Definition of Economics

Investopedia defines the study of economics as follows.

“A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.”

This definition is typical but it is not exactly right.

A better definition is the study of survival. The commonly used definitions are right but they are incomplete. The most critical economic behaviors occur outside of what is normally deemed a market. The first transaction everyone born makes over and over throughout life is to trade freedom for comfort.
This is one reason why economic models do not work. The decision making process does not occur as it is popularlly explained.

Human beings are all capable of individual thought but they default to herd thinking. Most of what passes as a personal opinion is a notion the mind hears and records. The notion is only a notion but it is mistaken for a self generated idea.

One of the ingredients of a free market and a high standard of living is freedom. What throws mainstream economists off is that the rank and file in any economy trade their freedom for comfort out of instinct. A political system based on democracy is assumed necessary to support free markets. In order to have genuine self government it would be necessary to impose freedom on a population faster than the individuals can bargain away their freedom.

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What Would Adam Smith Say Today?

What is known and understood is often discarded out of convenience. Adam Smith was an economist. Janet Yellen and Ben Bernanke are accountants and economists in name only. Adam Smith understood incentives. Ivy League economists are lost on the subject of incentives.
Below are some quotes from Adam Smith that are highly relevant in today’s world.

“Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.”
Adam Smith

No society can surely be flourishing and happy of which by far the greater part of the numbers are poor and miserable. ”
Adam Smith

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Adam Smith, The Wealth of Nations: An Inquiry into the Nature & Causes of the Wealth of Nations

Free market economics is a discipline that must be imposed on a society if a land is to be prosperous. The good of free markets cannot be noticed in the present moment but the good is always there. The role of government is to enforce free market discipline and of course government must not be allowed to be used to rig markets.


Music For The Hard Times Coming

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What exactly is the Federal Open Market Committee?

The Federal Reserve Web Site defines the committee as follows.

“The term “monetary policy” refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy.”

Common Sense Economics defines institutions according to how they function in real life.
In real life the Open Market Committee consists of twelve sociopaths, currently only ten, all attempting to accomplish personal agendas. Anything done in the public interest is incidental. Only sociopaths have the manipulative skills necessary to gain an appointment to such a high committee.
Who does the Open Market Committee serve? It serves those help the members accomplish their personal agendas.
In short, the Federal Open Market Committee operates the world’s largest wealth and income redistribution engine.
Who benefits? Most benefit goes to friends of the Fed and a friend is one who supports the power hungry members in their pursuit of personal ambitions.
If the official definition provided on the Federal Reserve web Site was accurate, there would be no asset bubbles. Use the description provided by Common Sense Economics and everything they do makes perfect sense.

Music For The Hard Times Coming

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Ahead of the Fed

Talk ahead of the Federal Reserve meeting is that the central bank may make noise about increasing rates. Americans are trained to believe government, especially the Federal Reserve, have magical powers. Such beliefs are easy to come by since human beings are hard wired to serve kings and prone to worship those they elect instead of exercising authority over them.
The Federal Reserve has been able to reduce interest rates because there has been no natural force causing them to move higher. If demand for money for buying plant and equipment was high or if borrowers were defaulting on loans in high numbers, rates would move up regardless.
Thinking errors abound. Credentials are universally accepted as competence, even when those who own credentials go their entire lives without making a single accurate forecast or implementing a successful policy. No matter what, citizens are going to believe these folks are highly adept.
Economists like Janet Yellen and Ben Bernanke experience the kind of success alchemists in the middle achieved when trying to turn base metals into gold. Kings were excited about the work the alchemists were doing and leaders today hang on every word that comes from a Federal Reserve Chairman. Neither has ever had even a little success in accomplishing the tasks they have attempted.
What I am expecting this week out of the Open Market Committee are emerging face saving initiatives. The public is starting gain awareness, that there has been no economic stimulus and that they have been robbed blind instead. It is human nature to believe anything coming from authority but there is one caveat. The believers must be comfortable. Americans are beginning to suffer some on account of all of the money that has been stolen from them by Fed policy. They are also learning that their chances of doing well in the future are greatly reduced.
Another thinking error is that of insisting that all are innocent until proven guilty. As true as that is in a court of law it is destructive to use that logic in day to day life. Only sociopaths have the manipulative skills to gain an appointment to the Open Market Committee. There is not an honest bone in any of the bodies who participate in Federal Reserve meetings.
Americans are starting to figure these things out. I expect face saving efforts to begin accelerating.

Music For The Hard Times Coming

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Yikes We Don’t Know Anything

Common Sense Economics starts by acknowledging what we don’t know. What we don’t know are the answers to the most basic and important questions. Some of these are:
1.) What is the universe?
2.) How big is the universe?
3.) How did the universe begin?
4.) What is life?
5.) What is consciousness?
6.) Is consciousness independent of life or part of life?
7.) ………………………….
It is actually a pretty long list. The fact is, we know almost nothing, Explanations of ourselves, government and society are based mostly on imagination. Things are explained the according to the way we would like for them to be rather than how they really are.
My favorite is the notion we live in a democratic society, a republic. Not once since the American Revolution have citizens been control of government. I know of not one case of citizens making changes by working within the system. Representatives are in fact elected but they have no incentives to represent voters who put them in office. Public opinion is easily managed, so voting only has a modest influence over government.
Common Sense Economics stays away from economic models which are really just wish engines. Government could help the economy but only be acting only as a referee and enforcing free market discipline.

