Start At The Top

In my book I address the specialized work in international trade of acting as an agent, giving the example of a friend who put together a deal between a Mexican manufacturer of a specialized device and a Japanese hospital group.  I point out this is in essence semi-retired work for people who have established themselves in business and are trusted by all the players to put the deal together.

Regardless of role in international trade, there are two things that are fundamental: relationships and taking no risk.  Since here is no recourse in international trade if and when things go wrong, everyone relies on the other party to do the right thing when things go wrong.  Insurance might help, but the bottom line is relationship.

The "taking no risk" is not a matter of somehow pawning risk off on a third party, it is a matter of pay as you go and at no step would failure be catastrophic.  For the semi-retired player, he knows what he is doing and manages the risk with experience and wisdom.

Long before there was ever an internet, there were trade leads and trade lead brokers.  They were to be ignored then as now, for they are people with no product talking to people with no customers. The best customers and suppliers with whom the start-up needs to work cannot be found there.  Alibaba is the most successful and worst. My analogy is Alibaba is a firehouse of waste water when you just need a sip of clean water. Great place to waste time and lose money.

To my regret, in my book I mention a clever tactic one of these semi-retired experts employed, and that is occasionally looking at old trade leads, and I explain why this was clever (although in the context, it should be clear it is inadvisable.)  Lord help me, occasionally someone will seize on that secondary tactic in an unlikely scenario and bet their life on it.

It is occurring to me way back then and to this day, those who want to work the "trade-lead" fantasy essentially want to start at the top.  You know, find a lead, a supplier, bring the two together, $100,000 deal, letter of credit to eliminate risk, make $5000 commission, next... sounds great but it cannot happen, will not happen in the real world.  It's all fantasy.  You know, someone has a great script, you get it in front of Spielberg, he contacts De Niro, they put a movie together, you make a $100,000 grand commission, you have passion for the deal, what could be more natural?  It ain't gonna happen.

(Some day I will catalog all the ways the delusion can go wrong.  Well, some week, since the problems are legion.)

Now as one of the participants this special session proceeds, I can see clearly the juxtaposition.  Continuing with the movie analogy, there are plenty of people today who contact Spielberg with a script, who then contacts De Niro, they put together a movie and the guy with script gets $100,000, etc.  That guy started at the bottom 30 years ago.  He was a messenger boy in a mailroom.  He worked his way up.  it wasn't the passion for the deal, the deal is easy, it was his passion for producing quality results within that medium, knowing everything there is to know.  All parties know and trust him.

Still with the analogy, what I teach in this export food class is how to start the only place you can start, in the mailroom as a messenger boy.  You take news you found and bring it to a seller, and then when you have permission you tell a buyer what the seller offers, again as a messenger boy.  The risk is mediated because the deal is so small, the lcl moq fob.  if the deal goes bad, expect both sides to expect you take the loss.  of course.  That is true no matter what.    But the deal is so small, and amelioration so easy, this risk is unlikely.  Frequency, not volume, is the way to growth and prosperity.

You flogging the lcl moq fob is to act as messenger boy between people who can trust you that much, to deliver a message.  if and when anyone cares about the message, then you can offer to help with the discussions, and given the likelihood more work is necessary than both parties can handle, you have created your own opportunity.  So all this work is search and learn, passing messages, finding the unseen opportunity that you create.  You grow from there.

I cannot teach anyone to be successful, or even what to trade.  i only teach people how it is done so they can save time and money getting to their own success. And how it is done is you start at the bottom and work your way up.  You cannot start at the top.  With what product is the one you love, you see how this product is a solution to that problem.

Spielbergs work is limited to pop culture and engllsh and disposable income.  With food it is non-discretionary budget, all languages and worldwide.  More opportunity there, but as always, demand is for quality content.  In food we call that specialty.

The process is easy, the customers are easy, getting the product right is the only hard part in this business.  That takes passion/joy.  Without it, your progress is unlikely.  And there is no way to start at the top.

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The Silicon Revolution

I recall a time of relative peace and much prosperity, a rock-solid economy.  The elements are still there, and may be revived at any time, for they are valid and reliable economic basics.  These are the bases for an authentic economy. We only lack people aware of sound bookkeeping, money, sales, and the mediating institutions which once provided for people in disaster before the government swept away all before it with ex nihilo credit.

I was listening to a 1949 radio show called Dragnet.  It's pretty funny.  When a family returned from a long vacation they found their furniture had all been taken.  The investigating police officers called the Salvation Army to help the family out.  A massive police effort was initiated to catch the burglars.

1. Police today would probably not bother much with a burglary.

2. The police today would not call the Salvation Army.  They would tell the family to contact a welfare office, if they showed up at all.

A change in police priorities is just one elements in a profoundly altered economy.

Matthew 7:24-27Douay-Rheims 1899 American Edition (DRA)²⁴ Every one therefore that heareth these my words, and doth them, shall be likened to a wise man that built his house upon a rock,²⁵ And the rain fell, and the floods came, and the winds blew, and they beat upon that house, and it fell not, for it was founded on a rock.²⁶ And every one that heareth these my words, and doth them not, shall be like a foolish man that built his house upon the sand,²⁷ And the rain fell, and the floods came, and the winds blew, and they beat upon that house, and it fell, and great was the fall thereof.

And...

Luke 6:47-49Douay-Rheims 1899 American Edition (DRA)⁴⁷ Every one that cometh to me, and heareth my words, and doth them, I will shew you to whom he is like.⁴⁸ He is like to a man building a house, who digged deep, and laid the foundation upon a rock. And when a flood came, the stream beat vehemently upon that house, and it could not shake it; for it was founded on a rock.⁴⁹ But he that heareth, and doth not, is like to a man building his house upon the earth without a foundation: against which the stream beat vehemently, and immediately it fell, and the ruin of that house was great.

This current economic system, where kids pay sales tax on the purchase of a bag of candy, and cities pay sales tax when they build a bridge (and scholarships are considered income for federal tax purposes, meaning the Ivy League can award scholarships to minorities, making their award numbers look good, but those same people cannot attend for inability to pay the taxes).

