Bruce Smith
By John | August 9, 2009
Yesterday, Bruce Smith was inducted into the Pro-Football Hall of Fame, recognizing his excellence as a football player with the Buffalo Bills and the Washington Redskins. Bruce contributed as an athlete and entertainer over a sparkling career, and certainly is deserving of this recognition.
But Bruce’s contribution at yesterday’s induction ceremony may have been even greater than that of his stellar football career. Like most inductees, Bruce thanked many who contributed to his success over his lifetime. But in addition to crediting people, Bruce credited principles - principles he has striven to live by, and principles which also contributed to his success. Among those principles were honesty, integrity, hard work, and the willingness to never give up.
In fact, Bruce told the story of the first time he went out for football as a young teenager. It was hot. Football practice was hard. So, like many teenagers might be inclined to do, Bruce quit. And, that could have been the end of Bruce’s football career. But Bruce had a father who lived by principle, and his father simply told Bruce to “never quit.” He told him verbally, and through his own life example. Perhaps his father realized Bruce had come to a crossroads in his life. Probably, his father had no idea the effect his simple statement would have on his son. But it did. Bruce didn’t quit. Inspired by his father’s words and example, Bruce went on to become one of the best football players to ever play the game.
Yesterday, Bruce accepted the honor bestowed upon him by the Pro-Football Hall of Fame. As one of the true giants of the sports world - a man respected by millions - Bruce revealed the secret of his success. As his father had before him, Bruce told the world, and all of those young athletes aspiring to become a Bruce Smith, the secret of success.
Honesty. Integrity. Hard work. And NEVER quit!
Topics: Commentary | 2 Comments »
America’s Youth
By John | July 30, 2009
I saw an interview of medical students on TV the other day. It triggered the following thoughts on America’s youth:
Today’s youth seem socially mature and socially sophisticated. They are self-confident and believe they deserve to get what they want. They are team players, and see themselves as part of a social group. They believe in the economic, social and educational systems in which they participate. They are articulate, upbeat and happy.
Today’s youth seem shallow - almost mechanical in the way they think. They buy into the latest fads. They believe in environmentalism, global warming and government energy policies. They believe in socialism, fairness and the good intentions of others.
Despite their self-confidence, most young people are relatively incompetent. They have spent the vast majority of their lives in institutional settings, and have developed few of the individual competencies of their predecessors.
Most young people are self-centered, but don’t see themselves that way. If they are store clerks, they will give priority to conversations with friends and ignore customers. They are unwilling to make sacrifices - they tend to do what they like doing - which can be both a positive and a negative, depending upon circumstances.
A couple of generations ago, we would not have needed to import migrant labor to harvest crops and perform menial tasks. Kids were expected to help out. Today’s kids don’t do menial tasks. They expect to enjoy what they are doing. If not, don’t do it! If I don’t have something to do that I enjoy, entertain me! I am entitled.
Like most young people throughout history, today’s youth are naive. They believe what they are told, and idealize their world. They don’t handle responsibility well, because they lack experience with it. They have been trained to trust in “the system.”
Now, getting back to that medical student interview I observed on television. When asked if they believed that the health care system needed reform, they all raised their hands. They don’t question the very need for a “system.” They don’t question the motivations of those advocating reform of the “system.” Their responses to questions were robotic, like they had memorized the party line.
As you can see, I am somewhat critical of today’s youth. I like them. They are pleasant people. However, they are products of an institution I don’t respect - government schools. Many of their beliefs won’t hold up in the real world. Let’s hope they adjust.
Topics: Commentary | 2 Comments »
PawnLand
By John | July 28, 2009
Pehrson Capital Corporation is announcing a new investment program, designed to take advantage of the lending malaise currently gripping the real estate industry.
After lending recklessly for several years, the pendulum has now swung the other way. Credit-worthy borrowers are unable to secure funding for worthwhile projects. Banks take deposits and hold on to them, instead of recycling the funds in the local community. Some of these would-be borrowers own free and clear assets, such as real estate. Under normal lending circumstances, this real estate would serve as collateral for loans. However, banks are not lending.
So, why don’t these real estate owners simply sell their properties? Without lenders to support the market, and with prospective users of these properties unwilling to expand their businesses in this economic environment, these properties can only be sold at a steep discount. Owners are unwilling to take such a “hit” on their properties. So, nothing happens. Worthwhile projects go unfunded. Valuable real estate sits idle, benefiting no one.
