Politics, Society etc.

[alvarezbassist17]

i did. there was actually a line this morning when i went. froze my ass off.

You mean it's not just dead people that vote in Chicago?

[chick de la lynch]

Voted this morning.  I just hope Boxer goes down. I hate that bitch.  Probably not happening tho. 

It's California, and Boxer has a good rep here. I'm not excited about Boxer, but all the other candidates didn't do much for me, either. Fiorina is way too conservative for California.

I was not excited about the candidates for governor, either and I don't think Jerry Brown will do much for the state. Whitman would have fucked California to the ground. There is a slight possibility Brown won't fuck California to the ground.  I wish I could have confidence in at least one of the candidates. And no surprise, pot will not be legalized here. LAME.

[blixa]

i did. there was actually a line this morning when i went. froze my ass off.

You mean it's not just dead people that vote in Chicago?

hahhaha

wait, there's a candidate named boxer?

[bright lights, big city]

i did. there was actually a line this morning when i went. froze my ass off.

You mean it's not just dead people that vote in Chicago?

dang, my boy Giannoulias could've used some of those old Chicago tactics to win the Senate gig.

[blixa]

i keep reading in the news media here that the republicans are gaining ground.

[E-Money]

Voted this morning.  I just hope Boxer goes down. I hate that bitch.  Probably not happening tho.  

It's California, and Boxer has a good rep here. I'm not excited about Boxer, but all the other candidates didn't do much for me, either. Fiorina is way too conservative for California.

I was not excited about the candidates for governor, either and I don't think Jerry Brown will do much for the state. Whitman would have fucked California to the ground. There is a slight possibility Brown won't fuck California to the ground.  I wish I could have confidence in at least one of the candidates. And no surprise, pot will not be legalized here. LAME.

Boxer is just part of the problem.  California has 12% unemployment and is 42 Billion in debt.  They simply cannot afford to continue on the path they're taking.  The economy will fold under Brown's watch, and our own government most likely have to bail them out.  I'm bummed about prop 19...

[alvarezbassist17]

Well, Minnesota proved again that they will not learn.  We voted in Mark "Premature Evacuation" Dayton today.  Like sweet, MN is already one of the highest taxed states in the nation, and he wants to add 2-3 new income tax brackets, as well as a new property tax bracket, in addition to disallowing people from having residency in low-tax states to avoid the income tax, a myriad of corporate taxes, and, get this, a state-run casino to raise revenue.  For fuck's sake.  I'm sending my resumes elsewhere, not joking in the least.  We've already been shedding homegrown businesses like a banshee, and now I'm sure the plague of people coming here from Chicago, etc. for illegal welfare benefits is just going to get all the worse.  While there was a lot of good news today, what a sad day for Minnesota; I had no idea the unions and farmers had bought so many people off.

Voted this morning.  I just hope Boxer goes down. I hate that bitch.  Probably not happening tho. 

It's California, and Boxer has a good rep here. I'm not excited about Boxer, but all the other candidates didn't do much for me, either. Fiorina is way too conservative for California.

I was not excited about the candidates for governor, either and I don't think Jerry Brown will do much for the state. Whitman would have fucked California to the ground. There is a slight possibility Brown won't fuck California to the ground.  I wish I could have confidence in at least one of the candidates. And no surprise, pot will not be legalized here. LAME.

Boxer is just part of the problem.  California has 12% unemployment and is 42 Billion in debt.  They simply cannot afford to continue on the path they're taking.  The economy will fold under Brown's watch, and our own government most likely have to bail them out.  I'm bummed about prop 19...

Oh, don't forget about that lovely half a trillion dollars in unfunded pension liabilities.

Voted this morning.  I just hope Boxer goes down. I hate that bitch.  Probably not happening tho. 

It's California, and Boxer has a good rep here. I'm not excited about Boxer, but all the other candidates didn't do much for me, either. Fiorina is way too conservative for California.

I was not excited about the candidates for governor, either and I don't think Jerry Brown will do much for the state. Whitman would have fucked California to the ground. There is a slight possibility Brown won't fuck California to the ground.  I wish I could have confidence in at least one of the candidates. And no surprise, pot will not be legalized here. LAME.

Can you be more specific at all?  I don't profess to be an expert on California politics, but I really don't get in what sense you mean fucked to the ground, and I certainly don't see how someone with some sense of fiscal restraint would do that worse than the governor-elect.  Care to enlighten me?

