Perhaps the Iraqis and their former oil minister and a leading member of the Iraqi National Alliance, Ibrahim Bahr al-Uluom, read this blog. The plan he outlined in the Wall Street Journal a couple of days ago is very close to what this blog recommended for Mexico's national petroleum industry last year.
See:
http://www.hhcapitalism.com/2008_07_01_archive.html
http://online.wsj.com/article/SB10001424052748704304504574610661109079836.html
Friday, December 25, 2009
Thursday, December 24, 2009
Julian Simon on Environmental Hoaxes and Immigration
[Leer en Español]
Conservatives and Republicans who oppose liberalization of immigration laws would be well-advised not to throw overboard one of their greatest allies in another vital policy area, that of climate change and other environmental issues. I am referring to the late Julian Simon. His book ‘The Ultimate Resource 2’ and works based on or inspired by it represent the nuclear warhead arsenal of the conservative and capitalist movements against radical environmentalist fraud. He catalogs and debunks over a hundred cases of environmental scare campaigns in the past 200 years that turned out to be so much global hot air emitted by carbon-spewing political activists out to grab power and earn big bucks (and frequent-flier miles) through notoriety. What’s more, he systematically explained WHY objectively it must be so that all such scares end up as hoaxes (not that that ever deters the activists from inventing new ones with every generation, if not season). Julian Simon is an indispensible ultimate resource all by himself in this regard. Simon’s work has been praised by Milton Friedman, George Gilder, Rush Limbaugh and many writers on the Wall Street Journal editorial page.
Having a strong agreement on one or any number of points does not mean that we will always agree on others. We can all easily name people with whom we agree wholeheartedly on some issues while being fiercely at odds on others. But at the very least, the views of someone whom we respect so highly ought to deserve a fair, honest, and open-minded hearing. To do less would be rather shallow and petty.
Simon named his book The Ultimate Resource to make the point that in the final analysis, physical assets like coal, oil, water and food are only as good, useful and available as the PEOPLE who gather, collect, mine, extract, refine, grow and harvest them. It is human beings living under liberty and the rule of law that are the most precious, scarce, productive and needed resource. In the short run, physical resources are of course finite; but in the long term, they are virtually unlimited, only constrained by human imagination, ingenuity, freedom and hard work. In simple arithmetic, since the average human being on earth, when given a chance, is perfectly capable of producing more wealth than he must consume, the more people we have on earth, the more wealth there will be all around. And this principle extends into the realm of all other problem solving as well, not just production of food and wealth but managing pollution, waste, health hazards etc; the more free people available, the cleaner the environment.
In The Economic Consequences of Immigration and Immigration: The Demographic and Economic Facts, Simon focused his pro- (human) life thesis on the specific case of people who decide to move from one place or country on Earth to another in search of opportunity and/or in flight away from persecution and/or poverty. He concludes that the supposed economic arguments against immigrants break down under examination of facts. Consider a sampling of Simon’s findings, which have changed little since he asserted them about 20 years ago:
• The total number of immigrants per year (including illegal immigrants and refugees) nowadays is somewhat less than it was in the peak years at the beginning of the 20th century when U.S. population was less than half as large as it now is.
• Immigration as a proportion of population is about a third of what it was in the peak years.
• The foreign-born population of the United States is 8.5 percent of the total population (as of 1990). It had always been above 13 percent during the period from 1860 to 1930.
• More than half of illegal aliens enter legally and overstay their visas and permits. Less than half cross the nation's borders clandestinely.
• New immigrants are more concentrated than are natives in the youthful labor-force ages when people contribute more to the public coffer than they draw from it;
• The average education of new immigrants has been increasing…[nevertheless] [t]he proportion of adult new immigrants with eight or fewer years of education is much higher than the proportion of adult natives.
• The proportion of immigrants with bachelor's or postgraduate degrees is higher than the proportion of the native labor force.
• Immigrants do not cause native unemployment, even among low-paid or minority groups.
• Immigrants who enter legally through regular quotas are not permitted to receive public assistance for three years, and they may be deported if they obtain such assistance.
• If refugees are excluded from the assessment…the rate of welfare use for new immigrants who entered between 1980 and 1990 is considerably below the rate for natives ages 15 and above.
• Social Security and Medicare are by far the most expensive transfer payments made by the government. These payments go almost completely to natives. This is because immigrants typically arrive when they are young and healthy, and also because older recent immigrants do not qualify for Social Security for many years after their arrival.
• As of the 1970s, immigrants contributed more to the public coffers in taxes than they drew out in welfare services.
The Summary of Important Facts about Immigration may be read here: http://www.cato.org/pubs/policy_report/pr-imsum.html
The complete pamphlet is available here: http://www.cato.org/pubs/policy_report/pr-immig.html
Simon died a premature death at age 65 in 1998, but his influence and rigorous methodology may be readily recognized in the work of his disciples, among them Stephen Moore and Daniel Griswold. The Cato Institute’s August 2009 Handbook for Policy Makers contains a succinct chapter on immigration which is the culmination of this decades’ long research effort. This document deserves to be carefully studied by any serious person interested in how the system should be reformed. Its recommendations in brief are:
• Expand current legal immigration quotas, especially for employment-based visas;
• Repeal the arbitrary and restrictive cap on H1-B visas for highly skilled workers;
• Create a temporary worker program for lower-skilled workers to meet long-term labor demand and reduce incentives for illegal immigration; and
• Refocus border-patrol resources to keep criminals and terrorists out of the country.
Conservatives and Republicans who oppose liberalization of immigration laws would be well-advised not to throw overboard one of their greatest allies in another vital policy area, that of climate change and other environmental issues. I am referring to the late Julian Simon. His book ‘The Ultimate Resource 2’ and works based on or inspired by it represent the nuclear warhead arsenal of the conservative and capitalist movements against radical environmentalist fraud. He catalogs and debunks over a hundred cases of environmental scare campaigns in the past 200 years that turned out to be so much global hot air emitted by carbon-spewing political activists out to grab power and earn big bucks (and frequent-flier miles) through notoriety. What’s more, he systematically explained WHY objectively it must be so that all such scares end up as hoaxes (not that that ever deters the activists from inventing new ones with every generation, if not season). Julian Simon is an indispensible ultimate resource all by himself in this regard. Simon’s work has been praised by Milton Friedman, George Gilder, Rush Limbaugh and many writers on the Wall Street Journal editorial page.
Having a strong agreement on one or any number of points does not mean that we will always agree on others. We can all easily name people with whom we agree wholeheartedly on some issues while being fiercely at odds on others. But at the very least, the views of someone whom we respect so highly ought to deserve a fair, honest, and open-minded hearing. To do less would be rather shallow and petty.
Simon named his book The Ultimate Resource to make the point that in the final analysis, physical assets like coal, oil, water and food are only as good, useful and available as the PEOPLE who gather, collect, mine, extract, refine, grow and harvest them. It is human beings living under liberty and the rule of law that are the most precious, scarce, productive and needed resource. In the short run, physical resources are of course finite; but in the long term, they are virtually unlimited, only constrained by human imagination, ingenuity, freedom and hard work. In simple arithmetic, since the average human being on earth, when given a chance, is perfectly capable of producing more wealth than he must consume, the more people we have on earth, the more wealth there will be all around. And this principle extends into the realm of all other problem solving as well, not just production of food and wealth but managing pollution, waste, health hazards etc; the more free people available, the cleaner the environment.
