#OWS – markets and currency

Video 2 to the OWS series –

A currency backed by gold and silver is what is called for in the constitution and that constitution was what the founders fought for.  The founders rose up against the greatest military force in the world at the time, risked their lives and the lives of everyone who supported their crazy dream of having a government and land based in the principal of freedom.  That alone should cause anyone who apposes the ideals of the founders to be branded un-American.  Have you risked the same to challenge the founder’s declaration and constitution?

Let’s say we are going to start our own government right now with our own monetary system.  First we elect the government then we take a look at what the population is and decide how much money to print up on our special paper that no one else has access to besides our new government.  Our government will eventually hand out [ all the money to the population and the free market allows people to quickly start trading and determining what is fair value for everything.  In this example we don’t trade with outside governments since the people produce all that is needed for our population.

In a very rare circumstance we would need to print up more money to keep up with the population growth or we might get deflation where the money doesn’t keep up with production and causes things to lose value.  For all the products that people use to totally and completely be over-produced all at the same time would be very difficult for a decentralized free market to do.  More realistically one or two products could be over-produced and lose value for a time and the producer of that product would have to diversify by producing something else or shut down that business because of market saturation.  Similarly, the business who produced PVC to make vinyl records needed to find a way to adjust to the new CD market in the 1980s.

But for this example we are going to pretend all products ever produced all at once became over-produced and our government needs to print more money to keep up.  The elected representatives with the special paper just start printing money.  Wait a minute.  How do we know how much money to print?  Is it based on apples or some other tangible asset? Is it based on the current population?  If we print too much money we will reverse the problem and have cheap money and expensive goods.  You see the balancing act the government is getting into.  Good thing the government answers to the people because if these idiots do the wrong thing we’ll just vote them out and get people in who understand how to manage the money supply.

Based on this hypothetical you can see that money might need to fluctuate from time to time and that is a big maybe.  It isn’t that big of a problem unless an exaggerated amount of goods or money is pumped into the system to distort the value of things.  You can also see that even if people in government make mistakes those mistakes will be corrected by us electing other people to office to help get bad monetary policy under control.

In our little example you can probably see that if some other entity other than our government had control over the printing of our money the people wouldn’t have control of their monetary system.  They wouldn’t be able to hold the government accountable for the imbalances in goods and money.  It doesn’t make any sense but let’s pretend the the government outsourced the printing of money to a printing company formed by a small group among the people and the way this printing company made it’s money would be to charge interest on every dollar printed for the government.  As I stated above, this wouldn’t make any sense.  Not only that but the printing company doesn’t have some special insight into the population without getting their information from the government.  Who knows the population better than the government who were elected by the people?  The government has the relationship with all the people in the land by way of elections.  How can a printing company know how much money to supply the population better than the government?

The answer is obvious; no printing company can know what is best for the population because they don’t have that relationship.  Further to that the people have no direct influence over the printing company because the printing company is a private company and by definition the public has no right to meddle with the business of a private company.  The obvious point against outsourcing the printing of money is obvious:

What will stop the printing company if the money they print is directly proportional to the profit they earn?

Expand that out to the banking sector in general.  If they make money from creating debt why wouldn’t they create as much debt as possible by making it as easy as possible to issue credit cards and loans?

Fast forward to today where it is now profitable to flood the market with opportunities to go into debt so the debt would become so great the occasional bankruptcy is negligible.  The banks adopted the Costco and Walmart business model for dealing debt.  You don’t make dollars from selling products, you make dollars from the pennies on the volume of product sold.

The US went from a nation of factories and mills in the early part of the 20th century to a nation that turned the process to buy things into the factory.  So what really happened is instead of products being produced here, people with greater purchasing power started being produced in the US. The people are the products that the US government is selling to other countries so that those other countries can make products and goods in their factories and mills.