[bright lights, big city]

out of like 4 million votes in Illinois for the governor race, only 8,000 separate Brady/Quinn. they're already fucking talking about potentially doing a recount.

[tarkil]

"U.S. is not greatest country ever"

http://www.politico.com/news/stories/1110/44500.html

[alvarezbassist17]

out of like 4 million votes in Illinois for the governor race, only 8,000 separate Brady/Quinn. they're already fucking talking about potentially doing a recount.

Yeah, same here for our governor's race. Guess i spoke too soon, but it's still not looking good for Emmer. HORNER!!!! *shakes fist*

[E-Money]

"U.S. is not greatest country ever"

http://www.politico.com/news/stories/1110/44500.html

Fail.

[alvarezbassist17]

Just thought I'd share this lovely little conversation I had with an extremely Liberal friend of mine on facebook.  Feel free to comment and tell me where you think I'm wrong or whatnot.

Dory Thompson
I can't even watch the news. It's disgusting. Just proves that Americans will follow anyone's lead. How can anyone with even half a brain believe in or listen to Sarah Palin??? I'm convinced the majority of the American people do not understand basic economics & no matter WHAT Obama does, republicans fight him on everything, ridicule him and refuse to work with him. How will anything get done now?

Corey Wright
Lol. Basic economics? You realize the federal government removed $2.4 trillion from the job-creating sector directly and then spent over a trillion more that nobody knows whether they'll tax for it in the future, sell more bonds, or just simply print at the Federal Reserve, yes? I mean I think Palin and a whole lot of the Republicans are pretty crazy too, but basic economics teaches that every job created by government necessitates the removal of a job of equal, if not greater value from the private sector. Government does not create or have any resources, it has to remove them from the private sector and redistribute them; that is a fundamental truth.

Sorry dor, not tryin to be a negative nancy or anything, i still luh ya!

Corey Wright
Sorry, i meant to say 2.4 trillion, etc *this year*

Here darlin, i've got another lil book for you to read

Economics in one lesson by Henry Hazlitt (pretty famous book, not a terribly long read by any means)

Www.hacer.org/pdf/hazlitt.pdf

Dory Thompson
Corey-
First off, not even in the most conservative world of economics does one government job equal one less private sector job-that is a faulty and flawed argument, one which the republican party sells to ignorant people who truly don't know the basics of economics. If you are so worried about the deficit, explain why the republican party refuses to keep the Bush tax cuts for the middle class until millionaires get to keep their tax cuts as well. High income individuals, even if we repeal the tax cuts are paying less in taxes than under any president-Reagan, Bush, anyone. Basically, by far the biggest reason we have the deficit is rich a-holes not paying their fair share. Research more before trying to talk economic policy on fbook. Still love ya tho!

Dory Thompson Also- the book you are telling me to read is by a guy who was prominent in the Austrian school of economics-basically a no government, laissez-faire school of economics that has been discredited by everyone but rapid tea partiers. It is more like an anti-governmental political pamphlet-NOT an economics book. You would probably fail Econ 101 using those ideas.

Corey Wright
Alrighty then. I'll have some more time to delve into your specific point after work, but trust me, i've done more than my fair share of research. I don't know where you heard the Austrian school has been discredited, but its proponents have been widely credited with predicting nearly every famous asset bubble since the 20s and giving the precise reasons why. And you're absolutely right about their lessons being against government intervention and mostly right about failing econ 101 with those ideas; the distinction being that you'd be failed by a professor who's a government schill. There's plenty of reputable programs that use that book, i googled "course outline economics in one lesson" and found plenty of results for actual college courses that use that book or an excerpt, some econ 101 :-o. Also, I've taken and passed micro, macro, cost-benefit analysis, etc. at the U and have read Keynes, so I also know and understand the statist arguments. But they truly are as wrong as wrong can be, or at least take their arguments to the wrong ends. You should at least give it a chance and see if any of it makes sense to you.

So you think that the deficit isn't caused by irresponsible spending at all? Or that the fact that every last prediction of economic turnaround made by our current administration being wrong was just caused by lack of "bipartisanship" or the rich not paying their fair share?

