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Against Government Money

January 23, 2010 1 comment

Back in the olden days, people simply bartered products.  One might trade a couple of loaves of bread for a fish.  In order to ease this process so people didn’t have to bring their produce to market, over time people turned to gold, later paper money backed by gold and ultimately paper money backed by faith in government as currency in trade.  Money itself should thus be considered as merely a commodity to be exchanged for other commodities.  It only differs from other goods to the extent that it is not consumed like milk or sugar or a house.  Its value is in serving as a medium of exchange of other goods and services.

As such, it makes no sense that governments should create money through “quasi-private” central banks, or at the very least impose legal tender laws that prevent others from doing so.  If there is consumer demand for facilitating the exchange of goods and services, then there will arise through the spontaneous order of the free market a system of competing providers of currencies.  Presumably, those who produce money that will retain its value will drive out of the market those incompetent or unscrupulous competitors producing depreciating money.  This is because money that retains its value over time will make the exchange of products easier because businesses will be able to make better calculations in exchange, and because as with any product, a premium will be placed on maintenance of value over depreciation.

One could speak to a host of problems with government currency: that inflation of the money supply unfairly benefits debtors at the expense of creditors and serves as an outright tax on all; that a constantly debased currency allows the government to fund unjustifiable wars in addition to all sorts of social programs and other means of unjust and unconstitutional wealth redistribution; that government naturally will mismanage the money supply just as they do all programs from a purely economic standpoint; that it is absurd that the government should have the power to outlaw monopolies yet grant itself a monopoly on a commodity like money that serves a specific special interest of the banking sector; and finally that government’s record in management of the money supply has been horrendous, with central banks creating a perpetual boom-bust cycle and constantly devaluing the people’s money.  Concentrating the monopoly power over the money supply in the hands of a select group of bureaucrats is an asinine, irrational and furthermore dangerous policy.

But without going into these sometimes arcane economic phenomena, the most important thing to understand is that at its core, money supply is just like the supply of any other good or service except to the extent that its value is derived from its use as a commodity in exchange, rather than from the utility we gain in consuming a traditional good or service.  If the market can provide other goods and services in the proper quantities and qualities to meet the demands of society, then surely it too can provide the proper quantity and quality of money.  To believe that somehow, government provision of money is any more sacred or preferable to government provision of any other good or service is pure folly.

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10 Points Americans Must Understand About the Economy

January 15, 2010 5 comments

1. The interest rate is a price – the price of credit like the price of any good.  In a free market the price would be set like the price of any good at the intersection of the supply of funds (our savings), and demand for funds (businesses’ and individuals’ investing wants).  Instead, we have an interest rate that is arbitrarily picked by a handful of economists from the Federal Reserve Banks.  To repeat, one committee centrally plans the cost of credit, of which interest rates on all debt are directly or indirectly based.

2. The Federal Reserve has the monopoly power to print or inflate the money supply, thus artificially lowering the cost of money (the aforementioned interest rate).  This means that they can (and always do) devalue the money in your pocket as every dollar printed decreases the value of all dollars to come before them.  Inflating the money supply may not lead to an increase in prices if an equal or greater amount of goods is produced, but the purchasing power of the dollar will still be reduced because without printing money, your dollars would have been able to buy more goods.  Alternatively, if more dollars are printed than goods are produced, prices will increase though not necessarily uniformly across all goods.  Inflation may not manifest itself in explicitly higher prices but merely impede prices from falling for certain goods as they would were the money supply to remain constant.

3. When you deposit money in a regular checking account, the bank doesn’t hold onto this money.  Banks only keep a small percentage of the money you deposit on hand in their reserves, lending the majority of the money you (or the Fed for that matter) deposit to others who lend it to still others and so on, in the process substantially increasing the money supply.  This is known as fractional reserve banking.  If everyone in America or even a decent percentage of Americans tried to take their money out of the bank on a given day, millions would be unable to access their cash.  Effectively, even with FDIC Insurance, all of the banks are insolvent as they do not hold anywhere near 100% of the money you deposit in their vaults, nor does the FDIC have the funds to cover all deposits.  The hypothetical that the Fed could potentially print up money for the FDIC to distribute is beyond the scope of this post.

