There is no historical evidence to suggest that money printing has ever done anything except destroy economies. Just ask the people of Zimbabwe.

We’ve already enacted bailouts in the tune of trillions with no upturn in the economy. Unemployment remains high. There is no recovery without employment. The idea that unemployment is a “lagging indicator” is ridiculous. It isn’t a lagging indicator, it’s the only indicator. The stock market can go as high as it wants. A high nominal value is meaningless. As much as the stock market has “recovered”, how stable is it? When the Dow Jones can drop 1000 points in a matter of minutes, we know we aren’t standing on solid ground.

This is volatility like we’ve never seen.

Bye Bye EU

There is an excellent chance the Euro won’t be around for much longer. It was an idiot’s idea to begin with. Who has it actually helped? No offense to any of the member nations of the EU but, the only really productive nation is Germany. The rest of you are–more or less–freeloaders. Ultimately, the EU has been great for the rest of you who do very little while Germany carries your asses.

That might be okay with you but, let’s not forget how the Euro has killed tourism. It is just too damn expensive for people to travel to Europe. Especially the big spenders from America. It’s lovely that you have a “stronger” currency–for now. But, what good has it done for your economy? Imposing a strong currency on a weak economy is economically unnatural. You become dependent on the entity that imposed this currency. Example: Greece.

The Greeks are rioting. They are burning buildings. Killing people. I do not support any of it but, the Greeks will do what they do. I am glad we haven’t resorted to that here in the United States. Force isn’t the answer. We can still accomplish what we need with peace.

But, can you blame the Greeks for rioting? The EU wants to impose austerity on Greece. Sounds like a nice word. But, what does it mean? It means the Greek people are going to suffer a drastically reduced standard of living. How happy would you be if some foreign entity forcefully made you poorer? I do mean foreign. The EU is not Greece.

None of this were the fault of the Greek people. It was the European Central Bank that kept interest rates too low for too long that allowed the bubble in the Eurozone to grow. This bubble is most devastating to weaker economies like Greece, Spain, Portugal, and Ireland. This should be to no one’s surprise but, those same nations are all in trouble. At this point, it’s just a matter of time.

The EuroBubble

Anyone with any sense could have seen that this arrangement with the EU was only going to end terribly. With the ECB, the Greek government no longer had to raise taxes on the people to fund their idiotic projects. They just had to create bonds, sell it to the ECB, and voila! brand new spanking Euros! This is the same arrangement the US Treasury has with the Federal Reserve.

Low and behold, Greek never had the capacity to pay all the bonds they created! And now Greece is where they are now: about to default. But we can’t have that! Those holding Greek bonds would lose a boatload of money. And apparently, those holders have friends in high places. I have no idea who owns Greek bonds but, I would not be surprised if some of our financial wizards on Wall St owned some. These are the same geniuses that bet on mortgage-backed derivatives so, it isn’t a far stretch.

On Mother’s Day, May 9th, 2010, the Federal Reserve agreed to be one of the handful of central banks to provide for the almost $1 trillion EU bailout. Great. American taxpayers are going to be on the hook for economic crises in Europe too. We really must be rich!

But, no. We aren’t. Our economy is still in the toilet. There are now a record number of Americans on food stamps. Yea, shit hasn’t gotten better.

The Last Straw

Our involvement in the EU bailout isn’t going to implode what remains of our economy. In the bigger picture, our involvement in the EU is negligible. This doesn’t mean we should be involved. We surely should not be.

The implosion of our economy was ensured as we enacted our own bailouts and increased the national debt to over 90% of GDP. It is going to go over 100% of GDP in no time with the gigantic budget deficits–bigger than the GDP of Canada. But even that wouldn’t necessarily result in armageddon. Japan’s debt is 200% of GDP and they’re still around. Granted, they have a zombie economy. But even a zombie is still “alive”–reanimated, whatever.

The last straw is going to be when interest rates go up. They have to. Either interest rates stay low and we suffer from massive inflation or we raise interest rates, the interest payments on the national debt becomes sky high, so we print money to pay it, and suffer from massive inflation anyway. No matter what, inflation is coming. And it’s going to destroy what remains of the US economy.

I won’t even include the $60 trillion of unfunded liabilities from Social Security and Medicare. No matter how slowly those unfunded liabilities become funded, inflation is unavoidable. It would take some magical free market ingenuity to create a bunch of Apple’s and Google’s for the economy to “grow” its way out of this.

This is highly unlikely. It would be more likely that you win the lottery tomorrow than it would be for a crippled and handicapped free market to create an army of companies like Apple and Google within the next decade. But, this is what the people in government are hoping for! Cross your fingers!

