I.O.U.S.A. Released
October 16, 2008 by Stephen Palmer · 6 Comments
If you’re not familiar with David Walker’s work with the Peter G. Peterson Foundation, I urge you to visit their website and get involved.
As Comptroller General of the United States and head of the Government Accountability Office (GAO) from 1998 to 2008, spanning both Democratic and Republican administrations, Walker served as the federal government’s chief auditor. Appointed by President Bill Clinton and confirmed unanimously by the U.S. Senate, he was an outspoken, nonpartisan advocate for addressing the major fiscal and other key sustainability challenges facing the country. He also led transformational reform efforts at the agency and within the accountability profession, both domestically and internationally.
The Peter G. Peterson Foundation is “…dedicated to increasing public awareness of the nature and urgency of several key challenges threatening America’s future, and to accelerating action on them. To address these challenges successfully, we will work to bring Americans together to find sensible, long-term solutions that transcend age, party lines and ideological divides in order to achieve real results [in the following areas:]
- Budget, savings, and current account deficits
- Entitlement benefits
- Health care costs
- Energy consumption
- Educational competitiveness
- Potential proliferation
The foundation has recently sponsored and released I.O.U.S.A., a documentary that “…boldly examines the rapidly growing national debt and its consequences for the United States and its citizens.” Spend some time on the website and watch the trailer below. It’s certainly timely and it’s refreshing to have credible, high-profile people working on the right things for a change.
Wonder Bread, Twinkies, & The Economy
October 11, 2008 by Stephen Palmer · 2 Comments
Revealing Lessons On Booms & Busts From A Bread Salesman
It may surprise you that I haven’t always been a world-renowned writer. Okay, so I’ve never been a world-renowned anything, but I have been a lot of other things throughout my illustrious career.
One of my early jobs was as a Wonder Bread and Hostess snack salesman servicing Mesquite, Nevada, a small casino town a half hour south of St. George, Utah. Interestingly, pushing bread and Twinkies taught me much about the economy, and it specifically gave me the ability to see through economic fallacies.
One of the lies perpetuated by the Great Depression, and which is being mirrored in our current economic crisis, is that the free market, by virtue of the profit motive run amuck, causes recessions. And, of course, the logic is that since busts are caused by the free market, government intervention and increased regulation is the solution.
Read on while an old bread salesman tackles this lie head on and demonstrates how ridiculous it is.
A bread salesman has three days to sell his product off the shelf before he has to remove it as stale. Any stales came off my bottom line, which meant that I had to track my numbers religiously. If I put too much bread on the shelf it would stale out; too little would result in lost sales.
In other words, I had every incentive to match my production with existing market demand. If I tried to inflate my production by ordering too much bread, it would do nothing but harm me. While I could, to a certain degree, increase market demand by offering discounts and bettering my marketing efforts, my influence was limited, checked and balanced by my consumers and competitors.
Lesson #1: Entrepreneurs have every incentive to ensure that their predictions match market demand.
A critical role of entrepreneurs is to predict the types and quantities of goods and services that people will actually buy. They use natural market indicators, such as past consumption, to make their predictions. Producing more than the market will bear harms entrepreneurs, whether they sell bread, steel, clothes, or mortgages.
As an entrepreneurial bread salesman, I had a route book that tracked every sale of every product on every day, which was my ordering Bible. Without that I was shooting in the dark and my profits would diminish substantially. With it, efficiency was optimized, waste was reduced, and profits were maximized.
However, occasionally I would experience sharp deviations from my normal sales, which threw off my entire process. For example, one day, shortly before a Superbowl Sunday, all of my hot dog buns in the grocery store mysteriously disappeared. My numbers were perfectly in line, yet some external force that I didn’t understand was at work.
I bumped up my orders. The next day, the shelf was wiped clean of hot dog buns yet again. I bumped up my orders even further. The next day, same thing. This time I really cranked up my orders. Super Bowl weekend came and passed, and on Monday I walked into mountains of hot dog buns, most of which eventually staled out.
In other words, there was a hot dog bun-boom, followed by a bust. Traditional economic theory says that I caused the bust with my profit-motivated greed. I wanted to make money so badly that I ramped up my orders. The truth is the exact opposite; I had no incentive to do so, and the bust was caused by forces beyond my knowledge and control.
In that case, what had happened was one of my casinos held a last-minute Super Bowl party for which they needed hot dog buns. Rather than ordering them directly from me, which is what they should have done, they had gone to the store for several days in a row and bought every package of buns on the shelf.
The boom was a fluke; the bust was simply a market correction of the fluke.
Lesson #2: Abnormal, artificially-induced market factors cause entrepreneurs to make faulty judgments regarding production.
Entrepreneurs who inaccurately predict demand fail; those who predict accurately thrive. But when external factors distort the indicators that they base their predictions on, the result is chaos and lost production.
