Republicans and Deflation

Are you a Republican? If you are, chances are the Republican National Committee. (RNC) has you repeating mantras about the danger of deflation. Deflation is automatically bad? Of course, you say. Your mind has recorded it as bad. It has to be bad. They said it was on Fox News. Good boy! Good Girl! No thinking required here. Political parties train their faithful to promote their own poverty. Consider your self trained. All is not lost. Now you can call yourself a conservative and have the respect and admiration of your peers.

Anyone who wants to study deflationary periods in history will learn different. Based on actual situations Common Sense Economics has determined that all with incomes below $250,000 per year would come out way ahead. Those making $250,000 to $1,000,000 per year would end up about the same. Billionaires would suffer for about 5 years and then start to recover.

Germany during the 1920s and the U.S. during the Great Depression are normally all that is mentioned and yes, in both cases everyone was miserable. The economy in the United States Economy has nothing in common with those two situations. Both situations were government induced and neither took place at a time when the productivity of labor was high.

Deflation following vast increases in labor productivity should be studied also, For that circumstance, look at the U. S. economy from the end of the Civil War until the beginning of the 20th century. Prices fell. There were periods where GDP contracted but business investment continued the entire time. Living standards for average Americans increased dramatically.

In a free market system, deflationary periods come and go. So do inflationary periods come and go also. During the latter 19th century, the economic system was largely free market based. At that time in history, the elite of the world did everything possible to rig markets and capture customers by using government but their skills were not as well honed as they are today. Today, that is all government is used for.

Had the U. S. relied on free market principles, our deflationary period would have already come and gone. Instead, the Federal Reserve has kept prices as high as possible as well as profit margins. Despite all of the fancy talk this has all been politically inspired.

When the productivity of labor increases lower prices are the reward average citizens receive. Why did the financial sector contribute so much to the Republicans this year? Controlling government economic economic policy is the easiest way to steal the productivity bonus American Workers deserve.

So there you have it. The Republican National Committee has convinced you that conservatives fear deflation. Promote your own poverty if you wish. Unfortunately everyone else will reap the same misery you do. You deserve the misery. Everyone else does not.

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Political Parties, How They are Defined and how They Function

Here is how The National Democratic Institute defines political party.

“Political parties are an essential component of democracy. By competing in elections and mobilizing citizens behind particular visions of society as well as through their performance in the legislature, parties offer citizens meaningful choices in governance, avenues for political participation, and opportunities to shape their country’s future.”

It sounds pretty good doesn’t it. It sounds absolutely wonderful doesn’t it? This is the euphemistic definition of political party. It is the definition society adopts and cherishes. But, this is not the true function political parities serve.

As human beings, unless we catch ourselves, we define ourselves and every institution that is part of our lives with the most flattering attributes a mind can come up with. Happiness may not be possible without these kinds of fantasies. But, if political parties were actually like The National Democratic Institutes’s description, there would be very few if any problems in government.

What are political party in terms of how they function. A political party is a deal making service that represents big money contributors in their efforts to gain advantages, usually in the market place, over competitors through the use of government. Political parties help pass laws that capture customers for favored citizens. Political parties help clients rig markets and force the rank and file to buy certain products and services. Political parties force contributions out of lesser interests much like the mob used to shake down businesses for protection money. The message is “if you don’t pay us, we might pass a law that will hurt you.”

Political parties educate their rank and file members in ways that cause them to unwittingly promote their own poverty. The Democratic Party is famous for seeking social justice and does a fine job of convincing their members, that social justice is a priority. Republicans promote themselves as as serious advocates of small government. It is amazing how many Republican faithful are convinced that corporate welfare is an ingredient in capitalism. As far as I know Calvin Coolidge, prior to the Great Depression, was the only Republican President who actually tried to reduce the size of government.

Why do people not wake up? The human species is driven by instinct with respect to their behavior in the aggregate. Miss this principle and there is no point in studying sociology, economics, anthropology, psychology or any thing else that encompasses group behavior. Men and women are instinctively driven to serve a master, preferably one that is kind and provides for them. The herd mode is adopted by default. Instinct feels natural. It is instinctive to trade freedom for comfort and that is exactly what people do. It is more natural to worship a politician than it is to rein one in. This is a hard lesson to teach because the natural response is to declare oneself an exception. A sheep probably doesn’t realize it is a herd animal either.

