economics free market

Budget gnashing of teeth

I’ve started seeing posts about how one team wants to “slash” the budget, leading to the impoverishment of millions because of cuts to to head start, planned parenthood, housing vouchers, NPR, etc. Of course the other team is yelling that the other side isn’t cutting enough. I’m going to split the difference and say that one side isn’t cutting much of anything, and the other side is making totally inconsequential (to the deficit) cuts. What needs to be addressed is Medicare, the Military, and Social Security. Everything else is window dressing. Predictably, neither side want to go near those things so what we are left with is political theatre.

Budgets at all levels are in pretty bad shape. What I’m hearing from the left is that tax cuts are what’s causing the deficits, and of course the right is blaming spending. Spending is, of course, the root of deficits. While both tax revenue and spending go into making a deficit, only one side of that equation is done to people, backed up with the threat of jail time. So I think there is a moral argument to cut spending as much as possible vs. raising taxes. Why folks seem to think it’s OK to take money from someone just because they have it has never made much sense to me. And that isn’t even taking into consideration the consequences of having too high an income tax…

This all reminds me of  the contortions people go through to lose weight. They will try various pills, diets, etc. when we all know what will lead to weight reduction, less food and more exercise. We’re going to need more taxes and less spending. Taxes are going to have to go up across the board, not just on the wealthy. Similarly, spending cuts are going to have to be across the board of the big three programs, at least on the national level. It’s the perfect solution, no one will be happy. What people want is more stuff as long as someone else is paying for it,  and so that’s what politicians promise.  That, in a nutshell, is how we end up where we are now.

I’m not sure what will be more effective, getting the political will up to stop eating so much and exercising more, or letting things go until we need bypass surgery/gastric bypass surgery. If the monetary system collapses, there will be enormous pain and suffering, but hopefully some sort of lesson would be learned. Plus, it would get our debt off the backs of subsequent generations… I’m sure that over time, the same mistakes will be made as long as fiat currency/fractional reserve banking is the norm. I worry that if the current lawmakers buckle down and do something sensible (not that I’m holding my breath) it won’t last long, probably only until the economy goes on another Fed induced boom. SIGH.

Do you remember what I was blogging about in September? Silver was $17 an ounce. It’s over $37 an ounce now. The longer the lawmakers quibble and nibble around the edges of the problem, silver and gold will continue to go up in price. Or is that the currency losing value? Just saying….

free market politics

Public sector unions

The stuff going on in Wisconsin has me posting things on Facebook and chatting with people and I worry that some may get the wrong idea about my stance on unions. I have no problem with people organizing to exert political pressure or to have leverage in negotiations. This is what unions should do. What I do have a big problem with is many states have laws on the books that require collective bargaining through unions.

Whenever you have the government throw its weight behind any particular group, enormous distortions in the labor market and general economy occur. By making labor more expensive than it otherwise would be, people get shut out of jobs. Usually it is the underprivileged and inexperienced that suffer the most under mandatory union hiring and bargaining. Unions should be able to bargain based upon higher quality workers, acting a lot like guilds. Unions should be something that workers work towards so that they can command better wages, benefits, etc. because of their certification.

In any case, I understand the appeal of unionization when there is a class of workers that do not seem to be getting their “fair share” of the profits. Things are totally different when it comes to public sector unions. There is no evil capitalist  taking the lion’s share of the profits, there aren’t any profits involved. Things are so much more muddled without profit motives and profits to capture. How do we know what a good salary is? How do we know what good benefits are? It’s pretty cut and dry in the private sector, you need to pay your way in both wages and benefits. If you don’t create enough value to cover those things, you get fired. If you are inexperienced and can’t create very much value, you don’t get paid much until you do. Of course if there are laws and agreements in place that do not allow low enough wages to accommodate lower skilled workers, they just don’t get hired and are stuck.

The folks protesting in Wisconsin are the poster children of why people do not like public sector unions. When times are tough, it is going to be difficult to tell taxpayers to go look somewhere else for the money that is needed. True, there are some public sector jobs that still have a good vibe attached to them. Firemen, Police, etc. Most of the rest don’t have such a good rep. The saying, “Close enough for government work,” exists for a reason. . It’s also going to be tough to drum up much sympathy for a public school system that has generally disappointed over the past 30 years or so despite having had enormous amounts of money pumped into it during that time. Unions with required collective bargaining power do not seem to have helped education much.

