American Jobs Bill: Takes money from those who could create wealth and gives it to those who consume it.

The President gave a very effective speech....if you listened only to what he said and ignore what he didn't say. He continues to operate from the erroneous Keynesian perspective that the economic problem to solve is not enough consumption, ignoring the fact that without efficient production of real value, there is nothing to consume. Consumers must first produce value if what we want is wealth-creating, win-win exchanges. Instead, what President Obama offered last night is more wealth redistribution: take money from those who know how to create wealth and give it to people who know how to spend it. It's a recipe for continued economic stagnation.

Our country is in an economic pickle after decades of massive public funding of economic goods such as roads, bridges, education and health care. It is all too easy to see what currently exists and ask for more. It is much more challenging to see what could have existed if government had stuck to its proper limits and allowed the market to supply these goods. What we need is a president with more confidence in freedom, a better understanding of the benevolent benefits of capitalism and a greater appreciation of the destructive effects of central planning.

How to Grow an Economy

Since the recession began Texas...has produced 37% of all new jobs in the United States. Richard Fisher, president of the Federal Reserve Bank in Dallas, says this remarkable job growth is due to these pragmatic factors: a business friendly environment, flexible economic policies, small government, no state income tax, no right to work laws, a 30.5% health care growth, and systematic tort reform (editorial, “The Lone Star Jobs Surge" Wall Street Journal, June 10, 2010).

from Dr. Richard Reece at Medinnovation. 

ARRA: The seen and the unseen

American Recovery and Reinvestment Act

What is seen:

450,000 government sector jobs "created or saved"

What is unseen:

1,000,000 private sector jobs forestalled


Read more in this Ohio State Study:

"The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled"

For the time challenged: NCPA highlights the study findings.

Bastiat's "That Which is Seen and That Which is Not Seen"

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Keynes vs. Hayek--Round Two

The only rap music I have found worth listening to.






Round One: Fear the Boom and Bust


(HT Patrick Peterson)

Dear Congressmen: Let the Economy Grow

The following is a letter I sent to my congressmen in Washignton adn Sacremento:

Dear _________

The solution to the rising national [state] debt and the obscene budget deficits is NOT to increase taxes but to cut spending.

We will not be able to tax our way out of this mess. We must grow the economy--and taxes get in the way of economic growth.

Government must be gradually reduced back to its proper limits of the courts, police and the armed forces. Steps must be made to eliminate government subsidies of business and non-profits, and work toward ending the massive welfare entitlement programs of government education, Medicare, Medicaid and Social Security.

NO MORE TAXES.

SPEND LESS.

I urge you to vote to repeal the tax increases scheduled to go into effect on January 1st, 2011.

Please vote to make permanent all the tax reductions enacted in 2001 and 2003--and abolish the inheritance tax as well.

It is not your money. It is mine.

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The Story of Business

Another great find by Ideas Matter.



How to get the economy going?

Any laws should "Make it simple. Make it understandable and predictable."

Read the rest of Max Border's post here.

What to do about the Fed

One of the biggest, if not THE biggest, issues facing us today is getting the budget and deficit under control and th economy growing again.

The Fed is trying to jump start spending through quantitative easing---but that's going to have the same effect as an alcoholic dealing with his problem by having another drink.

So what would be a better solution?

The best solution would be to End the Fed--but a more realistic solution may be to end the Fed's "dual mandate" of price stability and full employment and make its job simply the preservation of the value of the dollar.

Read more here and here.

What do you think?

(HT TIADaily.com.)

SIGTARP Quarterly Report

January 30, 2010 Quarterly Report to Congress from the Office of the Special Inspector General for the Troubled Asset Relief Program.

Let the Executive Summary speak for itself:

The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time. It is hard to see how any of the fundamental problems in the system have been addressed to date.

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street


• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.

The emphases are added, although it seems much of this summary could be highlighted as important.

It it hard to read the motto under the SIGTARP logo, so let me reproduce it here:

"Advancing Economic Stability Through Transparency, Coordinated Oversight and Robust Enforcement"

Think they will live up to it?


