Category: Economics
The False Paradigm of Government
| 21 March 2019 | 20:48 | Economics, Politics | No comments

There is a false paradigm of government where people accept the propaganda that governments run countries (or provinces or cities). Countries run because individuals and businesses engage in peaceful exchanges to produce goods and services and otherwise treat each other with respect and consideration. Peace and prosperity are directly related to how people treat each other. When people have respect for the person and other property of others, then everyone is at liberty to lead a peaceful, productive life.

What governments do run are bureaucracies which are burdens and obstacles to the peace and prosperity of society. The proper role of government is to give collective backing to the natural right that everyone has to protect their person and other property. In direct contradiction to that proper role, most of what governments do is take people’s property in taxes and interfere with people’s choices with regulations. When an individual takes someone else’s property or interferes with their choices, we call it a crime. When government does these same things, they call it legal as if their legislation can turn a crime into some kind of moral good.

Most political parties support some version of the scam that they can run things to our benefit. They have their various proposals about how they are going to do it differently with their set of taxes and regulations.

I will continue to promote liberty, but I despair of our society coming to the realization that their paradigm of government is false. The sad part of all this is that while many survive the burden of legal plunder, there are many who suffer in misery and heartache because of the burden of bloated government.

On Trade
| 23 June 2018 | 20:25 | Economics | No comments

Trade is most beneficial when it is unencumbered by government interference. The only useful thing government can do regarding trade is to back people up against robbery, theft, fraud, or anything of that nature. Free trade is when there are no quotes, tariffs, or other trade barriers that impede transactions between individuals and businesses any where, be it local, regional, or global. Governments don’t trade with each other so there is no good reason for them to be involved in trade.

Trade is another of those simple economic principles that is blown up into an “issue” that doesn’t exist. The only situation where a balance of payments means anything is in individual transactions.  When someone offers something for sale, they will expect payment with something of equal value. Actually both parties to the transaction will get something they value more than what they gave up, but it is balanced.  If you buy all your groceries from a given store, the transactions are balanced.  You buy their products and they “buy” your money.  It does not matter that they don’t buy products or services from you. Neither does it matter for the combined transactions of individuals and businesses between cities, regions, or countries.  The transactions are balanced and the money will circulate around which is the reason for having a medium of exchange.

The freer the markets, the more prosperous the economy. Trade between countries is no exception.  The less that governments interfere with trade, the better off everyone will be.

Taxing Businesses is Taxing the Rich?
| 15 September 2017 | 10:59 | Economics, Politics | No comments

Businesses exist because people have invested in productive assets like land, buildings, machines, and employees. These businesses provide goods and services that are voluntarily purchased or in other words things that people need or want. Taxes decrease the productivity of businesses which means less product, less employment, less income to buy other products. Taxes decrease the standard of living for everyone which is especially onerous for those on the lower end of the economic scale. So increase tax on businesses? Not a good idea.

Defining Capitalism
| 9 August 2016 | 17:42 | Economics | No comments

Capitalism is an economic system that uses a high degree of capital (or productive) assets, has a high degree of division of labour, and requires a medium of exchange. Capitalism started with what is called the industrial revolution and got a big boost with American independence and the spread of a greater amount of freedom and property right. Capitalism produces a myriad of products and services that sustain higher populations and reduce poverty. (Unfortunately, the term capitalism is misused to refer to political systems that grant privileges to large companies in violation of free enterprise and property rights.)

Subsistence agricultural and cottage industry is another type of economy that uses some capital assets, has some division of labour, and uses a medium of exchange along with barter. A hunter and gatherer economy uses few capital assets, little division of labour, and has largely self sufficient groups which which may or may not barter or use some medium of exchange.

The three types of economies described above can all exist in the same region at the same time although if capitalism is present, it will dominant the economy.

A capitalist economy can function in any form of government, but will be most effective where there is freedom and protection of property right. Socialist, fascist, and dictatorship forms of government restrict free enterprise and property right.  There is nothing stopping these forms of government from investing in productive assets, but they are subject to bureaucratic management which is less effective than private enterprise. Democracies are a mesh mash of socialism, fascism, dictatorship, and some property right all of which is subject to ineffective bureaucratic management.

