What Does “Economy” Really Mean?

Posted on February 14, 2013 by john

Dear Friends,

It seems to me, the term “economy” is too nebulous to really define anything effectively. It has so many parts that understanding it in any meaningful way eludes even the most astute thinker. If we break the term “economy,” into it’s macro constituent parts however, it makes the whole thing more manageable. The “economy” can be broken down into three macro segments. The Market economy, the Political Favor economy and the Underground economy. These macro terms can be further broken down into the micro with, the green economy, the oil market, and so on. The macro terms are easy and important to understand, to really comprehend what is being debated, when politicians make claims about the “economy.” Our very economies depend on it!

Most countries have all three “economies,” the market, political favor and the underground. The most wealthy have the market economy as the primary. Communist and some hard core socialist “economies” specifically outlaw the market portion of the total economy. They seek to have the political favor economy be the only one available, but an underground economy is brought into being anytime the Elite ban anything, that has an allure to the people. So even in the most hard core communist country, say North Korea with their three generation labor camps, (a crime against humanity if you ask me), There must exist at least two, the political favor and the underground economies.

The political favor economy is never called by name, so it may sound a bit tinny, but if you think about the concept… it is most apt. The political favor economy encompasses all government spending, and all capital expenditure, that is forced by regulation. The political favor economy produces nothing; it can only take what someone else has produced. If the producer is fortunate to have some measure of favor, he or she will be paid, (perhaps handsomely), lacking political favor, they might not be. The political favor economy is primarily directed at protecting the power, wealth and status of the political Elite.

The underground economy is well known and has been written about endlessly, sometimes glamorously, occasionally pilloried, but the underground economy is as organic as any, and as invasive as kudzu vine. It is born of regulation and negative examples. The more hypocritical the Elite as a group are, the more the underground economy will flourish. At the expense of generations of human beings, the underground economies of every nation, are nurtured by their Elite. As a result, as money is moved from the market economy to the political favor economy, some is drawn from the market into the underground economy as well, sometimes doubling the negative effect on the market.

The market economy has only been known since the seventeen hundreds, when Adam Smith wrote the Wealth of Nations, outlining the basic ideas of what a market economy is. The market economy is a dynamic, complex system, that efficiently gathers data about the wants and needs of the human race, with passive, adaptive built in mechanisms. The market then meets those needs, at the least cost to the environment, the people and in resources. The market economy is the source of all the luxury we surround ourselves with today. The vast improvements in efficiency, that have allowed so many people to remain idle, is in itself astounding, if it is given a moment’s thought.

All three of the macro economies I have mentioned meet someone’s self interest. The underground economy, meets the self interests of the drug lords, the crime bosses and the gangs, while the political favor economy, meets the self interests of those who have political favor, and lastly, the market economy, meets the needs of every segment of society, from the richest down to the very poorest, when it is actually employed. The biggest lie a politician can tell the poor, when there is almost no functioning market economy in that country, (the “economy” is dominated by the political favor economy) is, “It is capitalism that impoverished you.”

Politicians use the term “economy” as a way to blur what is really being talked about. When they call for “fairness,” they always seek to move more capital, the fuel for all the economies, from the market to the political favor economy. Since the underground economy is by it’s very definition, underground, it cannot be taxed as a source of revenue or regulated by, the political elite, and so has a inverse reaction to the effects of taxing and regulation. When regulation goes up, so does the underground economy’s fortunes, as the market economy’s fortunes are winnowed down. The political favor economy is called many things by the political elite. Both democrats and republicans prefer the political favor economy, to any other, so they seek to move as much of the workings of mankind into it as possible. So… when a politician speaks about the “economy,” keep the context in mind… which economy he or she is really talking about? If it is the political favor economy… he or she is trying to move capital from the market economy, (your pocket, regardless of their rhetoric), to the political favor economy.

Sincerely,

John Pepin

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The Political Favor Economy, Revenue and Our Standard of Living

Posted on February 11, 2013 by john

Dear Friends,

It seems to me, when a politician claims the government needs more revenue, what they really mean, is that you and I will have to lower our standard of living, so they can raise theirs… and we are called greedy if we complain about it! When taxes go up people must lower their standard of living. There can be no other result. Taxes are raised so that some government official, living in the lap of luxury at our expense, either doesn’t want to make a hard decision or they want to raise their political power with more spending. The political Elite always seek more revenue, there is no limit to their lust for the fruits of our labor, it is incumbent upon us to protect our wealth and liberty else we will forfeit both, to the ravenous maw of greedy politicians.

