms of total subscribers, and this was BASED ON PRICE!

THEN government started Medicare/Medicaide programs for various reasons, most of which was a popularity contest. Politicians wanted to be popular, so they wanted to throw a bone to electorate. Once these were in place, the insurance companies started lobbying the goovernment, as they saw these programs cutting into their profits because they were subsidized (same thing as with private rail and public roads,) and the insurance companies succeeded with Nixon and that was that. Now insurance is prohibitively expensive and it's employer based, so there are even less reasons for employers to hire Americans.

- the reasons are simple. Government colluded with insurance companies and health providers on one hand and it provided gov't subsidies through Medicare/Medicaide on another. The market was completely skewed, it had nothing to do with sound economics anymore.

Obama's Jobs Destruction Act

In his speech Obama didn't say "stimulus" once. He wants to stay away from that word, last stimulus was a failure and unpopular.

Of-course deficits that finance the stimulus destroy more jobs than the tax cuts create.

None of it is paid for, cuts from future increases is not paying for anything, but there is net increase in deficit (and it's underestimated) 450 Billion USD year 2011.

Debt ceiling now will have to be raised again obviously next year, because this is 450Billion that are not accounted for in the last debt ceiling increase.

Tax credit for hiring people who are unemployed for more than 6 months. So now employers will have incentive NOT to hire anybody who hasn't been unemployed for 6 months :)

More unemployment!

7.25 - is minimum wage. 4000USD is given as tax credit, and you have to keep the person for 6 months minimum.
So hiring somebody at 7.25USD/hour and given 4000USD credit reduces minimum wage to 3.40USD/hour.

Minimum wage will be reduced, and so there WILL be more employment, but some people will be FIRED to give more space for new minimum wage hires because of the tax credit.

Bill will make it illegal to discriminate against long term unemployed. So what will happen is that people who are long term unemployed will NOT be interviewed. Who wants to have a lawsuit on their hands?

If anybody is unemployed for 4-5 months, now there is a reason not to hire them right away, to interview them and to keep them on UI for another 1-2 months and then to get the tax credit once they are at 6 months unemployment time.

Of-course fire anybody after 6 months, get new hires. It's all going to be minimum wage jobs, nobody who is hiring people at good salaries will care about 4000USD tax credit.

The 1 year cut in SS payroll tax will make SS that much more broke (it's broke now, but it can be made worse.)

To pretend that there is SS "trust fund", gov't will borrow money, put it into "trust fund", borrow from "trust fund" and spend it on stimulus. Many lies all around.

If you hire a returning veteran, the tax credit is 5600USD. Applied to minimum wage, it makes minimum wage 1.87USD/hour. This creates huge government incentive to have very high turnover.

Payroll taxes will be lost on existing jobs, ha ha. They'll have to print more money.

For returning veterans with injuries (wounded warrior), you get 9600USD tax credit. For a minimum wage job this makes the pay a NEGATIVE ONE :) -1.98USD/hour.

Hire as many wounded warriors as possible immediately and just pay them, but the employer gets 1.98/hour for every new hire. Hire all of them and have the Fed monetize the debt that will be created paying these tax credits.

How do you like them apples?

The fundamental failure in this case is the failure of approaching the market from investor perspective, and this fundamental failure is incentivized by free money, just like the insane CEO pays and non-existing dividend yields.

The very reason WHY it is at all possible to trade stocks at these insane speeds is this: people do not see their purchases as investment, they are not looking for or getting dividend yields.

People who are purchasing stocks are not looking for an investment opportunity in the underlying business, they are looking for a way to flip the stock quickly and to make the money.

Automation of this process is INEVITABLE as all things that are repeatable and can be automated with some investment capital in order to make the process more efficient will be done. Investments will be made. Automation will remove the slow element in the equation - the human trader.

The fact that the stock market is now not providing investment opportunities, but is instead used to gamble in the hopes that the stock will move in the right direction (up or down), is based on the available amount of free (interest free) money that is provided into the financial system by the Federal reserve bank.

At this point that Bernanke promised to keep interest rates at 0%, expect more and more automation to happen in HFT, it is an inevitable result of this moral hazard.

The fact that the money is being debased quickly, and the so called "economists" - the modern era witch doctors of the kings are promoting this debasement and the fact that the majority of people are buying into this idea, that money needs to be destroyed and stocks are there for gambling and not for investment (not for business participation and not for dividends to be paid), this fact will also provide more space for this further perverse action.

The free money create incentives to gamble, destroy incentives to save, and people (here, on /.) are celebrating this very fact, while amusingly at the same time being perplexed and angered by the wider and wider spread of HFT.

In order to fix this problem, what should be done is the Federal reserve bank must be prevented from further debasement of currency. The market must be allowed to set the standards on what money is. The interest rates must be set by market pressures, not by government decree. Government must stop issuing debt that it cannot repay and it must liquidate the debt that exists.

