Wednesday, January 28, 2009

FBI Knew of Mortgage Industry Fraud

Another story worth your time.

This is the kind of stuff that just... I don't know, bothers me. It's hard for me not to say things that make me sound like nancy boy John Kerry. The Bush Administration took their eye off the ball.

The FBI knew about the mortgage industry fraud, briefed the Bush administration but they still diverted 2400 FBI agents to counterterrorism. It makes me wonder.

A Link To Tim Knight The Genius

Go read this post by Tim Knight.

I keep expecting that time will pass, and eventually I'll get less pissed off at the chicanery going on at the Treasury. It hasn't happened. I don't get tired of ranting about it either.

Did I use the word chicanery correctly?

Al Gore is at it Again

Al Gore is back before Congress to try to stop global warming. This is despite the fact the theory seems to be falling apart, but it's natural for him to try since he has a lot of money riding on this issue.

What are the facts about Al Gore's "An Inconvenient Truth"? His slide presentation, book, and movie are all seriously misleading. For a brief but excellent review of 25 misrepresentations in the book, visit Iain Murray's article, "Gorey Truths." One of the big shockers Gore used was the now famous "Hockey Stick" graph showing mean temperature changes in the Northern hemisphere over the last millennium. That graph has been thoroughly debunked. For a very readable explanation, see Orson Scott Card's "All in a Good Cause." For a deeper scientific treatment of the issue, see Steve McIntyre's work on the issue here. How about the impressive hydraulic lift shot in the movie version of "An Inconvenient Truth" when Al Gore shows a graph that correlates carbon dioxide levels to temperature for hundreds of thousands of years? He chose the scale very carefully; when you zoom in on that graph, in most cases temperature actually rises before carbon dioxide levels do, sometimes as much as a millennium before. Solar activity correlates much better to temperature changes than carbon dioxide levels do.

For graphs showing this correlation, please visit here and here.

In fact, Gore's slide show is full of pseudo science, questionable data and outright lies designed to stir people up. The goal seems to be twofold. First, Gore is making a lot of money from the panic from various sources, including a green hedge fund that gives him a huge stake in keeping the global panic going. Secondly, Gore and other global warming activists seem very committed to global socialism, and the global warming scare is a perfect vehicle for the institution of socialist policies. How bold is that claim? Not very, if you listen to Christine Stewart, Canada's former environment minister: "Climate change provides the greatest chance to bring about justice and equality in the world." On another occasion, she said, "No matter if the science is all phony, there is still collateral environmental benefits to global warming policies."

What about all that scientific consensus on human-caused global warming? Consensus is a political term in this case. Science isn't about consensus. It's about proposing a hypothesis, confirming or disproving that hypothesis through experiment and other data collection, and providing that research to the scientific community. If the proof can be replicated independently and repeatedly, and the hypothesis describes and accurately predicts real world phenomena, it becomes a theory. That theory stands only until a better one comes along. Even allowing the use of the phrase scientific consensus, however, Mr. Gore has a significant problem, as discussed in detail in point 24 of Iain Murray's article, "Gorey Truths." There really isn't any consensus at all.

Finally, much of the scare about global warming is based on projections about the future created by computer models. These models, again according to Al Gore, show that human interference is much stronger than any natural cycles. Really? Somehow I doubt that even the worldwide output of every tailpipe and smokestack in the world compares to the power of the sun. "The Sun's energy output is about equal to 77 billion megatons every second. The entire power-generating capacity of the earth equals about 60,000 megatons per year, so in one second the Sun produces over a million years' worth of energy for the earth. If the Sun derived its energy by burning coal, it would take only 18 hours to burn a mass of coal equal to the earth. And the Sun has been doing this for 4.6 billion years. " I digress, however. Simply put, the models global warming activists use are flawed. There hasn't been any global temperature increase since 1998 or so. From 1998 to 2007 is the warmest decade on record, they say, and then attribute that not to human causes, but to the Pacific current El Nino. Currently, global warming is stalled by the cooler current, La Nina. Oh, and by the way, new ocean data added to warming models say the earth may not warm for ten or fifteen years, but after that, it's going to skyrocket. Maybe. NASA's deep ocean probes meant to prove global oceanic temperature rise seem to be indicating just the opposite, and we may be headed into a period of global cooling.

