Rise Up and Take a Stand

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

Taxpayer Tea Parties All Across the Nation

Have you had enough taxation, regulation, over-spending, over-borrowing, bailouts, stimulus packages, and redistribution of wealth?

Our government exists to serve the People. We do not exist to serve the government. How well is your government serving you?

  • Our elected representatives are gutting our economy with irresponsible borrowing and spending for Toxic Asset Relief Programs, bailouts, and stimulus packages that benefit their major campaign contributors at your expense.

  • They’re diluting all of our savings, income, and retirement funds by printing up trillions of dollars of toilet-paper currency, leading to hyper-inflation and the devaluation of every dollar you own or earn.

  • They’re mortgaging our nation to China and other foreign powers, and indenturing our children and grandchildren to pay off the astronomical debt they’re incurring in our name.

  • They’re driving the industries that sustain our economy off-shore through prohibitively expensive and increasingly restrictive regulation, ostensibly to protect “the environment” and prevent “climate change.”

  • They’re establishing a whole new elite class of government employees who don’t produce anything, but are compensated more highly than the private sector can afford to match, — and are paid at the expense of the taxpayers.

  • They created this economic crisis by trying to implement social engineering as economic policy, and now they’re pretending they can get us out of this mess the same way they got us into it — by loosening up credit, promoting risk-free mortgages for those who still can’t afford to buy homes, and investing our money in the same toxic assets that are threatening to bring down the world economy!

On top of that, they plan to expand entitlement programs, under the misguided assumption that it’s the government’s role to provide for everybody who can’t or won’t provide for themselves — at the expense of those who do. They believe they need to pass even more laws to protect us from ourselves. States are drafting new regulations to determine how we can and can’t use our private property. And, at every level, they’re absolutely convinced that they know how to spend our money better than we do.

If the founding fathers could have even imagined the plethora of laws, regulations, ordinances, taxes, licenses, permits, fees, etc. that we are subject to today, and which are constantly increasing, they would roll over in their graves. Yet our current administration, and Congress, seem to believe we do not have enough government. They want to see government expanded at an even greater rate than it’s already expanding. One has to wonder what these people think the ultimate role of government should be. — It’s certainly a far cry from what our founding fathers intended.

If you’ve had enough, and you’re ready to stand up and send a message to your legislators that their days in office are numbered unless they STOP THE SPENDING, STOP THE BORROWING, STOP THE TAXING, STOP THE PORKING, and STOP REGULATING OUR ECONOMY INTO INSOLVENCY, find your nearest Taxpayer Tea Party and join us in protest on April 15.

It’s time to take a stand against overtaxation and overregulation. Please join me, and millions of others, in telling our government Get Your Hand Out of My Pocket and Leave Me Alone!

To find the Taxpayer Tea Party nearest you, visit http://TaxDayTeaParty.com.

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

Economics Lessons for Liberals: Inflation

This past week, the Federal Reserve announced that it’s going to buy $300 billion worth of long-term Treasury bills over the next six months, and $750 billion of mortgage-backed securities, to try to loosen up credit and lower mortgage rates. It was also announced that they’re not going to raise taxes to come up with this additional trillion-plus dollars (on top of the recent bailouts and stimulus bill). Instead, they would just crank up the printing presses and print up the money.

How many things can you find wrong with this picture?

Wasn’t it loose credit that created the current financial crisis they’re purportedly trying to get us out of? Aren’t mortgage-backed securities the “toxic assets” that precipitated the collapse of all those banks and financial institutions that we’re already bailing out with our tax dollars? These are the very building blocks of the biggest Ponzi scheme in economic history, but the Fed, in its infinite wisdom, sees fit to gamble 3/4 of a trillion dollars of our money on the most discredited and dangerous financial instrument ever concocted to dupe unsuspecting investors. Only, at this point, they can hardly be said to be unsuspecting.

We’re supposed to be placated by the fact that, this time, they’re not using our tax dollars, but are printing up the money on their little printing presses. So, therefore, it doesn’t cost us anything, right? That would seem to be what they expect us to believe.

Economics for Liberals, Lesson #4.* When the Fed prints new money, it devalues all the money that’s currently in circulation. Printing more money literally dilutes the value of everybody’s savings, investments, salaries, and retirement funds.

