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Journal Journal: As predicted ACA and insurance are incompatible.

An article in nytimes shows that millions of Americans choose not to pay insurance premiums but instead only get insurance coverage when they need it because the premiums are more expensive than government penalties of not buying insurance and because simultaneously the government forces the insurance companies to cover anybody regardless of any pre-existing conditions.

Back in July of 2012 I explained that ACA is unconstitutional and that the SCOTUS was completely political and wrong but also I explained that ACA and the very concept of insurance are absolutely incompatible.

I am going to use two of my quotes from that journal entry here:


This means that in principle if the tax (fine) is raised from its current level (and it will have to be raised, otherwise ACA is completely unworkable, everybody who has to pay for insurance under the ACA will cancel insurance and only 'buy' it when they absolutely need to and then cancel again, once done with the bills) so if the tax is raised, the mandate becomes immediately unconstitutional and ACA has to go back to the supreme court!


The tax (fine) will be raised, because people who do pay for their insurance today will stop paying, because this tax (fine) is so low today compared to the insurance plan payments. There will be some people who will be subsidised under the plan and will not have to pay for insurance, so they will 'buy' their plans with the subsidies. Also the people who actually need insurance to pay them right now, because they are sick, they will obviously 'buy' into insurance, since they cannot be denied due to the pre-existing conditions.

But this means that huge number of people will drop out of insurance, and the only people in it will be a minority of those who didn't have it until now and those who need insurance to pay for their treatment.

Under this scenario, the insurance companies will cease to operate. But of-course what is likely to happen is that the government will bail out the insurance companies with tax (and borrowed and printed) money. In the short term the government may even have an influx of cash because taxes (fines) will be collected from people who had private insurance prior to ACA but would cancel it now and just pay the tax (fine). But in the long run this means that insurance will become extremely expensive because of lack of payers and the government will be bailing out insurance with tax money at the new expensive rates.

the quotes above explain that people who are allowed to buy insurance only when they get sick will do so because 1. Insurance will become more expensive but the penalty for not buying the insurance is going to be lower than the cost of insurance and 2. The insurance companies will be forced to accept everybody with pre-existing conditions.

This means that no insurance company can actually run an insurance business in this government system without getting government bailouts, be it via taxes or other mechanisms (TARP comes to mind).

It is amazing how gullible so many people can be, looking straight into the same information that I am looking at and not connecting the dots at all. I was ridiculed on explaining these extremely obvious points (extremely obvious if one takes 10 seconds to think them). Of-course people prefer not to think about anything but then they miss the most obvious consequences that are going right towards them because of past actions.

There are more predictions in that journal post I wrote back in 2012, they will all come true, especially the points about bailing out insurance companies and generally worsening the level of coverage.

Now, I am not arguing that people should go without insurance, I am arguing that government shouldn't be forcing anybody into any product or service at all, all of these matters should be left to the private sector, which takes care of things like insurance and like medical care for profit, which is the preferred way of running things - for profit, thus ensuring that things are done efficiently while providing good customer service, all of this is the exact opposite of how governments do business (inefficiently and without actually treating customers as clients).

User Journal

Journal Journal: UBI is the modern version of Communism 1

In the last year or so there have been numerous stories on /. on the subject of Universal Basic Income (UBI). Many so called 'libertarians' left a number of comments on how they are supporting UBI because they think it might be more efficient than other forms of welfare.

Whether welfare is efficient or not is really irrelevant from point of view of individual freedom, putting a lipstick on a pig doesn't change the nature of the animal but I do want to bring to their attention this simple fact: UBI is the modern version of Communism and just like all other forms of collectivism, this form is doomed to misery, oppression, murder and finally economic failure.

Communism is absence of private ownership of means of production, possibly State ownership or in case of Marxism some form of collective non-State sharing. For voluntary forms of Communism or Marxism there is no need to reinvent the wheel, go to a modern day kibbutz, where people are participating voluntarily and this might be the best argument for *voluntary* form of cooperation to date.

However this is not the subject of my post. Here I am looking at the UBI imposed by the State, where the income taxes are collected from each person according to his or her income level (ability) and everybody is getting some minimum amount of money out of that pool on a monthly basis.

First of all automation, outsourcing and other forms of efficiencies are cited as the reasons for all of these UBI related ideas, so it is proposed that in some not so distant future people will no longer be able to earn a living by holding a job, because American (and maybe European) people are uncompetitive when it comes to automation and foreign labour. The reality is that labour and capital are always in competition and it is not necessary that capital should always win against labour in the market. Capital wins where government makes labour uncompetitive with various rules, laws, taxes and government intervening on behalf of unions that make it too expensive to hire labour and make it more practical to automate or outsource.

Once the labour is uncompetitive due to government intervention into the market the argument becomes that without UBI there will be no more jobs for people to take and so UBI is proposed as a form of welfare that is supposedly more efficient. In reality the reason why UBI is proposed has nothing to do with efficiency but everything to do with marketability of that concept. It is much easier to sell UBI to the public, majority of which is actually still working under the current system than to sell a welfare system that excludes people based on their income level. The argument is the same nonsense that was used to push through the SS and EI. Since everybody is supposedly going to receive the benefits it is sold not as a form of welfare (which has stigma attached to it) but as a form of universal entitlement that everybody gets.

