AIG spells nationalization of entire insurance industry

A I Jeez

The Wall Street Journal reports that since receiving government aid, insurance giant AIG has begun greatly underbidding its competitors in the insurance industry.  Fed Chair Ben Bernanke acknowledges this practice, and believes it is necessary for AIG to do this, in order to gain enough marketshare to become profitable.

With billions of government handouts, AIG is able to offer peerless premiums.  In a free market, offering such low premiums would be corporate suicide.  But AIG is not a free market participant.  It has government backing.  Bernanke and Treasury Secretary Timothy Geithner have, on numerous occasions, voiced their intent to do whatever is necessary to keep AIG from folding. In this context, risks that would normally bankrupt the company do not restrict its behavior, because its liquidity flows from a seemingly bottomless barrel, the purse of the citizenry.  Losses from these risks will continue to be subsidized, and those subsidies will encourage more risks, and bring on more losses.

Other insurance companies cannot compete with a company that has unlimited liquidity.  This leaves their executives with a dilemma: they can keep their premiums high and non-competitive, and lose all of their customers; or they can lower their rates to meet AIG’s, keep their marketshare, and become illiquid when they are forced to pay out to misfortunate customers.  Both of these options will end in bankruptcy.

When AIG’s competitors are nearing bankruptcy, one of a few results may play out:  they may fail outright, leaving their marketshare available to AIG; they may be bailed out by the government, which starts them on AIG’s path of neverending losses; or, they may be purchased by AIG.  In each of these results, a government-funded monopoly over the insurance industry is established.  This monopoly, like all monopolies, will suffer unnecessary costs and miss opportunities to innovate.

The added costs of a non-competitive insurance industry will be great, even in the unlikely circumstance that it is fully funded by premiums.  It is likely, however, that the monopoly would evolve into a nationalized insurance company, or a government service, rather than revert back to a private insurance corporation.

If AIG’s insurance role becomes a government service, it appears that the costs of that service will be borne by everyone who uses dollars, as the Treasury has started printing large amounts of currency to pay its bills.  This inflation is perhaps the most regressive form of taxation, because it hurts those who are not wealthy enough to protect themselves properly from its effects.

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Henry Hazlitt and I on the Auto Bailout

Hazlitt

“Dying industries absorb labor and capital that should be released for the growing industries.  It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other.  These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs.  They are solved by this system incomparably better than any group of bureaucrats could solve them.  For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumers not what the consumers themselves wanted, but what the bureaucrats decided was good for them.  Yet, though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it.  They are always trying to improve it or correct it, usually in the interests of some wailing pressure group.” – Henry Hazlitt, Economics in One Lesson, 1946

My beefs with the bailout:

  • It rewards failure (through “loans”) at the expense of success (through taxes).
  • The excuses are lame.  A few loosely-quoted examples:  “People won’t buy our cars because they think we might go bankrupt.”  More likely: they won’t pay for your inferior product.  People know that bankruptcy does not equal death, as I am sure all of your sales associates have told their customers.  Lame.  “Foreign companies are receiving good incentives to open new factories, but we have to use our old ones.”  More likely: the unions have you by the balls.  Lame.  “Foreign companies are getting assistance from their governments, which is why we need assistance from ours.”  Not sure if either of the claims made in this excuse are true, but lame nonetheless.  If other governments want to misplace investments, that’s their business.  Their economies will become weaker for it, and our overall economy will be relatively more productive than theirs, regardless of what happens to the automakers.
  • I live in Tennessee.  The auto industry in Tennessee is doing relatively well.  Why should Tennessee be punished for Michigan’s business failures?  For the taxpaying laborer at a Tennessee factory, there can be no sufficient reason.  It is stealing from the Tennessean.  It is immoral.
  • It is unconstitutional (see part 2 of Jefferson’s argument and replace “bank” with “auto loan,” then become disgusted by the monstrous parasite that is your federal government).
  • It will not save the automakers.  The beggars will be back to Congress, palms upturned, and because the government will have already invested in their success, it will be much more difficult to turn them away.
  • The government cannot “save” one industry without adversely affecting another, or–what is more likely the case–many others, through opportunity costs and/or taxation.
  • I prefer Honda, Toyota, and Nissan to GM, Ford, and Chrysler, mainly because, when the Japanese automakers take my money, they give me a car for it–not a promise to try to pay it back A.S.A.P.
  • The United States government is in a fiscal abyss, and one unfortunate generation will eventually have to fit the bill.  This is what I call generational slavery, because one or more generations has decided, rather than extinguishing its own debts, to pass them on to posterity, guaranteeing “confiscatory” income taxation (as if there were any other kind) in the future, and thus robbing future generations of their own labor.
  • As poorly as the executives at GM, Ford, and Chrysler have managed their businesses, the federal government (or “car czar”) would do the job even worse–much worse, I believe.