Dory Thompson
Corey-
Just because an econ class may use the book doesn't mean that they give credit to that book for being correct. Many econ classes study different views of economics so students understand what was taught in the past, and what doesn't hold water. My econ class did that. I also have passed all of those classes you've taken, and taken even more advanced classes about such topics because of the political science focus of my major. If you haven't heard that the Austrian school has been discredited, then you must not have been listening. I feel like you are one of those people who will become a conspiracy theorist and won't end up ever leaving your house because you think people are after you or something. Irresponsible spending? Yes of course, but not by this administration. Let's start with the war in Iraq and how much that cost. Anyone who knows anything about economics should know that economic turnaround, especially after such a deep recession, doesn't turn around over night, in a month, or in a year. Signs of progress have been made by Obama, but he is not a miracle worker. People seem to not know how long it takes to turn around such economic downturn. Did no one study the Great Depression? Things aren't fixed overnight. Money must be pumped into the economy in order to jump start it. Our country being able to work together and pass bills and laws to help turn around the economy is crucial. Everyone knows that if you can't work together as a team you're going to struggle getting anything done, it doesn't matter if you're talking about politics, work, your family or friends. So yes, the fact that republicans refuse to work with Obama and accept that he is our president has an enormous effect on the inability for things to change as quickly as they could. You too easily believe the things you read without understanding why they might not make any sense. It's sad that you think our teachers are all "government schill's" sounds more like you're just paranoid.

Corey Wright
Ok Dor, I wanted to start off by saying thanks for not deleting this; I feel like that's what happens the majority of the time when I try to have a discussion about this kind of stuff, and I'm glad you're willing to debate because I really get a kick out of it and hope to prove I'm not some conspiracy theorizing, tinfoil hat-wearer. I hate that kind of person, but I hold the views I do because I'm aware of the incentives had by politicians and those whom they benefit through their actions. I don't think there's some puppet master or group of Mr. Burnses sitting around plotting all of this.

Firstly, I wanted to say that I am not for overspending in any capacity, including defense. Clearly we have a whole lot of issues with that when we spend over 6 times as much as the next highest defense spenders. But I also would like to point out that the defense budget has grown during Obama's tenure, and that I don't really see a de facto difference in their policies in that they are both nation-building imperialists, albeit different nations. I was under the impression that he was going to cut defense spending, and I really do think that NOFX and all of the Democrats (as well as the war-hawk Republicans) have really given him a free pass on that one.

Ok so, on to economics. I don't know if you've heard of the Austrian Business Cycle Theory, but it's entirely pertinent to our current economic situation and this discussion. It was developed by Ludwig von Mises in the early 20th century and earned Freidrich von Hayek a Nobel Prize in 1974. It's kind of complicated to explain in a short time, but here goes (I'm probably going to plagiarize a bit so I don't fuck anything up). It was developed to explain the "cluster of errors" experienced in an economy that causes a boom, followed by a recession, and they determined that its cause was related to central banking. When central banks artificially manipulate interest rates through credit expansion (newly printed money given to banks raises their amount of loanable funds, lowering the interest rate), they set these errors into motion.

From Tom Woods:

"The lower interest rates stimulate investment in long-term projects, which are more interest-rate sensitive than shorter-term ones. (Compare the monthly interest paid on a thirty-year mortgage with the interest paid on a two-year mortgage — a tiny drop in interest rates will have a substantial impact on the former but a negligible impact on the latter.) Additional investment in, say, research and development (R&D), which can take many years to bear fruit, will suddenly seem profitable, whereas it would not have been profitable without the lower financing costs brought about by the lower interest rates.

We describe R&D as belonging to a "higher-order" stage of production than a retail establishment selling hats, for example, since the hats are immediately available to consumers while the commercial results of R&D will not be available for a relatively long time. The closer a stage of production is to the finished consumer good to which it contributes, the lower a stage we describe it as occupying.

On the free market, interest rates coordinate production across time. They ensure that the production structure is configured in a way that conforms to consumer preferences. If consumers want more of existing goods right now, the lower-order stages of production expand. If, on the other hand, they are willing to postpone consumption in the present, interest rates encourage entrepreneurs to use this opportunity to devote factors of production to projects not geared toward satisfying immediate consumer wants, but which, once they come to fruition, will yield a greater supply of consumer goods in the future.

