A new crowd sourcing "charity" for me

I am really getting into the crowd sourcing thing. The whole idea behind it is to get lots of people donating a little bit of money to fund something. I have been doing that with Kiva and Kickstarter.

If you don't remember, Kiva is an organization that helps put together small (by our standards) loans to people in developing countries so that they can make improvements. It is one of the more visible forms of micro-finance out there. I have decided to stop participating in that program mostly because it isn't clear that it makes a tremendous amount of difference. I think I am going to steer the money I had been using for Kiva to a more typical development charity. 

Kickstarter is a really popular place for people with ideas that need funding. They post their idea and ask for donations. As you go up the scale in dollar amount, they have better and better rewards to offer. It's a novel way to attract funding for pet projects. So far I have helped make several pens and a comic. Kickstarter is un, but it's no charity. I do it to get interesting things. The power of crowd sourcing allows some folks to do really big things. Several video game projects have gotten well over a million dollars and there is a new smart watch that is getting close to 9 million I think. Powerful stuff.

The latest crowd sourcing site I've stumbled across is wishbone.org. They look for "at risk" high school kids that show some potential and fund educational experiences for them. It's still a bit loosey-goosey for me to invest long term, but I happened across a student there that would like to go to a summer school program at my Alma Mater, Ithaca College. I can imagine a kid from a bad neighborhood in NYC getting a lot out of a summer thing like that, so I donated $25 to the cause. I need to do some more reading and see what this program actually accomplishes before I get too involved though. It isn't as though they are sending them to college, they are sending them to summer event, or some sort of seminar series and things like that. If I am going to be doing stuff with that site, it will be with things that have a good chance of getting people out of bad situations. If they want to study computer science, mathematics, medicine, engineering, etc. I don't mind lending a helping hand. Like I said, I'm going to do a little more research and see what it's really all about.

Healthcare reform

My Facebook page is being filled up with impassioned pleas to save healthcare reform. They are of course talking about the arguments in the Supreme Court over the "Affordable Healthcare Act." I'm not a big fan of the legislation, no surprise there. Funnily enough, I don't need to know the minutia of the 1000+ page law to draw my conclusion either. The main sticking point to me, and I think the reason it is being argued at the Supreme Court, is the individual mandate. The law says that everyone has to purchase health insurance, in fact it relays on this in order to realize its cost savings that are supposed to come from it.

Let's forget for a moment that this law is not about healthcare, but health insurance, and let's also forget for a moment that popular opinion shouldn't sway the Supreme Court. I am also going to, for the sake of argument, allow that the law actually would reduce health insurance prices and it would actually work out best for everyone. I don't believe that for a second mind you, but I don't want to dwell on that here.

Have you wondered why there is so much chatter about this supreme court case? I'm not talking about the political scorekeeping involved, I'm talking about the commerce clause.

 

[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;

 

That little clause has been twisted to the point where it is unrecognizable. It's meaning seems rather straightforward, but congress, with the Supreme Court's blessing, has used it in all manner of strange ways. In Ashcroft vs. Raich, the Supreme Court ruled that the Federal Government could outlaw marijuana because of the commerce clause even though in this case the defendant never sold it at all, let alone between states. It was ruled that the defendant could have sold it, therefore the federal government had jurisdiction over it. Judge Clarence Thomas said this in his dissenting opinion:

 

"If the Federal Government can regulate growing a half-dozen cannabis plants for personal consumption (not because it is interstate commerce, but because it is inextricably bound up with interstate commerce), then Congress' Article I powers -- as expanded by the Necessary and Proper Clause -- have no meaningful limits. Whether Congress aims at the possession of drugs, guns, or any number of other items, it may continue to "appropria[te] state police powers under the guise of regulating commerce."

 

So who could blame congress when it passed a law saying that it could force every American to do something? When pressed on what gives them that power, they respond that the commerce clause gives it to them.

This really is the drug war's chickens coming home to roost. Once the Supreme Court ruled that congress can essentially legislate anything at all because of the commerce clause, all bets were off. If this law gets struck down, they will have established that the Federal Government cannot force you to buy something. That's hardly a shocking idea and it shows just how nuts the law is as determined by the Supreme Court.

There was a time when lawmakers assumed that prohibiting a substance was unconstitutional. Banning alcohol was a popular cause at one point, but they knew they couldn't pass laws banning it until they amended the constitution. How quaint. It is now assumed that the federal government can legislate any damn thing it wants to. This law getting struck down will carve out a very narrow limitation on the feds, one that I'm really terrified that we have to spell out so clearly.

