Sunday, October 31, 2010

Partisan Immigration

Like Barack Obama, I actively sought out friendships with students from around the world during my education. I find that foreign students often had unique perspectives and interesting cultural insights.

My decision to hang out with the foreign students provided me with several direct experiences with the dark underside of the American professoriat. It turns out that the far left in our University also seeks out foreign students. It was when I was with groups of foreign students that Marxist professors would let their hair down and discuss Marxist theory in detail.

I would hang out with Latino students to practice my Spanish and meet Marxist professors out practicing their radicalism.

Truthfully, I was distraught. Students were coming to America to learn about a free society, and the Marxist professors were teaching them one of the most oppressive philosophies ever conceived.

During the conversations, the Marxists professors let on that they hoped to develop the illegal immigration community into change agents (brown shirts) for the upcoming fundamental change of America.

I still love the American immigrant community. When I heard the president say on Univision: "If Latinos sit out the election instead of saying, 'We're gonna punish our enemies and we're gonna reward our friends who stand with us'" (ref) my heart sank.

A Marxist professor working to radicalize students is one thing, actually having a president seeking to develop immigration as a source of division is another.

Last night, before I went to bed, I read a left leaning blog post in which a progressive pundit lambasted conservatives as being the block to immigration reform.

I thought the post laughable. Democrats had a super majority. If amnesty was really that important an issue to the party, they would have passed amnesty straight off. Amnesty is as divisive an issue in the Democratic party as it is for the nation.

After laughing off the theme of the message, I went to sleep thinking about the self-righteousness of the author. Like Obama, the author clearly saw the illegal immigrants as friends who would join in the battle against a common enemy: the conservative.

I wondered: "Would this progressive writer be supporting amnesty if he thought the illegal immigrants would vote Republican?"

It is impossible to look inside another's head.

Historically, however, one finds that many of our most restrictive immigration laws were written by the left when it was thought that immigrants were friends of the right.

So, I as my mind prepared to fall into a deep sleep, a fiendish idea flash into my conciousness. If Republicans really wanted to inact immigration reform, the best path would be to infiltrate the illegal immigration community and convince them to become Republicans.

If progressives thought illegal immigrants were likely to become Republicans, they would not only oppose amnesty, progressives would be screaming for massive government programs to drive illegals out of the nation.

The only problem with my plan, of course, is that I would be infuriated with Conservatives if they engaged in the same low level of manipulation as the left.

Immigrants, after all, come to America to be free. Politicians that strive to develop immigrants as a political force against their enemies are the lowest of the low. My heart breaks every when I see this group of people who I like being used as tools in radicalization efforts.

Party affiliation of immigrants should not be a primary concern in immigration law. When a group tries to manipulate immigration for partisan gain, the group harms both the immigration system and the country.

In deciding for or against an immigration law, one must be willing to ask: If the group had a different affiliate, would I still favor this law? If not, then the law should be rethought.

Thursday, October 28, 2010

Diagnosing the Problem

The last post brought up the Sarbanes-Oxley financial reform. The reform created tight new accounting standards and included stiff penalties for accounting malfeasance.

This reform followed the collapse of Enron and Worldcom. Both companies were rife with accounting scandals.

The fact that we saw big accounting reform after these troubles indicates that our leaders had diagnosed the troubles at Enron and Worldcom as accounting problems.

In my opinion, the troubles at Enron and Worldcom resulted from their business models. Enron was a company that used a complex models of dirivatives to control risk. With risk seemingly controlled, they took a hugely leveraged position to dominate the energy market.

Bernie Ebber's Worldcom was built upon a complex system of debt financing. The company tooked massively leveraged positions in the market and simply hoped that it could grow fast enough to become solvent.

IMHO: Both the Enron and Worldcom business models were flawed and doomed to big time failure. From my point of view, it appears that the accounting problems at the two companies appeared because their business models were falling apart.

If my opinion is right (and we all know that I am right) then the accounting scandals were a symptom of a bad business model. In which case, Sarbanes-Oxley confused a symptom for the underlying disease and was the wrong remedy.

By misdiagnosing the disease, Sarbanes-Oxley did not provide economic stability as its authors hoped. All it did was put a stranglehold on the productive portions of our economy that now had to comply with onerous regulations.

During the financial collapse of 2008, we had really good well audited data telling us that the complex business models built on complex derivatives and highly-leveraged debt financing was a house of cards.

Back to the current crisis: Our current president diagnoses the economic problem as resulting from the existence of Republicans. We've engaged in two years of new regulations and spending designed with the purpose of rewarding friends and punishing enemies.

If the root of our financial problems is the existence of Republicans, then the economy should be improving. If, however, it is the fault of these complex derivative based business models (hedge funds) and debt financing, then we are in store for ugly times ahead. One can't solve the problem of debt financing by borrowing and spending more.

Sarbanes-Oxley Revisited

We all know the metaphor that George W. Bush drove the economy off a two thousand foot cliff in to jagged rocks swarming with alligators. The Honorable Senator Al Franken provides a dramatic enactment of this metaphor.

Most of the people I know believe in Al Franken and believe this metaphor.

