Basejumper.com - archive

Being an economist I get some silly financial
questions. Some I chalk up to the equivalent
of old wives tales. Here are two of the most
common ones I hear and just wanted to make
sure you guys were in the know.


MYTH: Never pay off your mortgage.

Wrong, being debt free is the best. However, it
is wise to pay off debt with higher interest rates
first, like credit cards. Plus the interest paid on
student loans and mortgages is tax deductible.


MYTH: Never close a credit account.

While having at least one credit card is almost
a necessity in the modern world have many of
them is not a good idea. It hurts your credit
score because it upsets your income to potential
debt ratio. Plus the fewer account you have
the easier it is to service, monitor, and prevent
fraud & theft.

how does getting a new card and cancelling 6 months later affect good credit, 780 or higher. i am considering doing this to get flight miles from different companies who offer good start up incentives...

it puts an inquiry onto your credit report, and also drops the average length of your credit lines. If your credit is solid, then doing it once won't do much, but repeat incidents will drop your score.

I agree with VID666...

It upsets the ratios but only slightly and if you
already have good credit and do not plan to do
it frequently then have fun scamming them for
some frequent flyer miles!!

I am sick of all the credit card offers I get from
my company and others so anything we can do
to take advantage of their relentless marketing
I say the better!!

Tom this reminds me when we were sitting at the Mexican restaurant drinking and you drawing on a napkin trying to explain to us why me taking about a student loan for BASE Jumping would be what a good economist would do.

Hey, worked for me...

...drinking and drawing on napkins, that is.

Drawing boobies.

Boobies.

Just wondering what your views are on the economy and the reason for the turmoil in the markets. What do they teach you guys to become economists? Do they tell you the real reasons for boom and busts or do they tell you the same lies as the general public is told?

BASE570: what your views are on the economy
Um, medium shitty.

BASE570: reason(s) for the turmoil in the markets
Greed, poor decisions, and a lack of over-sight.

BASE570: What do they teach you guys to become economists?
In graduate school it depends on area of focus such
as Macro economics (aggregate, big picture stuff)
or Micro economics (specific industry or company).

However the core classes include:
basic & intermediate macro theory,
basic & intermediate micro theory,
fair amount of math: like stats,
business calculus, and econometrics
which covers modeling & regressions.
Plus several economic electives like
differential economies where we'd
compare and contrast economic
systems of different countries.

BASE570: Do they tell you the real reasons for boom and busts...
Yes, but sadly just as a magician is prohibited
from sharing his or her secrets so are we by the
Economic Guild of America.

BASE570: ...the lies they tell the general public...(paraphrasing)
Well in my opinion the dipshits of the media
have a fair share of the blame for many of our
problems...

Okay, here is the long and cheeky explanation
I give my students to help them wrap their heads
around the basics of the situation.

Nature abhors (does not like) a vacuum this
adage applies to human behavior also. You are in a
store standing a dozen deep in line waiting to pay
for your items while mentally cursing the slow
dipshit cashier... when all of sudden a new line
opens...well of course a bunch of people want to
hop from 9th in this line to 1st in the new line.

This is rational, from an economic perspective,
because the marginal benefit (MB) of the choice
exceeds the marginal cost (MC) of the choice.

Everyone wants to minimize their wait time since time
is valuable as leisure but a cost when stuck waiting.
The marginal cost of changing lanes is simply the
physical effort to walk over there while the marginal
benefit is getting the hell out of the store faster.


Now let's take this MB > MC idea and add in the old
idea that cheese attracts rats. Well in the rat race
everyone ones to find a quick and easy way to make
a lot cheese or money.

So workers, businesses, and entrepreneurs will switch
between fields in search of new, exciting, and profitable
endeavors. Think back to how many people jumped on
the dot-com bandwagon.... there were many companies
with zero profits but their stock was soaring. Well if
you bought amazon you scored and if you bought some
of the ones that failed well you lost money.


Everything in life involves some measure of finding a
balance between risk and reward. No one brags about
going bowling Friday night but some may brag about
skydiving, BASE jumping, climbing a mountain, or
swimming with sharks. Same with employment, a
welder working under water makes more money than
a regular welder. Sellers of meth or crack make
more money than sellers of weed because of the
different risks associated with the activity. When
you buy blue chip stocks like IBM, MS, etc. your
return is lower because you are not risking a lot.
Buy penny stocks, shorts, calls, etc. and you can
either make a lot or lose a lot.