The short version is this: The more hard data scientists obtain, the less accurate previous models of warming are shown to be. Also, the data seems to indicate natural factors solidly override any hypothesized human-caused ones. Perhaps Nature likes to make a liar out of Al Gore. In any case, I fail to believe the models, because I simply don't think we have enough data to be sure of anything yet, and I don't think our models are able to handle a system as complex as global weather. This is something global warming activists work hard to suppress.

My opinion on Global Warming falls very much in line with Michael Crichton's Author's Message in State of Fear:

"We know astonishingly little about every aspect of the environment, from its past history, to its present state, to how to conserve and protect it. In every debate, all sides overstate the extent of existing knowledge and its degree of certainty.

"Nobody knows how much warming will occur in the next century. The computer models vary by 400 percent, de facto proof that nobody knows; and

"Before making expensive policy decisions on the basis of climate models, I think it is reasonable to require that those models predict future temperatures accurately for a period of ten years. Twenty would be better."


Yes, he's a science fiction writer, but he also happens to be a trained scientist.

I do not know what the future holds. I submit that no one else does either, and that we need to work harder to find out before we do anything that would cripple the already weakened U.S. economy or prevent developing nations from producing and using the energy they need to join the modern world. Hysteria about and faith in global warming prophecies should be replaced with the healthy skepticism any critical thinker should use in evaluating scientific data. There's enough contradictory evidence to make a reasonable person sincerely question what the media and Al Gore tells her.

I question Mr. Gore's data, his methods and his motivation as I should and anyone should.

Saturday, January 24, 2009

How Republicans Can Reconnect with Independents and Win in the Northeast Again

Ex-Freakin-Zactly

Okay, this piece doesn't say all my exact feelings about how to reconnect with independents. But it covers a lot of ground that resonates with me.

I've done a lot of soul searching about why the Republican party has blown up in such an embarrassing way the last few years.

It's not just Iraq.

Check out the above link to a piece by John Avalon. It's a short read, and worth your time. I got it off a site called thenewmajority.com. I was searching for something I heard on NPR by David Frum. This is David Frum's new site, and it's stacked with a bunch of people who were Giuliani supporters in the GOP primary. It's a part of the GOP coalition that seems to reject the social conservative GOP more than I'm comfortable with.

Friday, January 23, 2009

Timothy Geithner, and Gitmo

Two articles from the National Review today:

A False Move on Gitmo

This article is critical of the Obama administration for glossily fulfilling a campaign pledge to close Guantanamo Bay. But in 'fulfilling the pledge' they haven't really done what the hard core anti-war base would want them to do.

The money quote:

"So to summarize: We’d love to close Guantanamo, but we can’t right now; we’d love to transfer detainees out of Guantanamo, but other countries don’t want them; we’d love to give every detainee a civilian trial, but we don’t have enough evidence; we’d love to release the detainees we can’t charge with crimes, but our intelligence tells us they’re dangerous, so doing so would be irresponsible; and we’d love to stick to the highly civilized, detainee-friendly interrogation practices approved by the Army Field Manual, but every now and then there may be an emergency when something more severe is warranted."

So what are all the Republicans crying about? That's what I wanted Obama to do! If he's going to close Gitmo, at least we should be glad he's doing it in a way that doesn't cut against the basic philosophy of keeping the country safe. Why are Republicans criticizing the Obama administration for moderately carrying out this campaign pledge. The people who should be pissed off are the hard core anti-war hippies who have been criticizing Bush/Cheney since Sept 12 2001. They're the ones being 'betrayed' by Obama. Republicans should be happy about it. Go Obama. I honestly don't care if the detainees are held at Gitmo, Diego Garcia, Fort Leavenworth or wherever. Seriously people. Say you've got a terrorist being held at Folsom Prison. Do you really think they're going to be treated better there than they are at Gitmo? Do you think they're MORE likely to escape? Come on. Those guys would be treated worse than child molesters. Republicans should shut up and be grateful for this course of action taken by the Obama administration.

A Free Pass For The Indespensable Man

This is a story about Timothy Geithner, Obama's appointment to be Treasury Secretary. I haven't been in love with Hank Paulson. In fact I think he's a douche. But Republicans should be giving Obama all sorts of crap about this appointment. In fact Democrats should be giving Obama all sorts of crap about this. Remember during the election when Joe the Plumber was 'discredited' because he hadn't paid like $1200 in taxes? Joe the plumber was discredited because he wasn't convinced and wasn't going to vote for Obama. Timothy Geithner is going to run the IRS. Any mistake, any omission, any mis-step where he didn't pay his taxes right should be the end of it.

