Thursday, December 24, 2009

Look out America, this is what socialised medicine is all about.

Socialism places equality above all else. Before prosperity. Before freedom. Before choice. Before people's preferences.

Socialised medicine isn't about helping the poor, but rather about tying the hands of the rest of society.

In Britain, the National Health Service reveals its nasty stripes in this telling encounter:


That principle was illustrated by the case of Debbie Hirst, a British woman with metastasized breast cancer who in 2007 was denied access to a commonly used drug on the grounds that it was too expensive.

When Hirst decided to raise money to pay for the drug on her own, she was told that doing so would make her ineligible for further treatment by the National Health Service. According to The New York Times, “Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones.” The right to health care is so important, it seems, that it can nullify itself.

Tuesday, December 22, 2009

Here's the elephant in the room

The Global Financial Crisis has not yet begun.

The US dollar, the world's reserve currency and supposedly every central bankers favorite store of wealth, is backed by enormouse debt, and a house of cards waiting to collapse.

It won't be long till the slow Japanese style deflationary slump kicks in as the debt burden continues to grow.

Nothing can go up forever, and eventually something's gotta give. Either the people cut their spending and repay their debts, or the government prints money like Zimbabwe and destroys the currency to keep them spending.

Mike Shedlock has the following post about an interesting Forbes article on the issue nobody in Washington wants to talk about:


Not too long ago, a billion dollars in a governmental budget was a lot of money. Then we got into hundreds of billions. People understood that this was a lot, just because of all the zeros. Now, unfortunately, the number has become small: the world "trillion," as in $1.2 trillion for health care reform, seems so tiny. But it has 12 zeroes behind it, which is so easy to forget.

The total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time."

Add the unfunded portion of entitlement programs and we're at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.

Thursday, December 03, 2009

An essay worth reading

The House that Uncle Sam Built is surely going to be an enthralling and worthwhile 20-page essay for me and my followers, with the following sharp and insightful opening paragraph:

The theme of “The House that Uncle Sam Built: The Untold Story of the Great Recession of 2008” is that government policy, not a failure of free markets, caused the economic trauma we have been experiencing. We do not live in a free market. We live in a mixed economy. The mixture
varies by industry. Technology is primarily free. Financial Services is primarily government. It is not surprising that the most government regulated and controlled segment of the economy, financial services, experienced the biggest problems. These problems were created by actions
by the Federal Reserve combined with government housing policy (especially the government- sponsored enterprises - Freddie Mac and Fannie Mae). Misguided government interference in the market is the real culprit in laying the foundation for the Great Recession.

Click here to download the entire essay.

Little Green Fanatics


Charles Johnson has finally confessed and written a post titled "Why I parted ways with The Right"

After 2 years of leftist hysteria, and alienating all his collegeagues on the Right, he finally acknowledges his changing philosophy.

And what better way to prove his stripes with a post that actually attacks the ClimateGate scandal as a criminal conspiracy ... by the hackers and climate skeptics !

Well at least he's half right there.. better than his average batting record.

For a closer look at his political wingnuttery and environmental fanatacism:

... the CRU theft was a criminal attempt to sabotage the Copenhagen climate summit, and the entire right wing blogosphere is complicit in the crime.
Gee was Charles Johnson this angry about the hacked emails of Sarah Palin ?

All thats left is for me to ask - Whats next ? Will LGF be cheering Castro and Chavez, Keynesian economics, the UN and other idols of the left ?

Thursday, November 26, 2009

Government corruption

When the government gets involved in anything, it inevibly becomes corrupt and politicised.

That is an unavoidable conclusion and the absolute truth that leads many people to distrust big government, and to try to keep the role of government as limited and consistent as possible.

When government is responsible for something as supposedly innocent as collecting statistics on unemployment, it is tempted to spin the numbers in a positive way. And Obama's job creation / recovery act tries to take credit for the non-existent recovery by tweaking the numbers:

According to a report from a shoe store in Campbellsville, Kentucky, the Army Corps of Engineers “created or saved” nine jobs when it used money allocated by the American Recovery and Reinvestment Act to buy nine pairs of work boots. The Wall Street Journal reports that the store’s owner, frustrated by the government’s confusing online forms, enlisted the help of his 42-year-old daughter, who figured nine—the number of people who would use the boots on the job—made as much sense as any other answer.

Wednesday, November 25, 2009

Little Green Failures

Charles Johnson's crumbling and moronic blog, and his ever changing postures and politicking are starting to wear thin on me. It seems he still has thousands of readers, but I wonder how long it will last.

3 years ago, it was pretty clear where he stood on issues. Nowadays, things seem to have changed, and not subtly.

He was about as pro-interventionist as you could get, a huge supporter of conservative blogs and the Bush presidency. Now, he peddles global warming alarmism and propaganda videos by Peter Sinclair, he supports socialised health care, ridicules all lovers of freedom and liberty (especially the tea party protestors and other Obama critics) as maniacal conspiracy theorists and white neo-nationalists and religious fundamentalists.

I was just browsing over some of his very characteristic and typical posts back in 2005, which include the following snippets.. mocking Al Gore for claiming he was non-partisan, mocking all Muslim groups for crying victim to racism, debunking many claims of Israeli soldiers commiting atrocities, pointing out the dozens of Palestinian 'cease-fires' involved continuing to fire upon Israeli civilians, and dozens of posts showing the Palestinian 'death cult' mentality, all whilst showing what a farce the UN is and applauding critics of the UN such as John Bolton.

It was hard to find a single mention relating to socialised medicine, or global warming and the IPCC. But here was a gem of a post in 2005 linking approvingly to Iowahawk who ridicules claims that increased C02 levels caused hurricane Katrina.

Even as recently as June 2008, he made fun of a left wing blog that cheered Obama for threatening anybody who stop him trying to pass his health care bill. And in August 2008, he exposed some of the radical supporters of Obama's campaign, including the Communist Party of America. Charles even used the term "Obamessiah" to ridicule the candidate whom he would later fall in love with.

It didn't take long for him to cheer Obama's plan for socialised health care, support every Democrat, become a global warming alarmist and at the same time, begin ridiculing Republicans and libertarians, ignoring his core issue of terrorism and Islamic fundamentalism, and begin making enemies of every ally he once had.

It seems he has come full circle today, with his post that mocks the Republican Party philosophy listed below, and simply labelling this a "failure". I'll highlight in bold some of the ideas that Charles very recently held to show how quickly he changes his stripes.

THEREFORE BE IT RESOLVED, that the Republican National Committee identifies ten (10) key public policy positions for the 2010 election cycle, which the Republican National Committee expects its public officials and candidates to support:

(1) We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama’s “stimulus” bill;

(2) We support market-based health care reform and oppose Obama-style government run healthcare;

(3) We support market-based energy reforms by opposing cap and trade legislation;

(4) We support workers’ right to secret ballot by opposing card check;

(5) We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;

(6) We support victory in Iraq and Afghanistan by supporting military-recommended troop surges;

(7) We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;

(8) We support retention of the Defense of Marriage Act;

(9) We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and

(10) We support the right to keep and bear arms by opposing government restrictions on gun ownership; and be further

RESOLVED, that a candidate who disagrees with three or more of the above stated public policy position of the Republican National Committee, as identified by the voting record, public statements and/or signed questionnaire of the candidate, shall not be eligible for financial support and endorsement by the Republican National Committee; and be further

RESOLVED, that upon the approval of this resolution the Republican National Committee shall deliver a copy of this resolution to each of Republican members of Congress, all Republican candidates for Congress, as they become known, and to each Republican state and territorial party office.

Wednesday, November 04, 2009

Che is a crap + boring movie.

Thats all you need to know.

2 parts. Each one over 2 hours long.
The film sequence is totally disconnected and random. Jumping back and forth in time.
The film doesn't even hint or portray his ideals or philosophy. He's just some friendly guy.

Steven Soderbergh is a dick. He doesn't really glorify Che. He just paints him as boring and average, but also popular and humane towards his comrades and his enemies.

