San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, February 12, 2016

Bernie's Plan For The Prisoners

I was watching the Bernie and Hillary show last night when the line of questioning moved to the topic of racism.  If you have been forced to watch any of these panel discussions as part of your required community service you would know that Bernie and Hillary are attempting to outdo one another when it comes to being a socialist.  Practically every question is turned into an opportunity for one or the other to say, "I agree with everything Bernie/Hillary said, but let me push my answer even further into God-hating, envy-filled socialism."  The question of racism came up because the candidates were in Wisconsin and Wisconsin is reputed to be the state with the highest percentage of black prisoners.  One of the airheads leading the panel discussion asked Bernie and Hillary what they would do about that situation if they were to become next King of the Socialist Democracy of Amerika.
To nobody's surprise neither of the candidates quoted that portion of the Constitution of the United States that empowers the President to "do something" about racism or the racial makeup of prisoners incarcerated in the most evil country in the world.  Also to nobody's surprise neither of the candidates took that opportunity to lecture the viewers about the severely limited role of the President under the terms of the Constitution.  On the contrary, both candidates not only assumed that the President is granted the power to do something, whatever that means, about the racial makeup of prisoners in this land but they also assumed that the President has the ability to "effect meaningful change," whatever that means.  It was a perfect example of everyone in the room agreeing to worship civil government and to imbue it with all of the powers of deity.
Hillary answered the question first.  She launched into a long diatribe about something she calls structural racism.  She told me that structural racism is everywhere and that Wisconsin has more structural racism than any other state in the union.  I think Hillary might be on to something.  I visited Wisconsin for the first and last time a couple of years ago.  While driving though Amerika's dairy land I distinctly heard voices emanating from the many barns that dot the countryside.  Do you know what the voices were saying?  I will tell you.  Time and time again I heard the voice of a Scotsman or an Irishman saying, "You are a dirty, stinking Welshman, and your mother dresses you funny."  I couldn't disagree with the dirty and stinking parts but when somebody decides to insult my mother that is another thing completely.  I was terribly offended by the blatantly racist comments I heard coming from those structures but I did not allow the structural racism I was hearing keep me from my appointed goal of visiting Lambeau field.
Maybe it was the cheese curds, maybe it was the structural racism coming from the barns I was driving past, maybe I was just in a bad mood because I was not able to see any northern lights while I was there, but by the time I got to Green Bay I was in a very racist mood.  As my wife and I pulled into the parking lot of Lambeau field we were aghast.  We were immediately surrounded by throngs of cheese-heads, arriving in waves of buses, from the outer reaches of this structurally racist state.  The stench of cheese was overwhelming.  We pushed through the crowd and managed to approach one of the gates to the stadium.   As we approached the gate we saw a statue of Bret Favre and then it suddenly dawned on me.  I was surrounded by a bunch of Frenchies.  Favre, in case you do not know, is "Southern French and Swiss French."  The name is derived from the occupational name for a smith or ironworker.  And Lambeau?  Do I need to say where that name came from?  Here I was, having driven halfway across the country, suddenly surrounded by a bunch of sissies who had directly descended from their French ancestors.  It was then that it happened.  I screamed out "You are nothing but a bunch of Frogs," jumped into my car, drove away, drove back to pick up my wife who was being savagely attacked by the baguette eating amphibians, and made a speedy getaway from that iconic stadium.  As I drove away I realized that I too was guilty of structural racism.  If only that stadium and that statue were not named after a couple of Frenchman.
After nodding my head in vigorous agreement with Hillary as she described the horrors of structural racism I could hardly wait to see how Bernie would one-up her.  I was not disappointed.  After agreeing with everything Hillary said Bernie went on to describe his plan.  To understand Bernie's plan you need some cold, hard facts.  I put a link to a post I have written about how Amerikan's are the most evil people in the world above.  If you go to that blog post you will see a sentence in which I wrote, "Those tyrannical despots in China have imprisoned 509% less of their citizens than the United States.  This is true despite the fact that the Chinese authorities have a strong predilection towards imprisoning large numbers of  "political prisoners."  That quote was in the context of describing how the SDA imprisons more of its citizens than any other country in the world.