All this detail, and the microloans of ex nihilo credit to the indigent via EBT cards, depends on computers, in other words the silicon revolution.  

Let us imagine that the capitalist demagogues finally lose their mass appeal in the face of repeated broken promises. Let us assume there will be a temporary return to bland, reliable, everyday political hucksters, as this so-called cycle of ‘outsiders’ gets played out. The mass discontent will not go away. As the economic crisis and inequalities grow, extra-parliamentary public outbursts will are inevitable. With them, fear and uncertainty among bankers, speculators and billionaire electronic gadget makers will set in. The much ballyhooed ’silicon architecture’ will crumble like sandcastles. 

Silica is just another word for sand.  Our economic system is built on sand.  Don't say you weren't warned.

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India, Gold and a Monetary Event and Some Change

So India is working on what USA has not quite done yet,  but Europe did, and that is eliminate certain bills and when people tried to trade the old for the new, they were obliged to explain where they got all this cold hard cash.

In USA, cash is "probable cause" of a crime at any level any cop says so, and since they get to keep what they seize, "says so" getting less and less every day.  War on cash.

Here is a guy whose reasoning is sound, although I agree with Sennholz that the Hegemon has way too many options, plus the Hegemon does not lose if the system crashes.  When the Soviet system crashed, the same people ended up on top.  The Russians were just smart enough, this time, to let change happen without bloodshed.  With USA having shed so much blood worldwide in this last 40 years, what goes around comes around. (Name a time when the news covered Soviet soldiers in combat.  Just Afghanistan?  That was only ten years long, and the Communists had the decency to self-destruct peacefully after that.  We are at fifteen years now...)

This guy is pointing out that gold is up to $1700 in India, about 40% higher than spot.  A change of currency is a monetary event, and inflation what happens when you print too much currency.  India explicitly here is printing more currency, and inflation is showing up in terms of money (gold.)

It is fun to read a prediction that you'll be able to buy an average house for 2.6 ounces of gold soon, and let the mind work out how easy it would be to buy that much gold and hold it.  This guy sells gold.  If it gets to that, you'll have so many other options, no gold required, that as today a gold play is just one marginal opportunity among countless others.  At one point I had a couple of kilos of gold in my house, plus 1,000 ounces of silver, I accumulated over the 00's, with a view of the "main chance."  I repented of that, and sold it all (at the top it turns out; taxes on gains will impact much getting a house for 2.6 oz of gold, making the play probably risible at that point in the future.)

The stories are black market machinations are pushing the price of gold up in India.  Could be, but I'd stick with printing too much currency.

As to the price of gold in India, the solution to high prices is high prices.  The high prices themselves will widen the smuggling, from petty to grand, and that will solve the problem of state policy failure.

People are still panicking over Trump, and those panicking I still think are doing so becasue they know the ex nihilo credit regime si over.  As to that, Trump is merely the messenger, Hillary would have done what trump will do, just as Obama did What McCain would do.  Just as Obama was used to draw back the disaffected left, so Trump is drawing back the disaffected right.

What is true no president keeps promises, at all, and Trump will be no exception.  What is also true is the iron is hot, and everyone can pointlessly vote, but everyone can also effectively act.  The election is decided, buy how you contribute to forging the iron up to you.

As the ex nihilo credit regime declines inexorably, your action replacing it, at the small business level, is both doing good and doing well.  It is the only reasonable "prepping" that can occur, because entrepreneurship is about the unseen, as Drucker says, "creating customers and innovating."  If you create something, then necessarily it is unseen until you act. When you start up a business, your product is a solution to a problem (and there is no solution that can be improved upon) but you cannot know what that product (or service) will look like around the bend, because its development is by iteration and iteration, based on customer feedback preceding each iteration, something that cannot be plotted linearly.   Whole lotta zig zaggin' goin' on. You have the passion and joy, but you have no idea what your offering will look like in a year, let alone a decade.  Neither does the hegemon (or competitors for that matter) so as fruit to pick you are too high and too far apart to mulct.

(The point of Intellectual Property Rights, monopolies issued by the hegemon, are to set designs in stone, with a promise of riches, so that creativity and innovation is suppressed, especially by threat of litigation if anyone dare improve on a monopolized idea, so we have extremely limited options from which to choose in life.  Car companies could not start in USA after the Big Three pooled patents among themselves, and anyone who tried to start up was obliged to overpay the big three for each automobile function a car needed.  Windshield wipers? Pay us.  Radio?  Pay us.  ABS?  Pay us. )

Obama was elected to stop the wars, the bailouts, close gitmo and fix healthcare.  Of course all of those are far worse today.  In 2010 he announced he wanted to double exports in five years.  Whole lotta ex nihilo credit spent on that, never happened.  If McCain won, it'd be the same.  Obama was against the Standing Rock pipeline, but as you can see from the video, on his watch, whole lotta work got done.


Trump won, meaning the iron is hot.  What gets forged depends on how people act, what they do.

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Dow 10,000 or Gold $10,000?

This fellow is apparently famous, and I can see why, because he nails it... here are two snippets:

Stocks have been a massive beneficiary of the biggest monetary expansion that the world has ever experienced. If we look at the Dow since the last major economic cycle started in the early 1980s, we find the most remarkable rise. In early 1980, the Dow was at 850 and today we are 19,000. That is a rise of over 18,000 Dow points in 36 years. This means that the Dow has gone up by 9% per year on average since 1981. A 9% annual increase leads the index doubling every 8 years. What a great investment. You buy stocks in 1980 for $10,000 and today in 2016 you have $220,000 without having to lift a finger. On top of that there has been a dividend yield of around 2% on average. But this growth in the stock market has not just happened on its own accord. Stocks don’t grow at 9% annually for 36 years without some rocket fuel. And the explanation is very simple. Debt has provided the fuel. Because US debt has also grown by 9% annually since 1981. So the recipe for becoming a successful and loved president is just to print and borrow money. There is an absolute correlation between the increase in US debt and the growth in the stock market.

and

The Dow/Gold ratio peaked in 1999 and is now in a downtrend. Once the current correction is finished the ratio will continue down towards the 1:1 level like in 1980 when the Dow was 850 and Gold was $850. The only question is at what level the Dow and gold will be when they reach the 1:1 ratio. Will it be Dow 10,000 and Gold $10,000? Or will we see hyperinflationary levels of 100,000 Dow and $100,000 gold? The absolute level is really irrelevant. Because at whatever level they meet will involve a catastrophic loss of real capital for a stock market investor.

