Thursday, February 21, 2019

Fact Check: The Truth About Our Two Party System

You've heard it your whole life; we have a two party system in the U.S. where power flips back and forth between the Dems and the GOP.  Sometimes Democrats control the government. Sometimes Republicans do.  And it's all more-or-less in balance giving us a wonderful diversity of governing philosophies. Yay us!

But, is it true?

In order to truly have control, a party must have the Presidency, a majority in the House, plus 60% of the seats in  the Senate.  Prior to 1975, Senate control required 66%.

That's because the Senate has a rule that prevents simple majorities from bringing legislation to the floor.  If one party has 51 Senators, they must find 9 votes from across the aisle in order to advance a bill.  This necessitates compromise of one sort or another.  It also empowers minority parties.  Any  minority party with at least 41 votes effectively has veto power over any bill it doesn't like.

For the first two years of the Trump Presidency, Republicans had simple majorities in the Senate and the House.  It was said that Republicans controlled everything.  But without a supermajority in the Senate, they couldn't even do basic things they had run on.  They also had several members who caucused with the Democrats on big issues like Obamacare.     

Only when one party has a cohesive supermajority in the Senate, a majority in the House, and the Presidency, can it truly be said that they are in control of the federal government.    

Can you guess when the last time Republicans had that kind of control?  It was 110 years ago!  1909 was the last time Republicans had the Presidency, the House, and a supermajority in the Senate.

When that Senate was voted-in, the President was Theodore Roosevelt, WWI was still years away, and Total Government Spending was about 7% of the private sector.        

Democrats, on the other hand, have had total, complete, absolute control for 15 of the last 110 years.  There were another 7 years where Democrats were within 1 vote of a supermajority while holding the House and Presidency.  There were also 4 years where Democrats had a supermajority, but didn't have the Presidency.  In total, Democrats have had effective Senate control for 26 of the last 110 years, while Republicans have had 0.  The last time Democrats had a supermajority in the Senate, with the House and Presidency was way, way, way back during the... Obama administration.

When Democrats didn't have complete control, or near complete control, they still had veto control in the Senate.  After 110 years of this, Democrats have taken Total Government Spending from about 7% in 1909, to about 70% of the private sector during Obama's eight years.  

So do we really have a two party system in our federal government?  In theory, yes, but in practice, we are a one party country.  Democrats have had either total control, near control, or veto control of the federal government's legislative agenda for the entirety of the last 110 years.

Here's the result in graphic detail:

Do you see any patterns on the above graph?  (Click on the graph to see it in higher definition, or to zoom-in.  Hint:  Recessions are visible as prominent bumps in the State and Local Spending (red) part of the graph.)

NOTE: Independents are not shown.  Independents who caucused with Democrats put them over the top for part of the 2009-2011 Senate,  and got them within 1 vote of supermajority in the 1993-1995 Senate. 

Tuesday, February 12, 2019

Socialism is the Darwin Award for Economic Ignorance [UPDATED]



Pop quiz:

The United States is:
      A) a capitalist country
      B) a socialist country

No doubt, you were raised to call our economic system, "capitalism".  But did you know that the term "capitalism" is actually a derogatory one?  Do you know who made that term popular?  Did you know that that term didn't exist when the founders designed our economic system? And is it even true that we are a "capitalist" country today?     

The original design of our economic system could best be described as "free-markets and limited-government", not capitalist.  But by the numbers, we have spent the last 100 years moving, or "progressing", away from our original design.  Arguably, we can no longer be considered a free-market / limited-government country.  Here's a graph that chronicles this "progress": (click on the graph to view it in higher resolution)


In 1900, total government spending (federal, state, and local) consumed less than 10% of the private sector (private sector = GDP minus federal, state, and local government spending).  Then, in 1919, exactly 100 years ago, the Communist Party of the USA was founded on an agenda of labor unions and totalitarian socialism.  By the 1930s labor unions were in full bloom, and some of CPUSA's socialist wish-list was already law.  Under Barack Obama, the last President to have a complete record, peace-time government spending consumed about 70% of the private sector. That is the highest peace-time level in our history.  Only WWII exceeded it.  When 70% of a nation's wealth is consumed by government during peace-time, that may not be textbook socialism, but it certainly isn't the free-market / limited-government we had prior to 1929.