Alright so back to the buying and selling of houses...


Agents who sell houses make commissions and a few
percentage points of a house can be a lot of money.
Selling a house involves wearing nice clothes, talking
with buyers and sellers, showing houses, driving the
prospective buyers around, wrangling the details of
the sale, and a fair amount of paperwork.

Brokers who sell mortgages make commissions and a
few percentage points of a house can be a lot of money.
Handling loans for buyers used be a gig primarily done
in person at banks. Well with the internet and changes
in how we do business people have started to be able
to work from anywhere and perform this task.


When the housing market is good these jobs are easier.
Well for a while, especially in Florida and California, the
housing market was booming and this big pile of easy
cheese attracted a lot of new people to the field.


So my buddy quits his job delivering beer for a local
distributor and gets his license to sell houses. A lady
who has done some sewing more me gets her license
to sell mortgages. Neither have any background in
business, economics, housing, etc.


Now many of the people who have the money and credit
to buy a house already did. The markets cools off a bit.
After a while the new players in the market are starting
to get real hungry because in the sales game you only
get paid when you sell.

So they start doing the same thing everyone does... lower
their price. We all buy more when prices fall which is why
'on sale' and 'buy one get one free' was invented.

These new buyers are less qualified, less income, less credit,
less sophisticated, and have higher debt loads. Hence they
are referred to as sub-prime. Like Spam instead of Chicken.

To get some of these marginal buyers into houses required
some creative measures. Let's assume there is a $100,000
house in a decent neighborhood and you got someone who
really wants it. They do not have $5,000 to put down as a
down payment, or the money to cover closing costs, but they
just got an AA and job making the most money they have
ever made in their life.

They want that house! The realestate agent needs money
and the mortgage broker needs money. So here's how we
get this un-qualified buyer into a house they can't really
honestly afford.


You get your buddy who works as an appraiser to write the
house up as if it was worth more like $115,000. This makes
it appear on paper that the buyer will immediately have an
asset with $15,000 of equity. You, the lender, and the buyer
all rationalize this grey area with the assumption that housing
prices Almost Always increase in value so the guy
or gal will end up being fine in a year or so. Oh, and to make
the monthly payment lower you give the buyer a variable loan,
which means if the prevailing interest rate in the market goes
up or down so does your monthly payment.


Like Steinbeck said... Of Mice and Men. So our new home
owner realizes oh shit, I have to pay back my student loans!?
Then the interest changes a little bit and not in the good way.
Pretty soon he or she realizes I am in over my head, they
might even figure this out sooner than later and want to do
something about it, like sell the house.

But the market has changed, it is cooling, it is over-saturated,
people aren't buying as much as they were. Oh shit my house
is now worth only $99,000 and I owe $102,000 on it, damn.

Eventually the person can't afford to make the payments on
their house and their car so they decide the car gets to them
to work so they need it more. Then comes the foreclosure
notices. Usually a bank can take back the asset that is
collateral securing a loan and be just fine...unless the borrower
owes more on the loan than the asset is worth, then it is like
a pawn shop who gave you $5,000 loan on your old Nintendo.


Well the buyer/borrower/new home owner is pist!! He or she
feels like they were lied to, so they are gonna stay in the house
until the very last day. The sheriff is coming at noon on 12-15
to kick you out and they plan to leave at 11:30 AM.

So they quit mowing the lawn (remember FL & CA) and taking
out the trash, fuck it, I leave it in the garage for that damn
mortgage company. Then on the move day he or she breaks
some windows and takes the light bulbs with them.


Now the house looks and smells like shit. The other people on
that street who bought their houses a while back, had the credit
and down payment to buy it, got fixed loans in good condition,
they mow the lawn, they paint it, do some landscape projects,
etc. Their houses are now worth a little less because this
eye sore on the street is driving down their house prices.


Multiply this by many, many, many people and you
have some of what happened to the housing market...


