The Theory of Money

Posted on July 19, 2012 by john

Dear Friends,

It seems to me that Milton Friedman’s theory of inflation and money supply presupposes a frictionless plain. A frictionless plain in economics is absolute lasses fair economic conditions. Friedman was a great proponent of lasses fair economics. I think he understood that his theory of money was effected by the economic environment of any given country. If an economy has lasses fair then Friedman’s theory is absolutely true, however, under normal economic conditions… his theory needs to be qualified. This has direct and important implications for the economic theory of money and it’s applicability to present and future economic circumstances. Our economic well being is directly effected by this theory and the qualifications on it.

The first aspect of his theory is, as the money supply is expanded beyond the actual economic growth of a country, the inflation rate will have a one to one ratio. If GDP was expanding at a rate of 1% and the money supply increased at a rate of 2% then there would be 1% inflation in that economy. This is a pretty self evident idea and is verified by graphing economic conditions in several countries over several years.

The other aspect of his theory, is that under conditions of recession where potential capacity is less than full utilization, then an expansion of the money supply may draw the economy closer to full capacity. By pulling in underutilized resources to feed the increase in demand that the additional money creates. Like the US FED has tried to do with QE1, QE2 and TWIST. The ECB (European Central Bank), has begun similar initiatives. These policies by the FED and ECB to expand the money supply, to bring the World economy closer to full utilization, have failed, and in fact have hindered economic expansion. Not due to any deficiency in Friedman’s theory but to an under accounted for facet of economics.

The under accounted for factor is the friction that regulation and political favor play in any economic expansion. To make the point, lets consider two economies that are operating at far less than optimal output. In the first, regulation is at a very high level, and political favor is required to start or expand a business. In this case the increase in money supply will not increase the utilization of that country’s infrastructural capacity. The friction that the regulation creates will keep potential businesses from hiring more employees to increase output to meet the demand.

We saw this happening in the US in the 1970s. The money supply increased, but economic output didn’t, even though the economy was operating far below it’s potential. Unemployment was high but inflation was also high. We can say that the friction, that regulation and political favor generated, stood in the way of utilization of the extra money, and so the increase in the money supply only fed into the inflation.

In the other possible scenario, we have an economic system that has lasses fair… and is underutilized due to recession. In this case if the money supply is increased then it would be easy for firms to hire more employees and increase output. This is because the friction to business is low in a country that allows it’s markets to function unfettered of government interference. We saw this in the 1980’s. After the stagflation of the 1970’s, under Carter’s government centered model of economics, Ronald Reagan instituted more lasses fair economic policies, and the economy regained it’s full productive capacity… and began growing at a fast rate.

This is why I say that Friedman’s theory of money supply is dependent on the economic conditions of the country in question. If the government implements government centered economic policies, then additional money only feeds into the inflationary feedback loop, due to the difficulties of bringing people and productive capacity back online. If however, the economic conditions in a country are such that bringing under utilized plant and workers back into production is easy, then we will see that Friedman’s theory works as stated.

Therefore, if a country’s economy is underutilized due to recession, and an expansion of the money supply is used as a means of increasing GDP, then for it to work, that country must lower the level of government interference or friction, else that expansion of the money supply will feed into an inflationary spiral, or if the economic expectations are too pessimistic, then we will see the money sit in the banking system, until economic conditions are more favorable to economic expansion. Then all of the inflation that has been banked will emerge and lower the value of every unit of currency in the economy. Inflation will appear where there appeared to be none… perhaps even hyper inflation.

Sincerely,

John Pepin

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The Hidden Option

Posted on July 16, 2012 by john

Dear Friends,

It seems to me mankind is at a crossroads. We are told the options are, a World government enforcing totalitarian socialism, or World government that enforces a totalitarian Caliphate. There are no other options being promoted by the World’s Elite. They are of one mind… Total World government is the answer. The unbiased media are completely on board with this pernicious notion as are most academics and political Elite. They wish to run headlong into this oppressive societal model they see as a utopian vision of World peace… the peace of the slave to the master. The individual, they see, must be controlled and re-engineered into ants, that merely serve the collective. Both are false options, evil incarnate, and will lead to more human suffering than any dictator has ever visited upon his people… Mao included.