Had the lower interest rates in our example been the result of voluntary saving by the public instead of central-bank intervention, the relative decrease in consumption spending that is a correlate of such saving would have released resources for use in the higher-order stages of production. In other words, in the case of genuine saving, demand for consumer goods undergoes a relative decline; people are saving more and spending less than they used to.

Consumer-goods industries, in turn, undergo a relative contraction in response to the decrease in demand for consumer goods. Factors of production that these industries once used — trucking services, for instance — are now released for use in more remote stages of the structure of production. Likewise for labor, steel, and other nonspecific inputs.

When the market's freely established structure of interest rates is tampered with, this coordinating function is disrupted. Increased investment in higher-order stages of production is undertaken at a time when demand for consumer goods has not slackened. The time structure of production is distorted such that it no longer corresponds to the time pattern of consumer demand. Consumers are demanding goods in the present at a time when investment in future production is being disproportionately undertaken.

Thus, when lower interest rates are the result of central bank policy rather than genuine saving, no letup in consumer demand has taken place. (If anything, the lower rates make people even more likely to spend than before.) In this case, resources have not been released for use in the higher-order stages. The economy instead finds itself in a tug-of-war over resources between the higher- and lower-order stages of production.

With resources unexpectedly scarce, the resulting rise in costs threatens the profitability of the higher-order projects. The central bank can artificially expand credit still further in order to bolster the higher-order stages' position in the tug of war, but it merely postpones the inevitable.

If the public's freely expressed pattern of saving and consumption will not support the diversion of resources to the higher-order stages, but, in fact, pulls those resources back to those firms dealing directly in finished consumer goods, then the central bank is in a war against reality. It will eventually have to decide whether, in order to validate all the higher-order expansion, it is prepared to expand credit at a galloping rate and risk destroying the currency altogether, or whether instead it must slow or abandon its expansion and let the economy adjust itself to real conditions.

It is important to notice that the problem is not a deficiency of consumption spending, as the popular view would have it. If anything, the trouble comes from too much consumption spending, and as a result too little channeling of funds to other kinds of spending — namely, the expansion of higher-order stages of production that cannot be profitably completed because the necessary resources are being pulled away precisely by the relatively (and unexpectedly) stronger demand for consumer goods. Stimulating consumption spending can only make things worse, by intensifying the strain on the already collapsing profitability of investment in higher-order stages.

Note also that the precipitating factor of the business cycle is not some phenomenon inherent in the free market. It is intervention into the market that brings about the cycle of unsustainable boom and inevitable bust. As business-cycle theorist Roger Garrison succinctly puts it, 'Savings gets us genuine growth; credit expansion gets us boom and bust.'"

The main reason I bring all of this up is because this artificial credit expansion (and you can check the federal reserve statistics on the historical money supply) had a whole heck of a lot to do with the housing bubble, the dot-com bubble, the savings and loan crisis of the 1980s in recent terms, but also the Great Depression and the Forgotten Depression of 1920. The reason the depression of 1920 is forgotten is two-fold. First, because it wasn't a depression, and second, because it is a perfect illustration of the government doing nothing and the economy subsequently recovering in a relatively very short time.

More Tom Woods:

"The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover — falsely characterized as a supporter of laissez-faire economics — urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.

Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.

The Federal Reserve's activity, moreover, was hardly noticeable. As one economic historian puts it, "Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction." By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923.

It is instructive to compare the American response in this period to that of Japan. In 1920, the Japanese government introduced the fundamentals of a planned economy, with the aim of keeping prices artificially high. According to economist Benjamin Anderson,

'The great banks, the concentrated industries, and the government got together, destroyed the freedom of the markets, arrested the decline in commodity prices, and held the Japanese price level high above the receding world level for seven years. During these years Japan endured chronic industrial stagnation and at the end, in 1927, she had a banking crisis of such severity that many great branch bank systems went down, as well as many industries. It was a stupid policy. In the effort to avert losses on inventory representing one year's production, Japan lost seven years.'"

This is key to understanding the solution to our current debacle. We have to allow the recession to run its course and the mal-investments to be liquidated in order to be able to start working profitably again and in order to do that, the Federal Reserve has to allow interest rates to be set by the market, in other words, to rise. In this sense, the recession is the cure. I know that sounds really bad, but it's the only thing that's going to work. If we keep pouring money into a misallocated economy, it will never recover, just like in the Great Depression, which genuinely didn't end until the government cut the budget by almost half between 1946 and 1948 and the government stopped sucking resources out of the private sector.