Thursday, January 22, 2009

Protecting the Children

From whitehouse.gov:

Address Gun Violence in Cities: Obama and Biden would repeal the Tiahrt Amendment, which restricts the ability of local law enforcement to access important gun trace information, and give police officers across the nation the tools they need to solve gun crimes and fight the illegal arms trade. Obama and Biden also favor commonsense measures that respect the Second Amendment rights of gun owners, while keeping guns away from children and from criminals. They support closing the gun show loophole and making guns in this country childproof. They also support making the expired federal Assault Weapons Ban permanent.

Oh, really? Before you "childproof" guns, why not start with leading causes of death? Pres. Obama could quit smoking, since smoking-related deaths kill more children every year than guns. Or, how about alcohol? We have to childproof that, because accidental deaths related to alcohol kill thousands of times the children guns do.

All of these deaths are preventable. I've childproofed the guns in my house, by teaching my child not to go near them, to call a parent if she ever sees one out, testing her on these instructions, and keeping the guns in a secure location. Any responsible gun-owning parent does the same.

I'd prefer that the government focus on keeping drunks from behind the wheel, since that's something over which I have no personal control. It's just a thought. Oh, and while I make sure my child can't get to my firearms, I'd like to be able to access them to protect her from criminals who would do our family great bodily injury.

Why not control the criminals instead of my very lawfully owned guns?

Update:

A horrible story was just forwarded to me demonstrating why it's so necessary for lawful citizens to have guns. Remember, Virginia Tech is a gun free zone, which is why it was so vulnerable to the 2007 shooting spree that made such big news.

Guns are not criminals. Criminals are. The police can't be everywhere at once, but good people with guns can stop criminals. This person didn't have to die. It's that simple.

Tax Evasion in Office

Anybody remember this story? Wesley Snipes went to jail for 3 years for failing to properly file his tax returns.

Meanwhile, as long as Timmy Geithner is really sorry, and it's really Turbotax's fault in his mind, he's okay to file fraudulent returns and be accepted to the post with complete control over hundreds of billions of dollars. Of course, Congress had to overlook the fact that he is blatantly lying about it being a mistake, given the deductions he claimed and the notices he signed. He simply did what he could to cheat the IRS out of every cent possible.

Normally I'm not sad to see someone outsmart the IRS, but for someone appointed to a vital post by Obama, shouldn't this be a huge disqualifier? I mean, Biden made it clear paying higher taxes is a patriotic duty.

Oh, and do we really think a guy who uses Turbotax instead of doing his own taxes line by line is the genius we want in charge of the Treasury?

Friday, January 16, 2009

Deflation Confirmed

The government released December's CPI today, which shows another month of decrease, at 1.03%.

The updated table for the last year is now:
MonthMonthly Inflation Rate
January 20080.50%
February 20080.29%
March 20080.87%
April 20080.61%
May 20080.84%
June 20081.01%
July 20080.53%
August 2008-0.40%
September 2008-0.14%
October 2008-1.01%
November 2008-1.92%
December 2008-1.03%

The average for the last quarter is -1.33%, which annually would be about -16%.

I looked over the CPI back to 1913 and it's very hard to find any comparable period. The best comparison I can find is 1929 to 1933, in which the deflationary period was followed by an inflationary period. And of course, we now know that time as the Great Depression.

A big difference is that back then the deflation was preceded by a huge inflationary period, which we haven't seen here yet. I've charted the raw monthly inflation rate from 1913 to 2008 -- the red line is a rolling 3-month average, and the blue line is a rolling 12-month average. Note the 12-month average hasn't dipped into deflation for 50 years, though we're just above it now. If January's CPI has a comparable drop, the 12-month average will drop into deflation.

Here's the chart (it's very wide, so you can scroll left and right if you click on it). Red is the 6-month average, blue is the 12-month average (when I first posted this I incorrectly labeled the red as 3-month average).


News reports are saying silly things like:
The Consumer Price Index dropped 0.7 percent in December, a third straight monthly decline, capping a year in which prices advanced only 0.1 percent -- the weakest 12-month reading since December 1954, the Labor Department said.
...