NOW, let's look at the credit market. These mortgage broker
companies figured out they were holding loans that were NOT
worth their face value. So they bundled them together and
sold them in the secondary market. Individually each of the
loans was sketchy but as a collected mass you figure not all
of them are gonna bounce.


Then the housing market did what we discussed above and
the people holding the securities backed by these assets
have lost money.... and for some reason I can't understand
big companies claim they do not know how much of their
money they have invested in these lemons.

When many companies in the credit market are hiding their
positions to preserve their stock prices then dis-trust really
increases. People become more apprehensive. Then add
in the 24 hour news media reminding everyone in the US
who is addicted to their TV's every 20 minutes that the sky
is falling and you see lots of fear, no consumer confidence,
and the ever growing uncertainty leads people and businesses
to slow their buying which helps slow the whole economy.

Here's a comic that's more or less on the money - if pictures and crayons are more your thing.

 

Thanks for the link, yeah pretty funny stuff.
Someone sent it to me in a Power Point form
that included voices for the guys.

Greetings Adam,

Hope all is well with you.

So for the topic at hand, well I agree with you on
the idea that each country and even every school
teach economics with a different focus and often
very different conclusions.

As for your 2 biggest assaults to our freedom...
we have discussed our different views on taxes
in person but for the benefit of the others lets
recover some ground.

1st the IRS, I do not like them either. CPA's,
tax attorneys, IRS workers, and the federal
government all want them for obvious reason.

I believe a government needs money to run and
that there are things that work better on a big
scale... such as interstates, national defense, and
space exploration (please leave the 'its faked'
discussion in Calvin's lengthy thread).

So how would you recommend we collect money?
I would prefer a 10% flat tax on income and 10%
federal sales tax for a tax rate of 20% on every
person, even Oprah.

2nd, what is it you dislike about the Federal Reserve?


As for great books to open eyes, I got one for you!!
"GANG of AMERICA" is simply fucking awesome!
It is available online in PDF format for FREE!
If anyone wants a copy just email me.

In it you learn the history of corporations and how
they were given rights originally earmarked for us
human beings and not an organization with such a
long life span, so much money, so much power,
and hence so much undue influence!!

Lastly, in my class we discuss drug trade and the
barter system inside prisons because although
raw and harsh they are both unregulated and
hence more real forms of capitalism.

Are interstates roads not paid for by fuel taxes and tolls? Did the government not have a national defense before 1913 when the income tax was created? I would hardly consider space exploration a national priority, but I would leave that up to the market to determine, and not give competitve disadvantages to private enterprise to advance government bureacracies.

Send me a pdf copy of that book, I'll check it out!


That is precisely the government regulation of the market that I am talking about. Anytime the government gives a benefit or entitlement to someone or an entity, then what they are effectively doing is giving everyone else a competitive disadvantage. That is the antithesis of a free-market. Governments can only give to someone what they take from others.

How can you say that drug trade in unregulated? Drugs are illegal! If drugs were unregulated then drugs could freely exchange hands, prices would plummet, drug related crime would mostly disappear, and purity would increase! I am shocked by your statement there.

The Federal Reserve Bank controls the supply of money. When they issue new money, new debt, or make credit to easily available, some people benefit and some people lose. Shortly, the people the money is given to benefit, and the people who have saved money lose. If you save money and the government increases the supply of money in the market, then your money loses value! Simple supply and demand economics tells us that if the supply of money increases relative to the available goods and services that money can buy, than prices must increase to reach equalibrium. The Federal Reserve Bank is causing inflation. Dollars are backed by nothing but the faith that people will continue to accept them in exchange for real goods and services. We need to return to an honest money system.

Free PDF

Yes, we totally agree!!

Sorry if I did not make my point clear.

Most of the negative externalities of the drug
trade are the byproduct of them being illegal.

Al Capone got rich when alcohol was illegal.
Now a days no one gets shot over a six pack.

Plus the price of alcohol is lower because there
is no huge risk that needs to compensated for.

However, the tactics of drug cartels are exactly
what an unregulated market would produce,
where economies of scale and market power
are really observed.

Staples and Office Depot wanted to merge at
one point but the DOJ prevented under the
sherman and clayton anti-trust legislation
because it would erode competition.

While a cartel would often rather kill their rivals
than buy them...