Just so...  when he says credit, he means "ex nihilo credit" and for that matter he means that when he says "printing money."

The article mentions real estate crashing, which is crucial to a boom in small business.

His summary is buy gold, and if buying gold, his advice is good.  But if gold becomes important, the Hegemon will just steal it.  The only real protection is self-employment, own the emans of production, in the form of fruit too high and dispersed for the Hegemon to get around to....

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Bank of England and Ex Nihilo Credit Regime

I hope this is clear:

Once upon a time, people would build a mill financed by a collection of homeowners whose homes were at risk if the credit (backed by the homes) could not be repaid by the revenue from the mill's operation.   There was some reward in building a mill and getting an agreed percentage of the income from the mill for having financed the mill, not to mention the fact that a mill also helps build up a community.  Think of the probity and due diligence in such an arrangement, with direct skin in the game.

An individual may do this as well, if his resources commanded enough credit to back such a project.  Again, this is a business arrangement.  It was either a joint venture, or a sole entrepreneur.  Everyone had skin in the game, no loans involved.  Especially no loans at interest.

Such business arrangements are creative and unitive.  They create something good, the unite the community.

Today a bank, as you see in the essay to which I link here, lends absolutely nothing.    Please note, as usual, they say "money" when they mean "credit."  Funny thing is, bankers are quite careful with these terms when they discuss business among themselves, but switch to confuse-ish when they communicate outside of the banks.

As mega-economist JK Galbraith said:

‘The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or to evade truth, not to reveal it.’ Money, p. 5  J. K. Galbraith

Indeed, and nothing is more fundamental to the deception than calling credit money.

In spite of backed by nothing, as the cited essay notes, that credit does call forth goods and services.  He who provides the goods and services wants to be paid, and is paid, in credit (not money!)  Credit against whom?  For the credit was created ex-nihilo.  "We owe it to ourselves" comes the answer.  That answer is actually quite true, but disguises the implications.  In essence, ex nihilo credit is the apotheosis of capitalism: privatize the profits, socialize the losses. The Hegemon's minions get the profits, we get the liability, the losses.  We owe it to ourselves.

Yes, a mill is built, as are bridges to no where and wars for profit and defense against blowback, and Tuskegee experiments, are all financed as well backed by absolutely nothing.  Yes, there are also homes financed this way, backed by absolutely nothing.  But what homes?  To whom?  Where?  Although economics prides itself on being a value-neutral science, it is the branch of study that produced the term "moral hazard."

We, ourselves, make good on the ex nihilo credit extended with inflation, a degradation of  current goods and services although the prices remain constant, we pay for it by less in terms of wages, as the fruit of our labors is diverted to paying down what "we owe ourselves."  When that credit is maxed out, we borrow, from say the Chinese.  And when that is maxed out, we pile the debt on to future generations.  Now note, for all of that, there is no money.  It is all credit, ex nihilo credit.

But here is the problem.  With bank credit created ex nihilo, by charter from the Hegemon, the range of goods and services that may be called forth is not the same that would be called forth in a money-based economy.  There is no probity with ex-nihilo credit, only politics.

It is an undisputed fact that Nixon went off the gold standard (lite) because the Vietnam war was bankrupting USA.  The first thing we bought on ex nihilo credit was 4 more years of defeat.  Then we got around to other things no sane people would finance: Fukushima nuclear power plant in 1976, and the other USA power plants, and so much more.  But but but, Fukushima is in Japan!  Yes!  And EximBank lends ex nihilo credit to Toshiba so Toshiba can buy from GE that in which no sane person would invest: crazy dangerous unstable massive nuclear power plants in an earthquake and tsunami zone.  Am I editorializing?  How come GE requires 100% indemnification on every plant it builds?  Because they are safe?  No.  Upon whose account is this liability placed?  We owe it to ourselves!

What could go wrong?  Nothing.  Because by the time something does go wrong, all the players are retired.  Mistakes were made, let's move forward.  As with all ex nihilo credit projects funded, the profits are privatized, the losses are socialized. Political agenda advanced.  And it gets better: with no government backing, Toshiba has come up with a free market micro-nuclear power plant that meets the needs of small communities.  Its safety and affordabilty has caused quite a stir, but, given regulatory capture, the regulators make sure we won't see safe nuclear power soon.

And since ex nihilo credit is a provision of the Hegemon, it is lent within bounds set by the Hegemon.  It is not price signals and the market deciding what assets are allocated to what needs, it is an auction by the Hegemon to rent-seekers who have what projects they will pursue at what interest rates. The winners are those whose projects at that price intrigue or delight the Hegemon.   Hmmmm...  a billion to advance frankenfoods?  Sold!  War?  You bet.  Bailout the banks? Existential imperative.  Domed stadium?  Of course!

Banking has become a completely distorted program of granular work in this regard.  We no longer have banking in USA. The lowest, closest form of banking to the market, the credit union, is no longer a credit union.  It's just small.

Now, should any of these not pay off, well, the bank does not want "nothing" (that which it put at risk, nothing), nor does it want your house.  What it gets is for as long as it takes, backed by law,  is a repayment out of your income stream what it anticipated in giving you a loan of nothing for something for which you come to learn you cannot pay.  Now you are trapped, enslaved if you took the student loan bait.  And it cost the Hegemon absolutely nothing, because we owe it to ourselves.

See the difference?  Usually, if a loan goes bad,  the lender loses something.  With capitalism, if a loan goes bad, the lender loses absolutely nothing.  You lose the house, but you are obliged to still pay for it, or go bankrupt.  if you go bankrupt, it doesn't cost the bank anything.  they already have a reserve for bad debt built into their system, and the write off of your debt simply restores the bank's ability to  lend again, given the reserve requirements of fractional reserve banking. Student loans are special cases, those who seek education become slaves if they cannot pay back the loan.