Not the slightest hint or mention of the executions and firing squads.

There is no explanation of the Cuban revolution, the philosophy behind it and the impact it left. In every scene, all the village people wave and cheer at the brave revolutionary soldiers. And Che simply plots strategy for his next attack against the military.

Not the slightest hint that the guy was a brutal killing machine.

Don't watch Che .. instead watch Andy Garcia's masterful The Lost City.

Thursday, October 22, 2009

Mine Your Own Business !

I just finished watching this interesting 2006 documentary that exposes the environmental movement's horrific anti-development and anti-growth attitude, and their complete hypocrisy.

Mine Your Own Business begins in the village of Rosia Montana, Romania, where a Canadian mining company is facing huge opposition from the environmental NGOs about their plans to develop a gold mine. The environmental movement issue statements that the villagers will suffer under this plan, the pristine environment will be devastated and that 700 villagers have been forcefully removed from their homes, and that it is deeply unpopular and unwelcome by the locals.

The documentary exposes all these claims as bald lies. The villagers were extremely eager to sell their homes voluntarily. The local environment was not quite so pristine and untouched, with polluted rivers from the era of a state run mine. And most interestingly, the villagers were very keen on having a mining industry in their local area for employment and income.

The same scenario was showed as the documentary makers travelled to 2 other mines that were opposed by environmental NGOs. One mine in Madagascar, and another in the mountains of Chile, were both welcomed by the impoverished locals, and fiercely criticised by the environmental activists.

On a technical note, the documentary is produced in a bit of a Michael Moore style, although obviously the political statement doesn't resemble anything Michael Moore has ever produced. A poor Romanian drill operator, eager to work, is taken to visit the other mines and is interviewed at length about his willingness to work and how his entire village depend on trade and commerce to survive and to be happy.

Key leaders of environmental NGOs are interviewed, and they are easily shown to be dishonest or deluded. They either claim that they "really know whats best" for the local villagers, and they even stretched the truth by claiming that that they have visited and lived in these rural villages where mining operations are being proposed, when they have never set foot in the area. They are exposed as wealthy and comfortable people who possess the delusion that they know what actually makes poor villagers happy, and one even spelled out his twisted opinion (I paraphrase here)

"We cannot measure happiness for these people the way we do for ourselves. Health, living standards, income - these aren't valid. We need to look at culture, environmental factors and their way of life"

After watching the entire documentary, this ridiculous claim is destroyed. Some terrific interviews with Deepak Lal and Frank Furedi give an insight into what drives the environmental movement, and I'd have to agree with them in viewing it as nothing more than a secular religion.

Wednesday, October 21, 2009

The ACCC hurt consumers yet again

Courtesy of the Daily Reckoning comes this interesting report:
Late last week the ACCC told supermarket chain Coles that it mustn't offer customers a 40 cent discount on fuel. You've probably read the news articles covering the story. But not surprisingly none of them point out the idiocy of the demand by the ACCC.

Of course, the Coles special offer had strings attached. Customers would have to spend over $300 to get the discount, but still, the chance to get your petrol at 70 cents per litre rather than $1.10 isn't a bad deal.

Sure, you could argue that Coles just inflates it's prices to pay for the cheaper fuel. If you think that then you don't have to take them up on the offer. But if you shop at Coles all the time anyway, then it's a pretty good deal.

However, according to the ACCC it's a bad deal and it had to be stopped.

Why? Here's what the ACCC had to say about the offer:

"However there is a balance to be found between providing consumers with discounts on the one hand, and on the other offering significant price cuts for sustained periods or repeated offers which might have deeper impact on competition in the long term. The ACCC is not satisfied on information currently available that this promotion struck the right balance."

Sunday, October 18, 2009

Goddess of the Market by Jennifer Burns

Here's a book I'll add to my shopping list - Goddess of the Market: Ayn Rand and the American Right.

The author, Jennifer Burns, was just on the Daily Show to promote her book, but rather than act as a passionate supporter of Ayn Rand, she presented her as some type of character of interest or fascination for conservatives.

John Stewart proved once again why he just doesn't quite "get it" most of the time. On the one hand, he seems to frequently tear into politicians (however the target is more often right wing ones than left wing targets) and ridicule their nonsense and broken promises. Whenever he has the attention span to fact check a claim, he usually does a terrific job of making fun of it. But it seems like he doesn't have enough attention to understand why conservatives are skeptical of big government, and instead interprets it as a shallow trick to rouse emotions and opposition to Obama.

He seems to flippantly and casually dismiss libertarians and free marketers as an angry emotional and irrational mob, whilst senior Democrats like Barney Frank and Nancy Pelosi are treated like sincere, virtuous public servants who give themselves to the greater good.

How did John Stewart describe Ayn Rand ? As an "elite", an "intellectual" who has a philosophy that works for the elite but not for the rest of us. And he mentioned that she upset the mainstream conservative movement in the 1950's with her atheism.

And immediately after, he mocked 'conservatives' Glenn Beck and Rush Limbaugh, saying that they are anything but intellectuals and therefore today's conservatives have nothing to do with Ayn Rand.

But all the while, he failed to acknowledge that the Republicans don't exactly always represent the libertarian school of thought, to put it mildly. And that those who associate themselves with the right are not necessarily traditional conservatives.

I sat aghast at the fact that the author, Jennifer Burns, sat quietly through this slanderous attack on the Ayn Rand and the conservative movement, and she allowed a TV host in the space of 2 minutes, to totally misrepresent the subject of her book, and the philosophy of liberty.

Liberty and individualism is not a system to benefit elites. In fact, communism is the only system which promotes the elites above the proleteriat.

Liberty and individual rights make sure that merit is rewarded and laziness is punished. Capitalism and free markets, as a system, doesn't "believe" in any kind of outcome. It does not promote the smart above the stupid, the strong above the weak.

It helps foster one very important outcome - that people face the consequences of their actions. And with that incentive, the capitalist economies have made people work harder, care for their families and build prosperity far more succesfully than any command economy like North Korea or Cuba.

John Stewart just doesn't get liberty, he even described it as a philosophy of extremist individualism, to be contrasted and compared with communism, another extremist ideology. And according to him ..... somehow, its up to today's talk show hosts, political pundits and talking heads to find the middle ground between freedom and totalitarianism.

I don't quite buy it.

Thursday, October 15, 2009

There's corporatism, crony capitalism and then there's free markets. has an excellent piece which sums up the idea that there is a huge difference between free market capitalism and between so called "deregulation" which ends up handing out government contracts and establishing cozy monopolies for private businesses.

I've heard far too many leftists decry huge calamities ( such as the financial crisis, Enron, the bailouts, failing education and health standards) as being due to deregulation and privatization. In the case of Michael Moore, he just blames capitalism, property rights and free enterprise as being behind the problems of the US health system or the financial crisis.

This piece rebuts that nonsense far more eloquently than I ever could.

On Education:

Consider Philadelphia's failed attempt to "privatize" education. The city hired the services of a supposedly private corporation called Edison to oversee it. All the schools were taken over by Edison and the city paid it to manage them.

With no competition in sight and a guarantee of payment by the government regardless of performance, Edison's operation was completely inefficient, and it promptly failed.

The proponents of public education were ecstatic. They could say to the world, "See — we're open-minded. We tried using the market to educate children and it failed; capitalism failed." Wrong! Capitalism didn't fail; corporatism failed.

On Enron:

And who can forget California's "energy deregulation" scheme? That fiasco began when voters passed a ballot measure mandating energy deregulation. Well, the legislature together with a handful of private corporations (including Enron) devised a system guaranteed to fail: they partially deregulated energy supply while keeping consumer prices tightly capped.

As was to be expected, energy sold on the spot market increased overall costs for suppliers, due in large part to manufactured shortages by energy brokers like Enron. Consumers gobbled up more and more wattage in the comfort of prices that government regulators kept artificially low, and the entire system began to collapse. Moreover, the government made it impossible for anyone to construct new power plants, thus ensuring that no one would be able to meet the rising demand for energy.

