I Pencil and Complexity Theory

Posted on October 14, 2013 by john

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

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Janet Yellen’s Federal Reserve

Posted on October 10, 2013 by john

Dear Friends,

 

It seems to me, Obama’s pick to head the Federal Reserve, Janet Yellen, will continue down the treacherous path Ben Bernanke has put the US and the World on. The huge amount of money printing will continue perhaps at an even faster pace. This has huge implications to the future of the world’s economy. Wall street is excited about Yellen’s pick because she will continue the printing. We are told that this time it will be different because there seems to be no inflation. But if I wind a spring in a clock there appears to be nothing happening, until I wind it too tight and the spring breaks and the clock ceases to function. This may be a good analogy of where we are going with inflation. Once the springs snaps inflation will show it’s ugly head in a hyper way.

 

Today there is very little inflation despite the 4 trillion dollars the Federal Reserve has added to it’s balance sheet. This money printing has amounted to 25% added to the money supply. In Milton Friedman’s theory of money, if the economy grows at 1% and 3% is added to the money supply, assuming full utilization of resources, there will be 2% inflation. You simply subtract the amount of money added to the system from GDP growth to get the expected inflation number. Over the last 5 years we have experienced no more than 9% GDP growth, while the money supply has grown 25%. This implies that when our economy gets near full utilization we will see 16% inflation. If that was where it will stop, it wouldn’t be that bad, it would be disruptive but the economy would adjust and after a few years the problem could be absorbed.

 

The conundrum is that the money supply is not only increased by the Federal reserve, the banking system itself also increases the money supply. When the Federal Reserve buys a bond, the person or institution that sells the bond gets a check. This check is then deposited in a bank. That bank returns the check to the Federal Reserve who then adds that amount of money to that bank’s Federal Reserve account. The bank that cashed the check then has more money to meet it’s reserve obligation. This frees up money for the bank to loan. When banks loan money part of the money loaned is made up. It is not depositor’s nor is it the bank’s, the money is simply invented. This magnifies the Federal Reserve’s money printing by orders of magnitude.

 

Moreover the Federal reserve has been buying US government bonds faster than the US government has been issuing them! That means the private sector is selling their US government bonds into the marketplace. To keep the interest rate government pays low, so the US government can afford the huge debt and deficit, the Federal Reserve must sop up the access bonds. This implies the apatite for US debt is decreasing while the elite argue about raising the debt limit. As nations, firms and people the world over sell US debt, and the Federal Reserve buys that debt, the amount of US government debt held by the Federal Reserve grows. This is called monetizing the debt.

 

Monetizing government debt has been shown to lead to hyper inflation. The most famous case was Wiemar Germany, but there have been many notable cases throughout history, none of them ended well for the country that nationalized it’s debt. Economists will argue that the US is a special case because the dollar is the World’s reserve currency. It is directly convertible into any other currency and all oil is bought with dollars. This means that if you live in Zimbabwe and want to buy a widget from Brazil, you must convert your currency into dollars then dollars into Brazilian currency. This creates a huge cache of dollars held by foreign nations for purposes of trade in commodities and oil.

 

Most of the nation’s of the World understand this and the devaluing of the dollars they hold comes directly out of their national coffers. As a result they are selling US government debt and are seeking ways to directly convert their currencies to any other. Thus eliminating the dollar as the World’s reserve currency. When this happens, regardless if the US economy is at full utilization, the US will experience out of control inflation. As the Federal Reserve winds the inflation spring the tension builds. Eventually catastrophically failing and plunging the World into recession.

 

The only answer is to balance the US budget and reduce the regulatory friction before the spring snaps. The Federal Reserve under Yellen can be expected continue to print money in hopes the US economy will get back on track. As we have seen, even the hint that the free money will slow down has sent the markets into a tail spin. Therefor, to keep Obama’s economy growing at even the pathetic rate it is, the Fed must continue the printing. To get the US Gross Domestic Product growing at the pathetic rate of 300 billion a year the Federal Reserve is printing a trillion. So instead of a magnifying effect the money that is being printed is seeing a negative return in the real economy. If you think about it, these facts make the budget battle in Washington far more important than an obstinately recalcitrant President’s argument with Congress over the debt ceiling and Obama care, it could mean the whole sale closing of all the programs people have become dependent on. If that happens, there will certainly be wide scale social disruption including violence in our streets.