For the record, the SDA imprisons 7 out of every 1000 of its citizens, or 0.7% of all people in the land.  Using the highest estimate, the Chinese government imprisons 1.5 out of every 1000 citizens, or 0.15% of all people in the land.   The SDA has a population of about 320 million.  The population of China is 4.3 times the SDA population, at about 1.38 billion.  Applying the rates of incarceration listed above I come up with 2.24 million prisoners in the SDA and 2.07 million prisoners in China.  I am going through all of this arithmetic because of something Bernie said last night.  Bernie mentioned the fact that the SDA has more prisoners than China.  He promised, if elected, that by the end of his first term as King the SDA would have fewer total prisoners than China.  If I have done the math correctly, and I probably haven't, Bernie would have to release 170,000 prisoners during his first four years in office while, at the same time, incarcerate no new prisoners.  Sounds like a great idea to me!
Bernie believes that prisoners are being treated unfairly.  He also believes that everyone currently doing hard time in Amerika's prisons is there for one or two reasons, or possibly a combination of both, exclusively.  Those two reasons are lack of education and lack of employment.  Bernie believes that the lack of a government school education and the lack of a government job is what causes crime.  The human propensity to be evil has nothing to do with it.  Bernie's solution to the problem of too many prisoners was to propose two new massive government spending programs.  Under these two programs every person currently in prison would be given a free government school education while they are in prison and a free government job when they are released.  Since Bernie adamantly believes that every person in prison is either morally neutral or morally good, it is impossible that his plan would not work.  Since men are not guilty of both original and actual sin and since men are actually basically good in nature it necessarily follows that a free government education and free government job will prevent crime and its associated incarceration.  Given enough time and money the prisons of the SDA will be empty, everyone will have a free bachelors degree from a government college and everyone will have a government job that pays well, has great health benefits and allows the person to retire after twenty years of service. What a country!
There were two answers to the questions about racism and incarceration rates that were not given last night.  The first answer, that men are sinful and do evil things and need to be punished, was never even considered as a possible response to the question.  No career politician will ever say that people are sinful and do evil things, unless they are talking about members of the other political party.  It is political suicide to proclaim belief in the ancient and historic Christian doctrine of original sin if one wishes to become a career politician.  Any assertion of theological orthodoxy, especially those doctrines related to the sinfulness of men, will offend so many potential voters that even Ted Cruz would be afraid to do so.  The idea that a solution to the problem of crime could be the regeneration of the human soul by the Holy Spirit of the God of the Bible is rejected outright.
The second answer that was never given is the real culprit in the case of racism and incarceration.  Neither candidate declared their support for the complete and total decriminalization of all drugs in the SDA.  The great majority of those black people rotting away in Wisconsin prison cells are there not because they have done anything immoral but because they have violated immoral laws about drugs.  If Bernie is serious about his goal to have fewer prisoners than China all he has to do is release all people currently imprisoned because of the application of immoral drug laws.  The prisons would empty overnight and they would not refill.  But no career politician is prepared to advocate for the abolition of drug laws.  That goes contrary to every nanny-state impulse in their sin-ridden bodies.  It goes contrary to their command and control personalities in which they see themselves as the saviors of the citizens of this idolatrous country and in which they see the citizens behaving as their adoring subjects.  As a result, Bernie's promise will go unfulfilled, even if he does become the next King of the SDA.

