Mexico is a better investment than USA?
This is an interesting article by Bill Gross of PIMCO. It outlines just how bad the US debt situation is and what some possible consequences are. However, when offering advice on investors, this really stood out for me:
Favor countries with cleaner “dirty shirts” and higher real interest rates: Canada, Mexico, Brazil and Germany come to mind.
Mexico? Mexico is now seen as a safer investment than the United States of America? I find that terrifying.
The Problem With Public Sector Unions
Ben Shapiro has posted a great article concerning the video below over at Ricochet. It nicely explains why public sector unions are corrupting the political process while bankrupting governments at the same time.
I don’t think this issue has gotten near enough attention. Public and private sector unions are fundamentally different. In the private sector both owners and their unions are restrained by the marketplace. If the owners give too much, or the unions take too much, they may very well destroy the very business they both depend on. There is no such restraint in the public sphere. All you need to do is increase taxes or add more debt. The other big problem is the inherent conflict of interest in that the government is giving benefits to people who will vote and support them.
I honestly see no reason for public sector unions at all. When I’ve worked in the non-union private sector I’ve often had my wages determined by an outside firm hired by the company. They would look at my skill level and determine what they are worth in the marketplace. The recommendations are very realistic. They can’t be too low or the employer will lose valuable employees overtime. Likewise, they can’t be too high as the employer has to make a profit to stay in business.
I don’t see why this same system can’t exist in the public sector. As secretary in the public sector should be making the same as her counterpart in the private sector. In fact, I would say the public sector worker should make 5% less as a price for the increased job security the public sphere offers.
The authority that has been given up by Congress to Washington’s alphabet soup of agencies is another big problem that no one seems to talk about. To me it is in direct opposition to the spirit of the founding and bottom up government. But what to do about it?
I have two ideas.
First of all most of the agencies mention shouldn’t even exist at the federal level. Those that remain should have their abilities to pass regulations stripped. They can make recommendations to Congress, but only Congress can actually pass their recommendations into law. Any other ideas out there?
The Explosive Growth Of Government Spending
I’ve always enjoyed articles by Neil Reynolds. He combines real historical knowledge with solid economic analysis. I’m surprised he works for the Globe and Mail. Anyway in this article he shows how government spending has exploded just about everywhere. Why is this? I think my analysis in my Bob the Builder article explains it pretty well. If you’re in government, the easiest way to get elected is to promise people unearned benefits. In the short term you get elected. In the long term you’re Greece.
Here’s the article
Related articles
- The government spends well over half our collective earnings (about 57%). Result? (politics.ie)
- Welfare Economics (jimdew.wordpress.com)
Why Government Grows (otherwise titled The Tale Of Bill, Bob, and Government Gus)
One of the big, make that maybe the biggest, issues that Conservatives and small government types have to come to grips is why government automatically grows. Even government led by such conservative stalwarts as Ronald Reagan or Margret Thatcher are not immune to this. Looking back at their records it becomes painfully obvious that, at best, they only managed to slow the rate of growth. Why does his happen?
One of the biggest reasons is simply the dynamic of modern (meaning, post WW2) elections. If you want to get elected the easiest way to do so is to simply bribe people. When asked to choose between getting something for nothing as opposed to standing on principle most people tick the box for option A. It’s always easier for any politician of any stripe to talk about some new vote getting program or benefit as opposed to running on thrift. As Obama himself said a few days ago, he’d rather be talking about new programs than plans to cut any amount of spending.
The question becomes, how to change this tendency that is built into the system?
I think I have the answer.
You might think the solution is radical, but I think it makes sense.
The solution is to privatize money.
Try this thought experiment on for size.
Imagine a simple country made up of two hardworking people, Bill and Bob, as well as a third person we’ll call Government Gus. Both Bill and Bob have worked hard and have $10 each. Government Gus, who does no work that anyone will pay for, has not a dollar to his name. Still, Government Gus wants to win an election so he needs to buy both Bill and Bob’s vote. “What do you want?” coos Gus. “Ask me for anything, it won’t cost you a dime!” Bill thinks about it and says, “If you give me free health care, you’ve got my vote!”