Only this will allow the currency to become valuable enough to be saved, it will create competition pressure between sovereign debt and the corporate bonds, this will force the companies to pay an actual INTEREST on the bonds - DIVIDENDS, which will in turn lower the pay that the CEOs and other management gets out of profits and simultaneously this will allow the markets to become investment vehicles again, instead of being giant casinos.

---

Obviously, this again, will not be a popular or an understood opinion here, but it must be said.

On this very site, there are so many troll moderators, I lost count of them.

Here are just a couple of latest examples of this phenomena taking place.

As you can see, there is a problem with this type of moderation, where a legitimate opinion is moderated as a troll but at the same time a comment like that gets various other moderations, like "insightful" or "interesting" or just "underrated".

What is the problem with this picture, what do we really have here? What we have here is a disagreement, which is then expressed by some of the moderators (who do appear to have more moderation points) by moderating comments they just don't like as 'troll', while others find these comments to be at least interesting to respond to and to attempt to moderate up to generate more discussion.

Of-course this is just part of the previous problem that rears its ugly head in this neck of woods.

If I were an operator on this site and I were legitimately interested in fixing this problem (if, of-course I saw it as a problem), I would have fixed it quickly and meaningfully.

1. Allow anybody to moderate any and all articles with a maximum of 2 moderation points. You have to be a signed in user, not just an AC.

2. If a comment receives multiple up and down votes, lock that comment at some average (like 3) and don't let anybody moderate it further. Obviously it's a controversial enough comment to be at least interesting.

3. Get rid of the super moderators - this is pure evil nonsense, they are clearly abusing their power and it's obvious immediately in cases a comment is moderated up and it's possible to read the moderation type (insightful or interesting or underrated) and all of a sudden it is moderated down, but there is no history of how it was moderated down.

4. Allow moderator point exchange. Why not treat moderation points as commodity, have a moderation point exchange, were some users exchange points with others and they could even establish a mini-economy based on this idea.

It's an idea, whether it's worth bothering or not, at least it's looking at the existing problem.

Money - store of value, unit of account and medium of exchange. It's always under attack by hacks that are called 'economists' by those who don't know better. Of-course here is the story and here is again my comment, again at 'troll' moderation for the reason that certain people disagree.

Of-course as always it is interesting to see that the people who are disagreeing are the ones that say they are for "the poor" on one hand, while being pro-Keynesian destruction of money and thus causing inflation and prices rising on the other.

---

Why do people care about what Krugman has to say? This is the guy who believes that destruction of wealth is the necessary stimulus that USA needs and that it would be great to have destruction even if by wars or natural disasters?

He believes there is a real difference in economics between 'micro' and 'macro', which is same nonsense as when the same differences are applied to evolution, so if you ask him - would he like his own house to be destroyed by a tsunami/tornado/flood, I am sure he'd answer - no. It's not good when done to a particular person. Only entire nations need to suffer altogether in wars and alien invasions.

This is guy is a Keynesian charlattan, he has nothing to do with economics, but his type of 'economics' is pervasive, because the politicians love these guys. The politicians invite these sort of 'economists' to be in the white house to help with policy, and this is the kind of help you get, while the universities then decide to have only these kinds of 'economists' propagate this nonsense further, so you end up with only Keynesian ideology in higher education. Thus all the underlying problems in the economy - because politicians use this charlatanism to give excuse for their only real agenda - stealing your money.

OK, from TFA:

- that's the problem. The entire fiscal policy of USA destroys the value of savings by inflation and this is what destroys the economy.

- RELATIVE TO WHAT, YOU DUMBO? Relative to other flawed currencies? :) Well, not to Swiss Franc. Not to Canadian dollar. Not to NZ dollar. Not to Australian Dollar.

Besides, 2008-2009 is a TERRIBLE time to compare, as too many people completely misunderstood what was happening in the real economy and plunged head first into the dollars, which was the absolute wrong thing to do (and it is wrong thing to do now too, but now people understand it. Look at kitco.com) Too many people actually think that Keynesian charlatanism is economics, so they fall in this trap of following completely wrong ideas.

Anyway, yes, it's deflation of assets in real terms, so in terms of gold/silver assets are falling in price. It's cheapest gasoline ever today - under 10cents for a gallon, but those are silver cents.

But the inflation is in dollars, which is why real money is going up.

- GOOD. Good for those who hold Bitcoins. Bad for those who hold dollars.

- This Keynesian wants you to be poor, do you understand that?

He wants you to pay 3.50USD for your gas, and BTW, he doesn't think it's high enough. They have a target to make it much higher. But he doesn't want you to pay 10 cents for that gallon.

- Except there was NEVER a case of depression that had anything to do with the gold standard. Yes, bank runs happened, resource mis-allocations happened in some cases, but it took a fiat system to create case for real depression.

Depression is destruction of economy, it happens due to the business cycle that the federal reserve creates. Krugman is not an economist, and the Nobel Prize committee should be ashamed of itself for giving out prizes in Economics constantly to guys like him (and Obama, for peace?)

There was just a story on /. based on an article from Harvard Business Review by Umair Haque, titled "Was Marx Right?". This is a point by point review of that article.