Yes, scarcity affects value of any commodity.

However, since we are over 9.3 trillion dollars
in debt it appears they are not just printing
up $100.

There are two other forms of inflation you
did not mention: Demand-Side where a
lot of people have money and want to but
there are not enough goods and services
to meet the deman. Supply-Side where
there is an increase in thwe cost of making
a good or service, quite often energy. So
a company pays more in transportation
costs to get their product to market so the
price the consumer pays increases.

As for monetary system no longer being tied
to the gold standard, I do not know enough
nor do I have enough data to have a really
strong opinion either way.

 

NO NO NO! Here is the definition of inflation from dictionary.com

in·fla·tion [in-fley-shuhn]–noun
1.Economics. a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to deflation).

Those other things you talk about are not inflation, but normal market forces of supply and demand. You are a nice guy, but it makes me cringe to think what you are teaching your students. Please read the book "Capitalism: The Unknown Ideal", I would love to discuss it with you at Bridge Day.

you aren't making any sense
Not the first time

Sure, prescription drugs are regulated and
of course most other drugs are illegal....

Let me explain it this way, prositution is
illegal in America (except Reno, NV) so
the business practices of hookers and
pimps are not regulated.


As for monopolies, when there is one seller
of a good or service with limited to zero
substitutes, there are a few different kinds.

I agree, a natural monopoly is NOT a bad
thing. Just think of the waste of having 3
cable companies in one town each running
coax cable underground to every house.

This would not have allocative or productive
efficiency because of redundants costs. So
why would you think having multiple water
treatment plants or multiple electrical plants
would be better?

YES, licensing is a "barrier to entry".

Doctor, lawyers, etc. all want to restrict the
supply of labor in their field to create an
artificial shortage to drive up prices.

De Beers is a great example of "near"
monopoly since they buy up any loose
diamonds, warehouse them, and reduce
the supply to jack up the price. Of course
no one in society is better off by paying
more for a diamond.

But some people are better off by having
a doctor that is properly trained & licensed.

Those other things are not inflation
My economic text book says they are.

You are a nice guy
Thanks

read the book "Capitalism: The Unknown Ideal"
I will

would love to discuss it with you at Bridge Day
Very cool that you will be at BD!
How thick is the book? I will look for
a copy soon and start reading.

ahh a rand fan. i loved her books. smart chick, really lousy writer.

Dude, i dont want your so-called morally perfect economic system. there are always fuckers out there who want money so bad, they don't give a rats ass who they fuck, what laws they break, or whos lives they ruin. a completely laissez-faire economy brings out the worst in those people. because a completely moral economy only works if everybody in it is completely moral. and that's how the rich get richer and the poor get dirt-poorer, and some of us think that produces a really un-cool, un-human, un-satisfying society to live in... some of us think there's some reasonable limit to the kind of threats, coersion, deceit, and fucking of unsuspecting human beings that a businessman can legally employ in the pursuit of money... some of us think that the less-saavy people in society dont entirely deserve to be exploited of all their wealth... and and we vote.

if i wanted the kind of cut-throat society that a "moral economy" would produce, i'd go live in the wilderness and fight grizzly bears for my dinner to hell with anyone else. life would be solitary, poor, nasty, brutish, and short, but gaw-dang i'd be free. actually, i'd rather make a decent living at a job i like, and live in a society with a large middle class, than have to look over my economic shoulder all the time.

i like low taxes, i like unobtrusive regulatory structures, and i like corporations (especially walmart). and the federal reserve may not be perfect but we're better off with it than without it, for the time being at least. and no, monopolies are NOT good for the economy unless they are price-discriminating monopolies. otherwise the unsupplied demand becomes a drain on the economy. even i remember that from econ 110. if someone popped up to answer that demand, then by definition it wouldn't be a monopoly market anymore. and as the good people at standard oil demonstrated, there are lots of sneaky ways to prevent those pesky start-ups from interfering in big profits.

smart people are really good at consolidating wealth and power, which is what a laissez-faire economy is really all about.. and left to themselves, a few people would ultimately claim almost all of it. i'd rather leave the power to something as incompetent as government, than give it to suits who are actually effective at wielding it. put another way, if power corrupts, better to give it to the retard who can't figure out how to do anything with it, than the smart person.

as for the space program, which you basically called pointless... imagine society today if we never had a space program. i guaranfuckingtee you we'd be speaking russian and REALLY be communist, cuz the commies would have all the ICBMs and GPS and JDAMs and velcro and we'd be begging for some of their delicious astronaut ice cream.

