The Allegory of the Fishermen

In a small village in Scotland a lake that was previously void of life was found to have fish.  Several entrepreneur/fishermen launched fishing businesses to take advantage of the rich natural resource.  The first few businesses to launch made enormous amounts of money which caused more entrepreneurs to test the waters.  Everyone in the village was better off.  The inflow of money caused restauranteurs, shop owners, resin suppliers, dentists, buggy manufacturers and nearly every other merchant to become wealthier.  With their surplus, many of the entrepreneurs invested in new equipment that would make fish processing much more efficient.  This investment yielded more surplus which was invested into forays into the shipping business, investment in property and other companies, and investment into medical research.  The increased wealth from production unleashed a wave of jobs. Tax revenues also went up and the government was quick to raise salaries sufficiently to attract good people, invest in infrastructure projects, and plan for growth.

Soon the fishermen reached a point at which the lake could not replenish the number of fish taken, so the government hired a scientist to study fish reproduction rates to determine whether or not fish quotas should be required and what those should be.  The goal was NOT to create a job for the scientist but to maximize production.  The scientist determined that the correct annual amount of harvest per year for all fishing enterprises would be 800,000 lbs per year.  The scientist also said that by adding a certain, inexpensive feed to the lake, that would cost $100,000 per year, the fishermen could safely harvest another 400,000 pounds of fish per year without any negative impact to the lake.  The fishermen were able to sell each pound of fish for $2.00.  The government, in order to optimize production, restricted the number of boats that could fish the lake and divvied permits via an auction.  There was also a tax placed on the permits that totaled $100,000 annually.  All of the tax revenues were used to purchase the necessary feed and the total annual lake harvest quota was set at 1,200,000 pounds of fish per year.  This was divided up into 12 months and all companies could fish as much as they wanted until the 100,000 lb monthly total was reached, then all fishing was prohibited for the rest of the month.  There were other costs to manage the operation besides the fee.  A scale had to be purchased and weighers had to be employed, but the system was optimized with appropriate government intervention, and a tax was carefully imposed to cover the costs to the government for optimizing production.

Ten years later another government was in power.  Although everyone was better off  economically, some were a lot better off and others less so.  The less so’s screamed, whined, complained, sabotaged, and lobbied the government to make them equal in pay with the fishermen who were amassing fortunes.  Their argument was that it was the lake and not the fishermen that had allowed prosperity and since the lake was public property that all should directly and equally benefit from the spoils.  The wise governor of the time heard them and tried to teach them economics but they would not listen.  He ignored them and production continued unhampered for ten more years.

The complainers were much better off than they were prior to the boom in the fishing industry, but, since they were not as well off as the entrepreneurs, they continued to lobby the government.

A young entrepreneur named Karl, seeing an opportunity to make a fair sum of money, came to the town and convinced the less rich that they deserved their full share of the spoils.  He co-opted the word, Justice, because everyone liked justice.  He helped them strategize on how to get more of the spoils.  He taught them to,

1.  Vilify the fishermen as being undeserving exploiters

2.  Control media communication

3.  Control school curriculum

4.  Foment unrest among the have-less’

5.  Place confederates in political office and in the judiciary

This done, the group infiltrated the political landscape.

The end result was that Karl made off like a bandit through kickbacks and fees.  The leaders of the have those who were less rich got richer.  The less rich got poorer and the less rich leadership blamed the increased poverty on their lack of complete power.  The focus went form production to jobs.  As jobs were the focus, the government required boat inspections and hired boat inspectors and expensive but invasive boat scanning machines.  So that no sharp object could penetrate any of the boat hulls, fishermen were required to be strip searched for their own safety.  Those ignorant of economics lauded the power of the government to create jobs.  But with no increase in production, the jobs amounted to a redistribution of wealth and an overall net loss to the economy.

There were three ways to pay for all this.  They could borrow money, raise taxes or inflate the currency.  A combination of all three was chosen.  Soon fishing was only marginally profitable for a fisherman and the good ones left for less regulatory waters.  Everyone got poorer, and there was high unemployment.  Worst of all, gubernatorial greed provided a corruption seedbed.  The politicians who’s shortsightedness had caused the town’s demise had transformed their positions from a public service role into a kingdom.  They instituted coronation parties, photo session,  vast benefits, trips at tax payer’s expense and lived as though they were owed an opulent living on the backs of the people doing the actual production.

The rest of the story is being written.  If you were allowed entrance into the community and given a chance to speak to any group, what would that group be and what would you say?

TSA Dialogue

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.