Posts Tagged ‘unemployment’

Our Sick Economy

Thursday, September 15th, 2016

 

Dear Friends,

It seems to me, when someone is coming down with an illness, initially the signs are slight and not too bad, later when the symptoms become worse they can be alleviated by aspirin and other medications, the worse the symptoms the stronger the medications needed to mitigate them, but when the illness hits with full force it can no longer be mitigated by medication and the body dies. Today the world economy is sick, the initial signs were ignored, so it has got to the point the strongest medication available is being used. Up to now, the symptoms have been mitigated by Keynesian principles, stupendous amounts of money printing, government debt spending, monetizing government debt, negative interest rates and central banks are even buying corporate bonds and stocks! From our own experience we can tell how bad a disease is, by the drugs used to treat it and when the morphine drip of monetizing the debt is used, pretty much all hope is lost. The chemotherapy of QE, Twist, negative interest rates etc… have lost their effectiveness and the illness has spread.

Using the right drugs to treat any disease is critical. Penicillin is wholly ineffective against malaria and quinine has no effect on strep throat. The Keynesian prescription is always spending, add to that the monetarist prescription of money printing, and you have the “universal” cure for every economic ailment. Of course not all ailments are the same. Just as strep throat is different than malaria the reasons economies falter are different. Moreover, if a single drug is used too much it looses it’s effectiveness and becomes inert, like the Keynesian prescription. Keynesian economics is the fall back position of every government since John Maynard Keynes described it. Like penicillin however, it has been used too much and for illnesses that it is unfit to cure, and so the overuse of Keynesian economics deficit spending has made our economies immune to the effects.

Some drugs only mask the symptoms of disease. Pain killers are an example of this type of drug. They mask the pain but have no effect on what is causing it. In fact, new studies have come out that show opiates actually enhance a person’s feeling of pain, if they are used too much. Monetary stimulus is this type of medication for an economy. It masks the underlying problems. Money printing makes the stock market and bond market appear to sail. That rise in stock valuation however only hides the problems. People understand the disconnect, like when an injured person looks down at his broken arm, but feels no pain because he has been given morphine. He sees the arm is broken, he knows it should hurt but the lack of pain confuses him. If another person isn’t there to render first aid, the victim will likely damage himself far more, from using it due to his lack of pain. Masking a problem only makes it worse especially if what caused the problem in the first place is not addressed.

To argue someone is doing well, even as they are on Keynesian life support and the morphine drip of money printing is being used, is to argue up is down. The media that calls itself unbiased knows if the true state of our economy were widely known, the faction they prefer would loose in a landslide, since they cannot allow that, they are pulling out all the stops to argue up is down. The media cherry pick data, and polish it before they deliver it to us, protecting their favored faction. The more they get caught manipulating data the more they do it. Like a witch doctor, his dancing and waiving a chicken leg over someone with cancer might be entertaining and have a placebo effect, in the end it will have no effect on the outcome, only possibly the duration.

Regulation is like poison, in small enough amounts it has no great harm and can even be beneficial in some cases, too much and it becomes toxic and perhaps even deadly. Our governments have been introducing regulatory poison into our economy since time immemorial. Since the effect of poison is to create illness where there otherwise would be none, the elite need to mask the symptoms of the illness they have created by regulation, crony capitalism, and corruption, even as they inject ever larger doses and more deadly poisons into our economy. The way to save a person who has been poisoned is first to stop poisoning her and then get the poison out her system, by chelation or by introducing an antivenin.

What we have is a sick economy… it has been sick for many decades and the illness has been metastasized by Obama’s policies. We have witch doctors, the media that calls itself unbiased dancing and waiving a dismembered chicken leg giving false hope, there are “doctors” who have only read one book and their only tool is a butter knife, performing open heart surgery, as we are being plied with heroine to mitigate the pain, and the patient dies a slow and lingering death. Our economy has been poisoned by government actions and so cannot recover until the right medications are used in the right amounts. Just as heroine will not heal a broken leg and can lead to the worsening of it by continuing to use it, masking our economic problems with money printing only makes them worse, because there is no incentive to stop poisoning our economy. We have progressed beyond the initial stages where lethargy, slight pain and muscle aches… through the open sores, crushing pain and high fever to being hospitalized in intensive care. Isn’t it time to stop poisoning our economy and use different medications?

Sincerely,

John Pepin

Today’s Federal Reserve Meeting

Thursday, June 19th, 2014

 

Dear Friends,

 

It seems to me, economists have been predicting three plus percent GDP growth since Obama came into office, and all their predictions have been wrong. The US GDP has stagnated for over five years despite the huge recession we were in when Obama came into office. Today, the Federal Reserve danced around the obvious, and all the economists Bloomberg radio interviewed, provided the dance partners. Yellen claimed the economy will achieve liftoff once we get by this latest slow patch and will exceed long term economic output… next year. This, despite all the previous predictions that have said the same thing, and have been wrong. I guess if they predict it enough, eventually it will come true, like if I predict a solid gold meteor will land on my property making me rich… long enough, it will happen. At some point however, this ceases to be a prediction, and becomes instead wishful thinking.