On the bailouts and financial crisis:

And don't get me started on Fannie Mae and Freddie Mac. These quasi-private corporations may benefit from privatized profits but their losses are socialized, creating a huge moral hazard. Where does it all end?

Whether we are discussing farm subsidies, bailouts, corporate favoritism, or licenses and privileges given to certain companies, we are in fact seeing the myriad ways that government has reared its head into the markets. Government and corporations invent scheme after scheme to ensure the superficial appearance of free enterprise, line the pockets of each, and shield the government from any blame.

Monday, October 05, 2009

Why government run health care really is scary

The Mises institute have a terrific post written by Yuri Maltsev about the perils of Soviet healthcare.

Here are some key excerpts:
The system had many decades to work, but widespread apathy and low quality of work paralyzed the healthcare system. In the depths of the socialist experiment, healthcare institutions in Russia were at least a hundred years behind the average US level. Moreover, the filth, odors, cats roaming the halls, drunken medical personnel, and absence of soap and cleaning supplies added to an overall impression of hopelessness and frustration that paralyzed the system. According to official Russian estimates, 78 percent of all AIDS victims in Russia contracted the virus through dirty needles or HIV-tainted blood in the state-run hospitals.


To improve the statistics concerning the numbers of people dying within the system, patients were routinely shoved out the door before taking their last breath.

At the end of the socialist experiment, the official infant-mortality rate in Russia was more than 2.5 times as high as in the United States and more than five times that of Japan. The rate of 24.5 deaths per 1,000 live births was questioned recently by several deputies to the Russian Parliament, who claim that it is seven times higher than in the United States. This would make the Russian death rate 55 compared to the US rate of 8.1 per 1,000 live births.

Having said that, I should make it clear that the United States has one of the highest rates of the industrialized world only because it counts all dead infants, including premature babies, which is where most of the fatalities occur.

Most countries do not count premature-infant deaths. Some don't count any deaths that occur in the first 72 hours. Some countries don't even count any deaths from the first two weeks of life. In Cuba, which boasts a very low infant-mortality rate, infants are only registered when they are several months old, thereby leaving out of the official statistics all infant deaths that take place within the first several months of life.


After seventy years of socialism, 57 percent of all Russian hospitals did not have running hot water, and 36 percent of hospitals located in rural areas of Russia did not have water or sewage at all. Isn't it amazing that socialist government, while developing space exploration and sophisticated weapons, would completely ignore the basic human needs of its citizens?

Thursday, September 17, 2009

Charles Johnson and LGF hate freedom

I've been a longtime reader of Charles Johnson's blog, LittleGreenFootballs, only to see it undergo a tragic decline to a meaningless rehashing of the days news, blind support of president Obama coupled with daily smears against all Republicans and libertarians alike.

For a clear example of how Charles Johnson tries to spin all news towards support for the president, read the following post, titled Obama Supports Extending Patriot Act:

Watch as the same people who loudly supported the Patriot Act for years suddenly start to find things wrong with it: Obama supports extending Patriot Act provisions.

The partisanship and blind loyalty to the president is astonishing. Let me just recap here. Obama broke a key election promise of his, and not only that, he did a complete backflip and broke his parties platform. Several senior Democrats have been fiercely opposing the Patriot Act and complaining about abuses committed under it for many years now. And the President not only keeps the Patriot Act intact, but extends it further.

Somehow, the focus of all this, and the biggest hypocrisy, is the fact that Republicans who once supported the Patriot Act will now start complaining ????

For months, LGF has been mocking the tea party protests by trying to associate them with the fringe of society - birthers and truthers.

The hatred of Ron Paul stemming from his non-interventionist foreign policy ideals has been perpetual. The Congressman has been portrayed as some Bircher society figure associated with conspiracy theorists, creationists and anti-semites.

Whilst doing this, he presents and links to narrow unqualified views on a range of issues on behalf of the present. From mocking creationism and promoting evolution (fair enough), to ridiculing all of the birth certificate crowd (also fair enough), he has moved towards linking to supporters of climate change hysteria, idiots who think auditing the Federal Reserve is a bad thing, and commentators that suggest Obama's health care reform is unquestionably benign.

From being a critic of the Democrats and anti-war crowd, to mocking 9/11 truthers and supporting the Republicans under president Bush, he has jumped sides.

But its not about which side you are on, its about what ideals and policies you believe in.

After moving across all issues and I predict that soon, LGF will have very little wriggle room left to move in.

Charles Johnson is an Obama lackey. For now.

Monday, August 31, 2009

Oprah's "national service" propaganda hour

Oprah just a ran a celebrity love-fest for president Obama. It was pure, unadulterated, gushing praise for a president who hasn't done anything yet.
Highlights include

  • Renowned scholars, Ashton Kutcher and Demi Moore, explain their devotion to the Obama campaign and presidency.
  • A 2 minute video clip of various celebritiess, many from the "Yes We Can" video, saying that America is now one united family.
  • Oprah hosting Joe Biden and wife, and talking repeatedly about "national service"
This last point made me shudder..."National service" should scare the hell out of us - I'm sure quite a few dictatorships have used that exact expression in the darkest moments of the 20th century.

- I guess Oprah hasn't read Robert Heinlein or seen the movie Starship Troopers :)

Sunday, August 23, 2009

Quote of the day

The Daily Reckoning has a great little prediction of what lies ahead for us all in this world of big government and high taxes:

--And so we begin the inevitable path toward capital controls in America. This first step is to crack down on tax evaders. The next is to prevent capital and currency from leaving the country. When the government is starved for revenue and refuses to cut spending, they have to prevent people from switching out of dollars and into other currencies or assets.
Its never been a better time to get your guns and your gold.

Friday, August 07, 2009

Filthy Lucre: Economics for those who hate capitalism

I've just finished reading this book by Joseph Heath, and the title alone should be enough to send alarm bells ringing.

Surely, we don't want to empower the fools who hate capitalism with some unjustified ideas that there are rational economic reasons to oppose capitalism.

And the first half of the book is quite a disappointment. The author says the 1st half is dedicated to dispelling right wing economic fallacies, and the 2nd half attacks left wing ideas and fallacies.

The first half seems to think that a libertarian "night watchman state" as described by Nozick has been proven unfeasable, that minimum wages do a lot more than create unemployment and that the real world has all kinds of prisoner's dillemas - situations where the individual parties do not act in the optimal sense and should be regulated by the state.

In each one of these chapters, Joseph Heath simply remarks that it is "more complicated than free market economists suggest" without really justifying why regulations, social welfare and taxes are all justified and beneficial.

The 2nd half of the book is much more agreeable, although it can be a bit long winded in making its point. One chapter that attacks the idea of "fair prices" takes aim at the Fair Trade campaigns, and shows how Oxfam asked for African coffee farmers to be paid double the market price, predictably resulting in a huge coffee glut, and then Oxfam reacted by asking the US gov't to destroy 5 million bags of coffee to keep the prices high.

Similarly, the Body Shop launched its "trade not aid" campaign in the early 90s, where they agreed to buy 6.3 tonnes of shea butter from cooperative producers in northern Ghana, at a price 50% above the local rate. The company decided to add an additional bonus to the price, which was to be invested in local schools or development projects.

What resulted should be obvious to any rational person. of the Body Shop's order created a "shea nut rush", followed by an entirely predictable glut. Farmers stopped growing all sorts of crops in order ot get a slice of the shea-nut action: In the first season, the northern villages, which normally produced about 2 tonnes of shea butter a year, churned out twenty tonnes, nearly four times what The Body Shop wanted... Making matters worse, The Body Shop, after discovering it had overestimated the international market for shea-related products, quickly scaled back its orders for the next season.

In the end, the author managed to attack other bad ideas such as "profits are bad", "capitalism is doomed", "equal pay for all" and "sharing the wealth". Joseph Heath positioned himself as somebody who supports the status quo.

He should double check his blind spots - government spending is wasteful, minimum wages do create unemployment, social security creates moral hazards, and regulation is ineffective.

