Political Positions on the Spectrum Explained in Plain English

 

LIBERTARIAN

A libertarian supports…

  • maximum liberty in both personal and economic matters
  • a much smaller government; one that is limited to protecting individuals from coercion and violence
  • individual responsibility
  • private charity
  • diverse lifestyles
  • the free market
  • defending civil liberties
  • abortion rights
  • same-sex marriage
  • sanctuary cities
  • Edward Snowden
  • fracking
  • clean alternative energy
  • oil drilling
  • felony voting rights

A libertarian opposes…

  • government bureaucracy
  • excessive taxation
  • Planned Parenthood funding
  • death penalty
  • Obamacare
  • drug price regulation
  • minimum wage
  • welfare
  • corporate tax
  • estate tax
  • border wall
  • Common Core
  • Syrian refugee immigration ban
  • military spending
  • torture techniques (such as waterboarding)
  • NSA surveillance
  • gun control
  • public campaign finance
  • War on Drugs
  • USA Patriot Act
  • Affirmative Action
  • Mandatory vaccinations
  • GMO labels
  • climate change regulations

 

REPUBLICAN

A republican supports…

  • free market capitalism
  • free enterprise
  • business
  • a strong national defense
  • deregulation
  • restrictions on labor unions
  • social-conservative policies
  • traditional values (usually Christian in foundation)
  • War on Drugs
  • school choice
  • individual achievement
  • fracking
  • death penalty
  • border wall
  • Syrian refugee immigration ban
  • military spending
  • torture techniques (such as waterboarding)
  • NSA surveillance
  • USA Patriot Act
  • oil drilling

A republican opposes…

  • immigration amnesty
  • abortion rights
  • Planned Parenthood
  • drugs
  • Obamacare
  • Common Core
  • gun control
  • minimum wage
  • estate tax
  • Environmental Protection Agency
  • global warming/climate change regulations
  • same-sex marriage
  • drug price regulation
  • welfare
  • corporate tax
  • sanctuary cities
  • public campaign finance
  • Edward Snowden
  • affirmative action
  • mandatory vaccinations
  • GMO labels
  • felony voting rights

 

POPULIST

A populist supports…

  • death penalty
  • obamacare
  • drug price regulation
  • minimum wage
  • welfare
  • corporate tax
  • estate tax
  • border wall
  • Common Core
  • Syrian refugee immigration ban
  • military spending
  • torture techniques (such as waterboarding)
  • NSA surveillance
  • gun control
  • public campaign finance
  • War on Drugs
  • USA Patriot Act
  • affirmative action
  • mandatory vaccinations
  • GMO labels
  • climate change regulations
  • clean alternative energy

A populist opposes…

  • abortion rights
  • same-sex marriage
  • planned parenthood funding
  • sanctuary cities
  • Edward Snowden
  • fracking
  • oil drilling
  • felony voting rights

 

 

DEMOCRAT

A democrat supports…

  • protection of social programs
  • consumer protection programs
  • workplace safety regulations
  • equal opportunity and racial equality
  • regulation against pollution in the environment
  • clean alternative energy
  • scientific consensus on climate change
  • cap-and-trade policies
  • abortion rights
  • same-sex marriage
  • Planned Parenthood funding
  • Obamacare
  • drug price regulation
  • minimum wage
  • welfare
  • corporate tax
  • estate tax
  • sanctuary cities
  • Common Core
  • gun control
  • public campaign finance
  • Edward Snowden
  • affirmative action
  • mandatory vaccinations
  • GMO labels
  • felony voting rights

A democrat opposes…

  • death penalty
  • border wall
  • Syrian refugee immigration ban
  • military spending
  • torture (such as waterboarding)
  • NSA surveillance
  • War on Drugs
  • USA Patriot Act
  • fracking
  • oil drilling

What causes birth rates to go down in developing countries?

Nobody knows every detail, and the research out there is limited on what has caused fertility rates to go down in developing countries. There are some educated guesses though.

1. As incomes have risen over time, birth rates have been declining. Child labor has gone down as well.

GDPDeveloping

Historic_world_GDP_per_capita

FertilityRatesWorld

ChildLabor

Why is this?

One possibility is what we saw in the industrial revolution in Western countries. As incomes rose, more and more children weren’t needed to work in sweatshops, and instead, families had the luxury to send their children to school instead. Not only did that keep children out of the workforce, but it allowed their children to have increased incomes for their own future because of their newly acquired education.

SchoolCompletion

2. People who live in urban areas tend to have lower birth rates than those in rural areas. Another reason is that populations in rural areas need their children to work in order to survive, and more children provides more income or labor.

UrbanFertility

3. Increased education rates are correlated with lower birth rates. I think this is correlated because not only are women busy getting and education instead of getting married and having babies, but with their higher education, it increases the likelihood of increased income, because their education provides better paying jobs.

I keep seeing again and again that poverty is related to so many different factors. It seems like if we eliminate poverty, we eliminate a lot of social problems as well.

Enrollment

EducationBirthRates

4. In areas with lower infant mortality rates, we see lower fertility rates. This is because mothers don’t need to have more children to get their desired number of children, because the children were dying as infants.

ChildMortality

5. Religion. In majority Muslim countries, there tend to be lower birth rates.

MuslimFertility

6. Average age of marriage influences birth rates around the world.

MarriageAgeFertility

7. Contraceptive use around the world is one possible factor but I couldn’t find sound research showing more contraceptive use over time. So we cannot assume this. Also, here’s a look at what methods people are using around the world, as well as, why people choose to not use contraceptives.

ContraceptiveWorldUse

ContraceptiveUse

NoUseReasons

Maximum political, social and economic freedom

It is my opinion that the maximum freedom economically, politically, and socially, given to all people, regardless of who they are, helps the maximum number of people, out of every system I’ve ever researched, and has the most scientific evidence to back it up.

Quality of life is not higher in countries with more social and economic controls on its people. In fact, the opposite is true.

The Human Development Index is the best quality of life measurement we have. It takes into account life expectancy, education, and income standard of living, among many other factors.

Here are the top 5 highest quality of life countries in the world:

  1. Norway 2. Australia 3. Switzerland 4. Denmark 5. Netherlands

(The U.S. is #8, in case you were curious)

Here are the bottom 5 lowest quality of life countries in the world:

  1. Niger 2. Central African Republic 3. Eritrea 4. Chad 5. Burundi

Then there’s an index of countries based on political and civil freedom such as, freedom of speech, religious, individual economic choice, association, assembly, freedom from violence and crimes, movement, LGBT rights, women’s rights, as well as, human trafficking, sexual violence, female genital mutilation, homicide, freedom of movement, and adoption by homosexuals. (Source)

By lowest 5 on the above quality of life scale, on a scale of 1-7, 1 being best, 7 being worst:

1. Niger: freedom rating: 3.5 civil liberties: 4 political rights: 3

2. Central African Republic: freedom rating: 7 civil liberties: 7 political rights: 7

3. Eritrea: freedom rating: 7 civil liberties: 7 political rights: 7

4. Chad: freedom rating: 6.5 civil liberties: 6 political rights: 7

5. Burundi: freedom rating: 5.5 civil liberties: 5 political rights: 6

Now let’s look at our top quality of life countries and compare their freedom ratings from the same index we just used.