4. The government’s debt is merely an insidious tax like inflation.  Government debt can only be paid down by taxing the people.  This tax can occur through direct confiscation by government, or indirectly when holders of our government’s debt demand a higher rate of interest, which in turn signals to markets that our economy is not generating sufficient revenues to pay down the debt, which leads to a perception of economic weakness and thus an increased cost of borrowing for everyone in the economy.  If the government prints money to pay down debt (which in and of itself should cause our debt holders to flood the markets with our debt and thus raise interest rates on everyone), this will represent a tax on the people as well.

5. Deflation, or a decrease in the money supply is the only antidote to inflation.  If the money supply is decreased, each dollar in your pocket becomes worth more.  The concomitant fall in prices will correct the artificial initial rise in prices from government printing of money.  In the process, since decreasing the money supply increases the cost of money, unsustainable enterprises with heavy debt loads will be put out of business, cleansing the economy by freeing up unproductive resources.  Where debtors benefit from an increase in the money supply because they can pay down their borrowings with cheaper dollars, creditors will benefit from a decrease in the money supply because they are paid back with more valuable dollars, which is one of the reasons why government prefers to inflate as it can lessen its own debt load and that of many of its constituents.

6. Deflation in prices while a symptom of deflation of the money supply is also the natural result of increases in productivity, as goods produced more cheaply in greater quantities (in the absence of money printing) will lead to falling prices which benefits consumers.  The so-called “paradox of thrift” that the MSM uses to vilify deflation in prices is wrongheaded, as people will spend on all sorts of products knowing that over time they will fall in price, as we have witnessed with numerous electronics over the years.  Even during a depression, when asset prices fall to certain levels there will always be buyers.  And if people are paying off their debt and/or saving in a time of falling prices in lieu of spending, this will be good for the economy because increasing the pool of real savings lowers the interest rate and allows businesses and individuals to borrow funds for investment at lower cost, legitimately stimulating the economy.

7. Despite the wishes of President Obama, all taxes are passed on to consumers as companies raise their prices to compensate for the increased cost of doing business.

8. Government cannot create wealth.  All it can do is take money from some people and redistribute it to others.  Every dollar the government uses must be taken from the private economy. Printing money to pay for things as we noted merely devalues your dollars, effectively taxing you.  Government financing through debt represents a claim on your wealth, a tax which as noted may be paid directly or indirectly.  Thus, while federal, state and local taxes may appear on a historical basis relatively low, the tax rate is deceptively masked by excluding government bilking through inflation and debt.  Government is a wealth killer, not a wealth creator.

9. The real estate problem in our economy centers on the fact that people owe more money on their mortgages than they are able to pay down.  The only fix to this problem is for people to either generate more income to service their mortgages, or default.  Any intervention to keep people in homes they can’t afford will merely perpetuate market imbalances, propping up the value of real estate and preventing qualified buyers from purchasing homes at fair prices.  There will be no true recovery in the mortgage-backed securities  market until the forces of supply and demand sort out this mess.

10. Our economic crisis at the most basic level occurred because too much money and credit were pumped into the economy, given that again the interest rate was set artificially low not by supply and demand in the market but by government fiat.  The recession signals that we must fix the distortions and malinvestments resulting from the centrally planned interest rate. The healthy path to recovery is to allow prices to fall (aided by debt repayment), liquidate failed enterprises (encouraging reallocation of land, labor and capital to more productive and profitable lines of business) and encourage saving to increase the pool of loanable funds for economic expansion. Any actions to the contrary (i.e. more or less all government policies being implemented or bandied about) will merely prolong the pain.

