Economics of Marijuana Laws.

inmdexOne important aspect of any law is how effective the law is in preventing the behavior it is designed to prohibit. When I taught high school I became certain that marijuana use by teens and pre-teens destroys any chance they have of gaining anything by going to school. As a special education teacher, I learned that many of the students who qualified for the special education program were heavy marijuana users, A great number of those qualifying around middle school were actually stoned on the day they were tested. Marijuana was present all over campus and any student who wanted some did not have to look hard to find it. All but the few who take honors classes learn almost nothing from the 9th through the 12th grades. Special education students on marijuana have no chance at all.

Knowing this, should marijuana be legalized? Well, the laws we have now are completely useless in keeping it out of the hands of students. Where students are concerned, it doesn’t matter whether it is legal or not. They get all they want. There is no point in wasting money trying to enforce a law that is so easy to violate, even children can do it.

People are not offended enough by marijuana use to have an effective law that is devoted to eliminating its use. When no less than half of the population is not offended by marijuana use there is no point in trying to make it illegal. This is true of any law. Laws need to have the cooperation of at least 80% of the population. Most compliance has to be voluntary. There are exceptions. But enforcement has to be brutal, like shooting users and dealers on sight, with no trial.

Current drug laws allow supporters to enhance their self esteem by showing their disdain for bad behavior. Organized crime gets a great deal of utility out of drug laws because high profit margins are guaranteed. The pharmaceutical industry, of course is opposed to legalizing marijuana.

I study issues thoroughly before coming up with opinions. The medicinal aspects of cannabis appear to be highly valuable. With the state of health care in disaster mode, it is wrong to deny responsible people access to natural herbs that have strong curative powers. Certainly research into medical uses should be encouraged. There are no reasons to prevent adults from trying to cure themselves with any safe herb where traditional medicine fails. As it turns out traditional medicine is failing miserably these days.

I have made some observations that some might find interesting. The people who want pot legalized the most are also the ones who are doing the most to keep it illegal. These are the stoners. They are not a sympathetic lot and engage constantly in maladaptive behavior. I took the time to study who gets arrested for drugs, where and when.

Almost never is a person arrested in his own home for indulging. This is all a matter of public record. Check the arrest records for any county that makes the information available on line. You might go blind before finding one arrest of a stoner at home. Also, it is rare for an arrest to be made for marijuana alone. The vast majority of marijuana charges are made in addition to other charges. The other charges are almost always for some kind of bad behavior like getting a DWI or committing another crime. Marijuana is almost never the original reason for arrest.

The people who want pot legalized for recreation are the ones who are providing all of the justification for keeping it illegal.

There are hundreds of laws on the books that have no utility to society. Supporting these laws makes certain folks feel morally superior. Marijuana laws fall into this category. As a retired teacher, I would certainly like to see pot kept out of the hands of kids. I would support the current law, if it was effective in doing this. I might support the law if it did any good at all.

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Understanding the Immigration Issue

i12333magesFinding causes of problems as well as solutions in economics is actually very simple. I say solution but problems are not actually solved. There are trade offs instead. Society gains the most when trade offs result in the most positive outcome. That is all that can be done.

Almost any economic problem is caused by a lack of faith in the free market system. Solutions are seldom seen because the solution is distasteful or at least requires deferred gratification. Countless hours and dollars are devoted to coming up with palatable solutions none of which are viable. A constitutional amendment promising the separation of government and the economy would benefit every living soul in the country. Such an amendment is not possible because free markets are not trusted.

The immigration issue is nothing more than a labor market issue. People in the United states are paid a lot higher to do the same work that people with as much or more education receive for doing the same work in other countries. Laws passed in the United States for the purpose of rigging markets have a devastating effect on third world nations. When the gasoline industry was rigged so that all gas contained ethanol third world people could no longer afford to eat. U.S, drug laws which do nothing to prevent usage, provide high profit margins for the drug cartels in Mexico. Crime has taken over Mexico and had destroyed many natural opportunities. All of these things encourage immigration.

