Thursday, July 28, 2016

Raging Against the Wrong Machine

I have to admit to not having the stomach to watch the DNC coverage - much as I didn't watch the RNC coverage.  In the case of the Evil party this week, I just had my gall bladder taken out; my system just isn't used to that much bile.  Besides, as I've said many times, I hate day to day politics.  Paying attention to politicians is like cleaning the cat box.   It's a disgusting, revolting task that exposes you to all sorts of dirty, filthy things you'd rather never see, but if you don't do it, the job just gets even more disgusting and revolting.

I have seen or heard bits and pieces; I've heard the crowd in the convention chanting "Lock Her Up" about the Hildebeest, which was the chant heard during the RNC that instantly and automagically became hate speech.  I've seen the idealistic communist Bernie supporters, and I'm going to rant against them for a minute.

There's a quote attributed to Friedrich Hayek that goes, "if socialists understood economics, they wouldn't be socialists", and it's obvious how right he was when you read what those kids are saying.  They show complete ignorance of what they really want and what socialism really means.  Take these two signs:  “End Capitalism Before It Ends Us (And the Planet),” and “Human Needs Over Corporate Greed.” These are dirt-common democratic beliefs; homilies for the spiritual brothers if you will.  To quote from The Scandal of Money.
Most Democrats see robotics and other advancing computer technologies as job killers rather than job creators, as if more workers would be employed if they were less productive. They see energy production as chiefly a source of pollution, to be suppressed by the Environmental Protection Agency (EPA). They are transforming the Internet into a sterile and litigious public utility regulated by the Federal Communications Commission. They are making the banks into a protectorate of the Federal Reserve Board, which they are turning into a fourth branch of government. All these Democratic extensions of government thwart entrepreneurial job creation. They are the chief threats to the middle-class family’s economic well-being.
In the case of the first slogan, it has been shown time and again, that when a company makes more of something, it costs less: 20 to 30% less for every doubling of quantity sold.  Pay attention Bernie lovers: that means the more they make, the more efficient they are, which means less waste and less harm.  In the second, case, capitalism isn't about greed, it's about filling people's needs.  If a company doesn't fill their customers' needs, they go out of business regardless of how greedy the owner is or isn't.  Furthermore, no system in history has lifted more people out of poverty than free markets have.  Free market principles have lifted almost 3/4 billion people out of extreme poverty in China alone, since the introduction of market reforms in the early 1980s.
Between 1981 and 2010 it lifted a stunning 680m people out poverty—more than the entire current population of Latin America. This cut its poverty rate from 84% in 1980 to about 10% now. China alone accounts for around three quarters of the world’s total decline in extreme poverty over the past 30 years.
The situation has improved so much since free market reforms in India that they have the same upward mobility as Americans do.  Comparing the year intervals of 2004-05 and 2009-10, about 40% of poor households moved above the poverty line between the intervals. Similarly about 11% of poor and vulnerable moved into the middle class during the same period.  

The kids don't know what they're protesting nor do they understand what they want to replace it with.  Take this quote from a protester named Michaela Bennett:
Bennett, who was a history major, noted that in countries such as Russia and China it hadn’t worked “when they’re tried to implement communist or socialist policies.”
This is the classic argument!  It has never worked before, they killed over 100 million of their own citizens, it has always ended in misery and suffering, but This Time It Will Be Different because they just didn't have the Right People in charge.  No thought to the fact that those previous times, those people thought they had the Right People in charge.  One wonders just how there could be advocates for such a system in 2016, despite well over a hundred years of experience with it. They misunderstand the system completely!  It's not going to work no matter who's in charge.  The same person, asked if her beliefs were socialist, says
“The idea of the community working together and supporting each other, that idea I do support,” Bennett, who lives in Bend, Oregon, remarked. “So if that’s socialism, I guess so.”
No.  No, it's not.  Not the way you put it.  What you describe is being a community and being a good neighbor.  At the most, it's contributing to local charities.  Socialism is when you get the government to train guns on everyone, take their money and use it to help communities they're not part of.  