Much has been made about the hypothetical broccoli law. The thought experiment goes like this, broccoli is good for you, so can the federal government force people to buy it if not eat it? It's a silly thing, no one really thinks that, but there are legions of people that think in the abstract that the government should legislate "good" things. You, know, for our own good.

this goes right back to my "Everything is fine as long as the right people are in power" model of politics. Why does no one think about the damage that will ensue as soon as the "wrong" people are in charge? Limiting government power is to protect us from whatever politician you think is evil incarnate. Dick Cheney or Nancy Polesi, it doesn't matter. No one should be afraid of the changing of the political winds.

This is the real reason why this case is so important. If we can get some sort of semblance of sanity with regards to the commerce clause, it will be a victory. With any luck, it will also force the court to reconsider previous contortions over the clause as well. Remember, the law being "good for us" is not a sufficient reason for the government to employ its force.

The problem with democrats and republicans

Ludwig von Mises summed up the entirety of political "solutions when he penned:

 

Scarcely anyone interests himself in social problems without being led to do so by the desire to see reforms enacted. In almost all cases, before anyone begins to study the science, he has already decided on definite reforms that he wants to put through. Only a few have the strength to accept the knowledge that these reforms are impracticable and to draw all the inferences from it. Most men endure the sacrifice of the intellect more easily than the sacrifice of their daydreams. They cannot bear that their utopias should run aground on the unalterable necessities of human existence. What they yearn for is another reality different from the one given in this world. They long for the “leap of humanity out of the realm of necessity and into the realm of freedom.” They wish to be free of a universe of whose order they do not approve.

 

I got that from the Mises Institute blog talking about how the OWS crowd is attempting to shut down west coast ports. So many people have definite ideas of what should be accomplished and how to accomplish it, they don't take any time to try to understand what might happen if they actually do what they intend. Their daydreams of sticking it to the 1% are going to cost a lot of regular folks paychecks. If they had their way, they would punish the 1% by making it much more difficult for everyone else to get stuff from Japan, Thailand, Vietnam, and yes, China. Even a basic understanding of economics would allow them to understand that it is impossible to "hurt" one group in isolation without affecting everyone else.

Mises.org also quotes Rothbard in that same post:

 

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

 

You can do what you want with yourself. Because it is impossible to know but the largest first order effects of any overall economic activity, acting on everyone else's behalf should be the first warning sign that you're out of your depth.

Investment grade debt

Most actual investment (as opposed to places to park your money) involves buying debt. Or to put it another way, you loan money with the hope of making more later on. Bonds are the most common way to do direct investment, you have a time frame and a specific rate of interest. Stock IPO's are another way of investing in a company. 

When you buy a bond from a company, you look at how likely it is that you'll be repaid based on the business involved. If its a good company with good products, they will create profits and be able to pay you your interest. But what about municipal and sovereign debt? There are no profits to be had, just ongoing tax collection. On the face of it, that seems pretty safe, that's what governments do after all. But all isn't well in tax land. Europe continues to crumble, their very currency may go away. When that happens, there is an excellent chance that the folks that loaned them those Euros will be left holding the bag. We're also hearing about more and more municipalities declaring bankruptcy. A casual glance at states like California make you wonder how safe those bonds are as well. 

My (perhaps not so humble) suggestion is to invest in productive, profitable businesses instead relying on tax collection for your investment. It's common sense really, invest in things that have upside! Or think of it this way, how much do you trust politicians? How much do you trust that they'll do the smart thing with your money? More and more we're seeing what that trust will get you, a lot less money.

The 99%

Reading last Sunday's Doonsbury really got me pissed off. Once again, Trudeau is hung up on what the top 1% income bracket is making. When BD finds out that the top 10 hedge fund managers were paid 18.8 billion, his reaction is, "It's game over - The Rich Won!"

 

Funny, I didn't realize we were competing, or playing a game or whatever. What, exactly have they won? And how are we less better off because of it?

BD keeps ranting, "Might as well just send them the rest of our money now, They're going to get it all eventually anyway!" Umm, right, because those evil hedge fund managers were raiding your checking account, right? They were hoarding all that money so that you couldn't get a sot at it, is that it? How is BD, or the rest of us for that matter, involved with hedge funds? How have they impoverished us? Why the assumption of guilt, why the feeling of being personally attacked?