In nominal terms, the largest socialist programs on Earth are all U.S. programs.  They make-up about 50% of our total federal, state, and local government spending.  Social Security is the largest government retirement program in the world.  Medicare, Medicaid, SCHIP, Obamacare, etc., make up the largest government medical programs in the world.  Our government welfare programs, federal, state, and local, are the biggest on the planet.  Our food stamp program is the biggest on the planet.  And our accumulated government debt is the largest in the world. Among the most populist countries, none, including countries like China, India, Indonesia, and Russia spend anything near what we do on social programs.  Many European countries do spend more per capita, but they are small compared to the U.S., and the spending differences are, for the most part, minimal.

But spending is not the only measure of a government's size.  Regulation plays an equally important role, and the U.S. economy is highly regulated at the federal, state, and local levels.  In short, one can make the case that between government spending and our high levels of regulation, we have already turned the corner.  For socialists though, there are no limiting principles, and thus there is always more to do.

Our latest socialist push, which began with Barack Obama, is gathering steam and is represented today by Bernie Sanders, Alexandria Ocasio-Cortez, and over half the Democrat party which supports Medicare for All, The Green New Deal, Guaranteed Income, Guaranteed Jobs, 70% - 90% marginal tax rates, and the like.  Today, socialism polls higher than capitalism among Democrats and the young.  It is an inexorable political force that is clearly visible on the graph above.  And it will undoubtedly continue to overtake our once free-market / limited-government system.

Unlike free-markets and limited-government, socialism in its fully realized form requires unlimited, or "totalitarian" government.  That's because coercion is at the heart of it.  Totalitarian government is required to force citizens to do something that is entirely unnatural - work hard without the ability to realize the fruits of one's labor.  (Gee, that sounds familiar. Didn't we fight a civil war over that?).  Dissociating work from reward is the "fatal conceit" of socialism, to borrow a phrase from F.A. Hayek.

But none of that is taught in America today.  Which is why we are where we are, and are careening rapidly towards totalitarian socialism.  Why is this accelerating now?

Pop quiz:   
  1. Who is the father of modern socialism/communism?  
  2. Who is the father of modern capitalism? 
Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  
  1. What is Supply Side Economics?  
  2. What is Demand Side Economics?
You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   
·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  
In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

Wednesday, February 6, 2019

SOTU: What if we are already a SOCIALIST country?

One of the most interesting lines in last night's SOTU speech was when Donald Trump declared, "The United States will never be a socialist country!"  Would a Bush have ever said that?  How about McCain or Romney?  Certainly no Democrat would ever say that since they consider socialism the future of their party!   

As Republicans applauded the line, the network cameras couldn't find the fresh young face of socialism in America, Alexandria Ocasio-Cortez, though they did manage to find the red-faced scowl of old Bernie Sanders who looked like a stake had just been driven through his heart.  A picture is worth a thousand Marxist dialectics.

I found the line somewhat ironic though, since I've been writing for some time that WE ALREADY ARE A SOCIALIST COUNTRY!  You may not realize it yourself.  Donald Trump may not know it.  And Bernie and Alex certainly don't think the project is complete.  But it's true.  Consider these points:

  • In 1900, government consumed less that 10% of the private sector in the U.S.  ("private sector" = GDP minus government spending)
  • Under Barack Obama, the last administration to have a complete record, the government consumed around 70% of the private sector in the U.S.
  • When a majority of the wealth production of an economy is dedicated to government during peacetime, that is by the modern definition... socialism.

