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Journal Journal: The End of Republic - Obama Signs NDAA 19

On the December 31, 2011, President of the USA, Barack Hussein Obama II has signed the National Defense Authorization Act.

In itself this wouldn't be anything out of ordinary, indeed NDAAs have been signed for years, however this one, for the fiscal year of 2012 is different in an important way, because it ends the Democratic Republic of USA and installs a dictatorial power of the 'elected' POTUS.

The MSM propaganda machine has been deployed to ensure that the population of USA (and probably of the world) does not understand that it was the President himself, who required that the current NDAA, which has provisions for 'indefinite detention' of 'suspected terrorists' by the military would also apply these powers against US citizens, which means that at this point the POTUS (any POTUS, Obama or anybody who comes after him), can capture and detain anybody in the world, including US citizens and hold them in military containment without a trial, without even possibility to contact any lawyers for any length of time.

This is clearly a complete violation of human rights, US citizen rights, the Constitution and the power of POTUS, who forced Congress to remove provisions from NDAA that would exclude the US citizens from these super dictatorial powers that the POTUS has assigned to himself.

You can read an MSM story for an example of how the MSM is used to confuse the issue, to make it seem that Obama was trying to do the right, the Constitutional thing, while in reality it is Obama who insisted that NDAA could not be signed without all of the provisions necessary to become a dictator.

At this point it is clear that the powers that govern USA are making their last preparations before the USD collapses and ensures the survival of the elite with this dictatorial nonsense and basically establishment of the martial law.

Say hello now to the Fourth Reich, say goodbye to any pretense of being a democratic republic.

User Journal

Journal Journal: Ron Paul in West Virginia Caucuses 7

Iowa caucuses are coming up in a few days, everybody is looking at that, I think Ron Paul has more chances than anybody else there, however few people are thinking beyond Iowa, but there is an interesting case of West Virginia now, where only Romney and Paul are registered for Republican primaries.

Here is something you might not have known: in West Virginia anybody can participate in the caucuses, regardless of party denomination! That's right, but since only Paul and Romney are registered, who do you think is more likely to win that State if one doesn't have to be a Republican to vote?

I believe if Ron Paul takes Iowa and comes within the first 3 in NH, he'll take Virginia.

South Carolina is also his for losing, and given this, I think the rest of the States can be swayed.

I don't think Texans are dumb enough to vote for Perry over Paul also, by the way.

Connecticut is Paul's and this should give him a real boost in New York.

User Journal

Journal Journal: blast from the past

India Moves To Censor Social Media

Russian Websites Critical of Elections Targeted In DDoS Attack

Interpreting the Constitution In the Digital Era

Why America Doesn't Need More Tech Giants Like Apple (chinese salaries)

China Probes US Renewable Energy Policy (Steve Jobs argument to stop

Hard Drive Prices Up 150% In Less Than Two Months

Climate May Be Less Sensitive To CO2 Than Previously Thought (go

OSHA App Costs Gov't $200k (USPS is subsidized and failing. Forever

A Drone Helicopter That Can Land On a Moving Truck (more money on war
based economy)

OpenSUSE 12.1 Released (insane chick arguing with me)

Rambus Loses $4B Antitrust Case (imagine world without patents)

The Almighty Buck

Journal Journal: How much is enough for a Keynesian? 2

Back in 2009 Paul Krugman said this about the 787 Billion dollar bail out

The $787 billion stimulus is not nearly enough to fill the "well over $2 trillion hole" in the economy, Krugman said. "A fair bit of the bill is not really stimulus," he adding, noting that just about $650 billion would actually spur consumer spending and other types of stimulus.

Now, if that in Paul Krugman's eyes wasn't 'big enough' to fix the problem, then I assume he wanted a much bigger bail out, correct?

Now we find out that the real bail out was given out by the federal reserve and it was at least 7.7 TRILLION dollars, that's 11 times the official bail out voted by the US Congress. Even that's not true. The bail out was over 13 TRILLION.

The obvious failures of Keynesian ideas are immediately obvious - it's never big enough, they say. Well, what if it was bigger than your GDP? Is that big enough?

It's always easy to say for a Keynesian - the bail out is not big enough so that's why the economy didn't recover. Then the truth about the actual size of the bail out comes out. What now? What now?

Will Krugman say now that the real bail out should have been not 7 or 13 Trillion but instead it should have been 700 Trillion to have worked?

Should it have been 700 Quadrillion?

What now? When will it become obvious even to the most dense Keynesian followers that their ideology is fatally flawed?