Obviously the author is not paying attention to what happened 40-45 years ago, namely defaulting on the promise to pay real money for federal reserve notes, destruction of currency, inflation, growth of government based on destruction of currency, capital flight and creation of more monopolies, due to increase of gov't size and thus regulations, which leads to creation of super-incomes for those on the very top of the ladder, but destroys competition and subsequently destroys the economy. Of-course wages are stagnant in this depression, which is combined with inflation.

This has nothing to do with anything Marx was talking about.

- ?? :) OVERPRODUCTION? ::))))) IN USA?? :)))

OK, this is just ridiculous on its face. USA has 53 Billion/Month trade deficit. USA has overconsumption based on inflation and debt but it has no over-production at all. Once China stops subsidizing the US consumer, US consumer will stop consuming, as there will be nothing to consume.

for they wouldn't have the means to purchase or invest in enough goods to keep the economy humming.

- In 19 century USA, the production was growing immensely, while consumption was also growing even though there was actual deflation (contraction of money supply due to gold being money).

- there is NOTHING controversial about this. This is true on its face value and if taken separately out of any context. As economy stagnates, profits must fall.

Of-course profits ARE falling, as all of the inflation is wiping out any real profits, and whatever profits are made by super-banks etc., that's all government propped up via further currency destruction.

- it's called specialization, which eventually is replaced with automation. Free market capitalism solves this type of problem by automation, where people used to spend all the time doing the same manual or mental task over and over again, free market capitalism solves this by increased efficiency through investments into new types of tools, eventually automating all of the repetitive tasks away. As to feeling satisfaction with ones own work - this is best rewarded in capitalism and it's definitely shunned upon with unionized approach to work.

Unions do not like to reward performance, they reward seniority.

The other part of the problem is government making it increasingly difficult for anybody to start their own business that competes with established monopolies, that government creates, maintains, protects, bails out and stimulates and taxes for. Try and start your own business and see how that works out for you in this over-regulated, overtaxed market, which also will not let you have business credit due to the fact that gov't destroys value of money and savings and makes it impossible to get meaningful credit and all the money goes into government bonds - this is by design.

- nobody exploits people in real free market.

People are only exploited in government regulated markets, which prevent any kind of real competition, and currency is destroyed, individuality is destroyed and group think is encouraged.

- iPads.

I don't know what the point of this 'prediction' is. As markets give people more of what they want, people are happier that they can have these things? In free market prices fall, they don't go up and at the same time quality increases and rate of innovation and invention goes up. As prices fall, more and more people can afford anything, and this allows everybody to have basically all the same things as anybody else.

Free market is the great equalizer and distributor, because anybody can have the same stuff, because things are plentiful and cheap.

----

The answer to the author of this nonsense article is - NO. Marx was not right, he was not an economist, and neither is the author of this..... whatever it is.

Of-course once this comment was left in the story, it immediately was deemed to be a 'troll', which it is not, but /. moderators do not get tired of marking thing that they personally disagree with as 'troll'.

Hmmm. Now the moderation brought my karma all the way down to 'Terrible'. I didn't know there was a level called 'Terrible' before. I wonder what's below 'Terrible', is it 'Fuck You' or something?

It's obvious that there is a moderator around with unlimited points that has a problem with my comments, whatever my comments are at this point. An AC suggested that I don't bother commenting here, so that must be the guy (could it be a girl? I wonder).

So what's the big offense here? Obviously it's having an opinion that doesn't jive well with that moderator. I don't know if it's fear that others might agree with the opinion or is it just legitimate hatred of some sort the roots of which I can't even identify?

What can I say, I'll keep commenting but I can't comment under my name, the account doesn't allow me to leave more than 2 comments per 24 hours now, and if they keep moderating down, it's likely that the account will be shut down completely, so it's going to be impossible to comment under the account, so I'll be an AC. Still leaving comments, but now without history, which is quite lengthy for me here, over 10 years now.

Does this make any sense? I don't know.

Hmmm. Now the moderation brought my karma all the way down to 'Terrible'. I didn't know there was a level called 'Terrible' before. I wonder what's below 'Terrible', is it 'Fuck You' or something?

It's obvious that there is a moderator around with unlimited points that has a problem with my comments, whatever my comments are at this point. An AC suggested that I don't bother commenting here, so that must be the guy (could it be a girl? I wonder).

So what's the big offense here? Obviously it's having an opinion that doesn't jive well with that moderator. I don't know if it's fear that others might agree with the opinion or is it just legitimate hatred of some sort the roots of which I can't even identify?

What can I say, I'll keep commenting but I can't comment under my name, the account doesn't allow me to leave more than 2 comments per 24 hours now, and if they keep moderating down, it's likely that the account will be shut down completely, so it's going to be impossible to comment under the account, so I'll be an AC. Still leaving comments, but now without history, which is quite lengthy for me here, over 10 years now.

Does this make any sense? I don't know.

inflation vs deflation
reasonable income taxes
taxes kill infrastructure