SS and EI benefits (as well as Medicare) are completely unnecessary for the people who are self sufficient, the people running profitable companies, people who are much better at investing their money than a modern State apparatus could ever be. Yet SS and EI are advertised as 'universal' to make them look as if they are not a form of welfare but instead a form of insurance. Of-course the people who do not need SS and EI benefits also absolutely do not need to pay into the SS and EI system through payroll taxes. Yet without them paying into these systems the payments would be in even more deficit than they are today. The proponents of SS and EI state that these programs are sustainable and would be even more sustainable if the wealthy people didn't have a cap at 100K or so that EI and SS percentages are taken from. Of-course those are the very people (the wealthier income earners) who do not need SS and EI in the first place, they shouldn't be in those systems, they don't need that form of welfare and they shouldn't be paying those taxes. Originally SS was set up for widows and orphans, not for everyone. Eventually it was extended to everybody else to make those ponzi scams workable much longer. The self employed were excluded from the system completely, they could afford their own retirement and other savings, they didn't have to pay into those programs, eventually they were forced to pay into them to make the ponzi scams run longer. Today the argument is that the wealthy should not have a cap for SS and EI payments to make those ponzi scams run longer yet.

UBI would be similar to SS in a way making it 'SS for all', not only for the retired. But why am I defining UBI as a modern version of Communism? Lets start from the obvious: everybody who works will have to pay into UBI and everybody who does not will not be paying into it. So this is a technicality, but basically it says: from each according to his ability to each according to his need. However under Communism there cannot be private means of production, there is either State ownership of productive resources or some voluntary collective ownership (like in a family or in a kibbutz). So the real question would a UBI system mean that the ownership and operation of productive resources will be nationalized and otherwise collectivized? My contention is that it is inevitable that a UBI regime requires nationalization and collectivization of resources and of all means of production. I will explain this in detail and I will start with a simplified model.

Consider two villages where both villages share common currency (dollars):

* Village A has a population of 10 people, each one of them is working in something productive. There is a farmer, there is a blacksmith, there is a hunter, there is a doctor, there is a shoemaker, etc.

* Village B has a population of 10 people, one of them is a milk farmer who owns a cow, the rest are either unemployed or are service sector workers, they do not possess means of production.

The milk farmer produces 10 litres of milk a day that he can sell at $1 a litre thus making $10 a day. The farmer sells the milk for dollars but the reason he wants to receive dollars is to buy goods produced by other workers. The farmer wants to buy some bread, shoes, tools, he sometimes needs to visit a doctor. The farmer also may pay for some service like for a haircut. The people from village A are able to supply the farmer with the goods exchanged for his dollars, the people from village B are able to supply him with some services.

A person from the B village (an unemployed individual) decided to start a campaign for equality in the village because the income levels are so different. The milk farmer can make $10 and a service sector worker can only make a small fraction of that while an unemployed person does not get to eat unless he can figure out something useful to do as a service or he begs or robs somebody. The campaign starts picking up momentum across the B villagers since they agree, they are all poorer than the milk farmer. Village B forms a government and collectively introduces a motion that requires that everybody in the village must get a UBI of minimum $1 a day. For this to work each one of the villagers must contribute what they are able to make the total sum of $10 a day so that the $10 can be distributed to each villager at $1 a day. The total taxable income of the B villagers is maybe $15, $10 of which comes from the daily earnings of the milk farmer. A UBI income tax is established and the milk farmer is now taxed at about 80%, which makes the 80% of UBI amount and the remaining 20% come from the rest of the villagers.

At this point the milk farmer looks at his income of $10, $8 of which is taken away and $1 is returned to him, making his daily net income $3 and he decides that it does not make sense to generate income in the village. So instead of selling his milk in both villages, he moves most of his sales to village A, where he now makes $8 out of the daily $10 and maybe he is able to sell $1 worth of milk in village B. Then he leaves the $8 in the bank in village A and only takes home $1 a day. All of a sudden the daily UBI taxable income in the village B falls from $15 down to $6. Since there are 10 people in the village it is not possible to split the $6 among them at $1 amounts and besides this would mean that even at the taxation level of 100% there is still a UBI deficit of $4 a day.

B villagers (except for the milk farmer) get together and decide that this will not do, they have to make sure that they have their $1 a day of UBI but to achieve this they have to force the milk farmer to bring his income home. Milk farmer does not agree but he is met with overwhelming force of 9 guns pointing in his direction. At this point the farmer's ownership of his property, his means of production are confiscated from him because he is unwilling to work within the system. He might decide to continue working within the system but again, from point of view of how the business is done he has no choice in the matter, he is no longer the owner of his private property and of his means of production. It is nationalization for all practical purposes, whether the milk farmer goes with the program or not. Eventually of-course there is a movement to ensure that nobody with such horrible background as a private property owner can actually live at any level above somebody with much more acceptable background (like that of a labourer or that of an unemployed, the formerly unemployed are the ones with the most time to set political agenda, normally they will end up in the top echelons of the newly formed government).

This is actually the road that was taken a number of times on this planet where 'social justice' doctrines have been taken to their logical conclusion, the end result is overall poverty, destruction of the means of production given that nobody is actually allowed to own productive property as to not ascend above the rest and generally economic calamity that comes some time after the installation of this type of a regime.

UBI is a modern form of Communism, it is the rose under another name or more to the point it is the proverbial lipstick on a pig.

User Journal

Journal Journal: Tapering..... in China. 5

and so it starts. The Chinese government decided to stop buying up US Treasuries and they are likely not going to roll over the US bonds that they already own, that would be Trillions of dollars that the Fed will have to print to buy up this incoming flood of the old Treasuries and without the Chinese in the US bond market, the Fed will have to buy up all of the new issued debt as well.

In this case what is good for the Chinese is bad for the Americans, Chinese are going to see a long needed deflation finally, while the Americans will see massive amounts of inflation, so much of which was exported to China previously, coming back.

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Journal Journal: Ho Hos are back, no word on the Ding Dongs 5

On November 21, 2012, Hostess Brands was shut down and went through a bankruptcy procedure to restructure its debts. On June 7, 2013, Hostess is open for business again under the new management.