Power in government is directly tied to spending. Every dollar, Peso, Euro or any other unit of currency spent by government, is a form of power. Not only the power to take the money but of the political favor the spending results in. Sometimes spending is to repay political favors given, and sometimes it is to garner political favor, but even if no overt political favor is bought or sold, spending, by the very fact that it is a form of inducement, carries power, political, economic and social. Political and economic are obvious…

Social, in that when large amounts of money are spent on a social program, it must warp the natural incentives and feed backs for our behaviors, that allow us to understand on a personal level what is right and what is wrong behavior. Government social spending is always to mitigate the negative effects of negative behavior. Government seeks to become the father in the family, the results of which have pushed out the real father from many households, to the great detriment of our economy and the social structure. But don’t worry, government will be there with more regulation and spending to solve this latest crises, caused by government.

When any money is taken from the market economy and put into the political favor economy… us real people have to lower our standard of living. This should be self evident, but to a large portion of the electorate in every country, it is lost in the haze of rhetoric and sophistry. Have you ever noticed that the debate is always about, this or that wealthy segment of society, having to pay their “fair share?” But after the debate is over, and the new tax structure is in place, your taxes always go up? When your taxes go up, where do you get the extra money, to make up for the lost personal revenue? You don’t. You and I have to stop buying something to make up for the loss in our personal income.

We must go without so that some member of the political Elite can have something extra. The politician is always against any cut in spending. You could never tell by their rhetoric but their actions speak louder than any political platitude. They will argue that spending must be cut, but not now… later. The economy is too weak to cut spending, and thus demand, (equating government spending to private demand, a typical sophist argument, comparing like with unlike). There is no limit to the logical calisthenics the political Elite will go to, to convince us that our loss and their gain, is somehow better for us.

The last thing an overseer wants, is to have to make a difficult decision, especially one that may threaten the cushy lifestyle they have rotted into. They seek every possible way to slither out of having to make a decision of moment. They wait, like a cat, for the opportunity to present itself to announce the we must loose more of our money or liberty, else some problem they created will get worse. The politician never seeks to actually solve a societal problem… that would reduce the need for lawmakers and bureaucrats. They endeavor to appear, to try to solve problems, while all the time making themselves powerful and wealthy in the process, and in fact making those problems worse.

Clearly when a politician calls this or that person, who begrudges government seizing his or her property, greedy, it is a statement of the lengths the political Elite will go to, in their unquenchable thirst for the fruits of our labor and the liberties our forefathers died and worse, to bequeath to us. They don’t loose a moment’s sleep, at the thought of someone making the choice to turn of cable TV, because the payroll tax went up. They will raise more revenue and subsidize cable TV for those who cannot afford it next year. That tax increase will force families to decide if they really need a second car to get to work…

Sincerely,

John Pepin

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Immigration Policy Sane and Insane

Posted on February 7, 2013 by john

Dear Friends,

It seems to me, the US needs to get a sane immigration policy in place, before our society breaks down completely. Immigration, or more to the point, illegal immigration, has been a wedge issue the progressives have used to pry naturally inclined republican Latino voters, from the republican party and to the democrat party. This wedge issue has worked so well, according to unbiased news accounts, that the republican party have become political lepers in the immigrant community. The beauty of immigration as a wedge issue is, that the more incompetently the government is at, securing the boarder, controlling the associated crime that must come with illegal immigration, and even to their duty to deport those found to be here illegally, the more the progressives can undermine any real effort, while painting republicans as haters of immigrants. The Elite’s intractability in this, has made this issue as important as any we face today, with repercussions for tomorrow.

Latinos are generally Christian people who value family and community. We all know the stance of the Roman Catholic Church on Abortion. Latinos for the most part, according to polls, follow the Church’s teachings on these matters, and yet vote, against their conscience for the party of abortion on demand, under any circumstance and at any stage of gestation, now even arguing for afterbirth abortion up to a year old! How can a Catholic man or woman vote for the party that not only condones the murder of millions of babies in this manner, a crime against humanity, but forces the rest of us through the tax system, to pay for it! Yet, the Latino community votes for them anyway, when the republican party is a far better fit with it’s focus on family values.

We are told by the unbiased media that the republican party is hated by the immigrant community because of their stance on immigration. In the push to effect the minds of the electorate, the unbiased media conflate illegal immigration and legal immigration, as if they were the same. By blurring the line between right and wrong behavior they have successfully grasped the initiative. Initiative is a tough thing to hold onto however. By unblurring the line, the truth can be explained to the legal immigrant community and more to the point, it would allow logical discussion on the subject instead of emotional rhetoric thrown around like footballs.