I, unfortunately, have developed the nasty habit of looking beyond the colorful metaphor to see what really happened. If Bush killed the economy, as is claimed, then shouldn't we be able to find a smoking gun in the legislation passed during the Bush years. (yes, I am mixing metaphors)

I dislike that Bush passed a tax cut without a corresponding decrease in spending.

NOTE: The Economic Growth and Tax Relief Reconciliation bill passed on June 7, 2001. Economic conditions changed slightly on September 11, 2001. Planes slamming into the World Trade Center disrupted several markets.

The primary financial legislation of the Bush years was called the Sarbanes-Oxley Act of 2002. This law "mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the 'Public Company Accounting Oversight Board,' also known as the PCAOB, to oversee the activities of the auditing profession."

This bi-partisan law strengthened financial regulations and created severe penalties for fraudulent financial reports. The accountants involved with Sarbane-Oxley reporting claim that compliance involved a great deal of work, and there is good indication that bill achieved some improvement in the quality and accuracy of financial statements.

During the financial collapse, few people were calling to question the accounting which showed Mortgage Backed Securities worthless.

Republicans in the Bush years complained about financial irregularities at Fannie Mae and Freddie Mac … which were systematically pooh-poohed by the mainstream media.

Other financial acts of the Bush years included a major bi-partisan expansion of Medicare with the prescription drug bill and a major bi-partisan expansion of CHIP (Children's Health Insurance Program).

Back to the Bush car crash metaphor.

There is an incessant partisan drumming that Bush drove the economy off a cliff. The current president uses the metaphor to justify pushing his political enemies into the back seat.

The metaphor is compelling. But, I can't help but wonder: if Bush is the one who drove the economy off the cliff, why aren't his finger prints on the mortgage backed securities, the community re-investment act, the credit default swaps, the mortgage backed securities, the CDOs, the Enron-style hedge funds, the currency manipulation and derivatives that imploded.

Many of the things at the heart of the economic collapse were created or expanded in the Clinton years.

Bush is to blame for many things. His primary fault is that he did not go after Freddie Mac, and he did not repeal the Security Modernization Act of 2000. But how could he make the political case for repealing laws that no-one really understood?

The Sarbanes-Oxley Act was a stab at a reform that people did understand. People did understand that fraudulent reporting undermined the market. Sarbanes-Oxley failed because cause of our economic duress was the absurd mix of derivatives traded on Wall Street. No matter how well accountants recorded these transactions, they could not change that fact that securities themselves were simply creating instable fluff.

Bush and the Republicans failed to identify and address the root cause of economic instability. When the Democrats took control of the economy in 2006, it was clear that the tax cuts without decreases in tax spending and the mix of toxic assets accumulated through the years would lead to sour economic times.

Yes, Bush is guilty of failing to identify the source of economic instability. All of the hard work invested in Sarbanes-Oxley compliance did not stave off the economic reality that our complex financial system created by progressives is inherently instable.

Unfortunately, Obama's economic policy based on projecting all financial ills onto his political enemies will not lead to any meaningful financial reforms.

The economy is interconnected and involved everyone. Obama's method of shoving his political enemies in the back seat is unlikely to result in prosperity as Obama's Moaist ways impoverish those he struggles against.

Although Sarbanes-Oxley misidentified the root of economic instability, at least it was bipartisan.

Tuesday, October 26, 2010

A Wallflower at the Tea Party

IMHO, the tea party is still more of an independent movement than a "conservative" movement.

Most of the people I've met in the tea party are independent thinkers. Many are people who would have been (or were) treated as pariahs by the conservatives of the Bush years.

In writing this post, I wish to emphasize that there's more than one definition of "conservative" on the book.

There are some definitions of "conservative" that line up well with my personal beliefs. In this world that values paradox over rationality, there are some definitions that are diametrically opposed to my views.

From one point of view, conservative is simply a partisan view in the infamous left/right split of the French Revolution. The partisan conservative simply reacts to the actions of the progressives.

I hate the label "conservative." For that matter, I think one of the primary reasons we are losing our freedoms is that the defenders of liberty have accepted this confusing label.

I realize that many of the people who embrace the term "conservative" have a firmly defined set of ideas in their minds when they use the term.

However, I have studied in detail the tricks of the left. The most destructive technique in their bag is the muddling of terms. To the majority of people on this planet, the term conservative is simply a partisan position.

The great strength of the tea party is its independence. The tea party has produced a number of candidates who are considered pariahs by conservatives of a few years past.

As America enters the final days of the midterm elections, I hope people re-emphasize the independence of the tea party movement and stop trying to equate it with conservatism.

Yes, if conservative is defined as such and such, then the tea party is conservative. But if one uses the dictionary or other common definitions of "conservative" then the tea party is better described as an independent movement.

The left knows how to tear about a nation by manipulating definitions. It is foolish to surrender a major share of the independent vote to progressives simply because conservatives fail to realize that there's more than one definition of conservative in public discourse.

Tweet button:

Monday, October 25, 2010

Zero Summary

The last post (Money is a Zeron Sum Game) provides a great example of how we get tied up with words.