What is all this "astronaut" nonsense? We call them COSMONAUTS hehehe

And along those lines, a private american company just successfully launched a liquid-fuelled rocket... and they are already booked for launches for the next three years. It'll be interesting to see where that goes

Care to explain what your thoughts are behind this nonsense?


If demand is unsupplied, then prices increase to the point of equalibrium, or to the point where it becomes profitable for others to enter the market to supply the demand. If you sell the best quality widgets at the best possible price, you will have no compettition, and therefore a monopoly. Monoploies are bad only when governments prevent others from competing.

Hi GreenMachine

thanks for your detailed reply to my questions.
Your response, however, was exactly what I was expecting... Fluff. They have taught you crap to misdirect you from focusing on the heart of the problem and that is the control of money by private bankers.
This is an excellent documentary on who controls our money. It was made over 10 years ago but that doesn't discount the importance of this information and it's relevance to todays economy. http://video.google.com/...=-515319560256183936

Enjoy!

thanks for the info on the book. I'll check it out! I'm with you on the whole 'republic vs democracy' thing...

AdamLanes is correct... The federal reserve and the IRS are the biggest frauds in the history of the United States. Please educate yourself as to how and why they were pushed through into law. You will find the 16th amendment was never ratified. Read the book or do a search on Bill Benson "The Law that never was" the book thoroughly documents the cover up with authentic certified copies of legislative actions from the archives of each state then in existence.
In exchange for financial support for his presidential campaign, Woodrow Wilson's agreed that if elected, he would sign the Federal Reserve Act (*PAID OFF). In December 1913, while many members of Congress were home for Christmas, the Federal Reserve Act was rammed through Congress and signed by President Wilson. Regarding his actions Wilson later admitted. "I have unwittingly ruined my country".
He also wrote:"A great industrial Nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men... who necessarily, by very reasons of their own limitations, chill and check and destroy genuine economic freedom." "We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world - no longer a Government by free opinion, no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men".

Have you met AdamLanes?

Just kidding, yeah the guy is a thinker
and has many ideas... some are right.
And I am getting a copy of the book:
Capitalism: The Unknown Ideal

As for my response being Fluff... what
were you really expecting... there is only so
much that can be taught in a couple years of
graduate school and then all professionals,
doctors, lawyers, and economists included,
start to practice meaning they
learn and grow.

I am young (36) as economist go and still
open to learning how and why the world
works but things are constantly changing
and the reasons of the past do not always
help explain the present or future.

As for the old arguement of the income tax
being a fraud... yeah, maybe you are right.
How the hell would I know, I was not around
in 1913. But ever since I have been alive so
has the IRS and the last thing I want is to be
fucked by them so I pay my taxes, even on
the income I making hauling meat.

Just like BASE jumpers arguing about tape
versus tailgates so do economists and any
random citizen argue as to why our country
is fucked. Unfortunately there is no exact
right answer...

AND if you look at this long thread you will
see many contradictions between each of
us and some contradictions between even
the arguements of a person's own post.

I read that having the government involved
in banking is bad and then I read that all
the private companies being involved in
banking is bad... well which is it?

Lastly, for now , I am watching your
documentary and will let you know what
I think once I finish it... in 3 or 4 hours.

