Principle #16 - GOVERNMENT SPENDING - THREE AREAS: TAX, BORROW, PRINT.
Spending tax revenue is a less efficient use of capital than individual consumers using that same money to make investments. For example, spending tax money on welfare programs is less efficient than individuals or business using that same money to create job opportunities and make those people on welfare more productive members of society. In addition, when the government borrows money by issuing Treasury Bonds, it creates huge debts that will be passed on to future generations. This is a negative influence on the economy because if there was a massive call on these debts, our country would be bankrupt. Printing money to finance more government programs also has a negative influence on the economy. When you print money, you devalue dollars, which creates fiat inflation because that money is not backed by anything.
Friday, April 10, 2009
Principle #15
Principle #15 - FOR EVERY ONE JOB CREATED IN THE PUBLIC SECTOR, ONE IS DESTROYED IN THE PRIVATE SECTOR.
Principle #14
Principle #14 - WHEN IN DOUBT, DO NO HARM.
If it ain't broke, don't fix it.
These bail outs and particularly the Stimulus Bill is doing harm to an economy that the current administration admits: "We haven't seen a crisis like this before."
They're failing to bring to light that they know if you spend , print, and borrow the amount of money that they have passed through Congress, you create a situation that is perfect for inflation (even hyper-inflation) to occur. The problem for America is the inflation does not immediately manifest itself, so you cannot evaluate failed policies in real time. However, there are real-world examples from history that shows you cannot spend, borrow, and print your way to prosperity. As always, slow and steady economic growth, born from good sound business practices, is the best path to prosperity. There is nothing sound about reckless spending, borrowing over 5% of our GDP, and printing over a trillion dollars.
If it ain't broke, don't fix it.
These bail outs and particularly the Stimulus Bill is doing harm to an economy that the current administration admits: "We haven't seen a crisis like this before."
They're failing to bring to light that they know if you spend , print, and borrow the amount of money that they have passed through Congress, you create a situation that is perfect for inflation (even hyper-inflation) to occur. The problem for America is the inflation does not immediately manifest itself, so you cannot evaluate failed policies in real time. However, there are real-world examples from history that shows you cannot spend, borrow, and print your way to prosperity. As always, slow and steady economic growth, born from good sound business practices, is the best path to prosperity. There is nothing sound about reckless spending, borrowing over 5% of our GDP, and printing over a trillion dollars.
Principle #13
Principle #13 - THE FREE MARKET HAS NOT FAILED, THE GOVERNMENT HAS FAILED.
The Free Market is not a fair market.
The governments latest quest to make sure no large companies fail is really the problem. The government's involvement in everyday market activities is the foundation of the current financial crisis.
For example, when Congress and a Statist(someone that wants the Federal Government to control the individual) President passed the Community Reinvestment Act in the late '70s, they created a dangerous practice of telling banks to make loans to people they would normally turn down due to risk. This, along with a lack of oversight, which is different that a lack of regulation, was a recipe for disaster. The social and economic engineering of left-wing,"big government" elected officials and bureaucrats refused to enforce the regulations that were in place to stop a Freddie Mac and Fannie Mae implosion from happening. As a matter of fact, they encouraged Fannie and Freddie making risky loans because home ownership was at a "all-time high" and more low-income folks were now homeowners. This was also fueled by a Federal Reserve that kept interest rates artificially low. Many people in Washington and on Wall Street knew that there was a brick wall at the end of Easy Street, but it was a case of no one wanting to take the punch bowl away while the party was in full swing.
The Free Market is not a fair market.
The governments latest quest to make sure no large companies fail is really the problem. The government's involvement in everyday market activities is the foundation of the current financial crisis.
For example, when Congress and a Statist(someone that wants the Federal Government to control the individual) President passed the Community Reinvestment Act in the late '70s, they created a dangerous practice of telling banks to make loans to people they would normally turn down due to risk. This, along with a lack of oversight, which is different that a lack of regulation, was a recipe for disaster. The social and economic engineering of left-wing,"big government" elected officials and bureaucrats refused to enforce the regulations that were in place to stop a Freddie Mac and Fannie Mae implosion from happening. As a matter of fact, they encouraged Fannie and Freddie making risky loans because home ownership was at a "all-time high" and more low-income folks were now homeowners. This was also fueled by a Federal Reserve that kept interest rates artificially low. Many people in Washington and on Wall Street knew that there was a brick wall at the end of Easy Street, but it was a case of no one wanting to take the punch bowl away while the party was in full swing.
Principle #12
Principle #12 - IMPORTS ARE JUST AS IMPORTANT AS EXPORTS.