“No problem”, says Gus. “What do you want, Bob?”
Thinking this sounds like a great deal, aBob says “I’d like free daycare!”
“Your wish is my command!” says Government Gus. “All you have to do is vote for me!”
Both Bill and Bob vote for Gus, and Gus is true to his word.
However, he does it in a way that Bill and Bob didn’t count on.
With one sly hand he takes $5 from Bill. He then hands $1 to Bob with a big smile on his face.
“Here’s your free daycare!”
“Thanks!” says Bob. “This is great!” Bob is so happy in fact that he doesn’t notice that Gus has just picked $5 from HIS pocket.
He then turns back to Bill, hands him $1, and says “Here’s your free health care!”
“Thanks, I guess”, says Bill.
After a goods nights sleep Bill and Bob think over what just hit them. Although Government Gus did what he said he’d do, they’re actually poorer for it. As things stand now Bill has $6 ($5 + $1 of heath care) and Bob has the same “($5 + $1 of day care).
Bill and Bob are pretty bright guys. It’s obvious that they were better off before accepting Government Gus’s “free” stuff. What’s more Government Gus now has $8, and god only knows what he’s doing with it. What do you think will happen the next time election year rolls around. Will Government Gus find it so easy to bribe Bill and Bob with their own money? Probably not.
They might even vote for Big Liberty Pete, and tell Gus to hit the road and get a real job himself.
But what happens if Government Gus DOES have a skill?
What if he’s, say, a world class counterfeiter?
Let’s rerun the above scenario with this new condition factored in.
Government makes the same promises, but this time he prints out some money when Bill and Bob aren’t looking.
Both Bill and Bob are thrilled. At first blush they both appear to be better off. They both still have their $10, plus a $1 worths of benefits they didn’t pay for. What more could you want? Bill and Bob aren’t quite sure where Gus got the $8 he now has, but hey, every body is richer now, at least in paper.
And of course, that’s the problem. Real wealth has nothing to do with numbers printed on pieces of paper. Money is merely a medium of exchange, nothing more. An unknown word starts to creep into Bill and Bob’s vocabulary. That word is inflation. The cost of everything is going up, to the point where they are just as poorly off as they are in the first scenario.
There is one crucial difference, though.
They are not able to make the connection between Government Gus’s sneaky counterfeiting, rising inflation and their now poorer states. The only thing they know is that things are getting more expensive and their lives are getting harder.
What happens when the next election rolls around? Do they vote for Gus, who is offering more programs to help, or Big Liberty Pete? I think you know the answer.
And there in a nutshell is the reason for the explosive growth of government the world over in the 20th century.
The fatal mistake is allowing Government Gus his own printing press.
As soon as you do the concept of “Of the people, by the people, and for the people” is turned on its head.
Without the ability to counterfeit Government Gus has to tax people honestly. This puts the people in the drivers seat. They earn the money and they have the power. The only way government can grow is if the people let them. Most people will see the benefit in being taxed a little for the few things that people can’t do themselves. These are things like national defense or a court system. Beyond that it is obvious that Gus can’t do much beyond his core competencies very well. Only when the productive Bill and Bob’s of the world give him the ability to counterfeit is Gus able to create the illusion that he can do more.
So, the question is, why transfer the power from the people to the government at all? It amounts to taxation without representation. Government Gus’s the world over have been able to take money from productive citizens and use it to buy power without the citizens knowledge or consent. If anything it’s WORSE than taxation without representation as most people are not even aware that they’re BEING taxed.
The answer, then, is obvious. It’s time to get rid of national currencies.
This is obviously an out there idea which I’ll have to expand on in a future post.
Tell me why I’m wrong though.
Told you it was radical. 