Note that this is by no means a comprehensive study of the above subjects, but rather a cursory look at essentials that the American public must grasp before we can ever expect to return to prosperity.

Immorality Writ Large and How to Fight It

May 20, 2009 1 comment

We are living through a time in which all common sense and logic has been sacrificed for blind hope and misplaced faith. According to the current gospel, peddled by the Messiah and even his anti-Christ enemies (the Republicans ironically), in a crisis in which millions are being thrown out of jobs, debts are being called in and people are being forced to cut back and save more, naturally we must see to it that these forces are prevented.

So we pump public funds into failed banking institutions that took risks imprudently and followed a business model in which short-term windfalls were rewarded over long-term viability and sustainability…all at the cost of the taxpayers and the financial companies that would have been able to find value and profitability in the assets that would have been liquidated had the banks been allowed to fail. We do the same with the auto industry, bailing out our failing companies, and specifically the UAW – the union that pushed the companies towards failure by demanding the massive salaries and benefits that bankrupted the companies in the first place. We reward debtors who purchased homes they could never afford by forcing lenders to rewrite mortgage contracts and allowing the government to purchase mortgage debt to keep interest rates low, with the government thumbing its nose at those who had responsibly paid off their mortgages. We relieve people who took on too much credit card debt by forcing lenders to lessen their fees (the fees necessary to compensate them for the risk involved in allowing people to finance their purchases through debt) by putting restrictions on “unfair” charges, inevitably causing those who were more responsible in paying off their debts to pay higher rates of interest.

When it comes to the protection of failing bureaucracies, it looks as if all of the states in the nation will be forced to bail out California (amongst others) when the federal government comes in and helps ameliorate their debts created by reckless spending. More importantly, the responsible states will not only be sacrificing their money, but their sovereignty to the federal government, due to the fiscal idiocy of the other states.

Even looking to something as fundamental as our progressive tax structure, whereby those who generate more income are penalized through higher levels of taxation (and forced to subsidize) those who earn less income, in every single case the people that are in the wrong are rewarded, while the people that are right or at least not responsible for these problems are penalized. Given the rate at which our national debt is expanding, the burden of these current problems unfortunately will be borne on the backs of future generations of Americans as well.

At length I have spoken in the past about how economically destructive these policies are, merely exacerbating problems instead of allowing markets and the individuals that make up the markets to adjust. I have explained that many of these problems were created by the government in the first place. I have also spoken to the fact that the holes that we are digging in attempting to stave off our problems, in the wasted future resources and diverted current resources being put towards government-planned projects, the massive amounts of money and debt creation by the federal government and also in our move overall towards a collectivist society.

But fundamentally, what I am seeing is that there is something far more insidious at play. What this crisis has illuminated to me is that because everything the government does has the force of law, it allows it to embody all of the worst traits of fallible man, writ large. More specifically, practically every single thing the government does and has done is about taking things from one group of people or more often all people and redistributing them to other people. Since the government can tax, it has the legal authority to rob you of your wealth and give it to someone else. Since the government can regulate, it has the power to help certain companies and harm the ones it doesn’t like. Since all can vote for government officials, government can allow 50% + 1 of the people to destroy the rights of all people; or allow 99% of people to subjugate the rights of the other 1%.

What I have come to realize is that unfortunately, our Founding Fathers did not think through deeply enough how far men were from angels, because the Founders were imperfect just like the people that they built the government for. They did not understand that while they tried to protect us from democracy, given the power to amend the Constitution, democracy could be implemented, with certain classes plundering other ones and bankrupting the nation in the process. Were the document to lay out in clear language any number of restrictions separating the public sphere from the private, this would simply lead to innovation amongst the people in subverting law and usurping power. Unfortunately, they didn’t understand the fatal flaw that they designed a framework in which the people got the government they deserved, not the government that was best. I do not mean to decry their efforts, but merely point out that as great as the Constitution they crafted was, it still could not ensure that people did not corrupt or disregard it.

