How Freedom is Lost

How does one lose one’s freedom? First of all, lets consider this from an individual level: a man loses his freedom when he commits a crime, fails to defend himself, runs out of money, or joins an organization which requires the forfeit of certain freedoms. These are major reasons why people around the world do not have freedom. Prisoners do not have the freedom to go where the choose, eat what they want, or simply live how they want to live. The reason for this in most cases is that the prisoner has done a crime and is paying for it with time behind bars. A person living without a gun or weapon in a crime ridden street has no chance to defend himself and will have to forfeit either his life or his worldly goods in the case that someone who overpowers him enters the house. A person who runs out of money must live their life paying back loans and possibly even joining the first category of prisoner. A person who joins a secret organization such as an intelligence agency forfeits his right to go to the countries of his choosing, hanging out with certain types of people, and sharing certain types of information.

How do these things apply to a country? Exactly the same, except the consequences are not always direct and imminent. When a country habitually commits crimes against humanity, other countries will decide based on whether or not it is politically, strategically, or economically beneficial, to intervene against the rogue government. This has happened in recent history against Hitler’s Germany, Facist Italy, Imperial Japan, Vietnam, Korea, Kosovo, Somalia, Afghanistan, and Iraq. The leadership of these countries except Vietnam and Korea ultimately had to give up power. Examples of countries which failed to defend themselves span the centuries and all share the common trait of no longer being sovereign. Corsica, the island in the Mediterranean Sea shaped similarly to the United States, is owned by France. Hawaii, a neutral nation ruled by Chieftains, was annexed into the United States in the late 1800’s. The Cherokee Nation, and all other American Indian tribes excluding the Inuit, were forced into reservations by the United States. Countries, unlike individuals, do not lose their national power when they run out of money. In fact, the people of those countries lose power and must cede it to their government as money is printed by the ton to make up for the lack of real value. As the government can spend as much as it wants with its fiat currency, the people must bear with making wages that drop in value in the double digits in the span of weeks! See Zimbabwe, which boasts yearly inflation in the millions(%)! There was a point at which Zimbabwe’s currency doubled every 1.3 days, and the bank has printing 100 trillion dollar notes (see photo) Zimbabwe 100 Trillion Dollar Note. Countries also lose their freedom when they join multinational organizations such as the United Nations, the World Trade Organization, etc. I will not go into the details today of how come countries cheat the WTO by putting trade protection on certain exports yet subsidize others.

Another point about freedom that must be stressed is that once a freedom is threatened by violence and hence not performed, that freedom is lost.

US Treasury Holders Alarmed at Rate of Money Printing

Top US Treasury holders especially China are increasingly vocal about their trepidation as the Federal Reserve cranks the money printing machines to full throttle. Cheng Siwei, head of China’s green energy program and former vice-chairman of the Standing Committee, recently said the following:

“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies.”

This is nothing new for people who are keeping tabs on the Federal Reserve, and economists in general. The solution to our economic situation was simple, simply create more money out of thin air and give it to those most in need. The very idea goes against the foundations of a free market society but according to the leaders of our country, the treasury department, and their masters when it comes to monetary affairs (the Federal Reserve board) it was something that must be done.

A measure put forward by Ron Paul to “audit the Fed” passed the House but has slowed down and will most likely be killed off by the Senate under threat of veto by the President. Local solutions to uncontrolled spending and increases in the size and scope of the government are reaching a point of futility but perhaps China will be more persuasive as the largest holder of US debt. In fact, every household owes China (taking only into consideration Chinese holdings of US Treasuries) over $6,000. Add on to that the gigantic amount of trade coming in and out of China, and you have the most important “concerned citizen” to be considered in the debate.

Cheng Siwei succinctly stated:

“The US spends tomorrow’s money today,” he said. “We Chinese spend today’s money tomorrow. That’s why we have this financial crisis.”

The funny thing about the situation is that the government is encouraging the return of the habit, as new programs encouraging people to spend their loose or non-existent money on items ranging from new homes to new ‘fuel-efficient’ cars in programs ranging from home buyers assistance and tax breaks to the novel “Cash for Clunkers” program which will be scoffed at by historians as the most ludicrous pilfering of the taxpayer’s wallet in recorded history.

Government Fiscal Flippancy or Fast Utilitarian Action?

The nigh ten percent unemployment rate is quite a dismal fact, but not something that hasn’t happened before. In fact, we are well below the twenty five percent unemployment that happened in the 1930’s and just around the same unemployment rate as in 1983, longer than most can remember and before many were born including myself.  Thankfully, this recession has not moved into such a dire situation as the Great Depression and is hence not labeled as such.