Speaking of Mao, Obama and his allies see him as their ideal model. They have often mentioned Mao in their speeches and revel in quoting him, “Political power comes from the barrel of a gun,” Obama had a Mao Christmas tree ornament on his tree, and so forth. Mao also believed in a World government that is all powerful. Today we have both political parties in the US proposing the total state as a viable option. One wants to race there the other wants a more measured pace. No one proposes the option that was enumerated in the US Constitution… individual liberty and human equality. Mao was an enemy of individual liberty as are the political, cultural and intellectual Elite around the World. Mao championed of economic equality.

This mind set is not only pervasive in the US but we see it around the globe. Europe is racing to that goal in many ways. One is by destroying the economies of Europe. The European model of economics has the roof supporting the foundation. They see this as ingenious… that they could get the government to support the people. The perpetual deficit spending and eroding of the work ethic is another facet of this mastermind plan. The Elite don’t see any problem with more and more people leaving the workforce to become dependent. This is the natural course of economic evolution… according to them.

This model has been so thoroughly discredited by history, one would think it obvious, but the Elite lower the level of education to the point of non education. Non education being the dumbing down of children and convincing them their eyes lie while the self serving utopian politicians tell the truth. Why believe an uncomfortable fact when the Elite claim comfortable untruths as verity? Not only our children are subject to non-education but we are as well. The culture encourages this lunacy on everyone who consumes entertainment.

The unbiased media report partial truths, untruths and outright propaganda. Like the sophist redefining of human equality into economic equality. The media is filled with nonsense like, what entertainer is running around on their spouses and fiction about global warming, that has to be renamed global climate change, because no one knows if the climate is warming or cooling, or how it is occurring… just that it is evil capitalism and freedom causing it. The unbiased media withhold real truth because it doesn’t promote the party line while the movies almost universally show goodness as bad and badness as good. Look at the lionizing of Che in The Motorcycle Diaries.

History is white washed except where it backs the totalitarian program. We are regaled with every evil that the West has visited on mankind without a word to the evils every other civilization has visited on humanity. The one sided story is promoted as profound truth further promulgating the non education we are subjected to. Colonialism is preached as total evil, (which it was), while the horrors Mao visited on his people, starvation as a political tool, mass murder of dissidents, reeducation camps and so forth, are glossed over… because he believed in economic equality. Pinochet’s atrocities are given full light, while the inhumanities of the communists that he was fighting, are ignored. Tamerlane’s murderous rampages, the destruction of religious monuments, wiping out of the Egyptian language, subjugation of people, Dhimmi status of other religions, abuse of women, the invasion of Europe and all the other atrocities of Islam are forgotten. The list of misdirection, erasing history and red herrings are endless.

We are being taught to be subservient to the State. We are being told anyone who seeks individual liberty and individual sovereignty is evil. That we are bad in our hearts and that it is only the total State that can rectify our sins against mother nature. We are bombarded with the pernicious notion that God doesn’t exist and we are to worship the created, or a man… instead of the creator. All this has one possible outcome… A new World order, where we are controlled by a very tiny cadre of self serving Elite, that have total power. Our willing ignorance feeds directly into their plans.

The question is, do we want one of those futures for our children? Maybe we should wake up, and give them liberty and prosperity instead, or are we going to deliver our children into the hands of these megalomaniacs? As I said in the beginning, we are being told there are only two options, but in fact there is another. It is up to us to take the hidden option. I hope and pray we do else or children will pay a heavy price.

Sincerely,

John Pepin

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Scandal and Tyranny Go Hand in Hand

Posted on July 12, 2012 by john

Dear Friends,

It seems to me that capitalism is based on trust. Without trust markets close down and money becomes just a bunch of paper. Trust is the lubricant that allows our modern market system to function. It is built by years of honest dealings of market players. Trust takes years to establish but merely seconds to destroy. Today we are seeing the destruction of trust, that will lower the standard of living of men, women and children all over the World… and possibly leading to a new world recession.

Most people work very hard for their money. After all, money is as much a representation of labor, as it is a unit of exchange and a store of value. Those who have worked hard and seek to store up that labor, so they can use it when they retire, to buy the means of production or even just as a source of insurance against the exigencies of life, are personally damaged when it is stolen. This is a strong disincentive to save and leads to a whole host of economic problems.

The banking system in our modern economies have a fundamental role in the growth of GDP. Money can be said to follow a circle. Wage earners work and then save some of their money in banks. Those banks amass that capital then lend money to people, who want to buy a home, start a business, or upgrade plant and equipment. Those companies then hire workers and the circle is complete. This entire system rests on trust in money, institutions and government.

