Tag: economics

Contra Klaus Schwab, Government Cannot Create Prosperity

There is no sense living in a free country without prosperity. Think Klaus Schwab of the global elites, “You will own nothing but be happy.” How charming.

If we want to own something, we should understand the system that creates prosperity and then protect it. Are you aware that many economists have no idea how prosperity is created? Their fallback position is “it’s complicated.” 

No, it is not.

We come from nature, from planet Earth. Understanding nature gives us a starting point for the mechanics of prosperity. Students of nature have described thousands of systems, but none have ever gotten to nature’s true foundations. Not even AI. 

A tenet of the environmental movement is “there is no waste in nature.” The obvious question, then, is if there is no waste, what is the mechanism that drives it out? 

Competition drives waste out of nature. 

People understand competition and they understand waste. What they don’t understand is that the two are inextricably connected like opposite ends of a seesaw. When competition goes up, waste goes down, and vice versa. Since there is no waste, nature is a perfect competitive system.

The competition/waste connection gets you a long way to understanding the operation of nature but there is a very necessary third fundamental; everything moves to ease.

You can prove this by going to a national park. There, signs read, “Do not feed the animals.” Why? Because if you start feeding the animals, they will stop feeding themselves. Everything moves to ease! 

We can apply these three fundamentals of nature to the two great systems unique to humans, the marketplace and government. 

We easily see that the marketplace operates essentially like nature. It, too, is a competitive system that eliminates waste. Everything about the marketplace is based on a move to ease. Why trade if it doesn’t make your life easier? 

Government, on the other hand, is singular, meaning there can be no competition. No competition means there is no mechanism to eliminate waste. It is a feature of the system. As for a “move to ease,” take a moment and think about government employees…enough said! 

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The $96 Billion Lie: How Liberal Economists Manipulate Immigration Statistics to Hide the Truth About America’s Job Crisis

An economic analysis reveals how selective statistics are used to portray illegal immigration as beneficial while obscuring its true impact on American workers.

For years, liberal advocacy groups and complicit media outlets have pushed a narrative that sounds almost too good to be true: illegal immigrants are contributing $96 billion annually in taxes while maintaining higher employment rates than native-born Americans. Like most things that sound too good to be true, this claim crumbles under basic economic scrutiny.

The recent surge in claims about immigrant “tax contributions” and “employment rates” represents a sophisticated misinformation campaign. The cornerstone of pro-illegal immigration propaganda is the claim that undocumented immigrants pay $96 billion in taxes annually. This figure, popularized by the Institute on Taxation and Economic Policy (ITEP) and parroted by countless media outlets, is a masterpiece of statistical deception.

The $96 billion figure lumps together sales taxes paid by everyone, excise taxes on gasoline and utilities, property taxes supposedly “indirectly paid through rent”, which is an economic fallacy, and a small fraction of actual income taxes.

Advocates then present this mix as if undocumented immigrants are dutifully filing tax returns and contributing to Social Security like law-abiding citizens.

They are not.

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Economic suicide by design

This week, Oregonians heard the announcement that Tektronix, an iconic Oregon-based company, is moving its headquarters from Oregon to North Carolina.

Tektronix has decided that it has had enough of the Oregon Democrat high taxes, poor schools, and constant degradation of the quality of life for its employees. Textronix was once one of the largest employers in the state of Oregon. Anybody working in the electronics branch of technology relied on Tektronix test equipment to troubleshoot electronic problems. Driving by the Tektronix campus was very sad for me when we moved to Oregon. The parking lots around the Tektronix buildings were mainly empty, and slowly got even emptier. As an Electronic Technician who relied on the Tektronix test equipment my entire career, this was like watching an old friend slowly die from neglect.

Elections have consequences, and so does how people vote. Voting for more taxes, higher fees, and the crazy bills the Democrat supermajority pushes through is costing Oregon thousands of highly-paid citizens who have had enough, and they then leave Oregon for different states. Yet Oregon continues down the same old path to economic disaster. Oregonians cannot figure out that Democrats are all the same; their solution to problems is to raise taxes and fees on everything. For decades, Oregonians have been voting for Democrats to lead Oregon, and nobody noticed that conservatives and Republicans were leaving over economic or freedom issues. The Democrats, Liberals, and progressives just kept on making Oregon less affordable and less desirable to raise a family or retire here.