Perhaps the speed at which information and money can travel these days, and perhaps the loose laws governing the printing and creation on money is what has dampened the recession, or perhaps it is only delaying it. Whatever the reason, it seems to be working. The rate that unemployment is increasing is slowing down, a good sign. Also, less protectionist policies have been enacted, which has also spared us from a trade catastrophe. Perhaps swift misappropriation has saved the day in the end, but at what cost?

Regardless of one’s views on the Federal Reserve, an obvious scare has somewhat been averted and our economy is apparently on the long road to recovery. Recent news reports state the job environment will take until 2012 to reach satisfiable unemployment rates. Ironically 2012 is supposed to be the year the world ends according to the Mayan calander and this report was released right before labor day weekend. Happy labor day, for those who are still employed!

Consumer Confidence Revisited

The average Joe will tell you that consumer confidence means “how confident people are about buying stuff”. However, I would like to disabuse the folks reading that still hold this idea.

The Consumer Confidence Index, in summary, is the average score of 5,000 households chosen at random of the following questions (voted positive, neutral, or negative):

  1. business conditions
  2. business conditions for the next six months
  3. employment conditions
  4. employment conditions for the next six months
  5. family income for the next six months

Reports are gathered by a private organization called the Conference Board [1] and issued.

The Conference Board also releases economic forecasts and their website has information about more indicators including:

  • Help-Wanted Online Statistics
  • CEO Confidence
  • U.S. Leading Index

I would advise anyone interested in knowing about these other indicators to go to the Conference Board’s website placed below.

[1]http://www.conference-board.org/

Lowering Prices Is Good Business These Days

Thanks to the economic situation, prices are starting to go down. Retailers, restaurants, and pubs are all lowering their prices to stay in business. From the pub in England offering a £1 food-menu to the Barnes and Noble here in the US putting some really nice weekly planners half price, sellers are saving their customers money and themselves in the process. In fact, from January 7th 2008 to January 2nd 2009 Walmart (WMT) went up over 25% while McDonalds (MCD) went up over 11%. [1]

Dow Jones Industrial Average 2008

Whether or not things will stay like this, I don’t know. One thing is for certain, if you are a retailer or sell goods to average consumers, lowering the price is the best way to attract more customers. Even though I have some money to spend, I feel like spending less when the economic situation is poor. I’m sure others feel the same. The worst thing to do now is raise prices.

I hope that the economy recovers in 2009, but if it doesn’t I think that the “sell cheap” motto should be adapted by sellers. If not, then let’s hope some revolutionary technology is discovered that will improve human life and the US and World economies.

[1] http://finance.google.com/finance?q=wmt%2C+mcd

Economic Summary of 2008

As the world begins the year 2009, everyone is probably wondering whether or not the economy will collapse further. Has the ripple effect reached the edge of the lake yet, or is this only the beginning of a economic fire that will burn down the entire forest?

In looking specifically at the United States economy, I would say that further readjustment is required specifically in the credit markets. Tightening credit on consumers, such as you and I, is understandable. But tightening credit on business, especially industries that have high upkeep costs, is essential. How is a factory that has suffered the economic storm of 2008 going to recover if it cannot borrow enough money to pay its workers, run its machines, or buy equipment?

The housing crisis, a crisis that could be avoided by being practical about home equity values and the absence of sub-prime lending, has cost banks so much that they are now withdrawing loans to those that need it the most such as small business owners with good credit scores. The very definition of sub-prime is “that which is less than standard”, or in our case lending to those with a less than safe record on borrowing. Lending to those who have defaulted in the past, lending to those that have no record of credit, etc.

Much of this lending was predatory, where the lenders had full knowledge of the loan recipient’s ignorance of the terms of the loan. This led to exorbitant fees and hidden terms and conditions for the recipients, and a fat paycheck for those who stooped so low as to engage in the sale of these loans. To make things worse, these predatory lenders, who traditionally preyed on the weak (those with very poor credit scores) were making a killing on those with good credit scores.

This, like all bad things, had to come to an end. Eventually, so many people were defaulting on these loans and many lenders went bankrupt, but don’t feel too sorry for them, their management managed to save a few golden parachutes. That was not the end of it, because these lenders happened to be on the stock market and up until the meltdown thier financial reports looked very good, attracting the attention and the investments of large hedge funds and individual investors alike.

Once the meltdown happened, a ripple effect occured and in the end trillions of dollars evaporated from the public. Those most banks most involved with the sub-prime loans or stakeholders of other banks that were received a major blow, and those small banks that involved themselves in over-zealous sub-prime mortgage lending went out of business.

All the coverage of this by the news industry caused a slowdown in spending, and that had a ripple effect on the car industry and others. This holdiday season was slow, and the only light at the end of the tunnel is lower gas prices, a light that is dimming down.