Faith Gap

People need to believe. They need to believe THATsomething magical, transcendent, other-worldly, or divine will allow for positive outcomes. They need to believe that statistical probability, reason, and science cannot adequately calculate the likelihood that future events will occur as predicted. Some of the more gullible believe that sexual attraction will ensure lasting happiness or that will power and the latest diet prophet will have them wearing a size two by October.

People need to believe IN a being or group that can deliver mystical, positive outcomes. As faith in the Judeo-Christian God has retreated, other charlatans, impostors, and imitators have gained ground. Faith has not diminished; it has shifted. Never is this more evident as a national phenomenon than has been shown by the election of Barack Obama. He was elected on faith in the unseen, untried and untested. He was elected on promises of goods that have not and will never be delivered.  He is not alone in his message of mystical over-delivery.  John McCain could not have delivered on his promises either.

Any successful candidate must harness the faith of the people, however misguided.  The Obama camp understood this and created a campaign that emulated a religious revival but in secular garb, and like other revivals, faith in the promised, yet unseen was the campaign’s core message.  HOPE was chosen over FAITH only to avoid an overtly religious reference.

Modern politicians have borrowed a page from 14th century Christian history.  Leaders of Christianity of the day were sure that they would lose their positions of power if the scriptures were able to be read by the masses.  They believed, rightly, that the proliferation of the doctrine of Christ as revealed in the Bible would ennoble and liberate the masses who would then require conditions, such as accountability to a clear standard, of their clergy.  This accountability was intolerable to the degree that when William Tyndale published and distributed what became known as the Tyndale Bible to the masses in England, he was arrested by church authorities, held in prison for over a year, tried for heresy, strangled and burned at the stake.  A knowledgeable public, even in 14th century England, would have little tolerance for mischievous ministers who would fudge doctrine for the political expediency of cajoling vile Henry VIII.

Accountability is also intolerable to modern politicians.  These political priests would rather have their works shrouded in darkness.  If they can mystify an opiated public, they can create multiple unholy alliances with modern Henry VIII.

Today’s remedy is similar to Tyndale’s.  If a public is informed and engaged, mountainous works of darkness and debauchery will be exposed.  A politician’s aspiration will cease to be Caesar and turn to emulation of Teresa of Calcutta.  A knowledge of logic, statistics, history, civics and economics applied to the Constitution (the how) and the Declaration (the why) will reign in false priesthood such as a rogue justice department whose civil rights division suffers a fondness for political alter boys.  It will depose would-be tyrants, and it will curb wanton debt inebriation.

Regardless of your political ideology, it’s time to engage.  Have faith, but bring to bear all of your intellectual and informational faculties.  If your faith is well-founded, it will be enhanced by rigorous testing.  If not, you will be able to avoid the kool-aid.

Do not miss this video!

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Seymour Logic

Feed me, Seymour!

Watch the following clip then read on…

Cast of Characters

Seymour — Washington Politicians

Audrey II — Government

Blood — Regulation, taxation

Audrey — Votes

Audrey II’s appetite is insatiable and, like a fat kid with indulgent parents, requires more sustenance as more is given. As with fat kids, supersized governments, rather than being productive, become ever more sickly, slow and parasitic with little chance of productive adulthood.

What is particularly pernicious is that, in the case of Greece, the United States and nearly every other troubled economy, Seymour has gone into the womb to seek new blood to feed Audrey II.

Keynes would say, “Go ahead and feed the monster! At some point, the monster will create a situation where more blood will be produced to cover the quantity required.” This is Seymour Logic. It is also displayed in the Broken Window Fallacy.

Seymour’s only check is Audrey’s love (votes). He has ensured that taxation and regulation happen to the other guy and not to him. Just look at health care for members of Congress as opposed to yours. He can increase his pay, benefits and perks with impunity. He has shielded himself from the gruesome and sobering task of blood extraction. By never having to ask or even face blood givers, requirements can quickly increase from pints to gallons with little remorse or reflection. Only Audrey stands in the way of aggrandizement through monster growth.