That’s where Pehrson Capital Corporation (PCC) comes in. PCC matches investors seeking superior returns on secured investments with these worthwhile projects.
Here’s how it works:
Let’s say Mr. Brown has a building under construction, but his lender refuses to advance any more funds. Mr. Brown has a tenant for the building, but he lacks the funds to finish it. Once finished and under lease, Mr. Brown can get a loan secured by the building, but he needs about $100,000 and time to finish the building.
Let’s also suppose that Mr. Brown owns some development land free and clear. Even in this distressed market, that land should be worth $200,000. He knows this land will be very marketable once the economy recovers, so is reluctant to sell it at the steep discount necessary to attract investors.
Mr. Brown approaches PCC, seeking funding. PCC matches Mr. Brown with an investor. After some negotiations, the investor agrees to purchase Mr. Brown’s vacant land for $100,000, lease it back to him for a little more than the carrying costs on the land, and gives Mr. Brown up to two years to re-purchase the land from the investor. During the first year, the re-purchase price is $110,000. During the second year, the re-purchase price becomes $125,000. And after two years? The re-purchase option expires, and the investor is free to sell the land at whatever price he can get to whoever he wants to sell it to.
Mr. Brown is confident he can utilize the proceeds from his vacant land sale to complete the building, lease it out, and obtain new financing secured by the building within one year. Therefore, he is willing to sell his vacant land at a steep discount, knowing he can buy it back. Even after paying the markup and some closing costs, this is a good deal for Mr. Brown.
And the investor? He receives a return several times greater than keeping his money in the bank. And if Mr. Brown doesn’t re-purchase the land? He has an even better deal. He bought property at 1/2 the current market price.
PCC is acting as a real estate pawn shop. If you, or someone you know, is seeking an opportunity like this, you may contact me at jlpehrson@mac.com or by calling 616-240-1919.
Topics: Rural Land Investment | No Comments »
Conservatism vs. Freedom
By John | July 16, 2009
Conservative spokespersons like Rush Limbaugh, Shawn Hannity and Ann Coulter claim that conservatism is the answer to our current economic debacle and that the majority of Americans are conservative. Polls indicate otherwise.
The news media would have you believe that all Americans can be placed neatly in one of two categories: Conservative or Liberal. If there are any left over, they must be Undecided, and still trying to choose into which camp they belong. I believe this perception is more than an over-simplification – it is an outright distortion of the truth.
America’s claim to fame – and its historical tradition – is one of freedom. Freedom is what made our country’s founding unique – the idea that government derived its power from the consent of the governed – the idea that government was to have its authority restricted to only specific functions – the idea that individual citizens were to be allowed to make decisions for themselves, as long as those decisions did not infringe upon the freedom of others – the idea that the individual was to be valued more than the collective. These were the unique characteristics of the American form of government, a form of government that not only flourished for over two centuries, but succeeded beyond the wildest dreams of its creators.
Neither conservative nor liberal can claim to represent this tradition. In fact, both repudiate it in favor of their own vision for America.
Liberals would have an all-powerful government – a nanny-state – that cares for everyone. They advocate government health care, government energy programs, government welfare and government education. In each case, to provide these benefits, the government must take first, before giving, thereby taking away personal freedom. (Freedom from want is not a right.)
Conservatives are more subtle. They constantly advocate less government and more freedom, at least with respect to economic issues. However, conservatives would constrain your freedom with respect to personal issues. They would close our borders (Do you really think they are primarily concerned about terrorists?), outlaw pornography, outlaw abortion, make Christianity the national religion and spend billions of dollars (and fill up the prisons) fighting their war on drugs. (Freedom to make bad decisions, as long as they don’t impact others, is a right.)
What America wants and needs is principled leadership. As a matter of principle (and constitutional requirement), the Federal Government is assigned the primary responsibility of protecting the freedom of its citizens. However, elected officials have abandoned that responsibility, have hijacked the government, and turned that government into the greatest threat to freedom its citizens face.
Liberals hijack the government and, acting on behalf of their constituents, turn the U.S. into a nanny-state. Conservatives hijack the government and, acting on behalf of their constituents, turn the U.S. into a police state.