 

Typically, immediately after a recession economic activity rebounds strongly for a year or two, but the recovery from the 2008 recession didn’t. The reason economies typically rebound strongly after a recession is due to the fact that the units of production become cheap. Labor rates go down, interests rates plummet along with the cost of plant and equipment. The destruction of outmoded firms drives down the costs. Lower costs of the means of production give those with new ideas, the ability to implement those ideas, resulting in the virtuous cycle of economic growth. This is the creation part of creative destruction.

 

This last recession had it’s share of what, at he time, were called “Vee shapers.” They were largely those economists in Obama’s political camp, who eschew the Schumpeter model of the economic cycle, creative destruction, and instead favor the Keynesian, aggregate supply aggregate demand model. They thought that since interest rates had been so suppressed by the Federal reserve, government was spending such tremendous amounts of money, in the form of stimulus, and their man was in, demand would go up and the economy would rebound very strongly, resulting in a V shaped recovery. We found that they were wrong… it was more of an L shaped recovery.

 

The economy dropped like a cow chip. Instead of rebounding it stagnated despite the record amount of stimulus. Trillions of dollars were spent by the government, what is called fiscal tailwinds, spending that drove up aggregate demand, but did nothing for the average man and woman. Interest rates have been extraordinary low for half a decade now with essentially no real GDP growth to show for it. Inflation has been alarmingly low as well despite the record monetizing of government debt that the Federal Reserve has done. Pimco has named the recovery, or lack of one, the “New Normal,” now the term has become the “New Neutral,” but by any name a skunk is a skunk. The labor participation rate has fallen off the table, GDP growth hasn’t even reached normal levels, let alone takeoff velocity, and the Federal Reserve along with most of the central banks of the developed countries have followed along and monetized their debt… to no avail.

 

The one exception is Britain who instead embarked on a policy of fiscal austerity. Economists the world over warned that Britain would suffer economic Armageddon as a result. They were wrong. Today Britain and Germany are the only developed countries that are experiencing real economic growth at all. Since their economies are too small to be the engine of the world’s economy, the world is left with America as the little engine, that couldn’t. The developing countries have stalled as well due to the lack of an engine pulling the train.

 

What everyone in the economic community are dancing around, and trying their best to ignore, is the tsunami of regulation that washed over the US economy in 2008-2009. That tidal wave of regulation continues flowing in to this day. Obama care was a thousand page law, one that has fluffed up to tens of thousands of pages of arcane regulation, hindering economic growth in a myriad of ways. It has driven up the cost of labor dramatically, without a penny of it going to workers. That increase in the cost of labor is still rising even today from Obama care! The incentives of that single piece of legislation has directly resulted in lower wages, terrific job losses and a cost of labor that is unpredictable. Dodd Frank was meant to eliminate the problem of too big to fail but has made that problem even more intractable than ever. It is driving small banks out of business, and pushing large banks to get larger, exacerbating too big to fail. In short Dodd Frank has failed. Environmental regulation has skyrocketed under this administration. But these are only the top waves of the tsunami.

 

These problems that regulation has created cannot be worked through with low interest rates, we have had a low interest rate policy for 5 years, and it has failed. No amount of new regulation can solve the problem of too much regulation, it’s like trying to heal a burn, by burning yourself more. The long term unemployed will not be solved by importing millions of low skilled labor, sopping up the few jobs that are still available, and raising the minimum wage will only drive down the demand for those low skilled jobs in the first place. Dancing is all well and good, but when the elite dance around the problems they created, simply to protect a President and theory they are in love with, all of us suffer. Any alcoholic can tell you, the only way to solve a problem is to recognize it, then roll up your sleeves and actually fix it. Unfortunately, that is not on the Federal Reserve’s dance card.

 

 

Sincerely,

 

John Pepin

 

The Progressive’s War on Prosperity

Thursday, March 6th, 2014

Dear Friends,

 

It seems to me, the progressive and democratic parties in the United States are waging a war on prosperity. The reason is irrelevant but their actions demonstrate the war is being waged. The consequences of this war on prosperity are monumental. They apply not only to today’s generation, but because economic growth is cumulative, the loss in economic activity today translates in to a lower standard of living for future generations. Such a remarkable thing as a war being waged on our prosperity, is important for people to know and understand, so we can do something about it. If we don’t act, the results will diminish our standard of living to that of a third world hell hole, eventually. There are very few people anywhere who want less for their children, and thus, no one in their right mind wants a war waged on prosperity.

 

I don’t need to be told a man is fishing to understand that a man is fishing. If I see someone putting a worm on a hook, the hook tied to a string, the string tied to a pole, and when the man has finished putting the worm on a hook, he tosses the baited hook into a stream likely to contain fish. I don’t need to know why he is fishing to know that he is fishing. He might want food, he might want recreation or he might like the sport of fishing, but when I see someone engaging in these actions, I know that person is fishing… even if they deny it. The same is true of the democrats war on prosperity.

 

Lets examine the actions of the democrat party over the last few years. The Keystone XL pipeline has been vetoed, pilloried and protested by democrats and progressives. They make the spurious argument that the building of it will lead to more carbon in the atmosphere. Leaving alone the absurdity of the Climate Change argument, that oil will be burned regardless of the pipeline’s creation. The Canadian government has said, if the US doesn’t buy that oil it will be sent to China. Everyone knows the Chinese will burn that oil happily. Not only will it be burned whether or not the pipeline is built, but the oil will then have to be shipped to China via oil tankers, opening up the possibility of oil spills, the transportation will consume more energy, thus emitting more carbon into the atmosphere, and the Chinese economy is far less efficient with energy than the US economy, so less will be produced at greater cost to the carbon load. So clearly their rhetoric doesn’t agree with their actions.

