This November, let's remind Washington of the true spirit of America:
Monday, March 22, 2010
Thursday, March 18, 2010
Tuesday, February 23, 2010
The Realities of a Controlled Market
Eileen Aj Connelly of the AP writes:
"During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.
It wasn't supposed to be this way. The law that President Barack Obama signed last May shields card users from sudden interest rate hikes, excessive fees and other gimmicks that card companies have used to drive up profits. Consumers will save at least $10 billion a year from curbs on interest rate increases alone, according to the Pew Charitable Trust, which tracks credit card issues."
This is the ugly face of government running interference in free markets. When will we learn the futility of these tactics? From the ghetto slums in New York created by rent controls to the absurd federal ethanol subsidies that end up replacing gasoline at a cost of around $82 a barrel, there seems to be a broad-based learning block against the historically proven fact that attempting to shape a marketplace by means of redistribution almost invariably fails. This is because the proper functioning of the market isn't really the goal - the culprit is generally some misguided notion of "social justice".
It wasn't supposed to be this way! That's funny: I could have told you exactly how it would be.
Fact: Credit providers are under no compulsion to grant you credit. By making it less profitable to grant credit to consumers, less credit will be granted.
Fact: You are not required to do business with a creditor. For that matter, you are not required to utilize credit at all.
Fact: If you are a high-risk borrower, you will likely pay high-risk rates. If you are a low-risk borrower (you pay your bills on time and live within your means), creditors will be willing to offer you lower rates.
In other words, by attempting to prevent credit card companies from using "gimmicks", "rate hikes", or "excessive fees", this law is actually having the effect of making credit more expensive and less available to everyone. This is not news to anyone with a lick of economic sense - we've watched history repeat itself countless times on this point.
By the way: credit funding, just like insurance, operates profitably by way of risk pooling. By attempting similar legislation on a similar market, we can expect similar results.
"During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.
It wasn't supposed to be this way. The law that President Barack Obama signed last May shields card users from sudden interest rate hikes, excessive fees and other gimmicks that card companies have used to drive up profits. Consumers will save at least $10 billion a year from curbs on interest rate increases alone, according to the Pew Charitable Trust, which tracks credit card issues."
This is the ugly face of government running interference in free markets. When will we learn the futility of these tactics? From the ghetto slums in New York created by rent controls to the absurd federal ethanol subsidies that end up replacing gasoline at a cost of around $82 a barrel, there seems to be a broad-based learning block against the historically proven fact that attempting to shape a marketplace by means of redistribution almost invariably fails. This is because the proper functioning of the market isn't really the goal - the culprit is generally some misguided notion of "social justice".
It wasn't supposed to be this way! That's funny: I could have told you exactly how it would be.
Fact: Credit providers are under no compulsion to grant you credit. By making it less profitable to grant credit to consumers, less credit will be granted.
Fact: You are not required to do business with a creditor. For that matter, you are not required to utilize credit at all.
Fact: If you are a high-risk borrower, you will likely pay high-risk rates. If you are a low-risk borrower (you pay your bills on time and live within your means), creditors will be willing to offer you lower rates.
In other words, by attempting to prevent credit card companies from using "gimmicks", "rate hikes", or "excessive fees", this law is actually having the effect of making credit more expensive and less available to everyone. This is not news to anyone with a lick of economic sense - we've watched history repeat itself countless times on this point.
By the way: credit funding, just like insurance, operates profitably by way of risk pooling. By attempting similar legislation on a similar market, we can expect similar results.
Tuesday, November 17, 2009
Wednesday, October 28, 2009
Tuesday, September 29, 2009
The Russians Understand our Lost Freedoms Better than We Do
Source: Pravda.Ru
It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.
First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blind the foolish.
Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more then Sunday circuses and their televangelists and top protestant mega preachers were more then happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized in America.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.
These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more then ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress (parliament). Again, congress has put up little more then a whimper to their masters.
Then came Barack Obama's command that GM's (General Motor) president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions.
So it should be no surprise, that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantee of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too. Prime Minister Putin, less then two months ago, warned Obama and UK's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing, as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.
Again, the American public has taken this with barely a whimper...but a "freeman" whimper.
