Recognize the Danger

Enjoy the lower gas prices but be prepared for an economic disaster like the world has never seen. You have not heard an attempt at honesty out of government in many decades. The depression has started, picking up where it left of in 2009. This will be far worse than what is called the Great Recession. The Federal Reserve has destroyed the economy.

Watch for pockets of discomfort. It is an error to think that programs for the poor and things like safety nets are totally for the benefit of those who qualify. Social programs exist so that Americans will always be comfortable? How considerate, you declare! People who are comfortable are likely to believe anything they are told. Make people feel important. Make them feel special. Tell them lies that make them feel special and they will believe every one of them and ask to hear more.

Notice that without fail every political speech begins by telling the audience how important they are and acknowledging all of their wonderful attributes.

There is no telling what you will be told as this economic calamity gets underway. If you believe any of it, it will be to your disadvantage. Social unrest will start as discomfort increases. Surely some of it will be violent. Regardless, you will hear many lies in the days to come,

“When Times Got Really Weird” is a timely Curbside Jimmy tune. Now is not a good time to sell your soul to the devil. The Devil is getting all the souls he can work with absolutely free. When trading freedom for comfort, the devil is usually out their making offers. There is no need for him to do it that way this time.

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A Future Conversation

For the last several decades, international banks, Wall Street, old rich, new rich, almost all corporations, news media, government and politicians have had compatible goals and incentives. Cooperation between these groups has been unprecedented and seemingly permanent.

For the first time in many years, these elite players are agreeing with each other less than 100% of the time. A commodity as universal as oil cannot fall in price as fast as it has unless the price had previously been elevated artificially. The oil price would not be falling unless people who have been cooperating with one another are no longer cooperating.

For the longest time, economists have been dismissing worries that a high trade deficit is a problem. They explain that it all balances out in the capital account. Foreigners buy American financial assets, so what is the problem?

The problem is that humans are not completely honest but they are assumed to be in economics. Foreign governments have tried to gain advantage by driving down the value of their currencies to make their manufactured goods more attractive around the globe. In the meantime the U.S. has been heavily subsidizing Wall Street and using the Federal Reserve to drive asset prices high above their natural market values.

In a short time mainstream economists will start making the astounding observation that a high trade deficit can be a detriment to the economy. There is nothing in economic theory to explain the effects of government inspired economic scams. It takes common sense to notice those things.

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244 Teens Killed in Chicago Since Michael Brown

Common Sense Economics is competely aware of the unfair treatment blacks get during encounters with law enforcement. That being said, the Brown case appears to be the wrong circumstance from which to launch protests and engage in civil disobedience. Unfortunatley, there will be many more incidents where police get out of line. Hopefully the credibility of black protesters will not be lost after making an issue of a case where the cop actually did need to use a gun.

There is only one danger to black teenagers which is greater than being killed by the police. Black teenagers are a far bigger danger to each other.

It is pointed out in the article below that 244 teenagers have been killed in Chicago since Michael Brown was killed.

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Anatomy of the Herd

Americans and people in general act on the basis that they think independently of one another. It sounds good and it is highly flattering to believe such a thing but the world would not be structured the way it is if people really thought independently.

The universe, at least the portion of it we occupy is governed by laws of dominance and subservience. Every life form that survives does so by dominating and making use of anything weaker. Strong members of a species find ways to be served by weaker members.

Human beings are natural herders of other animals. We organize other animals into herds so that we can eat them, milk them, sheer them, skin them and use them to satisfy any needs they might fulfill. Herding does not stop with other animals. Human beings also herd one another. The Old Testament is full of examples of one country conquering another with the result being weaker nations serving the strong ones. Humans use the same techniques of reward and punishment in herding one another as they use in herding animals of a different species.

The Declaration of Independence states that “All men are created equal.” Hopefully this was meant in terms of equal under the law or treated equally within the legal system. Most likely, we are all born with certain attributes so as to perform necessary tasks within the group. Those who become presidents, representatives and senators are born with political personalities which are largely the same as those of sociopaths. In order to take control of large groups of people, one must be completely ruthless. Something like a need to be honest would be a definite hindrance to anyone trying to be a king or a president. On the other hand the vast majority are preprogrammed to offer services to those in charge in return for comfort.