As some have argued, were the populace to be more educated, our government would be better policed and regulated by the people it is supposed to help protect, and closer to the kind of paradigm that was intended by our forefathers. However, the government through public education gets to indoctrinate the citizens from day one. Even for those who are home-schooled or receive a private education, they still might be deluded into voting for bad candidates — just look at the New York Times crowd or the Ivy League (I know, I can’t believe I am emerging from it with a clear head either). And an educated populace might be even more adept at using the government to serve its interests as is.

I have always found that more influential than any of these institutions are the people that we grow up with and live with – our families, our friends and our mentors. And this is why I believe that our role as free-thinking individuals is so important, and that we must seize this moment in which the world is upside down, when good is treated as bad and moral is treated as immoral to seek to open the eyes of our fellow men. We need to educate by teaching in theory, demonstrating in practice and appealing in good sense and morality to the fact that this system whereby everyone plunders everyone else in the end leads to our demise; into a land devoid of all values, corrupted and whithered like so many empires that came before us.

We need to engage in debate, unafraid of saying what we feel in our hearts and in our minds is right. We need to sharpen our arguments against our challengers so that we can swiftly, calmly and rationally show them the errors of their ways and turn them into our friends, or at least respectful enemies. We need to explain that our actions affect more than just those around us, but also our future: our children, and our children’s children. We need to preach that as Reagan put it “Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.” We need to argue that principles and values do matter, and that the consequences of sidestepping them are fatal. We need to scream at the top of our lungs that all progress comes from individuals, not coercive powers that dictate to free men that they must build pyramids or dingy fuel-efficient cars.

As things get worse and worse, people will first most likely react angrily. They will be looking for heads to roll. But we must keep our heads. We must be there with the answers, because it is only when people have lost everything that they will be willing to listen to the voices they dismissed before. If socialism can come into fashion so quickly from the height of what people thought was capitalism, then why can’t Liberalism supplant socialism just as quickly?

Until that day however, we must continue to advocate our principles in the face of angry, irrational intolerant sophists. We must keep fighting the good fight even if it means being hated. Derision and ridicule should be met with satisfaction, because it will mean that our detractors can only react emotionally to our reasoned arguments.

There is no shame in being hated by a group that is wrong theoretically, practically and morally. We must continue along, emboldened in the face of tyranny. We must defeat the gravest of evils with the greatest of goods: freedom.

What is Our Nation Coming To?

March 2, 2009 2 comments


When I started Mellon’s Musings, I did not anticipate how quickly things would unravel in the US and abroad. Perhaps it is because despite my best judgment, I did not want to believe it. Unfortunately, my worst nightmares are being realized. This time, things are different. When Rahm Emanuel said “You never want a serious crisis to go to waste,” he meant business, like Ari Gold negotiating on the High Holidays.

Glancing over the headlines of the week, it is clear that a creeping sense of socialism in this country is no longer creeping — it is a very real threat that no future administration may come close to being able to stop. If I am reading this situation correctly, we are at a true turning point in world history. The forces of freedom and liberty are fast being swept aside. We are heading into a Rousseaun era in which the United States and indeed all other states will degenerate in a large collectivist cesspool. Ayn Rand said, “We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” How right she was.

As I forewarned, other states, besides just New York are beginning to come up with creative ways to tax their citizens. One policy analyst says, “The most common phrase you hear from the states is, everything is on the table.” A California legislator says “We’re all jonesing now for money.” States are weighing “solutions” to their shortfalls like making marijuana legal so as to tax it, or allowing gay civil unions in order to boost tourism.

But think this through for a second. If people are struggling to make ends meet, why should taxation to support government be the number one priority? Why does a state have a right to our property to support itself before we do? Why in the hell do they have these big budgets to support in the first place? If we are having trouble paying our own bills, then forget about the state’s bills. Let it wither away! If I sound angry, it’s because I am.