For years, Audrey, donning a halter top, cheap high heels and smelling of tobacco and Wild Turkey has been unable to influence Seymour. She has naively trusted him and has turned a blind eye to not only monster feeding, but other shenanigans. Audrey must aspire to more than decadence and dilapidation. She must require of Seymour, restraint and accountability. Only then will the monster shrink and be kept alive by drops instead of gallons.

Get Ready For Inflation

What is known is that inflation is inevitable. What is not known is its timing, duration and intensity. The apocalyptic scenario is chilling. The Bernanke/Obama scenario is akin to a dental check up. Somewhere in between lies the truth. You would have to be older than I am to have experienced inflation that last time it was in full bloom in the United States. Those that were prepared lived through it with little pain, and a few of the strategy minded came out ahead. What we have never lived through is hyperinflation. I include two videos from someone who has lived through it and who has dire predictions for the future. I start with an inflation tutorial, go on to discuss the current situation and how we got where we are. I then present and review multiple predictions and move on to strategies.

Inflation 101

Inflation is the result of having too much money in the economy compared to the supply of goods and services.

The government has several ways to pull money out of the economy to avoid inflation. Bernanke is banking (he he) on several possibilities.

James Grant (no relation) opines that the government is taking “kitchen sink” measures to stimulate, but greater inflation may be the result of the spending orgy.

Now for the chilling side of things. Some are predicting meltdown. What they mean by that is hyperinflation. Hyperinflation has been seen on a limited scale in the past, but is predicted by the following two videos to be a global phenomena in the near future. These next two videos are lessons from Argentina.

This video also predicts doom and gloom…

What you can do to get ready if Bernanke is right…

Inflation helps borrowers and hurts lenders (but in a bailout era, lenders are protected at the expense of producers, ie. you and me and our posterity for a couple of generations). Because the government is a big borrower, inflation is only bad for it if people get upset and informed enough to change the regime. Basically, the government is able to pay off its fixed interest rate debt responsibilities with inflated dollars.  In the Bernanke scenario, inflation will rise (but not too high), taxes will go up, and the government will have an easier time paying off debt. If he is right, you should:

• Hold NO credit card debt (CC debt is adjustable debt. If you carry a balance on your CC debt, you will be toast later)




• Get out of any adjustable rate mortgage  (ARM) that you may have (If you are in an adjustable rate mortgage, get out of it fast)
• Have food storage (1 year)




• Plant a garden
• If you have money or assets, buy TIPS (Treasury Inflation Protected Securities)
• Own paper gold
• Consider Commodities
• Short the Dollar

The previous four suggestions are paper based. That is, you don’t have to hold gold bullion, pork bellies or buy another currency. You can accomplish all of these through paper transactions through a broker. There is security risk with actually owning and holding bullion which can be avoided with a paper purchase.

What you need to do to get ready if the worst-case scenarios are right…

The worst case scenario is brutal and unpredictable. Here are some ideas:

• Move out of large cities where demonstrations, riots and theft are more likely than in rural areas
• Take advantage of second amendment rights while you can
• Increase your food storage (one year minimum)
• Hold no adjustable debt
• Plant a garden
• Increase home security
• Own property in Brazil
  

Mormon leaders have been teaching members of the church to prepare for inflation and other events since about 1950. Recently, the warnings and counsel have become more urgent.  The advice is great for all scenarios. If you are not a Mormon, find one and ask about what has been taught for decades.  Here are some examples:

Joseph B. Wirthlin

James E. Faust

Gordon B. Hinckley

Ezra Taft Benson

From a political standpoint, government response from the current executive and legislative branches will likely make things worse for a time. It will get worse because of the character of the politicians involved.  They care much more about re-election and self-aggrandizement than they do about reversing the current destructive course of special-interest constituent subsidization, Governor Christie being the salient counter instance.  Making changes every November for a while would be a good idea.