Sunday, August 02, 2009

The Broken Window fallacy

You don't need to be an economist to have enough common sense to realise that pointless destruction of valuable goods and materials is pointless destruction.

In fact, only a special class of pseudo-economists and intellectuals would argue otherwise. They are fans of the broken window fallacy, which revolves around the idea that you can generate prosperity by breaking a window and paying somebody to fix it (because it keeps them employed and keeps money in circulation).

So many people have used reason, logic and sense to dispel this old myth, but it still lives on and has infected the halls of power in Washington and Canberra alike. Obama and Rudd believe in all kinds of pointless make work schemes.

Rudd believe in replacing existing school halls and playgrounds with new ones - even though the existing ones are only a year or two old, or in some cases, belong to a school with a handful of students.

A classic example of a make work program (which Keynes, Krugman, Rudd and Obama would love) involves paying thousands of people to dig holes, and thousands more to fill them in.

Pres. Obama gave the rubber stamp to the idiotic Cash for Clunkers scheme - where older cars are traded in for newer cars and the government chips in with a fat subsidy - up to $4500 per car. The older and the bigger the used engine, the bigger the subsidy.

This scheme is idiotic on so many levels, and the basic sentiment behind it is a make work / circulate money type of scheme to "stimulate" economic activity.

Failure #1 - $1 billion was allocated to Cash for Clunkers and US government forecasted it would last till November, but the funding ran out in just 6 days as thousands of car owners rushed to take advantage of this scheme.

Failure #2 - one condition for the dealership who buys the used cars, is to destroy the existing engine so it cannot be resold or recycled. Watch the following video and imagine this destructive process being repeated thousands of times across America:

Monday, July 27, 2009

Thats a good question.

Mark Steyn asks:

In the mid-nineties, which climatologist and which model predicted the cooling trend of the turn of the century and the oughts? And, if they didn’t, on what basis do you trust their claims for 2050 or 2100?

(hat tip: Tim Blair)

Thursday, July 23, 2009

Movie Review: Wall Street

Can I think of 2 words to sum up Oliver Stone's Wall Street ?

  • It blows.
  • Get real.
  • Bull-s@*t
  • Anti-capitalist
Seriously, this movie is so childishly simple, it just doesn't make sense. I could go over the entire plot, which at times seems plausible, but instead I'll just point out the plot twists that leave any intelligent person just gasping in disbelief.
  • Gordon Gekko as the ruthless capitalist who is shown to never consider any long term strategies that may be profitable - i.e he flatly rejects improving / cost-cutting any business he owns for future returns, but always opts to "trade" or sell-off the assets
  • Bud Fox as the blind obedient lackey of Gekko, becomes an industry spy, eager to follow and monitor other big players and give the insider information to Gekko. Of course, he was eager to sell his soul and betray everybody around him, and Gekko rewards him with countless millions. Is that what Oliver Stone thinks capitalism is all about ?
  • The SEC as the ever present and watchful authority who trap Bud Fox on charges of insider trading in the very end... are you kidding me ? The SEC couldn't catch Bernie Madoff and with their huge resources, have never been able to uncover anything at all that wasn't handed to them on a silver platter by the media and by industry insiders !
There are many more examples of how misguided Oliver Stone's anti-capitalist brain is. The truth is that free markets are not short-sighted, and they do not require some wise and prudent government oversight to steer them towards long term prosperity. In fact, business owners and employees are far better suited to plan for long term outcomes, whilst government bureacracies are much more fickle and held sway to short term political influences.

If free markets, which are based on individuals making free choices, were short sighted by nature, then we would see people spend all their money today, never build or renovate a home, never set themselves a budget, never manage to raise children, never manage to study a degree, never devote years towards developing their careers etc etc etc.

Oliver Stone's characterisation of capitalism as short term, profit grabbing, destructive game of backstabbing is ridiculous. Gordon Gekko plays a comic book villain, at one scene confessing that he "creates nothing, makes nothing, produces nothing for anybody".

Those working in banking and finance do indeed play a very productive and important role in an economy. First and foremost, they help determine prices for a whole range of assets - stocks, commodities, energy, private debt, sovereign debt. They create financial products to hedge risk - insure against future price movements, allocate capital to the best investments, and help liquidate the worst investments.

You don't see banking and finance workers building homes or cars or gadgets, but many of those real things do require some kind of finance.

Another ridiculous theme is that Charlie Sheen becomes more rude, aggressive, dishonest, disloyal and anti-social to his close friends and family as he becomes more succesful. The idea that climbing the corporate ladder means stepping on everyone else's head is something straight out of the communist manifesto.

The icing on the cake was the scene were Charlie Sheen is humiliated in front of his co-workers when the S.E.C catch him for insider trading, and arrest him in front of his floor. The very same S.E.C who slept through every financial scam and crisis in recent history.

There is one positive thing for me out of watching this

- if Wall Street sums up the very best case that the left wing can present against capitalism and free markets, then they really ought to think it through and get back to us when they've got some real theories.

Friday, July 17, 2009

The Critics of Keynesian Economics

I've finally completed reading this excellent and comprehensive book exposing the key Keynesian fallacies, first compiled by Henry Hazlitt in 1960, and as relevant as ever today.

To be honest, the author didn't have to write anything new. He simply researched and dug up roughly "some two dozen important critiques by eminent economists" and published them in one volume.

Each critique forms a chapter of this book, and I found that each economist would attack Keynes from a different angle. Some would remain very mathematical and duplicate his model, but by adjusting his narrow assumptions, found conclusions that were completely opposite to Keynesian remedies.

Jean Baptiste Say, the originator of Say's Law, (that you cannot consume that which you have not yet produced) which lies at the heart of the dispute between classical and Keynesian economists, has his full statement reproduced to prove that Keynes did not accomplish any such feat as proving Say's Law to be incorrect.

As Hazlitt explains, "It will be observed that Say's Law itself was intended as an answer to pre-existing Keynesian fallacies."

Another economist who made his contribution long before Keynes, was John Stuart Mill who elaborated and defended Say's Law.

Hazlitt helps do the subject justice by reproducing in full, John Stuart Mill's full writing under "Of the Influence of Consumption on Production" which Keynes had misinterpreted and truncated.

At this early stage in the book, I was left feeling as though Keynes had not addressed his rivals and he had simply constructed an elaborate model based on narrow assumptions, and tried to pass it off as a general theory of employment and business cycles.

One thing is for sure, by reading this book, you will get a clearer understanding of Keynesian ideas than actually reading Keynes himself, who seems to be very obscure and sometimes contradictory in his style of writing. Basically, Keynes ideas boil down to the following:

  • When an economy is left to the free market, it reaches a natural equilibrium where the employment level is below "full employment"
  • There exists a deficiency of demand in this equilibrium
  • Savings are a waste of capital
  • Deflation is a problem because wages just can't move downwards, even if the price level moves down.
The Keynesian cures:
  • Inflation to force real wage rates down
  • A central bank to lower interest rates, which reduces savings.
  • Governments using fiscal stimulus, even running deficits, to stimulate current consumption.
Every other critic in the book seems to land a solid blow against Keynes and his assumptions.

  • Jacob Viner attacks his definition of involuntary unemployment and the rigidity of wages
  • Etienne Mantoux does an excellent job of demolishing the idea of a multiplier as follows:
    "Given the definition of the multiplier, the propensity to consume therefore becomes equal to (1 - 1/k), which amounts to saying that as the propensity to consume approaches unity, the secondary effects of a primary investment would approach infinity. Remarkable !"
  • Franco Modigliani reproduces the Keynesian model as a set of simultaneous equations, but adopts the classical theory of the supply of labour function where wages are no longer downward-rigid... the conclusions and outcomes from this are very un-Keynesian -
    "The liquidity preference theory is not necessary to explain under-employment equilibrium; it is sufficient only in a limiting case: the "Keynesian case". In the general case it is neither necessary nor sufficient; it can explain this phenomenon only with the additional assumption of rigid wages.
Many other critics nail the point home, some of them short and easily understood, like Mises and Hayek, others doing a lengthy methodical deconstruction of Keynesian assumptions and claims.

