10 Rules: How Closed Minds Become Closed Borders

It is my intention to provide my readers with a very valuable and unique service.  I am a voracious reader and it is my special talent to distill complex subjects down to their simplest parts and principles (if indeed such principles exist).  Much of what is written, past and present, is intentionally obfuscated for political purposes or dishonest gain, whether of the material, intellectual, or emotional varieties.  It is designed to misinform or mislead.  Even when the ideas are simply muddle-headed rather than intentionally disingenuous, there is rarely an understanding of where those ideas originated, or historical consequences of their application.   These observations are particularly applicable to political discussions, but are not uncommon in virtually any serious discourse.

I am driven to know what is.  I grew up in an intellectually closed society, as one of Jehovah’s Witnesses.  I left that religious organization in mid-life only to find a whole smorgasbord of other closed societies, whether religious, philosophical, political, or social.  There is a vehemence and even fierceness of advocacy that inhibits civil conversation and betrays intolerance of different life experiences and conclusions.  What is most remarkable about all of these is that either side in any of these debates would passionately agree with my observations herewith stated, but only find them applicable to the attitudes and behavior of those with an opposing viewpoint!

As the polemicists outshout each other in the vain belief that raising the volume of their cranky bombast is the key to recruiting you to the cause or the sale, regard for evidence, logic, scientific method, clarity, and other calm pursuits are left behind like abandoned children.   Defense of our own position usually trumps all other considerations without any awareness whatsoever of the road by which we arrived at our convictions.  My most important takeaway from my own life-altering experience  is that I am the bouncer and doorman to my own mind, and I have sole discretion over what is permitted to enter.  I am the final arbiter of what I accept, because I become what I ingest intellectually.   This is a personal responsibility that I cannot delegate to any other person, institution, or authority. In my opinion, every one of my readers shares this same responsibility for themselves, for the same reasons and with the same rewards. Bitterness and anger about years wasted in misguided belief and defiance of reality are efforts to transfer responsibility for our own past choices onto others, but in every case it was we who negligently invited strangers, in the form of ideas, into our mind unidentified and unchallenged.  Even when we absorb faulty premises in our age of innocence, responsibility to identify and correct these later in life cannot be avoided with impunity.

I frequently include book reviews on this blog, on a broad range of subjects.  All of these book reviews are at least somewhat positive in nature, because I do not waste my readers time on books that are in my opinion without at least some important redeeming values.  I am neither Democrat nor Republican, neither liberal nor conservative, and these days, once you get past the rhetoric, it can be said their distinctions are often without differences.  I have no ideology except the value of the individual human being. Each of us is a minority of one.  Regardless of the comfort we find in each other, there is no collective brain.  Descartes famously said “I think, therefore I am.” What we think determines what we become.

I want to share some rules of the road from my personal experience.

When I was growing up, my parents taught me to eat everything on my plate at meal times.  It was axiomatic that to waste food was wrong, even though our young minds rarely grasped the contradiction in the fact that we didn’t overload the plate with all that food, the grown-ups did.  How could we possibly know that for the rest of our lives other BIG PEOPLE would be filling up our intellectual plates with the impassioned ideas, ephemeral notions, and absolute certainties they insisted we must ingest because it is “good for us.”  As in childhood, we trust the source, the same one we associated with survival itself.

Rule #1 :   The purpose of all propaganda is to become your “trusted source.” Read more..

Everyone, it seems, has the strongest notions of what is best for us, beginning with our immediate families and extending to all the institutions of our culture.  What is accepted and practiced in one generation may be repudiated by future generations.  The philosophy that someone else knows what is best for us is nothing more than delegating to strangers what gets put on our plate.  It makes no difference whether this authority figure or expert comes in the guise of clergy, government, Chairman of the Federal Reserve, media talking heads or television and movie script writers; all of them provide us with generous helpings of their opinions and rules and they expect us to eat it, even if it gives us heartburn.  They do not like to be ignored, and most of them are happy, if given the opportunity, to harness the coercive power of the state to enforce what they know is, if not for our own good, at least for the good of the greatest number.  After all, Daddy knows best.

Everything is based on core premises, and unfortunately these are usually absorbed unconsciously from the Influential People of our childhood and adolescence, parents, teachers, news media, friends, and church.

Rule #2:  At a tender age we are neither equipped nor qualified to evaluate  conceptual content, and we know little or nothing about possible  alternatives. 

Content becomes indelibly associated with the persons and institutions of authority that deliver it.  Because of this early childhood association between content and source, we begin to develop class distinctions based on these associations.  We are more inclined to trust and believe those who dress like we do, worship as we do, get educated where we do, and who earn their living as we do.  At the most mundane level it is often said that the best place for a young man to pick up a date is at a church wedding, because he benefits by association with the joy of the occasion and the trust placed in that institution by its members. A “no” response in a different context might become a “yes” at the wedding.

Rule #3:  As children, content becomes truth when it is delivered by those on whom we depend to survive.

Once imbibed, these childhood-acquired core premises become unchallengeable, eternal truths, the template against which all new information is evaluated.  We quickly learn to block dissonance, any new information that makes us uncomfortable.  As we build the rest of our lives around these core premises, our emotional investment in them becomes such that a challenge to their veracity becomes a challenge to our identity.  There is a crushing need to shut down, shut out, and utterly annihilate such threats, and this need is all the more powerful and insidious because it is experienced subconsciously, as in dis-ease.  We experience anxiety without knowing the cause. 

When you experience something that disturbs you, it may or may not mean it is bad for you.  A bad taste in your mouth may mean a poison mushroom, or it may only mean conflict with the taste of the previous mouthful, in which case you need to cleanse your palate before proceeding.  A mouthful of lemon juice may cure you of scurvy, but it could be intensely unpleasant right after eating a sweet.  Likewise you may have been led to believe that very wise people are looking out for your welfare, and this goes down pleasantly, like a sugar cookie.  You might have had great faith in the honest intentions and competence of Bernie Madoff in handling your life savings, or you may currently be planning an extended retirement on Social Security and Medicare as they currently exist, and it tastes sweet.

Rule #4:  What feels safe and tastes good may be the prelude to the financial equivalent of a diabetic coma.

In every case, we always trusted the source.  The doorman to our mind was sound asleep.  There were red flags about what we believed, but we chose to ignore them.

That’s why I write about labels.  I sit down to lunch with people of all stripes and within minutes I can hear, and feel, the palpable hatred as my temporary companions launch into diatribes about those who think differently than they do.  The emotional intensity and intransigence derives from the speaker’s sense of certainty.  A mere label such as the name of a political party, or particular belief or non-belief excites the passions and invites the derision of the group at the table.  To belong is to share in the laughter.  The opposite is equally true and commonplace; the willingness to blithely accept nonsense if it comes from a trusted source.  We will defend what we have already emotionally invested in.

Rule #5:  It is possible to have a lifetime investment in something that is indefensible by any rational standard.  

How long have we known, and has our government refused to acknowledge, that our Social Security is history’s largest Ponzi scheme ever?

I used to finish reading any book I had started.  Like cleaning my plate at dinner, I felt compelled to finish what I had started.  I don’t always do this anymore.  Life is too short.  I always seek to identify as quickly as possible  authors’ basic premises, and even if I disagree with them, I may continue reading if only because I enjoy the writing style or because an author occasionally drops in a redeeming original thought or new twist on something.  I no longer waste my time filling my mind with garbage, but there is a balance between that and closing one’s mind.  Periodically I have to remind myself to re-evaluate my own core premises to see if they still withstand close scrutiny.  The final questions are always, Who says so? Why?  Based on what?  I am always on the alert for the hidden agenda, the sugar-coated dodge.

If some distinguished authority figure makes claims that appear improbable and  unsubstantiated by the facts as you know them, assuming they know more than you is one possibility.  Another possibility is that they have reasons to be less than truthful on this occasion.

If their explanations more accurately resemble circumlocutions, going round and round in circles and making no particular sense, you could assume that their explanation is too deep for your comprehension, given their special training, or you could also entertain the possibility that their non-answer is because they really don’t have an answer but won’t admit it publicly.

How do you spot obfuscations, disinformation, and hidden agendas?    For starters, unless you’ve taken a serious course in statistics, distrust all statistics.  Most are not scientifically sound and are intentionally manipulated for uninformed public consumption.  I could say there are a thousand ways to do this, but that would not be a scientifically sound statistic.  So we’ll move on.  In commercial matters, follow the money.  In political and institutional matters, follow the power.  Look past the easy answers.  Look past the obvious beneficiaries of a particular group action.  The secondary beneficiary is always the real beneficiary.  The primary beneficiaries receive very diffused benefits.  They are the poster children of the much ballyhooed political action; the orphans, the poor, the children, the unemployed, the elderly, the American middle class, the racial minorities.   The secondary beneficiary receives very consolidated power;  the power to bestow or withhold.   Daddy isn’t interested in your growing up.  Daddy needs you to need him.  Daddy needs to be in control of permissions, punishments and perks.

Rule #6:  If someone is selling invisible clothes, let them run around naked.  

It is better to be underwhelmed by the titles and decorations and positions of power of the so-called experts.  Who even remembers yesteryear’s Nobel prize winners and Treasury Secretaries or Fed Chairmen?  If anyone makes claims that to your mind seem like the Emperor’s invisible clothes, let them wear them.  Plan your personal life and make your financial choices around your own perceptions, not theirs.  They will usually have agendas you will never know about, and disincentives to provide full disclosure or tell the unvarnished truth.  Do they really know better than you how to direct your life?  Most American households’ finances are looking better than the governments, perhaps for no other reason than we can’t print money like the government  does.  We have been acting to correct our balance sheets, to start saving and stop borrowing.  Does that sound like what they have been doing?  Do they care about you, or are they far more concerned about polishing their credentials to the largest blocks of voters?  This goes for anyone who is offering you advice on any subject.  Would you look to the Dalai Lama for guidance on improving your sex life, knowing he is a celibate monk?

In the end it’s the same.  Money is power.  But government is money plus guns.  By guns I mean the police power of the state.  With guns you can seize other people’s money.  If you get enough people behind you, even in a democracy you can decide whose money you will take, and how much of it.  This is REAL power, and this is why groups will spend a billion dollars to secure a position of power that pays only half a million.  The most expensive seats are reserved for those who hold court, who trade in favors and gifts, and who choose the winners and the losers.  These people are not producers; they are looters who talk as if they understand production.

All ideas have a history, and if you follow the thread of an idea back far enough, there are always surprises.  Every opinion, belief, and conviction—indeed every certainty, was arrived at in a certain historical and social context, and made perfect sense to those persons in their place and time, and was almost invariably the partial result of emotional turmoil in the author’s personal life.  In other words, intellectuals, philosophers, clergymen, or brick layers, we are all made of the same dirt.  Ideas all began with real people and every single one of them had problems, issues, and emotional dilemmas.  Some of them were morons.

Rule #7:  Many of the world’s greatest thinkers would be in therapy today.

Ideological sparks at the intersection of the right time and the right population periodically ignited the imagination of masses.   New truths became eternal truths that have often reversed themselves, sometimes over and over again, everyone so preoccupied with the minutiae of their daily routines they fail to notice the intellectual roundabout on which they have traveled for decades or centuries.    The grand ideas  have all come and gone, or splintered and evolved in almost unrecognizable ways, becoming innumerable dogmas and orthodoxies,  and today they make compelling narrative for the history or philosophy buff.  Those who take the time to look more closely are sobered by the awareness that in every time period of history there were those who were willing and eager to kill or enslave those who disagreed with them.    Our current democratic society provides some cultural and legal protections against this, but a basic meanness still often lurks beneath the surface of many human believers.  I hear it in conversations at lunch.

Rule #8:  There’s a troll under many a believer’s bridge.

When belief devoid of thought is extolled as a virtue, doubt becomes suspect, opposing opinions are demonized, dissenters are criminalized, and definitions of the enemy are crystalized.  Hatred is born and mob action is galvanized.  Ascendant mobs become the state. Other groups see opportunities to advance their respective causes by hitchhiking on the coattails of the rising group, with the idea that they will address their important differences after they achieve a more favorable situation in the power structure.   The state attempts to co-opt and harness culturally powerful forces (the most powerful of which is religion) and then moves to consolidate its power by weakening, neutering,  and eliminating competing groups.  There are no enduring loyalties, just the shifting sands of temporarily overlapping interests.

This is why I champion individual rights in my writing.  The individual is the smallest group in the world.  Protect individual rights and you protect the world.  Democracies are the competition and conflict between groups, but history is replete with the horrors perpetrated by one group (even elected ones) on other groups.  Great evil has been done repeatedly in the name of God or in the name of Society.  Even in a so-called free society there is nothing more fear-inspiring than observing an impassioned closed mind reflected in the eyes of another human being, so certain of his ideas in fact, that he will gladly sacrifice your life to prove it.  On their own, they are dangerous and capable of atrocities; organized into groups with their hands on the levers of power (duly elected or not), no one is safe.  Not even the members of their group.  Every group has its purges.

There IS a problem with championing individual rights.  It puts responsibility on the individual.  There is uncertainty, and results are neither equal nor guaranteed.  What is guaranteed is that no group can by itself or backed by the power of the state, make you do or be what you do not believe in.  And you can’t do that to anyone else either.  Not everyone is comfortable with that.

Individual rights are inalienable, meaning you were born with them and do not acquire them by permission from others–no one and no group can morally take them from you, even when those others are infused with certainty about their better idea.   They may seize your property and take your life by force, but they can never do so morally.  Individual rights mean the right to pursue your own life and happiness as your highest values, and you are free to seek and perform work that sustains those values.  This includes buying and selling from whomever you choose, to your own benefit.  Individual rights means essentially the separation of church and state and the separation of economic activity and state.

Individual rights mean the government is there to protect  individual rights of all, and no one is there to serve the government.  Individual rights in practice, of necessity mean small government because there just isn’t that much the government needs to do.  No modern state, including western democracies, will ever pay more than lip service to government based on the sovereignty of the individual because all governments derive their power from the purse, which includes both confiscatory taxation and gross interference with free trade of its citizens.  The power of government is in granting permissions.  That’s where the money is.

Rule #9:  The government’s favorite childhood game is “Mother, May I?”

You can recognize individual rights in action when your government fears to transgress against its citizens.  

Group rights, on the other hand, are acquired by permission from a majority of others in society, and those permissions can be revoked.  The herd sometimes gives little or no notice of intent to stampede.  The primacy of group rights derives from the belief that your highest value as an individual  is not yourself but your contribution to society as a whole.  Individuals can  expect to be sacrificed to the group when the group calls for it. Every single favor demanded of  government by a group always implies a request for the police power of the state to be used against someone else  who doesn’t want to do the group’s  bidding.  Otherwise, if the group could achieve its ends on a voluntary basis, arrived at through negotiation, documented and signed by the parties, why would they need to involve the state?  Groups only need the state to club minority interests into submission.   I use the word minority here in the very literal sense of anyone who does not have sufficient votes to protect their interests. Group rights are the inevitable political legacy of those obsessed with the certainty of their beliefs, so much so that in their minds the ends justify their means.  Sooner or later the means include the confiscation of human life and property by the state–for the benefit of the greater good, of course.  Group rights degrade into group warfare and lead to an indefinitely expanding state, with eventually the state dwarfing all other groups.

