BlockChain Follies

Ungh...  I am travelling and this got published before I was ready...

Recently I encountered a scammer who said he had launched the blockchain ground floor architecture with some $5 million is seed funding, and was inviting me among others to be impressed and talk about him.  No.

I was there at the advent of computers, and they are yet to yield a net benefit.  Show me you see what was lost, then you can total up what you think was gained, and give me your assessment: have computers offered us a net benefit?  If you account accurately, the answer is no.

So the constant promise is computers will set you free, a promise on par with Jesus saying the truth will make you free.  The promise must be huge, because the reality is short on deliverables.

The proffered benefits are secrecy and security.  What nonsense.  As if the internet is something the intel agencies cannot control.  They already do.  InQTel controls people down to their skin care.

The key fallacy is blockchain will allow anyone anywhere to be able to trust anyone anywhere regarding any even online.  Who, outside of an intelligence agency, needs an infrastructure which offers this benefit?  Donald Trump has probably a dozen people he needs to trust, after that it is all six degrees of separation.    We all need few others we trust to be effective, we all have a limited capacity to engage others, emotional, mental physical.  Even if true, how would blockchain transform this present reality?

Is this a video gamers dream?  In a video game thouisands of people are killed in a few minutes time, giving the impression that one is a superman, able to engage many people from all over the world in one place and deal with them all effectively.

Life is different.

Blockchain proposes to change the eternal aphorism from "it's all who ya know" to "it's all who you don't know" as if being able to transact with people you do not know will somehow improve your life, give you some advantage.  If so, how?  No word on that yet.

Where the internet is not being used, but could be effective, but not allowed. (I'll expand on this point, for example, allowing all patients to upload their medical histories to public sites so we can plainly see which hospitals are running secret human subject trials on the ill, as USA did in the Tuskegee experiments).

So to harness a generation to play at life, from well within the confines of mom's basement, in a world no more real the Grand Theft Auto, we have blockchain.  Here is an article promising "the world is different now":

uPort will feature tight integration of RepSys, our multifaceted, multi-tiered reputation system, that enables people, organizations and things (devices or software) to attest to the conduct of their counterparties with respect to various kinds of transactions: buying/selling, lending/borrowing/repaying, collaborating on projects, gaming interactions, and data quality and reliability. uPort serves as a container for reputational attributes like email addresses, Facebook URLs or state issued ID.

Oh. State issued ID.  Well, there is the money shot, as long as you submit your system to the hegemon, then it will be permitted.

Identity providers like governments, banks, and IT companies can cryptographically sign such attributes attesting to their validity using “reputational attestations.” 

There are two funny tactical errors in this article, the first is to cite Herbert Coase, a Nobel laureate for his work putting a halo on the hegemon's depradations.   The next is case law cited involving Florida land sales scams, from the 1940s, as a precedent for blockchain.  I think sometimes the people behind these movements have fun abusing their devotees.

This is not just the rantings of some cranky old man.  I am self-employed, I get to eat based on my productivity.  I have done everything with computres that can be done, I was in on TalkCity at ten cents a share and it went up to $35 something in its IPO, I have a profitable ecommerce site that has outlasted 1000 competitors... I beat the publishers and POD,  I deliver courses over the internet.  Few people have exploited the web as thoroughly as I have.  And I make it pay.  But it is hardly an improvement over anything we had before.  I know, as I have the advantage of having had worked n both worlds.

But the insurmountable alternative to this blockchain hype is the reality that anarchy works.  Think of business like those wagon trains (in fact businesses), which had private law agreed to at the beginning, all voluntary, and worked out quite well.  Violators were shunned, that is tossed out of the train. And anyone at anytime could elect to leave or gone on his own (important if you find yourself travelling with the Donner party.) At the end, this "government" (non-hegemomic) simply ceased to exist.  Any business relationship, indeed a lifelong career in self-employment, needs nothing.  How does blockchain in any way help?  Except to feed some fantasy of how the world works.  And at he same time to delight the hegemon with what, yet again, alacrity people clamor to be oppressed.

It has lowered to cost and widened the access to communication and research, but the vast majority of communication is desultory and the research pointless.  It has speeded some things up, but that which is faster was never in a hurry to begin with.

Time spent integrating into this blockchain thing is time not spent being productive, and thus you'll deny the rest of us the good of your genius, what you ought to have been doing.

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Andrew Young on Bretton Woods

Andrew Young was interviewed By Tavis Smiley on his show Sunday, and finished with Andrew Young.  It is a remarkable interview.   I've said if something is not true in all places at all times, then it is not true.  What I teach, what I learned, what I have found reliable in just about every field, Andrew Young finds true in freedom movements.

When you have 30 minutes, give a listen here...

At 31:12 on the timer into the show,  Cornell West asks Andrew Young about MLK’s critique of capitalism and imperialism.  Young said he never heard King talk in those terms of the problems they faced.  Young said King's analysis was Biblical, not economic.  Young quotes King as saying communism needed more freedom, capitalism needed more responsibility, or words to that effect.

To my mind problems are solved on levels other than they are experienced.  Economic (physical) problems are addressed on a religious level, mental problems addressed physically, etc.

I've argued you decide the field you want to enter, the customers decide what you will sell.  as to the freedom movement:  Young wanted jobs movement, the people wanted back of the bus to the front of the bus movement.  So that was the program they had to offer.

Appealing to government never got them anywhere.  It is when the civil rights leaders met personally with business leaders and business defied the (Jim Crow) law, that the South finally integrated.  Here again, government is never the solution, business always is.  In his book, The Walls Came Tumbling Down, Dr. Abernathy chronicles the same point.  I'll say it again, if you want to be a revolutionary, start a business.

Amb. Young also talked about political power, and the disappointments regarding movement politicians of African heritage who were either co-opted or sold out.  Two points: the progressives targeted preachers of African heritage to advance their causes contrary to the flocks interests, and to some extent successfully, and who does not sell out of those who go into politics?  Does anyone expect  people of African heritage to be less corrupt than anyone else.  It's why they call it politics, because it is corrupt.

At 33: 08, Young talks about one of his first votes as a new congressman.  The 1971 vote was on ending the Bretton Woods compact in which the dollar was tied to gold.      Young admitted his ignorance of economics as a new congressman, but had the wit to ask the salient question, if "the dollar is not tied to gold, won’t people play politics with money?"