User Journal

Journal Journal: On Minimum Wage and Inflation 5

It should be obvious to anybody by now that price and wage controls set by governments don't work. These ideas end up creating unemployment and black markets. But what about minimum wage, which is also a type of a wage control?

Well, minimum wage makes it illegal to hire somebody below a certain price (7.25 in US, but may differ to the higher side from State to State). What does it mean from point of view of employees?

1. This doesn't affect those who work above the minimum wage.
2. Those who work below minimum wage are suddenly priced out of their jobs.

What does this mean? If somebody only has the skills necessary to provide a company with about 3-4 dollars worth of benefit (profit) are now a net loss for a company if the minimum wage is above that amount of money. So hiring somebody at 7.25, who after all expenses only generates the company say 4 dollars makes absolutely no sense. Who is affected by this? Students, people who didn't even go to school, anybody who is just starting out.

When governments sets a floor price for a product, it makes it illegal for those, who cannot afford the item (or labor) below that price to buy that product. Some believe it makes sense to have government set the minimum wage, what would these people say about government setting minimum price on milk for example?

If milk had a government dictated minimum price of $5/liter, this would price a lot of people out of buying milk, this also would put many milk producers out of business, because now they have a much smaller customer base, much fewer dollars in that market.

So if you believe that it makes sense for government to set minimum prices, think about government setting minimum price of milk, or whatever your preferred product and think what this means from point of view of competition as well. So now it's illegal to sell milk at a lower price, this prevents any new competition from entering the market, trying to produce milk cheaper, because they can't even sell it legally.

Setting minimum price on labor creates similar problems, and with real unemployment being where it is (above 20% in US, see shadow statistics), it's preposterous that government talks about fixing unemployment without actually dealing with all of the regulations that it has on the books that actually creates unemployment.

From minimum wage laws, to 'equal opportunity employment' laws, any so called 'civil rights', which are just entitlements and obligations, which make it more expensive to hire people who have special government protections. Anything that government does regulating business, causes labor costs to go only in one direction, and that's the opposite direction to where they must be going.


Now realize that the government is schizophrenic, because on one hand it sets minimum wage and on the other it creates inflation, which in reality only 'helps' to grow economy (from Keynesian perspective) actually by reducing the purchasing power, it really only 'works' by lowering the actual earnings of a worker!

Yes, inflation (counterfeiting or money printing) is all about stealing the purchasing power, and when the Fed says it has a mandate to ensure price stability and maximum employment, it should admit that its mandate is a direct contradiction of the only tool in Fed's disposal - the printing press (figuratively speaking, they don't even have to print physical cash to increase the money supply.)

User Journal

Journal Journal: Occupy Wall Street Demands 6

This is a list of demands found on 'occupy wall street' website. This was posted by some Lloyd J Hart 508-687-9153 - again, right on that website.

Let's look at the demands, see what is it that the people want, must be good stuff.

Proposed List Of Demands For Occupy Wall St Movement!

- OK, so this is a 'proposed' list. I wonder who'll be approving the proposals?

Posted 9 days ago by Lloyd J Hart (Vineyard Haven, MA)

- some guy. Don't know who that is.

Demand one: Restoration of the living wage. This demand can only be met by ending "Freetrade" by re-imposing trade tariffs on all imported goods entering the American market to level the playing field for domestic family farming and domestic manufacturing as most nations that are dumping cheap products onto the American market have radical wage and environmental regulation advantages. Another policy that must be instituted is raise the minimum wage to twenty dollars an hr.

- so this is a demand to hike prices for goods.

First part of the demand is to establish trade tariffs.

Obviously Lloyd thinks that Americans need to pay more for goods. He also believes that the only thing that is standing between American based manufacturing/agriculture jobs and sales is a bunch of cheap goods produced elsewhere. Well, it's a reasonable assumption that if all goods were made more expensive to import into USA, then there would be no difference between buying an American made good and a Chinese product.

The only two questions are:

1. Does USA actually have the capacity to produce anything any longer that has been outsourced to other countries (USA has 53Billion USD/month trade deficit and half of the government spending is borrowed from foreign lenders). Where is the capital, where are the factories? Are there tools left? Factories? Experience? Shipment lanes? Supplier chains?

2. How will buying more expensive goods make the economy better? Isn't the point of industrialization to bring all goods to all people by using capitalism and increased efficiencies in production, so that anybody can afford anything that only the richest people used to be able to afford? Who benefits the most from industrialization and capitalism? Is it the rich person, who can hire a dish washer to wash his dishes, or is it a commoner, who can get all the cheap mass produced products, like dish washers and enjoy the same quality of life as a rich person used to have?