 

The keystone pipeline would however generate high paying jobs in the US. Not only from it’s construction but from the personnel that will be required for it’s maintenance, the resulting lower energy cost, allowing for more manufacturing jobs in the US, and the jobs that will be needed to refine, ship and sell that oil. The oil is still coming to the US, but far less efficiently on trains that consume oil to haul it to the Texas refineries, and as recent news stories have shown, shipping oil by train can be very hazardous, Ala Lac-Megantic. The only possible result of the delay and ultimate stopping of the pipeline, will be to reduce economic output in the US and lower the number of jobs, and thus diminish wages. This is only one of the fronts of the democrat and progressive war on prosperity however.

 

Obama care has demolished economic output as efficiently as the fire bombing of Dresden during the Second World War razed that city. I have written extensively about the economic consequences of that flawed law. One that I might add, is that the law has been delayed, to after the next election, specifically because of it’s negative impact on small businesses. The heavy handed regulation of such a large and economically vital portion of the US economy has made it very difficult for new small businesses to start and be profitable. Every economist will tell you that it is new businesses that generate the majority of new jobs in any economy.

 

The rhetoric of the Obama administration has been aimed directly at job creators. His incessant attacks on “The Rich,” his ever increasing tax load poured on businesses, and his dozens of job killing tzars, specifically tasked with regulating every aspect of our lives, has had a dramatic effect on our economy. The actions of the democrats and progressives say, far louder than words, that they are waging a war on prosperity.

 

The results are as clear to discern as the fish in a fisherman’s basket. The economic rebound after the 2008 recession has been the most dismal since FDR did the same thing in the 1930’s… there are no V shaper’s today, the labor participation rate has fallen off the table, food stamps are at an all time high, GDP growth has been predicted to be 3-4% but has come in around 1-2%, the term economists are using to describe the pathetic economic numbers is “The New Normal,” the Federal Reserve has had an unprecedented ZERO interest rate for 5 years to no avail, plus they have been printing money to the tune of over a trillion dollars to prop up the economy every year since Obama took office… I could go on and on but space limits me.

 

The actions of the democrat and progressive left are plain to see for anyone with their eyes open as well as the results. Why they are waging a war on our prosperity is irrelevant, but that they ARE waging a war on prosperity, is critical. If we take our role in democratic society seriously, we must stand and speak out, or else our children will pay a heavy burden for our silence. It is far better to be vilified as racist, mean spirited, hate monger, teabagger, un-American, seditious or any of the other spurious ad homonym attacks designed to silence us, than to bequeath to our children and their children, poverty, want and famine. Which is exactly what we will be doing if we don’t fight against, and win, this war on our prosperity.

 

 

Sincerely,

 

John Pepin

Jobs and Wages

Thursday, February 27th, 2014

Dear Friends,

 

It seems to me, if the government wants more jobs in our economy, all they have to do is cut job destroying regulations and taxes. While this is not a new idea, or a particularly novel one, it is an concept that has always worked. Government, and by government I mean politicians, pass more regulations every year with no end in sight. Tens of thousands of bureaucrats working diligently regulating every aspect of human existence. While this creates some good paying jobs, in the bureaucracy, it destroys private sector jobs, you know, the ones that pay for the bureaucrats. Unless we wake up to this fact, and stop believing their lies, our economy, jobs and wages will continue to suffer.

 

All politicians know this. They know that jobs are not created by government fiat or programs. Those programs and fiats destroy jobs. They certainly know, but so want the power their regulations give them over us, they don’t care about the consequences, our ability to earn a living. The hubris and egoism of the elite that engage in the type of job killing regulation, as their own actions show, care much more for amassing power than the economic well being of the people they are supposed to serve. In this self aggrandizing egoism, a few names stand out, as do the results of their regulatory policies.

 

Woodrow Wilson is one. He inherited a good economy and destroyed that good economy with growth stifling regulation, taxes and bureaucracy. The economy he passed to Harding was far deeper in recession than the US economy in 2008. Franklin Roosevelt took a bad economy and made it into “The Great Depression.” His policies were so intrusive that economic activity almost stopped altogether, and it wasn’t until his death, before the economy rebounded. The Second World War is often cited as the reason we came out of the depression, but had Roosevelt been President after the war, the economy would have hit new lows. Barack Obama has followed the policies of both Wilson and Roosevelt and the results have been exactly the same. This same experiment has been tried the world over and has failed every time. Proving it is impossible to tax and regulate an economy into prosperity.

 

If we examine the most productive economies we find that they all have several things in common. They all have low taxes, and they all have low regulation. Singapore, Liechtenstein, and Andorra are but a few examples. Those countries with the poorest economies all have high taxes and stifling regulation in common. Venezuela, North Korea and Zimbabwe are examples of this type. History shows, laissez fair capitalism enriches people every time it is tried, while socialist regulation impoverishes those same people.