Here’s a question. How many parents would willingly choose to send their children to public school if they were able to send them to a private school instead? I’m pretty confident that the vast majority of parents would choose the private option if given the chance. I doubt that many would cite the fact that very few private school teachers are not unionized as a reason. They would, however, cite lots of the effects of private vs. public (unionized) employment as reasons they like private school more. The private schools have higher standards and better results overall than public schools. Those results are directly tied to being more responsive to parents and teachers. That of course is tied directly to private schools continuing to make money…


All of this adds up to an uphill battle for the public sector unions in Wisconsin holding on to their collective bargaining power, let alone avoid the other concessions…


free market politics

The best summary of the Wisconsin mess

Reason‘s Tim Cavanaugh sums up the problem the Wisconsin public sector unions have


One picketing government worker blames Ohio taxpayers for acting like victims:

“What I’m seeing here today is that management is trying to be seen as the victim here, but they sit across the table and negotiated these deals just like us,” said Lawrence McKissic, of Twinsburg, who was at the Statehouse on Thursday. McKissic is an IT specialist for the Bureau of Workers’ Compensation in Garfield Heights.

“My concern as a state worker is that we would be unilaterally taken out of collective bargaining and it is being done without any word or input from the union or the employees,” he said. “They’re just trying slam this through this committee.”

McKissic refers to “management” as if he’s calling out a cabal of plutocrats rather than the people of Ohio, who will have to take up the slack for whatever new benefits accrue to the vital IT specialists of Garfield Heights. I think this is where the pro-union movement will find its limit. Outside of Detroit, Hollywood and what’s left of the newspaper industry, when you say “union” you almost always mean “government employee union.” In the private sector they expect results. The hard truth is that where public sector unions are concerned, there are no bazillionaires to point to on the other side of the bargaining table.


That’s really the crux of it. The public sector unions don’t have as much to bargain with since there are no profits to split with “management.” The state is in difficult financial shape, the money has to come from somewhere. Unions telling everyone that they can’t suffer these payments are essentially telling everyone else that they should suffer instead. We’ll see how long the union can sway public opinion…


Oh, and another related post made me laugh. I saw a posting in a blog that said, “Obama wasn’t elected by ‘big money’ so he should give more direct support to the union in Wisconsin.” Excuse me? The AFL-CIO isn’t “big money”? The public sector unions are among the largest, and most powerful lobbying organizations out there. Anyone that thinks that this is a battle for “the little guy” is out of their minds…

free market politics

Oh those wacky Greeks

Remember when Greece’s financial situation became untenable? Remember how the government tried to cut back costs because they ran out of money? We all laughed and jeered at the reaction the Greeks had to this, mass strikes, protests, etc. It was clear to everyone that some things had to change, but the public sector in Greece essentially said that everyone else should sacrifice, not them.


Man, was I glad I didn’t live in a place like that. So imagine my sadness when I read about the issues in Wisconsin. The administration is trying to cut into the deficit they have by lowering costs. They want the public sector folks to contribute to their own retirement packages and pay some of their own health insurance premiums. Keep in mind that those payments would still be half of what the typical private sector employee has to deal with. What was the reaction? Mass outrage from the public sector. There have been comparisons of the governor and Hitler (by the teamsters I think) and teachers comparing him to Stalin. No really… The democrat lawmakers have fled the capital to prevent the bill from coming to a vote.