A Ray of Sunlight

This is a terribly dark future. But, there is some good to all of this. Granted, it would be much better if we never bailed out Wall St and we didn’t grow government to the size it has become but, too late for that. We have what we have and there’s no sign that we can change course in time.

If we can cut the size of government drastically and alleviate the tax burden drastically, there is some hope that the worse won’t happen. But again, this is about as likely as “growing” our way out of the problem.

The only likely ray of sunlight is the fresh start we all get when the US Dollar collapses. It won’t be fun to get there but, at least the end of the rainbow will be a pot of gold.

In February of 2009, there was only one country without any national debt: Zimbabwe. They had a fresh start. Super markets with empty shelves as price controls were enacted by the government are once again plentiful.

Ultimately, this is not going to be fun. The other bright side is that all the technology we have are still going to be here. Economic destruction doesn’t just make these leaps in civilization disappear. It will never be as bad as the Great Depression or the Dark Ages. We have better technology. Humanity has improved virtually everything we do. Even Kings never had air conditioners or computers.

No matter the shit storm, it could always be–and has been–worse.

I am currently debating a friend of mine about the theory of natural monopolies. He has an economics degree from NYU. I have a degree in marketing but, I also study the works of the Austrian School of Economics. Clearly, his credentials are greater than mine on this topic but, in this case, natural monopolies is a myth taught at schools across the country.

In this video, Thomas DiLorenzo debunks the myth of the natural monopoly. You can find his written research paper here provided by the Mises Institute. The theory of natural monopoly does not logically fit with fundamental laws of economics.

The disconnect is that while the government says they want to do all those good things, they will end up accomplishing the opposite.

I’ve talked plenty about how the government’s attempts at rescuing the economy is the equivalent of giving a drug addict more drugs, how man-made climate change is a load of crap, and how the problem with healthcare is the excessive amount of government involvement. So, I won’t beat a dead horse. I will instead tackle another unpopular topic: the minimum wage.

If it was up to me, the minimum wage would be $0. The minimum wage is promoted as a means to create wealth equality and provide all Americans with a livable income but, the reality is nothing that is promoted. A minimum wage keeps more workers out of work.

The government is essentially saying that if you do not have the skills to warrant whatever the minimum wage is, you should not work. Sound backwards? It’s not. There is no reason for a company to hire you for $7.25 to do a job that is worth much less. So where there was a chance for people without skills to take a lower wage to learn the skills so that they can get ahead in life, the government takes it away.

If you made some wrong decisions or life just threw you a bad hand, you no longer have the means to work your way up. The government eliminated the steps at the bottom of the ladder and if you can’t jump high enough to reach the new bottom, you are screwed. To fix this unemployment problem, the government puts a band-aid over it by offering welfare for the people the government put out of work! How grand.

To compound the problem, the government via the Federal Reserve inflates the money supply to fund all their welfare/warfare projects and our cost of living goes up. To solve this problem, the government raises the minimum wage because it is now more expensive to live. The increased minimum wage puts more workers out of work and the government needs to offer more welfare by printing, borrowing, or taxing and the cost of living goes up more! This is the vicious cycle created by government and further made worse by more government intervention.

No one in Congress is going to vote no to the increase in the minimum wage because it is politically unpopular–except Ron Paul and a few others who understand economics and unintended consequences.

No one wants to see the actual picture of what the minimum wage does. When people criticize the minimum wage and call for its abolition–like myself–we are labeled as monsters who do not care about the poor. I am not multi-millionaire and I don’t make that much money. I just understand economics. I don’t care about the poor as much as I care about myself–I won’t lie about it.

I find little wrong with putting yourself, family, and friends first before random strangers. It is terrible that people are living in poverty but I am not so far away that the policies I support will benefit me at the expense of the poor. It will benefit everyone.

It is an economic lie that the minimum wage is good for the economy. If the minimum wage can solve our poverty problems, why not just make it $100/hr and everyone would be rich! Obviously, we can see that it would be disastrous and practically everyone will be out of a job or prices will be sky high for everything.

So as usual, the government is kicking the economy while it is down with this minimum wage increase.

Why do wine and liquor stores get a monopoly? We know that monopolies are bad. The more competition there is in the market, the better it will be for the end consumer–us.

I’ve seen little flyers at my local supermarket in support of this and I’ve heard the arguments against it. Those against the freeing of wine sales have a weak case at best.