Meanwhile, on a national scale, things are no better. We continue to throw money down the bottomless pits that are AIG and Citi. If what we are doing is not nationalization, then I don’t know what is. We are nationalizing everything: banks, insurance companies, automobile manufacturers and the housing market. We are burdening future generations with insolvent and bankrupt institutions that should have been allowed to go under months ago. I thought this was America, but alas, we have car czars (call it the Presidential Task Force on Autos, same thing) and urban czars too. Lenin is blushing in his grave right now.

Then we have this whole green issue. I largely ignore reading what environmentalists have to say because it generally enrages me. Being at Columbia, everywhere I go everything is green anyway. It’s not that I have anything against nature…I like clean air and clean parks just like everyone else. But this stuff is not about a clean world. This is about politics. Al Gore has made a fortune selling global warming to idiots across the world. Scientists have made their careers off of pandering about this stuff. But the bottom line is, as I understand it, there is no consensus at all as to whether or not what we do on Earth even makes so much as a dent in the overall climate patterns that occur over thousands of years.

Even if we did, how could anyone honestly feel that their livelihood should be sacrificed to nature. If people want to reduce themselves to foraging for berries then they can go right ahead, but they should bear in mind that they wouldn’t be able to survive without that food taken from nature. I for one will continue eating what I want, driving cars, using my computer, television, lights and paper because I want to live my life. It is not the government’s job to tell me what I can and can’t consume.

If we followed this kind of philosophy from the start, we would still be cavemen. There would have been no Industrial Revolution. A million of the things that we take for granted today would have never come to be. If we didn’t use the fruits of nature, we would not be able to live. But I suppose the Democrats might prefer this.

Their cap-and-trade bill looks to me like Smoot-Hawley’s little grandson in terms of its disastrous implications and terrible timing. For a little taste of what we might be looking at, listen to what Obama himself had to say about it: “You know, when I was asked earlier about the issue of coal, uh, you know — Under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.” But forget about specifics. What this represents is a commitment to the environment over the people. It seems like a great idea to me to raise the price of all types of energies, while putting hundreds if not thousands of people out of business by imposing these costs on our economy in the midst of a depression.

There is also talk of funding roads with a tax based on how many miles we drive. The government would be able to implant some kind of chip in our cars to keep tabs on us. I mean is there any way possible that this could be considered Constitutional? What justification is there for this based upon the limited powers we are supposed to grant our government? This stuff is sickening. They are literally looking to make robbery legal.

More sickening are Gordon Brown’s musings on a “global New Deal,” led largely by President Obama and himself. This sounds like another brilliant idea — what better way to shepherd in socialism then to subject everyone in the civilized world to it. What is so ironic about it all is that Brown calls for a world “where we defeat not only global terrorism but global poverty, hunger and disease.” Yet socializing one’s nation creates these very things. It brings civil unrest and leads to poverty, hunger and disease for the masses. This also factors into the discussion of having a world government. We see the problems that have befallen the EU now that some states aren’t quite carrying their weight, yet with the world putting their blind faith in Barack Obama, there is more and more talk of global solutions to problems, and perhaps even a global regime. When all the paper currencies collapse, I won’t be too surprised if at the least we move to a global currency, so we can all enjoy the hyperinflation together.

It is dizzying how fast this is all unfolding before us. Dizzying and also sobering. I for one do not want to live in a world in which I have to pay for someone else’s mistakes. I don’t want to live in a world in which the government has a claim on my property before I do. I don’t want to live in a world in which the government determines that the environment takes precedence over my life. I don’t want to live in a world in which free speech is protected, yet I have to be afraid that everything I say is “politically correct.” Most of all, I don’t want to live in a world in which the rights of the smallest and most important minority, THE INDIVIDUAL, are sacrificed to the mob for the public good.