Now, if you understand this, can you see it is not the money lent they want back, since no money was lent anyway, nor does getting paid back nothing for nothing mean anything.  Nor do the banks want the house.  What they want is your income stream, a percentage thereof, for nothing.  And that is precisely what they get as long as you are solvent.  And if you become insolvent, they don't care.

So can you see yet how it is interest, and not merely the FED, or lending nothing for something that is the problem.  It is interest paid, usury, defined as any amount for any time at any rate, that is the problem.

As Galbraith said, the point is to disguise.  And with the vast majority of economic activity based on ex nihilo credit, the vast ocean of commentary is oriented to the extant regime. But this evil regime is no secret, it was easy enough for me to figure out.  For most of history people pointed out this baleful tendency. That Bank of England explanation above is quite honest, but it is rendered impotent by calling ex nihilo credit "money."And once you know, you can estimate with probity what will work or not work, to your benefit.

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Farmland Investment: Kiss Your Money Goodbye

Boom and bust is more intense on farmland since it gets down to the price of the produce the farm offers.  Washington State farmland is in a boom, like Marin County 30 years ago.

The average sale price of high-quality Washington farmland has increased 25 percent in the last year, and is up 47 percent in the last four years, according to new data from Farmers National Company.

During the "great depression" the democrats went "full soviet" and introduced the "Perishable Commodities Agricultural Act" (PACA), a peculiar set of rules for the road different from the UCC under which the rest of commerce operates. Since capitalism is collectivism for the few, PACA was an initial effort at the Federal policy of "Get Big or Get Out."

Now, what happens in a big bust?  Prices fall, even produce.  But your taxes are based on what you paid for the land.  If you paid 50% more, the taxes on the land go up 50%.  And your neighbor feels the pressure too.  No problem when produce prices are high, but when they are low, the state says, "ƒœç© you, gimme my money!"  And when you do not have it, well...

State Forest trust lands are another category of state trust lands managed by the department. Most State Forest trust lands were originally privately owned forest lands forfeited to counties in the 1920s and 1930s due to unpaid property taxes. These lands were subsequently turned over to the state and today DNR manages State Forest trust lands for the benefit of the county where the lands are located. Most State Forest trust lands are in western Washington.

Forests have the crop ready to go.  In the roaring 20s, what better place to put excess wealth accumulated than in the booming forest industry? In the bust of the '30s, that wealth was redistributed to the Hegemon.  People investing in farmland today, and farmers expanding, are a delight to the hergemon.

Will there be a big bust?  Well $10 trillion in bonds at negative interest rate suggests a whole lotta smart people think so.

Property, pension and paycheck... all low hanging fruit for the hegemon.  Best to start a business and own the means of production and a customer list.  The you are too high and far apart for the hegemon to get to.

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Credit and Menger

The textbooks all say barter preceded money, money emerged as a solution to the problem of the necessity of double coincidences for trade to occur: a market one has 100 eggs, another has a goat.  Well, those two better be willing to trade each for the other, or no trade today.  Money allows people to sell one egg at a time, to the goat seller who sold his goat of 50 silver pieces.

Upon refection a couple of years ago it seemed to me that there must of been a step certainly before money, maybe after barter, that merchants extended credit.  I am happy to see plenty of people long before me arrived at the same idea.  But apparently the idea is controversial among theorists.  I am glad I am not a theorist.

Did credit precede money? Maybe. Does it matter? Nope.

Hmmm... not sure what is at stake here....

Since direct exchange, i.e. barter, may be inter-temporal. Barter need not be a spot transaction reduced to a particular place and time. If the concept of inter-temporal barter is accepted, then the evidence of credit existing before a common medium of exchange creates no conflict in Menger’s account.

Wait, if you whimsically expand the definition of barter to encompass a credit event, by asserting that a merchant who extends credit (pay me later) can be also deemed an inter-temporal (pay me later is what that means in this instance) barterer, well, I guess so.  But I think it is confusing to twist concepts to fit into theories.    As the writer says, it does not matter (but for another reason.)

The writer warrants the whimsical concept of "inter-temporal barter" with and example of milk today for grain tomorrow.  That's credit. Why call it anything else?  And if the grain dealer puts in writing he owes the milk made grain, so far so good.  But then the writer gets it very wrong:

Imagine that Anastasia has a promissory note (IOU) for a portion of Casimir’s grain harvest, but prefers apples now to a future claim on Casimir’s grain. Thaddeus prefers a future claim on grain than the apples hanging on his trees. So Anastasia offers Thaddeus the promissory note in exchange for apples. If not for the promissory note Anastasia, Casimir, and Thaddeus would have all had to meet to agree to such a transaction. Without inter-temporal barter in the form of a promissory note, Anastasia and Casimir would have never made the transaction and Anastasia wouldn’t have had the promissory note to use to barter for other goods.

That promissary note is not transferable.  Transferability is prohibited in law in most times and places, unless all three parties meet and agree, contradicting the advantage the writer claims,  Transferability of notes without the permission of all parties is a peculiar innovation to modern Western capitalism, necessary to unload junk or aggregate power.  The idea that Jack makes a deal with Jill, and Jill sells the deal onto Andre, without Jack's permission is odious.  Jack made a deal with Jill, based on who Jill is.   (Jill is forbearing, Andre is predatory).  It is very likely Jack does not care for Andre, and refuses to otherwise deal with Andre.  The law once protected people from transferability, and certainly in anarchy one would be protected.

The rejection of Menger based on the fact that credit existed before money is invalid. However, what Innes and Graeber argue is not entirely irrelevant. The story we tell to students and ourselves is oversimplified. We should rewrite our textbook accounts to include the possibility of credit preceding a common medium of exchange and call it inter-temporal barter.

Yes, the textbooks need to be rewritten, but not to add another layer of confusion with contrived definitions only to protect the reputation of a dead theorist, from what?  Clarification?