In The Economic Consequences of Immigration and Immigration: The Demographic and Economic Facts, Simon focused his pro- (human) life thesis on the specific case of people who decide to move from one place or country on Earth to another in search of opportunity and/or in flight away from persecution and/or poverty. He concludes that the supposed economic arguments against immigrants break down under examination of facts. Consider a sampling of Simon’s findings, which have changed little since he asserted them about 20 years ago:
• The total number of immigrants per year (including illegal immigrants and refugees) nowadays is somewhat less than it was in the peak years at the beginning of the 20th century when U.S. population was less than half as large as it now is.
• Immigration as a proportion of population is about a third of what it was in the peak years.
• The foreign-born population of the United States is 8.5 percent of the total population (as of 1990). It had always been above 13 percent during the period from 1860 to 1930.
• More than half of illegal aliens enter legally and overstay their visas and permits. Less than half cross the nation's borders clandestinely.
• New immigrants are more concentrated than are natives in the youthful labor-force ages when people contribute more to the public coffer than they draw from it;
• The average education of new immigrants has been increasing…[nevertheless] [t]he proportion of adult new immigrants with eight or fewer years of education is much higher than the proportion of adult natives.
• The proportion of immigrants with bachelor's or postgraduate degrees is higher than the proportion of the native labor force.
• Immigrants do not cause native unemployment, even among low-paid or minority groups.
• Immigrants who enter legally through regular quotas are not permitted to receive public assistance for three years, and they may be deported if they obtain such assistance.
• If refugees are excluded from the assessment…the rate of welfare use for new immigrants who entered between 1980 and 1990 is considerably below the rate for natives ages 15 and above.
• Social Security and Medicare are by far the most expensive transfer payments made by the government. These payments go almost completely to natives. This is because immigrants typically arrive when they are young and healthy, and also because older recent immigrants do not qualify for Social Security for many years after their arrival.
• As of the 1970s, immigrants contributed more to the public coffers in taxes than they drew out in welfare services.
The Summary of Important Facts about Immigration may be read here: http://www.cato.org/pubs/policy_report/pr-imsum.html
The complete pamphlet is available here: http://www.cato.org/pubs/policy_report/pr-immig.html
Simon died a premature death at age 65 in 1998, but his influence and rigorous methodology may be readily recognized in the work of his disciples, among them Stephen Moore and Daniel Griswold. The Cato Institute’s August 2009 Handbook for Policy Makers contains a succinct chapter on immigration which is the culmination of this decades’ long research effort. This document deserves to be carefully studied by any serious person interested in how the system should be reformed. Its recommendations in brief are:
• Expand current legal immigration quotas, especially for employment-based visas;
• Repeal the arbitrary and restrictive cap on H1-B visas for highly skilled workers;
• Create a temporary worker program for lower-skilled workers to meet long-term labor demand and reduce incentives for illegal immigration; and
• Refocus border-patrol resources to keep criminals and terrorists out of the country.
Dr George Reisman's Prescription for Economic Recovery
George Reisman is a retired professor of economics at Pepperdine U. and a direct, personal disciple of Ludwig von Mises (the Austrian-American economist who debunked socialism in 1922; lost the popularity contest to John Maynard Keynes) and Ayn Rand (author of Atlas Shrugged). He is author of a thick textbook on economics titled simply 'Capitalism'. At approximately 1 million words, I call it 'the suitcase bomb'.
He has his own blog where he continues to offer anaylsis and commentary on political economy. Any serious citizen who wants to understand how we got into this mess and how to get out -- permanently -- should take a serious look at his analysis of the current crisis and policy prescription for recovery:
http://georgereisman.com/blog/
http://georgereisman.com/blog/2009/11/pro-free-market-program-for-economic.html
He has his own blog where he continues to offer anaylsis and commentary on political economy. Any serious citizen who wants to understand how we got into this mess and how to get out -- permanently -- should take a serious look at his analysis of the current crisis and policy prescription for recovery:
http://georgereisman.com/blog/
http://georgereisman.com/blog/2009/11/pro-free-market-program-for-economic.html
Saturday, December 19, 2009
The Conservative and Republican Trump Card: Hispanic Voters
The Republican share of the hispanic vote has dwindled from a high of 40% in 2004 to 20% in 2008. But it doesn’t have to be this way; it could be 60 or even 80%. Republicans needn’t write off this segment of the population, and we certainly shouldn’t stupidly alienate it if we want to have a say in how our government is run and our country evolves in the next generation.
In general, hispanic citizens are hard-working, self-reliant, pro-family, pro-Judeo-Christian values; pro-Life, pro-school choice. These qualities should endear it to the conservative movement and the Republican party. There are plenty of hispanics in America, even those who participate in the Spanish-language talk radio forums (that I listen to and occasionally participate in), who are appalled at Barack Obama’s economic policies, his brownnosing of foreign leaders and entities, and the reclassification of foreign terrorists as common criminals subject to constitutional protections.
All the conservative movement and the Republican party would need to do to win this segment back to its side is make a sincere outreach appeal and stop appearing to foam at the mouth every time the topic of immigration, legal or illegal, comes up.
Conservative principles of limited government, free markets, free people, duty, honor and country, are not limited by ethnic origin, color or religion, and they do not stop at the border. There is no reason that conservatives can not support liberal (small ‘L’) free-trade policies with other countries and immigration policies that recognize the need for and benefit from immigrants both at the very low and the very high end of the education and skill levels, where they compliment our native-born medium-level average. There is certainly no good capitalist economic argument for undue restriction of trade or immigration.
This doesn’t mean roll over and play dead when Democrats nominate leftist socialist hispanics to high office, as in the case of Sonia Sotomayor. We have to take principled opposing stands and promote our people, of whom we have plenty ‘of color’. But it does mean refraining from painting 12 million people with a broad brush as some kind of criminal underground. To the contrary, reach out, educate this population in American civic values, and win them and their voting citizen cousins to our cause.
To do the right thing by their own principles and to win elections once more, conservatives need to TAKE THE LEAD in liberalizing trade and immigration laws under the rule of law, to make it easier for honest people to come here legally in order all the better to isolate the miscreants who violate our borders for criminal and/or terrorist purposes. By taking the lead in immigration reform, Republicans can take the election issue advantage away from the Democrats and prevent their worst and most irresponsible notions from becoming law over our impotent opposition.
Hispanics for Republicans? ¡Si, se puede!
Resources:
- American Thinker: Conservative Republican Values and the American Hispanic Mind
- The United States Needs More Conservative Opinion in Spanish
- National Review Online: Bush’s “Real” Hispanic Numbers
- Cato Institute: Will Democrats Err in Immigration Reforms?
- Daniel Griswold: As Immigrants Move In, Americans Move Up
- Wall Street Journal: sunshine for McCain
Friday, December 18, 2009
Index Income Taxes for Age
Should a 60 year-old pay the same income tax rate as a 30 year-old? Even if the 60 year-old earns more, (s)he has a much more limited opportunity to save for retirement; a lower rate for an older taxpayer would be just and fair on that ground. Moreover, a lower rate on mature but productive people would encourage more productivity in the economy from which we could all benefit, as opposed to rushing people out of the workforce, impoverishing us all.
