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.


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. 

Read more..

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

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