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The Nature of the Asset Base Upon Which America's Credit Depends

To review, USA's productive asset base is in essence how we pay for everything, and when we "put it on the tab" that is plan to pay Tuesday for a hamburger, or a war, today, that trio is based on our productive capacity,

That productive capacity is owned by the shareholders, and any bondholders are in front of shareholders as to payout in case of liquidation.  Pensioners are last in line.

On top of all these people with claims on the productive capacity of the USA, are all those with entitlements, the unemployed, the disabled, the military, the government workers.  Puerto Rico just defaulted on its bonds so it could pay government workers.

"This administration continues to take historic steps to ensure the residents of Puerto Rico continue to receive essential services while the commonwealth continues to face a delicate financial situation," a spokesman said Thursday.
The island isn't planning to make any of the $800 million payment to its bondholders due on July 1. Puerto Rico's government says it is in a "dire" financial position with only about $350 million in cash on hand right now.

Gee.  Wonder how they got in dire circumstances?  At any rate, screw the retired teachers cops government workers and anyone else on a pension whose "assets" are in those bonds, pay the people who show up today.

But back to that asset base.  A big part of USA production powerhouse is the auto industry.  For the last eight years sales have been driven by the fog-a-mirror credit plan, with people driving news cars off the lot they cannot afford to maintain let alone make payments.  It seems that has peaked.

Next we have our computer industry, which produces nothing but life-drain, but wait, never mind, that is all made overseas.

Let's move on to our jewel in the crown, Boeing.  USA Taxpayers must lend the credit to Boeing customers.  As Boeing itself said, no ExImBank, no Boeing.  Promise?

Hmmm… USA agriculture is a powerhouse.  But the vast majority is GMO, of controversial nutritional questions.

The installed base of infrastructure, real estate, plants and equipment, is rarely marked to market, that is on the books for what it is really worth.

Our asset base is the trough from which the vast majority do root.  Dare you even think about getting near it?

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Taxing the Rich: Let's Make a Deal

Good to see corporations are paying less and less in taxes over the last 40 years, since corporations cannot actually pay any taxes, as I have noted before, their customers ultimately do.

But we keep hearing to top 1% (it's actually 2.7%) pay over 50% of USA Fed taxes. 

In 2014, people with adjusted gross income, or AGI, above $250,000 paid just over half (51.6%) of all individual income taxes, though they accounted for only 2.7% of all returns filed, according to our analysis of preliminary IRS data. Their average tax rate (total taxes paid divided by cumulative AGI) was 25.7%. By contrast, people with incomes of less than $50,000 accounted for 62.3% of all individual returns filed, but they paid just 5.7% of total taxes. Their average tax rate was 4.3%.

I wonder if the 5.7% collected is worth the cost of processing the 62.3% of all returns filed?  Or is this third world stuff of costing more to collect than is gained?

But back to that 2.7%, them's the facts narrowly stated, but those same people are also the greatest welfare queens, getting far more in benefits than they pay in taxes.  The whole 2.7% pay 51% is a sham.  The easiest to spot is the Third Undersecretary for Humourous Gaits who earns $250,000 in DC and "pays taxes" (with 100% of his pay contributed by taxpayers) and gets a handsome pension as well.

When the Alaska Airline folk make stupendous sums buying Virgin Airlines with malcredit two things are happening at once.  Branson is bailing out of a game that is now over: borrow malcredit and mulct fabulous wealth from the income stream.  Alaska Air is making a play to get too big to fail.  It might work since Delta and United have such onerous legacy pensions that need busting, the powers that be may go with that outcome.

The reason not everyone is borrowing malcredit is they know the crash will be soon.  Debt does not reduce even though prices and income does.  To have $100 million in debt but not the revenue from investments of the 100 mil to make even negative interest rate principal payments, then it's bankruptcy, and there goes all the beautiful personal pension plans.  Whereas no one cared 8 years ago, the politics are different now, "the people" may demand a 99% tax on pensions above the first $36,000 in pension income.

Here is a rehearsal of an absurd idea again...

All told, individual income taxes accounted for a little less than half (47.4%) of government revenue, a share that’s been roughly constant since World War II. The federal government collected $1.54 trillion from individual income taxes in fiscal 2015, making it the national government’s single-biggest revenue source. (Other sources of federal revenue include corporate income taxes, the payroll taxes that fund Social Security and Medicare, excise taxes such as those on gasoline and cigarettes, estate taxes, customs duties and payments from the Federal Reserve.) Until the 1940s, when the income tax was expanded to help fund the war effort, generally only the very wealthy paid it.

As if...  corporations cannot pay taxes.  Their customers do.  So consumers pay all taxes, no matter how they are disguised.

We have a system where people are forced to pay for the guy who refuses to work.  In making such payments, the taxpayer of course nets less, and thus is forced to live next door to the guy who will not work, because the taxes paid keep the taxpayer poor.  That's fair. Isn't it?

There is a solution to this, let's make a deal.  Takeaway all the welfare payments to those in the top 2.7%.  Then watch what happens.  The false economy will fall, there will be a renaissance in business, the tax burden will spread, and the 2.7% will have nothing to complain about, or brag about, or whatever it is when they say they pay 51% of the taxes.

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Concern: White Male Suicide Increase

Let's look at the numbers:

Middle-aged white people now account for a third of all suicides in the U.S., a new government report shows.
Suicide is the nation's 10th leading cause of death, and the overall rate rose 24 percent in 15 years, according to the report from the Centers for Disease Control and Prevention.
Suicides have long been most common among white people — particularly older white males. But most striking in the new report is the growth in whites ages 45 to 64.

Hmmmm...  so they are checking out instead of facing the economic policies of the USA.  Not word on the other races, perhaps it is of little interest to Fox News.  It is of interest to those who post on such article, for they are preoccupied with denigrating people of African-ancestry.

Sounds like a problem of white entitlement, and maybe white privilege is nonsense.

At any rate, who has not considered suicide in his life?  Everyone does, but few go through with it.  It takes quite a bit to do so/  Is they problem they false dilemma?  Have they considered channeling their suffering (passion - from the Greek: to suffer) into creativity, and making the pain pay?