 

To argue that this or that billion dollar boondoggle is so important it cannot be defunded is absurd, especially when you consider the consequences of a true default, which would happen if the US dollar looses it’s reserve currency status. Imagine the value of your IRA falling to zero? Imagine if the value of your bank account fell to zero? Imagine if the Social Security administration went bankrupt? Imagine the military being laid off? Imagine no welfare, no Medicaid, no Medicare and all the functions of government going away… instantly. Do you think that would generate anger sufficient to promote violence or even war? That is why we have to get government regulation, debt and spending under control, to do otherwise is to run at a real cliff, like lemmings… ignorant of the danger until it’s too late. Now that you are no longer ignorant, what are you going to do about it? Keep running, or stop, and demand fiscal responsibility?

 

 

Sincerely,

 

John Pepin

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Government Shutdown

Posted on October 6, 2013 by john

Dear Friends,

 

It seems to me, Obama is saying to the American people, “resistance is futile.” In the science fiction series Star Trek Next Generation, the Borg were an evil alien race that lived in a collective. The Borg assimilated other people into the collective against their wills. Just as Obama care does. In many speeches Obama made before his election campaign and subsequent election he avowed he was in favor of nationalized health care. The speeches are freely available on line for anyone to see. The strong arm tactics of this administration will brooch no resistance to the collectivization of our health care. Judging by the Obama administration’s all too willing use of the mechanism of government, to punish political opponents, the seizing of American’s health care by government will give this administration hitherto unprecedented power over the lives, health and fortunes of every American.

 

We are told by the collectivists that America needs more diversity. This has become a mantra. Diversity is raised to a sacrament by the progressives, the incarnation of the collectivists in America. Now this is strange because real diversity in thought is not allowed by the progressives, in both the democrat and republican parties. Instead, anyone who believes differently than the collectivists are called, terrorists, anarchists and hostage takers. It would seem that anyone who truly believes in diversity would welcome a debate and encourage diverse ways of looking at a problem. So we have a dilemma, do we believe the words of the progressives, or their actions?

 

Obama will broach no discussion of the law that has savaged the American economy, and in doing so has lowered the economic outlook for people the World over. As I have written before in many blogs, the law that is called Obama care, (The Affordable Care Act), is an economic catastrophe. Those that understand this have taken a stand against this collectivization of the health care system in America. As the new leviathan of a law is implemented it is becoming plain to see that it not only doesn’t work but produces tremendous economic friction. Obama care will be the death knell of small business. This works to the collectivist’s favor. Schumpeter said that government must fetter business so that all businesses become giant, and thus will be easier for government to take over when the time is right.

 

Scott Brown was elected in Massachusetts simply to stop Obama care. His election in that uber left state was a testament of how much the American people didn’t want a collective thrust upon us. This is a clear statement of the wants of the American people at the time, never mind the polls showing the utter disdain we hold for Obama care today. The progressives would broach no stopping their assimilation of the American health care system under political control so they simply “deemed” the law passed, to undermine the results of an election. I would love to deem my taxes paid, but I suspect that tactic is closed to you and I.

 

Obama has said he believes in collective salvation. This pernicious theory is predicated on the notion that the rest of us must be forced to believe as the collective, else no one will be saved. This stands in direct contradiction to the teachings of the prophets of every religion. But is in line with the teachings of Marx and Engels. Collectivists demand we assimilate else we are to be destroyed… personally, (like they did Sara Palin), politically, (like they did Michele Bachman) and economically, (like they are doing to America).

 

History is the best means of divining the future. That which has been done in the past clearly can happen, but that which has never occurred may not be possible. The Nazis brought nationalized health care to Europe, reducing the fortunes of all the people in Europe to political favor. Dissension under a collectivist regime is never allowed, despite their calls for diversity, (until the collectivist gains power). The collectivist will undermine the will of the people if it suits his or her ends and even salvation is collectivized by the progressives. Because to the true believer in the collective, the Borg is the ultimate goal, where our species consciousness supersedes our individuality and we are relieved of our humanity in favor of the collective. So when Obama claims Obama care is settled law, and refuses to negotiate with his political opponents, he shows his true intentions by parroting the Borg, “Resistance is futile.” To that I would answer, “Resistance is divine.”

