I believe it was the 9th Commandment that said "Thou shalt always have the Big 3 in operation." Of course I may be remembering that incorrectly. This latest proposal however would surely make one believe that it was written in scripture or in stone that the Big 3, which consists of GM, Ford and Chrysler, must never be allowed to fail. I have a very simple question, why? Why not let these companies fail? Besides the amount of many they are asking for, over 20 billion $ will only keep them afloat until February anyway. All three of these companies are losing around six billion $ a month. Yes that's correct, six billion a month! What good is 20 billion? There are a few very simple routes that the government and the CEO's of these companies could pursue. First, let them go bankrupt. Pretty simple really. Now bankruptcy does not mean death. For example, Kmart, Continental Airlines, Delta Airlines, United Airlines, Fruit of the Loom, Texaco, Toys R Us etc all declared bankruptcy. However these companies didn't disappear. They were simply restructured, reorganized and put under new and better management. So this rhetoric about millions of jobs being lost is most certainly not true. Bankruptcy can be a good thing. It shows people that they are doing the wrong thing. Henry Ford had plenty of failures before he started Ford Motor Co. What if Ford had been bailed out after his first failure? Failure teaches people, and those who have the drive to succeed can learn from their mistakes. That is how progress is made. Sometimes failure is and should be an option so that we can learn from it and become better people because of it.
Another option is to cut short term costs. This is the option that most appeals to me. There is one simple way to cut short term costs; tell the union, in this case the UAW union, that their contracts are null and void. Yes that is correct, tell the UAW one of the strongest unions in the country that their contracts are being suspended. Now the economy as a whole is definitely having a huge negative effect on the Big 3. However I believe that the long term cause of the problems of the Big 3 consist of two major problems. These problems are the UAW and the absolute idiocy of the management of these companies. First though is definitely the UAW. Let us examine this further. How come companies such as Honda, Toyota, Nissan and others are not asking for a bailout? If it truly is just the economy's fault, claims Ron Gettelefinger head of the UAW, than all these other car companies should be at risk as well. Nissan, Honda and Toyota have all recently opened up new plants here in America. In fact Handa just recently hired over 900 Americans to work in one of their car manufacturing plants. So obviously the economy is not the only cause of the Big 3's problems. The main problem is the UAW. According to Daniel J. Ikenson, Assistant Director of the Cato Institute, "The average compensation for an hour of work at GM is $74. While at Toyota it's about $47." In fact economist Dr. Peter Morici has said that "Honda pays an average $18.41 and hour." He also argues that along with the absolute insane wages and benefits that the Big 3 offer, in order to make money they have to cut corners. Cutting these corners screws us, the consumer. They use cheaper materials for things such as upholstry, and it shows. The quality of GM car is nowhere near the quality of a Nissan or Handa car. Much of this is due to the outragious and I would argue criminal demnads made by the UAW.
For example, the UAW has entities called Jobs Banks. What are Jobs Banks? They are buildings that the UAW forced the Big 3 to create where laid off, or ex Union workers for any number of reasons go to get paid. What do they do there? Nothing, absolutelty nothing. Many of them simply sit around and watch TV or read magazines. Many times they have the continue to pay these idel employees for as many 4 years after they are let go. This actually made headline news on 20/20. I will link at the end of this article to that story and anyone who is interested can watch it. It is only around 5 mintues long.
A final option that they could pursue is trying to sell their company to a successful company. However with the power of the UAW hindering these companies, they may be hard pressed to find a company who is willing to take them over so quickly. They could attempt to weaken the union but doing this is easier said than done. The CEO's are also to blame for this. They made cars that consumers did not want. They also have a less effecient assembly line than companies such as Honda or Toyota. Handa and Toyota CEO's didn't waste money on private jets either. These CEO's need to be held responsible for their actions and their mismanagement of these companies.
The simple fact of the matter is this; no company is "to big to fail" and that the American tax payers should not be on line to bail these companies out. With the recent Wall Street bailout, the biggest redistribution of wealth in this country's history, these auto companies are thinking that maybe now they can grab a slice of that pie. To them I have one thing to say, the buck stops not here with the taxpayer but with YOU; deal with your own problems.
-In Liberty,
Mr. Jefferson
"Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all."
-Frederick Bastiat.