Currency has no intrinsic value; it’s merely symbolic of the value of goods and services that can be exchanged. The only way to increase the total value in a system is to increase the production of goods and services that somebody wants to consume. The sum total of the currency in a system represents the sum total of the real value in the system (goods and services produced). The value that each unit of currency represents is the ratio of the total units of currency to the total actual value in the system. When the actual value (goods and services produced) remains stable, but the total units of currency are increased, each unit of currency represents less of the total actual value and, consequently, has less purchasing power. That’s what’s known as inflation.

Inflation is simply another type of taxation. Instead of taxing you on each incremental unit of value you produce, the Fed simply dilutes the value of everything you currently have, as well as every dollar you will earn in the future. It’s an invisible tax, because you don’t see the government taking it away from you. You see higher prices for everything you buy, and you blame the producers. But the producers are paying higher prices for everything they have to purchase to produce what they sell to you.

So everybody’s stuck paying higher prices for everything, but they don’t have any more money. So everybody’s purchasing power is reduced, making everybody, in real terms, poorer than they were before the currency was diluted. That’s because the money that was printed up by the government was not distributed to the people whose currency lost its value, but rather was used to buy whatever the Fed buys with it. — In this case, toxic assets that they know are overvalued.

How do I know with such certainty they are overvalued? Because, if they were not overvalued, they’d be able to be sold on the free market. The very fact that government has to buy them up indicates they’re not worth the price at which the government is buying them.

Economics for Liberals, Lesson #5. The value of an investment is based on the ratio of risk to potential reward. If the risk is greater than the potential rewards, the investment is overvalued and nobody will buy it unless the risk is reduced or the reward potential is increased. In many investments, the risk is simply the risk of losing what you invested, so the risk can be reduced by lowering the price. When a balance is reached between risk and potential, buyers can be found on the free market who are willing to assume the risk.

But, when the government assumes the risk, the people making the decisions aren’t risking their own money. They’re risking the taxpayers’ money, either directly (through taxation) or indirectly (through inflation). In this case, the Fed is cranking up the printing presses and diluting all of our savings, investments, salaries, and retirement funds to purchase investments that are known to be bad before they buy them. If any corporate CFO were to behave that way, knowing what we all know today, they would be fired.

And, to add insult to injury, they think we’re stupid enough to believe it isn’t costing us anything because they aren’t raising our taxes — yet. But the biggest irony of all is that the purpose used to justify this devious machination is to perpetuate the very circumstances (loose credit and easy availability of mortgages) that got us into this economic crisis in the first place.

Just how stupid do they think we are? Just how stupid are we?

*Lessons #1-3 are posted in Economics Lessons for Liberals: Minimum Wage.

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

No! Don’t Do It!!

It’s like watching a horror movie. No! Don’t do it!! Don’t open the door! You cover your eyes because you don’t want to look. You can’t believe they’re going to do it. But you know they are. Even though it makes no sense, and it’s obvious to everybody watching that it’s the absolute worst thing they could possibly do. They’re going to do it anyway. Why? In a horror movie it’s because it’s in the script. And ultimately, it doesn’t really matter, because it’s all make believe.

But this isn’t a horror movie. It’s real. And it affects every one of us, but we’re powerless to stop it. All we can do is write our Congressmen and say No! Don’t do it!! Don’t give them the bailout money! And that does about as much good as shouting at the movie screen Don’t open the door! Because you know they’re going to do it anyway.

First they said they needed $700 billion to bail out troubled financial institutions. Letters to Congressmen ran 20-1 against the bailout and, last September, Congress voted against the bailout bill. But they kept sweetening the pot with a little pork here and a little pork there until everybody in Congress had enough pork in the bill to lure them into voting for the bailout, in massive disregard of the indignant outcries of the people who elected them.

Then Bernanke and Paulson turned around and said, You know what? We’re not going to use this bailout money the way we originally said we would, because that would have been a really stupid thing to do. (Really? When did you figure that out, Mr. Genius? That’s what all the people writing to their Congressmen were screaming all along.) But, even after acknowledging the plan was hopeless, instead of rescinding the bailout, they decided to spend it on something else. After all, they already had the money; you could hardly expect them to just give it back! — Not that they actually do have the money. But that’s never stopped them from spending it before. Why should it stop them now? — So they voted to spend all this money they don’t actually have, and then decided not to spend it for the purpose for which they swore they needed it. So now they’re going to spend it on something else. They haven’t yet told us what, exactly. Why not? Because they don’t know. They don’t have a plan. But spend it they will.