We use the word "capital" for both physical resources in the economy and as a synonym for money.

With the application of our creativity, rationality and time, we can invest physical resources to create more physical resources.

The real economy is a plus sum game. Playing the game well creates wealth.

Money, however, is zero sum game. Money is simply a tool we use to simplify trade. The value of money comes from its scarcity. The value of the dollar in your pocket depends a limited supply of dollars on the market.

The creation of new money shows up in the system as inflation.

Clever schemes that make money from money show up in the system as a wealth transfer or as inflation.

As the word capital refers to both real goods and paper money, the use of the word can get confusing. Real capital produces benefits when properly re-invested. Clever schemes that make money from money simply generate fluff.

This confusion can translates into broader economic and philosophical debates. In the Wealth of Nations, Adam Smith was talking primarily about the investment and re-investment of real capital. In Marx's Das Kapital, he spoke primarily about a ruling class that gains power through the manipulation of paper capital.

The unraveling of the American financial system shows an extremely corrupt system in which a ruling class is looting our nation through the manipulation of paper capital.

Unfortunately, our culture war focusses exclusively on the question of whether or not capital should be owned by the state or privately owned. In this war, the culture warriors fail to make subtle distinctions about the quality of the capital.

To win the war for freedom, people engaged in the debate need to ask what a person means by "capitalism" before defending capitalism. The monetary manipulation going on in our nation's bank is simply paper fluff that is sytematically impoverishing our nation.

It is the health of our real physical capital and not the health of the corrupt financial service sector that matters, yet our politicians rush to the aid of the banks to the cost of the industry and small businesses that produce the real wealth.

Sunday, October 24, 2010

Money is a Zero Sum Game

I heard a stupid phrase on a TV news show: The announcer said: "Money is not a zero sum game."

I suspect the announcer meant to say: "Economics is not a zero sum game."

But the sentence gave me pause.

People who fail to understand the difference between money and the real economy are apt come up with destructive economic policy.

As you see. Money is a zero sum game.

It has to be a zero sum game to work.

The goal of a monetary system is to create a stable unit of measurement for trading goods.

With a stable unit of measurement, I can place a monetary value on my efforts. You can place a value on your efforts. This information simplifies the transaction of goods and services.

The stability of money comes from the limited supply of money. The value of the dollar bill in my pocket is determined by the total amount of money in circulation.

A central bank can affect the value of money by printing more money or by taking money out of circulation.

In the American economic system, the Federal Reserve carefully monitors the monetary supply with a variety of tools to gauge inflation and economic growth. One tool is to create a basket of goods. On a regular basis, the Feds will tally up the basket of goods to measure inflation. If the currency is deflating, the feds can put more money into the system, if inflation is high, they can pull money out the system.

NOTE: The Federal Reserve created a funky fractional reserve banking system. They create money by lending to banks which then make multiple loans backed by the same dollar.

Some people think a steady rate of inflation is good. As such, the Feds gradually increase the money supply. This gradual increase in the monetary supply devalues the dollar in your pocket. A 2010 dollar has less purchasing power than a 1913 nickel. (The New American has a graph of inflation).

When the Federal Reserve was passed, a dollar bill was about as common as a hundred dollar bill is today.

Inflation works a little bit like a tax. The newly printed dollar is as good as the rest of the money in the system. The on the inside of the money creation system get quite wealthy.

Much of the concentration of wealth in our society is a direct result of the Federal Reserve.

A fractional reserve banking system also has the perverse effect of multiplying the debt in the nation.

The Federal Reserve was created by large banks. The Federal Reserve Act was written by a Senator Nelson Aldrich. His daughter married John D. Rockefeller and produced Nelson Aldrich Rockefeller who became vice president under Ford.

Folks of the Austrian School of Economics prefer the gold standard. The gold standard fixes the price of a currency to the precious metal gold and effectively caps the monetary supply.

Back to the thesis of this post.

The economy at large is not a zero sum game. As people reinvest the gains from the intelligent use of their resources, they effectively create more resources and more wealth.

Money is simply a tool that facilitates trade. The ideal money supply is stable. This stability comes from caps on the money supply.

While it is possible to create prosperity through the re-investment of real resources, attempts to make money from money results in inflation (devaluation of the currency).

Now, here is the problem: Our financial education takes place in schools which are detached from real world economics. As such, our scholars are drawn into studying the vagaries of money at the cost of real world economics.

Our economists, banks and financial institutions have created a vacuous system that creates billions of dollars in paper profits by trading trillions of dollars in paper money and derivatives of paper money. This fake economy has grown to such an extent that it is systematically choking and destroying the real economy that produces wealth.

Schemes that try to create money from money result in inflation which has the same effect on the real economy as a tax.

A Note on Capitalism

I really hate the term "capitalism." The term came into widespread use with the translation of Marx's "Das Kapital" into English. The term capital refers to both physical resources in the real world and to the abstract representation of capital in the monetary system.

Money and real world resources are separate entities obeying different mathematical laws. One can produce wealth by reinvesting real resource. Money is a zero sum game. Games where people make money from money diminish society as a whole.