On the plus side though, at least we all
care about our country and what is going
on with these issues. Many people of all
ages are ignorant and could care less...
chances are that has some impact also.

go ahead. dismantle the Fed tomorrow in one sweeping act of legislation. see what happens.

my point isn't that we NEED it forever, my point (and in reponse to 570 also) is that i think we'd have to wean ourselves off of it if we chose to abolish it. and i'd be in favor of keeping it around at least until the economy rebounds a bit (as it surely will, as it has in the past). The Fed is an imperfect solution to the perils of an unregulated economy, IMHO. the economy was not perfect and rosy before the fed existed, by the way. and the fed, along with the FDIC, seem to have done a pretty good job of reducing the frequency of bank panics of the 1800s and helping the american dollar become the dominant world currency, providing for elasticity in our currency, as well as making for a reliable check cashing system that apparently did not exist as we know it 100 years ago... So certainly there are downsides to the Fed, and people badmouth it, but no one here has enlightened me on its specific downsides, unless i missed it. they just say "oh the fed fucks everything up. get rid of it." perhaps someone would care to provide some concrete examples. (and don't just say, "look how crappy the economy is. that's the fed's fault" because those are the kind of vagueries i'm talking about. demonstrate some more concrete cause and effect please. i'm not saying it can't be done, or even that it's difficult, but you gotta at least try and i'd like to learn something more about it)



maybe you are trying to talk perfect theory, i'm trying to talk real-world pragmatism.

even in a perfect economy, with strictly moral players (a situation which does not exist in reality), that is not an accurate description of a monopoly market. if i am a monopolist, i'm going to set supply and price at a level that maximizes my profits, and i dont really care if its good for the economy or society. you are assuming that a monopoly that does so is doomed, because competition will arise. but that is a highly fallacious assumption--you can't assume that other barriers won't prevent competitors from arising even when there is a high degree of unsupplied demand, or that cartels & trusts wont arise.

there are a lot of reasons why competitors might be barred from competing with a monopoly, even in the face of extreme demand. sole ownership of a resource is just one example. powerful economic players are often successful at encouraging legislation that supports their continued monopolistic dominance, as another example. resorting to illegal/immoral behavior to discourage competition is also a reality of our economy, and that reality can't be ignored or tolerated.

The economic dead weight created by a basic monopoly can theoretically be reduced or eliminated if the monopoly is "price-discriminating." meaning that they will supply their product at a lower price to certain customers, but perhaps with a lower-quality widget or by controlling the manner in which the product is sold. in theory... there is nothing economically bad about this scenario. but i think this is a more accurate picture of monopolistic markets than yours.

feel free to continue with any specific misconception you chose.


I agree with what you wrote. I think the disagreement starts when one tries to define what it means to interfere with others' life liberty and property. you can't sacrifice too much freedom for security, or you'll have neither. but the denser society becomes, the more everyone becomes dependent on each other, and the more one person's freedom becomes another person's burden. i can't dump toxins on my property because it leaks into your aquifer. you cant party with celebratory gunfire because the stray bullets endanger me. there are certain things that i shouldn't be able to do, economically, because it disrupts other segments of the economy, even if i feel like it's my "right". it's not a perfect analogy, but that's the opinion i'm trying to express in response to your exclusive claim to a moral economic system.


I'll simply second what GreenMachine said.. and add that as long as we acknowledge that the government has a legitimate mandate to perform certain services, we have to fund it somehow. and then you have to ask, how could someone morally "opt out" of payment when they benefit from these services which are provided, in part, for them. the government has a legal authority to levy taxes, that's not really up for debate in my book. the debate is whether its a progressive vs flat vs regressive tax, or sales tax or income tax or toy poodle tax.. those are not moral decisions, those are practical decisions that should be resolved through electoral/political processes. if you don't like the IRS, vote for someone who will abolish it. and i'll vote with you, but it gets ridiculous when people conflate it into some huge moral atrocity.

and btw 570, no offense and maybe i'm a cynic, but i'm pretty skeptical of unsourced quotes, or quotes i dont know the full context of. woodrow wilson did a lot of stuff that i think was pretty shitty, but i'm not familiar with the immediate circumstances of those things you refer to.

 

Thanks all! Interesting ideas.

One question though; in your opinion, can you sustain a Rand type capitalism with zero growth?

(Obviously the follow up will be; if not, do you envision infinite growth?)

-h-

I agree that the federal resereve needs to be eliminated, and yes it can be done immediatedly. Such organizations have been eliminated in other countries throughout history with much financial success and national prosperity. Thanks for the link base570, very interesting documentory. Here is a video with similar information in a much shorter form, for those who dont have time for a three hour documentory, not as detailed though. http://video.google.com/...y+as+debt&src=2#

I did some more research on the federal reserve, and I think I have been trick into believing a conspiracy theory. According to the sources below the federal reserve gives the net interest to the treasury, and athough it is privatly owned the federal reserve is governed by elected officials. I am not entirely sure but I am beggining to think that the federal reserve is a good thing and that the forementioned video contains a lot of propaganda and feeds on fear mongering and common discontent with the IRS and paying taxes.