There is no way to slow down immigration with out doing one or more of a few things. The only way to stem the tide without reforming U,S. Drug laws and economic policies is to be completely brutal in enforcing the law. This is the way the Berlin Wall functioned and it worked for the most part.

The only genuine non violent method that will work is to return to free markets here in the U.S. and repeal laws that impoverish citizens of poor countries. When there is such a huge gap in what comparable jobs pay in different countries, countries that pay well are going to get immigrants.

This solution is not viable right now because its implementation would require faith in free markets and that is lacking world wide. I promise, no other approach would generate as positive an outcome.

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Hedging Against Looking Stupid

122854053_bernanke_388803cAmidst of world wide central bank efforts to keep stock prices elevated and moving higher, public figures especially current and past Federal Reserve Chairs are starting to comment that stocks are over priced. Remember these people all have genius plus IQs. The world is full of bright people doing stupid things. Why do smart people do stupid things? For one stupidity and intelligence are completely independent of one another. Stupidity is simply maladaptive behavior.

If a brilliant person wants something to be true bad enough, he will see it as true the same as will a moron. Chances are though Federal Reserve members are doing stupid things in keeping with the political agendas they are carrying out. Nothing is too stupid to do if personal gain is great enough. At higher levels economists get paid to lie so stupidity may not enter the picture. The price is right and accepting money is rational.

Still, the wealth effect that has been created never has had a prayer of benefiting the entire country. Do both Ben Bernanke and Janet Yellen really believe QE is a good deal? There is not a chance they do but you will never get an honest answer.

Just watch what happens. More and more statements will be of the kind that point to stocks “possibly being overpriced.” Look for others besides the Fed people to start throwing in their words of caution. Doing stupid things for profit is a whole lot different than doing stupid things because one is an idiot.

Expect more of these kinds of statements. They are hedges against looking stupid. Stupid for personal gain makes sense in a professional sense but no one wants to wear the label.

As for politicians, as the economy denigrates and the financial markets collapse, they will practice the art of not knowing. All will be innocent as in deprived of meaningful information.

Make no mistake. The Federal Reserve folks knew what they were doing.00_logo_1

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When Roosevelt Died

presidential-funerals-franklin-d-rooseveltWhen did the Great Depression end? Often Roosevelt is given credit for ending the Great Depression. Anyone who reads knows that he was responsible for the depth of the Depression. During the 40s the economy temporarily converted to a command economy. Business investment in the private economy began immediately when Roosevelt died. Despite all of the lofty theories that were abound, the success of the economy depended on things no one in government could see. No one was willing to invest in plant and capital equipment when there was an administration bent on destroying the free market system.

The second Great Depression actually started in 2007. Suffering at the top has been minimal so far due to Quantitative Easing or more precisely the Fed’s political agenda. Why are corporations not investing in plant and equipment today? Corporate leaders know the folly of government economic policy. They are happy to accept the gratuities that go along with quantitative easing. Insiders get paid big time when the price of their stock gets run up. In other words, pigs won’t back away as long as the farmer keeps throwing slop into the trough. They are smart enough however, not to invest in the future while quantitative easing is destroying the economy.

The severity of this depression has not yet been experienced but it is coming. When will this depression end. It will start to end when the Federal Reserve dies. So, it may not actually end.00_logo_1

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When Will The Stock Market Crash?

00_crashIf we were dealing with an honest normal market, it would go down sometimes for several years at a time. It would never crash like it did in 1929, 1987 or 2008. Even the bear markets of the 70s were partly due to government policy.

Crashes occur when government policy promotes high stock prices. Government policies come in all shapes and sizes. Following the great depression, derivative were mostly illegal. By the time the market crashed in 1987 derivatives had already become the tail that wags the dog. Stock prices lost their direct relationship to earnings. Even back then the practice of buying derivatives and then goosing the price of the underlying asset became popular. Today that practice is totally common place along with a multitude of new techniques for keeping stock prices moving higher independently or earnings.