The best form of government is a constitution that has laws that do no more nor less than protect the right of individuals to decide what they do with themselves and their possessions (property right) with provision to be made whole if that right is violated. All operations would be provided in the private sector where private ownership would avoid waste, the profit motive would provide low cost, efficient operations, innovation, and a high level of customer satisfaction, all in contrast to bureaucratic management. Under such a government, capitalism would flourish with peace and prosperity for all.

Minimum Wage Laws
| 16 January 2016 | 16:21 | Economics, Politics | No comments

A wage is a price that employers are willing to pay for an employee. Prices are subject to the law of demand. We have all seen the effect of demand where a price goes up and people buy less or a price goes down and people buy more. Setting a minimum wage increases the price to employ a whole group of people which will eventually result in an increase in unemployment including those persons who will now give up on the job market and are not counted in government unemployment numbers. Employers will adjust the way they run their businesses by changing the duties of a fewer number of employees or perhaps by introducing capital assets so a fewer number of employees can be more productive. People work for low wages because their lack of skills and experience puts them at that level of productivity. The way to increase productivity and the associated wage level is to increase skills and experience. The first step to increased productivity is to gain skills and experience in a low paying job, a step that is not available for many due to minimum wage laws. Many politicians and their supporters think the minimum wage is compassionate while in fact it consigns many to despair of being able to work. One does wonder about the sincerity of politicians since they increase the minimum wage a few dollars rather than to something like thirty dollars. Minimum wage laws are a prime example of the untended consequences of government intervention in the economy where those it is supposed to help are actually hurt.

Government does NOT create jobs
| 12 November 2015 | 12:25 | Economics, Politics | No comments

I have noticed in the press that once again government is saying that they are creating jobs.  If government returning tax funds to the private sector creates jobs, then when the taxes are taken out of the private sector, jobs are destroyed. It would be more accurate to say that government is restoring previously destroyed jobs in the private sector while incurring administrative costs in taking the taxes out and then putting them back in. The next worst thing the government does is destroy productive jobs in the private sector and replace them with productive jobs in the public sector which are less effective due to bureaucratic management. The next worst thing the government does is destroy productive jobs in the private sector and replace them with unproductive jobs in the public sector. The next worst thing the government does is destroy productive jobs in the private sector and replace them with bureaucratic waste and inefficiency. Canadian governments take over 40% of the annual private sector income in taxes which is a tremendous loss in potential investment and the associated employment.  Governments ignore the negative effect they have on the economy.  When a government claims to be creating jobs either they are dishonest or they do not understand the impact of taxes on the economy. The truth is that the net effect of governments is to destroy jobs.

Money, Banking, and Government
| 24 July 2014 | 16:57 | Economics, Politics | No comments

Money is useful or more correctly, essential, as a medium of exchange in a free enterprise, capitalistic economy. This type of economy has a large number of products and services, and a high degree of specialization. Consequently, people are occupied with their specialized work and don’t have time or means to produce all the products and services that they need and want. People exchange their specialized work for money and then use this money to exchange for the results of other people’s work.

Money represents productive work and it is illegal and illegitimate to make money by non-productive means called counterfeiting. Counterfeit money does not represent productive work so that if it mixes in the money supply, the counterfeit money will dilute the value of the money representing productive work. This is a form of stealing and a violation of the property rights of everyone whose money has been devalued.

Fractional banking is legal and consists of lending more than the bank has on reserve. These loans do not represent productive work since they are simply numbers added to an account balance. These loans enter the money supply and dilute or devalue the money. The difference between devaluation due to fractional banking and counterfeiting by private individuals, is that fractional banking is legal, illegitemate, and the scale is so large as to render the devaluation due to private counterfeiting irrelevant.

Besides legalizing fractional banking, governments also engage in a manipulation of money to monetize debt. In this process, the government incurs an obligation and pays for it by printing money. Once again, this money does not represent productive work, will enter the money supply, and devalue the money. And again this is legal, illegitemate, and on a grand scale.