 

Whenever laissez fair is offered as an option however, the elite in academia and politics make the spurious claim, we want to take the guard rails off the economy. This is entirely sophistry, because it is not regulation that protects consumers and workers, but standards. Regulations only benefit politically favored groups at the expense of everyone else. One example of job killing regulation is raising the minimum wage. Everyone knows, (politicians, economists and bureaucrats), that doing so will eliminate jobs, the only real debate is how many. Minimum wage jobs are filled by low skilled new workers. Statistics show that in the US there is huge unemployment in those areas, raising the minimum wage will eliminate some of those jobs, exacerbating the problem, and so low skilled new workers will have less opportunity to get work and start climbing the ladder out of minimum wage. Clearly, raising the minimum wage is counter productive, but those that don’t get laid off will think they have got a boon.

 

As long as the political elite can continue to fool the majority, into believing they are doing something for the economy when they are in fact destroying job prospects, we will continue to fall down the bottomless pit of poverty. Wages are like any other commodity, the more demand for workers the higher wages will be. As government drives down the demand for workers wages must naturally follow. This is no different than the price of gold or coal, if demand is high price is high, and if demand is low the price will be low too. Since Obama has taken office launching his war on business and enacted his job killing regulations, including Obama care, we have seen real wages fall, driven down because demand for workers has fallen. There has been no other recession, (other than FDR”s and Wilson’s), where the US economy has performed so poorly in the recovery, even going back to 1800. Obama’s great recession is due to the same policies that gave us the great depression. Isn’t it time to grow up and do what must be done? Stop listening to the glittering lies crooned by self serving egoists, and start believing the ugly truth, that government cannot tax and regulate us into wealth.

 

 

Sincerely,

 

John Pepin

The Retirement Paradigm

Monday, February 17th, 2014

Dear Friends,

 

It seems to me, the human body is not designed, nor is it suitable, for decades of physical toil, that is why people retire in their 50s and 60s. The system where we put aside some of our earnings for retirement is elegant, because it sets up a paradigm where people provide labor to the market system when we are young, and capital when we are too old to work. Those who claim, people will have to work until we are 70 or 80, have no concept of the physical toll of labor, because the have never physically toiled at a job. The system, where we provide labor when we are able and then capital once we have accumulated it, works well with the human body and it’s basic limitations as well as it’s abilities. Once we have moved from providing labor to providing capital, we can pursue new things, like starting a business, personal enrichment or helping with the grand kids. This is just another of the myriad of ways the market system benefits humanity and human beings.

 

The market system requires two basic inputs to function, labor and capital. When Marx derisively labeled the market system, capitalism, he was pointing to one of the fundamental requirements of the market. Marx considered labor to be the most important input, and that the introduction of capital into the equation rendered all human interaction, including that of the laborer and the manager, into a crass means of exploitation, the cash nexus as he called it. This is why he claimed, when we labor within the market, our work is alienating. What he failed to understand, is that the improvement in the human condition that the market system brought, and brings about, is based on capital funding the new ideas that create the improvement.

 

The market system allows the efficient transmission of ideas into production, while every other system, including and especially Marxism, discourages it. This transmission of new ideas requires capital, to purchase the means of production, and labor, to provide the production itself. As new ideas are incorporated into the existing system, old less efficient ones are rendered obsolete. This creates a basic instability to any nation that uses the market system, but that instability comes with a wage… an ever increasing standard of living for everyone.

 

When we are young we are able to labor without damage to our bodies. That is the nature of youth. But as we age, labor becomes more and more dangerous, even as our knowledge of our labor becomes greater. In the most efficient economies, as we become less able to labor and our knowledge about our labor becomes ever greater, we are promoted into management to take advantage of that practical knowledge. This has been undermined by the rise of the New Class, who go directly from school to management bypassing the labor phase. Thus crowding out those with practical knowledge. This means they enter management with very little practical knowledge but a large amount of theoretical knowledge and thus, hubris born of ignorance. Since this paradigm has become entrenched, the market system, which is ever evolving to meet the needs of humanity, has evolved to allow people to retire at earlier ages, even as our life spans get longer.

 

But our physical limitations remain. This is born out when we see ever more people getting hurt in their labor. The rise of physical therapists is the market system’s reaction to people laboring at older ages. Our bodies only have a few decades of physical labor in them, and then we must move from providing our needs from labor to either management, or by providing capital. Since the market system needs two inputs, labor and capital, both have value and either can be a means of support for people. Those who have labored for decades, and have set aside money for retirement, or where they have taken less in immediate wages in exchange for a defined pension, are able to retire from a labor based sustenance to a capital based one. Those who have been spendthrifts however undermine their own best interests.

 

Since capital is a basic input into the market it has value and in a functional market is paid commensurately with that value. This is upended when government policies lower the demand for labor, and thus wages, by importing cheap low skilled labor by immigration, making it harder to run a business through regulation, taxing labor, etc… or where national banks change the value equation of capital, through inflation or low returns on equity, caused by market warping policies, like money printing and nationalizing debt. When governments or central banks do this, they make it harder for those who have saved for retirement, to move from providing labor to providing capital. Other ways this paradigm is undermined, is when government’s seize the retirement funds of the people, (like in Argentina or Cyprus), or where the New Class manage companies so there is little return to shareholders, but huge wages paid to upper management. These economy damaging practices create the conditions, where people will have to labor far longer than is optimal for our bodies, and gives the incentive not to save but to spend.