Tweet button:

Saturday, October 23, 2010

Every Home Should be Store

This sounds fun. Some boys in Lewiston, Idaho ran a tiny pumpkin stand to cash in on the Lewiston Halloween market.

Not surprisingly, tax officials quickly squashed the entrepreneurial effort.

How dare kids sell pumpkins. America stopped being a free country with FDR. Parents should be teaching their kids to look to the government for their well being.

Americans voted for fundamental change in 2008, and there is no room for kids selling Halloween props in a fundamentally changed world.

As a free market radical. I applaud the kids for trying. If kids can make a few bucks carving a face into a pumpkin, then more power to them.

A primary concern of tax collectors is to drive free individuals from the market to make more money for professional shops.

If I were declared king of all, I would do the opposite. I would change the tax code so that every household was a business and applaud each time a kid invested their spark of creativity in creating a business.

This was the direction that I was headed with the Object Oriented Tax.

The OO Tax taxes an abstract object between savings and consumption. In this system, everyone has two accounts. They have savings accounts and spending accounts. People pay their taxes when they transfer money from their savings to a spending account.

The OO Tax would encourage people to invest their savings any businesses big and small. So, in the case of the pumpkin carving business, the kids would buy the pumpkins from their pre-taxed savings. They would carve the pumpkins then put the cash back into the pre-tax savings account.

When they transfer the money from their savings account to a spending account they would pay the tax.

The way the market works: the more that people are directly engaged in the process of creating, the more prosperous we become. The big government bureaucracies that squash the entrepreneurial spirits of our kids impoverish our society.

Friday, October 22, 2010

Conflicting Rational Styles

The last post was a stream of conscious post in response to disinformation in Wikipedia. The post introduced a few of my ideas on classical liberalism which I thought I should clarify:

I define classical liberalism as the application of a refined version of classical logic to the question of liberty.

The US Founders had a classical education based on the Trivium (language, logic and rhetoric). The primary logicians were Watts and Arnauld.

The US Founders were the generation after the Great Awakening. They had a strong religious upbringing tinted with a distaste for the excesses of religion.

Just as Aristotle disliked absolutes, the US Founders disliked extremes. Classical thinkers realized that any virtue pushed to an extreme became a vice. The classical tragedy (as defined by Aristotle and perfected by Shakespeare) would have a hero with a tragic flaw. The tragic flaw was a virtue pushed to the point that it became a vice.

To understand the US Founders, one needs to learn to appreciate their rational style.

The basic distinction between classical liberals and modern liberals is one of rational style.

Modern thinkers love to push ideas to extremes. In most cases they do this by projecting the extremes on others. You will notice that a large number of words ending in "ism" appeared in the English language at the beginning of the modern era. An "ism" is an idea pushed to an extreme.

When one pushes an idea to an extreme, the idea often folds back onto itself to create a paradoxes. There's a million of these paradoxes. For example, a democracy could destroy itself by electing in a dictator. Attempts to push rationality to an extreme results in irrationality. A society based on absolute individual self interest is apt to destroy the self-interested individual. Uniting one group in society against another creates division. An ideology of total toleration must tolerate intolerance.

There is a myriad of ideas that self destruct when pushed to an absolute. This is the reflexive paradox.

Modern thinkers love to push ideas to extremes and revel in the paradoxes they create.

The result of this paradoxical style is that modern liberals and classical liberals differ on most issues.

Notice how Obama and crew systematically come to different conclusions from the US Founders? This is the result of paradoxical rational style.

Because of the different rational style, classical and modern liberalism are at sharp odds. Classical liberals believe freedom is freedom and slavery slavery. Modern liberals hold freedom is slavery and slavery freedom.

Modern Conservatism is a reaction to modern liberalism. Classical liberals and Conservatives often agree on issues. However, the two groups often have a different rational style.

Much of modern Conservatism is kneejerk reactionism. If a progressive is for the environment, then the conservative is against it. Many modern conservatives revel in paradox just like the modern liberal.

It is my hope that Conservatives will get off their high horse some day and realize the extent to which it is the rational style and not just partisan issues that is destroying this nation.

Instead of just calling liberals names, I wish Conservatives would realize that the Founders of the United States were liberals, but with a better method of thinking than paradoxical mush that dominates modern discourse.

Tweet Button:

Wednesday, October 20, 2010

What is Classical Liberalism?

People reading this blog tend to slap it with the label "Conservative." Conservatism is a reactionary ideology tracing its history to the French Revolution.

Guess what?

I think the French Revolution was a mess from start to finish. The post revolution reaction was as corrupt as the radical ideas that started the French Revolution.

I am committed to neither side of the Left/Right split that formed in the French Revolution because I think the French Revolution was bunk.

I believe that the best path to an open and prosperous society will be found in the American Revolution. To understand the American Revolution, one needs to know what was going on before the Revolution and not what went on after the revolution.

The thought system that developed before the American Revolution culminated in the American Constitution. The ideologies that developed in the generations after the American Revolution culminated in the Civil War.