It's a thought.  Don't ice yourself and weird out your relations, start a business.

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Creating the 1%

An insider says things look worse than 2009.  Well, of course, nothing was done last time to fix the problem.  The powers that be just doubled down on the bad bet.  But what do they care, they win more when things get worse for everyone else.  The elections manifest this.

Interest rates are the problem, as the banker notes.  Everyone agrees, but no one agrees where they SHOULD be, and few point out interest rate at any level are a bad idea.

Interest on loans is

1. Not necessary for peace and prosperity and econ dev.

2. Not possible without state backing

3. Always does damage.

How come we have it?  It's how the 1% gets there.

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What Happened to Hointer?

Driving past the Hointer retail store it looked closed down.  I gave it no marks when it first opened, so I went to their website to see what's up.  You'd think the CEO ran Amazon for all the PR and speaking engagements she has.  You'd think the website would mention where the store is located if they keep mentioning a store.

But they are pushing consulting now, based on their own "popular Seattle store."

At least they are doing it right, now, that is testing with pilot projects and studying.  I wonder though, if they know how to control for variables, or are cold blooded enough to admit past mistakes.  If they knew how to design a valid study, and test reliability, they would have done that first, without blowing 5-10 million.

Maybe now they do.

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Mish Makes Big Data Mistake

Mish has a chart showing the increase of the min wage laws in California going back to the 1910s, over 100 years.  His chart picks one date in Aug of 1971 as an example, which shows the minimum wage of $1.65 an hour.  Ooooops.

That is exactly what I was making working in a hospital kitchen on that date.  That is to say, his chart is not adjusted for inflation, rendering it meaningless.  According to the Feds a $1.65/hour then is like 9.66/hour today.  There is no doubt wages have slipped.

Now I am an adamant opponent of minimum wage laws, which are designed to keep women and minorities impoverished.

The real problem is that malcredit so distorted the market USA manufacturing was gutted and then China stepped in to keep the capitalist game going.

Today's minimum wage laws are entirely driven by government workers, the house unions, whose wages are tied to "minimum wage plus."  Well, with a 50% increase in min wage that plus becomes exponential.  But the joke will ultimately be on them when the taxes are raised to sop up that windfall.

But back ti the point - minimum wage will not solve the original problem, just make the next phase more complex.

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The Ten Year at Negative 3% Fails Charge?

A comment on a negative interest rate article:

Doug53801 day ago

Anyone out there that could give me a better understanding of what this means? Seriously, it sounds important but I'm lost. - Thanks!

Just so.  He is not alone, nobody really knows what is going on, and the action is is wild and confusing as the counter-offensive at St Vith.

And the shortage has even migrated to the short end! “The 3-year note is also trading special at -20 basis points this morning ahead of its auction this afternoon.”

People are happy to lose money immediately?

Recall this is debt, not equity, and credit, not money, so this is deep uncharted territory.

In one of his shortest missives ever, Sean Corrigan notes:

That being the case, why on earth would any sane company boss make sizeable new expenditures whose IRR is deemed to be negative in cash terms – and which will therefore both deplete his equity and sap his means of paying dividends to the firms’ owners – when he can, as is becoming widely bemoaned, make alternative use of the same financial means to boost the price of his shares by swapping some of them for an obligation which he is effectively being rewarded for taking on, so making his hapless bond-holders pay his wages for him instead?

Well, yes, note his scenario - "company boss"... "dividends" ... "bond-holders" ... "swaps" ...  all developments of a capitalist market, and anathema to the self-employed.

There will be history books explaining what happened, but in the meantime, don't end up a statistic in a history book.  Start a business.

By the way, went into a Goodwill Store in an extremely wealthy neighborhood, in which the merchandise was stellar and mixed in with the used was new goods.  The prices were the same as in the poor neighborhoods (I'd rethink that) but my point is goodwill has figured it out: mix the new and the old.

Anyone starting up retail ought to do the same.



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World Can Be A Wicked Place; That's Good to Know

Here is an article that could not have made it into the NYTimes a decade ago, about TYCO moving to Ireland, but now the progressives are on the ropes, so a little honest assessment is indicated. The problem is the honesty is still impacted by bad economics... let me juxtapose sentences in from various paragraphs in the same article:

Johnson Controls said on Monday it was renouncing its United States corporate citizenship by selling itself to Tyco International, based in Ireland...Employees at a Johnson Controls plant in Beijing working on a seat assembly line. The manufacturing giant, currently based in Milwaukee,

Well, I am sure that is not quite how Johnson Controls put it, but the "scandal" certainly is a serial-bailout beneficiary USA company, that has subsequently moved manufacturing to China, is now moving it's "headquarters" to Ireland leaving the Milwaukee office to do what?

a deal struck in large part to reduce its tax bill, which it said should drop by about $150 million annually. ...
Until Washington lawmakers reform the tax code, we will continue to see an exodus of American companies from our shores in search of a lower tax rate...

And pushing for laws to bar companies from these deals seems increasingly quixotic. Every time a new tax law is enacted, the lawyers and accountants find a way around it.

Well, Milwaukee will be the USA design center for products which necessarily coordinate with the USA automaker designs, and tax compliance headquarters for worldwide minimization of tax liability, and coordination center for the bribery of venal politicians (I wax redundant).

So while as good socialists the NYTimes can get some facts straight, they lack the hard core communist's skill at getting all of the facts straight.

It surprises me that anyone would be offended at being called a communist, especially communists, when their claim to fame is to get the story right, the facts straight.  How else could they have won over half the planet?  Of course, the second part, basing policies on facts is another matter entirely, and that is when the bait and switch comes in.  Someone telling the truth is the bait, you own the audience, then you can do what you want.  Capitalists tell the most egregious lies straight to your face, and force a decision: buy the lie and thrive (short term), or reject it and flounder?  Be a shark or a minnow.

