by DC
School begins for many this week, and there are some hard truths about higher education that few wish to explore, let alone acknowledge.
1. Not everyone should go to college. Getting a higher education can be a marvelous experience, but it's just not for everyone.
I know of no country that attempts to educate everyone at this level. College was originally designed for students who are at least a standard deviation in academic aptitude above the mean. That eliminates all but about 16 percent of the population, and then a lot of those folks are wasting their time and money at a university.
John is a brighter than average high school student, but is not at the top of his class. He is good with his hands and understands how things work. His parents send him to college to become a lawyer.
He is in the bottom 20 percent of his law class. He graduates with an immense debt load and is considered to be a poor lawyer. He doesn't get much respect.
Suppose instead that John goes to a trade school to become a repairman. He is in the top 20 percent of this group. John the Repairman is highly respected. He has almost no debt, and he makes more money than John the Lawyer.
As an added bonus, society is in need of good repair persons, but we have no need for more bad lawyers.
2. Getting a college degree doesn't mean that you know anything. Modern universities don't require that students be knowledgeable to graduate. This sounds odd and administrators and teachers would claim that it is not true, but ask a simple question: What does a student need to know from a university to be allowed to graduate?
The answer is "nothing."
Students are required to complete a number of tasks. There is a long list of requirements. If they check each one off, they graduate. Students will work hard for grades; they will not necessarily work hard to know something. Modern schools have disassociated the two. Students memorize material, regurgitate it on an exam, and go their way.
Many students graduate knowing next to nothing. Don't take my word for it. I have been challenging my colleagues to test their students for years. I would love to be wrong on this, but ...
3. Grades don't reflect reality. There are entire areas of universities that give an automatic A to everyone unless they do poorly, and then they are given an A-minus. Much of this results from the improper use of student evaluations of teaching. Having students rate teachers is not a bad idea in itself, but it has evolved into a counter-productive travesty.
Imagine that at your workplace, several times every year, people you associate with are asked to fill out a questionnaire about you. They will remain anonymous and can say anything they wish. Management admits that it doesn't know what the surveys actually measure, but you will be denied merit pay, and perhaps even fired if your scores are low.
That in a nutshell is how universities use student evaluations.
Critics, and some supporters, maintain that the only reason that this system is maintained is administrative sloth and student crowd control.
Universities are essentially demanding that professors be well-liked by their students or they will be punished. Students are students because they don't know what they should know. The bottom line is that the evaluation system has resulted in grade inflation and a corresponding reduction in what students actually know.
Research over the last 10 years from all across the U.S. has consistently shown that teachers who get higher student evaluations produce students who tend to do more poorly in subsequent classes.
4. Like the housing market bubble, we may be approaching an education bubble. Paying a lot for an education makes sense if the returns are greater, but the cost of education is rising faster than the benefits. This has serious implications, which I will address in a forthcoming column.
Showing posts with label Education. Show all posts
Showing posts with label Education. Show all posts
Sunday, August 29, 2010
Friday, July 9, 2010
Does War Benefit The Economy?
As in the last post the following transpired between myself and another member of a forum. The topic was this article entitled "USA has two options to save its economy: declare default or trigger off war"
I post the following because it is a common belief even among educated people who should know better. That war somehow benefits an economy and the citizenry. No doubt some well connected benefit immensely (cough cheney cough) However when paying for a war the government has 2 options, raise taxes or print money both of which steal from the pocket of the citizen. When someone steals money from you this can NEVER benefit you.
So my initial response to the article was this.
"I disagree, there are no options to save the economy.
I don't see how the US economy was helped whatsoever by the mid east wars, the only thing that prolonged the inevitable is lowering interest rates to 0 and flooding the economy with money and cheap credit to unqualified people. This is already in the process of unwinding and another war will have no effect. We are already fighting too so I fail to see how adding 1-2 more zones will improve our economic conditions by any beneficial way to the average American. Sure GDP will go up because government spending is included in GDP, but it goes up at the pure expense of the people through devaluing their currency as well as inevitably increasing taxation (as if the latter is possible)
Starting a war will not increase meaningful US manufacturing, create jobs, lower personal and government debt, cut spending which are all things we desperately need.
War IS the health of the state, but when the state wins they win at the expense of the populace."
So a few posts later someone commented.
"A war in the style of Iraq,drains an economy, they simply dont want to "win". To Win a war, the people need to be subjugated and in fear, the Iraqis are neither,and havent been since the Invasion. The Iraq war is MEANT to drain the US economy, and to cause fear in the US to gain control, thats it! However a limited conventional war with China.Or Russia would be economically beneficial, as larger, more numerous items,(Tanks, planes, ships,rifles knives GI socks,etc.) would be needed to reequip the military.The US casualties , for the entire "War on Terror" is under 5500 dead and around 40k wounded(this includes 1100 who died in theater, but not combat) compare that to the Normandy campaign with 29k,dead and 210,000 wounded or MIA, or the 50000 lost in Vietnam in roughly the same time frame, it pales in comparison, IMHO the US population has no real stomach for those losses irregardless of their fate."
I replied
"Explain how war (government spending) in any form or fashion is beneficial to an economy?
Just look at the trillions printed to keep the charade going for the last 2 years, it hasn't even bought us a month of prosperity. Interest rates are already at 0, they can't afford to bring them up since they can't afford Tbill rates going higher, it would also collapse the housing market."
His reply
"If you go to war with your creditor,the debt vanishes."
To which I said
"How would that help our economy?
Only a portion of our debt is with China. Plus we are totally dependent as an economy on not only cheap imported goods (to hide inflation for one thing) but also for them to use that money to finance our empire. So pissing off your creditor is usually not a good idea short or long term."
So then he kinda backpeddles/changes the subject
"How else do you think they will get rid of it? **As I clearly said from the first post, I don't think they can get rid of it** it accomplishes population reduction and consumption, they will fight, it is planned.Its also a bit more than "pissing of your creditor" even in a conventional Sino-US war the casualties would be in the tens of millions.If it went nuclear, close to a billion."
My final response, which has gone unanswered so far
"I'm asking how it will help our economy, as in create jobs, create manufacturing that is a benefit to society.
You seem to be arguing that starting a war with China our largest creditor will erase a couple trillion from the debt and help our economic crisis. I just fail to see how. Even if it erased our current 13 trillion official debt, we still have over 100 trillion dollars of unfunded liabilities! Even if we kicked major ass in a war we would be back to this 13 trillion dollars in less than a decade, it only took 10 years to go from 4 to 14 trillion. It took 200 years to go from 0-4.
While fighting this war we will run up into the many trillions of dollars since undoubtedly there would be a draft and our military would have to double in size, where do you propose we raise this 2-5 trillion? From the people who are unemployed and heavily indebted? Or from the myriad of other countries who love our imperialism throughout the world and are only waiting to be asked to lend a helping hand?
China has us by the gonads and it would be the biggest mistake in history to start a war with them. It's like starting a war with your banker and supplier, you have no money, materials or food how long do you think the fight would last?"
I post the following because it is a common belief even among educated people who should know better. That war somehow benefits an economy and the citizenry. No doubt some well connected benefit immensely (cough cheney cough) However when paying for a war the government has 2 options, raise taxes or print money both of which steal from the pocket of the citizen. When someone steals money from you this can NEVER benefit you.
So my initial response to the article was this.
"I disagree, there are no options to save the economy.
I don't see how the US economy was helped whatsoever by the mid east wars, the only thing that prolonged the inevitable is lowering interest rates to 0 and flooding the economy with money and cheap credit to unqualified people. This is already in the process of unwinding and another war will have no effect. We are already fighting too so I fail to see how adding 1-2 more zones will improve our economic conditions by any beneficial way to the average American. Sure GDP will go up because government spending is included in GDP, but it goes up at the pure expense of the people through devaluing their currency as well as inevitably increasing taxation (as if the latter is possible)
Starting a war will not increase meaningful US manufacturing, create jobs, lower personal and government debt, cut spending which are all things we desperately need.
War IS the health of the state, but when the state wins they win at the expense of the populace."
So a few posts later someone commented.
"A war in the style of Iraq,drains an economy, they simply dont want to "win". To Win a war, the people need to be subjugated and in fear, the Iraqis are neither,and havent been since the Invasion. The Iraq war is MEANT to drain the US economy, and to cause fear in the US to gain control, thats it! However a limited conventional war with China.Or Russia would be economically beneficial, as larger, more numerous items,(Tanks, planes, ships,rifles knives GI socks,etc.) would be needed to reequip the military.The US casualties , for the entire "War on Terror" is under 5500 dead and around 40k wounded(this includes 1100 who died in theater, but not combat) compare that to the Normandy campaign with 29k,dead and 210,000 wounded or MIA, or the 50000 lost in Vietnam in roughly the same time frame, it pales in comparison, IMHO the US population has no real stomach for those losses irregardless of their fate."
I replied
"Explain how war (government spending) in any form or fashion is beneficial to an economy?
Just look at the trillions printed to keep the charade going for the last 2 years, it hasn't even bought us a month of prosperity. Interest rates are already at 0, they can't afford to bring them up since they can't afford Tbill rates going higher, it would also collapse the housing market."
His reply
"If you go to war with your creditor,the debt vanishes."
To which I said
"How would that help our economy?
Only a portion of our debt is with China. Plus we are totally dependent as an economy on not only cheap imported goods (to hide inflation for one thing) but also for them to use that money to finance our empire. So pissing off your creditor is usually not a good idea short or long term."
So then he kinda backpeddles/changes the subject
"How else do you think they will get rid of it? **As I clearly said from the first post, I don't think they can get rid of it** it accomplishes population reduction and consumption, they will fight, it is planned.Its also a bit more than "pissing of your creditor" even in a conventional Sino-US war the casualties would be in the tens of millions.If it went nuclear, close to a billion."
My final response, which has gone unanswered so far
"I'm asking how it will help our economy, as in create jobs, create manufacturing that is a benefit to society.
You seem to be arguing that starting a war with China our largest creditor will erase a couple trillion from the debt and help our economic crisis. I just fail to see how. Even if it erased our current 13 trillion official debt, we still have over 100 trillion dollars of unfunded liabilities! Even if we kicked major ass in a war we would be back to this 13 trillion dollars in less than a decade, it only took 10 years to go from 4 to 14 trillion. It took 200 years to go from 0-4.
While fighting this war we will run up into the many trillions of dollars since undoubtedly there would be a draft and our military would have to double in size, where do you propose we raise this 2-5 trillion? From the people who are unemployed and heavily indebted? Or from the myriad of other countries who love our imperialism throughout the world and are only waiting to be asked to lend a helping hand?
China has us by the gonads and it would be the biggest mistake in history to start a war with them. It's like starting a war with your banker and supplier, you have no money, materials or food how long do you think the fight would last?"
Wednesday, July 7, 2010
Americans Are Devoid Of Economic Knowledge
I am continually blown away by the raw ignorance of the American public. I don't know what is worse, those that have been brainwashed into either rampant israel first neo cons, radical outright marxists, or the ones who have no desire to even attempt to learn anything of importance and just watch american idol or whatever other garbage happens to be on TV.
I spend a lot of time perusing the internet and in so doing come across such ignorance unfortunately on a regular basis. So I am starting a new series of sorts where I post the stupidity here and also my refutation thereof.
I start today with an economics story posted at ANU News. The ABC story in summary was this
"By Ed Smith's math, the CEO of Walmart earns more in an hour than his employees will earn in a year. Alderman: Walmart CEO earns more in 1 hour than workers earn in a year. Smith, an alderman in Chicago, presented posters at a city council meeting showing that Walmart CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. By comparison, at a Walmart store planned for the Windy City's Pullman neighborhood, new employees to be paid $8.75 an hour would gross $13,650 a year."
Now I know I promised never to defend Wal-Mart again once they back Obama's health plan and I'm sticking to it, rather I'm refuting some basic economic misinformation I routinely come across.
So after reading the full marxist propaganda laden story I posted this to the ANU site.
"Wow a hit piece on Wal-Mart by jew run ABC news. How utterly surprising.
Let's see why would the jews hate Wal-Mart, could it be because they are defiantly anti union! So with that in mind why in hell would ANU run this garbage?
Does anyone force people to work at Wal-Mart? Why don't the employees work towards becoming CEO's? Also as far as CEO pay goes Duke is one of the lower paid especially considering the size of his company his annual salary is not 35million as the article claims but rather 1.2 million. After stock options and bonuses his total compensation for 2009 was just under 20 million still far lower than many other CEO's."
http://www.reuters.com/finance/stocks/officerProfile?symbol=WMT&officerId=248469
So then a brainiac "Scott Banks" chimes in
"ANU ran this "garbage" to show how well treason pays. If Mr. Duke could import 13 cent an hour Chinks as easily as he imports cheap Chinese crap there would be no Americans at all working at Walmart, just like there are no Americans manufacturing anything in America anymore. Thanks in part to traitors like Mike Duke."
So I reply
"I'd love to hear your explanation how Duke has anything to do with driving businesses from our land.
Let's assign blame where blame is due.
First if the jewish run central bank hadn't debased our currency by 95% we would be a far wealthier nation and could afford to buy higher quality goods.
Second, politicians to pay for the massive debts incurred by runaway spending tax the most productive in a society and drive them to more business friendly places.
Third, marxist controlled labor unions have driven up the wages to an unsustainable level that makes American labor not be competitive with the rest of the world. So let's recap, first you have a jewish run central bank who debases the money so that companies must pay their employees far more year over year because inflation is robbing them, second companies must pay their employees more because the government is robbing them, and third marxist labor unions are further exacerbating the problem by driving up the wages. Think about it if you had 0 inflation, no taxes and everything around you fell in price by 40% you could make 20-30k a year and live a comfortable life. But because of the aforementioned things you need to make closer to 100k to live the same lifestyle. You eliminate those problems and you will return to a world where factories can afford to remain here because they can pay US workers a fair price, and the worker in turn isn't robbed through inflation nor taxation.
Which of course is the problem. People look at the symptoms "oh America doesn't produce anything anymore" "this guy is a traitor blah blah blah"yet fail to go any deeper to address the problem. Wake up before posting anymore of this marxist crap."
So Scott Banks responds
"Blinded by Limbaugh neo-con horsecrap you fail to see that the solution is, and always was, protectionism. I'll explain it to you Thomas. America is like a family farm circa 1880. The homesteaders work all year chopping wood, growing crops, canning jam, spinning yarn, making candles and raising animals. When the family's needs for all of the above items have been met for the year the surplus is loaded into wagons and taken into town and sold. The cash is either banked or used to buy things the farmers cannot produce themselves. If the farm does not produce product in adequate quantities to sustain the family, let alone produce a surplus, the family must go into town and borrow money(or spend their savings)to buy the supplies they need to make up the difference for the year. That is how America as a nation is functioning right now. It cannot last. You go ahead and spew all the neocon globalist garbage you want about high wages, bad unions and competing with the Chinese. The fact of the matter is if America doesn't start producing products in quantities sufficient to meet the needs of it's citizens, America is going to go broke. Look at the charts for GDP, corporate debt, national debt, household debt. In 1975 America's GDP produced it's last trade surplus. From 1975 onward America's various debts took off into outer space. That is no coincidence. Like I showed, you either produce or borrow. The end of your foolishness is at hand Thomas. You're almost there and when you cross the finish line you can thank gutter rat traitors like Mike Duke and the Walton family for that."
And here is my latest reply.
"First, I run the website truthinourtime.com and I challenge you to find any shred of evidence to back up your claim that I am a "neo con limbaugh listening globalist"
Second, you don't seem to see the big picture that being WHY are goods cheaper to produce in China? I provided you with 3 of the big reasons why the US is not competitive in the global manufacturing market place.
Not only that but I provided a solution, kick out the jewish central bankers, kick out the marxist (jewish) programs in washington and kick out the marxist labor unions. Overnight you could lower wages because goods would be cheaper (due to the reasons I provided in the post above)
Now how in the hell does that translate to you as being "globalist" or "neo conservative"?
BTW feel free to email me personally at truthinourtime@gmail.com or stop by the website as I am in the process of turning our exchange into a post. "
Now Scotts is a very common argument (especially the ad hominem attacks when out of ammo) That protectionism, not abolishing the jewish run central banks which has devalued our currency 95% in a century, a marxist run government that through all hidden permits, fees and taxes robs the citizenry to the tune of 40-80% per year, or the labor unions that drive up the costs of goods for everyone.
Surely those things don't matter all we have to do is to put an import tariff on the chinese crap so that we all pay higher prices. Of course protectionists don't say anything about how our expensive goods will help us export any more goods.
As I pointed out to Scott and would like to reiterate. The problem isn't that nothing is made here and our trade deficit is off the charts. That is a symptom. The problem is that we CAN'T produce anything competitively on the global market place. It's like looking at someone and saying "damnit get out and win this marathon, why can't you win you bum?" The problem isn't that they aren't training but rather they have a broken leg and can't run competitively until it is fixed and putting a brace on the leg (protectionism) is a very short term fix at best and still won't make the runner or the economy competitive.
So let's go.
Why? Why is it that our labor costs are so much higher than that of China? Is it because they only pay pennies per day and we can't compete with that? Wrong you looking in the wrong place. Why do we have to pay workers 30k a year when in China they only make 5k?
Imagine you are an employee at a factory and make 20 dollars per hour here in the US. Now of this 20 dollars, the government through withholding SS, Medicare and Medicaid is going to take roughly 40% (employers have to match the 7% for SS so the total is 14% not 7%) So now you are left making in reality 12. Well guess what inflation is running at say a modest 5% annually so that's like making 11.40 an hour instead of 20%.
Well you say $11.40 is still way more than a Chinese factory worker makes and you are correct which is why stuff is made there and not here. Let's look at your money once you get your paycheck.
Assuming you work 80 hours every 2 weeks your paychecks will be around 913. So how do people spend their paychecks. Well everyone has a cellphone and 20% of the bill is just tax, 30% of every gallon of gas is tax, you pay probably 1% of the total value of your home per year in property tax, there are literally countless other minor taxes on everything you use and "own".
Now let's go shopping, and consider the store. Say Wal-Mart, now Wal-Mart has always worked on extremely small margin only a couple percent in many cases. So everything you purchase is subject to 7% sales tax but sadly it doesn't end there. The store itself has to pay it's workers a higher wage than normal to compensate for all the taxes and regulations they have t pay and jump through as well as to retain employees. Can you fathom what the property taxes are on a Wal-Mart? I find it sickening in the highest degree that the government literally makes more money % wise from a store such as Wal-Mart for doing absolutely nothing, even though Wal-Mart does 100% of the work from start to finish. Talk about a parasite.
This is just a very small scale example of the ways in which you are taxed but more importantly are taxed in hidden ways, such as the amount a store has to raise it's price on an item because of the income tax they themselves pay as well as the myriad of taxes and regulations imposed on businesses.
So you see the reason why we can't compete globally is because we are taxed into oblivion, not just directly, but in hidden sinister ways that most people don't even realize. How much cheaper would that computer be if HP didn't have to pay a team of lawyers to interpret different regulations, or pay taxes? According to the Fair Tax book (I am against any form of tax) the embedded tax in goods is 40%. So things would fall in price by roughly 40% if the government got the hell out of the way.
So prices would drop 40% directly, then you would no longer personally be taxed at say 50% of your income, inflation would be 0 and you wouldn't have to pay 7% sales tax. Now don't go and think that 200 dollar grocery tab reduced to say 40 bucks is going to make you richer because you make that much every couple days. Wages will also fall in relation to prices but percentage wise but your standard of living will rise.
For example now you make $11.40 (20) but grocery's cost $200 so after the government dies, over time the bill goes from 200 to 40 but your wages will probably fall from $20 down to say $8 but you only really made 11 bucks anyway and groceries were still $200.
So let's return to your factory now your boss only has to pay you 8 bucks an hour for you to be able to live the same lifestyle your currently enjoy. So they can hire twice the amount of employee's (say bye to double digit unemployment) and or sell their goods at a 60% discount. Now this is beginning to bring it inline with the rest of the world. It's starting to make the American worker competitive again and rebuilding our evaporating manufacturing sector.
Now granted these are just rough examples since it's 11pm and I'm tired mainly, but hopefully I have made you think about why things are the way they are and why in our current situation we CANNOT compete globally in the manufacturing sector.
I spend a lot of time perusing the internet and in so doing come across such ignorance unfortunately on a regular basis. So I am starting a new series of sorts where I post the stupidity here and also my refutation thereof.
I start today with an economics story posted at ANU News. The ABC story in summary was this
"By Ed Smith's math, the CEO of Walmart earns more in an hour than his employees will earn in a year. Alderman: Walmart CEO earns more in 1 hour than workers earn in a year. Smith, an alderman in Chicago, presented posters at a city council meeting showing that Walmart CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. By comparison, at a Walmart store planned for the Windy City's Pullman neighborhood, new employees to be paid $8.75 an hour would gross $13,650 a year."
Now I know I promised never to defend Wal-Mart again once they back Obama's health plan and I'm sticking to it, rather I'm refuting some basic economic misinformation I routinely come across.
So after reading the full marxist propaganda laden story I posted this to the ANU site.
"Wow a hit piece on Wal-Mart by jew run ABC news. How utterly surprising.
Let's see why would the jews hate Wal-Mart, could it be because they are defiantly anti union! So with that in mind why in hell would ANU run this garbage?
Does anyone force people to work at Wal-Mart? Why don't the employees work towards becoming CEO's? Also as far as CEO pay goes Duke is one of the lower paid especially considering the size of his company his annual salary is not 35million as the article claims but rather 1.2 million. After stock options and bonuses his total compensation for 2009 was just under 20 million still far lower than many other CEO's."
http://www.reuters.com/finance/stocks/officerProfile?symbol=WMT&officerId=248469
So then a brainiac "Scott Banks" chimes in
"ANU ran this "garbage" to show how well treason pays. If Mr. Duke could import 13 cent an hour Chinks as easily as he imports cheap Chinese crap there would be no Americans at all working at Walmart, just like there are no Americans manufacturing anything in America anymore. Thanks in part to traitors like Mike Duke."
So I reply
"I'd love to hear your explanation how Duke has anything to do with driving businesses from our land.
Let's assign blame where blame is due.
First if the jewish run central bank hadn't debased our currency by 95% we would be a far wealthier nation and could afford to buy higher quality goods.
Second, politicians to pay for the massive debts incurred by runaway spending tax the most productive in a society and drive them to more business friendly places.
Third, marxist controlled labor unions have driven up the wages to an unsustainable level that makes American labor not be competitive with the rest of the world. So let's recap, first you have a jewish run central bank who debases the money so that companies must pay their employees far more year over year because inflation is robbing them, second companies must pay their employees more because the government is robbing them, and third marxist labor unions are further exacerbating the problem by driving up the wages. Think about it if you had 0 inflation, no taxes and everything around you fell in price by 40% you could make 20-30k a year and live a comfortable life. But because of the aforementioned things you need to make closer to 100k to live the same lifestyle. You eliminate those problems and you will return to a world where factories can afford to remain here because they can pay US workers a fair price, and the worker in turn isn't robbed through inflation nor taxation.
Which of course is the problem. People look at the symptoms "oh America doesn't produce anything anymore" "this guy is a traitor blah blah blah"yet fail to go any deeper to address the problem. Wake up before posting anymore of this marxist crap."
So Scott Banks responds
"Blinded by Limbaugh neo-con horsecrap you fail to see that the solution is, and always was, protectionism. I'll explain it to you Thomas. America is like a family farm circa 1880. The homesteaders work all year chopping wood, growing crops, canning jam, spinning yarn, making candles and raising animals. When the family's needs for all of the above items have been met for the year the surplus is loaded into wagons and taken into town and sold. The cash is either banked or used to buy things the farmers cannot produce themselves. If the farm does not produce product in adequate quantities to sustain the family, let alone produce a surplus, the family must go into town and borrow money(or spend their savings)to buy the supplies they need to make up the difference for the year. That is how America as a nation is functioning right now. It cannot last. You go ahead and spew all the neocon globalist garbage you want about high wages, bad unions and competing with the Chinese. The fact of the matter is if America doesn't start producing products in quantities sufficient to meet the needs of it's citizens, America is going to go broke. Look at the charts for GDP, corporate debt, national debt, household debt. In 1975 America's GDP produced it's last trade surplus. From 1975 onward America's various debts took off into outer space. That is no coincidence. Like I showed, you either produce or borrow. The end of your foolishness is at hand Thomas. You're almost there and when you cross the finish line you can thank gutter rat traitors like Mike Duke and the Walton family for that."
And here is my latest reply.
"First, I run the website truthinourtime.com and I challenge you to find any shred of evidence to back up your claim that I am a "neo con limbaugh listening globalist"
Second, you don't seem to see the big picture that being WHY are goods cheaper to produce in China? I provided you with 3 of the big reasons why the US is not competitive in the global manufacturing market place.
Not only that but I provided a solution, kick out the jewish central bankers, kick out the marxist (jewish) programs in washington and kick out the marxist labor unions. Overnight you could lower wages because goods would be cheaper (due to the reasons I provided in the post above)
Now how in the hell does that translate to you as being "globalist" or "neo conservative"?
BTW feel free to email me personally at truthinourtime@gmail.com or stop by the website as I am in the process of turning our exchange into a post. "
Now Scotts is a very common argument (especially the ad hominem attacks when out of ammo) That protectionism, not abolishing the jewish run central banks which has devalued our currency 95% in a century, a marxist run government that through all hidden permits, fees and taxes robs the citizenry to the tune of 40-80% per year, or the labor unions that drive up the costs of goods for everyone.
Surely those things don't matter all we have to do is to put an import tariff on the chinese crap so that we all pay higher prices. Of course protectionists don't say anything about how our expensive goods will help us export any more goods.
As I pointed out to Scott and would like to reiterate. The problem isn't that nothing is made here and our trade deficit is off the charts. That is a symptom. The problem is that we CAN'T produce anything competitively on the global market place. It's like looking at someone and saying "damnit get out and win this marathon, why can't you win you bum?" The problem isn't that they aren't training but rather they have a broken leg and can't run competitively until it is fixed and putting a brace on the leg (protectionism) is a very short term fix at best and still won't make the runner or the economy competitive.
So let's go.
Why? Why is it that our labor costs are so much higher than that of China? Is it because they only pay pennies per day and we can't compete with that? Wrong you looking in the wrong place. Why do we have to pay workers 30k a year when in China they only make 5k?
Imagine you are an employee at a factory and make 20 dollars per hour here in the US. Now of this 20 dollars, the government through withholding SS, Medicare and Medicaid is going to take roughly 40% (employers have to match the 7% for SS so the total is 14% not 7%) So now you are left making in reality 12. Well guess what inflation is running at say a modest 5% annually so that's like making 11.40 an hour instead of 20%.
Well you say $11.40 is still way more than a Chinese factory worker makes and you are correct which is why stuff is made there and not here. Let's look at your money once you get your paycheck.
Assuming you work 80 hours every 2 weeks your paychecks will be around 913. So how do people spend their paychecks. Well everyone has a cellphone and 20% of the bill is just tax, 30% of every gallon of gas is tax, you pay probably 1% of the total value of your home per year in property tax, there are literally countless other minor taxes on everything you use and "own".
Now let's go shopping, and consider the store. Say Wal-Mart, now Wal-Mart has always worked on extremely small margin only a couple percent in many cases. So everything you purchase is subject to 7% sales tax but sadly it doesn't end there. The store itself has to pay it's workers a higher wage than normal to compensate for all the taxes and regulations they have t pay and jump through as well as to retain employees. Can you fathom what the property taxes are on a Wal-Mart? I find it sickening in the highest degree that the government literally makes more money % wise from a store such as Wal-Mart for doing absolutely nothing, even though Wal-Mart does 100% of the work from start to finish. Talk about a parasite.
This is just a very small scale example of the ways in which you are taxed but more importantly are taxed in hidden ways, such as the amount a store has to raise it's price on an item because of the income tax they themselves pay as well as the myriad of taxes and regulations imposed on businesses.
So you see the reason why we can't compete globally is because we are taxed into oblivion, not just directly, but in hidden sinister ways that most people don't even realize. How much cheaper would that computer be if HP didn't have to pay a team of lawyers to interpret different regulations, or pay taxes? According to the Fair Tax book (I am against any form of tax) the embedded tax in goods is 40%. So things would fall in price by roughly 40% if the government got the hell out of the way.
So prices would drop 40% directly, then you would no longer personally be taxed at say 50% of your income, inflation would be 0 and you wouldn't have to pay 7% sales tax. Now don't go and think that 200 dollar grocery tab reduced to say 40 bucks is going to make you richer because you make that much every couple days. Wages will also fall in relation to prices but percentage wise but your standard of living will rise.
For example now you make $11.40 (20) but grocery's cost $200 so after the government dies, over time the bill goes from 200 to 40 but your wages will probably fall from $20 down to say $8 but you only really made 11 bucks anyway and groceries were still $200.
So let's return to your factory now your boss only has to pay you 8 bucks an hour for you to be able to live the same lifestyle your currently enjoy. So they can hire twice the amount of employee's (say bye to double digit unemployment) and or sell their goods at a 60% discount. Now this is beginning to bring it inline with the rest of the world. It's starting to make the American worker competitive again and rebuilding our evaporating manufacturing sector.
Now granted these are just rough examples since it's 11pm and I'm tired mainly, but hopefully I have made you think about why things are the way they are and why in our current situation we CANNOT compete globally in the manufacturing sector.
Monday, May 10, 2010
Forgotten Facts of American Labor History
Just about everything that people think they know about labor unions and wage rates is wrong.
The standard tale that practically every student hears over the course of his education is that before the emergence of labor unions, American workers were terribly exploited and their wages were consistently falling. The improvement in labor's condition was due entirely or at least in large part to labor unionism and favorable federal legislation. In the absence of these, it is widely assumed, people would still be working 80-hour weeks and children would still be working in mines.
This oft-heard tale is, however, almost entirely false, and those parts of it that are true (the low standard of living that people enjoyed in the nineteenth century, for example) are true for reasons other than those alleged by pro-union historians, who see in them only confirmation of their prejudices against the market economy.
As late as the 1920s, labor law in America was based on the following considerations.
Freedom of contract and association were essential principles. A laborer was perfectly free to reject any offer of compensation that an employer might make to him, and an employer was likewise entitled to reject any offer made by a laborer. An employee was free to withhold his labor services if unsatisfied with his employer's terms; likewise, a group of laborers jointly exercising this individual right were permitted to do so. No one, however, was allowed to prevent individuals who wished to work from exercising their right to do so.
Strikers -- like anyone else -- were forbidden to interfere with consumers' right to shop where they liked. And strikes could not obstruct suppliers from making deliveries, since to do so would again violate the rights of others. Finally, since the employer's plant was private property, the employer had the absolute right to decide who would be permitted to enter, and complete strangers who wished to enter for the purpose of agitating his employees could be lawfully excluded altogether.
This common-sense legal approach to labor unionism began to give way with the Norris-La Guardia Act, signed by Herbert Hoover in 1932. The legislation made "yellow dog" contracts -- in which an employee could be required to promise to refrain from union activity as a condition of employment -- unenforceable in the courts. The Act also exempted labor unions from prosecution under the Sherman Antitrust Act. Although the Sherman Act should certainly have been (and still should be) repealed, if there were ever an institution guilty of "restraint of trade" it was labor unions, which not only withheld their own labor but which also used intimidation and force to keep down non-union competition. They would henceforth be exempt from behavior that the law deemed criminal in any other context.
The Act also prohibited the federal courts from issuing injunctions against labor unions in some cases and seriously crippled their ability to do so in others. Subsequent Supreme Court decisions made clear that the Act in effect shielded unions from prosecution for activities they may have engaged in during labor disputes. The injunction had been used to put a stop to union violence and property destruction when local authorities seemed unwilling or unable to protect life and property. Unions hated them.
As labor historian Morgan Reynolds explains, "An injunction temporarily restrained union actions pending a trial and this explains the intense union campaign against its use in labor disputes because once violence-ridden strikes were enjoined for a few days, they were difficult to revive, reorganize, and rekindle."
It is one of the many myths of American labor history that the courts issued injunctions frequently and indiscriminately. Labor economist Sylvester Petro undertook a thorough study of the period from 1880 to 1932 and found injunctions to be exceedingly rare: federal injunctions were issued in not even one percent of all work stoppages, while state injunctions were issued in less than two percent of all work stoppages. And these few injunctions were issued not to thwart labor union activity per se but to put a stop to violence against persons and property. Now even this protection of the employer's rights -- yes, employers have rights, too -- would henceforth be absent.
The New Deal added the National Labor Relations Act of 1935, more commonly known as the Wagner Act, to the mix. It had once been the case that a worker who did not wish to join a union or pay its dues refrained from joining and was not obligated to pay dues. Thanks to the Wagner Act, that individual freedom disappeared. From then on, if a majority of workers in a given bargaining unit chose to unionize, then that union represented all the workers and could require them either to join or at least to pay dues.
The usual defense of such coercion is that since the Wagner Act called for a single certified bargaining agent to represent all workers in a given bargaining unit, it was only fair that all such workers be required to contribute something to the union. After all, it is argued, since all workers gain from the union's activities on their behalf, it would be wrong for them not to contribute toward union expenses. This objection overlooks the real problem, which is the idea of having an exclusive bargaining agent in the first place.
If unions were content to bargain solely on behalf of their own members, then there would be no problem of non-members getting union benefits for free. If individuals were allowed to represent themselves and to enter into contracts with their employers on their own terms, those who wished to remain non-union would not be "free riding" on the benefits bestowed by labor unions, since the union would simply not bargain on their behalf. But federal labor law no longer guarantees workers this freedom.
(As a result of the Taft-Hartley Act of 1947 -- which labor historians detest despite the mildness of its provisions, which did little to overturn settled labor law -- states have the right to pass "right-to-work" laws, which prohibit unions from attempting to force union membership and dues on workers as the price for keeping their jobs.)
Once officially designated by a majority of workers as the exclusive bargaining agent for all workers, the union is never required to stand for re-election. Even after all the workers who originally voted for the union have died or retired, the union is simply assumed to have the support of a majority of workers. The new slate of workers has no say in the matter at all.
The Wagner Act also forced employers to bargain "in good faith" with unions that were established by a majority of workers. Whether an employer had complied with the vague instruction to bargain "in good faith" would be determined by the all-powerful National Labor Relations Board.
Moreover, the Wagner Act also interfered with employers' freedom of speech by making it an "unfair labor practice" to attempt to influence their employees' decision whether to unionize or not. Employers were required to permit union organizers -- that is, total strangers -- who did not work for them to use company property for the purpose of persuading employees to unionize.
Furthermore, the Wagner Act gave labor unions a degree of legal insulation afforded to no other group in society. The Act made labor unions immune to claims of vicarious responsibility. In plain English, that means that labor unions are not legally responsible for any violence their members might commit, even if union officials themselves order the violence.
All of these legislative measures made it much easier for labor unions to accomplish their goals. In order to fulfill their stated purpose of increasing the wages of their members, labor unions must restrict an employer's access to alternative sources of labor. That is to say, nonunion workers who wish to seek employment on the terms offered by an employer whose firm is unionized must be prevented from doing so. Harvard University's Edward Chamberlin once described the unique legal status that labor unions had been granted:
If A is bargaining with B over the sale of his house, and if A were given the privileges of a modern labor union, he would be able (1) to conspire with all other owners of houses not to make any alternative offer to B, using violence or the threat of violence if necessary to prevent them, (2) to deprive B himself of access to any alternative offers, (3) to surround the house of B and cut off all deliveries, including food (except by parcel post), (4) to stop all movement from B's house, so that if he were for instance a doctor he could not sell his services and make a living, and (5) to institute a boycott of B's business. All of these privileges, if he were capable of carrying them out, would no doubt strengthen A's position. But they would not be regarded by anyone as part of "bargaining" -- unless A were a labor union.
No wonder Nobel Laureate F.A. Hayek once said, "We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply."
In practice, during strikes the police have typically stood aside and done nothing in the face of union intimidation and even violence against non-union workers or those who simply wish to continue working. (This is one reason that the court injunction was so often sought in the past against violent strikes.) By means of this kind of coercion, labor unions are able to deprive employers of labor if they do not accede to union demands.
As Henry George wrote in the nineteenth century, "Those who tell you of trades unions bent on raising wages by moral suasion alone are like those who would tell you of tigers that live on oranges." The result of union activity, therefore, is to reduce the number of jobs in an industry and to raise the money wages of union labor, while at the same time relegating many workers, driven out of this line of work by the decreased quantity of labor demanded there, to other lines of work, whose money wages must decrease as a result of the greater supply of workers now forced to compete for them.
The net result is that the gains to certain workers are more than offset by the disabilities inflicted upon other workers. When union activity reduces the number of people who can be profitably employed in skilled trades, it correspondingly increases the number of skilled laborers who are forced to find work in fields that are well below their level of competence. The outcome of this displacement of skilled labor is no different from a situation in which laborers never possessed these skills in the first place. If union privilege prevents some workers from putting their skills to their proper use, the effect is the same as if they had never gone to the trouble to acquire them at all. Thus society produces below its potential, and wealth that would otherwise have been created never sees the light of day.
The ways in which labor unionism impoverishes society are legion, from the distortions in the labor market described above to union work rules that discourage efficiency and innovation. The damage that unions have inflicted on the economy in recent American history is actually far greater than anyone might guess. In a study published jointly in late 2002 by the National Legal and Policy Center and the John M. Olin Institute for Employment Practice and Policy, economists Richard Vedder and Lowell Gallaway of Ohio University calculated that labor unions have cost the American economy a whopping $50 trillion over the past 50 years alone.
That is not a misprint. "The deadweight economic losses are not one-shot impacts on the economy," the study explains. "What our simulations reveal is the powerful effect of the compounding over more than half a century of what appears at first to be small annual effects." Not surprisingly, the study did find that unionized labor earned wages 15 percent higher than those of their nonunion counterparts, but it also found that wages in general suffered dramatically as a result of an economy that is 30 to 40 percent smaller than it would have been in the absence of labor unionism.
Although labor unionism has actually made working people worse off, however, the usual argument for labor unionism and government legislation on behalf of labor is that in the absence of these things, employers will pay their workers unconscionably low wages.
Economist George Reisman proposes a useful thought experiment to the contrary. Suppose you own a car in New York City but eventually decide that the hassle involved in finding and paying for parking is simply too great, and you would like to get rid of the car for that reason. Suppose, further, that you have grown so frustrated with owning a car in the city that you would be willing to sell it for one dollar. Does that mean that you will in fact have to sell it for one dollar? Of course not. Given the great many potential buyers of your car, they will outbid each other. If a potential buyer offered you only one dollar, you would certainly turn him down even if, in a state of complete despair, you would have been willing to sell it at that amount. This person, because of his low bid, will miss out on the opportunity to own the car altogether since his rivals will simply outbid him.
Exactly the same process takes place in the labor market. The California State University's Charles Baird explains:
This idea, that workers without unions will inherently have a disadvantage in bargaining power relative to employers, is the basis for most individuals' support of unionism and is picked up again in the Wagner Act. But that disadvantage is a hoary myth. A worker's bargaining power depends on the worker's alternatives. If a worker either works for Employer A or does not work (i.e., if Employer A is a monopsonist), the worker has little bargaining power. If the worker has several employment alternatives, he has strong bargaining power. There may have been instances of monopsony or oligopsony in the 19th century, but... they were short-lived. Monopsony has not been a significant factor in the American labor market since the introduction and widespread use of the automobile.
The empirical evidence simply does not bear out the conventional wisdom regarding unions. If employers were really in a position to impose whatever wage rate they wished, then why in the decades prior to large-scale labor unionism did wages not diminish to near zero? (In fact, as we shall see below, real wages skyrocketed in the decades before modern labor law took shape.) For that matter, why did skilled workers earn more than unskilled workers? If firms were really in a position to tell workers to take or leave whatever pathetic wage they might choose to offer, why would they have felt a need to pay skilled workers more than unskilled workers? Why not just pay them both the same pittance?
The case for labor unionism does possess a superficial plausibility, but it is in fact entirely fallacious. Real wages rise not because of union activity but because of the process that George Reisman describes in his productivity theory of wages (which I describe here). In short, business investment in machinery increases the productivity of labor and therefore the output that the economy is capable of producing, and this greater supply puts downward pressure on prices.
As Reisman explains, "It is the productivity of labor that determines the supply of consumers' goods relative to the supply of labor, and thus the prices of consumers' goods relative to wage rates." This phenomenon is not always easy to see in an inflationary economy such as ours, in which prices of most goods seem to go up consistently. But the point remains: prices become lower than they would otherwise be, and all real incomes (wages included) increase.
This is why taxes on business and capital are so foolish and counterproductive. Such taxes hamper business investment, which is precisely what raises our standard of living. The vast bulk of high school teachers and college professors spend their time condemning the wickedness of businessmen and the wealthy, and describe taxation as a righteous method for redistributing the supposedly ill-gotten gains of the wealthy to the oppressed poor. To put it kindly, such people have not the faintest idea of how wealth is created, and their envy-driven policy proposals inevitably make society poorer than it would otherwise be.
The vast bulk of the existing scholarship on American labor history is essentially unreadable. It takes for granted all the economic myths of unionism, the essential righteousness of the union cause, and the moral perversity of anyone who would dare to oppose it. Major incidents in the history of American unionism, as with the Haymarket incident of 1886 and the Homestead Strike of 1892, are often misleadingly described in order to conform to the ideological demands of this one-dimensional morality play.
Labor historians and activists would doubtless be at a loss to explain why, at a time when unionism was numerically negligible (a whopping three percent of the American labor force was unionized by 1900) and federal regulation all but nonexistent, real wages in manufacturing climbed an incredible 50 percent in the United States from 1860--1890, and another 37 percent from 1890 to 1914, or why American workers were so much better off than their much more heavily unionized counterparts in Europe. Most of them seem to cope with these inconvenient facts by neglecting to mention them at all.
Labor economist W.H. Hutt referred to the Norris-La Guardia and Wagner Acts in 1973 as "economic blunders of the first magnitude." Economists Vedder and Gallaway find that New Deal labor legislation played a significant role in aggravating the unemployment problem. Both theory and history reveal the same conclusion: a society that genuinely wishes to become wealthier, to enjoy more leisure time, and to live longer will simply repeal all taxation on business and capital. That would do more for the material well-being of American workers than did all the storied episodes of labor's "struggle" -- labor historians' favorite word -- put together.
Reprinted from Mises.org.
The standard tale that practically every student hears over the course of his education is that before the emergence of labor unions, American workers were terribly exploited and their wages were consistently falling. The improvement in labor's condition was due entirely or at least in large part to labor unionism and favorable federal legislation. In the absence of these, it is widely assumed, people would still be working 80-hour weeks and children would still be working in mines.
This oft-heard tale is, however, almost entirely false, and those parts of it that are true (the low standard of living that people enjoyed in the nineteenth century, for example) are true for reasons other than those alleged by pro-union historians, who see in them only confirmation of their prejudices against the market economy.
As late as the 1920s, labor law in America was based on the following considerations.
Freedom of contract and association were essential principles. A laborer was perfectly free to reject any offer of compensation that an employer might make to him, and an employer was likewise entitled to reject any offer made by a laborer. An employee was free to withhold his labor services if unsatisfied with his employer's terms; likewise, a group of laborers jointly exercising this individual right were permitted to do so. No one, however, was allowed to prevent individuals who wished to work from exercising their right to do so.
Strikers -- like anyone else -- were forbidden to interfere with consumers' right to shop where they liked. And strikes could not obstruct suppliers from making deliveries, since to do so would again violate the rights of others. Finally, since the employer's plant was private property, the employer had the absolute right to decide who would be permitted to enter, and complete strangers who wished to enter for the purpose of agitating his employees could be lawfully excluded altogether.
This common-sense legal approach to labor unionism began to give way with the Norris-La Guardia Act, signed by Herbert Hoover in 1932. The legislation made "yellow dog" contracts -- in which an employee could be required to promise to refrain from union activity as a condition of employment -- unenforceable in the courts. The Act also exempted labor unions from prosecution under the Sherman Antitrust Act. Although the Sherman Act should certainly have been (and still should be) repealed, if there were ever an institution guilty of "restraint of trade" it was labor unions, which not only withheld their own labor but which also used intimidation and force to keep down non-union competition. They would henceforth be exempt from behavior that the law deemed criminal in any other context.
The Act also prohibited the federal courts from issuing injunctions against labor unions in some cases and seriously crippled their ability to do so in others. Subsequent Supreme Court decisions made clear that the Act in effect shielded unions from prosecution for activities they may have engaged in during labor disputes. The injunction had been used to put a stop to union violence and property destruction when local authorities seemed unwilling or unable to protect life and property. Unions hated them.
As labor historian Morgan Reynolds explains, "An injunction temporarily restrained union actions pending a trial and this explains the intense union campaign against its use in labor disputes because once violence-ridden strikes were enjoined for a few days, they were difficult to revive, reorganize, and rekindle."
It is one of the many myths of American labor history that the courts issued injunctions frequently and indiscriminately. Labor economist Sylvester Petro undertook a thorough study of the period from 1880 to 1932 and found injunctions to be exceedingly rare: federal injunctions were issued in not even one percent of all work stoppages, while state injunctions were issued in less than two percent of all work stoppages. And these few injunctions were issued not to thwart labor union activity per se but to put a stop to violence against persons and property. Now even this protection of the employer's rights -- yes, employers have rights, too -- would henceforth be absent.
The New Deal added the National Labor Relations Act of 1935, more commonly known as the Wagner Act, to the mix. It had once been the case that a worker who did not wish to join a union or pay its dues refrained from joining and was not obligated to pay dues. Thanks to the Wagner Act, that individual freedom disappeared. From then on, if a majority of workers in a given bargaining unit chose to unionize, then that union represented all the workers and could require them either to join or at least to pay dues.
The usual defense of such coercion is that since the Wagner Act called for a single certified bargaining agent to represent all workers in a given bargaining unit, it was only fair that all such workers be required to contribute something to the union. After all, it is argued, since all workers gain from the union's activities on their behalf, it would be wrong for them not to contribute toward union expenses. This objection overlooks the real problem, which is the idea of having an exclusive bargaining agent in the first place.
If unions were content to bargain solely on behalf of their own members, then there would be no problem of non-members getting union benefits for free. If individuals were allowed to represent themselves and to enter into contracts with their employers on their own terms, those who wished to remain non-union would not be "free riding" on the benefits bestowed by labor unions, since the union would simply not bargain on their behalf. But federal labor law no longer guarantees workers this freedom.
(As a result of the Taft-Hartley Act of 1947 -- which labor historians detest despite the mildness of its provisions, which did little to overturn settled labor law -- states have the right to pass "right-to-work" laws, which prohibit unions from attempting to force union membership and dues on workers as the price for keeping their jobs.)
Once officially designated by a majority of workers as the exclusive bargaining agent for all workers, the union is never required to stand for re-election. Even after all the workers who originally voted for the union have died or retired, the union is simply assumed to have the support of a majority of workers. The new slate of workers has no say in the matter at all.
The Wagner Act also forced employers to bargain "in good faith" with unions that were established by a majority of workers. Whether an employer had complied with the vague instruction to bargain "in good faith" would be determined by the all-powerful National Labor Relations Board.
Moreover, the Wagner Act also interfered with employers' freedom of speech by making it an "unfair labor practice" to attempt to influence their employees' decision whether to unionize or not. Employers were required to permit union organizers -- that is, total strangers -- who did not work for them to use company property for the purpose of persuading employees to unionize.
Furthermore, the Wagner Act gave labor unions a degree of legal insulation afforded to no other group in society. The Act made labor unions immune to claims of vicarious responsibility. In plain English, that means that labor unions are not legally responsible for any violence their members might commit, even if union officials themselves order the violence.
All of these legislative measures made it much easier for labor unions to accomplish their goals. In order to fulfill their stated purpose of increasing the wages of their members, labor unions must restrict an employer's access to alternative sources of labor. That is to say, nonunion workers who wish to seek employment on the terms offered by an employer whose firm is unionized must be prevented from doing so. Harvard University's Edward Chamberlin once described the unique legal status that labor unions had been granted:
If A is bargaining with B over the sale of his house, and if A were given the privileges of a modern labor union, he would be able (1) to conspire with all other owners of houses not to make any alternative offer to B, using violence or the threat of violence if necessary to prevent them, (2) to deprive B himself of access to any alternative offers, (3) to surround the house of B and cut off all deliveries, including food (except by parcel post), (4) to stop all movement from B's house, so that if he were for instance a doctor he could not sell his services and make a living, and (5) to institute a boycott of B's business. All of these privileges, if he were capable of carrying them out, would no doubt strengthen A's position. But they would not be regarded by anyone as part of "bargaining" -- unless A were a labor union.
No wonder Nobel Laureate F.A. Hayek once said, "We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply."
In practice, during strikes the police have typically stood aside and done nothing in the face of union intimidation and even violence against non-union workers or those who simply wish to continue working. (This is one reason that the court injunction was so often sought in the past against violent strikes.) By means of this kind of coercion, labor unions are able to deprive employers of labor if they do not accede to union demands.
As Henry George wrote in the nineteenth century, "Those who tell you of trades unions bent on raising wages by moral suasion alone are like those who would tell you of tigers that live on oranges." The result of union activity, therefore, is to reduce the number of jobs in an industry and to raise the money wages of union labor, while at the same time relegating many workers, driven out of this line of work by the decreased quantity of labor demanded there, to other lines of work, whose money wages must decrease as a result of the greater supply of workers now forced to compete for them.
The net result is that the gains to certain workers are more than offset by the disabilities inflicted upon other workers. When union activity reduces the number of people who can be profitably employed in skilled trades, it correspondingly increases the number of skilled laborers who are forced to find work in fields that are well below their level of competence. The outcome of this displacement of skilled labor is no different from a situation in which laborers never possessed these skills in the first place. If union privilege prevents some workers from putting their skills to their proper use, the effect is the same as if they had never gone to the trouble to acquire them at all. Thus society produces below its potential, and wealth that would otherwise have been created never sees the light of day.
The ways in which labor unionism impoverishes society are legion, from the distortions in the labor market described above to union work rules that discourage efficiency and innovation. The damage that unions have inflicted on the economy in recent American history is actually far greater than anyone might guess. In a study published jointly in late 2002 by the National Legal and Policy Center and the John M. Olin Institute for Employment Practice and Policy, economists Richard Vedder and Lowell Gallaway of Ohio University calculated that labor unions have cost the American economy a whopping $50 trillion over the past 50 years alone.
That is not a misprint. "The deadweight economic losses are not one-shot impacts on the economy," the study explains. "What our simulations reveal is the powerful effect of the compounding over more than half a century of what appears at first to be small annual effects." Not surprisingly, the study did find that unionized labor earned wages 15 percent higher than those of their nonunion counterparts, but it also found that wages in general suffered dramatically as a result of an economy that is 30 to 40 percent smaller than it would have been in the absence of labor unionism.
Although labor unionism has actually made working people worse off, however, the usual argument for labor unionism and government legislation on behalf of labor is that in the absence of these things, employers will pay their workers unconscionably low wages.
Economist George Reisman proposes a useful thought experiment to the contrary. Suppose you own a car in New York City but eventually decide that the hassle involved in finding and paying for parking is simply too great, and you would like to get rid of the car for that reason. Suppose, further, that you have grown so frustrated with owning a car in the city that you would be willing to sell it for one dollar. Does that mean that you will in fact have to sell it for one dollar? Of course not. Given the great many potential buyers of your car, they will outbid each other. If a potential buyer offered you only one dollar, you would certainly turn him down even if, in a state of complete despair, you would have been willing to sell it at that amount. This person, because of his low bid, will miss out on the opportunity to own the car altogether since his rivals will simply outbid him.
Exactly the same process takes place in the labor market. The California State University's Charles Baird explains:
This idea, that workers without unions will inherently have a disadvantage in bargaining power relative to employers, is the basis for most individuals' support of unionism and is picked up again in the Wagner Act. But that disadvantage is a hoary myth. A worker's bargaining power depends on the worker's alternatives. If a worker either works for Employer A or does not work (i.e., if Employer A is a monopsonist), the worker has little bargaining power. If the worker has several employment alternatives, he has strong bargaining power. There may have been instances of monopsony or oligopsony in the 19th century, but... they were short-lived. Monopsony has not been a significant factor in the American labor market since the introduction and widespread use of the automobile.
The empirical evidence simply does not bear out the conventional wisdom regarding unions. If employers were really in a position to impose whatever wage rate they wished, then why in the decades prior to large-scale labor unionism did wages not diminish to near zero? (In fact, as we shall see below, real wages skyrocketed in the decades before modern labor law took shape.) For that matter, why did skilled workers earn more than unskilled workers? If firms were really in a position to tell workers to take or leave whatever pathetic wage they might choose to offer, why would they have felt a need to pay skilled workers more than unskilled workers? Why not just pay them both the same pittance?
The case for labor unionism does possess a superficial plausibility, but it is in fact entirely fallacious. Real wages rise not because of union activity but because of the process that George Reisman describes in his productivity theory of wages (which I describe here). In short, business investment in machinery increases the productivity of labor and therefore the output that the economy is capable of producing, and this greater supply puts downward pressure on prices.
As Reisman explains, "It is the productivity of labor that determines the supply of consumers' goods relative to the supply of labor, and thus the prices of consumers' goods relative to wage rates." This phenomenon is not always easy to see in an inflationary economy such as ours, in which prices of most goods seem to go up consistently. But the point remains: prices become lower than they would otherwise be, and all real incomes (wages included) increase.
This is why taxes on business and capital are so foolish and counterproductive. Such taxes hamper business investment, which is precisely what raises our standard of living. The vast bulk of high school teachers and college professors spend their time condemning the wickedness of businessmen and the wealthy, and describe taxation as a righteous method for redistributing the supposedly ill-gotten gains of the wealthy to the oppressed poor. To put it kindly, such people have not the faintest idea of how wealth is created, and their envy-driven policy proposals inevitably make society poorer than it would otherwise be.
The vast bulk of the existing scholarship on American labor history is essentially unreadable. It takes for granted all the economic myths of unionism, the essential righteousness of the union cause, and the moral perversity of anyone who would dare to oppose it. Major incidents in the history of American unionism, as with the Haymarket incident of 1886 and the Homestead Strike of 1892, are often misleadingly described in order to conform to the ideological demands of this one-dimensional morality play.
Labor historians and activists would doubtless be at a loss to explain why, at a time when unionism was numerically negligible (a whopping three percent of the American labor force was unionized by 1900) and federal regulation all but nonexistent, real wages in manufacturing climbed an incredible 50 percent in the United States from 1860--1890, and another 37 percent from 1890 to 1914, or why American workers were so much better off than their much more heavily unionized counterparts in Europe. Most of them seem to cope with these inconvenient facts by neglecting to mention them at all.
Labor economist W.H. Hutt referred to the Norris-La Guardia and Wagner Acts in 1973 as "economic blunders of the first magnitude." Economists Vedder and Gallaway find that New Deal labor legislation played a significant role in aggravating the unemployment problem. Both theory and history reveal the same conclusion: a society that genuinely wishes to become wealthier, to enjoy more leisure time, and to live longer will simply repeal all taxation on business and capital. That would do more for the material well-being of American workers than did all the storied episodes of labor's "struggle" -- labor historians' favorite word -- put together.
Reprinted from Mises.org.
Friday, February 12, 2010
Is Limited Government An Oxymoron?
Doug Casey and Tom Woods take on the subject of government and it's role in society. It is a fascinating interview by two very astute scholars as they ask the question, is government even necessary?
Economics 101 With Tom Woods
This is a speech Tom Woods gave to high school students on behalf of the Mises Institute. It is really a good speech and it clearly lays out some basics of Austrian economic thought. It is a worthwhile video to watch especially if you are new to economics or have been bored by the subject in the past.
Saturday, February 6, 2010
Thursday, January 21, 2010
The Dumbing Down Of America
With our government run schools churning out morons like this I really lose hope for the future.
(CNSNews.com) – More Americans know about television’s Gosselin family (“Jon & Kate Plus Eight”) than know who the first chief justice of the United States was. Likewise, knowledge about pop culture trivia trumps knowledge about “Father of the Constitution.”
The findings are part of a new report issued by the Libertarian Lexington Institute that says teaching U.S. history in schools has been de-emphasized -- with “appalling results.”
The report, called “The Teaching of American History: Promise and Performance,” points to data from a December survey conducted by the nonprofit American Revolution Center (ARC), which showed a full 60 percent of Americans know how many children reality TV stars Jon and Kate Gosselin have -- eight -- but only 11 percent could identify John Jay as the first chief justice of the U.S. Supreme Court.
Given the choices of Jay, John Marshall, Charles Evans Hughes, and Alexander Hamilton, more people chose Hamilton than any other choice, yet he was the only one who never served on the nation’s highest court.
More also knew about the Gosselins, whose public divorce has generated countless inches of tabloid coverage, than could identify James Madison as the “Father of the Constitution.” Only 54 percent were able to do that, despite the aid of a list of other disparate historical figures like Abraham Lincoln and Winston Churchill.
“The appalling results of de-emphasizing the study of U.S. history in elementary and secondary schools have become painfully obvious in recent years,” said Robert Holland, the report’s author. “(S)chool reformers need to do much more to restore history as a vital subject in American education.”
Other findings:
-- Asked to place the Declaration of Independence in a basic chronology of major events in U.S. history, fewer than half were able to do it.
-- Just 49 percent knew that the founding of Jamestown, Va., widely considered the first permanent English settlement on these shores, actually predated the Declaration of Independence.
-- Only 7 percent admitted they did not know which choice came before the Declaration, while the other 44 percent wrongly thought The Civil War, The Emancipation Proclamation or the War of 1812 came first.
-- More than half of Americans -- 55 percent --attributed a famous Karl Marx quote, one of the philosophical cornerstones of Communism, to Barack Obama, George Washington or Thomas Paine.
Marx said, “From each according to his ability, to each according to his needs.” While 19 percent knew it was Marx who said it, another 19 percent thought it was George Washington, 15 percent thought it was Obama, and 21 percent identified Paine as the source.
-- Just 3 percent of respondents to the 27-question survey said their knowledge of American history would earn a grade of “F” before beginning, but 83 percent went on to fail by correctly answering less than 16 of the questions.
While ARC surveyed Americans of all ages, the 2006 National Assessment of Educational Progress highlighted that the knowledge gap is beginning early. The results of that survey show that only one-quarter of American 4th, 8th and 12th graders were deemed “proficient” in U.S. history at their grade level.
“The consequences of such lapses are far more grave than doing poorly on the historical portion of a ‘Trivial Pursuit’ game,” Holland said. “The success of our democratic republic depends upon citizens who believe in a common set of ideals as originally expressed in the Founding documents.”
Multi-Culturalism and the Legacy of the ‘60s and ‘70s
Holland identified the '60’s and '70s as the era when studying “traditional American history” began to decline, as focus shifted from the Founders and stewards of government and other institutions to previously ignored groups like “women, racial/ethnic minorities, and immigrants.”
“Whatever might be said for or against a broadening of the study of history, there is no doubt that the sharp switch led to declines in knowledge of the founding of the American republic, its enduring principles, and its accomplishments,” he wrote.
Don Soifer, executive vice president at Lexington and coordinator of its education department, said the emphasis on “radical multiculturalism” is one that “has become increasingly prevalent in many education schools in the country.”
The National Association for Multicultural Education, for example, provides seminars around the countries for teachers of all grade levels to help them, according to their Web site, “prepare students for their responsibilities in an interdependent world.”
Soifer told CNSNews.com the issue could be fixed by getting teachers to put the emphasis back on specific subject matter central to understanding America’s founding and history; information that the teachers themselves may be foggy on.
“There’s a diagram in the middle of the paper,” he said, “that gives some examples of just how extreme it is, of teachers who are teaching American history that have very little, subject-matter competence and experience in American history themselves and…have logged very little class time teaching American history themselves.”
The report points out several examples where decisions made by the school district or the quality of teachers have been problematic. In Sacramento, Calif., only 12 minutes per day of instructional time are spent on the subject of American history. In Madison, Wis., schools, only 4 percent of elementary teachers and 15 percent of middle-school teachers of the subject actually majored in history when they went to college.
To begin improving Americans’ historical knowledge, Holland wrote that policymakers “need to attack the problem at its source” by reforming the process by which states certify teachers as competent to teach history to America’s children.
“If teacher candidates lack access to a history major in a particular region for whatever reason, the alternative of winning a history teaching job through (another) route, such as passing a comprehensive examination of content knowledge might be an acceptable option,” Holland said.
“However, a state should not follow (for example) Illinois’ poor example and deliberately water down such a test, simply to qualify more candidates for jobs. High standards are necessary both for teachers and for students if the quality of education is ever to rise to an optimal level.”
Soifer said raising standards for proficiency in the subject matter in each state would be effective because teachers are “responsive” to changes in certification exams.
“(O)ne thing we’ve seen across the (board) is that teachers are responsive to teacher certification requirements,” he said, “and if those requirements emphasize other areas of professional development and not subject-matter competence, then the teachers are going to go in that direction. (I)t’s not that the teachers aren’t getting any professional development, it’s just that they’re getting professional development in areas that largely exclude subject matter competence, and in History, that’s a real problem.”
The American Revolution Center pointed out that there is some measure of hope, however, because more than 90 percent of those surveyed said knowing the history and principles of the American founding was at least somewhat important.
(CNSNews.com) – More Americans know about television’s Gosselin family (“Jon & Kate Plus Eight”) than know who the first chief justice of the United States was. Likewise, knowledge about pop culture trivia trumps knowledge about “Father of the Constitution.”
The findings are part of a new report issued by the Libertarian Lexington Institute that says teaching U.S. history in schools has been de-emphasized -- with “appalling results.”
The report, called “The Teaching of American History: Promise and Performance,” points to data from a December survey conducted by the nonprofit American Revolution Center (ARC), which showed a full 60 percent of Americans know how many children reality TV stars Jon and Kate Gosselin have -- eight -- but only 11 percent could identify John Jay as the first chief justice of the U.S. Supreme Court.
Given the choices of Jay, John Marshall, Charles Evans Hughes, and Alexander Hamilton, more people chose Hamilton than any other choice, yet he was the only one who never served on the nation’s highest court.
More also knew about the Gosselins, whose public divorce has generated countless inches of tabloid coverage, than could identify James Madison as the “Father of the Constitution.” Only 54 percent were able to do that, despite the aid of a list of other disparate historical figures like Abraham Lincoln and Winston Churchill.
“The appalling results of de-emphasizing the study of U.S. history in elementary and secondary schools have become painfully obvious in recent years,” said Robert Holland, the report’s author. “(S)chool reformers need to do much more to restore history as a vital subject in American education.”
Other findings:
-- Asked to place the Declaration of Independence in a basic chronology of major events in U.S. history, fewer than half were able to do it.
-- Just 49 percent knew that the founding of Jamestown, Va., widely considered the first permanent English settlement on these shores, actually predated the Declaration of Independence.
-- Only 7 percent admitted they did not know which choice came before the Declaration, while the other 44 percent wrongly thought The Civil War, The Emancipation Proclamation or the War of 1812 came first.
-- More than half of Americans -- 55 percent --attributed a famous Karl Marx quote, one of the philosophical cornerstones of Communism, to Barack Obama, George Washington or Thomas Paine.
Marx said, “From each according to his ability, to each according to his needs.” While 19 percent knew it was Marx who said it, another 19 percent thought it was George Washington, 15 percent thought it was Obama, and 21 percent identified Paine as the source.
-- Just 3 percent of respondents to the 27-question survey said their knowledge of American history would earn a grade of “F” before beginning, but 83 percent went on to fail by correctly answering less than 16 of the questions.
While ARC surveyed Americans of all ages, the 2006 National Assessment of Educational Progress highlighted that the knowledge gap is beginning early. The results of that survey show that only one-quarter of American 4th, 8th and 12th graders were deemed “proficient” in U.S. history at their grade level.
“The consequences of such lapses are far more grave than doing poorly on the historical portion of a ‘Trivial Pursuit’ game,” Holland said. “The success of our democratic republic depends upon citizens who believe in a common set of ideals as originally expressed in the Founding documents.”
Multi-Culturalism and the Legacy of the ‘60s and ‘70s
Holland identified the '60’s and '70s as the era when studying “traditional American history” began to decline, as focus shifted from the Founders and stewards of government and other institutions to previously ignored groups like “women, racial/ethnic minorities, and immigrants.”
“Whatever might be said for or against a broadening of the study of history, there is no doubt that the sharp switch led to declines in knowledge of the founding of the American republic, its enduring principles, and its accomplishments,” he wrote.
Don Soifer, executive vice president at Lexington and coordinator of its education department, said the emphasis on “radical multiculturalism” is one that “has become increasingly prevalent in many education schools in the country.”
The National Association for Multicultural Education, for example, provides seminars around the countries for teachers of all grade levels to help them, according to their Web site, “prepare students for their responsibilities in an interdependent world.”
Soifer told CNSNews.com the issue could be fixed by getting teachers to put the emphasis back on specific subject matter central to understanding America’s founding and history; information that the teachers themselves may be foggy on.
“There’s a diagram in the middle of the paper,” he said, “that gives some examples of just how extreme it is, of teachers who are teaching American history that have very little, subject-matter competence and experience in American history themselves and…have logged very little class time teaching American history themselves.”
The report points out several examples where decisions made by the school district or the quality of teachers have been problematic. In Sacramento, Calif., only 12 minutes per day of instructional time are spent on the subject of American history. In Madison, Wis., schools, only 4 percent of elementary teachers and 15 percent of middle-school teachers of the subject actually majored in history when they went to college.
To begin improving Americans’ historical knowledge, Holland wrote that policymakers “need to attack the problem at its source” by reforming the process by which states certify teachers as competent to teach history to America’s children.
“If teacher candidates lack access to a history major in a particular region for whatever reason, the alternative of winning a history teaching job through (another) route, such as passing a comprehensive examination of content knowledge might be an acceptable option,” Holland said.
“However, a state should not follow (for example) Illinois’ poor example and deliberately water down such a test, simply to qualify more candidates for jobs. High standards are necessary both for teachers and for students if the quality of education is ever to rise to an optimal level.”
Soifer said raising standards for proficiency in the subject matter in each state would be effective because teachers are “responsive” to changes in certification exams.
“(O)ne thing we’ve seen across the (board) is that teachers are responsive to teacher certification requirements,” he said, “and if those requirements emphasize other areas of professional development and not subject-matter competence, then the teachers are going to go in that direction. (I)t’s not that the teachers aren’t getting any professional development, it’s just that they’re getting professional development in areas that largely exclude subject matter competence, and in History, that’s a real problem.”
The American Revolution Center pointed out that there is some measure of hope, however, because more than 90 percent of those surveyed said knowing the history and principles of the American founding was at least somewhat important.
Sunday, November 22, 2009
Thursday, October 22, 2009
22 Reasons Why This Recession Is Different
This is a great post from the Survival Blog. I recommend you visit there daily, James Wesley Rawles is a wealth of information on a myriad of survival topics and as you can see his expertise is far from limited to camping, hiking and self defense.
I find it surprising that I'm now getting inquiries from readers, asking if "we've reached bottom" in the current economic recession, and asking if the time has come to start buying stocks or residential real estate. It seems that the talking heads of mainstream media are using some sort of voodoo. How can anyone think that we've hit bottom, and an economic recovery is in progress? To dispel the myths from the CNBC Cheering Section, please consider the following. (And note that I've provided references for each assertion, just so you know that I'm not talking out of mycamouflage hat.):
America will continue in recession. Most economic recessions are simply a product of the business cycle. These recessions are relatively mild and they often last just 12 to 24 months. The economic engine just readjusts and everything soon gets back to normal. But the recession that began in 2008 is something radically different, and it won't be short-lived. The current slow down was triggered by a collapse in the global credit market. For decades, the global credit market grew and grew, in an enormous debt spiral. Our neighbors to the south saw trouble coming decades ago, because their economies were at the time more debt-dependent than our own. As far back as the mid-1980s, their newspapers featured political cartoons that portrayed an enormous, insatiable monster that was invariably captioned "La Dueda"--"The Debt". Our cousins in Latin America saw it coming first, but the dark side of the debt nemesis will soon be clear to everyone.
The Federal governments's debt, just by itself is cause for concern. As an old gunsmithing friend mine, the late Chuck Brumley, was fond of saying: “If your outgo exceeds your income your upkeep will be your downfall." Several decades of profligate spending by the US Congress are finally starting to take their toll. Just because their friend Helicopter Ben has a high-speed printing press does mean that they can continue to spend money like drunken sailors in definitely. (On second thought, I should apologize for impugning the reputation of drunken sailors. They are actually much more conservative with their funds than congressmen.)
Because modern banking in the western world is based on interest charges that create continuously compounding debt, credit cannot continue to grow indefinitely. At some point the excesses of malinvestment become so great that the entire system collapses. This is what we are now witnessing: a banking panic that is spreading uncontrollably as wave after wave of ugly debt gets destroyed by margin calls and subsequent business failures.
Some economists are fixated on reading charted histories--and unrealistically expect that by doing so that the can reliably predict future market moves. Although they are working from a flawed premise at the micro level, the chartists do have some things right on the macro level: There are major economic "seasons" and even climate changes. The most vocal chartists like Robert Prechter hold to what is called the Elliot Wave Theory. And the big bad nasty in this school of thought is a Kondratieff Winter. This "K-Winter" is an economic depression phase that the world has not fully experienced since the 1930s. An economic winter does not end until after the foundations of industry and consumer demand are rebuilt. This can be a painful process, often culminating with war on a grand scale. (It was no coincidence that the Second World of the early 1940s was an outgrowth of the Great Depression of the 1930s.)
The US Federal Reserve and the other central banks are furiously pumping liquidity to the best of their ability, but in the long run they will not be successful. At best, dumping billions in cash on the economy will delay a depression by perhaps a year or two. But inevitably, a K-Winter depression will come. And the longer that it is delayed, then the worse the depression will be. Further inflating the debt bubble will only make matters worse.
"Big Picture" Implications
As I've mentioned before, hedge funds are presently most at risk in the unfolding liquidity crisis, because they use lots of leverage in lending funds that they themselves have borrowed. They borrow short and lend long, and effectively use debt compounded upon debt.
Even more alarming is the scale of global derivatives trading, particularly for credit default swaps (CDSes). Derivatives are a relatively new phenomenon, so most derivatives contract holders are only just now experiencing their first major recession. Thus, it is difficult to predict what will happen in a genuine K-Winter phase. In a perfect world, derivatives are a nicely balanced mechanism, where there are parties and counterparties, and every derivatives contract equation balances out to have a neat "zero" at its conclusion. But we don't live in a perfect world: Companies go bankrupt. Contracts get breached. Counterparties disappear and disappoint. We have not yet experienced a full scale "blow up" of derivatives, but I predict that if and when it happens, it will be spectacular. The pinch in CDSes (a form of derivative contract) in 2008 was just a faint foreshadowing of what we'd experience in a a full-blown derivatives collapse.
The scale of derivatives trading is monumental, and the vast majority of the population is blissfully ignorant of both its scale and the implications of a derivatives crisis. There are presently about $500 trillion of derivatives contracts in play. That is many times the size of the gross product of the global economy, but the average man on the street has no idea what is going on. It won't be until after the giant derivatives casino implodes that the Generally Dumb Public (GDP) awakens and asks, "What the heck happened?" Since the credit market began to collapse in the summer of 2008, the number of new derivatives contracts has dropped precipitously. But whether the aggregate derivative market is $400 trillion versus $500 trillion, when a crisis occurs there will undoubtedly be some very deep drama.
The next decade will likely be characterized by successive waves of inflation and deflation, and perhaps some of both simultaneously, at different levels. Countless corporations, and perhaps a few currencies or even governments will go under as this tumult plays out. (Take note of the recent vote of no confidence in Latvia.) The current low interest rates will soon be replaced by double-digit rates, much like we saw in the late 1970s. The dollar will lose value in foreign exchange, and may collapse completely. The Mother of All Bailouts (MOAB) will inevitably result in mass inflation. The bull markets in silver and gold will surge ahead, propelled by economic and currency instability. (Investors will be desperate to find a safe haven, when currencies and equities are falling apart.)
Mitigating the Risks
Be ready to "winter over" the coming K Winter depression. That will require: 1.) Prayer. 2.) Friends and /or relatives that you can count on (a "retreat group"). 3.) A deep larder, and 4.) An effective means of self defense with proper training. (For each of those four factors, see the hundreds of archived articles and letters at SurvivalBlog.com for details.)
Since additional large-scale layoffs seem likely, it would also be wise to have a second income from a recession-proof home-based business.
In the event of a "worst case" (grid down) economic collapse, it would be prudent to have a self-sufficient retreat in a rural area that is well-removed from major population centers. Get the majority of your funds out of anything that is dollar-denominated, and into tangibles, as soon as possible. The very best tangible that you can buy is a stout house on a piece of productive farm land. It will not only preserve your wealth, but living there may very well save your life.
I find it surprising that I'm now getting inquiries from readers, asking if "we've reached bottom" in the current economic recession, and asking if the time has come to start buying stocks or residential real estate. It seems that the talking heads of mainstream media are using some sort of voodoo. How can anyone think that we've hit bottom, and an economic recovery is in progress? To dispel the myths from the CNBC Cheering Section, please consider the following. (And note that I've provided references for each assertion, just so you know that I'm not talking out of my
- A broken global credit market that has not fully recovered. See: After Lehman, U.S. firms adjust to new face of credit
- Lack of transparency in Mortgage-Backed Securities and other re-packaged debt instruments. See: Geithner Blames Lack of Transparency for OTC Derivatives Hit on Market.
- The increasing Federal debt, which is growing at an unprecedented rate. See: The National Debt Clock.
- Mountains of consumer and corporate debt. See: Observations on the US Debt.
- The Federal budget deficit. See: Federal Deficit Hits All-Time High of $1.42 Trillion.
- Ever-expanding bailouts. (I call this The MOAB.) See: As More Companies Seek Aid, 'Where Do You Stop?'
- Monetization of the National Debt. See: Fed Could Expand MBS Purchases. (Can you spell Oroborus?):
- The destruction of the American consumer economy. (It had been artificially credit-driven). See: A Year After The Crisis, The Consumer Economy Is Dead.
- Chronic unemployment, possibly much higher than officially reported. See: Alternate Data at ShadowStats.
- More than $500 Billion USD in hedge funds that have borrowed short and lent long. See: Assets invested in hedge funds increase by $100bn
- A double wave of residential mortgage rate resets. See: this chart of scheduled mortgage interest rate resets.
- Continued down-ratcheting of house prices. See: Housing Prices Will Continue to Fall, Especially in California
- The under-reported "shadow inventory" of foreclosed houses. See: The "Shadow" Foreclosure Inventory
- The very likely collapse of commercial real estate ("the other shoe to drop".) See: Is a commercial real estate bust inevitable?
- A huge crisis lurking in over-the-counter derivatives. See my analysis published in 2006 and the dozens of articles on the Derivative Dribble Blog.
- Under-funded pensions. See: Almost half of top unions have under funded pension plans.
- A coming wave of municipal bond and municipal bond hedge fund failures. See: The Failure of Leveraged Municipal Bond Hedge Funds.
- Increasing numbers of bank failures. See: FDIC: Bank Failures to Cost Around $100 Billion.
- Insurance company collapses--some, like AIG, were foolish enough to insure more than a trillion dollars in derivative contracts. See: AIG: Is the Risk Systemic?
- Worsening state, county, and city budget crises. See: State prepares for shutdown as budget deadline looms, and this article from a liberal site: Predicting Worse Ahead from America's Economic Crisis.
- Loss of faith in the US Dollar, on the FOREX. See: Dollar's reserve currency status in focus as G-7 finance ministers meet.
- The coming mass currency inflation, following some asset deflation. See: Which is more likely in 2010: Deflation or inflation?
America will continue in recession. Most economic recessions are simply a product of the business cycle. These recessions are relatively mild and they often last just 12 to 24 months. The economic engine just readjusts and everything soon gets back to normal. But the recession that began in 2008 is something radically different, and it won't be short-lived. The current slow down was triggered by a collapse in the global credit market. For decades, the global credit market grew and grew, in an enormous debt spiral. Our neighbors to the south saw trouble coming decades ago, because their economies were at the time more debt-dependent than our own. As far back as the mid-1980s, their newspapers featured political cartoons that portrayed an enormous, insatiable monster that was invariably captioned "La Dueda"--"The Debt". Our cousins in Latin America saw it coming first, but the dark side of the debt nemesis will soon be clear to everyone.
The Federal governments's debt, just by itself is cause for concern. As an old gunsmithing friend mine, the late Chuck Brumley, was fond of saying: “If your outgo exceeds your income your upkeep will be your downfall." Several decades of profligate spending by the US Congress are finally starting to take their toll. Just because their friend Helicopter Ben has a high-speed printing press does mean that they can continue to spend money like drunken sailors in definitely. (On second thought, I should apologize for impugning the reputation of drunken sailors. They are actually much more conservative with their funds than congressmen.)
Because modern banking in the western world is based on interest charges that create continuously compounding debt, credit cannot continue to grow indefinitely. At some point the excesses of malinvestment become so great that the entire system collapses. This is what we are now witnessing: a banking panic that is spreading uncontrollably as wave after wave of ugly debt gets destroyed by margin calls and subsequent business failures.
Some economists are fixated on reading charted histories--and unrealistically expect that by doing so that the can reliably predict future market moves. Although they are working from a flawed premise at the micro level, the chartists do have some things right on the macro level: There are major economic "seasons" and even climate changes. The most vocal chartists like Robert Prechter hold to what is called the Elliot Wave Theory. And the big bad nasty in this school of thought is a Kondratieff Winter. This "K-Winter" is an economic depression phase that the world has not fully experienced since the 1930s. An economic winter does not end until after the foundations of industry and consumer demand are rebuilt. This can be a painful process, often culminating with war on a grand scale. (It was no coincidence that the Second World of the early 1940s was an outgrowth of the Great Depression of the 1930s.)
The US Federal Reserve and the other central banks are furiously pumping liquidity to the best of their ability, but in the long run they will not be successful. At best, dumping billions in cash on the economy will delay a depression by perhaps a year or two. But inevitably, a K-Winter depression will come. And the longer that it is delayed, then the worse the depression will be. Further inflating the debt bubble will only make matters worse.
"Big Picture" Implications
As I've mentioned before, hedge funds are presently most at risk in the unfolding liquidity crisis, because they use lots of leverage in lending funds that they themselves have borrowed. They borrow short and lend long, and effectively use debt compounded upon debt.
Even more alarming is the scale of global derivatives trading, particularly for credit default swaps (CDSes). Derivatives are a relatively new phenomenon, so most derivatives contract holders are only just now experiencing their first major recession. Thus, it is difficult to predict what will happen in a genuine K-Winter phase. In a perfect world, derivatives are a nicely balanced mechanism, where there are parties and counterparties, and every derivatives contract equation balances out to have a neat "zero" at its conclusion. But we don't live in a perfect world: Companies go bankrupt. Contracts get breached. Counterparties disappear and disappoint. We have not yet experienced a full scale "blow up" of derivatives, but I predict that if and when it happens, it will be spectacular. The pinch in CDSes (a form of derivative contract) in 2008 was just a faint foreshadowing of what we'd experience in a a full-blown derivatives collapse.
The scale of derivatives trading is monumental, and the vast majority of the population is blissfully ignorant of both its scale and the implications of a derivatives crisis. There are presently about $500 trillion of derivatives contracts in play. That is many times the size of the gross product of the global economy, but the average man on the street has no idea what is going on. It won't be until after the giant derivatives casino implodes that the Generally Dumb Public (GDP) awakens and asks, "What the heck happened?" Since the credit market began to collapse in the summer of 2008, the number of new derivatives contracts has dropped precipitously. But whether the aggregate derivative market is $400 trillion versus $500 trillion, when a crisis occurs there will undoubtedly be some very deep drama.
The next decade will likely be characterized by successive waves of inflation and deflation, and perhaps some of both simultaneously, at different levels. Countless corporations, and perhaps a few currencies or even governments will go under as this tumult plays out. (Take note of the recent vote of no confidence in Latvia.) The current low interest rates will soon be replaced by double-digit rates, much like we saw in the late 1970s. The dollar will lose value in foreign exchange, and may collapse completely. The Mother of All Bailouts (MOAB) will inevitably result in mass inflation. The bull markets in silver and gold will surge ahead, propelled by economic and currency instability. (Investors will be desperate to find a safe haven, when currencies and equities are falling apart.)
Mitigating the Risks
Be ready to "winter over" the coming K Winter depression. That will require: 1.) Prayer. 2.) Friends and /or relatives that you can count on (a "retreat group"). 3.) A deep larder, and 4.) An effective means of self defense with proper training. (For each of those four factors, see the hundreds of archived articles and letters at SurvivalBlog.com for details.)
Since additional large-scale layoffs seem likely, it would also be wise to have a second income from a recession-proof home-based business.
In the event of a "worst case" (grid down) economic collapse, it would be prudent to have a self-sufficient retreat in a rural area that is well-removed from major population centers. Get the majority of your funds out of anything that is dollar-denominated, and into tangibles, as soon as possible. The very best tangible that you can buy is a stout house on a piece of productive farm land. It will not only preserve your wealth, but living there may very well save your life.
Wednesday, April 1, 2009
Thursday, March 5, 2009
Jesse Jackson Jr. - A Moron Like His Father
Source: www.roguegovernment.com
By - Lee Rogers
A new House Resolution seeks to amend the U.S. Constitution to guarantee all citizens of the United States the right to a public education of equal high quality. This is perhaps one of the dumbest Amendments to the U.S. Constitution ever proposed. The government is incapable of providing high quality education and it is not the intention of the Department of Education to create individual thinkers. The goal of the Department of Education is to ensure that the control of what children learn is centralized at the federal level. With that being the case, it is obvious that this proposed amendment will guarantee that everyone will all get a horrible education and be indoctrinated into their brainwashing system equally. It is no coincidence that after the Department of Education was formed, that we have seen a continued degradation in quality of education despite the fact that billions of Federal Reserve Notes are continually funneled into this institution.Here is the full text of the proposed amendment HJ Resolution 29 introduced by Jesse Jackson Jr. (D-IL) the son of racism profiteer stooge Jesse Jackson.
Proposing an amendment to the Constitution of the United States regarding the right of all citizens of the United States to a public education of equal high quality.
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled (two-thirds of each House concurring therein), That the following article is proposed as an amendment to the Constitution of the United States, which shall be valid to all intents and purposes as part of the Constitution when ratified by the legislatures of three-fourths of the several States:
‘Article--
‘Section 1. All persons shall enjoy the right to a public education of equal high quality.
‘Section 2. The Congress shall have power to enforce and implement this article by appropriate legislation.’.
This proposed amendment to the Constitution will guarantee total centralization and control over the educational system under the guise of providing high quality education for all. Of course, high quality education for all is not the goal. Instead, the goal is to ensure perpetual control over the educational system to ensure that all children are taught material that is approved by the criminals in Washington DC. A government guarantee of education is not a natural right and sounds like something that would come out of the United Nations, Nazi Germany or any other socialist or fascist dictatorship and not in a supposedly free country. Not only that, but the powers that be want to make everyone think that they are granting people rights, when rights are not derived from government. Man has inalienable rights and education is not one of them. To hell with Jesse Jackson Jr. who thinks that we all have a right to an education when it isn’t even an inalienable right to begin with. This is a stupid proposal and is meant to grant more government control over the educational system using a Constitutional amendment as the excuse to do so. Most people won’t care though, because they don’t have a fundamental understanding of how we are all born as free human beings and need not to be granted rights by a bunch of criminal politicians.
Jesse Jackson Jr. has also proposed other stupid Constitutional amendments which we will cover in more detail at a later date. Check out these links below.
Amendment Centralizing Power Of Congress Over Elections
Amendment On Reproductive Rights
Amendment Guaranteeing The Right To Health Care
Amendment Guaranteeing The Right To A Clean Environment
Amendment On Progressive Taxes
Amendment Guaranteeing The Right To Safe Housing
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