December 14, 2008

The Ultimate Insult

So President Bush made a surprise visit to Iraq today. He got an interesting reception. I can tell you from experience in the Middle East that getting a shoe thrown at you is not a compliment....but it is funny.

December 10, 2008

The Environment and Property Rights

Perhaps one of the most ambiguous subjects pertaining to liberty and the role of government is the question of the environment. I say ambiguous because there are certain assumptions that rule the subject, making counter-arguments seem trivial. For instance, it would seem silly for an atheist and a Christian to argue over the necessity of a certain religious rite. The atheist assumes that God doesn't exist, so to him, a religious rite would be inherently unnecessary. The argument is trivial to the atheist insofar as he assumes the non-existence of God.
In a similar manner, there are certain assumptions about the role of government with relation to the environment that must first be dealt with. My assumptions here are that individuals are free and cannot be punished for the actions of another individual or a group as a whole. This is not to say that whatever one does is morally right as long as it does not harm another person. There may be any number of moral responsibilities of an individual toward the environment. However, these responsibilities cannot be enforced by government without taking away the liberty that government purports to protect.
Those who argue for government protection of the environment often make the assumption that the environment is an entity in and of itself that requires or merits legal protection from the state. However, since the environment is not in and of itself a legally responsible entity, it also cannot be legally protected, only insofar as it is itself property of an entity that is legally responsible and protected. Thus, the "environment" can only be protected legally if it is property of a person and is in danger of being harmed by another person.
According to property rights, I can do whatever I wish with my own property. I simply cannot harm the property of others. If it can be shown that I have harmed the property of another, that entity has grounds for legal action against me. If no harm can be shown, there can be no punishment.
Now, let's take the case of pollution and its affects on the "environment". If a factory pollutes and it can be shown that this pollution harmed another's property, then those harmed can sue the factory. However, if the factory can somehow collect its pollution and recycle or store it such that it does not harm another's property, even if it does cause harm to the property of the factory itself, no one can claim injury and no legal action can be taken.
Now, there are cases when the pollution of an individual entity does not cause harm, but the collective effect of several individuals does. The most apparent case of this may be car exhaust which causes smog. If it were true that one individual driving one car could cause smog and harm the property of another, the individual driving the car would be responsible. However, if the actions of the individual alone are not sufficient to cause harm, he cannot be punished as part of a group for his actions, because he is not personally responsible for any harm.
Here are some other examples of what I mean. In the 1800's, people moving westward over the plains chopped down trees along the Mississippi River and its tributaries. This caused more runoff that normal from rain and the result was flooding in New Orleans. (At least, this is what is generally accepted as the cause of some flooding in New Orleans in the 1800's). So, the people of New Orleans built higher dikes to channel the water and protect their property. They had no legal recourse against a large group of individuals whose collective actions caused harm. Furthermore, it cannot be said that any one individual caused the harm. It cannot be said that any one person caused flooding in New Orleans. As such, the people of New Orleans treated it as an act of nature and dealt with it as best they could to preserve their property.
There may be another example. The same people, coming west, found that their herds were being attacked by wolves and so they, as individuals, took measures to protect their property and elminated most of the wolves in the Midwest. As a result, years later, there was an enormous increase in the population of deer. Could this be blamed on any one individual? No, and therefore, the people who settled there began to deal with the lack of wolves as if it were an act of nature, taking it upon themselves to control the population of deer. Such is the approach that could be taken toward the proposed problem of global warming.
Now, the common practice widely accepted is that government has to regulate harm caused to the environment so that these costs imposed on others, such as pollution, can be redirected upon those who caused them. This is the principle behind certain taxes and the 'cap and trade' system. There are several problems with these assumptions and proposals of regulation. The first is the denial of property rights. That is, one is not allowed to use his property as he sees fit. The government denies the right to pollute one's own property, even if the person considers this an acceptable cost to achieve his ends. But more importantly, the system of 'cap and trade' assumes that people have the right to pollute others' property. Businesses are given credits to pollute and they can buy and sell these credits in the market. The fact that a factory may be polluting my property is of no concern to the government if that given factory is within its "pollution credits". I have no legal recourse because it is assumed that the factory was given that right by government.
In addition, the 'cap and trade' system presents a problem of economic calculation. That is, the government automatically assumes that it knows how much pollution is optimal. It sets the limit at that level and then distributes credits accordingly. But how does the government know that this level of pollution is the most efficient for property rights of the individuals affected? The optimal pollution level may be lower or higher. The limit imposed merely assumes to know that level. But this is impossible for a government to know, just as a government cannot know the optimal production levels of goods.