If this bailout passes, the Lions will go 0-16 this season.  Sorry Detroit, karma’s a bitch, but I’m sure one more quarter of Ford’s failing operations is preferable to one win at Ford Field.  Go Colts!

No liquidity problems for Lawson campaign

Lawson

While every other entity in America is crying about its inability to access cash, BJ Lawson’s Congressional campaign just received a huge injection of liquidity.  Lawson, who is running for a U.S. House seat in North Carolina’s 4th district, raised over $150,000 from thousands of donors on Tuesday alone.

Many citizens across the nation feel betrayed by a Congress that recently passed an unconstitutional $700 billion Wall Street bailout, which has evidently done nothing for market confidence or financial stabilization.  North Carolina’s 4th district voters share in the dissatisfaction.  Their House member, David Price, voted for the record taxpayer bailout, after his office failed to answer phone calls from constituents trying to convince him to vote against it.  It appears that, in David Price’s 4th district, representative government has taken a back seat to other interests.  Since the bailout’s passage, U.S. markets have closed down considerably every day, as Americans are quickly abandoning a system that they feel has thrown them–and their freedom-loving values–overboard.

Despite what we’re told is a vacancy of cash in the U.S. financial system, some Americans are still investing what they have left in a brighter future, and many believe the best way to invest is to contribute money to representatives who will vote to replace an overtly corrupt banking system.  They recognize that free market capitalism has disappeared under the weight of an inflationary system of unrecoverable public and private debt–a corrupt and bankrupt system that continues to garner the support of Rep. Price, despite its detriment to North Carolina’s working citizens.

$150,000 says North Carolina’s residents will want less interference and more freedom in their financial lives this November.  Congress’ approval rating is 9%, and BJ Lawson is in tune with a lot of angry voters, who seem to understand that David Price voted to take away a chunk of their paychecks and some of their economic freedom.

Open bailout opposition letter to Congress

Stolen from you by U.S.

“That government is best which governs the least, because its people discipline themselves.” – Thomas Jefferson

There is a lot of hype in Washington this week, a lot of short-term thinking, but very little honest reflection and philosophically sound governance based on the long term prospects of the American economy.  Jefferson was right: our financial markets have fallen into a cycle of government dependence and therefore no longer discipline themselves.  The American economy has lived beyond its means; to deny this is to declare yourself ignorant and unfit to govern.  We have floated on a cloud of credit, and believed ourselves to be in heaven, and though we have ventured far from earth, the latest liquidity squeeze has allowed us to see just how far we must fall when our economy’s bill comes due.  Though the $700,000,000,000 proposal before you may indeed postpone the payment date, the American people will eventually have to pay dearly for living on money that has been given value–not by production–but by irrational faith, and you can be certain that every postponement will make that future payment more painful than it would be today.  Do not be convinced that there are no free market solutions to this crisis.  The unspeakable ideal of economic freedom will pump more liquid capital into our financial markets than the government ever could, and more importantly, the money generated by such a system would be sound and valuable.  The chronic risks of moral hazard and inflation this bailout poses far outweigh the risks of a brief credit crisis caused by market-liquidated debt.

We cannot become wiser before we admit that we have been foolish in the past.  Market interference was, in most instances, foolish.  The Community Re-Investment Act was foolish.  Taxing capital gains was foolish.  Turning over Congress’ constitutional money-coining responsibility to a private, secretive organization was foolish.  Encouraging irresponsible lending through never-ending taxpayer bailouts was foolish.  Artificially low interest rates were foolish.  Price manipulation was foolish.  Giving up on sound money was foolish.  Losing faith in freedom was foolish.  Ours, however, is not a fated existence.  Nowhere is it written in stone that we must remain foolish, or that we cannot obey Constitutional principles.  If, as Senator John McCain likes to say, you “came to Washington to change Washington,” now is your chance to realize your lofty dreams.  Crisis is the proper time for reform.  Now is the time to embrace real capitalism.  The American people should not be told to fear freedom, as they are being told now, but to embrace it.  The time has come for Americans to be rewarded for their own successes, and held accountable for their own mistakes.  The time has come for the ambitious legislators in Washington to stop fiscally abusing the children of this nation.

