Archive for December, 2010

Return of Sovereignty

December 22, 2010 Leave a comment

The rich rules over the poor, And the borrower becomes the lender’s slave.

And it should be our endeavour to keep as much as may be out of debt. Some sell their liberty to gratify their luxury. – Matthew Henry, Commentary on the Whole Bible (1710) 

In the United States, we face not only an economic and political struggle, but also a moral one. Behind the old creaking facade of our two-party system in the U.S. is a chilling reality – we live in a plutocratic system where our sovereignty, both national and individual, is more imagined than real. Bill Still outlines the problem in the video below. (HT @tickerguy / Market Ticker).

As Bill Still outlines, not only has our government forfeited its sovereignty by allowing the Federal Reserve Bank to control the emission of the currency, it has allowed itself to become indebted to banks who create money out of thin air through the fractional reserve lending system.

Our government is no longer a sovereign one as illustrated by this recent quote from Senator Spencer Bachus:

“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said. 

If our elected leaders are there to “serve the banks”, then it makes me think they no longer serve the people.

Our whole economic system is based on debt. Government borrows money to finance its operations. Individuals are encouraged to assume more and more debt in order to expand consumption. We see consumption not only of goods, but also education – assumed to be a requirement to attain an economically viable position – leading to the assumption of crushing levels of debt for many.

From personal experience, debt is the enemy of personal sovereignty. An indebted person no longer works for themselves or their family. Instead, they work for whatever entity they owe the debt to. Today, typically, that entity is a bank or other financial institution. Crushing debt grinds the debtor into dust, makes their dreams seem unattainable, and puts incredible stress on marriage and family life.

Our current state of affairs is a distant cry from the vision held out in the Declaration of Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

But, our natural rights – including the right to hold and dispose of property – are under assault by powerful interests. These interests may not dispossess us of our property or rights in a direct manner. Instead, they have steadily eroded national, state and individual sovereignty. What is impressive, and frightening, is that sovereignty is being destroyed so quickly on all levels. This goes beyond merely state and individual rights versus the federal (or national) government. While in the past I have examined the ill effects of the 17th Amendment – direct election of U.S. Senators and the erosion of our protections under the 10th Amendment, our nation’s illness has progressed far beyond those matters.

The dilemma of today is as much a moral one as it is an economic or political one. It is a matter of a moneyed plutocracy using the monetary system to accumulate more wealth at the expense of everything else. While some actions such as the mobility of capital, wage arbitrage, etc. can be interpreted various ways, there is a pattern of the subversion of sovereignty in order to benefit a relatively small number of wealthy interests which profit by further indebting nations, states, governments at every level and individuals. 

So, what can be done? One idea is outlined in Bill Still’s book No More National Debt.

Still advocates monetary reform. Essentially, he is calling on nations to revoke the currency monopoly they have granted to central banks while also ending the practice of borrowing money to finance operations. It makes a good deal of sense. It has always seemed absurd that the Federal Reserve lets banks borrow money at almost no cost, but then pays banks more substantial interest to not loan out money. The Federal Reserve’s Primary Dealers trading in U.S. Government securities gives a good indication of who the true powers behind the throne are.

BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
UBS Securities LLC. 

Interestingly, Representative Dennis Kucinich, has proposed through the NEED Act eliminating money as debt. I recommend you read the whole article, but the NEED Act would, amongst other things, do the following:

  • End money issuance as debt instrument
  • Move the FOMC function to the Treasury and require its operations be neither inflationary or deflationary
  • Require lending be granted by Treasury or from private sources with no government backstop
  • Would bar use of depositor funds for lending purposes
  • Effectively end Too Big to Fail (TBTF) by forcing government to borrow only by specific congressional authorization


I suspect the odds of the NEED Act being approved by Congress and signed into law by President Obama are pretty slim. Unfortunately, if something isn’t done soon we can only expect our sovereignty to only erode further. I am in my 40’s now, and can only imagine what future the youth of tomorrow will face. Over at Sovereign Man the problems faced by the young are outlined:

