Tim Ayles Awfully Wrong, Like His Target

Tim Ayles is getting good press on an article he wrote.  He is attacking the idea of the demise of the USCurrency.  He is right, it will not die soon.  His analysis is awfully wrong.

But to argue that government spending is all a waste and the money spent ends up being vaporized, is wrong. Government spending, even wasteful spending, is someone's income. Food stamps become the income of Safeway and Albertson's. Employees who work there get paychecks, and the shareholders get dividends. That money ends up being spent as well. Again, not fair to some who are productive, but also not a waste. If you run a productive business, chances are you too have received some of this "stimulus" money. If you are that against government spending, go to great lengths to make sure you don't let any of that money get into your hands, and then watch your business struggle.

Here Ayles forgets something:  where did the money come from?  Government spending is my income mulcted from me.  Why should I be forced to give it to Safeway for nothing in return?  Ot worse, to have Ssfeway give the benefit to someone else? Which causes that someone else to not produce, like a farmer paid not to grow.   It is far worse than Ayles perceives in his keynesian universe, I am denied the good of the creativity and productivity of those who simply have money transferred to them and on to Safeway.  Ayles misses both sides of the equation.

There is this funny little thing that keeps us from being truly free men. Taxes. Grocery stores don't have the luxury of deciding to exist on barter as some would have you believe. It's not that they don't desire such situations, but the government mandates they continue to accept paper money by force. The US Government has determined that taxes are to be levied on owners of property and services, and those taxes will only become extinguished in the form of paper dollars. Failure to submit to this monster will require time in prison. So under the motivation to not spend time in jail, citizens work tirelessly, offering labor and goods in exchange for paper dollars so they can feed the tax monster. I am not saying I approve, but it is the system in which we currently live. Thus, individuals and businesses who can create wealth are forced to figure out ways to obtain paper dollars. Capitalism allows a small carrot of incentive in that the more dollars you can obtain by productivity, the better lifestyle you can live, even though taxes go up with the higher income.

Or not.  A financial adviser reckons wealth in dollars.  Again, there is more under the sun that is dreamt of in his philosophy.  How about lifestyle?  But Ayles thesis, that contrary to Gloom and Doom reports, foreignors will keep accepting dollars is not because we are forced to pay taxes in dollars, but because the USGovt still has countless ways of mulcting ever more value, and rich targets at cutting expenses.  California’s situation is ripe for wiping out the debt by repudiating Gray Davis’ errors.  If it comes to protecting the dollar or taxing pensions 100% over $30,000, and 100% on the second pension, expect the tax.  The dollar will stand because the USTaxpayer can still stand so much.  Sure, the dollar will fall, if and when things get to Stalingrad-like conditions in USA.  It's goofy to think the system is sound, it is merely tradable.

I try to stay away from businesses who leech the system of wealth creation when I invest. Entertainment companies for example do nothing to create wealth in America. These businesses would not exist unless producers created wealth, which in turn allows that wealth to be spent on these types of businesses. I am a big believer of going through your portfolio and ridding yourself of the leeches. Spend money with the leeches, but don't invest in them. They do not create wealth, they take it.

Odd definition of wealth.  Entertainment companies are notoriously obscure in accounting and no doubt funny in reporting, but if they make money offering people options in entertainment, how is that not wealth?  Or again, is wealth only dollars, or ever more access to goods and services by ever more consumers, including entertainment?

It gets worse..

Take a look at any defense contractor such as LMT, GD, NOC and LLL.

They are all cash cows, and most all of them get over 90% of their revenues from government spending.

They spend money on stuff that kills people and blows things up. Not very "productive".

Yet, those businesses are gushing cash.

This is awful.  Who cares if a company gets money to kill people (including USA soldiers) and blow things up (police crash a drone into a police tank!) in pointless elective wars, as long as it “creates wealth?”  A theme I hit is progressive USA is essentially racist, and dedicated to the Darwiinian project of eliminating people who are brown or darker.  the right wing wants to do it overseas, the left wing in USA.  There are countless people in the commanding heights who promote it, and the casual way in which war crimes are accepted as long as it is “creating wealth” (if that is how you define creating wealth) it is ok.

Ayles goes on with a reductio ad absurdum argument about giving everyone $1 million, to suggest it would not matter.  Back to my first paragraph.  It would so distort the economy by redistribution of wealth, misallocation of assets, and denial of productive participation in the economy, by the recipients, we’d never recovery.

His price of a chocolate bar in time taken to earn it again misses on two points:  a chocolate bar not only costs more today if you account for the weight, it is no longer as wholesome as it was back then.  the deterioration is theft.  Better to take the example of a 1964 Kennedy half dollar (silver) which you buy you a motorcycle tank of gas.  Today that would cost you $10.00.  Or you could sell the 1964 Kennedy half dollar for $10, and buy a motorcycle tank of gas.  The point is, gas was 50 cents a tank in 1964 when money was money, but it is $10 when money is funny.  50 cents is not the same thing as $10, the difference is $9.50 wasted in reduced benefits so many places.  In a properly functioning economy, prices naturally fall.  

Ayles is simply describing the Soviet Union economy as a good thing.  By all means, go communist, but try China instead.  they seem to have a more lasting communism.  Of course our system will fail.  They all do.  The question is how an individual responds.  Rome was invincible, But Seneca and his crew knew better.  From Miss Stroup:

"Quid autem interest quomodo sapiens ad otium veniat, utrum quia res publica illi deest an quia ipse rei publicae, si omnibus defutura res publica est?" (Seneca, de otio, 8.2)

In this case, otium is time characterized by private/social reading/writing as opposed to public involvement (Correspondent’s explanation) Translation:

"But what does it matter how a wise man comes to otium, whether because the state is unavailable to the man or the man is unavailable to the state - if the state is going to fail everyone, no matter what? "  

Whatever Ayles track record as a financial adviser, one should keep in mind Nassim Nicholas Taleb’s book on financial advisers and survivorship bias.



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