 

I would be very sympathetic if Trudeau were to detail how much money people made off the bailouts by the US tax payers. Through the government;s largesse, a few politically connected groups had their fortunes protected with our tax money. As unfashionable as it may be, I don't mind people making vast sums of money through voluntary transactions. If it is voluntary, it doesn't affect me. If my masters DC decide to protect cronies with my money, that is theft. Why isn't Trudeau angry about that? Why isn't BD making his check out to the Treasury? The hedge funds are leaving him alone, the feds aren't...

 

The OWS crowd have been using the 99% rhetoric to great effect, but once again, I think they are misguided. When Steve Jobs died, several reporters asked some OWS folks what they thought of him. The reactions were overwhelmingly positive despite the fact that Jobs was certainly in that 1%. I like to think that if pushed on the matter, most of those folks would admit that Jobs did it right. He made stuff that everyone wanted and became rich doing it (and pulled lots of people out of poverty along the way). He never went to the government for help, even when Apple was on the verge of bankruptcy. Jobs wasn't alone, there are plenty of entrepreneurs in the 1% that have provided services and goods for us. So why rail against the 1% when there are clearly great people in there? Why not protest against the people that get money from us without our permission? Why not protest against the ones giving away our money without permission?

 

Why indeed. People that make money by providing us things are great, people that essentially steal are not. Why are the two so often confused with one another? When will most people see that the dirtiest money flows out of DC? Why don't people protest that? Oh right, they did, and got called racists for their trouble...

 

 

Thinking in aggregates (corporations aren't people)

Mit Romney has been getting some press for his "Corporations are people" blurb. Lots of people are mocking him, pointing out the obvious, that corporations are not people. The irony is that the people mocking him are missing the point. Not only that, they are assuming that corporations are people after a fashion. Let me explain...

What Romney was trying to say was that corporations are made up of people and anything that is done to a corporation eventually ends up affecting the people that make up that corporation. The people mocking him are essentially assuming that a corporation is a stand alone entity. They think they can tax it and regulate its speech without affecting actual people. To my mind it is yet another example of being sucked into the fallacy of aggregates being tangible things. And like all of the other examples of that fallacy, acting against that fiction causes problems for actual people.

Paul Krugman is another great example. Whenever he claims that an alien invasion, or 9/11 would be good for us, he is thinking of GDP. GDP is an aggregate of production in a country. It is a loose proxy for economic activity. What he overlooks, and we should never forget, is that GDP is an aggregate measure that doesn't tell us the first thing about prosperity. Trying to boost GDP can in fact have effects, and it might even make that measurement go up, but what does it really mean for all of us? If GDP gets a boost from rebuilding from a disaster, will anyone care?

I myself am guilty of talking about aggregates. How often do I rail against "the government" as if it were a single, monolithic thing? I should be more precise and bemoan the laws passed by congress, the unilateral action of the executive team in the White House, or the actions of the board of the Federal Reserve. It's important to remember just how few people are actually moving things around for the rest of us. All of those groups try to co-opt us by saying that they are doing what they do for "the American people." As if there were a simple group mind that is happy with the same things. They do what they do for the benefit of what they think the American people are, but how often do you or I agree with them?

And of course the most common aggregate fallacy of them all is all of the talk about "the economy." There is no such thing. We are the economy. Each one of us, each action we take, every transaction we do, every act of cooperation with someone else, that's what the economy is. There is no way we can sum all of that up with a single concept let alone a word. When you look at it like that, phrases like "The economy is depressed," or, "The economy needs to be boosted" stop making sense. We need to respect the enormity of what we are summing up in that aggregate. The idea that a single action can improve all of the things that make up the economy is pure hubris.

Things are complicated. We like to sum things up for the sake of being concise, but we quickly lose what is actually being discussed. Language has a funny way of shaping our thoughts, we need to be careful about lumping too much into neat, orderly concepts because that rarely exists in the real world.

NPR funding

My facebook feed is full of my friends gnashing their teeth over attempts to defund NPR. The general theme seems to be , "Those damn Republicans! How stupid are they? We need NPR, the government should keep funding it!" For the record, I have enjoyed some public radio from time to time. Having said that, I'm puzzled by the attitude that is implied. Surely, if NPR was super important, people would go ahead and support it directly. I'm not trying to be snarky, I'm really trying to understand why people feel that it is important that the US government has to be a middleman for this seemingly important thing. I am really looking for a reason other than "Everyone else should pay for things that I think are important." That's not it, is it?

 

Whether they realize it or not, the angst seems to boil down to being unhappy at not being able to force other people to pay for those things. I'm willing to give the benefit of the doubt to most people and say that they have bought into the "government funded" trap. There is a lot of confusion as to where the money comes from. The government doesn't fund anything, tax payers do. The dream of a free market guy is that people that value something would actually be the people that pay for it.