Polls would seem to confirm that most Americans want the country its founders envisioned. They respect the Constitution. They want freedom. And, given that freedom, are willing to accept personal responsibility for fulfilling their own wants and needs.
Conservativism, in its present form, is not what Americans want.
Topics: Government Excesses | No Comments »
Plunging Dollars - Hungry People
By John | July 5, 2009
Decades ago I came to the conclusion that America was on an unsustainable economic course. Eventually, the system had to collapse.
Long term trends are sometimes ignored because of the “forest for the trees” effect. Because we are so close to events, and the long-term process happens so gradually, we don’t see what’s coming, or think about it.
Let’s review my version of the economic history of the past 100 years in the United States.
As warned by our Founding Fathers, government tends to expand at the expense of personal freedom. The political types are ambitious. They want more control. They tend to exaggerate their own importance. They are elitists, believing they, alone, can make the “right” decisions. The masses cannot be trusted to make decisions on their own. They lack the correct perspective. They don’t look out for the common good.
For example, a governmental body must establish zoning restrictions to oversee the development of the local community. Otherwise: Chaos! At least that’s what is “sold” to the local community. A few challenge this concept, but most go along. A few elected officials have now taken partial control over private property that belongs to others. And, of course, this process is multiplied many times over at all levels of government throughout the country. Government advances – freedom retreats.
The Founding Fathers anticipated this power grab and tried to restrain it through the checks and balances built into the structure of government, and through a constitution that places limits on the power of the Federal Government. However, over the past hundred years those restraints built into the Constitution have been gradually eroded, until we have reached the point where a combination of ambitious individuals in the U.S. House of Representatives, the Senate and the White House are ignoring constitutional restraints and are riding roughshod over individual rights. Given the pretext of an economic crisis, financial institutions and manufacturing companies are being effectively nationalized. The country is fighting two wars, and the military is acting as world policemen. A crisis caused by excessive debt is being addressed by exponentially increasing the debt of the Federal Government.
In 1913, the Federal Reserve was established to provide a stable currency and help eliminate financial panics. I’ll let you decide how that has worked out.
In 1934, President Roosevelt intervened in the economy, extending the Great Depression, devaluing the dollar and making it illegal for U.S. citizens to own gold. (Where does that fit into the Constitution?)
In 1971, President Nixon intervened in the economy, establishing wage and price controls, and totally eliminating the convertibility of dollars to gold – we were now on a purely fiat currency, with no restraint on the printing of paper money.
Throughout the first 140 years of our country, we had inflation and deflation. But, on balance, the dollar retained its value. An 1800 dollar was worth about the same as a 1900 dollar. However, a 1900 dollar was worth many times as much as a 2000 dollar. During the twentieth century, the political types took control of our currency, and look what they have done with it!
Much has been written recently regarding how we got into this economic mess. There is no question in my mind as to who is primarily responsible. Excessive government spending, coupled with government policies that encourage consumption and debt and discourage savings and investment put this country on an unsustainable economic path. But the common view is that we are just in a recession that is more severe than most, but we seem to be emerging from it. Everyone looks forward to business as usual. They don’t see the forest for the trees.
Well, not everyone sees the world this way. Especially our creditors.
Since coming off the gold standard in 1971, the value of the dollar has been plummeting. Even given government statistics regarding inflation, this is not a pretty picture. But, in my opinion, government statistics have been drastically under-reporting inflation for decades. The dollar’s collapse has been much more dramatic.
Since World War II, the dollar has served as the primary medium of exchange between the nations of the world. As the U.S. has run current-account deficits, we have imported manufactured goods and exported dollars. Foreigners have accepted these dollars in exchange, and have lent them back to us by buying U.S. Treasury securities. That is changing.
Foreign governments, in particular, observe the behavior of our Federal Government with grave concern. Faced with huge federal budget deficits, our government revs up the printing presses, sending out checks to everyone from individual citizens to banks to car companies. Faced with huge federal budget deficits, our government proposes massive new spending programs to nationalize health care, auto production and alternative energy programs. Faced with huge federal budget deficits, our government just keeps creating more fiat currency.
Would you lend money to anyone who behaved like this? Well, neither will our creditors.
Foreign governments are meeting to establish alternatives to using dollars in international trade. China has proposed creating a new international currency. China, Russia, India and Brazil recently met to work on this project. The U.S. was not invited to this meeting.