 

Today we have people in the intelligentsia, (The New Class), who claim our children will have to work until they are ready to die. This is less of a burden for the new class, because they don’t labor, they manage. The human condition is such that, it is in everyone’s best interest to have a system where we labor when it is most efficient and least dangerous, and where we move to providing capital instead of labor, when our bodies become less efficient and more prone to damage. This has the added benefit of freeing up those who are retired to expand their minds, and perhaps provide some of the ideas, ideas that are fundamental to the market system’s growth. The practical knowledge and skills we build up throughout our working careers is excellent fodder for new ideas and new business possibilities. Rejuvenating the market with new ideas that become available, because people can switch from providing labor to providing capital, frees us up to pursue new ideas to the market, creating a rising standard of living. Unless the system is warped by our own leaders that is…

 

 

Sincerely,

John Pepin

Manipulating Economic Data for Crass Political Gain

Thursday, November 21st, 2013

Dear Friends,

 

It seems to me, the latest revelation about the ongoing Obama scandal machine, is perhaps the most egregious. The New York Post has reported that the Census counterfeited the employment numbers just before the 2012 election! No President has ever been reelected with unemployment over 8%. The census lowered the unemployment statistic to 7.8%… when the real number was far higher! This has a profound effect on the economic well being of you and I.

 

The bureaucracy is supposed to be absolutely non partisan. The power of the bureaucracy today dwarfs that of the rest of government. The executive branch, which the bureaucracy falls under, is tasked with enforcement of the laws and rules pertaining to it. This cuts the legislative as well as the judicial branch out of the loop when it comes to bureaucratic oversight. The bureaucracy gives the executive branch has almost unlimited authority over our day to day lives. That the Obama administration is using the power of the bureaucracy to manipulate economic numbers to get reelected is an abuse of power of the highest order.

 

The IRS scandal was egregious but this latest scandal is far worse. The IRS scandal was where the Obama administration was using the taxing authority of the government to limit the speech and punish his political adversaries. That in and of itself is a high crime due to the clear Constitutional infraction, IE limiting free speech. Manipulating economic numbers has a more pernicious effect however.

 

The United States is a capitalist nation. In a capitalist country businesses depend on economic data released by the BEA, Census and other departments of the bureaucracy, to make profoundly important decisions. Decisions that effect employment, wages, GDP growth, investments, pensions and the list goes on. These decisions effect the economic well being of every American citizen deeply. Now that we all know that the numbers the government releases are in some cases fiction no one in their right mind can count on any of them.

 

Even if 99% are true, who is to know which of the thousands of statistics the US government releases are true or politically motivated? The wise person who knows there are lies mixed in with truths will not believe anything unless it is independently verified. Now we all know there are at least some lies designed based on political machinations. To make an economic decision based on false data could cause a person to go bankrupt. When it comes to a person’s own economic well being, we are all rational maximizers.

 

Therefore, this latest scandal has a greater effect on the economic well being of the American people and people the World over, than any scandal by any President yet. The World will be effected because the US is still the economic engine of the World. Since the US is the engine many economic decisions made in other countries are based on the US economic statistics. Now that they know at least some are politically based, no country can rely on them. This makes the economic foundation not granite but quick sand.

 

Perhaps this is part of the reason the World’s economy is faltering. Oh yes, Britain is seeing an economic rebound and Germany is going full bore, but the rest of the nations around the World are either in recession or teetering on it. The US economy is on life support through a trillion dollars a year printing and monetizing the debt by the Federal Reserve. Taking money from savers and giving it to spenders. China is faltering as is all of Asia. The recent uptick in the Japanese economy is a mirage based on, again, monetizing their debt too. Most of the nations in Europe are in economic free fall. Italy is in it’s third year of recession and the picture is no better in Africa. Thousands are drowning in the Mediterranean sea trying to get to recession torn Italy!

 

The excuse the bureaucracy is giving is the manipulation wasn’t systematic! Lies compounding lies. To manipulate such statistics for the crass reason of holding political power is criminal. It will inevitably further lower the economic lot of Mankind. Regardless if the unbiased media pick up this latest scandal or try to cover it up is irrelevant because the monied elite and the world’s bankers know. Rest assured they knew before the Post reported it. They will react accordingly, without regard to the well being of the World’s working people, let alone the impoverished. Yes Obama has really done it this time. There will be no negative consequences for Obama but for you and I the results will be dire. But at least now we know with certainty… the connivers in government cannot be trusted with anything!

 

 

Sincerely,

 

John Pepin

I Pencil and Complexity Theory

Monday, October 14th, 2013

Dear Friends,

 

It seems to me, the most commonly known analogy in economics is, I Pencil. This narrative shows that the capitalist system produces things of such complexity it would be impossible for a central authority to do it. Moreover this story illustrates what can be produced at extremely low cost opening up their availability to the masses of people. What is not well known about I Pencil. is that it also illustrates the complexity theory of economics. This is a very important point that the writer of I Pencil couldn’t have known because complexity theory had not been invented. What makes this important for the average person to understand is that it shows the futility of government control over an economy. If we as a people understood this very important concept, we would stop undermining our own economic prosperity by electing progressives, who only seek power and authority over everything.