I realize a shitload of what I said is probably pretty controversial given your high opinion of government-funded and/or diehard Liberal professors, but here's links to the articles I got information from (if you'd like to check their citations as well), and I'd be absolutely more than happy to provide further explanation and information. Hope you don't still think I'm nuts, Dor, cuz this just took me like an hour to put together.

Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s

http://www.independent.org/newsroom/article.asp?id=138

The Forgotten Depression of 1920

http://mises.org/daily/3788

Dory Thompson
Corey-
honestly, you're crazy, you're diluted, and you're so far off base with your ideas and thinking, that I can't even respond anymore. I truly love you, but hope that you realize that you are not superior to everyone who teaches economics. Just because you read extremist ideas does not mean that those people are right and the majority are wrong.

Corey Wright
Haha, ok Dor. Well I'll leave you with a few predictions, and we'll see who's crazy, given time.

1. The economy is not going to recover. Unemployment will not fall with the massive amount of capital being removed from the private sector.  As always, capitalism will be blamed.
2. Housing prices will continue to fall because we overbuilt and are continuing to stimulate a burst bubble with the government-supported secondary mortgage market and low interest rates, but these will have no effect.
3. Freddie and Fannie are going to require at the very least $500 billion, more than likely a trillion-dollar bailout.
4. The dollar will continue falling against other currencies, much more quickly against gold (whose price has gone up ohhh only about 3-fold in the last 5 years, a direct representation of inflation).
5. Foreigners will stop buying our bonds; the return will be worth less than the inflation that will occur while they are holding them. When this happens, the Federal Reserve will be the only one to buy their bonds.
6. Our citizens will all have to take a massive cut in our standard of living as responsible countries will gain the purchasing power once held by the dollar in our more fiscally responsible days.

And if you would've talked to me in July, I would've told you that the Fed was going to engage in more quantitative easing (or printing money to buy gov't bonds).

http://money.cnn.com/2010/11/03/news/economy/fed_decision/index.htm

I don't think I'm superior to everyone who teaches economics, but I wholeheartedly believe that Austrian Economics is more correct than Keynesian pump-priming a thousand times over, and I could prove it to you if you'd actually read any of it with a somewhat open mind.

Oh, and it's deluded.

P.S. I'd also like an example of when priming the economic pump has worked, one single time.

[one weak]

6. Our citizens will all have to take a massive cut in our standard of living

I don´t know shit about economics, and I realize I have taken this point out of context and subtracted the rest of the sentence, but in my opinion I hope this does happen. With my lack of knowledge towards economics, my opinion is that (with the exception of those here on the board who know their stuff, and others like yourselves) the money gurus in power are telling me to spend all my money. We are given a bullshit slap on the back for buying shit we don't need? No way. The only way I am getting rewarded for being fiscally smart is to see others fail at it. So, keep it up America! I want more sob stories of folks who lost their home, car, boat, vacation home, because they got laid off and collected unemployment for a year and turned down job after job because the pay was too low. Pride is tough to swallow, apparently.

[alvarezbassist17]

I also wanted to post this article because I've heard a whole lot of vilification of the rich going on recently, and while firstly I find it disgusting that people would want to steal from people that earned their higher incomes through voluntary means (obviously this isn't the case with some rich people (read: executive of Fannie and Freddie and the like), but that's the neo-fascist state we live in for ya), the economic arguments they use are just flat out falsehoods.

For Society To Thrive, The Rich Must Be Left Alone

Mises Daily: Thursday, March 02, 2006 by George Reisman

Paul Krugman is very upset. In his Monday New York Times Op-Ed column this week, he complains that while the real incomes of the great majority of Americans have essentially stagnated or declined over the last thirty-five years, "income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent."

He describes the situation as one of "a rising oligarchy" and says, "it suggests that the growth of inequality may have as much to do with power relations as it does with market forces." Krugman does not explain what he means by "power relations" beyond implying that economic inequality in and of itself is their cause. "There's an arrow of causation," he says, "that runs from diverging income trends to Jack Abramoff and the K Street project [a project designed to enmesh Republican politicians and lobbyists]."

The essential thing to understand here about Krugman is that he is a Keynesian. And as Mises observed, "The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions." This failure is present in Krugman's hostility to economic inequality.

