QE Insanity

Posted on January 8, 2015 by john

Dear Friends,

It seems to me, if as Einstein said, “Insanity is doing the same thing over and over again and expecting different results…” then our Central Bankers are the most insane people ever born. The pseudo science of economics will not be dissuaded by mere real world observed results, that contradict their theory, no, that would be like… giving up! You have to admire their willingness to sacrifice the standard of living of the whole world to prove a point. The United States Federal Reserve has printed trillions of dollars and used them to monetize the debt. The Bank of Japan is doing the same thing with the Yen, as now Draghi is claiming he will do as well to the Euro. Despite the trillions printed and given to government and the big banks, which in a normal economic cycle would result in runaway inflation, there is no inflation as measured by the eggheads at the Fed, ECB, or the seat of Abenomics. Their failures lead to our losses, in our wages, pensions, savings, house values, and yes, our basic standard of living.

Keynesianism is a philosophy in the arena of the Wealth of Nations. John Maynard Keynes was a British economist, who posited that since an economy is driven by the demand for it’s supply, in an economic downturn, which by his thinking was a period of time where supply outstripped demand, then government spending could gin up demand and swing an economy back into growth. Basic and simple to understand, it also had another thing going for it… it empowered government officials to tax and spend more, “for the good of the economy.” What Keynes and later demand side economists fail to understand is… not all demand is created equal. Consumer demand is always the most productive and government demand is actually often destructive of economic growth.

Japan is the poster child for Keynesianism’s failure. When Japan first went into their decades long recession the government was flush with excess reserves. The government of Japan spent huge sums in typical Keynesian fashion to stimulate the economy. It failed. They raised taxes and spent more, the economy floundered, a new party was elected into office on the promise they would spend more. They regulated and spent more, and the economy went downhill even faster. Abe was elected to print more and spend more, he raised taxes, printed more and is monetizing Japan’s huge debt… to no avail.

The southern states of Europe have had a healthy government sponsored safety net for decades. As a result, today the governments of south Europe spend huge amounts of money, keeping able bodied young people out of the workforce. The drag on the economies of those countries is like pulling a three bottom plow through a swamp. No amount of government spending would be enough, to satisfy the demand for free money from government, but the politicians have promised what they have promised. The elite could never lessen their grip on the economy through regulations and taxes, buttressed with graft and bribes. If they had the ability to print their money into hyperinflation they would do it in a nanosecond.

The US Federal Reserve has gone through six incarnations of money printing, TARP, TWIST, QE1, QE2, QE3, Monetary easing, and now ZIRP. Trillions have been printed and handed to the too big to fail banks (TBTF), and government. With all the propaganda that the US government has reigned in spending, the numbers the unbiased media use are compared to the days of trillion dollar stimulus short term measures, not long term averaged spending to GDP. Today the US government spends as much of GDP as anytime in history, 36% of GDP is government spending! That means 64% of the economy is pulling the plow while 36% ride it and claim they are helping. Yet even with all that Keynesian “stimulus” the economic outcome for Americans is getting worse by the day.

The past is littered with regimes that tried to print and spend their way out of a recession, they have all failed, spectacularly. The ones traditionally cited are Wiemar Germany and Argentina, but there are many other examples of hyperinflation triggered by monetizing the debt. Hungary was the worst ever in 1946, but Zimbabwe in 2008, and Yugoslavia in 1994, were crushing… the examples go on and on. Printing money to stimulate the economy has failed every time it has ever been tried. It empowers the political elite to take more and spend more however, and with that incentive at play, it will be given many more chances in the future as well, just in case it might work sometime.

The egghead economists answer to their failure of money printing… to raise wages, lower real unemployment and underemployment, the lack of small businesses, rising food inflation even as imported goods get cheaper, stagnated housing market, and the multi trillion dollar bond bubble the Fed’s policies have created… is to do more of the same. We are told we must let them print more and blow up more economic bubbles else we would be in for it. They have become like a typical mad scientist. Despite all the monsters they have created in the past, and the destruction those monsters wrought, there is only one way, their way, the consequences be damned because someday it will work… it just has to!

Sincerely,

John Pepin

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The Family Unit

Posted on January 5, 2015 by john

Dear Friends,

It seems to me, the family predates capitalism, and so the family can get along fine without the market system, I don’t believe however, the market system, (and therefore our civilization), can get along at all without the family. The traditional family unit has served the human race for eons. Through famine, plague and ice ages, the basic family unit has kept human beings alive on this inhospitable planet, since Adam gave up a rib. Because the market system tempers people to make all decisions rationally, weighing the advantages versus the disadvantages of a given action, any pragmatically rational maximizer will understand the utility of the family, in civilizing our children and providing a strong thread upon which to weave the fabric of our civilization. To the Fabian/Frankfurt school, new class progressive however, the family stands in the way of progress, and so must be destroyed by whatever means necessary.

The traditional family unit is a cord that is interconnected with the cords of other families to create the fabric of society and culture in which we live. The stronger and longer those threads the stronger and more useful the fabric that can be woven from them. Break up the family and those threads become weak and short. As long as there are sufficient long and strong threads the fabric of society will hold together, but once too many short weak threads get woven in, the fabric easily rips apart.