"Deflation is just around the corner," said Meny Grauman, an economist at CIBC World Markets in Toronto.

"With the U.S. economy roughly one full year into a deep recession, the prospect of deflation is a concern for another time, especially on a day when the U.S. government has decided to inject billions more into the U.S. banking system."

Watch out folks, here it comes.

Thursday, January 15, 2009

Protect Yourself from the Biggest Heist in History

My previous three posts cover the groundwork necessary for this one:
  1. Currency
  2. Deflation
  3. Inflation
Now it's confession time: I'm not an economist. I'm a software engineer who just pays attention to the news.

Deflation has started--I don't have to be an economist to see that. Not when this story just pops up this morning (Wholesale prices fall for 5th straight month) in addition to the evidence I presented this morning. And the Fed has said it's going to crank up the money supply to do their best to stop it (actual quote from the article: "Mr. Plosser said the Fed must assert that it will resist expectations of deflation, and he noted the central bank has pumped large amounts of liquidity into the financial system.").

When the deflation cycle ends, there's no way the money supply can shrink fast enough to prevent massive inflation. That is the heist that's coming. Inflation will reduce the value of every dollar you hold. Things of value will retain that value (I expect long-term investments like 401(k)'s to do okay, etc.). But luxuries and cash (including what's in savings accounts) will drop precipitously in value. And if prices rise too fast, people on a salary will have a hard time adjusting their lower buying power to meeting basic necessities.

So here's my plan to protect myself from what's coming. Hopefully it can be useful to other people.

Hold To Value

As prices fall, it may be tempting to buy luxuries. I don't however plan to buy a new flat screen TV (even though I find it tempting). I'm going to buy canned food and durable goods. I'm going to buy an extra pair of shoes and more clothing for my kids that they'll grow in to. That way, when the inevitable inflation hits, I'll be able to save on those expenses.

I also plan to buy precious metals and a quality rifle. I'm already an enthusiastic hand gunner, but a rifle will be something which will hold value. And in the worst-case scenario, I can defend my food. :)

The metals and other things hopefully can be converted into usable currency (or barter!) as necessary if cash becomes short during inflationary times.

We recently replaced a dead car in our family, and we picked a used vehicle that was highly rated for dependability and lifetime, and wasn't the newest one on the lot. We partially financed it (remember, debtors win when inflation hits) but put enough of down to keep the payments to a reasonable monthly level.

Hold To Truth

I continue to search for voices of truth I can trust. Not very many economists predicted this downturn or even the housing collapse, even though common-sense pointed at it (and highlighted it, and made it blink red on and off). People who were interested in truth found it (my personal favorite is Glenn Beck, who is far from perfect, and many people disagree with his opinions, but he does work hard to find out his facts).

I intend to hold to true principles as well! When I compared the $700B bailout to a bridge, I never expected the reasons for the bailout to be abandoned right after it passed (rather than buying sub-prime loans, the government put money directly into banks). The justification for its passage was barely okay in my opinion. Every spending plan since then has been a violation of free market principles. Even Bush famously said, "I've abandoned free-market principles to save the free-market system." That's an absurd statement. We are on the high road to socialism. Bush didn't save the free-market system, he pointed a gun at its head and pulled the trigger. If it dies, it will be an execution, not a natural death. If you're falling off a cliff, pretending gravity doesn't exist won't save you.

Principles only matter when your back is up against the wall. If you don't hold to them when you're being tested most, you didn't really believe in them to begin with. And I don't believe in big government handouts because I don't accept theft as moral if it's passed as a majority vote, even if I benefit in the short term from the theft.

Hold to Freedom

As the federal government gobbles up private enterprise, it encroaches on our freedoms. I read the Constitution and Declaration of Independence recently (ah, the benefits of homeschooling) -- those inspired words ring loudly in my ears today. We're teaching our kids about how important freedom is, and how great the Constitution protects those freedoms as long as it is respected. We will likely come out of the current crisis with less freedom than we did going into it, and we're going to have to fight to shrink the monster of government back.

There is the very real possibility that the federal government will borrow hugely to rescue states from insolvency, fold pension plans into social security and health plans into a federal heath plan. Once that happens, the government will be able to tell you what to do with your life, property and pursuit of happiness. Our liberty will definitely shrink unless we stand up for it.