Krugman and all other enemies of economic inequality conceive of wealth and income strictly in terms of consumers' goods. As they see matters, a wealthier, higher-income individual simply has more goods and services that he personally can enjoy than does the average person. This view is reflected in the typical depiction of capitalists as fat men, whose plates are overflowing with superfluous food, while struggling wage earners starve. The alleged solution is to take from the surplus of the capitalists and make good the deficiency of the wage earners.

The truth, which real economists, from Adam Smith to Mises, have elaborated, is that in a market economy, the wealth of the rich — of the capitalists — is overwhelmingly invested in means of production, that is, in factories, machinery and equipment, farms, mines, stores, and the like. This wealth, this capital, produces the goods which the average person buys, and as more of it is accumulated and raises the productivity of labor higher and higher, brings about a progressively larger and ever more improved supply of goods for the average person to buy.

Thus, for example, because the automobile companies have numerous modern and efficient automobile factories, there is a production of automobiles sufficient for almost every family in the United States to own one. Because Exxon-Mobil and other oil companies own oil wells, pipelines, and refineries, there is gasoline and heating oil for the average American to buy. (And if the wealth of these companies were greater, and if its use in developing sources of supply were not blocked again and again by those who value the wildness of nature above the welfare of people, there would be a larger and more affordable supply of gasoline and heating oil to buy.)

The capital of business firms is also the foundation of the demand for labor. The wealthier and more numerous are business firms, the greater is the demand for labor and the higher are wage rates. As illustration, just consider where it is more desirable to work: in an economy with few or no business firms or only small, impoverished business firms, or in an economy with large numbers of wealthy business firms. It is obvious whose competition for one's services will be more beneficial.

Thus, in a market economy, people have a two-sided benefit from the capital owned by others. The capital of others is the source of the supply of the goods they buy and the source of the demand for the labor they sell. And the greater is that capital, the greater is this two-sided benefit to everyone. To the extent that the supply of goods produced is greater, prices are lower. And to the extent that the demand for labor is greater, wages are higher. Lower prices and higher wages: that is the effect of capital accumulation.

An essential prerequisite of capital accumulation is saving. What is saved out of income is added to capital.

For a variety of reasons, the incomes that are most heavily saved and invested are higher incomes rather than lower incomes. A major reason is that high incomes are often earned as high rates of return on capital, and, by being heavily saved and invested, are the means of building a personal fortune. Such high incomes, moreover, are earned as the result of introducing new and better products and more efficient methods of production. Their being heavily saved and invested and thus enlarging the capitals employed makes possible an increased production of the new and better products and a wider application of the more efficient methods of production.

To the extent that our economy is still free, all this is undoubtedly true of the high incomes Krugman complains about. They are the incomes of the great innovators of our time, such as Bill Gates, Michael Dell, Steve Jobs, and Sam Walton — the men whose efforts have transformed important parts of our economic system and who could not have done it had they not been free to earn and then save and invest extraordinarily high incomes.

Of course, not all the high incomes earned in our economy are of this character. There are also high incomes earned as the result of government subsidies and government harassment of competitors. And there are high incomes earned by trial lawyers who bring bogus class-action law suits. These incomes are earned largely at the direct expense of the innovators. And precisely because of this, it should be clear, they are earned indirectly at the expense of everyone else in the economic system.

The essential point here is that the economic inequality that results from economic freedom is to the material self-interest of everyone. It is the foundation of rising real wages and a rising standard of living.

Given the actual nature of economic inequality under economic freedom, how can we reconcile the apparent side-by-side existence of greater economic inequality with economic stagnation or outright decline?

Some part of the answer may be that the increase in the degree of economic inequality is only a matter of appearance, not reality. The lower income tax rates of the last generation may well have resulted in the reporting of substantial high incomes that were previously concealed by means of various methods of tax avoidance.

But let's put that aside and proceed to a more substantial answer. This is an answer suggested, surprisingly enough, by Krugman himself, when he referred to "power relations" in contrast to "market forces."

"Power relations" — i.e., the use of physical force by one person or group against another — are present in all forms of government intervention in the economic system. There is no law, regulation, ruling, edict, or decree whose enforcement does not rest on the threat of sending armed officers to arrest and imprison violators, and, if they resist, to kill them if necessary.