It doesn't matter that the percentage of our tax bill going to NPR is tiny isn't important. Shaking you down for fifty cents or fifty dollars is bullying all the same. Granted, I am paying a lot less for NPR than the various wars we've been fighting. I don't like those either and I'm under no illusion what is the more pressing concern. I wish both Democrats and Republicans would keep their eye on what's more important. Nevertheless, I can't help but think that "listener supported radio" would be best, you know, supported by listeners. If there aren't enough people willing to pay for it, that should tell you something.... I say that NPR should beat congress and cut ties to the taxpayers money. Rely on your listeners, it's the honest thing to do.

The limits of Logic and world views

I know that I think differently than a lot of people do when it comes to things like economics, politics, and religion. What strikes me is the reactions I get from people. There is a common belief that if someone has deduced things logically, they must be right, and therefore I must be wrong. They confuse making sense for reality.

Imagine if told someone that parallel* lines can intersect and in some cases must intersect. If that person were in an argumentative mood, they might point out that the very definition of parallel lines forbids them from crossing. If this were a political, economic, or a religious point, more times than not I would be dismissed as an idiot. I've gotten that reaction fairly frequently. What I almost never get asked is why I might think that way. It turns out there's a whole bunch of other types of geometries out there, as soon as you put lines on curved surfaces, basic rules of geometry get changed.

The point is that both I and my mysterious debater can logically defend why my view is right or wrong. The efficacy of logic is limited by the initial conditions or beliefs you start with. If you think you live in a Euclidian world and I think I live in an elliptic world, we are never going to come to any agreement or understanding if we rely on logic to stake out our claims.The same thing goes for any other world view you can think of. Once you believe you know the basic underpinning of your world, everything else follows logically.

Most people do what "males sense" to them based on their beliefs. If you try to point out that any given view they have is incorrect or, too often these days, tell them that they are stupid, you won't get anywhere because they are a long ways down the causality chain. If you want to convince them to change their mind about something, you need to go to much deeper. When I talk to people about religion, economics, and even politics, I am usually pointing out that we don't live in a Euclidian world despite appearances and how much sense it seems to make. It takes time, but ultimately you have to convince people you live in a better world than they do if you want them to come around to your way of thinking. It may not be a great way of scoring quick points, but it does give them some things to think about. That can lead to real conversations as opposed to slogans and name calling.

Of course, it's a lot easier to not do any of this. Gotta keep telling myself that it's worth doing. I think it pays off long term, if only for my mental health...

 

* I am using Euclid's definition of parallel. Loosely, that is that if there is a line and a point off that line, there is only one line that can be drawn through that point that does not intersect that line. That's Euclid's 5th postulate, we call it parallelism. In elliptic space, there can be no parallel lines as Euclid postulated.

Budget gnashing of teeth

I've started seeing posts about how one team wants to "slash" the budget, leading to the impoverishment of millions because of cuts to to head start, planned parenthood, housing vouchers, NPR, etc. Of course the other team is yelling that the other side isn't cutting enough. I'm going to split the difference and say that one side isn't cutting much of anything, and the other side is making totally inconsequential (to the deficit) cuts. What needs to be addressed is Medicare, the Military, and Social Security. Everything else is window dressing. Predictably, neither side want to go near those things so what we are left with is political theatre.

Budgets at all levels are in pretty bad shape. What I'm hearing from the left is that tax cuts are what's causing the deficits, and of course the right is blaming spending. Spending is, of course, the root of deficits. While both tax revenue and spending go into making a deficit, only one side of that equation is done to people, backed up with the threat of jail time. So I think there is a moral argument to cut spending as much as possible vs. raising taxes. Why folks seem to think it's OK to take money from someone just because they have it has never made much sense to me. And that isn't even taking into consideration the consequences of having too high an income tax...

This all reminds me of  the contortions people go through to lose weight. They will try various pills, diets, etc. when we all know what will lead to weight reduction, less food and more exercise. We're going to need more taxes and less spending. Taxes are going to have to go up across the board, not just on the wealthy. Similarly, spending cuts are going to have to be across the board of the big three programs, at least on the national level. It's the perfect solution, no one will be happy. What people want is more stuff as long as someone else is paying for it,  and so that's what politicians promise.  That, in a nutshell, is how we end up where we are now.