  1. Norway: freedom rating: 1 civil liberties: 1 political rights: 1
  2. Australia: freedom rating: 1 civil liberties: 1 political rights: 1
  3. Switzerland: freedom rating: 1 civil liberties: 1 political rights: 1
  4. Denmark: freedom rating: 1 civil liberties: 1 political rights: 1
  5. Netherlands: freedom rating: 1 civil liberties: 1 political rights: 1

And here’s the U.S. in comparison:

United States: freedom rating: 1 civil liberties: 1 political rights: 1

The more freedom people have, the higher the quality of life.

What about economic freedom? Do people with more economic freedom have a higher quality of life?

Let’s do this thing again with an economic freedom index.

Here is the index’s definition of economic freedom: Freedom to: “work, produce, consume, invest in any way they please. Government allows: labor, capital, and good to move freely, refrains from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.” (Source)

Let’s start with the highest quality of life countries (scale is from 1-100, 1 being the least free, 100 being the most free economically):

  1. Norway: 70.8
  2. Australia: 80.3 (5th highest in the world)
  3. Switzerland: 81.0 (4th highest in the world)
  4. Denmark: 75.3
  5. Netherlands: 74.6

And here’s the U.S. for fun:

United States: 75.4 (#11 on most economically free)

Now let’s see the countries with the lowest quality of life:

  1. Niger: 54.6 (#129 out of 178 countries)
  2. Central African Republic: 45.2 (#168)
  3. Eritrea: 42.7 (#173)
  4. Chad: 46.3 (#164)
  5. Burundi: 53.9 (#133)

The most economically free country was Hong Kong, the least economically free was North Korea.

(Source)

So there we have it. The most socially, politically, and economically free countries have the highest quality of life, and the least socially, politically, and economically free countries have the lowest quality of life. That is a big reason I believe allowing the maximum amount of freedom, given to the people, increases quality of life.

What would happen if we raised the minimum wage to $100/hour?

What if we raised the minimum wage to $25/hour? Why not $100/hr? What would happen then?

Let’s use an example of a business owner who runs a diner.

1. It would become cheaper to have the owner wash the dishes rather than hire a dishwasher. (Unemployment rises)

2. To compensate the current employees, the owner would have to raise the price of his meals. (Inflation rises)

3. Customers would stop going to the restaurant because the prices are too high. Especially those who aren’t receiving the minimum wage (unemployed, students, retired people). (Purchasing power declines)

4. It becomes cheaper to buy machines to handle the labor than human beings, and the owner begins letting people go, and replacing them with machine labor. (Human labor declines)

5. Foreign products start to look more attractive to consumers. If you can get a similar product, say frozen pie instead of fresh pie, for $5, instead of fresh pie for $50, you’ll probably buy the foreign frozen pie that is cheaper because it does not have the $100 minimum wage. (Trade deficit, imports increase)

6. Maybe the owner decides to start hiring illegal immigrants, not document workers and instead pay them in cash, or not report income to the IRS at tax time. (Increase in black market economy)

7. The owner cannot afford to pay his best workers more than his lowest workers any longer and they end up making similar wages, if not the same. This leads to a loss of the higher productivity workers as they try to find higher paying work or they begin to slack off at work because they are getting paid the same regardless of how hard they work. (Brain drain increases, low morale)

 

 

 

The minimum wage doesn’t do shit to reduce inequality and lift people out of poverty.

Paying people a minimum wage causes prices to rise, as employers have to pay their employees more. Not every business person, in fact only .3% of them, could afford to not raise their prices, and take a profit cut, when the minimum wage is raised. 99.7% of businesses in the U.S. are small, employing 500 people or less. That’s why prices go up. They have to. Not because they’re greedy, evil capitalists.

The minimum wage also increases unemployment. Many employers have to lay people off because they don’t make enough to pay them the higher wage. Also, they are less likely to hire because they can’t afford to hire new people at the higher wage.

UnemploymentMinimumWage

(Source)

That’s because of labor supply and demand

LaborSupplyDemand

Raising the minimum wage is just to make politicians look good. Inflation has eaten away at the lowest wages over time the most anyway due to government policies inflating the currency. So it pretty much grows so slowly, the economy has already grown enough that employers are already paying minimum wage or higher.

MinWageAdjustedInflation

(Source)

If raising the minimum wage actually worked, why do they have to keep raising it all the time? It’s because prices begin to match the minimum wage, and inflation devalues the wage.

 

Foreign aid just goes to more war

Foreign aid gets entangled with politics. Foreign aid also includes weapons to unstable governments with a lack of security.

The vast majority of foreign aid goes to Afghanistan and Israel, by far. Even though the poorest countries in the the world, the ones that need it most, receive some of the least aid, if any at all.

Countries that receive the most military and economic assistance foreign aid.  (Source)

  1. Afghanistan $7.2 billion 2. Israel $3.1 billion 3. Jordan $1.3 billion 4. Pakistan $980 million 5. Kenya $891 million

 

Top 5 poorest countries median income per capita PPP. (Source)

  1. Liberia $118 2. Burundi $129 3. Mali $165 4. Burkina Faso $168 5. Madagascar $205

 

Median income per capita PPP is a good measurement because of this: imagine a scatterplot of incomes. Some are going to be very high, some are going to be very low, and most are collected together somewhere in between. If we just took the average, it would be skewed by the very rich and the very poor, which wouldn’t be an accurate indicator of where most people actually are.

PPP is how much purchasing power they have. If the currency is highly inflated, that means incomes are actually lower than they look on paper.

Now let’s see how much foreign aid the poorest countries in the world get in comparison 

  1. Liberia $249 million 2. Burundi $37 million 3. Mali $169 million 4. Burkina Faso $62 million 5. Madagascar $58 million

Far lower.

Now, I get why we supply Afghanistan. We owe them for starting a war that killed 26,000 civilians, the size of a small town. Another number that needs to be taken into account though, is that 75% of the civilian deaths have been at the hands of the taliban. There has been several invitations for the taliban to participate in peace talks with the president of Afghanistan but the taliban has refused, making their own demands that the occupation is ended, blacklists barring them from entering and leaving countries, and “innocent prisoners freed.”

But Israel? The country has the 4th highest life expectancy for men, 7th highest military expenditures, and 6th highest civil war and unrest.

Liberia, on the other hand has: the 3rd largest unemployment rate in the world, 5th highest number of children out of primary school, 6th highest battle related deaths, and 7th longest standard workweek.

So if we’re going to give foreign aid, which I don’t think we should, we should at least give it to places that need it, and not just places we can fund more wars.

Historical economies

Incomes have risen per capita globally, since 500 B.C.

WorldGDPPerCapita500BC

(Source)

What happened in 1000 A.D. that caused it to go up a little? 

I don’t entirely know. What I do know the Islamic World was in its Golden Age, Europe was in the Middle Ages, and Rome was the most powerful state in the world. Maybe that had something to do with it.

What happened in 1300 A.D. that caused it to dip and then go back up?

Again, I don’t know completely, but these are the things that I do know happened around that time: the Mongol Empire, the High Middle Ages, the black plague, and the end of serfdom and the beginning of capitalism. So probably the black plague, which killed 30%-50% of the population.

What happened in 1900 A.D. that caused it to go up so drastically?

Industrialization!

Here’s a look at different estimates of the human population 100,000 years before the present.

HumanPopulation

What happened around 8,000 years ago? Civilization!

What changed at around 5,000 years ago? The first recorded revolutions AND imperialism!

Paleolithic era (estimated 3.3 million years ago-10,000 BC)

Humans were made up of small kin groups. The global population was between 1 and 15 million, in comparison to the 7 billion we have now. The average world GDP per capita was $158 per year (adjusted to 2013 dollars) and did not rise very much until the Industrial Revolution in 1760-ish.