Keeping trust in our financial institutions is a valid role of government. If we look at countries whose governments have coddled wrongdoers and recoiled at punishing their oligarchs, we see that they, universally, have very low standards of living coupled with overly powerful governments. GDP growth in countries is drastically reduced, when government is in bed with a small cadre of Elite, that are above moral behavior.

Lack of trust in institutions is a strong incentive for people to elect socialists and communists to government. This is another fact we see in third world countries. The people have lost trust in their institutions and government. It is ironic then, that the people turn to an oppressor, to stop the financial oppression. But the fact is, when someone is drowning, they will turn to anyone or anything no matter how dangerous. If nothing can be trusted, grasping for anything, we turn to the cult of personality. The cultish figure claims to have the answer, in our terror, we believe him. We ignorantly and foolishly run into his open arms… and right into the embrace of tyranny.

Today we see a constant barrage of Elite financial institutions gaming the system and no real negative consequences for them. Government regulators have dropped the ball in the US on the Madoff scandal, Enron, MF Global and now the LIBOR scandal and PFG Best. These scandals have one thing in common, they all should have been seen by the regulators but were overlooked. Remember that the SEC was asleep at the switch when the 2008 financial crisis hit. In the case of Enron, there were jail sentences passed out, but in the case of MF Global, Jon Corzine is walking free in the Hamptons. Not only free to enjoy his ill gotten gains, Congress, his fellow Elite, expressed sadness, that such a good man was damaged by the scandal. Now, with the LIBOR and PFG Best, we see that again our government has dropped the ball.

The poor showing of the world’s stock markets is in part a reflection of the pernicious corruption in our institutions and markets that has led to our distrust in them. The answer of government is to increase regulation, but there were regulations on the books… that were ignored. Had they been followed, and effectively enforced, the scandals wouldn’t have happened in the first place. But the SEC and other oversight agencies failed miserably. The upshot is, the Elite, who fail us time after time, will ask for more and more power to regulate, regulations that will, doubtlessly, not be enforced. This will lead to greater and greater oppression of us, and lowering of our living standards, with no positive outcome… for us.

The answer is not to give those who keep failing us more power, but to replace them with people who will do their job… and make them answerable to us. Giving a corrupt man more power to fight corruption is like trying to put out a fire with gasoline. In this case, it is not only our prosperity that provides the tinder, it is also our liberty and posterity. But the eyes of the Elite glitter as they douse us with gas and the reality is ugly to behold. The heads that should roll are the ones on the officials who never fail to choke in the clutch. If they don’t… tyranny befalls the foolishly naive.

Sincerely,

John Pepin

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Glittering Lies and Ugly Truths

Posted on July 8, 2012 by john

Dear Friends,

   It seems to me that people are easily deceived and difficult to enlighten. We are surrounded by this reality yet are mostly blind to it. People fall into traps every day and no one is immune. Not only are we constantly deceived but there is not a one among us who can deny it. This is the normal state of affairs when it comes to human beings. Our lives and our children’s lives are profoundly negatively affected by this truth.

   The primary means a scammer uses to deceive us is by telling us a lie that we want to believe. It may be so attractive that we want it to be true to the point of warping our underlying sense of disbelief. The effective cheat will use this propensity against us. They know that we have this weak spot in us and they use it like a wedge to separate us from whatever they seek to gain. We willingly bite the bait like a fish a lure.

   Reality is, more often than not, unattractive. In our ignorance we hope that reality is not true and so we disbelieve it. This is the reason enlightenment is so hard for us to grasp. True enlightenment is not soft or attractive it is hard and repulsive. We want to have goods without working for them, we want to be enlightened without embracing the spiny truth, we want respect without giving it and we want fame without consequence. This is the other side of the coin of how easily we can be deceived

   Mankind has grown powerful by the scientific method yet we eschew it’s use in matters of humanity. We instead turn to false hopes given to us by scammers and con artists. We are deceived not by others as much as by ourselves. It is not the con artist that fools us, he only facilitates the process, we fool ourselves. We fail to use the scientific method when we weigh good and bad. Yet if we applied the scientific method we would quickly discern the truth and we would laugh in the liar’s face.

   The scientific method uses trial and error, applies the law of reproducibility and disregards the possibility of magic, having anything to do with the outcome of a certain chemical reaction or physical process. When we apply the scientific method to our investigations of the world around us… we are enlightened. Our material welfare has been greatly enhanced by this method, which has uses other than exploring the world we live in, however.