Sane immigration policy would take into account the vast number of people that want to come here. It would throw aside racial and ethnically based policies, in favor of testing applicants to see if they seek to come to America, to be Americans. That, in a sane World, would be the way it is done. Instead the system the Elite have set up is full of pernicious incentives. Worthy people who would make great additions to the melting pot are stuck in limbo for decades, while those that broke US law to come here, are offered a path to citizenship! What message does that send? People who are here legally are denied continuances very often for stupid bureaucratic reasons. If they stay then they become illegal and are forced by the system to, steal identities, drive without a license, work under the table, along with a host of other socially disruptive things.

Immigration policy should give great allowances for people who are here legally, and ask to stay longer, especially if they want to become citizens. Smart policy would allow almost as many people who ask to come to be allowed to come. The only caveat being that they seek to be Americans. If they want to go to America and be Americans, they are exactly the people Americans want to come here. If they want to go to America to overthrow the Constitution, then no, they should not be allowed entry under any circumstances.

The sticking point is the eleven or so million illegals that live in the US. The citizenry of the United States is smart enough to be uncomfortable with that many people living here… illegally. The people understand that illegal aliens must break our laws making them second class citizens, or be given special treatment, and be above our laws. If that is the case, then the illegals have been made the masters, by the political Elite. Because a master is someone who is above the rule of law. The American people understand that any society that has masters, must have slaves, and Americans hate slavery, especially their own. So if illegal immigration is not addressed, either illegals become the masters, or they become second class citizens, little better than slaves.

The deeply Christian Latino community votes for the anti family, anti Christian party, despite their deep Christian faith, due to the successful propaganda of the progressives, in blurring the line between legal immigration and illegal immigration, while the unbiased media fuel the fires of anger at the republicans. Immigration policy that had a whit of sanity would allow far more people in, almost everyone who applies, the only test should be whether or not the would be immigrant wants to be an American, and anyone wanting to overthrow the Constitution, no matter if they eschew violence or not, should be kept out.

Illegal immigration must be stopped. The only way to stop it would be to build a West Bank style fence between the US and Mexico. Government must stop all illegal immigration, and then open the door widely, to legal immigration. If the political Elite wanted to, they could quickly achieve this, so apparently they don’t. Illegal immigration is too handy a wedge issue, a source of cheap labor for gardeners and nannies for the Elite and disrupts the steady functioning of society, driving more need of regulation and legislation, thus the legislator. Yea, we really do need a good and smart immigration policy, but I’m afraid with Obama and the rest of this bunch… we won’t get it. Too bad for us, the more intentionally incompetent the Elite are, the more indispensable they become.

Sincerely,

John Pepin

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The Lot of the Black Conservative

Posted on February 4, 2013 by john

Dear Friends,

It seems to me the politically bravest people in the US today are black conservatives. Vitriol is heaped upon them without regard to any humanity whatsoever. The unbiased media use thinly veiled racial epithets while the progressives forward every negative stereotype against them. Even in the black community, I am taken to understand, black conservatives are threatened and pilloried. The lot of the black conservative is hard at best and being made harder by the direction our political elite are moving society.

Don’t think that you don’t have a dog in this race… because you do. Our primary attribute, is that we are all human beings, so what is done to one of us, could be done to any of us. If we turn a blind eye to a blatant injustice, we not only become complicit in the crime, but become the perpetrator’s possible next victims. To think that, someone else’s secondary attribute makes them more likely too suffer an ill, is epically stupid.

Look at the way Clarence Thomas was treated by the unbiased press as well as the political elite. They conspired to promote the most negative racial stereotype against him to derail his nomination for Supreme Court Justice. They threw filth at the man, that had so little basis in reality, even the coordinated action of the unbiased media and the political elite, couldn’t keep it corporeal. Clarence Thomas got a thumbs up from the Senate, despite the blatantly underhanded means the progressives used, to keep him off.

Why do you suppose it is, that black conservatives are so dangerous to the progressives that they will cross any bridge and burn that bridge behind them, to personally destroy a black conservative? Going to such an extent they will undermine every one of their stated principles and objectives in doing so? The evidence is incontrovertible. So why? I believe the black conservative represents an existential threat to the progressive ideology and power. That’s why no limit is ever set… when attacking a black conservative.