Mesolithic era (estimated 20,000 BC-9,500 BC)

This was the end of the last glacial period. There was slow domestication of plants and animals, as well as small settled communities.

Neolithic era (estimated 10,200 BC-2,000 BC)

Trade and exchange began among neighboring tribes because tribes specialized in different things, and traded what they were most efficient at. The first money was probably cattle. In fact, I think the word money comes from the word for cattle. The first commodity money existed, so for example shell jewelry in the form of strung beads. For distribution and organization of scarce resources, humans relied on tradition, community cooperation, and/or top-down command.

Early money, money cowry:

MoneyCowrie

Antiquity or Bronze and Iron ages (3,300 BC-800 AD)

City states developed at this time. Sumer, modern day Southern Iraq, developed a market economy and their money was shekels, a certain weight measure of barley. They also had the first written financial laws such as interest rates, fines as punishment for a crime, inheritance, taxes, and division of land.

Temples were the first creditors, in Sumer. They charged interest and rent, as well as, doing business with debt and making profit. This was probably the first legal profit-seeking trade. A temple!

GDP per capita (PPP) globally since 1 AD-2015 AD

In 1 AD, the highest GDP per capita (PPP) in 1990 dollars, was Italy with $809 per person in the population annually. By 1,000 AD, it was Italy again but with less, $450 per person in the population annually.

Strangely enough, in 1 AD, the poorest countries were the Scandinavian countries with $400 per person in the population annually and it stayed like that until 1500 AD. It’s strange because now, Scandinavia is around #15 on the list of GDP per capita income as of 2015, with about $47,000. To put it in perspective, the U.S. is #11, at $55,000. Compare that with the wealthiest population in 1 AD, Italy, making $850 as your annual income.

Classical era (476 AD-1453 AD)

India and China made up half the size of the world economy. Commerce began going long distances and nations began to trade with other nations. Denominations of gold and silver coins were first introduced in Lydia, modern day Turkey. The first economists began to write their thoughts on things such as scarcity of resources.

The first gold coins, the Lydian Lion

LydianLionCoin

The Middle Ages (400 AD-1400 AD)

In the Middle Ages, there was an increase in population and trade. The silk road began trade between Europe, Central Asia, and China. Italy began the first modern accounting and finance systems. The first banknotes were used in China in 800 AD.

Early Modern era (1500 AD-1800 AD)

The Early Modern era saw the beginning of mercantilism, nationalism and international trade. It was also the end of feudalism. Europeans came to the Americas and traded between the two continents, as well as with Asia. The economic and political thought of the time was to use military to secure and protect markets and supply sources.

The Industrial Revolution (1760 AD-1840 AD)

Energy was discovered and produced in mass amounts. Right there at the tail end is the utilization of hydraulic fracking, otherwise, it peaked in 1970.

OilProduction

This grew the population and GDP per capita into that famous hockey stick shape.

WorldPopulation

WorldGDPPerCapita500BC

The twentieth century (1900 AD-2000 AD)

The highest growth occurred in the 1960s during post-war reconstruction. Another contributor to the rapid growth was going from national trade to international trade. Shipping containers made it cheaper to transport good internationally.

 

 

Why I fucking love talking about inflation, deflation, banking, the Great Depression and GOLD

Did you see this shit?

1280px-US_Historical_Inflation_Ancient

(Source)

I love old graphs. The farther back they go, the better. That way, you can get the big picture perspective on a subject. The problem with a lot of graphs is people think if they see a big line go up on a graph over the course of 5 years, that means something really, really bad happened or is going to happen. The truth is, 5 years is usually not enough data to make a generalization.

If a broker claimed that, if I invested with them, I would get a return of 150% because they had made that over the course of 5 years, I would tell them to fuck off and ask what they made in the previous 50 years. 5 years doesn’t tell you shit about an investment.

As you can see in the chart, historically, deflation and inflation were, most of the time, balancing each other out. But sometimes it’s not.

Why is that?

A lot of the time, it’s because of war and other forms of government influence. For example, in the chart, you can see around when WWII started and ended there was inflation, followed by a ton of deflation. Inflation and deflation work like weights on an old scale. If the market was a conscious brain, it would always be striving for balance, or as economists call it, equilibrium.

What goes up, must come down.

If you have a monopoly on the currency, though, then you can control it… at least most of the time. Most governments do this with some form of a central bank. Several small, island nations don’t have central banks though. (Source)

Equilibrium is a beautiful economic concept that makes me think of birds flying in formation without needing to talk to each other, or order in chaos, or even just human nature.

Equilibrium is the balance between the forces of supply and demand. It’s the point in a chart where the price is equal to the quantity.

Here’s a hot pic:

economics5

But along with market equilibrium AND human nature, comes the exceptions and the outside forces that can effect it.

Like, an entity, such as a government, that has a legal monopoly on currency. (Source) For example, the Federal Reserve in the U.S., instituted in 1913. They can set incentives to cause banks to lower or raise interest rates and they are the only ones allowed to print/inflate/deflate the currency. Which has been paying the bills for a long time. It has also been paying for the rapid rate American imperialism around the world.

And I think people might like it that way.

Having a national bank that is both private and public does have its advantages. For instance, people don’t know they’re being “taxed” in a way. The government doesn’t have to raise taxes, cut spending, or borrow from elsewhere to afford things. They can inflate the currency, by printing more of it into the marketplace, making it less valuable.

Here’s an example:

Say I have 3 Babe Ruth baseball cards and there’s only 100 in the world. It’s a rare baseball card, so it’s worth a lot of money. There were only 100 printed in the world. But say whoever prints baseball cards decides to print 1 trillion Babe Ruth baseball cards. Then what happens? Suddenly, my 3 Babe Ruth baseball cards are worth less money now, because all my friends on the block also have 3-5 Babe Ruth baseball cards. Now nobody is interested in buying a Babe Ruth baseball card, and there are so many of them, so people start using them as kindling for fires, because they’re more valuable as kindling.

That’s what happened, except with currency during the Weimar Republic (Germany). It would take wheel barrows full of paper currency to buy a loaf of bread, it was worth so little. So some found it more valuable to burn for warmth. That’s an extreme example of inflation: hyperinflation. But it hopefully shows an easier understanding of the concept.

money_to_burn

Historically, this happens a lot during wars. I’m pretty sure, because war is really, really expensive to fund. War isn’t the only reason, by far though.

WarAndInflation

War means inflation will go up, usually, because they go off the gold standard to “afford it.”

US_Unemployment_1890-2009

Always being at war makes unemployment a thing of the past!!!… Maybe?

What do gold and silver coins have to do with anything?

Everything.

Throughout history, since 600 B.C. to be more exact, (source) people have been using gold and silver on and off as currency. Off during times of war, when inflation is needed to pay the expenses of the war, and back on when the money becomes worthless because inflation has become too high.

The cool thing about commodities, like gold, is that the one that holds it value the most usually out competes the other monetary forms over time, historically. (Source) Hence, it’s historical popularity.

Lydian Lion coin. The world’s oldest coin, from what is now known as Turkey.

LydianLionCoin

This is an example of how it would work.

I would go to the bank with my paper $1 bill. Legally, I could go to my banker and say, I’d like to take out the equivalent of 1 paper dollar’s worth of silver. The banker would then weight out the silver, and give me the equivalent of 1 U.S. dollar piece of paper’s worth of silver, a certificate. I could then turn around and use it to pay for some groceries or something, or I could do the reverse.