This is an example of what free market based restructuring looks like after a company goes through normal bankruptcy due to no longer being able to operate and carry on with its fiscal responsibilities to the lenders, bond and share holders. Obviously the restructuring made the company profitable again, the plants and equipment were bought at auctions, the unions and various obligations to those unions written off as they should be.

The socialist/fascist/collectivist media is complaining full force that many people lost their jobs, of-course that was the point - restructuring debts, restructuring operations, streamlining operations, ensuring that the business can continue without impossible liabilities.

If it were up to the socialists/fascists/collectivists, the government would have stepped in (right into it) and bailed out the unions as it did in case of GM and some others. Of-course GM is going to fail again because it is still structurally unsound, even more so than before.

Had GM been allowed to go through the same bankruptcy procedures, the plants would have been bought up in auctions by more responsible owners at large discounts and made profitable again, plants and equipment don't go to waste, capitalism reclaims discarded pieces of business to rebuild them specifically because they have no liability baggage attached to them after restructuring.

Instead when the government steps in, it ensures that the business continues as usual, the only way governments know how - by stealing from actual owners and loading business with more liability and debt ensured by the tax payers.

It is a good thing that Hostess was allowed to go bankrupt, GM and all the banks should have also been allowed to go bankrupt, they would have re-emerged, clean slate, made profitable again in a sustainable manner.

This time capitalism won, the brand is back in business and people can enjoy their wonder breads and whatever other products named with plenty of sexual innuendo.

User Journal

Journal Journal: Interpreting the Constitution = breaking the law. 2

I think it is funny what is happening on /. in terms of comment moderation, it seems like a very dedicated and coordinated approach. So I think that comment should get its own journal entry, here it is.

I make the argument that the Constitution is not in fact a "living, breathing, malleable document", that it is to the government what criminal code is to an individual.

The Constitution is the law and when the government officials say that the law needs to be interpreted rather than clarified and amended if it is unclear on something, what they are saying and doing is they are breaking it.

A murder trial involves figuring out whether murder was committed and whether the individual in front of the judge and jury did it and what the punishment should be. Of-course jury can nullify the law, but so far I hear that nobody tried doing that during a murder trial. So the trial does not include figuring out whether murdering people is bad, whether the legislature that set the law meant for people to be murdered under certain circumstances, if the person murdering them was doing it while pursuing criminals (or terrorists) as a government official for example.

Same thing must be done in case of the Constitutional law, same thing exactly - if something is unclear in the Constitution it needs to be clarified IN the Constitution.

However the Constitution must be followed, it is the chains around the hands and the legs of the government. It is supposed to be the chains that hold government within its limits. But what happened to that idea? The politicians figured out that amending the Constitution is too damn hard, they would rather break the law and call that "an interpretation".

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Journal Journal: Gerard Depardieu, Bernard Arnault, Tina Turner... there's a theme there 4

Tina Turner is getting her Swiss citizenship after spending the last 20 years living in Switzerland, in itself this is not news, what is interesting is the fact that she is renouncing her USA citizenship. USA is one of very few countries in the world that taxes foreign incomes of its citizens, even if they are not actually residents in America. For the singer this means millions in saved taxes obviously, good for her.

Gerard Depardieu renounced his French citizenship and moved to Belgium (though now he also has his new Russian passport, that's an weird turn of events given that in Russia the real taxes on individual entrepreneurs are ridiculously high, one needs to be connected to government to be able to keep his gains, the rest are living under constant threat of government violence against them, there are really no property rights in that country).

Bernard Arnault, probably the wealthiest businessman in France, owner of Louis Vuitton Moet Hennessy applied for Belgian citizenship, he is probably worried about his income but also wealth and death taxes in France.

There is a theme there, and that theme is: for people who hate the rich so much, they certainly like to rely on them for productivity and tax money. Another thing that comes to mind has something to do with geese and golden eggs, but I am not sure socialists are quite verse in such esoteric matters.

Funny enough, Bill Maher said something a couple of days ago that was actually mildly correct. Of-course he doesn't understand that he is part of the problem, when he talks about the 'dirtbags', he is enabling people to be 'dirtbags' by promoting socialist, collectivist, fascist ideas. He is correctly noticing that the number of people 'pulling the wagon' is shrinking and the number of people 'riding in the wagon' is growing. Well, Bill, you are part of the reason that so many people decided they will not pull the wagon, that it is much more comfortable sitting in the wagon, and worse yet, yapping from the wagon at the people that are pulling it to pull harder.

The people in the wagon are yelling that the ones pulling the wagon are 'not doing their fair share'.

User Journal

Journal Journal: The fake 'Fiscal Cliff', the fake 'Debt Ceiling' and the fake SS 11

In this journal entry I will explain that the so called 'Fiscal Cliff' is actually something positive for USA economy and that avoiding it is part of the problem and that the solution that the government is looking for is fake. I will explain that the real cliff that USA has to be worried about is not the 'Fiscal Cliff', which in fact should be much bigger, it's not a cliff, it's a tiny bump in the road, but the real cliff that USA is moving towards is the debt and currency crisis. 'Fiscal Cliff' is part of a solution, it's not a problem itself. I will also show that 'Debt Ceiling' is fake (everybody knows that part), but also that the rhetoric surrounding 'Debt Ceiling' is completely misleading and the words that come out of mouths of politicians, such as Obama and supposed 'mainstream economists' are the exact opposite of the truth.

Just like the 'Fiscal Cliff' thing that isn't going anywhere, the 'Debt Ceiling' is also a topic for discussion. What is 'Fiscal Cliff'? It is a deal that the US government supposedly brokered with the rating agencies to prevent them from lowering USA credit rating. The deal is to cut some spending and to raise some revenue in order to reduce overall deficit and debt. Of-course a real rating agency (Egan Jones) wasn't swayed by that nonsense and lowered US credit rating a number of times and is sued by SEC.