Thursday, February 11, 2016

Jobs Are Fungible

"Fungible" is an economic term that is used for "goods contracted for without an individual specimen being specified that are able to replace or be replaced by another identical item; or put another way, they are mutually interchangeable."  I give you this definition not to insult your high intelligence but in recognition of the fact that most people are probably not aware of the term and how it is used in circles of economists.  Now that we are all on the same page, I have something to tell you that, if you are Bernie Sanders or Donald the Trumpet, will shock your socks off.
Jobs are fungible.  Let me write that again so it can sink in.  Jobs are fungible.  Both Bernie and Donald love to rattle their sabers at China when it comes time to discuss "jobs," whatever they are.  They are licking their chops in anticipation of being elected and declaring a trade war with China.  Idiots, all of them.  The talking heads moderating the various panels discussions we have been subjected to these past several months speak a lot about jobs but seem to have no idea what a job is.  They ask the candidates for King what they are going to do to create more jobs, as if career politicians have some magic power to do so.  Then they ask those same candidates what they are going to do to keep jobs in the SDA, as if they are as controllable as herds of migrating reindeer heading back to Norway.  So, in  light of all this confusion,  let's take a moment and define another term. What is a job?
Everyone who makes the decision to participate in the economy must bring something to the dance.  A free market economy will not allow you in the door if you do not first bring something.  That distinguishes a free market economy from government coercion.  When you go to a party sponsored by the government you are only allowed to bring a large, empty bag and a long list of things you want the government to steal from your neighbor and give to you.  But that is another issue for another day.   When you come to the free market party you must bring something.  Some people bring goods they have made and hope to sell to willing buyers.  Others bring what they hope are desired services which they can sell to willing customers.  A small number of people bring ideas to the free market, and hope to find someone, usually a bank sitting in a dark corner and smoking an aromatic cigar, to sponsor them and the pursuit of their ideas.  Most people, however, are not entrepreneurial and they come to the free market bearing nothing but their ability to perform some sort of task.  These people are called laborers and economists, for no good reason, divide them into skilled and unskilled categories.  
When I first started out in the world I went to my first free market party carrying nothing but my ability to clean up the messes of other people.  I ended up getting a job as a janitor.  That was a job that fit my skills and allowed me to pay my bills.  I exchanged my ability to clean up after others with various businesses in exchange for cash payments.  When someone agreed to pay me money to clean up after him we both were responsible for the creation of that job.  I now had a job as a janitor and my employer had an employee who would, hopefully, do a good job cleaning up his messes.  I have continued cleaning up messes down to this very day.
You should be able to see that a job is nothing more than two people willing to serve each other in some fashion.  In my case I serve by cleaning and my employers serve by paying me cash.  Each of us goes away happy and content with the situation.  If either of us does not do our job or if circumstances change and my skills are no longer needed or if the employers cash runs out, the job ceases to exist.  Jobs are created and destroyed by the millions every single day.  The people responsible for the creation and destruction of jobs are the very same people who make the voluntary decision to go to the free market dance.  Once at the dance all sorts of fancy dancing takes place and, if they are lucky, people pair up and create jobs.  The whole process can be seen as quite economically erotic.  It represents a beautiful melding of people in search of something they do not have but want to have, exchanging what they do have with others who can provide what they want.  That was a bit of an awkward sentence, as if talk about erotic dancing were not awkward enough, but I think you get the point.
Now along come Bernie and Donald and they tell us that China is stealing our jobs.  Are you beginning to see the lunacy in that statement?  Who is the "our" that these crazy men are talking about?  My job as a janitor belongs to me and no one else.  I, along with the person who is paying me, created my job.  In addition, since I have more work than I can do myself, I have created many more jobs as I pay people to do the work I have been contracted to perform.  Nobody else created the jobs I have created and I resent the idea that the jobs I have created somehow belong to someone else, especially if that person is a politician.
It is not likely to happen but you tell me what you think I should do if when I wake up tomorrow I discover that China is now on the southern border of the Socialist Democracy of Amerika and I can hire Chinese workers to do the jobs my current employees are performing for half the cost.  For the purpose of the argument I will posit that I have just fulfilled each of the employment contracts I have with my various employees.  Everyone was paid exactly as promised and I am now looking to fill my jobs for another year.  As I look at my need for ten employees I believe we all know that Bernie and Donald would tell me that I must hire the same ten people who just finished their contracts with me even though it will cost me twice as much to do when compared to hiring ten new Chinese employees.  Hummm.....I wonder if the Donald practices this principle when he hires people to build his buildings?  It should be obvious to all but the most envy-filled person that I am free to do whatever I want to do with my money and I am free to hire whoever I want to do my work.  I will hire the Chinese citizens and increase my profits by 30%.  Unfortunately very few people in the SDA are not shot-through with envy so many people would be angry with me for hiring Chinese workers.  I would be accused of shipping "our jobs overseas."  I would be accused of being unpatriotic.  I would be threatened by career politicians with new laws designed to keep me from creating jobs as I see fit.
Jobs are fungible and they are free to go wherever they want to go or, more accurately, wherever they are directed via voluntary contracts. No businessman is morally required to hire any particular people in his pursuit of profits.  Every businessman is free to create jobs anywhere in the world he wishes to do so.  Those who come along and claim to own the jobs the businessmen have created are thieving socialists up to no good.  Moving a job to another country can be good business.  Informing a businessman that he is immoral for doing so is always good democratic politics in a God-hating, envy-filled country.  When good business clashes with good (read "bad" in the sense of immoral) politics guess who wins?  You got that right.  I might have to lay off a couple of employees this year because of my increased costs associated with compliance to government made rules regarding my business.  Guess who will be blamed for the loss of jobs?  You got that right again.

Wednesday, February 10, 2016

What Is "An Economy?"