I could go to the bank with my silver, and say, I’d like to get as much paper dollars as I can for this ounce of silver. Then, in return, the banker would give me a $1 paper bill, which I could then go buy groceries or something with.

And most people preferred to carry around the paper rather than a piece of metal. Just for convenience sake. Kind of like how plastic credit cards are easier than carrying around $1,000 in paper dollars these days.

Modern banking and the fractional reserve system

One of the issues I think will be seen as primitive in the future is how we have done banking historically.

I’m a fan of full-reserve banking, regardless of the doomsday naysayers who are akin to fortune tellers. And when I say full-reserve banking, I am meaning banks have to have an account with your name on it, and keep that money in your account on hand.

Wait a minute, banks don’t actually HAVE my money in my bank account?

No! It’s loaned out to other people! Complete strangers!

Which leads us to…

Modern banking, fractional reserve banking, which began with gold and silver roughly like this, in the 17th century:

Someone would go to the banker with something valuable they had, such as silver, which can be made into things or used as a store of value abstractly, like we do with paper currency. The banker would hold it for me and I would pay him to store it there, much like a storage unit.

That is full reserve banking.

But after 100 people did that, the banker would be left with storage unit after storage unit of valuable assets, just sitting there doing nothing.

So, he gives some of my silver to another person. The banker will charge that person interest, a borrowing fee, that builds and builds the longer he goes without paying it back, plus the fee/interest. The banker will get a cut AND I won’t have to pay the storage fee anymore.

That sounds like a deal.

The borrower goes out and buys materials to build a fishing net. Suddenly, he can catch way more fish to feed his family AND there’s fish left over to sell to others who don’t have nets or maybe aren’t very good fishermen but they’re good at something else they’d like to spend time doing. In exchange, people are giving the borrower money that not only pays back the amount borrowed, but ALSO the interest/banker’s fee, and ALSO more money (profit).

Everybody’s happy.

And that’s how it’s still done today, except with paper currency, not tied down by any value instrument at all. We call it fiat money and fractional reserve banking.

(Source: Money facts; 169 questions and answers on money – a supplement to A Primer on Money, with index, Subcommittee on Domestic Finance; U.S. Congress. House. Banking and Currency Committee.)

What the hell is fiat money?

Fiat money is a government mandate on what is declared legal tender. It is given a government determined value and is not tied to anything, such as a store of value, a commodity, anything. It is not representative money like gold certificates.

Here’s what’s weird though.

Fiat money has been used throughout history, and always fell out of favor and crashed due to inflation.

To put it in historical context, the world using fiat currency, as it does now, is not new, and it has only been since 1971 that we’ve been 100% using fiat money. Other countries had fiat currency around for sometimes as long as 100 years and sometimes only 20 years.

It has crashed before throughout history, and that doesn’t mean it can’t crash again. I think people get the idea that the government will take care of everything and smarter people are in charge so things like economic collapse won’t happen anymore.

Silly.

What goes wrong historically with banking

Now the banker is making the same deal with 70 of the 100 customers he has storing valuable assets in his storage (bank) where he is loaning out their assets in return for more money.

But I want my valuable asset (silver) back. Maybe I want to use it to make jewelry, maybe I want to give it to someone who desires it in exchange for something I desire like bananas or a massage. Anything.

No problem.

So the banker goes to get my silver. But he already lent it out to someone else who is using it and he’s waiting for them to pay it back.

Now the banker is faced with a dilemma.

He decides to borrow another customer’s silver to give to me while he waits for the silver/money to come back from the person who is borrowing my original silver.

What?

Things just got more complex.

What if 70 out of 100 people do that though? What if 70 out of his 100 customers wants their assets back?

Well, he just doesn’t have them.

And that’s the problem with fractional reserve banking. People eventually want their money/silver/valuable assets back at their convenience. They don’t want to wait on someone to pay back the banker who can then pay you back. And if 70 of the 100 people who are customers want their assets back all at once, the banker doesn’t have the assets to give it to them, and the bank goes bankrupt, has to close, and everyone has lost the assets AND money they put in.

That’s a run on the banks.

That’s what that looks like historically, that’s what it looked like during the Great Depression, and that’s what that looks like in modern day banking. BUT it’s a little different in modern banking and money.

The government requires banks to carry a certain, very small amount of deposits, only 4-6%. But we also have FDIC insurance, which is where the government guarantees that up to $250,000, you will be able to take your money out of your account, whenever you want, because they have the power to print limitless amounts of money, in case the bank doesn’t have it.

Regardless, throughout history, we keep doing it over, and over and over and the same thing happens: bank failures aka banks go bankrupt. There are long periods of time where they don’t go bankrupt, but eventually, they do.

BankFailures

That’s a financial fraud to me. It’s the same idea as Social Security and insurance. There’s no Social Security account with your name on it, holding all the money you’ve paid into it throughout your life. The money you are paying now goes to the people collecting Social Security NOW.

Insurance and social security requires a pool of more money coming in than is going out. A legal ponzi scheme, that if a private company does, they go to jail.

Which is why social security is about to become insolvent too, if something isn’t done to fix it, by someone much smarter than me.

SocialSecurity

If I run a bank and everyone is dropping off silver or gold, and more are dropping off assets than they are taking out, everyone looks like they’re getting richer. There’s more to lend and more profit can be made potentially and everyone is betting on more and more people to drop off their valuables, which the customer eventually plans to take out and retire on.

That’s what happened during the Great Depression.

Everyone who had invested their pennies or fortunes, depending on who you were, thought profits would go up forever, that the country was in a new age of progress, and so they invested more and more.

In 1913, the Federal Reserve Act instituted the Federal Reserve, and reduced the amount of gold backing the dollar had from 100% to 40%. This caused a fuckton of inflation.

Inflation made the economy look great. Everyone was getting credit and loans at unbelievable interest rates. Cities seemed to be built in a day. Everyone was getting jobs right off the boat, everyone saw their standard of living go up from where they had been before, and the stock market was booming. There seemed to be an endless supply of capital. Capital meaning something that increases the ability to make something. For example, a construction truck to build a house, or investment money from your uncle, or the stock market, or a credit card.

However, what goes up, must come down.

Eventually people wanted to collect and the money wasn’t there.

It started when Great Britain didn’t have the tax revenue to go to WWI, so they went off the gold standard.

Bold, underline, put. in. red. Blame the Brits!

There was a (compared to how we know it turned out later) “small” run on the British sterling, which caused Britain to put in exchange controls on their money that weakened the gold standard greatly, and caused a huge amount of inflation, because gold being tied to a currency stabilizes it so there’s not too much inflation.

UKInflation

Side note about how a gold standard works:

There is a limited amount of gold in the world, except what hasn’t been mined yet in the ocean, because the world doesn’t know how to mine for it yet. Because there’s a limited amount of gold, the price is relatively “fixed”. When tied with paper currency, we can, for example, say 1 piece of paper equals .5 ounce of gold, and we can keep it that way, because the price doesn’t fluctuate very much, without government intervention. But, that’s usually the way it goes.

Anyway, back to WWI and Great Britain and how them going off the gold standard started the Great Depression.

This worked like a domino effect on the American economy and then in the rest of the world later. I imagine because the history and economy of America and Britain are intertwined moreso than we were, at least at that time, with other countries.

So everybody panicked and took their money out of the stock market and the banks all at once in response.

