I discovered a comic or graphical novel by Irwin Schiff today while browsing through my RSS feeds. Someone on Campaign for Liberty asked for help with producing a children’s book focused on Liberty. A comment pointed to How an Economy Grows and Why it Doesn’t by Irwin Schiff.

This is essentially a comic book that tells a story and teaches economics at the same time. I found it to be incredible useful and a good means of understanding basic economic principles. I liked it so much so that I decided to put it into an easier to use form.

So have a read when you get a chance. It is good stuff! Especailly in current times when things are all going awry and no one in the mainstream has any idea what is going on! Irwin Schiff explains sound economics in an easy to understand fashion. And who doesn’t like cartoons?

The Washington Post had an interesting article written by Reid Hoffman, founder of LinkedIn, about letting start-ups bail us out. I wouldn’t be calling what he talks about a bail out–it would be a real stimulus. I love start-ups and have made it a point to only work for small companies–the smaller the better.

While I absolutely agree that it will be up to new businesses and innovative entrepreneurs to bring the United States and world economy out of this crisis, I do not agree with the means by which Hoffman suggests. The last thing we need is for governments to create more bubbles–we are living the result of the last government created bubble.

Hoffman says that “we need incentives for business innovators.” That is very true. However, the incentives should not be to “encourage small business with loans”. The SBA has always attached terms to their loans and it must be used for specific purposes that they deem important. This is influencing the flow of capital to industries or sectors that the government wants. This is creating a bubble.

Secondly, where is the government getting the money to lend? The government has no money today. It didn’t have money yesterday either but, it is in worse shape now than it has ever been. If the only means to get this money is to tax, borrow, or print then one group will be made worse off for another. Redistribution of capital never makes the economy better off. If an idea has merit, capital will find its way there–that is how the free market works.

While this proposal is a better alternative to creating jobs using war or public works projects, there is still an infringement of Liberty as long as the government needs to take from one group in order to lend money to another.

“Venture capitalists are biding their time — not for want of good ideas, solid management or stable capital but to ensure that they can get the most bang for their buck. Similarly, venture capital firms are waiting for the slide to stop and the recovery to begin before investing.”

I’m not sure if that is entirely true. As the founder of LinkedIn, I will assume that he knows better than I do. I am not in the VC circle. Regardless of whether that is the truth, there is an economically sound reason why people don’t want to lend.

No one knows when or how the economy is going to turn north again. The government is intervening on a weekly–if not daily–basis thus creating an environment of uncertainty. It is much riskier to make long term investments that VC’s generally make if no one knows what the rules are going to be six months from now.

Start-ups are going to lead us out of our current predicament but, it will not be because of government “stimulus” or loans. If these companies can find a way to flourish it will be inspite of the government and not because of it.

It seems like every time I see a Russia Today video with Ron Paul on LRC, it is an interview conducted by my friend, Dina Gusovsky. I am jealous every time.

The AP headline actually read: Regulators pledge to shore up financial system. However, the brilliant plan that these “regulators” have in mind “includes the option of increasing government ownership in financial institutions.” That is not just making the problem worse–not fixing it.

Apparently, this new scheme to increase government ownership won’t cost more taxpayer dollars.

“In a new twist, regulators have the option of allowing the government to boost its ownership in banks without having to pour more taxpayer money into them. That would be done through a technical change converting the status of the government’s shares in a financial institution.”

What? So we are going to fiddle with the numbers? I am no financial wizard but, unless you are buying more shares of a company, how else would you own more of it? Changing types of shares does not magically increase the value you had in the company.

I’m going to say that this will cost more taxpayer dollars and be a waste. We already own 80% of AIG and apparently they need even more money now. AIG is currently a penny stock–what a sight to see. This is a zombie company that needs to go out of business.

These regulators are some of the biggest users of Doublespeak alive.

“Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption (of the program) is that banks should remain in private hands,” the regulators said.

It is true that the economy functions better when managed in the private sector. What isn’t true is that these regulators want to keep it that way. They talk the talk but, fail to walk the walk. The government owns more percentages of banks with each passing week. Nationalization is said to be “off the table” but, it is going to happen at the rate we are going.

The markets are continuing its downward spiral as the government refuses to let bad debt be liquidated so that smarter people can manage the resources left over. As the Austrian School has been preaching: you cannot solve the problem of too much credit with more credit!

Economics is going to take center stage for the Obama administration this week. Obama is having a Financial Stability Summit with a variety of people including cabinet members, economic aides, and Congressional leaders. He will then speak to Congress on Tuesday at 9PM about the economy.

On Thursday, Obama will unveil his budget and plan of action to “fix” the economy. The markets fell off a cliff last week and is still sinking today. The markets may or may not rally after Obama unveils how he will manipulate the economy and cause capital to move into areas that the market feels it should not.

Obama also pledged to cut the budget deficit in half by 2013. I suppose if you increase the deficit enough, cutting it in half would be less difficult. $500 billion deficit looks better than $1 trillion but, it is still pretty astronomical.

Chances are all the spending will do nothing to fix the economy and surely make things worse. It hasn’t worked in the past. Even the crazy Keynesians like Paul Krugman agree it hasn’t worked in the past. They just think there wasn’t enough spending–how laughable.