HT Big Government via Dr. Lydia Ortega @ The Bar Stool Economists Yahoo Group

Emerson Electric Shrugs

From Manufacturing and Technology News:

Emerson Electric Votes With Its Feet, Saying The Government Is Destroying American Manufacturing Nov. 17, 2009

The federal government is "doing everything in [its] manpower [and] capability to destroy U.S. manufacturing," says David Farr, chairman and CEO of Emerson Electric Co., in a presentation at the Baird 2009 Industrial Conference in Chicago Ill., on Nov. 11. In comments reported by Bloomberg, Farr added that companies will continue adding jobs in China and India because they are "places where people want the products and where the governments welcome you to actually do something. I am not going to hire anybody in the United States. I'm moving. They are doing everything possible to destroy jobs."

In his Powerpoint presentation available on the Emerson Electric Web site, Farr notes that the federal government is damaging prospects for U.S. economic growth with a $1.41 trillion federal deficit (10 percent of GDP); $12 trillion in government debt that will grow to $20 trillion in 10 years; a policy of printing money; a "non-targeted $800-billion stimulus"; bailouts for Wall Street and the automobile companies; the prospect for cap and trade legislation; a "government takeover" of health care to the tune of more than $1 trillion; increasing taxes and regulations; and a "lack of U.S. $ support" for manufacturing. The global stimulus "soon will fade," says Farr.

Emerson Electric did major down-sizing in response to the recession (14% decrease in headcount and shut down 75+ facilities) and plans to build back up over seas, leaving the increasingly interventionist U.S. Government behind, and unfortunately U.S. workers as well.

A few choice slides from his PowerPoint presentation:

Slide #7

Slide #11

Slide #13

The Source of True Benevolence

"Absolute power corrupts even when exercised for humane purposes. The benevolent despot who sees himself as a shepherd of the people still demands from others the submissiveness of sheep. The taint inherent in absolute power is not its inhumanity but its anti-humanity."

-- Eric Hoffer (1902-1983) American author, philosopher, awarded Presidential Medal of Freedom Source: The Ordeal of Change (1963), Chapter 15 (HT Liberty Quotes)

What makes a despot a despot is the initiation of force used in place of persuasion. Despotism can be implemented by an individual (dictator, King, Imam, etc.) an elite minority (aristocracy, Politburo, etc.) or by unlimited majority rule (democracy, democratic socialism, etc.)

The despotism we face today, here in the United States, is that of insufficiently limited majority rule guided by political leaders who have no compunction about using force to achieve their goals. The use of force is justified by the fact they wield it for the sake of the poor, or the planet, or the uninsured, or the foolish investor or a failing business--but it is force none-the-less.

This is not the road to peace and prosperity. There is no compassion in denying a man the right and the ability to freely live his own life for his own sake. Compelling a man to sacrifice his life, or labor, or property for the lives or goals of others breeds resentment and hatred, or slavish submission. Other men become threats and/or burdens to one's own well-being. The use of such force reinforces the use of political power to gain special advantages at the sake of others less powerful.

The antidote is the absolute prohibition of the initiation of force, guided by a proper understanding of the individual rights of life, liberty and property, implemented through a constitutional republic whose sole purpose is the protection of those individual rights. It is only within such a system that true benevolence can be found. When the right of the individual to live for his own sake is jealously and consistently defended, the only permitted interactions are persuasion and voluntary trade. Contracts are upheld by law. Violence is prohibited. Fraud is carefully defined, outlawed and duly punished. Other men become values, potential assets and allies in the preservation and flourishing of one's own life.

Wealth is not the problem--neither its production nor consumption. Selfishly valuing and living one's own life is not the problem.

The problem stems from the failure to banish the initiation of force from the armamentarium of acceptable means for achieving one's goals--either as an individual, or as a community of any size. White-washing force through a political process of voting does not change the essential nature of the act.