(NOTE, the term "ideology" was coined by Destutt De Tracy (1754, 1836) during the French Revolution)

The thought system of the American colonies in the eighteenth century was clearly different from the thought system in the old world. The ideology of the American Revolution was also radically different from the ideologies that developed in the French Revolution.

DeStutt De Tracy was a friend of Thomas Jefferson. I think that Tracy was on the correct track in realizing that we needed different terms to discuss different thought systems.

In order to discuss the thought system of the US Founders, we need a term to describe it. I really like the term "Classical Liberalism" and I believe that we could improve our condition by studying and understanding this thought system.

The US Founders had a refined classical education. Their logic books include Isaac Watts and Arnauld. They read Xenophon not Plato. Like most thinkers of the Aristotelian tradition, the Founders had a distaste of paradox.

The US Founders were the generation after the "Great Awakening." So, they had a strong moral upbringing, but were livid at the excesses of the Great Awakening … such as the Salem Witch Trials.

The founders had a strong foundation in both faith and reason. Conservatives like Glenn Beck tend to ignore the reason part of the equation.

The founders of the United States were livid with the corruption of the old world. They applied their refined classical education to the question of liberty and came up with a radical new way of thinking.

I define "classical liberalism" as "the application of a refined classical logic to the question of liberty." The ideology stretches from Locke through to the penning of US Constitution and the development of the free market. It includes a number of voices including Adam Smith, Addison and the US Founders.

Reading the Wikipedia article on Classical Liberalism (drawn 10/19/2010) broke my heart. The article appears to be based on the ramblings of a wild-eyed progressive professor at the University of Utah named E. K. Hunt. As a progressive, Mr. Hunt's goal is to position classical liberalism as a quaint economic view that existed prior to the enlightened progressives.

The article starts with the declaration: "Classical liberalism is a political ideology that developed in the nineteenth century in Western Europe, and the Americas."

This is a misquote of Richard Hudelson (Modern political philosophy (1999), p, 37-38) who said: "By the middle of the nineteenth century a coherent vision of how society should be organized had taken shape in England, western Europe and the Americas. This vision is the political ideology of classical liberalism."

For those of you with a public school education, different prepositions mean different things. Changing the preposition "by" to the preposition "in" completely changes the meaning of the sentence. Note the sentence "I want our military in Iraq" is different from the sentence "I want our military out of Iraq." All I did was change the preposition.

I believe that classical liberalism developed over a long period of time and that it had become main stream by the nineteenth century. With the claim that the ideology was developed after 1800, the Wikipedia article negates my belief.

NOTE, the term "classical liberal" appeared well after the development of the ideas to differentiate it from modern liberalism which evolved through Rousseau, the French Revolution, Kant, Hegel and Marx.

Personally, I think the biggest difference between classical and modern liberalism is that classical liberalism rejected paradoxes, while modern liberals embrace paradox. Classical liberals held that freedom is freedom and slavery is slavery. Modern liberals march in step with Hegel and believe freedom is slavery and slavery freedom.

Classical Liberals believed that there is one eternal truth with is antithetical to progressivism which believes that truth changes with political expediency.

The Wikipedia article attributes the core principles of classical liberalism to E.K. Hunt. The article reads:

"According to E. K. Hunt, classical liberals made four assumptions about human nature: People were 'egoistic, coldly calculating, essentially inert and atomistic'."

This article is an absolute joke. Egoism is a preoccupation of modern philosophers such as Sidgwick (1838–1900) and Freud (1856–1939). Yes, some free marketeers of the modern age such as Ayn Rand were prone to wax eloquent about egoism. But, guess what? Ayn Rand was not claiming to be a classical liberal. She called her philosophy objectivism.

E.K. Hunt's assertion that ideas developed in the modern age were the foundation of classical liberalism is nothing but second rate disinformation. It is absurd to assert that the core of classical liberalism is a set of ideas that were developed after the theory became main stream.

These little assumptions stated by Hunt are used in game theory and mathematical modeling. Game theory is a thought system used in modern philosophies like Public Interest Theory. Game theory is not core to classical thinkers. One can't refine out a few attributes of a philosophy discussed in game theory and claim it to be the basis of classical liberalism. Classical logic, classical science and Christianity were the foundations of classical liberalism, not game theory.

Despite the fact that the Wikipedia article boldly claims that classical liberalism was developed in the 1900s, the history section of the article includes some of the primary names involved in the evolution of classical liberalism including Locke and Adam Smith. Like most pieces of propaganda that seek to discredit the free market, the article made Smith's illusion to an "invisible hand" the foundation of the Wealth of Nations. You actually have to read the book carefully to find this metaphor which is clearly used as an embellishment, and not as a foundational principle.

There is no mention of Franklin, the US Founders or Constitution, which are considered intellectual pariahs by the like of EK Hunt.

I felt physically ill after reading the Wikipedia article on Classical Liberalism. The goal of the article is to position the early works on liberty as simply a step in the progression toward the progressive's dystopia.

I, on the other hand, believe that there is a very sharp distinction between classical and modern liberalism and that if we wish to restore prosperity in America, we need to figure out this distinction.