The REAL reason beyond rising Oil Prices (even Mark Steyn doesn’t know)
Image via Wikipedia
Today, I came across another excellent article by one of my favorite writers, Mark Steyn. In it he exposes the hypocritical posturing of politicians who are attempting to blame everyone’s favorite whipping boy, big oil (Booo! Hissss!), for the rise in oil prices. However, they naturally ignore the fact that all of them, in one form or another, advocates polices that are limiting the supply of oil, and is therefore driving up prices as well. You can read the article, in all its brilliance, here.
However, in my opinion, Steyn misses the SINGLE BIGGEST reason for the rise in oil prices, which is the decline of the US dollar. The article I found here talks about this in more depth. The only thing this article misses is that ALL CURRENCIES, as they are based on paper, are losing their value. That’s what the documentary I linked to before, Fiat Currency, talks about. This should be a major issue, but so few people understand it, including economists but especially politicians, it just isn’t. We’re in for some interesting times ahead …
FIAT EMPIRE – A Great Documentary I found using Digg
Image via Wikipedia
Dec 5, 2006 This Award-winning documentary video, featuring presidential candidate RON PAUL, was inspired by the book, “The Creature From Jekyll Island” This explains it all in layman’s terms anyone can understand.
Using Digg, I was able to find this really well done documentary on the gold standard, sound money, and the dangers of our current paper (fiat) money system. Going through the comment section, I found several arguments against this video that I wanted to comment on here.
Lame. This is a very weak argument. All money and valuation is “smoke and mirrors” – gold doesn’t hold an actual value – just intrinsic in the eyes of the people. There is no difference between our fake valuation of gold & silver vs our valuation of dollar bills and soon our valuation of a single number that represents our wealth in a computer database somewhere …
There is some truth to what the person is saying above. No good or service has an objective value. Something acquires a subjective value when people want it, and are willing to trade real good and services for it. People desire paper currency because they believe they can exchange it for other goods and services. However, what they don’t understand is that paper is not stable, as the government is able to print as much of it as they want. As a crime, this is not different than what counterfeiters do. All governments of all stripes do this. The advantage of having your money backed by something real is that government can’t do this.
Dollars are backed by the same force that everything is backed by: supply and demand. Just how gold really shouldn’t be worth what it’s worth (it’s just a shiny metal a neat ability to avoid oxidation), dollars can be exchanged for goods and services even though you can’t go to a bank and ask for something physical. And as long as we all agree to use dollars instead of chickens or gold as an exchange, then the system works.
My point above kind of answers this as well. He makes an interesting point, however, probably without intending too. As long as we all agree to use dollars … That’s kind of the rub, isn’t it? As the government keeps printing more money, that paper is worth less and less (this is called inflation). When this happens, people stop using it, and the currency collapses. People see their life savings wiped out, their lives ruined. See what happened to Germany in the 1930’s, or to a lot of Latin American or African countries today. It is always a bad idea to let anyone (whether counterfeiters or the government) create money out of thin air. Personally, I’d take chickens over the US dollar at this point.
It amazes me how many people can talk on this subject without having a graduate level constitutional law class or even an college economics class….
I bet this person has a university level education. This is going to be a future post all by itself, as it nicely shows the problem with our entire education system. Stay tuned.
A Change in Direction and Focus …
In my previous post I talked about why this blog was no longer going to be an exclusively make money online blog. I mentioned an article from Jay at DatMoney, and Jay was kind of to post a comment. He notes in the comment that he had a friend who changed his blog from mmo to anything he wanted to talk about, and he has met with much success. I plan on doing the same thing.