What is the problem? The problem is that at some point any credit rating agency has to lower credit standing of an individual or a company or a country that cannot pay its bills and lives on perpetual credit. Your credit risk is measured and presented to potential debt buyers (creditors), that's the point of a credit agency. The credit agencies that did not yet lower USA credit are in bed with the USA government, they are in fact licensed by USA government, the moment they don't play ball they will feel the entire wrath of USA government upon them.

Playing ball in this case means keeping the score artificially high. USA credit score is in reality junk. USA is a deadbeat debtor, it is a terrible credit risk, it cannot repay its debts. That's precisely the words that come out of USA politician and so called economist collective mouths, they are all repeating this same nonsense:

If USA cannot get into more debt, it will default on its payments.

That is pure nonsense. Today USA only has to shell out 360 Billion USD in interest payments per year to not default on its interest payment obligations. This is not about repaying the creditors at all, this has nothing to do with the principal, the USA government promises to default on the minimal interest payments to its creditors if it can't raise more debt. But these words by USA politicians are extremely dangerous, they are the proof that USA has no intention of ever repaying that debt, not even making the minimum yearly payment that it can absolutely pay out of its tax revenues.

USA is a deadbeat debtor and every politician in USA and every so called 'mainstream economist' says exactly that every time they open their mouth to tell the world that if USA cannot raise more debt it won't make the 360 Billion USD interest payment for the year!

But I want to show you that the fact is that USA can make its yearly interest payment with just the revenues that it collects from taxes, that the real reason people like Obama talk about default has nothing at all to do with the minimum yearly interest payment, it has everything to do with the fact that US of A is completely broke, it's bankrupt, its Treasury is bare and its financial obligations cannot be met.

Consider these numbers for the year 2013:

1. The total tax revenues for USA Federal government are 2.46 Trillion USD.
2. The total expenses for USA Federal government are 3.8 Trillion USD.
3. The interest payment on the outstanding public debt that is on the books is at least 360 Billion USD for the year based on the interest rate (which is manipulated by Federal reserve and other banks, but that's a separate subject matter).
4. Social Security benefit payouts are budgeted as 882.7 Billion USD.
5. Medicare for the year is budgeted at 523 Billion USD.
6. Medicaid for the year is budgeted at 283 Billion USD.
7. Other mandatory programs for the year is budgeted at 654 Billion USD.
8. War will cost 525.4 Billion USD.

Add it up, that's 2.868 Trillion USD

That is not even everything, there is other spending, discretionary spending, etc., which is another 932 Billion USD (difference between 3.8 Trillion and 2.868 Trillion).

So the total revenues are 2.46 Trillion USD, total expenses are 3.8 Trillion USD, the interes payment is 360 Billion USD. If you get rid of the interest payment from both sides, that leaves about 2.1 Billion in revenues and 3.4 Billion in spending. This already means that there is a gap of 1.3 Trillion USD between revenues and expenses.

That gap of 1.3 Trillion USD is what the entire fake 'Debt Ceiling' crisis is about. Why is it fake? Because it will be raised, there is no question about it, the government will raise its own debt ceiling. The government will not be stopped by artificial lending limits imposed by itself upon itself (the debt ceiling idea was introduced in 1917, at the same time as the Federal reserve was given the green light to monetise US Treasury debt, the debt ceiling was there to prevent overspending by government, but USA government never failed to raise it every time it hit it).

To expect government to impose its own debt ceiling upon its spending is precisely like expecting an alcoholic to impose his own drinking limit upon himself or a drug addict to impose a drug limit for himself. It can't happen, it won't happen, just like in cases of the alcoholic and the drug addict, the debt ceiling will be a hard one, imposed by the reality, by the creditors. Once Chinese stop subsidising USA consumption with its production and absorption of USA created inflation, then USA will no longer be able to get into more debt, nobody will give USA the opportunity. That's when the real CRISIS will hit, when USA has nothing to consume. Americans believe they have a new type of economy, they call it 'consumption based economy', well there is no such thing.

There no consumption based economy, there is no service economy, there is no difference between the pre-industrial and post-industrial economies. The only thing that keeps such a thing going is the wealth that was accrued over the productive years and the inertia of the world that can't actually come to terms with the fact that its debts will never be repaid, USA cannot repay them.

Now, why can't USA repay the debts? Are the people wrong when they say that what is needed is economic recovery and then things will get better? Yes, they are wrong. There is no recovery, there can be no recovery, there will be no recovery. The reason for that is that to have a recovery USA has to experience deleveraging first. The bad debts have to be written off, the companies must go bankrupt, banks must fail (and they will, they are part of the money laundering operation in USA, which pumps fake money in form of new credit from the Fed to the commercial banks to the Treasury and the commercial banks make the arbitrage between the fake 0% interest rate on the Fed's loans and the fake 2-3% Treasury interest rates for 10, 20, 30 year bonds).

Until the bad debts are written off, until the failed companies fail and release the scarce resources that they are still occupying, until the government stops pumping liquidity into the market to try and inflate the credit bubble out of the recession again (this time it's the bond and the dollar bubble), there can be no economic recovery. That's why we know that there will be a real crisis, the sovereign debt crisis in USA and the dollar crisis that will come with it, because US Treasury bonds are the same thing as US dollars. They are a promise to be paid USD in the future, there is no difference between dollars and bonds.

I hope it is now clear to the readers that what is actually happening with the fake 'Fiscal Cliff' and the fake 'Debt Ceiling' crises is actually a political game that will be played until there is a real monetary collapse in USA. USA is already in an economic collapse, but it does not have to go through the monetary collapse, it chooses to go through it. Why do I say that? Because of the fake 'solutions' that the government and the people apparently want to implement to these fake 'crises'. Their solutions are not solutions, their solutions are equivalent to a person driving a run away car on a road to an actual cliff and instead of trying to break, instead of turning, even instead of jumping out of the car, the driver just closes his eyes and pushes the pedal to the metal while keeping the same direction!