Now, imagine this scenario: As the U.S. Treasury continues to finance its massive spending program, demand for Treasury securities dries up, as foreigners no longer are willing to lend us money. They are spending their dollars (as China is) to purchase hard assets, raw materials and land. They are no longer willing to hold dollars – they don’t trust their continuing value.
As the Treasury has no choice, they must continue to sell securities. Who is going to buy them? The Federal Reserve Bank. And how does the Federal Reserve Bank pay for these securities? They create dollars. Out of thin air.
Dollars in circulation grow dramatically in supply. No longer acceptable to settle international transactions, the demand for dollars is dropping dramatically. Let me see if I remember my basic economics: Increasing supply; decreasing demand. I remember! Plunging price!
What does “plunging price” mean with respect to a national currency? It means that all other currencies rise relative to the dollar. It means that anything purchased from other countries becomes much more expensive. Think manufactured goods from China. Think oil from the Middle East. Think natural gas and wood products from Canada. Think about how we now live in a world economy, with each country dependent upon goods and services originating in other countries.
A plunging dollar translates into exploding prices. As the dollar sinks, lenders of dollars demand a higher return on their loans, as they realize they will be paid back with dollars that have less purchasing power than the dollars they lent. Interest rates will skyrocket.
All holders of dollar-denominated assets will see the value of their savings plummet. The dollar is only as good as the full faith and credit of the U.S. Government, and we are now witnessing how good that is!
So, what should you do with your investments?
Rule number one is to get out of dollar denominated assets – bonds, CDs, promissory notes, bank accounts of all kinds.
Rule number two is to get into hard assets – assets that will hold their value over time because people desire and need them. Gold and silver have traditionally served this purpose, as has real estate. Gold and silver coins might serve a purpose as a medium of exchange in an environment in which dollars are no longer acceptable.
What type of real estate makes sense in this scenario? As all non-essential economic activity would be expected to collapse, one needs to be selective. Understand that many sources of income might dry up, as increasing numbers of participants in our economy become unable to meet their obligations. Luxury retailers will be unable to pay their rent in a shopping center, for example.
Everyone will give priority to what they must have. We can’t live without food, and we must have a place to live.
I maintain that the best investment you can make in this economic environment is farmland. That is the case because all Americans need to eat, but also because citizens of other countries might be experiencing increasing living standards even though the U.S. economy is in shambles. With a cheap dollar, food exports might be a thriving industry.
So, here’s the opportunity: You own dollars. Dollars have no intrinsic value. They can be printed at the whim of the Federal Government. They are in excess supply at a time when demand is expected to decline. You, like creditor nations throughout the world, would like to dispose of these dollars before they become worth even less.
You are faced with an alternative investment to dollars – farmland. Farmland is in limited supply, and can only be created with considerable effort and expense by converting other types of land to farmland. Farmland is experiencing increasing demand, as world population increases, and as more world citizens increase their wealth and demand better diets.
High risk, declining supply/demand relationship. Low risk, favorable supply/demand relationship. Your choice.
Can you think of a more solid investment in a time of economic turmoil than farmland?
Topics: Rural Land Investment | 1 Comment »
Pirate Problems
By John | April 16, 2009
The “leaders” in Somalia are suggesting that the pirate problem must be tackled on land, as it is too difficult to patrol the vast ocean. Of course, they will require funding to accomplish this……
This nonsense is nothing short of blackmail. “Give us money and we will stop attacking your ships.” Of course no amount of blackmail payments will stop the pirating - it will only encourage it. As long as ransom continues to be paid to pirates to release ships and hostages, the pirating will continue.
The hand-wringing politicians are expressing their concerns. In fact, if the escalation in pirating continues, I predict calls for international conferences to address the problem. After all, the problem is very complex, and as Secretary of State Hillary Clinton has suggested, requires a multi-pronged international effort to solve this problem - and it won’t be solved overnight. Blah, blah, blah, blah, blah, blah………..
Do you know why we haven’t had a piracy problem for 200 years? It wasn’t because potential pirates were afraid of international conferences. It was because they were afraid of being blown out of the water. Weren’t merchant ships of 200 years ago armed? Are we so afraid of offending criminals that we are no longer willing to defend ourselves? Is it the responsibility of the U.S. Government to provide for Somalis? I thought the function of the U.S. Government was to protect the freedom and property of Americans. Silly me!