1) Your government-run university tuition is going to go through the roof, saddling you with unfathomable debt before you even enter the world as an adult;

2) Once you graduate, you’ll be the last in the hiring queue;

3) If you do get hired, you’ll be the lowest on the totem pole and the first to be let go when tough times befall your business;

4) Once the labor market eventually stabilizes, you’ll enter your prime earning years with some of the highest tax rates ever seen as your government continues to cannibalize your generation to pay off its largess and indebted entitlement programs that benefited older generations;

5) For your entire working life, you’ll pay into a pension system that is going to be bankrupt by the time you’re qualified to draw on it;

6) More than likely, you’ll never achieve the standard of living that your parents achieved;

7) Whatever wealth your parents accumulated won’t be left to you– the bulk of it will be confiscated by the state (unless your folks were smart enough to plant multiple flags) due to a host of death taxes.

The article concludes with:

Most of all, stop playing by everyone else’s rules. Refuse to be enslaved by the idea that it’s your civic and moral responsibility to pay off the debts of your government’s failures. Cast off the yoke of their control… and summon the courage to live a life by your own design.

The path to prosperity in the Age of Turmoil depends on this ability to reject the old system, declare your economic independence, and carve your own path. 

So, if you think the outlook for sovereignty is grim now, put yourself in the shoes of a young person. You can be sure that the moneyed interests won’t easily or willingly return our lost sovereignty. Ultimately we will have to demand it be returned and then be willing to back it up. In the meantime, it may pay to have a Plan B, just in case the battle to win our sovereignty back doesn’t go according to plan.
Categories: Uncategorized

My Father and the Federal Reserve Bank

December 14, 2010 Leave a comment

Due to time restraints this treatment of the Federal Reserve Bank and the effects it had on my Father's business will be substantially shorter than I would like it to be. Hopefully, at some future date I can take up the topic again in a little more detail.

During the early to mid-1970s my Father, who had successfully managed a number of "dime stores" from the store management level to the entire west coast of the U.S., went into the retail business for himself and built a successful and profitable chain of three stores in Washington state. Two of these stores were in relatively small towns – Forks and Twisp, Washington – that relied on logging and the lumber industry.

For a time business boomed. The businesses grew. Our standard of living increased and we lived a very comfortable life. All of this changed in the period of the late 1970s to early 1980s. Inflation began to increase dramatically, and the Federal Reserve Bank, led by Chairman Paul Volcker, hiked interest to unprecedented levels in an effort to lower inflation.

Increased interest rates had multiple negative effects on my Father's businesses. First off, increased interest rates ground real estate and the construction industry to a halt. This, in turn, negatively effected the logging industry and lumber mills that were the economic backbone of where the businesses were located.

Even worse, my Father had taken out variable interest rate loans. Initially, these loans had very favorable interest rates. However, with the Federal Reserve's policy of high interest rates, many businesses and individuals were unable to pay their loans. This was not the case with my Father's businesses. However, due to deteriorating economic conditions, the bank called his loans and forced him into bankruptcy.

The mill in Twisp, Washington was eventually closed and then taken down to the bare ground. Forks, Washington is now more well-known for the Twilight vampires that for its lumber industry.

There is no doubt in my mind that my Father made some mistakes. However, I think the business could have survived if not for the extremely high interest rate environment. While extremely high interest rates were something he might have planned for it was, at the same time, something that had never occurred in his lifetime. Looking back, it also might have been better to have had the stores in more economically diverse areas so that a downturn in one sector of the economy would not have had such a large effect on the business. It may also have been better to have expanded more slowly in order to have more cash reserves to sustain the business through an economic downturn. Hindsight, of course, is 20-20. 

On the other hand, the policies of the Federal Reserve Bank were devastating economically and altered the future of whole industries and changed the futures of many areas and individuals. The FED is not the free market. It is a banking cartel that attempts to manipulate the free market for the benefit of its members and the politicians who serve at their pleasure. Over time, this constant economic manipulation and mutual covering between the bankers and the politicians creates a climate of economic instability and less opportunity for small businessmen, like my Father, to participate in the economy and prosper.