I'm not sure what will be more effective, getting the political will up to stop eating so much and exercising more, or letting things go until we need bypass surgery/gastric bypass surgery. If the monetary system collapses, there will be enormous pain and suffering, but hopefully some sort of lesson would be learned. Plus, it would get our debt off the backs of subsequent generations... I'm sure that over time, the same mistakes will be made as long as fiat currency/fractional reserve banking is the norm. I worry that if the current lawmakers buckle down and do something sensible (not that I'm holding my breath) it won't last long, probably only until the economy goes on another Fed induced boom. SIGH.

Do you remember what I was blogging about in September? Silver was $17 an ounce. It's over $37 an ounce now. The longer the lawmakers quibble and nibble around the edges of the problem, silver and gold will continue to go up in price. Or is that the currency losing value? Just saying....

Public sector unions

The stuff going on in Wisconsin has me posting things on Facebook and chatting with people and I worry that some may get the wrong idea about my stance on unions. I have no problem with people organizing to exert political pressure or to have leverage in negotiations. This is what unions should do. What I do have a big problem with is many states have laws on the books that require collective bargaining through unions.

Whenever you have the government throw its weight behind any particular group, enormous distortions in the labor market and general economy occur. By making labor more expensive than it otherwise would be, people get shut out of jobs. Usually it is the underprivileged and inexperienced that suffer the most under mandatory union hiring and bargaining. Unions should be able to bargain based upon higher quality workers, acting a lot like guilds. Unions should be something that workers work towards so that they can command better wages, benefits, etc. because of their certification.

In any case, I understand the appeal of unionization when there is a class of workers that do not seem to be getting their "fair share" of the profits. Things are totally different when it comes to public sector unions. There is no evil capitalist  taking the lion's share of the profits, there aren't any profits involved. Things are so much more muddled without profit motives and profits to capture. How do we know what a good salary is? How do we know what good benefits are? It's pretty cut and dry in the private sector, you need to pay your way in both wages and benefits. If you don't create enough value to cover those things, you get fired. If you are inexperienced and can't create very much value, you don't get paid much until you do. Of course if there are laws and agreements in place that do not allow low enough wages to accommodate lower skilled workers, they just don't get hired and are stuck.

The folks protesting in Wisconsin are the poster children of why people do not like public sector unions. When times are tough, it is going to be difficult to tell taxpayers to go look somewhere else for the money that is needed. True, there are some public sector jobs that still have a good vibe attached to them. Firemen, Police, etc. Most of the rest don't have such a good rep. The saying, "Close enough for government work," exists for a reason. . It's also going to be tough to drum up much sympathy for a public school system that has generally disappointed over the past 30 years or so despite having had enormous amounts of money pumped into it during that time. Unions with required collective bargaining power do not seem to have helped education much.

Here's a question. How many parents would willingly choose to send their children to public school if they were able to send them to a private school instead? I'm pretty confident that the vast majority of parents would choose the private option if given the chance. I doubt that many would cite the fact that very few private school teachers are not unionized as a reason. They would, however, cite lots of the effects of private vs. public (unionized) employment as reasons they like private school more. The private schools have higher standards and better results overall than public schools. Those results are directly tied to being more responsive to parents and teachers. That of course is tied directly to private schools continuing to make money...

 

All of this adds up to an uphill battle for the public sector unions in Wisconsin holding on to their collective bargaining power, let alone avoid the other concessions...

 

The best summary of the Wisconsin mess

Reason's Tim Cavanaugh sums up the problem the Wisconsin public sector unions have...

 

One picketing government worker blames Ohio taxpayers for acting like victims:

"What I'm seeing here today is that management is trying to be seen as the victim here, but they sit across the table and negotiated these deals just like us," said Lawrence McKissic, of Twinsburg, who was at the Statehouse on Thursday. McKissic is an IT specialist for the Bureau of Workers' Compensation in Garfield Heights.

"My concern as a state worker is that we would be unilaterally taken out of collective bargaining and it is being done without any word or input from the union or the employees," he said. "They're just trying slam this through this committee."

McKissic refers to “management” as if he’s calling out a cabal of plutocrats rather than the people of Ohio, who will have to take up the slack for whatever new benefits accrue to the vital IT specialists of Garfield Heights. I think this is where the pro-union movement will find its limit. Outside of Detroit, Hollywood and what’s left of the newspaper industry, when you say “union” you almost always mean “government employee union.” In the private sector they expect results. The hard truth is that where public sector unions are concerned, there are no bazillionaires to point to on the other side of the bargaining table.