For more on this topic, check out Murray Rothbard's article here. (Beware, its a bit long)

December 7, 2008

A couple jokes...

You will have to zoom-in on this one, but it's worth it:

December 4, 2008

More spending....We gotta have more spending

The government's solution to the current economic problem is more spending. Where have I heard something like that before?
Oh yeah! More cowbell!!

December 3, 2008

Money: Part 1

Money is really a simple topic, but the concept has been so corrupted over time that I anticipate this will take multiple posts to discuss. Hence, the Part 1 in the title.
In order to understand what money is, we have to look at its origins. Money was originally a commodity itself. That is, it had intrinsic value because it cost somebody something to produce. For instance, if two farmers used wheat as a medium of exchange, each knew how much work, resources, and time it took to produce one bushel of wheat. They knew likewise how much work, resources, and time it took to produce one gallon of milk. They could therefore decide what benefit, in terms of wheat, one gallon of milk had in order to determine a rate of exchange (price). But they had to denominate the benefit in terms of a real commodity, something that costs to produce, otherwise they wouldn't know the "price" of the good.
Eventually, large groups of people started using precious metals as a means of trade. This was because the metals didn't lose their value due to time or environmental conditions so they could be readily circulated and widely accepted. In addition, metals could be verified by a simple system of weight measurement. The most important thing to remember here though is that precious metals did not simply grow on trees. They took work and time and resources to mine and refine. Thus, the miners could measure their production in terms of gold mined and refined in a day and how much of that they were willing to exchange for the goods and services they required.
The fundamental and original concept that money itself must be a commodity has been all but lost in today's economy. However, because of our historic use of precious metals as money and denomination of those metals in terms of our currency ($$$), we are able to operate with a system of prices. That is to say, without the basis of money as a commodity, we would never know how much something costs in terms of dollars, because dollars are not themselves a commodity and cost virtually nothing to produce.
This concept is vital in understanding the challenges in our current monetary system. Along with a basic understanding of supply and demand, it logically leads to some important conclusions that I will discuss later. However, I would like to first propose this theory of money and ask: What am I missing? Is there anything in my explanation that needs to be modified?

December 1, 2008

The Similarities are Disturbing

This is a bit overdue, but I had a bit of trouble finding the videos. So the first video is a typical infomercial done by that annoying guy that yells all the time. I thought it was a good primer for the second video:

The second video is a small clip of the automotive executives' testimony before the House Financial Services Committee. I wasn't sure whether to laugh, yell, or cry:

November 25, 2008

Marriage: right or rite?....or both?