Here are a few links to the video sources I quoted in the article
http://www.youtube.com/watch?v=73c-1YwEPH4
http://www.youtube.com/watch?v=SEPJFWWprMo
Showing posts with label capitalism. Show all posts
Showing posts with label capitalism. Show all posts
Wednesday, December 10, 2008
Friday, October 10, 2008
The Answer to our Economic Problems:Free Market Capitalism
This is a failure of unregulated markets. That phrase seems to have been adopted by every politician, analyst and most economists. The very idea that our current economic situation is a "failure" of free market capitalism is absolutely without any merit. The abandonment of free market principles is what got us into this mess in the first place. The economy should have gone through a recession back in the late 1990's during the dot-com bubble burst. This was the time when everyone was buying dot-com stocks and many put their entire savings into internet stocks. The market corrected because sadly there is no need for 1,000 Amazon.com sites. I will place a link at the end of this article for readers who are interested in reading and learning about the dot-com. I want to encourage thought and shamelessly promote the Ludwig von Mises Institute; so forgive me for not spoon feeding every detail myself. I will now, very basically explain our current financial crisis according to the Austrian business cycle theory and monetary theory. However I STRONGLY ENCOURAGE those interested to go to www.mises.org to learn more from people who are much smarter than myself.
"Artificially low interest rates caused by government intervention into the market will lead to malinvestment. As this malinvestment is discovered markets; left unhampered by government interference; will naturally correct and be able to separate good investments from malinvestment." There it is folks. That's your answer. Ludwig von Mises wrote this in his Magnum Opus "Human Action" back in the 1940's. Henrzy Hazlitt, Frederick von Hayek and many others have stated something similar to this even before Mises did. This is the cause of all of our problems. Here is the basic rundown. The federal government; in all their infinite wisdom; created Fannie and Freddie after the stock market collapse of 1929. The crash of 1929 was also a result of an abondement of free market principles. Hoover and his intervention into the credit and monetary market did not allow the markets to correct and paved the way for arguably the most active and I would argue one of the top 3 worst presidents this country has ever had, FDR. I will write more about the Great Depression and FDR's absolutely horrific policies in a later entry.
Fannie and Freddie were, as Henry Paulson put it, in the "business of making the American dream possible." However the price tag for making the American dream possible was placed on the American taxpayer. Here is a simple fact of life, not everyone can afford a 500,000$ house. Fannie and Freddie together own over 80% of the country's mortgages. They are GSE's; Government Sponsored Enterprises. many investors had more confidence in buying mortgages from Fannie and Freddie because they were "guaranteed" not to fail because they were backed by the government. It is the same principle of having confidence in a bank that is insured by the FDIC. As stated earlier the dot-com bubble of the late 1990's has a lot to do with our current situation. After the bubble burst, we should have had a recession back then. However the then president, Bill Clinton and the then chairman of the Federal Reserve, Alan Greenspan wanted to avoid the recession. So Greenspan decided to drastically lower the interest rates and spured the rampant investment into the housing market. The artificially low interest rates convinced many people who were renting at the time that they could afford to buy a house; usually a very big expensive house. The banks, backed by the loans and mortgages of Frannie and Freddie were encouraged to make very risky loans to people who had a very shaky credit history. These mortgages were then resold on the stock market. People were basically betting millions that these loans would be repaid; looks like they were wrong. The problem now is that there are too many houses and the malinvestments are not being allowed to be purged from the system. People bought houses they could not afford and those who have lower incomes are being evicted. All the while those on wall street have received 700$billion courtesy of the American tax payer. So who really benefited from these loans? Without these government interventions these people would never had bought these houses they couldn't afford and the tax payers wouldn't be paying for it. Yea I don't know about you but I really hope that these same people decide to "help" us out some more. I think they have done quite enough.
Now many people blame the selling of these mortgages in an unregulated market as the main culprit, implying that stricter regulations are the answer. Those who committed fraud and stole people's savings should be prosecuted and brought to justice; there is no doubt about that. However without government intervention by the Federal Reserve, government monetary policy and the risky loaning encouraged by Fannie and Freddie this situation would never have happened. Fannie and Freddie did not respond to market forces and were backed by the monopoly that is government power. The prospect of being held responsible for their actions was never there. They felt they could never fail and they acted as such. Institutions without the backing of government safety nets have to act with their long term self interest in mind. This, as people in Washington are unaware of, is called BEING HELD RESPONSIBLE FOR YOUR ACTIONS!! If these institutions fail, it is only themselves and their investors that are at risk. This fact keeps most private institutions always vigilant and always monitoring themselves and being very frugal and cautious with how they spend their money. A lesson those in Washington should be obliged to learn. Those businesses and institutions that do make bad decisions or committ fraud are then brought to justice by either market forces, or held accountability by the justice system. The free market is its own safeguard and regulator.