I think the road that USA is taking is economic and societal suicide. USA just cannot admit that SS, Medicare, Medicaid, War, other 'mandatory' and 'discretionary' spending that it wants to keep should be cut drastically in order just to slow down the real collapse that is coming. Actually what really has to be done is shutting down most of the government offices, abandoning the ideas of SS, Medicare, Medicaid, Wars and most other government practices and activities, getting rid of most of business regulations, getting rid of the income related taxes, payroll taxes, Medicare taxes, all labour related laws, etc., and allowing the failed businesses to fail, allowing the failed government structures to fail, allowing the failed people to fail.

That's the only way to stop that car and actually turn back going away from the edge of the cliff.

Notice that the cliff I am talking about is the debt and currency crises, not the fake 'Fiscal Cliff' and 'Debt Ceiling' crises.

When Obama says:
"We must pay our debts, we must borrow more money to do it", what he actually says is this:
We cannot pay out obligations, not the 360 Billion, but SS, Medicare, Medicaid, Wars, etc.

In reality getting more debt means not paying obligations.
Not getting more debt means actually paying obligations (but of-course I am talking about obligations to the bond holders, not the SS, Medicare, Wars, etc., that stuff cannot be paid without more debt).

When I say that 'Fiscal Cliff' is fake, I am addressing the actual topic of debt that USA collects, and I am showing that USA will vote to raise its fake debt ceiling and that whatever measures that POTUS and the government were supposed to take in the deal with the credit rating agencies will not be taken. There will be no measures, the spending will increase, the debt ceiling will grow and the so called 'Fiscal Cliff' will be averted. When I say: 'Fiscal Cliff' is fake, I am saying that the government (and the public) already know that they will avert it.

The truth is that USA needs to hit the 'Fiscal Cliff', hitting it actually means starting to slow down that car that is moving towards the edge of the real cliff, of the debt and currency crises cliff.

The 'Fiscal Cliff' as it stands is nowhere near enough to stop the car, but it would cause a slight slowdown of the car moving towards the real cliff. Unfortunately for USA the fiscal cliff is not a cliff at all, it's a slight bump in the road, it's not going stop the car falling off the edge of the real cliff that is coming (the bond and dollar collapse, the currency crisis to go with the economic crisis that USA is in now and which will become much worse than anybody can even imagine today).

USA needs the fiscal cliff, it has to be a much bigger fiscal cliff, but USA will not hit it, it will 'solve' it, and that solution is the problem, that solution coupled with raising the fake 'Debt Ceiling' means closing your eyes while pushing the pedal to the metal and keeping the direction towards the edge of the real cliff.

The remaining idea I would like to address is the idea that USA spending is not a problem that USA federal government is not getting enough revenue. If you believe that it is the case then realise that effective taxes have to go up to cover the 1.3Trillion dollar difference between the current revenues and expenses, and since the current revenues are about 2.4Trillion and expenses are 3.7Trillion, the 1.3Trillion means an effective raise of about 54% in taxes on every person.

Does anybody think that it is possible to raise effective taxes in USA by 54%? An attempt to raise effective taxes upon everybody by 54% will cause a complete shutdown of most (if not all) economic activity in the country. Obviously the wealthy are already bearing a disproportionate tax load and they are moving their productivity elsewhere and the middle class and the poor would be crashed if their taxes went up that way.

So in reality it is the spending that needs to be cut minimum by that much in order actually to stop the car from falling off the edge of the real cliff.

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Journal Journal: Privately maintained and restored infrastructure. 5

Here you all can see something on youtube that shows how private enterprise deals with infrastructure when it has to do it.

On this youtube channel you can see videos reporting progress and a final opening of a bridge that was fixed privately by some entrepreneurs, who put together money, resources, machinery (one of them, Sergei Zaharov owns a metal shop).

The bridge was going to be fixed by the local government for 13.5 Million rubles, which is about 445000 USD, however the private businessmen spent their own time (3 months altogether), a total of 40 people were involved in the project and they fixed the bridge for only 300,000 rubles, which is only about 10,000 USD.

You can see the video of the opening of the bridge once it was fixed here.

Here is what the problem looked like originally.
This was 1 month into the renovation.
2 months into the renovation.
Here is an example of the work that had to be done.

Private individuals can and do in fact restore and maintain infrastructure and they do it at a fraction of the cost of what government spends (or wants to spend).

Despite all the naysayers out there.

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Journal Journal: -1 Insightful, -1 Informative, -1 Interesting, etc. 4

User Journal

Journal Journal: Watchmen 5

This is not a review, the movie had enough of those, this is just a thought. Apparently what people expect from their superheros nowadays is ability to sacrifice millions 'for the sake of saving billions' and the superheros who refuse to go alone with that scheme must be killed (and they are in the movie). I think the director is counting on securing support of an average movie-goer, selling him on the idea that sacrificing a small number of people is just fine as long as the majority supposedly gains from it.

Of-course the entire concept is nonsense, there can be no beneficial murder. Sacrificing a minority for the benefit of a majority is not a virtue, it is a crime against individuals and their rights. Also while believing that world's super-powers (the countries with nuclear potential to destroy the planet) would cooperate against a common enemy is somewhat sound, believing that such a truce would be long lived or would lead to a more stable situation is nonsense. Power will not be shared and it only takes a little time before the old enemies are at each other's throats again. Of-course there is an added level of 'benefit' that their major cities are destroyed, which cannot make political or economic situation more stable, it would however achieve the exact opposite result.