The Federal Reserve and political "leadership" in Washington, D.C. make decisions that have real consequences in the lives of real people. In the case of my Father, the consequences were negative and long-lasting. He lost the business that he spent a decade building. He ended up spending the better part of his remaining years paying debts and other obligations related to the failure of the business. He worked many long, difficult days on the road as a sales representative for various companies to support his family. Against all of this he bore up pretty well and only rarely fell into self-pity.

Unfortunately, to some degree, he was a victim to an economic system that was not designed to further his interests, but the interests of others. I have tried to learn lessons from his experience. For instance, when I have taken out mortgages on homes, I always choose a fixed interest loan rather than a variable rate. I saw up close what a variable interest loan could do, and it wasn't pretty. From my Father and the business I also gained a basic understanding of how a business is run, profit margins, cash flow, advertising, choosing a location, etc. They were all valuable lessons. But, the most important lesson, only realized years later, is that the free market is no longer free. Instead, the market is manipulated, and the chief manipulator is the Federal Reserve Bank.
Categories: Uncategorized

Taxes and Spending: Sick of Irresponsible Politicians, Lying MSM

December 13, 2010 Leave a comment

I was watching an interview today with Chris Wallace and Congressman Peter Welch (D) from Vermont. The interview was absolutely infuriating. While Representative Welch attempted to discuss the effects of extending Bush tax rates on the deficit, Chris Wallace ignored what Welch was saying, instead focusing on who would win the political "game" in Washington.

This is the ongoing pattern of our politics and media today. Karl Denninger made a very salient point about this tax deal on The Market Ticker.

A $2 trillion deficit would put our deficit over 14% of GDP next year, which is higher than the level that triggered the explosion in Greece and Ireland.  And there is nothing in this proposal that offsets with spending cuts, so as far as I can tell, it's all going right on the credit card.

We have clear examples in Greece and Ireland of what will likely happen if we don't reign in our ballooning deficit, but we do worse than nothing. Instead we're on a path to make the deficit worse. In response our politicians and the MSM try to distract us with the false debate of tax increases. Don't get me wrong, I am opposed to tax increases. What I favor is radically smaller government, but that isn't what our irresponsible politicians and T.V. talking heads are chattering about. Whatever you call this – a tax cut or simply maintaining the current Bush tax rates, the result will be to dramatically increase the deficit. It will add around $900 billion more to the deficit over the next two years.

Supposedly one of the reasons Republicans were elected this November was to deal with the outrageous deficit and growth of the deficit under Obama. This will instead increase the deficit while doing nothing to shrink the size of government.

Democrats aren't any better. Many of them would prefer to raise taxes while doing nothing to stop or even slow the ever expanding federal government.

Denninger concludes his article about the tax deal with this:

If you were wondering if we were going to run smack into the wall at 100mph and splatter our nation, wonder no more – the answer is YES.

We have no leadership in this country. People in positions of political and economic authority continue to thwart the clear will of the people to deal with our out of control government, including the extra-legal actions of the Federal Reserve. Our government is bought and paid for multiple times over. If you think you are a "constituent" you're sadly mistaken. In our vulturocracy you're merely a carcass to be picked clean by the powers that be.

Our politicians didn't listen to us when the economic crisis began, have continued to ignore us, and won't listen to us in the future unless we lay peaceful siege to Washington, D.C., the Too Big to Fail banks, the Federal Reserve, etc. Until we do so this crap will continue. I don't know about you, but I am sick of these vultures.  
Categories: Uncategorized

Twitter: Why are You Following Me?

December 12, 2010 Leave a comment

Occasionally on Twitter I will receive an @ reply from someone either asking me why I am following them, or if I am following them by mistake.

This strikes me as strange. Sometimes the person asking the question is relatively new to Twitter and only follows a few people, or only has a few followers. Still, it seems odd. It isn't something I would think would happen via some other media. For instance, I can't imagine a web site, newspaper, magazine or TV network would take the time (perhaps because they are so large) to point out that you really aren't the type of person who would be interested in what they have to offer.