Who has independent thoughts? Perhaps as much as three percent actually speak words that are the result of original thoughts. Everyone else believes they are thinking but what passes as a thought is only a recording the mind has made. Almost all political discourse is of this nature, especially what is heard in conservative echo chambers.

With the advent of the Internet, is was initially thought the masses would be empowered. For a while it turned out that way but the end result is that technology facilitates herding efforts. The Internet makes it possible to manage the thoughts, opinions and behaviors of countless people. The most profitable businesses these days are corporations like Google and Facebook that build and manage herds of people.

American Citizens wrongly profess that they are in charge of government. The role of American Citizens is much like that of dairy cows. Like cows, citizens are made as comfortable as possible because that way they are of greater use to the people in charge. Programs for the poor are actually of greater benefit to the elitist who run government. As long as the poor are comfortable there is not much chance they will riot or cause problems in other ways.

In a democracy, there is great competition to determine who gets to milk the herd. The Republican National Convention and the Democratic National Convention are facilitators of the herding process. Any American who joins or supports a political party is actually unwittingly promoting his own poverty. Aggregations of people are managed in about the same way as aggregations of animals.

Every human being has the ability to think independently but the herd member role is the path of least resistance. In the coming times of stress, do not expect common people to take control of government. In all of history, that has never happened. When people are under stress they ask for more government even when government is the cause of the stress. It is human nature to treat government as if it had divine powers. This will be very unpleasant for the very small number who live and think outside of the herd.

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Instinct, Government and Economics

Common Sense Economics is alone in understanding the role instinct plays in decisions people make. Decision is actually not a perfect term because when instinct kicks in the reasoning is bypassed. No decision is actually made. The behavior is automatic.

Albert Einstein was a is frequently quoted because he had many thoughtful and clever things to say. He defined insanity as follows.

“doing the same thing over and over again and expecting different results.” _Albert Einstein

Despite getting miserable results over and over again without exception mankind looks to government to solve problems. Democracy gives citizens a choice but time and time again they choose central economic planning over free enterprise. Since the beginning of the Republic government has not failed to make a problem worse, even once. Central bankers who have never once made an accurate forecast are looked up to as if they were gods. Never in the history of the world has a government economic policy failed to make an economic problem worse.

It could be argued that we are all insane, based on Einstein’s quote. It is more reasonable to ascribe such consistently destructive behavior as instinctive. As evolution continues, human beings have intellectually surpassed the need to depend on instinct to survive, but instinct is present and plays a huge role in determining how everyone uses his time and energy.

All of the social sciences study human beings as autonomous, responsible, independent thinkers, Each is assumed to act individually. Use this model and never in a million years will it explain human behavior in the market place, politics or anywhere else.

Everyone can think independently but instinct is the path of least resistance. By default, political choices are made instinctively.

Clearly, the most basic of instinct is to exalt the species. Humankind is defined with the most flattering terms possible. Study mankind as an animal and everything makes sense.

The world’s experiments with democracy started three to four hundred years ago. During that time period there has not been one case where ordinary people reined in government or even demonstrated authority over elected leaders. Intellectually people are completely capable of understanding principles of free markets and democracy. Given a choice they instinctively choose something else.

In the human animal mind, government is divine. They are driven to serve a master and in time always end up doing so. Common Sense Economics had identified the most common transaction as that of trading freedom for comfort. This is not a conscious decision. It is instinctive and automatic.

At the time the Declaration of Independence was signed, only a tiny percent of the population had any inclination to rebel against the king. A handful of men literally crammed liberty down everyone else’s throat. Today democracy based governments are failing. The right to vote is meaningless in the face of the right to control public opinion. A small group of elites control government and use it to collect rent off of everyone else, just as was the case when the colonies separated from England. Government provides a way for the privileged to live above the law and they do.

So, what is next. If, ordinary people are going to hold on to a significant portion of their rights, a small number who truly value liberty will have to do as the founding fathers did and cram it down everyone else’s throats. Otherwise the rank and file will bargain their way back into servitude. Considerable progress has been made already in that regard.

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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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