One of the reasons I look to Rousseau in all of this is that his love of the state of nature is reflected in the socialism of the day. Rousseau said of leaving the state of nature that “most of our ills are of our own making…we could have avoided nearly all of them by preserving the simple, regular and solitary lifestyle prescribed to us by nature.” Of imagination he says, “Imagination, which wreaks so much havoc among us, does not speak to savage hearts.” Rousseau marvels at the barbarian whose, “desires do not go beyond his physical needs. The only goods he knows in the universe are nourishment, a woman and rest; the only evils he fears are pain and hunger.” Of private property he said, “The first man who, having fenced in a piece of land, said “This is mine,” and found people naive enough to believe him, that man was the true founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not any one have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody.” Clearly ’tis better to be a savage than a civilized human being.

This is the philosophy that is waging its war on whatever shreds of Lockeanism are left in this once great place. We need to fight this. People should be in the streets rioting over the ridiculous usurpations of power that the state is making right now, yet most seem to go on with their lives in many ways completely unaffected and ignorant of the terrors surrounding them.

But these ignorantly blissful folk are getting the government they deserve to be sure. This is the ultimate result of a democracy in which every man seeks to gain at the sake of every other man through the instrument of legal plunder that is the state.

Turning back to Rand, she said that “It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.” Barack Obama is the man collecting the sacrificial offerings and being served. I don’t want to sacrifice my life to him though. Deep down, I don’t think most Americans desire to either. But if the people do not awake shortly, they may find that one day soon they may not recognize the land they once called home, nor will they much appreciate the masters of the house.

Citi Field Chicanery

February 4, 2009 Leave a comment


First let me state a few qualifiers when it comes to the Mets’ now infamous Citi Field. Citi Field is gorgeous. The team that will inhabit it is not as gorgeous. It is outrageous that the taxpayers are backstopping the bank which made the naming deal with the team. It is embarrassing to an organization that has already suffered epic collapses the last two seasons to be going into a new stadium dealing with this kind of headache. With this in mind, let me proceed to the broader controversy regarding the naming deal.

Today in the New York Times, representative Dennis Kucinich argues regarding naming deals that “Treasury has the power under TARP to make broad changes, They have to. It’s not whether they can or should; they have to. The legal issues are very easy to maneuver.” According to Kucinich, Citi Field represents “an egregious example. But we have a list of other banks we’re working our way through. We’ll hold hearings.” I do agree with Kucinich that naming deals such as Citi’s with the Mets represent extravagent, and probably poor expenditures. I don’t know how Citi projected that it would recoup their $400 million investment in the naming rights to the stadium, but investment banks made all sorts of investments far more ridiculous over the last decade to be sure.

Further, given that taxpayers are the ones who are responsible for propping up the company responsible for this deal, it should anger all of us. But what Congress (Mr. Kucinich excluded given his populist rhetoric against the bank bailouts) fails to realize is that were it not for the government’s decision to bail out these institutions, these types of issues would not exist. As Citi unwound its assets during its bankruptcy, the naming rights deal could be nixed and purchased by another company. Where were Kucinich’s angry colleagues when it came to bailing out Citi in the first place?

The outrage amongst politicians when it comes to naming deals not only masks their lack of appreciation that this would not be an issue were it not for propping up failing ventures, but also masks the greater implications of their intervention. Since we all are now shareholders in these institutions, the government will tinker with their management. This begins with caps on executive pay, but who is to say that it will end there?

As poorly as some of these institutions were managed, and granting that a lot of their poor management was due to incentives created by government intervention, I would guarantee that government control of the banks will be even worse. Do you think that Nancy Pelosi knows how to create a DCF model in Excel? Does Barney Frank know how the market for CDO^2’s works, let alone what a CDO^2 is?

Much as I think that President Obama could give a hell of a pitch to investors on the virtues of a closed-end real estate fund, there is no way that the government can ever run these businesses properly. Command economies have always failed. The government lacks the profit motive and the knowledge to successfully manage these companies. Putting the firms under the purview of government represents the greatest moral hazard of them all.