Let me propose a reduction in income taxes, either in absolute terms or in the calculation of taxable income, of 3.33% per year above 35 years of age. Under such a plan, a 50 year-old taxpayer would pay 50% of the taxes (or have taxes based on calculated taxable income reduced by 50%) as a 35 year-old earning the same income; after 30 years of incremental reductions, a 65 year-old would pay zero and could continue working and earning, income tax free if (s)he wanted.
Mature people are more likely than younger ones to be conservative, responsible stewards of their own wealth. I believe such a plan would not only benefit the economy generally by encouraging more productivity where it is at once so ripe and so sorely needed, but it would also alleviate the looming retirement / Social Security crisis.
Your comments please.
Sunday, November 29, 2009
121 Reasons to Reject Obama-Reid-PelosiCare
Obama-Reid-PelosiCare is a bad, old idea that must be defeated.
[In Summary...]
- 1. It’s unnecessary.
- 1.1) The American system, for all its warts, is still the best the world.
- 1.2) A supermajority of US citizens have coverage they are satisfied with, and the un-insured do not lack services.
- 1.3) There are options for improvement available which would cost NOTHING.
- 1.1) The American system, for all its warts, is still the best the world.
- 2. It’s destructive.
- 2.1) It crowds out voluntary cooperation and the private health insurance market.
- 2.2) It raises costs and risks to business, aggravating unemployment and inflation.
- 2.3) It creates the mother of all budget deficits and social conflict as far as the eye can see and beyond.
- 2.1) It crowds out voluntary cooperation and the private health insurance market.
- 3. It won’t work.
- 3.1) It takes private medical decisions out of the hands of patients, families and doctors, and assigns them to Washington bureacrats and committees. The latter are neither wiser nor more caring.
- 3.2) Wage and price controls aggravate shortages, raise costs and stifle innovation.
- 3.3) It’s Socialism by definition (no matter how much the anti-capitalist sponsors try to deny it): a government takeover. Socialism has been demonstrated over and over again to be a failure. It won't work because it can't.
- 3.1) It takes private medical decisions out of the hands of patients, families and doctors, and assigns them to Washington bureacrats and committees. The latter are neither wiser nor more caring.
[In Detail...]
Obama-Reid-PelosiCare is a bad, old idea that must be defeated
- 1. First, because it’s unnecessary.
- 1.1) The American system, for all its warts, is still the best the world.
- 1.1.1) No other system provides as high quality care to so many of all socio-economic levels as ours.
- 1.1.1.1) The Breast cancer survival rate in the USA is 90%. In Europe, it’s below 80%[5] (National Bureau of Economic Research).
- 1.1.1.2) Life expectancy in the USA is is 73 (men) and 79 (women) years (up 50+% in 100 years), compared with 59 and 72 in Russia (down 15+%). Yet Russia has had socialized health care for 90 years.
- 1.1.1.3) Infant mortality rates appear high in the United States because we actually count them, including premature births. Most countries fudge their numbers.
- 1.1.1.1) The Breast cancer survival rate in the USA is 90%. In Europe, it’s below 80%[5] (National Bureau of Economic Research).
- 1.1.2) No other system produces more or better innovations, advances and science prizes as ours. Why kill the golden goose?
- 1.1.2.1) In 37 of the last 50 years, 68 Americans have won the Nobel Prize in ‘Physiology or Medicine’.
- 1.1.2.2) Who in 2009 wants to be treated with 1999 state of the art? But if innovation stops, the best we’ll have in 2019, or 2029 or 2039 is only what we already have today.
- 1.1.2.3) The UK already killed one of its golden geese: kidney dialysis. Pioneered the technology, but has one of the lowest rates of usage in the world.
- 1.1.2.1) In 37 of the last 50 years, 68 Americans have won the Nobel Prize in ‘Physiology or Medicine’.
- 1.1.3) No other national system – the UK, France, Canada, Germany, or Russia – has produced results better than the US.
- 1.1.3.1) 800,000 Britons are on surgery waiting lists. 15% report having to wait[6] for more than 6 months for elective treatment.[7]
- 1.1.3.2) Patients diagnosed with cancer in the U.S. have a better chance of surviving the disease than anywhere else. The World Health Organization also rates the U.S. No. 1 out of 191 countries for responsiveness to the needs and choices of the individual patient.
- 1.1.3.3) The British Audit Commission notes that accidental death due to hospital errors in the UK have increased 500% in the last 20 years.[10]
- 1.1.3.1) 800,000 Britons are on surgery waiting lists. 15% report having to wait[6] for more than 6 months for elective treatment.[7]
- 1.1.1) No other system provides as high quality care to so many of all socio-economic levels as ours.
- 1.2) A supermajority of US citizens have coverage they are satisfied with, and the un-insured do not lack services.
- 1.2.1) A survey conducted jointly by the Kaiser Family Foundation, ABC News and USA Today, released in October 2006, found that 89 percent of Americans were satisfied with their own personal medical care.[2]
- 1.2.1.1) 93% of insured Americans who had recently suffered a serious illness were satisfied with their health care. So were 95% of those who suffered from chronic illness.
- 1.2.1.2) 70 percent of the uninsured who indicated their level of satisfaction said they were either "satisfied" or "very satisfied" with their health care, and only 17.5 percent said they were "very dissatisfied."
- 1.2.1.3) 60% of women voted for Obama, but 74% are happy with their own health care. 64% would rather have a private than government plan.
- 1.2.1.1) 93% of insured Americans who had recently suffered a serious illness were satisfied with their health care. So were 95% of those who suffered from chronic illness.
- 1.2.2) There are not and have never been 50 million Americans without access to healthcare.
- 1.2.2.1) 10 million of the uninsured live in households that earn at least $75,000, according to the Census Bureau[8].
- 1.2.2.2) 18 million uninsured are between the ages of 18 and 34. Being young and healthy and excercising free choice, they choose not to purchase insureance.
- 1.2.2.3) 5% of the ‘uninsured’ are illegal aliens who should not be entitled to welfare at the expense of citizen taxpayers.
- 1.2.2.1) 10 million of the uninsured live in households that earn at least $75,000, according to the Census Bureau[8].
- 1.2.3) The critical long-term uninsured are less than 5% (12 million, NOT 50 million) of the population. Even these get treated in emergency rooms that are the envy of the world.
- 1.2.3.1)It isn’t necessary to overhaul (destroy) the system that works for 96% of the population for the sake of helping 4%.
- 1.2.3.2) Even if you regard 12 million uninsured as a crisis, it does not follow that a plan crafted by Obama, Reid and Pelosi and enforced by a massive new bureacracy is the solution.
- 1.2.3.3) How about giving 5 minutes of ‘equal’ consideration to the Republican plan?[11] Naah! Of course not!
- 1.2.3.1)It isn’t necessary to overhaul (destroy) the system that works for 96% of the population for the sake of helping 4%.
- 1.2.1) A survey conducted jointly by the Kaiser Family Foundation, ABC News and USA Today, released in October 2006, found that 89 percent of Americans were satisfied with their own personal medical care.[2]
- 1.3) There are options for improvement available which would cost NOTHING[1].
- 1.3.1) Liberate the national health insurance market. Allow citizens to purchase insurance across state lines. Don’t New Yorkers buy produce from California?