  • The big ticket items have all been largely socialized in the U.S. over the last century - housing, education, finance, health care, and retirement.  Only food, transportation, energy, and communication remain as somewhat private sector matters.  (Except of course for food stamps, school lunches, agricultural subsidies, public transportation, Amtrak, TSA, FAA, NTSB, EPA, DOE, etc. etc. etc.)   
  • Health care is almost entirely controlled by the government, and for the poor and those over 65 on Medicare and Medicaid, where the bulk of health spending occurs, it is entirely funded by government.
  • Virtually every mortgage in the U.S. is owned by a Government Sponsored Entity, like Fannie Mae and Freddie Mac.  
  • Every student loan since the Obama administration now comes from the government.  
  • The entire financial sector of the U.S. economy is backstopped and heavily regulated by government.  
  • Education is almost entirely funded and controlled by the government.
  • Social Security is the largest retirement program on earth, and even private pensions are guaranteed by the government. 
  • Government is so vast and unlimited that even Donald Trump, an avowed anti-socialist, is powerless to stop these policies and programs.  
  • We have about $22 trillion in debt, and the Fed borrowed/printed another $3.5 trillion under Obama.  It's a total of about $25 trillion in debt funded by a private sector that runs about $13 trillion annually.  
  • If and when interest rates normalize to around 5%, which is inevitable, we will more closely resemble Venezuela than any version of the U.S. we've ever known.
Sorry, I know no one wants to hear this, but we are basically a socialist country now.  What Bernie Sanders and the Ocasio-Cortez Democrats are talking about is putting the finishing touches on it.  They need totalitarian socialism for eternal power.  Taking over the four areas not already socialized -  transportation, energy, food, and communication is the next step.  That's what the "Green New Deal", "Net Neutrality", "Guaranteed Income", "Guaranteed Jobs", 90% Taxes, and $15 Minimum wage will help accomplish.  Add in "Medicare For All" and we are cradle to grave totalitarian socialist.

Uninformed voters are always suckers for free stuff.  They never understand that the cure is always worse than the disease, when the cure is socialism.         


Wednesday, January 9, 2019

A Failure To Communicate

Donald Trump gave his Oval Office address on the border last night.  Chuck Schumer and Nancy Pelosi gave their response.  Unfortunately, for the American people, the two speeches displayed the futility of politics today and the insanity of abandoning limited government as we have.

The two sides weren't even talking about the same thing!  The President made a speech about protecting the American people from drugs and violence flooding across the southern border.    Chuck Schumer and Nancy Pelosi made a speech about protecting the government from a  partial shutdown.  They were like two ships passing in the night.

The President used facts, statistics, and real life stories to bolster his argument.  He showed respect for his critics and made no moral judgements about their opposition.  The Democrats denied there was a problem in the first place, though they didn't refute any of the Presidents statistics or anecdotes.  They showed nothing but contempt for anyone who disagreed with them, accusing them of immorality, racism, and stupidity.

I'm not sure what the final outcome of all this will be, but the President seems to have won this round.

And then there were the optics:



   

Monday, December 10, 2018

Why Are Markets Going Down? [UPDATED]



As usual, there're many things that are driving markets lower.  Among them are political uncertainty, China trade, an aging expansion, softening housing, troubles in Europe, etc.  But also as usual, there is an 800 pound gorilla in the room that is behind the momentum.  Today, like 2008, the gorilla in the room is the Fed.  The Fed has recently been raising interest rates to the point that last week one of the measures of the yield curve turned negative.  As any economist will tell you, nothing screams trouble like a negative yield curve.  It's the economic equivalent of your mate asking you to sleep on the couch; it may not be over, but it ain't lookin' good!

Two months ago Donald Trump tweeted that The Fed had "gone crazy", which was interesting since he had appointed Fed Chairman Jerome Powell himself just a short time ago. At the time, I defended Trump saying perhaps he was doing this because he understood economic history.  The worsening yield curve and market sell-off more or less prove his point.       

One of the untold stories of the financial crisis in 2008 is how the Federal Reserve, under the very respected Ben Bernanke, collapsed the housing market by raising rates too high and too fast.  Ben Bernanke became Fed Chairman February 1, 2006 when the Fed target rate had already been raised by Alan Greenspan to 4.25%. The day Bernanke became Chairman he raised the Target Rate to 4.5%, but he didn’t stop there. He kept raising until July 1, 2006 when the Fed Funds Target hit 5.25%.  So, from July 1, 2004 to July 1, 2006 the Fed raised its Target Rate from 1.00% to 5.25%, an increase of 425% in two years.  Imagine if food or gas went up by 425%!  Shortly thereafter the yield curve was negative, and the rest is history.  