It seems that people make snap judgments, unsurprisingly, about who would want to follow them, or who they would want to follow.

However that just seems very narrow. Not that I do it all the time, but I do enjoy learning about other points of view that differ from my own. With all of the push in praise of diversity, it is interesting that diversity of opinion doesn't seem to be the kind of diversity many are interested in.

Some people are actually offended that I would have the temerity to follow them. How dare I read what they write! It's almost as if the idea that someone with a differing opinion is out there reading their stuff is a threat to them.

A simple way for people really offended by someone following them would be to block them. It is not something I do very often. More often than not, I block someone who over a period of time has shown no willingness to have a dialog. I like to have an open and vigorous debate on the issues, but I will only stand for so many attacks or mindless rants before I lose interest. I am also not a fan of people making negative Twitter Lists. Certainly they have every right to do so and I have a right – at least at present – to not be on those lists. It just seems childish to me and rather than waste the time thinking about it I will block those who want to put me on their nasty list. I might reconsider if those people at least tried to engage in a conversation first, but none ever has.

Another point missed by those who ask why I follow them is that as the number of people I follow on Twitter grows larger, I only really have time to "dip my toe in" the Twitter stream. There are far too many Tweets to read. I find that when I do read the Tweets of those who ask why I am following them, that I often am interested in what they have to say. Sometimes I am not. If I am not interested, it isn't because they have a different point of view. Usually, I am not interested in Tweets that are very conversational with lots of different people. Something like:

@blahblahblah What's up.
@yadayadayada Drinking a beer and mowing my lawn.
@nyucknyucknyuck Touchdown!
@zzzzzzzzzzzz Breaking big rocks into little rocks.

I am sure the people they are Tweeting this stuff too are interested, but I am merely lost. I'm interested in finding out what is going on in the world, what people are thinking, what is news, etc. I'm not as interested in the more mundane details like where someone is hanging out right now and what kind of sandwich they are eating. I'm not saying those aren't acceptable topics of conversation. I'm just not geared in to those kinds of details.

So, if I am following you, it is more than likely because I either saw something interesting you Tweeted, or you follow someone who follows me. What better people to meet than friends of friends. Often you have something in common. If not, no big deal. It's not as if I am standing over your shoulder reading everything you're Tweeting. 
Categories: Uncategorized

Repo Man: Mr. President You Can’t Drive My Car

December 11, 2010 Leave a comment

Well, I had some other posts planned but they will have to wait for another day because the now infamous remark that President Obama made regarding not giving the keys to the car (the economy) to the Republicans still irks me. 

It's not just the fact that Obama's virtual resume (I wonder if he has updated it for after the 2012 election) is more ethereal than the digital bit-stream it is carried on, it's the very idea that any president, Congress, political party, or other institution ought to possess the "keys" to the economy or country.

We live in a representative republic under a free market economy – at least in theory. Our political institutions, in combination with the banking system, has slowly mutated our system through constitutional amendment and legislation to the point that it is nearly unrecognizable. I won't go into all of the details here, but you can read my articles Abolish the 17th Amendment – Direct Election of Senators and The FED Stole My Lunch Money for my take.

In economies where the government possesses the economic keys, their ride is a broken down heap by the side of the road – think Cuba and North Korea. No mechanic can get under the hood of those failed economic engines and repair the damage that has been done.

The alternative to centrally planned economies such as North Korea and Cuba is the free market. It is imperfect to be sure, but the best alternative available. As difficult as it is for our central bank, congress, and President Obama to believe, free means just what it says. Free from interference and manipulation. That doesn't mean free from regulation or rules. I am not – at least not yet – an advocate of anarchy. However, if the government continues to fiddle with the economic engine that powers not only our economy, but also provides support to our representative republic, then anarchy might well be our final destination.

So, pardon me if I get a little peeved when President Obama arrogantly asserts that he should hold the keys to our collective political and economic future. Excuse me if I don't want either party to hold the keys either. My apologies to the technocrats at the Federal Reserve Bank for pointing out that all of your pointy heads – even if they could be joined together into one big pointy super-brain – will never be able to allocate scarce economic resources as efficiently as millions of individuals free to choose how to spend their own money.