Once again, the message is, “Our benefits are sacrosanct, even if they are far better than the private sector. Cut something else.” Someone else should pay instead of us, even if they’re only being asked for a small concession. In most places, it is the public sector workers that are bankrupting the state, I’m sure it is the same in Wisconsin. I’m hopeful that this display will further turn the voters against the public sector unions, but I’m not sure that the idea that the state does not have unlimited funds will sink in until the government gets shut down…

free market odds and ends


Just did my 24th loan through Kiva. I have been putting in $25 a month since September of 2009 and now things are starting to really roll. By my estimates, I have put in $450 into Kiva but have made $600 worth of loans. As people pay me back, I channel that money back into more loans. The last two months have been great, when I do my usual $25 contribution there is already over $25 in my account. Now I’m doing 2 loans a month even though I’m still putting in the same amount as I always have.So far there has been exactly 0 defaults. This is how things are supposed to work. People get infusions of capital making them more productive. They pay that money back and then that same money can go to someone else. Yes, they pay interest on the loan (not to me BTW, I only get back what I put in) but that assures that the money is being put to productive uses.

Most people see this as a great charity. I can’t help but notice that it looks like good old fashioned loans to improve capital and productivity. In other words, this looks exactly the way things would be absent market distortions. In an ideal world I would receive some of that interest instead of only getting the warm glow of helping someone out. That’s really the only thing separating what Kiva does from good old-fashioned capitalism.

One day I might need to withdraw the money I’ve put into Kiva. I have that option. I’m not getting any interest on putting my money aside, and I run the risk of not getting some of it back. Additionally, if I do want to withdraw the money, I might have to wait until it gets paid back to me before withdrawing. In general though, I feel good about what Im doing with this money and with a diversified enough portfolio I know that I can get most of it back eventually. Why aren’t more people doing this?

free market freedom

Why do you carry that around?

We were talking about rolling  coin across out knuckles at work (don’t ask, I have no idea why we were talking about that),


so I pulled out my $5 Canadian Maple Leaf coin to try it. My manager immediately asked, “What’s that?” I showed her and explained that it is one ounce of silver. Sure, it has a value of 5 Canadian dollars printed on it, but the value of the silver at that point was a hair below 30 bucks. I had bought it 5 months earlier for around 18 bucks.

Her next question was, “Why do you carry that around?” The most basic answer is that I like it. There is something solid and reassuring about the size and weight. With a little more thought, I also like it as a conversation starter, and it had worked this time too. It gave me the opportunity to mention the difference between fiat currency and hard money. Don’t worry, I never go into too much detail, unless they are interested of course…

I also carry it around to remind myself of the difference between how the currency maker and the market value money. Everything varies in price over time, but paper money’s and regular coins’ values are changed by that country’s central bank primarily. The government can print whatever value it wants on silver, but they have zero control over the actual value. In an ideal world, no single group could hold sway over the value of our money, our store of value. This is as close as we can come to that right now. It’s good to be constantly reminded of that.

free market technology

The FCC Should Not Regulate the Internet | Cato @ Liberty

A great summation of my unease over the FCC rules about the internet is from this article from CATO. Here’s the money quote:


“The arguments against government regulation in the name of “net neutrality” have not changed: A good engineering principle is not made better if dogmatized and given to lawyers and bureaucrats to enforce as law. The FCC and its regulatory regime are almost sure to be captured by major ISPs and turned to their benefit, used to suppress competition and blunt innovation.

A premise of net neutrality regulation—and much other regulation—is that consumers can’t be relied on to defend their own interests. Taking that premise, which I don’t, it follows that regulators must step in. But that syllogism skips over an additional premise: that regulators can do a better job.”



I wonder if people will ever catch on to the fact that regulation is frequently steered by the very groups that are being regulated. What appears to be onerous to big corporations is usually embraced by them because of their ability to absorb the costs. Smaller firms, and/or newer ones can’t so the regulation ends up reinforcing the status quo. There are other good points brought up in the article, give it a read!


The FCC Should Not Regulate the Internet | Cato @ Liberty: “”

(Via .)

free market freedom

Capitalism vs. conservative liberals

While I don’t like to paint in such broad strokes, I do agree with this article. Power to the people indeed, free those markets!

culture free market

Income inequality again

A friend of mine posted a link to a NYT opinion page entitled “Our banana republic,” and in it the author says:

Our Banana Republic – “In my reporting, I regularly travel to banana republics notorious for their inequality. In some of these plutocracies, the richest 1 percent of the population gobbles up 20 percent of the national pie. But guess what? You no longer need to travel to distant and dangerous countries to observe such rapacious inequality. We now have it right here at home”


Did you see what he did there? There are plutocracies that have big income disparities, we have big income disparities, therefore the rich here are just as bad as the rich there. True, he doesn’t come out and say it, but it is a clear inference he wants readers to make.