- 1.3.1.1) Allow employees to use their employer’s contribution and shop for themselves.
- 1.3.1.2) Lift mandates on insurance policies that limit offerings and choices. One size does NOT fit all.
- 1.3.1.3) The Commerce Clause of the US Constitution was intended as a free-trade agreement among all the states. Open the market!
- 1.3.1.1) Allow employees to use their employer’s contribution and shop for themselves.
- 1.3.2) Permit and promote free-market and consumer-choice options like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)[3].[4]
- 1.3.2.1) Health care and insurance costs should be tax deductible for everyone, not just employees of large corporations and the government.
- 1.3.2.2) Stop telling doctors and hospitals who and how they must and must not treat. Let them make their own decisions about charity vs. bankruptcy.
- 1.3.2.3) Charities, religious organizations and non-profits have a role to play. Get out of their way.
- 1.3.2.1) Health care and insurance costs should be tax deductible for everyone, not just employees of large corporations and the government.
- 1.3.3) Enact tort reform. Frivolous lawsuits, runaway malpractice litigation and the corrupt legal casino drives up costs for everyone.
- 1.3.3.1) Health ‘reformers’ complain of overuse of unnecessary medical tests. But these tests are defenses against frivolous lawsuits.[9]
- 1.3.3.2) In the 4,000+ pages of the bills, there is no tort reform. They don’t dare limit attorneys' fees or impose caps on damages. The Democrats are in bed with the trial lawyers to the tune of millions in campaign contributions.
- 1.3.3.3) If you think it’s important to preserve the right to sue, and think you’ll have that right under a single-payer, government system, think again, and carefully.
- 1.3.3.1) Health ‘reformers’ complain of overuse of unnecessary medical tests. But these tests are defenses against frivolous lawsuits.[9]
- 1.3.1) Liberate the national health insurance market. Allow citizens to purchase insurance across state lines. Don’t New Yorkers buy produce from California?
- 1.1) The American system, for all its warts, is still the best the world.
- 2. Second, because it’s destructive.
- 2.1) It crowds out voluntary cooperation and the private health insurance market.
- 2.1.1) The ‘public (government) option’ makes it a losing proposition to offer any private (voluntary, free-market) option.
- 2.1.1.1) Section 202 of H.R..3962 REQUIRES you to enroll in a ‘qualified plan’ without defining what that means.[14]
- 2.1.1.2) Section 59b of H.R..3962 indicates that the IRS will enforce your qualified health insurance enrollment with fines
- 2.1.1.3) Sections. 1158-1160 reduce payments for patient care to what it costs in the lowest cost regions of the country. Good luck if you’re in New York or Florida.
- 2.1.1.1) Section 202 of H.R..3962 REQUIRES you to enroll in a ‘qualified plan’ without defining what that means.[14]
- 2.1.2) Private companies compete with each other for market share based on satisfying customers at the lowest cost. How can they compete with government entities whose cost overruns are covered by taxpayers?
- 2.1.2.1) Private practices and firms can’t rationally compete with rivals (the government) that they are obliged to subsidize with their taxes. Do we tax Pepsi to support Coke?
- 2.1.2.2) State agencies, with their inflexible bureacracies and insulation from the need to satisfy customers in order to earn a profit, can’t rationally compete with private firms.
- 2.1.2.3) Something will have to give. That something will be private practices and firms… and quality of service, cost, efficiency and innovation. Hello stagnation.
- 2.1.2.1) Private practices and firms can’t rationally compete with rivals (the government) that they are obliged to subsidize with their taxes. Do we tax Pepsi to support Coke?
- 2.1.3) Instead of a free market where people compete and cooperate to help each other, we’ll have a multi-trillion-dollar political battlefield where special interest groups, lawyers and lobbyists jockey for advantage.
- 2.1.3.1) The bills themselves are Frankenstein monster products of political jockeying, not unified, coherent proposals. Their mandates and penalties are arbitrary inventions.
- 2.1.3.2) Forcing drastic change on a divided public maximizes conflict, stirs angry protests and increases political polarization[17].
- 2.1.3.3) It’s the politics, stupid! So-called responsible ‘moderates’ like Mary Landrieu fret about the cost of the program until they get their share of the pork[18].
- 2.1.3.1) The bills themselves are Frankenstein monster products of political jockeying, not unified, coherent proposals. Their mandates and penalties are arbitrary inventions.
- 2.1.1) The ‘public (government) option’ makes it a losing proposition to offer any private (voluntary, free-market) option.
- 2.2) It raises costs and risks to business, aggravating unemployment and inflation.
- 2.2.1) Forcing employers to offer coverage that satisfies Washington is a manifest strain on those firm’s financial health. That can’t make it easier to hire more workers. 2.2.2) Unemployment is the crisis the government should be focussed on relieving as the priority before health care.
- 2.2.1.1) Consumers will pay higher prices (and taxes) for the products of businesses who were compelled not by their customers but by the government to act ‘correctly’.
- 2.2.1.2) When a business is faced with rising costs, it must become more efficient, raise prices or get out of part or all of its markets.
- 2.2.1.3) How much sense does it make to beat up ‘greedy’ businesses that succeed and earn profits, then turn aroung to bail out the poor ones that are ‘too big to fail’?
- 2.2.1.1) Consumers will pay higher prices (and taxes) for the products of businesses who were compelled not by their customers but by the government to act ‘correctly’.
- 2.2.2) Unemployment is the crisis the government should be focussed on relieving as the priority before health care.
- 2.2.2.1) With 10+% unemployment nationally and 12+% in California, you would think the federal government would be able to figure out its priorities better.
- 2.2.2.2) Nothing makes it harder to obtain health insurance than the loss of one’s job. Fix unemployment and you solve the problem of the uninsured population.
- 2.2.2.3) Labor is an economic good with a price. Right now the price (and risk) is too high. Government must focus on policies that make it easier, cheaper and less risky to hire.
- 2.2.2.1) With 10+% unemployment nationally and 12+% in California, you would think the federal government would be able to figure out its priorities better.
- 2.2.3) Monetary and fiscal fiddling and meddling have resulted in the worst economic recession in 50 years. Don’t give us more of the same in health care!
- 2.2.3.1) Manipulating interest rates and guaranteeing unsound risk gave us the credit crisis. Manipulating actuarial calculations will destroy health insurance just as surely.
- 2.2.3.2) Read The Housing Boom and Bust by Thomas Sowell, then tell us that we need the federal government to run health care.
- 2.2.3.3) Cutting income and capital-gains tax rates permanently would be more stimulative to employment and the economy overall than any government spending plan.
- 2.2.3.1) Manipulating interest rates and guaranteeing unsound risk gave us the credit crisis. Manipulating actuarial calculations will destroy health insurance just as surely.
- 2.2.1) Forcing employers to offer coverage that satisfies Washington is a manifest strain on those firm’s financial health. That can’t make it easier to hire more workers. 2.2.2) Unemployment is the crisis the government should be focussed on relieving as the priority before health care.
- 2.3) It creates the mother of all budget deficits and social conflict as far as the eye can see and beyond.
- 2.3.1) Honest supporters of the bill admit that it’s a huge open-ended commitment that will NOT be self-financing work out exactly as planned. John Cassidy, The New Yorker, November 4, 2009[12][13]
- 2.3.1.1) “There are no provisions to substantively control the growth of costs or raise the quality of care” – Jeffrey S. Flier, Dean of Harvard Medical School[15]
- 2.3.1.2) Sections 2521 and 2533 of H.R. 3962 establish racial and ethnic preferences in awarding grants for training nurses and other vocational programs.