So the very first demand is: increase our costs and somehow this is supposed to return production capacity that USA lost. But by increasing the costs of products that Americans are consuming by installing all sorts of tariffs, how are the Americans supposed to then save capital to restart the lost production? There are no factories. There are no tools. There are no supply chains.

Second part of the demand is to set minimum wage at $20/hour.

Clearly Lloyd thinks that the current unemployment levels at $7.25/hour are not high enough, he is interested in pushing the minimum wage to $20/hour and pricing out those people, who produce less than $20/hour of goods (not including the production costs). Lloyd should rethink this position and aim higher. He really should start at $2000/hour, because given inflation levels that his demand would generate and given the amount, by which the prices of goods will be raised (because all of that lost production capacity will have to be covered somehow). The cost of living in USA will obviously be much higher given the first part of the demand - introducing tariffs. One does not introduce tariffs to keep prices down, one introduces tariffs so that prices can go up (in case of USA it's not just going to be prices that will go up, the products will no longer be accessible, because USA doesn't produce anything to cover its consumption.) 90% of US sea food is bought from Asia. Introducing tariffs will increase the prices, does Lloyd really believe that the amount of $20/hour will be enough for him to have that comfortable life he is probably hoping to have?

$20/hour is not just a piece of paper. Somebody must produce $20/hour worth of goods in order for somebody else to consume that amount. We are going to go over the next demands, where probably there will be a demand for 'guaranteed employment', so it's likely Lloyd wants everybody to make $800/week or $3200/month. So if everybody is making $3200/month but the prices for all of the foreign products are raised due to tariffs and there is no domestic production, what will the inflation have to be (money printing for consumer loans) in order for people to afford any goods, because $3200/month becomes the base line income for everybody. In real life this means that $3200/month become equal to 0.

I don't see Lloyd thinking this through very much. Anyway, let's look at the second demand.

Demand two: Institute a universal single payer healthcare system. To do this all private insurers must be banned from the healthcare market as their only effect on the health of patients is to take money away from doctors, nurses and hospitals preventing them from doing their jobs and hand that money to wall st. investors.

- what we have here is a monopoly on health care that Lloyd wants to institute. Of-course the minimum payment for everybody will be $20/hour, I am not sure what Lloyd thinks about taxes on this money, who is supposed to pay for this single payer health care system, it's not defined in this demand.

But clearly the private insurance will be outlawed, which means the costs of insurance will be whatever government insists it will be, and government will have to provide this to everybody. In order to provide health insurance and care to everybody via government, the taxes will have to be raised, because currently large number of Americans (likely up to 50 Million) do not have health insurance - many are on government health insurance already, those are the seniors and the unemployed. Of-course with $20/hour minimum wage, there will be many more unemployed people (unless work is somehow guaranteed by the government, like it was in the former USSR, where employment was full, but production was minimal.) If at $7.25/hour there are at least 9.1% or 14,000,000 unemployed, in reality the number is over 20%, which is about 28,000,000 unemployed. At $20/hour, the number of unemployed is likely to triple. That means anywhere between 42,000,000 and 84,000,000 unemployed. Since 14,000,000 is just over 9%, then 100% is under 150,000,000 total people that are supposed to be working, which is about half of the population of USA. Having a quarter to over half of these people unemployed raises the question: what are the taxes supposed to be to give everybody full medical coverage?

Maybe what Lloyd really means is that government should be paying for the health care by any means necessary, so taxing/borrowing/printing the money. Well, that's how USSR did it. Of-course what that means is that the money is artificial, as nobody will give USA anymore loans at that point with such high unemployment, the credit interest is likely to be in double digits. So USA will tax and then print the difference, which means very high level of inflation again, so Lloyd's $20/hour is really not enough at all, as prices will be forced up by that type of inflation. Of-course printing money is the last resort of the failed government. Money is not paper, money is reflection of production. Somebody has to produce $20 worth of products in order for that $20 to buy those products. If there is no production corresponding to that $20, then the 20 will be used to bid up prices of products that are produced. Of-course government is unlikely to admit this type of inflation, it's not admitting it now.

What is more likely is that there will be price and exchange controls implemented, once government takes all of the above measures, and price and exchange controls always lead to one thing: shortages and black markets, as money becomes worthless, nobody wants to sell anything for it and products disappear and are only sold for type of money that will be considered more stable. What that will be is not difficult to imagine: any type of foreign currency that is still backed by production and precious items, metals. Of-course, back in the USSR any use of foreign currencies and precious metals for trade was completely illegal and punishable very harshly, it could be punishable by death. Will US population agree to such measures to stop its economy from going underground completely?

