401(k)s and IRAs to be nationalized?

Posted by David on November 10th, 2008

When Argentina moved to nationalize pension funds, the media correctly identified it as a “grab” and people took to the streets in protest. I think Americans might just roll over, however.

read more | digg story

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No such thing as a free lunch

Posted by David on October 15th, 2008

When arguing against the Genetic Information Nondiscrimination Act last year, I wrote

If discrimination based on comprehensive genetic screening is legal, we can expect health providers to tailor plans according to our individual risk factors. That might be to the disadvantage of a minority of high-risk individuals, but greater information about risk factors will lower uncertainty, and thus lower rates overall. Furthermore, insurers will offer incentives to people who take proactive steps to discover health risks and take steps to alleviate them. Expensive procedures such as frequent biopsies or preemptive removal of organs might be fully covered for individuals whose genetic profiles uncover a high cancer risk.

Unfortunately, Congress did not heed my arguments, and banned genetic discrimination anyway.  It is now illegal for health insurers to take genetic factors into consideration when setting premiums.  What effect do you think the law had on the incentive of insurance companies to pay for their customer’s genetic screening? 

If the goal of the law was to encourage genetic screening, it clearly had the opposite effect.  In response, celebrities are now “fighting for women to have access to MRIs and genetic testing.”  Having forced insurance companies to ignore the results of genetic testing, people now want to force them to pay for it.

Do you think that people who find out that they have a higher probability of having an illness with genetic factors would be more likely to purchase more health insurance than individuals with a low probability of genetic illness?  As I wrote last year,

It does not take an economist to predict that rates would immediately rise, as healthy people, refusing to pay for their neighbor’s health risks, stopped using insurance altogether. As the young and healthy jump ship, insurance companies would have to increase rates, accelerating the trend. Without further government interference, the health insurance business would disappear completely, shortly after millionaires on their deathbeds became the only people able to afford policies.

Are you still wondering why healthcare is so expensive in the U.S.?

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Ban on short selling hurt investors

Posted by David on October 10th, 2008

What is the difference between the U.S. and the Russian economy? Answer: In Russia, they do not pretend to be capitalists. Seriously though, it appears that we are getting closer to nationalizing many of the broken industries that still remain in the U.S. such as automobiles, airlines, financials and who knows what else.

read more | digg story

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Swiss government supports granting plants rights

Posted by David on October 7th, 2008

If you thought the animal rights movement could not get any more insane after the Spanish government granted apes rights, here is a new low:

The Federal Ethics Committee of the Swiss government has unanimously concluded that the right of plants should be recognized. Their conclusions (PDF) of their statement on the “moral consideration of plants for their own sake” includes the following:

 

  • “Harm caused to plants”, including the “decapitation of wild flowers” is “morally impermissible”
  • Plants should be “excluded for moral reasons from absolute ownership”
  • Genetic engineering is acceptable only as long as their “reproductive ability and adaptive ability are ensured” and “always involve[s] consideration of conserving and safeguarding the natural, i.e. not man-made, network of relationships”
  • The “patenting of plants as such is morally impermissible and contradicts the dignity of living beings” [minority opinion]
  • “the complete instrumentalisation [i.e. domestrication] of plants – as a collective, as a species, or as individuals – requires moral justification”

 

You can laugh now, but not so long ago, the vast majority of people of people would have laughed at the idea of “animal rights.” To the extent that governments recognize the rights of any animals, plants, or rocks to exist for their own sake, they equally restrict the rights of human beings, since human civilization is only possible by the manipulation, exploitation, and appropriation of nature to suit the selfish interests of human beings. The call to recognize animal or plant rights is ultimately nothing less than a call for the xenocide of the entire human race.  For more see the ARI mini-site Environmentalism and Animal Rights

Environmentalism | 4 Comments »

What you need to know about the economic “crisis”

