America has about 4% of the world’s population, yet houses 25% of the world’s incarcerated. What’s going on here? Chris Campbell digs deep into the industry to figure out the truth. While many blame the private prison industry, the real culprit, says Chris, begins right outside your door. Read on…
“While I heartily subscribe to your premise of pursuing one’s dream,” one reader, Donald J., wrote, “there are alternate perspectives worth considering.”[We’re listening… go on.]“Some wiseguy once said that life is what happens to you while you’re waiting for something better to come along. Milton put it a little more poetically in one of his […]
Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…
Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…
All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…
The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.
Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...
When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.
The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...
Americans expatriate because they want to get out of the country. Corporations expatriate for similar reasons. Clem Chambers explains...
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]
The midterm election season is upon us, and it’s a tossup whether the Republicans will win the Senate, or if President Obama, seemingly oblivious as conflict flares up around the world, will, through his continuous campaigning, keep Harry Reid in his majority leader seat.The only thing we know for sure is that sociopaths will be […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]
Turn on the tube and economic ignorance seems to be everywhere. There is constant shilling for more government. Business is demonized. Man is said to be trashing the environment. “Workers and women are oppressed” is the constant mantra.And members of the clueless media nod their heads in unison.Only John Stossel has provided the fresh air […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]
It might sound like the latest new product from Apple, but IPAB is actually the newest major legal challenge to Obamacare.Recently, a three-judge panel in the 9th Circuit Court of Appeals in San Francisco heard arguments about the Independent Payment Advisory Board, or IPAB, a 15-member panel created by the Affordable Care Act and empowered […]
Americans have come to believe that the IRS and the income tax are inevitable parts of our lives. After all, most everyone alive today has lived his entire life under federal income taxation.It wasn’t always that way. For some 125 years, the American people lived without having any tax imposed upon their income.The obvious question […]
The European economy is turning from stagnation to contraction. Financial journalists are concluding that “austerity” is the reason.
They say that forced reduction in government services is sending not only the continent, but the U.K. into an economic tailspin and — heaven forbid — the same could happen to the United States. Look and panic: America’s various levels of governments are contracting, laying off workers and cutting services.
The whole civilized world is doomed, they say, by this reduction in government. To their minds, an expanding government leads to an expanding economy, as measured by gross domestic product (GDP). Cuts in government do the opposite.
But have there been actual cuts? Veronique de Rugy of Mercatus has looked at this claim government by government and finds throughout the U.K. and Europe mostly higher taxes, higher spending, more regulation, and a near absence of serious and substantial structural reform. The cuts that have taken place have been forced by economic reality.
If for one night a drunk can’t get to the slot machines, this does not amount to gambling austerity.
But here is a more-important question: Does government drive the economy? Look around at all the things you love, all the services that are most beneficial to your life, all your material aspirations and dreams. How many of them were or are produced by politicians and bureaucrats?
As Albert Jay Nock said, government has no resources or power of its own. Everything it has it has taken from us. It produces nothing, but exists only to the extent it can feed off its host — wealth creation aimed at serving customers in the private economy.
It seems like a simple and incontrovertible observation, but it must not be, because otherwise-intelligent people seem to miss it. The New York Times’ Eduardo Porter complains about Americans and their aversion to taxes. He was just in Italy, he says, with an economy in shambles, a government bloated with debt and corrupt bureaucracy, yet his son, who developed an untimely rash while vacationing, was served lickety-split by an Italian doctor, gratis.
Porter figures that’s government as it should be.
A good share of Italians may be unemployed and their economy may be shrinking, but their social safety net stretches farther than ours and supposedly their poverty rate is lower. Their free health care covers even tourists.
To believe Porter, the laws of economics have been repealed in Italy. Great food, great wine, free health care, and no one has to work in this paradise.
According to Porter, America has plenty to learn from Italy and countries like it that tax their citizens at an appropriate level, unlike the good old US of A that can’t seem to get its citizens to cotton to the idea of handing over more of their property to the state.
Porter doesn’t talk about individual tax rates. He focuses on the percentage of taxes collected to GDP. That percentage in the developed world averages 35%, while America is falling behind, at less than 25%. Only Mexico and Chile are less taxacious.
Of course, as Bill Bonner told the Agora Symposium crowd in Vancouver, GDP is just another phony government number. He wrote in Whiskey & Gunpowder in 2010:
GDP growth alone is a fraud. The gross number just doesn’t tell you anything worth knowing. It doesn’t really matter how fast an economy is growing. What counts is how fast it is growing per person… and whether that “growth” is real or phony. Growth is not the same as prosperity… Someday, we promise you, modern economists will be ranked below doctors who bled their patients to death and jungle tribes who threw maidens into volcanoes. They are quacks.