[url]http://www.geocities.com/CapitolHill/Embassy/1154/flaherty.html
[/url]
http://video.google.com/videosearch?www_google_domain=www.google.com&hl=en&emb=0&q=federal%20reserve%20conspiracy%20debunk&src=4&um=1&ie=UTF-8&sa=N&tab=wv#

on the internet? I'm shocked!!

Okay so basically the Federal Reserve is a mechanism for the confiscation of wealth. This is all very well explained by Alan Greenspan in the book "Capitalism: The Unknown Ideal". Prior to the creation of the Federal Reserve Bank, the banking system in the United States and most of the world was based on gold. "The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit." The government uses this expansion of credit to pay for chronic defecit spending, which politically is more favorable than directly increasing taxes.

(The following are the words of Alan Greenspan from the article "Gold and Economic Freedom" in the book Capitalism: The Unknown Ideal.

"Under a gold standard the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset." ... "The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. but the fact is that there are now more claims outstanding than real assets. The law of supply and demand cannot be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus earnings saved by the productive members of society lose value in terms of goods." ... "In the absense of the gold standard, there is no way to protect savings from confiscation through inflation."

Maximizing profits is not exclusive to monopolies. You would not be able to set your supply and prices arbitrarily unless you have a coercive monopoly. A coercive monopoly is exclusive control of a market exempt from competition through government control. Otherwise, your "monopoly" would be open to competition if you arbitrarily set price and limited production.



There are always barriers to enter any market, some more than others. As long as the government does not limit competition through subsidies, licenses, permits, or other legislative actions, then people are free to compete.


So if I invent something, should I not have sole ownership of the technology? Should you be able to use my patent in order to compete with me? What if I spent millions of dollars developing my technology, and then you come along and just steal it?



Yes, now you see! Government legislation in the market is the real problem! Legislation of the market is thwarting competition, and is the antithesis of capitalism.


Crimes against life, liberty, and property, should not be tolerated. Every individual has the right to life, liberty, and property. Your rights to life, liberty, and property, do not allow you to infringe on the rights of others to their life, liberty, and property. Its a rather ssimple concept. Think about it.

so, government intervention in the markets -> bad


so, government intervention in the market to protect a patent -> good


back to government intervention in the market -> bad?


I'm trying, but also wonder why bother? it reminds me of the debate about how many angels can fit on the head of a pin. I don't see a path back to the theoretical world you describe.

 

the government must introduce some mechanism to protect patents.

when a patent infringement is proven, the patent owner expects some sort of remedy.

thus, the government is expected to intrude at some level. different people will always disagree on the extent.

truely free markets would NOT respect patents. I can argue that the one who markets the idea can create more value than the one who comes up with the idea. the most fabled inventors in this country understood the need for both talents.

(few would claim any Microsoft was best in breed, but they sure did a good job of marketing!)

First of all, thank you for the quote. It sounds like you intend to present it as an indictment against the federal reserve system, but I don't think that your excerpt from Greenspan (which I did not entirely quote here), by itself, is a very solid attack.

For instance, what if i said that a little bit of controlled inflation was good for society in the long run?

I also think that the claim to "unlimited expansion of credit" is hyperbole. if the government is dumb enough, it can keep trying to extend credit, but if it goes too far the whole system would collapse. what it does have, if used prudently (and that's a big 'if'), is a system to expand credit in times of need and shrink it at other times.

In it's full context, my above quote is not meant to imply that ONLY monopolists try to maximize profits. the point was that the monopolist (nor, incidentally, any other capitalist for that matter) doesn't care about the effect of his monopoly on society. ironically, ayn rand spent a lot of ink explaining that one of the reasons free capitalism was so virtuous was because it WAS good for society and not just the individual.

the distinction i tried to imply is between a monopolist who sets everybody's price and supply, and a capitalist who sets his own selling price and his own volume of supply. the former forces everybody to adhere to his metrics, while the latter offers what he deems most profitable in a competitive environment, while other options exist for consumers.

