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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Common Sense is Not Automatic

Let me review some basics with respect to Common Sense Economics. First know that using common sense is not automatic. First one must learn to recognize and remove the euphemisms of life, which distort our thinking. Without this first step common sense hurts more than it helps. Wrongly define institutions people and activities and common sense generates wrong answers. So, as human beings, are we special? Not hardly, but we all unwittingly act on the basis that we are. Mankind is basically good? Mankind is defined as good, but a quick glance at history reveals that it just ain’t so. Bad? No, lets just go with neutral. People act according to the incentives in front of them. Incentive based behavior is modified by various constraints. Nothing more need be said. For the sake of comfort and happiness, after our thinking is over, we can return to the world of euphemisms. The next financial crisis is close at hand and it is going to take all the wits a person has just to survive. Most Americans will lose everything they have.
Knowing that the economy is going to collapse doesn’t take much intelligence. By using common sense, without the handicap of euphemistic definitions of people and everything else, all we have to do is understand that over the last three decades, free market attributes have been removed from the structure of the economy. The rate at which our free market economy has been dismantled over the past five years makes it highly like the collapse will come very soon.


Euphemism Mountain

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Economics of Illegal Immigration

I would like to remind folks that more than being a legal issue, illegal immigration is a labor market issue. This makes it an economic problem and government cannot solve economic problems. Governments can only make political decisions. Economic decisions are beyond the capability of any government. An economic decision is made when there is no choice but to economize. An economic decision is always a last choice. We would all like to have all we want of everything we desire but we are forced to economize. Alwl pr oposals to handle the current situation on the Mexican border are political decisions, so with any of these the problem will get worse.
I have long been a proponent of an open border with Mexico. It would be easy enough to give anyone who wants to visit a picture id after taking finger prints or even a DNA sample. It is a myth that illegal immigration hurts the U.S. economy. It is almost impossible for any stranger to visit a foreign country without creating additional economic activity.
The flow of immigrants is not going to slow. The cause is the huge difference in pay for foreign workers and American workers with the same level of education. There is a constant incentive to go where there is higher pay. In time this imbalance will be leveled no matter what. Americans will earn less and workers in other countries will earn more.
Politicians who believe Hispanics are a group who will be big government loving constituents are going to get a sad surprise. Over the years, the rank and file in Latin countries have learned to coexist with governments. Much of economic life in Mexico is conducted completely off the government’s radar. What politicians will end up with is a multitude of businesses that report no income, pay no taxes and are assumed not to exist. That is the way life is in Mexico. How do I know? I have lots of Mexican friends and I am glad of it.
On another note, reports of Hispanic travelers paying $4000 to $10,000 to be smuggled into the United States are lies. There are reports of families in Honduras saving $5000 and paying to be smuggled into the United States. Poor people in the United States are rich compared to poor people in Latin America. How many American poor save $5000? I have never heard of a case. If it was possible to save $5000 in Honduras, people would be leaving Detroit and going down there.

Free Cheese

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What Janet Yellen Doesn’t Know

Learn enough and one seems to disregard or forget the basics. Perhaps one can earn a Phd by faking it, never even knowing the basics. Most likely someone like Yellen, believes that with her brilliance, she can override the basics with supernatural powers.http://quillian.net/blog/?p=1639

Sweet Suzie’s Kool-Aid

Common Sense Economics, instead, relies on the basics and regards post graduate economics as misguided mush.
Basic economics which no one disputes, recognizes scarcity as a necessary attribute of money without which it will cause more damage than good.

Americans have not yet grasped the damage central banking has done to the economy.

Economics Department



Free Cheese

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