The devaluation of money by fractional banking and government money manipulation is easy to do with fiat money which has no commodity base. Fiat money is simply paper supported by legal tender laws. The value of fiat money is not tied to anything like a precious metal, so the amount of fiat money can be increased at will.

It is the people doing productive work that lose due to the devaluation of money. People tend to pay more for products and services over time, not because these things are worth more, but rather because the money is worth less. In a truly free enterprise economy, things get cheaper as the capital expands. Consider the difference between digging a hole with your bare hands or using a shovel or using a backhoe. Capital is productive resources and as people accumulate these resources they become more efficient and productive so that the cost of what they are producing decreases and things become cheaper. Computers have come down in price even in the midst of money devaluation. The computers are more dramatic because it is emerging technology. Gasoline priced in gold is cheaper in 2014 than it was in 1960.

We should have stable money that keeps its value and fairly represents the productive work for which people are paid. This is possible if the devaluation of money by fractional banking and government money manipulation is illegal just like counterfeiting by individuals.

Job “Creation”
| 5 August 2013 | 16:50 | Economics, Politics | No comments

In a recent letter to the editor, Leon Benoit, MP Vegreville-Wainwright, was disputing comments about the job situation. Mr. Benoit used the phrase “job creation” several times as in “We’re proud to announce the creation of 36,000 jobs for Canadian youth through the program”. I would like to invite Mr. Benoit to return to his Reform Party principles of small government. The truth and reality regarding jobs and government is that governments destroy jobs. Any money that a government puts into jobs came from the private sector along with more money to run through a wasteful, inefficient bureaucracy. Taxation destroys more jobs than governments can try to replace. Governments cannot compete with the private sector in job creation.

The Problem With Taxes
| 30 March 2012 | 18:18 | Economics, Politics | 1 Comment

There are two major problems with taxes. First of all, taxes are illegitimate. Governments can make taxation legal, but they cannot make taxation right. (For further explanation see here)

Secondly, taxes do not do us any good. The propaganda would have us believe that government is going to help us with all kinds of things. These stories never mention that the financing for this help is coming from the resources of individual citizens in the form of taxes. The implication is that the government can use the citizen’s resources more effectively than the citizens can. The truth of the matter is that by taking resources out of the private sector, government taxation destroys jobs and productivity. The taxed resources incur a huge overhead in the form of bureaucratic management that is wasteful, inefficient, and slow. Some pittance may make its way back to us, but it cannot compare to what has been lost. Taxation is a major drag on the economy and gives everyone a lower standard of living, but is especially hard on those with the least.

Free Enterprise Versus Regulation and Privilege
| 13 March 2012 | 20:34 | Economics, Politics | No comments

Free Enterprise
Free enterprise means that people can conduct their affairs and enter into contracts with each other without interference from the government. Free enterprise means that people can decide how, when, and where they will use their possessions and to what purpose. People can decide what to exchange with others. Individuals are capable of making these decisions and if they need help, then free enterprise can provide standards associations and rating services.

Government Interference

Government interference in people’s affairs and business by imposing bureaucratic control is wasteful, inefficient, and slow moving. Government imposed codes become irrelevant, out dated, and hamper innovation. Large businesses lobby government to impose regulations in their sector which the large businesses can afford to implement and which stifle their smaller competition thus introducing waste, inefficiency, and slowing progress. Government licences to perform certain work grant a monopoly privilege by imposing hurdles in money, time, and quotas. Such licences will once again give us waste, inefficiency, and hampered innovation.

Bureaucratic Management
Our governments have taken on an ever increasing role as central planners using bureaucratic management. Bureaucratic management has no profit incentive as in free enterprise management. The consequence is that the bureaucracy has no incentive to control costs but rather to spend all or more of their budget and add to their personnel regardless of need. Bureaucracies have no price discovery in a market so they will push salaries and prices to the upper limit. Bureaucracies have no competition so there is no incentive to innovate and progress. People in bureaucracies are the same as people in free enterprises; the difference is in the systems, not the people. By its nature, bureaucracy is wasteful, inefficient, and slow.

Prosperity
Freedom and free enterprise is the way to prosperity. By its nature, free enterprise anticipates and fulfils the choices of consumers in an efficient manner while moving to the next innovation.