So, should it be any surprise to discover that the Democratically controlled Congress of America is working on passing a new regulation that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Franks, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.
The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left.
The proud American will go down into his slavery with out a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.
It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.
First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blind the foolish.
Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more then Sunday circuses and their televangelists and top protestant mega preachers were more then happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized in America.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.
These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more then ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress (parliament). Again, congress has put up little more then a whimper to their masters.
Then came Barack Obama's command that GM's (General Motor) president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions.
So it should be no surprise, that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantee of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too. Prime Minister Putin, less then two months ago, warned Obama and UK's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing, as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.
Again, the American public has taken this with barely a whimper...but a "freeman" whimper.
So, should it be any surprise to discover that the Democratically controlled Congress of America is working on passing a new regulation that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Franks, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.
The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left.
The proud American will go down into his slavery with out a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.
Wednesday, September 23, 2009
Statistical Abuse
I saw this graph today indicating the rising costs of health insurance premiums for single and family coverage from 1999 to 2009:
What interested me the most was the complete absence of inflation data. A comparison between 2009 dollars and 1999 dollars? Really?
Knowing that gold tends to be the best available indicator of currency inflation thanks to its nearly constant historical demand worldwide, I decided to plot the price of health insurance against the average price of gold per ounce over the last ten years:
The basic argument is that if gold is an accurate measure of currency valuation, it is an excellent indicator of currency inflation. Plotting the increase in premium prices against gold prices over a decade demonstrates that the real cost of health insurance premiums has fallen. This of course assumes a flat demand for gold, and thus is not perfect. Keep in mind the demand for gold has remained nearly constant for many hundreds of years (thus its moniker, the "Golden Constant").
If the original graph indicating increasing premiums is to have any meaning, inflation data must be included and accounted for. Otherwise, we are measuring the cost of a good by a fluctuating paper currency. Since it is very difficult to determine a perfect index for measuring inflation, I choose to use the gold standard as most existing indexes (such as CPI and WPI) are of transient value and often subjected to political interference. After all, what statesman wants to inform the citizenry that their dollar will only purchase 75% of what it did the year before?
I added series of gold price, gold price/oz x 10, and a series representing the average price for family coverage adjusted against the price of gold. The amount of inflation suggested here in no way paints a very rosy picture of our long term economy, but certainly helps to indicate that the real costs for health care might not have increased as drastically as some suggest.
From the Wall Street Journal:
Gold Turns Out to Be the Best
However, the results were much better when we tested average annual commodity prices as a predictor of the following year’s CPI since 1970. All three commodity prices showed predictable power over the long term (one year). However, it is clear from the regressions that gold was the best indicator of inflationary expectations (R-squared, 0.42), followed closely by the Dow Jones Commodity Spot Index (R-squared, 0.37), and oil was a distant third (R-squared, 0.18). In fact, it could be determined that oil was a poor indicator of inflationary expectations as measured by the CPI. This view falls in line with the work of energy economist Douglas Bohi, whose historical work concludes that oil has far less impact on the world economies than most economists believe.[1]
Gold as a Measure of Price Inflation
Historically, we can see how gold has significantly anticipated the rise and fall in purchasing power. When the world went off the gold exchange standard in 1971, the price of gold rose sharply from $35 an ounce to $200 an ounce, reflecting the sharp rise in commodity and consumer prices in 1973-74. Then gold suddenly topped out in 1975, about the same time the CPI rate started dropping. When consumer price inflation started moving up again, reaching 14 percent in 1979-80, gold moved in sympathy, rising from $100 an ounce in 1976 to $850 an ounce in January 1980. The long disinflationary era of the 1980s and 1990s saw a declining trend in both consumer price inflation and the gold price, although that trend may be changing again soon.
In short, it appears that the price of gold does a good job of reflecting the inflationary environment as measured by the Consumer Price Index. It is certainly a better indicator than the crude oil price.
Research by the late Professor Roy Jastram (University of California at Berkeley) suggests that gold maintains its purchasing power over the centuries. After investigating the purchasing power of gold over the past 300 years, Jastram concluded that, despite major inflations and deflations, Nevertheless, gold maintains its purchasing power over long periods of time, for example, half-century intervals.[2]
Based on the above new evidence, wouldn’t it be appropriate for the New York Times and the Wall Street Journal to add gold to their summaries of the financial markets?