- 2.3.1.3) It would actually HELP Obama’s chances of re-election in 2012 if the health care bill fails.[19] Political failure that spares the worst economic damage is better than the alternative.
- 2.3.1.1) “There are no provisions to substantively control the growth of costs or raise the quality of care” – Jeffrey S. Flier, Dean of Harvard Medical School[15]
- 2.3.2) How many failed stimulus packages does it take to discredit an economic theory or an administration’s competence?
- 2.3.2.1) This program hasn’t even yet passed, yet the Obama administration’s MONTHLY budget deficit is already greater than G.W. Bush’s for an entire YEAR.
- 2.3.2.2) As practiced by Congress, Keynesianism claims that money spent by government multiplies economic benefit. Yeah, right!
- 2.3.2.3) What isn’t seen is what gets destroyed by separating capital from its original producers. How many jobs were lost to create the ‘stimulus’ job?[20]
- 2.3.2.1) This program hasn’t even yet passed, yet the Obama administration’s MONTHLY budget deficit is already greater than G.W. Bush’s for an entire YEAR.
- 2.3.3) The illegal immigration problem will explode, with fraud, abuse, and social unrest. If you want responsible immigration reform and domestic peace, this isn’t the way to achieve it.
- 2.3.3.1) European countries[1][16] that have large numbers of immigrants on the public dole have social problems MUCH worse than we have YET seen in America.
- 2.3.3.2) The unemployment rate among immigrant youth in Paris is 40%. Every year, rioters burn 500 cars.
- 2.3.3.3) Open borders have to be conditioned on capitalist principles, not invitations to suckle benefits from the host society.
- 2.3.3.1) European countries[1][16] that have large numbers of immigrants on the public dole have social problems MUCH worse than we have YET seen in America.
- 2.3.1) Honest supporters of the bill admit that it’s a huge open-ended commitment that will NOT be self-financing work out exactly as planned. John Cassidy, The New Yorker, November 4, 2009[12][13]
- 2.1) It crowds out voluntary cooperation and the private health insurance market.
- 3. Third, because it won’t work.
- 3.1) It takes private medical decisions out of the hands of patients, families and doctors, and assigns them to Washington bureacrats and committees. The latter are neither wiser nor more caring.
- 3.1.1) It’s already happening. Check out the Medicare Commision with its 15 members appointed by the president, with powers to dictate what is covered and how it will be paid for.
- 3.1.1.1) Recently the US Preventative Services Task force changed recommendations on mammograms, saying women under 50 don’t need them[23]. ‘Recommendations’ have a way of becoming rules.
- 3.1.1.2) What would the Democrats, CNN and MSNBC have said if George W Bush had proposed that?
- 3.1.1.3) Even if politicians were the wisest among us, there’s still too much data and too many variables for them to keep track of between campaign stops, press conferences and photo-ops.[32]
- 3.1.1.1) Recently the US Preventative Services Task force changed recommendations on mammograms, saying women under 50 don’t need them[23]. ‘Recommendations’ have a way of becoming rules.
- 3.1.2) Do you know what the Office of Management and Budget is? That’s YOUR new health insurance company.
- 3.1.2.1) Who should get medical care? Whose life is worth saving? Who should decide? Ezekiel Emmanuel (health adviser to President Obama and brother of White House Chief of Staff Rahm Emanuel)?[24]
- 3.1.2.2) Which advice is better for women--a US Dept of Health and Human Services (HHS) panel of medical experts, or the Secretary of the same? Their statements contradict each other.[28]
- 3.1.2.3) The British National Health Service is the biggest employer not just in the United Kingdom, but in the whole of Europe. Care to estimate the size and budget of a U.S. health bureaucracy?[33]
- 3.1.2.1) Who should get medical care? Whose life is worth saving? Who should decide? Ezekiel Emmanuel (health adviser to President Obama and brother of White House Chief of Staff Rahm Emanuel)?[24]
- 3.1.3) The more government controls choices, wages and prices, the less information is available in the market to guide their wise and benevolent decisions.
- 3.1.3.1) The government program can’t function if for-profit players are allowed to ‘poach customers’, so private practice and firms will eventually be outlawed.[25]
- 3.1.3.2) The House bill gives the HHS task force the mandate to review "the benefits, effectiveness, appropriateness, and costs of clinical preventive services" in making its de facto insurance coverage rulings[29].
- 3.1.3.3) The founders designed our Consititution knowing that no nation would ever be governed by angels. That’s why we have separation of powers and minimal concentration at the center.
- 3.1.3.1) The government program can’t function if for-profit players are allowed to ‘poach customers’, so private practice and firms will eventually be outlawed.[25]
- 3.1.1) It’s already happening. Check out the Medicare Commision with its 15 members appointed by the president, with powers to dictate what is covered and how it will be paid for.
- 3.2) Wage and price controls aggravate shortages, raise costs and stifle innovation.
- 3.2.1) Sneak preview: New York State. Cost of HMO plan for family with children: $39,000.
- 3.2.1.1) The whole concept of insurance as a low-cost pooling of risk for unlikely but catastrophic events has already been completely overwhelmed and perverted by excessive regulation and mandates.
- 3.2.1.2) Socialized medicine has not improved health or general welfare anywhere that it has been tried.
- 3.2.1.3) They couldn’t even deliver the H1N1 vaccine on time and under budget. And we want to trust them with the whole massive, complex system? Why?
- 3.2.1.1) The whole concept of insurance as a low-cost pooling of risk for unlikely but catastrophic events has already been completely overwhelmed and perverted by excessive regulation and mandates.
- 3.2.2) Washington’s hostility to profit is already discouraging qualified people from entering the medical field and investors from taking risks.
- 3.2.2.1) We are facing shortages of doctors and other medical professionals – 125,000 by 2025 according to the Association of Medical Colleges[26].
- 3.2.2.2) But who wants to risk years of study and hundreds of thousands of debt only to become a bureacrat’s peon[30]?
- 3.2.2.3) Price controls cause shortages. That’s Econ 101.
- 3.2.2.1) We are facing shortages of doctors and other medical professionals – 125,000 by 2025 according to the Association of Medical Colleges[26].
- 3.2.3) If risk takers are not compensated when they lose, but punished when they succeed, they’ll stick their money into a mattress or buy gold. Forget about investing in uncertain quests for miracle drugs.
- 3.2.3.1) It costs over a billion dollars to bring a new drug to the market. Who’s going to pony up that dough when private investors flee? You?
- 3.2.3.2) The politicians yell ‘greed’ (and you cheer the politicians) when the pharmaceutical companies actually attempt to recoup their costs.
- 3.2.3.3) Where are the next miracle drugs to come from, if not research and development? That requires willing investors and risk-takers.
- 3.2.3.1) It costs over a billion dollars to bring a new drug to the market. Who’s going to pony up that dough when private investors flee? You?
- 3.2.1) Sneak preview: New York State. Cost of HMO plan for family with children: $39,000.
- 3.3) It’s Socialism by definition (no matter how much the anti-capitalist sponsors try to deny it): a government takeover. Socialism has been demonstrated over and over again to be a failure. It won't work because it can't.