Group rights lead to totalitarianism, which is sanctioned and even welcomed by the public in the name of efficiency.  When the cacophony of bitterly opposed groups gets too rancorous and the machinery of the state grinds down, someone with the necessary stage presence steps forward and suggests temporary consolidation of power to get through the political impasse.  We all know the rest of that story.

You can tell group rights in action when citizens fear their government.

So what is my point?  Am I advocating political activism in favor of limited government and individual rights?  Not really.  You can, of course, if you want to.  All I am encouraging is to become aware of what is happening around you, and to be aware of the ideas behind the events.  Keep your finger on the pulse of the politics in your community, your state, your nation.  Be more careful what you believe in, and scrutinize documentation with a critical eye.  In almost every location it is possible to exercise a great deal of personal freedom as long as you don’t make too much fanfare about it.  Love your life, keep your mind open and your passport current, and

Rule #10:   Know where the border is.

Closed minds eventually become closed borders.

 

The Gods Among Us

In the beginning there was Money.  Well, not exactly.  There was barter.  There was a high degree of vertical integration, which is a fancy way of saying if you wanted something back then, it was pretty much up to you to grow it or make it yourself.  What trade existed was largely between members of the tribe or village or group.  If some guy made a pretty cool hunting knife, and his wife was nagging him for a deer to butcher and eat, a trade of the knife for the deer (or parts of it) might take place.  Trading was simple, uncomplicated, and very very slow.  Life was brutal and short.  At the end of the day, when you had run out of you, you had also run out of future.  You aged quickly and died young.  When groups of nomads found a place to their liking, they sometimes stayed, settled in, and became agrarian.  Society became more complex, and slightly greater specialization of labor became possible.  One family could grow things from the soil; another could domesticate animals as a source of meat.  There was still no Money.

Trading in this primitive context was still taking place among the so-called Indians on this North American continent when the first Europeans arrived.  The native Americans were fascinated with some of the baubles brought over by the Europeans and willingly traded furs for them.  Eventually some commodities became so commonplace and essential to daily life in primitive societies that they took on new importance as a means of facilitating trade.  Salt, because it was needed by everyone for daily purposes, came to assume more importance as a form of “money” than it formerly had as just salt.  Since everyone had salt, and used salt, goods and services were traded using salt as the store of value and medium of exchange between trading partners.  The same was true of other things of universal value, including furs.  Because of their prized ornamental value and scarcity, gold and silver  became universally accepted as Money. 

The term store of value is very important.  Without some universally accepted warehouse of value that had been produced, all exchange was limited to what could be immediately produced and immediately consumed.  No long term planning was possible, and without long term planning, the Industrial Revolution with its complex machines and processes was impossible.  Modern society was impossible.  The invention of Money was a prerequisite to all the amenities of life as we know it.  Without the invention of Money, we would all still be primitives.  In spite of Rousseau’s idealization of the Noble Savage, the Garden of Eden it was not.  Man was the victim of ignorance, superstition, disease, and unmitigated natural disaster the likes of which are only occasionally experienced today in the poorest parts of the world.

In primitive society, wealth was limited to whatever a person could produce in a day, or a month, or a year of his own individual effort.  All other wealth was acquired by confiscating the values produced by others at the point of a spear, or in time, at the end of a gun.  All great monuments of history were made possible by the confiscation, not only of others wealth, including their grain, their herds, their tools, but also the confiscation of the people themselves, physically.  People became property, to be used and exploited by their conquerors.  When Rome was starving because of crop failure, their solution was to conquer Egypt with their legions, make that part of North Africa a vassal state and require them to ship their grain to Rome at prices Rome dictated.  You might say that Rome “nationalized” Egypt;  Cleopatra, in name at least, still “owned” the means of production, but the prices were dictated by Rome, her Master.  For a while, she was able to continue her pretense of being in charge of her country, of being Queen.  Then one day Caesar extended an invitation she could not refuse:  to come to Rome to visit, as his “guest”.  The dress code for the event was a little intimidating–naked, in shackles, to be paraded as the spoils of war through the crowds of Roman rabble and oglers, the nobility and the great unwashed.  Cleopatra committed suicide.

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Rome, of course, did not invent slavery.  Man was a part of Nature, and you took what you wanted, if you could.  You formed groups and tribes for this purpose, for there was greater safety and strength in those groups and tribes.  There was no concept of the individual or individual rights; you were a member of your group, and your survival depended on that group.  If your group won, you confiscated the property of your rivals, including his children and women.  Anyone you had no use for, such as the old or the sick or the dangerous, you killed.  And of course, if your enemies prevailed, you shared the same fate. 

If you were successively victorious, you celebrated by building temples to the gods who had blessed you, or you worshipped the gods among you  Of course you also built monuments and palaces to your leaders and warriors, as totems to their greatness.  And if your civilization succumbed to a rival some time later, your enemy sat on your thrones and lived in your palaces that they acquired the same way you did–by force.  You supplicated your gods and you placated your gods, and you worshipped and obeyed your kings and princes as gods themselves, or the sons of the gods, or the direct representatives of the gods.  And sometimes the Great Leaders and Warriors had to share the power in an uneasy alliance with the Priests and Shamans who controlled and manipulated the fears and superstitions of the human herd, who provided opaque and inscrutable explanations for why things sometimes went wrong, who demanded sacrifices for the gods of both this world and the next.  It reminds us somewhat of the chief economists and central bankers  ‘divining  the liver’ of the economy, reading the stars, making their prognostications and gobbledygook commentary about what it all means, and who also require sacrifices so that the gods may be propitiated.

There were two ways to acquire wealth; the tedious, slow way of trading successfully with others, or the riskier but faster way–to seize what others already had.  You could do this as a petty murderer; or as a tribal leader, a mass murderer if the occasion demanded it.  You could enslave others, or you could be enslaved by others.  The spoils went to the winner.  For those who chose the route of peaceful and voluntary trade with others, the advent of Money was an organic process that developed naturally as a more efficient way to trade.  It expanded the possibilities of what could be traded, as Money was a way to store value.  Money was a symbol of value that had been created and was warehoused somewhere else.  If on the other hand, you were a Ruler, Money facilitated the confiscation of the wealth of your subjects.  As a Ruler, you saw Money as nothing more than an extension of your right to plunder your subjects; if you insisted that your subjects pay their taxes to you in salt, or grain, or gold, you didn’t care what medium of exchange they used among themselves, as long as you controlled the form in which they paid you.  This became your Treasury.

As the Ruler, what did you need a Treasury for?  Well, your subjects didn’t always have the products or skills to do what you wanted.  So you had to bring people and products in from other places, and to do this you had to trade with them.  You could force your own subjects to engage in slave labor, but you could not do so with others outside your domain, for most likely they belonged to another Ruler, another Tyrant.  They were his property, not yours.  If the other people were accustomed to gold as a means of exchange, as you were, trading was simple.  If they did not use gold, trade quickly got more complicated.  Now there were two forms of money, your gold and whatever they were using.  A rate of exchange had to be negotiated.  If they were using salt, then you had to establish how much salt was equal to an ounce of gold.  Your joint answer to this question would become your exchange rate between two kinds of money.

You also need a Treasury to finance your wars.  You may have had your own troops, but many, if not most wars were fought with soldiers-for-hire, mercenaries.  Either way, they had to be paid.  If soldiers didn’t get paid, they and their families didn’t eat, and when people don’t eat, they get deeply unhappy.  Unpaid soldiers have a nasty habit of slipping away in the night and disappearing.  So they had to be paid, with Money that would be recognized and accepted by others with whom the soldiers would want to trade.  In ancient societies, soldiers were paid in coin.  When the Treasury of the Ruler was low, he would order his minions to shave slivers of metal off the coins, then melt the shavings down to forge new coins.  The coins of the realm tended to get smaller and smaller and people would notice and feel they were being defrauded.  And of course, they were.  By the Ruler, who was trying to expand his Money supply the only way he knew how.  When Rulers figured out alloys, they would instruct their keepers of the Treasury to mix base metals with the precious metal, again in an effort to take the existing amount of gold or silver and make it go farther by cheapening it.  When people felt they were being cheated, they demanded additional coins in payment to make up for the parts shaved off, or the new alloy coins.  They started making etched ridges along the circumference of the coins, so that if any shaving of the edges was attempted, they would know it because the ridges would be missing.  All through history people everywhere showed a basic desire to keep what was theirs, and all through history they tended to distrust their Rulers intentions with their money.  And with good reason.  The Rulers treatment of their Money was the equivalent of a cheating pair of scales.

Over the millenia, nothing has really changed very much.  With the advent of the printing press, it became a lot easier to steal from one’s subjects.  Until shortly after World War I, the currencies of the world’s governments continued to be pegged to gold as a means to facilitate trade between nations on an objective standard.  Because the rest of the modern world had been decimated by the ravages of what had come to be known as The Great War, the American dollar had become the currency of the world; in other words everyone was willing to be paid in American greenbacks because it was agreed that those dollars could be redeemed in gold on request from the American Federal Reserve, our central bank.  Because there was a steady loss of gold over the years from the American Treasury, President Nixon unilaterally decided to take the American dollar off the gold standard in 1971.  Confidence in the American dollar was waning, and foreigners wanted the gold instead.  Well, no more.  The Law of Unintended Consequences prevailed, as always.  In today’s world, when foreign governments acquire larger quantities of another nation’s currency than they are comfortable with, they sell the undesired currency on world markets.  You see, paper money, like gold, oil, cotton, grain, or cattle, can be sold in markets created specially for the purpose.  Currency is bought and sold on what is called a Foreign Exchange market, or FOREX for short.  Well, after Nixon took us off the gold standard, foreign governments rushed to get rid of their dollars by dumping them on the world market, exchanging dollars for other currencies then considered more valuable.  When there are more sellers than there are buyers, the price of a commodity goes down.  The dollar is a commodity, and the price of the dollar went down.  Now let’s make this next connection in a flying intuitive leap:  A paper dollar unattached to an objective gold standard has no value in and of itself.  It represents only the faith of the people who use it.  When it is obvious that governments are trying to unload a lot of dollars, it quickly erodes people’s confidence in that dollar.  When the confidence in the value of the dollar goes down, what the dollar is able to purchase goes down also.  When it takes more dollars to purchase the same item than it used to, you have inflation.  The same thing has happened as when an ancient Ruler mixed other metals with gold in order to create more of it.  The purchasing power of the unit of currency goes down when people don’t trust it; so they want more of it in payment than they used to.  Prices go up.  If you have the same quantity of a currency as you had before, but the purchasing power of that currency has done down, you have just become poorer, as surely as if someone had robbed you during the night.

When Rulers, or governments, for whatever reason, add to their Money supply, you have more money chasing the same goods, which means the purchasing power of the unit of currency goes down, which is just another way of saying the price went up.  The price is nothing more than how many units of currency are required to purchase an item, any item.

The American consumer nation became an empire of debt in order to pay for all the goodies it imported from foreign nations.  America paid those nations in dollars, and by 2001 almost 80% of all dollars in existence were held by foreigners according to Bonner and Wiggin in Financial Reckoning Day Fallout.  Under normal circumstances foreigners can get rid of dollars by buying American goods in return, and this keeps foreign currencies in balance.  That didn’t work because we were importing way more than we were exporting, so the imbalance grew.  Foreigners could have once again dumped their excess dollars on the foreign exchange market, which would have driven the value of the dollar down, which would have made foreign goods more expensive, and our exports cheaper.  That would have reduced demand for foreign goods, and reduced their sales to us.  They wanted to keep their factories going at full production, and that meant continuing to sell to America at maximum levels.  So instead, what did the foreigners holding excess dollars decide to do?  They decided to get rid of those dollars by buying up American assets, including businesses, real estate, and financial investments.

But the plot thickens.  At about the turn of the millenium, America was in the throes of a recession.  The Federal Reserve, determined to make this go away, decided to make credit cheaper by lowering interest rates to unheard of levels.  They wanted Americans to buy, and they figured the best way to do this was to make money cheap.  Cheap credit, combined with government incentives to lenders to make residential mortgages available to people unlikely to pay those mortgages, resulted in a lot of toxic mortgages out there.  Because money was cheap and easy, demand for residential real estate went through the roof, and that of course, caused the prices for that real estate to go through the roof as well.  So prices of real estate are spiraling up, money continues to be cheap and easy, there are a flood of unworthy mortgages.  Now for the rest of the story.  The flip side of cheap money is that lenders, who make their profits off of interest they charge, now have sharply reduced profit margins because their product, money, is too cheap!  They are practically giving it away!  What to do?  Simple:  slice and dice these toxic mortgages that everyone knows are going to result in default by the borrowers, repackage them, take them off the lenders hands, and sell them to ????  Why the foreigners who are holding more dollars than they know what to do with, and let them buy them at outrageous premiums!  And why would they do so?  Why, because the prices of real estate have been spiraling upward like the forced steam of a 19th century locomotive.

Now to put this in perspective, if you got a twenty-dollar bill from an ATM machine, and then went to the grocery store to make a purchase only to find your twenty-dollar bill is counterfeit, what would or could you do?  The bank won’t take it back, and the grocery store won’t accept it as payment.  The one last holding the counterfeit bill takes the hit.  That would be you.  You are out $20.  Unless of course you go up the street to McDonalds or Starbucks and use the same bill to make a purchase, and get change in non-counterfeit denominations.  You have successfully handed off your risk of loss to someone else.  This is what the lenders and Wall Street did with the toxic mortgages.  They pawned them off, at exorbitant profit to the first suckers they could find–the foreigners looking for a place to put their excess holdings of American dollars.  Foreigners such as foreign central banks, for example.

The rest, as they say, is history.  The bubble price level of real estate popped, the mortgages were much higher than the value of the properties that collateralized them, the foreign holders of these toxic repackages had a fit, American lenders who didn’t leave the party early enough got stuck with a lot of non-performing loans, which meant that they no longer had sufficient reserves on hand to cover their exposure to those bad loans (which meant they were insolvent and a prime target for a run on them by their depositors.)  Then there were the insurors of these toxic assets who were extremely overleveraged and ready to go under, starting with AIG.  The American government came to the rescue, and bailed out the banks, the insurors, the foreign central banks.  How did they pay for all this?  At the heart of it all is a defective product–the toxic mortgages and the packages they became a part of.  There is no market for mortgages worth 30% less than the homes that are the collateral.  And to make matters worse, the prices continue to drop, and no one really knows how to determine what these properties are worth, other than to put them out to sale in a market where no one is buying.  So the Federal Reserve decides to buy the toxic financial instruments at prices that are made up, pure fiction.  And the Fed buys these mortgages with more fiction, pretend money.  Money created by making  book entries in digital ledgers.  The banks receive the digital money, their reserves are stabilized, and they are removed from the Endangered Species list.