 

 

Sincerely,

 

John Pepin

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Our Bright Future

Posted on October 3, 2013 by john

Dear Friends,

 

It seems to me, I usually warn about potential threats to our liberty and prosperity, but that gives a skewed impression of my true beliefs about the future. I do see many possible dangers facing us, some are from our government(s) running amok and others are foreign in nature, while they have the potential of lowering us and our children to serfs and slaves, the future in the long term, is bright. Mankind has never advanced in a straight line. The progress in human understanding has always been through fits and starts. Sometimes reversing direction for a long time but always eventually getting back on track. The Dark ages were just such an example. Mankind taken as a whole, is a complex system, complex systems have a way of finding equilibrium. This equilibrium of the complex system that is humanity, is generally to improve the standard of living, increase the liberty of individuals and limit the power of political favor as well. In the long, or perhaps short term, this bodes well for the future of humanity.

 

If we look back at the arc of human history we can see that people’s lives used to be short, violent and brutish, (to use another’s phrase). This is still true in some parts of the World. The evils that humanity has seen are largely a result of our own ignorance and self indulgence. Slavery for example has largely been eliminated from human existence. Unfortunately, there are those who enslave others still, but they are almost universally criminal and not State sanctioned. This is a huge step for mankind. That slavery is becoming more and more detested, by people the World over, is a sure sign there is hope for us.

 

Thrasymachus said that most people want to live their lives in peace. This is true enough but he went on to say that the great men want power over others. This always manifests itself in the form of political power. The “great men” that he spoke of were and are the political elite. It is human nature to seek power over others. This is the thesis of Freud’s concept of the id. Irrational, lusting after whatever the id wants. Power being at the top. That human governments have put in place checks and balances to limit and minimize this aspect of our nature is another sign that we are able to learn. That the majority of us want to live in peace is another source of hope.

 

The founding of the United States and the subsequent writing of our Constitution was a seminal event in human history. It was an evolutionary step in limiting the power of the political elite. Rome had limited the elite through the use of the Consular system, which worked well for them for hundreds of years, but eventually failed. Ancient Greece used the Ostracism to limit the power of the elite to some avail, but in the writing of a constitution the power of government was enumerated in a written document, open for all to see, but most importantly… enforceable. The true innovation in the American Constitution was stating overtly, that the power of government comes from the people, not that the people’s liberty comes from the government.

 

Of course the elite have always sought to free themselves of whatever shackles that are placed on them. This is why there have been so many failures of governmental systems. This is as inevitable as the sun rising in the east. The attempts of the elite to throw off any limitations on their power are the reason humanity has retreated so often. We can expect this to continue as long as there are people. That we have advanced so far is reason for optimism. Perhaps we will loose our liberty to the elite today but it would be foolish to believe future generations will not again win it back. The nature of complex systems are that they have long tailed events. Unlikely happenings, that change the system profoundly, and sometimes in kind.

 

Capitalism has proven itself to be the most efficient means to advance mankind’s humanity to man, as well as generate prosperity, whenever and wherever it is used. This knowledge is like a genie escaping from a bottle, it cannot be put back in. Limited government through constitutionalism has proven itself to be the best way to insure that the elite don’t misuse the power invested in them. Western Philosophy, while often nonsensical, has brought us the Renaissance, the Reformation, the Enlightenment and constitutionalism as well. Eventually teaching the basic truth that all men are created equal. The future of mankind is bright. Our children, or maybe great great grand children, will inherit the stars. When that happens humanity will have suffered, loved and matured. Isn’t that the way all things grow? To start as an infant, grow to be self indulgent adolescents and eventually to mature into productive adults. Hsun Ching said the congenital nature of man is evil and that the good in us is a learned trait. I expect humanity is no different… we are learning to be good, and good we will eventually be.

 

 

Sincerely,

 

John Pepin

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Missing the Forest For the Trees

Posted on September 29, 2013 by john

Dear Friends,

 

It seems to me, it is human nature to ignore the big things we agree on, and vilify each other for the little things we disagree on. Christianity is one example. There are protestants who believe the Roman Catholic church is the Whore of Babylon. Many Christians who follow the European branch have, or had, utter disdain for the Coptics who have a different view of the divinity of Christ. It doesn’t stop there. Conservatives fight amongst themselves over everything while ignoring the big picture. What is interesting however is that those who seek fundamental change are united. Perhaps once our civilization collapses, they will turn on each other and wash the World with blood, over their disagreements. No matter if they will, because first they seek our civilization’s destruction.

 

There are so many Christian sects it is impossible to count them all. We have argued over Justification to the death. The Coptics were let to the wolves because they believe Jesus was fully God, while Europeans believe Jesus was fully God and fully man. I imagine there is even a sect out there, that will fight to the death if someone claims Jesus took three steps on the top of Calvary, instead of four. These are really petty disagreements and have the effect of delegitimizing Christianity not empowering it. The basic fact is that Christians believe Jesus was the messiah. All other disagreements are superfluous to that over arching truth. To kill or denigrate someone who believes in Jesus is absurd and endangers one’s immortal soul.