Until the 1960’s blacks in America were a concrete voting block for the republican party. Reams of articles were written about the dangers of a race in America being so decisively behind a single party. The deeper problem the democrats had back then, was that they uniformly stood against voting rights for blacks, they enforced segregation, democrats were the party of slavery before the Civil War. It had been the republicans who led the suffrage movement, had liberated the slaves, and voted against segregation. But Lyndon Johnson successfully flipped the old paradigm to the modern one we see today. One where blacks in America almost universally vote democrat. Black conservatives pose a threat to this new paradigm simply by their very existence let alone if their message is ever heard!

What it boils down to however, is that republicans and conservatives need to do a much better job at rallying around black conservatives, when they come under fire. The democrats have no problem rallying around the pedophile who was getting free trips to the Dominican Republic to hire child prostitutes. The democrats have no problem supporting this dirt bag, but if a progressive makes even the most absurd claim against a black conservative, the republican establishment runs away like he or she has bubonic plague. Perhaps because most of the elite in the republican party are progressives at heart?

Until republicans start doing their job, promoting conservative/libertarian values, and defending themselves and their allies, the democrats will keep winning elections. Our republic is threatened by this absurdity. Blacks and Latinos are a natural voting bloc for libertarian and conservative values. It is the job of the republican party to explain how these things work and why we need them. Tossing black conservatives to the side shows disdain for them and is as self defeating as it is witless.

Sincerely,

John Pepin

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Economic Contraction Q4 2012, What does it mean?

Posted on January 31, 2013 by john

Dear Friends,

It seems to me that if we don’t change headings, our economy will crash, bigger than 1929. The 4th quarter 2012 GDP figures that just came in showed a contraction. If we have another 2 quarters of contraction we are in recession. I don’t know if this quarter, 1st quarter 2013, will show decline or growth. I have strong suspicions that we are at the beginning of a pernicious downturn however. This would be tragic for the World Economy, the United States economy and the fortunes of every American.

When Obama came into office the economy was at the perihelion of a recession. Bush had enacted the Troubled Asset Relief program that became know as TARP. Bush had also began the bailout of AIG, to stop the cascade of bank failures, that seemed on the horizon at that time. The Swearing in ceremony in 2009 was at the very bottom of the recession.

Obama came in and immediately called for most of a trillion dollars to be spent on his “stimulus.” He claimed the US economy would hit 9% unemployment if he didn’t get the money, (it did anyway). $800 billion was borrowed in your name, and spent on pork, political slush funds and handouts to political backers. The idea was to stimulate the economy with all that added spending. Like Keynes urged government to do when in recession… spend spend spend, to drive up aggregate demand.

Not only did Obama get most of a trillion dollars to spend as he saw fit, (and has yet to meet his obligation to report to Congress the results), he got additional stimulus money, as well as an open checkbook. The US Senate has not passed a budget for the last 4 years! The House has for the last 2 but the Senate has not even voted on them. In Obama’s first 2 years in office the House was as indolent as the Senate. As a result the US budget deficit and debt has skyrocketed under Obama.

Obama care is starting to hit the American consumer and worker this year. Waves of taxes will be washing the cash from American consumer’s pockets from it. The economic impact will be bolstered by the tsunami of regulations that will hit American industry. The cost of health insurance is poised to double driving up the cost to business for every employee. All this will create a strong incentive, for firms to lay off as much of their work force as possible, simply to stay in business. Giving Obama care profound negative impacts on the economy.

The media is now starting to report, in the foreseeable future, the US debt will exceed 200% of annual GDP! This level of spending cannot continue. The bond market vigilantes will put an end to Obama’s profligate spending before that… I hope. No government can sustain this level of deficit spending and remain a viable concern. It is not possible. Historically, most countries that have found themselves in this situation, have printed money to get out, and slipped into a hyper inflationary cycle.

The Federal Reserve is printing money at $85 billion a month in their attempt to pull this economy out of the ditch. The money supply has grown under Obama and Bernanke at an extraordinary rate, (30% in the last year). This phenomenal printing of money has not resulted in fast GDP growth or inflation, countering traditional money theory. This is made possible by both the zero velocity of money and most other countries on Earth printing in a race to the bottom. And so, as more money is printed the tension builds, like winding a spring, at some point either the spring gives or the mechanism breaks. Neither outcomes are good especially in our economy.