Let's take a step away from economics for a bit. We'll be back soon, I promise. The discussion of liberty invariably comes in contact with the modern discussion of rights. While there seems to be a common misunderstanding of the word "right" and its origins, we can discuss the corruption of our language another time.
A couple of weeks ago, I watched a protest by opponents of California's Proposition 8, hoping to be able to talk with some of them and discuss what their actual demands were. In a few words, there wasn't really an opportunity to talk with any one of them. Amid the accusations of bigotry and hate, I wondered to myself why it was that gays wanted so much for the state to legally sanction their unions as marriage. What was it that they gained from having a marriage as opposed to just a civil union?
The most obvious things are protections the state gives only to married couples. These include tax credits and visitation rights etc. For these reasons, the state regulates marriage closely. In fact, you have to get a license from the state to get married. Think about have to ask the government permission to perform a religious ceremony; you have to ask the government permission to marry someone.
Black's Law Dictionary defines a license as, "The permission by competent authority to do an act which without such permission [...] would be illegal." This means that if the state has the power to license you to marry, it also has the power to prohibit it. If you don't get a license, you are breaking the law.
Thus, if the state can license heterosexual couples, it can prohibit homosexual couples. The question is merely what the state's policy is. Does it allow homosexual marriages or not? In the current case, it has been both, depending on who you ask: the people of the state or the judiciary. The people voted to prohibit homosexual marriage while the judiciary declared that prohibition unconstitutional. The debate is heating up even now.
To me, it is obvious that marriage is between a man and a woman. This is simply what the word means. But personal and religious definitions aside, I think we may all be having the wrong debate. Instead of discussing how the state should define marriage, let's go back and rethink if they should define it at all.
So there it is: Should the state define marriage? If so, why and how? If not, why not? It seems to me that the debate over whether the state should define marriage at all is so far gone that it has become next to impossible to revive it. But if we could, wouldn't this be a better way to preserve our religious freedom and Constitutional integrity? How do we revive the real debate? If we can't, how do we choose sides in the current one?

November 22, 2008

Could this guy be right?.....again

Check out these videos. Peter Schiff predicted what is happening and they laughed at him:

Now, they aren't laughing anymore, but they still are reluctant to listen to him:

November 19, 2008

Inflation or deflation? What is going on?

