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.

Sifting through the crap

Crap

99.9% of everything you will ever hear from a U.S. politician or media pundit is total crap. I present to you five widely discussed issues that do not matter, so that next time you hear them on the radio or television, you can say to yourself “this is pointless conversation”:

  1. Energy policy: The energy industry is part of the economic market. It operates most efficiently on its own and requires no help from the government (unless there is a monopoly in the market). Anyone who thinks limiting our choices on energy is a good thing is delusional. Stay away from them. It is remarkable how many believe that people can be made better off by the imposition of limitations on their choices. Here’s how it works, honestly and simply: when (and only when) gas prices become too high, an alternative energy source will become dominant.
  2. Environmental issues: If your property is being damaged by another person’s (or group’s) pollution, sue them. If you can prove your case, you will win. Chances are, you’ll be one of many, and those who choose to pollute will soon stop because of the amount of expenses they are incurring from mounting lawsuits. There are no regulations necessary–just the simple legal protection of property.
  3. Illegal immigration: The leaderships of both parties have decided nothing will ever be done to stop this. In fact, they hope to someday unify Mexico, Canada, and the U.S. under a multinational government.
  4. Racism, sexism, feminism, anti-religious sentiments, and other prejudices: You are easier to control if you think along these lines at all. Whether you are practicing these or blaming others for doing so, you are falling right in line with what the status quo wants. You are focusing on an issue that does not matter, which works out perfectly for the people trying to make sure they can continue to steal money from you without your noticing.
  5. Islamofascism: This is a huge myth. If you think radical Muslims are about to take over the United States, you are wacko. You need to see a mental health professional and talk about your irrational fears.

From now on, if you hear one of these issues mentioned on the news or anywhere else, remember that someone is trying to entertain or bewilder you, and that nothing they say can swindle you out of a wise and well-reasoned vote. The list above is far from exhaustive.

Now that you know what sorts of issues don’t matter, here’s some that do: The Constitution, Bill of Rights, fiscal restraint, and sound monetary policy (the elimination of fiat currency). If your legislators are focusing more on the first list than this one, they need to be replaced.

You’re welcome.

If we the people leave, do they the rulers win?

We have owners.  They own us.

“Truth is treason in the empire of lies.” – Ron Paul

The long-term economic outlook for this country is so grim–and this is well-researched and almost universally accepted–that I can hardly see myself sticking around to endure it. A free and great industrial republic has become a credit-addicted empire, propped up today not by human productivity and ingenuity, but by the artistic renderings of the Bureau of Printing and Engraving–a small bandage placed fruitlessly on a fatal systemic illness.

Americans, as a whole, are either unaware of their collective fate, or unwilling to alter it. Toss charges in whatever direction you wish; the real culprit is in the mirror. But no matter where we place the blame for our government’s fiscal mess, we would be wise to understand that economic laws cannot be ignored forever, that justice is a force of nature not to be denied, and that reality will set in–as soon as we accept this diagnosis, we can begin to treat the disease. Every American born today enters a society of bondage, accompanied by a $75,000 liability to a government that child did not elect. I am twenty-four years old, and I hope that in the future, American children will be born free. I am, however, reluctant to believe this will happen in my lifetime.

As we the people request greater freedoms, they the government tighten our chains, and we are left with a choice: we may stay in America and struggle against our rulers for what we once called inalienable rights, or we may seek refuge in another land. If I, as an advocate for liberty, leave America, have I allowed the totalitarian forces in this country to win? Is liberty like a game, with winners and losers? If so, is there any chance the people can ever beat the government? Should I stay and fight for America’s true cause, or should I go and find prosperity elsewhere? My dilemma is not a new one. In Hitler’s Germany, were the liberty-minded citizens who fled the country better than the liberty-minded activists who stayed and were imprisoned or killed for their beliefs? As I wonder which option is better, I am reminded of a couple of quotes:

“I am in Birmingham because injustice is here.” – Martin Luther King Jr.

“Independence is my happiness, and I view things as they are, without regard to place or person; my country is the world, and my religion is to do good.” – Thomas Paine

If I could find a truly free country, I would move there, but it seems the increasingly oppressive governments of the world have rejected the enlightened principles that many countries once embraced, and most individuals still do embrace. What keeps me here is best expressed by the following utterance, which, though relevant, is probably too clever and wise to appear alongside my earnest musings:

“You and I have a rendezvous with destiny. We will preserve for our children this, the last, best hope of man on Earth, or we will sentence them to take the last step into a thousand years of darkness. Alexander Hamilton said, ‘a nation which can prefer disgrace to danger is prepared for a master, and deserves one.’ And in that sentence, he told us the entire story: if we lose freedom here, there is no place to escape to; this is the last stand on Earth.” – Ronald Reagan

Let freedom ring.