 

That's really the crux of it. The public sector unions don't have as much to bargain with since there are no profits to split with "management." The state is in difficult financial shape, the money has to come from somewhere. Unions telling everyone that they can't suffer these payments are essentially telling everyone else that they should suffer instead. We'll see how long the union can sway public opinion...

 

Oh, and another related post made me laugh. I saw a posting in a blog that said, "Obama wasn't elected by 'big money' so he should give more direct support to the union in Wisconsin." Excuse me? The AFL-CIO isn't "big money"? The public sector unions are among the largest, and most powerful lobbying organizations out there. Anyone that thinks that this is a battle for "the little guy" is out of their minds...

Oh those wacky Greeks

Remember when Greece's financial situation became untenable? Remember how the government tried to cut back costs because they ran out of money? We all laughed and jeered at the reaction the Greeks had to this, mass strikes, protests, etc. It was clear to everyone that some things had to change, but the public sector in Greece essentially said that everyone else should sacrifice, not them.

 

Man, was I glad I didn't live in a place like that. So imagine my sadness when I read about the issues in Wisconsin. The administration is trying to cut into the deficit they have by lowering costs. They want the public sector folks to contribute to their own retirement packages and pay some of their own health insurance premiums. Keep in mind that those payments would still be half of what the typical private sector employee has to deal with. What was the reaction? Mass outrage from the public sector. There have been comparisons of the governor and Hitler (by the teamsters I think) and teachers comparing him to Stalin. No really... The democrat lawmakers have fled the capital to prevent the bill from coming to a vote.

 

Once again, the message is, "Our benefits are sacrosanct, even if they are far better than the private sector. Cut something else." Someone else should pay instead of us, even if they're only being asked for a small concession. In most places, it is the public sector workers that are bankrupting the state, I'm sure it is the same in Wisconsin. I'm hopeful that this display will further turn the voters against the public sector unions, but I'm not sure that the idea that the state does not have unlimited funds will sink in until the government gets shut down...

Charity?

Just did my 24th loan through Kiva. I have been putting in $25 a month since September of 2009 and now things are starting to really roll. By my estimates, I have put in $450 into Kiva but have made $600 worth of loans. As people pay me back, I channel that money back into more loans. The last two months have been great, when I do my usual $25 contribution there is already over $25 in my account. Now I'm doing 2 loans a month even though I'm still putting in the same amount as I always have.So far there has been exactly 0 defaults. This is how things are supposed to work. People get infusions of capital making them more productive. They pay that money back and then that same money can go to someone else. Yes, they pay interest on the loan (not to me BTW, I only get back what I put in) but that assures that the money is being put to productive uses.

Most people see this as a great charity. I can't help but notice that it looks like good old fashioned loans to improve capital and productivity. In other words, this looks exactly the way things would be absent market distortions. In an ideal world I would receive some of that interest instead of only getting the warm glow of helping someone out. That's really the only thing separating what Kiva does from good old-fashioned capitalism.

One day I might need to withdraw the money I've put into Kiva. I have that option. I'm not getting any interest on putting my money aside, and I run the risk of not getting some of it back. Additionally, if I do want to withdraw the money, I might have to wait until it gets paid back to me before withdrawing. In general though, I feel good about what Im doing with this money and with a diversified enough portfolio I know that I can get most of it back eventually. Why aren't more people doing this?

Why do you carry that around?

We were talking about rolling  coin across out knuckles at work (don't ask, I have no idea why we were talking about that),

so I pulled out my $5 Canadian Maple Leaf coin to try it. My manager immediately asked, "What's that?" I showed her and explained that it is one ounce of silver. Sure, it has a value of 5 Canadian dollars printed on it, but the value of the silver at that point was a hair below 30 bucks. I had bought it 5 months earlier for around 18 bucks.

Her next question was, "Why do you carry that around?" The most basic answer is that I like it. There is something solid and reassuring about the size and weight. With a little more thought, I also like it as a conversation starter, and it had worked this time too. It gave me the opportunity to mention the difference between fiat currency and hard money. Don't worry, I never go into too much detail, unless they are interested of course...

I also carry it around to remind myself of the difference between how the currency maker and the market value money. Everything varies in price over time, but paper money's and regular coins' values are changed by that country's central bank primarily. The government can print whatever value it wants on silver, but they have zero control over the actual value. In an ideal world, no single group could hold sway over the value of our money, our store of value. This is as close as we can come to that right now. It's good to be constantly reminded of that.