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Josh Hawley Wants To Raise the Minimum Wage

Sen. Josh Hawley (R–Mo.) has introduced a bill to increase the federal minimum wage, which has been $7.25 an hour since 2008. Hawley wants it to be $15 an hour. Many of us thought that the minimum wage issue was settled, but here we are again.

This is freshman-level economics: If you introduce a price floor on labor, the supply of people willing to work at that wage will exceed the demand, resulting in unemployment. If an employer can either have three employees making $10 an hour or two at $15 an hour (and one on public assistance), which do you think he would choose? Politicians like Hawley seem to think companies will simply accept lower profit margins. But they won’t—they’ll raise prices, cut staff, or go out of business.

Since hardly anyone earns $7.25 an hour these days, the federal minimum wage doesn’t cause serious economic distortion. A $15 mandate, by contrast, would wreak havoc, especially in low-cost-of-living areas. A simple thought experiment would be to imagine what would happen if we had a $10,000-an-hour minimum wage. This would obviously eliminate most jobs. The same principle applies to smaller hikes, even if the effects would not be as drastic. If prosperity could be legislated, we would have done it long ago.

Hawley is an interesting mix: socially conservative, economically populist. He has supported tax hikes on the rich, expanding the power of unions, capping credit card interest rates, expanding Social Security, imposing tariffs, and imposing prescription drug price controls. He’s frequently on the same side as such left-wing figures as Sens. Elizabeth Warren (D–Mass.) and Bernie Sanders (I–Vt.). In fact, he and Sanders, a self-described socialist, co-sponsored the bill to cap credit card interest rates.

What does it mean to be a Republican these days? What defines Republican economics? It used to be lower taxes or balanced budgets, but no longer. The Democrats are getting a lot of mileage out of being anti-tariffs, but that’s not because they are philosophically committed to free trade—most of them are reflexively opposing Trump. If a Democrat is elected in 2028, there’s a good chance they’ll maintain his tariffs. Voters don’t have many free market choices remaining.

We are a long way from 2005, when President George W. Bush and Treasury Secretary John Snow made an honest attempt at privatizing Social Security, or from 1998, when President Bill Clinton was pondering a bipartisan move along similar lines.

The camera loves Hawley; he’s handsome, articulate, and dangerous. When it comes to economics, there isn’t much daylight between him and the furthest-left factions of the Democratic Party. It is all about the packaging. If Hawley seems less crazy to the average voter than Warren and Bernie, that should worry us all.

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Did Smoot-Hawley Cause The Great Depression?

Americans are taught in school that the Smoot-Hawley tariff legislation of 1930 greatly exacerbated the Great Depression and sent the world spinning off into a decade of debt deflation and economic contraction.

This seems to make sense until we remember that the history of the United States over the past century was written largely by progressives. In fact, the Great Depression began in 1920 with a decade of falling prices for farm products, a deflationary wave that eventually engulfed the real estate sector and the entire US economy.

What is missed by many discussions of Smoot-Hawley during and after that period, is the fact that the economic collapse of the 1930s was already a given with or without the new tariff law. The impetus behind the political decision to raise tariffs was a misguided reaction to the collapse of agricultural prices, but the force behind this deflationary wave was primarily “positive” factors such as new technology and innovation. The deflation that began after WWI decimated farm communities and eventually led to the collapse of real estate prices, particularly Florida real estate.

Support for protectionism was the consistent refrain from the corporate and farm lobbies in Washington in the nineteenth and early twentieth centuries and was supported by members of both political parties. But the real underlying cause of the powerful political push to raise the existing tariffs even higher at the end of 1929 may be found in the substantial changes that were occurring in the American economy.

Many historians and economists blame the level of tariffs after World War I and particularly during the Great Depression for making more severe the economic contraction and unemployment following the 1929 market crash. The passage of the Fordney-McCumber Tarif Act in 1922 symbolized the unique Republican penchant for trade protectionism — and currency inflation — that stretched decades back in time to the party’s inception in the 1850s.

In his 2005 book, “Making Sense of Smoot Hawley,” Bernard Beaudreau argues that the imposition of tariff protection for U.S. industry in 1930 was simply a continuation of the policies implemented by the Republican Party after they returned to power in 1920. Beaudreau cites the rising productivity of U.S. factories, the spread of electrification throughout America, and the continued influx of cheap foreign-produced food and manufactured goods as the chief cause of the deflation during this period. Bread production, for example, became automated in the 1920s, contributing to a decline in bread prices.