Posted by David on September 28th, 2008

Economics is not a complicated science. This may not seem obvious to you if you’ve following the news from Washington, where a cabal of politicians, financiers and lobbyists have been spent the last several weeks desperately making a series of increasingly complicated, expensive, and ultimately unsuccessful plans to “save the economy.” As the costs of their schemes have spiraled from billions and into the trillions of dollars, it has become increasingly urgent for you, the source of Congress’ deep pockets, to examine the potential impact of their actions on your taxes, savings, and investments. Even if you have no intention whatsoever of voting this November (which, given the choices, is hardly unreasonable), it would behoove you to take the consequences of the pending federal bailout into consideration for your own benefit.

The key to understanding economic theory is to grasp that the same principles that apply to your personal finances, and perhaps to your interaction with your local grocer apply equally to the world at large, at all levels of economy activity. The key to understanding politics is to grasp that political success requires advocating policies which violate these basic economic principles – and then evading the consequences of their own policies – with the voters’ eager participation in the delusion.

A Potato Farmer Learns About Business Cycles

Suppose, for example, that you grow heirloom potatoes. Each season, you harvest most of the potatoes for consumption or sale, and save a fraction to plant the next season. The saved potatoes are your supply of loanable funds – the consumption you forgo now to invest in future production. The percentage of saved potatoes is your savings rate, and also your interest rate, since the consumption you forgo now is your investment in next season’s production capacity. Suppose that you have reached an equilibrium, so that each year’s saved potatoes are just enough to produce the same sized crop next year. Common sense indicates that you cannot increase your future consumption of potatoes without an increase in savings, and therefore a decrease in present consumption. This is a key point – increasing the rate of economic growth is only possible through increased investment. Increased investment is only possible through increased saving. An increase in saving requires a decrease in current consumption. The same principle applies when you decide to dine out less often this month to afford a new iPod next month.

Imagine that you keep track of your remaining potato stock in a ledger. If your ledger is accurate, each hash mark in the ledger corresponds to a real potato – the potatoes are your “gold standard.” For a while, potatoes are plentiful and life is good. Then, one day, you see a commercial for the latest product from Apple – the iTater, a laptop made from potato starch. You must have it – but your ledger shows that the expense would cut into next year’s seed stock. No problem – you just add another zero to the count of remaining stock and proceed to the nearest Apple store. You experience utopia with your iTater – welcome to the boom phase of the business cycle! Your constituents (the wife and kids) are happy, consumer spending is up, and interest rates are down (saving potatoes requires less of a sacrifice in current consumption – according to your ledger.) You have taken your ledger off the “potato standard” and created a fiat currency – but who cares, life is good, right?

What happens next season? Since the act of writing down numbers does not actually conjure up potatoes, you will be unpleasantly surprised when your stock of real investment capital suddenly runs out, and is not sufficient to meet planned expenses. You may be forced to liquidate your assets at a large loss (the iTater market is not so hot now that the iTater 2.0 is out), and without a true accounting of available investment capital (the seed stock in your cellar) long term planning becomes impossible. Welcome to the bust phase of the inflationary business cycle!
If you wise up to your economic fallacies, you will cut current consumption (no iTater Lite for the kids) to restore savings rates and pay debts. But suppose that you take a hint from Washington, and decide to implement a “bailout plan” by adding some more zeroes to your ledger, and resuming unsustainable consumption level by getting the tots the iTater Lites. You might even get a loan from your neighbor Mr. Wen.

What happens now? You’ve “rescued” your personal economy this season at the cost of further depleting your investment capital. You’ve won the “vote” of your kids this season, but you have even less capital for next season. Rather than allowing your personal economy to recover, you have further distorted your grasp of reality, and now have no idea how many spuds you have to consume, and how many you need to save. You can attempt borrow seed stock from your neighbor Mr. Wen, but unless you can drastically cut consumption to pay interest, he will eventually grow impatient and refuse to lend any more. The more you attempt to extend the illusion, the farther out of touch you become with reality, as the numbers on your ledger show exponential growth upwards while your actual consumption plummets toward zero. You’ve discovered hyperinflation, the ultimate destiny of all fiat currencies.