As of today, the Fed has gone from 0.25% to 2.25% in under three years - an increase of 800%!  [UPDATE] 2.50% in three years - an increase of 900%!  Granted, these ratios mean less when the denominator is so small and the rate is below the rate of inflation, but respected Fed Chairmen have been tragically wrong about this before.   If Powell is wrong, 800% 900% IS crazy. 

And why does the Fed always do this when Republicans are in the White House?    

Tuesday, November 6, 2018

VOTE! (If you can pass this quiz)


"VOTE!", we are commanded.  Every elections season we are incessantly barked-at to go to the polls and participate in our democracy.  That's not surprising.  The same people ordering us to vote are the ones who dominate dominate the narrative.  They think their message has gotten through and we'll vote according to their dictates. This is true on both sides of the aisle.  If a Leftist is ordering you to vote, chances are they think you are a Leftist too.  Ditto on the Right.

I also believe you should vote, but only if you are informed enough to make an intelligent decision.  Do you know some history, some economics, and some current events (and not the "fake news" versions)?

Voting for the sake of voting without being informed is the same as investing without having a clue; you are bound to lose your shirt.  I have no interest in morons choosing my government.  None at all.

So, here's a brief quiz to see if you should vote:

  1.   Who famously said, "I can see Russia from my house!" 
  2.   Who told Americans in the wake of 9/11 to, "Go shopping!"
  3.   What President's policies ended the Great Recession, finally found Osama bin Laden, and achieved its military goals in Afghanistan and Iraq?
  4.   Which President praised neo-Nazis in Charlottesville, VA, and mocked a reporter's handicap?


If you nailed this quiz, go vote.  If not, stay home and read a book on economics or history.   


Answers:
1. Tina Fey said that.  Sarah Palin never did.  
2.  Newsweek said that.  George W. Bush never did.
3.  George W. Bush's policies did those things, not Barack Obama's, even though he was in office at the time.
4.  No President did that, including Donald Trump, who said some of the people in Charlottesville protesting removal of a statue were "good people".  He never praised the neo-Nazis who were there.  And many media outlets falsely accused Trump of mocking a reporter's handicap by gesticulating in a spastic manner, which he DID do, but A) the handicapped reporter was not spastic, and B) Trump uses that spastic gesture ALL THE TIME, and even used it earlier in the same speech when referring to indecisive military Generals!      




    


     

Monday, November 5, 2018

Socialism is the Darwin Award for Economic Ignorance



Socialism is poised for a big victory in tomorrow's 2018 midterm elections.  The so-called "big blue wave" is, among other things, a big socialist wave.  Democrats have overnight become the 'Democrat Socialist Party" and across the board are running on massively expanding government entitlements, all paid for by redistributing wealth from everyone richer than you... to you.  What could possibly go wrong?   

Most people paying attention to economic history know full well that all forms of socialism lead to economic misery and human suffering.  It's not surprising that some would wish that fate on their fellow countrymen, after all some people are inherently cruel, nihilistic, and even suicidal.  But that doesn't account for everyone sucked into this self-destructive vortex.  Some people are true believers and think that socialism will actually help people.  Why is that?           

Pop quiz:   
  1. Who is the father of modern socialism/communism?  
  2. Who is the father of modern capitalism? 
Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  
  1. What is Supply Side Economics?  
  2. What is Demand Side Economics?
You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   
·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  
In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

Thursday, November 1, 2018

The Roots of Jew Hatred [UPDATED]



The massacre of Jews at a Pittsburgh synagogue last week was the most deadly attack on Jews in our nation's history.  And while a single deranged person did this on his own, these things do not happen in a vacuum.

Being Jewish myself, I always assumed Jew hatred was based on ancient gripes that only simple minds could abide, and since simple minds would always be around, so would Jew hatred.  I still believe that, but I've also seen how contemporary words and attitudes play a role in causing men to act on those ancient gripes.

While my last name is distinctly German, my family all originated in Russia, and I can't trace a single family member back to Germany.  Jewish persecution in Germany goes back much further than the modern holocaust and Hitler's Nazis.