According to Porter, America is not only not taxing enough, it’s not taxing the right way. Consumption needs to be taxed, instead of taxing labor and capital “that damp people’s drive to work and invest, putting a drag on economic growth,” Porter writes. “And the tax code is riddled with preferences and loopholes that further distort people’s economic behavior.”
I agree with his point about distortions and disincentives to work and invest, but he’s implying that governments in the rest of the world are living off the VAT (value-added tax) exclusively and not taxing income and capital gains.
This, of course, isn’t true. Europe taxes everything. And despite taxing everything, their countries are broke, and getting more so.
As Margaret Thatcher once said, “The problem with socialism is that eventually you run out of someone else’s money.”
Here in the U.S., private business is adding workers, but as Shaila Dewan and Motoko Rich report in the Times, governments are handing out pink slips, and that is hurting the recovery. Some 706,000 government positions have been axed since April 2009:
“The unfortunate reality is our revenue streams have not rebounded,” said Timothy R. Hacker, the city manager of North Las Vegas, which has cut its workforce to 1,300 from 2,300 and is about to lay off 130 more. “Shaking this recession is becoming increasingly difficult”…
More than a quarter of municipal governments are planning layoffs this year, according to a survey by the Center for State and Local Government Excellence. They are being squeezed not only by declining federal and state support, but by their devastated property tax base.
The federal and state governments depend upon private-sector economic growth that can be taxed. In turn, local governments are dependent upon that same economic vitality — none of which is generated by the government. It’s backwards to think government jobs create economic growth when, in fact, government jobs can be supported only by economic activity in the private sector.
State and local governments expanded mightily with the housing boom. Mr. Hacker’s employer — the city of North Las Vegas — moved into lavish new digs during the bubble Each and every demand made by the public employee unions was accommodated because the city’s growth was thought to be endless.
When local housing markets crashed, so did local government finances.
But President Obama doesn’t understand economics or cause and effect any better than those writing for The New York Times. He thinks the public sector must grow to compensate for the private sector, not hiring. “Each time there was a recession with a Republican president,” Obama says, “we compensated by making sure that government didn’t see a drastic reduction in employment.”
The Wall Street Journal makes the same claim. Without increases in federal spending, the recovery doesn’t have a chance, write Ben Casselman and Conor Dougherty:
Recent economic data show that long before the fiscal cliff hits, federal spending already is falling — and taking a toll on the recovery. Federal spending and investment fell at an annual rate of 0.4% in the second quarter and has fallen 3.3% in the past year. Federal employment has fallen by more than 52,000 jobs in the past year and for the first time is lower than when the recovery began.
They even found an economist to provide a juicy quote to support their argument. “It’s unbelievable how much the economy is getting hurt already by the sharp drop in federal spending,” Deutsche Bank chief U.S. economist Joe LaVorgna said.
All of this implies that all jobs are homogeneous. If a worker isn’t needed in the private sector because consumers aren’t buying that particular good or service, then government can just replace that job with a job in government doing something that consumers in the private marketplace won’t pay for.
Politicians and Keynesians believe that swapping these two jobs will preserve economic growth. Life will go on as before.
This is nonsense. The worker had a job because he or she produced more than he or she cost the employer in the pursuit of satisfying customers. Fewer customers means fewer jobs are needed. Less economic activity means fewer tax dollars going to government. Fewer tax dollars means government doesn’t have the resources to hire more people.
The idea that hiring more government workers stimulates economic activity stands reason on its head.
Economics professor Tyler Watts makes the point in The Freeman online:
Perhaps we’ve been spoiled by hundreds of years of a generally prosperous and growing market economy into assuming that all workers necessarily add to economic output by exactly the value of their paychecks. There is a strong tendency toward this result in a strictly market-based competitive economy.
But professor Watts quickly makes the point that government workers don’t provide the same value. There is no market test to determine if government workers are generating value. Only political rules apply.
The fact that government employment is shrinking is only a signal that economies worldwide are attempting to recover from decades of debt and malinvestment, which includes too much government.
Government layoffs are a good thing. They put more resources into the private sector, which is the only real source of growth. Whether the GDP number is up or down doesn’t mean a thing. After all, since everyone believes China’s GDP number is inflated, why shouldn’t we assume governments deflate the number when it suits their purposes?
Government austerity is, in the long run, a blessing to the rest of the population.