I believe that my point about monopolies vs. price-discriminating-monopolies is a well-established, if perhaps over-simplified, tenet of classical economics. GreenMachine I wonder what your take on it is.

Are you claiming then, that government interference is the only barrier to market entry? If so, that's a very strong claim and I believe I have already countered it. If not, it sounds like you are saying that there are always barriers to entry, yet no one is blocked from entering ...which is a contradiction. But I dont think you mean that, please help me understand what you are saying. Are you talking about barriers to entry, or are you talking about government prohibitions on entering?

My claim is that if you take the government out of the picture, there would still be various entry barriers, and not everybody would be free to compete, and in certain situations, no one would be free to compete, against a would-be monopoly.

I wasnt referring to patent rights, although it raises an interesting branch of discussion. What I had in mind was sole ownership or control of a physical resource. lets say you are the last country left on earth with petroleum reserves, you will have a monopoly. with today's technology, no one can compete with you in that market... although they could develop a better technology and enter a different market.


No one here is contesting intellectual property rights. but patent rights expire eventually... where's the natural law that dictates the lifespan of a patent? as far as i can tell, its determined by political processes (ie, consensus, compromise, or coersion). and if i invent something, i do want monopoly control over it for a while. i'll maximize my profits, and get rewarded for my investment. Meanwhile, because i limit supply, there is a zone on the supply-demand chart that is not benefitting from my technology. IIRC it is called "dead weight".

edit to add: and i dont mean to imply in this particular example, that this kind of monopoly is detrimental to society. you and i would both agree that it creates a favorable and necessary incentive for technological development. there's a difference between being "bad for society" and "carrying economic dead weight." some monopolies are the latter but not the former, and some monopolies are arguably both.

i dont think that all government legislation thwarts competition. some of it does, and where we agree that it thwarts competition, we might agree that it's bad too. some government legislation supports competition, too. we might disagree on whether a certain piece of legislation is supportive or antagonistic towards competition.

as I said, the government is not the only "large economic player." however it is one of the less competent and more inept players. yet as citizens, or "shareholders" if you will, we have an interest in making sure it doesn't behave in a manner detrimental to ourselves. for these and other reasons, i don't feel that it can threaten me as severely as an entity that is both large and good at what it chooses to do. that doesn't mean that i think the government should have a lot of power, but it should have certain powers. and individual should have other powers. but just like there's a distribution of powers among branches of government, to prevent immoral behavior, there should be a distribution of power among economic players... or the fittest one will end up with all of it. i'm not talking about idealistic capitalism here, i'm talking pragmatically.


i have thought about it very much, its one of my favorite topics. but again, i'll point out that you and i might disagree on the line where one person's freedoms impinge on anothers. that is not a trivial disagreement.

i think there's a cost to protecting against others' crimes against your rights, and sometimes that cost is manifested (ironically) as an infringement upon your own freedom. it is a tradeoff that every society makes to some degree, in order to live in peace.

hope i didnt get too long winded, i'm too tired to proofread. i enjoyed reading your points a lot. i'll be back in a few days...

...to be continued...

I had a few beers, dinner with the wife,
about to sit in the bean bags, and relax
in the Zen room but come Monday when
I am killing time in my office I will be
sure to address some of these good topics.

Till then you economic units and thinking
men have a real good/safe weekend.

 WOW, Loooong Ass Fucking Thread to read and hoping Not to again. and to top it off. Domestic ECONOMICS cause and effect Holy shit this has to be a first.
AdamLanes ??? . I don't think??? I have ever seen this AdamLanes while jumping. BUT, I imagine him looking maybe somewhat like this Pic. of the Elephant Man with Large oversized and deformed skull that is hiding his Huge Brain. The HUGE Brain that enables him alone to understand world economics above all other jumpers. But sadly looking like this. He must stay indoors out of the daylight only to appear periodically in the dark of night to do discrete BASE jumps and hide from ground crew his hideous head with the Huge Brain.
.

BAAHAHA that was the best ´most recent´ post that I could have possibly seen in this thread!

Sorry Adam and no offense to you, but that was funny