An editorial in the Denver Post a week or so ago correctly described Bernie Sanders as a socialist misfit who is preaching economic ideas that were, or should have been, "discredited decades ago."  As you might expect, those who support Bernie and religiously believe in the confiscatory principles of socialism have taken exception to the newspaper's position on the issue.  One socialist by the name of Mary Casper, of Bailey, took the time to write a letter to the editor in which she ends up making a vain attempt to defend socialism and discredit the free market.  Her comments are indicative of what passes for an economic argument in the minds of the socialists and I thought it would be worth repeating and criticizing her arguments here today.  Mary wrote:
"Your editorial is wrong about which economic ideas should be discredited.  The 'trickle down' theory of enriching the already rich has decimated the middle class.  I can remember when we did have an economy that worked for most people. There was an accessible education ladder that we could use to move out of poverty.  As recently as the 1970s, our state paid four-fifths of the cost of college tuition for in-state residents at public colleges.  Now a college education comes with massive student debt, limiting options for young people.  The privatization of student loans and many other services might be good for Wall Street, but not for Main Street.  Let's return to an economy that works for the common good."  Thus saith Mary of Bailey.
Mary begins by contrasting her religious socialism with what she calls the "trickle down" theory.  The trickle down theory of economics is not an actual school of economic thought.  Some people believe the phrase can be attributed to Will Rogers.  Perhaps that is true, I don't know.  Most recently the phrase was used by socialists to ridicule the free market, supply-side economics of Ronald Reagan.  According to Wikipedia, supply-side economics "is a macroeconomic theory which argues that economic growth can be most effectively created by investing in capital, and by lowering barriers on the production of goods and services. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices; furthermore, the investment and expansion of businesses will increase the demand for employees and therefore create jobs. Typical policy recommendations of supply-side economists are lower marginal tax rates and less government regulation."
A simpler expression of supply-side economics is the assertion that "consumption takes care of itself."  The general understanding is that the universal economic problem of scarcity is best resolved by allowing capitalists to create goods and services.  Capitalists create those goods and services because they believe consumers will eventually buy them.  Economic wealth and economic growth are therefore products of entrepreneurs utilizing savings and investments to produce capital, goods and services which others are willing to purchase.   Concentrate on the supply side, and the demand side will take care of itself.  That is the correct belief of the supply-siders.
The alternative economic position is that of Keynes who wrote about the problem of aggregate demand.  According to Keynes, demand is what creates economic growth.  Consumers demand things and somehow those shiny things magically appear.  Keynes is one of many who claim that economic growth can be created by having the government print more money and distribute it to its cronies. In their view this creates an almost unlimited demand as those cronies spend the counterfeit dollars into the economy that somehow magically induces capitalists to  create shiny things for them to buy.  I call the Keynesian theory believed here the "pushing on a string of money to create economic growth" theory.  Yes, it is as stupid as it sounds.
The pejorative phrase "trickle down" actually describes a real economic benefit of the free market.  Another way of expressing it is to say that a growing economy raises all boats.  Everyone benefits when an economy expands.  Both rich and poor become wealthier when an economy grows.  The problem for socialists like Mary, however, is that entrepreneurs grow richer more quickly than non-entrepreneurs do when the economy expands.  The fact that businessmen assumed all the risks when they decide to create goods and services for the consumers seems to be lost on Mary.  The fact that those who take all the risks should be rewarded for their efforts is a concept Mary is incapable of comprehending due to her religiously held doctrine of class envy.  Mary is wrong.  The "middle class," whatever that is, has not been "decimated" as the rich businessmen of this country have become richer by producing goods and services consumers want to purchase.  Here is a graph from her very own socialist government proving that point.  Although there have been brief periods of time when real personal income has declined for a quarter or two, it is the case that real (inflation adjusted) personal incomes have grown at the rate of  about 3% per year since the 1950s:

                              https://research.stlouisfed.org/fred2/graph/fredgraph.jpg?hires=1&g=3kRP

Here is the long term view of personal income growth in real terms.  Real disposable personal income is at an all time high, and continues to grow:

                              https://research.stlouisfed.org/fred2/graph/fredgraph.jpg?hires=1&g=3j9F

Mary reminisces fondly about the good old days when "we," whoever that is (it certainly does not include me) "had an economy that worked for most people."  I wonder which economy she is thinking about?  Could she be dreaming of those wonderful days when 90+% of the citizens of this country worked on farms?  Ah yes, what beautiful days those were.  Working from dawn to dusk, behind the smelly end of a horse or some other beast of burden which was being enlisted to pull your plow through hard-packed soil, in the hope of having enough of a harvest in the fall to get through the winter without starving to death.  I remember it well how people who had children in those days would refuse to give them names until they had survived one year.  No point in naming a child only to have it die, they thought.  Then something happened.  Evil industrialists designed new machines that allowed economic production to skyrocket.  Former farmers flocked to the cities where they could get high paying jobs and better living conditions.  Sickness declined, life spans lengthened and people were much wealthier all across the board.  Then, an evil man named Henry Ford began producing an automobile that was affordable enough for practically everyone to be able to purchase one.  Makers of horse drawn carriages, buggy whips and other horse paraphernalia, as well as all of the maintenance people employed to clean up after horses on the city streets, were suddenly without a job.  Curse that evil man!  Oh how we all long for the days of full employment when the city streets were clogged with disease and fly infested piles of horse manure.  If only the government had been strong enough at that time to protect the poor working people who suddenly found themselves out of a job and living in those filthy streets.  We could still be riding horses today.  How wonderful it would all be!
Mary, like all true believers in Bernie, focuses upon the idea that college education should be free.  She pines away for the day when the taxpayers were forced to pay a good portion of the expenses associated with college degrees.  She longs for the day when the taxpayers will be forced to pay for "free" degrees for everyone in this immoral and envy-filled land.  It does not seem to bother her in the slightest that she must first steal money from someone, primarily the middle class she so adores, in order to get the funds to pay for her free degrees for all program.  Nope, the only thing that bothers Mary is the fact that someone somewhere makes more money than she does.  That will not do.
Mary seems a wee bit confused when it comes to her understanding of the relationship between student loans and the wildly escalating costs associated with college.  Like her mentor Bernie she blames "Wall Street," whatever that is, for the problem of high college costs.  It is lost upon her poor, envy-filled little brain that the blame for higher higher education costs lies squarely on the shoulders of the government and career politicians she worships.  Contrary to Mary's view of the matter, student loans have not been privatized.  A truly privatized student loan would not require a mountain of government paperwork to get one, nor would it have a government subsidized interest rate and repayment plan associated with it.  The government of the Socialist Democracy of Amerika, bending to the will of the majority and in attempt to buy more votes, decided to subsidize college educations.  To the surprise of nobody who understands the economics of the free market, when you subsidize something you get more of it.  With more demand for college degrees the institutions producing those degrees were able to raise the costs associated with them much more quickly than the costs for other things that were not government subsidized.  If Mary truly wanted advanced education to be affordable for the middle class she would be calling for the government to get completely out of the education business. But Mary does not want that.  Mary wants me to pay the bill for her son to get a college degree, and then return to her home to live in the basement and play video games for the rest of his life.
Mary's final comment is classic.  "Let's return to an economy that works for the common good," she writes.  Mary sees the economy of the SDA as an entity that can be managed by elitist government planners for the "common good," whatever that means.  Here is a very simple truth to grasp....the economy of the SDA is the combined economic activities of hundreds of millions of people as they go about their daily lives and engage in buying, selling, saving, investing, producing and consuming.  It is no more possible to manage or control the economy of this country than it is to herd cats or train wallabies.  The socialist dream of a steady-state economy that is tangible, predictable and able to be managed by government bureaucrats working at the direction of career politicians is a complete and total fiction.
Mary's "common good" is, of course, nothing more than a socialist mantra.  I can assure you, if Mary had her way it would not be good for me, and I am a mere commoner.  My taxes would go up.  More of my money would be stolen by the government and given to her.  Mary does not want an economy that works for the common good because that would mean a free market economy in which each person is rewarded according to what he produces for others.  No, Mary wants an economy in which the politicians she elects use their coercive power to take money from the productive and give it to her and her ilk.  Mary wants a Robin Hood economy where the productive are punished and the lazy and slothful are rewarded.  In a word, Mary is a socialist.