The panel testifying as to the wisdom of ending Bretton Woods consisted of Paul Volcker, Arthur Burns and George Schultz.   Arthur Burns replied “young man you’ll soon learn the dollar doesn’t need you to protect it.”

Young experienced the rebuke as  “shut up colored boy.”

The committee voted to end Bretton Woods on a voice vote.  Andrew Young was right, they were wrong.

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Understanding Ex Nihilo Credit and the Coming S&P Crash

There are all these hints out there, but what to make of them?

Indeed, if one left it at that, the answer would not be exactly wrong, however there is one more factor which is rarely discussed, and which – according to Deutsche Bank – explains virtually the entire equity rally of the past four years: the collapse of the equity risk premium as a result of plunging bond yields, which as a reminder, is the direct pathway by which central banks operate, by monetizing government, and now corporate, debt.

How do you monetize debt?  I know what they say they do, but certainly it cannot actually happen.  Something else happens when they do that to which they refer.

Debt itself is already the result of a monetization event.  When I lend you $20, you have a debt of $20.  the books are balanced.  My currency is converted to debt.  If I ship you $500 in goods net 30, you owe me $500, a debt.  In both instances there is a monetization event, and the books are balanced.

Now to take that $20 you spent and you owe me, and then say the debt can be monetized, that is counted as money, well, folks, now the books don't balance.  You have an asset, a liability, and another equal liability.  One asset two liabilities.

If a loaf of bread is a dollar today, and tonight you print 100% more currency, soon enough a loaf of bread will be $2.00 to absorb the increase in currency.  This is the definition of inflation.

But things get tricky when we are talking debt, not currency.

If debt is priced at 6%, and you "print" (monetize) again as much debt, then do prices of debt drop, deflate?

Does the interest rate drop from 6% to 3%?

Do the assets which now have a double liability drop in value, or wait, the reverse?  Do they rise in value, denominated in currency?

What happens to credit, or underlying assets, when the above occur?

The article is in relation to the price of the S&P, and notes a logical drop in the market of 40%.  But none of this is rational, for ex nihilo credit has no rational basis.  And there is always regression to the mean when there is a bubble burst.  The drop would be more like 60%, and when the short sellers start unwinding their positions, in a month or so it would stabilize at a 40% drop.  Smart money is in cash waiting to pick up that 50% bounce from the crash bottom to stabilized bottom.  That for the insiders, politicians, Foundations, etc.  You just lose 40%  And anyone who does lose money in the market, when everyone is screaming crash, well, don't they deserve it?  Anyway....

As Deutsche Bank’s Dominic Konstam writes over the weekend, “various Fed officials have raised the issue of financial stability in the context of the reach for yield and riskier products to make up for low rates. This is part of financial repression. The logic might be that once the Fed has normalized, elements of that reach for yield and risk would be unwound and this could lead to disruptive financial market volatility.”

Since when does getting my $20 back create instability?  Since when does getting my invoice for $500 paid create instability?  Getting paid means the monetization event on the books is unwound.  Well, both sides desire this above all things.  Bt what is disrupted in the FED scam is when getting paid zeroes out our mutual deal, but there is still that second liability out there.  There is nothing to which to relate it.  Yes, before it was fraud, but there was some pig in a poke, the mark did not open the bag yet to find it empty, as it is with the pigeon drop scam. The point at which the mark realizes he's been scammed can be quite disruptive, for the mark.  The FED's job is to keep the scam going (at least past the election).  When the mark is hapless citizens, and they realized they have been scammed, then it is pitchfork, tar and feathers time.

Is it not amazing that every top criminal fraud scam becomes a government program?  Social Security is based on the Ponzi scheme, the Federal Reserve System counterfeits, Treasury runs the pigeon drop scam,  Romney/Obamacare is the pig-in-a-poke,  Section 8 housing is price fixing...    unh, one could go on ad nauseum.

Anyway, back to the scam at hand.  As everyone says, this is all new.  There has never been a negative interest rate phenomenon in history. So the dynamics are yet to be recognized.

I do not know if I have any of the above relating to negative interest rates and ex nihilo credit correct.  I don't think an economist can figure this out, since they do not have the forensic tools to do so.  I think an accountant could, assuming they have the ability to define terms correctly, and not just GAAP everything.

I'd be delighted to hear from an accountant who can critique my analysis.  In so doing, maybe we can figure out some of the dynamics, and then figure out the great "so what?"

If you know a working CPA who is game to critically assess all this, I'd be delighted to entertain their views on this blog.  Who knows, maybe we'll both become famous.

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Analyzing Trump On China

Deng Xiao-ping, circa 1979, when he finally overcame the Maoists, toured USA, then visited with Lee Kuan Yew of Singapore, some Hong Kong Billionaires and others and consulted on how to play his hand.

Brilliantly! USA was in the early but irreversible stages of lending malcredit at usury and the hollowing out of USA industry, small manufacturing first, then big manufacturers was well underway.  It would be merely a few years before USA needed massive new factories and management to COPY what USA makes in state of the art new factories.

The great roll-up of the family-owned USA small business occurred over the 1980s, with the capitalists and the communists co-operating in the collectivization of the USA economy.  Get big or get out is the stated economic policy of the USA.

For those unemployed new welfare programs were created, students loans could be given to create the impression of advancement, and Starbucks became the new hiring hall.  Whoever you are, no matter your circumstances, the Man can make up some life-support system for you, and simply put it on the tab of future generations, since there is no rational limit on malcredit.  If and when a culling is necessary, why, we have Obamacare ready.

Now comes comments from Trump:

And I'm not angry about China, in fact I respect them, I made a lot of money with China... I'm not angry at China, I'm angry at our leaders for being so incompetant that they allow it to happen. 
And I said this as part of my response to the Wall Street Journal when they just called.
I said, in the history of the world, this is the greatest theft ever perpetrated by anyone or any country, what China has done to us. 
It is the greatest single theft. They have taken our jobs, they have taken our money, I mean I see the empty buildings all over Staten Island... I see them all over... Really really sad. That's not going to happen anymore with me... 
The truth is, we have all the cards.