Global Warming Policy kills

Carbon dioxide, also known as plant food, really isn't the problem people make it out to be. Graphs of carbon dioxide levels charted with global temperature often show temperature increases preceding carbon dioxide increases.

Atmospheric carbon dioxide doesn't kill people. Historically, slightly warmer temperatures than we currently enjoy have been wonderful for human population.

On the other hand, global warming policy kills as demonstrated by this story. It is shocking that a scientifically unfounded and politically motivated human-caused global warming movement can possibly be seen as more important than human life, but this story demonstrates it.

Deflation, Now 2 Months Running

Just a few data points.

Since the new year, gold has been falling in price.

Oil prices have cratered since the massive high last summer.

Since about August, the US Dollar has been increasing in value against the Euro, the Pound, the Swiss Franc and the Canadian Dollar (that is, the buying power of the dollar has been increasing -- the price of these currencies is decreasing).

And here's the latest table for the CPI (Consumer Price Index):
MonthMonthly Inflation Rate
January 20080.50%
February 20080.29%
March 20080.87%
April 20080.61%
May 20080.84%
June 20081.01%
July 20080.53%
August 2008-0.40%
September 2008-0.14%
October 2008-1.01%
November 2008-1.92%

A monthly deflation rate of 1.92% means an annual deflation rate of 23.04%.
23.04%

One month isn't a trend though, right? Well, October was no picnic either. A monthly deflation rate of 1% hasn't been seen since 1938.

Here's a graph of the inflation rate since 1985 (click the graph to embiggen). Notice anything?


The report for December 2008 comes out tomorrow morning (Jan 16). We'll see what it says.

Wednesday, January 14, 2009

Global Lying

It's not like they haven't done it before. The hockey stick graph was generated using very misleading data.

Still, it's a shock that when the observed numbers don't support the beliefs of global warming activists (read, Global Socialism activists), they'll simply change those numbers.

There are no lies these people won't tell to support their agenda. As human-caused global warming junk science gets more fully debunked, one wonders what lengths they'll go to to try to preserve their myth.

Monday, January 12, 2009

Inflation

This follows on from my comments on currency and deflation.

If the money supply shrinks, you have fewer dollars chasing goods. If it grows, you have more dollars chasing goods.

Inflation

More dollars lead to increased prices and inflation, just as more bidders in an auction raises prices. Most people understand the basic idea that "stuff costs more." Okay, that's what inflation is, but rarely do I hear people talk about the cause and effects.

Examples of Inflation

Housing
If you doubt that more money causes inflation, look at the housing market. When lenders were giving loans to anyone, it flooded money into the real estate market. It should have surprised absolutely no one that there was a housing bubble. Lower rates and qualifications meant that it was less expensive to borrow (yep, money was actually cheaper).

Oil
In 2000, the rules for trading oil were relaxed (60 Minutes describes it as "effectively deregulated". And thus in July of 2008, a lot of money flooded into oil futures. Normal speculation (which tends to soften the spikes and drops of normal price responses) was overwhelmed by people new to the market, thus driving the price of oil far above what it would have been otherwise, and we're still trying to figure out what the price of oil is now.

Neither of those are examples of inflation per se, because properly inflation is a general increase in prices, not in just one area of the economy.

Effects of Inflation

So prices go up, so what? You know that when prices go up that it's harder to buy groceries, office supplies, etc.--your costs go up. So inflation hits people who are spending money. You trim your budget. Or you get a raise as your experience rises, hopefully faster than inflation. If you're a business owner, you know the phrase, "grow your business or die."

Another effect is that inflation hits people who have loaned money. Banks have loaned out money at (say) 6%. If inflation hits 6% it means banks aren't getting any return on their money. They're loaning out money and when it comes back, it has the same buying power. Which means that banks go out of business.

Ah, but what if you've borrowed money? You win on inflation. You borrow a dollar and when you pay it back, it's worth less than it was when you borrowed it.

So the big winner on inflation is anyone who owes money. And who's the biggest debtor in the United States? The US government of course. The same entity that can print money at will. Back in 1944 we promised not to do that at the Bretton Woods conference, but we seem to be ignoring that in our current effort to prevent deflation (see my last post).