- 3.3.1) There’s a reason HillaryCare failed in 1994. Americans read the bill and understood its abolition of private medical practice and takeover of 1/6 of the economy.
- 3.3.1.1) Socialized care was ‘invented’[27] by Otto von Bismarck of Germany in the 1880’s and made a constitutional right in the Soviet Union in 1918. There’s nothing new under the sun.
- 3.3.1.2) 78% of AIDS vicitms in Russia contracted the virus through dirty needles or HIV-tainted blood in the state-run hospitals[31]. Great track record.
- 3.3.1.3) Socialists in America have been trying to implement it here ever since, but Germany and Russia have never been the model for US to follow.
- 3.3.1.1) Socialized care was ‘invented’[27] by Otto von Bismarck of Germany in the 1880’s and made a constitutional right in the Soviet Union in 1918. There’s nothing new under the sun.
- 3.3.2) The most prosperous, secure, and healthy peoples of the world are those that live in liberty, with the least government intrusion, low taxes and free markets.
- 3.3.2.1) Government is an armed agency whose proper role is the prevention and punishment of murder, assault, robbery, fraud, theft, rape, persecution and conspiracy.
- 3.3.2.2) If government would stick to its own role, then voluntary cooperation among patients, families, private insurance companies and dedicated medical professionals will take care of the rest.
- 3.3.2.3) Advocates of sociialized medicine in the United States use Soviet propaganda methods to achieve their goals. See Michael Moore’s ‘Sicko’. Then again, don’t.
- 3.3.2.1) Government is an armed agency whose proper role is the prevention and punishment of murder, assault, robbery, fraud, theft, rape, persecution and conspiracy.
- 3.3.3) Pop Quiz: Socialism has been definitively debunked since:
A: 1989?
B: 1961?
Correct answer is
C: 1922.
or maybe D: 1620
- 3.3.3.1) There’s a reason the Berlin Wall fell in 1989. Totalitarianism could not compete with liberty. Socialized health care is a totalitarian animal. It tolerates nothing it does not control within its reach.
- 3.3.3.2) The building of the Berlin Wall in the first place in 1961 was a manifest admission that socialism is a prison for its citizens.
- 3.3.3.3) Ludwig von Mises explained in 1922 why the socialist ideal is impossible and MUST FAIL everywhere it is tried. Read: Socialism: An Economic and Sociological Analysis.
- 3.3.3.1) There’s a reason the Berlin Wall fell in 1989. Totalitarianism could not compete with liberty. Socialized health care is a totalitarian animal. It tolerates nothing it does not control within its reach.
- 3.3.1) There’s a reason HillaryCare failed in 1994. Americans read the bill and understood its abolition of private medical practice and takeover of 1/6 of the economy.
- 3.1) It takes private medical decisions out of the hands of patients, families and doctors, and assigns them to Washington bureacrats and committees. The latter are neither wiser nor more caring.
References, Notes and Sources
[1] http://online.wsj.com/article/SB10001424052748704013004574517961189341646.html
[2] http://www.foxnews.com/politics/2009/06/24/obama-pushes-national-health-care-americans-happy-coverage/
[3] http://online.wsj.com/article/SB10001424052748704204304574545814221561286.html
[4] http://www.hsainsider.com/
[5] http://www.defendyourhealthcare.us/images/Why_U.S._gives_hope_to_breast_cancer_patients_10-29-09_.pdf
[6] http://www.digitaljournal.com/article/244716/Study_UK_Health_Care_Flawed_Canadian_Wait_Times_Highest_and_Dutch_Care_Scores_Best
[7] http://news.bbc.co.uk/2/hi/health/3749801.stm
[8] http://online.wsj.com/article/SB10001424052748704335904574495131591949574.html
[9] http://townhall.com/columnists/CharlesKrauthammer/2009/11/27/kill_the_bills_do_health_reform_right?page=full&comments=true
[10] http://www.thefreelibrary.com/_/print/PrintArticle.aspx?id=86044656
[11] http://www.gop.gov/solutions/healthcare
[12] http://www.newyorker.com/online/blogs/johncassidy/2009/11/some-vaguely-heretical-thoughts-on-health-care-reform.html
[13] http://online.wsj.com/article/SB10001424052748704795604574522680235765894.html
[14] http://online.wsj.com/article/SB10001424052748704795604574519671055918380.html
[15] http://online.wsj.com/article/SB10001424052748704431804574539581994054014.html
[16] The author lived 4 years in France, 3 in majority-immigrant neighborhoods.
[17] http://online.wsj.com/article/SB10001424052748703932904574511263515975366.html
[18] http://online.wsj.com/article/SB10001424052748704888404574550012759377786.html
[19] http://townhall.com/columnists/LarryElder/2009/11/19/senate,_help_your_president_--_deep-six_obamacare!?page=full&comments=true
[20] See That Which is Seen, and That Which is Not Seen, by Friedrich Bastiat, 1850.
http://bastiat.org/en/twisatwins.html
[21] http://online.wsj.com/article/SB10001424052748703792304574504020025055040.html
[22] http://online.wsj.com/article/SB10001424052748704402404574527493169603118.html
(written by a Democrat)
[23] http://online.wsj.com/article/SB10001424052748704204304574543721253688720.html
[24] http://online.wsj.com/article/SB10001424052970203706604574374463280098676.html
[25] http://www.thefreelibrary.com/_/print/PrintArticle.aspx?id=99491045
[26] http://online.wsj.com/article/SB10001424052748703574604574499423536935290.html
[27] Much the same way that Al Gore ‘invented’ the Internet.
[28] http://townhall.com/columnists/KenBlackwell/2009/11/26/politicizing_medicine,_medicalizing_politics?page=full&comments=true
[29] http://online.wsj.com/article/SB10001424052748704779704574552320222125990.html
[30] http://online.wsj.com/article/SB10001424052748704402404574525903492235572.html
[31] The Lesson of Soviet Medicine, by Yuri N. Maltsev, Free Market vol 27 no. 10, Oct 2009 published by the Mises Instititute www.mises.org
[32] And voting ‘present’.
[33] http://article.nationalreview.com/?q=MWVkNTBjM2M1NzFhZmY0ZWNjODc5ZWY3YWIwYzE0ZWQ=
See: The WSJ Guide to ObamaCare
Saturday, October 10, 2009
Bozo Peace Prize
Imagine if George W Bush had been nominated for the Nobel Peace Prize just 12 days after taking office in 2001 and then receiving the award on October 9, 2001, when his personal favorability ratings were at their peak and the most of the world stood with America in the aftermath of 9/11. Liberals, Democrats, Republicans -- anybody -- would rightfully call it a joke and a travesty.
Any credibility the Nobel Peace Prize committee may have had left, it lost yesterday. Awarding such a prestigious and lofty honor to a man who has accomplished NOTHING apart from execute a well- (community-) organized political campaign and make a few speeches that make some select Americans FINALLY proud of their country and a few foreigners feel good about America again, would be hysterically funny if it didn’t have such dire, bloody, tragic consequences. Barack Obama has completed less than one year of his term; the economy, unemployment and public finance are in a shambles not seen in at least 30 years, the Holocaust-denying Iranian regime is on the fast track to acquiring nuclear weapons, and the ‘good war’ in Afghanistan isn’t quite so good anymore, resulting in a blitzkrieg-fast renunciation of commitment to our allies.