Keynes seems to be the biggest source of all economic fallacies in the modern era.

You cannot spend your way to prosperity. You cannot turn a stone into bread. You cannot pump-prime an economy perpetually, stimulate consumption, and not suffer any negative consequences. Inflation is not costless. Deflation is not an eternal spiral. Prices can indeed adjust to balance the supply and demand of labour and savings.

If only the wider public, or at least the economics profession and political advisors, would consider reading this book.

Thursday, July 16, 2009

The minimum wage only hurts the poor.

Courtesy of the ALS comes this excellent summary of how minimum wage laws make us feel good about ourselves, whilst they actually price poor people out of performing work.

The CIS have a terrific article about minimum wages too. Read it all.

Thursday, July 02, 2009

Site Feeds up and running

The blog has been updated, hopefully the RSS feed will work for users who choose to subscribe via the sidebar. Next task - I will soon update my favorite links.

Unbridled and unrestrained capitalism ?

Thomas DiLorenzo has an excellent smackdown of the myth that the global financial crisis (GFC) was caused by unrestrained, unregulated American capitalism.


run amok in financial markets is said to be a cause of the current crisis. But the Fed alone - a secret government organization that is accountable to no one and which has never been audited - performs hundreds of regulatory functions, in addition to recklessly manipulating the money supply. And it is just one of numerous financial regulatory agencies (the SEC, Comptroller of the Currency, Office of Thrift Supervision, FDIC, and numerous state regulators also exist). In a Fed publication entitled "The Federal Reserve System: Purposes and Functions," it is explained that "The Federal Reserve has supervisory and regulatory authority over a wide range of financial institutions and activities." That's the understatement of the century. Among the Fed's functions are the regulation of

  • Bank holding companies
  • State-chartered banks
  • Foreign branches of member banks
  • Edge and agreement corporations
  • US state-licensed branches, agencies, and representative offices of foreign banks
  • Nonbanking activities of foreign banks
  • National banks (with the Comptroller of the Currency)
  • Savings banks (with the Office of Thrift Supervision)
  • Nonbank subsidiaries of bank holding companies
  • Thrift holding companies
  • Financial reporting
  • Accounting policies of banks
  • Business "continuity" in case of an economic emergency
  • Consumer-protection laws
  • Securities dealings of banks
  • Information technology used by banks
  • Foreign investments of banks
  • Foreign lending by banks
  • Branch banking
  • Bank mergers and acquisitions
  • Who may own a bank
  • Capital "adequacy standards"
  • Extensions of credit for the purchase of securities
  • Equal-opportunity lending
  • Mortgage disclosure information
  • Reserve requirements
  • Electronic-funds transfers
  • Interbank liabilities
  • Community Reinvestment Act subprime lending requirements
  • All international banking operations
  • Consumer leasing
  • Privacy of consumer financial information
  • Payments on demand deposits
  • "Fair credit" reporting
  • Transactions between member banks and their affiliates
  • Truth in lending
  • Truth in savings
That's a pretty comprehensive list, the result of 96 years of bureaucratic empire building by Fed bureaucrats. It gives the lie to the notion that there has been "too little regulation" of financial markets. Anyone who makes such an argument is either ignorant of the truth or is lying.

Thursday, June 18, 2009

Why Krugman (and Keynes) are completely wrong.

Krugman, in 2002: (hat tip, Liberty Papers)

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble.

Monday, May 11, 2009

Capitalism is nowhere to be found

The ALS have a post which show how socialism and welfare programs have captured most voters in our democracy through their entitlement programs.

Age Pension, Disability Support Pension, Carer Payment, Bereavement Allowance, Newstart Allowance (the “dole”), Sickness Allowance, Parenting Payment, Widow Allowance, Youth Allowance, Austudy Payment, ABSTUDY, Special Benefit, Service Pension, Partner Service Pension, War Widow’s & Orphan’s Pension, Income Support Supplement, Family Tax Benefit (A), Family Tax Benefit (B), Baby Bonus, Double Orphan Pension, Maternity Immunisation Allowance, Child Care Benefit, Child Care Tax Rebate, Rent Assistance, Pharmaceutical Allowance, Remote Area Allowance, Telephone Allowance, Utilities Allowance, Seniors Concession Allowance, Pensioner Education Supplement, Education Entry Payment, Work for the Dole supplement, Language, Literacy and Numeracy Supplement, Pension Bonus Scheme, Pension Bonus Bereavement Payment, Crisis Payment, Mobility Allowance, Carer Allowance, Carer Bonus, Seniors Bonus, Pensioner Concession Card, Low-income Health Care Card, and Commonwealth Seniors Health Card.

And some people are still on discontinued programs, including Mature Age Allowance, Partner Allowance, Widow B Pension, Wife Pension (Age), and Wife Pension (Disability Support Pension). Not to mention tax expenditures.

Wednesday, April 29, 2009

Pay your taxes or go to jail

Thanks to the folks at Reason, this enlightening video about income tax and just who is already paying for the burden of government largesse:

Defamation and slander by ninemsn

This article, reporting on the death of Richard Pratt, makes the following false claim:

On Monday, the Commonwealth DPP withdrew all charges because of Mr Pratt's advanced terminal cancer.

Lack of evidence.. ill health.. its all the same right ?

I hope the Pratt family get lawyered up and sue.

Monday, April 27, 2009

The road to socialism

A new government intervention for Australia - lenders can now be sued for damages if they make loans that turn sour.

The uniform national law will for the first time cover mortgages, credit cards, pay day lending and other consumer credit products.

The Australian Securities and Investment Commission will be charged with enforcing the so-called responsible lending laws.

Under the laws, defaulting borrowers will be able to sue for damages as a result of being put into loans they cannot repay.

Breaches will attract fines of up to $220,000 for individuals and $1.1 million for corporations and jail terms of up to five years.

Why is it that so few people can see the side-effects and hazards of this legislation ?

Firstly, it imposes huge new costs and risks on lenders, thus making them less likely to make all kinds of loans - good and bad.

Secondly, it runs counter to other government interventions in the banking sector. Efforts to lower interest rates, boost first home owners grants, support the property market, provide a guarantee to bank deposits have all acted to expand and maintain the supply of credit to the market (much of which has been based on some fairly bad and sub-prime type lending).

Which brings me to my view of how things are shaping.

Whilst a pure dictatorship moulds and grows government to his single purpose - his limitless power and prestige - what we are seeing is a typical socialist government.

It blindly and clumsily creates new government plans, powers and agencies to maintain power and popularity and to look like it is acting in the best interest of "the society". Yet many of these agencies often have impacts that contradict each other, and the society becomes burdened with thousands of pages of regulations that limit freedom and tie everybodys hands.

No consideration is given to the existing plans, agencies and regulations that we are saddled with. As the layers of complexity and regulation build, we begin to see what I call "the crap sandwich".

And these ill conceived plans are not free:

ASIC will be given an extra $66 million and hire 200 new full-time employees to administer the laws.

Its tough being a taxpayer these days.

Monday, March 23, 2009

Conroy you dumb bastard, come here !

You are the stupidest power-hungry tyrant to be empowered with ministerial responsibility in the history of Australian politics.

Come on.. I dare you. Watch this website. Monitor it closely. I know you want to. You might learn a thing or too.

The Federal Government will begin trawling blog sites as part of a new media monitoring strategy, with official documents singling out a website critical of the Communications Minister, Stephen Conroy

Tuesday, March 17, 2009

Private vs Public sector.

Public transport is a fricking disaster.

(the above sentence applies equally for public health and education)

The latest doom and gloom comes in an Age article titled..

Hard-times just the ticket for public transport.

Most socialists need only glance at the above headline and immediately begin with their usual script full of the empty talking points which are easily demolished through logic, and repeatedly refuted through evidence and facts.