“In addition to charging grocery stores franchise fees of varying amounts for the right to sell wine, it would nearly triple the excise tax on wine sales and eliminate financing for the New York Wine and Grape Foundation, a trade group.”

An increase in excise taxes is a bad thing but the elimination or reduction of government financing for the New York Wine and Grape Foundation is perfectly fine. Why do they need subsidies in the first place? If the foundation cannot exist without government aid then it shouldn’t exist at all. The active participants in the wine industry can maintain their own foundation.

As a consumer, I would love it if I could buy wine at my local supermarket. However, I wouldn’t expect any specialty wines at a supermarket. There will always be a market for specialty wine and liquor stores. It will likely be a smaller market and their business models may have to change but, that is how business is. There is never a guarantee that your market will stay the same forever nor a guarantee that you will stay in business forever.

The mere fact that the government grants wine stores a monopoly on the sale of wine makes consumers worse off. The availability of wine will increase and the price will decrease. This is better for the wine industry as a whole as the market will expand.

“A coalition known as the Last Store on Main Street, representing 2,742 New York wine sellers and liquor store owners, says the move would force more than 1,000 such stores out of business and lead to a loss of more than 4,000 jobs.”

Those who lose their jobs due to this can find jobs elsewhere. There is no reason why millions should suffer just because thousands will lose their jobs. The benefit to society is greater than the loss.

“I’m a parent,” he said. “For the 25 years I’ve been in business, I’ve been extremely conscious of people who try to buy liquor when they’re not legally entitled to it. So I’m concerned kids might be able to get alcohol more easily. I don’t want those kids on the road.”

The argument of an increased sale of alcohol to minors is asinine. Supermarkets already sell beer and card their patrons. The process of the sale of beer can just as easily be applied to the sale wine. This is clearly a moot point. Ideally, there would be no age restriction on the purchase of alcohol but, this is the society we live in.

“And are more people going to drink more wine just because it’s in a grocery store? I don’t think so,” Mr. Massoud said. “I think the demand is finite.”

That is just a gross misunderstanding of economics. Demand is always infinite. It is supply and price that keeps demand in check. We always want more things. If prices are lowered, demand will go up. It is an absolute certainty that more people will drink wine if it was more widely available and cheaper.

It is about time NY got rid of the wine monopoly. It will be better for all of us.

Tom is entertaining and informative in this 50 minute speech. You need to watch this!

Politicians love comparing the Great Depression to what is going on today. The reality is that it will never be as bad as it was in the 1930′s. Not because we have such great government institutions in place to make sure something so devastating never occurs again–in fact, we have the opposite in place–but, technology and the free market has improved everyone’s lives so greatly that it would be very difficult to literally relive the 1930′s.

There may be comparable numbers in terms of relative stock market losses, unemployment, etc. but, we still have the technology that we didn’t have back then. No matter what happens, unless we go back to the stone age, we are going to live through this depression in a much more comfortable state.

Now that we have put things into perspective, the heads of state attending the G20 Summit in London are using the threat of a world wide Greater Depression to further undermine people’s Liberties and make the situation worse for the masses. Obama is pitching his monkey-devised economic rescue plan to the world in hopes that everyone will adopt it.

I plea to the rest of the world to ignore what Obama has to say. He is either intentionally trying to feed poison to a weakened world economy or he has no economic understanding–either one is bad for all of us.

“We cannot afford half-measures and we cannot go back to the kind of risk-taking that leads to bubbles that inevitably burst,” he (Obama) said Wednesday.

This line is mostly meaningless. Who is taking risks? What the hell are half-measures? Obama has never said anything meaningful so this is certainly not something new. He is all about vague ideas of hope and change. Obama’s economic stimulus plan is an economic disaster.

The stock markets have rallied in the past week. Some people may call this the beginning of the new bull and that we’ve hit a bottom. It could be possible but, that is highly unlikely. The more likely scenario is that this is a bear market rally.

The sad reality is that ever nation at the G20 has the same plan. They want to argue over how much regulation here and there but, the ideas are all the same. They want to pump in enormous amounts of money into the economy. It doesn’t take an economic genius to understand that you cannot solve the problem of too much spending and credit with even more spending and credit.

However, it is the economic geniuses who will tell you we need to spend more and go deeper into debt to solve the problem of being in too much debt! There is no financial wizardry that makes this a workable solution. Natural laws cannot be defied by government!

The entire G20 hocus-pocus is to make it look like world leaders are doing something to save the world economy from ruin. There is nothing they can do that they also like to solve or mitigate the problem. The real solution is to shrink the size of government all over the world. Politicians don’t like to do that. Why would they want to take power away from themselves?