   Economics, social interactions, governmental processes, and law, are a few of the things we should be applying the scientific method to… but never do. We hate to look at the reality of the world when it comes to our personal lives and decisions. Take law for example, we never look at the logical outcome of a law, we only look at the behavior we seek to curtail when it is passed. As a result, we are constantly bombarded with unintended consequences, which require more laws to rectify, which have more unintended consequences… and so on. Leading to the overgrowing of our garden by the kudzu vine of law.

   Economics is another area of human existence we fear the use of the scientific method. We have empirical evidence of what works, and what leads to human suffering, yet we usually choose the path to want and need. Moreover, it is those that claim to be scientifically minded, who espouse the means to poverty instead of the means to societal wealth. As I have shown, it is not out of evil that we do this, it is because we believe what we want to believe… and disbelieve that which we want to disbelieve. In the case of economics it is a result of what we mischaracterize as a sense of moral outrage and indignation, that we must allow freedom for those who have merit, to become wealthy, and thus we all gain a measure of wealth. It is more attractive to believe, against all historical and empirical evidence, that we can simply proclaim the poor into a state of wealth. Even though history shows us the misery and human suffering this results in… every time it is tried.

   Attractive lies are more believable than ugly truth. Until we understand this fact we are doomed to visit want, misery and need on those we love most.

Sincerely,

John Pepin

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Why Are We In The Ditch Again?

Posted on July 4, 2012 by john

Dear Friends,

It seems to me, when a car goes into a ditch, to blame the car manufacturer, passengers, bystander or gas station, that changed the oil a few weeks ago, is ludicrous. Today, the unbiased media claim it is everyone but the driver, that put the car into the ditch. We pull it back onto the road, he puts it right back into the ditch again, and the only one who escapes all blame is the driver. The first time it went into the ditch they might have had an argument, economies go into recession it is a matter of economic reality, the second time it went into the ditch, their argument was getting weak, the third time their argument mimics the theater of the absurd. Now we are in the ditch a fourth time and the driver is pointing at the people who paved the road. At what point do we take the driver’s license away from this incompetent nincompoop? The damage to the car gets worse every time he puts it into the ditch… and we all must ride in it.

I am of course speaking of Obama’s handling of the US economy. He subscribes to the command and control theory of economics. This theory was proven wrong in Cambodia, the USSR, China, North Korea, Cuba, and now in Europe, Venezuela, and Zimbabwe. As I have pointed out many times in this blog, commend and control, or top down economics, is fundamentally inefficient. The complex system that is an economy doesn’t lend itself to one man or a small cadre of powerful officials ordering it. Too many decisions must be made every second for this model to work. Not to mention the proclivity of people, who are merely flawed human beings, to misuse the inordinate power to enrich themselves and their political allies, at the expense of everyone else.

Someone should tell Obama the blamer, that when he points the finger at someone else, three fingers are pointing back at him. No one likes a blamer. They smash everything they touch and blame someone else for their actions. Blaming is not a viable way for a President to run a country. It is the primary way socialists channel credit for a ruined economy from themselves however. This is as pernicious a means of avoiding fault as any. It was highlighted in Orwell’s book, Animal Farm, when the pigs blamed Snowball for all the negative repercussions of their policies.

Obama is the most powerful President the United States has had in my lifetime. The only two Presidents that came close were FDR and Wilson. These imperial Presidents, Obama, Wilson and Roosevelt had the same economic policies, IE top down command and control. In the case of FDR and Wilson the theory was new and hadn’t been so thoroughly disproved. Today with all the history against it, you would think that even a fool who had a modicum of education, would clearly see this fact. Unfortunately our school systems in the US and Europe white wash the reality of this economic sophistry.

When the initial downturn happened economic circles broke into two factions. There were the V shapers and the U shapers. The V shapers claimed the downturn would quickly turn around, and the economy would go into a time of high GDP growth, the U shapers said the economic downturn would take a bit longer but after a longer bottom, would go into a period of high growth. Both were wrong, this economic down turn has been characterized by an economic cycle that bumps along the bottom, like a fishing lure. Unfortunately there are no fish willing to bite anymore. We can rightly call this an L shaped recession… a drop with no recovery.

Obama is inebriated with his own press and power. His rhetoric effects the Supreme Court, he wins Nobel Prizes without accomplishing a thing, the unbiased press love and protect him, and he is fawned over by the cultural Elite. He has fallen victim to his own hubris. The unbiased media are claiming the economy was back on the road in the first quarter of this year but now is back in the ditch. They bend logic pointing at everyone and everything… but the driver. It seems to me that it is time to take the license from this drunk before he kills more people.