This force is appropriate when used against common criminals, whose defining characteristic is that they themselves have previously used force against innocent victims, in committing such acts as robbery, rape, and murder. In cases of this kind, the government's use of force serves to protect the innocent and to enable them to go about the peaceful pursuit of their happiness.

Government intervention in the economic system, in contrast, is the use of force not against common criminals, who have previously initiated its use, but against peaceful citizens engaged in production and voluntary exchange and whose only "crime" is that they have done something the government has decided it does not like. This force serves to prevent people from doing what they judge to be in their interest to do and to compel them to do what they judge to be against their interest to do.

In all cases of this kind, the government's force operates to make people worse off than they could have been. And the more extensive the government's intervention becomes, the greater becomes the gap between the life that people must live and the better life they could have lived had the government not stood in their way. At some point government intervention becomes sufficient to cause people to live not only worse than they might have lived, but worse than they actually did live in the past.

This last is what has been happening to the American people since the era of the "New Frontier" and the "Great Society." Since that time, the weight of government intervention has become sufficient to stop or nearly stop economic progress for large numbers of Americans and to cause actual economic decline for many.

Inflation, Social Security, and Medicare undermine the incentive to save and accumulate capital. Vast government budget deficits absorb large amounts of the savings and capital that do exist and divert them from business investment to financing the government's consumption. More recently, the government-engineered housing boom, built on the foundation of artificially low interest rates imposed by the Federal Reserve, has operated in a similar way and diverted further vast sums from business investment to housing purchases. And before the housing boom, the dot-com bubble, also created by the Federal Reserve, created the illusion of vast wealth and capital that served to squander substantial portions of the capital that did exist.

Inflation has also played a major role in enlarging the highest incomes in the economic system. This has been the case insofar as inflation (understood in terms of an increase in the quantity of money) entered the economic system in the form of new loans that served to drive up securities prices and thus the value of stock options. Take this away, and the rise in the highest incomes over the period that Krugman complains about would be much less, if it existed at all.


But there is more. The last forty years or so have seen the imposition of environmental legislation and consumer product safety legislation, and numerous other government programs that serve to increase the costs of production. The great majority of people assume that the higher costs simply come out of profits and need not concern them. But the fact is that the general rate of profit in the economic system remains more or less the same, with the result that increases in costs show up as increases in prices, or as decreases in other costs, notably, wages.

The real wages of the average American are stagnating in large part because the higher real wages he could have had — precisely on the foundation of the work of today's great businessmen and capitalists — have instead been used to pay for the cost of environmental and safety regulations. Money that might have been paid as higher wages has instead been used to buy equipment, materials, and components required to be in compliance with these regulations. Larger supplies of goods that might have come into existence and driven down prices or at least prevented inflation from raising them as much as it has, have been prevented from coming into existence, especially by environmental regulations.

This is the answer economic theory gives to Krugman and to the hordes of other intellectual dilettantes whose writings and lectures on the subject of economic inequality proceed in ignorance and thus end up amounting to just so much clutter — clutter irrespective of the prestige attached to the venues in which it accumulates.

[one weak]

I like the article except for the part where the welfare of humans is being held back due to attempts to uphold the wildness of nature. I guess I would rather see nature thrive and be protected rather than my heating bill go down because oil companies have less regulations to follow and fees to pay. I am in the minority, I understand.

[alvarezbassist17]

6. Our citizens will all have to take a massive cut in our standard of living

I don´t know shit about economics, and I realize I have taken this point out of context and subtracted the rest of the sentence, but in my opinion I hope this does happen. With my lack of knowledge towards economics, my opinion is that (with the exception of those here on the board who know their stuff, and others like yourselves) the money gurus in power are telling me to spend all my money. We are given a bullshit slap on the back for buying shit we don't need? No way. The only way I am getting rewarded for being fiscally smart is to see others fail at it. So, keep it up America! I want more sob stories of folks who lost their home, car, boat, vacation home, because they got laid off and collected unemployment for a year and turned down job after job because the pay was too low. Pride is tough to swallow, apparently.

Ok, I sort of agree with you, but for different reasons.  