Imports were still perceived to be a threat by the American manufacturers of that day, despite already high tariff levels. Underemployment was the result of the lack of demand and thus falling product prices that resulted in the 1930s. American industry became too efficient too quickly, resulting in a global surplus of goods and an equally dangerous lack of demand. Air-conditioning and improved transport helped to leverage the future value of Florida swamp land into a towering speculative bubble that collapsed two years before the Great Crash of 1929.

A century before the invention of such things as “artificial intelligence” or AI, American workers worried about technology taking their livelihoods. Senator Reed Smoot (1862-1941), Republican of Utah, said of Smoot-Hawley: “To hold the American tariff policy, or any other policy of our government, responsible for this gigantic deflationary move is only to display one’s ignorance of its universal character. The world is paying for its ruthless destruction of life and property in the World War and for its failure to adjust purchasing power to productive capacity during the industrial revolution of the decade following the war.”

The onset of the Great Depression from the summer of 1929 on brought the unemployment rate from 4.6 percent in 1929 to 8.9 percent in 1930. Congress sought to correct this imbalance by limiting imports via the Smoot-Hawley tariff. While there is little doubt that higher tariffs made the Great Depression worse, higher levies on imports may not have been the primary factor. Indeed, the introduction of electricity and other innovations drove strong growth in many sectors of the economy, but not on the farm.

This alternative view of the role of Smoot-Hawley in turning the market crash of 1929 into the Great Depression of the 1930s is important to understanding the narrative of the 1920s. Following the Great Depression and World War II, the U.S. position regarding tariffs changed dramatically, in part because much of the industrial capacity of Europe and Asia was destroyed by the conflict.

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Osama bin Laden’s Secret Weapon: Economic Literacy

While acknowledging his great evils, future strategists and historians will one day likely recognize Osama bin Laden’s strategic acumen. With minimal resources or technology, Osama bin Laden managed to create immense socioeconomic damage and nearly destroy both of his main enemies—the “godless” Communist Soviet Union and the Zionism-supporting United States. Bin Laden achieved this using only one simple weapon, a basic understanding of economics, and thus, the immense harm that military spending does.

A simple economic concept is all we need to understand why most military spending is so detrimental. Every living order—whether it’d be a single cell, or a collection of them like a human being, or a collection of humans like a community or a company—is in a constant cycle of the production and consumption of wealth. A surgeon produces wealth in terms of surgeries, which he exchanges for money, which he then exchanges for the wealth he consumes in terms of housing, energy, food, and so on.

Production increases the world’s economic pie of wealth and order, while consumption reduces it. If the government taxes people and uses the money to hire 100 laborers to work on digging holes, only to then refill them, the laborers have not produced or increased the economic pie in terms of useful wealth, yet they trade their wages for—and then consume—goods and services (civilian goods that lead to life, enjoyment, etc.). This leads to an overall net shrinking of the economic pie to the detriment of the taxpayers who were deprived of the wealth which they sacrificed a part of their lives to create. In order to realize overall economic growth, action and social cooperation must be coordinated to facilitate more production than consumption.

With the above in mind, let us now look at military spending. Every year, about $1.5 trillion—an amount similar to the entire yearly productive output of Spain, which has the world’s 15th-largest economy at $1.58 trillion GDP—is consumed by the millions of people employed by the national defense bureaucracy and its associated contractors as they produce push-ups, military drills, jets, nukes, and other weapons. There is a massive consumption of real wealth taxpayers were deprived of and production of goods which do not improve the lives of Americans. Should the US be invaded, the production of the aforementioned would have been well worth the $1.5 trillion dollars of wealth consumed. But, since there is no chance of anyone attempting this, and they themselves—not being completely bankrupted by the attempt—the materials created would all be virtually worthless.

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Opposing The Keynesian Illusion: Spending Does Not Drive The Economy

Keynes held that the economy can suffer extended periods of high unemployment because of deficient aggregate spending. A contraction in spending results in businesses having excess inventories and reduced revenues. Businesses respond by cutting back and decreasing their demand for labor. Due to “sticky wages,” this results in a large decrease in employment and incomes for workers. The problem comes full circle and self-aggravating because workers as a whole must restrict their spending due to their reduced incomes.