So he starts off right, merely stating knowing the score, he too played his cards right.   He also notes the problem is the USA, not the Chinese.  Just so. The he switches "...what China has done to us."  But Trump, they played their hand to the objective detriment of USA just as you did, so by the same token, you condemn yourself.  This of course is lost on the crowd cheering Trump waving red meat of blame China.  The Chinese see what he is doing, telling the Chinese Trump understands perfectly well what is going on, AND Trump is waving red meat in front of his adoring crowd, who haven't a clue. China gets Trump, helps him by objecting to him, and are no too worried that USA will ever be a viable threat.

China has as many empty building as USA, and as many problems.  But China can say to its youth, "go west, young man!" with its Belt and Road initiative integrating Beijing with Berlin.  Indeed, an ancient fairy tale "Journey to the West" is getting multi-decade continuous play in China.

USA has no such West, unless you mean analogously "war."  That is all USA does now, and that is not working out so well as an economic policy.

We do hold all of the cards, since China still copies and we can get creative.  But under capitalism, with our banking system and IPR, it is not possible in USA for good ideas to move forward.  Mag Lev comes up, it gets crushed by "self-driving cars."  New medicines and cures advance, Big Pharma shuts them down.  People try to protect nutritious food, they are thrown in jail for patent infringement.  Countless creative people have fallen through the looking glass of their smartphones, likely never to return.  People with smartphones have no idea what they are missing.

Sure, if we were to deregulate banking, medicine, education, and get rid of our IPR regime, we could be free, just, prosperous and peaceful.  But no, check out this youtube.

Marvin Gaye and Stevie Wonder saw all this long ago, at the beginning:




And of course...


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Hurry Up & Get Biggest!

You can grow your own company and avoid the mess corporate in which corporate America is mired...  their jig is up.

Longer-term, if these new secular trends working against profit margins are to remain in place, earnings growth will be much harder to come by for corporate America than it has been over the past few decades. And there are plenty of signs it is already becoming very difficult for them. Corporate cash flow has essentially been flat for the past five years. At the same time, more and more companies recently have resorted to financial engineering via buybacks, non-GAAP reporting and even outright fraud. My guess is this is all in an attempt to make up for broadly slowing organic profit growth due the these secular tailwinds shifting to headwinds.

Alaska Air is buying Virgin, Branson is smart enough to cash out.  This is a nice analysis.

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Econ 101: The Damage is Done During the Boom

The Econ 101 lesson that must be remembered is the damage is done during the boom, not the crash.  The crash is just the unbalanced economy tipping over.  Karen DeCoster caught an excellent example of hegemon interest-rate market distortion in real time:

The auto bubble, with its easy credit and super-low (or no) interest rates guiding the way, has redirected consumers from more affordable small and mid-size cars to the $30k – $40k+ SUVs and pickups that are financed at or near 0% on a 5 – 7 year loan period. In mid-2015, Kelley Blue Book reported that the average new car transaction price had reached $34k. I personally know of individuals who have financed cars that cost at or near 100% of their annual (gross) salary. This is not uncommon, and it is unsustainable.

Here an article on Stockman's site gets started in analysis way too late in the narrative:

Few question the importance of private credit in the global economy. When households and businesses are borrowing to expand production and buy homes, vehicles, etc., the economy expands smartly.
When private credit shrinks–that is, as businesses and households stop borrowing more and start paying down existing debt–the result is at best stagnation and at worst recession or depression.

Stockman usually writes as if the problem started 25 years ago..  well... try 1971.  But to the point, what is the source of that "private credit?'  If it is malcredit, whether private or hegemon, it is every bit as toxic.  Who cares if people use hegemon or "private" malcredit?  It is all damaging.

The private credit that matters is asset based.  That is created between two parties who assume all risk upon themselves.  This benecredit is always pitch-perfect and is limited only by the rational considerations of economic actors.  No hegemon required (which is why the hegemon attacks it.)

We can walk away from this today, but we won't.  We've all assume our tallies show a net positive, when truly they only show the degree to which we are guilty.

Start a business, move over to the side that ameliorates.

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World Trade Crashing: Ho Hum!

The newest Census report on imports and exports show world trade is crashing for USA too!  Look at it go!  Both imports and exports!  I read the articles too!  Baltic dry index down! Maybe people should gain some perspective!  This is one year!

http://www.census.gov/foreign-trade/data/index.html?eml=gd&utm_medium=email&utm_source=govdelivery

Much more useful is to observe what has happened over the last 40 years, starting with Nixon going off the gold standard (lite).  Those trend lines accelerate after 1971.

https://www.census.gov/foreign-trade/statistics/graphs/gands.html

Let's begin with Earl Butz, Nixon's Sec of Agriculture, who announced the policy of USA is "get big or get out."  Now, this does not mean that Uncle Sam was to help only big business, it means they will harm small business at the same time.  Stated policy, enacted means, results achieved.  At what point do you believe them?

Although regulations, taxes, death taxes all helped destroy the family business, even more insidious was unleashing banks to create and lend malcredit, at interest, when previously the vast majority of lending in USA was at no interest, and almost all the rest at cost of loan processing, through thrifts and credit unions.

The trick became rocking the cantillon effect, the more money you borrow, the closer you get to the source, the lower the cost: crush the competition, roll up the industry.

First they came for the USA manufacturers, countless small businesses. And those who fell for the folly of price cutting, down they went.  When the big box stores had wiped out USA industry, then they went to China, whose credit became good, give the untapped resources of the world largest country in people.

That big dip is 2008, which would have been a good peak to end the damage, but as you see in eight years things have gotten much worse, fatter problem.  Well, the next crash will be all that more bad for those engaged in the false economy (if you are employed, have a pension or stock portfolio, own property...  you are probably to that degree tied up in the false economy.  You'll learn how much by how bad this next crash hurts.).

A few points;  the damage is done during the boom, the crash is simply the correction.  The longer the boom, the more gets corrected.

The bottom of a market is not low prices, it is no buyers.  If you think anything is low priced now,  you ain't seen nothing yet.

The right side of the 2nd graph will look like the left, except 40 years of downward.  Deflation instead of inflation.  Rent, don't own.  Delay getting paid, not hurry up and pay me.  Work for yourself, family business with no benefit plans, not a "job with bennies."  This will be the path to wealth, properly defined.  It is the path to your peace and prosperity.