Topics: Property Rights | 2 Comments »
What is Money?
By John | April 14, 2009
What is “money”? Is a piece of paper - a dollar bill - money? How about precious metals? Gold? Silver? Copper? Platinum? How about gems? Diamonds? If I write you a check, have I given you money? Is the balance in my bank account money?
Where does money come from? Who decides what money is?
“Money” is frequently described in terms of its functions - in terms of what it does:
1) Money is a store of value.
2) Money is a medium of exchange.
3) Money is a unit of measure of value.
OK. That’s what money does. But, what is money?
Money is a promise. Money is a promise from the issuer of that money to the recipient or bearer of that money. A promise of what?
1) Money is a promise to return to the recipient of money the same value that was supplied, no matter how much time has elapsed. If money is backed by something specific of value, such as gold, the promise is that the money will be worth the same quantity of gold when it is redeemed as when it was issued. If money is not backed by something of value - if it is a fiat currency - the same principle applies. The relative value the money had at the time it was issued should still be there when it is redeemed, regardless of how much time has elapsed in the meantime. Otherwise, money has failed to perform its “store of value’ function.
2) Money is a promise that its integrity and acceptability will be maintained over time. Whatever that promise is, whether it is convertibility to gold or other precious metals or just its ability to maintain a constant purchasing power over time, money should retain a consistent reputation so that it will be readily acceptable among the community in which it serves. Otherwise, it has failed to perform its “medium of exchange” function.
3) Money is a promise to maintain the perception of constant value. A building built in 1800 should measure the same dimensions today as the day it was built, as long as we use the same unit of measure, such as the foot. Similarly, a dollar tucked away inside a crevice of that building in 1800 should have the same purchasing power today as it did when it was hidden. If it does not, the promise has been broken, and the “unit of measurement” function has failed.
It matters little whether money is represented by precious metal, a paper certificate, a token, a cord of wood or an electronically stored contract. If it adequately performs the above itemized functions, and fulfills its promises, it is money. It doesn’t matter if that money was originated by a national government, an international body, a bank, a private organization, or an individual. If it looks like a duck, walks like a duck and quacks like a duck, its a duck. At least until it is no longer a duck.
If Thomas Jefferson were to return to Monticello today, recover a dollar bill he had stuffed in the wall in 1800, and try to spend that dollar, do you think he would find that dollar acceptable “money”?
The U.S. dollar was backed by precious metals - gold or silver - throughout most of our history. Throughout most of that history, the dollar maintained a constant value. At times, such as in wartime, the U.S. government found it convenient to manipulate the value of the dollar, but it subsequently came back to its previous value. Then, in 1934, President Roosevelt devalued the dollar relative to gold, and made it illegal for U.S. citizens to own gold. This was “necessary” to support government programs.
Then, in 1971, President Nixon took the U.S. entirely off the gold standard - meaning the dollar was no longer convertible to gold, even in international transactions. This was “necessary” to support government programs.
Since 1971, the dollar has been backed only by the “full faith and credit” of the U.S. Government. That means that if you own a U.S. dollar you may take it to the Government and redeem it for - a U.S. dollar.
The basis for U.S. money today is credit. Through the actions of the Federal Reserve Bank and other banks, money is created by lending to others that which they do not have. Banks are only required to keep a fraction of what they have loaned out in reserve. And, of course, the U.S. Treasury can just print money, and does, at any time.
Is there anything wrong with that? No, in theory, there is not. As stated above, it doesn’t really matter what we call money. It doesn’t have to be backed by anything. It can be fiat money. As long as it fulfills its promises to the community it serves, it is money. The problem, of course, is that there is no longer even the pretense of keeping these promises.
The Government today enjoys a crisis. It is “necessary” to create dollars to support its programs.
The dollar is becoming worthless. It is only a question of how fast. Dollar investments are at risk.
Duck!
Topics: Government Excesses | No Comments »
What the Hell do I do Now?
By John | March 9, 2009
The rat is no longer seeking cheese. He just wants out of the trap.
Investor goals have changed in the past few months. Many no longer rank profits as their primary objective. Safety - preservation of purchasing power - has taken precedence.