Those talking points are as follows:

  • Not enough funding ! The government has been and continues to deprive "the system" of sufficient resources (This talking point comes from public transport lobby groups, unions and the ABC )
  • Poor and dumb planning. (Usually the opposition political parties and media figures recite this one)
  • Unregulated free markets are to blame !! (From the ABC and the hard left)
Each of these arguments is vague and shallow. Not a single fan of public transport would care to tell us what sufficient funding is. Nor would they tell us what "good planning" is. And the 3rd falsheood is all too easy to trot out, by asserting that free markets exist everywhere and that no act of government played any role in creating or exacerbating the problems.

Yet ... history clearly and unambiguously reveals that each new decade brings about more and more funding for each public sector industry, more and more efforts placed into planning and regulation, and more pages of regulation and greater government ownership than before.

The exceptions are the success stories - when government privatised AND DEREGULATED industries like telecommunications, banking, transport, trade, commerce and hospitality.

The leftists cannot have their cake and eat it too. They cannot place thousands of regulations on a semi-privatised public transport sector, where only the train operator bids for the government contract to operate a monopoly, and then give their usual knee-jerk reaction of blaming free markets/privatisation when things go wrong.

Back to the story:

THE deteriorating economy is adding to Melbourne's public transport woes, with commuters boarding trains, trams and buses to save money.

A survey of 600 people by public transport marketing and information agency Metlink has found that 75 per cent of Melburnians are trying to save money because of worries over the economy. As a result, a third are looking to use public transport more to cut their budgets.

Read that paragraph. What is the actual news item being reported ?

More people are using public transport.

Why is this "bad" or "grim" news ? ?! Isn't this what the government wants us to do ? They tell us not to use our cars, they place stamp duty, registration, fuel taxes and parking restrictions everywhere, they tell us to catch more trains and do our bit for "the environment".

Could you imagine the same response for any single private industry out there ?
If more people buy televisions, or groceries, or go out to the movies, or go out to restaurants, would that particular industry complain ? No, they would be overjoyed and do their best to serve all these willing customers.

I think even the most hard-core statists, the advocates of socialised health, medicine, education and transport, realise deep-down some of the inherent problems in their huge plans to spend our money on their personal priorities for society, but fail to publicly acknowledge them.

Wednesday, March 04, 2009

The best overview of the subprime collapse

An 86 minutes long video. This is it.

Boy was this crisis a failure of government regulation and socialism.

Tuesday, March 03, 2009

The economic boom !

In troubled times, where is this safe-haven that provides high and rising wages, widespread employment and rising standards of living ?

Canberra !!

Employee Earnings and Household Incomes

Average weekly full-time adult ordinary time earnings in Canberra are approximately A$1,280 per week, which is 16 per cent higher than the Australian average. However, as noted earlier, output per capita of Canberra workers is 31 per cent above the national average.

Earnings and the high workforce participation rate are also reflected in disposable household income figures for Canberra. The gross household disposable income per capita at A$49,923 is around 61 per cent higher in Canberra than the national average.

Modern Telecommunications Infrastructure

The high quality of infrastructure serving Canberra provides many advantages to businesses. Canberra was one of the first cities in the world to introduce a broadband fibre-optic network, and the ACT ranks alongside Singapore, Finland, Sweden and the USA as having one of the world’s most IT-connected communities.

Operating a Business in Canberra

There are more than 25,000 businesses in Canberra covering almost every conceivable form of activity and business structure. They range in size from multinationals that have strategically chosen Canberra so they can be close to the Australian Government’s A$200 billion procurement decisions, right down to micro businesses servicing larger businesses, the public sector or the needs of local people.

They range in size from multinationals that have strategically chosen Canberra so they can be close to the Australian Government’s A$200 billion procurement decisions, right down to micro businesses servicing larger businesses, the public sector or the needs of local people.


Canberra’s workforce comprises approximately 200,000 people, made up of 190,000 residents and approximately 10,000 people who commute from nearby population centres in New South Wales. About 115,000 Canberrans are employed in the Territory’s private sector, with the balance employed in the public sector. [ 200,000 - 115,000 = 85,000 public servants !]


The chief minister of the A.C.T provides the following factoids:
  • the ACT record low unemployment rates - the ACT’s current unemployment rate of 2.7 per cent in May 2008 is well below the rate in any other jurisdiction;
  • an average weekly wage in Canberra about $180 more than the national average.
  • increased expenditure on health, which has almost doubled from 2001-02 to 2008-09;

Yes, Canberra, mafia headquarters, is where a lot of the stolen loot is handed out !

Stimulating our debt

How can I possibly debunk each and every fallacy, idiocy and lunacy presented in the:

$42 Billion Nation Building and Jobs Plan

I think these monumental wastes of capital and destruction of wealth and savings speak for themselves:

    • Free ceiling insulation for around 2.7 million Australian homes

    • Build or upgrade a building in every one of Australia's 9,540 schools

    • Build more than 20,000 new social and defence homes

    • $950 one off cash payments to eligible families, single workers, students, drought effected farmers and others

    • A temporary business investment tax break for small and general businesses buying eligible assets

    • Significantly increase funding for local community infrastructure and local road projects

I've always been complaining about welfare and government spending from a moral and philosophical point of view. It is all too easy to attack welfare from a practical point of view, saying that it goes to "bludgers" and "cheats".

But the real hazards behind the system, the very essence of why an extensive welfare system is immoral, and the very rationale that is articulated so clearly by Ayn Rand in Atlas Shrugged, is the following:

That people can present their *needs* as a claim on the property and liberty of others.

And thus each and every need (including failures, mistakes and idleness) are ultimately what are rewarded and compensated by government.

Our government occasionally lets the mask slip, to reveal that this very principal and philosophy is at the core of every regulation. Every single "stimulus" measure is carefully designed to exclude the self-sufficient, and those with a good income. Every single stimulus measure rewards failure of some kind.

Build 500 new science laboratories and language learning centres in schools that can demonstrate need.

Urgent maintenance to upgrade around 2,500 vacant social house

$950 Farmer's Hardship Bonus paid to around 21,500 drought affected farmers and farm dependent small business owners receiving exceptional circumstances related income support.

$950 per child Back to School Bonus to support 2.8 million children from low- and middle-income families.

At least 20,000 low-income households will be assisted by having access to secure and affordable public or community housing.

You see my point already ?

Every dollar the government spends is forcibly taken from somebody else who earned it. They are being compelled to pay for certain things. Those certain things are all justified on the basis of need. Nothing more and nothing less.

Tuesday, February 24, 2009

The fox in charge of the henhouse

Or otherwise - why Australia's federal budget is doomed.

Ken Henry and his band of looting socialist thugs at the Treasury have revealed their ugly stripes in a leaked report given to the PM in 2008.

THE private health insurance rebate paid to millions of Australians is "very poor policy" and should be dumped, according to a confidential briefing to Treasurer Wayne Swan.

Okay, so far, I follow you. After all, if the government was giving a 30 percent subsidy, we could have a tax cut in its place and use the savings, right?

Documents obtained by The Age reveal that Treasury, in one of its first briefings to the Rudd Government after its 2007 election win, urged Mr Swan to seriously consider scrapping the rebate. The briefing said the billions of dollars lost annually to the rebate would be better spent on public hospitals.

Bugger !

Money would be "better spent on public hospitals" ? Public hospitals who feed at the trough, fail to improve services despite their revenue doubling over a decade, and who control, regulate and ration out critical health services to the lucky few ?

How can such bad and unsound advice come from Treasury, who are appointed to spend tax-payers money ? Our budget is entirely doomed, we've already seen a couple of big states hit the financial brick wall (NSW + QLD), its easy to guess that Rudd will drive the federal government into the same situation by the time his first term is up.

But lets not worry about such things. Bless the money hole !

The latest bailout news from the People's Soviet Republic of America

Mike Shedlock magnificently translates financial-speak in this latest joint statement from the Treasury and Fed:

A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.

My Comment
: Clearly, the US Government will continue to bail out insolvent banks no matter what it costs taxpayers.

"We announced on February 10, 2009, a Capital Assistance Program to ensure that our banking institutions are appropriately capitalized, with high-quality capital. Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis.