(Incidently, the 2nd is also a graph of the growth of government in USA, and a graph of the growth of microsoft, and so many other false economy monsters.

The drop in exports, small as it is, is mostly big business trades, not small specialty trades, as I have demonstrated here several times.

So get self employed, if retail great.  If wholesale, competing on design, take advantage of the worlds excess capacity to source your items, and in the coming years, when USA real estate crashes (and commercial crashes far faster and deeper than residential) families will be able to start small businesses in USA, manufactories, etc, and slowly we'll see a renaissance in USA small business.

It's about time!

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Mag Lev Lexus Skateboards

This blog has for years advocated Mag-Lev as a solution to pollution, energy costs, foreign dependency, police abuse, transportation inefficiency and a host of other problems.  Now come Lexus with a working solution:

Before we get to that, here's a brief description how it works: Lexus’s hoverboard uses magnetic levitation, or maglev, to achieve frictionless movement. Liquid nitrogen-cooled superconductors are combined with a magnetic surface to essentially repel gravity. Maglev technology itself isn’t new, and this isn't the first hoverboard to use it. American startup Arx Pax raised over half a million dollars last year through a Kickstarter campaign to fund its Hendo Hoverboard.

Note these are private company efforts, the hegemon is merely getting in the way.  And indeed, if we want to see a revolution and economic recovery as grand as we saw with telecommunications when Carter deregulated phones and Al Gore gave us the internet, then we need to deregulated transportation so private companies can raise equity on real assets and build out a mag lev system, where China is ahead of us already.  To make this happen, the Hegemon has to relinquish power, as Carter (my favorite president) did when he eliminated the ICC.  (Carter did the heavy lifting, the right thing, and Reagan got the credit for the massive benefit to the economy.)

Usually such technological advance goes from the general to the specific: the railroad steam engine for mass use drilled down over time to the internal combustion personal locomotion, the auto+mobile.  We still use the word "car" (from an individual train car) to refer to a individual transport unit.  But this time it seems to be going from the individual (the skate boarder) to the car, trucks, railroads.  The country that is the least regulated and most free market will win this contest.

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Since No One Went To Prison For NAFTA, Now TPP

NAFTA is a massive bipartisan fraud on the citizens of North America, which has directly precipitated civil war, and since it has gone unprosecuted, the usual suspects are back at it:

“It is incomprehensible to me that leaders of major corporate interests who stand to gain enormous financial benefits from this agreement are actively involved in the writing of the TPP, while at the same time, the elected officials of this country, representing the American people, have little or no knowledge of what’s in it,” wrote U.S. Sen. Bernie Sanders, I-Vt., in a letter to Froman earlier this month. 

O come on Bernie, you know how the game is played.  We set up rules and regulations and policies that benefit big government/big business, then call it free trade.

Expect more poverty and war of this passes.

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Welfare Queen Gets Tired

Here is a fair criticism of an ExIM bank critic... by an ExIm Bank client:

She and others like her pontificate from behind a desk, using theory and political rhetoric rather than considering how their words can impact American jobs. By contrast, employees with our U.S.-based company happen to work face-to-face with product distributors and with farmers in fields all around the world.  Our company is based in Gilbert and we began using the Ex-Im Bank nine years ago. Alan J. Merrill is executive vice president of Bio Huma Netics, a Gilbert-based company that manufactures fertilizer and wastewater solutions.

Yes, theory against experience pales.  So let me reply to Merrill who claims to have been on EXIM Bank life-support for nine years in business, from someone who already had ten years experience of dealing with buyers and sellers face-to-face around the world, before being self-employed for thirty years.  Ready?

Our competition includes some of the largest agriculture companies in the world. Many of them receive support from their home governments. The Ex-Im Bank helps level the playing field so that we, as a small business, can get our product overseas and compete on quality, not financing.

Well, which is it?  There is an internal contradiction to say you need financing, so you don't need financing.  How can you possibly control for the variable of EZ cheap credit when trying to assess whether quality is a factor in a sale?  You can't.  So here is what you have missed by being a welfare queen, instead of a entrepreneur:

One cannot compete on quality.  You would have learned this had you actually gone out and tried to build business without the ExIm boondoggle.   Quality and service are standard offer items.  The quality of your fertilizers are set to what the market wants, no more no less (as is service).  Within an extremely narrow band, all players offer the same quality and service.

What builds markets for small business is design, the only place where small business can and need to compete.  A fertilizer designed to produce a specific effect, solve a specific problem, as opposed to the standard fertilizer.  Now for a uniquely beneficial fertilizer one may charge a premium price and have no problem finding customers who are ready willing and able to pay.

Indeed, the fact you admit the people with whom you deal are not able to pay means legally they cannot be designated customers.  The legal definition of buyer is ready, willing and able to buy. You don't have a business, you are really a sort of government-funded NGO.

Why are your customers so weak that they need USA taxpayer loan guarantees before they can buy (or more to the point, before you will sell?)  Why are taxpayers running the risk of default, and not your company?  You say "look at the jobs" when we should look at your company.  (The ExIm Bank now forbids this, hiding the list of names they finance, in this way we can no longer know when ExIM Bank deals go bad.)

Google reports variously 700 fertilizer exporters in USA... why is Merrill's the only one that needs taxpayer bailouts to continue (aside from the Koch brothers of course, welfare queens extraordinaire)?  Why should you have an advantage over the some 658 others who sell and get prepaid for export sales, not USA taxpayer guaranteed funding?  What about the employees of well-run companies who lose their jobs because overseas buyers who are perfectly capable of paying the other company agree to save money by buying from a USA taxpayer wealth transfer scam that your company mediates?

And what of the domestic producers in your target market?  How are they to compete when you offer USA taxpayer subsidized product against the domestic product?  EXIM Bank support has ruined many an overseas producer, adding to the hatred of USA.

Businesses on running-bailout need not concerns themselves with competing in markets.  For all that ExIm bank is used by almost no one in business of international trade.

If a country is effectively subsidizing its exports, then trade in that country's subsidized product until that bad policy breaks them.  Get rich off their folly.  It is how Dow Chemical got started.

Without the bank, we would not have access to financing alternatives, and as a result, would not be able to export to many of our current customers. But opponents of the bank suggest that the private sector will step up to meet the needs of small businesses like ours should the bank's charter expire.