The problem with this demand also is that somebody will have to provide these medical services. Of-course printing currency and paying with it is exactly the same as stealing labor. Who exactly will have to suffer from this? Clearly the doctors and nurses. So in order to make sure that they don't just quit in huge numbers, there will have to be incentives implemented - from punishment to special treatment, like providing them with food stamps and stamps for whatever consumer items that they will be able to get for the money that is paid to them.

So the economy will be rotating around printing large amounts of money, paying it to the doctors/nurses and making sure that they can buy stuff with that cash not from the black market. It's not going to be easy for the average American to agree that the doctors and nurses should be getting these privileges. After all, everybody else has their $20/hour and they want to buy stuff too. The politicians will obviously have special access to food and other types of stamps, this will divide the people into those who have just the cash, and those who have cash and stamps to buy things with. I am afraid Lloyd will be on the barricades again, requiring food and other types of stamps for himself and everybody. The question is: who is going to be making stuff?

Demand three: Guaranteed living wage income regardless of employment.

- since $20/hour becomes 'minimum wage' in Lloyd's world, then living wage is that very $20/hour, if I am not mistaken? So then regardless of whether one works or does not work, he/she should be getting these $20/hour. OK, so the real question is this: why work?

Why work if the living wage is given to you anyway?

OK, so why should anybody work?

But then the final question: if NOBODY WORKS where are these products going to come from? Why should the doctors and the nurses work? What is the incentive for anybody to work?

If the inflation is so high, that $20/hour becomes much LESS than the living wage, because any available items are in thousands of dollars per item, is Lloyd going to come back to the barricades and require that the minimum living wage is increased to whatever it is at that point (like I said: $2000/hour)? If he is successful then and everybody starts receiving $2000/hour regardless of whether they work or not, how does that change the situation at all?

Why work at $2000/hour? Why should anybody work if they are giving the minimum living wage at that level anyway? $2000/hour? What will happen to the inflation at that level, will the products be repriced to cost in millions?

So if products are repriced and now cost millions, will Lloyd come to the barricades requiring that everybody gets $2,000,000/hour?

Do you get my point?

Do you know that during the twenties in USSR this what was happening with money and prices and markets? Has Lloyd ever study history of other countries? USSR? Soviet China?

Demand four: Free college education.

- Same as with doctors and nurses, now the professors going to be forced to work while everybody else is just getting their minimum living wage. Why should the professors work? I guess they also will have to receive their special privileges of food and other products as stamps with their cash. Also if one gets minimum living wage regardless of what it is, why bother going to college at all?

In USSR the employment was 100%. Everybody was REQUIRED to work in fact. In the time of Kruschev it was a CRIME to be seen outside of work place during work hours. This became a curiosity, since anybody who was getting a haircut or was in a movie theater could be arrested (and some did), because they were not at their required work place.

The governmnet had to force people to be at whatever work places in order for them to receive their assigned salaries. But this goes against the demand that Lloyd is issuing for a required minimum wage regardless of whether one is working or not, so Lloyds demands go much beyond of even what USSR was doing. In USSR people were required to work. Of-course most of them did worthless unproductive work, that's why there was so little produced, from food, to shoes, to TVs, there were huge shortages, and even with the money that people were getting it was very difficult to buy anything. Inflation - everybody was guaranteed their salaries, so salaries meant very little when somebody wanted to buy a car.

Indeed, how would one buy a car, when his salary is maybe 120 rubbles/MONTH and a car starts at 6,000 rubbles? Even when a person was able to produce that amount of rubbles somehow (never mind how), even then actually BUYING a car was hard. One had to have these special sort of 'stamps' to buy a car.

But Lloyd doesn't even want anybody to be forced to work, otherwise he wouldn't have demanded a minimum living wage whether they are working or not. So I wonder what a car would have to cost relative to people's salaries, and what type of special privileges would be required to own one.

Demand five: Begin a fast track process to bring the fossil fuel economy to an end while at the same bringing the alternative energy economy up to energy demand.

- Solindra. Of-course in a society that put tariffs on everything that is imported, even if it is produced in other countries with subsidies already (so it's really unproductive NOT to buy the things that were already subsidized by foreign governments, which means tax payers, which means these things are sold at a loss). But never mind that. How would it be possible to get away from fossil fuel economy? I suppose the reason behind it is GREEN, but this means that not only Americans would be required to switch from fossil fuels, but to be consistent, Americans would have to stop drilling and exporting their fossil fuels to other countries.