I'm taking the keys. You see, I'm the repo man and I have come to repossess my car. You haven't been making your monthly payments, plus you're a really bad driver.
Categories: Uncategorized

Future Posts

December 10, 2010 Leave a comment

It seems that things are getting very busy here with work and everything else, so this post will be short. Just a few teasers for now on future posts.

1) My Dad. It has been a little over 10 years since his passing, and his birthday was a few days ago. Am planning on writing about him and his influence on my life.

2) A follow-up post on whether our economic system is moral or not. Want to cover some comments received on the original post plus examine whether or not the question is the right one, and what – if anything – we should do about it.

3) Silver. Not as sure about this one, but it is an interesting subject to me. Is silver worth investing in? Is there any fundamental reason to invest in it. Max Keiser has been encouraging people to invest in silver as a way to bread J.P. Morgan which has been accused of manipulating silver prices and shorting the market.

Well, those are a few ideas. If anyone has any suggestions, comments or ideas, please let me know.
Categories: Uncategorized

Joy of Paying Down Debt, Saving

December 9, 2010 Leave a comment

Just a quick post today.

Like many other people, I accumulated more debt than I should have. Unfortunately some of that was credit card debt. It is something I should not have allowed to happen, but compulsivity got the better of me and long-term thinking got pushed aside for short-term consumption.

The recent economic contraction – really a papered (literally in FED printed money) over depression – plus some personal revelations, began to change the way I think about money, debt and savings.

[I'll leave the personal revelations for another day, but let me just say that a little bit of self-knowledge goes a long way towards re-asserting control over your destiny.]

Over the years, I have tried various times unsuccessfully to save money. Most of the time this was because some bad debt came back to bite me in the backside. I would accumulate a nice little savings nut, only to have to hand it right back over to someone I owed money to. In addition, I tended to stumble from one "good" business idea to another, depleting savings with the idea that the business would ultimately generate enough cash to refill the empty coffers. None of my "good" ideas ever panned out.

Personality-wise, I never felt very well-suited to any line of work. My Dad was an excellent salesman and earned a good living in sales. He also had a certain amount of compulsivity and managed to burn through quite a bit of money over his lifetime. I tried various sales careers, ranging from retail sales, working for my parents selling product on the road, and international sales. None of these pursuits was ever very satisfying for me and left me feeling pretty empty and cold.

I managed to get things flying straight when I joined the Army. Accumulated enough money to invest in an IRA. However, upon leaving the Army, I managed to clean out all of that money attempting to go into business for myself.

It seemed as if I would never learn. All of this came to a head a few years ago when all of the debt came crashing down. There were some pretty miserable days. My wife reached the end of her rope and demanded that the debt be dealt with or else. We'll just say that I chose to deal with the debt rather than face the or else.

We began to negotiate down debt and arrange repayment with various credit card companies – a process which is now nearly complete. It was an arduous process – one which initially made money extremely tight for us. There were many days when after paying bills there was barely anything left to cover gas, food, etc.

I don't really know how we made it through, but we're still standing. During that time I decided to look for a more stable line of work. Rather ironically, that stable line of work turned out to be in manufacturing – an industry noted for shrinking, not growing. Another delicious little irony is that the job is in recycling – one of those "green" jobs Obama talks about. In this case, the business actually makes money and probably does more to help the environment than most who squawk about saving the planet will ever do. But putting all that aside, the job turned out to be something I enjoy. i went from a temporary line worker, to an assistant supervisor, and ultimately got promoted and am now a shift supervisor. The job is very physical, far different from any job I have ever had – most of my former jobs were very sedentary desk jobs, or jobs where I spent large amounts of time driving. Our benefits are good and I have began to make contributions to the company 401(k) where I am receiving a company match. We have profit sharing and it appears the business has a good opportunity to continue growing.