No, opponents say if your parroting of false EXIM claims of profitablity were true, then a bank would do the business.  But you can only get financed when a bank says you'll fail otherwise.  What does that say to the rest of the taxpayers funding you?

Small businesses here in Arizona and across the country can tell you that without Ex-Im there is no other option. The private sector can't step up to meet our needs because commercial banks are most often unable or unwilling to finance or insure the international deals we conduct. Without financing or insurance, these American businesses and jobs will be put at risk.

Well, yes.  The jobs at risk are all false economy jobs. Merrill parrots EXIm's well documented lies about turning a profit, a point that is prima facie nonsense because if so banks would do the loans.  Yes, these jobs exist because of misallocation and malinvestment, provided by ExIm Bank.  And the same  misallocation and malinvestment is crowding out real economy jobs.

It's not the cards you are dealt, it is how you play the hand.  There is no judging a man as to how he plays his hand, if he wants to pursue being on the dole, that is his choice.  Indeed, when I lecture I advise on a strategy of raiding the dole meant only for big business judiciously to advance a small business advantage. But when he wants me to believe his choices are a good thing for everyone, then that is insulting and abusive, expecting me to go along with his pretense.  In life, NEVER believe your own PR.

Merrill actually starts out with the best quote:

Be it President Barack Obama, lawmakers or D.C.-based think tanks, we tire of being told how to run our business.

Hilarious.  Typical republican. Barack Obama has put the ExIm bank on steroids, making your gig possible.  Like most welfare queens, he wants his EBT card but bristles when people suggest he get a job.  It is HARD being a welfare queen!  People want accountability for what you do with their money!  Soooo tiring!

I never get tired of criticism.  It is either not true, or where true, I readily admit it.    I get media rate, a huge subsidy, on the books I sell.  Why should taxpayers subsidize delivery to my customers?  Why, indeed?  I don't advocate it continue, I say get rid of the USPS.  Let private companies run it.  Until then, I rock the subsidy.  But if they get rid of the subsidy, I won't go away, because the subsidy is not critical to my success.  By defending ExIm bank, you are expressly stating you cannot survive without it.

Don't worry, the ExIM bank will not end until the USA ends (and the USA will end because such as  the ExIM bank cannot be ended).  But you can join the other 659 or so USA fertilizer exporters and offer a product people actually want to pay for.  But you have to compete on design, not taxpayer guaranteed low price.

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Lawlessness - Polio Vaccine

A libel against Islam is their fear of science and medicine, odd that since most of our advances in medicine from the middle ages on were compliments of Moslem doctors.  The fact Moslems resist Western vaccination programs, for fear of sterilization campaigns or worse, is held up as proof of perfidy.  And what do we have?  News the CIA used vaccination teams to sniff out Osama bin Laden.

In Pakistan, where polio has never been eliminated, the C.I.A.’s decision to send a vaccination team into the Bin Laden compound to gather information and DNA samples clearly hurt the national polio drive. The question is: How badly?

The article tells us Western Powers have succeeded in getting many Moslems leaders to endorse their work.  I would advise otherwise.

1. USA has a history of using medical treatment programs for nefarious ends.

2. The stated means is to work through religious leaders.

Much better to stop making war on Islam and peacefully trade wherein Islamic business people will trade in legitimate and wholesome medicine.

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Comcast Down

In spite of paying for premium service, comcast is down again.  Now if the email does not work, but the web does, I can go to Comcast's website to find out what is going on, or at least find out if ther is a problm.  You would thinkk so.  Impossible.  Vast layers of thick to keep you from finding out what is up.  Give up before finding out.  One would think there would be some advantafe to placing that info front and center.

Of course, taxpayer subsidized and regulated Comcast cannot care, but given their lack of concern others can step in make good... check this out...

Comcast problems

Although comcast refuses to inform their customers, downdetector will and offer ads inviting customers to switch.

I love the degree to which we have free markets...

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Social Conditioning

You think and feel certain ways largely due to social conditioning.  The money and power to get you to think and feel certain ways is astonishing.  Check out this graphic on where you get your information.

People WANT to think like everyone else, therefore these consolidations are possible.  We all want others to fight our battles for us, so we are told constantly that we can have that.  It is not true.

The biggest battle in life is we against ourselves, and being self-employed does that.  It is a revolutionary act in which you shift in what you can do for yourself to what you can do for others.

That right there is the heart of all personal transformation.

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USA Invades Iraq So China Can Have Cheap Oil

Very many of us saw this coming as we watched Colin Powell lie the USA into a war in Iraq:  China is getting the oil.

“We lost out,” said Michael Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.”
The depth of China’s commitment here is evident in details large and small.
In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic.
Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants.

We could have just bought the oil, just as China is proving today.  We need truth commissions to find out who said what when, and then prosecute these people and send them to the countries we invaded for punishment.

USA needs to get back on track and stop blaming Islam for our toleration of election fraud and third string leaders.

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How Coase & Friedman Rose to the Top

The heart of our economic problems is our willingness to give power to people who use the power incompetently or maliciously.  People who understand this are nonetheless are trapped in false dilemma: “we must transfer power to others, if we can just get the right person in office.”  Never in the history of mankind has the right person been in office.  Never.  There may be a reason for that.  The reason is we are not suppose to give our power over to the state.

The rationale for giving our power over to the state is to get others to fight our battles for us, an unviable plan.  The powers that subsequently be use their aggregated force on their subjects, until they get so abusive the subjects escape to anarchy and another master emerges.  Le Roi est mort, vive le Roi!

The project of the powers that be is to get policy right so as to extract the most with the least effort, which necessarily means bad public policy.

I talked about why bad public policy emerges. Now I’d like to look at how. As part of this series, I want to look at a specific example of bad policy being developed for the powers that be.

A short history up to the 1930s:

Free markets are the natural condition, and they reemerged in the west largely compliments of Anglo-Saxon common law.  As capitalism emerged, that 800 year tradition was a stumbling block to free markets, free markets being the bane to capitalism.  Some judges actually upheld the law.  

If someone built a coal fired plant and dirtied mom’s laundry, in a relatively free market political economy mom could sue the coal fired plant and get an injunction to stop and damages for the laundry.  The plant would have to burn anthracite and put in filters.  This would make its products not too expensive, just more expensive.  But there would be no pollution.