Anyway, the first reality is no corporation ever pays any taxes.  All taxes are paid by the end user.  When I buy a Hershey chocolate bar, when I bought it I paid all of Hershey's taxes, whatever they may have been.  The idea that Hershey ever pays any taxes is utterly absurd.  After remitting a tax liability, from funds gained by sales of product, Hershey is profitable.  That Hershey is still in business is because their customers pay their taxes.

Now, Hershey does not care one way or the other regarding tax rates, as the writer notes, any rule will be evaded.  But that misses an important subtlety. Tax regimes exist for a given purpose, and it may not  be a given in capitalism, but it is in democracy, that there must be wealth transfer, and wealth is best mulcted at the point of realization, for the last 40 years only the SME level.

Well, Hershey may not care about the taxes, but they do care that better chocolate is so expensive that it does not compete with Hershey, and Hershey cannot afford to pay any taxes when is competitors like Nestle pay no taxes.  The rules are written, and paid for, so that they do not.  Now, ostensibly a micro chocolate company may use the same written, engineered loopholes, but it is not economically viable to do so at such a small scale.  When you have a million in sales, you cannot afford the $500,000 in accounting fees to gain the benefits.  When you have a billion in sales, well, you can.

Here is a complicated example of a tax rule for everyone, that can only serve the 1%.  Expensive wine comes in from Europe at 8% duty, all big and small  must pay.  99% of the 8% paid in duty may be recovered (duty drawback) if it is re-exported.  OK.  But wait, wait.  In wine, it does not have to be the same wine exported.  Yes, you can take the worst red wine vinted (so to speak) in USA, Gallo's rejects, and export that to say China, pennies a litre, and regain 99% of the duty paid on fine wine imported from Europe to USA.  Now this provision is available to one and all.  But a small wine importer is not in a position to maintain a Hong Kong sales office for East Asia as Gallo does. A small importer is considering 99% return of 8% duty on $500,000 of imports is $40,000 or so, well worth pursuing.  But to earn it, he must export as many litres of USA made wine (note the rule, litres, not price).  Well, a small importer may be able to maintain a Hong Kong sales office to move say 50,000 litres of American schlock into China, but surely at a cost of around $40,000, making the whole exercise a wash, at best.  At the same time, the big boys can rock the loophole -

1. Gallo does not have to figure in the cost of its mistakes onto its saleable product, something smaller wineries overseas must include in their prices, of course ultimately paid by the usa consumer.  (USA wineries tell of Chinese buyers who show up waving cash and offering $2 a bottle, smart vinters give it to them, good and hard.  This stuff in "made in USA" bottles is the reason USA wines have such a horrible reputation in Asia, a direct result of USA duty rules.)

2.  In USA, wine is considered hazmat, so it may not be dumped in a field or down a drain.  Cheaper to fill a flexitank and sell it to the Chinese, even for pennies a litre, especially when there is a tax rebate on  the import side of the company.  Chinese rascals can then refill empty Lafite Rothschild bottles retrieved from fine restaurant dumpsters with Cal-plonk and get into the system at $12,000 a bottle, to be praised for its nose.

3.  Next there are layers upon layers of other subsidies and benefits in other areas which again, inure to the largest.  (Not to mention big gets "free" credit.)

In all cases all taxes are paid by the consumer.  The Hershey product has little in the way of taxes, and the reason that delicious, healthy chocolate is $60 an ounce is it gets no tax breaks, nor subsidies, they actually produce something that is a net benefit to society, as opposed to some 85% of the corn sold in USA, which is sold at a net deficit.  The Iowa caucus is all about first telling the Iowa farmer the subsidies will remain, he need never worry about working for a living.  Get big or get out!  Food as a weapon!  The welfare checks will continue.  Any politician who says otherwise will not advance beyond Iowa.

The power to tax is the power to destroy.  Tax codes a putatively fair, they apply to all biz, but in reality  The point of taxing business is to allow big business tax break while laying on the burden of taxes specifically on the self-supporting natural economy and its customers.

Now often these taxes are too much if they are too high for natural economy customers to countenance when naturally added to the cost of doing business.  When you add the unnaturally high costs of ingredients when bad ingredients chase out the good, plus the absurd tax rates, there is a point where the price is too high to sustain a viable small business.  Get big or get out, the policy of the USA government; cheat on taxes, a full employment guarantor for the tax collector; or lesson the quality with bad ingredients, a morale killer for the passionate entrepreneur.  Capitalism offers no alternative.  Democracy demands no less scorched earth. The entrepreneur goes out of business, and as the end user (since he has no customer upon which to pass the costs) he is stuck with the tax bill, true to form, the end-user pays all taxes.  A seized passport over unpaid taxes will now serve as fair warning to anyone who will consider self-employment.

A capitalist lie is capitalism is the apotheosis of all economic experience.  Given that lie as dogma, there is no countenancing there could be better. On the other hand, communism has as an article of faith the Christo-Islamic ideal of eventual anarchy, free markets, of which communism is merely a step-on the road to general peace and justice.

When in history has the hegemon not been a boor?  There is always the simple way to play in such an awful regime.  Small repetitive deals.  You can manage all risks by making all of your payments, even in advance, and in such regular small amounts that you have early warning that you are off track and you can shut down if need be, pay off minimal amounts, lick you wounds, and do it again, ever better at the task.

What is the alternative?  Invest in negative interest rate bonds?  Property? Bet the paycheck is not taxed more?  Figure your pension will save you?

Employees are saps, according to Harry Reid.  Ignore the interviewer, just listen carefully to Harry Reid, his argument is taxes are voluntary because you can choose to be self-employed and pay no taxes:




The idiot is the interviewer who cannot hear what Reid is plainly stating.

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Jeremiah 15-10

Once you have the definition of a loan as a charitable event, and only a charitable event, then it's possible to begin to see more clearly business dealings.  As an aside, here is this:

I have neither lent on usury, nor men have lent to me on usury; yet every one of them doth curse me.

Anyone who lent money as a business was iconically despicable.  Has anything changed?

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Lending Credit Instead of Money

Ivo Mosely is prereading his upcoming book on the genesis of asset-free usury over at the Cobden Center.  He is out with the 5th chapter, and it is fascinating to see the long slow process that has led to the worst iteration of this crime, manifest in our economy today.