 

In the United States, those who seek to preserve the founding principles argue and fight all the time. To the detriment of the Republic. The Founding Fathers didn’t agree on much, but they did agree on the founding principles, that the power resides in the people, God is the source of our Rights and that government must be limited. To disagree on the finer points is ok but to undermine our own sovereignty because of a small disagreement is stupid.

 

Those who seek to destroy the founding principles of our republic are united in their loathing of them. They will most certainly go to war once they have successfully destroyed the republic, and thereby civilization itself, because they will all want to be the dictator. To that end they will fight to the death, but over larger issues, like, should the World be atheistic communist, should all the people of the World be subjected to Sharia, which form of Islam, Sunni or Shia, they will fight to the death about any number of issues, but the issues they will fight over will be the larger ones.

 

Clearly, it is idiotic to fight over small things, and in doing so, loose the most important thing. Mature adults, (a very rare thing today), understand that honest people will disagree honestly. That I believe Justification is by faith and works, does not mean I drink the blood of the saints, and I don’t think those who believe justification is by faith alone are evil. We simply disagree on a small point but agree on the larger one. Moreover, it is impossible for any of us to know the truth of it, because God has not revealed it to us. Those who think they absolutely know the will of God are presumptuous in the most pernicious way.

 

What we need to do is shake hands on what we agree on. We can come together on the big choices, like the founding principles of the US. To fight a new reformation about politics is to allow the founding principles to be destroyed. We might win a small argument but what good is that if we become slaves? What good is it to be right about how many steps Jesus took on Calvary if our immortal souls are lost? Perhaps I have mispelled a word, does that negate everything I have said? If you believe it does then you are blinded to the large because you focus on the small. There is an old saying, “To miss the forest for the trees.” It seems appropriate when referring to our petty disagreements while we allow fundamental principles to be lost. The future will be bright, if we come together on the underlying principles, but dark if we do not.

 

 

Sincerely,

 

John Pepin

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Things that Work and Things that Don’t Work

Posted on September 26, 2013 by john

Dear Friends,

 

It seems to me, no matter how much someone wants a thing to be true, if it is not, it is not, and never will be. The desire of a person bears not a whit on reality. We might want to fly without the use of wings, and many have died trying, but the simple truth is, we need the use of machinery to fly. Moreover, no matter how many times a thing that will not work is tried, it will not work. The average man and woman understands this very basic concept, because we are subject to the results of our actions, and we bear the costs of those that do not work, but the elite have no such training in reality. The road is paved for them so they need not stumble. This makes them appear deft but in reality it hobbles them, and profoundly distorts their ability to discern truth from fiction and right from wrong.

 

Take economics. The elite love and worship at the feet of John Menard Keynes. This economist gave the elite not just permission to deficit spend but he made it a duty. The elite in every country on Earth believe in Keynesian economics. Because Keynes gave them an excuse to do what they really want… tax and spend. There is no thought required to open a checkbook and write a check, especially if the money is earned by someone else.

 

The elite don’t have to suffer for their bad decisions, the rest of us do. The elite destroy the economy through high taxes and regulation, and they get richer, while the rest of us get poorer. Notice how under Obama, the supposed champion of the poor and middle class, the world economy is muddling along, but the wealthy’s fortunes are sailing? Is it a coincidence, while the wages of Americans have taken a historic hit under this Keynesian, the stock market is breaking records weekly? The answer is simple, money printing has allowed the elite to escape the negative effects of their own policies. You and I on the other hand are stuck in the mire of the Keynesian swamp.

 

Every time Keynesian economic theory has been used it has resulted in failure of the economy. There is not one example where Keynesian theory has gotten a country out of recession, while every example where this fellow’s theory has been used, has resulted in economic malaise. Some notable examples are, Woodrow Wilson’s magnificent recession, Franklin Roosevelt’s Great Depression, Carter’s stagflation and now Obama’s great recession. Is it coincidental, that the economic times under Keynesians are so unique in their poverty generation, they are named?

 

The elite so want Keynesianism to work they will never stop trying. They cough up excuses like phloem, “we didn’t spend enough,” or “we didn’t spend long enough.” The answer is never that the policy is flawed. The elite do the same thing over and over, always getting the same result, economic stagnation, but they never tire of it. Largely because they don’t suffer the negative effects, we do. They want Keynesian economics to work so badly they cannot imagine it wont… someday. Since they don’t feel the effects of low wages, except in lower employee cost, they have no problem enacting a flawed economic policy, over and over.