At the same time, I took a hefty share of my check and set it aside in a savings account. Some of that money is used to pay down debt, and the rest grows savings. With an uncertain economic future, I am determined to have money set aside – partly as "insurance" and partly to have a small degree of economic independence. I don't ever want to be flat broke again. I don't want to be completely vulnerable to the economic winds or changing government policies.

I now am focused much more on the medium to long-term. That requires a fair amount of concentration on the present moment. I rarely, if ever make an impulsive major purchase. I find that most times, if I give it a day or two, I don't really need the thing that seemed so necessary or tempting. I am working on both my real life and financial life – which are more intertwined than I previously realized. While I am somewhat of an idealist and have tended to think money and possessions aren't so important I now realize that, being married, there has to be some balance. In my youth, I rented a room so small I could reach my arms across and touch the closet on one side and the wall on the other. I'm no longer that youth, and my wife certainly deserves better than to live in a tiny little "dungeon" room with me.

As part of that focus, although it has no direct bearing presently on my finances, I am making the effort to write more. I have always wanted to write on a regular basis, but never made the time to do so. I'm not necessarily a good judge of my own work, so I can't say how I am doing. I only hope someone out there reading this gains something worthwhile from it – if only a way to enjoy a few passing moments. I figure if my writing is to improve, it's only through continued exercise of the writing "muscle". So, I continue on – writing, thinking, and acting on the things I believe are important. I figure I can either live accidentally, or on purpose. I choose to live on purpose. I choose to make the effort to establish some small ordering of the elements of my life. Will it work this time? I pray that it does, and I hope that if you are struggling with some of these same issues, that you find your own joy and happiness. It isn't always easy or fun. You'll likely wonder if it is worth the struggle. Don't give up. From someone who has been there and is still on the path, it gets better. Each small victory brings you one step closer to the life you hope for. But, hoping is not enough. You have to take the first step and start the journey.
Categories: Uncategorized

Time for a Siege of Washington, D.C.?

December 8, 2010 Leave a comment

This is an idea that I had contemplated a while back. However, organizing is not my greatest strength and I am glad that someone else has a similar idea of laying siege to the government and the Federal Reserve (and by extension all of the Too Big to Fail banking institutions that continue to violate the rule of law and manipulate the political system). 

On January 21, 2011, the Guardians of Liberty will lay siege to federal offices in DC and all over the country. These peaceful sieges will remain in effect until: 

Obamacare is Repealed
The Federal Reserve is Audited and Ended
Our rights are recognized by every government agency
No Compromises!
We Stop When IT Stops!

A siege, in a traditional sense, is the surrounding of a castle or town in order to force the inhabitants to comply with the demands of the occupying forces. It is a method of attrition. In our sense, it is a civil action designed to bring the cause of injustice to the public eye and to the politicians who have the power to restore liberty to the people. It takes people to show up and to remain on the line during the entirety of the siege not only in DC, but in localities all across the land at federal office buildings and unconstitutional bureaucracies of the many different U.S. Departments.  

The government continues on a reckless path of destruction, increasing the debt, allowing banks to hide their insolvency, turning a blind eye the massive fraud in mortgages – including foreclosure fraud, allowing the debasement of our currency through Quantitative Easing, ignoring the will of the people at every opportunity, destroying jobs and the middle class, negotiating trade agreements guaranteed to further erode our manufacturing base, send jobs overseas, and equalize our wages (downward) to those of much poorer nations.

None of this is accidental, and asking politely through quaint letters, emails, phone calls and protests will never ever bring about the desired results.

If it is not already too late and we hope to restore something our constitutional republic, now is the time.

We must begin a continuous, peaceful protest that brings us face-to-face with the powers that have brought our country to the brink of disaster.

The alternative is the complete destruction of our political/economic system by those we have entrusted to protect it, and the end of our way of life.
Categories: Uncategorized

Is Our Economic System Moral?