Tuesday, February 9, 2016

The Folly Of Negative Interest Rates

The stock market whipsawed around yesterday, going from a low point of negative three percent to finally close down about one and a half percent on the day.  Last Friday the financial talking heads on the business news stations informed me that the market was dropping because Friday's jobs report was too good, thus causing short term investors and day traders to fear that the all powerful Fed would react by raising interest rates, choking off economic growth and creating a recession.  Yesterday that all changed.  By the end of the day those same financial gurus were informing me that the reason for Monday's drop in stocks had to do with the fear found in short term investors and day traders that the Fed was going to initiate a program of negative interest rates.  How those two directly opposite financial events could possibly be responsible for the exact same market reaction on Friday and Monday was not explained.  The concept of negative interest rates is a fascinating one.  Let's consider it for a while today.
According to Investopedia, "During deflationary periods, people and businesses hoard money instead of spending and investing. The result is a collapse in aggregate demand which leads to prices falling even farther, a slowdown or halt in real production and output, and an increase in unemployment. A loose or expansionary monetary policy is usually employed to deal with such economic stagnation.  However, if deflationary forces are strong enough, simply cutting the central bank's interest rate to zero may not be sufficient to stimulate borrowing and lending.  A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe."
Contrary to the religious beliefs of economists who worship the State, the rate of interest in the economy is not and cannot be set by the Fed, or any other government organization.  The rate of interest in an economy is the average of all the individual rates of interest held by all market participants.  The rate of interest for each individual market participant is determined entirely by himself, as he appraises his life situation and economic goals.  The rate of interest exists, and this is supremely important, because everyone values the present more than the future.  No sane individual would ever make a deal in which he commits himself to loaning money to someone else in order to get less back later.  The reason a person wants more money back in the future is due to the simple fact that everyone values the present more than the future.  How much a person values the present in comparison to the future sets his rate of interest.
Some people might be willing to loan me $1000 if I pay them $1050 back at the end of the year.  That would be a 5% rate of interest.  Others would demand $1100 and some might be willing to loan it to me for $1030, a mere 3% rate of interest.  When all of these individual rates of interest are taken into consideration the real rate of interest, set by the free market, is established.  It changes all the time as market participants change their opinions about things, but at any given time there is an average rate of interest that is the same thing market rate of interest.
From what I have written it should be obvious to any person who does not draw a paycheck from the taxpayers, by way of the government, that a negative rate of interest is impossible.  The real rate of interest in the economy is never negative.  Nobody ever demands less money back on a loan.  Only government can cook up a scheme in which the absurd and contradictory notion of negative interest rates can allegedly become good fiscal policy.  Let's consider the definition of negative interest rates presented above to see if it sheds any light on the situation.
John Maynard Keynes was a British economist from whom the term "Keynesianism" has been coined.  Keynes was a God-of-the-Bible hating reprobate who worshiped civil government who wanted to give civil government power over all economic transactions.  In order to accomplish his goal he cooked up an economic theory that he knew would appeal to career politicians and State worshipers all over the world.  Keynes argued that ordinary citizens like you and me are really stupid and we constantly do really stupid stuff.  That quickly got the attention of elitist politicians who wholeheartedly agreed with his fundamental analysis of their subjects.  According to Keynes, economies go into recessionary periods because people become afraid and stupidly "hoard" their cash rather than spending it on shiny things.  When people keep their money rather than spending it on shiny things Keynes said something called "aggregate demand" drops, thus causing producers of goods and services to reduce their prices in order to ring up sales.  As they reduce their prices consumers decide to wait until prices drop even more so they end up hoarding even more cash.  The vicious cycle started by consumer stupidity must be fixed by the intervention of omniscient and beneficent government agents who enter the situation and solve the problem of insufficient aggregate demand by creating counterfeit money and giving it to their cronies to spend.  As their cronies spend the newly minted cash prices are able to start rising and we are all saved by the inflation the government has created.  Even dumb consumers eventually learn they need to start buying shiny things before they become more expensive and pretty soon producers are backlogged with new orders.  Presto, chango....the government planners have caused us all to spend ourselves to prosperity!  What a wonderful system, if only it were true.
I have dealt with the inanities of Keynesianism in many previous blog posts.  Do a search under that term if you want to read some of them.  Needless to say, economic growth is not brought about when the government floods the market with counterfeit dollars.  It is not possible to spend our way to prosperity.  All real economic growth comes from savings and investment, the very thing Keynes derogatorily declared to be "hoarding."  Aggregate demand, as all biblical economists understand, always takes care of itself.  People buy shiny things because they want them and to postulate that every consumer, en masse, makes the decision to buy something after watching a single price and making the purchase at the same time everyone else does is absurd.
Under the erroneous terms of the Keynesian theory a call for a negative interest rate can be used during periods of deflation, but the Socialist Democracy Amerika is not in a period of deflation.  Deflation takes place when the supply of money in the land contracts.  Here is a graph showing the rate of growth in the supply of money in the SDA over the past ten years.  Does it look like money is drying up to you?