Obama has made the political climate very hostile to profits and markets. People are not willing to take a chance and start a business in this anti business climate. Yet today, when the shocking numbers came out, Obama blamed the republicans! Claiming that their intransigence over the debt ceiling and fiscal cliff was the reason. His hypocrisy, due to his own intransigence, was never pointed out by the unbiased media… because that would be biased. So the irony is lost on the public. He also made the siren call for more government spending. As if the trillion dollars plus each year deficit he is racking up is not spending enough!

The fact is, we are heading to economic oblivion if we don’t change the course we are on. No nation can tax, print and spend it’s way to prosperity. That road only leads to calamity. Haven’t enough nations of people traveled down that road to ruin already? How many more millions will suffer oppression, poverty and subjugation, at the hands of those who claimed to be the protectors of the people? The only way to change direction is to call your Congressman or woman. Let them know you want the budget balanced, regulation lowered and stop the crony capitalism! In short… tell them to get off their fleshy derrieres and do their jobs!

Sincerely,

John Pepin

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Can Government Solve All Our Problems?

Posted on January 28, 2013 by john

Dear Friends,

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

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

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

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

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

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

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

Sincerely,

John Pepin

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A Solution for Too Big To Fail.

Posted on January 24, 2013 by john

Dear Friends,

It seems to me, the too big to fail dilemma gets worse, every time our legislators have a go at it. The Elite’s regulations always result in pernicious incentives that, instead of preventing banks from becoming too big to fail, actually create the conditions where banks must become too big to fail, else they cannot compete. The new regulation bears such an associated cost that it makes small banks uncompetitive, not due to market forces, but to regulatory causes. Of course, the Elite only take, they never give, their solutions are always more regulation, as we have opined in the past, so their solution must add to the problem, no matter how well crafted their regulation is. This increases the chance for great disturbance to our financial system. The same system your 401K is invested in, as well as your checking account, your savings account and any other account you have of M2 or M3 money. This makes the too big to fail problem your problem too.

Too big to fail is a result of old bank regulations, passed in an earnest effort to solve issues that became apparent after the 1929 banking crisis. As with all regulation, it created more problems than it solved, requiring more regulation. Banks actually create money, just like they had a printing press in their basements, but to create money, they need to have deposits and make loans. Obviously, creating money is a strong incentive to bankers to get deposits like, checking accounts, savings accounts, money markets etc… All a bank’s insured deposits are guaranteed by the Federal government through the Federal bank, (The Fed).

Banks are required, by regulation, to have a certain amount of the money deposited in their bank available as M1 money. The theory is, in normal times, a bank will never see 10% of it’s deposits withdrawn in a day. The problem is… our economy is a complex system. In complex systems, rare events graph in long tails instead of bell curves. Very unlikely occurrences are not only possible in complex systems but are certain. Because of this, there are times when more money is demanded than the bank can produce, if that happens the bank is in bankruptcy and must close it’s doors. It becomes the property of the Fed, it’s assets sold, and it’s debts paid. The Fed then insures every depositor’s first 200K of money if the assets don’t meet the debts.

When a bank becomes too big to fail it means that if it were to fail and go bankrupt the entire economic system would be put in jeopardy. The daily debts and outlays of a tottering, too big to fail, institution would be disrupted if it were to fail. Checks would bounce even though sufficient funds were available, paychecks couldn’t be cashed, large money changers could be shut down for a period of time like PayPal, inter bank payments would be disrupted, and the Fed would be handed a steaming pile to deal with. This could lead to a cascade of possible bank failures as the debts one bank owed another were disrupted by failures causing more failures. Banks that survived the first round would stop lending and hoard assets to stay alive. The entire monetary system could collapse if this were to happen… and it almost did! The 2008 banking disaster could very well have led to the very cascade of bank failures I have explained.

Therefore, a bank that is too big to fail will be bailed out, no matter how far off the rails it goes. This gives their debt issuance the implicit backing from the US Government, further exacerbating the problem. Because a smaller bank doesn’t have the implicit backing of the government and so must pay a higher rate on it’s debt! Plus a higher regulatory cost to nominal deposits makes it a virtual commandment for all banks to get… too big to fail! If you think about it for even a moment, even a fool would realize, we need to get a handle on the too big to fail dilemma.

The answer is as simple as it is hard for the Elite to swallow. Remove as much banking regulation as possible. Leave only standardizations eliminating regulations. This would level the playing field for the smaller banks and credit unions. Then, determine an upper level of bank holdings, that would make a bank become a systemic risk. Reduce that by 10% and set this as the upper limit for protected managers. Banks would be allowed to grow beyond this limit, but if they failed for any reason, the board of directors, the president, the CEO, the CFO and all the vice presidents would go to jail, even past bank officers up to the time the bank passed the limit. They would serve not less than 4 years and no more than 10 years. Make the law as simple as possible with no wiggle room for an especially weaselly CEO to worm through. Make them personally liable for the bank’s solvency if it grows past this point… and it won’t.