As Common Sense Economics has explained many times, just know human kind is driven by instinct more than reason. The world would not be the way it is if this were not so.

People don’t question the definitions they are given because they will not challenge an existing order they are instinctively driven to serve.

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A Quote From a Guy Who Gets it.

“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” Singer wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.” _ Paul Singer

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Privateers Stock Market and Fed

Here it is in plain English, how the stock market is manipulated higher. As I have written before, the Federal Reserve is defined as an unbiased economic institution. That definition suits everyone so it is treated as such. Its members are defined as the most brilliant economists on earth. All who observe them with the exception of Common Sense Economics, are satisfied that they are indeed brilliant.

The reality gap in this instance is huge. In terms of how it functions, the Federal Reserve provides a way to manifest into reality the desires of the most politically powerful people on the planet. The members of the Open Market are the most ruthless members of their profession and are driven by blind ambition. They are smart enough but actually have betters. Their betters are the economists and business people who game their activities. They are also not as smart as the best salesmen in the world who have access to them and convince them to do this that and the other. The Federal Reserve is nothing more than a way for the people who have access to them to get what they want. Or, put another way The Federal Reserve provides a way for really smart people to reap where they don’t sow.

The Federal Reserve could not create a stock market bubble sole on its own. Getting stocks to move higher without supporting fundamentals requires the cooperation of politicians who pretend not to know what is going on and the services of privateer firms.

I use the term privateer because they have so much in common with the privateer pirates who were licensed by their governments to attack and rob ships flying foreign flags. This was in the days of mercantilism. Governments and pirates had common goals, so they worked together.

Higher stock prices are good it is reasoned. All other efforts to simulate the economy have been completely exploited. The wealth effect is all that is left. Modern privateers are the firms who work closely with the Federal Reserve in a wink and nod system. High frequency trading firms and everything else is fine provided their effort move the stock market up. When the Fed is confident a firm will route newly created money into equities, that firm gets the business. The privateer firms get tips and heads up from the Fed in reward for their participation in Fed’s agenda. In other words privateer firms trade risk free. Any scam is fine as long as stock prices go up. Politicians who understand the financial markets practice the art of not knowing.

This is how the upper one percent in the U.S. has captured such a huge portion of the nations income. It is also how the poor and middle class have lost so much during the last decade. This is also how the global economy has been destroyed.

Activities such as these allocate resources so inefficiently that genuine growth is no longer possible. Soon stocks will crash regardless of privateer firms and any new stunt central banks come up with. Privateer firms are not operating out of patriotism. This a once in a life time opportunity to make mountains of money without taking any risk whatsoever.

When every possible trick has been tried, the last short is squeezed and stocks start dropping regardless of central banks, the privateers will cut and run. When the Federal Reserve is no longer of any use to them, most will flip to the short side of the market and clean up on the way down.

Make no mistake the privateers have no conscience at all. Neither do the members of the Federal Reserve.

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Democracy is a Good Idea But it Isn’t Working

When our founding fathers set up the country, democracy had not been tried in a serious way. There was fear that an uneducated majority would vote the assets of everyone else into their pockets. Ben Franklin equated democracy to two wolves and a lamb deciding what to have for dinner. They organized a Republic to try and avoid that scenario. It was a good point but there were other issues they didn’t consider.

As it turns our human behavior in the political arena is guided by instinct and intellect takes a distant back seat. For eons humanity had lived under kings, chiefs and other leaders. Rather than elect representatives and rein them in, they sought the equivalents of kings and searched for messiahs. Americans were charged with the task of overseeing government but have always voted as if searching to find a parent to look after them.

Of course candidates for office like the rest of humanity are guided by self interest. It is safe to say that self interest is part of every human transaction. In all but a few cases it is the dominate motive.
With respect to highly ambitious people who run for office self interest as a motive is overwhelming.
In the absence of extreme pressure from constituents representation goes to those who offer the most in terms of helping the elected person achieve personal goals and aspirations.

Since work is a always second choice, selfish interests use government as a way to reap where they don’t sow. Once power has been achieved, holding onto power is too important to let outcomes to elections determine who holds an office. The right to shape public opinion, it turns out, trumps the right to vote as a means of determining who wins elections.