Sincerely,

John Pepin

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The Politicization of Everything

Posted on July 2, 2012 by john

Dear Friends,

It seems to me, everything in our society, civilization, and media, are being politicized. Every action, attitude and assumption by the individual and or group, is characterized politically. As we all know, to politicize something takes it out of the realm of personal freedom and individual choice, and brings it into the arena of political favor. This trend has profoundly negative consequences for America and the World.

Government lives and dies by politics. Everything government does is driven by politics. Those that are in government are, by definition, good at politics, and so it is in their self interest to politicize everything. This is simply human nature. Those who have some advantage seek to leverage that advantage into personal gain. Some do it, by providing a service or good to make a living, others use politics to take from those that produce. We see this empirically proven, by politicians who have never produced a thing, but regulation… yet are millionaires. This is obvious yet overlooked. We are angry at at politicians for it but we are so mesmerized by politics we fail to see it.

Healthcare is one aspect of the total politicization of human existence. Sophist assumptions are made by politicians daily. Some include, but are not limited to… everyone must be covered, that government interference in the market would yield positive results, that rent seeking on the part of insurance agencies is a benefit, that the only way to stop moral hazard is to create incentives to moral hazard, the list goes on and on. These are all spurious arguments by politicians put forth as logical and echoed by the unbiased media.

Healthcare is an avenue for the Elite to get politics into the most intimate areas of our lives. When government, a fundamentally political institution, is the primary decision maker in our healthcare choices, then, by definition, our healthcare will be decided by political favor. When this is the case, it is those people who have political connections, that get the benefit, and those who have no political power, subsidize the gain the others receive. The freedom of the market is an impediment to this outcome and so is characterized as a problem.

The US Constitution has been politicized to an amazing degree. This is clearly shown, by the violent fights those people who believe in the politicization of everything, put into vilifying appointees to it. Everyone understands that the definition of the Constitution depends on who is on the Court instead of what it was supposed to mean. The split decisions that come from that august body are further evidence of this. The argument that the Constitution is a living breathing document, shows how strongly politicians feel about changing the Constitution, which was originally a non political structural document, into a political one.

Regulation is another example of the politicization of everything. Regulation only goes up, never down, (unless it benefits some politically favored group). It is never winnowed of old, unneeded, incompetent, burdensome or blatantly political rules. It is only expanded to give hard working bureaucrats more work. The role of regulation is supposedly to fix market failures but, as a matter of fact, they only serve to damage the interests of the people at large, and further warp markets creating more market failures, while delivering profits to those few who are politically connected. Regulation protects companies and individuals, who would rather not face market competition, from having to improve their product, service or actions.

These are by no means the sum total examples of the politicization of everything but space limits us. The logic of collective action is the primary force at work here. Those who get the goods from the politicization of everything, unabashedly protect their interests, while those who pay the price, are vilified as selfish, if they try to defend their right not to be coerced by government to subsidize the politically favored. This leads to the lowering of the national wealth, increasing political faction, a diminishing standard of living for the masses, structural inefficiencies in the market, and most perniciously, the incentive to become politically favored, instead of providing the best good or service to capture a larger part of the market. The negative consequences are cumulative. As they accumulate our comfort and security are consumed. But our loss is a gain for those who are politically favored.

Is this a profitable and benign state of affairs or a pernicious and evil one? Will it lead to an improvement in the lot of Mankind or a diminishing standard of living? And so, should it be allowed to continue?

Sincerely,

John Pepin

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Europeans are Painting over Their Problems.

Posted on June 28, 2012 by john

Dear Friends,

It seems to me, when your roof is leaking, painting the ceiling is worse then doing nothing. That is exactly what they are doing in Europe, covering up the stain, and not addressing the underlying problem. In the case of Europe the basic problem is the welfare state. While bailouts may make the picture look better… until the next bailout, they only make matters worse. The structural rot gets worse and worse, while the European leaders pretend that all the house needs, is a new coat of paint. The people of Europe are in for a very rude awakening, when the house collapses, due to the leaking roof rotting the structure of their economy. Unfortunately, their collapse will lead to dire consequences for the whole World.

In micro economics, the spendthrift’s profligacy must lead inexorably to bankruptcy, but in macro economics, mistakes can be covered up… for awhile. The State has many options for disguising their extravagance, while the individual must suffer the consequences… immediately. This results in States piling errors upon mistakes and kicking the can down the road. It is only possible to cover the frivolous spending of the state for so long however. Once the errors are piled high enough no amount of shoring can hold it up.