                            https://research.stlouisfed.org/fred2/graph/fredgraph.jpg?hires=1&g=3nCy


Even if we were currently experiencing deflationary conditions in the SDA, that is not a bad thing.  In fact, deflation is good.  The Keynesians get it all wrong when they praise inflation and condemn deflation.  I posted an article to this blog proving that point previously.  It can be found here if you are interested.
A fatal flaw in the negative interest rate theory is the belief that people will flock to banks to borrow money simply because banks have money to loan.  That belief is simply untrue.  People do not borrow money simply because banks have money to loan.  People borrow money when they want to borrow money, not because banks want to make loans.  It is the bank customer that initiates the loan transaction, not the bank itself.  This fact has been clearly illustrated over the past several years as the Fed engaged in various quantitative easing programs.  Those programs did not result in an acceleration in the rate of loan growth.  On the contrary, that money was taken by the banks and put on deposit with the Fed as an "excess reserve."  Look at this graph showing the amount of excess reserves on deposit with the Fed since QE began:

                              https://research.stlouisfed.org/fred2/graph/fredgraph.jpg?hires=1&g=3nUt

All that money the Fed created, for the most part, ended up back at the Fed.  That is a good thing since if it had actually worked its way into the economy we would be experiencing Jimmy Carter era type inflation right now.  My point is simple.  Interest rates are near zero right now and banks have trillions of dollars to loan but commercial and industrial loans have not exploded.  Look at this graph:

                          https://research.stlouisfed.org/fred2/graph/fredgraph.jpg?hires=1&g=2LD9

The Fed can set interest rates on the negative side of the ledger and all it will do is punish banks for not being able to loan the money out.  If banks could make more money loaning it out to customers today than they can by keeping it on deposit with the Fed, they would be doing so.  The fact that they are not doing so tells you all you need to know.
Finally, the bottom line behind negative interest rates is the idea that it "is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe."  In other words, the government interjects itself into the voluntary business transactions of banks and their customers in a vain attempt to force banks to make loans and customers to accept them.  The concept of a negative interest rate is not an incentive, it is a form of coercion designed to force people to do things they would not ordinarily do and, if they do not conform to the wishes of the government, they will suffer financial penalties.  Is that what we want the government to be doing in our economy?  Making matters even worse, if the federal government is successful in forcing people to borrow money that they would not ordinarily borrow, all that has been accomplished is the sowing of seed for the next cycle of inflationary boom followed by a recession and economic collapse.  Any cycle of economic growth that is the creation of negative interest rates is not real.  It is unsustainable and will eventually collapse.  And that will end up, as government intervention in the free market inevitably does, doing more harm than good.
 