There is only one problem.  The Fed, when they came to save the day, expanded the money supply of the world’s largest debtor nation to a degree unprecedented in history.  The whole world’s financial system continues on life support, and the machine is making disturbing noises.  You see, there is one minor detail everyone seems to be forgetting.  There are only two ways to acquire wealth:  produce value, or steal the value produced by someone else.  This nation’s value comes from its manufacturing plants, research and development departments, its science labs and production facilities.  There are no current economic indicators that reliably tell us these numbers are improving.  So can we print our way to recovery and prosperity?  Ben Bernanke says we can.  Tim Geithner says we can.  The President says we can.  In time, all that wildly inflated Money supply is going to work its way out into the economy, which means the purchasing power of the dollar is going to drop.  When ordinary people sense in their gut that the value of their dollar is dropping, they will rush to get rid of their dollars, just like foreign governments did in the last ten years.  But who will take them?  As the floor drops out of the dollar, we will rush to spend them in the morning, because they will be worth less by the evening.

Will the government’s debts be honored?  Of course.  Everyone who is owed will be paid.  With currency devalued to a fraction of its face value when it was borrowed.  But who can argue?  Everyone can see the numbers printed on the paper.  We will all be poorer, except those favored few who are in on the insider trading, who get rid of their money first. 

The remainder of the burden will be borne by the taxpayer.  Isn’t it amazing how much better we can feel, knowing we are taxpayers and not slaves?  Would we ever agree to becoming slaves?  Of course not.  At exactly what point does a taxpayer subjected to Washington’s gang warfare become a servant of the State? 10%?  25%?  50%? 75%?  Are we perhaps like Cleopatra, passively accepting our vassal state, as long as we are allowed to pretend we are still a free people?  Do you think Cleopatra felt better knowing that her country’s production of grain was being confiscated for the “good of society”, society as defined by her captors?  Roman society?  Like every other tyrant cum Benefactor in history, Cleopatra eventually got what she deserved, for she also was one of them.  She too had been one of the Gods. 

The claim of governments to control over money has no basis in nature or any rule of law recognizing individual rights and private property.  Statists all believe in the moral superiority of the collective; for them the sovereignty of the State trumps the sovereignty of the individual the State supposedly serves.  It is not hard to figure out which philosophy prevails in our culture.  The well funded collectives who contributed heavily to the campaigns of our politicians have been generously rewarded.   And what of the well-heeled financiers, bankers, stockholders and managers of the insurance companies, the foreign central bankers, and our own professional bureaucrats who created this problem?  They are the very ones selected to be bailed out or worse, chosen to correct it!

We, the individuals, the smallest and most unprotected “group” in the nation, will foot the bill.  Between inflation and taxation, dear Reader, it is our wealth that will be confiscated or destroyed.

Perhaps, like Cleopatra, we too have been given an invitation we cannot refuse.

The gods are still among us.

Why the Federal Reserve Exists

Here we go with the vocabulary thing again.  I promise to make this easier than your last root canal.  The Federal Reserve Bank is a central bank.  Central banks are created to control and manipulate the money supply.  The money supply is the aggregate total of all the money in circulation in an economy.  It is often referred to in the media and the industry as M.  Controlling the money supply frees governments from the responsibility of living within their means.  It makes it possible for them to counterfeit money.  All governments have laws making counterfeiting their currency illegal.  That is because all governments have a monopoly on counterfeiting and do not tolerate competition in the business.

Governments counterfeit money in the exact same way all counterfeiters do; they print it, and slip it into circulation into the economy.  They spend it.  They spend more money than the economy produces because they do not want to live within their means.  They do not want to live within their means because they use money to buy votes.  They give out goodies in return for favors; favors in the form of legislation that promotes the welfare of one group over another group; favors that line their individual pockets, reward their friends, punish their enemies, and above all, favors that get them re-elected.

Other reasons are given, of course, for the existence of the Fed.  But it is axiomatic that all governments seek continual expansion of their powers, and control of the public purse and the power to tax is the Holy Grail for power seekers.  The founding fathers of this country feared government more than anything, and the Constitution they framed was to protect us, not from foreigners, and not from each other, so much as from our elected government itself.  The debates about economic policies are a sideshow and a distraction; the main event is the relentless expansion of executive power and the quiet transfer, not only of wealth, but of personal liberties as well.  Without economic freedom based on individual rights, private property, and the right to keep and dispose of our earnings as we choose, there is no freedom at all. Read more..

Governments, all governments, do not really favor free markets, because in a free market you decide the winners and losers in trade, and the winners are those who produce what you want to buy at prices you are willing to pay.  You vote constantly with your wallet.  Losers go to government and ask them for favors, such as passing trade restrictions on those competitors who are better or smarter or faster than they are at producing what you want.  When legislators grant those favors, they expect favors in return.  This is called cronyism.  Cronyism is a form of corruption. Corruption on a massive scale, such as we see now, is the first sign of internal decay and the beginning of the end of empire.  America is an empire in late stages of such decay.  When trade is made possible primarily by permission, or political pull, resources cease to be allocated efficiently.  Those with get-up-and-go get up and go.  Bottom line:  trade and wealth goes to wherever it finds the most freedom to seek its own advantage.

Governments all prefer a command-and-control economy rather than a market economy.  In a market economy, the decisions are made at the bottom, by the millions of consumers.  The consumer is sovereign.  The consumer is boss.  In a command-and-control economy, the decisions are made at the top.    Who do you think does the commanding and controlling?  You are so very, very smart.  Yes, the politicians do, and the bureaucrats and regulators they appoint.  In a command-and-control economy, the government is sovereign.  Usually the ultimate goal of a command-and-control economy is, well, you guessed it—control.  Of you, the consumer.  To what end?  The accumulation of power and privilege.  To line pockets, enrich the ruling class, and permit the ideologically driven to save the world.  To save you.  Even from yourself.  They know best.

Command-and-control economies prefer big. Big what?  Big Corporations, Big Unions, Big Institutions, Big Media.  Why?  Big is easier to control.  You call in all the bosses of Big and you tell them what to do.  You threaten them with a Big stick.  And you promise them carrots if they deliver.  Then the government lets Big do their job for them.  Big collects the taxes for government, and performs countless other administrative duties free of charge for the government.

If Big Corporations do their bidding, laws are passed, manipulated, or enforced selectively to help Big Corporations succeed over their more able competitors.  When Corporations fail and would otherwise go out of business, government bails them out with taxpayer money.  This rewards Big Corporations for their generous campaign support, and it also rewards Big Unions by keeping their overpriced labor untouched.  In other words, government makes sure that no real solutions are put in place, that nothing substantive is changed, but that the inefficient and ineffective and incompetent are allowed to continue on as before, sustained by the public purse where the public has already rejected them at the cash register. Government grants monopolies to some winners, and it throws up bureaucratic hurdles to newcomers as protection bought by Big Corporations.  It investigates some Big Corporations in order to benefit other Big Corporations.  It extorts money from all business, large and small.  It decides winners and losers. This is called corruption.

All Big Corporations began as small business that began with drive and new ideas.  They flourished and grew and became Big.  Then they seek to keep other small businesses from competing with them.  They do this by going to government for protection.  The free market cannot be trusted.  Consumers might decide to buy the newer, better idea.  So government doesn’t want to kill small business, but it would prefer to decide which small businesses get to join the Big country club.

Big Unions are expected to tell their memberships how to vote, and to turn out massive campaign support when it is needed. In return, Big Unions get legislation passed that makes it easier for them to organize people into unions who don’t really want to be in a union.  Big Unions get favorable treatment by government agencies that control labor and management disputes.  Big Unions in turn can control or influence which Big Corporations get Government contracts. This is called corruption.

Big Media is rewarded with inside information, direct access to important people, scoops that improve ratings, and higher ratings bring in higher advertising revenues. Big Media can also be rewarded by legislation that tends to bring the Internet, or the power of millions, under closer government control.  Big Media is the propaganda arm of government, and the primary purveyor and amplifier of bad philosophy from the Humanities departments of our mainstream universities. 

Hiding in those hallowed halls are generations of resentful and envious intellectuals who yearn for a return to the Old European model of society where the bespectacled and leather-elbowed writers and philosophers garner the same reverence as the greedy money grubbers, the shop keepers, the retailers, the industrialists.  These intellectuals resent having only the same vote as the ordinary, unscrubbed mechanic or factory worker who could not possibly recognize or appreciate the superior intrinsic value of the intellectual author whose books gather dust in the publishers’ warehouses while trashy romance novels make their authors wealthy. They pride themselves on their spiritual elitism.  According to them, the only useful social purpose for the materialistic captains of industry is to create wealth that can be transferred (plundered) by those who court government’s favor.  The universities (Big Institutions) have cranked out generations of teachers, artists, writers, philosophers, and intellectuals wholly indoctrinated in a bias of anti-capitalism, which is nothing more than our unfettered freedom to trade as we please, with whom we please, each of us seeking our own interests.  As George Orwell said once, some ideas are so preposterous only an intellectual could believe them.

Part of Big Media’s role in assisting government is to confuse language, to expropriate legitimate terms and concepts and then skillfully change their usage to mean the exact opposite of the original definition.  Through the skillful use of propaganda, society has been revolutionized without firing a shot.  The Revolution is over, and we didn’t even notice there was one.  For the record, we lost.  Sometime during the night our servants became our Masters.  Free enterprise has become a euphemism for trade by permission.

Big Institutions obtain subsidies and grants that keep them in existence, even when no one really knows anymore why they should exist.  Because if they were truly necessary, surely the free market consisting of the rest of us, would support them as being in our own best interests.  Government subsidizes and controls what we would not pay for, precisely because we would not pay for it.  The government doesn’t think we know enough, that we are not sophisticated enough, to make those choices.  Government will spend our money for us.  And many times government doesn’t really care about whether something is a good choice or not; they simply have friends to reward and favors to repay.  This is called corruption.

Public education is a gigantic institution, funded by tax dollars, and mandatory.  Even if you have no children, you are going to pay taxes to support it.  Government controls the unions that control the teachers; therefore government controls the indoctrination and world view of our children.  It is also by means of this monopoly on education that toxic ideas are spread throughout the culture.  Government controls, and everything, every meaningful transaction, is subjected to influence and infinite subtle forms of bribery. This is called corruption.

When poor decisions happen, Big has a meeting:  Big Government, Big Corporations, Big Media, Big Institutions, Big Unions, and they decide who will be blamed, and who the winners and who the losers will be.  All solutions will of course include a further expansion of government influence, power, and intrusion into the marketplace.  The marketplace, folks, is a euphemism for us.

How does government do all this; how does government get all this past us, the voters?  The first rule of thumb is the artful use of propaganda.  Regardless of the controversy, it is better to unify everything into one common enemy, one Devil.  For Hitler, it was the Jews.  In our nation, it is business, always portrayed as greed personified.  Except in certain useful instances, it is not necessary to get too specific.  It is not necessary to label any business in particular, but rather to attack an amorphous, gray, ambiguous entity such as greed and business in general.  You see, government has a love/hate relationship with business.  The government wants control of business, but it doesn’t want business to go out of business, at least not most of them.  If business goes away, there is nothing to plunder, nothing to expropriate, to tax or seize.  Occasionally some Big Corporation, very often in bed with government, is caught in some behavior so outrageous that it causes a public outcry, and then of course there needs to be a “public hanging” to satisfy the mob.  And those members of government that were involved backpeddle as quickly as possible so as not to be fatally associated with the errant business entity.  If you think I am exaggerating the extent to which the elites of our culture endorse an anti-business animus, ask yourself, when a businessman plays a significant character in the movies, how does Hollywood typically cast his character?  And when events conspire to reveal corporate excesses, such as in our present time when so many on Wall St. were taking hundreds of millions of dollars in bonuses even as they squandered other people’s fortunes, how much exposure is given by Big Media and Big Institutions to the complicity of government in such shenanigans?  Barely a word.  Were it not for the Internet, how many of us would know the rest of the story??

Then there is divide and conquer. Encourage group thinking, and then pit one group against another group, and let human nature take over.  This is where the R word has been so effective:  disagree with proposed legislation and you are labeled as racist.  Government-sponsored racism is everywhere, and for a very good reason.  Divide and conquer.  Pit every man against every other man.  And then play the paternal role of Benevolent Referee.  The government is here to help!

Maximize the formula of concentrated benefits, dispersed cost. Those voters who stand to gain the most will work hardest to get a law passed; and the cost will be dispersed over a much larger group.  If a given piece of legislation will provide a benefit of $10 to Group A, but will cost everyone else only 1/100 of a cent, no one blinks and lets it pass. Government promotes  democracy, which is nothing grander than gang warfare, and weakens the Constitution which champions individual rights (the smallest group, and obviously the only group without a lobbyist to buy protection for it), the only real rights that cannot morally be voted away by any majority. 

And finally, the ultimate government weapon:  culturally imposed altruism.  By “culturally imposed” I mean simply the prevailing philosophy in the culture.  Frame all legislation in terms of the right and moral thing to do for Group A, and call anyone who disagrees selfish.  In a culture that has been brainwashed for over a hundred years that our only purpose in living is to live for others, and not for ourselves, bring up the S word and all opposition runs for cover! 

Government utilizes the Big Media and Big Institutions (major universities very beholden to government for subsidy) to promote the idea that government has access to a very special kind of human being:  this phenomenon is smarter, better educated, and more intellectually agile than the people and businesses and institutions s/he controls and regulates.  This special form of human being is likewise wiser, more prescient, more inclined to take a long term view, and look out for your welfare better than anyone else.    And most important of all, this special human being is not selfish!  This special person is a paragon of virtue, incorruptible, devoid of ambition, immune to lust for power, sex, or money.  This special form of human being is here for you, and will always treat you like a customer, with respect, deference, and competence, because they know you have choices.  You could go elsewhere.  Who is this special form of human being?  Why, your government worker, your government bureaucrat, your friendly regulator.  And who do these enlightened human beings report to?  Why your elected officials, of course.  Thanks to bad philosophy in our universities and culture, government is granted a pervasive and benevolent benefit of a doubt; it is here to protect us, to look out for us.  Protect us from whom, from what?  From those avaricious, for-profit people.  Because they are selfish. 

Government is altruism at its finest.  Are they not committed to taking from those who produce, to distribute to those who do not?  How very Robin Hood-ish.  How very unselfish.  So now we have millions lined up outside Sherwood Forest, waiting for Robin Hood to show up.  No one wants to work in the fields any more; Robin Hood is taking from that wicked Sheriff of Nottingham, and is going to redistribute it to the rest of us.  All we have to do is wait in line.  Of course, in the fable, the Sheriff got rich by taking loot from others too, just like Robin Hood does.  What no one told us is that in Part II of the fable, Robin Hood becomes the next Sheriff of Nottingham.  He got to liking being in control of the transfer of wealth.

In our world of free trade, the rich are despoiled because they created wealth, not stole it.  We punish some for their virtues of innovation, industry, and thrift, and we reward others for their indolence and sloth.  Everyone except the producers gets something for nothing.  It is their right!  This is the Age of Entitlement.  Our Founding Fathers began this nation with a legacy from the Age of Enlightenment.  This is ideological corruption.

Now your elected officials at the federal level pass about 600-700 laws each session of Congress.  Do you really think your lawmakers read all that stuff?  If they did, they’d have no time to prepare for their next election campaign, which begins approximately 60 days after their last election.  There are hands to shake, babies to kiss, speeches to give, fundraisers to attend.  The business of democracy must go on!

So who do you think tells your lawmakers how to vote on all this legislation?  Their support staff and bureaucrats, that’s who.  And of course the phone calls from vested interests calling in their chips.  It’s payday, boys.  Here’s a little verbiage we want you to sneak into that Bill; here’s how we want you to vote.