If we had stayed with that, in free markets with property rights and natural law, there would be no pollution.  This is not some theory, it was the law in earlier relatively free markets.  If automobiles makers found their cars stopped for pollution, cars today would simply collect all that exhaust, filter it, and there would be a solid exhaust puck you would sell when you filled up for another tank of gas (for in that form it would have some industrial use.)   The old system worked, but it militated against the huge corporation.  So the capitalists had to get rid of the law. 

What happened over time, and you can read about this as one theme of many in Horwitz’s book, the Transformation of American Law, is judges, since they are politicians, would begin to rule for the power plant against mom, under the newly emerging utilitarian regime, that the common good for the most people is paramount.  But this gave us pollution.

(Now I do know we have pollution control laws on the books for London circa 1200 having to do with smoke from cooking fires so thick that breathing got difficult.  A law was passed, but industry offered charcoal which was cleaner.  Smoke comes from water content and impurities, and colliers turned wood into light, clean charcoal. The law was unnecessary.)

The pollution that came from industrialization was termed an externality.  How to handle externalities when there was now no rational limit to pollution? Well, tax it.  Note, please, that taxing it does not get rid of the pollution.  It in fact allows it to continue.  The progressives love cap and trade not because it ends pollution, but they get to make money trading in pollution.  The progressives get to put a halo on making money harming the environment.

Pigou was the leading economics thinker up to the 1930s when Keynes took over.  The Pigou economic plan of taxing externalities delighted the progressives because it gave them something to play with, public policy   But taxing externalities was too inefficient and made for huge government which adds to something called transaction cost. 

So how to make it easier for the powers that be to aggregate ever more power, without having the property rights holders interfering with lawsuits and the taxing of "externalities?" One evening there was a big meeting in Chicago, in which the ideas of one Ronald Coase were discussed.

Here is a description of the big Coase meet.

http://istanbulsunset.blogspot.com/2006/11/addendum-coase-friedman-story.html

Milton Friedman's son is an economist in his own right, and the work of Coase is explained by he who learned about Coase from his father.

As son of Friedman explains the key problem Coase is solving:

A court, in settling disputes involving property, or a legislature in writing a law code to be applied to such disputes, must decide just which of the rights associated with land are included in the bundle we call "ownership." Does the owner have the right to prohibit airplanes from crossing his land a mile up? How about a hundred feet? How about people extracting oil from a mile under the land? What rights does he have against neighbors whose use of their land interferes with his use of his? If he builds his recording studio next to his neighbor's factory, who is at fault? If he has a right to silence in his recording studio, does that mean that he can forbid the factory from operating, or only that he can sue to be reimbursed for his losses? It seems simple to say that we should have private property in land, but ownership of land is not a simple thing.

He is referring to the bundle of rights, the old concept of intangibles that come with property rights. All of this had been worked out over 2000 years and in place for about 800 years before the capitalists figured out a way to over come it...

Here is David Friedman's explanation of Coase's solution.

The Coasian answer to this set of problems is that the law should define property in such a way as to minimize the costs associated with the sorts of incompatible uses we have been discussing--factories and recording studios, or steel mills and resorts.

So, change the definition of property and old protections no longer apply to the new situations, situations that are not new, just open to a new approach by virtue of a change in definitions.  If we pull all the aggrieved together and work out a solution in which everyone makes more money, then that is the solution we need.  There is a reason these people are also called monetarists.  One problem is to be aggrieved, you have to be a money-maker.  Mom and her laundry don't count.

It took all night for the crew at Chicago, brilliant minds all, to realize this was the answer for overthrowing 800 years of anglo saxon law.  Now the best part is Coase’ s ideas were like stem cells, extremely basic and undeveloped.  Most of his ideas were actually developed by others claiming to be following Coase. Coase never developed the Coase theorem, a follower did.  Why would anyone credit Coase with their own ideas? Coase ran the Law and Economics journal at U Chicago and attended academic conferences and advised people on what to write to get into the journal.  In academia, it is perish or publish. Not only did he drive the content, his contributors were liberal with their credit to Coase.

These ideas got their blank slate to test in Chile after Allende. Based on Chile, their ideas went global.  I've spoken with a Congolese priest who quoted Friedman, the good results are so well known.  The victors write the history.

With the Allende coup we had murder, deaths squads, etc and USA favoritism. No telling what would have happened without the Allende coup, but we do know what happened with the Allende coup.  It will not serve to say "under socialism, Chile would have suffered" because we will never know what would have happened under socialism in Chile, because they never got socialism in Chile. Perhaps under socialism, like under communism, Valparaiso would have become the Hong Kong of the East Pacific.  And we do know Allende was elected peacefully.  The trouble started when the capitalists grumbled, not when Allende was elected.

We also know plenty of places where the economy improved without a coup, murder, deaths squads, etc and USA favoritism.  And Chile is now rather tightly woven with USA's fate.

I prefer the ideas that have economic advancement without murder, coup, death squads, disappearances...  every country has problem people.   The economies who advance without the violence and accommodate the disaffected are the ones whose systems interest me.

Every plan people come up with requires that people change or some people need be eliminated or it is limited to the some how elite: religion, philosophy or intelligence.  No one’s plan for change has yet worked.  Any plan must be what has already worked.

The trick is not find a way to change human nature, the trick is to withdraw the consent for the state to aggregate power.  As I pointed out 1 Samuel 8 is the first of many instances where people clamor for oppression for themselves.  Part of our work is to undue the damage done. We can take heart observing places like Switzerland, Hong Kong, Andorra, Singapore, San Marino, Iceland, the Vatican, etc, where the state is nearly nonexistent and in that measure malefactors find little purchase from which to leverage their evil.  And where the state is nearly nonexistent, self-government flourishes.

It all there...  under the wreckage of capitalism.  No matter what you urge or idea to help others, or yourself, the first step is to withdraw your Consent to be governed by the state.

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Note To Employers - Save Your Business

Note to employers whose employees are now acting like vendors, not employees, like you are not an employer, you are a client.  Thank your lucky stars.  Let me explain why.