The distinction has much more to do with the underlying rational theory than with the subject matter. The classical liberals had a completely different rational theory than modern liberals. We need to rediscover this rational theory.
Although the Wikipedia article on Classical Liberalism is total bunk, I will ignore it and continue to concentrate on this important distinction.

In the modern lexicon, Classical Liberalism is closer to the stated view of American Conservatives than it is to Modern Liberalism. Unfortunately, the corrupting influence of the reactionary impulse of Conservatives is almost as damaging to the ideas of classical liberalism as is the corrupt rational theory of modern liberals.

America is a nation being torn apart by the perversion of words, and I don't see any group effectively defending the lexicon of freedom.

Tweet Button:

Monday, October 18, 2010

What is the Opposite of Regular?

Last night the question popped into my head: "What is the opposite of regular?"

It was past midnight and the trite answer "irregular" did not pop into my mind. Instead my mind grappled with the image of regularity. The goal of regulation is to impose uniformity and order.

The regulated is uniformed and ordered. So, the opposite of regularity is diversity.

Oddly, "regulation" and "diversity" are the two biggest buzz words in the progressive lexicon. Whenever a conservative argues for freedom, the left lets loose a squeal about how we need regulation. When conservatives concede and accept the need for regulation, progressives let loose with a squeal for diversity.

This game of screeching political slogans from opposite terms might be called oppositional dialectics. This game of spouting out opposing ideas appears rational and balanced to those who've never been exposed to logic, which, I guess, is why progressives pulled the study of logic from the curriculum.

I went to sleep with a steady stream of leftist professors, pundits and politicians screeching these opposing ideas as they systemically place a stranglehold on the American people.

A little tiny innocent voice asked in a soft tone "Why don't those evil Republicans recognize the need for regulation?"

To which my weary cynical voice responded: "When the right argues for regulation, the left immediately projects negative images on their partisan foe and calls for diversity."

The two great debates of 2010 are immigration and health care. The left wants to grab power in health care and demands regulation. On immigration, the right wants to enforce immigration law. The left counters by projecting false images of racism on the right and spouts off about diversity.

Accepting that diversity is the opposite of the regulated, we see that the left is simply using oppositional dialects in the grub for power. This is politics at its worse.

I see a few readers are not convinced that diversity is the opposite of regulated. While progressives were quick to yank logic from the curriculum, we did learn a little logic in the study of set theory.

In a system of regulation, those things which are uniformed and ordered are "regular." Those things that are not uniform and ordered are "irregular." The "regular" and "irregular" are disjointed sets.

The union of the regular and irregular is a diverse whole.

Sometimes regular is the opposite of irregular. A person with constipation is irregular, while one with good digestive health is regular.

However, the regular is not necessarily the opposite of the irregular. Let's say a regulated cookie jar has only round cookies. It would include regular cookies like Oreos or Chips Ahoy, but would exclude irregular cookies like Gingerbread Men.

A Gingerbread Man is not in any sort of conflict with Oreos. They both are great dunked in milk.

A regulated cookie jar is in opposition to a cookie jar that accepts the diverse whole of cookies.

The modern political lexicon is full of buzz words and false dichotomies. We would do well if we spent more time thinking about what the buzz words mean. The oppositional dialect that squeals the words ""diversity" and "regulation" for partisan ends usually does little more than lead to greater division.

Tweet Button:

Sunday, October 17, 2010

Shame on All You Grown Ups.

The Greenpeace video below should make all of your grown-ups feel ashamed.

If you wait to the end of this video, you will find that a leftist group with the word "Peace" in it's name says the lines are drawn and you must choose sides. You are either a friend or an enemy.

I am not sure how one chooses sides on the most complex issue of our day (climate), but our left leaning education system is teaching children to be angry and they are ready to rumble.

Wednesday, October 13, 2010

Shorting Infrastructure

Yesterday I watched a political speech advocating that the United States raise taxes to make a massive investment in infrastructure.

The system where the government is the primary source of investment and ownership is called socialism. Preferring a free society, I collapsed into my thought cave and asked if it was even possible for a free people to own portions of "the infrastructure."

The term infrastructure refers to the basic structure on which businesses and society build. The infrastructure is extremely valuable to businesses, but it is hard to package and bill.

Infrastructure is too big for one person to own. Society needs a form of shared ownership to develop and own infrastructure.

Corporations are a form of shared ownership. So, what would happen if one took a billion dollars in infrastructure wrapped it in a corporate structure and sold stock.

So, let's say a group took infrastructure with an assessed value of a billion dollars wrapped it up in a corporation and sold stock. For argument sake, imagine the group issued ten million shares of stock with an expected face value of $100 per share.

Since infrastructure investments are valuable but don't directly generate income.

Hedge funds would look at the balance sheet for the infrastructure company and immediately slam it with hundreds of millions in short sales.

Because of the regulations that allow short selling, each share of infrastructure stock would immediately lose 30% to 50% of its value the moment the stock hit the market. The people holding this infrastructure stock would be wiped out.

Proponents of short selling claim they have a God-given right to short any publicly traded stock with the simple promise that someone in the future repurchases the stock.