The self interest of every member of a bank’s board of directors will make absolutely sure, every bank in which he or she is a member of the board, will remain well under the limit. No bank president will allow his or her bank to grow beyond the limit, and top quality candidates for vice presidents, will be non existent. This would solve the too big to fail problem simply and efficiently. Our economy would be allowed to grow at an expanded rate due to less regulation, money would be more available to small businesses and entrepreneurs because small banks usually lend to these important economic actors, and a major systemic problem will have been addressed, once and for all.

Sincerely,

John Pepin

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Government Thinks We are Stupid

Posted on January 21, 2013 by john

Dear Friends,

It seems to me, a fundamental problem with most regulation, is that they require as a precondition, people are stupid. This premise of regulation doesn’t comport with reality. People are smart, self interested, and for the most part rational maximizers. The ability to reason, makes our desires like water, they will seek any opening to flow downhill. Regulation that seeks to stymie some want or need of people, whether to be free, to be able to engage in the business that best suits them, to be famous, to be wealthy, to take drugs or whatever their heart desires… usually drives that activity underground. Those with sufficient desire and enough craftiness will find some loophole in the regulation that they can slip through. If not then violence is the next choice. In the face of more regulation, the desires that self interested individuals will seek, will not be stopped, they will only become more pernicious, more damaging to society and more inhuman, warping our society by the tensions built up from the disparities regulation creates.

Regulation always has, as it’s justification, the intent to stop the meeting of one’s interests by damaging the interests of another. In this, regulation has a noble intent, but as we all know, the road to hell is paved with good intentions. Regulation is usually not put in place to protect citizens, regulations are, more often than not, enacted to allow an oligopoly to form. Governments believe oligopolies are in their economic self interests, and so, are always trying to help them form. Proposed regulation, that is actually to protect some economic interest, cannot be sold to the public as such. That would be a certain kiss of death. It has to be sold to the citizenry, how it is to protect them from “unlicensed” practitioners, or “unscrupulous” businessmen. Reality being that the very people protected by the regulation are often the unscrupulous ones, the ones barred, the entrepreneurs.

Think about a group of people walking through the woods. A large tree has fallen across the path. They will quickly find the easiest way around the obstacle. Once the most effective path is found the majority of the group will take this path. The path will be enlarged, and made easier to go around the tree, for the next group that stumbles across it. Regulations for economic interests, are like cutting brush and filling in the path you have made around the obstacle, enhancing the barrier of the fallen tree to those who will come later. People however, have the inherent ability to size up an obstacle, and find a way around it, even enhanced ones. Regulation is no different than any other obstacle, if someone wants to get by it, they will. Therefore, regulation is only a true obstacle for people inclined to follow it anyway, or those dumb enough not to be able to find a way around it. Those that have the desire, intellect and daring, will find a way.

There are many kinds of regulations that this philosophy applies to. Sin tax regulation for example, The higher the government taxes cigarettes the more the black market for cigarettes grows. No one is foolish enough to believe that the black market is a benevolent phenomenon. Therefore the government, through regulation, provides the incentive and ensures the profitability, of bad actors. Obama’s fiat regulation, that mental health care givers, report on patients that have guns is another example. This sets up an entire universe of negative incentives and feedbacks magnifying those incentives.

Remember our premise is that “people are not stupid.” The information that Obama has ordered this new law by arbitrary rule, and so it is now the law of the land, will not be lost on those people who self identify as needing mental health help. Being self interested they will forgo treatment, even where they themselves understand it is necessary, because they understand that the person who administers to them, will be nothing more then a government snitch. If this is the case with those who self identify, then how much more, for those who do not?

I am sure all of you know of many other examples to go along with these. It is a fact that human beings are sly. This makes it true, that regulation is merely an obstacle, and we are smart enough to get around obstacles, cannot be overstated in the case of regulation. As additional poorly considered regulations, build more tension and further warps our society, the functions of civil life, our standard of living, our emotional well being, our safety and the safety of our children… will be put more at risk. The answer, is to remove the distortions in our civilization, with more liberty, more standards and less regulation.

