Category Archives: Economics

A Reminder of the Meaning of Money

Atlas Shrugged is a very VERY long book, but worth it.  Basically it tells the story of how we let ourselves be enslaved by the people who claim to “help us”.  When we hand over responsibility for ourselves, we hand over ourselves.

Anyway, one the strongest speeches in the book is known as The Money Speech.  Franciso De’Anconia is at a party and overhears a guest exclaim that money is the root of all evil.  His response:

“So you think that money is the root of all evil?” said Francisco d’Anconia. “Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

“When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor–your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?

“Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions–and you’ll learn that man’s mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

“But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made–before it can be looted or mooched–made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.’

“To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss–the recognition that they are not beasts of burden, born to carry the weight of your misery–that you must offer them values, not wounds–that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade–with reason, not force, as their final arbiter–it is the best product that wins, the best performance, the man of best judgment and highest ability–and the degree of a man’s productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

“But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality–the men who seek to replace the mind by seizing the products of the mind.

“Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he’s evaded the knowledge of what to value, and it will not provide him with a purpose, if he’s evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

“Only the man who does not need it, is fit to inherit wealth–the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason why you call it evil?

“Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men’s vices or men’s stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment’s or a penny’s worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you’ll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

“Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

“Or did you say it’s the love of money that’s the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It’s the person who would sell his soul for a nickel, who is loudest in proclaiming his hatred of money–and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it.

“Let me give you a tip on a clue to men’s characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

“Run for your life from any man who tells you that money is evil. That sentence is the leper’s bell of an approaching looter. So long as men live together on earth and need means to deal with one another–their only substitute, if they abandon money, is the muzzle of a gun.

“But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich–will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt–and of his life, as he deserves.

“Then you will see the rise of the men of the double standard–the men who live by force, yet count on those who live by trade to create the value of their looted money–the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law–men who use force to seize the wealth of disarmed victims–then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

“Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’

“When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, ‘Who is destroying the world? You are.

“You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it’s crumbling around you, while you’re damning its life-blood–money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men’s history, money was always seized by looters of one brand or another, whose names changed, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves–slaves who repeated the motions once discovered by somebody’s mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer, Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers–as industrialists.

“To the glory of mankind, there was, for the first and only time in history, a country of money–and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man’s mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being–the self-made man–the American industrialist.

“If you ask me to name the proudest distinction of Americans, I would choose–because it contains all the others–the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity–to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality.

“Yet these were the words for which Americans were denounced by the rotted cultures of the looters’ continents. Now the looters’ credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide– as, I think, he will.

“Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns–or dollars. Take your choice–there is no other–and your time is running out.”

Robber Barons

This must be like part 17 in the series, but here we go again.  It seems as if the rich just keep getting richer at the expense of us little guys….

Wal-Mart Stores Inc. launched a full-fledged price war with Amazon.com Inc. and a nation of book retailers, lowering online prices on certain highly anticipated hardback titles to $9.

How DARE they?!  These evil greedy corporations are getting rich off the backs of the common man.  I mean really, reducing the price of books in an effort to gain market share!  What is this world coming too?

Unalienable Rights

Or so it is in part:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness.

I posted the other day about a conversation I had with colleagues of mine that are from Europe.  During that conversation I was stunned to learn that they honestly felt that health care was such a right.  Imagine my surprise when I saw this new bit of news:

(CNN) — Finland has become the first country in the world to declare broadband Internet access a legal right.

Starting in July, telecommunication companies in the northern European nation will be required to provide all 5.2 million citizens with Internet connection that runs at speeds of at least 1 megabit per second.

“We think it’s something you cannot live without in modern society. Like banking services or water or electricity, you need Internet connection,” Vilkkonen said.

It is a view shared by the United Nations, which is making a big push to deem Internet access a human right.

Unbelievable.

America was founded on the concept of Liberty.  Liberty to pursue our own benefits, or not.  The Liberty to claim my life as my own.  In short, these rights would be as true today, tomorrow as when they were written 230 or so years ago.  These rights will protect our citizens and can be spoken to as it pertains to those citizens 10-20 or even 50 years from now.

So tell me, how are these “human rights” being considered by  the UN to be delivered if not by curtailing another’s rights to pursue their own liberty?

At Least This is Honest

Mr. Obama has announced that he would like to take money from me and give it to the elderly.

WASHINGTON – President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year.

The White House put the cost at $13 billion.

While it’s maddening that Obama continues the worst practices of the previous administration [all the while blaming them] at least he isn’t trying to trick me into thinking that he’s doing something brilliant.  You know, like legislating lower prices.  Here he is admitting that we’ll have to spend tax payer dollars, $13 billion of them, for his decision.