For a while now, I have been worrying about the prospects of inflation. Well...not really the prospects, because I know it is a problem, even the government admits that we have inflation. Rather, I have worried that inflation is rapidly destroying the value of the money I have saved in the bank. Recently though, I have started hearing news about deflation, which I thought was utter nonsense. How could deflation be happening now? Gas prices were high; food prices were high; movie ticket prices were high; car repairs were expensive. If we had deflation, I thought, I would be getting richer every day. My money would be worth more as prices went down.
But then I started hearing people say deflation was a bad thing. They said that falling prices made people defer their spending and that made businesses suffer. They said that people in debt suffered with deflation because it would be harder to pay back debts. They said it was a "wolf" that was at the door ready to eat us all alive.
Then I started seeing gas prices go down; food prices started stabilizing so to speak; housing prices were still going down, and I wondered how it was possible? How could all this money that the Federal Reserve was printing actually allow any prices to fall? Then I started to worry again. What if deflation really is a problem? What if it does stifle business growth? I think I have come to a conclusion: deflation is just what we need right now.
Let me explain. In 2001, a recession caused the Federal Reserve to lower interest rates and 'pump more liquidity into the system'. This means they printed more money and expanded the money supply so that people could keep on spending money as if nothing had happened. Well, they printed so much money for so long that people began spending money like they never had before. Loans were easy to get. Cars were easy to buy. Housing prices went through the roof. People refinanced their houses and took the apparent appreciation in value of their homes and spent it on that trip to the Bahamas. In fact, we even were able to fight two wars at seemingly no cost and people were still having a great time. Life was good. Democracy was spreading. Capitalism was making us all so rich. What could have gone wrong?
Some of the first indications were people starting to default on their mortgages. You see, they had borrowed all this money and spent it on cars, houses, vacations, hot dogs, iPods, computers, flat-panel T.V.'s, and the irresistible yummies that they saw on those flat-panel T.V.'s. Suddenly, they had nothing to show for it. The cars were breaking down. The houses needed to be painted, recarpeted, and refurnished. The vacations were mostly just pictures on facebook. The hot dogs had long served their purpose. The iPods were out of warranty, and the flat-panel T.V.'s were too small to see the whole football field. They had spent all their money on things that brought absolutely no return. Worse, it had all depreciated in value and they were still making payments on the stuff. This could be called malinvestment.
It gets worse. You would think that businesses would have been smarter. They would have spent their profits on retooling, upgrading, and training. But they didn't. Rather, they payed for employee vacations and golf tournaments etc. They malinvested even worse than the consumer. Why? Because money was cheap, and they would pay it back with the profit they got when they sold their houses and businesses into a stock market that was always in the green.
Well, let's get to the point. In few words, prices got high. They got really high, and now no one could pay back all the money they owed. So people and businesses started going bankrupt. One by one they went down and all the talking heads said, "It can't get any worse" or "This is just a little dip". Now we face widespread bankruptcy.
So what do they say we have to do to solve it? Here's what we hear from all the big shots: 'Well, we need more liquidity. People don't have enough money to spend. We can't let large companies fail. Get people spending money again like they were and all will be better.' But how can the cure be exactly what caused the disease in the first place?
Here's what we need: deflation. We need a correction to what prices are supposed to be at. We need to return to sustainable prices of years ago (perhaps more). How long will it take? No longer than we let it. I remember in 2001, gas prices were even lower than they are now. Maybe we are getting there. Is anybody truly worried about the price of gas? Not really. Its a good thing insofar as we don't have to spend so much on gas and can start paying back all our debt. In fact, the more prices go down, the better off we will be in the long-run, because we will have disposable income to pay back our debts.
Some ask what will happen to the businesses though who suffer from deflation and lower profits. They may go bankrupt. Well, this is exactly what we need! I am serious! If they participated in the malinvestment during the boom, they have to accept the responsibility of the hard times that come with the bust. What remains will be stronger businesses who are better able to suit demand and smarter at investing.
What is the alternative? Well, we could do what we are doing right now. We could bail out all of America to itself. We could just get a new credit card with an unlimited line of credit and just put it all on that and start over.
We need to start over alright, but by getting out of debt, not by going into more. A wise man said, "As long as we live above our means, we are destined to live beneath our means." Are we ready for this? The politicians are scared to death. They think they are responsible, and they are, at least in part, but they are trying to cover their tracks by passing the buck to coming generations. Can we sacrifice now for our children? Can we accept personal responsibility for our foolishness and not shift that to another person who might not even be born yet? I admit, I am not sure I want to. Can't we just keep on going like we have--pushing the debt to our children, just as our parents pushed in onto us? After all, we are doing them a favor and making the world safe for democracy right? Isn't that an investment? Won't America and the world be so prosperous some day that we can pay back all our debts and live in peace and harmony?
I know I sound cynical and mocking here, but these are actually legitimate questions that reflect the views of a lot of people, even mainstream politicians and economists. How do we respond to them?

**I should note that strictly speaking, inflation is not a rise in prices just as deflation is not a fall in prices. Inflation is an increase in the money supply/goods and services in the economy ratio. That is, the total money increases relative to the goods and services available. The effect of this is an increase in prices but inflation itself is not defined as that. Deflation is the opposite.

November 18, 2008

Ron Paul vs. Ben Bernanke

Two old sparring partners go at it again. This time, Ron Paul calls Bernanke's bluff. Bernanke then tells an untruth about whether he has discussed this international currency with central bankers. Notice that at the end he says, with a hint of a smirk, that central banks are planning to sell gold. Is he looking to drive down the price of gold? For what purpose?

November 17, 2008

The Other Healthcare Crisis

There has been a lot of talk, especially among certain prominent politicians, about the so-called "Healthcare Crisis" that is looming over so many uninsured and under-insured Americans. They tell us that something must be done to prevent this crisis from causing financial ruin for millions of Americans. They promise "failure" if we do not come together and agree to have the government fix the "crisis".