My Translation
: "This new capital will not cost anyone anything. It will be dispensed by magic fairies and recovered at a later date. We cannot share exactly how this magic works because under the rules of the magic ministry, we would be stripped of our magic hats and lose the rights to dispense magic if we did. Trust us. This is the proverbial free lunch that everyone says does not exist. However, like magic pixie dust, it does exist, it really does."

Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares. The conversion feature will enable institutions to maintain or enhance the quality of their capital.

My Comment
: The market cap of Citigroup is $11.5 billion. The market cap of Bank of America is $20.3 billion. How does a Government guarantee $400 billion of Citigroup and Bank of America debt and inject another $75 billion in preferred convertible shares without costing anyone a dime and without requiring any new capital? Why, magic pixie dust of course.

Monday, February 23, 2009

The ACCC responds !

To my mock-complaint made last week, about electronics retailers who offer "best price guarantees" and who sell goods "below cost price" to consumers.

Of course, I am personally satisfied, not outraged, that businesses make every effort to sell goods and services to customers. They should have every right to offer and set whatever prices they please.

But the sad reality is that Trade Practices Act, and all of its devilish detail exists, and the ACCC has been known to successfully prosecute businesses for charging prices too high, too low, changing prices quickly or simply for being a dominant market player.

The ACCC representative suggested that my accusation that these large electronic retailers were engaged in some kind of predatory pricing under Section 45 of the TPA would fail on two counts:

1/ You need to prove the seller is in an "extremely dominant market position". Harvey Norman and Clive Peeters, although both are large, are considered to operate in a highly competitive market where lots of people sell competing electronics.

2/ You need to prove that the seller is "keeping their prices below cost for a prolonged period of time with a specific intention of targeting their competition".

I explained how the legislation is quite vague and ambiguous, that is why I thought that it could be applied to just about any succesful business in Australia. The ACCC representative replied that the legislation in Australia is quite short, and the rule of thumb is to interpret case law to look at similar situations.

I questioned how the ACCC establishes the "intention of targeting a business" part - was it by guessing ? They responded that there are cases where there is evidence - giving the example of a large supermarket that continually and repeatedly undercutting a small grocery store in the same shopping centre, whilst making inquiries about its suppliers and costs.

( This is what I call normal competition - and the consumer benefits from this )

What isn't mentioned is that if, by the same token, the small grocery store monitors the supermarket prices, and responds by undercutting every price and outdoing them on every special, the legislation cannot or would not likely be used against the small player.

The way I see it, basically is that a judge, on his whim, *can* choose to punish a business under the TPA for engaging in regular trade. And the business is in extreme trouble of it is the most succesful player in its industry.

Thursday, February 19, 2009

Recessions are healthy things

Yes indeed, recessions are the medicine an economy needs to take before it gets better.

Certainly, it has tragic consequences for many hard workers and home owners and borrowers throughout the economy as output contracts. But the underlying theme is that so many human activities and so many resources were mis-allocated towards speculative bubble activities.

The best thing about these depressions is that it uncovers all the irrationalities, myths and misconceptions that existed during the bubble period. We just emerged from the biggest credit bubble in history. The assumption was that property and share prices would continue to soar, Asian economies would continue to grow and make things cheap, the Western consumer would never satsify his appetite to consume imports and grow their debt, and the savers of the world (Brazil Russia India China and the Middle Eastern states) would fuel America's debt forever.

THATS A LOT OF RISKY ASSUMPTIONS THERE ! I say good riddance to them.

And Obama and Bernanke think this kind of process is unhealthy ?

Whenever the crunch hits and people try to pull their money out, you see just how honest and sound some of these speculative activities were. Yet another ponzi scam was just unconvered. How many years did the SEC have to investigate these guys??

Texas financier R. Allen Stanford is accused of cheating 50,000 customers out of $8 billion dollars but despite raids Tuesday of his financial empire in Houston, Memphis, and Tupelo, Miss., federal authorities say they do not know the current whereabouts of the CEO.

Of course, you can't pull off a scam without government connections. Why doesn't an angry mob form outside Washington and demand the heads of the following politicians ?

But in addition to angry clients, Stanford, like Madoff, has many friends in Washington.

Stanford's business is headquartered on the Caribbean island of Antigua. In the last decade, Stanford and his companies have spent more than $7 million on lobbyists and campaign contributions in efforts to loosen regulation of offshore banks.

Among the top recipients: Senator Bill Nelson (D-Fla.), Congressman Pete Sessions (R-Texas), Sen. John McCain (R-Ariz.), Senator Chris Dodd (D-Conn.) and Senator John Cornyn (R-Texas), one of the members who took a trip to Antigua where he was entertained by Stanford.

Look how blatantly corrupt America has become - Washington has an ever increasing budget to spend ($1 trillion stimulus anyone ?) with growing regulatory powers each year, its no wonder every business tries to lobby and bribe politicians to get on board. How can Washington have the infinite wisdom to dish out $1 trillion of payback within a few days, in an optimal way that will stimulate economic growth ?

During the recessions, you get to re-discover reality.. it can be ugly, but society is better off without all these ponzi schemes.

Wednesday, February 18, 2009

Creating Jobs or Making Work ?

I've stolen the excellent headline from this Reason Magazine article which poses the very relevant question to its readers. In the current media coverage of each government's bailout or stimulus package, there is repeated mention of "jobs".

For a free-market advocate, this terminology causes quite a bit of hesitation and discomfort. Not all jobs are the same, clearly. But when government spends hundreds of billions (from taxpayers of course) on short term projects to provide jobs, there are many issues.

If there were absolutely no hazards involved, government could just pay half of the unemployed to dig holes, and the other half to fill them in. Unemployment would vanish. But in truth, so would our capital, our wealth, our standards of living and productive capabilities.

Henry Hazlitt, in "Economics in One Lesson", described a raft of foolish "make work" programs introduced during the Great Depression by FDR. For example, the teamsters in New York introduced a regulation so that all truck drivers visiting New York state had to hire a local New York truck driver to sit beside them for navigation. You had 2 truck drivers doing the job of one.

Government spending has an undeniable track record of being very inefficient and costly. So we often hear the argument put forward in recent times that we need any kind of spending, no matter what, just to "stimulate" our economy.

And with the mention of the word "economy" in that context, most free marketers will once again shudder at the misuse of the word:

The beauty of Obama's dual argument is that he can say the stimulus package is all about putting Americans back to work and then, when challenged on the question of whether this is an efficient way to do that, he can say all the work needs to be done anyway. Conversely, when challenged on the question of whether all these projects are really worth the money being spent on them, he can cite the jobs they "create or save" as a backup justification.

From a technical perspective, a job is created when an employer offers a salary in exchange for a worker's labor. So even if that employer is the federal government, and the salary comes from a stream of tax revenues (or future tax revenues, or even the printing press, for all those governments getting deep into debt), then that still counts as a "job", right ?

No it surely does not.

The nature of a job surely counts. A job that is created when a private employer hires labor, paid for with his own capital, as part of a business that seeks to maximise profit is a real job. Each employer is sacrificing his own wealth, and expects something in return from the employee. Each employer seeks to maximise profits, improve productivity and innovate and grow their business over time, which is the very engine of economic growth and allows for more employment or higher incomes in the future.

The free market consists of millions of voluntarily employed people, developing their skills and applying them across a range of industries, each of which produces something that is in demand and can earn revenue. As we can see, the majority of people are employed by, and receive their income from, the free market.

The same cannot always be said of the public sector. The nature of government work is that a central planner or bureaucracy is given a budget to spend, and chartered with a responsibility to both employ people and to spend their annual budget (or else they won't receive their budget in full the following year).

I read another chapter from Milton Friedman's "Free to Choose" last night which established that when you spend your own money and your own priorities, you seek to both get good value, and to get something that satisfies your own priorities. The hazard occurs when you spend somebody else's money towards somebody else's priorities, where there is no consideration of the budget, and no consideration of that other person's priorities.