At that point I wonder what Americans could even trade with at all with other countries? At $2,000,000/hour living wage (or whatever it is), not producing anything because nobody will work - why work if you are paid 'minimum living wage? What will Americans be producing at all and what will anybody want to trade with them for? Again - nobody wants to trade for empty promises, people trade because of competitive advantage, to exchange products they are good at for products somebody else is good at. So what will Americans be so good at, that they will produce with their non-working work force, special privileges for politicians, doctors, nurses and teachers/professors? It really is not clear.

Switching from fossil fuels and not selling fossil fuels abroad due to ideology will put a real strain on the American market. It's not clear why would anybody be doing anything and why would anybody sell anything to Americans from abroad.

Demand six: One trillion dollars in infrastructure (Water, Sewer, Rail, Roads and Bridges and Electrical Grid) spending now.

- Of-course USA is broke. But never mind that, at $20/hour work force, 1,000,000,000,000 dollars will buy 50,000,000,000 hours of work. That's 50 billion hours of work. Of-course that's 6,250,000,000 work days or 17,123,287 work years (counting at 365 days/year). If this project goes ahead, then this will provide over 17 Million Americans with 1 year of work. On the other hand it can also provide 34 Million Americans with half a year of work. Or it could be 68 Million Americans with 3 months of work. It also could be 1.5 months of work for 134 million Americans. Well that's good. That would keep them occupied if they are forced to work, because government can't really do anything but get people to work on some infrastructure projects. Government doesn't do anything else but shovel ready stuff and here is an opportunity to do a lot of shoveling. I just don't know why stop at 1Trillion. Why not just hire every American to do this for a much longer time, the way USSR did it?

Of-course I am also at a loss as to why would anybody want to do this hard work when they can just kick back on their guaranteed minimum living wage?

Demand seven: One trillion dollars in ecological restoration planting forests, reestablishing wetlands and the natural flow of river systems and decommissioning of all of America's nuclear power plants.

- Ah great, 1 more Trillion. Same questions as above.

Demand eight: Racial and gender equal rights amendment.

- I don't understand this demand. Isn't there already all of this done in USA? Hasn't pretty much every employer been sued one way or another, which is part of the reason there is such huge unemployment among those, who are given all these various privileges?

Demand nine: Open borders migration. anyone can travel anywhere to work and live.

- I have news for Lloyd: Lloyd, the economy that your demand will create will only have one direction for migrant workers. It's going to be OUT of USA. This demand cannot be satisfied at all given all the other demands. You will have to impose an iron curtain to make sure there is still somebody left in the country to do all this free work: teaching, healing, growing forests and building bridges.

Demand ten: Bring American elections up to international standards of a paper ballot precinct counted and recounted in front of an independent and party observers system.

- whatever. I don't even understand why this silly demand is here given everything else? It's incompatible with all the other demands again, because you can't have change of policy once you instrument all these demands on minimum wages, work, etc., you can't change the government, because you will end up losing those demands for sure. You have to enforce one party, one rule, one time and try and keep it as long as you can, otherwise none of these demands will stay in action, once the true costs of them are understood. What is the point of elections if Lloyd is going to dictate the policy from barricades is what I am actually asking?

Demand eleven: Immediate across the board debt forgiveness for all. Debt forgiveness of sovereign debt, commercial loans, home mortgages, home equity loans, credit card debt, student loans and personal loans now! All debt must be stricken from the "Books." World Bank Loans to all Nations, Bank to Bank Debt and all Bonds and Margin Call Debt in the stock market including all Derivatives or Credit Default Swaps, all 65 trillion dollars of them must also be stricken from the "Books." And I don't mean debt that is in default, I mean all debt on the entire planet period.

- ah, so Lloyd is now telling the entire planet what to do.

OK, how about trying that just in the USA first and then telling everybody how that went? Don't forget - your bank 'deposit'.... it's a loan to the bank. Your grandmother's pension .... it's a loan to the bank, and it was loaned out as a mortgage or a student loan. But of-course at that point it doesn't matter, because everybody is getting 'minimum living wage', working or not. Of-course 'debt' really means assets. The banks OWN 'your' houses, because banks bought them for you and gave them to you. What you really want to do is confiscate bank's assets. OK, whatever, you want to crash the banks. That's fine. In fact WHY HAVE BANKS AT ALL?