How many times do we hear, “be sure and vote. It is your civic duty?” Voters both liberals and conservatives head to the polls with their mind full of sound bites their minds have recorded from the media. The thoughts folks are exposed to are adopted as personal insights but are nothing of the kind.

Voting has great potential but mind control determines how elections turn out. With few exceptions, the winner of an election is acceptable to the reigning power structure at the time.

In the U.S. the financial sector is the most powerful group trying to gain traction in this election cycle. The majority of their political donations which are enormous are now going to Republican Candidate. Republicans are gaining a lot of power in 2014.

Chances are very good Democrats will now come out attacking Wall Street and the distorted income distribution. They will offer no real solutions but will seize the opportunity to offer a culprit as a way to gain back public support. This is the way politics actually works. Constituents have no chance of being represented by either party. They do get things but only as a means of pacifying them and keeping them comfortable. Politicians have known for a long time if the rank and file suffer too much they will rebel. This lesson was learned very well in the sixties during the Vietnam War. Any changes that came out of the sixties came from citizens working outside the system. It was business as usual at the ballot box.

Constituents will believe anything as long as they are comfortable and made to feel important.

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Choosing the Best Sociopath

Politics is highly competitive. Only sociopaths have the manipulative skills to get elected and remain in office. Politics is the most competitive occupation out of all endeavors. It is so competitive that sticking to the truth is a sure way to lose. To win, it is necessary to say or do anything that works. Truth has no utility in politics and winners use it only in odd circumstances when there is no risk in doing so. Any truth can be made to sound better with a little embellishment. People will vote for the politician who sounds the best.

When a sociopath takes office, all is not lost. A sociopath’s version of conscience is an exaggerated need to maintain high self esteem. There is a constant fear of losing a positive public image. So, on the outside a sociopath appears to have a conscience like everyone else.

So, how does one get good out of a sociopath who holds a public office? Righteous ridicule is to a sociopath as kryptonite was to Superman.

The scriptures are a great source of natural law.

Matthew 23:13
“Woe to you, teachers of the law and Pharisees, you hypocrites! You shut the door of the kingdom of heaven in people’s faces. You yourselves do not enter, nor will you let those enter who are trying to.

Why would Jesus ridicule the Pharisees? The pharisees were the sociopaths in charge during his time.

People are much too gentle with the representatives they elect.

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Tuesday’s Elections

Self government is a myth Americans live by. Working withing the system is deemed a virtue. Those who work outside the system are extremists and trouble makers. Schools leave students with the impression that democracy is a gentle form of government where we all decide things together and everyone ends up happy. Those who live by myths die by the hands of the myths they live by.

The right to vote has great potential but not the way it is exercised today. Since the beginning in 1776, Common Sense Economics has not found one case where Americans went to their representatives with an idea and the representatives acted on that idea for the benefit of constituents. Surely, on a local level a handful of exceptions may be found. Common Sense Economics is still looking. On a national level, there has been nothing close.

Successful political initiatives have always been sold from the top down. The job of congress has been to sell the public on ideas, not to implement ideas from the bottom up. Still Americans are convinced they are in control of government and that by voting they have done their duty.

Slowly your right to vote has been converted into a pacifier like those that are stuck in a baby’s mouth to keep it quiet. The right to control public opinion long ago surpassed the right of suffrage as the most productive tool for making changes in government. On a national level the Republican National Committee and the Democratic National Committee ostensibly serve the public but in reality are deal-making services the elite of the world use to rig markets, capture customers and promote causes from which they benefit. Rank and file members of each party act as servants to the elite. Their only rewards are feeling good about themselves and maintaining a high status among peers.

This is the general situation voters face in Tuesday’s elections. Common Sense Economics has two hopes. 1.) Out of frustration, citizens might vote out a large number of incumbents. 2.) After the elections frustration will be high enough, that citizens start working outside of government to accomplish their goals. The sixties and seventies were times where protests and other unorthodox methods were employed with great success. Not all changes were good but working within the system would have caused no changes at all.

Common Sense Economics knows that behavior in the political arena is governed by instinct rather than reason. Democracy is a young development along history’s long time line. People are hard wired to serve kings and treat political candidates as potential messiahs. In the meantime aspiring messiahs are governed by self interest, the same as everyone else. Elected representatives end up serving those who best assist them in gaining power and achieving personal goals and aspirations.