They’ve put out the word that there’s $700 billion of free money on the table, and they’re going to give it all away. To whom are they going to give it? The criterion to qualify seems to be incompetence. But not just any incompetence, only massive incompetence will do. To qualify for some of this free money, a corporation or institution has to prove they’ve mismanaged their finances on such an unprecedented scale that they’re billions of dollars in the hole and have absolutely no way out, short of a federal bailout.

The three automakers deserve to go out of business. GM and Toyota each sold 9.37 million vehicles last year. Toyota made $17.1 billion. GM lost $38.7 billion. What more needs to be said? But, instead of letting economic Darwinism take it’s course, the government wants to compel the taxpayers to throw our hard-earned money at them so they can flush our money down the drain after their own. This is madness. Just say No! Don’t do it!! Don’t open the door!

And, of course, now everybody else is lining up for bailouts as well. Even city and state governments are getting in line. The economy is bad. An awful lot of businesses are losing money or going bankrupt, and local governments are losing tax revenue because their tax base is losing their jobs. So why not just stick a hose directly into the pockets of all the taxpayers in the country, and siphon out more and more money until the well runs dry, to keep businesses afloat that are unable to make a profit on their own merits? Surely, every business deserves to make money, whether or not they provide good value to their customers and investors. Free market be damned! Move over Rover, let Government take over. It seems the government is determined to prove they can waste even more money faster than the failures they’re bailing out.

Which brings us back to the horror movie. Everybody in the audience can see that disaster lurks behind that door. But the protagonist is about to open it. We’re all sitting on the edge of our seats, gripping the handrests, holding our breaths, and whispering through gritted teeth – No! He hesitates with his hand on the knob. Don’t do it!! (But we know he will.) He twists the knob. Don’t open the door! And then he does ———————–

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

Social Engineering as Economic Policy

What we are witnessing today is not a failure of the free market. It is the failure of social engineering as economic policy. And it’s a disaster of epic proportions.

Nobody’s disputing that this disaster was precipitated by irresponsible lending practices, or that Fannie Mae and Freddie Mac were at the root of the whole debacle, though the ramifications have now spread far beyond them. What people are arguing about is the interpretation of the events that led us here, what should have been done differently, and what should be done to contain the fallout now that the pyramid scheme has blown up.

Hard core free market proponents, like me, will say that Fannie Mae and Freddie Mac were a mistake from the beginning. The government should have kept its nose out of the home mortgage industry, and not attempted to manipulate the market to enable people who couldn’t afford houses to buy them. On the other hand, proponents of the “government is good” and “more is better” philosophy will say the problem was that there wasn’t enough government manipulation. (Could there ever be?)

But, curiously, in 2005, when Alan Greenspan told Congress that Fannie Mae and Freddie Mac were “placing the total financial system of the future at a substantial risk,” and the Senate Banking Committee proposed a reform bill requiring tighter regulation of those two entities, the Democrats opposed it, on a strict party line vote, crushing the bill before it got out of committee. Barack Obama, Hillary Clinton, and Christopher Dodd all voted against it. (John McCain, incidentally, was one of the co-sponsors of the bill.)

Huh? Democrats voting against more regulation? Republicans voting for it? One would expect Republicans to favor less regulation, as regulation is antithetical to a free market. But, in this case, it already wasn’t a free market. A free market has its own natural checks and balances. Once the government has removed or impaired any of those natural checks and balances, the market loses its equilibrium and bad things can happen. What the Republicans were attempting to accomplish by proposing tighter regulations on Fannie Mae and Freddie Mac was to artificially restore the natural constraint that had been removed by shifting the risk from the lenders to the taxpayers.

In a free market, the desire for profit is counterbalanced by the aversion to risk. If the risk incurred by an investment or loan outweighs the profit potential, it’s not in the investor’s/lender’s best interest to participate, so the transaction doesn’t occur. However, when the government removes the risk associated with a bad transaction, by assuming the risk itself, then the natural constraint of risk aversion that would apply in a truly free market is eliminated, and investors will take risks that would otherwise be unacceptable. That’s what happened in the case of Fannie Mae and Freddie Mac. The taxpayers assumed the risk, and Fannie Mae and Freddie Mac made unsound investments.

In today’s mortgage industry, mortgages are always packaged up and sold to aggregators, who sell them to bigger aggregators, with Fannie Mae and Freddie Mac at the top of the pyramid as the granddaddies of all aggregators. Because Fannie and Freddie had no risk aversion, lenders further down the chain were free to take risks they wouldn’t otherwise take, knowing the aggregators would buy up the high risk (subprime) mortgages anyway. This was intentional.