Because government operates under the mantra of altruism, or unselfishness, and government officials pride themselves on the fact that they are not tainted by the dirty profit word, doublespeak and obfuscation become a professional responsibility.  Unions can never be painted as a business within a business with profit incentives, with its own leadership and management infrastructure, with their own “corporate” ambitions and perks;  unions can never be painted as what they frequently are, as paid thugs and shake-down artists that will rely on misrepresentation and lying; a protection racket that uses physical violence and intimidation when necessary to increase the all-important paying membership.  No, unions need to be portrayed as the unselfish champion of the common man, Joe SixPack, who is powerless to fight for his rights against the Leviathan of Big Business.  Little does Joe SixPack know that Big Union and Big Corporation have already cut a deal in the back room.

Teacher’s unions need to be portrayed as protecting the rights of the most underpaid professional class in America.  But who is going to champion the rights of the ones really without representation, the kids of our country who are graduating without a basic mastery of reading, writing, and the English language?  Ah, but take a stand against the all-powerful teachers unions, and you will be accused of throwing our education system to the wolves.  Our children are the real customers here, but let us not forget that when it comes to education, this is not market driven.  God forbid, put our children’s education in the hands of profit-seekers??!!  Why, some parents would selfishly want to put their children in the schools where they would get the best academic education (like our unselfish politicians??), instead of our centrally controlled and socially approved model of distribution!

Laws are enforced against businesses in order to protect the consumer from decisions he has already made!  He is not purchasing the higher priced union-manufactured product, and instead selfishly went for a cheaper, better quality product!  He doesn’t trust a certain bank because of foolish investment decisions it made, and therefore withdrew his money from that bank, causing it to become illiquid, but that bank needs to be saved where the market would have let it die twisting in the wind.  The bank will be propped up, and the government will protect it with guarantees, and it will protect the consumer from any of the banks future bad judgments by guaranteeing their deposits. So bankers can continue to take huge risks and consumers can be careless who they bank with.

The government is also busy looking out for the interests of all the displaced workers who are laid off, victims of downsizing by the brutal free market.  It therefore incurs a moral hazard in the form of those who are in no hurry to find replacement work, or get retrained in different vocations that are more in demand.  Since they cannot collect unemployment and work at smaller jobs in the meantime, the government creates a black market of under-the-table workers who pay no taxes.  My God, self-interest seems to be everywhere!  But please don’t think that self-interest has anything to do with politicians being concerned about the unemployed vote.  Our politicians are above self-interest.  They are here to serve their fellow man.  They are altruists.

Now assume for a moment, for the sake of argument, that our fearless leaders are far, far less than what they pretend to be; assume for the moment that their primary concern is not our welfare, but the perpetuation of the jobs and privilege paid by us, and assume for the moment that our servants have become our Masters.  And assume (correctly) that they print money when they want to spend more.  And assume that they use the vehicle of the Federal Reserve to make all this possible.  So what?  Didn’t we all enjoy our stimulus payments?  Did any one write their Congressman objecting and returning the check?  So what’s the problem?

Here’s the problem:  Our currency is the dollar.  The dollar works for us as currency only because we all accept it and are willing to use it.  No kidding.  It isn’t backed by anything.  Nothing.  Except your willingness to use it.  Savor that thought for a moment.

There is this thing called Supply and Demand.  When these two forces are more or less equal, prices are stable.  Every commodity in the world is subject to supply and demand.  This includes money, which is a commodity.   Anything bought and sold is subject to the Law of Supply and Demand.  If Supply of anything remains the same, but demand for it grows, the price goes up.  And vice versa.  The price is a symbol of the value of the item in demand.  When the price goes up, it means your unit of one dollar can buy less of the item.  Now get this:  we usually think of price as being attached to the item bought and sold, but the price is really a statement about your dollar:  a low “price” means your dollar buys more; a high “price” means your dollar buys less.  Makes sense so far, right?  Now suppose you have two widgets for sale in a room, and there is $10 available for those two widgets.  Your price per widget is going to be $5 each.  Now suppose we introduce another $30 into the room, for a total of $40 available for those two widgets.  The price is going to rise now to $20 per widget.  Did we get more value for our money?  No, we still only have two widgets.  So what changed?  The purchasing power of the dollar as the unit of exchange.  This is what happens when you print money.  It doesn’t matter who is doing the printing:  the Treasury or illegal counterfeiters.  When you introduce more money into the room (the economy) the purchasing power of your dollar goes down.  In the example above, your cost per widget went from $5 to $20, or an increase of 400%.  That’s called inflation. Were more widgets manufactured?  No.  The supply remained the same.  The purchasing power of your dollar went down.  You are now poorer.  It takes more dollars to buy the same thing. 

Not everyone gets hurt the same.  It takes a while for the new counterfeit money to work it’s way around the room, and it takes a while before the Seller of the widget realizes there’s more demand (in the form of more dollars) for his widgets.  It takes a while for the price of his widgets to move up.  The first people to use the new counterfeit money feel little impact; the purchasing power of the dollar hasn’t changed yet.  The ones who get hurt the most are those who saved a lot of dollars under their mattress, in their 401k, or anyone on a fixed income.  When they finally get around to spending their dollars, they are going to discover that the price of a widget went from $5 to $20.  Their dollars don’t go nearly as far as they used to.  This is how governments print money to steal from their savers.  It is a sneaky way of impoverishing your citizens, stealing their wealth and savings, and for the government at least, the best part is no one notices for a long time, no one understands that the government was the root cause, and therefore it doesn’t get voters riled up the way, say, higher taxes would.

Now let me emphasize one more time:  were more widgets manufactured in this example?  No.  Was the room (the economy) producing more?  No!  All that changed was that more money was introduced into the room.  Could you say that this economy was growing?  No!!  When you brought more money (counterfeit) into the room, did everyone feel richer? Yes, for a very short while.  But the new money was an illusion, and as soon as it worked its way into full circulation, everyone got poorer, because there was more money chasing the same two widgets for sale.  It just took more dollars to buy the same stuff.  This is like a great, global shell game.  Someone got cheated.  Can you figure out who?

The trickster, the one who controls the shell game, is the Federal Reserve.  And it serves its political Masters, for their political ends. 

Now, my fellow neophyte economists, can you guess what’s coming?  It’s a Category V tropical storm way out in the Atlantic, thousands of miles away.  It is ugly, ominous, foreboding, and its immediate direction is undetermined.  Once it moves there will be little time to prepare, and it will be vicious and destructive.  It’s target??  The dollar.  Trillions of fiat (counterfeit) dollars are being printed and introduced into the economy.  We are in uncharted financial territory.  What will happen when the impact of that new money is finally felt in the system?  Have you figured out what will have to happen to the dollar?  Production is stagnant and the money supply has been wildly inflated with printed money.  Can you connect those dots now?

Have you noticed the experts puzzled because after pumping this vast sum of newly printed money into our economy, everyone should feel better off, but doesn’t?  Have you noticed that the economy is supposedly improving, but production is not?  Do you remember what happened when you still only had two widgets in the room, but a lot more dollars introduced into the room to chase those two widgets?

The world has never seen a storm like this one.  It could bring a decaying empire to its knees; it could drastically lower the standard of living of the world’s greatest consumer nation; it could destabilize our social institutions; it could foster riots in the streets; it could induce our terrified citizens to quickly grant emergency powers to our government to restore order.  Would we ever find our way back to what we were?  Highly unlikely.  The problem is not the Chinese.  The problem is the weakness within; a viral infection of bad philosophy and bad ideas, ideas with consequences, ideas intended to dumb us down, curb our individualism, and foster the creation of an all-powerful nanny State that directs and controls all of our economic activity.  Who could possibly prefer such a government?  Some who feel safer in the middle of the herd; even if the herd is running over the edge of a cliff, they don’t seem to mind too much, as long as they’re in lots of company.  And the others, the really dangerous ones, are the ones who seek the power over the herd.   Greed and moral decay  turned us from a nation of Yankee ingenuity into a zombie State of  Welfare entitlements and Hollywood circuses.  And like the Roman Empire, our military legions are scattered worldwide trying to keep the barbarians from the gate.

It has been said that a people get the government they deserve.  It is easy for us to point the finger at some greedy business leaders,  incompetent bureaucrats, or power hungry politicians.  But weren’t we all glad to get something for nothing?  Weren’t we glad to be able to buy houses we couldn’t afford, with mortgages we never intended to pay (because we thought we knew we could sell the house quickly at an even more inflated price and walk away with quick money)?  And when the government promises free health care, or improved benefits, doesn’t that tickle our ears?  Who pays for this?  We benefit, someone else pays.  That works for us, right?  And when our government tells us they have figured out a way to pay for all this without going into even more debt, even though that same government already has about $67 trillion in existing unfunded liabilities and a 100% failure rate at living within its means we still believe them, right?  Why?  Because we want to believe them.  Because what’s wrong with a little something for nothing?  Do you hear anyone challenging universal health care on moral grounds?  Yes, I do know of such people.  For a powerful expose of the moral issues involved, go to  David Kelley‘s article Is There a Right to Healthcare? at http://www.atlassociety.org/showcontent.aspx?ct=14&h=53  For a courageous response to the question of why is healthcare different from other commodities essential to survival, such as, say, food, go to Bradley Doucet’s article here http://www.atlassociety.org/cth-43-2212-WOE-HealthFreedom.aspx.  Should the government take over the bakeries, and the distribution of bread, produce, and other food items essential to survival?  And finally, for an in-depth evaluation of both moral and practical issues, read an article by Clifford Asness, Health Care Mythology, at his website http://www.stumblingontruth.com/

We can debate practical aspects of any given issue till the cows come home, but in doing so we are missing the point.  Any time something is offered for nothing by a government, someone is being enslaved.  As novelist and philosopher Ayn Rand said once, free milk makes a slave of the milk man.  Any time something is offered for nothing by a government, the reach and power of that government is being expanded.  We are all so accustomed to our entitlements that we have forgotten to ask the really important questions.  Has it occurred to us that the redistribution of wealth and resources is only one part of the issue, the least important one, and that it masks a concerted and determined effort by some to totally change our form of government and increase and extend executive power and privilege into every nook and cranny of our lives?  We are a nation and a people that has lost its way because we have unwittingly bought into bad ideas and bad philosophy smuggled into our culture without our awareness.  The smugglers knew exactly what they were doing; we did not.  It’s time to wake up.  Not to change the world, but to change our individual lives.  If you are one of the ardent souls who has read this blog this far, then you will also want to read a truly excellent article documenting what I have written in this paragraph.  The article is called The Revolution Was, by Garet Garrett, written in 1938.  You can read it at http://www.rooseveltmyth.com/docs/The_Revolution_Was.html

All governments have an insatiable desire for more power.  That power is only possible by seizing control of economic activity within the country or empire.  Such governments achieve their control of the purse strings, and proceed to further enrich themselves by plundering their own citizens, and when there is nothing left to expropriate, they ration whatever is left of the nation’s wealth.  Governments do not produce wealth; they only plunder and ration.  Governments choose the winners and the losers.  Central banks, of which the Federal Reserve is the foremost example, are the tool governments use to manipulate the supply of money in the economy, increasing governments wealth by devaluing their own currencies.  Continued unabated, it spells the end of the middle class, the end of empire.  The only wealthy left standing are those handpicked by government.  After 300 years of capitalism, we are back full circle to Kings and serfs.  The barbarians weren’t the problem after all.  We did it to ourselves.

 

Financial Literacy: When a Bank Collapses

There has been so much debate about bank bailouts, and most people have nothing more than uninformed, generalized opinions on the subject, usually based on personal philosophies about the proper role of government in our nation’s economy. Bernanke and the Fed have maintained that the bailout was absolutely necessary in order to stop the economy from charging over a cliff. Is this what really happened? Or are the big banks an informal extension of the government already, and the taxpayers are routinely called upon to bail them out due to their poor business judgments? And if the latter is true, then surely such government “protection” creates a moral hazard in that the banks know  no matter how foolhardy or careless they may be,  when push comes to shove their survival is assured, i.e.  Big Business always gets saved by Big Government! Exactly how did the banks, particularly the Big Banks, get in so much trouble? How exactly was this related to the real estate bubble? Get part of the picture in this short video: Financial Literacy: When a Bank Collapses at http://www.youtube.com/watch?v=oG0ry145ymc.

Money, money, money . . .

All knowledge is hierarchical, which means we learn in layers, and each layer is built on what went before it.  You have to learn the letters of the alphabet before you can grasp how they go together to make words, and you have to master the concept of words before you can formulate sentences.  The same principle is true of economics or financial literacy.  You have to master basic concepts before you can move on to more complex, higher intellectual planes.  So let’s take a few baby steps here, and make sure everyone has a grasp of the fundamentals.

 But before we begin, once again let’s deal with the issue of Why bother?  Economics is generally considered to be the dismal science, and even the briefest mention of the subject causes the eyes of most people to glaze over in disinterest.  Paradoxically, let them lack for money and they will riot in the streets, kill each other, and overthrow governments.  We are so accustomed to technological progress, and we have become so certain of its inevitability that we become intellectually lazy and expect things to happen today and tomorrow as they did yesterday.  We do not want to trouble our pretty little heads or interrupt our texting, youtubing, or endless chatter on social media to really learn what causes an economic chain of events.  So we blithely throw around terms such as money, markets, investing, supply and demand, or wealth without any comprehension of what those terms mean. 

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We tell others we have a position on matters, such as ‘we are for free markets’ or we are ‘against bailouts’ without realizing that we are using labels as a substitute for thinking.  I do not write to tell you what you should think, or what positions you should adopt, or what conclusions you should draw.  I write to give you the tools with which to analyze and make your own judgments.  And I AM here to tell you that when the crowd is going North, you almost always want to look South.  But it takes more effort and learning to be an effective and intelligent contrarian.  Taking an opposition viewpoint without solid information is as ignorant as traveling with the herd and rivals adolescent behavior for conformity.

I have written repeatedly that money is NOT the same thing as wealth, and yet folks still don’t get it.  If you asked most anyone on the street, if they had one wish, what would it be, the answer for most would probably be “More money.”  They are equating money with wealth, and that is totally wrong.  As a matter of fact, if you make that mistake in your mind, you are going to make a lot of financial mistakes because of it.  Once again, money has no value in, and of, itself.  Money is a symbol, and it draws its value from what it symbolizes.  Money represents the use of the human mind to create value. 

What is value?  Something people will act upon to gain or keep.  If you value your car, you will change the oil and maintain proper air pressure in the tires.  If you value your house, you will mow the lawn.  If you value your spouse, you will show a sustained interest in him/her.  Value means there is a valuer.  Value is not an abstract concept; it implies there is someone who is doing the valuing. To value implies action.  Therefore different people will value things differently.  In any given society, people trade values, and they use some form of money as the medium of exchange.  There is no absolute, intrinsic, abstract value to anything.  The value is assigned by the person doing the valuing. 