New class progressivism is based on the philosophies of Marx, Nietzsche, and Freud, both the Fabian and Frankfurt school have as their stated goal, to progress the world to a planetary Marxist government. To that end, the Fabians believe in destroying the system so they can recreate it in a way more becoming to them, while the Frankfurt school is more agreeable to a “rationally guided” evolution from within. They both hold the family in great disregard, understanding that the family stands in their way, as it is the primary source of the societal and economic strength of any society, if fundamental change is sought, then this foundational asset needs to be wiped out.

The new class love to use spurious statistics to forward their diabolical goals, like the fact the prison population in the US is 40% African American males, while they only make up 12-13% of the total population. This is offered as proof of the racist nature of the American judicial system. What they refuse to allow spoken, is the fact that the African American population has largely succumbed to the Fabian and Frankfurt school propaganda and policies, replacing the father with the state.

Today very few young black men know who their fathers are. They don’t come from traditional families they come from broken homes. Those who are born into traditional families with a father, mother, brothers and sisters, have incarceration rates that are in line with general demographics. So the fact is, the high incarceration rate among black men, is due to the policies, plan and goals of the new class, not in any inherent socialization problem of people of African descent or racism from the society as a whole.

For a market system to be efficient it needs civilized people who can be trusted. The ancient Chinese philosopher, Hsun Ching said, “The congenital nature of Man is evil, the civilization in us is a learned trait…” In that we are born barbarians and are civilized by our families. A civilized person can be trusted at his or her word while a barbarian will seek any means to get out of honoring their word. The increasing demand for attorneys is proof we are becoming less civilized and more barbaric. Driven by the continued corrosion of the family.

A market interaction is favorable in some way to both parties engaging in it, unless one doesn’t follow through, or is untruthful about the product or the payment. The more people that have been civilized the more efficiently a market can work, but as the family is corroded and people become less and less civilized, the markets become ever more labored until they freeze up and cease to work. The failure will be blamed on the market itself instead of the loss of the family and Marxism will be the “only logical solution…”

Strongly civilized people create a sinewy thread that can be woven into a robust society, able to withstand anything God or mankind throws at us and our economy requires civilized people, our families provide those civilized people. So if we want a stable prosperous society, able to deftly manage catastrophes and war, we must do everything in our power to protect the family unit. Socialists however, believe so strongly in their goal they are willing to risk any danger, even cutting the very thread of our civilization, to get their one world Marxist government. If only they could evolve us there, by destroying the family unit if need be, then we would live in utopia, which in Greek means… nowhere.

Sincerely,

John Pepin

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Friction

Posted on January 1, 2015 by john

Dear Friends,

It seems to me, a bearing is designed to reduce friction so the shaft it holds can rotate with as little loss as possible, adding sand and thus more friction increases loss to the point the shaft fails in service. We all intrinsically understand that friction makes machines break and work less efficiently but for some reason we don’t correlate that effect to our economy. Just as the friction from sand, rust or a failed bearing reduces efficiency and eventually causes failure in a machine, economic friction from taxes, regulations, corruption and having interest rates set by unaccountable people with dubious alliances, all cause an economy to function less efficiently and eventually fail.

Economics to many seems like magic, giving economists the gravitas of Merlin, but like Merlin’s magic, economics is mere pseudo science. Economics tries to explain how an economy works, and prove it understands by correctly predicting future economic conditions, given present circumstances. A tall order by any standard. It’s fatal flaw is that one of the underlying functions of economics is the human being. We are instrumental to economic outcomes. Clearly, in any area of “science” that involves the human being our science is woefully inadequate, especially as compared to our grasp of physics, mathematics and lately astronomy.

It is our lack of perspective about ourselves that makes our research into ourselves, our nature and emotions, reactions, decision making, etc… so difficult. Without comprehensive knowledge of ourselves we cannot ever really call economics a science. Our lack of dispassion concerning ourselves results in our self interests driving our observations. It is self evident that every politician always wants more power, to do whatever she sought power for in the first place, therefore, given a choice of several options she will always choose the option that results in increasing her power, it is in her self interests. Each time this happens the friction to our economy is increased. The effect on the economic outcome of each person is small individually, but the cumulative effect is huge, and the friction adds up.

Money flows through the economy like hydraulic fluid, mechanical energy or electricity flows through a machine. In a machine the engineer strives to limit the resistance to the flow of whatever the energy the machine is processing. In an economy, the engineer is the government the blue prints, government policy. The engineer builds a machine to do it’s function as efficiently as possible but a bureaucrat builds the economy as inefficient as possible. That is because the engineer is using mathematics and physics to build her machine while the bureaucrat has only his self interest to guide him. No matter how schooled in economics he may be, the bureaucrat’s incentives are in the end, self interest. The same hold’s true for politicians only to a much greater extent.

Every tax, license, regulation, requirement, zoning law, etc… requires an entrepreneur to get a lawyer, which costs money and time, multiplying the friction of the initial rule. Where an engineer puts in a bearing a bureaucrat puts in a clamp that he can tighten at will. The politician has hands to grease, and his ability to grease those hands, is based on his ability to effect changes in economic friction. He can tighten down the clamp a bit, so only the largest company in an industry can turn a profit, returning hundreds to one to his corrupt backer, for her campaign donation. At every level of government, friction to economic operation is piled on, and our politicians lament the gap between the rich and the poor.