Economists before Adam Smith noticed that huge quantities of credit, based on very few assets, were passing as money, enabling real property to be purchased by people who had done nothing to gain it besides speculate or fund the speculations of others.[i] The ‘financial revolution’ was inevitably accompanied by a social revolution: the old landed gentry were being bought out and displaced by speculators in finance.[ii] Some economists were concerned about the effects on society generally, of such people gaining political and financial power.[iii] ‘Every little scoundrel gets a new estate’ commented Charles Davenant in 1701.

In 1707, there occurred one of those momentous turning-points in history which no one much remarks on. The nature of the event probably explains why it is so obscure: debt became a legally-recognised commodity. Not exactly a bit of history to thrill the imagination, and yet it changed the world, transforming how money could be made and leading by slow process to the situation today, when financial operators own most of the world’s wealth.

 Fascinating reading, start with this chapter, and read the previous four at your leisure.



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Mish v Kotler, a Free Market Rebuttal

I read Mish every day, for his research is great and his analysis often good.  He is a capitalist (and I am not) and a recent post is a good opportunity to compare and contrast.

Mish rebutted a communist's criticism of capitalism, which is a tough job since communists get their facts straight (and fall down on prescription).  So read Mish's rebut of Kotler, and below is my rebut of Mish, which delineates the differences among capitalism, communism and free markets.  Mish's points are numbered, and in helvetica, mine are in times new roman.

Mish 14 Point Rebuttal 

1. It is capitalism that is responsible for improved standards of living over the decades.

Capitalism is state-sponsored, so it has winners and losers.  It is responsible for the improved standards of living of the winners.  We all love a system that works for us.  We are all victims of survivorship bias.  Only free markets can improve standards of living, and capitalism is no more free-market than communism.

2. The Fed and government bureaucrats, not capitalism is behind growing income inequality. That said, some degree of inequality is not only a good thing but a very necessary thing. People need to be rewarded for bringing new ideas to the market. Successful new ideas raise the standards of living of everyone, and income inequality creates the very incentive to market new ideas.

Right, but the patterns and practices enshrined in law to support capitalism are the result of capitalism.  Free markets are anarchic, and capitalism is not.  Mish begs the question when he says “people need to be rewarded...”  Prove it.  If your definition of wealth is personal accumulation perhaps, but the innovators motivation is rarely personal accumulation.  Straw man argument.

3. The inflationary policies of central bank planners is the primary reason people do not make a "living wage".

Inflation is inherently capitalistic.

4. Throughout history people feared automation. Yet every technological advance created new jobs. One reason for the acceleration of job losses now are the very "living wage" proposals espoused by those like Kotler that price humans out of jobs.

Automation requires higher paid people to maintain machinery and equipment.  Capitalism dispossesses those who love farming by means of collectivization through usury.

5. It's not the role of businesses, nor should it be, to be concerned with undefinable "social costs".

Economics is value neutral?  How come the Austrians use the term “moral hazard” when referring to investment.  In a free market, actors are exquisitely interested in social costs of their activities, for upon the weal of their customers all depends.  Only capitalists need be dull to costs, for their results are rape and pillage wherever it raises its ugly head.

6. It's not capitalism that fails to charge businesses for pollution costs, but rather governments.

Wait what?  The government is supposed to charge for pollution costs?  How?  Cap and trade?  In a free market, the costs of pollution are allocated strictly to the polluter.  Capitalism allows for the privatization of profits, the socialization of losses.

7. It is beyond idiotic to propose capitalism causes economic instability. It is governments and central banks that cause economic instability.

Now Mish, mustn’t bite the hand that feeds.  No government, no capitalism, for no hegemon to enforce the fraud of usury that is the heart of capitalism (accumulating capital for investment, either malinvestment or misallocation.)

8. With his concern about "community commons", one can easily see Kotler is a dyed-in-the-wool socialist. The problem with socialism is, it does not work and never will.

Actually, community commons works quite well, Israel had 400 years of no one owning property as we know it,  Iceland too, all reverting to original allocation, the best free market example working on earth today, Hong Kong, no one is allowed to own land, American Indians make 99 year leases with the paleface, not sell them land... common ownership works quite well in free markets, but is impossible in capitalism, wherein personal accumulation is paramount.

9. Capitalism does not encourage high consumer debt. The Fed and central banks do, in the inane belief debt drives the economy.

Ungh...  the excess of the heights Mish deems improved standards of living cannot be achieved without the FED and central banks.  Capitalism depends on debt. Marvel at the malinvestments and misallocation, if it benefits you it is good, ignore the povery worldwide, whence it was mulcted.

10. Capitalism does not let "politicians and business interests collaborate to subvert the economic interests of the majority of citizens". Rather corrupt politicians willing to do anything to get reelected are the problem.

Capitalists are innocent bystanders in the actions of politicians and capitalist business interests?  hmmmm... internal contradiction.

11. Capitalism does not favor short-run profit planning, but tax laws might.

Taxes don’t matter in a free market.

12. In point 12, Kotler argues in favor of "anti-competition". Competition is the very essence of improved products and rising standards of living.

Mish you know that all government action is by means of regulatory capture, and the capitalists write the rules by which free markets are curtailed.  Funny how you ignored that, to only note that competition is good.  Kotler implies competition is good too.  A sore thumb this point.  Only free markets can properly regulate themselves.  You took a pass.

13. Capitalism does not focus on GDP at all. Misguided economists, politicians, and central banks do.

True, but his point is macroeconomic, and at the microeconomic, capitalists define wealth as accumulation, which is misanthropic.

14. Pray tell, whose "social values" do we need to consider? Mine? Yours, ISIS? Kotler's? Personally, I do not want some jackass or set of government jackasses, deciding what is socially right or wrong.

Capitalism is state-sponsored, so it has winners and losers.  It is responsible for the improved standards of living of the winners.  We all love a system that works for us.  We are all victims of survivorship bias.

While the capitalists and communists argue over social values, only the free market can reflect by human action, free from force or fraud of the hegemon and its minions, what values society possesses.

A pox on both their houses.

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