A powerful speedboat may be worth $75,000 to you and of no value to me whatsoever.  For you, the speedboat may serve as a totem of your financial success, or it may help you attract the beautiful chicks.  For someone like me, who maybe has violent motion sickness, can’t swim, and is happily married, such a boat would represent a needless expense and headache to maintain.  So if I won the speedboat in a sweepstakes, its only value to me would be to trade it with someone for something else.  If we did that, we would, again, use money as the medium of exchange.  For me, money permitted me to exchange an asset, my speedboat, for someone else’s asset, and the transaction was made possible by our mutual acceptance of a currency. 

All assets are created, or enhanced, by the creative use of the human mind.  The asset itself is wealth, not the money you paid for it.  The money you paid for the asset is the numerical value you attached to that asset.  The production of that asset required raw materials, tools, a place to manufacture it, and people to perform the specialized functions to make it all happen.  Every single person involved was trading with everyone else, and in every case, the medium of exchange was some form of currency, or money.  The system of exchange only worked because everyone involved accepted the currency at the same face value.

Because people do not understand money, they are quite flippant about taking someone else’s money or about dictating to them how to dispose of it.  Because money represents the use of your strength, time, mind, and other resources to create something trade-able with others, your product, or what you trade, is your private property.  If you were a part of a team effort, which is most often the case, your particular contribution is also valued in currency, or money, in the form of a wage.  A wage is nothing more than a price for your labor.  The higher your skill level, or the rarer your particular knowledge, or even the value of who you know, the higher price you will be able to command in free trade with others.  To help you grasp this concept, remember that there would be no such thing as employers and employees were it not for government wanting employers to be their tax collectors and bookkeepers.  This is not a job employers ask for, nor do they get paid for it, but if they refuse to do it they go to jail.  If they had not been conscripted for compulsory bookkeeping service, employers and employees would be contracting with each other, and there would be no “class” issues or grave power issues.  They would be buying and selling to each other.  It is interesting to note that the IRS has detailed laws to make sure no one is illegally “contracting” with someone who “should” be labeled an employee, thereby shorting the tax man.

 Those who insist that there is a “fair” price to any form of human labor do not understand money or value.  Again, value is not intrinsic.  God doesn’t send down prices from heaven, but some think society should send them up from the bottom.  What creates the value of what you produce?  A valuer, also known as a Buyer.  A Buyer is someone who is going to take his own money (which represents the value of his creative effort trading with others) and exchange it with you for some service you will perform at your Buyer’s request.  The price will be determined between the two of you, and you will both have to come to an agreement on a number, and the medium of exchange will again, be currency, or money.  If you cannot come to an agreement, no exchange of values will take place.  Each of you will continue to seek other trading partners with whom you can exchange at a value more to your liking.  Who knows, at the end of the day you might come back together and make the deal of the morning work, because neither of you has been able to get the price you wanted.  Since you are both free to dispose of your effort, how can anyone say it was unfair?  To say one or the other should  have gotten a higher price is to deny the whole concept of value; that value is not assigned by some elite Know-it-All, but by Buyers.  And folks, some stuff never gets bought because there are no buyers at an asked-for price.  This is called the market, and the market can be humbling.  I may delude myself that I am a terrific writer, and I may further delude myself that I have just completed the next Nobel Prize for Literature.  When my novel bombs commercially, I may console myself by stating that the market obviously doesn’t appreciate true literature and good taste (which of course may be true), but the fact remains that I am going to be poor because good, bad, or indifferent, the valuers in my marketplace didn’t value my book enough to open their wallets and hand over their money in exchange for it.

Now in my example, the critics may differ from the public at large, and may give my book high praise.  As a matter of fact, I may actually win the Nobel Prize for Literature, but I am still very unhappy because once the prize money is gone, there is no ongoing commercial value to my book because the public ignorantly, and stubbornly, still refuses to buy it.  If my book is for sale for $30, and a bricklayer makes that same amount of money for one hour of masonry work, he may decide that a competing value would be more to his taste, perhaps a DVD of a new movie he wants to watch.  So he will trade his product (completed masonry work) for his movie instead of my literary masterpiece.

In a free market, there are always lots and lots of people unhappy with how well, or more likely, how poorly, they are trading.  They insist that there are intrinsic values that a market does not recognize; they believe in a value without a valuer.  Actually, what they believe in is not a free market, where everyone makes their own choices about their money (the symbol of what they worked to produce and trade).  Rather, they believe in forced trade, by coercion.  They don’t believe that what people earn really belongs to them; they subscribe to a form of altruism that in actual practice becomes slavery; they believe that what each earns according to their ability, belongs to others, according to their need.  In fact, everyone has become a slave to everyone else.  They therefore subscribe to a control economy where a group of Know-it-Alls can dictate value for everyone, and the result is price fixing.   So if I cannot sell my artistic product satisfactorily on the open market, because no one is particularly interested, or at least not at my price, the superior valuers can subsidize me through the National Endowment for the Arts.  This is using your money, taken by coercion, to pay me what you wouldn’t of your own free will.  Apparently only the superior valuers were able to identify the intrinsic value of my opus.  It was necessary to override the obvious poor taste of the bricklayer in the free market who wanted to watch a movie instead of buying my classic.

Price fixing, dear Reader, is all around you; you just don’t know it.  Minimum wage, for example, is a form of price fixing.  A wage is a price, and the government sets a price floor below which no trading for labor may take place.  Now obviously, this is not the same as a free market choice, because the price floor is only set because some folks, both Sellers and Buyers, absent the government’s involvement, would willingly trade below that price level in a free market.  The person selling their labor and skills in this transaction is the Seller, and the person acquiring their services and skills is the Buyer.  Why would anyone disagree with two people who voluntarily came to a trade agreement and price?  Only if they believed there was an intrinsic value that the free market would not recognize.  So government coercion is used to mandate a higher-than-market price.  If it weren’t higher than market, at least in some geographic areas, there would be no point to the legislation.  Interestingly, whenever you hear minimum wage legislation debated in Congress, you never hear the debate framed in moral terms, that it is price fixing, applying coercion to what otherwise would have been a free market transaction.  No, the debate is always limited to whether or not minimum wage legislation creates higher unemployment, jobs reduction, layoffs, etc.  What everyone is overlooking is that some people, the elite Know-it-Alls, believe they have a superior capacity to determine value than the individuals doing the trading.  And in so deciding, they have also de facto declared that the product of your time, energy, skills, and mind, are not your personal property to trade as you see fit, but subject to their superior valuing skills.  This is a control economy.

Another and very current example of government involvement in “free” markets is the issue of health care.  Legislation presently on the table for consideration will fix prices of services and some service providers.  As with the partially nationalized banking sector and automotive sector, the government will establish the permissible compensation of health care providers.  The first issue is, and the one most ignored, of course, Is health care a moral right, and on what basis?  Read Professor David Kelley’s answer here:   http://www.atlassociety.org/showcontent.aspx?ct=14&h=53.  For more information on the disinformation we are being fed on the subject, read Health Care Mythology by Clifford Asness, founding principal of AQR Capital Management here:  http://www.stumblingontruth.com/.  And finally, since the argument for government mandated health care is based on it being a survival issue, that begs the question of how is health care different from, say, food production, which is also a survival issue?  Should the government also fix the price of bread?  Or does it already?  Read an excellent response from Bradley Doucet here:  http://www.atlassociety.org/cth-43-2212-WOE-HealthFreedom.aspx.

Those who favor a control economy always see themselves as the elite valuers, or at least being prominent or influential in determining the final result.  They pride themselves in creating social justice, and their vehicle for fixing the world is your earnings.  They do not see your earnings as your property, to dispose of as you see fit, but rather as public, or community property, to be disposed of by the community, as vested in them, the valuers.  There are quite literally thousands and thousands of manifestations of this throughout our economy, which is known as a Mixed Economy.  It is halfway between capitalism and socialism, or as the Republicans dubbed it recently, compassionate capitalism.  I guess that equates with a compassionate plantation owner who is well intentioned towards his poor, ignorant slaves.  The Big Boss in the big, white, plantation house knows best for all of us.

Every control decision has unintended consequences, because there is no way to predict accurately how the herd will react, or what will stampede them in this direction or that direction.  Predicting human behavior is a lot like predicting the weather; there are too many variables to get very accurate about it.  In a free economy, you don’t have the burden of predicting; you simply allow people to trade on a voluntary basis and things take their course.  Control is not an issue.  On the other hand, in a control economy, every control requires even more controls.  Combine that with the fact that in a control economy, every decision becomes a political decision, every decision becomes subjected to competing gang warfare among the special interests, all of whom are being paid to obtain and/or peddle influence.

It is extremely difficult to create and preserve wealth when a substantial part of all your earnings are expropriated in the interests of social tinkering.  Wealth is created when money is re-invested in additional assets, aka land, manufacturing plants, machinery, R&D, skilled labor to produce further earnings.  It is this reinvestment of earnings, through money as the medium of exchange, that results in productivity growth, or higher Gross Domestic Product (GDP).  Only an increase in real GDP results in wealth.  Wealth is wealth; there are assets at work that produce an excess over expenses that are reinvested over and over again, that lift a society out of poverty.  No society in the history of the world has ever taxed its way to prosperity.  Some borrowing, and therefore credit, contributes to the growth of GDP:  borrowing for further investment.  Borrowing for consumption is digging a hole with a shovel.  When governments borrow heavily, as the United States government has been doing, they destroy wealth, because the government is now competing with all business for the limited supply of credit available; the more the government sucks up (by offering higher rates), the more expensive commercial credit becomes (or it becomes unavailable altogether).  That drives up the cost of doing business, reduces capital investment in business, and halts the growth of GDP in its tracks.  Printing money is not the same as creating wealth.  The problem with printing money is that it confuses money with wealth.  Wealth is investment in assets that create new and further wealth.  Sucking credit out of the economy by borrowing so much that government is now competing with business for available capital, and politicizing business decisions, is not a road to financial responsibility, and recovery; business quickly focus on political connections rather than efficiencies and higher productivity.  After all, at the end of the day, it will be government that will decide who gets to survive and who won’t.

Sometimes because of a government’s actions, the public loses all confidence in the currency of the country.  The currency in effect becomes worthless, quite literally not worth the paper it is written on.  In time this could be the price the United States will pay for its present political decisions.  We’ll see.  When governments succeed in destroying their currency because of ill-fated attempts at social engineering through a control economy, they usually see their only means of correcting their mess to be, of course, further controls.  In its final stages this often involves physical repression, incarceration, labor camps, torture and death.  Some countries, such as France, during their Revolution, declared that anyone who refused to conduct trade using the worthless currency of the day was to be subject to the death penalty!  I have always found it ironic that the motto of their Revolution, that culminated in the Reign of Terror with the tumbrels carrying many thousands to their death at the public guillotine, was none other than the eloquent “Liberty, Equality, Fraternity”.  No one seemed to realize that the first two were mutually exclusive; that everyone cannot be free, and still achieve equal results.  We are equal in our title to individual rights, but unequal in everything else.  Their experiment in social engineering led to the inevitable bloodbath that has been the hallmark of every experiment at State control.  But still we persist.  Surely we will get it right the next time!???

As always, thanks for visiting.  Subscribe on the right side of this page (FREE)  and become financially literate!  John Bechtel

Why Democracy Isn’t Enough

Human beings are a tribal species, and like most of the lower species on this planet, they prefer to travel in herds.  Truly free thinkers have always been a desperate minority, and it has been the unfortunate destiny of such individuals to periodically carry the world forward on their backs, often having to apologize for their discoveries, recant their theories under torture, or have their earnings plundered by their inferiors.  In a world culture based on the nonsensical concept that all men are created equal, these individuals have broken from the herd in their thinking, transcended commonly accepted “truths” and challenged the orthodoxy of the day.  Their discoveries and powers of production have done exponentially more to raise the standard of living  the world  over than the efforts of all the hand-wringing social planners of the planet combined.  The politicians of the world would have nothing to redistribute were it not for the outstanding minds and abilities of these scientists, engineers, and entrepreneurs.  To say that these persons are only the equals of the hordes who benefit from their exceptional minds can only be called the triumph of ideology over reality. Read more..

The breeding ground of all innovation is freedom; the freedom to challenge the unassailable, to think the unthinkable, to doubt the cherished myths of the culture, and should one be successful, the freedom to keep as one’s own property the product of one’s efforts.  One of the greatest myths of all time is that the purpose of our life is to live for others, a belief that runs counter to both rationality and reality.  A basic axiom of all conscious existence is that we must work to assure our own survival, and that in the case of man, survival is obtained by the use of our mind.  When the existence of lower species is threatened by some force of Nature, instinct requires fight or flight, and many or most die in the process.  Man, on the other hand uses his mind to understand and harness the forces of Nature, to bend those forces to his will.  In the process he has gone from being one of the weakest and most vulnerable of species to exercising a fundamental control of all of Nature, with the possible exception of viruses.  Like most other species, humans are hardwired to compete with each other for dominance, to seek power within the herd just for the sake of that power, and also to compete sexually.  It stil matters who obtains the favors of the female and succeeds reproductively.  Again, like other species, the male of the human species will strut “his stuff” to show his desireability.  One of the most seductive blandishments of a human male is the demonstration of power over others in the herd.  As Henry Kissinger is famously known to have said, there is no greater aphrodisiac than power.  This explains a great many phenomena such as why guys with expensive cars get laid more often; men with power or wealth, or even the mere appearance of such  attract females much younger than themselves; why even physically homely rock stars attract hordes of beautiful, adoring women.  It also explains a great deal of consumerism, or the need to constantly acquire new toys; the appearance of wealth and power is usually just as effective a means of displaying one’s standing in the herd as the reality of them.  Much of Nature is based on camouflage and deception in order to succeed at reproduction. 

There are essentially two ways to compete in the acquisition of power and assets:  one is to create value through innovation and production, and the other is to plunder the values created by others.  The more free a society is, meaning the more likely an individual is free to think for himself, without coercion, and the more free s/he is to keep the product of his efforts, the greater the aggregate innovation and productivity of that society, or herd, as a whole.  In other words, more freedom and less plunder equals prosperity.  One has only to look at third world petty dictatorships to see the net result of a herd dominated by plunder by their own petty chieftains; anyone with ‘Get-Up-and-Go’ in their tribe has gotten up and gone.  Your best minds will go where they are more likely to be able to keep the fruits of their labor.  Incredibly, your greatest minds are “selfish”.  They want to keep what they have earned, and they want control over its disposition.  If they are charitably inclined, they want to decide on the worthiness of potential recipients of their largesse, and they resent expropriation of their earnings by any gang of power lusters who seek control of the producers in their society.  They see no need to apologize for their success, nor do they feel morally obligated to expiate unearned guilt by giving away their wealth.  If they are as accomplished at the art of philosophical introspection as they are at physical creation of value, they understand that theirs is the only moral form of economic activity and for which no apology is required.