And by the way, the US owes a lot of money. Current accumulated debt is about $10 trillion (that's $10 million million, or $10,000,000,000,000). The annual deficit has run about $300-$400 billion, but with all the bailout talk that is going to run to over $1 trillion, and Obama has promised that we've got billion-dollars of deficits for years to come.

All of that doesn't even include the expected $54 trillion we've promised in social security but haven't been funded.

Which is what I've been leading up to: what to do about all of this. I'll tackle that in my next post.

Deflation

I briefly discussed the reasons for currency, now let's go over what can go wrong with it.

Deflation

Deflation is what we call it when prices drop and keep dropping.

Aren't low prices a good thing? Well, yes if you have a job. However, if people don't buy goods at lower prices, here's what happens:
  1. Goods build up in the warehouses
  2. Producers no longer get orders for new product
  3. Producers lay off workers
  4. Laid-off workers have less income
  5. Lower income means fewer people to buy
  6. Return to step 1
Any economic cycle has an end. However, a deflationary cycle terrifies people who run banks. Here's a lecture from Ben Bernanke (currently the Chairman of the Federal Reserve -- the Fed for short) back in 2002 about deflation:
However, a deflationary recession may differ in one respect from "normal" recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero. Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash. At this point, the nominal interest rate is said to have hit the "zero bound."
He continues warning what to do about this:
First, the Fed should try to preserve a buffer zone for the inflation rate, that is, during normal times it should not try to push inflation down all the way to zero.
The current overnight rate is at 0-0.25%. We are now at the "zero bound" Bernanke talked about in 2002.

So what was his plan if we get to that point?
So what then might the Fed do if its target interest rate, the overnight federal funds rate, fell to zero? One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities.
Oh, yes that's happening now. 30-year Treasury yields had been falling, and now are going up again. Bernanke continues:
Sustained deflation can be highly destructive to a modern economy and should be strongly resisted. Fortunately, for the foreseeable future, the chances of a serious deflation in the United States appear remote indeed, in large part because of our economy's underlying strengths but also because of the determination of the Federal Reserve and other U.S. policymakers to act preemptively against deflationary pressures.

...

prevention of deflation is preferable to cure. Nevertheless, I hope to have persuaded you that the Federal Reserve and other economic policymakers would be far from helpless in the face of deflation, even should the federal funds rate hit its zero bound.
The wonky explanation about deflation is that the money supply contracts. That is, there are fewer dollars chasing the same goods. That can happen because of high interest rates (meaning it costs more to borrow, so people don't borrow as much) or in our case, a general depreciation of assets (housing and stock crash anyone?).

To counter this, theory is to use tools to increase the money supply. We can't lower the interest rates (they're at that zero bound), so what can we do to increase the money supply? Why, print more money! In fact, the non-asset money supply has been increasing (so the printing has been going on for some time now). Here was the headline on the Drudge Report a few days ago:

Looks like they're doing their best to avoid deflation. But what does that lead to? Inflation.

We'll talk about Inflation next.

Thursday, January 8, 2009

What is the Value of a Dollar Bill?

One of the failings of our culture is how often the voter is asked to make economic decisions, without first understanding basic economics. If you're one of those people, I heartily recommend Thomas Sowell's Basic Economics.

Here's my attempt to provide a foundational understanding of what is coming with the economy. We're in for an interesting currency ride, but to explain that, we have to go over what currency is worth.

Why do we pass paper around?

Paper money has no practical value of course. Coins have some practical value (you can use the metal for great projects like this one, or this one). The amazing thing that most people don't realize is that nothing has an inherent price. You set the value an egg or a pencil or a lamp when you decide to trade something you own for it.

Wealth is created every time a voluntary trade happens. If I trade my pencil for your egg, it means you value the pencil more than the egg, and I value the egg more than the pencil. We both win. But of course eggs and pencils aren't convenient to carry around. Paper and coin currency are more convenient, and have the additional advantage of being fungible (a fun word that means that any dollar bill is exactly the same as any other dollar bill).

Now it used to be the case that the dollar bill was tied to a quantity of gold. Even when you wrote a contract, you could required to be paid in "or the equivalent value of gold." The reason gold is used as a currency is:
  • it is stable - it doesn't react with other compounds, so it doesn't tarnish, etc.
  • it is easy to identify and verify as real
  • there is only so much gold in the world - you can't simply manufacture it
Even so, gold only has the value you think it does. An ounce of gold can be traded for whatever you want if you can get someone to agree to it. If you accept an ounce of gold for your refrigerator (the price for gold as I type this are about $855 / ounce), it's because you think someone else will take that ounce from you and give you something you value about the same as your refrigerator.