The Roots of the Housing Crisis

Let’s now apply the analogy of the potato farmer to the mortgage crisis our economy is now experiencing. The seeds of the crisis were laid during the New Deal, with the federal government’s creation of Fannie May and Freddie Mac for the purpose of allowing mortgages to be issued at below market rates. In other words, they are a form of price control (a price ceiling) on interest rates for home mortgages. As with all price ceilings, the consequence of making goods artificially cheap is a shortage. In this case, the physical supply of building materials, land, architects, and construction workers is not sufficient to meet demand. The existence of coercive government price controls is obscured by a number of elements intended to maintain the myth that every American family has a “right” to a home. The elements include the superficially “private” charters of Freddie and Fannie (and now, the other institutions being bailed out), the extra-legal guarantees provided to those entities (massive lobbying and high-level relationships with both political parties), and the indirect way the costs of shortages are paid (price inflation, rather than an increase in taxation).

Much of the blame for the mortgage lending meltdown has been placed on the “failure of the free market.” But is there really any truth to this? The financial industry is the single most regulated industry in the economy. The failing institutions are precisely the ones that New Deal policies were meant to protect us from: the FDIC was supposed to prevent bank runs, the SEC was supposed to be stop shady investments, Fannie May and Freddie Mac were supposed to make sure that loans went to people who deserved them. Opportunistic politicians like John McCain are quick to blame the capture of regulatory institutions on lobbyists and “special interests.” He promises to fix the problem by giving yet more money and power to corrupt government agencies, much like a mob boss who blames his enforcers for his protection schemes, and then promises his victims to lay off them if they just give him more guns and money. The only reason that special interests are so involved in government is that the government has ingrained itself so deeply in our lives. Giving more power to the state to regulate markets and redistribute wealth and privileges from one group to another only increases the incentive to strengthen one’s political connections.

There are two particular stimuli for the present housing “crisis.” First, is the expansion in the money supply by the Federal Reserve, motivated in part by the desire to pay for American overseas commitments without a proportionate increase in taxes, in part as a response to the destructive consequences of the anti-business sentiment that created regulations like Sarbanes-Oxley, and as a response to its own inflationary policy of the late 1990’s, which (much like the case of the unfortunate farmer) resulted in the boom and bust of the Dot Coms. Second, is the 1995 Community Reinvestment Act, which basically forced banks to make unprofitable subprime loans to poor neighborhoods and minorities. In 1999, the repeal of the Glass-Steagall act was tied to the CRA rating of banking institutions, again forcing them to make unprofitable mortgages. As the consequences of the loose money policies and the CRA began to come crashing down in 2008, the government responded with HOPE NOW and Project Lifeline, which use a combination of threats and taxpayer-sponsored bribes to prevent the markets from self-correcting. Unfortunately, as our farmer learned, attempting to fix over-consumption by increasing consumption only makes the situation worse.

The vicious pattern of inflationary business cycles is a downward spiral that is not a creation of the unrestrained greed of businessmen. Yes, businesses are complicit to the extent that they have taken part in the state’s redistribution of funds from taxpayers and dollar users. But this is only a minority of politically-connected enterprises. The Community Reinvestment Act is in fact an attempt to force financial institutions to become altruists – that is, act against their own self-interests. The mortgage crisis is primarily the inevitable result of a political-economic ideology that essentially attempts to turn wishes into reality through collective delusion. This ideology is in turn the product of a philosophy that rejects objective reality in favor of a reality created by the collective consensus, rather than the inescapable consequences of cause and effect.