The collapse of credit, the sharp contraction of economic activity, and the plummeting stock market have taken their toll. The viability of seemingly healthy companies is called into question, creating an exodus from the stock market. The flight to safety has attracted funds to U.S. Treasury securities and caused their yields to approach zero. Massive federal spending and deficits convince investors of the inevitability of rampant inflation sometime in the future.
This is not a pretty picture. If you put your money in bonds, CDs, money market funds or your mattress you risk losing purchasing power through inflation. Holding securities in this uncertain environment is considered too risky.
What should investors be doing? Well, for one thing they should own assets that will retain value over time - assets that are not expected to be in excess supply in the near future - assets that are tangible - asssets that are real. Precious metals, such as gold, have always retained value in uncertain times. Unfortunately, gold has had a huge run-up in price in recent years. If the economic outlook should brighten, gold could be expected to decline in price.
For many investors, real estate now makes a lot of sense, even though they may not have invested in real estate in the past. For those lacking experience, they need help evaluating the market - evaluating the risk/reward relationship.
As we have seen, and are seeing, real estate is also subject to market fluctuations. The recent housing bubble is a good example. I would expect to see other categories of troubled assets in the near future, as leveraged properties become unable to service debt. Retail, office, motels, resorts, etc. are experiencing declining revenues and probably will even more so in the coming months. So, for the investor seeking safety, I suggest avoiding leveraged investments.
Real estate investing has traditionally focused on income and cash flow. But what do you do when the income and cash flow become exceptionally uncertain?
For many of these safety-seeking investors, I believe vacant land is the answer. Buy for all cash. Buy at bargain prices from motivated sellers. Buy properties with low carrying costs. Plan to hold for several years - don’t count on an economic turn-around in a few months.
Whatever type of property an investor is buying, he needs to have a good handle on the supply-demand relationship for that type of property in that location. Don’t buy something that will be in surplus supply in a few years. And, again, don’t assume we will come out of this recession conducting business as usual. This administraton is behaving as anti-capitalists. Money is being printed and spent at unprecedented levels. These actions have consequences, and will for years to come.
Know the market you are investing in. Consult others. Know values. Then buy with the confidence that you now own a solid, appreciating asset.
Topics: Rural Land Investment | No Comments »
The 80/20 Rule
By John | March 6, 2009
According to the 80/20 Rule, in any given population, 20% of the people will provide 80% of the production for the entire group. In other words, 80% of the people will only provide 20% of the total production. This rule is frequently applied to sales organizations, but it seems to have general application - it seems to conform to human nature. For whatever reason, only about one out of five people are truly motivated; are truly committed to excel at what they do.
Now, let’s suppose we have a society of free people, a society subject to laws that protect the freedom and rights of its people; a society with a government that enforces those laws, but otherwise leaves everyone to pursue his own interests. According to the 80/20 Rule, after a period of time, about 20% of the people in that society will hold about 80% of the wealth of that society. Why? Because only about 20% of the people are really driven to succeed. They work exceptionally hard, apply themselves to achieving their goals, and become economically successful. The other 80% are satisfied to just “get by.” They may live relatively successful lives, but they are not motivated to excel like the top 20%. But, because of the exceptional productivity of the top 20%, much wealth is created, employment opportunities abound, and the entire society flourishes.
Now let’s take that same society and make it a pure democracy. Unlike in the above example, where the government was limited to those tasks necessary to protect the rights and freedom of its people, in a pure democracy everyone has a vote, and the government is free to involve itself in whatever the majority decides it wants the government to do.
Absent restraints, voters now begin voting for their perceived self-interest. For 80% of those voters - the 80% that only has 20% of the wealth - it now becomes in their self interest to “spread the wealth.” Rather than have wealth distributed according to who earned it, let’s distribute it more equally. Let’s establish a new value system, one that rewards everyone equally, not one that rewards those over-achievers.
This, of course, appeals to the bottom 80% of the economy. Unfortunately, this new system creates a strong disincentive to produce for the top 20% of the economy. At first, it doesn’t seem to make much difference, as a seemingly fixed quantity of wealth is re-distributed throughout the economy. The bottom 80% are very pleased at being able to acquire wealth they have not earned.
The top 20%, however, are not pleased. They have no further incentive to be productive. If everyone receives the same reward, regardless of effort, everyone is encouraged to become “average.” And, without incentives, this “average” steadily declines into mediocrity. The productivity of the entire society declines. Everyone is now equal. Everyone now lives in poverty.