The simplest technique is to simply not enforce laws if the result would case any decline in stock prices. Today the practice of hyping a stock higher is so common no one notices. It is actually illegal still. Who cares if it makes the stock go up? Price manipulation to the upside is a government inspired, celebrated practice because it is compatible with the goals of all incumbents.

Friends of the Fed, trade risk free, provided they assist in raising stock prices,

Enough, Enough, Enough you say. Everybody already knows all of that.

The stock market may crash any day, but on any given day the odds are against it, But, it will crash and destroy the lives of everyone with stocks, IRAs, or a pension. That can’t be avoided. The damage that has been done is already to great.

There is one way a crash could be delayed for several more years. Privateer firms, friends of the Fed and many others have already made an exit. These firms normally prosper by scamming hedge funds, the public, short sellers especially, and anyone else who tries to profit by trading securities. These firms are having trouble making a go of it these days because all of the sheep have been sheered. There are no longer enough victims to go around.

Central banks have started buying outright. They have political agendas to carry ought. Investors can only buy stocks with the money they have earned. To central banks money is like grains of sand on the beach. They can have all the money they want just by deeming it into existence.

There are no central banks that will ever just say “the gig is up, sorry suckers, you lose. There is a realistic chance they will just absorb any supply that comes on the market for the foreseeable future. For central banks to buy enough stock in the Dow 30 components to have a controlling interest is completely feasible. They will do it as an alternative to giving up their jobs and admitting they have been dishonest.

If this happens, it will destroy the profitability of the world’s biggest corporations. Welfare for the rich causes the same behavior issues in the rich as regular welfare has on the poor. Corporate insiders are huge stockholders. Under honest conditions, stock prices reflect the success of corporations in generating profits for shareholders. If the Federal Reserve is driving the price of their stock up independently of profits and losses, who needs to work for a living? Heck, with all the free money the Federal Reserve is giving away it makes sense for the corporations to buy their own stock and goose its price that way. Folks get offended at high CEO salaries but they shouldn’t. Those are private contracts and the salaries are paltry compared to the masses made from the Fed, simply giving then their profit.

Central banks owning stock outright will completely destroy the real profits of the worlds largest businesses because it takes away incentives to produce efficiently.

If central banks continue the buy up supply route expect stock prices to get real sluggish and drop over a number of years.

A crash is still the most likely resolution because the public is becoming more suspicious every day. Suffering is becoming more widespread. Without suffering, government policy appears good and no one worries. Cause common folk a little inconvenience and they get un-trusting very rapidly. With just a little more misery Americans might think deep enough to recognize Quantitative Easing and other asset enhancement initiatives as the welfare programs they indeed are. When even a small fraction of Americans knock of the scam, there is no way the Fed will be able to continue its political agenda. Then the market will crash.

As obvious as it is to just a few, the majority in the country still have no idea how much the corruption is costing them personally.

Fascism the Incurable Cancer

Pro-Business Vs. Free Market

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Idiots Never Unite

Idiots Never UniteBack in the 70s I read a book that explained how there was no way the patients in an insane asylum would ever rebel and take over the institution. Why? His theory was that idiots never unite. I wish I could give credit but I can’t remember the name of the book or the author.

It may be only idiots who never unite but only the truly intelligent, ambitious and politically powerful work together. Today, the the unholy trinity of government, corporations an the media work together constantly. Certainly they are not idiots and they are united in their efforts to achieve their common agendas. There doesn’t have to be a formal conspiracy. There could be it doesn’t matter. They work together. How it is all structured is not important and it is unknowable in the present.  Clearly members of the unholy trinity are not idiots.

The public is not united. Theories abound that the masses of ordinary humans are in fact idiots in how they deal with with governments. The politically powerful, are united so as to exploit others. Again, the politically powerful are not idiots.

For ordinary people herd living is very peaceful for decades at a time. Is smooths out life and reduces stress.  Every one hundred years or so, a political or economic crisis occurs due to lack of interest in overseeing the operation of government. Self government is bound to fail after years of lack of attention from voters. Ruthless actors simply take what they want until there is nothing left to take.