When they rage against the "top 1/10 of 1%", they've got it all backwards.  They're raging against the wrong machine.  They're raging against people who are generally not doing anything illegal.  Sure, they're beneficiaries of a rigged system and a few probably helped set it up, but not all of them.  Why not try to fix the system so that it really can't benefit one segment of society, if the goal is really to "end injustice".  If they don't want to fix the system, their argument comes down to, "let me benefit from corruption".   The bad system is our phony money from the central banks.  If we had real money and not the central banks' imaginary numbers, there would be nothing to take advantage of.

When they talk about money as being wealth, they have it backwards.  Dollars aren't wealth, they're only a yardstick to measure wealth by.  By analogy, a clock measures time, but it isn't time itself.  And wealth can't be created by creating more dollars any more than you can create more time by painting more numbers on your clock.  It's a good analogy because if you repainted your clock to 36 hours, you'd decrease the "worth" of each hour - from 1/24th of a day down to 1/36th of a day but a day would still be a day just as the value of each dollar goes down in proportion to the number they create.  You'd have more hours but the same amount of time just as every time the Fed creates more money, you have more dollars but the same amount of wealth (if any) thanks to the fetid central banks.

So when they rage about the top 1/10 of 1% having gained so many more dollars, it's meaningless.  The real effect of the central banks is that everyone has more dollars compared to 10 or 20 years ago, but the buying power of those dollars has been diluted by the numbers of dollars they've created.  Adjusted for inflation, using numbers more like measured data in The Chapwood Index or the 1980s method used at Shadowstats than official CPI numbers, the majority of people haven't had an increase in buying power since all power was given to the central banks and the "gold window" closed in 1971, destroying real money.  The only things that allow most of us to survive are the improvements technology has brought us (including farming technologies) and the work of wealth creation, such as the price decrease that comes with every doubling of quantities manufactured.  The incredible price decreases in electronics have increased the standard of living for billions of people.  Did you know that the cost of lighting an area; your home or whatever, has decreased one hundred-thousandfold if you go back to the middle ages?  That's in terms of the hours of labor per lumen-hour of light.  (See Gilder, The Scandal of Money, Kindle location 445)  Stretched out over long periods of time, that's the improvement that markets and technology have given us. It's the main reason anyone feels like we're not sliding backwards in buying power.  As we slide backwards in buying power. 

But Bernie supporters will probably never argue to get rid of the Fed and restore real money.  The Fed, while technically not a government agency, is Big Government personified.  It's complete central control on a par with the old Soviet Politburo.  Bernie supporters seem to long for an all-protective Big Brother (to borrow a phrase) to provide for them, rather than to face the world.  Although some of them might go with BitCoin over the Fed if we didn't tell them it wasn't government controlled...
Bernie supporters, if your argument is "let me benefit from corruption" instead of fixing the system, you're part of the problem.  If you want a surrogate parent, who really doesn't care the slightest bit about your best interest and will crush you with the slightest wrong move, push for a bigger government.  Go ahead and get that pepper spray in your face.  If you really want justice, try getting on board with the moves to get rid of central control of money, so that it's fair again.  Real money depends on justice above all else.  Your enemy isn't the "richest 1%", it's the Federal Reserve Bank.


  1. Technology and innovation are what have - and will - save us from all of the end-of-the-world scenarios screamed about by the Left. From a Malthusian prediction of mass starvation because one man (can;t recall his name, darn it) who developed a disease resistant type of corn that has increased crop production all over the world, to the discovery of new oil fields and shale oil "saving" us from the fears of "peak oil", to the de-bunking of the global warming, uh, climate change, uh, death by that toxic substance "CO2" (which no human being could survive without).

    But they will always come up with some new reason to fight technology and the benefits derived from it.