The use of such force is an indispensable part of the legislation currently being debated or implemented: bills on energy, climate change, banking, business bailouts, economic "stimulus" programs and on and on. It is also integral to all welfare programs, which by their very nature involve forcibly taking from some to give to others: the new healthcare "reform" proposals, the old Medicare and Medicaid, Social Security, government-funded education, government unemployment benefits, and on and on. The desire for everyone to live a full, comfortable and healthy life is laudable, but the listed programs are not benevolent in their means, even if compassionate and well-meaning in their ends.

Kindness, compassion, charity, love---these all can only exist voluntarily. The only truly benevolent stance with regard to another human being is "Convince me, or leave me alone." All else entails force and is inhumane and anti-human, no matter how well intentioned.



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Knowing what you stand for

At a pre-9/12 gathering, Dr. John David Lewis spoke on the importance of knowing what you are fighting for---not just what you are against. He encouraged all who are involved in the current protests to stay focused on the principle which explains exactly what is wrong with the recent explosive expansion of government into our private lives: the violation of the Rights of Man--rights which are rights to actions, not rights to things.

I have heard several political commentators, and the President himself, bemoan the coarsening of political discourse--those who disagree are no longer simply wrong but are denounced as immoral and evil. But what is at stake is not just which of several a strategies to choose in order to achieve a worthwhile goal. It is not a mere bickering over details. What is at stake is whether or not we abandon the principles upon which this country was founded: Individual Rights. This IS a moral battle. Those who promote collectivism, in any of its myriad of forms, are promoting STATISM at the direct expense of FREEDOM--and to do so IS evil because it is an an attack on the individual's right to live his life for his own sake.

This talk is an important reminder: the biggest problem with national health insurance, cap-and-trade, bank and auto company bailouts, etc. is not the immense financial cost. It is that each of these interventions are a direct and personal attack on our rights to life, liberty and property.




HT The Forgotten Man

The Essence of a Government Stimulus

Brought to you by The Rational Capitalist:

Obama: Please Try This at Home

If you want to understand why “stimulus” programs do not work in the sense of generating economic growth, try the following experiment at home or at your place of business.

Go up to someone and hand them $20 and tell them that by giving them this money, you intend to “stimulate” the local economy. Observe what happens. The recipient now has $20 to spend or do whatever. However, note that you have $20 less to spend. Therefore, there will be no net affect on the local economy. All that has happened is that the recipient has twenty of your dollars to spend on something he wants, and you have $20 less to spend on something you want.

The rest is just as pithy. Read it and enjoy!

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Ramblin' On

Peter Schiff often has a lot of good things to say, and he said quite a lot of them in his recent Henry Hazlitt Memorial Lecture at the Austrian Scholars Conference on March 13, 2009. Unfortunately, he frequently got side tracked and the speech in its entirety is long and rambling. Below are a few choice segments..and as lengthy as they are, the original article is much lengthier. If you prefer, you can meander along with Peter through the whole speech posted on the Ludwig von Mises Institute website--or you can read the highlights below.

Why the Meltdown Should have Surprised No One

Comparing the current recession to the dot.com recession:

When people bought stocks they pretty much bought it with their own money. And if they got a margin account, maybe they had to put 50 percent down. And many of the brokerage firms were requiring higher margins on Internet stocks. So, when the bubble burst, the losses were pretty much confined to the people that made the bad bets.

And at least when the losses happened, nobody tried to bail anybody out. If you lost money, you lost money. There was no one looking to the government to get their money back because they bought a dot-com stock that went to zero.

None of the brokerage firms failed. Nobody failed because they had loaned money to people to buy stocks.

This time around, of course, everybody who bought real estate did it with somebody else's money. Very few people were paying 100 percent. Many people were buying real estate with none of their own money; people were buying real estate with nothing down. Is it any surprise that people gambled when they had nothing to lose?...

On securitization and government guarantees:

The reason that it was so easy for people to borrow all this money to buy houses was because of securitization.

At first it started with Freddie and Fannie. If it wasn't for Fannie Mae and Freddie Mac, Americans couldn't have borrowed all this money to buy houses. The only reason they did it was because the US government was co-signing their mortgages.

And people knew, well, if you lend somebody money to buy a house and if they can't pay you back, the government will pay you back. And, so, people were able to borrow a lot more money than a free market would have allowed because the government was there co-signing it.