Jews began being murdered in Germany en masse way back in the 11th century.  Not only were Jews a religious minority, they were also accused of usury, causing plagues, and, of course, killing Jesus.  Back then, the church prevented Christians from lending money, so if you borrowed money, you were probably indebted to a Jew.  Moreover, Jews were frozen out of many professions including farming, and thus were less susceptible to plagues which tended to affect agrarian populations.  These things formed the basis of Jew hatred.  Then came the Crusades in the 11th century and Jews began their long history of being slaughtered by Germans.

Despite that, many Jews survived and remained in Germany after the Crusades.  Some even thrived.  But then came Martin Luther.           

In 1543, a German named Martin Luther wrote a 75 page screed called "The Jews and their Lies".  It instantly became a best-seller.  Luther was a key figure in the Protestant Reformation and one of the most influential Christians in history.  He was also a rabid Jew hater.   His book laid out the case that ultimately led to the bulk of the Jews being driven from Germany, and 400 years later, the Holocaust of WWII.

Luther labeled Jews as vermin, vipers, dumb, miserable, stupid, fools, blind, senseless, thieves, and usurers.  To deal with them, his recommendations included burning their synagogues, burning their houses, not allowing them safe passage on roads, forcing them into labor,  and killing them. 

Here's a sample of his conclusions:
Burn down their synagogues, forbid all that I enumerated earlier, force them to work, and deal harshly with them, as Moses did in the wilderness, slaying three thousand lest the whole people perish.

These words have reverberated throughout history.

Which brings me to my point.  In the wake of the slaughter in Pittsburgh, many are looking to point fingers and find out what led this deranged man to take action.  What ideas filled the vacuum of his twisted mind?  Who knows. The only thing we do know is that he was not a Donald Trump supporter.  He was listening to other voices.

A week before the murders, a modern American religious leader and influential Democrat named Louis Farrakhan went on a Jew hating rant in front of a large cheering crowd, and then followed up with this Tweet:



As far as I can tell, no prominent Democrat has publicly and emphatically condemned Louis Farrakhan for this latest Jew hating rant.  None.  Not one. 

Words and ideas matter.  They echo through history.  As a Jew, I must shine a light on this and point out its pedigree.



[UPDATE 11/4/18]
Louis Farrakhan is currently in Iran and chanting "Death to America" and "Death to Israel".  Democrat leaders have remained steadfast in their.....complete and absolute silence.   

Wednesday, October 24, 2018

Why The Pipe Bombs Did Not Come From A Conservative: [UPDATED]



Several prominent Democrats and Liberals recently received pipe bombs in the mail.  It goes without saying that this is wrong regardless of who did it.  And while I have no idea who actually did this, I have a pretty good idea who did NOT do it:  this was not done by a Conservative!

That doesn't mean it's necessarily  a "false flag" act by a Liberal.  It could be a deranged Liberal who hates these people.  It could be a deranged Liberal with a single issue gripe.  But it most likely is not a Conservative.

How can I be so sure?       

Pre-emptive political violence is a phenomenon of Liberal behavior.  Take the example of Presidential assassinations; no President has ever been assassinated by a Conservative:

  • Lincoln, a Republican, was killed by a Democrat actor. (the Robert DeNiro or Alec Baldwin of his day?)
  • Garfield, a Republican, was killed by a deranged person ostensibly from the same party, but he was a lawyer who spent time on a "free sex" commune.  No Conservative, he. 
  • McKinley, a Republican, was killed by an Anarchist.
  • Kennedy, a Democrat, was killed by a Communist.
What are the odds this is a coincidence?

And take for example what's been going on recently:

  • Senator Rand Paul has been shot at, physically attacked at his home, and had his family threatened by an ax.  Three separate incidents, all by violent Liberals.
  • Ajit Pai, FCC Chairman, has had constant threats on his life, the most recent resulting in the arrest of a Liberal who specifically threatened to murder his kids.  
  • EPA Chief Scott Pruitt was verbally assaulted by a Liberal while dining in a restaurant.
And these were just the names beginning with "P" on a single recent news day!  I could go on with every other letter of the alphabet based on recent events, all the way up to and including today.  Nothing approaching this happened during Obama's eight years when Conservatives routinely but peacefully opposed his policies.

What explains this phenomenon?  