What I feel like you're referring to without knowing it is the massive debt-fueled consumption that has gone on by the American public in recent years.  And I agree, it's bad and should definitely be curbed (but definitely, DEFINITELY not through more laws or regulations by gov't (aside from going back to a 100% reserve gold standard, but that's pro-free market because fractional reserve banking is essentially a fraudulent contract)).  But at the same time, the incentives for this behavior have been put in place by the Federal Reserve and our fiscal policy, as well as a whole mess of propaganda by our politicians and their Keynesian economists.  The Federal Reserve artificially lowers interest rates by its very nature, thereby taking away the incentives to save from the people, as well as setting into motion the business cycle (explained above).  Our household savings rate has been under 10% for 30 years, while Japan's is closer to 20% and China's around 25%.  

The myriad business cycles we've experienced since the Federal Reserve's inception has not only slowly impoverished the people, but also encouraged an economy based on speculation (because you can't get shit for returns anymore unless you take a lot of risk) and forced us to rely on debt.  But arguably the biggest bunch of economic bullshit handed down is the whole idea that spending drives an economy, and that couldn't be more wrong or detrimental.  The only reason this has been able to continue is because of the artificial demand for dollars because of its status as world reserve currency as well as the willingness of foreigners to purchase our bonds.

So yeah, I tend to agree with the typical view of "fat Americans," but it's not because we're capitalists or a productive nation, it's because we steal the purchasing power of foreign nations through the inflation of our money supply, and we are completely dependent on perpetual debt.  But that's not the fault of the people, the people that understand what I just said are few and far between, and if there's any in the government (besides Rand and Ron Paul) that understand it, then they just lie through their teeth to get re-elected.  I'd be happy to provide further explanation if I was unclear.

[alvarezbassist17]

I like the article except for the part where the welfare of humans is being held back due to attempts to uphold the wildness of nature. I guess I would rather see nature thrive and be protected rather than my heating bill go down because oil companies have less regulations to follow and fees to pay. I am in the minority, I understand.

Yeah, George Reisman has a bit of a different view on that that really requires explanation.  I wouldn't be able to explain it as well as him, so if you want, you can listen to this lecture by him.

Resource Economics and Environmentalism

http://mises.org/media/1028

You also might need to understand the Libertarian view on environmentalism to understand that he's not pro-destruction of the Earth, Libertarians just have a different (in my opinion far better for the Earth, anyway) view on how to save it.  Here's a wonderful lecture on that by Walter Block:

http://mises.org/media/1890

[one weak]

*whoops response to previous statement

Yeah I got ya. I guess from a strictly social and personal perspective one must sometimes ignore the hows and whys of economic decline and figure out how to curb your own spending. I get that there are larger forces at work here, but there sure seem to be a lot of excuses other than being personally responsible.

[one weak]

This environmental video is a trip. I'm gonna smoke my left-wing peace pipe, hug a tree, and watch it later....hahah.

seriously, i will watch it and give my perspective.

[alvarezbassist17]

*whoops response to previous statement

Yeah I got ya. I guess from a strictly social and personal perspective one must sometimes ignore the hows and whys of economic decline and figure out how to curb your own spending. I get that there are larger forces at work here, but there sure seem to be a lot of excuses other than being personally responsible.

Yeah, I'm with you there.  I feel like people buy into it way too easily, but that's just because you and I have stronger moral barometers than a lot of people.  But again with the incentives.  Throughout the 20th century, the government added more and more programs and bailed out so many people that there really isn't any reason to be responsible anymore.  I mean you can sort of see the progression when you talk to the elderly and then get progressively younger; more and more people have just completely abdicated personal responsibility.  I don't think that pattern happened totally randomly, and it wasn't the free market because its influence has done nothing but wane throughout that period.  

But yeah, I'm not for bailing out anyone who's taken on more debt than they can handle or acted irresponsibly, either.  I'm just saying there is a tangible, non-sociological reason for it happening to our culture.

This environmental video is a trip. I'm gonna smoke my left-wing peace pipe, hug a tree, and watch it later....hahah.

seriously, i will watch it and give my perspective.

Haha, fuck yeah dude.  I really get a kick out of listening to that funny Jew talk, too.  I love Walter Block; he's got some great material on other topics, too.

But also, I wanted to note that I started off as a Liberal, too.  I voted for Kerry in '04 (clearly I wouldn't again), but I really really feel like the values of your run-of-the-mill, not crazy socialist Liberal are better fulfilled by Libertarianism in every single way (besides perhaps abortion, but they offer more of a compromise than conservatives, there's a great Walter Block lecture on that, as well).