Just as politicians leveraged the panic of the Great Depression to blame the failure on the free market to amass more power, so are we being told today that our financial crisis was initiated by greedy and speculative entrepreneurs.
What we’re not being told is how the Federal Reserve and other government agencies distorted free market indicators prior to the crisis. For example, in September of 1999 the New York Times reported that, “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action…will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.”
This report details how Federal Reserve policy heavily influenced the crash, including controlling the interests rates and margin requirements.
Here’s the big picture: The Fed controls the money supply and interest rates, which are huge determinants of market demand. When money flows freely, people spend freely. A “booming” economy in America today is largely false and artificially created by the Federal Reserve manipulating the money supply. Then, when the true demand catches up to the Fed-created market lies, it all comes crashing down.
In other words, our booms are false and our busts are but corrections.
Lesson #3: When created by the manipulation of the money supply, economic booms and busts do not represent the free market, and the culprit is illegitimate government intervention, not the free market.
In actuality, an economic bust — when preceded by a government-interventionist boom — shows the true power of the free market to realign itself even when influenced by massive external forces.
In the case of my hot dog buns, the culprit was a casino that failed to order enough product at the last minute then distorted my grocery store numbers without my knowledge.
Similarly, our current financial crisis was not caused by the free market; it was caused by government intervention. The Federal Reserve distorted natural market indicators which in turn prevented entrepreneurs from predicting accurately.
Lesson #4: The solution is less regulation, not more.
The way to prevent economic booms and busts is to prevent the government from illegitimately manipulating the money supply. The money supply must be backed by hard, precious assets, which largely prevents top-down exploitation.
Keep the money supply stable, protect unalienable rights, then get out of the way as entrepreneurs pursue the profit motive, understanding that they are naturally incentivized to match their production with legitimate market demand.
Stay tuned for more articles further explaining our current economic crisis and its solution.
While you’re waiting, consider these questions and provide your answers as comments to this post:
- Which societal institution has incentive to manipulate market demand and why?
- If material things have no intrinsic value, then why does a gold-backed currency largely prevent manipulation of the money supply?
- What caused the Great Depression?
- How does our current crisis mirror the Great Depression and why does that matter?
Move the Cause of Liberty by (1) subscribing to the Sentinel, a free weekly newsletter boldly illuminating the principles of freedom in a darkening nation, and (2) pledging your Life, Liberty, and Sacred Honor to the Cause by signing the Declaration of Dependence.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
Palmer Says Bush Feeding Market Instability
October 10, 2008 by Stephen Palmer · 2 Comments
I just read an article on Yahoo! News entitled “Bush Says Anxiety Feeding Market Instability.” It prompted me to write my own version of the article. My version will make more sense after you’ve read the original.
(Note: Apparently Yahoo! News updates their stories, so the article I link to above is not the exact article that this was based on. But you’ll still get the point.)
Palmer Says Bush Feeding Market Instability
By STEPHEN PALMER, COL Correspondent
October 10, 2008
ROUND ROCK, TX — Stephen Palmer said Friday that the government’s financial rescue plan was aggressive enough and big enough to plunge America into a depression and rob citizens of their hard-earned savings, but it may take time to fully kick in as the government props up unstable policies and institutions. “We can solve this crisis and we will — by getting rid of the Federal Reserve,” he said in brief remarks from his home.
Palmer spoke as leaders of the world’s top economies gathered in Washington to figure out how they could leverage the panic to confiscate more illegitimate power.
Mr. Palmer noted that major Western countries were working together in an attempt to undermine every positive step we’ve taken toward creating just and equitable society since 1776, including ignoring their respective Constitutions.
“Through these efforts, the world is sending an unmistakable signal. We’re in this together and we’ll be oppressed by our governments together,” Palmer said.
Palmer said how he understood how Americans could be concerned about their economic future. “That anxiety can feed anxiety and that can make it hard to see all that’s being done to worsen the problem and strip us of more freedom,” he said.
But despite a relentless sell-off that has seen the Dow Jones industrials plunge 20 percent in the past seven trading days, Palmer said, “We are a prosperous nation with immense resources and a wide range of tools at our disposal — all of which can be employed when we get President Bush, Henry Paulson, Ben Bernanke and the Federal Reserve out of the way.”
Mr. Palmer said the new $700 billion tyranny plan that President Bush signed into law a week ago authorizes the Treasury Department to socialize financial institutions at the whims of one man.
It wasn’t the first time Mr. Palmer has declared that the government stop distorting the market by controlling interest rates and the money supply, although it has also been mentioned by several other prominent economists and experts.
Since the bailout package was signed into law, the conversation about how it will be used has shifted from how taxpayers are lining the pockets of corporate executives to how they are supporting an overblown government.
Nationalization of the U.S. banking industry was once unthinkable, but in a stagnant pond of public apathy, anything is possible.
The government is authorized under the law to “screw taxpayers.”
