Common Sense Economics

Supposed you owned a bakery and a man from the government came by and and told you that from now on the government was going to cover the cost of inventory for you and all of the bakers in the country. All you had to do is make the bread and pastries and pay other normal costs of doing business. Your profits would sky rocket. In a short time, you might begin to believe that it was good for the rest of the country to get free flour from the government. But, in fact the country would produce far too many baked goods which would be a big misallocation of the country’s resources.
Money is the inventory that banks carry. In a free market setting, banks have to buy their inventory by paying people enough interest to encourage them to save. In the US today, banks get from the government what is very close to free money. Government gives banks their inventory for very close to nothing. Far more money is in circulation than is necessary for conducting the country’s business. Excess money flows into the financial sector causing bubbles in first one asset class and then another. Excess money also finances government initiatives such as that of enhancing stock prices. Great effort goes toward convincing you the taxpayer that it is good for everyone if government covers the major cost banks have in doing business. What looks like well meaning central economic planning comes down to taking money out of your pockets and sending it in the direction of others who you have been trained to perceive as your role models. Most new welfare is in the form just described and is that says out of your radar. Free money to banks is actually a greater burden on you than more visible expenditures where benefits are direct, such as welfare and food stamps.

Jean and I were able to see Ron Paul speak in San Antonio tonight. This is a six minute video of his best points.

U.S. Corporations pay the highest corporate tax rates in the world. I will explain why this is logical and good. U.S. corporations have the unchallenged use of the Federal Government as a tool to create, define and manage the markets they operate in. Corporations are responsible for creating almost all of the legislation that comes before congress. Loose monetary policy has provided corporations with profit margins that are far greater than what would occur in a free market setting.
Actually a corporate tax rate of zero would make sense in another set of circumstances. If congress was to do away with all corporate subsidies and begin to serve the interests of their constituents a zero tax on corporate taxes would benefit everyone.
As it is corporations need to pay highly for the benefits they extract from the rest of the country by using government as a business tool.

With Romney, Gingrich and Santorum, how low are Republicans willing to go? The Republican Party is a sinking ship this season because there are enough smart people who won’t vote for a new sociopath when the one we have now is being contained.

The greatest American tragedy of this century so far has been the mushing down of ordinary people who call themselves conservatives. Most of these are Republicans. Outwardly Republicans present themselves as freedom loving patriots. Inwardly they are driven by nothing more than an unquenchable thirst for sanctimonious feelings. In Ron Paul, Republicans have the only conservative candidate in the country. However, to support Ron Paul one would have to give up a degree of sanctimony, engage in self examination and study issues in depth.

When MF Global declared bankruptcy it was discovered that 1.2 billion in customers money was missing. No one who was with MF Global knows what happened to the money at least thats what they say. No one seems to know the truth, but waterboarding has not been tried. Since waterboarding is not torture maybe waterbording should be used on MF Global executives. 1.2 billion is a lot of money to steal.

The market is in very strong hands right now. Unlike the rest of us, the black boxes are never governed by the law of large numbers. Their funding is unlimited. You, mutual funds and everyone else can sell and the market will still go up until some exogenous event rocks the market for a while or until the capital markets are finally destroyed. With black boxes in control, the principles of technical analysis work almost in reverse. A rally like we are currently experiencing, with very poor internals, won’t end as so many expect. As long as volume remains moderate to light it will be squeeze, squeeze, and squeeze indefinitely. Sentiment can be bearish or bullish and it won’t matter. As far as market direction is concerned traders don’t matter, nor do most hedge funds. Supply will never exceed demand until the entire system breaks down. Why? The black boxes have unlimited funds. The more traders there are short, the fewer funds the black boxes have to use anyway.
The black boxes have an additional advantage in knowing that you the technician will place stops and follow established theory. That is all part of the algorithms the black boxes use to exploit the market.