Overnight, banks went bankrupt and the stock market had the biggest crash it had ever seen before.

This is an inflation adjusted, long term historical look at the stock market in the U.S.

StockMarket

Look! The stock market will go up forever!!!… Maybe?

As you can see, if you’re reading this, you’ve probably witnessed worse crashes happening to the stock market than the Great Depression. Isn’t that crazy to think? But more about that in another post.

Deflation during the Great Depression

The Federal Reserve responded to the crash by raising interest rates, in the hopes of increasing the demand for dollars. This just made the situation worse, as raising interest rates causes more deflation!

People started hoarding their money. They couldn’t trust to put it in the stock market or the banks because they could lose it. Businesses had to stop hiring and had to lay people off because they lost all their money that was in the bank. They had to close their shops because the investment money dried up when it was lost in the stock market. As people took their money out of the banks, there was less paper money in the marketplace, which made it more valuable. People didn’t spend what they had very much and knew it would be more valuable the next day anyway so they continued to hold onto it.

All of this compounded on itself and made the deflation even worse, a deflation spiral downward.

Look at the Great Depression and how peoples’ incomes dropped after the stock market crash.

GDPPerCapita

With no gold standard holding us back, growth in the economy will go up forever!!!… Maybe?

In 1934, Congress passed the Gold Reserve Act, devaluing gold to 40% of its real value. Probably because they were hoping that devaluing gold would cause people to hold less gold, and inflate the currency more. That’s just conjecture though.

Unemployment: Great Depression vs. Great Recession

15% of the GDP was lost during the Depression, compared to the 1% that was lost during what is now called the Great Recession of 2007-08. 25% of people during the Great Depression became unemployed. 1 out of every 4 people you knew was unemployed. Compared to the Great Recession, which had a top unemployment rate of (by the government numbers) 5%. I think it was higher, however, because most sources I have read have stated such. Some saying it almost reached the height of the Great Depression.

Here is an alternate unemployment rate measurement. The larger measurement that shows a larger unemployment rate includes long term and short term discouraged workers, who were taken out of the official government measurement as recently as 1994.

UnemploymentRate

How America got out of the Great Depression: War

In 1934, the government nationalized all gold by ordering the banks to give their gold supply to the U.S. Treasury. They also suspended exchanging paper money for gold.

They raised the maximum income tax rate from 25% to 79% and the minimum income tax rate went from .375% to 4%. To put it in perspective, currently the maximum income tax rate is 55% and the minimum is 0%. Regardless, raising the income tax didn’t help get the country out of the Great Depression. Neither did President FDR’s New Deal. Not even a blip on the recovery radar.

IncomeTaxRates

And then World War II broke out.

The U.S. used to have a defense policy, meaning, don’t attack unless attacked first. Then the Japanese government bombed Pearl Harbor, and that sounded the alarm that it was time to go to war.

I think culture cannot be underestimated when it comes to things that seem to be laws like laws of economics. Americans, having seen their country under attack and fellow citizens killed in cold blood, became focused on justice and patriotism.

Men seemed less concerned about the huge national debt and new hefty taxes and instead ran to their local government offices asking what they could do to help the war effort. Sometimes this meant enlisting, sometimes this meant signing up for a large government contract.

The war was good for employment

As more men enlisted in the military and more businesses began to switch from whatever they were building before to war goods, unemployment numbers began to decline sharply from 25% to under 10%. Not only that, but as men were going to war, businesses, who had previously fired women who were working if their husbands already had jobs, were employing a whole 50% of the population (women) that they hadn’t been employing before. So then the employment numbers looked REALLY good. Everybody seemed to have a job, and a good job, a manufacturing job that produced real “stuff,” unlike the services based economy we have now.

There was more money entering the marketplace, trading hands within the country and outside of it, growing the economy. Or at least looking that way.

Women, employment, and equality

It is my opinion that the war also helped raise women’s standards of equality.

It used to be that men worked all week and handed over their paychecks to their wives on payday, so that she could pay the bills, go grocery shopping, and use it to basically run the household, while he headed to the bar to kick up his feet with his male pals at the end of the week. The women raised the children, the men helped make them, maybe played with them for a while, but mostly spent all their time working long hours, trying to do their part to contribute to the household.

I think both roles are respectable, and I cannot say for sure which one was more difficult because I never lived that life, but from what I have read, women didn’t really have the glory the men got, regardless of how much work they put into the children and the household at large.

Now, with WWII, they were more independent, making their own money, not relying on a man financially, which is currently the #1 reason women stay in abusive relationships with men today. They are dependent on them financially, or at least feel stuck. I think financial freedom, whether you’re a woman or a man, can also contribute to your social freedom. Maybe that’s just my American values seeping out subconsciously, but that’s at least what it seems like to me.

The social stigma of a woman having a job, while not eliminated, was reduced, because everyone was so focused on the values of justice and patriotism, which seemed to override previous values that a woman’s role is to be head of household, except on her tax return. In that case, the man is head of household.  So again, doing the work without any of the glory that a man got.

Now women could physically, practically prove they were just as capable as men by literally doing the work men had previously done. Which in my opinion, subconsciously planted seeds in people’s minds that women could possibly be capable of doing things men could do and sufficiently.

How did the government pay people to fund the war?

They went $321 billion more in debt.  They taxed, spent, inflated, and borrowed.

Federal_Debt_Held_by_the_Public_1790-2013

This is U.S. debt in terms of percentage of GDP

It’s hard to see that well because the bottom chart is zoomed out but do you see how closely it matches in with the very first inflation/deflation graph I showed you?

1280px-US_Historical_Inflation_Ancient

I overlaid the U.S. historical inflation rate with the inflation adjusted price of gold to see if there was a correlation. I know it’s hard to see clearly but it was the best I could do. To me, the peaks and low points seem to line up the closer we get from the 1970s on.

InflationDeflationGoldIA

What happened in 1970? 

The country went off the gold standard completely. This caused inflation to rise, and stay inflated for what looks like the longest amount of time since 1650. It seems that as inflation rose to high levels again, the price of gold skyrocketed. Also in 1970, it became legal for private ownership of gold again. The high spike might be due to that too. It’s hard to say because there are so many variables someone smarter than me would have to control for.

What happened in the 1980’s that caused the price of gold to drop so drastically?

The central bank raised interest rates and gave incentives to banks, who typically do the same thing when the Federal Reserve does something. It’s a complex process that involves buying treasury bonds that I would love to cover in a different post.

As interest rates rose, it made less sense to own gold. It made more sense to hold on to your money and put it in savings. People sold their gold because it was at an all time high and became very wealthy if they sold at the right time.

How deflation is bad

The bad part though, was that GDP shrunk. There was less money going around in the marketplace. Business didn’t hire as much because it made more sense to hoard the money, considering it could be more valuable later. The unemployment rate went up.

How deflation is good

The Federal Reserve was destroying dollars to make the currency rarer, and and it became more valuable. Foreign countries bought U.S. dollars in the hopes that they would gain more value tomorrow.

How inflation is bad

The reason they raised interest rates was to control the inflation rate that people were afraid was rising too fast and too high.

High inflation means higher prices, especially on commodities such as food and energy, which is why oil prices went up to very high levels in the 70’s and the government had a failed policy of rationing, which is also something I’d love to cover in another post because this one is already incredible long.

CPI

In 1970, the U.S. went off the gold standard, remember? Also, inflation has stayed up since then. Prices have also gone up.