Government caused this problem and more government spending will not help it. This 700$ billion bailout will do only a few things. First it will most certainly cost more than 700$ billion the government is notorious for not being able to calculate costs. This money will also go right back to the politicians. When those who passed this bailout run for re-election who do you think is going to finance their campaigns? I'm putting my money on a lot of the bailout money going back to their campaigns as a great big "thank you" for baling their ass's out. This will also destroy our currency. Despite what many in the mainstream media and economic world say inflation is NOT rising prices. Inflation is simply an increase in the money supply. What this does is make the purchasing power of our dollars go down. Which in turn is why the FDIC is so counterproductive. Many people may feel confident that their money is "insured" by the FDIC. This may help prevent bank runs and gave a so called confidence in the banks but in the end it can only hurt people. Many leave their money in these banks while the government prints more and more of it. Both Obama ad McCain want to increase spending on domestic programs and abroad. This coupled with the absolute bullshit stimulus checks and the 700$billions bailout is going to rob people of their money's value. By the time people decide to withdraw their money from the banks they will have seen their savings destroyed and their purchasing power is in shambles. This is exactly what happened in post WWI Germany. If it was not for the FDIC people would have taken out their money sooner and could have invested it. The FDIC provides people with a false sense of security and allows the government to rob them; all the while pretending to protect their savings.
Free market banking, a gold standard and a limited government are the answers to our problems. Many in government to want to help, but they don't seem to understand that by intervening they are causing more harm to those that they are attempting to help. The free market is the la salvation we have. The market of ideas and commerce; and both of these must be left free and unhampered if we ever hope to overcome the tough times ahead and want to reign in our government. It is time for the market to be allowed to work and the ideological battle must be won. I consider it my job to spread the ideological and moral superiority of free market capitalism through advocating and writing. This battle for the heart of the American free enterprise spirit must be regained and capitalism needs to stop being the whipping boy of those who want to expand the size and power of government over our lives for their own gains.
In Liberty,
Mr. Jefferson
Here is the link for the dot-com story.
http://mises.org/story/736
www.mises.org
Check out Murray Rothbard's book "America's Great Depression" for a very detailed analysis of the reasons for the prolonged causes of the depression.
http://www.mises.org/store/Americas-Great-Depression-P63C18.aspx?AFID=14
If one rejects laissez faire capitalism on account of mans fallibility and moral weakness, one must for the same reason also reject every kind of government action.
-Ludwig von Mises
"Artificially low interest rates caused by government intervention into the market will lead to malinvestment. As this malinvestment is discovered markets; left unhampered by government interference; will naturally correct and be able to separate good investments from malinvestment." There it is folks. That's your answer. Ludwig von Mises wrote this in his Magnum Opus "Human Action" back in the 1940's. Henrzy Hazlitt, Frederick von Hayek and many others have stated something similar to this even before Mises did. This is the cause of all of our problems. Here is the basic rundown. The federal government; in all their infinite wisdom; created Fannie and Freddie after the stock market collapse of 1929. The crash of 1929 was also a result of an abondement of free market principles. Hoover and his intervention into the credit and monetary market did not allow the markets to correct and paved the way for arguably the most active and I would argue one of the top 3 worst presidents this country has ever had, FDR. I will write more about the Great Depression and FDR's absolutely horrific policies in a later entry.
Fannie and Freddie were, as Henry Paulson put it, in the "business of making the American dream possible." However the price tag for making the American dream possible was placed on the American taxpayer. Here is a simple fact of life, not everyone can afford a 500,000$ house. Fannie and Freddie together own over 80% of the country's mortgages. They are GSE's; Government Sponsored Enterprises. many investors had more confidence in buying mortgages from Fannie and Freddie because they were "guaranteed" not to fail because they were backed by the government. It is the same principle of having confidence in a bank that is insured by the FDIC. As stated earlier the dot-com bubble of the late 1990's has a lot to do with our current situation. After the bubble burst, we should have had a recession back then. However the then president, Bill Clinton and the then chairman of the Federal Reserve, Alan Greenspan wanted to avoid the recession. So Greenspan decided to drastically lower the interest rates and spured the rampant investment into the housing market. The artificially low interest rates convinced many people who were renting at the time that they could afford to buy a house; usually a very big expensive house. The banks, backed by the loans and mortgages of Frannie and Freddie were encouraged to make very risky loans to people who had a very shaky credit history. These mortgages were then resold on the stock market. People were basically betting millions that these loans would be repaid; looks like they were wrong. The problem now is that there are too many houses and the malinvestments are not being allowed to be purged from the system. People bought houses they could not afford and those who have lower incomes are being evicted. All the while those on wall street have received 700$billion courtesy of the American tax payer. So who really benefited from these loans? Without these government interventions these people would never had bought these houses they couldn't afford and the tax payers wouldn't be paying for it. Yea I don't know about you but I really hope that these same people decide to "help" us out some more. I think they have done quite enough.