As far as the plunderers are concerned, there are only two basic types, and both types rely exclusively on one source of power:  the power of a gun.  The first type are the dictators of the world, who make no pretense at their goals and their methods.  They exterminate anything and anyone in their path.  They often make feeble efforts at philosophical or theological justifications for their power lust, but they generally achieve their rise to power due to physical intimidation and violence, and the general vapidity of humans in a herd.  Inexplicably, humans in the face of mortal threats to their freedom and very existence, often react like a doe in the headlights of an approaching vehicle.  They freeze up and in many cases pay the price of their own destruction.  Just as often, a herd population will endorse a potential dictator because they support the use of his strongarm methods to achieve goals of their own.  This is why in modern societies, the rise to power of some autocrat or other is frequently and enthusiastically applauded by intellectuals and journalists who see themselves as part of the power structure of the new regime, or they see this regime change as an opportunity to impose on the general population ideologically-based imperatives that would otherwise be rejected in a free society.  It rarely occurs to these people that the tyrants they put in power have no regard for life or property of anyone, including their own supporters.  Without a rule of law, everyone is at risk, and the new tyrants are quick to turn against their own supporters as potential threats to their power.

The second type of plunder is through democracy.  The real challenge of political philosophy is not to make the world safe for democracy, but to make the world safe from democracy.  Democracy is nothing more than a euphemism for mob rule or gang warfare.  The majority rules.  Period.  As NY Times columnist Russell Baker once said, ‘I despise the implied assumption of all minorities that if the tables were turned, they would be different.’  If you didn’t get that statement, read it again and think about it for a moment.  All minorities, meaning any group of any description whatsoever, chafes at the restrictions and limitations imposed on them by their majority rulers.  Their only recourse is to work at undermining the power structure of the powers that be in order to supplant the dominant party by their own.  One group, or gang, is pitted against the others.  Whenever a minority achieves its objective and comes into power, they immediately seek to use the levers of government power at their disposal to reverse their fortunes, and now impose their cherished values on the new dissenters.  Even in a democracy, the ultimate power is the power of a gun.  Each faction seeks control over the legislative process, first to perpetuate their own power base and maintain  control of the public purse, and the penalty for noncompliance with new laws is inevitably fines, imprisonment, or worse.  In the United States, our system  and our prisons are overflowing with the abuse of elected power.

In a democratic society, as in all of Nature, camouflage and deception are the norm.  One’s real goals can never be stated.  All controversial legislation is ALWAYS framed in humanitarian terms, in order to cast the opposition as selfish, ruthless, egotistical, or worse.  Moral high ground is always sought as the ultimate mask in any ideological struggle, ending with each side out-shouting  the other in their professions of love, compassion, and self-sacrifice.  Not the self-sacrifice of the power-lusters, but your self-sacrifice.  Power mongers are notorious for creating exceptions for themselves in the sacrifice business.  Almost all populism falls into this category; it panders to the greed and ignorance of the masses.  Not understanding the creation of wealth, and envious of those who have more than they, however earned, the masses enthusiastically support any legislation to “soak the rich”.  In their eagerness to pick the pockets of those above them on the socio-economic ladder, they forget there are many below them just as eager to pick their pockets.  So a fundamental question is, Who gets to pick the pockets of others?  And who gets to be the victims?  The mob will rule.  So a few years ago, in an effort to expropriate more of the wealth of the producers, legislation was passed at the federal level called Alternative Minimum Tax, which was designed to make the wealthy pay more taxes regardless of their legitimate deductions.  In other words, individuals above a certain income level were to be denied tax deductions that were legal for everyone else, in order to make them pay more taxes.  That was an example of populist legislation, since there are a lot less rich voters than those not rich.  The legislation appealed to the greed of the masses.  The middle and lower classes were more than happy to pick the pockets of the higher-ups in order to pay for their pet entitlement programs.  Why not?  But the legislation backfired because in the next few years the incomes of large numbers of the middle class grew so much, by inflation or otherwise, and threw them into the ranks of the “rich”.  Hey, they had never approved the picking of their own pockets; AMT was designed to pick the pockets of others!  The politicians hastily threw together new legislation revising the AMT to relieve these screaming voters.

Free societies regularly and incrementally vote themselves into slavery.  In the beginning they always believe they are merely imposing their own “appropriate” and “moral” and “unimpeachable” objectives on an unenlightened society; the giving away of freedom is always preceded by an arrrogance and elitism of the few who feel compelled to fix the world and tell everyone else how to live their life, and to overrule any disagreement with the power of the government’s gun.  No one is safe in any so-called free, democratic society, unless there is a firm rule of law, beginning with a Constitution limiting the power of the government and its voters.  It means there are some rights, individual rights, that can never be voted away by any majority, no matter how wildly popular with the masses.  The masses of voters are a herd, and they are educated by popular television, and can easily be induced to run off a cliff to their own destruction.  The media are largely indoctrinated by the universities, which are heavily influenced by an intelligentsia that favors collectivism, altruism, and government control of the masses.  Markets are also subject to herd mentality, and when they run off a cliff, the government usually steps in and says Step aside, we can do this better.  They then create the virus of the next financial pandemic, and in the process accrue and consolidate power over more and more of the subject population  and its economic activities.  Rarely is freedom lost all at once.  That’s all for today.  John Bechtel, Greenville, SC

Why We Believe: The Power of Utopia, Part II

 

In Part I of this article, I discussed how people are vulnerable to belief when they are unhappy or unsatisfied, and most people are one or the other most of the time.  In times of dramatic change, people are scared, insecure, and eager for anything that promises certainty.  Unsure of themselves, they are quick to follow any Confidence Man or Group who exudes a high level of certainty and self-assurance, whether the facts warrant it or not (and they usually don’t).  When the Confidence Man (or Group) also promises some form of utopia that people want, and if that Utopian suggests that the crowd can have what they want by taking it from someone else, few will resist that temptation.  Such plunder is always camouflaged in language of some form of altruism, of everyone sacrificing or giving up for the common good.  Such behavior is successful because historically, for millennia property existed by permission, not by right, and it was usually acquired by military acquisition, not by trade.  Those who actually produced economic values were viewed as serfs, as socially inferior to those who controlled their products by force.  In addition to this historical emphasis on property acquired by force and kept by permission, feudal society viewed the tribe, not the individual, as the core unit of society.  So when we moved to the Industrial Revolution, property earned was considered the property of the group, or tribe, rather than the individual.  The prevailing philosophy has been one of altruism, meaning that the individual was expected to give up some part of his earnings, without compensation, to the tribe.  Although technology has changed dramatically, we still cling to these ancient paradigms. Read more..

Altruism, like its political offspring, socialism, represents a view of life based on need, want, sympathy, pity, handouts.  In a society where these values are paramount, the greatest virtue is achieved by those who sacrifice their life, time, and resources to distribute to those in need.  While there is a place for charity in life, a time when those of us who have done well want to help others less fortunate, particularly through no fault of their own, and who are therefore eager to get back on their feet, something ugly happens when a person’s need becomes accepted as a moral claim on another person.  Helping then ceases to become charity, and is extended either through social pressure (guilt) or coercion (expropriation and redistribution).    I remember, almost ten years ago, when I was introduced to a professor in the Humanities Department of Ohio State University who quickly engaged me in debate over raising taxes to fund some of her pet projects of a humanitarian nature; that when I objected on the grounds that such taxes ceased to be charitable gifts but in fact became the forced and immoral seizure of private property, she looked at me with half a sneer and said ‘surely you can live without some of your precious profits’.  The point was not whether I could, or could not, live without some of my profits.  The point was that they were my profits that I earned through the use of my mind, and were for me to dispose of as I saw fit.  Her viewpoint was that my abilities, the product of my mind’s effort, did not belong to me, but belonged to the tribe or the collective.  The harder I worked the more I was to be penalized in a scheme called “soak the rich”.  She did not view my earnings as my property, but rather the property of the collective, and I could keep only what the collective decided, by their permission.

I understood this feudal attitude, because I grew up under this philosophy.  My father, for whom financial literacy was NOT an outstanding character trait, fervently believed that there was only so much wealth in the world, and so if some had more than we did, they obviously took it out of our pocket somehow.  He had no idea that this concept was a holdover from the days of feudalism when wealth was not created, but only confiscated.  The King owned all property, and he awarded land and castles to noblemen in reward for successful military service (which in fact meant the successful seizure of other people’s property).  These gifts of land to the nobles were held by the King’s permission, and “ownership” could be revoked at the pleasure of the King.

 My Dad’s sense of economics served him well.  He never understood money or wealth, had virtually no  financial literacy, and he died very poor.  Under the feudal system, people were born into their economic circumstances or social class, and no movement upward was possible, except to become a successful warrior and kill or enslave other property owners and confiscate that property.  Serfs were the producers, and they got no thanks for their efforts, other than permission to keep enough of their own  product to subsist—barely.  This was an agrarian society, and production was of the brawn, not the brain, variety.  Brawn was looked down on, and the products of brawn were expropriated by the nobles and the King.  The serfs survived by permission; the nobility survived by brute force.

 There was a psychological payoff for the serfs though.  The serf’s wife or children could not, and would not, ask him why they did not live in as nice a house as the nobleman in the castle.  A man’s lot in life was inherited and unchangeable and accepted.  In a capitalistic society, however, it was another story altogether.  With free trade, based on one’s ability and hard work, output varied considerably, and consequently, so did wealth.  So a man’s wife, could, and would, point to the better neighborhoods and pointedly ask why their family was not doing as well as the Smiths, or the Jones.  People compared themselves to others, and envy and resentments developed to a far greater degree than existed before.  The class society began to weaken, and upward mobility became a real possibility, as did a Middle Class.

 It is a mistake to underestimate the importance of this phenomenon.  From the times of earliest man, in all our tribal societies, status has been very important to our species.  In this respect we are like many other species, and we quickly develop a pecking order, a power structure, a hierarchy of status.  Among early man, pre-ideology, even pre-religion, we subscribed to a form of animism, wherein we ascribed human attributes to  animals.  Even in these primitive civilizations, enclaves, and villages, we erected totems which were not so much religious symbols, but rather symbols of  social status in the hierarchy of the village.  The taller, wider, more elaborately carved and ostentatiously decorated totems belonged to those with the highest standing in the village.  Not much has changed.  Today our totems are our luxury cars, our beautiful homes and neighborhoods, the clothes and jewelry we wear; anything to tell the outward world what our status is in the social hierarchy in which we live.  Because such comparisons are so easy, we can come to hate those who have more than us, and class warfare can set in.  We can also come to despise the system that makes such comparisons so unwelcome.  How do I tell my wife that Fred down the street was just smarter than me, worked harder than me, caught opportunities that I missed?  How do I tell her that in the marriage sweepstakes she didn’t do as well as Fred’s wife?  Rather than deal with this reality, I now resent Fred, and my wife now resents Fred’s wife.  And since we can’t afford what Fred has, we attempt to fake reality by buying the same things that Fred has on credit that we can’t afford.  Envy has a lot to do with a consumer society.  We want what others have, not so much because we  need it, but because they have it and it has become a “totem”.  The more things change the more they stay the same!

 In the case of my family, my mother developed a personal philosophy that served her well:  she knew others had more because they were dishonest.  This included all entrepreneurs and business people.  With the feudal paradigm to draw from, we had less, they had more; somehow they had stolen our birthright, our fair share of Nature.  How?  We didn’t know how, but somehow they had.  There was no reasoning with this position. We confused fantasy with reality.    Did anyone force employees to work for this businessman?  No.  Did anyone force the customers to buy from this businessman?  No.  Did anyone force other business people to sell to this businessman?  No.  Then if everyone is making their own choices with no coercion, how did this businessman steal from all of us?  No answer.  We just know he did.  This was our family’s way of evading the reality that we did not understand the creation of wealth.  It also meant that until or unless we improved our financial literacy, we had no chance of changing our economic situation.  (To our credit, we did not consider our need a claim on anyone else.  We went to the doctor only when we could afford it; we took on extra jobs, or we did without.)  Socialism operates on a principle that does not exist anywhere in Nature.  It attempts to legislate into existence an equality of result that runs counter to reality, to what IS.  Imagine trying to grow a forest where it was required that every tree be exactly as tall as every other tree.  Imagine trying to fertilize the scrawny ones to encourage them to grow faster and taller, and that failing, trying to limit the growth of the taller ones, or pruning them back, in the spirit “of fairness.”  Such is the challenge of the utopians of the human species.

 There are other historical and psychological reasons why we long to believe the utopians.  There is for example, the matter of intrinsic worth.  In a market society, you become wealthy by selling a good or service that a lot of people want.  It does not matter whether the item in question reflects good taste or atrocious taste; what matters is if it appeals to the taste of a mass market.  There are many who take great offense at this, including intellectuals, artists, scientists, educators, etc.  They may consider themselves to have great intrinsic talent, only to find that those who pandered to a more common taste earned much more money.  Once again envy comes home to roost, as we have to deal with the awkward business of comparing our totems, or stature, with others in our society.  So a professor may disdain a former student who has been much more financially successful than he, the professor, could ever be.  When the market does not reward my clearly superior talents, it is only appropriate that the government, and its elite, give me the recognition, of which  the market in its blindness, deprives me.

 Socialism always involves forms of elitism, substituting the taste and opinions of the few over the wishes of the many.  The use of force, or coercion, to accomplish this is a given.  Government subsidizes what the market will not recognize.  If you don’t believe this, go in any art museum today and ask yourself if the “market” put a lot of that stuff on the walls?  As George Orwell once said “Some things are so preposterous, only an intellectual could believe them.”

 In a free market, as in all of nature, each produces and survives according to his ability.  Those with less cannot blame it on living in a class society where they have no chance to change their station in life.  Those who compare less favorably with their colleagues and peers often hate the free society that invites such unfavorable comparisons and takes away the excuses.  I learned this lesson well in the early seventies in Brooklyn and Newark, NJ, where I developed many friendships among the Haitian immigrants of that period.  They had everything against them; some spoke poor English, many were illegal, almost all were quite poor and lived many families per apartment.  But they had good minds and a great work ethic, and the vast majority of them within a few short years became successful business owners and landlords in former slum areas burned out by the race riots of the period.  When most of the population around them were complaining that they had no chance because of racial bias,  the Haitians, who were of the same race as their neighbors, created wealth.  To this day they serve as an inspiration to me of what can be done with intelligence and great desire.

Those on the other hand who are unwilling to deal with their own limitations, and do not  work to expand their abilities may choose to find refuge in platitudes, such as “We are more spiritual; we do not trade in material things”.  Authors of little-known book titles scoff at the “material” or “poor taste” of the buying public.  They find the worth of their own writings suffused with intrinsic worth that clearly cannot be evaluated by their lack of financial success.  All of this is a form of pretentiousness, the intellectual equivalent of leasing a luxury car we cannot afford in order to fake a success we have not achieved.  Great literary works are by definition authored by people who went against the conventional wisdom of the time, and whose fame was often posthumous.  That does not mean however that an economic system that allows for others who did achieve financial success by catering to a popular taste is to be condemned.  Personally I have found some of the great classics a real treat, and with some of the others, I couldn’t help wonder by what standard they made the cut into “greatness”.  I have always had the arrogance to reserve the right to my own judgment in such things.  Just because someone tells me that a work is great art does not mean I am going to agree.  I still cannot bring myself to accept the crude scribblings of a small mind as “art” just because it came to hang on a museum wall by some fraud of the popular culture.