  2. There are so many factors involved in a discussion like this. One problem we are facing is that no matter who is elected we are looking into the abyss. "Maybe" it won't be 1929 all over again but more likely it will be worse. Worse because in 1929 50% of the people in this country lived on the land or near to the land (as in their parents still lived on the farm). That means they knew how to grow and preserve their own food and had the means to do so. Today that is more like 2% who live on or close to the land (maybe more, depends on how you define it all). It's all going to come tumbling down. How bad and when, who knows or could know. But the facts and reality of the situation is our economy is not well and our national debt is outrageous and our politicians and bureaucrats are clueless. We were in much better position in 1929, more resilient, our people were more capable (when it came to surviving) and we hadn't already shot our wad borrowing and tinkering with interest rates. The FED today is like that duck, calm and serene on the surface but underneath they are paddling like crazy and we aren't making progress. We have to fudge (lie) the economic pointers to make it appear that we are doing OK. Do you really believe we have 5% unemployment? Do you really believe inflation has been so low that no raise it SS was due? When the next bubble bursts there is no more resiliency in the system, no more cards up the FED's sleeve. We will default on the debt but probably not soon enough we will let it sap all our assets and income first. We will lose jobs lots of jobs as will the rest of the world. Our leaders will flounder and screw up intentionally and through ignorance. It will get bad and then get worse. I am certainly not the only person who believes this and I suspect a lot of people, politicians and economists believe it as well but must hide their beliefs.

    1. You and I are in violent agreement. I believe I've said virtually everything in your comment at one time or other in the life of this blog. I know I can't expect people to know everything I've said and I know that I get new readers all the time, but I also can't water down every post with lists of what I've said before (I'm bad enough about linking to my old articles). I'm really not sure how to address that.

      All that aside, I thought it was all going to collapse before the 2012 election!

      I also have that nagging fear that the next bubble to break will be the worst by far, and it will make the '30s look like good times. There are more optimistic arguments against that, for what it's worth.

      But my key point is that this was all set up in 1971 when Nixon closed the gold window. You can argue that he was forced to do it because we didn't have enough gold to cover the deficits from LBJ's "guns and butter" policies, but he's the one who killed the dollar as real money. And it's not like there's been no more deficit spending since then. The coming collapse didn't have to happen, but it has been put in place by every move the central bankers have made. I do believe it's both unavoidable and imminent. I just hate seeing the kids unable to separate the real cause of the things they protest from the effects they protest.

      At the time Nixon did that, he was advised by Milton Friedman. Friedman is celebrated all the time for his libertarian stances and defenses of free markets, but he went through a phase of believing central banks were the answer, and that's when he sold us down the river. He was given a Nobel prize for that, which had the effect of making him reluctant to change his mind, only coming out against central banks toward the end of his life.

    2. When I was a child my mother would make a "money cake" for our birthday. It was simply a cake with coins wrapped in wax paper through out the cake and a silver dollar for the birthday child. I can remember going with her to the bank to buy a silver dollar. You give them a paper dollar and they gave you a silver dollar. But two things happened since the 1950's that changed all that: 1. Massive debt. 2. Massive population increase.

      I do not believe any large country could today have a monetary system backed by PMs. Yes it started with the increased borrowing in the 60's and yes Nixon's decision to stop backing the dollar with gold was a significant point BUT if he hadn't France would have had all our gold and we would have none. There simply is not enough gold or silver to back the dollar or the Euro or any large currency. Arguably we could not have this terrible debt and debased currency today if the dollar was still backed by gold and silver BUT we would have gone bankrupt long ago because the rest of the world was in the 60's demanding payment in gold and France was leading that demand. There simply is not enough gold on earth to back our money. There was enough gold when our entire population was closer to 100 million and the rest of the world owed us money. Those days are gone forever.
      I would certainly advise individuals to own gold and silver. I would also advise individuals to buy food and necessities and to pay off debt and have some savings. Our leaders are incompetent or worse intentionally creating this disaster. We will be on our own in the future and your government will become your enemy (i.e. outlaw gold or silver, pass laws against 'hording', confiscate guns and punish legal owners of guns). IMHO there are dark days ahead. I fully expect the Democrats to steal the election and the left are the oppressors (the right is just stupid and unorganized stumblebums but the left are organized Marxist style oppressors). They have built a cabal out of immigrants (legal and illegal) disaffected groups and rent seekers and these groups now outnumber the working people. It's been a great run but the U.S. is in decline and worse we are about to step over the abyss with no bottom. The future is unpredictable but I would guess we will see events that can only be described as "biblical' in their effects. May you live in interesting times.