Now many people blame the selling of these mortgages in an unregulated market as the main culprit, implying that stricter regulations are the answer. Those who committed fraud and stole people's savings should be prosecuted and brought to justice; there is no doubt about that. However without government intervention by the Federal Reserve, government monetary policy and the risky loaning encouraged by Fannie and Freddie this situation would never have happened. Fannie and Freddie did not respond to market forces and were backed by the monopoly that is government power. The prospect of being held responsible for their actions was never there. They felt they could never fail and they acted as such. Institutions without the backing of government safety nets have to act with their long term self interest in mind. This, as people in Washington are unaware of, is called BEING HELD RESPONSIBLE FOR YOUR ACTIONS!! If these institutions fail, it is only themselves and their investors that are at risk. This fact keeps most private institutions always vigilant and always monitoring themselves and being very frugal and cautious with how they spend their money. A lesson those in Washington should be obliged to learn. Those businesses and institutions that do make bad decisions or committ fraud are then brought to justice by either market forces, or held accountability by the justice system. The free market is its own safeguard and regulator.
Government caused this problem and more government spending will not help it. This 700$ billion bailout will do only a few things. First it will most certainly cost more than 700$ billion the government is notorious for not being able to calculate costs. This money will also go right back to the politicians. When those who passed this bailout run for re-election who do you think is going to finance their campaigns? I'm putting my money on a lot of the bailout money going back to their campaigns as a great big "thank you" for baling their ass's out. This will also destroy our currency. Despite what many in the mainstream media and economic world say inflation is NOT rising prices. Inflation is simply an increase in the money supply. What this does is make the purchasing power of our dollars go down. Which in turn is why the FDIC is so counterproductive. Many people may feel confident that their money is "insured" by the FDIC. This may help prevent bank runs and gave a so called confidence in the banks but in the end it can only hurt people. Many leave their money in these banks while the government prints more and more of it. Both Obama ad McCain want to increase spending on domestic programs and abroad. This coupled with the absolute bullshit stimulus checks and the 700$billions bailout is going to rob people of their money's value. By the time people decide to withdraw their money from the banks they will have seen their savings destroyed and their purchasing power is in shambles. This is exactly what happened in post WWI Germany. If it was not for the FDIC people would have taken out their money sooner and could have invested it. The FDIC provides people with a false sense of security and allows the government to rob them; all the while pretending to protect their savings.
Free market banking, a gold standard and a limited government are the answers to our problems. Many in government to want to help, but they don't seem to understand that by intervening they are causing more harm to those that they are attempting to help. The free market is the la salvation we have. The market of ideas and commerce; and both of these must be left free and unhampered if we ever hope to overcome the tough times ahead and want to reign in our government. It is time for the market to be allowed to work and the ideological battle must be won. I consider it my job to spread the ideological and moral superiority of free market capitalism through advocating and writing. This battle for the heart of the American free enterprise spirit must be regained and capitalism needs to stop being the whipping boy of those who want to expand the size and power of government over our lives for their own gains.
In Liberty,
Mr. Jefferson
Here is the link for the dot-com story.
http://mises.org/story/736
www.mises.org
Check out Murray Rothbard's book "America's Great Depression" for a very detailed analysis of the reasons for the prolonged causes of the depression.
http://www.mises.org/store/Americas-Great-Depression-P63C18.aspx?AFID=14
If one rejects laissez faire capitalism on account of mans fallibility and moral weakness, one must for the same reason also reject every kind of government action.
-Ludwig von Mises
Thursday, October 2, 2008
Ground Control to Major Tom
It was bound to happen. I hoped however; I hoped that things may be changing. I was on cloud 9 a few days ago; amazing what less than 48 hours and a dose of reality can do for the mind. The House veto on the bailout may all be for not. The Senate early this morning voted FOR, by a margin of 74-25, the somewhat altered buy ultimatley the same bullshit bailout bill. Might as well call this bill "Stick it to the American taxpayer." The same flawed logic of how artificially low interest rates would "stimulate" the market is being used for this bailout. The idea that letting the credit markets correct naturally is "to risky" is the logic in DC. I thought that the government interference into the market by creating Fannie and Freddie and the absolute failure of them would teach our government something; apparently I was banking on a majority of politicians learning from past mistakes and having some foresight; I'll pause there to give you time to laugh histarically at that.