But there were some mortgages that the government wouldn't co-sign; these were the ones known as the subprime mortgages. But Wall Street figured out that, well, we can securitize these mortgages; the government won't guarantee them, but we're going to buy them all up and put them into these structured products, and by structuring them like this we're going to reduce the risk....

Well, but it was because Wall Street was able to securitize all these bonds and sell them to the Japanese and sell them to the Chinese and sell them to the hedge funds that there was demand. And, of course, why was there so much demand for high-yielding assets? Because the Fed had the interest rate too low. Everybody needed yield and they were willing to take risk to get it...

It used to be that the mission of Freddie/Fannie, before they went broke, was to try to make homes, homeownership affordable. Now their mission is to keep home prices high, to keep homes unaffordable, to make sure we have to mortgage ourselves to the hilt to buy a house.

The government solution is high prices but low mortgage payments subsidized by the government. The free-market solution is low prices. Because if real-estate prices go down, you don't need to borrow that much money to buy a house. So it doesn't matter that your mortgage payment is a little higher...

The Fed vs. the Free Market

President Bush, in one of his speeches, said that Wall Street got drunk. And he was right, they were drunk. So was Main Street. The whole country was drunk. But what he doesn't point out is, where'd they get the alcohol? Why were they drunk?

Obviously, Greenspan poured the alcohol, the Fed got everybody drunk, and the government helped out with their moral hazards, and the tax codes, and all the incentives and disincentives they put in — all the various ways that they interfered with the free market and removed the necessary balances that would have existed, that would have kept all this from happening...

Federal Ponzi Schemes

The US government, we don't pay our bills. We're like Bernie Madoff. People loan us money. How do we pay it back? We borrow more.

If somebody came to Bernie Madoff a couple years ago and wanted their money, they got it. Why did they get it? Because they were able to take in new money. They found another sucker who didn't know it was a Ponzi scheme.

Same thing the US government does. Every time a bond matures, we just go sell another one. And every time we need to pay interest on the national debt, we go borrow that too. Well, it works until nobody wants to lend us any more money, then we're going to have to default, just like Bernie did.

And there's only two ways we can default. We just legitimately don't pay, or we print money. That's it...

Growing the government instead of the economy

And, what's happening now, of course, is the government is using this economic crisis, that they caused, to get even bigger, to grow their power, to expand, to come to our rescue, to save us from the evil forces of capitalism with government, with socialism...

[President Obama]wants the US economy to have a sound foundation, but he wants to be the one that builds it. He thinks the government can erect a sound foundation; that central government planning can replace the market; that resources can be allocated efficiently by politicians who want to get votes, as opposed to entrepreneurs who are looking for profits. He wants to replace the invisible hand with the hand of the state. And he thinks that he can do it better...

It's all about bailing and stimulating:

The government right now — everything that they're doing — what is the government trying to do right now? They want to bail people out and they want to stimulate.

Well, the bailouts are the worst thing that you can do, because they want to bail out companies that should fail, that should be bankrupted. Bankruptcy is a good thing. It's the way the market cleanses the economy of companies that shouldn't be there.

Why shouldn't they be there? Because they're not generating profits; they are not effectively utilizing resources. Those resources need to be freed up. Right now they're being held hostage. We need to free them up so that we can use them productively...

But the stimulus, what is it that the government is trying to do with the stimulus? The government is trying to recreate the conditions that led to the crisis. Because when they talk about stimulating the economy, they're not talking about stimulating economic growth. They're talking about stimulating spending...

[W]e said, "Hey, we're actually getting wealthier!" — even as we were getting poorer, because we were spending money instead of saving money. But — and as we spent money, we counted that spending as GDP. And, so, as long as our GDP was rising, we thought our economy was growing.

But the whole time our GDP was actually going up, we weren't measuring real economic growth. We weren't measuring how much wealth we had been destroying or dissipating. We were simply spending. And we thought we were okay because some appraiser said that our house was worth more, or the stock market was still going up.