High inflation discourages savings because the money becomes less valuable over time, and if the inflation rate is higher than the interest rate you would get on a savings account, the money’s value gets eaten away and there’s no real incentive to keep saving.

How inflation is good

Inflation is good for paying off debt and racking up debt because you can pay it back with inflated dollars. There’s more money in the marketplace going around, printed by the Federal Reserve and expanded by the banks. Say I have a student loan debt of $8,000 in 1980. By the time I pay it off in 2000, 20 years later, my income is $50,000 and $8,000 seems like nothing, so I pay it off.

Here’s another interesting one on the price of gold historically.

Notice that when inflation goes up, the price of gold goes up. That’s because paper dollars are becoming less valuable and gold is staying relatively the same, since there is a more fixed amount of gold in the world than paper. I will show you what it looks inflation adjusted too.

GoldPriceHistorically

(Larger)

This one is inflation adjusted gold prices. Notice also how when interest rates go down, gold prices go up. That’s because the currency becomes more volatile, so people will buy more gold, increasing its value, because there’s less gold in the marketplace, and gold becomes a more stable, reliable place to store your money over a long term horizon.

InflationAdjustedGoldPrices

And here’s historical interest rates.

long-term-interest-rates-us

And here are interest rates overlaid with gold prices.

GoldInterestRates

The one exception to gold prices going up and down with interest rates was during the South African and Yukon discoveries of gold. That makes sense to me because finding a fuckton of gold is going to make everyone start buying up all the gold they can get for free, by mining it. So when regardless of when interest rates went down, the price went up. That seems to be the only time though.

However, there was also the discovery of gold in California and Australia in the mid-1800s. I wonder why interest rates went up AND gold prices went up at the same time. You would think with more gold circling the marketplace, the price would go down, because of inflation.

Well, let’s see how much gold was actually mined, and how much it was worth at its height, and how much was actually found. That way we can determine if the amount found was enough to flood the marketplace and reduce or increase the price.

California

California_Gold_Production

$2,000,000,000. 2 billion!

It seems to me that California and Yukon didn’t find all that much gold. So I guess my hypothesis is right that interest rates are almost always matching up with the the price of gold.

Australia

I couldn’t find a graph for it, but they found a measly $2,000,00o in today’s dollars.

Yukon

Yukon

South Africa

I find this number hard to believe, but the value of the gold found in South Africa was, $750,800,531,800. Wow, $750 billion.

Worth more than over all the gold in the world ever found, COMBINED, by 1930.

GoldSouthAfrica

And that, my friends, is why interest rates didn’t affect gold prices during the South African gold rush. It flooded the market with gold, causing the price to increase when it was discovered, and crash harshly once it was all mined, because there was more in the market place, which caused the price to go down. It became worth less because there was much more of it in the economy.

 

A very brief history of the beginning of capitalism

Since capitalism began, worldwide incomes have risen to levels higher than they ever have in history.

WorldGDPPerCapita1500

worlduntil2000

(Source)

It surprises me that people still believe capitalism has caused people to become poorer than ever in history. Pre-capitalism we had a system of feudal lords and serfs. Capitalism began in the 1300s between the monarchs and the serfs.

Everybody was poor and the further you go back, the poorer people were. We live in the wealthiest period in history, by far.

Do people who are anti-capitalism want to return to that pre-capitalist society? Certainly serfs were poorer than our poorest of today.

GDP per capita (PPP) in 1 A.D. vs 2003 A.D. (Source and Source)

The highest GDP per capita was in Italy in 1 A.D. $800. That’s right, $800 per person for a whole year. That’s in 1990 dollars. Not 1 A.D. dollars.

Japan had the lowest GDP per capita of $400 per year. $400. The U.S. was also $400 annually but this was before Europeans came over and screwed up the place for everyone.

Now, the highest GDP per capita in 2003, was the U.S. with $29,037. Keep in mind this is 1990 dollars AND in 2003. It’s much higher now. As of 2016, it has almost doubled, and is at $55,805.

The lowest GDP per capita in 2003 was in Africa, $1,549 annually. That is appalling and we should do everything in our power to raise the standard of living in Africa, but also, in comparison to 1 A.D. number, Africa is still twice as better off than the wealthiest country, Italy, in 1 A.D.

So enough about how great the world could be without capitalism. We know what the world was like without capitalism. Would you want to live in it again?

Pre-capitalism: serfdom

Serfs performed self-sustenance labor, which would look like farming to provide just enough food for themselves. There was little technological innovation because there was no competition to incentivize it. (Source) Serfs were paid by getting to live on their land and having a house. They still had to pay rent and when they did get money from their lords, it was salt or small pieces of gold OR none at all.

“Because serfs had obligations to produce for lords, they had no interest in technological innovation; because serfs produced to sustain their own families, they had no interest in co-operating with one another.” (Source)

That is why technological innovation was stagnant.

Then agricultural productivity reached it’s technological limitations and stopped growing, they had a famine, and the black death led to a population decline, and as a result, a decline in labor. (Source)

Fuck.

The feudal lords decided to spend all their money on war, which is expensive, so they taxed the serfs.

Wow.

In a panic, Nobles competed to find enough serfs so their estates could be kept up. The nobles began trading human beings for wages, which encouraged people to move to towns that were offering to pay wages, rather than just earn their keep.

As a result, the population grew.

In England, the serfs rebelled and started buying out their landlords’ land, which they accepted because they were desperate for cash.

Serfs began a more capitalist system in the form of landlord-tenant relationships over land. If they made enough money, then they could actually buy the land.

I think the serfs rising up after the famine TOTALLY proves my point that people only overthrow their government if they are hungry.

Anyway, so that’s what led to the collapse of the manorial system and ushered in mercantilism. That’s what led to the beginning of investment in new technologies and a burst of discoveries, especially in the field of agriculture. This led to the marketplace, where the serfs could sell their shit.

Mercantilism

Towns began to trade, and when towns had similar goods, they would compete for money, lowering their prices as a result, and more people could afford what they were selling.

Colonization

What’s the best way to acquire wealth? To steal it, right? Get it for free.

But actually, this doesn’t lead to the greatest wealth creation. Under colonization, countries would go to war with other regions, and strip them of their resources.

One of the problems, besides the destruction of human beings lives, as well as their cultures and civilizations, in the worst, most inhumane ways; is it actually wasn’t that profitable. Machines became more profitable than free human labor.

So for a while at least, slavery was profitable, just not as profitable as industrialism.

Industrial capitalism

Adam Smith was the one who initially noted that mercantilism was not the development creator that the world thought it was. He believed it was a continuation of the feudal system and keeping the world from advancement. His influential book An Inquiry into the Nature and Causes of the Wealth of Nations wrote on paper what we now read in our economics textbooks in school on what is now capitalism.

With capitalism and industrialization, technological discoveries were developed rapidly. For the first time in history, the poorest people could become wealthier without being born into it. It was the first time poor people COULD become wealthy, and wealthier than their feudal lords, nobles, and banking families. It was the first time in history that could benefit levels of society besides the noble class. It reduced the class system that was stringently in place previously.

What does homelessness in America look like?

As children, we are encouraged to be independent. When you become an adult, it’s OK to abandon your family and friends for a job in another city. I’ve heard many people stop to talk to homeless people and angrily tell them to get a job. As if former criminals who can’t pass a background check can easily bootstrap themselves and get employment. As if someone without an address can get a US identification card and show proof of their identity when applying for a job. As if homeless shelters are not overcrowded and bedbug-ridden to the point that it makes more sense to sleep outside.