 When all else fails, when we observe, and envy, those who have achieved much more than we have, we can fall back on the old standby:  “But they’re not happy.”  This conclusion is more ubiquitous than one might think.  In the interests of brevity, I will only say this:  It is true that neither money, nor wealth, will bring happiness.  But it is also very true that the absence of it can bring a lot of unhappiness, debilitating stress, and grief.  For all those who bemoan the modern state of society, I can only ask how many of us would like to live without our medical science, our conveniences that we take so for granted, our mobility, our leisure time, our extended lifespans?  It is one thing to denigrate these things in “chic” social banter; it is quite another to survive as the noble savage, the primitive man who lost all his teeth by the age of 20 and who was exhausted, diseased, or dead by 30; who had no time for such leisurely pursuits, and most of whose children died before they ever reached maturity.  How very interesting that our culture considers charitable work a great virtue, but rarely speaks out in praise of all the men (and women) of the mind who created the wonderful world we live in, and whose minds keep it going.  They are often forgotten because, just like in the millenia of the past, production was expected of the competent.  Why? Because they were competent.  The producers were serfs; the nobility redistributed the value of what they produced.  The nobility were the lords of confiscation and reallocation of resources. 

 Ultimately, what is the appeal of all utopias?  It is the belief that we can get something for nothing.  It doesn’t matter whether the goal is material or spiritual, whether it is financial success, or respect,  admiration, or love.  If it is a desire to have what we have not earned, we will choose to believe what facts and reason will not support.  When you scratch the surface of all utopian philosophies, somewhere below the shiny surface is an ugliness of power lusting, greed for the unearned, envy of those who have earned it, and a desire to fake a reality that doesn’t exist except in our wishful thinking.  Utopia is the suspension of disbelief; it is the attempted triumph of consciousness over existence; the belief that we can remake what IS by no greater effort than wishing it to be so.

Thanks for visiting!  John Bechtel, Greenville, SC

Why We Believe: The Power of Utopia! Part I

About ten years ago I was asked to give a speech about the power of cults, largely because I had been raised almost from infancy as a Jehovah’s Witness, a religious organization often associated in the public’s mind with cultism.  Some of the hallmarks of cultism are a need for certainty, a conviction that you have absolute truth and are the final authority on that truth, and repression of dissent.  Some cults exercise a physical control of their members, but most of them exert a psychological control.  A true believer is someone who no longer needs coercion or physical restraint, but who now acts as if those restraints are still in place.  I can best compare it to training a guard dog; you use a choke collar with such consistency that eventually you remove the choke collar from the neck of the dog and he is so conditioned that he continues to act as if the choke collar is still there.  When, in my thirties I left this organization, I was eager to embrace a society of intellectually free people, and I was excited about the prospect of associating with others with open, inquiring minds.  I was astonished to find so much more of what I had just abandoned, only worse:  People who were born into freedom, and yet who both abused and despised it.  Read more..

Cults are all about utopias.  Everyone on this planet is unhappy about something.  Everyone has a problem that they would like to go away, everyone knows someone else who has what they want, or more of it.  Everyone believes their life could be much better, if only . . . You fill in the blank.  Cults gain adherents by claiming to have found the ultimate truth, the only solution, the compelling argument, The Way.  Sacrifices will have to be made, but that is a small price to pay, isn’t it, if you look at it unselfishly?  Quite usefully, cults  provide a devil, or scapegoat, on which to project blame for whatever our particular grievances are (Management, Jews, Foreigners, The Other Religion, The Rich, The Other Political Party)  We have enshrined in our Declaration of Independence our right to the pursuit of happiness; utopians promise the reality of happiness and fulfillment, not the illusion of its pursuit.  Whatever freedoms you may enjoy at the moment, you can be sure that utopians will require that you sacrifice some of them in exchange for their promise of better tomorrows.  Why do people believe them, often in the face of considerable evidence that their claims are a fraud and have repeatedly failed before?

Charismatic leaders cash in on the conditioning you have already experienced; you have absorbed a basic philosophical premise, from your schools, your church, your family, your books, media, movies, songs, everything that comes at you during all your conscious hours, that the only acceptable, moral purpose of your life is–others.  Not you, but others.  Your ultimate value in life is not your life, but everyone’s life except yours.  This is the moral ideal of most cultures on this planet.  The appropriate expression of this ideal is submissionEvery other life form on this planet seeks, by instinct, its own survival.  But our culture teaches us that, as humans,  our moral ideal is to promote the survival of others over our own.  Since this is an unnatural standard, and one that runs counter to our own nature as man, it becomes a standard we cannot live up to, and therefore a standard that induces guilt.  Whoever controls and manipulates our guilt load controls us.  They can now remove the choke collar from our neck, and we will faithfully follow them as surely as if there is a gun at our back.  We will go even further; we will give them what Ayn Rand called ‘the sanction of the victim.’  We have anointed our new Masters.    Once they have obtained our tacit acceptance of the premise that our life is not our highest value, and that our highest purpose is to serve others, it only remains for someone else to decide what the exact form our sacrifice, or service, should take.  When our sacrifice is in the name of God, our payoff is in the Hereafter; when our sacrifice is to Society, our payoff will be just around the next corner, after we have eliminated poverty, restored the ozone layer, reversed global warming, stabilized international trade, protected jobs, revived failed businesses, won the war on drugs, and soaked the rich.  But there is one thing about all sacrifice–it is always later.  So the first prerequisite for a succesful cult mentality is a pervasive culture of self-sacrifice.  This sets the stage for the first charismatic politician, dictator, ayatollah, or  power luster that fortune favors.

The second pre-requisite for loss of freedom to a cult is a CRISIS of sufficient magnitude to scare us out of our wits, and that wrongly leads us to believe restoring stability would be worth a “temporary” loss of some freedoms. Once these freedoms are gone, it is almost impossible to get them all back.  Why is this?  When it comes to freedom, history is not on our side.  As a matter of fact, freedom as an individual right is a very recent development.

During all of the ages of man, there have been two classes of people:  the producers and the expropriators.  Whether the producers were serfs tilling the soil, or forgers of iron or bronze, or men toiling on the pyramids, they were slaves who worked to eke out an existence, to survive, and for the benefit of their Masters, who controlled them with the sword, torture, and death.  Sometimes it was a hostile relationship, and sometimes a symbiotic relationship.  Empires rose and fell by the use of force, and the major difference between the rulers of men was the degree of autonomy they permitted their subjects.  Some of the vanquished were slaughtered, others were placed in chains, some became vassals and achieved a state of semi-freedom in exchange for paying tribute, or a tax on their “freedom”.  Man’s natural state was that of a slave, and only might made right.  Some form of slavery was characteristic of almost all civilizations throughout history.  Until, that is, the philosophical period that came to be known as The Enlightenment. 

For the first time a case was made that the natural state of a man was that of freedom, and that this freedom was his by right, not by permission.  Yes, he could still be enslaved by force, but his jailers were violating his moral rights in doing so.  Man’s highest value was his life, and it was proper and moral for him to seek his survival and his happiness.  The lower animals survived by instinct, but man survived by the use of his mind, and the use of that mind came to be his work and his means of survival.  Therefore, to rob a man of his product, to rob him of the fruits of his use of his mind, was in fact to rob him of his right to life.  Therefore, property, obtained as the product of his mind, was also his right, as a corollary to his right to life itself.  Thus, the right to independent thought (intellectual freedom) and property rights (economic freedom) came to be associated together for the first time in history.  How interesting that these two freedoms tend to disappear together as well when people are enslaved.  Since man survives by the use of his rational mind, it is not possible to separate the two freedoms; it is not possible to have one without the other.  There is no freedom without economic freedom. 

So when Thomas Jefferson wrote that man had the ‘inalienable right to life, liberty, and the pursuit of happiness’, he was not writing the obvious; he was making a radical departure from the orthodoxy of all of human political history.  He was stating that man did not obtain life, liberty, and the pursuit of happiness by permission, but by inalienable right!  This was not a group right, because a group right would have implied that his life or freedom could have been denied him by the group; no, an inalienable right was an individual right.  In this way Jefferson was championing the rights of the smallest minority in the world–and the most maligned–the individual human being.  No other person, clique, group, political party, thug, ruffian, dictator, junta, or voting bloc, could morally deprive him of his right to life, liberty, and the pursuit of happiness. 

Jefferson and the other founding fathers had another daunting task on their hands:  If wealth is to be created by innovation, invention, and production, and the values so produced freely traded, and not expropriated by military conquest, then what is the proper moral role of government in the lives of men?  Since property  derives from the application of our minds to natural resources, the only other way to acquire property is to plunder it from those who produced it.  If plunder is easier than work, men will resort to plunder, according to Frederic Bastiat, the author of the delightful treatise La Loi.  To prevent them from doing this, we give government a monopoly on the use of force.  Government is there to protect our property from plunder by foreigners and also from plunder by domestic thieves and ruffians.  But who is to protect us from our own government, if they get it into their head to plunder us? Our only protection could be Rule by Law, so that even our enemies have to abide by this law. 

Our Constitution was specifically designed to protect us from our own government, because from time immemorial the law itself has been used as the tool with which to plunder, or expropriate property from the masses.  When the law is politicized, bent to the will of the group in power, and when that group is replaced by another group, the new group simply uses the power of legislation to turn the tables on their former tormentors.  Under a rule of law, it should make no difference what the political opinions are of a potential jurist; he would have no means to bend or change the law to his ideals.  When the rule of law deteriorates into the rule by people, a civilization has attained the first step on the road to tyranny.  There is nothing to stop anyone who wants what you have.  It is theirs for the taking, because they use the law to seize it!  This degradation of the rule of law is well advanced in our society.  As we gradually migrate from a rule by law to a rule by people,  a higher premium is placed on the political opinions of candidate jurists, because the limitations and restraints placed on legislators by the Constitution are under attack by judicial activists, who believe that any small loss of freedom is more than compensated for by the compelling social benefits of their proposed new legislation.   What happens when the seemingly good intentions of the legislators turns out to be not quite so well-intentioned after all?  Even granting these lawmakers the benefit of a benevolent doubt, do they understand that in weakening the Constitution, they have weakened the Rule of Law and moved an entire nation closer to Rule by People, where any and all of us are sitting ducks for the first gang with the opportunity to capitalize on it?  The problem with all utopians is that in their vision of the world, they themselves will be pulling the levers of power.  It never occurs to them that someone else might be the beneficiary of the damage they did to our system, and that they might end up being among the victims.

We have experienced a prolonged erosion of respect for the rule of law, and a concomitant politicization of the legal process in America.  Add to that a culture that incessantly promotes the spirit of altruism, i.e. that only a life lived in the service of others is moral and worth living.  We are in the middle of the greatest global financial meltdown in history.  We have created a culture of entitlement, which means the right to confiscate and enjoy the product of other men’s labor, without compensation.  A government produces nothing; it can only seize and redistribute.  When it provides anything, any service, for nothing, it has made a slave of someone else.  That someone else is the producer.  When politicians extol the benefits they are giving us in exchange for keeping them in power, they are trading in stolen goods.  For anyone else, that is a felony.  For government it is a privilege.  If the victims of this expropriation have the temerity to complain, they are selfish and anti-social.  This is the corrupted morality of our mixed economy, and it is this anti-life morality that has rendered conservatism helpless.  Unable or unwilling to defend capitalism on moral grounds; which is nothing more than economic freedom, freedom to produce, trade, and keep the product of your trade; the conservatives hope to compete with the neo-socialists by trying to out-do them in the expropriation department by advocating “compassionate capitalism”.  What does that mean, that we’ll say “Thank you” when we expropriate the product of your mind and work??  By what definition is it compassion to expropriate, by force, the product of one man’s effort in order to distribute it to another?  And what makes government a better judge of the worthiness of the recipient’s need than the producer of the values being expropriated?  The implied answer:  The government will be “unselfish” distributing the producers goods, whereas the producer will likely be more “selfish” and may want to keep his earnings.  By what morality does a man need to feel guilty about wanting to keep what he has earned? Is this the thought pattern of a free society, or the thought pattern inherited from the endless ages of the producer as the slave so that the privileged classes can seize the product of his labor?  And yet this is what a philosophy of altruism has produced:  submission, bowed heads, and mindless obedience.  We are just as conditioned as the dog after the choke collar has been removed.  We know our place, we go along in order to get along.  Once we have experienced the power of a choke collar, we don’t actually have to be threatened with it anymore to secure our compliance.

Our free system has been weakened by the relentless assault of bad philosophy.  Freedom is lost when public attitudes change, when people cry Foul when someone picks their pocket, but think nothing of picking the next man’s.  The stage is set.  Now enter any gang of politicians with initiatives,  the worth of which they are absolutely convinced (remember–cults are identified by a need for certainty with the cult leader as the final authority), and their attempted expropriations are framed in the context of service to humanity, but which regrettably involves the confiscation of property.  Their presentations are  couched in terms of the highest moral ideals, so much so that any opponents should feel compelled to apologize for their lack of compassion and crass selfishness, and be shamed into silence!  “Big government is here to help!” It is in this incremental manner that liberty is lost.  As philosopher David Hume once said:  “It is seldom that liberty of any kind is lost all at once.”  When the public arbiters of what private property we are allowed to keep are done with their economic coercion, the loss of intellectual liberty is not far behind.  In no time at all our attitudes, opinions, and values are monitored, and a system of rewards and punishments tells us what is acceptable and what isn’t.  This process is also at an advanced stage in this country, but that is the subject of another article.

Alexis de Tocqueville, in his book Democracy in America comments on ‘the new servitude’:  ” . . . It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate to rise above the crowd.  The will of man is not shattered but softened, bent and guided; men are seldom forced by it to act, but they are constantly restrained from acting.  Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to be nothing better than a flock of timid and industrial animals, of which government is the shepherd.”

There are soft cults, such as the situation described by de Tocqueville above, and there are hard cults, such as Stalin’s attempt at utopia, or Hitler’s brand of national socialism.  The difference between soft and hard cults is often one of incrementalism, of time and opportunity; there is always someone whose view of the world is so compelling, so incisive, and well, so right, to them at least, that it justifies the use of force against others, until of course, those others come to their senses.  And if they don’t? . . . . well, sacrifices have to be made.  Nine foxes and one chicken just voted on what to have for dinner.  The chicken lost.  It lacked vision. The funny thing is, when the foxes came for it, the chicken didn’t run, it didn’t resist.  It knew its glory was in serving the needs of the others.

Thanks for listening.  Leave a comment.  John Bechtel, Greenville, SC

Did Capitalism Fail?

The global economic crisis now in play is being universally touted as the failure and collapse of capitalism.  The cover of the February 16, 2009 edition of Newsweek ecstatically proclaimed “WE ARE ALL SOCIALISTS NOW”.  The documented collapse of Wall St. institutions and international banking is being gleefully interpreted as the failure of capitalism itself.  In the furious debate that has ensued, the arguments for and against capitalism have focused entirely on the causes of various recent economic phenomena, such as Wall St. greed, the failure of regulators, the incompetence of one or another administration, and the complexity of derivatives that were both unheard of and technically impossible only twenty years ago.  All of them have totally missed the point.  Capitalism has not failed, because capitalism was not practiced to begin with.  Pure capitalism has never been practiced because it is philosophically unacceptable in our culture.  What is called capitalism today is a hybrid political philosophy so filled with contradictions, it is unable to defend itself.  To answer the question in the title of this article, we have to begin at the beginning. Read more..