Sincerely,

John Pepin

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On the Debt Limit Debate

Posted on January 17, 2013 by john

Dear Friends,

It seems to me, the upcoming debt ceiling debate could be won handily by the republicans, if they only use some good old down Eastern shrewdness. The debate has been framed by Obama, the democrats and the unbiased media. They have established a false narrative. The future of the United States is at stake, so to allow a false narrative to not only be established, (republicans have no control over the unbiased media’s narrative), but to allow it to become commonly understood, would be tantamount to stabbing the republican voters in the back. Unfortunately the republican Elite specialize in stabbing their base, conservatives and libertarians, in the back. Not only the future of the United States is at risk from the gamesmanship the Elite in Washington are playing, the very threat of the American government defaulting on it’s debt, the US being the World’s bank, puts the whole of the planet at risk as Obama score points on republicans. We are poorly served by both parties in this, the republicans due to their love of the unbiased media and hatred of their voters, and the democrats who push down the gas peddle of spending even as the ultimate debt cliff looms closer…

The unbiased media are working as hard as they can to insure that Obama and the democrats win the hearts and minds of the American people. To the power structure in Washington, Constitutionalists are the enemy, we the people are cannon fodder, in their war against the Constitution. We are to be cajoled, bullied and forced if need be, to agree that the Constitution of the United States is the real problem. The Elite use every underhanded means to this end. They call anyone who brings up the Constitution an extremist. It is perfectly acceptable for an economist to attack a conservative or libertarian, for fighting that the government live within it’s means, but if they attack the policies of democrats, that are demonstrably damaging our economy, they are attacked, even tenured professors are threatened with loosing their jobs if they speak out. The Elite in both the media and Washington have never seen a Right they didn’t want to take away. The debt limit debate is another manufactured “crisis” they can exploit in their war on liberty.

To counter such powerful propaganda and outright lies, Conservative, libertarian and any politician who shuns the progressive agenda, must be wise as an owl and sly as a fox. No matter what the constitutionalists do or say, in an effort to limit the growth of government taxation, spending and intrusiveness, the unbiased media will misquote, demonize and even doctor video or audio tape, to make their point. Newt Gingrich’s Contract With America was called his Contract On America by the unbiased media. To expect different would be foolish.

In order to counter such powerful political riptides, the US House of Representatives should pass a bill numbering priorities to spending… if the debt ceiling is not raised by the deadline. Such as, making debt payments number one, Social Security payments number two and continuing listing all departments in priority, not only for today’s debt ceiling debate but for all that come in the future. Then send it to the Senate.

Harry Reid would have to allow a vote especially as the debt limit ceiling gets closer. With a bill on his desk, to spare the United States and the rest of the World, from the worst case scenario if the limit is passed, even the unbiased media would have to question it. Pressure would mount on Reid both to suppress the bill and to allow it to come to a vote. Obama would want such a bill suppressed because the lack of it gives Obama the upper hand in the propaganda wars. If such a bill were to land on Obama’s desk he would not sign it. Doing so would let republicans off the hook but not signing it would give Obama the blame. Obama would be faced with a political loose loose.

No matter if Harry Reid suppresses this bill, or President Obama refuses to sign it, all the political shrapnel would squarely hit the democrats and Obama. Even the most unbiased media person will be forced to report the truth… (most likely a distorted version of the truth), that a bill to eliminate the worst effects of a debt ceiling, not only for today’s debate but for future debt ceiling debates, being passed in the House, was suppressed by the Senate or was vetoed by Obama. This would infuriate foreign countries and their news outlets, because Obama would be directly threatening their countries as well, with his brinkmanship. The World’s economy would continue to be put at risk by future debt standoffs, a way out was at hand, but Obama and the Democrats stood in the way.

The answers the Elite are giving are simply laughable. (Or they would be if there wasn’t such import in the question). Bernanke, claiming the US should eliminate all debt ceilings, is just plain stupid. That is telling your wife, “The new gold card is maxed out already honey… what we need is an unlimited platinum card.” Clearly this is stupid writ large. The trillion dollar coin idea is just as ludicrous. If the US minted a trillion dollar coin, and deposited it with the FED, it would be instant hyper inflation. The raising revenues siren call is blatantly self serving for the Elite. That is obvious because there is no amount of revenue, the system the politicians have created out of our Constitutional republic, could ever meet the greed of the Elite. For every dollar in gained revenue these reprobates will spend two. More revenue is like tossing more kindling on a fire. It might suppress the flames for a moment but when the fires poke through they will only get higher.

