Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
On Feb. 7 the United States will once again reach its statutory debt limit, meaning it cannot legally borrow any more money. Since the obvious option of cutting spending to match the amount of revenue that the government collects is off the table for some inexplicable reason, Congress will have to pass a new, higher […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Dr. William C. Padgett is a retired optometrist who has been trying to bring an elderly care facility to Beaufort County, North Carolina, for over a decade.“Our senior citizens,” he laments, “are finding that it is difficult and in many cases impossible to find an appropriate long-term care facility locally.” Though he has received several […]
If you don’t have the angst out of your system concerning Wall Street banksters, Government Sachs, and the Affordable Care Act, settle in with Matt Taibbi’s Griftopia to make your blood boil one more time.Investors should be reminded of 2008 as they shrug their shoulders and put their money back in the stock market. The […]
What do 8 of the 10 wealthiest people in the U.S. have in common?Aside from being able to fly in private jets, the common thread is that each of them has made their fortune thanks to a start-up.Let me explain…From tech titans like Bill Gates and Larry Ellison (founders of Microsoft and Oracle, respectively), to […]
“Inequality is the defining challenge of our time,” according to President Obama. It’s certainly the topic of the day for Paul Krugman, Joe Stiglitz and a whole raft of liberal pundits.But have you noticed that hardly anyone else is talking about it? When is the last time you heard a shoeshine person or a taxi […]
In December of last year, I left my career to travel the world for one year.My plan was to visit as many countries as possible on my Star Alliance Around-the-World ticket in the first nine months, then, for the remaining three months, return back to the country that most caught my eye and my curiosity.Nine […]
Economic history is primed to repeat in the nastiest of ways unless the government stops distorting the price of something we use every day.Every product, good, or service has a price, which is essential to rational decision-making. We use prices every day as vital data that guide us. Without true prices, prices not distorted by […]
A new survey from Harvard University found a large majority of young Americans do not believe the law will save them money, do not believe it will improve their health, and do not intend to sign up for insurance through the new exchanges.
Uh-oh!The new pope, Francis from the Pampas, has just warned us to beware the “tyranny” of capitalism.Each man worships his own gods. Some worship at the altar of Jesus of Nazareth. Some at the altar of the Almighty Dollar. The capitalists don’t bad-mouth Francis’ god. You’d think he would cut them the same slack.Bad-mouthing Catholicism […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
A president stands disgraced. Congress is scattering. Bureaucrats are baffled. Pundits are reaching. Industry is scared. Politicians are scrambling to do something, anything, to make it better. One political party is in meltdown and the other loving every minute of it, hoping to ride the calamity to electoral gains.The so-called Patient Protection and Affordable Care […]
Given the enormous role that the welfare-warfare state plays in American life, it is always easy for libertarians to find deprivations of liberty, such as coerced charity, drug war incarcerations, the IRS, torture, surveillance, and assassination. Infringements on fundamental rights and liberties have become such an integral part of daily life that many Americans have […]
For those schooled in economics, the gasoline shortage during Hurricane Sandy last November was no surprise. Demand for gas goes up. Supply lines are disrupted. It’s the old supply-and-demand thing. The price goes up. Higher prices attract new supplies from unconventional paths. Prices respond and fall back again. The market handles it just fine.
All is well except for one thing: There were anti-gouging laws on the books. These laws restrict the upward path of prices. Plus, most people anticipated exactly what happened. By executive order, governments at all levels impose even more restrictive controls. These controls prevented prices from being licitly raised at the onset of the crisis.
Most of us got our news during this time from conventional outlets. We lived on scraps of information. Most reporters, as you probably know, are not schooled in economics. They don’t know what to look for. They see a gas line and don’t know what to make of it. The whole problem just mystifies them. They don’t get how cause and effect work in the economic realm. That’s why those of us on the outset had to make due with such scattered reporting.
What about the people on the ground? There was one trader in New Jersey schooled in economics who knew exactly what to look for. He understands cause and effect. He knew that shortages were coming. And he knew the market wouldn’t give a flying flip about the government’s orders not to raise prices.
His name is Peter Earle. He did real-time reporting during the entire episode.
His report begins three days after the storm hit. He was on the ground watching pump prices. He saw black markets working. He was downloading smartphone applications that were quoting real trades. He spent his evening hours on websites where there were bid-ask quotes going on constantly. He subscribed to every gas tweet, of which there were many thousands.