Here is the unattractive truth people; were are in a recession now and it will get worse, much worse. This bailout will make it 10 times worse. We were in for a bad year or two, the way we are going its going to turn into a bad decade. The Austrian theory of the business cycle predicted all of this. If people were to read Ludwig von Mises and Murray Rothbard they would think they were reading a modern day Nostradamus. Except Rothbard and Mises actually predicted something and made accurate assessments. So I guess nothing like Nastradamus actually; but you get my point. The sad part is that both presidential candidates are in support of this bill. Sadder still is the blame that free market capitalism is getting because of this. The problem is that Republicans gave lip service to free market speech but when they were elected did not make any real free market reforms. They simply made more loop holes and advantages for corporations and gave tax incentives to some businesses while neglecting others. They operated state capitalism, also called corporatism. Where private business and government get in bed together and make deals for each of their benefits. When government and business crawl into bed together, the offspring that it would unleash on the world would make even the most extreme conservative scream for it to be aborted. Under a truly free market system these businesses would have to operate solely on competition and would not be given government aid or advantage.
The problem was not lack of regulation; far from it. The real crooks are the businesses and government that made these back door deals and artifically manipulated the market. Under the truly free market system where competition sets the standard all these risky loans and maleinvestment would not have been made on this scale. And if maleinvestments were made the people who gave the loans and those who did not hold up to their ends of the deal would be held responsible; not every single honest hard working American. That is the beauty of the market; responsibility. As the Austrian economist and champion of liberty Frederick Hayek once said
"Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions. Liberty and responsibility are inseparable."
It is safe to say I have come off of my high from a few days ago. My plane is taxiing into the airport and my tray table in front of me is in its upright and locked position. Too bad the landing gear doesn't working and the government is the pilot with the Federal Reserve chairman Ben Bernanke as co-pilot. What's even worse is that all of you are on this plane with me. The only question left is how we land. Do we make an immediate crash landing on the tarmack? Do we land it as soft as we can in an open field or a body of water ? Well if what we are seeing unfold infront of us is any clue my money is on the pilots driving straight into the impending mountain right in front of us. Hope you have a parachute.
In Liberty,
Mr. Jefferson
"It is always from a minority acting in ways different from what the majority would prescribe that the majority in the end learns to do better."
-Frederick Hayek
Here is the unattractive truth people; were are in a recession now and it will get worse, much worse. This bailout will make it 10 times worse. We were in for a bad year or two, the way we are going its going to turn into a bad decade. The Austrian theory of the business cycle predicted all of this. If people were to read Ludwig von Mises and Murray Rothbard they would think they were reading a modern day Nostradamus. Except Rothbard and Mises actually predicted something and made accurate assessments. So I guess nothing like Nastradamus actually; but you get my point. The sad part is that both presidential candidates are in support of this bill. Sadder still is the blame that free market capitalism is getting because of this. The problem is that Republicans gave lip service to free market speech but when they were elected did not make any real free market reforms. They simply made more loop holes and advantages for corporations and gave tax incentives to some businesses while neglecting others. They operated state capitalism, also called corporatism. Where private business and government get in bed together and make deals for each of their benefits. When government and business crawl into bed together, the offspring that it would unleash on the world would make even the most extreme conservative scream for it to be aborted. Under a truly free market system these businesses would have to operate solely on competition and would not be given government aid or advantage.
The problem was not lack of regulation; far from it. The real crooks are the businesses and government that made these back door deals and artifically manipulated the market. Under the truly free market system where competition sets the standard all these risky loans and maleinvestment would not have been made on this scale. And if maleinvestments were made the people who gave the loans and those who did not hold up to their ends of the deal would be held responsible; not every single honest hard working American. That is the beauty of the market; responsibility. As the Austrian economist and champion of liberty Frederick Hayek once said
"Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions. Liberty and responsibility are inseparable."
It is safe to say I have come off of my high from a few days ago. My plane is taxiing into the airport and my tray table in front of me is in its upright and locked position. Too bad the landing gear doesn't working and the government is the pilot with the Federal Reserve chairman Ben Bernanke as co-pilot. What's even worse is that all of you are on this plane with me. The only question left is how we land. Do we make an immediate crash landing on the tarmack? Do we land it as soft as we can in an open field or a body of water ? Well if what we are seeing unfold infront of us is any clue my money is on the pilots driving straight into the impending mountain right in front of us. Hope you have a parachute.
In Liberty,
Mr. Jefferson
"It is always from a minority acting in ways different from what the majority would prescribe that the majority in the end learns to do better."
-Frederick Hayek
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