If the Ozymandias (Adrian Veidt) wanted to increase stability in the world and achieve some for of higher cooperation among enemies, given his insight into limitless power he could have fairly easily achieved this goal by supplying the world with huge amount of very cheap energy. He could set up multiple corporations around the world selling the energy so cheaply, first he would put many 'old world' energy companies out of business but then he would provide enough energy for many new forms of businesses to be created. Cheaper food production and manufacturing, cheaper shipping, cheaper communications. Everything that he could do with the power and he chooses to pursue his idea of playing out the dreams of another murderer from history - Alexander the Great.

If after watching this movie an average person is left with an impression that it is an acceptable thing to do, to sacrifice minority for the benefit of majority (even if it means ideas based around grandiose totalitarian utopia and even when it is masked with a supposed formula for survival) then the director has done his job in cementing more of this collectivist ideology of central planning, the anti-humanist idea that anything goes as long as the technocrat can sell it as if it is done "for the greater good".

The greatest crimes on this planet were committed by people promising to ensure "the greater good". The future of such crimes is not behind single individuals, it is behind the mob, voting completely democratically to bring about yet another totalitarian regime. A regime that would take care of the mob by making a beneficial sacrifice of a small number of people (and small number of people would always lose in a democratic elections, thus the definition of mobocracy).

From murder of millions to "save billions" in the super-hero movies to taxing the few wealthy 1-2% apparently to ensure economic prosperity of everybody else. It doesn't work in the movie and it doesn't work in real life. It's not good morality and it's not good economics, but it makes a great show and sounds good in politics.

User Journal

Journal Journal: Another day on /. 21

Another day on /., another batch of troll moderators perpetrating a coordinated (or an uncoordinated) moderation attack as has been the case for a few months now. One thing is for sure, they don't forget to go back to comments made days ago and moderate them down religiously, whatever they are. It is especially effective in case when the story is no longer on the front page (but also it doesn't matter much I suppose either, nobody is really reading any longer at that moment in time) The comments that are moderated somewhat above the -1 score will be moderated down by subsequent moderators, who will also come over to the page to get rid of any positive scores. Often the moderations happen in batches, which is easy to see, since moderations of multiple comments happen within a span of a couple of minutes. Very often the comments are left with moderation: '-1 Insightful' or '-1 Informative' or '-1 Interesting'.

The comments are mostly moderated Troll, sometimes Flamebait, sometimes Offtopic and sometimes simply Overrated.

including comments in my journal

Clearly the intent behind the moderation is to silence the opinion, not for any other purpose, since moderating past commentary this way does not have any role in any current discussion, so the reason to moderate comments in stories that nobody is reading for a few days is to ensure that in the future only a limited number of comments can be made from the account (2 comments per 24 hours is the maximum that can be made when the 'karma' score is minimal.)

The attack is obviously personal in nature, since the same exact thing is happening in my second account and the responses that are left on my comments after the moderation by various ACs imply that this is done to ensure that the voice of the opposition to their ideology is silenced.

Of-course not every comment there is at the bottom of the score pyramid, however the moderations that push the comments down come after the discussions are over, a couple of days after nobody else is reading the threads, which simply shows the indiscriminate nature of the attack.

Clearly there are people who cannot argue against my type of message but they surely do not want to have my message around to create an echo chamber that prevents any sort of a real discussion.

User Journal

Journal Journal: Class warfare 17

Given the modern time attitudes on class warfare with comments like these insisting that the class war is waged by the rich on the middle class and the poor, and generally the media and politicians insisting that the 'rich are not paying the fair share', I decided to take a look at historic income tax data that can still be found on IRS site
Individual income tax returns starting from 1954

Business tax returns starting from 1959

The current tax returns up to 2010

It is a surprise to look at those records, since the currently accepted message is that the rich are paying much less than before and that they were paying much more in the fifties when the tax rates were up to 70 and even 91%.

Happy to report that this is pure nonsensical propaganda.

An example of individual income returns from 1958 and 2012 shows that only 236 people paid some money at the silly 91% rate that is out of 45.6 Million tax returns that were filed.

Another interesting finding is that 0.178% of all returns filed paid 35% or higher, which means only 8549 people paid 35% in taxes or more. 3.5% of all income taxes in 1958 were paid by these top earners, who paid 35% or more in taxes.

Compare that to the current situation, there are 2.5Million taxpayers (which is almost 2% of all tax payers) that paid 35% or more.
Interestingly enough today 3.5% of top earners pay 41.5% of all income taxes.

So how can this be that the populist message is that in 1950s the tax code was so much more progressive and the rich paid so much more in taxes (and that's apparently why the economy was so strong, or so the liberals and progressives tell us today), yet today 2.5 Million people pay 35% or more in taxes and pay 41.5% of all income taxes while in 1958 only 8549 people (0.178 of all filers) paid 35% or more in taxes, which constituted only 3.5% of all income taxes.

Clearly the propaganda machine is well and running.

User Journal

Journal Journal: Review of The Campaign (the film) 2

Finally I got to watch a movie I heard of some time ago, it's called The Campaign with Will Ferrel, Zach Galifianakis, John Lithgow, Dan Aykroyd, Brian Cox and others. It has some memorable moments and it is definitely funny. Unfortunately the message that it is sending is horrendous, to explain what I mean by this I will have to give out many spoilers, so if you don't want to see any of that stop reading right here.