The same thing goes for dollars. You accept dollars in exchange for your stuff, because you expect to use those dollars to pay for something worth about the same as your stuff.

Next time: Deflation.

A Gem of Common Sense

Recently, Tom McClintock became a congressman from Northern California. He's well known in this state for his efforts to restore fiscal sanity to an out of control Legislature. As a State Senator in the permanent minority party in California, he didn't have a lot of power to do that.

As a junior congressman in the U.S. House of Representatives, he still doesn't have much power to change things, but he has kept his common sense.

This morning on the Armstrong and Getty Show he said, "Government can not inject a single dollar into the economy that it hasn't first taken out of the economy. And it takes productive use and puts it to less productive use and that doesn't help the matter, that hurts it. That's how the recession of 1929 became the chronic depression of the 1930s."

While Rep. McClintock was explaining this, President Obama was busy asserting, "We cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy—where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit."

That is simply false. Let's take government assistance. Approximately 70% of all monies allocated for assistance to the underprivileged are consumed by the administrative structures designed to distribute them.

My faith engages in massive charitable efforts, and has an administrative cost of 0%. That's correct--the work is carried out by volunteers who see the money as a sacred trust. I'd like to see the average administrative cost for private charities--quick research for this post didn't turn up figures, but I'm willing to bet private charities are more efficient than government by a large margin. Anybody with actual figures, please comment, or I'll do more research as time permits.

Who's doing a better job?

Instead of taking money from the economy, there are some simple things government can do to help the economy right now. Save perhaps Japan only, the U.S. has the highest corporate tax rate of any industrialized nation. Drop it to 20% or lower to attract business back into the country. Temporarily drop the capital gains tax to a low percentage, perhaps 2%, and cap it at 10%. This will encourage investment, which will lead to more money available for entrepreneurial ventures, which generate the revenue required to make our economy healthy and provide a strong tax base for government.

While we're at it, we might scrap the current tax code and go with the lowest possible flat tax instead. That method of taxation created a robust economy from the ashes of Russia's prior systems, though recent drops in oil prices have done great damage to that economy.

When it comes to cash flow, we don't need a government filter between business, people and money, since the bureaucracies reduce the amount of money that makes it back out into the economy. The solution isn't more government intervention, it's less.

Wednesday, January 7, 2009

That's Rather Shocking

I'm always amazed how people accept otherness as a matter of course--you must or you're intolerant. It's okay to bash Christianity, because it's familiar. Traditional values are fair game, too, despite the fact that they've worked for many years and the alternatives don't seem to do as much good for society.

I'd submit that there are limits, however. Tolerance of intolerance isn't tolerance, it's stupidity.

This protester certainly doesn't speak for everyone on the pro-Palestinian side of things, but the message sure gives such protesters a bad name.

By the way, you don't have to be anti-Palestinian to support Israel in this conflict. I'm pro-Palestinian, pro-Israeli and anti-Hamas, anti-terrorist. I think if anyone lobs missiles into your territory for 6 months before you start surgical strikes, you've shown admirable restraint.

Israel is going out of its way to avoid civilian casualties. Hamas is going out of its way to inflict them.

Yet, it seems like those on the left are still anti-Israel. Perhaps they agree with this demonstrator that Jews should "Go Back to the Oven"? I don't care how tolerant you are, that line is unacceptable, and a sign that we've let things go too far in our society.

Saturday, January 3, 2009

Teach Your Kids to Touch Type

As a computer programmer, I have a lot of tools. Compilers, debuggers, drawing tools, etc. But my primary tool is the keyboard. I spend upwards of eight hours each day in front of a keyboard. I continue to be amazed at other people who choose this profession, yet can't type to save their lives.

For the foreseeable future, everyone will be spending lots of time in front of the keyboard. So teach your kids to do it without hunting and pecking! I learned on my own and could type 20 WPM by the time I was 11 years old. In junior high school I learned to touch type and got up to 40 WPM. By high school I was typing at 75 WPM. I wonder how much time I've saved over the years by not pecking out all my time on the computer.