What he found was extremely revealing. Despite laws and warnings, threats and denunciations, the market did, indeed, work as expected. The action began on Nov. 3. Prices shot up from $5 to $10 and $15 per gallon. Diesel was selling for $35. Generators were also all over the markets, rising in price.
The markets became very sophisticated very fast. People were including delivery in their price at premiums. Within hours, the terms became more complex, varying by quantity purchased and service provided. One seller offered the following terms: “10 gallons costs $150, 20 gallons costs $200, 30 gallons costs $250.” Another offered 50 gallons for “no less than $7 per gallon.” Still another offered $12.50, but with a 5-gallon minimum.
Earle calls the sellers of gasoline and other essentials “disasterpreneurs” — business people who know how to make a buck while providing the services people need. We think of black markets as consisting of sketchy people selling to sketchy people, but this was not the case. Absolutely the whole population was involved.
Already on this day, the economically illiterate were denouncing what was going on. Earle quotes one tweet: “Instead of trying to screw people, you should be someone who has no heat… free gas ***hole.”
Well, that misses the point. Gas will be rationed in good times and bad. It can be rationed through market prices that reflect real scarcities or it can be rationed by executive edict, as was eventually the case in New Jersey.
All throughout this day, prices were both up and down. The highest price Earle found was from devastated Staten Island. It was for 5 gallons for $25 per gallon. But not even an hour later, he found a new low offer that fell to $8 per gallon.
Interestingly, not all bids were for money. Earle found some evidence that some unnamable illegal services were being offered for gasoline. Also, the following morning, a trade in New York sought to buy 5,000 gallons of gas for a baseline minimum of a $20 Gold Eagle.
Interesting, isn’t it? Most people don’t keep much cash on hand. In a crisis, they can’t get to a cash machine. In a serious crisis, the cash machines don’t work. Or maybe they are empty. What do you do? Gold and silver might be the only truly marketable commodities.
The trading boards were also filling up with offers to bring gasoline from Maryland, Ohio, and as far away as Georgia — all provided that market prices would prevail. After all, if there are surpluses in those states, why not truck it in, make some money, and do some good at the same time? Makes sense.
Yet as expected, it was just as these markets were driving down the price to a stable equilibrium that officials at all levels started to announce they would soon begin prosecuting price gougers. That did it: Prices went up again to the $15-20 range. This was when things got pretty scary and the market players had to become a bit more careful, arranging deals in secret and exchanging goods rather furtively.
The political pressure to crack down only increased. As I wrote at the time, Gov. Chris Christie briefly considered letting the market work. But reports said that he said this almost as an intellectual musing and then quickly shifted to a full-scale rationing position based on the 1970s model of something totally irrational. The days on which it was legal to buy depended wholly on your license tag. That immediately led to new forms of markets opening up: markets for license plates!
Did any of the controls make any difference at all? According to Earle, they managed only to drive legitimate markets underground. They slowed markets and distorted them, but did not end them. From the point of view of what was actually being bought and sold, they made no difference whatsoever. People from all walks of life threw themselves into the black market to survive.
People never imagine that they will openly defy the powers that be. Americans like to think that they are law-abiding people and that their government has their best interests at heart. But matters change when your refrigerator stops working, your house is freezing, cellphones die, and your car has no fuel to get to the store or the hospital.
Suddenly, regular people in New Jersey and New York found themselves having to make the decision between obeying and surviving. They chose surviving. You probably would too.
Will officials learn anything from this experience? Absolutely not. They will repeat it. The experience of Sandy only ended in tightening the gouging laws. Gov. Christie was widely considered a hero even though his despotic actions spread misery much more widely than it otherwise would have spread.
Here’s Earle’s conclusion, written during the thick of the action: “What’s keeping folks fed, warm, and safe in Queens and Staten Island? Not FEMA, the Red Cross, Obama, or Romney. Anarchy is.”
By anarchy, he means human action. People finding peaceful ways to deal with disaster. Some of those ways included getting generators, buying gas on the free market, and even paying in gold and probably silver, too.
Here is an interview that was my pleasure to conduct with Mr. Peter Earle, the man who is the source of much of the information above. Peter is a trader in New York with an scientist’s eye for detail. In this interview you will learn how people managed to get by when the whole of the state’s infrastructure collapsed, and the government was doing everything possible to restrict access to basics. He shows how people defied the law in order to survive.