But all that was an illusion, and now that those bubbles have burst, there's no way to go back to it...

[W]hen you borrow money and you invest in productive capacity, you have a real asset and the asset can generate revenue...And we became the world's wealthiest economy because we borrowed to produce. What we've done recently is we've borrowed to consume. We didn't produce anything. We borrowed money and bought trinkets. We bought depreciating consumer goods. So how can we possibly pay the money back? We didn't acquire any income-producing assets to pay the money back....

Nothing fundamental has changed

[T]he combination of Obama/Bernanke is way worse than Bush/Greenspan, but it's the same philosophy. Nothing has changed. This might as well be the third Bush term. He is doing the same exact stuff.

The rhetoric is a little bit different, but the policies are all the same, the ideas are all the same: that economic growth is a function of people spending money and that we need more government to stimulate the economy; that we should bail out the people who fail and punish the people who succeed. And that we should have no interest rate. The Fed should be cranking out money...

And if we want to have a real economy, if we want to have production, then savings need to go to producers. Well, they're not going to go to producers if they're squandered by consumers. They're not going to go to producers if the government is borrowing all the money.

So what do we need? We need the government to eliminate the deficit and go to a surplus. We need the government to stop spending money and depleting our savings. We need consumers to stop spending money and rebuild their savings. We need a recession. We need it. We need one badly...

Toward the end of the article, Schiff draws and interesting parallel between what happened during the Great Depression and now. I know, I know, that comparison has been WAY over done. But, in pointing out that Hoover was mistakenly associated with a free market, just as Bush is today, and then was followed by Even-Bigger-Government Roosevelt, whose policies deepened and prolonged the depression, what President Obama is doing now is even less defensible. It's the same damn thing all over again!!

The popular notion is that we had a depression because Hoover was so irresponsible that he trusted the free market and he did nothing, and because he did nothing we had a depression. And then Roosevelt rode to the rescue and saved the day with big government.

Well, the reality, of course, is that we had a depression because, (a) we had a Federal Reserve that was too easy in the 1920s and created a boom.

And then when the boom bust, Hoover ignored the good advice of his secretary to the treasury — which maybe is the last time the secretary to the treasury ever gave anybody any good advice. And instead of allowing the free market to work, he came up with all kinds of crazy things to bail people out and to prop things up and to distort prices and fix wages and all kinds of things that created the depression.

And then Roosevelt came in and proceeded to make it worse. And everything that Roosevelt did exacerbated it and made the depression great...

And that's very similar to what's happening now. You got Bush, who is the Hoover now of this generation, who is now associated with the free market, who is nothing like the free market. And now we have Barack Obama, like Roosevelt, coming in to save the economy with big government. Of course, the government is already huge. Maybe he hasn't figured that out.

Wealth is not the problem. Wealth is the solution. But it has to be real wealth, based on production and investments from savings--not consumption based on debt and dollars created out of thin air.

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An Optimistic Perspective on Current Events

Lately, it has been easy to become discouraged by the barrage of statist rhetoric and actions coming from federal, state and local government--especially given the apparent wide public support these actions are receiving. I am always grateful for the occasional article which injects a bit of optimism into the debate. Perspectives like that conveyed in the article linked below provide a helpful reminder of how it takes time to change the assumptions held by a culture, and the importance of working to lay the groundwork. I particularly liked the parallel the author draws between the spread of ideas and the Austrian theory of capital structure. I hope you too can receive a bit of a boost to help you carry on.

"[I]deas are higher-order factors of production."

from Academic Scribbling and Current Events by Art Carden.


Addendum: A complimentary post on this subject can be found today (6/10/09) at Gus Van Horn.

California finds a backdoor to the Fed's magic printing press. Will it be unlocked?

Doug Reich, The Rational Capitalist, has made a crucial observation that needs to be understood far and wide. Be sure to read his entire post, also up at simply Capitalism.

Now Your State Can Print Money Too!