From Detroit to Teheran and from California to Carracas, America is weaker than it has been in at least a decade, and that’s no small part of what the Nobel Committee must be cheering. Horray for the not-Bush! There will be a nasty wake-up call for these cheerleaders and the rest of the peace-loving world when the consequences of that weakness play out.
You have got to be kidding! Even if the man is destined to be worthy of the honor, let him actually accomplish something before awarding the prize. Has the Committee no shame? Has there ever been a more nakedly partisan political award by a supposedly objective, non-partisan organization? The actual effect of President Obama’s policies on world peace cannot, will not be conclusively known for at least months, more likely years. Republicans, conservatives, libertarians and I join Democrats, liberals and socialists in hoping and praying that the next years will see a reduction in human suffering, war, disease and oppression throughout the world. But to declare it to be so because we wish it so is precisely the kind of mass intoxication that resulted in World War II, 9/11 and a hundred other calamities.
People, wake up, grow up and get serious. Peace is not some touchy-feely Starbucks pastry. It’s a serious imperative of civilization that must be DEFENDED, with courage, lives, and yes, guns, bullets, tanks, aircraft and bombs. Bozo the Clown has done more for world peace than ANY first-year US President, with the possible exception of Harry Truman.
Any credibility the Nobel Peace Prize committee may have had left, it lost yesterday. Awarding such a prestigious and lofty honor to a man who has accomplished NOTHING apart from execute a well- (community-) organized political campaign and make a few speeches that make some select Americans FINALLY proud of their country and a few foreigners feel good about America again, would be hysterically funny if it didn’t have such dire, bloody, tragic consequences. Barack Obama has completed less than one year of his term; the economy, unemployment and public finance are in a shambles not seen in at least 30 years, the Holocaust-denying Iranian regime is on the fast track to acquiring nuclear weapons, and the ‘good war’ in Afghanistan isn’t quite so good anymore, resulting in a blitzkrieg-fast renunciation of commitment to our allies.
From Detroit to Teheran and from California to Carracas, America is weaker than it has been in at least a decade, and that’s no small part of what the Nobel Committee must be cheering. Horray for the not-Bush! There will be a nasty wake-up call for these cheerleaders and the rest of the peace-loving world when the consequences of that weakness play out.
You have got to be kidding! Even if the man is destined to be worthy of the honor, let him actually accomplish something before awarding the prize. Has the Committee no shame? Has there ever been a more nakedly partisan political award by a supposedly objective, non-partisan organization? The actual effect of President Obama’s policies on world peace cannot, will not be conclusively known for at least months, more likely years. Republicans, conservatives, libertarians and I join Democrats, liberals and socialists in hoping and praying that the next years will see a reduction in human suffering, war, disease and oppression throughout the world. But to declare it to be so because we wish it so is precisely the kind of mass intoxication that resulted in World War II, 9/11 and a hundred other calamities.
People, wake up, grow up and get serious. Peace is not some touchy-feely Starbucks pastry. It’s a serious imperative of civilization that must be DEFENDED, with courage, lives, and yes, guns, bullets, tanks, aircraft and bombs. Bozo the Clown has done more for world peace than ANY first-year US President, with the possible exception of Harry Truman.
Sunday, July 19, 2009
How the Barbarians invented Banking
Once upon a time on a planet not very far away...
There was a street next to a pile of stones. I forget whether the stones were there to repel foreign invaders or to channel irrigation water, but it was a high and long wall. So they called the street Wall Street. And all the people of the village would gather there to exchange their goods. You see, after generations of making everything for themselves, the villagers figured out, one by one, that they would be better off if they made (or grew or hunted) something they they were good at and exchanged it for something someone else was better at producing. Igor was good at hunting rabbits, so he dedicated himself full-time to hunting rabbits and brought them to market and exchanged them for carrots raised by Uk. That way both Igor and Uk had more rabbits and more carrots than either of them would have had if they had had to produce them all by themselves. Aggar had a talent for spinning wool, so she did that and exchanged with Kolo, who was good chopping firewood. Aurel had a problem, though. He was the best ox-breeder in the village, but every time he brought a unit of production to market, he had to butcher it right there and exchange the meat for different products of others, or go home without exchanging with anyone. Even when he did butcher the animal, he couldn't always find traders for the whole result, so much of it spoiled. He hadn't gone to an ivy-league university, but something told him intuitively, instinctively, that one ox ought to exchange for more than a pound of carrots or one rabbit. But he didn't need a hundred rabbits or 500 pounds of carrots at a time; he needed a broader variety of goods, but a barter system was a very clumsy way to obtain it.
Yag liked to dig, and he found a yellow metal in the ground. He brought the metal to market and exchanged it for other goods. People gave him rabbits, carrots, wool and even oxen for his yellow metal because it was beautiful, could be used to decorate household items as well as the persons themselves, fill tooth cavities and manufacture electronic microprocessor components. Best of all, it was soft, heavy and malleable; it could be cut to just the size/weight/amount needed in the moment and a small amount was highly valuable. Even those people who had no use for the gold themselves figured out that they could exchange their goods for gold, then exchange the gold for something else they really did need. Not everyone needed a rabbit or a carrot every day, but almost anyone would be willing to accept gold in exchange if the amount were right. Money was born.
Droughts, pestilence, floods, earthquakes and hurricanes were a big problem. Whenever such a disaster hit, it would wipe out all the goods anyone had and there would be nothing to exchange or eat. So Beul invented the weather-proof warehouse, and charged the other villagers a fee (in gold) to store their goods safely. But even without droughts, floods et al, some goods couldn't be stored for long without spoiling. Gold, on the other hand could keep virtually forever, but this virtue created problems of its own. If one accumulated more gold than needed for a short period (a day, a week, a month) then it would be too inconvenient to carry around and too dangerous to leave at one's house. Still, people wanted to save wealth so that they could be assured of having resources, food and clothing in the future, even if they couldn't hunt, farm or spin then. So Beul expanded his business and offered to let people store their gold in his warehouse. Initially he put each customer's gold into individual safe-deposit boxes and gave them a piece of papyrus with their name on it and a number matching the number on the box, so that the customer could claim his or her gold later. But very quickly he realized that gold was fungible, that is, that it didn't matter which gold went to which customer, as long as the quantity matched the number on the receipt. So he kept all the gold together (which was more convenient) and handed out receipts, which he called dollars, with a specified amount and the picture of a dead president, king, foreign plenipotentiary or other dignitary on them. When people needed their gold, they came back to the gold warehouse and exchanged some of their receipts for gold. If they had more gold than they had immediate need for, they took the excess gold to the warehouse and got more receipts.
But then another funny thing happened. People started using the receipts themselves as if they were gold. They started exchanging rabbits, carrots, oxen and wool for the papyrus receipts. They knew they could always exchange the receipts for the real gold any time, but since it was so easy to carry around the papyrus instead of the metal, most of the latter remained in the warehouse most of the time. Ogmo came up with another idea. Through his trading and saving, he acquired a significant number of receipts for gold, more than he needed for his immediate consumption. So he allowed other people to borrow them and use them, as long as they promised to return them all, plus a few more, in a year's time. Financial credit was born.