The debt load you took on in boom times cannot be supported by the lower sales volume and tighter margins you have now during the bust.  So you are cutting employee costs, rebalancing inventory, renegotiating the lease, and cutting overhead.  Everyone has a different weighting in these areas, so its all about judgment.

If you are like many businesses you’ve by now fired your high priced, boom time help and replaced them with low priced help.   You’ve cashed in your 401K and paid the tax and penalty to make up for the loss of the bank line of credit.  You await the promised economic recovery, when you can replenish your stores.

If you own a restaurant you have at least one chef working for free.  It is called staging.  For the restaurant to be open, and minimum wage paid (and not just work for tips) someone has to work for free.  It is the poor bastard who has a chef degree and a student loan, who is working for free hoping somewhere, sometime a chef drops dead.  Since working for free is illegal, these chefs move on, pretending to be "guest cheffing."  

As you know "interning" is quite widespread, but the politicians made it illegal about 3 years ago.  And they exempted politicians and lawyers.  I am not making this up.

In any event, you are doing what you have to do until the economic recovery comes.

There is no economic recovery coming.  We are in year five of a 30 year rolling disaster, which will get far worse.  There is simply no way, for lack or perspicacity AND concern, that any public policy will address any aspect of the economic crisis.  This is not to say your business cannot do better. There is business out there, but you need to change to get that business.  And you need good people to make it happen.  Such people are hard to find, or impossible, it would seem, to afford.

If you are looking at other people in business as your competitors, you are looking in the wrong direction.  They are in the same boat you are.  He who will eat your lunch has not yet started a business.  He will beat you because the workers will all be owners, their rent will be dirt cheap, they will have no debt obligations to service, and they will likely get vendor financing for customers they serve with better product at a lower cost. They will not be flogging dead inventory.

This competitor may be working for you right now.  Your impulse may be to fire this person when you find him going all entrepreneurial on you, treating you like a client, but you may be better off listening and working with this person.  Listen to the person’s ideas, and between the two of you you may pull your business out of the death spiral.

Now, you may look around the low priced help you have, or whoever you have on staff, and say, no such person here.  And creative, smart aggressive energetic people are too expensive to hire right now.  Right?

Wrong!  Again, you are stuck in old thinking.

Your business like all other has a series of posters on the wall outlining how the state, as a matter of public policy, has interfered in the rights of employers and employees to negotiate any deal they like.  Public policy is meant to curb the excesses of the capitalist system with rules and regulations.  Never mind that if a system engenders excesses we should dump the system, get rid of capitalism, but no. Keeping capitalism alive is necessary for progressives to have something to do.  It may not have mattered when the economy was growing, but it is counterproductive right now.  Public policy no longer fits within economic reality.  The economic reality is we cannot afford any playing at "public policy."  In any event, the trick is to not be duped into confining you thinking within the limits of public policy.

Public policy is for employers to be a welfare agent for employees from cradle to grave.  Your parents’ employers took care of you from the cradle, and your employer is to care for you to the grave.  Of course people change jobs, but laws such as COBRA provide for seamless transition.  It is all so out of touch with economic reality.  A huge solution to a tiny problem.  Costs on top of pointless costs.

A new conception of "employee"  (ick... I don't like the word...) may prove to help align production with reality, but may also be one heck of a competitive advantage.  A network of associates who show up for an hour and earn $1000 to produce $10,000 in sales is better than a full time employee who costs $5000 a month and produces $40,000 in sales.  You get better performance from the former and there is a mountain of management costs for the latter. Full timers tend to equate time with entitlement, and an idle mind is the devil's workshop. 

If so, where to farm new recruits?

There is massive unemployment out there, even when people who would be working are hanging out in school or otherwise diverting themselves.  Uncertainty alone may forbid hiring.  Inability to contract on terms mutually agreeable makes sure you do not hire anyone new.  Forget about them.  They want to be employees and cannot help you.

I once wanted to learn about ag exports so I spent a year in Wenatchee picking, sorting, storing, packing fruit in Wenatchee, and then consulting with a couple of big outfits on ag exports.  The farmer I initially worked for told me the Mexicans ask for a certain wage, and his reply was "it's not in the fruit."  The meaning being, there was only so much he could make off the fruit, and that determined what he could pay.  At some point, it was better to lease his 30 acres out to big bad Dovex who got its money cheaper and was big enough to rock the subsidies.

Paying employees in your business is not in the plate or the furniture or the clothes.

There are some people stepping outside the box.  You’ll see them appearing to compete with you, either inside your company or out.  Or they may have other gigs in which they are more interested in than yours, but their creativity may serve you.  Bring them on as consultants, or in a way that you get your $10,000 in sales, and they get $1000, but only for one hours work.  Match the personnel to the opportunity.

These people do not want bennies, they dread mandatory "health care."  The thing is a literal killer on many levels, but in short, they don't want to pay for something they will never use.  They made separate arrangements for "health care" to stay healthy.  They want no retirement because it would not occur to them to retire.  They will never collect unemployment because it would not occur to them to be unemployed, which is always a voluntary circumstance.  When you are talking to people, listen.  Don't wonder if they would be a good employee.  Wonder under what conditions they will work WITH you.  The employee is over.

Competition means to strive with, not fight against.  How can you work with these lives wires in a way that benefits you both?

One final thing.  Most people are out of business before they realize it.  Get cold blooded about your situtation.  Have your CPA advise you when your liabilities grow to the point where you can go bankrupt and end up with nothing but $125,000 (what you get to keep in bankruptcy)  If you get there, go no farther.  Cash it all in.

Reflect on this.  What if you had absolutely no obligations, knew what you know, and had $125,000 to start over?  No worries except the business you want to build, from scratch.  The other people in the business, who have not gone bankrupt will remain shellshocked, dispirited, struggling full of woe.  You will be trim, fit, tanned and ready to rock.

The people you are really up against, the ones who will eat your lunch, are right there,  absolutely no obligations, no worries except the business they want to build, from scratch.  They are trim, fit, tanned and ready to rock, except for the experience and $125,000.  You have the advantage of experience and cash.  Doesn’t that sound pretty good place to be?  It is an option, study it.

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Government Investment Fails

Lots of talk about government action in stimulating the economy, in spite of the fact we’ve always known it does not work... they say so themselves...