The real point of the G20 Summit is about how governments around the world can make this economic crisis worse.

“Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead.

Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after.”

It is almost second nature for people to want government to enact laws forbidding behaviors, substances, or activities that they won’t agree with. This has mostly to do with the “government is the solution” mentality. In reality, government is not the solution. This is why prohibition of alcohol failed so miserably in the 1920′s.

“The right policy, therefore, is to legalize drugs while using regulation and taxation to dampen irresponsible behavior related to drug use, such as driving under the influence. This makes more sense than prohibition because it avoids creation of a black market. This approach also allows those who believe they benefit from drug use to do so, as long as they do not harm others.”

This is the sensible policy because the war on drugs is never going to eliminate the use of drugs. Those who want to use drugs are still going to use drugs. The only outcome of the war on drugs is death as black markets are created.

“The U.S. repealed Prohibition of alcohol at the height of the Great Depression, in part because of increasing violence and in part because of diminishing tax revenues.”

Although I would rather see sensible policies enacted and a respect for Liberty displayed when we aren’t in an economic sinkhole, I’ll accept it anyway. Perhaps the government will be forced to legalize drugs in an attempt to generate more revenue in a quickly shrinking economy.

I was going to go to bed and perhaps have an early rise in the morning but, I decided to surf Facebook and found myself tagged to a note on someone’s thoughts about capitalism. I had debated this person on the topic of Obama’s economic policies in the recent past. What was obvious from the debate is that I am in support of Liberty and freedom and he is in support of central planning and big government.

It is certainly not rare to have big government supporters in the State or city of New York. Since Obama has become President, I have become more and more a fish out of water when it comes to political debates. Where everyone was against Bush’s idiotic policies, no one dares criticize the Messiah’s idiotic policies. The scariest thing is that they don’t see the similarities.

I consider myself a student of Mises and have learned a great deal from economists, philosophers, and statesman–not statists–who are knowledgeable of his work. While Mises has long ago refuted Marx, it has not stopped the boneheaded Marxian ideas from spreading.

So, while every centrally planned form of government has failed since Marx and before Marx, we are still debating whether a free society is the best one to live in. It was Einstein who defined insanity as doing the same thing over and over again expecting different results. In that sense, all Marxists are insane–and so are their policies.

My motivation to write this instead of sleep was from a Facebook note. This note came about because of a quote I posted by Henry Hazlitt:

“The whole gospel of Karl Marx can be summed up in a single sentence: Hate the man who is better off than you are.”

The author of the Facebook note was outraged. Before I had read this note, I did not know the author was a Marxist. I knew he supported big government and believed it to be a good idea to steal from one group to give to another–in this case it was stealing from the poor to give to the rich or what is known as bailouts.

That is the great irony of all centrally planned societies. They promise prosperity for all and that no man shall be better off than another. In practice, it is true, the masses are all equal–equally poor–and the elite few running the show live like royalty.

“The average person becomes wealthy in the United States through one of a limited amount of things. The most common: Luck. People with the set of skills necessary to profit in the system are actually a dime a dozen. The only difference is that some of them were at the right time and place. I think there’s a book out that recently addressed the subject in great detail, actually.”

I will not disagree that it has become more difficult to make it in the United States. The government has gotten bigger and people have become less free. The only result of that is a lower standard of living for everyone. The problem is not freedom–the only way one can blame freedom that is to ignore all of history.

Of course, when people criticize systems and name them the United States, they are really talking about free markets. Sadly, the free market has been on life support for a long time now in the United States and all the criticisms of how this system is not working is really a criticism of how big government doesn’t work.

In an actual free market, hard work and savings is what makes people wealthy. Creating products and services that benefit the masses is how one is rewarded. There is always luck but, to credit all good things to luck is underestimating yourself and giving yourself a free pass when you fail.

The culture of laziness and not taking responsibility for oneself seems to be greatest draw to Marx. We want to feel that we are “safe” at the expense of being free. We don’t want to do any real work, we just want to complain about how hard we are working and how the “man” is keeping us down!

The book that the above quote refers to is Fooled by Randomness. I have not read the book but, I am aware of it. From what I understand, the book talks about economic success in stocks and financials as being random. Anyone who actually understands economics would know that there is nothing “random” about what happens.

When governments create bubbles, everyone is going to look smart. When the bubble pops, all those previously “smart” people are going to look real dumb. The reasoning is that they weren’t that smart–it was just too hard to fail in the bubble. It isn’t random. The “business cycle” isn’t random–it is created by government and it is predictable.

The better title for that book would be Fooled by Ignorance and Misinformation.