The movie is about a 4 term Democratic Congressman, Cam Brady (Ferrel), running for the 14th district in North Carolina, who is behaving like a clown mostly because he has no positions of his own and he is quite silly in real life. As he says (paraphrasing): America, Jesus, Freedom, I don't know why they like when I say it but they do and so I say it. He is such a clown though, that eventually it costs him his political capital and a powerful business interest, represented by "Motch Brothers" (Aykroyd, Lithgow) (an obvious jab towards the Koch brothers), who are interested in increasing efficiency of their production facility in China, and to do this they want to open factories in America and bring Chinese labour to those factories. The reason in the movie is that the Chinese work for 50 cents an hour and work in unsafe conditions. In order to achieve this, the Motch brothers went on buying large pieces of land in the 14th district and now they need their own Congressman to pass legislation that would abolish the minimum wage and the EPA rules, which would not normally allow operation of that type of a factory because of some form of pollution that it would produce. The factories in America would increase profits of the operation by cutting down shipping costs but they would be manned by the 'insourced' Chinese labour, not by American workers.

Normally the Motch brothers would just buy Cam Brady, but Brady is having political problems and so they came up with a simpleton Republican candidate, Marty Huggins (Galifianakis), son of Raymond Huggins (Cox) to run against Cam Brady. A number of hilarious scenes are then shown, with various comical situations where Huggins is running against Brady. However somewhere alone the line, Brady finds out about Motch brothers intentions and decides to go against them because he finds their actions immoral. The Motch brothers then turn the game around, approach Brady and eventually rig the elections and ensure that Brady wins. However after the elections, Brady talks to Huggins and changes his mind, declares that he is not a good Congressman but a good Politician and resigns, asking Brady to become the Congressman instead. At the end everybody is happy that the Motch brothers lost the money on their land deals and that the factories will not be opened in the 14th district.

Ok, so that's the story. If you are like most other people who watch this movie, you are led towards the conclusion that is imposed upon you by the makers of the film, you probably think that this is a great win for America (Jesus and Freedom), and the People, who are standing strong against the powerful evil, profiteering business interests and that the politicians, while misguided, are actually good guys and they are together with the people and they just need to be shown what is the right thing in order to do it.

There are a number of serious problems with this movie, starting with the fact that this is a great piece of pro-collectivist, pro-central planning, anti-competitive, anti-capitalist, anti-humanist, anti-Constitutional propaganda. Of-course there is an attempt to hide it behind the veil of being non-partisan, since it is the Democrat, who is shown to be the politician that is in the wrong (for the most of the movie) and it is a Republican candidate that is shown to be in the right (once he gets the situation), however what is actually shown is that the Republican candidate is not actually a Republican, or put more correctly, he is not actually a conservative candidate.

A conservative candidate should understand that bringing production facilities to America is a good development. This means brining investment capital into the country, allowing tools, machinery, supply chain, management to be established to produce the goods that people apparently want to buy. After all, the Motch brothers said they were making double profits by moving production to China already and they would make double profits on top of double profits by moving production facilities back to America as long as they could produce in the same conditions as they did in China. This means that the product (kids toys, dolls and such), are a well selling product in America, so Americans are happy to buy the cheaper product that is produced in China (there wouldn't be any doubling of the profits if the Americans didn't buy more of the product, and by moving production to China, the Motch brothers lowered their production costs, allowing them to lower the sale prices and thus capturing more of the market share).

A conservative candidate should understand that government regulations surrounding minimum wage and EPA laws are actually hurting the economy and preventing businesses from bringing in capital into the country, preventing new production facilities to start manufacturing again. In fact any number of insourced Chinese labourers would still be better for the Americans, if the product was manufactured within the borders, the cost of the final product would be lower, the pollution and energy expense due to shipping would be lower, the trade deficit would be lower (those goods don't have to be imported if they are produced domestically), the Chinese workers would be spending their earned salaries in USA, there are all the income taxes that would be paid, the 14th district would rebuild some of the supply chain links, there would be more jobs eventually surrounding the factories. If the operation proved successful, more factories could be open in USA eventually, and Americans would start working in them again, even though without the minimum wage and EPA laws, but they would have jobs that would further reduce economic dependency on the rest of the manufacturing world. Eventually the Americans would decrease the trade deficit and would start working out the debt problem, and as more of the capital would be saved, the factories could be made more and more efficient, but this nearly always means less and less polluting without any EPA rules, that's just how technology works. The minimum wage laws are a problem in America and the rest of the Western world, with tens of millions unemployed people it should be obvious that minimum wage and the welfare state is the wrong path for economic growth and prosperity.

Of-course there are other problems with the movie, as I mentioned already, the politicians are shown as almost noble people, who are truly there for the 'common good' and for 'the people' and anything that they do wrong only is a consequence of the greedy, evil business interest. The politicians are shown in a positive light and the business people are shown to be evil. However it were the business people that tried brining the capital and production back into USA and it were the politicians that stopped it in this movie. It were the Motch brothers that wanted to open the factories, nobody else did. The business people are shown to be immoral, evil, greasy profiteers, who do not think about anything else but themselves.

Of-course what is omitted is the fact that these very 'greedy, evil' businessmen brought the goods to the Americans, that the Americans were willing to buy voluntarily, without any forceful coercion. This is exactly what makes businessmen and profits a much more moral enterprise than any politician, because politicians are pushing laws on people that people would normally not want to comply with voluntarily and this is done through threat of government violence. Also while businessmen are thinking profits first of all, that does not change the reality that profits made out of voluntary exchange of products and services allow for actual economic growth, that is because obviously the consumption of the wealthy individuals is limited to some amount per year, but their investments are limited only by their ability to earn. And so by limiting wealthy people's ability to earn with laws, regulations, taxes, inflation, what is actually limited is not their consumption but their savings and thus their investments, which means production.

The point is that the makers of this movie rely on people's lack of understanding of all things: economics, politics, history. It is unfortunate that most people will likely simply follow the path that is laid before them by the producers, take the bait and leave having a stronger belief that the government is the actual answer to the economic and societal problems, while business and free market is the wrong approach. Of-course the reality is that it is only business within the context of competitive free market capitalism that allows growth of economic wealth and thus improving quality of life for everybody in the society.