The FCC Should Not Regulate the Internet | Cato @ Liberty

A great summation of my unease over the FCC rules about the internet is from this article from CATO. Here's the money quote:

 

"The arguments against government regulation in the name of “net neutrality” have not changed: A good engineering principle is not made better if dogmatized and given to lawyers and bureaucrats to enforce as law. The FCC and its regulatory regime are almost sure to be captured by major ISPs and turned to their benefit, used to suppress competition and blunt innovation.

A premise of net neutrality regulation—and much other regulation—is that consumers can’t be relied on to defend their own interests. Taking that premise, which I don’t, it follows that regulators must step in. But that syllogism skips over an additional premise: that regulators can do a better job."

 

 

I wonder if people will ever catch on to the fact that regulation is frequently steered by the very groups that are being regulated. What appears to be onerous to big corporations is usually embraced by them because of their ability to absorb the costs. Smaller firms, and/or newer ones can't so the regulation ends up reinforcing the status quo. There are other good points brought up in the article, give it a read!

 

The FCC Should Not Regulate the Internet | Cato @ Liberty: ""

(Via .)

Capitalism vs. conservative liberals

While I don't like to paint in such broad strokes, I do agree with this article. Power to the people indeed, free those markets!

Income inequality again

A friend of mine posted a link to a NYT opinion page entitled "Our banana republic," and in it the author says:

Our Banana Republic - NYTimes.com: "In my reporting, I regularly travel to banana republics notorious for their inequality. In some of these plutocracies, the richest 1 percent of the population gobbles up 20 percent of the national pie. But guess what? You no longer need to travel to distant and dangerous countries to observe such rapacious inequality. We now have it right here at home"

 

Did you see what he did there? There are plutocracies that have big income disparities, we have big income disparities, therefore the rich here are just as bad as the rich there. True, he doesn't come out and say it, but it is a clear inference he wants readers to make.

Now if he had gone on to explain how our government is funneling taxpayer money into the pockets of our top 1% and that these thieves should be brought to justice, I'd be sympathetic but skeptical. I do think that happens, and I do think those folks and the politicians that enable it should be held accountable, but I don't think it's as widespread as it is in those plutocracies. I am interested in hearing any evidence about that though...

No, the author didn't make that argument. What he did was to point out the recent income disparity here in the US, infer that the people making a ton of money are somehow bad people, and then bring up "evidence" that when some people get rich, the people below them wreck themselves trying to catch up and suffer higher divorce rates. Seriously, he essentially says that the people not making as much in the top 1% mess themselves up, and the rich are to blame. I'm assuming that the author's solution is to narrow the discrepancy to avoid those bad things. I'm also assuming his suggested cure is to either take the money away or prevent people from making that much money to begin with.

It reeks of the worst social engineering hubris I can imagine. Some people do not cope well when they see others doing better than them and so we are morally justified to take money away from folks because some others don't like it. Give me a break. Taking money from people should be the last option, not the first. I've covered this ground before but I'll say it again, just because some people make (much) more money than others does not mean there is a problem. If, like those plutocracies, the top 1% is actually stealing from everyone else, then fine, let's go get the rich. Well how else are they getting that rich Isaac? Glad you asked, another blog post to follow...

Making money

There are two ways to get more money. People can willingly give you money in exchange for a good or service you offer. That's business, trade, etc. The other way you can get more money is if you take it from someone else. That is commonly called theft.

 

If you want to discuss the morality of making money, just look at how they get it. In my view, earning money through selling goods or services is morally neutral. Of course, there might be a moral component to those goods and services, but as far as the act of making money goes, I don't see any moral component to it, good or bad. Contrast that with theft, which is always a bad thing.

What's interesting is how people see the fabulously wealthy. Somehow, without even thinking about it, the moral indignation of theft creeps into the conversation even though the money was voluntarily given to those people. There is an assumption that hedge fund managers, Wal Mart, athletes, etc. have somehow done something wrong by making all that money. There's probably an historical bias there. Over the centuries, when someone became very wealthy, it usually did involve stealing money from someone. Various barons, conquistadors, armies, kings, etc. have made a habit of it. Modern day thugs such as Hugo Chavez, Kim Jong Il, Hosni Mubarak, etc. use a similar approach. Contrast those guys with Warren Buffet, JK Rowling, Bill Gates, Steve Jobs, and the like. Notice anything? Right, the first set of guys (why is it always guys?) use the power of governments to extract wealth from their populations. They are thieves. They get rich at the expense of someone else. As they get richer, others get poorer. The second set of guys made their money by offering services or products and getting paid for them. Trick question, who became poorer so that Bill Gates could make all that money?