The Philosophy of Make-Believe Economics

The German philosopher Emmanuel Kant famously argued that there are two realities: the noumenal, which is the way the world really is, and the phenomenal, which is the way conscious beings perceive it with their senses. Since the conceptual faculty is an object of distortion, the real world is forever beyond human understanding. Our perception of reality is therefore only an illusion, but it is a collective delusion, shared by all of society. American philosopher John Dewey took Kant’s premises to their natural conclusion: since “ultimate” reality is unknowable, social consensus is the sole determinant of truth and morality. Dewey rejected the notion of truth and of right and wrong as such, and held that pragmatic experimentation should be our sole guide to action, with democratic consensus as the ultimate manifestation of truth, morality, and political change.

Few people act like our potato farmer and deny the objects and events that happen before his very eyes. Yet in economic matters, most people, including most politicians, mainstream economists, and investors unconsciously follow Dewey’s philosophical principles: reality is ultimately driven by social consensus, and the success or failure of markets depends only on the optimism or pessimism of consumers and investors. This is more than the belief that wishes and prayers affect reality – this is a belief that one’s wishes are reality – if only enough people share the delusion.

The Federal Reserve and the Treasury Department are faithful followers of Dewey and Kant. By artificially lowering or raising interest rates, the government attempts to turn our perception of reality (the interest rate) into reality – our actual propensity to save. But pretending that there is a sufficient stockpile of spuds in the cellar is not the same thing as having a sufficient stockpile. The artificial manipulation of interest rates leaves investors flush with cash, but short on worthwhile investments (or vice versa) and thus diverts increasingly scarce resources into increasingly inefficient investments. Prudent investors (like the banks not in this week’s news stories) stay away, while politically-connected spendthrifts splurge. Markets become increasingly unstable, and sooner or later, things come crashing down. The more you attempt to evade reality, the worse the disaster that you are asking for will become.

General | 9 Comments »

SEC bans Stock Shorting

Posted by David on September 18th, 2008

In light of the SEC’s decision to ban all short selling, last year’s One Minute Case for Stock Shorting is especially relevant.

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Christianity and socialism glorify human suffering

Posted by David on September 14th, 2008

 

This is Angelique. She wanted to die with dignity

This is Angelique. She wanted to die with dignity

Here is a tragic tale about a woman affected with a terrible terminal illness who only wished to die in peace. Instead, her months were spent in terrible pain, and her last hour was spent “vomiting faecal matter” as her brother “held a bowls under his sister’s chin.” Before her death, Ms. Flowers begged her society for the right to die as she wanted:

“The law wouldn’t let a dog suffer the agony I’m going through before an inevitable death. It would be put down. Yet under the law, my life is worth less than a dog’s.”

Her brother ads:

“How can that be right? How can society believe terminal patients should be put through awful agonising deaths? 

What is to blame for this perverse reversal of morality which defines “compassion” as the glorification of human misery? At first, I was tempted to blame the socialist mentality of Australia’s ruling Labor Party. Under the collectivist ideology, human beings are slaves of the State, and may not live or die except by the State’s judgment that they are of use to Society. On the other hand, the religious ideology is that human beings are animated corpses, souls given a temporary lease on mortal life for the sole purpose of blind obedience to their deity, who may not live or die except by the ruling of his earthly representatives.
In this case, it may be both as Austrialia’s current prime mister is a vocal leftist commited to integrating Christianity into the political sphere.

General | 2 Comments »

American Fascism versus the pornographer

Posted by David on September 13th, 2008

In 2003 I explained why totalitarian regimes like China are so fiercely opposed to human sexuality:

The threat posed by the selfish pursuit of one’s happiness is the driving motivation for authoritarian regimes of all kinds to have joined organized religion in fiercely opposing public acceptance of sexuality as a natural and moral activity.