This is not conjecture. That the above scenario is an accurate description of human behavior is an observable fact. Travel around the globe. Compare the wealth of people in various countries with the economic system is which they live. Free people, living in a society with a stable government that respects the freedom and property rights of its citizens, flourish. Governments that do not allow its citizens to keep the fruits of their own labor preside over impoverished populations.
OK, so why would democracies vote to re-distribute wealth? It isn’t in their own interest, is it?
Well, that assumes voters are intelligent, informed, responsible, far-sighted people. That assumes voters will not choose their short-term interests at the expense of their long-term interests. I contend those assumptions are false.
Much criticism has been leveled at Republicans in the U.S. for not standing up for limited government, for fiscal responsibility, for supporting the Constitution, for private property rights, for freedom. Polls seem to indicate that most voters believe in the principles of government established by the Founding Fathers. However, when it comes time to vote, are those voters even aware of how those principles relate to what they are voting for? If a candidate promises to “help” me, will I not vote for him? If I am promised something for nothing, if I am promised that I will be protected from my own bad behavior, will I not be swayed by those promises?
An argument can be made that the steady growth of the Federal Government in the U.S., at the expense of individual freedom, is inevitable. Observe the history of the past one hundred years. The rate of growth, the pace at which new government programs are developed, varies. But the trend is unmistakable. Government advances. Freedom retreats.
Is it realistic to expect that a new generation of officials will be elected who will then proceed to reinstate our freedoms and reduce the size and scope of government? Who will vote for them? If it hasn’t happened in one hundred years, under both Republican and Democratic administrations, what would make us believe it will happen in the future? What would bring about such change? After all, in a democratic society, don’t the people get what they want?
Topics: Property Rights | No Comments »
Those Old Failed Policies of the Past
By John | February 9, 2009
In the normal course of human events, there will be ups and downs. There will be fluctuations. Throughout U.S. history there have been economic contractions interspersed among economic expansions that are the envy of the entire world. Occasionally, those contractions become “panics.” In the midst of a panic, it may appear that the world as we know it is coming to an end. So far, that hasn’t happened.
We are in one of those panics. Some of the more panicky among us are questioning the viability of the system that got us here. They would condemn capitalism as a proven failure. Really?!!!
Let’s take a brief recess from our panic to examine the condemnations of the panicky.
First, this economic contraction had a little non-capitalist help. If one wanted to create a housing bubble, how would one go about it? One might create government sponsored entities to purchase home mortgages. That will assure an unlimited supply of funds for home purchases. One might enact legislation to interfere with normal lending standards and require that even those who can’t afford houses be granted loans. One might put pressure on bank regulatory agencies to require banks to fall in line behind the goal of providing “affordable” housing. One might package home mortgages into securities that could be pedaled to unsuspecting investors throughout the world. One might enact tax laws that made interest on home loans deductible from federal income tax, while providing double taxation of those funds invested in common stocks of publicly traded companies, thereby directing investment funds away from productive employment and into housing. One might have the central bank of the country support debt by expanding the money supply and keeping interest rates low - even negative at times. Yes, that should do it. That should create an enormous housing bubble that would eventually burst with an explosion heard around the world.
Oh, and here’s the fun part. After having manipulated the economy into a panic, let’s conceal our role in the process by blaming the very system we were manipulating. i.e., this was not the fault of our interference in the market, this was a failure of capitalism!
But wait, it gets better. Now that everyone is in a panic, they need to be rescued, right? Let’s continue to manipulate the ecomony, this time by alleging that we need a large dose of Keynsianism - we need to create a huge spending program that’s now needed to “rescue” the ecomony from the failures of capitalism. And if those programs just happen to consolidate enormous power in the central government, well that’s just great! It worked for FDR in the 1930s. I am sure it will work today.
Of course, in the 1930s, the massive intervention in the economy by the federal government prolonged a recession into a decade-long depression. That depression only ended with the greatest war in world history.
Oh, and to those who object to our tactics? Let’s just say that to do otherwise is to employ those old failed policies of the past. That way, when someone points out that WE are just employing those old failed policies of the past, we will already have tied up that expression.
Confusing, huh?
Topics: Government Excesses | 1 Comment »
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