Government spending falls entirely into this category. Whilst tax cuts, especially cuts in business tax and income tax, would provide the free market much more capital to employ people in dynamic and growing industries.

It seems clear that each stimulus project is designed to be short term - building roads, highways, green energy, refurbishing schools. Now these sound like noble goals in themselves, but what happens to the workers when these projects expire ?

The private sector would deploy labor and other critical inputs in a much more sustainable way, and use them dynamically and efficiently where they are most needed.

The article concludes:

If the projects really were cost-effective, of course, there would be no need to cite the jobs they create. And if creating jobs were an end in itself, as Obama often seems to think it is, there would be no need to find projects that are worth doing because of the public benefits they deliver. In fact, it would be better to throw money around willy-nilly so as to maximize job creation, in which case we surely could get more than 3.5 million jobs for $787 billion.

Tuesday, February 17, 2009

Clive Hamilton - Nanny Statist

The headline alone is like a red rag to a bull, and should drive most reasonable people to outrage. Go click on his scare-mongering nonsense if you dare. I've taken out one extract below:

Web doesn't belong to net libertarians

Clive Hamilton, Charles Sturt University | February 16, 2009

Some participants in the internet filtering debate do not believe that access to porn on the internet is a problem. One referred to the sorts of images I have described as "naughty pictures". Others take an extreme libertarian view that people (including children) should be able to view whatever they like.

Ahh, the attempt to win the debate through demonising and marginalising your most well known opponents. The old strawman.

All of us internet users and fans are suddenly a fringe group - extreme libertarians. But our statist opponents who want to censor and regulate the internet represent parents, children and just about everybody who cares about "the children".

Hamilton then continues:

Reflecting the influence of moral relativism, there is a common belief in the internet community that any restriction means the imposition of one set of moral values on others who don’t hold them. Any sexual practice, no matter how bizarre, is just a matter of personal choice.
Firstly.. censoring content, by the state, is nothing less than imposing one set of moral values on the entire society.

And internet usage has nothing to do with actual sexual practice. The internet is nothing more than communication, completely peaceful and non-violent.

Basically, Hamilton tries to characterise all freedom of speech concerns to sex, deviant behaviour and predatory paedophiles.

Fortunately, we do not live in the type of society favoured by organisations like Electronic Frontiers Australia. We live in a democracy where citizens ask their governments to impose restrictions on certain types of content that are regarded as harmful to individuals or to the community more broadly.
Clive Hamilton's opinions are harmful and offensive to me, yet I don't go lobbying Canberra to censor him.

But perhaps the most revealing words in the Get Up statement are "our internet". The internet does not belong to the net libertarians, who seem to believe they inhabit a cyber-nation that is beyond normal forms of social regulation. The net belongs to all of us and, like other forms of communication, is subject to our collective decisions.
Yes and should be run according to the whims of Clive Hamilton ! This thug-o-crat has no room for individual disagreements in his utopian view of collective societies living in harmony. I suppose some kind of counselling or re-education is in order for those who disagree with him .. err.. I mean "society".

The ACCC can prosecute anybody under the sun !

We live in a police state. When government is big enough, and enough laws and regulations are passed, each and every one of us can easily find ourselves in breach of some statute and prosecutable. When you criminalize all kinds of behaviour (smoking marijuana, avoiding taxes, charging customers too much or too little), you create a society of criminals.

When business owners who maintain their integrity and form voluntary agreements with customers set prices, they must do so in compliance with the following mumbo-jumbo or else they may find themselves dragged before a court, charged with thought-crimes, and to face much embarassing PR (see Pratt, Woolworths, Myers, Qantas for examples).



Contracts, arrangements or understandings that restrict dealings or affect competition
(2) A corporation shall not:

(a) make a contract or arrangement, or arrive at an understanding, if:

(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

(i) is an exclusionary provision; or

(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.


Contracts, arrangements or understandings in relation to prices

(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.


Misuse of market power

(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
(b) preventing the entry of a person into that or any other market; or
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

(1AAA) If a corporation supplies goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying the goods or services, the corporation may contravene subsection (1) even if the corporation cannot, and might not ever be able to, recoup losses incurred by supplying the goods or services.

(1AA) A corporation that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services, for the purpose of:

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; or
(b) preventing the entry of a person into that or any other market; or
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.


Tuesday, February 10, 2009

Stop the bailout ! Senators respond to my enquiry.

I've tried to "save the world" as Gordon Brown would say, and stop this ridiculous one-off stimulus package that gives money to people who haven't earned it, and drives us deep into debt for many years.

After emailing all Victorian senators, all Liberal and National senators, both independent senators and a few Labor senators, I've only received a handful of responses, but all of them seem to agree that the stimulus is a huge mess.

Senator Barnaby Joyce:

Thank you for your email and support. The current fire tragedy is front and foremost today and our efforts should be solely concentrating on this today.
The stimulus package put us on a trajectory to financial economic oblivion with a 200 billion dollar debt, and for what pink batts, boom gates.

What about real infrastructure inland rail between Gladstone and Melbourne, what about the getting the water from the north where there are floods to the southern drought and now fire, what about pensioners. And now Mr Rudd has the arrogance to say “get out of the way”.

If the emails that I am receiving in the hundreds are correct then this package is of high concern to all who will be left with the debt to grind down the economic breathing space that our nation requires.

Senator Helen Kroger:

Senator Kroger thanks you for your recent e-mail.

There are many problems with Labor’s Economic Stimulus Package introduced into Parliament this week.

The Coalition believes that the package is poorly targeted, ill-thought through and irresponsible in today’s economic climate. There is no evidence that the Government’s $10.3 billion spending package before Christmas created the 75,000 jobs Mr Rudd promised.

The Coalition believes in good public policy that will create jobs and encourage productivity.

The Coalition has decided to oppose the Government’s irresponsible package – the largest increase in Government expenditure in 35 years. We are aware that this decision will not be popular, however, we firmly belief it is the right decision.

One of the biggest problems in the Government package is the lack of measures that directly and broadly support employment – particularly employment in the small business sector.

To achieve this goal, the Coalition has suggested that the permanent tax cuts currently scheduled for 1 July 2009 and 1 July 2010 be brought forward, and backdated to 1 January this year.

By the middle of 2010 this would leave a two-income household earning $80,000 approximately $1700 better off.

Senator Nick Xenophon:

Thank you for your email to Nick Xenophon regarding the economic stimulus package. Nick will be considering all aspects of the package carefully before deciding how to act. As Nick has said, "If you are going to by a $42 billion car, wouldn't you want to have a look under the bonnet?"

Thank you for taking the time to write to Nick on this important issue, and I will forward your comments to Nick and his advisors for their information.

Senator John Williams:

Senator Williams is opposed to the economic stimulus package in its present form. He believes money should be spent on long term infrastructure not one-off short term cash payments. He is also concerned that we are loading future generations with debt plus interest.

Friday, February 06, 2009

The intellectual depth of the left

Our PM:

The work came as the Prime Minister attacked Malcolm Turnbull as an agent for unrestrained greed and wanton neo-liberalism for his refusal to support the package because it would create a $70 billion debt.

Our Victorian Premier:

The package "couldn't be better-timed", Mr Brumby said.

"It means jobs, it means certainty, it means confidence, it means security."

Is there much depth to this argument ? Is it logically consistent ? Does it rely on reason ? Is it free from any premises and assumptions ?

No to all of the above. It is all self-serving propaganda.

How does saying no to years of deficits, tens of billions of dollars of spending equal unrestrained greed and neo-liberalism ?

Kevin Rudd's use of language is disgraceful Orwellian nonsense. It is Kevin Rudd who seeks more power and more authority to put the government budget into a massive deficit that will take future taxpayers years to repay. It is the opposition who stand up to this arrogance, and they are the ones accused of "greed" ?

What is "neo-liberalism" anyway ? Its communist speak for free markets and capitalism. The ideas and the actual growth of free markets and capitalism have been around for centuries. Portraying it as some scary modern phenomena to be done away with, like fast food, is downright shallow.