1994, 2000: Remembering the words of Goldwater and Reagan, American median voters want smaller government and balanced budgets, so they elect Republicans; in return, they receive the most rampant growth in government (and public debt) this continent has ever known.  2006: the median American voters want out of a conflict that is unrelated to their security or welfare, so they elect Democrats; in return, the war’s funding is not cut off but greatly increased.  2008: the American people want no taxpayer bailouts, they want to end the bubble-blowing policies of the Federal Reserve, and they want to stop the growing cycle of debt that has ruined a once free economy; in return, they are presented with the largest taxpayer bailout ever, a more powerful and secretive central bank, the largest economic bubble-blowing scheme ever contrived, and more debt than they can ever afford to pay off.

The blindfold has been removed from the American people.  They are awakening to a pattern that reveals self-government as a myth.  The extraordinary actions of the federal government are only serving to remove its mask, revealing its nationalist, socialist, imperialist, authoritarian, unresponsive, evil face.  We can accurately predict that, on matters of true importance, when a particular course of action is supported by more than 70% of the American people, their government will pursue the opposite course, pretending the people are a force of no consequence–an attitude to be expected of King Louis’ court, but not of a republic’s elected leaders.  I need not remind you of the French response to that attitude.  The United States government has lost so much legitimacy that it may not survive the latest proposal, should it pass.  The American people are well-aware of the truly criminal nature of any financial bailout; a huge one will both injure and offend them.  Moreover, it will not come without consequence; their lanterns are burning, their pitchforks are raised, and they are prepared to halt the criminal acts of this government, should it become necessary for them to do so.

Want some bad debt? Bailing on America.

Rights wronged

“I do solemnly swear that I will faithfully execute the Office of President of the United States, and will, to the best of my ability, preserve, protect, and defend the Constitution of the United States.” – Presidential Oath of Office in its entirety

“Stop throwing the Constitution in my face!  It’s just a goddamn piece of paper!” – George W. Bush, (so help us God)

“Go f*** yourselves, America.” – U.S. Secretary of the Treasury Henry Paulson (paraphrased)

“Amen, Mr. Secretary!” -Barney Frank (shockingly not a retard…according to standard definitions), and Christopher Dodd (aka, Oppressive Slimeball)

The unwritten American law: when any financial institution makes any bad loan anywhere, that institution is not accountable for its error: the American taxpayer is.  Actually, for the sake of preserving the market (and when they say “preserving”, they mean “undermining”, the American taxpayer will now prop up any large corporation, assuming it is a complete and total failure.  GM, Ford, Bear Stearns, Lehman Brothers, IndyMac, AIG, Fannie Mae, Freddie Mac, and every other non-competitive corporate loser: do not worry, because the United States no longer believes in capitalism.  Therefore you cannot fail; in fact, as a reward for your magnificently unsuccessful business models, you get free money from the American taxpayer.  The D.C. mafia are perfectly happy to crap all over the average American in order to sustain a politically friendly (albeit criminal) banking system.  What’s the old saying about America’s hospitable nature? Give me your swindling, your greedy, your corporate jet-flying masses?

Guess what, America? Henry Paulson is officially above the law.  $700,000,000,000 is not nearly enough; $2,000,000,000,000 is far from “enough” for the socialist journey upon which your government now embarks.  There will be more to pay, more to print, more to steal from your labor.  This new socialism is insatiable.

America does not have leaders anymore.  It has rulers.  It has owners.  They rule you, they own you, they have spent over a century subverting the supposedly binding agreement between you and them called the U.S. Constitution, and they have the power–through formal taxes and inflation–to take every last real dollar you ever saved, and they will, because their cars aren’t fast enough, their jets aren’t new enough, their diamonds aren’t big enough, and they know you are a bunch of suckers who still think the Presidential election matters.  Wake up and read the Constitution.  You’re getting royally screwed, America, and by a creature many of you still consider friendly: the federal government.  This President, this Congress, these judges and bureaucrats, these candidates–the agents of change–are, for the most part, your masters and your enemies, and if you let them, they will strip you of everything but your soul.