There is hope, however. I estimate that 3% of the population engages in original thought. As it is none of that 3% is aware of the threat to the country. Anyone who looks can see. The 3% can be reached.

So far every fascist cancer has destroyed its host country. It doesn’t have to be that way this time.  There has never been a case where the public has become aware of the threat and mounted a counter initiative.

All it takes is reaching the 3%. Do not think there is anything to gain from silence.

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Fascism the Incurable Cancer

Pro-Business Vs. Free Market

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When the Truth Comes Out

article-2651288-1E8D57AF00000578-104_306x420I am the only economist I know of who treats Federal Reserve policy as completely political. All others see Open Market members as good people trying to help the country.

I frequently profess that the truth has no utility in politics. On rare occasions it does make an appearance and that is when, not knowing or acknowledging the truth will make a person look stupid. That is a mistake Janet Yellen is not going to take.

Here is an article, describing Yellen’s new found awareness of risk in stocks. Risk is being acknowledged while the Federal Reserve is doing every thing it can fathom, to goose stock prices and reward the elite class which determines Yellen’s agenda.

http://finance.yahoo.com/news/feds-yellen-says-equity-valuations-142814995.html

Do not mistake this truth telling effort to turn into an ongoing effort to enlighten the public.

Think of it as a hedge against looking stupid when the stock market crashes and confused citizens hit the streets protesting and rioting.

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The Unaware

unawareTalk radio hosts give the impression that they have studied issues and present themselves as being on top of the passing scene. Don’t be fooled. Conservative spokespersons are no different in the way their understanding has progressed than many of the 60s radicals. Their spiel never changes when new information emerges.

Early in their careers they learned a few conservative ideas. They have stuck to the only ideas they understand. Circumstances have changed. The conservative movement is very much alive but the seasoned talk show hosts are not part of it.

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No Radio Talk Show host will say much that is contrary to the interests of networks and advertisers. Entitlements and social programs are fair game. Pro-business and fascism are off limits.

I have not found one who has snapped to the fact that the growth of government is being caused from the top down. Not one understands that it is not pressure from the poor and displaced that is causing unrestrained growth of government.

I don’t think it is actually out of ignorance that they are failing to understand. They are not what they claim to be. Sean Hannity and Rush Limbaugh are the worst and most damaging because they have such large audiences. Rather than educate listeners as to genuine threats, they exploit the sentiment that is already available.

This is the nature of broadcasting. It is all about building an audience and it makes little difference what content attracts an audience.

Any fool can look out the window and see that there is a bigger problem than poor people trying to get something for nothing from government. Chances are the radio folks are indeed clueless and never really waved the conservative banner for any other reason than to build an audience.

In the minds of “conservatives” today, pro-business is pro-capitalism. Conservative talk radio hosts all fit into this category. Of course this is non-sense. The fascist cancer that has infected the country is far more threatening than anything that is discussed on the radio.

Why have things worked out this way? It has to do with incentives. Even Ivy League economists understand incentives, although they ignore them. Talk radio hosts owe their income and popularity to the kind of organizations which profit by using government to rig markets, capture customers and control public opinion. There isn’t a way Sean Hannity and Rush Limbaugh are going to point fingers at the hands that feed them.

Fascism is the most serious threat the United States has ever faced and the very people who could create an awareness of the problem are busy nurturing it along. The Fascist cancer can only be turned back by rank and file citizens. You really have no one with power or influence on your side.00_logo_1

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Happiness is Getting Robbed Blind

Guns001-CaseyOh, its not at gun point and apparently people really don’t mind. When I was a stockbroker in the 70s there was an old Joke. It went, “As, salesmen first we get their interest and then we get their principle.?”