This is a crucial point:  The US doesn’t produce anything and what is produced is traded at a huge deficit.  Meaning, they sell us much more than we sell them.  We the people are used to go into debt to keep other countries producing.

#OWS – capitalism

Video 1 to the OWS series –

The only reason a business exists is to create wealth.  It creates wealth first for the customers because if the customers weren’t entirely benefited from the product or service, that business wouldn’t have customers.  It creates wealth for as many people as are able to be employed with that business for years and years.  It creates wealth for the share holders since these people are risking their money to allow the business to have operating capital which helps get and keep employees who make decisions about how good a company they are going to have.

The biggest problem with people favoring the government so easily is that those people are ignorant to the cost of doing business.  This is understandable since the majority of people don’t start businesses.  Most people just go to work, do their work and leave.  Never knowing all the costs and charges that go on behind the scenes to support their job.

Before you rent a space the government has regulations about what a building should look like before it is suitable to be rented.  There are commercial codes to make the place ‘safe’ and environmental standards.  Even if they don’t make the place safe they add to the cost of rent because the landlord will definitely be passing on those costs onto the business in higher rent.  Depending on the business you have you will be charged a business license fee, then you will be taxed by the city based on your profit to maintain that business license, you will be taxed by the state on your profit and you will be taxed by the federal government all on that same profit.  Then if you have employees you will be taxed for each employee and each employee will be taxed on that same money.  Then you will pay the local government your sales tax that you have been collecting on their behalf.  Depending on your type of business numerous insurance costs are in your future.  Insure the building, insure the products, insure the employees. Don’t forget about legal liability costs, unemployment costs and other built-in government programs that come along with hiring people.  Each time we have to pay something or do something that isn’t involved in getting or keeping customers it is unproductive and by default is a money loser for the business.

It reminds me of the movie ‘Goodfellas’ when the club owner asks Paulie to be his silent partner and no matter what you will pay that silent partner.  [play movie sound]  The government benefits with you on your way to prosperity and goes def, dumb and blind when you fail unless you still owe a tax while you crashed your business.

The fees that are paid to government can be argued important or not on a fee by fee basis.  The best way to argue for a fee is pointing out where it adds value to something.  The government isn’t valuable besides what value it creates for the people it governs which is why government always frames their excuse for the fees by suggesting it is making things safe for the people.

There are more fees that simply feed government than can reasonably be argued that such fees are for a common good.  The resistance to fees is usually a failure of the payor to have value for the service, safety or protection the government says the payor is getting for the fee.  Which can also be stated as the government doesn’t provide valuable services for the fees it charges

Two things can solve this problem; either the government gets more honest and only charges for the value based fees or drops the fees in general to where a business doesn’t feel such a burden.  Unfortunately the government is a monopoly unless you’re a really good business.  If a business has enough money the world becomes your market and in that case you can choose any government in the world to do business.  Just like we chose where to rent based on price and location the business that makes enough money can choose which government to deal with.

Remember, a business’s only function is to create wealth.  The people who start those businesses have many different reasons to start. Some people just want money so they exploit a market.  Some people want change or to start a revolution.  A business allows these things to be everlasting.

Capitalism makes the most sense for the people who want the most freedom because the indicator for how much money a company makes is directly proportionate to how many people freely choose to buy that company’s products.  Therefore, the companies with the most money have given their customers the most wealth and enriched their lives.  If it didn’t create wealth or enrich customers why would they buy?  There isn’t any force by the government to buy one thing over another.  It would cease to be a ‘free’ market in that case.  once the government forces anyone to buy anything the free market is contaminated and is no longer a free system.  Similarly, if a government favors a business by giving them money the free market is undermined.  There is a bigger point here which I will make in a following post; that is government doesn’t really have any money.

Which brings me to my last point;  there are two types of monetary distribution systems.  One is based in freedom and the other is based in slavery.  One is by an individual buying something they find value in and the other is by government forcing an individual to surrender their income, taking from them the direct influence where it is spent.