In 2008, advocating and practicing the right of all human beings to pursue their life, liberty, and happiness as they best see fit is grounds for a lifetime sentence in a federal prison of the United States of America:

Money quote by John Stagliano:

America became great because the founders knew that the power of the majority had to be strictly limited to protect this wonderful concept of “rights.” They knew that the rights of a minority, and especially the most important “minority”, the individual, needed to be protected against the will of the majority. And the most important right that they sought to protect, the FIRST Amendment to the Constitution, is the right to free speech. That is the right to express oneself in whatever way one wished, as long as that person was not “forcing” himself or his ideas on anyone else.

Who knew pornographers were so eloquent?

(More pro-porn activism: DefendOurPorn.com)

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Support Tor: fight Internet censorship

Posted by David on September 8th, 2008

Unless you are utterly ignorant of the outside world, you have heard that the government of China actively monitors and censors its citizen’s access to the Internet.  Its tight grip on Internet services is part of an overall policy of brutal suppression of free expression and human rights in China, including organ harvesting, mass murder, forced sterilization, and all the other assorted atrocities that go along with a totalitarian socialist regime.  As brutal as China is, the state of human rights in Putin’s Russia may be even worse. 

Besides their oppressive governments, China and Russia also share a large number of Internet users.  Being a highly decentralized network, the Internet is a critical link for citizens in these countries to connect to each other and the outside world.  Unfortunately American companies have eagerly provided technology that the Chinese government uses to block access to banned content and track down and shut down users and content publishers.

Fortunately, the technologies that allow the creation of ubiquitous surveillance also make possible ubiquitous secrecy.  One particular tool for circumventing state censorship is the Tor anonymity network.  For some time now, I’ve been running a node on the Tor network, which allows users to communicate anonymously on the Net.  Tor is an “onion routing” network, which means that I can see the (unencrypted) traffic leaving my node, but I cannot know where it originates. 

A common concern with anonymity networks is that they can be used for malicious purposes, such as identity theft, piracy, or child pornography.  I was curious to see how my node was being used, so I used some network sniffing software to monitor the sessions leaving my own node.  Since my snooping sessions occurred around 1AM, I was not surprised to find that most of the traffic went to Russian (which I speak) and Chinese (which I can translate) sites.  As far as I could tell, none of the content was illegal.  I found users browsing websites for gaming, online forums, photography, and health information.  (A health information blog might seem innocuous in the West, but such information is closely controlled in China.)  It only took a few minutes however to find traffic to Secret China.com, a site in Chinese devoted to “promoting freedom of the press, a connecting bridge between the Western culture.”  Now as a statistical survey, this is a small sample, but it seems likely to me that at the very least, a substantial part of Tor traffic is being used by people who have legitimate reasons to hide their online activity from their governments.

If you wish to support freedom and privacy, consider visiting the Tor website, downloading the software, and running a Tor node.  You can read some reasons to run Tor on the project’s site, but here are mine:

  • I want to protect the rights of all people to communicate without interference or punishment from their governments.
  • I am concerned about the U.S. government’s policy of warrantless and unconstitutional surveillance, and want to protect myself against the consequences of its continued progress towards a totalitarian regime.
  • I believe that like the right to bear arms, my rights may become useless if they are not exercised.

Some tips for using Tor:

  • I am using the “unstable” version just fine.
  • You must configure Tor as a relay if you want to run a Tor node.
  • Tor will use a lot of traffic if you let it (slowing down your internet access and potentially reaching monthly bandwidth limits if you have any), and may expose you to legal investigation.  You should familiarize yourself with its options, as Tor makes it easy to control both the type and volume of traffic is relays. 
  • If you disable all the exit policies or enable the “help censored users reach the Tor network”, you can run a node without exposing yourself to liability.
  • The bandwidth graph will show total usage, so you can adjust the bandwidth limits appropriately.  For reference, Comcast has a limit of 250 GB per month.

Sci/Tech | No Comments »

A visual guide to the 2008 presidential election

Posted by David on September 7th, 2008

My thanks to Burgess Laughlin and C August for providing this handy visual guide to help me understand the key difference between the candidates:  A Visual Guide to the Election

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