 

There is an interview of Frederik Hayek on Youtube in which that great economist laments being right. He wrote the book, The Road to Serfdom. In which he extols the virtue of laissez faire economics and the palliative effect of low taxes and regulation on an economy. While Keynes told the elite to print, tax, regulate and spend. Keynes was, and still is a hero to the elite, while Hayek is a villain. The few times Hayek’s policies have been implemented the results were quick and decisive. Under Coolidge the economy surged and we got the Roaring Twenties. Ronald Reagan did it again with similar results, but Reagan was hobbled by a democratic congress that was intransigent, they so loved Keynesian policies they fought Reagan at every turn. Despite the push back, the fact is, Reagan’s policies pulled the US out from Carter’s stagflation and ushered in the boom of the eighties. Obama’s Keynesian policies have eliminated all the economic gains since then.

 

In the halls of power, the elite sit with their backs to us. They suffer no ill effects of their policies, and to insure that fact, they exempt themselves from their own laws. Like Obama care. Since they never suffer for their own policies they have no incentive to learn. Why would they go about it any differently in the future? Their power is assured by the unbiased media, who dutifully pillory any other point of view, than that of the progressive elite. Listen to what the unbiased media call the Tea Party. For the elite, to do something that has never worked, over and over, is genius, for the rest of us… it is insanity.

 

 

Sincerely,

 

John Pepin

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The Economic Argument Why Obama Care Must be Defunded

Posted on September 23, 2013 by john

Dear Friends,

 

It seems to me… Obama care is an economic train wreck. The devastation it’s already done, has lowered the standard of living of the World’s people for generations, let alone the future damage it will do. Since the growth of an economy is an aggregate thing, it piles upon itself, slow economic growth, for whatever reason, lowers the pile that is being piled on as well as the amount that is added… The effect is not only immediate but cumulative and everlasting. This is very bad, if you consider that we have been under this economic malaise, since the recession was claimed to have ended. So, not only are your economic outlooks lowered the well being of your children and grandchildren will be effected… negatively.

 

Think of this, the Federal Reserve has been printing 85 billion dollars a month for a year. In 12 months that accumulates to a bit over a trillion dollars. Now compare that trillion of printing to our actual GDP growth. The US is an economy that is about 15.7 trillion dollars, (according to the BEA)… at a growth rate of 2% yields annual growth of about 320 billion dollars. In other words, to get 310 billion in annual growth the Federal Reserve is printing, from whole cloth and adding into the economy, over a trillion! That implies a recession loosing 680 billion annually if the printing went away! Moreover, it’s a pathetic return at 1/3 of the money put in! Instead of getting more money out, due to the ability of banks to magnify the money supply, the FED is seeing negative return on their printed money! So… what is happening to that 680 billion? Is there so little business activity the money is setting in the banking system’s reserves, or is it going overseas? Now the question must become, why is it not spent here?

 

Businesses need to know what their cost structure will be to project future profit or loss. Obama care throws a huge monkey wrench in firm’s ability to predict. The law is thousands of pages long, it’s impossible to know how the bureaucrats will interpret and apply them, heck, they haven’t even written all of them yet, and they have already written tens of thousands of pages of regulation! Therefore, no one knows what they really are, or will be, and obviously how they will effect businesses. Moreover, Obama care is costing firms real money today to hire experts to answer these very unanswerable questions, money that could be better spent investing in labor or productive machinery. The sad part is, until Obama care is implemented, or not, the uncertainty of it will continue to corrode the economy, like acid. If it is implemented the continuing damage to economic growth will be immortalized in entitlement.

 

The lack of investment in machinery and labor will accumulate. As the demand for labor goes down the price of labor must go down. Meanwhile, Obama care is driving up the cost of doing business so prices must rise else firms will have to lay off or go out of business, further driving down the demand for labor. As people’s wages are driven down by Obama care, and the prices we all have to pay for the goods of society go up, our standard of living must necessarily go down… profoundly. In Complexity Theory this is called a feedback loop. The negative input into the system, is fed back into the system, by the system, in a self sustaining way, thus exaggerating the initial input.