From Coolidge:

“It is difficult for men in high office to avoid the malady of self-delusion. They are always surrounded by worshipers. They are constantly, and for the most part sincerely, assured of their greatness. They live in an artificial atmosphere of adulation and exultation which sooner or later impairs their judgment. They are in grave danger of becoming careless and arrogant.”

Conclusion

In preparation for this post, I spoke with several wall streeters and economists and found no predictive consensus. I really don’t know what will happen. I can say, in the words of Mr. T, “My prediction, PAIN.” It’s time to prepare for the worst and hope for the best.

John Adams Quote

John Adams: “Liberty must at all hazzards be supported. We have a right to it, derived from our Maker. But if we had not, our Fathers have earned and bought it for us, at the expense of their ease, their estates, their pleasure, and their blood”

Check Out This Video

Honk if I’m Paying for Your Piano Lessons!

First we heard that we have to pass the bill to know what’s in it.  Now that we have passed it, we are learning what’s in it.  It is heartwarming to know that I and my children will be funding the healthcare of artists who’s works do not stand a chance in a market of art buyers.  Maybe I can fund the healthcare of a scriptwriter at comedy central who will attack my religion, race, political position, and morality.   Thanks, Nancy!

Senator Bennett’s Sudden Dismissal and Internet Regulation

What could Bennett’s Senate dismissal and proposed internet regulation possibly have to do with each other?

First, a question I asked my students

As we discussed web strategy in my entrepreneurship class, I asked the following question to my 30 students, “Who stands to gain more from unregulated internet proliferation, libertarians or socialists?”

Surprisingly to me, the vast majority said that socialists have more to gain.  I do not agree.  Information control is critical to socialist causes.  The FCC recently suffered a legal loss when a court ruled that the FCC has no jurisdiction in the internet.   The court ruled so due to the Bush  Administration’s broadband reclassification of the internet to “information service.”  As “information service,” the internet cannot be regulated or governed by the FCC.  See the article below for an explanation.

http://www.seattlepi.com/business/1700ap_us_tec_internet_rules.html

Following its loss, the FCC’s plan is to reclassify the internet in a way that will allow the FCC to 1) control how service providers allocate bandwidth and 2) subsidize internet use to the poor.

Conservatives are bristling at what they say is another government takeover and another redistribution of wealth.  They point to Communist/Socialist/Totalitarian countries that all regulate the internet as a way of keeping the masses under state control.  With few exceptions, the rulers of these countries are only able to maintain control by squelching dissenting voices.  Many libertarians/conservatives (Glenn Beck for one) claim that any further regulatory control is a mere “foot in the door” toward further free speech encroachment and must be stopped if we are to maintain our quickly diminishing level of freedom.  The below article discusses Hugo Chavez’ attempts to regulate dissenting voices.

http://news.cnet.com/8301-13578_3-20000415-38.html

Senator Bennett was sent packing because he could not be relied upon to stand on principle.  By his own admission, he believes that it is naive to think that you can go to Washington and get anything done without vast compromise.  But getting things done is hardly a worthy aim.  In fact, at least for convention voters, getting things un-done is a worthier pursuit.  The internet regulation battle will be at least partially decided by congress.  Having lost the government encroachment battle on healthcare, banking, auto industry and others, GOP convention voters wanted assurance and clarity that further government encroachment on anything else would be akin to a war declaration.

A strong message out of this was sent to Senator Hatch who faces reelection in two years.  He also glories in his gaming ability.  He thinks it is naive for Pollyanna conservatives to suggest that principal should supplant expediency.  Senator Hatch has two years to make his case.  His reelection depends on it.

Wealth “Out of Thin Air” — The Proper Role of Government in Prosperity — Part 1

If you have never studied economics, you need to understand the strange and magical math of exchange before I make my next points.