Music For The Hard Times Coming

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Our Eternal Ignorance

Basic questions have no answers. We do not know what life or consciousness are. Everything else is in the defined with euphemisms. Normally, we accept the euphemistic definitions of institutions and phenomena as true and make decisions accordingly.
Not even for an hour in our history have ordinary people been in control of government. The right to control public opinion is far more powerful than the right to vote. All that is accomplished through government is the result of groups and individuals working outside the system.

Music For The Hard Times Coming

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Cause of the Coming Riots

From birth people are taught to trust. When government engages in activities such as deficit spending and quantitative easing who would guess the only possible outcome is that income and wealth is passed from the bottom to the top? There is no need to guess because there is actually no chance that such tactics will ever contribute to the common good.
So, what does that have to do with riots, why and when they will start? Americans are currently unaware of the degree to which they have been cheated. They are likely to find out and all hell will break loose. Suppose grandma has saved $100,000. In a free market setting, she would get a return of perhaps $5000 per year or 5 percent. Since the Fed provides banks with money at less than the rate of inflation, Grandma only gets about $750 per year on here savings or 0.75 percent. This is no different than stealing $4250 per year from the poor old lady at gun point.
For the most part old folks are fine with this because their hearts are filled with trust and they believe persons such as Janet Yellen are honest and competent. The opposite is true and people are in danger of finding out.
How often have you heard that inflation is in check? It is not, but in a free market setting consumer prices would be falling. Prices are supposed to fall when the productivity of labor increases, which it has by leaps and bounds over the past 40 years. The poor are ignorant so they don’t know they are being cheated. Aggressive monetary policy bolsters the profit margins of corporations at the expense of labor.
When people hit the streets and start burning and breaking things don’t be surprised. Most of them won’t even know why they are rioting when it starts. Currently, Americans are being bled white with respect to economic policy.
Economic stimulus has never been anything other than welfare for the rich. Hardly a soul knows how and why it works out that way but it is theft, plain and simple.
Janet Yellen, Ben Bernanke and all of the other smart people in charge have IQs in the stratosphere. Enhancing economic activity by removing pillars of free markets from the economic system is a contradiction to basic economic theory. They are completely aware of the damage they are doing. They are not good people.


Free Cheese

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Looting is Legal

Now that looting has broken out in Ferguson by both opportunists and others engaged in civil disobedience, it is a good time to explain that looting the overall population, through government is the most common task performed through government. Looting by making use of government is legal. Federal Reserve Policy extracts and redistributes so much money from ordinary citizens, the amount is unfathomable. The purpose of ordinary citizens in the minds of the politically elite is about the same as that of a cow in a dairy farm. People don’t seem to mind and most are not even aware of what is happening.
All laws passed today rig markets and transfer wealth from the bottom to the top. American citizens become impoverished but in third world nations, people starve as a result of laws passed in the United States. A good example is the requirement to have ethanol in gasoline. Grain farmers use government to force consumers to buy ethanol which raises the price of corn. American consumers pay more for products like bread and cereal but where people live on less than $2.00 per day, starvation is the result.
The situation in Ferguson is unique because it is all visible and illegal. Looting by using government is completely legal but hardly a soul knows it is happening.

Free Cheese

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Economics of Ferguson and Looting

Understanding Ferguson, looting and the public action from the vantage point of common sense is easy. Life without euphemisms is stressful. At critical times, though, we are better off setting aside the comforting euphemisms we use to define our existence. Crime and government have merged. History shows that this is normal. It has taken the United States over 200 years to deteriorate to this level. In time people with political power make use of government as a means to live above the law. So common is this practice that people who control government are unaware that their dishonesty actually is noticed.
What happens when citizens know their government is dishonest? They lose respect for the law and break laws when the risk is low and the opportunity presents itself. The looters in Ferguson are stealing only a miniscule fraction of the amount that Wall Street steals from average Americans in several seconds. Every law on the floor of congress is devoted to transferring wealth from the bottom to the top. In a country where law doesn’t apply above certain income levels, why would folks be unnerved when low ranking citizens break some windows and carry out merchandise?

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When Interest Rates Rise

There is a lot of discussion now about what will happen throughout the economy when the Federal Reserve raises interest rates. Let me assure you, the Fed has much less influence over interest rates than is popularly believed. Lowering interest rates has been easy because the demand for money has been so low. I am telling you, interest rates will rise like nothing seen before when lenders face massive loan defaults. The question should be, is there anything the Fed can do to stop interest rates from rising after it is clear that the economy has been destroyed? The answer that question is no.


Free Cheese

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