Capitalism is a form of political philosophy.   The philosophy taught and accepted as orthodoxy in our Humanities departments of our universities was largely imported from Europe during the nineteenth century.  Europe’s ancient economic model and paradigm was that of feudalism, a system where the act of production was performed by serfs.  In the minds of medieval Europeans, manual labor was split from intellectual life and All property belonged to their kings(the head of their tribe) and this property was bestowed by the King’s permission to noblemen, usually as a reward for military service to the King.  Property could, and often was, reclaimed by the King at his whim.  This system lasted well into the nineteenth century, when it was replaced by what came to be called capitalism.  What really happened during this century is that ownership of property and production changed from the head of the tribe (the King) to the people of the tribe (the State).  The tribal attitude remained unchanged.  This is very important.  The concept of individual rights of a sovereign man was virtually unknown in Europe. considered inferior to it.  The role of nobility was to own and control such production.  Any act of material production was considered lowly and demeaning, and certainly not an appropriate pursuit of the upper classes.  Europe was (and is) very tribal, and everyone’s role was to serve the tribe.   About this same time the science of political economy came into being, but was again based on the tribe as the smallest unit, not the individual.  Political economy was the study of the most efficient utilization of economic resources, but those resources belonged to the community, and the individual was the smallest cell of that community.  A serf was still a serf, and the only known paradigm was ruling the producers of material goods with physical force, and this use of coercion was the privilege of the noble classes of society.  The American concept of individual rights of man was drastically and radically new.  In feudal Europe, there was no dignity or value to the creation of wealth, the honor and glory  was in the confiscation of it.  The American system was based on the principle that wealth was to be owned by its creators.  We became a great nation and economic powerhouse because people here could become wealthy beginning with nothing, because they were entitled, by law, not permission, to keep what they earned.  We understood early on that without economic rights, without the right to private property, there were no rights, for property rights are nothing more than the right to keep the results of our effort.

European political economy however clung to the preeminence of the tribe rather than the individual, and the products of ones efforts belonged to the community, and any profit or surplus was to be disposed of by the ruling class for the benefit of the tribe.  In America we saw a human being as an end in himself; in Europe they saw man as a member of the tribe.  Europeans were collectivist in their mindset; we were individualist here in America.  This has a lot to do with the fact that we have been a wellspring of innovation and entrepreneurial activity that has been the envy of the world.  Anywhere in the world, a young person with get-up-and-go wanted to go to America.  Europeans tended to be more rule -bound and clung to corporate models that emphasized security over risk taking; more safety and less reward.  Their society provided extensive social safety nets for the less productive and more regulatory restraints on the more productive.  In Europe individual rights were largely subordinated to group rights.  In the event of a conflict between the two, the greater good of the greater number prevailed.  That of course begs the question, The greater good as determined by whom?  The answer of course is by whomever is in power at the moment.

The American experiment was enshrined in our Constitution and in our Declaration of Independence, two remarkable documents designed to separate us from any other democracy; these statements of intent declared that even in a democracy there were some things that could NOT be voted on, and that would NOT be subjected to the will of the majority:  anything that was a violation of individual rights could not be voted away by some majority in power.  These documents were to protect us from our own government; that the goals, visions, and wishes of  any groups or gangs that might get voted into office were limited by the sanctity of individual rights.  Those rights began with the right to hold property by law and not by permission.  In America our problems began with a philosophical conflict between capitalism, or each individual seeking their own personal happiness and life values, and the ideal of altruism, i.e. that man’s highest and greatest value should be in the service to others.  In time it became culturally unacceptable to openly declare so-called selfish motives, such as profit, and all such self-seeking behavior had to be camoflaged as job creation, charitable donations, community involvement.  A man’s profits could only be justified by how much of it he gave away (to charity) for the public good.  In a capitalistic society, values are established by objective criteria; the worth of a man’s product is determined by what another man is willing to trade for it (markets); whereas in a collectivist system, values are assigned according to either subjective (what I think) criteria, or intrinsic (what the value should be) criteria.  We saw this manifested most recently by the current administration assigning salary caps to any organization which receives a government bailout.  Who decides what such caps should be, and by what criteria?  Rather than capitalism, we have what is commonly known as a mixed economy, which is a hybrid of capitalism (private ownership of the means of production), socialism (mostly private ownership of the means of production, but State regulation of it) and communism (all State ownership of the means of production).  A mixed economy resembles feudalism to the extent that you “own” property until the King (the modern State) says you don’t.  In a mixed economy, the State regularly interferes with free market processes, usually in the pursuit of political power thinly disguised as altruistic purposes.  A mixed economy lurches schizophrenically back and forth from free market initiatives to social planning according to which philosophy is currently enthroned by the electorate.  In a mixed economy, political decisions are frequently imposed by force on “free” markets for political or ideological reasons.  Any time such decisions are imposed, they are never market choices or there would have been no need to impose anything by force, edict, or law.  One of the many problems with social engineering is the Law of Unintended Consequences.  Such was the case in 1999 when the Clinton Administration leaned heavily on  Fannie Mae to ease the credit requirements on loans to subprime borrowers.  Home ownership was declared a “right” without regard to financial qualifications.  The banks were eager to make such loans because they got to bundle them and sell them in “securitized” packages at huge mark-ups to investors, primarily foreign governments.  Easing of credit created a gigantic bubble in the real estate asset class, all of which has created our current global crisis.  In a truly free market, without government guarantees, lenders would have been far more circumspect about credit worthiness; and without government interference with credit markets, we would not have had too much cash (and credit) chasing too few goods (real estate), resulting in runaway inflation of home prices.  When the credit bubble collapsed, the promised collateral rapidly deflated in value, causing the banks to stop lending in an effort to improve their reserves, and no one, not the banks, not the government, and not the politicians, wanted to fix a real, current market value to the collateral for loans in default.  To do so would have required a massive mark-down of the banks assets and a considerable number of them would have been insolvent.

The above referenced Newsweek article positively gushes about our rush to European-style socialism, engaging in circular prose and unanswered questions; the questions without acceptable answers.  I give you:  “Whether we want to admit it or not . . . the America of 2009 is moving toward a modern European state.”  And, “As entitlement spending rises over the next decade, we will become even more French.”  Or how about this one:  “Polls show that Americans don’t trust government and still don’t want big government.  They do however, want what government delivers, like . . . protections from banking and housing failure.”  “The Obama administration is caught in a paradox.  It must borrow and spend to fix a crisis created by too much borrowing and spending.” (emphasis mine)  Crisis created by what policies?  No answer.  Then in direct contradiction to what it said before about a decade of increasing entitlement spending by government, this author continues:  “Having pumped the economy up with a stimulus, the president will have to cut the growth of entitlement spending . . . ).  The next article in that issue of Newsweek says approvingly:  “One of the more lasting effects will be a steady drift toward what could be called a European model of governance, regulation, and paternalism. . . the U.S. government will be forced to fill the gap, firmly directing  businesses in all sorts of ways—regulating some industries (particularly banking and the automotive sector) with big brother vigilance, favoring others like clean energy with grants and loans, and turning still others—health care and pensions—into virtual wards of the state.”  Now folks, before we lose our perspective, this loving, paternalistic, omniscient government is the same one that spent Social Security trust funds (the largest Ponzi scheme in history), that lists an enemy nation-state, China, as its largest creditor, that has a national debt equal to $186,717 for every man, woman, and child in America, that is on target to incur $7 trillion in new deficits over the next 10 years, and that has already this year of 2009 incurred a deficit equal to 4 x the total deficit for 2008, which up till then was the record highest!  Folks, this has nothing to do with capitalism.  This is vintage social planning.  The Newsweek article continues:  “So aside from expanding the social safety net, the government will have to take a greater role in guiding business toward ends the state deems healthy for the overall economy.” (Emphasis mine)  This is not the creation of wealth, it is confiscation and redistribution of that wealth to fit social and ideological visions of the planners with the guns.  This is the practical application of altruism in the field of economics, and the only real question is, how do we seize property without losing our producers?  “Publicly funded” means property expropriated from those who produced it.  As Newsweek notes almost as an afterthought:  “Slow growth could kill rugged American individualism, too.”

All of this is possible only because no one has the courage to challenge the socialists on moral grounds; that altruism is theft, not service; and that the great flaw of socialism is not its very unpleasant side effects, but the fact that it separates the producer from the product of his efforts and denies his right to keep it.  It forcibly redistributes that wealth in ways that foster dependence (aka paternalism) and the greed of the needy.  It is a philosophy that is anti-life, as we acknowledge in the Declaration of Independence, wherein we acknowledge the right to life, liberty, and the pursuit of happiness.  Since property in a free society comes by the production of objective values that sustain life, expropriating those products is separating a man from his means to his life.

Did capitalism fail?  It never had a chance.

Thanks for visiting.  Leave a comment.  John Bechtel, Greenville, SC

Why Socialism Always Loses (and Always Wins)

Every so many years during the last quarter century a book has been published declaring the death of socialism and the triumph of capitalism.  Always rash, such predictions were not only premature but incurably optimistic about human nature.

 

Briefly put, socialism is the concept that wealth should be redistributed from those who created it to those who need it.  It is based on the concept that all men are equal, or would be at least, were it not for factors beyond their control, such as genetics, culture, personal history and upbringing.  None of us get to pick our parents or our gene pool, and we can easily become trapped in our neighborhoods and other disadvantaged circumstances.  Read more..

Socialism is fundamentally based on the philosophy of altruism, i.e. that the highest purpose of human life can be found in the service of others.  For the religious, this finds expression in duty to God and neighbor; for the secular altruism finds its expression in service to Society.  The core premise of socialism is one of sacrifice of self to the needs of others.  Icons of socialism are Mother Theresa, Mahatma Gandi, and anyone else who may have sacrificed the life they wanted to live for a life of lesser benefit to themselves, but in the service of others.  Socialism is about self-denial, self-abnegation, servitude, and duty.  Its hallmark is guilt, the guilt of those who thus have to sneak their pleasures.  If the bottom of society can not be brought up to an equal level with the rest of society, then the top level of society has to be brought down.  Not equality of opportunity, but equality of results is the benchmark of success.  Since man is basically “selfish”, socialism always involves the use of government coercion, the threat of a gun, to achieve its aims.  People cannot be relied on to sacrifice themselves in large enough measure to achieve the utopian objectives. 

 

The emotional payoff for the practitioners of socialism is first of all power, for you have the ability, either by the vote, or by regulatory authority, or subjective law, or well-financed lobbying, to intrude on the lives of others and compel them to adhere to your personal vision of the “good”; and if your appeals to their sense of unselfishness and self-sacrifice are not successful, you always have the power of the governments’ guns to fall back on.  For those not in power, an  emotional payoff is the knowledge that if they plead their case loud enough, their needs and misfortunes may receive attention from the authorities, usually in the form of a transfer of wealth from someone more productive than you, to you.  For all who sacrifice, there is the satisfaction of a certain self-righteousness, and if their sacrifices result in unhappiness or death, there is always the promise of eternal life and other gratifications on the other side.  Finally, a universal appeal of socialism is that nothing is our fault, nothing can be helped, and anything less than total equality is obviously unfair.  Therefore the seizure of the property of others for redistribution is considered not only moral, but a right, an entitlement.  It is not even charity, because charity is voluntary, not coercive.

 

Socialism has a strong appeal for underachievers and those envious of the success of others, and it also appeals to those who seek power over others.  The hallmark of socialism and its underlying premise of altruism is “loaded language”, or the doublespeak of those who dare not declare their real motives.  Every wish, every desire, every legislative initiative, every grab for power, is carefully wrapped in the language of sacrifice, self-abnegation, and the good of society, particularly a society of victims.  In this way it seeks the moral high ground of the argument, handicapping the opposition and accusing them of shallow greed and self-seeking.  When the wider culture holds altruism as its highest value, it becomes a potent political weapon.  In a culture where altruism predominates, for example, businessman will rarely mention the profit motive, but frame their efforts in terms of job creation.  The former would be an admission of selfishness; the latter an evidence of nobility of spirit.

 

Socialism appeals to the power seekers, because the process of redistribution of property has to be administered.  When the electoral process is involved, it is the case of nine foxes and a hen deciding on what to have for dinner tonight.  The election itself is a fraud, because it is a violation of natural, immutable rights of every individual to keep what he has earned.  Most of the redistribution is decided by bureaucrats, however, not by the electorate, and in time a vast regulatory bureaucracy takes on an existence of its own and becomes the Master of those it supposedly serves.  Then begins the craven march of “political entrepreneurs” who come to plead their special neediness, and thus begins the corruption as constituents vie with each other for influence with the power brokers.  Favors are exchanged, bought and sold, and secret “pull” with the authorities becomes more important than real competitiveness.  As a matter of fact, the bureaucrats are frequently sought out for regulatory relief and protection from competitors who threaten to overtake them.   Who you know has now become more important than how good you are at what you do.

 

This creeping corruption eventually erodes the entire system, robbing it of its efficiency, and replaces it with the adulation of mediocrity.  Units and nation states become less able to compete in the global market place, sheltered by domestic regulation and protection.  For a while such a nation state can maintain an illusion of security, but its internal corruption weakens its fiber until it can no longer sustain itself and it collapses under its own weight.  Its producers produce less; its needy need ever more.  If you are highly productive and efficient, your virtue is punished, and your “excess” property is confiscated and redistributed to the less productive.  You experience the flight of human capital, as your best and brightest follow the money and leave your country to work elsewhere, anywhere where they can keep more of what they earn.  These are vilified publicly for their failure to appropriately sacrifice to those they left behind.  It is then common to see a government close its borders, not to those trying to get in, but to restrain those inside from leaving.

 

All of this is why socialism always fails.  It runs counter to human nature.  It runs counter to reality, and can only be enforced with guilt, and that failing, a gun.  It doesn’t work because you cannot ask a man to work hard and not keep what he has earned.  Socialism is an attempt to practice slavery under another name.  Socialism is an attempt to load as many fleas on a sled dog as possible without killing the dog.  Altruism maintains that the dog does not have a right to its own life as an end in itself, but that its only right to existence is to support the fleas.  The dog begins to exert most of its effort winning the approval of Flea Control authorities rather than pulling the sled.  It becomes lethargic and listless and ineffective.  The other sled team wins the race.  Whoops.  Too many fleas.  Killed the damn dog.

 

In a culture where altruism is the moral ideal, socialism always revives, being eternally reinvented, like draping a dead body with new clothes.  In this sense, socialism always succeeds.  Voters in an altruistic culture will always grant government the benefit of legitimacy and good motives that it will deny to businessmen, because the modus operandi of government is theoretically service to others, while business is self-seeking.  In a modern industrial society, this assumption of the moral high ground by socialists is never attacked; criticism of socialism is always based on practical grounds.  “Socialism is a grand ideal,” we are told, but “unfortunately it doesn’t work.”  Or, “it would have worked if it had been properly implemented.”  If only that damn Hitler or Stalin had gotten it right!  Socialism revives, only to fail again.  With self-sacrifice as the moral ideal, corruption, ineptitude, and bloodthirst are excused as regrettable aberrations.  We’ll get it right the next time!

 

Dear readers, this is where your government is going at full throttle.  Come back to this website in the next few days for a sequel on “Did Capitalism Fail?”

 

Thanks for visiting.  John Bechtel, Greenville, SC