It is always in the country's best interest to have imports from other countries to push you in the direction of your comparative (competitive) advantage. Trade allows you to rise above the levels of self-sufficiency. This pricinple is positive because imports create competition and options which results in lower prices for consumers.
One out of every five jobs are directly related to trade.
Good business: keep American corporate taxes low and tariffs low as well. The winners will be those companies that are the most competitive and the consumers...that's Capitalism.
It is always in the country's best interest to have imports from other countries to push you in the direction of your comparative (competitive) advantage. Trade allows you to rise above the levels of self-sufficiency. This pricinple is positive because imports create competition and options which results in lower prices for consumers.
One out of every five jobs are directly related to trade.
Good business: keep American corporate taxes low and tariffs low as well. The winners will be those companies that are the most competitive and the consumers...that's Capitalism.
Saturday, March 21, 2009
Principle #11
Principle #11 - SANCTIONS NEVER WORK.
Example: Lybia never really suffered under sanction from the West, and Kaddafi didn't change his threatening ways until America in 2001 got tough on Terrorist states. The lesson is economic sanction never work unless the whole world community shuts out the bully state. As history has proved, some other bully country will trade or give aid to other trouble making bully states, thus rendering sanctions impotent.
Example: Lybia never really suffered under sanction from the West, and Kaddafi didn't change his threatening ways until America in 2001 got tough on Terrorist states. The lesson is economic sanction never work unless the whole world community shuts out the bully state. As history has proved, some other bully country will trade or give aid to other trouble making bully states, thus rendering sanctions impotent.
Principle #9
Principle #9 - BUSINESS BORROWS FIRST
Always. Small Business and Big Business will borrow money first and save their cash for either "rainy days" or dividends. Business will always borrow first to ensure a flow of cash when gearing up for capital investments.
Always. Small Business and Big Business will borrow money first and save their cash for either "rainy days" or dividends. Business will always borrow first to ensure a flow of cash when gearing up for capital investments.
Principle #8
Principle #8 - INFLATION IS NOT EVEN.
Inflation benefits those who receive the money first.
For example, the people with market power will pass higher prices onto the consumer without loss of market share, resulting in permanently higher prices. This principle has a negative influence on the economy because currency should be stable and neutral. If it benefits someone, it violates the rule of neutral currency, and that is always bad.
With the federal government spending and printing so much money recently, inflation is soon to be on the rise. Those in the government, bankers and industry leaders will still find a way to benefit from inflation/hyper-inflation. It is the small businesses and consumers that ultimately get shafted in the end.
Solution to inflation: dramatically cut federal spending, and peg the dollar to a precious commodity like gold.
( The US Economy went off the stable currency rails when Nixon took America off the Gold Standard. Editor note: Nixon was a politician and a terrible economist. He was no friend of the Conservative Movement; he was a Washington Elitest who believed in Big Government.)
Unfortunately I don't see that happening with the current administration.
The first eight principles are on ECONOMICS, the next two are on BUSINESS.
Inflation benefits those who receive the money first.
For example, the people with market power will pass higher prices onto the consumer without loss of market share, resulting in permanently higher prices. This principle has a negative influence on the economy because currency should be stable and neutral. If it benefits someone, it violates the rule of neutral currency, and that is always bad.
With the federal government spending and printing so much money recently, inflation is soon to be on the rise. Those in the government, bankers and industry leaders will still find a way to benefit from inflation/hyper-inflation. It is the small businesses and consumers that ultimately get shafted in the end.
Solution to inflation: dramatically cut federal spending, and peg the dollar to a precious commodity like gold.
( The US Economy went off the stable currency rails when Nixon took America off the Gold Standard. Editor note: Nixon was a politician and a terrible economist. He was no friend of the Conservative Movement; he was a Washington Elitest who believed in Big Government.)
Unfortunately I don't see that happening with the current administration.
The first eight principles are on ECONOMICS, the next two are on BUSINESS.
Principle #7
Principle #7 - Long term growth is based on two factors:
1) What you've got [inputs: a) Natural resources b) Infrastructure ]
2) How you use it. [a) Human capital]
What is important here is that you don't see the three industries that appear in Principle #4. You don't promote long-term growth by making taxation, regulation, or litigation part of an economic plan. Every time Washington gets involved in the economy they do something that squanders the above inputs and increases the prevalence of higher or hidden taxes, regulations, and litigation.
For example, when a piece of legislation like the economic stimulus bill gets passed, it doesn't address energy prices - i.e. drilling for more oil (natural resources), it actually hikes taxes on people and businesses making over $250,000 - job producers (increasing human capital).
Therefore in order to grow the economy "long-term", you need to maximize your resources, human and natural, and stay away from policies that allow the cancers of taxes, regulation, and litigation to infiltrate the economy.