    4. They're following the complete playbook, aren't they? Not sure if they've killed off all the professors and intellectuals yet. Working in the fields will kill many of them. Just like Mao did it.

    5. And Pol Pot in Cambodia.

  3. Re: The Post

    You know this, and I know this, but "The Kids" today don't know it because the marvelous public "education" system has completely and utterly failed to properly educate them in the core values that mad this country what it was.

    And dear God, how it pains me to write "what it was".

    May God have mercy on us. Or at least those of us who still believe in Him.....

    1. There's a quote attributed to Henry Ford, "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

      There probably wasn't a single person in that convention center that understands this. They scream and scream about the problems caused by big centralized government and the fix they want is bigger government and more centralized control.

      The entire DNC argument is "let me benefit from corruption".

  4. as if more workers would be employed if they were less productive

    They would. If you want full employment, simply ban the wheel. Practice for that by banning fossil fuels.

    [in] those previous times, those people thought they had the Right People in charge

    'Our God can beat up your God. Our priests have deeper communion than your priests.' Government is a religion. You're trying to talk fundamentalists out of being fundamentalists, and that never works.

    Commenter Anonymous July 29, 2016 at 11:20 AM I do not believe any large country could today have a monetary system backed by PMs. / There simply is not enough gold or silver to back the dollar or the Euro or any large currency.

    Sure there is, all you need is enough Gold atoms that the pieces you exchange are large enough to conveniently handle. Here's how it's done: the legislature declares that all dollars in existence are backed by, exchangeable for, all Gold in Fort Knox. Tells the Treasury to run the coin stamping presses until people stop asking for redemptions. Last I heard someone try to do the division, it came out to USD$100,000 / Gold ounce.

    Now, the reason you say "there simply is not enough" is because you are infected by the "government" religion. You want other people to share your delusion that the organization named "government" is not subject to the ordinary laws of arithmetic. This is insane. Government is bankrupt, and if you don't want to live in a war zone you need to hurry up and do the bankruptcy reorganization.

    1. The last time I did that calculation, back in late 2011, I took the publicly available number for the ounces of gold in Ft. Knox (which, of course, many people don't believe) and divided it into the M1 money supply.

      "If we simply divided the 2.2 trillion dollars in the M1 money supply by the amount of gold in Ft. Knox, that would bring the price of gold to $14,900 per ounce, so each dollar would be backed by 1/14,900 of an ounce (around 2 milligrams). I have seen writers suggest that the M1 supply is drastically under reported; that would increase that $14,900 price. Likewise, if there is less gold in US hands, that also acts to increase the price - which reduces the amount of gold behind each dollar. I'm sure you've heard the people who speculate that there is no gold in Ft. Knox and the Fed took it all. That would make gold almost unobtainable in dollars."

      FWIW, the Treasury department says the current M1 supply is 3.242 $Trillion, and it works out to $22,000 per ounce of gold, and the Mint says there's the same number of ounces of gold in Ft. Knox as there was in 2011.

    2. I argue that a large part of the goal is to eliminate fractional reserve multiplying, which is another form of counterfeiting. That means the gold should be spread over all deposits denominated in dollars, which do not have an advertised risk like a mutual fund, as if they were all withdrawn at once. That means instead of M1, gold should be divided over M2 or maybe M3.

      Historically, I believe the gold warehouses have most of their claimed contents when they crash, but they've oversold warehouse receipts and changed from a warehouse into a speculative product. I suspect this is because it is easier to hide a theft done by fractional reserve. You can split the take with politicians who pretend to regulate you, yet the low-level warehouse workers don't suspect anything wrong because the warehouse is still full. I expect to find Fort Knox contents mostly intact, but claims oversold ten times.

    3. I recall a story about India soon after the British granted the country independence.

      A British civil engineer was watching a group of Indian men digging the soil away for a road tgo be built using spades and wheelbarrows.

      He asked why they were not using mechanical excavators. "Job creation" was the reply. "So why are they not using teaspoons to move the soil?".

      Phil B

  5. The picture in your post adds way more than 1000 words to what you have succinctly written.