Does America know where its economy is headed?

America on the verge

As a rule, Congress will not address a difficult problem until it becomes a crisis. Former GAO Head David Walker resigned because Congress would not address what he calls “unfunded liabilities” or the “fiscal gap,” which is the growing difference between the nation’s implicit debt and its expected revenues. The sum seems destined to bring the United States to its knees. Earlier this year, the federal government modestly estimated it to be about $58 trillion (estimates have been as high as $72 trillion), and the total is growing sharply. To give you an idea of how big that number is, each American household’s equal share of that would be over $400,000–over $175,000 per person (in addition to the taxes they are already expected to pay). This is especially frightening because we know that the net household worth of the United States is $56 trillion and falling. It would appear that the United States is worth less than it owes, and is therefore technically bankrupt. If the federal government seized the assets of every single American citizen today, it still would not be financially capable of keeping its promises.

When Congress wouldn’t listen to him about this issue, David Walker decided to take his message to the employers of the legislative body, the American people. Despite help from billionaire Peter G. Peterson, Walker and his message are still widely ignored.

Walker’s assertion is this: America will undergo a severe and prolonged (if not permanent) economic depression if it does not change its spending practices now. The claim is based on economic laws and reality, and cannot be denied. Walker is right.

As Americans, we are left with a choice between two emotions: we can get angry about our economic situation now (and elect people that will start spending and promising responsibly), or we can be sad about it later, at which point we will be very poor and helplessly incapable of fixing the problem. The rulers of our nation, along with our media, have already chosen the latter option, by focusing attention on gay marriage, drug use, and abortion while the world’s greatest economy keels over, but it is not yet too late to alter their choice. If Americans are able to replace rulers with leaders, and base their votes on sound policies (and this is a HUGE if), they can still avoid economic collapse, but they must act now with their ballots, by electing responsible candidates like William “B.J.” Lawson of North Carolina’s Fourth District.
Ron Paul and BJ Lawson protecting the dollar

Generational slavery

Checks needed for purchasing more check printers

“Man has no property in man; neither has any generation a property in the generations which are to follow.” – Thomas Paine

I remember watching an episode of Oprah (though I should clarify that this is not a habit of mine) a couple of years ago, featuring a woman who had been duped by her fraudulently bankrolled husband–he seemed to have everything (on credit), but actually could not afford any of it, and when the bills came due, he disappeared, and left her holding the yacht payments.  She was bankrupt, and would have been left in a position of pseudo-slavery for the rest of her life had Oprah not stepped in–all because someone who was supposed to care about her abused her trust.

This woman’s financial situation is a microcosm of the generational explosion of debt that will soon torment the United States and much of the world.  The baby boom generation is about to retire and start collecting Social Security and Medicare benefits, the costs of which have traditionally been underestimated.  Current budgeting practices are unsustainable, which of course means they cannot be sustained. 

The problem is not the baby boom generation’s politics but its size–there are 77 million of them, but there’s still only one Oprah, and only one American labor force, which isn’t growing at near the rate of the retirement-benefit force.  The only long-term solutions are massive government cuts or massive tax increases, neither of which are very good campaign platforms.

Boomers did not have as many children as their parents did, so in order to support the boomers the way the boomers have supported the elderly, the new American worker must be prepared to pay a confiscatory income tax rate or go to jail, or leave the country.  Unfortunately, a number of the most talented individuals of my generation (perhaps even I) will choose to abandon ship and keep their finances above water.

The sad thing about this reality is that everyone knows it, and no one will stop it.  Our nation faces a fiscal tsunami of debt that is growing every year, with no end in sight.  When our leaders choose to ignore it, and when we choose to ignore that our leaders ignore it, we are committing a moral crime no less severe than (and almost exactly the same as) the slavery of old, asserting that one group of people (those working in America today) may steal the labor of another (those to work in America in the future) against their will, and for no greater reason than the chance timing of their births.

The only morally just way to handle the debt and obligations of the American government is to stop deficit spending now.  Anything that can be cut must be cut.  Start with the war, which almost everyone now agrees was a mistake to begin with.  Move on to other government boondoggles until we have trimmed them down to an approachable size.  Until we can get the budget under control, we should consider the American government fiscally and morally bankrupt.