These include the couple in South Dakota making $45,000 a year and trying desperately to put their two sons through college, but not Wall Street executives making $5 million per year and struggling with the overwhelming decision of how they should spend their money.
It is Mr. Palmer’s position that the Bush administration’s authority extends to whatever it feel like doing, since Congress doesn’t have the guts, nor the knowledge, to check it on any front.
“The plan they are executing is aggressive. It is the wrong plan. It will take time to have its full impact. It is flexible enough to get even more tyrannical as the executive branch amasses more power. And it is big enough to work, the definition of ‘work’ being to collapse the economy,” Palmer said.
He also noted that the Federal Reserve has injected hundreds of billions of green pieces of paper into the system — with little to no oversight and with nothing backing it. Other central banks have cooperated to help speed up the rate of inflation and erode the savings of every American.
“The federal government has a comprehensive strategy to lull the people into temporary security at the cost of freedom,” Palmer said.
While he sought to reassure Americans that the situation is not hopeless and that we should continue doing all we can, Palmer also acknowledged that this was one of the most egregious acts of tyranny in our nation’s history.
Palmer said his online community, The Cause of Liberty, has launched initiatives that are “helping common Americans to reclaim their responsibilities as citizens and to restore the American Republic.”
He also noted “rigorous discipline” must be enacted by the People to make sure that the government doesn’t “take advantage of the crisis to illegitimately erode our freedoms.”
“Over the past few days,” Palmer continued, “we have witnessed a totally predictable drop in the stock market, much of it driven by the stupidity and power-mongering of the government and the Federal Reserve. This has been a deeply unsettling period for the American people.”
Move the Cause of Liberty by (1) subscribing to the Sentinel, a free weekly newsletter boldly illuminating the principles of freedom in a darkening nation, and (2) pledging your Life, Liberty, and Sacred Honor to the Cause by signing the Declaration of Dependence.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
Ron Paul on the Passage of the Bailout Bill
October 6, 2008 by Stephen Palmer · Leave a Comment
I heard it on…Princess Bride?
October 4, 2008 by Aspen Eggimann · 1 Comment
“Do you always begin conversations this way?”
The most humorous conversations are peppered with quotes from the classic movie Princess Bride. If you haven’t seen it, stop reading and go watch it. Like any good classic it gets better and more applicable each time seen.
What can we learn from this classic? Let me point out a few lessons that I think fit perfectly with our times.
1. When I hear our presidential candidates use the word “change” every couple of minutes, unfailingly Indigo’s voice comes into my head saying, “You keep using that word. I do not think it means what you think it means.”
Change is not being in Afghanistan versus Iraq, or visa versa. It is getting out of foreign nations we shouldn’t be in.
Change in education is not working on “No Child Left Behind” as was suggested in the VP Debate. Change would be getting the Federal Government out of education and and giving that power back to the parents and states.
2. As for the bailout just passed in Congress;
“Think it will work?”
“It would take a miracle.”
One senator, after changing his vote to yes on the economic bailout, said that the fear on Wall Street was going to affect Main Street.
Maybe it is time that Wall Street be afraid.
As a nation we cannot continue on in our current economic situation. We have become a nation that consumes more than it creates, spends more then it earns, and takes more then it gives.
Wall Street does affect Main Street, so let us start the process of changing our economic strategies as a nation. Having the government there to catch business when it falls only prolongs and extenuates the long range problems we will face.
3. Longfellow said our nation was a “ship of state” and that all humanity hung upon its fate. If that is the case where is the watchmen crying, “Look! The cliffs of insanity!”
4. I always get a funny feeling when I hear someone in government make statements about easing the burdens of the American people, having the government look out for the middle class and defending the common workers of America. For as the Dread Pirate Roberts said, “Life is pain… Anyone who says otherwise is selling something.”
It is human nature to tend to fall into a trap of wanting things to be easier, to not have to think about problems and to let someone else do the dirty work for us. But it is better to do the work then buy up the services of the government and let it run our lives.
In closing, “Let me explain — no there is to much — let me sum up.”
First, understand that the current debates between presidential candidates are not about change in policy; they are about change in approach.
Second, as uncertain as the future of our economy is right now, “bailouts” aren’t going to help. Ronald Reagan once said that you can talk to a child until you’re blue in the face about spending — or you can cut their allowance. Giving more money isn’t going to cure the mismanagement of it. Our $700 billion dollars is only a band aid on a gaping wound.
Third, lets listen to people who are telling us we are headed towards disaster.
Fourth, now is the time to reclaim the responsibility of self-governance and watch over our nation and communities. Lets stop abdicating our responsibility to others in exchange for convenience.
And next time you watch Princess Bride, think about government — I promise you’ll learn a lot.
Move the Cause of Liberty by (1) subscribing to the Sentinel, a free weekly newsletter boldly illuminating the principles of freedom in a darkening nation, and (2) pledging your Life, Liberty, and Sacred Honor to the Cause by signing the Declaration of Dependence.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
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