Case Study 1

Baskets and Spears (borrowed from Bill Whittle)

On Robinson Crusoe island, there are two populations, mountain and lowland. The mountains are rugged and agriculture is nearly impossible. There is, however an abundance of large game to be hunted as well and wild berries, tubers and roots to be harvested. In order to hunt the large game, the mountain dwellers became expert spear makers. They extract ore from the surrounding hills, temper and polish the steel then fasten the steel point to a polished, straight stick. The spears are marvelous. They have to be in order to ensure community survival. The mountain dwellers also make baskets to haul berries, bulbs and roots. The baskets are poorly made by comparison and are in need of constant repair. Time spent to make a spear is three hours. Time spent to make and repair a basket is six hours.

The lowland population is made up of gatherers and as such, they have become expert basket weavers. Their baskets are so tightly woven that they hold water. This has allowed them to harvest fish from the sea and keep them alive for days in the village. They also plant and harvest various small crops. Their baskets are strong and light and rarely fail. They also make spears to hunt fish and small game, but the spears are poorly made, rarely effective and are in constant need of repair. It takes three hours to make a basket and six hours to make and fix a spear.

One day, a lowlander meets a mountain dweller for the first time. The lowlander admires the mountain dweller’s spear and the mountain dweller admires the lowlander’s basket. They each exchange with the other and both are benefited. The lowlander saves at least three hours and owns the best spear in the village. The mountain dweller also saves at least three hours and owns the best basket in the village. The three hours is calculated by counting the six hours saved in making an inferior basket for the mountain dweller and in making an inferior spear for the lowlander. Then subtract the time it took for the mountain dweller to make his superior spear and for the lowlander to make the superior basket and you have a three hour savings for each. Both villages are so excited about the prospect of the time savings associated with exchange that they agree to free association. Both are made wealthier and decide to take their time savings and invest that time in better plumbing, running water, recreation, and better housing.

Wealth is created out of thin air!

But the magic does not end there. Suppose that both communities made spears and baskets of equal quality. Suppose that it took the average mountain dweller 10 hours to make a spear and 11 hours to make a basket. Suppose that it took an average lowlander eight hours to make a spear and 10 hours to make a basket. The lowlanders are better at both spear and basket making. So it makes NO sense to exchange, right? WRONG.

Do the magic math!

Suppose that during a year each community wants to have 1,000 new spears and 1,000 new baskets. If they work on their own, it will take the lowlanders 8,000 hours to make to make spears and 10,000 hours to make baskets for a total of 18,000 total work hours. For the mountain dwellers it takes 10,000 hours to make 1000 spears and 11,000 hours to make 1000 baskets for a total of 21,000 work hours. The combined total is 39,000 hours.

Magic!

If the lowlanders focus on spears and the mountain dwellers focus on baskets in spite of the fact that mountain dwellers are inferior at both spear making and basket making, most assume that there is no gain or at least that there is no gain for the lowlanders. If lowlanders specialize in spears, it would take them 16,000 hours to make 2,000 spears. If the mountain dwellers specialized in baskets, it would take them 22,000 hours to make 2,000 baskets. The total number of hours worked is 38,000 hours. They have just magically created 1,000 hours of wealth out of thin air! Individually, the lowlanders are better off by 2,000 hours and the mountain dwellers are worse off by 1,000 hours. To make it work for both sides, they could split the surplus and both be better off by 500 hours each.

Wealth is fabricated out of thin air!

There is no finite pot of wealth in the universe that has to get divided up and in the division, some get richer and others get poorer on an absolute scale.

Case Study 2

The Bonus (Also Bill Whittle)

You work for an insurance company. You sit at one of several desks among several other employees that do similar work as you. One morning get a call from a vice president who asks you to come to his office. When you enter, he greets you with a warm handshake and a big smile. He thanks you for your good work over the last year and explains that the company is enjoying windfall profits. He hands you a check for your good work. As you leave his office, you look at the amount on the check. You are stunned. The check is for $100,000. At first you think it must be a typo. You look the check over carefully and realize that the amount is correct, and you start thinking of all the things that you could do with $100,000. You can pay off your student loans, buy a new car and still have money left over for a few vacations.