At the root of the Liberal/Conservative divide on violence are four intertwined dichotomies: 

First, at the base level, Liberals and Conservatives make decisions through different pathways. Liberals decide emotionally, and Conservatives decide rationally.  That’s not to say anyone makes decisions entirely one way or the other.  It's a matter of degree.  Think of the Yin Yang Taoist symbol where each side has a piece of the other.  Violence is an emotional response to political differences.   

The second part has to do with limiting principles.  A rational mind understands the concept of limiting principles and operates within those constraints.  An emotional mind knows no limits. Everything is on the table.  That’s why artists, musicians,  entertainers, and entrepreneurs tend to fit in the Liberal category.  These are the people you want to party with, and whose concerts you want tickets for.  But it’s also why violence is an option; if everything is on the table, nothing is not.

Third, is the difference between Liberals and Conservatives on the importance they place on the individual vs the collective.  Conservatives believe that individual rights are supreme over any group or collective.  Liberals believe the opposite, putting group and collective rights at the top.  Therefore, an individual or several individuals can literally become sacrifices to aid a group or a larger collective. Millions have been killed under this Liberal assumption in socialist countries by the likes of Stalin, Hitler, Mao, Pol Pot, Castro, etc.  A Conservative respects the rights of individuals, including Liberals, to live in peace.  Liberals have no such qualms.   

Fourth has to do with an understanding of the nature of man.  Conservatives intuitively understand that any sustainable system must acknowledge the nature of man.  Liberals believe that they can control men, essentially denying their nature.  This cannot be done without totalitarian control, and totalitarian control can only be obtained through force and violence.     

A nominal Republican or Trump supporter could indeed go haywire and send bombs to Liberals and Democrats, but it won't be a Conservative one.    

That, I can tell you!


[SIDE NOTE ON RACIST VIOLENCE]
Racist violence is usually portrayed as coming from the "far right", the implication being that it is Conservative violence.  It is not.  For example, when the "Alt-Right" marched in Charlottesville and a  participant drove into protesters killing a woman, the media portrayed this as being the act of a Conservative.  Watch this Prager U video below to understand why this is not the case.  (Hint: the alternative to the Right is the...Left.  Hence, the Alt-Right is actually Left and has three core beliefs that are in direct opposition to what Conservatives believe.  Watch the whole video:)



[UPDATE]
Well, of course he's been caught, and while he IS an outspoken Trump supporter... he's NOT any kind of conservative.  This perp is a career criminal / male stripper who's been exhibiting deranged behavior for 30 years.  His long list of prior arrests includes bomb threats, domestic violence, theft, and drugs.  He was a whack-job long before Donald Trump ever came on the scene.  Behold Cesar Sayoc, the new face of "conservatism" according to the Pop Media:


              

Thursday, October 18, 2018

Trump vs. The Fed



Donald Trump has been causing eyes to roll in the economic community by taking on the Federal Reserve in a very Trumpian way.  "I think the Fed has gone crazy", said the President who appointed the current Fed Chairman, Jerome Powell.  Why is Trump doing this?  What is going through his mind?

Here's a guess: Perhaps Donald Trump knows his economic history?

One of the untold stories of the financial crisis in 2008 is how the Federal Reserve under the very respected Ben Bernanke collapsed the housing market by raising rates too high and too fast.  Ben Bernanke became Fed Chairman February 1, 2006 when the Fed target rate had already been raised by Alan Greenspan to 4.25%. The day Bernanke became Chairman he raised the Target Rate to 4.5%, but he didn’t stop there. He kept raising until July 1, 2006 when the Fed Funds Target hit 5.25%.  So, from July 1, 2004 to July 1, 2006 the Fed raised its Target Rate from 1.00% to 5.25%, an increase of 425% in two years.  Imagine if food or gas went up by 425%!  Shortly thereafter the yield curve was negative and the rest is history.  

As of today, the Fed has gone from 0.25% to 2.25%, in under three years, an increase of 800%!  Granted, the percent increase means less when below the Goldilocks neutral interest rate and the denominator is so small, but respected Fed Chairmen have been "wildly" wrong about that before.   If Powell is wrong, 800% IS crazy. 

And why does the Fed always do this when Republicans are in the White House?