For Keynes, the solution is found in the government, which can increase the money supply and engage in deficit spending. Monetary and fiscal policies are aimed at stimulating (indirectly) and replacing (directly) aggregate spending, respectively. Instead of focusing on these destructive prescriptions, I want to take a closer look at the central placement of aggregate spending in his analysis.

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Inflation Bites: The $38 Million Man

It’s easy to think of “inflation” as an abstract economic principle and forget that it has real impacts on real people.

Federal Reserve Chairman Jerome Powell acknowledged the pain of price inflation during his press conference at the close of the December FOMC meeting.

“We understand very well that prices went up by a great deal, and people really feel that, and it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in that burst of inflation that was very global.”

Powell did not admit that he and his fellow central bankers were largely responsible for that pain, although he took credit for bringing inflation down, saying, “Now we have inflation itself is way down — but people are still feeling high prices — and that is really what people are feeling.”

Yes, Jay. We are feeling those high prices — because they haven’t come down! In fact, they continue to rise, just not as quickly as they were last year.

I might note here that inflation is on purpose. Making prices rise and go up is a stated policy. They just don’t want prices to rise so fast that you notice.

Unfortunately for the powers that be, you’ve noticed.

Just how much have prices gone up?

According to the most recent Consumer Price Index (CPI) data, prices are up 2.7 percent in the last year. But those of us living in the real world know prices have gone up much more than that.

Joaquin Henault and Laura Williams recently highlighted the dollar’s loss of purchasing power using the “Big Mac” index.

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The Economy Has Failed the American People, But It’s Taboo To Say Why

The economy has failed the American people, but it’s taboo to say why because that would undermine the entire power structure that so richly benefits the few at the expense of the many. The few have an extremely compelling motivation to obscure the “why” and to enforce the taboo on saying it aloud.

The economy has failed the American people because it’s a two-tiered power structure that’s essentially neofeudal, meaning it’s an updated version of traditional feudal social orders. To understand this, we must start by understanding traditional feudalism.

In feudal societies, life is pretty good for the nobility in the castle on the hill. For the powerless peasants working the fields below to fund the nobility, life is less good, and so the peasantry is open to changing this asymmetric power structure to a fairer balance.

To maintain its grip on power, the nobility must promote a social zeitgeist in which the peasantry’s powerlessness is the natural order of things and therefore resisting this structure is not only a sin, it’s futile.

One key feature of feudal social orders is the impermeability of the line between nobility and peasantry, what we call social mobility. Nobility and serfdom were established at birth, never to change. Serfs were bound to the land of their birth and could not leave; their servitude was for life.

This was a regression from the Roman Empire, which allowed ownership of land by free citizens, and relatively free movement of citizens throughout the vast empire.

Wedged between these hereditary classes were the merchants and craft workers whose services were essential to the nobility’s maintenance of power. As Fernand Braudel documented in his massive three-volume series Civilization and Capitalism, 15th-18th Century (Vol. 1: The Structure of Everyday Life, Vol. 2: The Wheels of Commerce, Vol. 3: The Perspective of the World), the story of capitalism is the steady expansion of commerce and production eventually generated a class with sufficient power to unseat the feudal power structure and replace it with various flavors of capitalism.

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Malice Aforethought

Professors of finance are a dime a dozen. Their theories are generally shallow and wrong… or kooky and silly. We weren’t sure which category Professor Richard J. Murphy of Sheffield, England, belonged in. We doubt that his core thesis on the coming crash is correct… but it is provocative.

At first glance, Murphy appears to be even more of a cynicalist than we are. He believes Donald Trump is offering dumb economic policies intentionally… trying to sink the US economy.

Everybody knows restricting trade is bad policy. It prevents people from getting the best product at the best price… and it allows uncompetitive, but politically well-connected, domestic companies to stay in business long after they should have been liquidated.

Threatening foreign nations with sanctions if they use currencies other than the dollar is another bad idea. It’s like when you’re losing a Little League baseball game… and threatening to take the bat home. Eventually the foreigners will find their own bat.

And there’s the threat of deporting millions of workers. Add those deported workers to the $2 trillion Musk and Ramaswamy say they will cut from the Federal deficits… and the higher prices caused by tariffs…

All of them coming on stream just as the stock market reaches bubble highs…

… and you have set the stage for a catastrophic meltdown.

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