--
1. Douglas R. Bohi, On the macroeconomic effects of energy price shocks, Resources and Energy 13 (1991), pp. 146-162. See also my column, The Freeman (August 1994), pp. 457-458.
2. Roy Jastram, The Golden Constant (New York: John Wiley & Sons, 1977), p. 132.
What interested me the most was the complete absence of inflation data. A comparison between 2009 dollars and 1999 dollars? Really?
Knowing that gold tends to be the best available indicator of currency inflation thanks to its nearly constant historical demand worldwide, I decided to plot the price of health insurance against the average price of gold per ounce over the last ten years:
The basic argument is that if gold is an accurate measure of currency valuation, it is an excellent indicator of currency inflation. Plotting the increase in premium prices against gold prices over a decade demonstrates that the real cost of health insurance premiums has fallen. This of course assumes a flat demand for gold, and thus is not perfect. Keep in mind the demand for gold has remained nearly constant for many hundreds of years (thus its moniker, the "Golden Constant").
If the original graph indicating increasing premiums is to have any meaning, inflation data must be included and accounted for. Otherwise, we are measuring the cost of a good by a fluctuating paper currency. Since it is very difficult to determine a perfect index for measuring inflation, I choose to use the gold standard as most existing indexes (such as CPI and WPI) are of transient value and often subjected to political interference. After all, what statesman wants to inform the citizenry that their dollar will only purchase 75% of what it did the year before?
I added series of gold price, gold price/oz x 10, and a series representing the average price for family coverage adjusted against the price of gold. The amount of inflation suggested here in no way paints a very rosy picture of our long term economy, but certainly helps to indicate that the real costs for health care might not have increased as drastically as some suggest.
From the Wall Street Journal:
Gold Turns Out to Be the Best
However, the results were much better when we tested average annual commodity prices as a predictor of the following year’s CPI since 1970. All three commodity prices showed predictable power over the long term (one year). However, it is clear from the regressions that gold was the best indicator of inflationary expectations (R-squared, 0.42), followed closely by the Dow Jones Commodity Spot Index (R-squared, 0.37), and oil was a distant third (R-squared, 0.18). In fact, it could be determined that oil was a poor indicator of inflationary expectations as measured by the CPI. This view falls in line with the work of energy economist Douglas Bohi, whose historical work concludes that oil has far less impact on the world economies than most economists believe.[1]
Gold as a Measure of Price Inflation
Historically, we can see how gold has significantly anticipated the rise and fall in purchasing power. When the world went off the gold exchange standard in 1971, the price of gold rose sharply from $35 an ounce to $200 an ounce, reflecting the sharp rise in commodity and consumer prices in 1973-74. Then gold suddenly topped out in 1975, about the same time the CPI rate started dropping. When consumer price inflation started moving up again, reaching 14 percent in 1979-80, gold moved in sympathy, rising from $100 an ounce in 1976 to $850 an ounce in January 1980. The long disinflationary era of the 1980s and 1990s saw a declining trend in both consumer price inflation and the gold price, although that trend may be changing again soon.
In short, it appears that the price of gold does a good job of reflecting the inflationary environment as measured by the Consumer Price Index. It is certainly a better indicator than the crude oil price.
Research by the late Professor Roy Jastram (University of California at Berkeley) suggests that gold maintains its purchasing power over the centuries. After investigating the purchasing power of gold over the past 300 years, Jastram concluded that, despite major inflations and deflations, Nevertheless, gold maintains its purchasing power over long periods of time, for example, half-century intervals.[2]
Based on the above new evidence, wouldn’t it be appropriate for the New York Times and the Wall Street Journal to add gold to their summaries of the financial markets?
--
1. Douglas R. Bohi, On the macroeconomic effects of energy price shocks, Resources and Energy 13 (1991), pp. 146-162. See also my column, The Freeman (August 1994), pp. 457-458.
2. Roy Jastram, The Golden Constant (New York: John Wiley & Sons, 1977), p. 132.
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