 

Experts are telling businesses large to small that Obama care is going to hobble them. That is why so many firms and groups, using political favor, have escaped Obama care. The associated paperwork, taxes, and regulations will drive up their costs and lower their efficiency dramatically. No one knows how much… but everyone knows it will be impressive. Since the first responsibility of a business owner is to keep the doors open they will try mightily to do just that. Unfortunately, due to Obama care, they have to limit the hours their employees can work, else they get hit with the most draconian parts of the law, simply to keep the doors open. Small businesses, who have much more limited ability to hire lawyers and experts than large firms, are effected far more than big ones.

 

Small business is the engine of any economy. Real growth in an economy is organically driven by small startups not giant ones. Entrepreneurs get an idea and they start a business. If that new idea revolutionizes some aspect of business, a new economic cycle is started. Ford did that with the Model T, Gates did that with MSDOS… hydro-fracking and 3D printing are just the newest incarnations of this paradigm. When the environment for small business becomes toxic, as Obama care makes it, the cycle is shut down. Banks won’t loan money to a fly by night who has no useful projections of his or her cost structure. That would be an irresponsible thing to do with depositor’s money. The leviathan bureaucracy of today’s government, a Godzilla that has been expanded dramatically by Obama care, now has the ability to regulate in real time. Thousands of little bureaucrats in their cubicles, dutifully regulating anything they can get their hands on, especially new ideas… undermining economic growth in the process.

 

The main reason our economy is so wounded is Obama Care, pure and simple. This tragically flawed law stops the entrepreneurial process in it’s tracks. Small businesses are hurt the most… magnifying the effect on real economic growth. Diminished growth, that will be exaggerated over time, as future growth has a smaller base to expand upon. Nothing I have said here is astounding or out of left field, it is economics 101. Any economist will tell you that incentives count. This is a basic law of economics. But, due to the willingness of this administration to use the mechanism of government, for political ends, economists are cowed… one only need look at the way Nial Ferguson was treated. Obama and the democrats have silenced most opposition, and set regulatory incentives against the capitalist mode of production. That is why the republicans must not blink, they must defund Obama care… Not as much for ours, but our children and grandchildren’s economic future depends on it.

 

 

Sincerely,

 

John Pepin

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The Slippery Slope of Utilitarianism

Posted on September 19, 2013 by john

 

Dear Friends,

 

It seems to me, the philosophy of utilitarianism is a slippery slope. Many well intentioned people have espoused the utilitarian philosophy with tragic results. Utilitarianism, like Bentham and John Stuart Mill’s seem to have an empirical basis, but in fact are based entirely on subjective opinion. That such a huge mistake is made in defining them is astounding. Some of the worst atrocities ever committed by men upon mankind have been justified under a utilitarian philosophy. Even today utilitarianism under girds the thinking of many philosophers. The weakness of utilitarianism needs to be pointed out else our society is susceptible to evils from all directions.

 

Utilitarianism is thought to be a form of morality based on logic, and is often summed up with the trite saying, that which brings the greatest good to the greatest number. The pleasure, or happiness, (depending on the philosopher), is quantified and compared to the suffering it will bring about. In this, it appears to be based on a cost benefit analysis, when in fact it has no such basis. Mill tried to put a counterpoint to the strict utilitarianism of Bentham with his notion of the quality of pleasure. Quality being a metric of the goodness of a pleasure, torture my be pleasurable to the sadist but is of a lower quality than say, philosophy. In my mind quality falls very short because it depends on who is doing the measuring.

 

I am a bit of a utilitarian myself. I do agree that there should be some form of cost benefit put on an action, philosophy, economic or governing system. Where I fall away from the utilitarian ethos, is that I believe in an overarching morality, that of Human Heartedness. The theory of human heartedness comes from Confucius. He meant it to be tangentially defined as the Golden Rule but it goes further. If an action is not human hearted it is not good no matter the “quality.” Furthermore quality is subjective to the measurer not an objective measure. The sadist may believe his pleasure outweighs the pain of the victim but only a demon could believe torture is human hearted.

 

My favorite philosopher, Mo Ti, had a strictly empirical utilitarian philosophy. Mo Ti was far more empirical in his philosophy then Bentham or Mill. To sum up one of Mo Ti’s arguments… if we weigh the damage to the carts, the weapons, armor, infrastructure, crops, and the loss of productive capacity of those killed or handicapped in war, against the uncertain gain of winning, it is obvious that the cost far outweighs the benefit… This is far more empirical than any of the arguments I have heard made by Mill. Unfortunately the very caring philosophy of Mo Ti was followed, logically, by the cruel philosophy of Shang Yang, who’s philosophy visited suffering on the entire Middle Kingdom, during the Chin dynasty.