Affordable housing is a euphemism for making home loans available to people who would not qualify for a loan under a free market system. The reason someone would not qualify for a loan in the free market is because they present too high a risk. In other words, they can’t afford to pay off the loan. Fannie and Freddie represented a wide scale experiment in social engineering. It was an attempt to use federal policy to “level the playing field” so anybody could “afford” to buy a home whether they could actually afford to pay for the home or not.

When the Republicans wanted to tighten the reins on Fannie Mae and Freddie Mac, and preclude them from making excessively risky investments, it would have meant they could no longer fulfill the mission of making homes “affordable” to those who couldn’t afford them. That’s why the Democrats opposed the bill. And that’s why we’re where we are today.

The great experiment in social engineering has now failed. Dramatically. And, because the experiment was backed by the full faith and credit of the U.S. taxpayer, it is our money, and our future, that is getting called in as collateral for this grand social experiment.

Anybody who blames this failure on the free market is either dishonest or naive. It was liberal social policy masquerading as economic policy that got us into this mess. If you want to see more of the same in the future, there are plenty of Democrats still in Congress. And there’s one running for president, too.

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

No Federal Bailouts!

Many people are insisting that the government has to bail out AIG because, in the current situation, if the government didn’t step in, the result could be a worldwide depression. I understand that. I still think it’s the wrong thing to do.

If the government doesn’t bail them out, we’re going to have an economic crisis. But we’re going to have one anyway, whether they bail them out or not. The money with which the government bails out these failed institutions will be borrowed from other countries. Then the taxpayers will be stuck with the bill for not only the bailouts, but the interest on the money to bail them out. And, when the bill comes due to the taxpayers, where will all that money be going?

The situation is going to get worse, whichever way we play the cards. But the way in which it gets worse will be different, depending on what we do now. And that’s important. Because our nation’s future depends on it. Do we want to let a failed system collapse, knowing it will have a seismic impact on the whole world economy? That would be bad. Or do we want to indenture our nation’s future to other powers whose interests are not necessarily aligned with ours? What other option is there?

This whole gigantic mess was caused by wide scale irresponsible borrowing. How is borrowing on an inconceivably more massive scale going to solve the problem? We are already the biggest debtor nation in the world.

Liberals are quick to blame it all on capitalism, but what actually got us here was government meddling. Further government meddling isn’t going to get us out. For years, the Fed kept interest rates low deliberately to fuel the housing bubble. It was a specific federal policy intended to make it easier for first time homebuyers to be able to buy homes they couldn’t otherwise afford. (Now strike the word “otherwise” from that sentence, and there’s the root of the problem.)

Federal policy was designed to encourage overspending. It was a government-subsidized Ponzi scheme, with the FHA, FannieMae, and FreddieMac at the top of the heap, backed by the full faith and credit of the U.S. taxpayer. All accountability was shuffled away, through multiple layers of loan aggregation. When people started defaulting on loans that should never have been made, and institutions started defaulting on their debts to other institutions, speculation on defaults (aka “swaps”) to hedge the bad bets became rampant. (That’s what brought down AIG.)

The entire economy, from the top down, is built on debt. At the bottom of the pyramid are millions of individuals borrowing from banks, who borrow from government sponsored agencies, while the government borrows from foreign countries, granting them financial power to wield over us in the future. Even as individuals are going bankrupt from bad debt, the nation is sinking ever deeper into deficit spending. The problem is systemic. The madness has to stop.

This country is headed for disaster because of fiscal irresponsibility at every level, encouraged by those who think the government can just manipulate the economy a little bit more, just another tweak here or another pinch there. A push here or a squeeze there. But it’s all an illusion as long as the debt keeps growing.

Debt is dangerous. We are selling our sovereignty, like a drunken wastrel squandering his children’s inheritance. Our deficit spending increases exponentially decade after decade. The national debt balloons. Instead of having any plan to pay it off, we keep borrowing more.

Stop the presses! (The ones printing up the dollars, that is.) Stop the borrowing. Stop the spending. Stop overregulating industry and labor so corporations have to send jobs overseas to stay competitive. Stop the subsidies for farmers not to grow crops. Stop all the greasy earmarks. Stop foreign aid. We need our leaders to sit down and acknowledge the fact that the nation is broke — worse than broke. We have a negative net worth!

We cannot go on as we have been. That’s a fallacy. Prolonging the inevitable just gets us deeper in the hole we’re going to have to eventually dig ourselves out of. Let’s stop now, and start demanding fiscal responsibility from our leaders and ourselves.