Now if he had gone on to explain how our government is funneling taxpayer money into the pockets of our top 1% and that these thieves should be brought to justice, I’d be sympathetic but skeptical. I do think that happens, and I do think those folks and the politicians that enable it should be held accountable, but I don’t think it’s as widespread as it is in those plutocracies. I am interested in hearing any evidence about that though…

No, the author didn’t make that argument. What he did was to point out the recent income disparity here in the US, infer that the people making a ton of money are somehow bad people, and then bring up “evidence” that when some people get rich, the people below them wreck themselves trying to catch up and suffer higher divorce rates. Seriously, he essentially says that the people not making as much in the top 1% mess themselves up, and the rich are to blame. I’m assuming that the author’s solution is to narrow the discrepancy to avoid those bad things. I’m also assuming his suggested cure is to either take the money away or prevent people from making that much money to begin with.

It reeks of the worst social engineering hubris I can imagine. Some people do not cope well when they see others doing better than them and so we are morally justified to take money away from folks because some others don’t like it. Give me a break. Taking money from people should be the last option, not the first. I’ve covered this ground before but I’ll say it again, just because some people make (much) more money than others does not mean there is a problem. If, like those plutocracies, the top 1% is actually stealing from everyone else, then fine, let’s go get the rich. Well how else are they getting that rich Isaac? Glad you asked, another blog post to follow…

economics free market freedom

Making money

There are two ways to get more money. People can willingly give you money in exchange for a good or service you offer. That’s business, trade, etc. The other way you can get more money is if you take it from someone else. That is commonly called theft.


If you want to discuss the morality of making money, just look at how they get it. In my view, earning money through selling goods or services is morally neutral. Of course, there might be a moral component to those goods and services, but as far as the act of making money goes, I don’t see any moral component to it, good or bad. Contrast that with theft, which is always a bad thing.

What’s interesting is how people see the fabulously wealthy. Somehow, without even thinking about it, the moral indignation of theft creeps into the conversation even though the money was voluntarily given to those people. There is an assumption that hedge fund managers, Wal Mart, athletes, etc. have somehow done something wrong by making all that money. There’s probably an historical bias there. Over the centuries, when someone became very wealthy, it usually did involve stealing money from someone. Various barons, conquistadors, armies, kings, etc. have made a habit of it. Modern day thugs such as Hugo Chavez, Kim Jong Il, Hosni Mubarak, etc. use a similar approach. Contrast those guys with Warren Buffet, JK Rowling, Bill Gates, Steve Jobs, and the like. Notice anything? Right, the first set of guys (why is it always guys?) use the power of governments to extract wealth from their populations. They are thieves. They get rich at the expense of someone else. As they get richer, others get poorer. The second set of guys made their money by offering services or products and getting paid for them. Trick question, who became poorer so that Bill Gates could make all that money?

The answer is of course no one. Wealth creators get rich without making anyone poorer. Yes, people had to give some of their money to Bill, but they got something back for it, it was an exchange. As a matter of fact, people got much more out of Bill’s products than what it cost them to buy them. Through trade, both parties are made better off. That’s trade for you, and it’s the appeal offered by actual free trade and capitalism.


“But that billion dollars they made could pay for 20,000 teachers!” That’s a different issue. You don’t like what they do with their money. I’ll first point out that it is always easier to allocate other people’s money (see congress for a prime example). I’ll also point out that they are not you and do not share your priorities. The fact that they don’t share your priorities is probably why they made a billion dollars… When you worry and fret about what people do with the money they make, try to remember all of the people that they made better off through their activities. It is that which made them rich. People had to decide that what they were offering was worth more than their money. The billionaires have already done a lot for society simply by offering a demanded service or product and they got rich as a reward for it. No, they probably won’t pay for 20,000 teachers, but they will do something with that money. They will reward someone else for services and products and the cycle goes on and on. Earning money is a great thing for everyone.