 

Another reason naked utilitarianism is so profoundly dangerous is that it is based on pure logic. The Ancient Chinese philosopher, Kung-Sun Lung, who argued in dialectic that a White Horse is not a Horse, was not actually saying a white horse is not a horse, but that logic and language are deficient, ad absurdum. In Kant’s, Critique of Pure Reason, he used a different argument to come to the similar conclusion… that pure logic is inadequate to come to any real understanding, because it can go so far afield from actual reality.

 

In modern times we see the results of utilitarianism in the suffering socialism has wrought on mankind. The communist, socialist and progressive all argue in utilitarian terms. The example, from each according to his ability to each according to his need, is a nakedly utilitarian statement. It assumes that most will benefit if the goods of society are forcibly, equally distributed. Pleasant sounding rhetoric but history shows the foolishness of that notion. Over one hundred million human beings murdered to enforce it to date. Clearly not at all human hearted.

 

Utilitarianism has value but falls short of a truly human hearted philosophy. It lacks the moral foundation of the golden rule, do unto others as you would have them do unto you… the foundation of human heartedness, and Christianity by the way. Utilitarianism lacks the basis of empirically measurable reality like William James philosophy of Pragmatism, and being based upon pure logic, it can go very far away from the good into evil. That history shows us utilitarianism philosophies have been the font of so much human suffering is a sure sign it is wanting. That is why I say, utilitarianism is a slippery slope… to despotism.

 

 

Sincerely,

 

John Pepin

 

 

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Who to Believe

Posted on September 16, 2013 by john

Dear Friends,

 

It seems to me, lest anyone believe too much what the media or government claims, all one needs to do is open an encyclopedia from the 1930’s, and read what it says about the Soviet Union under Stalin. People have far too much faith in what we are told by the unbiased media and government. We accept the stories as gospel, and are told to disbelieve gospel, thinking and acting wrongly as a result. We should read all that is available on a subject… especially that which we don’t agree with, else our perception becomes narrower and we ourselves become more and more ignorant, regardless of how enlightened we consider ourselves. The times in which we live are too perilous to be willfully ignorant.

 

Any encyclopedia you open, from the 1930’s, will have a glowing account of the wonders of communism under Stalin. I have a copy from 1940. It goes on and on about the rights of the people living under communism. It claims poverty is eliminated in the USSR. While history shows us, at the same time, the people of the Ukraine were being systematically starved to death. Untold human suffering was brought about by Stalin. In addition to the millions who had food stolen from them, food they had grown, there were purges that resulted in hundreds of thousands of deaths by firing squad, hanging, and torture. History shows how very very wrong those encyclopedias were.

 

Despite the fact that many knew about the atrocities of the communists at the time, these fictions were written in encyclopedias and distributed to the American people as reality. Any librarian will tell you that an encyclopedia is the best of reference material. That they are subject to political ideology is not tragic, it is a statement on the veracity of those, who are the gatekeepers of information. Not a pretty statement either. That such atrocities were glossed over, by the media elite and even the writers of encyclopedias, is damming of those who promoted such fables as truth.

 

Truth is not subject to perspective. Truth must be objective else it is opinion. Today we are inundated with opinion that masquerades as truth. The tragic part is that real truth is more often than not, derided as opinion or conspiracy. We can see in the example of the encyclopedia that even the most reliable sources of information are subject to political calculation. Opinions that are portrayed as truth, are a fallacy that we must realize as such, or we will be subject to acting on lies… to our own and our children’s detriment.

 

When we have only lies, opinion and falsification to base our decisions on, we are not really making informed decisions… we are being manipulated. People who manipulate, never do it for the benefit of those who are manipulated, but for their own egoistic self aggrandizement, to garner wealth or to seize power. Not one of those reasons are human hearted. The thoughtful individual has to be very careful of what we believe, and what we disbelieve, but to be a rational maximizer we must not discount information, we are told by the elite media, is conspiracy. They have been caught so many times fabricating lies and portraying them as truth they cannot be believed at all. Look at CBS, creating from whole cloth lies about George Bush’s military record, reporting it days before an election and claiming them as reality, when nothing could be further from the truth.