The whole thing functioned quite well until one day Beul got a sneaky idea. He was running low on wealth of his own. He had a warehouse full of rabbits, carrots, wool and gold, but none of that really belonged to him; it belonged to the customers who held the receipts. His only claim was to the warehousing fees charged for his services. The goods themselves were not his. But he disregarded moral principle and... wrote himself a receipt for gold, in an amount equivalent to 1% of the total gold in the warehouse. And he went into the market to buy rabbits, carrots, wool and oxen. What's the harm? he thought to himself. He realized that if everyone demanded their gold at once, he would be seriously short and the villagers would kill him. But, he thought, no one will notice, because never does everyone need their gold all at once. The receipts have taken a life of their own as the de facto money of the market.
But this original fraud did have an effect. Since Beul had the extra receipts first, he could buy goods which would have been bought by others. Incrementally, he bid goods away from other buyers, and the gold-receipt price of everything in the market started to creep up... by about 1%. Beul got addicted to his easy wealth. He continued to write counterfeit receipts to gold for his own use and spend them, first 2%, then 5%, then 10% of the total gold store. When the gold-reciept price level in the market reached 15% higher than its original level, more and more people started returning their receipts to the warehouse in exchange for real gold. Since there was now less gold in the warehouse, Beul's fraudulent receipts had a proportionately higher distortion effect on the market. Finally, when prices reached 50% higher than the original level, there was a run; EVERYONE who held a receipt for gold in Beul's warehouse demanded the gold. But by now, for every 3 receipts in the market, there were only 2 units of gold in the warehouse. Beul could not honor all of the promises. The villagers then realized how Beul had achieved his lavish lifestyle. They were compasionate; they sent him for rehabilitative therapy in the cave of the scorpions, vipers and smallpox.
There was a street next to a pile of stones. I forget whether the stones were there to repel foreign invaders or to channel irrigation water, but it was a high and long wall. So they called the street Wall Street. And all the people of the village would gather there to exchange their goods. You see, after generations of making everything for themselves, the villagers figured out, one by one, that they would be better off if they made (or grew or hunted) something they they were good at and exchanged it for something someone else was better at producing. Igor was good at hunting rabbits, so he dedicated himself full-time to hunting rabbits and brought them to market and exchanged them for carrots raised by Uk. That way both Igor and Uk had more rabbits and more carrots than either of them would have had if they had had to produce them all by themselves. Aggar had a talent for spinning wool, so she did that and exchanged with Kolo, who was good chopping firewood. Aurel had a problem, though. He was the best ox-breeder in the village, but every time he brought a unit of production to market, he had to butcher it right there and exchange the meat for different products of others, or go home without exchanging with anyone. Even when he did butcher the animal, he couldn't always find traders for the whole result, so much of it spoiled. He hadn't gone to an ivy-league university, but something told him intuitively, instinctively, that one ox ought to exchange for more than a pound of carrots or one rabbit. But he didn't need a hundred rabbits or 500 pounds of carrots at a time; he needed a broader variety of goods, but a barter system was a very clumsy way to obtain it.
Yag liked to dig, and he found a yellow metal in the ground. He brought the metal to market and exchanged it for other goods. People gave him rabbits, carrots, wool and even oxen for his yellow metal because it was beautiful, could be used to decorate household items as well as the persons themselves, fill tooth cavities and manufacture electronic microprocessor components. Best of all, it was soft, heavy and malleable; it could be cut to just the size/weight/amount needed in the moment and a small amount was highly valuable. Even those people who had no use for the gold themselves figured out that they could exchange their goods for gold, then exchange the gold for something else they really did need. Not everyone needed a rabbit or a carrot every day, but almost anyone would be willing to accept gold in exchange if the amount were right. Money was born.
Droughts, pestilence, floods, earthquakes and hurricanes were a big problem. Whenever such a disaster hit, it would wipe out all the goods anyone had and there would be nothing to exchange or eat. So Beul invented the weather-proof warehouse, and charged the other villagers a fee (in gold) to store their goods safely. But even without droughts, floods et al, some goods couldn't be stored for long without spoiling. Gold, on the other hand could keep virtually forever, but this virtue created problems of its own. If one accumulated more gold than needed for a short period (a day, a week, a month) then it would be too inconvenient to carry around and too dangerous to leave at one's house. Still, people wanted to save wealth so that they could be assured of having resources, food and clothing in the future, even if they couldn't hunt, farm or spin then. So Beul expanded his business and offered to let people store their gold in his warehouse. Initially he put each customer's gold into individual safe-deposit boxes and gave them a piece of papyrus with their name on it and a number matching the number on the box, so that the customer could claim his or her gold later. But very quickly he realized that gold was fungible, that is, that it didn't matter which gold went to which customer, as long as the quantity matched the number on the receipt. So he kept all the gold together (which was more convenient) and handed out receipts, which he called dollars, with a specified amount and the picture of a dead president, king, foreign plenipotentiary or other dignitary on them. When people needed their gold, they came back to the gold warehouse and exchanged some of their receipts for gold. If they had more gold than they had immediate need for, they took the excess gold to the warehouse and got more receipts.
But then another funny thing happened. People started using the receipts themselves as if they were gold. They started exchanging rabbits, carrots, oxen and wool for the papyrus receipts. They knew they could always exchange the receipts for the real gold any time, but since it was so easy to carry around the papyrus instead of the metal, most of the latter remained in the warehouse most of the time. Ogmo came up with another idea. Through his trading and saving, he acquired a significant number of receipts for gold, more than he needed for his immediate consumption. So he allowed other people to borrow them and use them, as long as they promised to return them all, plus a few more, in a year's time. Financial credit was born.
The whole thing functioned quite well until one day Beul got a sneaky idea. He was running low on wealth of his own. He had a warehouse full of rabbits, carrots, wool and gold, but none of that really belonged to him; it belonged to the customers who held the receipts. His only claim was to the warehousing fees charged for his services. The goods themselves were not his. But he disregarded moral principle and... wrote himself a receipt for gold, in an amount equivalent to 1% of the total gold in the warehouse. And he went into the market to buy rabbits, carrots, wool and oxen. What's the harm? he thought to himself. He realized that if everyone demanded their gold at once, he would be seriously short and the villagers would kill him. But, he thought, no one will notice, because never does everyone need their gold all at once. The receipts have taken a life of their own as the de facto money of the market.
But this original fraud did have an effect. Since Beul had the extra receipts first, he could buy goods which would have been bought by others. Incrementally, he bid goods away from other buyers, and the gold-receipt price of everything in the market started to creep up... by about 1%. Beul got addicted to his easy wealth. He continued to write counterfeit receipts to gold for his own use and spend them, first 2%, then 5%, then 10% of the total gold store. When the gold-reciept price level in the market reached 15% higher than its original level, more and more people started returning their receipts to the warehouse in exchange for real gold. Since there was now less gold in the warehouse, Beul's fraudulent receipts had a proportionately higher distortion effect on the market. Finally, when prices reached 50% higher than the original level, there was a run; EVERYONE who held a receipt for gold in Beul's warehouse demanded the gold. But by now, for every 3 receipts in the market, there were only 2 units of gold in the warehouse. Beul could not honor all of the promises. The villagers then realized how Beul had achieved his lavish lifestyle. They were compasionate; they sent him for rehabilitative therapy in the cave of the scorpions, vipers and smallpox.
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