“[W]e have every right to hate the wealthy man- he has no right to that wealth.”

Any free person would find that appalling. Apparently people have a “right” to a house and a “right” to health care but, a person who works hard and saves has no “right” to his own money! Classically Orwellian and also classically Marx.

Those who believe one has no right to his money–his property–but, believes in a right to own a home or a right to health care has zero understanding of Liberty at best. I recently wrote a large piece about Liberty and so I won’t repeat it but, do read it.

“Freedom is not a thought that is readily adaptable to the masses.”

That is even more appalling to free people. It is certainly not unexpected for a Marxist to want to enslave everyone. That is the only way the Marxian utopia can be founded: by force.

“Of course, you are free to stab yourself in the leg. The adrenalin would give you a high, even. What would you do when you started bleeding to death?”

Then you die. If you freely choose to kill yourself–you can do it. I can’t kill you and you can’t kill me but, you can kill you. i don’t recommend it but, it is your choice. Every choice has its consequences and it is our responsibility to deal with them. We have no right to forcibly spread the pain to other people. Other people are free to burden some of our pain if they choose to.

“In this society we have people lacking intelligence, wisdom, or even common sense, running around with the idea that they can do whatever they want with their capital because it is a ‘free’ country. They have no idea what that even means, the true beauty of that concept. Ignorance is indeed bliss.”

They can do whatever they want with the capital outside of hiring someone to kill someone else. Liberty is not a complicated idea–it is a natural one. The irony in stating the people don’t understand what it means to be free is that people understand even less about the effects of government legislation on their lives.

The choice here is to let people live peacefully in “ignorance” or allow one group to enslave another without the other knowing it or consenting to it. To criticize Liberty and then offer an alternative that is even worse is hardly a good argument.

“In considering this, I remembered why I loved Marxist writing. He recognized that in order for wealth to exist, someone must put in the effort needed to create it. This he called labour power. Marx was extremely naive, in that he assumed the human race would be able to put aside greed and selfishness and testosterone in order to assure each person would receive the appropriate result of his labour power. He assumed that we all cared for our fellow man.”

This quote contradicts itself before it is finished. Marx didn’t have all this economic understanding wrong, he just came to wrong conclusions with some of the right concepts. Wealth can only be created through production and savings–absolutely correct.

The author claims Marx is wrong in assuming men are good yet, believes that there should be a big government to regulate everyone else. The classic argument to this is: where do you find these angels? If men are greedy and selfish and you give men great power to regulate and tell others what to do, how are they not going to act in their best interest? If men are evil, the last thing we need is a big government.

History is witness to the fact that big governments only rape and pillage those it governs. Never has a big government done something in the best interest of its citizens over doing what is in the best interest of those in government. This being the greatest fallacy of Marx and all central planners.

“I believe in the America that John Locke and Thomas Jefferson and Ben Franklin believed in. I don’t believe in democracy, because they never believed in it and they were right not to. Seriously, does it make sense to any of you? A person with no college education and no background in politics has the same vote as a doctor, a lawyer, the President! Talk about unqualified for the job. I don’t believe in capitalism, but the free trade system has its uses.”

Everything above contradicts this last paragraph. This final paragraph is the case for Liberty and free markets. There is no system where you can avoid having someone unqualified to rule everyone else. The reality is that we are all unqualified to tell others what to do. We never know what is best for an individual–only they do.

Democracies are garbage and I, like Jefferson and Franklin, do not believe in rule by the majority. I am for Republics as our Founding Fathers were. So while our politicians keep trying to confuse us and tell us that we are a Democracy, we are not. Recite the Pledge of Allegiance and you will note that we pledge allegiance to the Republic. And no where in our founding documents is the word Democracy present.

Ultimately, that last paragraph is hopeful. Hopeful that Americans still understand freedom. It is just a matter of exposing the truth behind financial meltdowns like the one we are experiencing.

They want us to believe it is a “defect” of the free market when the reality is that this was a government creation. They want us to believe this is due to a lack of regulation when the government has never had a heavier arm in the market. They want us to believe that government can protect us from another collapse when they have engineered every major economic collapse since the Great Depression.

There is a reason why the depression in the 30′s is called “Great”. All other depressions didn’t last so long because the government never intervened. Depressions have gotten worse since the creation of the Federal Reserve and the rise of ever greater government–this is not a coincidence. If there is one thing we don’t need, it is more government.

Few people can explain sound economics as well as Peter Schiff. He explains why the stimulus is garbage and that the result of all this government spending is going to result in an inflationary depression.