When you ask why or how this could happen–how the freest modern society could fall so far, and become economically depressed and politically oppressed–they will respond as they do now, explaining that they are not accountable, but you are–and sadly, in a way, they will be right.  The further their explanation strays from the truth, the more oppressive they will become, the more dangerous dissent will become to them.  The Constitutionalist will take on the foster name “terrorist”.  The reflective person will be legally termed the dangerous person; the truthful person: an enemy of the state.  As a wise man once said, “truth is treason in the empire of lies.”

Letter to the regulatory proponent

More regulation is not helping America

“Despite the long term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they had otherwise been had government policy not actively encouraged over-investment in housing.” – 07/12/2002 (in House, Congressman Ron Paul, R, TX)

The economic problems we are experiencing now are a result of regulation, and we actually wanted them to happen, so that we could have an excuse to propose more regulation. We predicted this recession would happen way back in 2002. We knew it would happen all along, and we were actively warned about it, and we listened, and we decided to let it happen anyway. The Democrats knew it would happen, and so did the Republicans, and they could have stopped it. They didn’t because, quite frankly, they don’t give a sh** about you or me, or anyone else in this country that doesn’t directly help them gain or retain power, or help propagandize people like us. If you think regulation is the answer, read up on Adam Smith and Friedrich Hayek, because you’ve been relying on the “news” for economic information, and they’ve got you painfully brainwashed. Americans now live like feudal serfs, working all of their lives, and never controlling their directions. Socialism is more similar to the tyranny of the past than to the prosperity of the future.

Other things you should know, in your infinite economic wisdom, before you take over the free market and start planning the economy: medical care is only expensive because it is overregulated. any economist will tell you that competition brings down prices, and the government is helping big health/drug companies keep competitors out. the market mechanism actually works pretty well with very little regulation, as long as collusion and monopoly are avoided wherever possible.

And lastly, the reason people work all of their lives at a grueling job for little pay is because the government makes it really hard for them to offer their services at a marketable price, by creating artificial labor surpluses. Workers also give a sizeable percentage of their earnings to government. They also have difficulty using their skills for their own profit because starting a business requires them to fill out long, expensive licensing forms, and they often are discouraged by the added tax burden. Many feel like they can’t go out on their own because they do not know the tax laws well enough, and are afraid they will break the law while trying to help themselves. However, all of these situations help the corporation for which they endlessly slave away, because it keeps the upstarts down. Hooray for taxes.

Stealth bailouts and the Washington Mafia

You’ve been hearing about the Bush/Paulson plan for “streamlining” or “revamping” the “outdated” regulatory system.  Let me take the spin off of this story for you:

 The plan is to allow the Fed to do whatever the hell it wants to, injecting taxpayer money into whatever irresponsible bank needs it for the time being.  After the liquidity pressures in the market subside, the Fed will use its newfound power to stop banks from doing anything stupid again; this is basically a nationalized banking system without a mask.  The unthinkable conclusion of Bush and Paulson is that the only reason we have this recession is because the Fed doesn’t have enough control over our finances, when in fact it is a result of government coercion.  The same federal government that encouraged irresponsible lending is now denouncing it, but offering to pick up the tab.  We should elect people like Ron Paul, or become familiar with the fact that the aristocracy will always win, and the people will always lose.  The people will remain at the mercy of corporation, which hides behind a pretend government.

The more I study this, the more I realize nearly all politicians are scum, and that the federal government is much more similar to a criminal organization than a service organization.  In fact, I can think of no difference between what organized crime does and what the federal government does, except that the federal government has more power, and involves millions of people that only want to do honest business.  To look at what our government does, and want to be a perpetuating force in that process, is a lot like wanting to be made in the Italian mafia.  It’s all about power, prestige, and money, and at its core it is merely a group of thieves who force others to work for them, hiding behind expensive suits, slick haircuts, and a team of grunts with automatic weapons.  I can live with the Sopranos; they don’t steal from me.  I can’t take the Bushes and Clintons anymore.  All the nationalist and/or socialist mobsters can go to hell.  America is for liberty, so get your hands out of our pockets.