 

I Pencil. is a story of how a pencil comes into being. If you or I set out to make a 10 cent pencil the cost to us would be extraordinary. The cedar in a pencil is from the Appalachian mountains, the graphite and glue from where ever they are cheapest made, the paint from China, the eraser from rubber made in south America and the brass ferrule from who knows where. For you or I to gather all these components and assemble them into a pencil would be prohibitively expensive, yet they are produced by the market system so cheaply they can be thrown away, if the eraser is worn. All the inputs are from diverse parts of the world, made by diverse people for diverse reasons. The point is they are all available to the capitalist to produce something that is fundamentally different in kind from the original inputs.

 

All of the advancement of Western society has been through the innovation of the market system. Innovation that is made possible by the diverse products the market provides. As new products are made available by the market more innovations are available to the entrepreneur. If graphite were not available the pencil would not be possible. People, not governments, make innovations. Governments stifle innovation through regulations that, while well meaning, serve to undermine the availability of new products. This is usually done to protect some job or politically favored industry. The result is always lower wages, lower productivity and high unemployment. All add up to a lower standard of living.

 

The various inputs to a pencil are manufactured probably for other reasons than to make pencils. Glue is made for furniture and a myriad of other reasons by the glue industry. These divers industries can also be considered components in the complex system that is the market or an economy. These diverse actors in the economy are interdependent, are able to learn, they communicate, and they respond to their environments, IE, the demand for their products versus the cost to manufacture them. Firms within industries are another example of complex actors that lower the granularity of the approach. Each has an interest in creating new products that can be used in new ways.

 

As new products come onto the market more products can be made or perhaps made cheaper. Like the mechanical loom made it possible for the laborer to have a wool coat, because coats became cheaper, new products allow entrepreneurs to come up with new products and services that further improve the lot of Man. The new products are different in kind from the inputs. Like a pencil is different in kind from rubber sap, graphite or cedar, new products that could have never been predicted emerge from old and newly made available products. No one ever born, let alone a bureaucrat, could have predicted that an innovation devised by Bell Labs, the transistor, coupled with another Bell Lab invention, PCM, would enable the innovations we live with today.

 

Just as the digital computer is different in kind from the transistor the transistor must have been invented before the computer would be possible. The original innovation as well as the emergent innovation could only come about under a system of bottom up emergence into a viable product. Once government eliminates the complex system of the economy, breaking it to the whims of the political elite, innovation will necessarily stop. The standard of living of the people of the world will stagnate and then decline. We see this in every nation that has risen up under capitalism and fallen under socialism. England used to be the world’s super power until it destroyed itself with socialist regulation. Japan rose under laissez fair capitalism and now is grinding to a halt under socialistic friction, Hong Kong has maintained laissez fair market regulations and continues to see a steady increase in the standard of living of it’s inhabitants as well as huge immigration.

 

The best way to understand this fact is by watching human emigration. The mass of people move from places where the markets are limited by regulation for whatever reason, socialist, religious, protectionist or any other, to places where the market system is more free to work. That they often undermine the market in their new homes by calling for protectionist measures, socialist “fairness” or demand religious exceptions, is a tragic consequence of freely moving people. That governments go along with these anti market regulations is a sure sign of the decline of that nation. Soon the people will vote with their feet to leave that weakened magnet and are drawn to the new country that has embraced laissez fair. Let it work, should be the motto of every nation on the planet, because it works.

 

 

Sincerely,

 

John Pepin

Can Government Solve All Our Problems?

Monday, January 28th, 2013

Dear Friends,

It seems to me, the primary difference between what in America are called liberals and conservatives, boils down to the question, can government solve our problems. As a society we have many difficulties, some have been with us since the dawn of time and others are more recent, but people, society and civilization have problems. So, can government solve these problems for us, or should we do it ourselves? How you answer this question largely determines who you generally vote for. (Or should vote for). We all have a stake in this question, whether we want to or not, so it is best if we examine it to see if our preconceptions maybe clouding our judgment.

No one is unable to point out inequities in our society and civilization. Our pundits are paid handsomely to do this endlessly. We are regaled daily how this or that aspect of civil life is threatened by this or that action. The problems get bigger and more intractable and we shrink at the very thought of addressing them. The unbiased media play one string, that string is that if only a new law were passed… proving to us how they answer the question.

Everyone wants to point out a trouble but very few ever have any ideas how to solve them so most of us, or maybe not, turn to government. If a thing seems to us to be too big for us to handle, as individuals, we feel overwhelmed. This feeling of being overwhelmed induces in us another feeling, that of powerlessness. Anyone who feels powerless to meet a societal issue turns to whomever seems to have the power they themselves lack. Government has that power, it is titanic, rich… and is always willing.

People who feel government is the best able to solve the issues facing Mankind, are more likely to vote democrat/progressive, while those who believe government is as often as not the font of these problems, is more likely to vote republican/conservative. The political divide in the US is far more nuanced than this crude representation, but to reduce the granularity would be far too time consuming, and wouldn’t further our understanding. There is some merit to both arguments, the one is more pleasing to the emotions, and the other, to reason.

The argument that government can solve our problems is based in emotion rather than logic. As I indicated before, the main reason we turn to government, is due to our emotion of being overwhelmed and thus powerless. Government, being huge, powerful and wealthy, is seen as having the most ability to enact some solution that eases our feeling of powerlessness. Even if they don’t fix anything or even make it worse… responsibility will be lifted from our shoulders. In our emotionally induced blindness, we fail to see that the very power that government wields, is a derivative of our own massed power, but the feeling of powerlessness and the desire to be unburdened, makes that option the most glittering.