46% of the homeless population has severe mental illness and/or drug/alcohol addiction.

How much has been spent over time on helping homeless people find housing?

HousingAssistanceSpending

Well that seems pretty good that it’s been going up, even after having been adjusted for inflation.

What the hell happened in 1985 though?

President Jimmy Carter increased housing spending when he was president, which President Ronald Reagan slashed next term back down to pre-Carter spending. Sweet.

What percentage of the 2015 Federal Budget was spent on housing?

HousingSpending

(Source)

1%.

I once met a woman who had worked doing homeless outreach. When I asked her what homeless people needed the most, she said, “homes.”

The short story of Bernie Madoff OR The biggest fraud in history

Bernie Madoff ran an investment firm that required more money coming in than was going out. He cut huge checks that were hard to believe, because the whole thing was too good to be true.

Then the financial crisis happened around 2008, and people started taking their money out of their investment accounts because they were losing 37% of what they had put in. However, when people went to pull their money out of their accounts, they couldn’t, because it didn’t exist in the first place.

Bernie Madoff became a great scapegoat to the government and population at large. The judge, in fact, said that “the message must be sent that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll.”

Bernie Madoff became the face of the near end of capitalism, and a show of how greedy capitalism makes people do morally bad things.

And what he does was truly horrible.

It was fraud, plain and simple, which we already have laws on the books for. But when it came to prosecuting him, the government used him to set an example, and he was sentenced to a ridiculous 150 years in prison and restitution of $170 billion.

Not to say he didn’t deserve a big punishment, but murders have an average punishment sentence of 20 years. I think after everyone lost their savings and retirement in the 2007-08 financial crisis, people wanted blood, revenge, and justice to make themselves feel less helpless.

So that is the short story of the biggest fraud in history.

How laws are bought and sold in America

The second highest profit margins in the land are in the financial/real estate/insurance industry, which loves to fund the status quo politicians, regardless of party, and these politicians turn around, and in my opinion, don’t prosecute fraud very much such as ponzi schemes, which are illegal in the private industry but seem to be fine when the government does it (medicaid/medicare/social security). My thinking, is that they believe it’s not wrong and won’t collapse, because even if the government doesn’t have the revenue to pay out, they have the authority to print the money, even if it’s not worth as much, to pay our bills.

Here is a cool website that shows a list of all your favorite 2016 presidential candidates and just how much money they got from the financial/real estate/insurance industry:

  1. Hillary Clinton $13.2 million (Democrat) 2. Jeb Bush $7.2 million (Republican) 3. Marco Rubio $6.1 million (Republican)

Even Bernie Sanders (Democrat), who seems to me to be a lot different than the establishment candidates, received $1.8 million from the financial/real estate/insurance industry. However, his #1 contributors are retired people, followed by people in education.

Oddly enough to me though, Donald Trump (Republican) is not on the list. His #1 campaign contributions? Retired people.

Hillary Clinton’s (Democrat) #1 industry contributors are in the investment/securities industry. That signals to me that there’s something Hillary has said or in the way that she votes that makes people in that industry think she will do them some legal favors.

The biggest contributor is Renaissance Technologies, who funds both sides of the aisle, 40% democrat and 60% republican. They only have 290 employees and are worth $65 billion. Their success is due to creating mathematical algorithms, statistical analysis, and utilizing computational linguistics to pull together perfect investment portfolios that have an average return rate of 35% over a 20 year span. To put that in perspective, 10% is the average rate of return people get on their investments historically, at least on the S&P 500, IN A LIFETIME. And that number includes all recessions, the great depression, and the 2007-08 financial crisis.

So either it’s overvalued and going to crash, or maybe they invented a great product/service, at the right time in history. Only time will tell.

It is my opinion, that you can tell what the big issues are going to be within the next few years based on who is spending the most money on politicians and what their industry is. There’s a big spike in spending on the financial/real estate/insurance industry before and during the 2007-2008 financial crisis.

FinancialGraph

 

The fucking economy

This is how you get more government social programs and safety nets:

1. Raise taxes, which will reduce growth in the economy because people  won’t have enough hours, which leads to not enough wages to go spend and create more jobs and it would reduce the number of jobs because people will have less money to pay them.

Here is a diagram showing how tax is dispersed and deadweight loss of efficiency arises.

TaxDeadweight

2. Cut spending on important programs, especially social security, medicaid, and/or medicare because they by far take up the vast majority of the budget and we already can’t pay for it without loans from china and japan AND taxes.

Here’s a goddamn graph. We’re completely reliant now on government spending.

BushTaxCut

Largest federal spending we can’t afford anymore:

HousingSpending

 

And tax revenue that’s not enough to pay the bills

USTaxShortfall

Income taxes and taxes on businesses make up the majority of the revenue. Corporate taxes may seem low but the U.S. corporate tax is the highest out of all the developed nations.

TaxRevenue

3. Inflating the currency by printing more so there’s more money in the marketplace, which pays the bills, and makes us look like we can pay our bills, but it really just makes the money less valuable, which really hurts poor people the most, because they go to buy food, and $1 can buy a loaf of bread instead of a loaf of bread and milk like they could have before the printing of the money.

With inflation, we can go into debt FOREVER!!!

USInflation

Consumer Price Index broken down

CPIFood

But the world banks and the people who make the biggest investments are firm believers always having moderate amounts of inflation and I’m more middle of the road.

I’m not for or against inflation and/or deflation. I think it’s best when it’s balanced. When $1 = $1 instead of $1 being able to buy $2 worth of food or $1 being able to buy .25 cents of food.

The 1960’s. The golden age of wealth, the closest to not to much inflation, not too little, and the baby boomers having it pretty sweet.

1960sinflation

3. But the economy will save us! GDP growth will go up forever!!!

RealGDPgrowth

(Source)

Oh.

Hey wait a minute… 

If GDP growth has become smaller since 1960, and the average these days seems to be 4%… and the average inflation rate is 3.22%… that means… 4%-3.22% = .88%… THE ECONOMY IS ONLY REALLY GROWING AT .88% PER YEAR OH MY GOD SOMEBODY TELL THE PRESIDENT!

GDP growth WOULD increase tax revenue due to an increase of income. Too bad our inflation rate is too high for that to happen.

Trade offs

So you see, this is why I think there are trade offs and pros and cons to both inflation and deflation.

I don’t know of a time in history that it was ever popular to have a balanced rate of inflation.

What’s so bad about deflation, Federal Reserve, World Bank and IMF?

With deflation, the currency is more valuable and can buy more things and it encourages savings which people do because their money will be more valuable tomorrow than it is today, so it’s a good idea to keep it in a bank account earning even more valuable with interest. People produce higher quality things, not plastic made in China, though they’re working on it.

Have you ever seen a coat that was made in the 60s? They would last forever. People would go to get alterations to tailor them to their bodies, and they knew how to sew when holes eventually did get in them, because it was more cost effective to learn to sew at home and repair things, than just throw it away and get a new one, because it’s so cheap and then when THAT gets a hole in it, throw that away because it’s essentially worthless.

I think capital is best when it comes from BOTH savings and credit and a little of both. Savings shrinks the growth of the economy though. People spend less money because they’re saving their money so they can do things like earn interest and start a business or have retirement money for their future.

Interest rates and real GDP growth looks a whole lot like supply and demand. (IS stands for Investment-Savings and LM stands for Liquidity Preference-Money Supply) In my ideal economic fantasy world, these things meet at equilibrium.

