TrumpCare Fails!

Big news: Obamacare is not replaced by Trumpcare.

Do you really want one quarter of the economy and your ability to purchase lifesaving and life improving interventions managed by, designed by, and named after a politician who never delivered any health care or ran an insurance company?

Washington had no computer policy yet IBM, Microsoft, and Silicon Valley developed by voluntary organic self-organization. Somehow we get lots of computer provided products at reasonable or free prices.

Washington had no individual transportation policy, yet Detroit grew and produced cars affordable to the average American. This all occured before Eisenhower created a national highway system.

Washington had no entertainment policy (perhaps entertainment was not important enough to deserve Washington meddling). Now we have free and low cost entertainment that is so good the whole world inports our products.

Washington has no kitchen appliance policy, or footwear policy, or vacation package policy, or book and magazine policy, or (until very recently) Internet policy. All those areas are horrible for consumers, right? Oh, wait.

Where does Washington have it flagship policies?

Well there is housing.  Washington had to intervene in the housing market to encourage more ownership and by the right people. Lets see the results. The housing market experienced an unsustainable bubble and then crashed bankrupting all the banks in the country and the Washington backed mortgage finance companies.  Requiring taxpayers to provide millions or billions of their hard earned money to bail out the housing finance “system” (banks, Freddie Mac, Ginny Mae, mortgage backed securities, etc) or face economic collapse.  Nice work Washington.

Lets look somewhere else.

Well there is college education. To help less advantaged students gain a college education, Washington provided guaranteed, non-dischargeable, subsidized loans to anyone who wanted to dream of a college degree. The waterfall of money led colleges to raise prices to soak up all the free money sitting on the table. Washington certainly benefited the colleges – the local college is the only nice place in most declining areas. From Johns Hopkins in Baltimore to Lafayette in Easton, PA, the college is the only thing with money to make a nice appearance.   Of course, the students cannot repay the loans. Taxpayers will have to have their hard earned dollars used to forgive student loans that never should have been made in the first place.

Well there is the retirement system. Washington said, left on your own you would invest in the American economy hoping it would fund your retirement years. Foolish Americans. The American economy is risky – look at 2008 when the stock market lost over 50% of its value in a few months.  Much better to give your money to the USG in the form of payroll taxes and in return for the USG promising to give you lots of money when you retire. While the USG can borrow unlimited amounts at near zero costs to spend anything it wants, this is a good deal. Greece had the same deal when Germany lent it any amount of euros. When repayment became an issue, Greece became a nation of people looking at tree bark for nutrition. If you like the prospects of the social security system, bravo. Most younger people understand that there will be nothing in the social security system for them in the future. It is a scheme of Washington that will end in tears for most everyone.

What next for our technocratic masters in Washington?



Capitalism is not an ism at All

To me, capitalism is simply the absence of force in human economic relations. If you wanted people to be able to deal with each other freely by voluntary agreement, you would get private property and capitalism.

It is not an “ism” at all.

Alright. I have to fend off some common attacks. Capitalism requires private property. All property is theft.  How does someone acquire legitimate title to property?

In law school I learned the first way was appropriation from nature. Sort of like mixing your labor with something that was freely available in nature to anyone who could take it. Deer hunting, for example. No one says the hunter who bags a deer on public land is not entitled to his venison chops.  Or if I picked up a tree branch and carved it into an exquisite statute. I took something from nature, available to anyone, and made it valuable by mixing in my skill and effort and then own it.

In the field of real estate, mixing your labor with nature is adverse possession. If you take a tract of land (lawyer talk) that someone else is not actively using and use it like an owner and your use is notorious (not hidden – visible to all), exclusive (you act as if it is ours – prevent others from using it) and continuous (for a period of years), the land becomes your property.  That is still the law in the USA. It has been the law in common law countries for centuries. You created private property by taking something from nature and mixing in your labor and you made it your property.

The other way to legitimately acquire property is to get it in a voluntary exchange from the previous owner.  Buy it.

Here is a problem. I buy a house and land from “X”. Only he got it from someone who got it from someone who stole it from an Indian tribe. I don’t have good title! If you are forever open to examining the providence of title, or you are willing to accept new evidence about the validity of title forever, then no one has good title.

The solution is you pick some date that all titles to property existent on that date are recognized as valid. No secure property title means you might find that someone else owns the land you just spent millions to develop.  Do the Indians who sold Manhattan have a claim to the property or do the Indians who lived on Manhattan before them and were forced off by Indian war? In the future will we discover an even earlier user of that land who lost it by war? One must simply set a date and say all titles to land at this date are legitimate no matter how arrived at – otherwise it is a never ending examination and no one can invest to improve land sure tha tthey own it.

All property is theft from an absolute justice point of view. In practicality, as the centuries of unjust appropriation of land recede most property becomes something purchased instead of stolen. Cosmic justice is impossible for mortals. I would like capitalism and private property with perfectly just determination of who has title to every square inch of the Earth, but it ain’t going to happen.

So, once title to property is established, capitalism means you do not have to enter into any agreement that you do not want to. Generally, that means you do not enter into any agreement that does not benefit you. So each agreement, each transaction, everything, makes you better off.