Those that consider government a poor choice to repair all the problems in society and culture, base their arguments more in reason, than in emotion. Clearly some of the problems we face as human beings is and was generated by government. To deny this would be to deny the Sun comes up in the East and sets in the West. Logic further dictates that government is made up of people, with flaws and foibles, just as any group of human beings, this gives us the insight that they may or may not be the best people to solve a variety of issues, in fact they may be the exact wrong people to be given such power. Especially if the trouble they are given to fix is based outside their sphere of reality. These considerations, along with the inescapable unintended consequences that go along with every government action, give us a strong argument that society is in fact not best served, when government is the solution to every question.

Emotion is as valid a reason to make a decision as logic. When faced with a hungry lion we use emotion to great effect. But, emotion is in the sphere of animals and reason is the attribute of Mankind. Government is a fabrication of mankind. When faced with a danger that is based in nature, we are well served to use emotion to get us out, but when faced with a non natural danger, we are best served to reason it out. The focus of a natural danger being time dependent, and one of our own construction being situationally dependent, we are smart to keep them each in their respective universes. So, to use emotion where logic is due, is as foolish as to use logic where emotion is called for. In all things… including government.

Sincerely,

John Pepin

The War on Prosperity

Thursday, December 6th, 2012

Dear Friends,

It seems to me, Obama is prosecuting a war on prosperity, and it is going along much better than the war on terror. The assault on savers and people who do the right thing has reached a fevered pitch in his all out crusade. Not only savers but anyone who does the right thing, by traditional standards, is in the cross hairs of this administration. The upshot is that our economic outlook is diminished by the day while the power of government is enhanced. The continued attack on all virtue in America today, and around the World, should be at the front of everyone’s agenda, because it will lead to a lower standard of living for us and our children.

The war on savers is reaching it’s fourth year. In his campaign against virtue Obama has some powerful allies. The FED under Bernanke, has undertaken a plan to bankrupt anyone who saves for their retirement, by printing money at the fastest rate ever in US history. Every dollar the FED creates in it’s QE1, QE2, Twist and now QE3, (otherwise known in financial circles as, QE infinity), steals some of the value of every dollar in circulation. The incentives this creates are all pernicious. To save money today is foolish because the value is eroded daily by government intention.

As the fiscal cliff looms ever larger, we see that Obama is positioned to avoid all blame, no matter what. The unbiased media will dutifully point to republican recalcitrance despite their stabbing their own constituents in the back. The republicans are more than happy to attack Tea Party politicians but are totally unable to point out Obama’s failings. Apparently the leaders in that party are fully on board with the war on prosperity and will fall on their swords for it. We the American people have few allies and those we do have are being systematically marginalized by the republicans and democrats.

Now we are looking at a dividend tax increase. This further erodes the ability of Americans to save and prepare for retirement, as well as penalizes those who are retired, and have put sufficient money away for it. The ability of people to get some return on their saved dollars, is not only reduced to zero, the money itself is being stolen by the unending printing, reducing the real return to a negative. Those people who have gone without, so they could get a few dollars in the bank are the obvious victims, but there are far more victims than that.

As government’s policies create an environment where saving is discouraged… there will be less savings. This is obviously true. What the results of the policy to punish savers will be are not as obvious. When money is not saved in an economy the ability of companies to invest in plant and equipment is reduced. This is magnified by huge unending government deficits. Government deficit spending sops up the little capital that is available, especially as government gets the first crack at any money in the system, including investment from abroad. When money is not available for investment in productivity enhancing tools and equipment productivity in the economy will suffer. This will inevitably lead to lower wages for labor. Lower productivity leads to lower wages and lower competitiveness.

Not only are wages in an economy negatively effected the amount of labor required is also diminished. This is due to the fact that as productivity in an economy is lowered the ability of that economy to compete in the global marketplace is also diminished. Jobs move overseas and small businesses fail. The FED and Obama pretend this can be averted by lowering wages through the devaluation of money. The problem with this logic is that every nation on Earth is printing money at breakneck speed to keep up with America. This leads to a race to the bottom, lower wages world wide, and an attendant lowered standard of living for everyone on the planet, along with the very real threat of hyper inflation.

The class warfare rhetoric is the propaganda arm of Obama’s war on prosperity. Whenever a war is fought to win there is a propaganda campaign. Obama’s version of Goebbels is the entire democratic party. They speak in unison about the villainy of the rich. The irony that they are in fact the rich is totally lost on them. But the reality is, the war is not on the rich… it is on virtue. They would have to do violence against their own self interest, to make war on the rich, and psychopaths would never do that. The war is against prosperity and virtue… not the rich.

The spectacular increase in the food stamp program as well as the unheard of rise in Social Security disabilities are signs the campaign is succeeding. They show the magnitude of the war our government is waging on us. Those that work are being squeezed on all fronts. Our money is being taken right out from under our noses, our wages are being lowered even as we get raises, our job prospects are diminished by the results of the war on prosperity… and our children will have a much lower standard of living than we had.

Perhaps the best way to understand what is going on, is to listen to Obama’s hero, George Soros, (the guy on the other side of the teleprompter). It was Soros after all who said, “There must be a managed decline in the west.” The war on prosperity is the manifestation of that decline. The problem with decline is that once it starts it is very hard to stop. Sooner or later the managed decline becomes a full slide to oblivion. Then the full weight of government malfeasance will fall on the heads of our children… But in any war there are casualties.