Remember, these are only the direct effects of strict government regulation of the banking sector. There would also be a great effect on the markets. If the government is to have say over the operating activities of the major banks, what kind of implications will this have for retail and institutional investors? Will money flood out to less-regulated private equity and hedge funds? Will those shops then become as regulated as the (remaining) big banks? What kind of confidence will exist in the markets when the biggest broker-dealers are being managed by politicians? Will people not recall what happened to all of the other GSE’s?

There are a plethora of problems with these institutions being managed by the government. The Citi Field naming rights deal is very small relative to the big picture, but it exemplifies the direction the government is going. I am just as angry as everyone else that we are responsible for keeping the Citi naming deal alive, but we must remember that it was because of government intervention that we got ourselves into this mess in the first place. As if it wasn’t bad enough that the Mets aren’t going to pursue Manny Ramirez, now us tortured fans have to deal with this pathetic situation.

On the Notion of Sacrifice

January 23, 2009 2 comments


One of the central messages of President Obama’s inaugural speech was that Americans now must sacrifice in a time of great hardship. This sounds noble, but also is rather vague. What kind of sacrifice is Obama talking about?

It would be fair to venture to guess that sacrifice for Barack Obama means a number of things that our forefathers would have shunned. Sacrifice means higher subsidization of the masses by those at the top of the economic scale through increased taxation. Sacrifice means imposing the will of the government on the people in the name of “fairness,” “equality” and “justice.” Sacrifice means that everyone must be required to bail out the few who are reckless and irresponsible. Sacrifice means coercive taking of our life, liberty and property for the “greater good.”

At root of all of this is collectivism. How did we end up here? We had an economy that was mixed as opposed to a true, free-market one. We had a small republican government that grew to be a massive democratic one. We had a society built on success and failure, that gave way to one of success and protection against failure. We took the middling path, which inevitably led us to this socialistic mentality. I posit that democracy mainly paved the way for this collapse, but that will be addressed in a post in the near future.

Prior to the Great Depression, we lacked a government-imposed social safety net because of the sacrifice of individuals. Some voluntarily chose to provide for those who were less fortunate, not always with just a handout, but for some like Rockefeller by providing an education for those who showed aptitude in the hopes that they could better themselves. Our forefathers fought for our country, sacrificing their lives so that they could build a society where they would not need to sacrifice their liberty and their property. They sacrificed so they could establish a country built on the natural rights granted to them by G-d, not the rights so determined by the new Messiah, Mr. Obama.

People labored in steel mills and coal mines not out of the goodness of their hearts, but out of self-interest, and this work helped pave the way for unprecedented economic growth. It all brings to mind Adam Smith’s line in the Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

We did not achieve our prosperity from forced sacrifice, but from voluntary trade predicated on the self-interest of individuals seeking to better their lot. People could dispose of their wealth for the most part as they so chose. Universities, libraries and medical institutions were established by wealthy folks, and charitable institutions were able to provide (probably much more efficiently than the public) services for those who were needy. But this charity again was voluntary.

You have to wonder why it was the case that the government stayed out of the business of charity. Was it because individuals knew that politicians would only use these programs out of their own self-interest to gain votes? Was it because of the belief in a government with limited responsibilities? Was it because of the belief that it wasn’t the job of all of society to take care of those who were broke?

I think it was probably a combination of all of these things. Also, I think that while individuals may have acted out of self-interest in giving charity like politicians (be it for PR purposes or for religious reasons), they were still making this decision unto themselves, not forcibly requiring all others to sacrifice as well. There just is not this sense of individualism anymore. It is one for all and all for the banks. We all own a piece of Wall Street, we all own a piece of Fannie and Freddie over on Main Street and we all own a piece of Detroit too. Of all cities, I mean come on…Detroit?!

We did not build the most prosperous nation in the world through sacrifice and collectivism. We built it through the self-interest of the skillful, visionary individuals that immigrated to this land. Our forefathers did not sacrifice themselves during the Revolution for more sacrifice; they sacrificed themselves for freedom. To forget this fact would be to tarnish their efforts.