The fact that hedge funds aggressively short all publicly traded equities creates an absolutely insane economy where people wanting to share ownership in equities are forced to develop a hyper-growth strategy or perish.

Common sense ideas, like investing capital in infrastructure, get punished viciously by hedge funds and market makers that place trillions of dollars in shorts against such firms.

The idea that people must be allowed to short any given publicly traded equity forces all publicly traded equities into the same business mold. It creates an artificial centralization that systematically impoverishes the people of the world.

Short selling is not a right. Short selling was the creation of centralized exchanges for the expressed purpose of regulating stocks.

Allowing people to sell stock in companies that they do not own is a violation of the property rights of the people who built the equity. Short selling does direct harm to the productive segments of the economy. Short selling is a regulatory regime that has proven itself, time and time again, to be a net negative for society as a whole. It is a regulatory mechanism that should be abolished.

Monday, October 11, 2010

Short Sighted Regulations

NOTE: This is part one of a two part post. I have an errand to run and will post the second part tonight or tomorrow.

Short selling was the creation of centralized exchanges for the expressed purpose of regulating stock prices. Short selling regulations allow traders to sell stock that they do not own. Proponents of short selling claim that short selling improves the liquidity of a stock. If a stock is in short supply, a short seller simply creates phantom shares of stock with the promise of buying it back later.

This justification is a joke. Historical data shows that short interest tends to increase during a liquidity crisis. Short selling increases during economic dips effectively decreasing liquidity when liquidity is needed most.

Even worse, not all shares get repurchased. If a stock goes bust, then the short seller never repurchases and keeps the loot from the sale tax free.

Short sellers claim that their actions can prevent pump and dumps. Just like everyone else, short sellers want to buy high and sell low. So, when short sellers find a pump and dump scheme, they join in on the pumping while they are selling stock, and enjoy the downward slide.

The only difference between the short seller who pumps and dumps and the CEO who pumps and dumps is that the short seller loves to rub it in.

Short selling is an inherently negative and inherently anti-market activity. The regulations that allow short selling are a direct assault on property rights.

Stock ownership is a mechanism for shared ownership. The people who want to share ownership will issue and distribute stock.

The short selling regulations say that, for this group to sell their stock on a public exchange, they must allow anyone in the market to start selling phantom shares of the equity on the market. The sale of phantom shares competes with the sale of real shares.

The short sellers claim that they are performing a public service, but the selling of phantom shares in equities ends working exactly the same as a large tax against the most productive elements of an economy.

Each year hedge funds, market makers and market manipulators reap billions of dollars in short selling regulations each year. As such, they spew forth with inane justification for the regulations.

Claims by these groups systematically prove false. As short selling has the same effect as a tax on the most productive elements of our society, I believe that the regulations allow the short-sighted allowing short selling be removed and the destructive process of short selling be eliminated.

Tweet Button:

Thursday, October 07, 2010

Toxic Sludge from Hungary

I heard an ad for a report on "Toxic Sludge from Hungary!" So, I waited through the commercial thinking it would be a report on George Soros. It turns out the report was on a chemical spill.

Tuesday, October 05, 2010

Decentralization and Deregulation

In the post on the Redistribution of Wealth I brought up the interplay between regulation and market centralization.

Regulation has the effect of centralizing markets. The centralization of markets has the effect of concentrating wealth and disenfranchising the people at large.

With this model one can easily see how progressives undermine their good intentions. Progressives imagine that some great good would come to the masses with just a little more regulation and order. Progressives then create centralized markets and massive government regulators to impose order. The end result of the effort is a few extremely powerful insiders and impoverished masses.

The model also exposes the weakness of the Conservative position. Conservatives rebel against the government regulations, but try to preserve the centralized market.

Deregulating a highly centralized market does not achieve the widespread benefits one would hope to achieve with market reform. When one simply stops enforcing the regulations of the centralized market, the insiders will try to use their market clout to impose order. The effort is likely to result in chaos.

Restoring a free market actually requires a strategy. One strategy would be to create a regulatory regime that decentralized the market. Decentralized markets do not take kindly to central regulation. So, if a decentralization effort was effective, it would be followed by a movement to either end the regulations or to preserve only those regulations that maintains the decentralization.

How to put this different. Marx instructed his followers to use the tools of the capitalist to bring down the capitalist system. I suggest that freedom lovers use the tools of the progressives (regulations) to unravel the centralized markets created by the progressives.

This methodology is best seen in the Medical Savings and Loan.

Employer based insurance was the creation of progressives. This system created a paradigm where every medical transaction was a lawsuit against risk pools. Insurance necessitated the creation of insurance regulations and effectively consolidated in the health care market into a centralized market.

The Medical Savings and Loan would break apart the risk pools into a collection of savings accounts, loans and grants with the savings accounts under direct control of the policy holders, the loan reserves under the control of the Medical Savings and Loan and the grants under the control of charitable organizations.

This new set of regulations would create a decentralized market. With each person directly controlling his medical resources, the people would seek to preserve only those regulations that protect their health care resources.