One reason why spending at the state level can rarely get out of control is because states lack the power to print money. In other words, they must rely on taxation or municipal bond offerings to raise money to fund their budgets. Since taxation is unpopular, there is an obvious political limit to increased tax rates. Since private municipal bond investors can only buy so much debt before asking for higher interest rates, there is also a limit to the amount states can raise through borrowing. The federal government figured out how to get around this limit by creating the Federal Reserve System which is a pseudo private bank with the power to create money. The Fed can buy federal government debt from the public with fake money. Therefore, the federal government always has a buyer for its paper.

Now, the states want to get in on the action.

Of course, the states will not ask for the direct power to print money. They have a more clever way...


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The President and the Rule of Law

President Obama says he doesn't want to own auto companies--but his actions are speaking louder than his words.

Mike Shedock summarizes the current deal being negotiated with GM:

If the deal goes through as currently proposed....

• The Treasury (taxpayers) would be stuck with 50% of GM's equity (currently worth $625 million) in exchange for forgiving about $10 billion in federal loans.
• The UAW would get 39% of GM's equity (currently worth $488 million) in exchange for giving up $10 billion in health care benefits
• Corporate bondholders would get 10% equity (currently worth $125 million) in exchange for giving up $27 billion in bonds.

The UAW will own 39% of GM, and the US Government will officially own 50%! As the Wall Street Journal points out, this also means that the US Government will receive 87 cents-on-the dollar, the UAW receives 76, and the bond holders only 5 cents-on-the-dollar. Bond holders are, not surprisingly, trying to hold out for a better deal.

But the government's defacto control of the auto industry has been going on for decades: forced negotiation with unions, CAFE regulations which required the manufacture of cars customers did not want, threat of anti-trust actions effecting pricing and other key business decisions (read a summary here.) These interventions into the management decisions of a private company have served to hobble it into its current state of failure.

It's a classic example of government intervention causing a "market failure" which is then used as an excuse for further government intervention.

More recently, taxpayer bailout of GM was accompanied by government control over the choice of the company's CEO, the imposition of limits on executive compensation, and threats of "green" requirements on future car production. The government's heavy hand is playing a major part in trying to resurrect this business which it helped to kill. It is incredible that there is not more outcry against these overt acts of statism.


The latest "news" is that Chrysler is also bankrupt.

This proposed deal includes an attempt to run rough-shod over Chrysler's bond-holders. (See the pattern?) The Washington Post had this to report on the negotiation process:

A group of about 20 firms who declined to go along with the 11-th hour deal struck by the Obama administration to save Chrsyler from bankruptcy, has just released a statement claiming that the deal was unfair...

The holdout lenders -- who said their combined debt holding represents about $1 billion of the $6.9 billion owed to senior secured lenders – ... said they had offered to accept 60 cents on the dollar, despite “long recognized legal and business principles” that gives senior lenders such as themselves the right to be repaid in full before others recover anything in bankruptcy court.

“Our offer has been flatly rejected or ignored,” the group said. “In its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.”

Another WSJ article captures the essence of these actions through the experience of one man's struggle against President Obama's calls for "sacrifice" versus standing on principle against "government's strong-arm tactics."

Usually secured lenders are paid back in full before other unsecured creditors, which includes employees. This time, he says, the government is brokering a plan that he says goes against decades of bankruptcy law...

"We did not contemplate having our first liens invalidated by a sitting president...I feel personally threatened because of what the government is doing at Chrysler and General Motors and how they are changing the rules of the game, instead of allowing bankruptcy laws to be carried out the way they are written."

The chief executive is supposed to execute the law, not rewrite it.

One more ominous twist: As part of the proposed plan for Chrysler, the UAW will end up owning 55% of the company.

With the UAW as a significant owner in these two large auto companies (don't forget the UAW's 39% share of GM), doesn't that mean the Union will be negotiating against itself in setting up contract agreements? And what about the relationship between Ford and the Union? When it goes into contract negotiations, won't it be negotiating with it's main competitors?


Private property rights and the rule of law are two essential bastions of liberty and civilization. Our chief executive is trampling on both. He justifies it in the name of averting an economic disaster. But the real disaster is the long term effect his policies will have on our future liberty and prosperity. You can not save the economy, or anything else of real value, by destroying the very foundations of civilized society.


UPDATE:More on this over at Rational Capitalist, and Instapundit.
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Blogging is not enough

The daily assaults to our freedoms have become almost overwhelming. My response has been to stay abreast of events as best I can, to study the history and functioning of our banks and the Federal Reserve, and to spend what time I can communicating what I learn to others. I've written to my congressmen---and received back mass-produced form letters, which make it painfully obvious no one actually read what I wrote. But to do nothing is to stand on the track with the train headed toward me. Here are two projects I am supporting to help counter the attacks on capitalism, the only system which will provide us with lasting peace and prosperity.

Speaking Up through Books

Atlas Shrugged is a story of high drama, depicting the consequences of a society that consistently acts on the anti-life premises of altruism and collectivism. One law and regulation at a time progressively denies individuals the fruits of their labor, simultaneously strangling and exploiting the ability of the productive to create wealth and value. The evolving economic dictatorship is both actively and passively enabled by the productive themselves as long as they continue to accept the moral premises which deny a man the right to exist for his own sake.

This story is today writ large. For a chilling example, watch this clip of bankers statements following a meeting with President Obama in which he warned them:

“Be careful how you make those statements, gentlemen. The public isn’t buying that.”
“My administration,” the president added, “is the only thing between you and the pitchforks.”

These are the kind of comments I would expect from a Mafioso, not my country's president--and yet they are completely consistent with the premise that individuals and the businesses they create must purchase from others their right to exist. Our politicians are all too willing to act as the "Public's" henchmen, demanding and accepting sacrifices under the auspices of The Greater Good. Originally written to restrain government intrusion into the private affairs of men, our Constitution has been reinterpreted in ways that severely weaken its ability to protect our inalienable individual rights. The story of Atlas Shrugged can help alert critical thinkers to the dangers we face right now as all three branches of our government steadily increase statist controls of both the socialist and fascist variety.* The trend toward bigger government and greater controls will not reverse until the consequences of the loss of liberty are grasped by the general population and that understanding is clearly communicated to our elected officials.


The second project I would like to showcase is an example of the kind of action which is open to us all.

From what I can tell, the originator took an idea, created a website and a means to collect contributions in order to fund his idea, and now is spreading the ideas of liberty one kit at a time. Here is his mission in his own words:

The Lucidicus Project is an independent educational initiative designed to encourage medical students to think about the foundations of individual rights, and consider what a social system built on the consistent defense of such rights would mean for medicine and healthcare.

Our mission is to provide the Medical Intellectual's Self-Defense Kit to medical students in the United States and around the world. The kit contains books and other resources that define and clarify the meaning of important concepts such as rights and capitalism, and demonstrate how they relate to medicine and healthcare. Every few weeks, we also publish editorials that comment on current issues.

This project exists and grows thanks to the voluntary donations of its supporters. Kits are distributed free to qualified medical students, and there are no membership fees or registration. If the preservation of individual rights is important to you, and if you support the work we do, then please consider contributing to The Lucidicus Project today.

The website also allows contributors to see where their money is going. Beginning with the first recipient in 2005, a brief paragraph introduces each student who has received the kit, dispelling the anonymity which helps preserve a disconnect between our ideas their real-life consequences. Each law and regulation passed that restricts or controls the ability of physicians to offer their best advice and judgment to their private patients (a.k.a. us) acts as a damper on the minds and spirits you see depicted in these bright, young and optimistic faces.

There is much to admire in this project. It's grassroots nature. It's promotion of exposure to ideas. The inclusion of recipients who agree, disagree and are not quite sure. The demonstration of the effectiveness possible by targeting a specific audience with a clearly delimited and focused goal. The example of benevolence in action, both in the tone of its text, as well as through its coordination of voluntary interactions on multiple levels: the contributors, the recipients, and the creators of the materials.

I hope you will help these projects grow.

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*"Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically."--The Concise Encyclopedia of Economics

Diagramming Geithner's Plan

Geithner Plan I

Explanation of the Toxic Asset Theory of banks' failure to lend, and the Treasury's recent proposals to "solve the problem," including the original idea behind TARP as well as Geithner's new plan of Private-Public Partnership Investment
Program. (14 minutes)



But wait, there's more!
Caveat: The criticisms are good, but the speaker's proposed alternative solution is not.

Geithner Plan II (12 minutes)



These clips demonstrate how the new plan sets us up for yet even more government-subsidized risk through "investment" scenarios which end in either private gain or socialized loss. Additionally, the government's diagnosis is flawed on several levels.

The problems Geithner's plan aims at solving appear to be primarily: (1) potential bank insolvency if "toxic assets" are sold at market price, and (2) the failure of banks to loan in spite of recent and copious money infusions from the government. The first aspect is to be addressed by providing banks with an indirect bailout--government assistance to buy off bad assets via shared equity-risk and non-recourse loans. In regard to the second, other reasons besides toxic assets may be why banks aren't lending, perhaps most importantly, the scarcity of credit-worthy borrowers. Bailing banks out from underneath their self-inflicted exposure to declining asset values won't change the fact that people who are good credit-risks aren't interested in acquiring more debt.

How can this possibly work?

Financial Rescue Nears GDP as Pledges Top $12.8 Trillion (Update1)

By Mark Pittman and Bob Ivry

March 31 (Bloomberg) -- The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

The following table details how the Fed and the government have committed the money on behalf of American taxpayers over the past 20 months, according to data compiled by Bloomberg.

===========================================================
                             --- Amounts (Billions)---
                              Limit          Current
===========================================================
Total             $12,798.14  $4,169.71
-----------------------------------------------------------
 Federal Reserve Total   $7,765.64  $1,678.71
Primary Credit Discount           $110.74        $61.31
Secondary Credit                    $0.19         $1.00
Primary dealer and others         $147.00        $20.18
ABCP Liquidity                    $152.11         $6.85
AIG Credit                         $60.00        $43.19
Net Portfolio CP Funding        $1,800.00       $241.31
Maiden Lane (Bear Stearns)         $29.50        $28.82
Maiden Lane II  (AIG)              $22.50        $18.54
Maiden Lane III (AIG)              $30.00        $24.04
Term Securities Lending           $250.00        $88.55
Term Auction Facility             $900.00       $468.59
Securities lending overnight       $10.00         $4.41
Term Asset-Backed Loan Facility   $900.00         $4.71
Currency Swaps/Other Assets       $606.00       $377.87
MMIFF                             $540.00         $0.00
GSE Debt Purchases                $600.00        $50.39
GSE Mortgage-Backed Securities  $1,000.00       $236.16
Citigroup Bailout Fed Portion     $220.40         $0.00
Bank of America Bailout            $87.20         $0.00
Commitment to Buy Treasuries      $300.00         $7.50
-----------------------------------------------------------
FDIC Total             $2,038.50     $357.50
Public-Private Investment*       $500.00          0.00
FDIC Liquidity Guarantees      $1,400.00       $316.50
GE                               $126.00        $41.00
Citigroup Bailout FDIC            $10.00         $0.00
Bank of America Bailout FDIC       $2.50         $0.00
-----------------------------------------------------------
Treasury Total          $2,694.00   $1,833.50
TARP                              $700.00       $599.50
Tax Break for Banks                $29.00        $29.00
Stimulus Package (Bush)           $168.00       $168.00
Stimulus II (Obama)               $787.00       $787.00
Treasury Exchange Stabilization    $50.00        $50.00
Student Loan Purchases             $60.00         $0.00
Support for Fannie/Freddie        $400.00       $200.00
Line of Credit for FDIC*          $500.00         $0.00
-----------------------------------------------------------
HUD Total                 $300.00    $300.00
Hope for Homeowners FHA           $300.00       $300.00
-----------------------------------------------------------
The FDIC’s commitment to guarantee lending under the
Legacy Loan Program and the Legacy Asset Program includes a $500
billion line of credit from the U.S. Treasury.

The cause of our suffering: too much saving?

Today's post is published over at Simply Capitalism.

I hope you'll check it out.

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