Thank you, Mr. President, for being honest.

Love,
-pino

But I Voted For Him

And now I want me money.  Or so goes the general consensus if you read the Reuters article describing the Home Rescue Plan.

Obama, grappling with the worst U.S. housing crisis since the Great Depression, pledged to help as many as 9 million families keep their homes by reworking their mortgages.

Let’s not forget that the whole reason those 9 million families are struggling is because the government “pledged to help as many as 9 million families keep obtain their homes by reworking cheating* on their mortgages.

Eight months later, the plan is plagued by delays, red tape

delay and red tape?  A government program defined by delay and red tape?  Come on!

some critics say, a reluctance by banks to do their part.

Riiight.  Cause last time the banks “did their part” a housing bubble was created, then burst and we were plunged into this problem.  After which the banks were rewarded for “doing their part” by having themselves taken over, vilified, their CEO’s fired and then their pay limited.  Honestly, why wouldn’t the banks “do their part?”

Just 17 percent of eligible borrowers have had their loans modified and monthly payments cut. Hardly any have been given a cut in the amount they owe on homes which are now worth less.

Huh.  Weird.  It doesn’t seem that banks want to lend money to people who demonstrate that they can’t pay money back to banks that lend them money.  Bitches!  Oh, especially hard hit are the owners who have negative equity-who would have guessed?

For homeowners like Jeff Latta, there was no help at all.

Latta, a 53 year-old retiree, pays $1,600 in monthly home payments that eat up 93 percent of his pension and he struggles to make child support payments.

So, a 53-year-old man decides that he wants to quit working at 53 [at least] and discovers that he is having trouble paying the bills.  Unbelievable.

To help pay his mortgage, Latta has slashed his bills by hunting for food in the wooded hills around his town of Albany in southern Ohio, and growing his own vegetables.

Serious.  I wonder if “slashed” means the same thing in Reuters talk as it does in Pino talk?  However, to his credit, Mr. Latta is doing a lot more than many other folks in his condition.  But let’s be honest here, if $1600 is 93% of his pension, he has $120 left over.  No vegetable is going to cover that gap.

In March, Latta heard about Obama’s Home Affordable Modification Program, or HAMP, that allows mortgage payments to be reduced to 31 percent of a homeowner’s income.

Awesome.  Because you can just legislate away the annoying aspects concerning the laws of Economics.

Latta applied for a loan modification but was rejected. His bank said his income from selling pumpkins and firewood — a net of $906 in 2008 — was too high.

Serious.  Even HAMP must know on some level that this is just silly; it’s designed to fail.

That banks lent irresponsibly in the U.S. property boom is irrefutable. As San Diego-based realtor Steve Rodgers says: “If you could fog a mirror, they’d give you a mortgage.”

While this is true, it is also true that banks were forced to carry a required portion of their lending portfolio in this low income high risk demographics.   To say that they did this on their own is disingenuous.

Look, in the end I feel bad for Mr. Latta.  But check this out, if you make $1720 a month you can’t afford to live in a house.  Move to an apartment.  Or a smaller house.  Or something.  And more advice?  Give up on the pumpkins and firewood and move to Raleigh; they have work there.

12,000 Jobs Created

Minnesota is reporting that they have saved or created nearly 12,000 jobs due to the stimulus package. That’s more than 1 per lake, and Minnesota has a lot of lakes!

So, how much stimulus money did Minnesota get? About $4.7 billion.
How much has Minnesota spent? About $1.6 billion.
So, at this rate, how many jobs is Minnesota predicting? 35,000.
And the White House, how many did THEY predict? 66,000.

So, even using their own numbers, the White House and Minnesota is falling short by 47% of the predicted total, or 31,000 jobs.

And the jobs that WERE created? Let’s see:

  • $16.6 million to put 5,800 youth to work over the summer.

So, let’s see.  The state spent $16.6 million to hire a bunch of kids for the summer?  And that counts as a job saved or created?  So, really, what Minnesota is saying is that they saved or created 6,200 jobs.  5,800 high school kids having summer jobs doesn’t count.

Way to go Minnesota!

Alan Colmes: Is a Capitalist

Saturday afternoon, Alan posted on the emerging news media; citizenry media.

With newspapers folding and many denizens in the old media not understanding the new media, the young entrepreneurs at metrojacksonville.com are on the edge of the curve.  Locals, including officials, can’t wait to post there, knowing their messages will be read by an engaged citizenry.  They are using the web the way it is meant to be used, incorporating a level of interactivity that most newspapers haven’t grabbed onto.