December 7, 2010 2 comments

I have been thinking for some time about whether or not our economic system is moral or not. It is a matter which I am considering writing more comprehensively about, but thought that this post would be a way to get some thoughts out in the open, and hopefully receive some feedback. It seems to me this issue is an important one given our current economic crisis and the increasing opposition of portions of our population to our government’s economic policies and the policies of our central bank – The Federal Reserve. While I realize that this question also needs to be considered in light of alternative economic systems and forms of government, I won’t be considering those questions in this post due to time and length considerations.

It seems to me that a moral economic system would include the following:

  • Monetary System: Is money a store of value as some believe? Is it better to back a currency with some commodity or other instrument that society agree has value? Is money what government says it is? Is a fiat system like the one we have at present a good and moral system? Should our monetary system encourage, discourage or remain neutral as to whether individuals or institutions accumulate debt or not? Is the issuance of currency strictly a matter left to government as many assert under our Constitution? Should competing “currencies” or “stores of value” to the official currency be allowed?
  • Respect for the rule of law
  • The ability of individuals to accumulate and sell / transfer property with minimal government interference
  • Protection of property from unlawful seizure – including money (which is property) by the government (this would include matter ranging from imminent domain to the type of taxation on regulation regime that our economic system has in effect)
  • Interest rates: 
    • The first and most basic question is, should the charging of interest on loans be allowed?
    • If money is a store of real value, and interest rates reflect both that value and the risk of loss by the lender, should there be an upper or lower limit to the rate of interest charged – whether it be to individuals, businesses, between the FED and other banks, between banks, etc.?
    • How much disclosure and illustration, if any, should be required of companies lending money at interest to individuals?
    • How much responsibility does an individual have when accepting a loan at interest?
    • How much responsibility does the entity that extends a loan at interest have to ensure the loan can be repaid?
    • How easy or difficult should it be for an individual, business, or government at any level to refuse to repay a loan at interest which can never be repaid?
  • Transparency: Although this term is getting somewhat cliched, all players in an economic system need to have access to information in order to make decisions. If the system is opaque, then some individuals or institutions will have more access to information than others. While it is certain that some individuals, through research, education, background, etc. may acquire knowledge that others do not, that is distinct from an individual or institution receiving privileged information (inside information) because they are political patrons, etc.
  • Consumption: Is there such a thing as too much, or too little, consumption? Do we live in a Malthusian world of limited resources or do advances in technology allow us to effectively increase our resources? Some of this likely depends also on your view of religious cosmology.
  • Distribution of resources: This issue has long been one of intense debate and continues to be. Is there any obligation to ensure an “equitable” or “fair” (however defined) distribution of resources between individuals or nation-states? If there is, is this a matter best left to government, individuals, private institutions, quasi-government institutions, or some combination of any or all?
  • Opportunity / Mobility: What are the opportunities for an individual to advance within the economic system? Is there upward and / or downward economic mobility? How much, if any, buffer should be provided to shield individuals from downward mobility – job loss under any circumstance (ranging from changes in industry, individual decisions, natural disasters, etc.) ?
  • Saving: Saving is effected in part by interest rates, protection of property, consumption and other issues. Should savings be influenced by government policies? In our current monetary system savings on deposit with banks can be loaned out multiple times due to fractional reserve banking. Banks make these loans at interest. Should an individual or institution expect a certain return given the rate of interest that banks are able to charge for loans?
  • Taxation: Taxation is another longstanding source of controversy and debate. Taxation policy can effect distribution of resources, consumption, opportunity / mobility, savings – most anything depending on the level. Is there an upper or lower limit to how much should be taxed? Is taxation theft as some argue? Taxation also ties in to the size and role of government in the economy. 
  • Role of Government: What, if any, role should the government play in the economy? Again, this affects all of the points discussed above. Should government merely set up a framework and ensure a level playing field, or is a larger role required that takes into account other factors?
  • Competition vs. Cooperation: Is one of these values of higher order? Is competition necessary to maintain the economic order? Is competition selfish or is their an invisible hand? Is cooperation more important? What role does individual choice play? Can or should we be “made” to cooperate to advance some ends?
I realize there are going to be numerous good points missed in this relatively short discussion of the morality of our economic system. Personally, I lean toward the belief that we need a moral economic system that follows natural law, and comes from God. I respect the fact that a significant number of people may disagree with me. Unrelated to this, but interesting nevertheless, is the potential for examining our economic system as it relates to morality, to forge common ground between individuals of diverse religious, political and economic perspectives. It seems to me that many religious conservatives, fiscal conservatives, progressives, libertarians, independents, and others have similar critiques of our current economic system. While those differing political philosophies may not agree on the ultimate solution to our economic problems, we could make some progress just based on areas where there is agreement that some – for lack of a better word – change needs to be made.