One option that the “leaders” of Europe have been talking about, to shore up their heap, is a European wide bond system. This is no different than giving someone with a FICA score of ten, an unlimited credit card, and cosigning on it! I propose an experiment… If the “economists” that believe in this solution, really trust in it, then why don’t they get a gold card and give it to a heroin addict. Then they can see how well their “solution” will work in the real world.

The other option, the one that has been called innovative, is to have European wide banking deposit insurance. This is merely wall paper to cover the discoloration. It solves nothing! The banks will still be forced to make more bad loans, to the insolvent drunks who run Europe today, until the entire system is riddled with ship worms! The only possible result, is the prodigal European states will continue borrowing money, and going out to eat with it. Every adult knows that if you borrow money, it is foolish to spend it on consumables, you spend your own money on consumables. When you borrow money, it must be used for investing, in something that will add value or result in an income stream. To go out to eat with borrowed money is a sure path to insolvency… for the individual as well as the State.

The only real way to fix it, is the one no one is talking about, stop the out of control spending! There will be pain but it must be done. It will be forced on them sometime in the rapidly approaching future. The only real question is, manage the pain… or let it run out of control? If they control the slide, they can avoid the most dire outcomes but an uncontrolled fall will leave everyone to the vagaries of a chaotic collapse.

Those that espouse spending cuts are vilified by “economists” and the unbiased press. The siren call is that Europe can grow out of the mess if they only spend a little more. Fiscal responsibility is confused with what they call austerity. The European economists seem to think that spending cuts can’t get spending under control. They must also include tax increases! This is just as stupid as those that think spending more is the solution! European taxes are far too high today and more taxes will only serve to lubricate the slide to economic oblivion. How they cannot see this escapes me… unless they do see it, and are so corrupt they want a European economic collapse, with all the negative consequences that go along with it. This seems like conspiracy theory to the nth degree… or is it?

The macro solution is to cut spending, lower regulation, cut taxes and let the market work the debt out. There is no other way. But this solution is seen as too politically dangerous. The poltroons in Europe have made their bed, now they must sleep in it, but they quiver in terror at the thought. There will be pain with the real solution, but there will be far worse suffering and negative consequences for Europe, and the World… if someone doesn’t go up on the roof and fix the leak. Too bad they are so afraid of heights.

Sincerely,

John Pepin

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Obama Care, Fast and Furious, National Security vs Liberty and Freedom

Posted on June 25, 2012 by john

Dear Friends,

It seems to me, the more you stir a stench the more it stinks, and the stench coming from Washington stinks to high heaven. The pending Obama care decision from the Supreme Court will in large part decide the future role of government in the lives of citizens. The looming contempt of Congress vote in the House of Representatives, will show if the republicans there have any real chutzpa, or if they are the poltroons we think they are. The continuing leaks of highly classified national security secrets to the unbiased press, historically, would have justified a special prosecutor, but today we are told, a supporter of Obama is sufficient to investigate this damming case. Despite the fact, there have been measurable diminishments in our national security, while all the evidence points to a high ranking official in the White House. These are momentous times we live in. We will either be called the most stupid generation or the most enlightened by posterity. They are the ones who will suffer the calamities our lack of wisdom will visit on them or the rewards of our virtuous action.

The role and nature of the US government going forward depends on the ruling of the Supreme Court. If the Court goes the way it did in Wickard vs Filburn then we are in dire shape. The role of government will forever be enlarged, to the point we as citizens have no control of our government, while our government has total control over us. We will live in fear of our government while they will have absolute antipathy for us. There is a term in the dictionary for this state of affairs… it is called tyranny. Benign tyranny is still tyranny.

The case of Holder’s contempt vote is less obvious yet carries just as much moment. The democrats are calling the vote a nakedly partisan attempt to paint Holder in a bad light. Nancy Pelosi has claimed it is only because Holder is suing several States to protect the “right” of dead people and non citizens to vote in our elections. The merit of dead people and non citizens “voting” is not even debatable, by allowing people not legally allowed to vote, to cast ballots, undermines the very nature of a representative republic. To claim that to scrub illegal votes from the roles is a partisan position, shows the pernicious sophistry of Nancy Pelosi’s rhetoric, and does nothing but misdirect the debate.