This is only one of the fundamental problems with the “planned” economy, and why the laissez faire economy does so well… friction. The planned economy is nothing but friction, bribes, restrictions, permissions, the list of impediments to operating a business efficiently, even with virtual slaves as workers are so pervasive, that instead of adding value at each stage of the manufacturing process the system actually destroys value. In other words, the cost of labor and other inputs become so high due to friction, the value of the manufactured good is less than the original cost of the raw material. All due to friction imposed by politicians, because economics is a pseudo science, in the hands of self interested politicians.

We all want a well functioning economy. A well functioning economy produces general prosperity, low crime, advancing standard of living as well as other social advantages like less racism, more virtuous people and a return to the nuclear family as the primary family unit, that is because in a well functioning economy, we are too hard at work getting ahead, to commit crime, if we are selling sofas we could care less if the buyer is African, Asian or space alien, it is the color of his money that counts, the effects of a well functioning economy are many and positive. The way to a well functioning economy then… is to remove friction from our economy.

Sincerely,

John Pepin

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Ideal Government

Posted on December 29, 2014 by john

Dear Friends,

It seems to me, ideal government would be invisible to those “governed.” Imagine bringing up your children in a place where politics doesn’t matter because the government is limited the way the founders intended? Under such a system you and I would go about our lives not having to interact with government at all. No bribes, no political favor, no licenses, no taxes, very limited legal code, well, you get the picture. If we lived in that way, with only the most limited amount of government possible to provide for common defense, and standards to facilitate commerce, our interactions with government would be few and far between. Moreover the ability of a faction to seize control of government and drive their agenda down our throats would be eliminated. Prosperity would be the norm and the wealth gap would naturally contract under such a system, but then again, that is exactly why it would never be allowed, and anything like it is so hated and vilified by the elite.

Under such a system, where government is strictly limited to national defense, protecting the property rights of the people and providing standards, (not regulations), to facilitate commerce, people would have little need to engage government. Most people wouldn’t even know where the town clerk’s office was because there would be no need. But that is exactly the rub, isn’t it? If that were the case, government officials would not be able to make such large amounts of money, their ability to enrich themselves through crony capitalism, graft, bribes, and outright theft would be eliminated, if we didn’t need government permission for everything.

Every time you have to go to the town clerk’s office to get the government’s authorization to engage in some activity, the role of government is enlarged and power of government is enhanced, with a commensurate increase in the status and wealth of those in government. The cronies of government officials would have to work for their wealth instead of having it bestowed to them. Regulations create the conditions where some people, those with the right connections, can become immensely rich while those without the connections must stay in the station they were born into, regardless of their abilities and virtues.

The ability of potential despots to seize power would be eliminated. If government is limited so it is not allowed to monitor it’s citizens, pass reams of laws and regulations that empower the state over the individual, control the people with military power, seize the property of individuals, or practice arbitrary power, a would be oppressor could not oppress. There is not one case in human history where a power given to government has not been abused, no matter how much the people agreed when that power was given, that power has always been abused. That is because giving power to government is stepping out onto a slippery slope.

Without the friction that regulations, licenses, fees, taxes, and political favor create, the economy of a nation would operate at maximum efficiency. Without the elite controlling who can get ahead by rewarding their friends with favors, the ability of people to become uber rich would be lessened, and the wages of the bottom rung of the economic ladder would be increased… such that the gap would naturally become narrowed. The resulting rise in demand for labor would drive up the wages for that labor. The supply demand curve would swing to the advantage of workers, instead of management, because rapid economic expansion that such a system would encourage would keep the demand for labor high.

The power and prerogative of the elite would be limited as well. Which of course would be unacceptable to them. Those who wield power are always loathe to relinquish that power. They take, they never give, that is why the natural progression of every government, political system and republic that has ever been constituted, has been eventual tyranny. The elite convince us that if only they had a little bit more power… oh, the good they would do for us. Conversely they claim that any small taking of their power would result in calamity. Anyone trying to limit the power and role of government therefore becomes a de facto enemy of the state.

The goal of limited government is not a pipe dream, it has been achieved in the past, it is the limiting of government absent violence and revolution, that eludes humanity. People vote with their feet whenever they are allowed to. No one flees to Cuba, people flee from Cuba to the US, Canada and Europe. No one is migrating to North Korea, people risk their lives escaping that tyranny. Venezuela doesn’t have a problem with people from other South American nations rushing their border, people are trying to get out. Yet the elite in the media, government and academia fill the airwaves with propaganda that if only we could become like North Korea, Venezuela, or Cuba, life would be a utopia.

Every human being yearns to be free, prosperous and moral. That is why people vote with their feet, fleeing despotism to places that are only marginally more free. Despite that reality, anyone who seeks to limit the power of the elite are enemies of the state, and are treated harshly while those who seek to unshackle the power of government are hailed as heroes… like Che Guevara. We could achieve near universal prosperity, if only the friction to the economy was removed, by limiting the ability of government officials to decide who gets what. Limited government creates the conditions where a despot cannot amass the governmental might he or she would need to usurp power, by eradicating arbitrary power itself. Yes, limited government would be a boon to humanity, that boon would come at cost to the elite however, and as such, will be fought at every turn, but the gain by winning the battle, even engaging in it… ideal government, is well worth the effort.