It’s not like I no longer want to make money online, it’s simply that the focus has changed. Rather then coming from a place of wanting to make money online first, I’m going to focus on my interests and passions first, and then try and monetize that. You know what I mean? Before, I think I was really putting the cart before the horse, so to speak, whereas now I think I’m coming at it from the right angle. Take the site I set up earlier (you can read about it’s creation in the “niche inspector” category) at www.acne-solution-tips.com. The information there is actually good, but do I feel I’m really adding anything new to this topic? Thankfully, my acne days are long behind me. Did I have fun researching and writing the articles for this site? I’m curious by nature, but acne isn’t one of the topics that is high on my list. Do I want to set up another site similar to this one? Not particularly.
So, the question is, what is my plan going forward? Well, here’s what I’m going to be focusing on with this blog for the foreseeable future.
1. Politics / economics – I’ve always been interested in this stuff. However, I’m really going to focus on creating little youtube video’s on various topics, aside from just writing. I talked before in a previous post about how impressed I was with the video that was done on the declining American dollar and gold. This is the kind of thing I’m looking at. I think it would be a lot of fun.
2. I think I’m going to build a site all about Vancouver, where I live. There is so much to do here, and I haven’t been to too many places since I was a child. When you live in a great place, you typically don’t explore it that much. You figure, well, I can do that tomorrow. Not anymore. I’m going to really explore this city this summer, and I’m going to create a cool website about it. Stay tuned.
3. Health and Fitness Stuff. I’m always interested in health and fitness, plus I have some somewhat unconventional views on the subject.
4. As far as the Make Money Online Stuff, I think I’m mostly going to quote Aaron at FullTiltBlogging. If you’re interested in this, I suggest you go to his site and check it out.
Anyway, that’s where I’m at right now. For the rest of the week, I’m really planning on looking into the social networks, as I can see this being very helpful going forward.
Till next time,
- Dave
Whose the REAL Culprit in the Global “Food Shortage”?
Image via Wikipedia
I’ve been reading a lot of articles recently on the so called world “food shortage”. Apparently, the price of food is rising around the world, and people want to know why. Many politicians are raising the specter of global warming as the cause. Others are pointing the finger at bio fuels, where we are subsidizing people to turn food into fuel. Personally, I find the global warming angle a sham, while I have a little more time for the bio fuel point of view. However, I suspect the real cause (as in 95% of it) is our old friend fiat money. In an earlier post, I linked to a YouTube video, explaining how the US dollar, since decoupled from gold, has been steadily declining in value. This is why other commodities, such as gold, have been steadily rising in value relative to it. However, commodities are not limited to gold and silver. Food is a commodity as well. As all of the world’s governments print more money, is it any surprise that the value of food is going up as well? I could write more about this, but instead, I’ll just link to this great article I found on this at RealClearMarkets. It’s a worthwhile read:
http://www.realclearmarkets.com/articles/2008/04/the_foodshortage_myth.html
Something Different: Scrooge, Nixon, and Gold – Oh My!
And now, as they say, for something completely different. Earlier today I was surfing some blogs when I cam across this video at www.flimjo.com. It basically makes the case that the American Dollar (like every other currency in the world that I’m aware of) has been declining in value ever since it was decoupled from gold in 1971. Now, the reality is that the gold standard was being undermined for decades up to that point. When Nixon removed it, he was basically just pulling the life support plug. Nonetheless, the video is great. Take a look.
Now, the question is, why is this so? To understand why, we first need to understand just exactly what money is and what purpose it serves. Buckle up, because I suspect that most economists do not understand this.
There is nothing magical about money. Money is a medium of exchange, nothing more. Imagine Robinson Crusoe on his island. Does he have any need for money? Absolutely not. He is forced to do everything himself to survive. Life is pretty brutal for poor old Robinson Crusoe. Now, imagine when Friday shows up. Does he need money now? No, it’s still just easier to barter. Maybe Robinson Crusoe collects coconuts all day, whereas Friday fishes. They then trade at the end of the day and they are both better off as a result. Still, there’s no need for money at this point.