If everybody is just getting $20/hour, whether they are working or not, if everybody is just given somehow what they need (I don't know who is producing it all, but OK), then why have banks?

It's not just Communism - it's beautiful. Anything you ever wanted is immediately given to you, all of your dreams are fulfilled, why have banks? Just have one Central Bank (like they had in USSR), and have it print all that cash and be done with it. Who needs deposits and loans and financial instruments, anything? I guess ATMs are still banks' property. It can be confiscated too. Why not? You are confiscating all of their assets anyway (the houses, all of the collateral), why not confiscate the remaining assets as well, after all, what use are those to the banks if they are not allowed to collect on their assets anymore? The holders of the banks - the shareholders, they are the people who now have their investments wiped out, it's them and all of the depositors and all of the counter-parties that have their assets and investments wiped out.

Of-course the question is: why didn't the government just allow that to happen ALL BY ITSELF back in 2008? I guess there wasn't Lloyd around with the list of these wonderful demands.

Demand twelve: Outlaw all credit reporting agencies.

- Again, what's the point of any reporting agencies if the banks are destroyed? I don't even understand this point, there will be no credit agencies because there will be no credit. Who is going to be THAT STUPID to give credit to ANYBODY EVER AGAIN if credit can be 'forgiven' by a Lloyd's popular/populist demand? Never mind credit agencies, just outlaw credit (and that's what market will do for you, once it realizes what just happen with these 'debt forgiveness' idea.)

Demand thirteen: Allow all workers to sign a ballot at any time during a union organizing campaign or at any time that represents their yeah or nay to having a union represent them in collective bargaining or to form a union.

- This is just gratuitous. Who wants to be in a union if you can just get minimum living wage without working? Lloyd, stop rubbing the salt all over the wounds.

These demands will create so many jobs it will be completely impossible to fill them without an open borders policy.

- OH!

Oh my god.

I don't know who Lloyd is, but if he is any older than 5 years of age, then I hope that people find him and comfort him, because he is lost. He is so absolutely lost.

I wonder how many people read this list of demands and thought: this is a good list, it makes sense?

Anyway, I don't need to write anymore on this subject. I hope it is understood what kinds of ideologies we are presented here with - 4-5 year olds can come up with this. At that age, when a kid is told that the parent has no money to buy something, the kid can tell the parent to just "buy some money". Anybody above that age should know better that money is not just paper, it's production, and that people who don't have to work will not work, because there is no reason to do it. It should be clear to everybody that this list is a product of USA's current education system that has completely failed to produce individuals who are capable of any rational intelligent thought and have no idea about what money is, where it comes from, why it exists, why people work, why people don't work, what people want in their lives, what products are, etc.etc.etc. This is completely unbearably ridiculous, yet here it is, black on white.

All I can tell you is this: beware. BEWARE! This is the same ideology that crashed the tsarist Russia at one point in time in 1917 and created what was known as USSR - Union of Soviet Socialist Republics. But this list is even more ridiculous, because while the Marxist/Leninist slogan of USSR was: "From everybody's abilities to everybody's needs", the slogan here is: "I want, I want, I want". That's all there is to it.

This is a tantrum of a 5 year old child. This is no different than those bankers who said the same thing during 2008, well, people should understand that failures should allow to fail. Risk must be dangerous, that's why it's risk and not a 'guarantee'.

Yes, students have it hard. No, I don't think students who sign under the demands above should ever even have an OPPORTUNITY to go to any university/college or even high school. They belong as apprentices somewhere in wood shop or on a fishing boat. This government will likely forgive their debts, why not, bank debts were forgiven and having too many students with these grievances is dangerous for the society. Of-course the ONLY way to forgive these debts is to make sure that nobody can every get into the same debts ever again, so all loand guarantees by government must be stopped. How likely is that to happen in USA today? This is a tragedy.

However I understand their frustration with their loans. They were tricked into these loans by the system, that told them they needed to get a bachelor's degree in something even to have any job at all, and the market was crashing all around them, and they were too young to understand these problem, and their parents were born into a system that already lost any sense of what money was. Federal reserve, FDIC, FHA, Freddie/Fannie, SS, Medicare, minimum wage, civil rights - those are not just bad ideas (civil rights are entitlements and obligations that cause less employment and higher employment costs by the way, and minimum wage just creates unemployment and destroys opportunity for a first job), these are idea that remove REALITY of what work is, what money is, what risk is.