The claim it is merely a partisan attempt to vilify Holder is hypocrisy writ large. Even a cursory examination of recent history shows the underhandedness of this argument. Scooter Libby was sentenced to jail, for lying to a grand jury in a blatantly partisan attempt to vilify President Bush, over the outing of Valerie Plame, (which had no effect on national security unlike the recent leaks). The Special prosecutor already knew who had told the unbiased media, which should have put the matter to rest, but the democrats pushed until they got the conviction of a Bush appointee to jail. Regardless of the fact, known at the time, he had nothing to do with the original charge, and was simply confused about the specific wording of a conversation with a reporter, several years earlier. To have gone to such great lengths then, and to act offended today, is hypocrisy at best and outright criminal at worse.

These are truly important issues. The nature and role of the US government is at stake. Shall we remain a Constitutional Republic, with limited government, or shall we become command and control like North Korea, where the Constitution means whatever the Elite tell us it does. Like the side of Orwell’s barn… where some are more equal than others. Can the government send guns into a friendly country, to assist drug lords who are fighting an existential war with the legitimate government, resulting in the verified deaths of over 300 Mexicans and at least 1 US Federal Agent, with no investigation and no consequences. Can the government escape all oversight even when they put our national security at risk for political gain?

These questions will decide the fate of our own children, but moreover, they will decide the fate of the World at large. The US has been a force for good in the World despite the spurious rhetoric by those engaged in the slaughter of their own citizens. So, it is not only the children of the US Citizen that are at risk, it is the fate of children around the World, that hang in the balance. Will our elected officials and appointed judges, make the right decisions and protect the traditional US value of limited government, or will they change the course of history, rendering the US Constitution impotent and thrust the World into oppression? The cowardly politicians might back down, allowing corrupt politicians to win, destroying the Constitution and undermining the concept of free and fair elections, eliminating all oversight of elected officials, and empowering those that want a World despot. But, in the end, as Saint Agustin said, “People get the government they deserve.” Who is really to blame for this reek, them… or us?

Sincerely,

John Pepin

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Bureaucracy vs Complexity

Posted on June 21, 2012 by john

Dear Friends,

It seems to me, the main difference between bureaucratic and complex systems, is that bureaucracies are inefficient and primarily benefit those in charge, while complex systems are extremely efficient and the benefits are more widely distributed. This is a well known truth yet is overlooked by most people. This fact can be applied to many areas of life but is most appropriate in the sphere of economics. Overlooking or disregarding this reality leads to all sorts of negative outcomes, like huge trade deficits, lowered economic outcomes, low or even negative GDP growth, and even outright tyranny.

Bureaucracies are hierarchical in structure. This type of system is characterized by a top down decision making structure. The commanders in such a system can be a single person or a group of people. All governmental structures are built this way. The decisions are made at the top, the middle men enforce them and the people dutifully carry them out. Unfortunately, the natural evolution of this type of system, is for those in charge to become more and more selfish. Feeding both their greed and egos until all the efficiency is wrung out of the system and only the people at the top get any benefits.

This is only one avenue of inefficiency in the bureaucratic system. Perhaps the primary source of inefficiency in a bureaucracy, is that so many decisions need to be made every second of every day in a modern economy, it becomes impossible for any group of people, no matter how smart or benevolent, to keep up. The task is simply too herculean. Just think about how many decisions need to be made when you build a house. The floor plan must be thought out, the type of heating system must be determined, the electrical feed must be decided, the exterior siding and trim must be considered, the color of the home is important to it’s blending into its surroundings, the interior color scheme and trim must also be considered, the roof system and treatment must be thought out, the list goes on and on. This doesn’t even take into account the millions of smaller decisions that need to be made, like figuring the rise and run of the cellar stairs, how long to cut each stud, the rafters must be measured and bird’s mouths cut… etc. Now, magnify this a hundred million times, and we have the decisions that are made in a simple economy in a single second.

Command and control economies, like socialist and communist, are forms of bureaucracies. If we look at the historical examples, of governments that have been socialistic or communistic, we see that this paradigm holds true. Those at the top get the goods while the people get the orders.

Complex systems are distributive in their structure. Decisions are made at the lowest level possible by the people who have the most information regarding them. This distributed decision making structure of the complex system, is the fundamental reason complex systems are so much more efficient… than bureaucratic ones. As the decisions themselves, are made by those most able to amass the necessary information to make them, in the most efficient way possible, the benefits are also distributed to the people… not the bureaucrat. Another reason complex systems are more efficient is that they build in competition. Competition forces efficiency, because those that are less efficient, are surpassed by those who are more efficient. This makes the limited money available more wisely spent and thus achieves the most bang for the buck.