People don’t learn from their mistakes. They learn from the consequences of their mistakes. If you shield them from the consequences, they’ll make the same mistakes again. I say, no bailouts for lenders or borrowers or gamblers with other people’s money! Let the market correct itself, as painful as that correction will be, and then laissez-faire.

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us

Sometimes Nothing is the Right Thing to Do

I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.
John McCain

Despite the fact that Senator McCain has said the economy isn’t his strong point, he has a lot stronger grasp of basic economic principles than anybody else running for president, not to mention a lot of other people in Washington who ought to know better.

In addition to the Bear Stearns bailout, since the beginning of the year, the Fed has loaned over $260 billion to banks that got into financial trouble by making bad mortgage loans. The Foreclosure Prevention Act of 2008 is on the horizon, and there’s another bill lined up behind it to extend an additional $300-400 billion in federally guaranteed (that means guaranteed by you and me) mortgages for people who overextended themselves to buy houses that were well beyond their means.

Senator Obama talks about “folks [being] tricked into purchasing loans they can’t afford.” Both Senators Obama and Clinton think we need to kick in a $30 billion dollar emergency housing fund (at taxpayer expense) to help bail out these poor victims, never mind that they’re victims of their own greed and irresponsibility. Senator Clinton also wants to freeze subprime mortgage rates and impose a 90 day moratorium on foreclosures for the poor dears. And, earlier this week, Senator Clinton suggested that perhaps the government should start buying up foreclosed homes. It’s not enough for the government to be in the healthcare business, now she wants to get it into the real estate business, too. (Is there any business Mrs. Clinton doesn’t think the government should be in?)

While Senators Clinton and Obama are leaping over one another trying to come up with more innovative and expensive ways for the government to manipulate the housing market, Senator McCain is quietly saying it isn’t the role of the government to bail out either the banks or the borrowers. The Democrats scoff. Democratic National Committee Chairman Howard Dean sneers that McCain is taking “the same hands-off approach that President Bush used to lead us into this crisis.”

What the Democrats fail to understand is the basic principles of economics. (But what else is new?) It was not a “hands off” policy that got us into this mess, but a “hands on” policy of lowering interest rates and expanding FHA, FNMA, and FHLMC financing to encourage unprecedented (and unwarranted) growth in the housing market. The government got us into this situation by meddling in the free market. It isn’t going to get us out by meddling more. What needs to happen is the market needs to find a balance where the demand meets the supply. The only way for that to happen is to let it occur naturally. Yes, it means housing prices will drop. They’re doing that anyway. Yes, it’s painful. But it has to happen.

Federal policies aimed at making it easier for first time home buyers to buy houses before they could actually afford those houses led to an artificially high demand, which artificially inflated prices. People (and financing companies) started playing fast and loose, speculating that the manic spiral in home prices would continue indefinitely. But it couldn’t. Supply increased to meet demand, interest rates went up, people who overextended themselves couldn’t meet their payments and started defaulting, demand fell off just as supply was peaking, and the market was oversaturated. Now it has to correct.

The laws of economics weren’t made up by economists, any more than the laws of physics were made up by physicists. These “laws” are based on observation and analysis of naturally occurring phenomena. They can’t be changed or wished away. Imbalances do occur but, over time, they correct themselves. The housing market is self-correcting now. It will eventually reach equilibrium. Any measures that attempt to forestall that will only postpone the inevitable. A problem deferred is not a problem solved.

The Democrats insist that the government can’t just stand by and do nothing. Something bad is happening. We must do something! Anything! They have no idea how to solve the problem, because the problem can’t be solved by more government meddling, and government meddling is the only thing they know how to do. But, since they can think of nothing more embarrassing than standing around doing nothing, they’re leaping over each other trying desperately to show us that they will do something. (Not nothing, like Senator McCain.) And what they’ll do is what they always do. When they see a problem, they throw money at it. Your money. My money. Everybody’s money. Unfortunately, that won’t solve the problem. Because, sometimes, nothing is the right thing to do.

The Democratic response, as usual, is like a parent with a spoiled child. They think it’s their job as parent to prevent their child from ever experiencing any pain, so they go to any lengths to shield it from the consequences of its own actions. But a child who never faces consequences never learns. Sometimes pain is necessary, especially when it’s a natural consequence of irrational behavior.

Bookmark/Rate this post: Digg it Stumble It! add to del.icio.us