Sincerely,

John Pepin

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Hope

Posted on December 25, 2014 by john

Dear Friends,

It seems to me, of all the things Christians are called to do, hope is one of the hardest but the most rewarding. Some of us live in the past, where all our failures and misfortunes drag us down. Others live in the future, a future that promises great things that always seem to be just out of reach, but to actually have hope one must live in the present. The past tells us where we have been, and the future shows us where we can go, but it is in the present that we have the power to make the future. That power is based on hope. It is human nature to see a looming problem, like war, famine or tyranny, and to loose hope. We are overwhelmed by the magnitude of our problems, and to hang onto hope seems childish in the face of such overwhelming odds, but it only through hope that we have a chance at a better future. We as Christians, are called to have hope against all odds, put our problems in God’s hands and work in the present to save the future.

Our pasts have a great deal to teach us about what works and what doesn’t. It is the past that allows us to enjoy today and succeed tomorrow. Our past is full of lessons on how to have relationships, how to navigate the world, what gives us happiness and what takes that happiness away. The past is a terrific resource for us, but it can also be a bog that we get caught in, holding us fast and dragging us down. If we dwell on our past mistakes, instead of learning from them, we get stuck in a morass of self pity. Those who are stuck in their past mistakes or misfortunes cannot get past them and stagnate. Hope allows us to move beyond our failures to a better future where we can use those lessons to improve our lives.

Those who live in the future are never happy today. Their minds are filled with all the good things that will happen tomorrow and as such they miss all the good in their lives today. Often the future is a place to escape those things we find overwhelming today. We retreat into our Utopian vision of a future where we are smarter, richer, wiser and more attractive. But in doing that we undermine our ability to get wiser, smarter, richer and more attractive, because to get those things tomorrow, we must work for them today. The future is a great place to plan for but living there undermines that future. It is only in living today that we can effect our futures in a positive way.

Today, we may not be the the smartest man or the richest woman, but if we work to improve ourselves we can get there… powered by hope. It is the lack of hope that discourages us and stymies our efforts. Why struggle if there is no hope? The reality however, bolstered by the entire history of the human race, is that there is always hope. People miraculously go into remission from deadly cancers, tyrants fall at unexpected times and our loved ones get off drugs. There was no possible way Timoleon could have singlehandedly overthrown the tyrant of Syracuse, but he did. The problems facing Athens when Solon was elected were insurmountable, threatening the very existence of Athens, but Solon solved them. When Rome itself was burned to the ground and occupied by the Gauls, there was no possibility Rome could be retaken, but it was. The history of the human race is a story of hope against all odds. Even our very existence is a story of hope.

Those who don’t believe must do everything themselves. As the quintessential American Philosopher, William James taught, the philosophy of Christianity allows people to be calm in the knowledge that in the end God will sort it all out, but the atheist has no such hope. The poor atheist must take all the responsibility upon him or herself while a Christian can rely on God. To the atheist there is no hope, only struggle and pain, then a dirt bath. To choose hope over despair is not a cop out, it is the definition of wisdom. It is pragmatic to choose hope, and impractical to choose hopelessness, because it is hope that improves our lives and hopelessness that diminishes them. Regardless, God gave us free will, to choose hope or hopelessness.

The Christmas season is the time for hope. Christ came to save us from our own sins giving every one of us hope we can transcend them. He didn’t hang out with the Pharisees, he hung out with Prostitutes, Tax collectors and laborers. His message of hope was for everyone, not just the wealthy and powerful. Those with temporal power usually don’t lack hope what they lack is humility. Those of us who make up the mass of humanity however need hope. We are humbled every day by our demons. There is not a soul among us without some demon or two hounding him or her. It is through hope and the diligence that hope allows that we escape them and move to a better place. To a Christian there is even hope in death, the hope that we are saved by the actions of Jesus, hope that his life, death and resurrection brought into the world.

On Christmas eve, it is essential that we understand the message of hope that Jesus taught, accept the gift of hope he gave and live in that hope. Of course we fall now and then, what child has learned to walk without a bruised knee? It isn’t in giving up that we succeed, it is in giving in, to the hope Jesus gave us, and using that hope by working to make our lives and the world a better place, while relying on God to get the details we can’t, that is how we advance as human beings. The message of the Christmas season is one of hope, not every problem we face will be solved, nor that every tyrant will be overthrown, but that in our personal lives, even in death, Christians have hope. It is the legacy of our Savior.

Sincerely,

John Pepin

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Incalculable Value

Posted on December 22, 2014 by john

Dear Friends,

It seems to me, almost anything can be assigned a value, in fact, that is one of the basis of the market system, but we often assign value inappropriately. There are some thing that have incalculable value. Value is often based on scarcity, sometimes on utility and occasionally on vanity, but to have incalculable value is to transcend all other considerations. When we don’t understand value, we often destroy that which has incalculable value, for something with temporal value. How much of a loss is it to loose that which has incalculable value to get something of temporary value? The loss is magnified by the ignorance, because the loss comes directly from our hearts and souls. So many people diminish their lives, harden their hearts and darken their souls by misallocating value, that I thought it time to write about it, to help improve the lot of Mankind.