Dare I mention, if people retained control over their health care resources there would be a massive redistribution of wealth from the ruling elite to the people. The medical savings and loan would take all of the wealth locked into insurance companies and put it back in the people's hands.

Oddly, one of the biggest blocks to the Medical Savings and Loan is the words we use in political discourse. The process of liberating people's health care resources from control of insurance companies is called "liberalization."

Conservatives and Progressives are engaged in a death struggle over who should control the health care system: Conservatives want big private insurance. Progressives want big government.

The health care reform that does best by the people liberates resources from the elite and places them back in the hands of the people. This type of system used to be called "liberal."

Monday, October 04, 2010

Charitable Giving Works

Several posts back, I announced a major change to the Medical Savings and Loan. The original design attempted to supplement a policy holder's savings with reinsurance. I removed the reinsurance in favor of a system of grants.

When people in the MS&L have medical costs that go beyond their ability to self-fund their care, the MS&L triggers a search for grants. There is likely to be the same (if not more money) in the grant program than in re-insurance. The primary difference between the medical savings and loan and insurance is that the medical savings and loan openly acknowledges charity as charity.

Because the medical savings and loan calls the overages "grants" instead of "reinsurance," people's knee jerk reaction to the Medical Savings and Loan is that the non-profit community could never absorb the hit from people switching from employer funded to self-funded care.

I should emphasize that the Medical Savings and Loan does not lean on existing charities. It brings its own money to the table. The MS&L breaks down the money in the current insurance system into separate accounts called savings, loans and grants.

It is likely that grants would be administered by existing charities, but the money distributed would come from the MS&L income stream.

The video below shows Representative Senator John Thune who supports attaching a Charitable Giving Amendment to be attached to the budget to preserve tax credits for charitable giving. The piece leads with an interesting fact that Americans already give $300B to charities.

The infrastructure to do big things is already in place. The Medical Savings and Loan simply adds to this wonderful tradition of giving.

Rather than requiring policy holders to buy re-insurance (administered by a wall street fund), the Medical Savings and Loan channels the money from reinsurance through the existing charitable organizations.

Lets say the MS&L would have bought $100B in re-insurance. I changed the program so that same $100B goes through the charitable infrastructure. When a person can't afford to self fund their care, they system would hit up the charities who just happen to have recently received an influx of cash for charitable giving.

The charitable sector is already massive and has proven to be the most cost effective way to help supplement care. It makes sense to expand those things that work well.

On the Redistribution of Wealth

Before asking "Should government redistribute wealth?" one should ask "can big government effectively redistribute wealth?"

If big central government is not effective at redistributing wealth, then the question of whether or not is should engage in the activity is pointless.

Big government has the predictable effect of centralizing markets. This centralization of the market gives a small number of insiders control of things. The insiders dominating the system become rich and powerful, while the masses languish.

The idea that a really big government will create an economy with an even distribution of the nation's wealth is foolish, because wealth tends to follow power. The consolidation of power invariably leads to concentration of wealth.

Conservatives would win the argument on the size of government if they switched the debate from "Should the government redistribute wealth?" to "Can the government effectively redistribute wealth?"

This observation immediately brings up the question: Why don't they do this?

Instead of posing the winning arguments, rich conservatives have some strange compulsion to put on clown suits and tromp around on stage complaining about their taxes.

I've wondered why conservatives consistently push such a weak argument.

My fear is that some conservatives avoid shifting the debate from "Should" to "Can" because the statement "Central government is a bad tool for redistributing wealth" begs the question of "If big government can't do the job, then what can?"

The answer, of course, is decentralization. Just as centralizing the market concentrates wealth. Decentralizing the markets opens up opportunities for those outside the power centers. Decentralization of the markets would effectively redistribute wealth.

We already have a highly centralized market with massive concentrations of wealth. It is possible that some conservatives want to preserve the imbalances of the status quo, with its centralized markets and inequitable distribution of wealth.

I dislike using the term "conservative" in discussions about the free market, because the term is nebulous. It is impossible to tell what the self-described conservative is trying to conserve. Is the self-described conservative fighting to restore a free market, or is the conservative trying to preserve existing power structures?

The vast majority of people calling themselves conservative really want to restore the free market. The minority of conservatives who want to preserve the centralized markets are able to pull the strings which undermine the efforts of the people.

To recap:

The problem I see is that regulations from big government have created a highly centralized market. This highly centralized market artificially concentrates wealth in a corrupt ruling class.

Simply deregulation a highly centralized market is problematic. When one tries this the power brokers in the centralized market run amok … to the detriment of us all. Restoring the free market requires both deregulation and decentralization. Deregulating a highly centralized economy leads to an even worse mess.

Defenders of the free market have a nasty habit of skirting the distribution of wealth issue. Rather than trying to divert attention from the inequitable distribution of wealth, free marketeers would be wise to change tact and take the issue square on by pointing out that big government tends to centralize markets and concentrates wealth.

This new tact, however, tells us that to restore the free market, we need to both deregulate and decentralize.

Tweet Button:

The MS&L

I should point out that the Medical Savings and Loan combines deregulation and decentralization.