There are always revenues coming in to government from the various taxes. This revenue is sufficient to pay for the most basic services of government like debt service, social security and scaled back defense, the entirety of the bureaucracy would have to be shut down though. The problem comes in when the President seizes the power of the purse from Congress and uses it for political purposes. Power of the purse was given to Congress, intentionally, by the framers of our Constitution. It is supposed to limit the power of the executive. This executive however, has wrested the power of the purse from Congress, largely due to Harry Reid and the Senate abdicating their responsibility to pass a budget. Obama can simply use his power to spend, or as in this case, not to spend, to strategically punish the American people and institutions, ginning up anger against republicans who the unbiased media will be vilifying for Obama’s choices.

The debt limit debate is perfectly suited for Obama to exploit to his advantage unless the House makes a decisive move. Passing a bill into law, that enumerates the spending priorities by congressional mandate, would not only set the World’s minds at rest, knowing the US will not default on it’s obligations, but would return the power of the purse to it’s rightful owners. The spending could be debated without catastrophe looming, and any political backlash would be a worry of all factions, not just the one who wants our Constitutional republic to endure.

Sincerely,

John Pepin

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Guns Trust and the Elite

Posted on January 14, 2013 by john

Dear Friends,

It seems to me, a government that trusts the people with firearms, is a government that can be trusted. The opposite holds to be true as well, that a government that doesn’t trust citizens with guns, is a government that cannot be trusted. We can further say that, to the extent the government is wary of armed citizens, that government itself is dubious. This is important for people to understand, our standard of living, liberty and posterity are all endangered by government that seeks to disarm it’s citizens.

The Elite’s answer to every question that arises, is with more laws, more regulation and less liberty. They are a one stringed banjo. The answer is never less regulation, or more liberty. Our freedoms are always eroded while their reach into our lives becomes ever more intrusive. The Elite want to control more and more of our lives, for our own benefit “to be sure,” but no big brother is ever going to govern well, regardless if it is from a revolution or evolution. Human beings all seek liberty while the State always progressively seeks tyranny.

The progressives believe that society and government can be evolved to the perfect socialist State. They think that we can be trained into ants in their ant colony. The progressive ideal is a communist government without the revolution. They only differ from communists in the implementation of their ideology. In order to evolve society into an ant farm they first must disarm us. Our ability to defend ourselves gives us some protection from a tyrannical State, and a sense of individuality, which is antithetical to a “liberal.”

Individuality is both loved and hated by the progressives. They want unanimity of political thought, to do this, they splinter all other thought into warring factions, within society. Progressives love the artist who immerses a crucifix in urine, they adore Che Guevara the mass murderer, and they worship the emotion driven politician who doesn’t bother read the laws he or she passes. The progressives hate people who are self reliant, those people don’t need government handouts, socialists despise businessmen, businessmen allow people to be self reliant by providing work, and most of all, the progressives detest politicians who stand in their way.

Look at some of the things the Elite have been saying about our Rights and Our Constitution. Obama made it clear he this our Constitution is a charter of negative liberties, the Supreme Court judge, while on foreign soil, said, she would not us the American Constitution as a model for a new State forming today, the new amendment in the House to repeal the Constitutional limit on how many terms a President can serve, the list is as scary as it is sobering. Does this sound like people interested in limited government? Obama’s Homeland Security Department has called anyone who has more the a month’s worth of food a potential terrorist! Does that mean he could legally go house to house, seizing surplus food from people’s cupboards? The citizenry would have to be unarmed for this to happen. It has been done many times in the past by the progressive’s ideological peers.

A government that has no desire to overstep it’s Constitutional bounds will be neutral to guns. If the Elite have no intentions to intrude into the lives of the citizens then that Elite will no be threatened by guns in the hands of free men and women. Government that guarantees the liberty of it’s citizens would welcome an armed people because that nation would be impossible to invade. This would, does, naturally lower the cost of a standing army. The IJA didn’t even consider the thought of invading the US mainland due to the widespread proliferation of guns in the hands of Americans.

The progressives on the other hand, who seek to evolve government into their socialists ideal must, as a matter of expediency, disarm the citizenry, else those self reliant among us can stand up to their intrusions. The more relentless the progressives in power are, for their evolution of society, the more ardent they will be in gun confiscation. If there isn’t enough gun violence in the news they can exploit, to grab the Second Amendment away from the people, they can always create some in Mexico. Therefore, the level of their ardor can be reliably measured, by their distaste to having guns in the hands of free citizens. That’s why I say, the more the Elite want a disarmed people, the less we can trust them.

Sincerely,

John Pepin

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