Another objection. The hungry man cannot negotiate to voluntarily trade with the rich man. The hungry man has to take what he is offered. The sick patient cannot negotiate price with the life saving doctor. The average intelligence man cannot negotiate fairly with the genius.

Well, your needs and limitations are just facts of nature. If I develop a shopping center at great expense on land I own and an earthquake destroys it, nature took its toll. I can insure or otherwise provide for it, but it does not mean other people have to make up my profit. My misfortune is mine, not an argument that people should not be able to make free agreements that they desire designed to improve their economic standing. I may have less freedom to contract because of circumstances. I may need money more than the other party. That is no reason to destroy freedom to contract which does so much good.

So if you set aside the argument “all property is theft” which really means human knowledge is limited and imperfect. If you set aside the unequal bargaining power argument, which really means, we won’t allow some people to act freely because of our paternalistic attitudes. Then you get capitalism.  Legally protected ownership of private property and the ability to voluntarily make enforceable agreements with others regarding it.

In relatively capitalistic twentieth century America, very average people progressed their material well being fantastically. They did not need smarter people to protect them by taking control of their lives. The middle class grew to undreamed of proportions. Human kind no longer was a small rich elite and a giant poor underclass, as it was for most of the history of mankind.

A large middle class was a product of free market capitalism. It was an American phenomena for tha most part. More socialistic mixed economies failed at that.


The End of Work

Conventional economic wisdom is that the world suffers from a lack of [aggregate] demand. In plain words, people and businesses are not willing to purchase as much stuff as can be produced.

There are many suspected causes. Past debt may be causing people to not take on new debt. Stuff purchased with borrowed money is also stuff purchased so reduced borrowing reduces [aggregate] demand.

Another suspected cause is wage stagnation. Wage earners are more likely to spend whatever they get in a paycheck. Wealthier people might save or invest extra money. Less in wages, more in investment returns leads to less spent and more saved and invested.

If these are indeed causes, the proposed solutions are things like asset purchases by central banks to put money in the hands of banks (TARP), or lower interest rates to encourage borrowing, or even negative interest rates to cause savers to spend. A higher minimum wage will place money  in the hands of people who have a propensity to spend.

Still, I can’t help wondering: how did we get to a place where demand is lacking, after so many decades where there was lots of demand supporting the creation of great industries? I mean, human wants are infinite. Introspection shows me that I have lots of demand. Well, I guess it is not demand unless I have the dollars to do something about my wishes. The 2008 stock crash ruined my plans. My assets are returning to 2007 levels today, nine years later. By normal growth expectations my funds would have doubled in nine years. I certainly don’t want to borrow since I have so much less today than I reasonably expected to have. At current projections I have many more years to work after age 65. Looking at things “from the other side” so to speak, my lack of demand is merely a lack of assets/income. If I had more money I would demand more stuff.

So let’s look at ways I could have more demand, i.e., get more money. As I previously said, more borrowing is out of the question, Americans are leveraged up to the hilt.

I could drive for Uber on my days off. People around here actually make good money driving late Friday and Saturday nights so that other people can enjoy a drink or two in the evening safely.

Maybe it is a lack of opportunities to make more money that limits my demand. Why are there a lack of ways to make more money when people all around me desire things and services?

Uber is an example.  Uber fills many people’s desires or needs, and allows others to make money doing it. Obviously where Uber operates more people use it than use cabs where it does not operate. I laugh at the idea of getting a cab in the suburbs at a private house party where I had a few drinks. It would be an hour or more from calling a dispatcher to seeing a ride, if they arrived at all. Yet local governments are waging an ongoing war against Uber in many areas. The existing cab companies have a monopoly and give poor service at low cost, skimming the most valuable customers while ignoring all the others. Millions of dollars of potential commerce are stifled in preserving the  monopoly rent of a few established players. Millions of dollar value units of demand are never created because the potential providers are prevented from providing value to other people.

Those people around here who are making good money driving for Uber could never get a job with the local cab company. The demand for the crappy service they give is limited.  The pay is poor (I don’t know why, when the Uber pay is good for a hustler). The positions are not just when you want to work but you need to fit schedules and shifts and maybe give up other employment opportunities.

There are many other ways to make money that are effectively banned. Peter Schiff reports that financial regulation has become so oppressive that he today could not form his financial firm. I started an ISP in 1987 with a Unix server and a dozen modems in my basement. There were very few regulations applying to someone who wanted to run a computer in his basement and allow other people connect to it over a public telephone line with a modem. I closed down my ISP when the federal government created a law that required me to keep copies of every email my friends and neighbors sent through my system for some months in case they wanted to spy on them. Could you imagine starting an ISP today? What are the net neutrality requirements and where do I get software to implement them? Only a giant corporation could follow the rules.

Right now, in America, it is very difficult to compete with any established business. Big companies are C corps and pay a top tax rate of 35%. A small business or start up is an LLC and pay as an individual at a top federal tax rate at 39.5% A big company can have an HR and a legal department that allow it to navigate regulations. A small business is often a one or two person shop. A big company can get a special tax deal on pain of moving jobs out of the community. A small company does not get its phone call returned.

Main Street, small business, local start-ups are all suffering under our current political system. There is less growth and innovation, which comes mostly from small business and start-ups.

So I think a contributing factor to the lack of demand is the smothering of competition against entrenched interests.