The answer is of course no one. Wealth creators get rich without making anyone poorer. Yes, people had to give some of their money to Bill, but they got something back for it, it was an exchange. As a matter of fact, people got much more out of Bill's products than what it cost them to buy them. Through trade, both parties are made better off. That's trade for you, and it's the appeal offered by actual free trade and capitalism.

 

"But that billion dollars they made could pay for 20,000 teachers!" That's a different issue. You don't like what they do with their money. I'll first point out that it is always easier to allocate other people's money (see congress for a prime example). I'll also point out that they are not you and do not share your priorities. The fact that they don't share your priorities is probably why they made a billion dollars... When you worry and fret about what people do with the money they make, try to remember all of the people that they made better off through their activities. It is that which made them rich. People had to decide that what they were offering was worth more than their money. The billionaires have already done a lot for society simply by offering a demanded service or product and they got rich as a reward for it. No, they probably won't pay for 20,000 teachers, but they will do something with that money. They will reward someone else for services and products and the cycle goes on and on. Earning money is a great thing for everyone.

 

What capitalism is

In my last post, I gave a defense of capitalism against a common critique (it's exploitive, it's evil, etc.) but I didn't really talk about what it is. Capitalism is what happens when people are free to make the most of what they have. People have skills, education, money, land, etc. and they want to use those things to better themselves. That's capitalism. It is something that occurs naturally, it isn't something you can legislate or put into action from on high. A government can do little but impede it. Capitalism is a "ground up" as opposed to a "top down" phenomena. Clearly, free trade is involved in this too, they are related, but not exactly the same thing.

Here's the thing about capitalism, what it looks like will vary depending on what system it is in. What many people decry as capitalism is really the effect of being in a system where influence is being sold. There is a big difference between crony capitalism and free market capitalism. Here in the US, companies routinely get special breaks, incentives, and outright subsidies from the government. Strangely enough, people tend to get angry with the companies instead of the system that allows them, encourages them actually, to purchase that influence. Why get angry at the people asking when you cold get angry at the people selling the influence? Cronyism is a feature of a government with too much influence.

Capitalism happens regardless of what system is implemented in the government. The uglier the capitalism is, usually the stricter the government control of it is. The overall impact of capitalism will be better the more freedom there is. Black markets usually breed violence as they run up against government authority. With true free markets, violence just isn't worth it. Free markets also allow people to improve themselves as they accumulate capital. That capital may be in the form of money and the things you can get with money, but often times it takes the form of improved skills. This is why easy entry into the job market is so crucial. Developing skills is the surest way to increase pay. If you have no skills, or very few, you are going to have to start at the low end of the pay scale. As you develop more skills, capitalism will allow you to parley them into better jobs. Having a large pool of skilled workers will allow countries' overall wages to climb.

 

Capitalism is something that is done by individuals trying to make the most of what they have. INothing wrong with that. n my view, anything that tries to limit that is the true evil.

Self sufficiency and freedom

 

Our entire way of life depends on others doing lots of work for us. We do our work for them as well. It's a great system. You do what you you can to help other people, and they do what they can to help you. Isn't it great to have other people do things for you? It's especially good since I have no idea how to make a lot of the things I use. We all barter our labor for the things that we want through the intermediary of money. You work and are given IOU's to other people's labor in the form of money. Other people will do almost anything for you in exchange.

When viewed in this way, it is easy to see why a society based on freedom of exchange works so well. It gives all of us the most varied products and services and the lowest prices. When you see money as the way to barter your labor for others labor, paying low prices seems even better! Cooperation is the name of the game, and freedom is the cause of it, and the result of it.

People that espouse "self sufficiency" have a general distrust of this idea of free cooperation. In my more cynical moments, I get the feeling that they just distrust people in general. Self sufficiency is the road to privation. You spend much more of your most precious commodity, time, on things that could be gotten much more easily with exchange. Cooperation and exchange is the two laned road to abundance and freedom.

There are people that espouse the idea that we should grow our own food, raise our own animals, and do our own canning (canning for God's sake!) in order to pursue freedom. All that stuff is fine if you enjoy doing them, but don't pretend that you are any more "free" because you did it yourself. Don't kid yourself, you have given up a lot to do those things.

Our current wealth is evidence. I once asked my grandmother why she didn't can things and make pickles anymore. She gave me a look that I'll never forget and said, "Because I don't have to anymore." Canning was hard work and it simply wasn't worth her time. She would have laughed in my face if I had told her that some people think that canning is part of the formula for freedom.

Go shopping for the things you need, work for other people's benefit, and enjoy the extra time you get instead of doing everything yourself. What could be more freeing than that?