I couldn’t help but being impressed by Ayn Rand reaching to us from the past:

Creative destruction. Even as a reliable icon like the delivered print newspaper makes it’s way into the the same museum as the rotary telephone, VCR and horse drawn buggy, we see the beautiful effects of ingenuity, creativity and the capitalist way. More and more people are finding that the old way of receiving news is no longer meeting their needs, so they “vote” with their wallets. Given the fact that news print and printing presses and journalists and editors are “rationed by price” we are seeing the release of these resources due to people purchasing other forms of news delivery.

Certainly the impact of the loss of their jobs will be hard for those journalists, editors and print specialists, but society overall will benefit and become more productive. Net/net, everybody wins. We see a less efficient form of media fall away, we see competition in the new forms that we are allowed to choose from and, even better, they are cheaper than the $0.75 a day it costs to purchase the local fish wrapper. In short, life is good, even great.

Imagine the lack of progress if the government stepped in, stole your money right from your pocket and propped up an industry that no one wants to see succeed? I would think we would be upset that the progress of a nation would be halted in it’s steps. Impossible? Nope:

blogs.reuters.com/mediafile/2009/09/24/how-to-subsidize-news-without-feeling-dirty/

Posted by John Galt
October 10th, 2009 at 10:56 pm

Who knew that Ayn lives?

Why Would We Tax Chinese Tires?

When American’s are really struggling right now to make ends meet, why would the United States impose a tax on tires being shipped to the country?  I mean, if we are really trying to give our consumers the opportunity to save and spend money, why, why would we tax something that they need?

“China strongly condemns this grave act of trade protectionism by the U.S.,” the spokesman for China’s Ministry of Commerce, Yao Jian, said in a statement issued on the Ministry website (www.mofcom.gov.cn) Saturday.

“This step not only violates the rules of the World Trade Organization, it is also contrary to the relevant commitments that the United States government made at the G20 financial summit.”

I am having a hard time understanding why we would impose trade restrictions that would endanger our relationship with China; one of our largest trading partners.

I should re-read this thing–be right back.

Oh, I see now:

The United Steelworkers union, which represents workers at many U.S. tire production plants, filed a petition earlier this year asking for the protection.

It said a tripling of tire imports from China to about 46 million in 2008 from about 15 million in 2004 had cost more than 5,000 U.S. tire worker jobs.

Forget I asked.  These are not the droids you are looking for.

The Price of a Stamp

So, in my last post I spoke some about the minimum wage and the buying power associated with it.  I used a concept shown to my by Mark Perry.  That is, comparing the cost of goods from 50 years ago to that price today.  I added a little twist and included the price of that good had it too kept up with inflation.

I thought it would be interesting to do the same thing with the cost of government controlled goods.  Like a postage stamp.

Here goes.

Cost of a stamp in 1958:  $0.04

Inflation Price:  $0.30

Real Price Today:  $0.44

So, while the price of products today is going down relative to it’s 1958 inflation price, the cost of postage is going up.  By almost 50%.

The Power of the Non-Minimum Wage

The argument for the minimum wage is that, without it, people will be unable to keep up with the essentials of life.  Let’s check that out.

In 1956 the minimum wage was $1.00 American.  One WHOLE dollar.  However, that translates into a whopping $7.93 today.  Which, by the way, is more than than current minimum wage set forth by the Federal Government; $7.25.

Let’s see how we compare:

Comparison of Prices:  1958 and 2008
Product Price in 1958 Inflation Price Real Price Today
Automatic Toaster $12.95 $95.39 $15.88
8 Cup Coffee Maker $15.50 $114.17 $19.99
AM Table Radio $13.95 $102.75 $29.00
Starter Guitar $17.95 with case $132.22 $99.99
Globe of the World $12.95 $95.39 $39.97
Flash Camera $5.90 $43.46 $45.88
Child’s Bicycle $18.45 $135.90 $59.00
Pup Tent $13.92 $102.53 $38.88

So, what does this tell us?  It tells us, that while wages have not kept pace with inflation, the cost of goods has also not kept pace with inflation.  In fact, the real price of goods has actually become cheaper, much cheaper, in terms of today’s dollars.

An interesting experiment conducted by Mark Perry in a post found here shows how many hours a worker would have to work to afford a defined set of products.

Again,we can do the same:

Comparison of Hours Worked: 1958 and 2008
Product Hours Worked in 1958 Hours Worked in 2008
Automatic Toaster 32.375 2.19
8 Cup Automatic Coffee Maker 38.75 2.75
AM Table Radio 34.87 4
Starter Guitar 44.87 13.8
Globe of the World 32.4 5.5
Flash Camera 14.75 6.3
Child’s Bicycle 46.1 8.1
Pup Tent 34.8 5.4

And again, we see that it’s not even close.  Not only have the products that we have to choose from expanded, but the cost of those products, in terms of real dollars AND hours worked have plummeted.