However, as society grow more complex, bartering becomes more and more difficult. Take this example. Farmer Huey raises cows and produces milk. He decides he is tired of living in the dark, so therefore he wants to trade some of his milk to Dewie the candle maker. However, there’s a problem. Dewie is extremely lactose intolerant, and wants no part of Huey’s milk. Poor Huey, what’s he going to do? Well, he could go and try and find some third party that produces something that Dewie desires, but who is not lactose intolerant and actually likes milk. He could do this, but can you see right here how inefficient this is? This is why money, a universally recognized medium of exchange, comes into being. Rather than barter for things you may not want in the hope of getting things you do, it is far more efficient for Huey to sell his milk and accept a medium of exchange (money) for it in return. Dewie will accept this medium of exchange, as he knows he will be able to use it to get anything he feels he needs.
The question becomes then, what to use as this medium of exchange? Well, why not use leaves, a la The Hitchhikers Guide to the Galaxy? The problem here is that both Huey and Dewie have to work to produce milk and candles. They are not going to want to exchange their goods for something that any fool can pick from a tree. How about a commodity like corn? Well, it does take some work to grow corn, but what if you don’t want to exchange your corn for something else right away? Your corn will go bad, and then where will you be?
In a free society, through trial and error, many different commodities are tried in order to fill the role of “medium of exchange”. What they all eventually settle on, is gold. Out of anything you can think of, gold is scarce, highly durable, portable, and in high demand. When Huey exchanges his milk to someone who desires it for gold, he can approach Dewie with confidence, knowing that he will accept the gold for candles.
Paper currencies arise when people realize that carrying around gold is a pain. Isn’t it easier to have a paper certificate, a note, saying that if you wish, you can exchange the paper for gold? This is how paper currency’s start, and there is nothing wrong with them. As long as Huey and Dewie have the confidence that the paper they are getting is backed by the real thing (gold), they’re happy.
The problem occurs when the government takes over the production of the paper money. For a time, everything works well, as the government paper money is backed by gold. However, this starts to fall apart when the government starts to print more money than it has in gold. Why does it do this? Well, government doesn’t actually produce anything that people will voluntarily exchange for. Whatever it does must be paid for by taxes. The problem, though, is that people don’t like to be taxed. However, if you want to get elected, isn’t the easiest way to buy people’s votes? It doesn’t matter what it is, free health care, a new stadium, etc. The sneaky politician will promise whatever it is you want as long as you’ll vote for him. However, once he gets into office, how does he pay for it all? Does he do it the honest way and raise taxes? Of course not! People may not have voted for him if they actually know how much his promises cost. Besides, he promised not to raise them. The easiest thing to do is to start paying for his promises by literally printing paper money. He does this and for the time it appears to work. However, at this point the gold standard is already under furious attack. The paper currency is now a lie. The government paper currency may say that it is worth 1/20 an ounce of gold, but there is now more paper out there than gold to back it up. So long as everyone doesn’t try and exchange their paper currency for gold, the politician is safe. Nonetheless, cracks will start to appear …
The video said that the US came off the Gold Standard in 1971. Really though, the Gold Standard started to come under attack with the creation of the Federal Reserve in 1913. When Nixon took the American buck off it in 1971, he really had no choice. The dye had been cast long before. However, once that last frail link to gold was lost, politicians of all stripes could promise the moon, free in the knowledge that they could print as much money as they wanted. At some point though, Huey, Dewie, Louie, and everyone else realize that they are exchanging hard earned products for pieces of valueless paper with dead presidents on them. When enough people awaken to this reality, the jig is up, as they say, and the currency collapses.
Fun fact. Every paper currency which is backed by nothing ends up being devalued until it is worthless. This has been true throughout human history. There are no exceptions.
Well, enough with that for today. For tomorrow, I plan on getting around to talking about my experiences with the 10 Day cash secret. Also, notice that I’ve added these cool social media buttons to the bottom of the post. If you want to do this, you can find the wordpress plug in here:
http://wordpress.org/extend/plugins/sociable/installation/
To our Success!
- Dave
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