InvestmentSavings

So wages do get lower because people are hoarding their money and there are less jobs to go around because the money isn’t being spent on hiring new people. But prices go down so poor people can afford more food. And in a contraction of credit, jobs in inefficient sectors are going to more efficient sectors. (Horse and buggy, anyone?)

It’s like inflation is giving people a sugar cube when they have cancer and telling them it will help. Sure, sugar tastes good, but the bitter medicine (deflation), actually helps cure the disease. The governments of the world like to feed us sugar cubes and tell us it’s medicine, when really we need the bitter medicine.

Imagine I got a loan to have a horse and buggy business. They didn’t sell well because of an auto saturated economy. Now, there’s a bust in the natural business cycle, and the credit is drying up. People are becoming wiser that horse and buggy is the wave of the past. So people stop buying and they save their pennies for a more expensive but more practical car. The horse and buggy operation either chooses to foreclose, or they go into the automobile industry to stay afloat.

Pros and cons

There are pros and cons to inflation AND deflation and anyone who tells you there’s not is drinking the kool-aid (which is most people probably).

With inflation, the currency is less valuable, poor people’s wages do go up, but it just looks like they’re getting wealthier because the money is worth less and you have to spend it fast because it’s not going to be as valuable tomorrow. So it looks like the economy is growing and everybody’s happy.

But poor people can buy less “stuff” like food, and their bills are higher, and wages are worth less.

DollarValueFed

The above shows how the inflationary policies of the Federal Reserve have decreased the value of the dollar down to pennies. That’s from decades of inflation.

But inflation does encourage people to invest because they have a larger quantity of money so they spend it on opening a business and lenders are more willing to lend to people with lower credit scores because they are making a shit ton off the interest of people’s credit cards and loans and shit. It does encourage debt though, which is why we live in a debt-based economy.

4. Borrow and get in debt.

Here’s who owns all our debt

LoansFromChina

(Source)

Basically we live on inflation, debt, and ponzi schemes like medicaid, medicare, social security, banks, and the financial industry in general and we’re all fucked and there’s nothing the 3 of us reading this can do about it. I love you.

Corporatism and punishment for crimes in America

Capitalist greed, is what everyone thinks was the sole cause of the 2007 financial crisis. It was a big part of the blame, and that’s undeniable, but also, who is giving out the permits and punishing the financial industry, that makes billions with a hundred million in fines?

This is an amazing infographic of the largest corporate fines and settlements since 2007

http://www.informationisbeautiful.net/visualizations/punytive-damages-biggest-corporate-fines/

The largest corporate fine in U.S. history goes to the Gulf of Mexico oil spill in 2010. BP was fined 110% of their income, $4.5 billion.

I remember this when it came out. It was all over the news when the spill happened and I remember the public wanted blood. It involved the sinking of an oil rig, which spilled oil for 87 days. 11 people went missing.11 people went missing. It was “sealed” in 2010, however, reports in 2012 said the oil rig was STILL leaking. The cause was defective cement on the rig, done by Halliburton, which received a punishment of $1.1 billion. One of the government’s favorite corporations to give contracts to without competition. Who “lost” $23 billion from Iraq. No punishment. They’re the ones who got to steal all of the oil from Iraq by building oil “infrastructure”.

Regardless of Halliburton being the cause, BP was punished more.

In contrast, the Exxon mobile spill? Their fine was 1% of their income.

This is not capitalism like many people believe. This is pure corporatism, which is not the same. Capitalism includes competition. Corporatism is when government gives special privileges to businesses and in return, businesses give kickbacks to the government.

Who is getting all their campaign money from the financial industry?

The status quo politicians that the people keep voting into power over and over, who are incumbents because they watch the news, and the news skews the headlines to achieve their political aims and biases.

And nobody pays attention to the rest of the article.

They see the headlines and it puts ideas in their head that are really just catchy click bait but it’s TV and magazines too.

That’s my hypothesis anyway.

There is no better solution to fixing the American economy. Sorry.

Sure, we have safety nets like social security, welfare, medicaid, medicare, and unemployment programs. The U.S. is middle of the road to the lighter end of tax rates compared to other industrialized nations.

tax rates world ranking 300k

(Source)

Here are the real numbers on how taxed we really are:

We have a 35% corporate tax rate, 0-12% corporate tax rate for state-local taxes. The global corporate tax rate, for comparison, is 24%. (Source)

We have a 0% to 55.6% income tax rate that includes federal, state and local taxes. (Source)

Payroll tax pays 15%-19% for social security and 2.9%-3.8% for medicaid/medicare. (Source)

25% of the GDP goes to taxes. (Source)

I’m not saying the country should have higher tax rates. But I do think that having moderate tax rates and fewer safety nets than other industrialized countries shows a lack of efficiency in how the money is being spent.

This is which taxes make up the government’s tax revenue:

2010 Federal Revenues Pie

(Source)

Your income tax and your employer’s payroll tax bill make up the majority of the pie. Even though we have the highest corporate income tax among the OECD countries, it still makes up a small percentage of the revenue. Corporations are already taxed 39% of their revenue/profit. Making it higher, in fact, does causes businesses to move their operations elsewhere, where costs are cheaper, so they don’t have to decide to raise their prices, and lose customers who come across a cheaper product made overseas.

Here’s how our taxes are spent:

GovSpendingWeb

This sucks.

It really fucking sucks. Because what are we going to cut? The biggest pieces of the pie are health, social security, and defense. It might be nice to have less of an imperialist boot in the face of every country on earth, but even if we cut half of that, it’s still only 8%, and that money would probably need to be swallowed up to pay for social security and healthcare for people who really need it.

I also find it sad that 16% is spent on military but only 4% on veterans. I’ve never been in the military. I don’t know what that’s like. But I imagine watching your friends die in front of you for some rich politician’s political aim deserves more than 4% of the entire budget. Especially when 16% is being spent on starting or maintaining more intervention. I think if you work any job where your risk of dying or being injured is high, you should probably have more benefits than someone working a cushy white collar office job where they sit at a computer all day like me.

SuicideVeterans

(Source)

It makes sense to me more now why we are so in debt. Because who wants to deliver the bad news? So we keep borrowing, printing, and inflating.

What about raising taxes on the rich? (There’s a graph for that too.)

RichTaxes

The rich actually do pay the majority of the taxes.

Let’s go over the list of why all the great solutions are not great solutions at all:

  1. The U.S. doesn’t pay income taxes that are too high OR too low. It’s more moderate to light, compared to the rest of the world.
  2. Income and business taxes already pay 40% of what they earn.
  3. Corporate taxes make up only 8% of the government revenue but they are already taxed 39% on what they make. Too much and they could move overseas, resulting in higher unemployment, meaning even less tax revenue, and people needing to collect on government programs even more. Detroit is an example of this.
  4. Wasteful spending is not the culprit. The majority of taxes are being spent on healthcare, social security, and to a lesser degree, defense.
  5. The rich already pay the vast majority of the taxes. 97% if the tax revenue comes from the richer, top 50%.

I thought when I started this, after I dug into the research, I would be able to find the most common sense solution. Now, I don’t.

But what I have gotten out of the research, is that any politician giving you any of these solutions is full of shit and just trying to get votes to stay in power OR they’re uneducated on the real research on the topic.

Another thing I understand more now is why we borrow so much money from China and Japan. It buys time until someone smarter than us comes up with a better solution.