1) What you've got [inputs: a) Natural resources b) Infrastructure ]
2) How you use it. [a) Human capital]
What is important here is that you don't see the three industries that appear in Principle #4. You don't promote long-term growth by making taxation, regulation, or litigation part of an economic plan. Every time Washington gets involved in the economy they do something that squanders the above inputs and increases the prevalence of higher or hidden taxes, regulations, and litigation.
For example, when a piece of legislation like the economic stimulus bill gets passed, it doesn't address energy prices - i.e. drilling for more oil (natural resources), it actually hikes taxes on people and businesses making over $250,000 - job producers (increasing human capital).
Therefore in order to grow the economy "long-term", you need to maximize your resources, human and natural, and stay away from policies that allow the cancers of taxes, regulation, and litigation to infiltrate the economy.
Monday, March 16, 2009
Principle #6
Principle #6 - PRICES MUST BE ABLE TO TELL THE TRUTH.
For example, having a price ceiling like rent control will create a housing shortage. This distortion in price actually hides the true market price and causes a serious homeless problem (an affordable housing shortage situation at best). This, and other examples of PRICE CEILINGS, create shortages because it generates too much demand and not enough supply. Therefore, this example has a negative effect on the economy, but the principle in theory is positive.
For example, having a price ceiling like rent control will create a housing shortage. This distortion in price actually hides the true market price and causes a serious homeless problem (an affordable housing shortage situation at best). This, and other examples of PRICE CEILINGS, create shortages because it generates too much demand and not enough supply. Therefore, this example has a negative effect on the economy, but the principle in theory is positive.
Principle #5
Principle #5 - ALL ECONOMIC BEHAVIOR IS BASED ON ONE'S OWN SELF INTEREST (and it is not a sin).
This is explained best by Adam Smith. He said 'People are selfish by nature.' Therefore they will invest or spend money that will suit their own personal needs, not someone in the next county or state. Smith talks about this "Invisible Hand", where you best take care of others by taking care of yourself, as a positive influence on the economy; because if you become economically strong, you could create jobs in your town.
This is explained best by Adam Smith. He said 'People are selfish by nature.' Therefore they will invest or spend money that will suit their own personal needs, not someone in the next county or state. Smith talks about this "Invisible Hand", where you best take care of others by taking care of yourself, as a positive influence on the economy; because if you become economically strong, you could create jobs in your town.
Saturday, March 14, 2009
Principle #4
When likened to a ship, the U.S. economy has three permanent ANCHORS:
1) Taxation
2) Regulation
3) Litigation
These three industries account for over 35% of the U.S. Gross Domestic Product.
All taxes (especially income, property, and sales taxes) suppress growth.
1) Taxation
2) Regulation
3) Litigation
These three industries account for over 35% of the U.S. Gross Domestic Product.
All taxes (especially income, property, and sales taxes) suppress growth.
For example, taxation puts money in the hands of bureaucrats who use my money less efficiently than I can. This always has a negative effect on the economy (crowding out effect).
Regulations on imports in the form of quotas and tariffs will limit competition and ultimately raise prices on imported and domestic goods. This also has a negative effect on the economy because if the prices are not able to tell the truth (artificially inflated prices), then you will eventually have a reduction in demand (increase in supply) and a shrinking of the industry.
Litigation also has a negative effect on the economy because it does not produce anything. The money gets wasted in the court system or on lawyer's expenses.
Thursday, March 12, 2009
Principle #3
Principle #3 - When you live above your means, you can do three things:
1) borrow
2) reduce savings
3) sell assets
For instance, if you spend more than you get paid, then you put vacations or luxury items on credit cards. To pay off these credit cards, you may have to reduce savings or use future income to pay them - thus saving less money.
If the Government spends over budget, then they will sell Treasury Bonds to foreign investors (selling assets). This principle always has a negative effect on the economy because savings and capital are reduced. This is bad because saving money is always good...always!
1) borrow
2) reduce savings
3) sell assets
For instance, if you spend more than you get paid, then you put vacations or luxury items on credit cards. To pay off these credit cards, you may have to reduce savings or use future income to pay them - thus saving less money.
If the Government spends over budget, then they will sell Treasury Bonds to foreign investors (selling assets). This principle always has a negative effect on the economy because savings and capital are reduced. This is bad because saving money is always good...always!
Wednesday, March 11, 2009
Call your Senator and stop the madness!
http://senate.gov/general/resources/pdf/senators_phone_list.pdf
Let your Senator know where you stand on "Big Government Spending" and hold them accountable to use solid business principles.