Intrinsic value is hard to come to grips with. A thing is often said to have intrinsic value if it is widely desired, like gold, diamonds, platinum or other pretty bobbles. The lust in men’s hearts for gold is often used to argue gold has intrinsic value. But does gold really have intrinsic value? It has utility as a metal for it’s conductance, luster, durability, malleability and resistance to corrosion, gold can be a store of value protecting us from devaluing fiat currencies, moreover, gold and gems are scarce. Sadly, the thirst for gold has driven men to kill each other with the blood lust of a cuckold, but do those attributes give gold intrinsic value? No, the value in gold, precious gems, art and other pretty things that touch the heart with lust, is simply vanity.

Water and air are perhaps the most utile things we know of. There is not one among us who could live five minutes without air and our bodies would die without water in less than two days. Therefore we can say that water and air have utility and are valued for that utility. But water and air are usually plentiful and being commonly obtainable they have little value due to scarcity. Make them scarce however, and a drowning man will give all the gold in the world for a breath, drop a woman in the desert without water and within a day, there is not a thing she would not exchange for a sip. The value of those things we need to live, are based on utility and scarcity, but don’t have incalculable value.

The value of a car is it’s ability to carry us from place to place, the value of money is it’s ability to be traded for those things we desire and need, while the value of furniture is in it’s ability to give us a place to set down. Our televisions have utility in their ability to inform us, divert us and entertain us, but there is no intrinsic value to furniture, televisions or cars. We value them and consider them precious, but in the end, they can be replaced. Too many of us value our things as if they had intrinsic value instead of for their utility. When we do, we often ignore or devalue that which has incalculable value, to our great loss.

Things have temporal value, in that their value is temporary and based on their utility, scarcity or our vanity, but only a being can have incalculable value. A being that loves us unconditionally like a dog or cat, a child that looks up to us with adoring eyes, the person who completes us, the mother or father who would gladly lay down and die for us, and the friend who will drop what he or she is doing and help us in our time of need… all have incalculable value. That value is not based on utility, the dog may make us feel good, and that is a form of utility, but the value of a dog far exceeds it’s utility. Our parents lives are temporary, since they are not immortal their value could be said to be based on scarcity, but to do that would be as soulless as a rock. Our children are an extension of us, but to value them as such is to base their value on vanity. The value of those who we love is never based on scarcity, utility or vanity, the value of our loved ones is always incalculable because they are irreplaceable and permanent.

It is in loosing sight of that with incalculable value by holding precious that which is temporal we diminish ourselves. What good is it to gain the world and loose one’s soul? What benefit is it to us to so value a car that we alienate someone with incalculable value over a scratch? To what end do we send someone’s child to die in a war over an insult, land, power or prestige? We loose that which has incalculable value for something with mere temporal value. What do we gain if we loose that which has incalculable value for that which has mere temporal value? To value scarcity, utility or vanity over the sacred, is to be unwise in the most profound way.

Sincerely,

John Pepin

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Solving Ukraine’s Problems

Posted on December 18, 2014 by john

Dear Friends,

It seems to me, Ukraine’s situation is rapidly deteriorating, impoverishing it’s citizens and pushing the breakaway areas with war and the threat of war. What a sad state of affairs for people who, because of their geologic location, have taken it on the chin over and over. The political system is broken beyond repair with whomever is in power crushing any opposition at will. There is no effective protections for freedom of speech, assembly or conscience. The people of Ukraine deserve much better. Every nation on the planet could learn a thing or two, how not to run a country, from Ukraine’s example. There are answers to the thorny problems Ukraine faces, but unfortunately, real solution are being ignored for war and arbitrary power.

Ukraine’s history is one of invasion, violence and tyranny. From the dawn of history Ukraine has been invaded by empire makers. The Mongol invasions were particularly hard on the people, with whole cities raised to the ground, every man woman and child killed, even the dogs, cats and livestock! Tamerlane slaughtered the Ukrainian people with the glee of a demon. When the Soviet union controlled Ukraine, Stalin stole the food the Ukrainians had grown themselves, selling it on the world market, starving to death millions of human beings! The poor Ukrainian people have suffered for centuries under the heavy hand of sadistic invaders and despots. It is past time for those sturdy people to have a measure of freedom and prosperity.

President Petro Pososhenco continues in the footsteps of the man he deposed. Instead of ushering in an era of peace and prosperity he has turned to war and autocracy. While it is only human to want revenge for grievances suffered, when a politician does it, the lot of the whole people is lowered. Today the Ukrainian central bank is broke with all of Ukraine’s gold stolen. The war with separatists sporadically flaring up, and now with US lethal aid going to Ukraine, the likelihood of a shooting war with Russia becomes a real possibility. Crimea is lost to Russia, for now, and the Eastern cities are in the hands of separatists, which would be a blow to any sovereign nation. Sadly, Ukraine is used to blows, and is likely punch drunk.

A better option, in my humble opinion, would be to sign a peace accord granting the breakaway areas autonomy, as long as they don’t formally become part of Russia. This would stop the bleeding, both of human blood and economic red ink. War is never a good option especially when there is an alternative. Of course it take two for peace and only one for war, with the Russian Ruble in free fall, the Russian people looking at hyper inflation and the Russian economy collapsing, war becomes more probable, since war is a traditional way to make patriots of starving people. Nothing rallies a people like a rip snorting war. Granting the breakaway areas autonomy would take the possibility of outright war off the table.