Common Sense Economics knows that true self government is at least 1000 years away. In the meantime it is hoped that the few who truly value freedom will vote as usual but begin looking for other avenues for imposing freedom on others. Few stop to realize that our founding fathers were very few in number and literally crammed freedom down the throats of everyone else. No more than 30% of the population was ever in favor of independence. As Common Sense Economics has explained, people are instinctively driven to trade freedom for comfort. The few who rise above that instinct must be successful in forcing loberty on everyone else or it won’t happen.

Subprime Neigherhood is a tune Curbside Jimmy wrote back after the financial crisis of 2008. It is still a good tune today.

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The Logic of Programs for the Poor

As long as people are comfortable they believe what they are told, never protest and support authority. That is the logic of programs for the poor. Do the poor benefit? Of course they do but the programs are of far greater value to folks who administer them. Those who benefit the most are corporations which feed off of the programs.

The poor would be better of without government assistance. The poor never lobbied government to get these things started. They take what is offered just as do the rich, Unlike the rich, mostly the poor would not complain if the programs were discontinued.

Never make the mistake of thinking politicians have good intentions with respect to programs they support and push through. Government programs make recipients more manageable.

Laws are passed to serve those with political power.

On another note, politicians who think Mexican Immigrants are suckers for big government don’t know many Mexicans. I do. In Mexico, dealing with the government is an art. To the politicians I say, Mexicans know you a lot better than you know them. The unofficial economy in Mexico may be bigger than the one the government knows about and taxes.

Here is a nice Curbside Jimmy Tune, A Dead Man’s Credit Cart, Music for the Hard Times Coming.

Posted in Daily Comments | Leave a comment and Today’s Earnings has been trading for $300+ for a while with a price earnings ratio of around 600. In a real world setting AMZN would be trading for under $5.00. Common Sense Economics knows that for the human species, work is a second choice. Bragging about work ethics and personal initiative is a staple in human to human conversation. Make no mistake, rent seeking for the elite is the preferred method of making a living. For company insiders, goosing a stock price by hook or crook is the best and most lucrative way get paid.
Countless elites rejoice as a stock like AMZN moves into the stratosphere. Chests are pounded and the virtues of hard work and capitalism are proudly proclaimed. But, stock prices are managed politically and the elite are really just on welfare, although not officially.
Government economic policy extracts countless dollars from the poor and middle class every second and transferees it to the billionaire class. Folks don’t seem to mind, especially those who identify as conservatives. QE keeps profit margins up and wages down and rank and file conservatives relish in the role of paying tribute to their role models.
In the end, government policy destroys the whole economy, elites and everyone else. But, the elites don’t care. They have already eaten their lunch.
Perhaps, the real economy is too weak for AMZN to avoid losses anymore and hype is working less well as a promotional tool. Consumers are getting less impressed with playing the role of sucker.
It turns out that despite the finest hype money can buy, AMZN has reported a loss. Buybacks won’t help a company that can’t report positive earnings because fewer shares magnify losses just as they magnify profits.

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Fantasy of Economic Models

It takes a high I.Q. and lots of hard work to get a PHD in economics, especially from an Ivy League School. Yet a third grader with common sense could debunk almost anything that comes of their mouths in thirty seconds are less.
Economic models and forecasts fail for the same reason chain letters fail. Erroneous assumptions are made about human behavior and character. Also, provisions are never made as to new incentives that will be created and old incentives that will be destroyed. Government is always assumed to make economic decision when it is impossible to for it do so. Does self interest disappear when government takes on a task? Only in the minds of learned economists do government agents work towards the best interests of ordinary citizens.
Fantasy is a major cause of happiness. Some fantasies continue throughout life without interruption. Those that deal with money and survival cause great sadness when they collide with reality and cause misery and poverty. Where there are fantasies about economics, there is always a reckoning day and a sad ending.
There is nothing ignorant about the American Public. Most work to many hours and have too much responsibility to keep up with the numerous ways they lose money due to economic policy. Still, there will be great distress when average folks discover just how much Quantitative Easing has cost them. The price has not yet been paid.
As a political initiative Quantitative easing has been successful in transferring massive wealth from the politically naïve to the politically powerful. As an economic initiative it has destroyed the economy.

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