I would be interested in any opinions that you have regarding the morality of our economic system. If there is something I have missed, that you feel is important, etc. please feel free to post your comment.

Categories: Uncategorized

Will Debt De-Leveraging Boost Economy?

December 6, 2010 Leave a comment

Will Debt De-Leveraging Boost Economy?

I have been thinking about this some from a personal perspective. While I believe consumers de-leveraging their debt should free up some extra cash for consumption, I am not convinced it is going to provide a very big boost to the economy. Here are a few reasons why:

  • High unemployment makes people fearful of spending too much money. If you lose your job tomorrow, it may be months – if not longer – before you get hired again.
  • Government policies such as Obamacare, pending decisions on extending Bush tax rates, and the generally chilly attitude of the current administration towards small business has made people uncertain. When people are uncertain, they tend to do nothing rather than increasing spending.
  • Saving and autonomy: With increasingly intrusive government and worries over higher taxes and more regulation, it seems one of the only things an individual can do to maintain some small level of autonomy is save money. If a person can save several months (even better – several years) of cash in case of emergency or job loss, then that opens up the option of moving to where more jobs are, working part-time while seeking a new job, acquiring additional education, etc. The alternative to saving for many is relying on the government to provide benefits. Government money always comes with strings – nothing is free. 
  • Re-examination of values: Many people during the current economic downturn have taken the time and re-examined what is really important to them. Friends, family, religion, hobbies, causes, etc. have taken on new found importance. Keeping up with the Joneses and working as hard as you can to acquire the latest bauble often comes with a hidden price. If you're up to your eyeballs in debt, you're not really free anymore. You have to keep working just to pay your bills. In fact, you may have to work more than full-time just to meet your obligations. Where is the time to enjoy all that stuff you purchased? Don't get me wrong. I like stuff. I love gadgets. However, I want to own my stuff, not have it own me. If you're working yourself to death, have no savings, live in constant fear of losing your job, and worry you can't pay your bills, then it seems to me that you are owned by your possessions.
  • Rebellion: Granted, I don't believe this is necessarily a large percentage of the population, but I think more people are waking up to the fact that we live in a debt based economy. Our current monetary system only creates money with the creation of a corresponding debt. It is a fiat system which is not sustainable over time. It forces people to become slaves to their debt and makes banks their masters. If you're a banker, it's great, for you – not so great. What is interesting now is that government is pushing people so hard to spend money, when saving is needed. In the long run saving will allow households to de-lever and gain some degree of control over their finances. Ironically, increased savings would also benefit the banks by giving them a larger base of money to make loans to businesses or individuals. Personally, with so much pressure to spend and so many government created disincentives to save, I tend to rebel and save even more – partly just to spite the powers that be and partly to have some degree of independence.

I don't know if consumers will or won't change their attitudes regarding consumption over the long-term, but I know my attitude has definitely changed. I am not anti-consumption. However, I am much more pro-saving than I have ever been in my life. I see people in business who are careful with their money, investments in equipment, and hiring who are able to successfully maintain their business even in a down economy. I also think about every purchase now and rarely – if ever – make an impulsive spending decision. Too often in the past I would purchase something, only to regret it later. I enjoy saving and knowing that should an emergency come up, there is at least something put aside to help make it through to the other side. It may not be much, but the alternative is being buffeted by the fickle winds of government policy and an uncertain economy. Faced with that alternative, I would rather put aside something for tomorrow than spend, spend, spend today. 
Categories: Uncategorized