Monday, February 8, 2016

Waste All The Water You Want

I was watching a mildly interesting Super Bore yesterday when a commercial came on telling me how to behave.  I am always interested in commercials that inform me that I am stupid and uncaring if I do not behave the way the producer of the commercial wants me to.  Most of the time these commercials are produced by the government and paid for by the taxpayers.  All of the ads from the Ad Council that tell me to stop bullying and "pay it forward," whatever that means, are of this genre.  To my surprise this commercial was paid for by a profit seeking corporation.  Here is a brief description of the commercial:
"Colgate toothpaste will air its first Super Bowl ad in February's game, and it has little to do with oral care. The 30-second spot titled 'Save Water' aims to focus on the millions of gallons of water people waste by leaving the tap running while brushing their teeth.  The ad will be an adaptation of a 60-second ad originally created by Y&R Peru for the brand in Latin America last year. It will dovetail with an #EveryDropCounts social-media campaign, a spokeswoman for Colgate said in an e-mail. It all aims to point out that Americans on average waste 4 gallons of water per day by leaving the faucet running while brushing their teeth. The ad is set to air during the two-minute warning during the second half"
I have several comments to make about this advertising campaign and none of them are good.  Let's start with the fact that it is never good business to insult your customers.  I switch back and forth between Colgate and Crest.  After being told that I am a stupid idiot who does not even know how to brush his teeth properly I will no longer be using Colgate.  I do not appreciate having the money I spend for a tube of toothpaste being used to make a commercial telling me what to do. What business is it of Colgate's if I choose to keep the water running while I brush my teeth?  And where did they come up with that ridiculous "four gallon" number for the amount of water that allegedly runs down the drain while the "average Amerikan" brushes his teeth?  I find that impossible to believe.  Do the math yourself.  Fill up four one gallon jugs with water and slowly pour them down the drain while you are brushing your teeth.  By the time you have finished pouring the water down the drain you teeth will have either dissolved away from the hours of abrasion or you will be left with a mouthful of bloody stumps where your teeth used to be.  Come on Colgate people, have some respect for common sense.
Why is Colgate even concerned about water conservation in the first place?  What right does the Colgate company have to tell me how to brush my teeth?  I can't believe that Colgate would pay the $5 million it costs to run a 30 second ad telling me to turn off my faucet.  There is no way they can recover that cost.  So what are they up to?  My best guess is they are pandering to the greenies among us, hoping that they can convince them to buy Colgate products because the company is so obviously green.  Pandering to greenies is, I believe, a good way to increase profits these days.  Pandering to the semi-greenies is even better.  That is not because so many people have become tree-hugging environmentalists.  I believe it is simply because so many people want to pretend, due to peer pressure, that they "care about the environment," whatever that means.  People will pay a premium to be able to tell themselves that they are environmentally aware even though that awareness has no impact upon their daily behavior whatsoever.  Those people are the semi-greenies.  You can always spot them from a mile away.  They will engage in all sorts of tokenistic environmental behaviors that have no impact upon the real world but that allow them to tell themselves they are good people who care about mother earth, whatever that means.
The commercial was entitled "Save Water."  I had no idea that water was in need of saving.  Human beings are in desperate need of salvation but, the last time I checked, water was doing just fine.  There is no hell for water to go to when it dies, if it could die, which it can't.  Even if there were a hell for water to go to it would most likely put out the fire.  Of course I suspect if I asked the advertising executives at Colgate why they entitled the ad campaign "Save Water" they would not tell me it is due to the fact that water suffers from the consequences of original and actual sin.  On the contrary, I suspect I would be told that water suffers from the sinful activities of men, as men open their faucets and allow water to run, unused, down the drain.  I am not sure what that sin is but I am pretty sure most people believe it to be a sin to waste water, whatever that means.
Colgate and its greenie constituents would not have to spend $5 million on a Super Bore ad if the government would get out of the water business.  As is always the case, if there is a problem with water, and I believe there is, it can be traced to the activities of the government.  The problem with water, however, is not that people waste it.  The problem with water is that government claims ownership of all of it.  Water should be just like any other commodity.  It should be traded on the free market and it should be priced according to the inexorable law of supply and demand.  If water were to be regulated by the free market rather than the various governments which claim ownership over it, we would find that its price would vary widely around various parts of  the country as the relative supply and demand for it would set its price.  The best way to "conserve" water, if that is a desirable or even a possible outcome, is to let the price mechanism do the work for us.  I would put a lot less water on my lawn in the summer if I had to pay ten times the price I currently pay for it.  Thinking realistically I believe we all know that a free market in water will never happen because career politicians would lose too many votes from constituents who have become dependent upon taxpayer subsidized prices for their water.  So rather than letting the free market conserve water career politicians and their lackeys use guilt manipulative television commercials to do their work for them.
I conclude my post today with what will, no doubt, be a revelation for Colgate and the greenies who admire the company.  There is a physical law which tells the informed among us that energy can be neither created nor destroyed.  That is a rather simple concept that even a simpleton like me can understand.  There is another simple concept that is incomprehensible to all career politicians, environmentalists and Colgate executives.  Water can neither be created nor destroyed.  It is impossible to "waste" water.  Every drop of water that was created by God thousands of years ago is still here.  There is not one more drop of water in the universe today than there was the day God created it.  Water may exist in different conditions (liquid, solid, gas) but the total amount of water on the earth is exactly the same today as it was yesterday and will be tomorrow, even if I leave my faucet running all night long.  Since the total amount of water extant on the earth never changes it necessarily follows that it is a meaningless concept to speak of conserving it.  Water is always conserved.  It is conserved by the earth itself.  And not only does the earth conserve water, it purifies it as well.  The natural water cycle, controlled by the providence of God Himself,  regularly cleanses all of the water on the earth more efficiently and effectively than the most expensive government operated water purification plant.  I suspect that gets to the heart of the issue for career politicians, environmentalists and the Colgate company.....they want to play god and attribute to themselves the ability to conserve water.  That is called idolatry and is not a good idea to practice it.