In this case the 'trickle down' part of the economics was the cheap, abundant products created by the capitalists and the new investments available to the society via the savings and investments that come out of profits made on the sale of those products. The efficiencies that are gained by the Motch brothers, which allow them to make more profits by running factories closer to where the sale occurs, also allows bringing the price for the final product down, which allows the consumer to have more purchasing power, because he now has to spend less money buying that very product.

The politicians of-course are not fighting to get elected to stand for any real economic growth or the people, if they were, they would be on the side of all people, not just the majority, who wants to impose various confiscatory policies upon those, who are much more productive and thus have more earning power themselves. Quite the opposite is true, the politicians know very well that they can always pander to the public and use that as leverage to pass various legislation, that forces the businesses to shell out more money to those very politicians, so that the businesses could get around the legislation. Of-course this has many effects, first of all it fills the coffers of the politicians, but it also limits competition only to those companies, who get access to the political power. Coincidentally this reduces competition in the market and causes prices for the end consumers to rise, which reduces efficiency and steal purchasing power from the people, while simultaneously reducing the economic activity that would otherwise take place.

So this movie, while being hilarious in places, is extremely damaging if taken on its face value, but that is the most likely outcome for the most of the public that will end up watching this great piece of anti-capitalist, pro-collectivist and thus pro-government and anti-individual rights propaganda.

User Journal

Journal Journal: Bernanke votes for Obama 1

Federal Reserve came out with an open ended QE, the sequence number does not matter (it's officially 3, but really it's much more than that, Federal Reserve has been buying up bonds and generally creating fake money and propping up the financial sector for a very long time now).

Of-course the economy is as always the victim of this type of behaviour, the savers are further punished, anybody living off of fixed income is further punished, everybody living pay check to pay check is further punished, because all new money that the government creates either prevents deflation (which is a normal situation for a productive market) or it even forces the prices to increase (which is what the majority of people think of when they think about inflation).

Of-course rising prices are not a meaningful measure of economy at all, actually falling prices is a better measure, because it means there is more competition, there are more efficiencies, better technology, more automation, all of which allows the businesses (corporation and other types of businesses) to lower their prices to compete for the customer base. That was a normal course of events for USA before the Federal Reserve was set up, almost 100 years ago. Prices were falling and the money was growing in value.

The increase in prices in the markets will be blamed by the politicians upon the speculators, but of-course speculators are not to blame for the increase of prices, as far as the market is concerned, the speculators have really under-appreciated real assets. The prices of commodities and equities are being held down relative to the promise of open-ended Federal Reserve action. When somebody says: gold is too expensive at 1700 per ounce, they don't realise that they are measuring the value of gold is a currency that has no value at all given the promise of the Federal Reserve and all other central banks in the world to buy up debt with fake money. This is monetisation of debt, this is the reason for the equity prices going up as well as commodity prices.

Equity prices are prices of companies in the market and since the Fed promises to wipe out debt with inflation, the companies also 'gain' from this action, because they are holders of debt as well. However the real rise in equity prices is simply a function of the open-ended fiat currency supply in the market.

This action does show that the Federal Reserve chairman, Ben Bernanke is voting for Obama in these coming elections. Obviously Bernanke doesn't want to go back to a teaching position some place nowhere in Princeton, he wants to stay in power, he enjoys it, and thus he is helping the sitting president (as every Fed chairman has done before) to get re-elected by providing a short term fix to the long term problem and thus making the long term problem much graver, the consequences of an open-ended monetary expansion is inflation and potential hyper inflation and destruction of the currency. For obvious reason a destroyed currency does not help the economy.

Most of the so called 'economists' that are really government mouth pieces, are calling for more of this type of action, some are even saying that the Fed is doing today what it should have done back in the thirties 'to prevent depression'. Of-course these are witch doctors, in the late twenties and all the way through the thirties (except a short period of time) and through the forties and so on, the Federal reserve has been in the market, propping up bond prices, forcing interest rates lower.

The politicians and 'economists' and various pundits are talking about the coming 'Fiscal Cliff' as if that is the actual problem that the USA economy is facing. It's not a problem, it's part of a solution, which will be avoided. They are all very conveniently forgetting that this so called 'Fiscal Cliff' situation was a response by the government promising to cut spending, a response to a rating agency promising not to lower the rating of the USA sovereign debt.

The real problem for USA is not cutting spending it's the opposite. The real problem for the US (and other countries) economy is to continue spending, to continue government programs that cannot be paid for, to continue printing currencies, to continue expanding government powers, to continue destroying savings, to continue trying to push interest rates down.

Of-course the bond market today has responded in a logical manner, surprisingly enough, given how it responded previously. The prices for bonds are falling, so the interest rates on bonds are going up. Eventually this process will become unstoppable, just like the resolve of the Fed and US government (and all other governments and central banks in the world) to destroy the value of their money.

The solution for the people is not to follow their governments off this real cliff, the fake money cliff, which ends up being the economic cliff. The solution is to avoid fiat currencies of the world altogether. In fact anything except for currencies and various debt instruments is a valid way to avoid inflation, some things are better than others (precious metals, other commodities, farming), some are not as good (various non-farming and non-mining and non-financial equities, properties), but these are completely the wrong way to go: currencies, government bonds, financial equities.

Obama is going to be re-elected, so people like this are going to continue setting the policies and for those who don't have much in terms of savings it is going to become a serious problem. Maybe investing in a small piece of farming land is not such a bad idea, for those who can't do it on their own, maybe it makes sense to stock up on various non-perishable goods. The prices are going up and will go up further, again, not because of any speculation or even bad weather and droughts, it's very specifically tied to the inflation that all the governments are involved in at this point.

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