Our leadership believes that Americans should have access to affordable, quality health care and peace of mind about long-term financial security. We will ask our members and the public to demand solutions (

Well, I feel it is the duty of freedom-loving Americans to certainly demand solutions...but not in the way they would have you believe is necessary. First, it begins with a need to understand the healthcare system and the economic principle of insurance.
Insurance groups people into pools based on risk so that it can estimate probability and costs. If insurance companies didn't group people according to risk, they would have to assume ultimate risk for all of their customers. Thus, customers who would rarely if ever use the insurance (the losers in this case) would end up paying the same premium as those who are more likely to use it (the "winners" as it were in this case). However, because of competition, insurance firms gather information about their customers in order to assess their risk. Customers at lower risk can be pooled into a lower-risk category and can pay lower premiums.
Now, there are certain things that are not insurable. Suicide, for instance. This is because suicide is wholly dependent on the actions of the insured. Suicide doesn't happen by accident. If insurance companies covered suicide, who would get coverage for it? I wouldn't. I wouldn't want to pay for it. This would not be a viable venture for an insurance company anyhow. This would be equivalent to insuring my house against arson, that is, burning down my own house myself. At any rate, actions or events that hold personal responsibility cannot be insured against because the firm cannot calculate that in their estimates of risk.
At least, that is what we would expect in a free-market. This is not the way things are today. For instance, there are many people who are put in the same risk pools who in fact belong in different pools. They have different risks, and yet they are grouped together and made to pay the same premiums. In addition, there are many people who are insured for things which are, by definition, uninsurable. Insurance has hereby become a system of income redistribution resulting from regulation.
There are several examples of these regulatory distortions imposed on the Federal and State levels upon insurance companies. In these cases, insurance companies must offer coverage for these things to their customers:
49 States mandate treatment for alcoholism by insurance companies
At least 27 States mandate treatment for drug addiction
Chiropractors in at least 45 States
Psychologists in at least 36 States
Social workers in at least 22 States
Hairpieces have to be included in Minnesota
Marriage counseling in California
In more than 12 States, companies cannot ask any AIDS-related questions
In D.C. HIV testing is prohibited for insurers
the list goes on....

The effect of these regulations is certainly not at all what was intended by legislators. The most important effect has been that insurance companies are forced to raise their premiums because they cannot assess the risks of certain individuals and cannot group others according to their risks. Therefore, customers who do not have these risks are forced to help pay for the risks of others in their artificially-high premiums.
What is the effect of this? Well, if I am being forced to pay for coverage that I do not need, I may choose to not be insured at all (after all, I haven't gone to the doctor in years). Those who remain insured are then charged higher premiums, and the problem compounds. And yet, as an uninsured person, I am then somehow part of this "Healthcare Crisis" which many propose to fix by imposing more regulation...the precise thing that caused me to be uninsured in the first place.
How do you solve the problem of people dropping their insurance? Well, a certain politician proposed a solution: mandate health insurance! Others say "single-payer" government insurance would solve the crisis. But what would be the economic effect(s) of these policies? Can we foresee them? How can we possibly solve this problem with the proposed solutions? What other solutions are there?

November 16, 2008

Topics for Discussion

These are some of the topics I would like to discuss as I encounter them in the news or otherwise. For many of these topics, I have yet to form a concrete philosophy or explanation that formulates my philosophy. I would like suggestions for topics and I will add them to my list.

Monetary policy

Gold Standard

Competing currencies


Definition of life


Right or rite

Foreign Policy


World organizations


Sovereignty and free trade

Legislating Morality




Democracy vs. Republic

Confounding the language of liberty

Acts of nature



Standing army vs. Militias

Organizational Ambiguities

Seek change internally or externally?


My wife suggested that I start a blog as a way to develop my political and economic ideas. The goal is to get insightful input from others on issues that I have either not fully developed as part of my philosophy or personal questions that I have yet to answer about the role of laws and liberty in society. I anticipate it becoming a forum for those of us seeking to understand the principles of liberty and how to apply them in our lives and project them into our society. I hope that many of my friends, family members, and acquaintances can contribute, as well as others who stumble across these posts.