This paper from the Congressional Budget Office (CBO), written in response to a request from the Senate Committee on the Budget, reviews the available data on the economic value of federal investments in infrastructure, education and training, and R&D. It focuses on empirical evidence produced since July 1991, when CBO last analyzed the issue in the study How Federal Spending for Infrastructure and Other Public Investments Affects the Economy.

And what did they find?

In short, the federal government's opportunities for making investments that yield economic benefits are limited. Of course, some do exist: by definition, federal investments that pass a careful benefit-cost test can contribute as much to growth as private investments. And some federal investments that are not justifiable on economic grounds may be desirable for other reasons--for example, if they advance the social goal of equality of educational opportunity. Nonetheless, there is ample reason to be skeptical that increased federal investment spending would increase the growth of GDP. 

To stimulate the economy we need freedom, not more regulation and taxes.

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Why We Do Not Have 100 MPG Cars

Safety regulations add about 500 pounds to a car today, which kills gas mileage.  So if we did not have such regulations, would cars be unsafe?  If we are against government mandated safety-regulations, are we against auto safety?

Safety depends on the driver, not the car.  Younger less experienced drivers also drive lighter cars.  So guess where fatal crashes cluster in statistics.

The NHTSA only shows since 1994.  But look at this graph outlining the progress in reduction of highway deaths. http://www-nrd.nhtsa.dot.gov/Pubs/811346.pdf   Notice anything?  Where are car safety features mentioned?  Well, seat belts.  Good call.  Airbags, mixed review (airbags and automated braking systems give people false sense of security so they tend to take more risks, eliminating the benefit.)  So what are we left with in the graph?  Most safety advances come from rules and regulations. not technology.

If you oblige drivers to put infants in rear-facing child seats, enforce drunk driving laws and check speeding, there are less deaths.  Indeed!  If you constrain people enough with enough laws, and throw enough people in prison, things get safer.  So government regulation does work, in its own way.

But which of the government regulations would we not have if the insurance companies were responsible for auto safety?  What if we had no National Highway Traffic Safety Administration?

Well then insurance companies would have to take on the expense of writing the rules of the road for their clients, not the government.

Now you may say, the NHTSA has only a $3/4 billion budget, only 750 employees averaging $140,000 per year (averaging, including secretaries)... that's cheap as government goes.

But it is only one of thousands of billion dollar agencies we do not need, and collectively, cannot afford.

Right now we borrow money from the Chinese to pay for this agency.  Do you think insurance companies would pay employees as well?  Tolerate waste fraud and abuse among the workers?  Come up with nonsense regulations among the sensible ones?

The cost of this benefit would drop tremendously if we were to eliminate it and shift it onto insurance companies, where it belongs, where it once resided before being taken on by rent-seekers.  And remember those pointless auto safety features?  Insurance companies would demand them only if they proved effective.

So we'd likely have lighter car, safer drivers and much higher mileage. It is how free markets work.

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Why We Do Not Need Government Health Care

This being Sunday, I thought I'd show how the restrictions religion poses paradoxically advances free market goods and services.

In government dictated health care insurance companies cannot get a license unless they offer a full range of policy-mandated options.  Now keep in mind this is even before Obamacare.  But when you make Blue Cross or any other insurance payment, you are paying for another person's abortion when they have one, and paying thus is forbidden the Christian and Muslim.

(Not to mention the other problem where govt hijacking the insurance industry has them shift their emphasis from loss prevention to actuarial and probability gaming.  Today we have no idea how insurance really would work.)

Given these narrow confines, an enterprising devout Christian hit on a method of insurance that, well, looks like real insurance.  In essence, a group gathers for mutual aid.  Members agree to make a monthly insurance payment, in this case full medical care for a single at $135, two parent family at $320.   The members submit any medical bills above the first $300 per year to the group headquarters.  HQ verifies the bills, and then directs the members that month to mail their payment to the person in the group who has medical bills to cover.  So if Joe Smith has $13,500 in medical bills this month,  100 members mail their payment to him, as an act of charity, and he pays his $13,500 in medical bill directly to the hospital or doctors or whoever.  Anyone else who has bills gets covered as well.  Each month they clear out all bills, one way or another.  Wow.

Members pay $175 a year to join, and for that administrators check and verify the bills, and negotiated down bills for members (cash talks) and also maintains lists and a clearing house of doctors who esteem cash paying patients.  This efficiency lowers the cost of health care.

Since doctors are not obliged to flog murderous medicines to stay in business, they can offer true cures, and expect no problem from an insurance company.  tis will allow the free market to fund efficacious cure.  Forget paying for "health care," we want to pay insurance for cures!  Health care is free... diet and exercise.  Only a government would force you to buy what is free.

This plan has about 17,000 members across all 50 states.  All of these people are conscientious objectors to abortion and sterilization, etc... so their passion led to an innovation that gives them better medical care cheaper outside of the system.

Some Catholics did something analogous.  When the Pope forbid contraception, but not natural family planning, some Catholic doctors worked within those confines to come up with natural family planning that is superior in method effectiveness to any artificial system.  And no cost, and no side effects.

But wait, there is more!  All this research led doctors realize that almost all womens health concerns first manifest, or offer markers, within their fertility cycles.  So depending on the nature of the fertility cycle, disruption, they could offer what is going wrong and catch problems very early indeed.  Artificial Birth Control actively suppresses the natural processes, leaving women to find out too late.

Now you cannot hear about this without first asking, and one is not inclined to ask unless one is obedient to the confines of dogma.  Imagine that, a health-care revolution precipitated by Vatican censoriousness.

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When the Feds are destroying particular small businesses, for example family farms, they bring in local police for back up and familiar uniformed presence, to assure more compliance.  What is amazing, and should be understood, is the alacrity with which local police are happy to go along for the ride, even if they are destroying the local tax base that feeds them.

Some doubt is being cast on the story of a swat team collecting on a student loan, where a private citizen has run down this story, while Fox is running its usual "blame the victim" angle. The remarkable thing about this story is how difficult it is to get any information. The HuffPost has an article and in the comments section info from the lawyer for the victim.  Bottom, line this is about the department of ed, a swat team and student loans.  Nonethelesss, the raid had local police as back-up, and they say they were just along for the ride.

  All of this is just a result of the bad economic policies, and those in government turning to their ultimate tool, violence, to govern for the sake of governing.

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