Even the parents of these kids, who sign under these demands don't know any better. The parents OF the parents of these kids maybe could know. The people who DID know where the parents of the parents of the parents of these kids. THEY KNEW. They were there when understanding what work and what money and what risk is was still clear and important. They were there, but they did not stop the catastrophe of the cancerous growth of government, that lead to this level of ignorance for millions of people and 2-3 generations of people. This is not going to be easy to overcome, you should expect great deal of dissatisfaction and danger coming from these very people, who are like 5 year old minds in 20 something year old bodies, who don't know any better but they know that 'No Child is Left Behind'. They'll have to learn the hard way that when 'No Child is Left Behind', then EVERY child is left behind.


Journal Journal: Does China need USA more or does USA need China? 7

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!


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.

User Journal

Journal Journal: Drug War 12

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.

User Journal

Journal Journal: Why SS is unconstitutional and immoral Ponzi Scheme 17

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:

Helvering v. Davis, 301 U.S. 619 (1937), decided on the same day as Steward, upheld the program because "The proceeds of both [employee and employer] taxes are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way". That is, the Social Security Tax was constitutional as a mere exercise of Congress's general taxation powers. - the gov't argued that SS payments are not earmarked, not actually going to be used for any purpose, but are only collected under general taxation powers of Congress.

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 payment was issued on January 31, 1940 to Ida May Fuller of Ludlow, Vermont. In 1937, 1938 and 1939 she paid a total of $24.75 into the Social Security System. Her first check was for $22.54. After her second check, Fuller already had received more than she contributed over the three-year period. She lived to be 100 and collected a total of $22,888.92.

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.


What really happened to that money?


That money became a net negative for the economy.




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.


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


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.


So why is that bad?


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


Economies work best when there is a strong middle class, and when the deltas between the poorest and the middle, and the middle and the richest, are relatively small.


-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.


Economies also work best when money circulates around rather than pooling in one place.


- 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.


Not all rich people spend/invest their money in ways that create any significant number of jobs.


-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.


Even the ones who do don't spend it in ways that benefit the US economy. Your average multimillionaire will buy a Porsche or a BMW or a Ferrari or a Lotus before he buys a Cadillac. The majority of money spent on mega-yachts, jewelry and exotic whatsits leaves our economy never to be seen again.


- 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.


Give a few extra bucks to a poor person and they'll spend it. On housing. On food. On entertainment. On healthcare. It'll support businesses of all sizes, it'll support the economy, and you know what? It'll end up right back in the rich person's pocket. Win, win, win.


- 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.)

The Almighty Buck

Journal Journal: Federal reserve printing more money 8

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:

Release Date: September 21, 2011
For immediate release

Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow.

- 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.

Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated.

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

Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased.

- 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.

Investment in nonresidential structures is still weak, and the housing sector remains depressed.

- 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.

However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

- "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.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.

- 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.

The Committee continues to expect some pickup in the pace of recovery over coming quarters

- blah blah blah. Worthless.

but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.

- 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.

Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets.

- which you are causing.

The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further.

- 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.

However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

- what a sentence!

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities.

- 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.

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.

- 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.

This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

- 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? :)

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

- 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!

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

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

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

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

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

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


Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

- 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.

User Journal

Journal Journal: Ron Paul Wins California 3

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.

User Journal

Journal Journal: 2 Billion "loss" and Investing in Inflation 4

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.

User Journal

Journal Journal: Health Care Policy 3

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

The first Model Ts were built at the Piquette Road Manufacturing Plant, the first company-owned factory. In its first full year of production, 1909, about 18,000 Model Ts were built. As demand for the car grew, the company moved production to the much larger Highland Park Plant, and in 1911, the first year of operation there, 69,762 Model Ts were produced, with 170,211 in 1912. By 1913, the company had developed all of the basic techniques of the assembly line and mass production. Ford introduced the world's first moving assembly line that year, which reduced chassis assembly time from 12½ hours in October to 2 hours 40 minutes (and ultimately 1 hour 33 minutes), and boosted annual output to 202,667 units that year After a Ford promised profit-sharing if sales hit 300,000 between August 1914 and August 1915, sales in 1914 reached 308,162, and 501,462 in 1915; by 1920, production would exceed one million a year.

These innovations were hard on employees, and turnover of workers was very high, while increased productivity actually reduced labor demand. Turnover meant delays and extra costs of training, and use of slow workers. In January 1914, Ford solved the employee turnover problem by doubling pay to $5 a day, cutting shifts from nine hours to an eight hour day for a 5 day work week (which also increased sales; a line worker could buy a T with less than four months' pay), and instituting hiring practices that identified the best workers, including disabled people considered unemployable by other firms. Employee turnover plunged, productivity soared, and with it, the cost per vehicle plummeted. Ford cut prices again and again and invented the system of franchised dealers who were loyal to his brand name.