The next thing Ukraine should do is get their political house in order. To that end, I have advocated for all nations, including Ukraine, a NUMA or Fourth Branch. It would chain the lawmakers to their own laws and Constitutional limits. Of course the Fourth Branch option would require a Constitutional rewrite. If done right such a rewrite would have many beneficial effects. The US Constitution should be the basis of any new Ukrainian Constitution… with the addition of a NUMA. A Constitution that strictly limits the role, scope and power of government, would allow the free market to do it’s thing. For a better explanation see an excerpt from my last blog here.

If these two things were done Ukraine’s economy would start flourishing. The Ukrainian people are smart, hard working and risk takers, all of which are essential to a rapidly growing economy. Until the war is ended, and the government retreats to it’s rightful role, the Ukrainian economy cannot possibly get on solid footing. If the economy of Ukraine becomes dynamic, the gross domestic product per person would skyrocket, or in other words, the Ukrainian people would see prosperity they could have only dreamed of before. Once that happens the breakaway areas will almost certainly petition the Ukrainian government to allow them back in. Self interest trumps all other considerations. Ukraine could slowly rebuild itself without the exigencies and ruin that protracted wars always bring on. This would be a peace and prosperity based solution to the fundamental problems of Ukraine. Wise leaders would take the path of peace and prosperity, while foolish ones, war and poverty… Let’s pray the leaders of Ukraine are wise and not foolish.

Sincerely,

John Pepin

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The Brink Of Economic Collapse and World War

Posted on December 15, 2014 by john

Dear Friends,

It seems to me, The world’s economy is teetering on the brink of collapse. I know, many “Henny Penny” pundits have been saying that for awhile, but I believe the portents are there to substantiate the thesis now. We are in this predicament because governments the world over are so in love with Keynesian economics, the welfare state and socialism. Japan and it’s Keynesian driven lost decade, France with it’s love affair with socialists and socialism, Germany trying to buck the trend, Russia more interested in expanding it’s sphere of influence than improving it’s core economy, South America’s fling with outright Marxism, the never ending wars and corruption destroying Africa’s economic future and China with it’s aggressive threat to expand it’s empire as well, our world is perilously close to an economic disaster that will lead to a world war. I hope and pray something can be done to head it off but I fear it is too late. Our leaders will never admit they were wrong about Keynesian tax and spend economic policy and their new class supporters would revolt if they did.

Japan had a huge budget surplus in 1990. Since then, they have spent so much on Keynesian stimulus they have built a huge debt, and have now stooped to monetizing their debt, in the name of “stimulus.” Their GDP is stagnant but the standard of living is falling due to rising inflation. All proving, no matter how much a nation protects it’s gargantuan corporations, unless small businesses are allowed to start and thrive an economy is DOA.

France sways between socialism lite and Marxism in it’s leaders. Even one of the most pro capitalist politicians in France, Sarkozy, is in love with the welfare state. France has gone from one of the primary engines of the Eurozone, to an empty freight car, that has to be pulled along with most countries in Europe. The southern nations of Spain, Italy, and Greece are in total economic collapse. Even Norway is having trouble with the low crude oil prices putting a damper on their economy. Europe is even intent on changing it’s demographic from Europeans to Middle Easterners, who have a totally different world view than Europeans, which is a social experiment never done before, with unknowable repercussions.

China has embraced Keynesian economics in a big way. They are following in the footsteps of Japan and the results appear to be the same as well. China has experienced a huge growth in the standard of living of it’s people, like Japan did after the war, because of it’s embrace of capitalism. It has done what Japan did, becoming a giant exporter of goods, and doubled down on the Keynesianism by ginning employment by building ghost cities. That economic paradigm can work for awhile, as we have seen in Japan, but once the economy matures to the point where cheap labor and crony protections stop being the primary driver of growth, China will, and we see it now, slow, stall then fall… as did Japan.

Africa is mired in a cycle of war, socialism and corruption. Even South Africa with it’s vast resources is faltering under the weight of it’s Marxist policies. There is not one functioning government on the entire continent! From Egypt and Morocco to South Africa and Namibia every government is either corrupt, outright socialist, at war, or some admixture. Despite the oceans of oil under Africa, the glittering mines of diamonds and gems, the uranium reserves as well as precious metals deposits, Africa’s economy has been in almost total free fall since the colonial powers were thrown out.

South America has gone down the road to serfdom in a big way. While Venezuela is the poster child of a dysfunctional economy, due to Marxism, the whole of the continent is staggering under the weight of Marxist insurgencies and policies. Venezuela stands a bit of focus, they didn’t buy the oil infrastructure foreign oil companies built, they moved troops into them and declared them state owned. Hugo stole anything he wanted. Despite getting the infrastructure free they cannot run it and it is collapsing. Argentina has more resources than 90% of other nations, yet continues to go through spate after spate of hyperinflation, because of their beloved welfare state. So much so they have obliterated the middle class.

The United States still has not recovered from the Great Recession despite the propaganda to the contrary. Even as the US economy continues to stagnate the government is intent on increasing regulations and taxes. Moreover, the US government has become enamored with becoming a police state, complete with total monitoring of all it’s citizens ala… 1984. The deficit has exceeded 100% of GDP at 18 trillion dollars on a 17 trillion dollar economy and rising another trillion a year. Even as the welfare state is destroying our economy, the new class calls for more welfare, more taxes and more regulations, while undermining wages with illegal immigrants, subsidized by welfare state policies. Proof is the US dropping in rank of free economies.

I like to compare the economic fortunes of places like Hong Kong and Singapore with the likes of Argentina and South Africa. The difference couldn’t be more stark. While South Africa and Argentina have vast natural resources, Hong Kong and Singapore have none, yet the economies of Hong Kong and Singapore are dynamic and bustling, while the economies of South Africa and Argentina are basket cases. The reason is simple, Hong Kong and Singapore encourage small businesses to start and grow, have minimal regulations and taxes, while South Africa and Argentina are highly regulated, high taxed and undermine the work ethic with their socialist policies.

All of this brings us back to my original premise, that our World’s economy is on the brink, and that brink could very well lead to world war. The collapse we are seeing in the price of oil is driven by diminishing demand because supply has grown less than reported World GDP growth. Since energy is a primary input for all economic activity, that lower demand is telling of the direction of our economy, of course it is a short termed event… due to the cartel. If our World’s economy does collapse, it will be because of the new class’ love of power and control over the lives and fortunes of the people, justified by the siren of socialism. Economic collapse will inevitably usher in another world war. WWII was driven by the economic collapse of the Wiemar republic brought on by the draconian terms of the Armistice and the Great Depression. This time it will be no different. The alliances might be different, but the result will be the same, poverty, violence and suffering on a global scale. Sadly, when it is over, our leaders will not have learned the lesson, again, they will go back down the Keynesian road of socialism and welfare state, again… with the same results, again.

Sincerely,

John Pepin

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Regulation in Canada and the US

Posted on December 11, 2014 by john

Dear Friends,

It seems to me, the contrast couldn’t be more stark between the policies of Canadian Prime minister, Stephen Harper and the US President, Barak Obama, the difference being their exuberance to regulate. I am of course talking about Stephen Harper’s response to new regulation over Canada’s oil and gas industries. Harper called the idea, “Crazy economic policy…” While at the very same time, Obama is implementing new regulations to limit the amount of potentially explosive gasses in crude, shipped out of North Dakota. The first protects the wealth and freedom of the people while the second corrodes our economy, wealth and liberty. Unless we grasp this fundamental difference between sound economic policy, and poison pill economic policies, we will be forever trapped in an ever downward spiral of poverty and despotism.

Stephen Harper was the only head of state that successfully navigated the financial crisis with his country’s economy intact. Canada didn’t see the collapse of it’s economy like every other nation on Earth did, (including China), and it’s banking system emerged as one of the most stable on the planet. Today, Canada is experiencing a decline in their fortunes due to the floor dropping from commodities prices, because Canada’s economy is dependent on natural resources as the primary growth mechanism. Yet even with the steep decline in commodity prices the Canadian economy is still firing on all eight cylinders. Because of Harper’s policies.

The US on the other hand, was the primary cause of the financial collapse. The policies that led to the crisis had their roots in Congress’ desire for economic tinkering. Democrats had become incensed by what they called “Redlining of neighborhoods.” To rectify that “unconscionable” situation, they forced lenders, via regulation, to give loans to people who the lenders knew couldn’t pay back. Economics is like water, no matter how tight you hold your hands, you cannot squeeze water, and like water those regulation caused the banking and financial system to have untended consequences. The financial system had to create new and innovative ways to mitigate the risks of default by borrowers, through bundling huge numbers of mortgages together, including many good loans with a few bad loans, (a derivative), with the idea that if a few went underwater, the rest would be fine and the underlying security would be solvent.

When the housing market went into bear territory the whole scheme came crashing down. More loans were going into default than projected, due to home owners not only unable to pay their loans, but unable even to refinance, because their principle had now become higher than the underlying asset price, IE, their homes. Many lost their homes and many voluntarily gave the keys to the bank. This caused the whole economic system to become unbalanced, (since no one could determine the real value of those derived financial products). With no one able to fix the value of the derivatives, the banks balance sheets became opaque, leading to them looking to their insurers to re balance their books. The giant insurers like AIG became insolvent with so many claims, and the house of cards came crashing down… all because of the government meddling in the economy to give a politically favored class an advantage in an otherwise free market exchange.

Canada changed course when they elected Harper. They went from an uber progressive state to a conservative one… just in time. Harper has been trying to remove burdensome regulations from the books and standing strong against new economy destroying regulations. This latest statement from Harper is telling of how cagey he is when it comes to economics. He rightly realized that further hobbling an economy that is already being slowed by external forces, (the global slowdown), would be counter productive if Canada is to see economic expansion and an improving standard of living. The difference was further highlighted by the Canadian dollar versus the US Dollar, during the financial crisis, for the first time the Canadian dollar became more valuable than the US dollar!

Regardless of the economic weakness, Obama and his new class progressives are increasing regulations at light speed. The newest regulations on the US oil and gas industries is supposedly to protect people from exploding rail cars like in Quebec. Now, that makes perfect sense, unless you know the facts of what happened in Quebec. The cause of the accident that burned Lac-Megantic to the ground, was faulty brakes that allowed the untended full train to roll seven miles down a hill, and derail near the waterfront. It had nothing to do with any explosive gasses it had everything to do with the brakes on the train. Moreover, if safety is the real concern, then a pipeline could easily be built that would transport the crude more efficiently and more safely, but the downside of that idea, is that politically favored Warren Buffet would loose millions, since his trains are the ones that transport the crude.

Today the US is mired in an economic depression in some ways more pernicious then FDR’s. The reason is the incessant meddling in the economy by the elite to enrich their cronies at cost to everyone else. Thousands of hard working bureaucrats tirelessly writing new regulations to destroy the world’s economy has become the norm. Canada is trying to chart another course, piloted by Stephen Harper, that will enrich the average Canadian. Every time deregulation has been tried, it has resulted in economic prosperity, and every time the elite have become enamored with economic shenanigans, the economy has gone into depression. This time is no different. What I hope will be different, is that we will learn our lesson, that heavy handed regulation of an economy, destroys that economy. Sadly, with all the hard lessons we have ignored in the past, I doubt we will learn it this time, but at least Canada is on the right course… for now.

Sincerely,

John Pepin

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Arbitrary Rule and Great Poverty

Posted on December 8, 2014 by john

Dear Friends,

It seems to me, two of the most corrupting influences on Mankind, are both arbitrary power and great poverty. Both stultify the soul and wither one’s empathy, they lower a person’s thinking to the most base level, reducing him to a mere animal, and both great poverty and arbitrary power give a human being a sense of entitlement, all of which lower instead of raise the individual. Only a saint could remain unaffected by unlimited power or great poverty. Therefore, if we want to live in a virtuous society, if we want mankind to grow in knowledge and wisdom, and if we want our children to live in safety and prosperity, we must strive to mitigate the effects and to eliminate arbitrary power and great poverty.

Arbitrary power has been known to be evil for thousands of years. Solon, the lawgiver of Athens, made even favoring arbitrary power punishable by the ostracism. Such was the threat the ancient Athenians held for arbitrary power. What arbitrary power is, is exactly what the term implies, that a person or group, have total control over a land and it’s people. They can make up laws as they want, they can change laws, they can take the property of others without consequence, they can order citizens executed without trial… basically, there is no limit on their power over others. Essentially, everyone suffering under arbitrary rule, are slaves, in the most draconian sense of the word. There are two kinds of tyranny, legal and arbitrary, a legal tyranny is the better because even the despot must follow the law when he tyrannizes you, but in arbitrary rule the despot’s power is unlimited. Nazi Germany is an example of a legal tyranny.

Great poverty lowers a human being’s thought to basic needs. What drowning man wouldn’t pull down even his own loved one? When living in great poverty a person doesn’t have the luxury of being able to take flights of imagination, the stomach intrudes on the mind. Those who live in great poverty have no means to change their lives because society itself lacks the resources. The starving man has no scruples around a loaf of bread, similar to a despot, who has no scruples at all. Seeing one’s own children starve to death takes away our humanity. How can it not? All of these factors impel those who live in great poverty to join rebellions, and engage in crime, because nothing strips the veneer of civilization from a person like starving to death. Unlike the despot however, once great poverty is lifted from someone their humanity returns rapidly, but the person who practices arbitrary rule is lost forever.

Wherever there is great poverty there is arbitrary rule, and whenever there is arbitrary rule, there will be great poverty. The two go hand in hand. In States where there is arbitrary rule the economy cannot function properly. There is not one example of an economy that survived arbitrary rule throughout history. Marxist nations have all collapsed economically because socialism grows arbitrary rule like a stagnant pond grows algae. Throughout the ages every great civilization that has risen in virtue has fallen in vice, vice that was introduced by arbitrary rule. When Pericles came to power in Athens he perverted Athenian polity and law to his own ends. He built great edifices to his mythical gods, and his ego, he used the ostracism as a weapon to enforce his arbitrary rule, and the result was the subjugation of Athens to Sparta.

In nations with great poverty there is always arbitrary rule. Darfur is an example of arbitrary rule destroying a people and ushering in great poverty. There has never been great wealth there, but the people had sufficient food, shelter and clothing. Once the despot, Al-Bashir, decided the people of Darfur were expendable, and on resources he wanted, he simply took the resources. When the people rebelled, Bashir sent military jets to kill them, he forced them out of their ancient villages and into the desert. The resulting great poverty was on television for all to see. Yet, most took the wrong lesson from that example, most believed the great poverty of the people of Darfur was the result of war, ignoring the root cause of that war, arbitrary power. Many believe Darfur’s great poverty could be alleviated by foreign aid, but the reality is that the warp and the woof of the problem is arbitrary rule.

Unfortunately, the siren call for the leaders of any nation to arbitrary rule is so great that only the most saintly, or the most limited, can resist it… and it is obvious that our leaders are not resisting. Despite the cautionary history of collapsed civilizations, lost wealth, and entire nations enslaved, arbitrary rule is even more of a threat now than ever in history. With modern technology, a despot could control every aspect of the people’s lives, like in the book, 1984 George Orwell. With our market based economies, of the various nations around the world, incipient arbitrary rule has already done great damage. Today we still live in relative wealth, but that is slipping away fast, even as we are told we should turn to socialism, to get an ever larger piece of an ever shrinking pie. In the end, if our children have to live in great poverty, it will be because we allowed arbitrary rule… again.

Sincerely,

John Pepin

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