 

The wise man and woman believes everything and nothing. It is critical to understand the nature of men and mankind to know truth. When a news story claims that people are behaving in a way that is not consistent with history, human nature or logic, the rational human being has to weigh that information carefully, else he or she is subject to manipulation. We must understand that truth is not perspective dependent it is objective, perspective is subject to personal bias, bigotry and self interest. Our media is never unbiased and those who claim that mantel are lying to our faces… and they know it. To believe a liar is to be willfully ignorant and therefore makes us subject to acting against our self interest. That there is even one example of reference material that promotes a false narrative, shows us that even the most reliable sources must be evaluated and checked against historic norms, the teller’s biases and our own rational self interest. To understand is to be catholic in our reading and critical in our acceptance. To do otherwise makes us a tool of the elite, and human beings are NOT tools, we are ends in and of ourselves.

 

 

Sincerely,

 

John Pepin

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911 and the Surveillance State

Posted on September 12, 2013 by john

Dear Friends,

 

It seems to me, one of the results of the 911 attacks on the World Trade Center, is the surveillance state we now live under. The surveillance state has been a long time coming but the terrorist attacks of 12 years ago greatly accelerated the trend. The elite seized on the opportunity to move ahead with their plan to monitor every aspect of our lives, not to protect us from terrorists, but to protect their shredding the Constitution from our outrage. This is a continuation of the elite’s overall scheme to move the US from a Constitutional republic to a socialist democracy. Anyone who has their eyes open must be alarmed at the development.

 

The NSA scandal has it’s roots in the 911 attacks. When the Patriot act was implemented and became law under George Bush it was sold as a means to protect the homeland from future terrorist attacks. The reality it seems, is far more sinister. The sweeping surveillance of the American people by our own government is Orwellian in it’s scope and intrusiveness. The Snowden leak is only the tip of the iceberg I’m afraid.

 

There is not a single aspect of our lives that is not monitored by our government. They vacuum up information from our Twitter and Facebook posts, our phone records, our personal information and our financial information. If you or I were to get just the phone records the government claims are not personal or private, we would be charged with a CPNI, (Customer Personal Information) crime. We would be tried with the full weight of Federal law. The irony is delicious. If those records are truly impersonal and not private then why is it illegal for us to gather that information? Because they are personal and private.

 

Many police cars have license plate readers that operate all the time. The readers log the owner of every car they pass, where that car is, at what time… and store that information in a government database. The government could conceivably use this information to model every American’s comings and goings. Software could use this data to predict not only where we are at any given time it could be used to predict our actions. Most major cities have government cameras on street corners. If these cameras are coupled with face recognition software they could be used to reduce the granularity of the police license plate readers. It is impossible to argue this is not an intrusion on our privacy.

 

Off site backup is a great idea and a wonderful business model but leaves anyone who uses it open to further government intrusion. Every bit of your hard drive is backed up on the firm’s server farm. They can have the very vest encryption software and have the most stringent privacy policies, but all that information is only a subpoena away from the government tracking your web habits, writings, political leanings, financial information and who your friends are. All in real time without you even knowing they are doing it! The problem is only magnified by cloud computing.

 

As we know, the government, not just the American government but all governments seek to increase their power over the citizenry. This is not new nor is it startling. Governments have always been this way and the United States founding fathers understood all too well this pernicious nature of government. That is why they put such stringent restrictions on the US government in the Constitution. Those restrictions have been under direct assault for over a century now. The fear that 911 caused in the American psyche was exploited to speed the scheme up.

 

Today if you or I bring up the Constitution we are scoffed at. Nancy Pelosy laughed when she was asked if Obama Care was Constitutional. The unbiased media derisively call those of us who argue on Constitutional grounds, “conspiracy theorists” and our own government has issued directives that clearly state that Constitutionalists are potential terrorists! Imagine that! Patriots who consider the Constitution a limiting document are called terrorists, but those who openly call for the overthrow of the US government, are not! Our government refuses even to call Islamic terrorists, who openly avow terror as a means to conquer the World, terrorists! This shows conclusively, the surveillance state is not aimed at real terrorists, it is aimed at citizens who seek to limit government on Constitutional grounds.

 

The IRS scandal is proof positive that the US government is, or at least has, used the apparatus of government to promote a political ideology, and we can reasonably extrapolate that scandal to any other surveillance program. If someone misuses one tool without consequence why wouldn’t they misuse other tools? Now the IRS is the gatekeeper of our health care as well as who gets tax free status. The ability to deny medical coverage to someone, due to his or her political ideology, is a very powerful tool to dominate citizens, by the political party that wields power. Coupled with the ambitious program to monitor our every move gives government unprecedented power to control us. There is no hiding from Big Brother government, and I am afraid that is exactly where we are headed, an Orwellian state… if we are not already there.

 

 

Sincerely,

 

John Pepin

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