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From Cato@Liberty
Weak Health Care Stocks Drag Market Lower
- Associated Press, February 26, 2009Obama Proposes $634 Billion Fund for Health Care
- Washington Post, February 26, 2009So the government wants to take over one-seventh of the U.S. economy and the market drops. I’m shocked.
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A great article on real economic recovery and savings. Here.
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Ever since I entered graduate school in 2005 I have had a (probably unhealthy) obsession with the economy, poiltics, and investing. This is all the more interesting because I was ( and hopefully will be again ) studying computer science. After reading quite a bit I have come to two real conclusions:
I believe my first conclusion explains itself. If you read the US Constitution or the writings of the founding fathers, then you know that you should be a libertarian who believes in the US Constitution. Enough said.
My second conclusion merits a bit more explaining. As it is, I believe it is wise of me to defer to those who have already made this argument. So let me stand on the shoulders of giants and send you here (The Case For Natural Money) to begin. I’ll most likely say more about this soon.
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The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.
~ Thomas Jefferson
Usually I think Glenn Beck is a bit over the top and pro war. This time he is right on the money.
Inflation/deflation actually has nothing to do with prices. A price is the value a person assigns to an object. This value changes over time, with adjustments in supply and demand, and with changes in production costs. Prices always vary and, in a capitalistic society, tend to decrease dramatically.
Inflation is an increase in the amount of available money in circulation. This erodes purchasing power and makes every dollar worth less. It also makes debt easier to pay off. This is why you cannot save and get rich. Our money is simply devalued too quickly to keep up.
Deflation is a decrease in the amount of available money in circulation. This adds to purchasing power and makes every dollar worth more. It also makes debt more difficult to pay off.
The Fed has inflated our money and financed it with debt. Welcome to the US and our fiat money system.
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The US True Money Supply can be seen here. Talk about inflation. Dang. But I do have some other thoughts on the current economic situation.
One one hand we have Bernanke and his cronies inflating the life out of our money supply. Everyone knows this is bad. Nobody in their proper mind thinks that this is good. (As a side note, if economists would just agree that the definition of inflation is an increase in the money supply I think this whole debate – of whether expanding the money supply is good or not – would finally go away.)
On the other hand we have a scared public – both national and international – who are afraid to spend. So, despite the fact that the money supply is increasing dramatically, the cash is simply not circulating. This is hedging inflation to some degree.
On the mystical third hand we have the appointment of Paul Volcker as the head of President Obama’s Economic Recovery Advisory Board. Volcker is an avid inflation fighter from the Reagan days.
My conclusion (more of a guess I suppose)? The government is going to expand the money supply. Once things start freeing up and moving they will attempt to allow the dollar to devalue just enough to make the US debt manageable. Then, using a Volckeresque strategy, the US will see a rapid increase in interest rates reminiscent of the 1980s in order to scare off more inflation.
It just seems like everything is pointing in this direction.Welcome to the world of fiat money folks.
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Last night I came across a quote from Ludwig Von Mises in his book Notes and Recollections:
My theories explain, but cannot slow the decline of a great civilization. I set out to be a reformer, but only became the historian of decline.
Look around the world today. The governments of the world are in deep debt and are inflating their way out of it by printing money. Liberty is being encroached upon. The size of government is swelling. Private property rights are being ignored. Protectionism is being enacted. Finances are collapsing. Homes are being foreclosed. This list only gets longer. We are still in a great decline.
I’m afraid that in the coming years historians, governments, and private citizens will look back in shame and dissapointment. What words will fall from their lips? “Mises was right.”
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I just read this article and have again been reminded of why sound, private money is important to capitalism. There are a few reasons, especially in the USA. Most of these are spelled out in the article I just mentioned, but I will still repeat some here while adding a few of my own.
I also feel that I should take a moment here to explain what inflation really is. In the world as it stands, countries use a monetary system known as fiat currency. This means that the currency has value simply because it is believed to have value. In reality there is no value to the currency – it is just paper and very low value metals.
Historically gold, silver, bronze, and copper had always been used as currency because the have intrinsic value and are scarce. The dollar itself was originally backed by gold as well. The old saying went, “Good as gold. Sound as a dollar.” This meant that government s could not print more money than the gold/silver that they had on hand.
After WWII, the US was in a rare position and, as its currency was backed by gold and still sound currency, it became the worlds reserve currency. US dollars were a safe investment.
Once the backing of gold was removed (Thank you FDR and Richard Nixon) the government was free to print as much currency as it wanted in order to fund programs and pay bills. They still do this and they print roughly 10% more money every year. This means that every year the money supply increases by roughly 10% and the value of your cash on hand decreases by 10%. Basically US citizens don’t only pay taxes, they also let the government steal an additional 10% of their wealth through inflation.
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If a communist tells you that your plan is too socialistic, it probably is. Read here.
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“The stimulus bill does that, and calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system.”
This is taken from Bloomberg. The last thing I want is the government making my medical choices. The last thing I want during an economic downturn is the government stifling innovation. This is true socialism.
As Americans we should always expect more from health care because we pay for it! Get the government out of it! My life does not belong to them. My health does not belong to them.