Demand side economics is a form of bureaucratic decision making process, while supply side economics is a form of complex system. Demand side, as expressed by John Maynard Keynes, empowers the bureaucrat to take money from the earners and spend it to drive up demand. Supply side encourages those people who earn money to make their own decisions what to do with it. The one presupposes the individual will make the most of their own money while the other presupposes the government will make the most of someone else’s money.

The upshot is that demand side’s inefficiency’s create incentives to corruption, huge government deficits, general poverty and outright oppression, the other, supply side, leads to economic growth, personal freedom and general prosperity. But demand side has one thing going for it, it empowers those in charge, to misspend money earned by others, to massage their egos, enhance economic outcomes for the rulers and create a perpetual ruling class. As Thrasymachus said, most people just want to be left alone but those great men want power…

So I ask, is it more important that “great” men have power, or that there be general prosperity?

Sincerely,

John Pepin

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Obama’s Spurious Logic

Posted on June 17, 2012 by john

Dear Friends,

It seems to me that when Obama and the minions in his administration and the unbiased press, claim that Romney will return us to the failed policies that got us into the “great recession,” he is engaging in the most pernicious form of sophistry. What the World needs today is less spurious logic and more thoughtful action. When Obama engages in sophistry he essentially admits his ignorance of economics or he is maliciously trying to avoid blame for his own failed policies. This has profound negative consequences for us, our children, and the people of the World.

Obama seems to have the notion that it is growth in government that creates growth in the economy. This is ignorance writ large. Growth of government does nothing to grow the economy of any country or nation. Government growth necessarially lowers economic outcomes. Every dollar that government takes from the private sector is misspent, due to the fact that no one is as careful spending the money of others, as they are spending their own. Therefore, government spending is less efficient than money spent, by those that worked to earn it.

His spurious logic bypasses the fact that the housing implosion was a result of government’s meddling in the free market by a democrat controlled congress. The democrats in congress claimed that certain neighborhoods were being red lined. This was rectified by congress, during the Clinton administration, by forcing banks, credit unions and other lending institutions, to lend money to people who were not good for the loans! This meddling in the free market led to an explosion of people buying houses that they couldn’t afford. As long as the price of housing went up the bubble got bigger. But, as we all know, (except Obama), bubbles must eventually pop. When it did, the collapse of so many loans resulted in what Obama’s “great recession.” Like FDR’s great depression.

It ignores the fact that it was supply side economics that brought us out of Carter’s stagflation. Ron Reagan instituted Hayak’s supply side economics and the results speak for themselves. The American economy was in far worse shape when Reagan took office. Reagan instituted regulation reform and lowered taxes. He made it easier to start a business. This led to a huge jump in growth of the US GDP. His policies made more people rich and savaged the ranks of the poor raising many into the middle class. This was a bad thing to Obama and his ilk because it is the poor who are their main political supporters. It is in their interests to have a large and growing impoverished class.

When Obama claims that republicans only want to give the rich tax breaks he doubles down on his spurious logic. This is patently sophist because, supply side gives tax breaks to those who are trying to get rich, not those who are rich. The already rich are the primary beneficiaries of Obama’s policies. Those that are trying to get rich are the very people who create jobs! The already rich have a negligible effect on the job market because they have their money in trusts. They had their wealth given to them by their parents, who engaged in the market system and got rich by it. Their children, the already rich, want to close the door to people who seek to join their ranks. This is the embodiment of Joesph Schumpeter’s theory.

When our politicians engage in spurious logic, to hide their own shortcomings, the American people are poorly served. The results of growing government, are visible for all to see, in Europe. The fast approaching economic collapse of the European welfare state model, will create a whole new level of poverty in Europe. A level of want and need that Europe has not seen since Charles Dickens wrote his books about poverty. Obama will visit this future on the American people by his policies. As a result, we will not be in a position to help the people of Europe, climb out of the economic catastrophe their politicians have given them and their children. We as people of the World have to open our eyes and think for ourselves. We must look through this sophistry. If we don’t, our children and their children, will inherit poverty, want and war, as our legacy. Is that what we want or are we willing to call evil evil and sophistry sophistry? The decision is ours to make, but we had better hurry, time is running out.

Sincerely,

John Pepin

Posted in economy, Group Politics, International Power, media, philosophy, polictics of class envy | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment