Jeff Neal for C.U.R.E. - Certain Unalienable Rights Endowment

Archive for the ‘Financial’ Category

Social Security is Wisconsin writ large

In Economics, Financial on February 24, 2011 at 9:25 am

The controversy in Wisconsin incidentally involves unions and teachers.  The core problem is what is euphemistically called ‘unfunded liabilities.’  In Tennessee we call it either broken promise or a fraud.

For years and years, government officials have promised to give Person A something (health care or retirement income) in the future.  We all know that the only way the government can do that is by taking Person B’s money from him (see earlier piece about government’s wealth creating impotence).  The promise made to Person A is just a (future) tax on Person B.

Social Security, Medicaid, Medicare, unemployment insurance, ObamaCare . . . they’re all schemes manufactured by politicians to transfer wealth from Person B to Person A in exchange for Person A’s vote.  Looks like a sweet deal for Person A, because the payoff for him is immediate.  What all the Persons A (YOU!) don’t seem to understand is there are only so many Persons B (also YOU!).  And when the time comes to collect, everybody (well, every taxpayer – there are some net takers – about 1/2 the country, that is) is a Person B.  There is no free lunch, or to paraphrase Maggie Thatcher, evetually you run out of Persons B.

Among other purposes, the government our founders established had as its primary responsibility protecting free men’s rights and property from other men’s grimy hands.  Now the government is the theif with grimy hands.

Our Constitution worked while it was operative.  However, now our governments at all levels are run by men and women who routinely ignore the Constitution.  They proudly declare that their mission is ‘protecting’ this group or that constituency, and that protection is accomplished by TAKING money from someone else.  As charitable as they make it sound, as sympathetic as the recipient of the loot may be, it’s still theft.   That the man with the gun also has a badge or IRS i.d. card doesn’t change the nature of the act.  An unfunded liability perpetrated by the government is generational theft, it is taking one man’s future and giving it to another man to spend today.

We need a better brand of politicians.  Let’s find them and soon.


Government Spending and Egypt

In Economics, Financial, Opinion, Political Critique on February 14, 2011 at 1:04 pm

The Obama administration claims to look for ways to control spending, to control the national debt – some day in the future, after it’s done ‘investing’ our money for us.


The discussion (noise) about spending in the federal government is spoken in code, isn’t it? Nothing makes any sense to me, and my English is pretty good.  Here’s a translation of the $3.7 Trillion budget discussion.

Government officials, Republican and Democrat, have concluded that the only good spending is government spending, since that is the only kind that results in the accumulation of more power in the hands of 535 men and women.

How does Egypt come into the picture?  Hosni Mubarak did not continue to siphon money from the Egyptian economy after he had X-Teen billion $s in the bank so that he could be more fabulously rich.  In truth, he continuted the theft to broaden his reach, to increase his power over the apparatus that ruled every facet of Egyptian life.
Back in the USA — $3.7 Trillion divided by 535 is approximately $7 Billion.  We have 535 Hosni Mubarak’s in the US Congress, and their job is handing out – each of them – $7 Billion, every year.

The same desire that drove Mubarak, the same all-consuming thirst for control, drives Washington, DC.  The spending machine gets bigger and bigger by the day, it feeds lobbyists, union officials, campaing consultants, media trainers, congressionial staffers aspiring to be on TV, the compliant media machine, and on and on . . . NO ONE represents the tax-payer in Washington; the entire conglomerate feeds off of government spending, and it has to enlarge itself constantly or it starves.

Defeating that beast is the challenge of Americans. Unfortunately the so-called “campaingn finance” laws make it virtually impossible to mount an effort to fight the party machines, because it is illegal to accumulate the resources (i.e. money) necessary to buy a big enough megaphone to be heard over the above-mentioned noise.

Take a look:

There is an answer and when we get enough voices to join us we will announce it, and the unConstitutional FEC laws will not stand.

Commercial Real Estate – A look back

In Financial on February 5, 2011 at 5:13 pm

A slightly dated video of a certain prominent Washington, DC developer produced by Huffington Post.  Government actions will not and should not attempt to save the free market from its mistakes.  Too much leverage, cheap money, prolific development, unchecked risk-taking, and unrealistic economic predictions led to a bubble.  It had to burst, but the government ill-advisedly socialized the pain rather than let the flawed business plans result in failure and losses.

See video here.

Anesthetics, Job Growth and The Bazooka

In Economics, Financial, Opinion on February 5, 2011 at 4:46 pm

Notwithstanding that none of them actually say this, a read of the books and reports about the financial panic of fall 2008 leads to this conclusion: the capital markets will remain relatively stymied and stagnant until they are freed of government intervention and arbitrariness. “Saving” GM and AIG and similar acts that purported to prevent or eliminate the pain of failed business plans are the equivalent of giving the financial system anesthesia. When the drug wears off, unless the disease has been cured, the pain returns and is usually worse. That’s where the US economy is headed. Government actions are propping up the price of certain assets and securities, but government actions are driving down the value of those assets and securities, particularly in the real estate sector. When price finds value, as the market forces say it must, it will be a steep and painful fall that will destroy trillions of dollars in wealth.

Markets seize up due to what has been called ‘regime risk,” and that is the primary cause of the loss of value – the lack of liquidity; money is not flowing to its most productive, profitable uses.  Uncertainty in the rules of the road paralyzes the market, robbing it of one of its key supporting characteristics – the truth. Other risks can be assessed and quantified; regime risk can not be.  When capital seeks safety, risky, innovative ventures starve, and we get lackluster job growth.

To get a sense of why the investors are reticent to bet on the future, one might read Hank Paulson’s book On the Brink. It is a confessional about how he, among other abuses of power, scared Congress into giving him a “bazooka” so he would have enough power to “save the financial system as we know it” (and feed the victims to whichever bank or crony was on the right side of the conference table). That kind of arbitrary, extra-legal behavior by the government makes market participants keep their wealth in protected, safe investments, rather than deployed in risk-taking, innovative ventures. None of the capital market’s participants who are not ‘lobbied-up’ will step up to the black jack table so long as the politicians are in the back room deciding with the lobbied-up crowd whether sometimes the dealer’s 23 beats 21.

Oh, and now the “other” team has the bazooka, a development that Mr. Paulson reveals that he does not appreciate. He writes that he was surprised when candidate Obama, previously having been so engaging during the 2008 campaign, stopped talking to Mr. Paulson the day after winning the election. DUH, Mr. Secretary; the bazooka conveys with the presidency. “What use are you to me now?” was President-elect Obama’s clear message to outgoing Secretary Paulson, and poor Hank had no idea he’d done it to himself.

We found the ‘free lunch’

In Economics, Financial, Health Care Reform, Humor, Political Critique on February 2, 2011 at 4:16 pm

It is reported that a US Senator has found either the perpetual motion machine or the free lunch.

Well, sort of.  [CLICK below to read MORE] Read the rest of this entry »

Bailouts – Debt vs Equity

In Financial, Opinion on February 1, 2011 at 11:47 pm

This piece from Cafe Hayek (Link Here) by one of our best economists about a distinction that we don’t hear much about.  Generally speaking, government bailouts saved lenders and management, not shareholders.

Moral Hazard is not some academic theory.  It is exactly why the financial markets unwound in 2008.  The consequences of risk were distorted and difficult to trace – often the owners of the upside potential of investments had no downside, having passed that risk on to unsuspecting bondholders who thought the rating agencies, who had nothing at stake, had correctly assessed the risks of securities that were rated as AAA (or some other ‘investment grade’ rating).

Neither greed nor deregulation caused the financial markets to seize-up in 2008.  A disconnect between risk evaluators and risk takers caused much of the problem.  Risk takers naively let others with nothing at risk evaluate the risk takers’ exposure.  That never has worked.


The gap between rich and poor

In Economics, Financial, Opinion, Recommended Reading on February 1, 2011 at 10:30 pm

Don Boudreaux again.  Several examples that make the point that wealth is not necessarily sticky or bias.  Wealth is created by worthy, hungry and hard-working men.  It isn’t static or loyal.  It, absent government intervention that favors the well-connected, flows freely to and from the productive and the moochers, respectively.

See his piece HERE. on Cafe Hayek.

Another point.  About the purported problem of a concentration of too much wealth in too few hands….those who are for ‘distributive justice’ seem to favor a set of government policies to ‘correct’ that problem might check their math.  Taxation to spread the wealth would give 535 men and women control over the wealth of millions of ‘rich’ people (1% of the population is > 3 million people, and they possess a mathematically disproportionate % of the wealth in America).

535 is 0.000147% of the population.


Saving money by reducing freedom

In Economics, Financial, Recommended Reading, Regulation on February 1, 2011 at 4:55 pm

Economist from GMU, Don Boudreaux, strikes again.  Please, Mr. President, let us buy whatever lightbulb (or wine, or automobile or health care) we, as free men and women, choose.

Incandescent Arrogance

Regulating by banning things for which people would otherwise pay a premium is typical of our government’s arrogance.


Government is not a business

In Financial, Opinion on February 1, 2011 at 4:42 pm

Louis Gerstner maybe have been legendarily successful as Chairman of IBM, but his advice concerning how to execute a government “reinvention” (WSJ piece here) is misguided.

There are at least two fundamental differences between the US constitutionally created federal government and a business:

1.  One exists because its “customers” created it to, among a very limited number of other purposes, protect them from other “customers” infringing upon their “certain unalienable rights.”

2.  One’s powers include the power, backed up by the license to use power, to TAKE money from its “customers” so as to pay for its operations and carry out its purposes.

To apply business school management lessons to, or talk about efficiency of, the operations of the federal government is to misconstrue its purpose and to fail to contemplate and protect against the dangers of the potential abuse of the license to use force to compel behavior that comports with law.

Businesses (1) risk nothing but their owners’ investments, (2) can’t use force against customers who don’t do as they’re told, (3) are not, individually, an integral and necessary part of the nation, and (4) can make mistakes without endangering every other institution in its path.

Failure to see the difference between the nature and roles of government and business leads to many mistakes.  Control of the government fisc and custody of its immense power are not the same as making shareholders happy with a bottom line.  Analogies and comparisons that blur those distinctions are useful to the crowd that wants a bigger, more powerful government.  They do not lead to a more free society.

A Letter to the WSJ

In Financial, Letters to Editor, Regulation on January 31, 2011 at 3:54 am

Our letter recently published in The Wall Street Journal

Link here.

You smilingly call it “fine print” when you describe the portion of President Obama’s recent executive order that requires agencies to consider the unquantifiable benefits of “human dignity, fairness and distributive impacts” when weighing the costs and benefits of a regulation (“Obama’s Rule-Making Loophole,” Review & Outlook, Jan. 24). That’s not fine print. That is the very essence and the sole purpose of the executive order—to override any and all previous orders which required an honest, objective cost/benefit analysis.

[CLICK BELOW and READ MORE] Read the rest of this entry »