That was a joke, but that is precisely what is happening in the economy today. You save money and you get no interest because the Federal Reserve is giving unlimited amounts of free money to international banks. Who needs to pay you 5% to borrow the money you struggled to accumulate? Then they will get your principle because you have been herded into IRAs. Stocks are a big part of IRAs. When the stock market collapses, IRA holders will be the last to sell because they will not want to pay any penalties involved. Then when banks start failing government won’t be able to fund the FDIC. Savers will be given stock in the failing bank instead. Why? That will be deemed the only solution possible.

There you have it. It will work out just like our old joke from the 70s. Wow, and back then it was only a joke.

Today Americans have the highest self esteem of any group of people in history with the possible exception to the Nazi’s prior two and during the first years of WWII. Those of us who have studied natural law understand that unreasonably high self esteem turns people into slaves to anyone who knows how to manage how they feel about themslves. What is a feel good mechanism to one person is a behavior management tool someone else.

Americans do not mind losing money on their investments as long the loss occurs on the advice of an expert. When the collapse comes, don’t be surprised at folks when they take the attitude that Bernanke, and Yellen did their best but it was just more than they could handle. As losses accumulate,it may very well be “We know you tried. Thanks for your service.”

The truth is that there never has been a chance of Fed policy doing anything but rob the poor and give their money to the rich.

But, who cares. Americans will still have their self esteem.

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Gaming The Fed

Criminals Posing as Economists

Criminals Posing as Economists

 

 

I can say with complete authority that there is not one real economist on the Federal Reserve Open Market Committee. How do I know? I am a real economist and I know political hacks when I see them. The Federal Open Market Committee consists of hired guns carrying out the political agendas of others who helped them get appointed and confirmed. Having a degree does not make a person an economist. A degree is no indication of competence. Don’t get me wrong, these folks are not morons. They are some of the finest statisticians, accountants, and mathematicians in the world. They are so good that they can fool just about anybody by talking over their heads and dazzling them with terms only they understand. I am not impressed, partly because I am not bad at math myself but more so because I understand the limitations of mathematics and statistical models.

For an engineer building a bridge math is an indispensable tool. For a social scientist, math is good only for describing what has happened up to the current time frame. Economics, mathematical models have no predictive value. The multitude of suckers who comprise the American population believe every word that comes out of their mouths. When an institution like the Federal Reserve makes a decision, it changes all of the incentives that cause men, women and children to do what they do. The model therefore becomes immediately useless.

The models are useful to open market members because they allow them to cite reasons for what they do. In 2008 economists earned a lot of money convincing fools they could save the world from an economic disaster. What they have done is prevent the economy from ever recovering. Quantitative easing has never been anything other than the carrying out of a wealth transferring political agenda. That goal has been accomplished and now the focus has changed to preserving the wealth and power of the financial elitists who determine their agenda.

The job of the Federal Reserve is to increase the wealth of all who help the members get nominated and hold on to their jobs.

Right now the primary job of the Federal Reserve is to push the stock market higher for the benefit of all who have political authority over them.

The algorithms they use are complex but what the algorithms accomplish are simple. Anyone who has traded for a long time can notice prices being supported, in much the way stock prices have always been supported with respect to new offerings. The firm handling the offering has legal authority to manipulate the offering price steady for a certain time period. The Fed is not limited by the law, so deals can be made to prevent stocks from falling for many days running. Each day a small number of stocks are goosed to serve as confidence builders. Every effort is made to make it appear as if the market is about to fall so as to suck in short sellers who are subsequently squeezed out of their positions. This is all government business. Anyone can notice on days when there is news that would normally cause a shake out, central banks buy with both hands and halt any sell off early on.

The unsuspecting investing public is happy as larks because they are watching their IRAs rocket in value. Only a few will ever get their money out at a profit. Why? Only a handful can sell at the top and a few more will be able to sell at a profit at all. This is where math actually is useful. It is mathematically impossible for everyone to sell an investment at a profit when it is severely is severely overpriced. Folks will be shocked at how fast value comes out of their holdings.

The best thing to do is sell right now. There is now way for the economy to grow at all now, much less at a pace fast enough to justify artificially elevated stock prices.00_logo_1

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