Let your Senator know where you stand on "Big Government Spending" and hold them accountable to use solid business principles.
Principle #2
Principle #2 - BUSINESS ULTIMATELY PAYS NO TAX.
i.e. If the government goes after business, they will charge you more at the register or take more out of your paycheck. Business will pay taxes, but that money comes from you and me in the way of higher prices for goods and services.
It is also important to remember: the entrepreneur bares all the risk. When you tax that entrepreneur, she/he has less capital to spend on things like human resources and raw materials. The money for taxes will not be taken from their profit margin, those taxes get passed along to the public in the price of the products.
For example, if people and small businesses who make over $250,000 get taxed at a higher rate, they will either need to charge more for their products and services or lay off some of their workers in order to hold profit margins.
Bottom line: A lower corporate tax rate will promote job growth and keep prices low, resulting in a better standard of living for the American public.
i.e. If the government goes after business, they will charge you more at the register or take more out of your paycheck. Business will pay taxes, but that money comes from you and me in the way of higher prices for goods and services.
It is also important to remember: the entrepreneur bares all the risk. When you tax that entrepreneur, she/he has less capital to spend on things like human resources and raw materials. The money for taxes will not be taken from their profit margin, those taxes get passed along to the public in the price of the products.
For example, if people and small businesses who make over $250,000 get taxed at a higher rate, they will either need to charge more for their products and services or lay off some of their workers in order to hold profit margins.
Bottom line: A lower corporate tax rate will promote job growth and keep prices low, resulting in a better standard of living for the American public.
Tuesday, March 10, 2009
Class is in Session - Principle #1
Hello Friend,
In these times of economic uncertainty, I would like to bring to light the economic principles we know as truths. Principles that will be discussed but never refuted. They are often challenged, yet stand up to scrutiny and prevail as proven facts.
Hopefully this blog will provoke deep thought and action by those who participate in subsequent posts. The purpose of this blog will be to focus on current events and stimulate discussion about solutions for economic/business issues of today.
Principle #1: ALL ECONOMICS ARE MICROECONOMICS.
The ultimate decision maker in any economic situation is ME. We vote with our dollar and feet every day. If you like some one's product or service, you willingly award them with patronizing their business. If you do not like some one's product or service, you may leave their establishment and find some else who will serve your needs.
This is what our economic system is based on. This is why our free market system works. It breeds competition and gives markets the ability to be shaped by its participants. Any third party influence (big gov't, judicial or criminal) that seeks to take economic power away from the participants should not only be limited, but eliminated. In order for our economic system to work, and for the preservation of liberty, we all need to be vigilant in keeping our free markets FREE.
Principle #1 is further illustrated by observing the bear market on Wall Street. There are tremendous bargains in the stock market right now, but there are no buyers because of a confidence deficit created by The President and greed on Wall Street. Therefore, we are seeing a market that continues to fall when recent "blue-chip" stocks are trading at record lows. Individuals are voting with their investment dollars and they are voting for "Saving" or "Selling stock", and voting against Capitol Hill's inability to fix the situation. Investors will not bail out The President and Congress by buying stocks until they start treating businesses as job providers instead of criminals.
In these times of economic uncertainty, I would like to bring to light the economic principles we know as truths. Principles that will be discussed but never refuted. They are often challenged, yet stand up to scrutiny and prevail as proven facts.
Hopefully this blog will provoke deep thought and action by those who participate in subsequent posts. The purpose of this blog will be to focus on current events and stimulate discussion about solutions for economic/business issues of today.
Principle #1: ALL ECONOMICS ARE MICROECONOMICS.
The ultimate decision maker in any economic situation is ME. We vote with our dollar and feet every day. If you like some one's product or service, you willingly award them with patronizing their business. If you do not like some one's product or service, you may leave their establishment and find some else who will serve your needs.
This is what our economic system is based on. This is why our free market system works. It breeds competition and gives markets the ability to be shaped by its participants. Any third party influence (big gov't, judicial or criminal) that seeks to take economic power away from the participants should not only be limited, but eliminated. In order for our economic system to work, and for the preservation of liberty, we all need to be vigilant in keeping our free markets FREE.
Principle #1 is further illustrated by observing the bear market on Wall Street. There are tremendous bargains in the stock market right now, but there are no buyers because of a confidence deficit created by The President and greed on Wall Street. Therefore, we are seeing a market that continues to fall when recent "blue-chip" stocks are trading at record lows. Individuals are voting with their investment dollars and they are voting for "Saving" or "Selling stock", and voting against Capitol Hill's inability to fix the situation. Investors will not bail out The President and Congress by buying stocks until they start treating businesses as job providers instead of criminals.
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