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.

A 1918 Bureau of Labor Statistics survey of 211 families living in Columbus, Ohio found that only 7.6 of their average annual medical expenditures paid for hospital care (Ohio Report, p. 116). In fact, the chief cost associated with illness was not the cost of medical care, but rather the fact that sick people couldn't work and didn't get paid. A 1919 State of Illinois study reported that lost wages due to sickness were four times larger than the medical expenditures associated with treating the illness (State of Illinois, pp. 15-17). As a result, most people felt they didn't need health insurance. Instead, households purchased "sickness" insurance -- similar to today's "disability" insurance -- to provide income replacement in the event of illness.

... 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:

popular support for the legislation was low because of the low demand for health insurance in general

- 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.

According to one CCMC study, the average American family had medical expenses totaling $108 in 1929, with hospital expenditures comprising 14 percent of the total bill (Falk, Rorem, and Ring 1933, p. 89). In 1929, medical charges for urban families with incomes between $2,000 and $3,000 per year averaged $67 if there were no hospitalizations, but averaged $261 if there were any illnesses that required hospitalization (see Falk, Rorem, and Ring). By 1934, Michael M. Davis, a leading advocate of reform, noted that hospital costs had risen to nearly 40 percent of a family's medical bill (Davis 1934, p. 211). By the end of the 1920s, families began to demand greater amounts of medical care, and the costs of medical care began to increase.

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.

As the demand for hospital care increased in the 1920s, a new payment innovation developed at the end of the decade that would revolutionize the market for health insurance. The precursor to Blue Cross was founded in 1929 by a group of Dallas teachers who contracted with Baylor University Hospital to provide 21 days of hospitalization for a fixed $6.00 payment. The Baylor plan developed as a way to ensure that people paid their bills.

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

THEN the DISASTER struck:

The AHA designed the Blue Cross guidelines so as to reduce price competition among hospitals. Prepayment plans seeking the Blue Cross designation had to provide subscribers with free choice of physician and hospital, a requirement that eliminated single-hospital plans from consideration. Blue Cross plans also benefited from special state-level enabling legislation allowing them to act as non-profit corporations, to enjoy tax-exempt status, and to be free from the usual insurance regulations.

- 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:

The enabling legislation freed the plans from the traditional insurance reserve requirements because the Blue Cross plans were underwritten by hospitals. Hospitals contracted with the plans to provide subscriber services, and agreed to provide service benefits even during periods when the plans lacked funds to provide reimbursement. Under the enabling legislation, the plans "enjoy the advantages of exemption from the regular insurance laws of the state, are freed from the obligation of maintaining the high reserves required of commercial insurance companies and are relieved of paying taxes" (Anderson 1944, p. 11).4 Enabling laws served to increase the amount of health insurance sold in states in which they were implemented, causing growth in the market (Thomasson 2002).

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

to protect themselves from competition with Blue Cross, as well as to provide an alternative to compulsory insurance, physicians began to organize a framework for pre-paid plans that covered physician services.

more collusion:

Within these rules were provisions that ensured that voluntary health insurance would remain under physician supervision and not be subject to the control of non-physicians.

initially plans were cheap:

In 1939, the California Physicians' Service (CPS) began to operate as the first prepayment plan designed to cover physicians' services. Open to employees earning less than $3,000 annually, the CPS provided physicians' services to employee groups for the fee of $1.70 per month for employees

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

the market for health insurance exploded in size in the 1940s, growing from a total enrollment of 20,662,000 in 1940 to nearly 142,334,000 in 1950 (Health Insurance Institute 1961, Source Book, p. 10).

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

So successful was commercial insurance that by the early 1950s, commercial plans had more subscribers than Blue Cross and Blue Shield. In 1951, 41.5 million people were enrolled in group or individual hospital insurance plans offered by commercial insurance companies, while only 40.9 million people were enrolled in Blue Cross and Blue Shield plans (Health Insurance Institute 1965, Source Book, p. 14).

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.

Medicare and Medicaid expenditures have grown as a percentage of total national health care expenditures since their inception in 1966. The figure points to some interesting trends. Expenditures in both programs rose dramatically in the late 1960s as the programs began to gear up. Then, Medicare expenditures in particular rose sharply during the 1970.

- 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.

User Journal

Journal Journal: Obama's Job Destruction Act 36

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?

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