Sincerely,

John Pepin

Obama and His Legacy

Monday, March 12th, 2012

Dear Friends,

It seems to me that Obama will be remembered as the worst President in US history. He has not missed a single opportunity to lower the status, wealth and power, of the US in the World. He has delivered foreign policy catastrophe after foreign policy catastrophe. His mishandling of the economy is horrendous and his policies have led to diminishing expectations from our youth; the new normal. In every measure he will be shown to be not only lacking but dangerously incompetent or perhaps even a Manchurian Candidate. You and your children and your children’s children will be paying the price for his Presidency. Another four years of Obama and we can reasonably expect the United States will cease to exist as a sovereign country. We will all be required to bow to Saudi Kings.

Members of the unbiased media, either consider Obama to be precious… or terrifying. They never attack Obama about anything he says or does. The unbiased media are perfectly willing to attack every aspect of a “Conservative” but when Obama makes an absurd statement like, there are fifty eight states in the US, he gets a total pass. Some consider Obama to be precious, in the same way Smeagol did his ring, in the JRR Tolkien books. They worship Obama and throw laurel wreaths at his feet. He is protected and coddled by even the “conservative” biased media. No one is willing to point out a single foible of the man, like say, his communist friends and ideology. This is extremely dangerous to our Constitutional freedoms. A cult of personality is the worst possible of Presidents.

The jobs economy has not improved under Obama’s leadership. In fact it has been made much worse by his policies. The US has five point four million fewer jobs now than when Obama took office. Any month the numbers have improved even slightly, the unbiased press has come out and claimed the unemployment rate may not be good, but at least it is moving in the “right” direction, when it has been lower than expected, the unbiased media are silent. Everyone forgets the fact that since Obama took office, millions of new workers would like to enter the job market, but are stymied by the few employment opportunities available. Youth unemployment is at an historic high under Obama. Unemployment will never get back to five percent under Obama… even if he were given four terms, like FDR.

Energy prices have skyrocketed under Obama. He has spent billions upon billions of tax payer dollars, funding boondoggles like Solyndra, as well as ten others, to the tune of six and one half billion dollars. All that spending has not amounted to one penny decrease in the cost of energy. That wasteful spending totally driven by Obama’s politics has only been a subsidy to his political supporters and Chinese manufacturing. They have been able to swoop in and pick up that technology for pennies on the dollar. I ask you, do the Chinese really need Obama, to subsidize their energy companies?

As bad as Obama has delivered on the economy and energy his foreign policy blunders have been epic. He squandered a chance to overthrow the Iranian Regime, relieving the World of an existential nuclear threat, when he refused to back the democracy protesters in Iran. He remained silent, when the suicidal apocalyptic theocracy government in Iran, abused dissidents into Europe and the US. He remained silent when the families of those dissidents were rounded up and tortured. His silence makes him complicit with the Iranian Regime… Our mortal enemy.

Obama has set the Middle East on fire. His policies have directly led to the collapse of a friendly nation, Egypt, and turned that friend into a foe. His policies has delivered Tunisia and Libya into the hands of islamofascists. He is working to undermine our allies everywhere on the planet. His apologies to the Taliban, have empowered them to kill American soldiers, by the very people they have personally trained. It never crossed Obama’s mind to punish the glistening turds that defaced those quarans, but he is willing enough to punish American soldiers, who make the smallest mistake in religious sensitivity. He is snatching failure from the jaws of victory in the War on Terror.

Obama is the biggest threat to our Constitutional liberties ever. He seeks to take over all Christian churches in America, while giving a free pass to islamofascists to close Wall street every day, for prayers, among other things a Christian would never be allowed to get away with. He denies the Catholic church has even the right to appoint bishops, or establish cannon, (like Obama’s hero Mao), and seeks to take on that responsibility himself. It is apparent, Obama wants to become the titular head of Christianity in America, as well as political despot. This is only the tip of the iceberg of Obama’s unconstitutional acts. From deeming his healthcare bill passed-without an actual vote, his legislating by fiat, the list is endless and shows a total hatred for our Constitutional liberties and limited government.

I could write for pages and pages, why Obama is the worst President we have ever had, and may be the last President we ever have, but I try mightily to keep my blog one page. In short, Obama is as dangerous to our rights and freedoms, as any head of State has ever been. He compares to Adolph Hitler and Mussolini in his policies. He is a vehement anti Semite and I believe he hates Christianity as well, he hates the free market, he is a Stateist, the list is endless… how Obama is like Hitler and Mussolini. His actions speak far louder then the unbiased media’s silence.

Friends, we are in mortal danger, from this man remaining President. Unfortunately, it looks like the anti capitalist Elite, are going to get their man into the Republican slot. If that happens, and Romney is the Republican pick, I will not vote at all. I refuse to vote for a progressive no matter if there is a D after his name or an R. Romney doesn’t want to disassemble Obama’s machine; Romney wants to run it. He believes, the American people want a republican progressive to run the tyranny machine, not a democrat progressive. I think he is wrong… No One wants a tyranny in America, except the Elite, who would be the oppressors.

Do you want a tyranny here? Too bad. it’s coming, whether or not you or I want it.

Sincerely,

John Pepin