Later, in the lunch room, you tell your co-workers about your good fortune. They congratulate you and tell you that they all received $500,000 bonuses. You can’t believe it. Suddenly, the sweetness of the $100,000 has turned acrid as you now contemplate what you could have done with the $500,000 that you did not get.

The story describes the ugly side of human nature. A biblical parable teaches the same lesson.

Matthew 20:1-16

1 For the kingdom of heaven is like unto a man that is an householder, which went out early in the morning to hire labourers into his vineyard.
2 And when he had agreed with the labourers for a penny a day, he sent them into his vineyard.
3 And he went out about the third hour, and saw others standing idle in the marketplace,
4 And said unto them; Go ye also into the vineyard, and whatsoever is right I will give you. And they went their way.
5 Again he went out about the sixth and ninth hour, and did likewise.
6 And about the eleventh hour he went out, and found others standing idle, and saith unto them, Why stand ye here all the day idle?
7 They say unto him, Because no man hath hired us. He saith unto them, Go ye also into the vineyard; and whatsoever is right, that shall ye receive.
8 So when even was come, the lord of the vineyard saith unto his steward, Call the labourers, and give them their hire, beginning from the last unto the first.
9 And when they came that were hired about the eleventh hour, they received every man a penny.
10 But when the first came, they supposed that they should have received more; and they likewise received every man a penny.
11 And when they had received it, they murmured against the goodman of the house,
12 Saying, These last have wrought but one hour, and thou hast made them equal unto us, which have borne the burden and heat of the day.
13 But he answered one of them, and said, Friend, I do thee no wrong: didst not thou agree with me for a penny?
14 Take that thine is, and go thy way: I will give unto this last, even as unto thee.
15 Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good?

Some people (maybe most) would rather be equally poor than unequally rich.

With these two case studies as a backdrop, we can introduce government as a party to exchange.

Stay tuned for part 2

Doing the November Cow

I’ve had occasion to relate a rather crass story about two bulls on a hill, the one young and the other old. First the story, then the application.

There were two bulls on a hill, the one young and the other old. The young bull surveys the cows below and with youthful exuberance, suggests to the old bull, “Hey, I have an idea. Why don’t we run down the hill and do one of those cows?” The old bull considers the young bull’s suggestion for a moment, then says, “Why don’t we walk down and do ‘em all?”

I was impressed by an idea expressed by one of Maria Angelica’s posts where she said,

“what you conservatives better understand is that winning the Latino vote would secure your political sway for decades to come. Liberals and democrats understand this. They cater/pander to the Latino community. If not for George Bush’s relative popularity among Latinos, you would have likely had a two-term Gore White House.”

You can read the rest of her piece, HERE.

So there is rabid vitriol afoot in conservative circles. You can join several facebook groups on either side of the debate, and the shouting match may further mobilize conservatives into an anti-incumbent frenzy that will last through November. Conservative’s will claim a well-earned victory, and the young bull will have run down the hill, spewing snot and other fluids, and will have done the November cow.

I, for one, would rather win the war than the battle. A strategic (old bull) would suggest a different approach. Here are some ideas:

• Better enemy selection. There are two possibilities. You can blame federal bureaucrats for inferior immigration policy (a view legal and non-legal immigrants agree with), or you can blame illegals (a view legals and non-legals despise). The President has taken a conciliatory approach and blamed the bureaucrats and thereby increased his already lock on the Latino vote. So what? you ask. If he enjoys a Latino lock in 2012, he will be nigh unbeatable.
• You are not going to ship all illegals home. There is not enough money or political will to build a fence (or any other barrier mechanism of man and materiel) deep, long and high enough to stop US entry. So you have an alternative. You can be like the guy in the bar in Belfast, Ireland who goes off on an ale-induced rant about the rotten English (nothing gets done, but it sure feels good). Or you can 1) understand the other position and 2) broker a solution that will win confederates that really enjoy high alignment with conservative aims.
• You can stop drinking Kool-aid.

Liberals are thinking of the 2016, 2020, 2024 and even the 2036 elections.  Conservatives are excited about November.  Take a lesson from an old bull.