Christian: n,

A person who believes in Jesus Christ, God incarnate who came to Earth and became flesh to die on the cross, sinless for our redemption.

libertarian: n,

"A person who believes that no one has the right, under any circumstances, to initiate force against another human being, or to advocate or delegate its initiation. Those who act consistently with this principle are libertarians, whether they realize it or not. Those who fail to act consistently with it are not libertarians, regardless of what they may claim."

-- L. Neil Smith

Friday, February 22, 2008

The Physical Laws of Economics

Economies and trade are natural occurrences. Like everything in nature, (created by God), the world's economy is in a constant state of flux while simultaneously seeking equilibrium. The natural laws of economics, like all natural laws, such as those dictated by physics, are laws because they are not variables. They are fixed and unchangeable. There's nothing man can do to permanently alter the balance they seek, but we can, through an expenditure of force, temporarily effect the balance. However, since the force required to effect the balance can never be sustained indefinitely against the natural equilibrium seeking forces, there is always an equal and opposite negative reaction, or in the case of economics, and equal and opposite cost. It is very important to remember that value is subjective and that supply and demand are not constants. It is, therefore impossible to regulate them by centralized planning.

A Few Examples:

Price Controls; The government's attempt at fixing the market price for a good or service above or below its naturally fluctuating value. Not long after price controls are put in place, that portion of the economy is knocked artificially out of balance and the natural economic laws of supply and demand, etc., begin to seek equilibrium. Prices fixed above or below the natural value of goods and services will disrupt the balance of supply and demand achieved through pricing flexibility. Additionally, black markets appear offering them at above or below the fixed price. Minimum wage laws and their unintended consequences are a great example of this in action.

Prohibition; The government's attempt to legally forbid trade of certain goods or services. The natural result is scarcity which drives up the price and provides the incentive to trade them on the black market. Prohibition has never achieved its stated goal and never will.

Professional licensing; The stated goal is consumer protection. That said, it seems odd that it's always the providers who cry for professional licensing, not the consumers. Here again, the attempt is thwarted by the economy's natural forces. Licensed goods and services become more scarce. The providers, with less competition to worry about, decrease quality and raise prices, again creating fertile ground for black markets.

Time is the key. An economy left alone in its natural state, (absolute free trade), will fluctuate with supply, demand and quality. The natural economy has a built in correction system which reacts almost instantly on each individual transaction, lessening the time involved in re-establishing the balance as compared with governmental meddling and tinkering which can delay market signals and makes the inevitable oscillation toward the natural correction longer and more severe.

Think of the economy as a physical object, like an aircraft. In its natural state it is on the ground and stationary. The four forces which act upon an aircraft are weight, lift, thrust and drag. Weight and drag can be temporarily overcome through force in the form of the expenditure of fuel. However, the more altitude and velocity one wished to achieve, the greater the fuel expenditure and the aircraft will exhaust its fuel supply. There's an aviation adage that landing a plane is the hardest part of flying. To the contrary, landing is the simplest part. All one has to do let go of everything and the plane will eventually find the ground all by itself. Landing a plane safely? That's a whole other story, but obviously the safest place where there's the least possible chance of disaster was on the ground where you started. The "altitude" and "velocity" of the economy can also be increased with quickly apparent benefits, but like the aircraft it will eventually have to come to rest back on the ground. And what of the fuel consumed for its temporary trip aloft? In economic terms, that's called wealth and to keep the economic aircraft moving high and fast, unfortunately burns wealth at a greater rate than it is created. At some point the foolish attempt to usurp the natural laws of economics must be paid for with an equal and opposite reaction. Activities, which artificially hold an economic situation aloft for too long, will crash.

I guess that's why politicians and socialists are so enamored with space travel. Vanguard I, the oldest manufactured object still in orbit was launched on March 17, 1958. The satellite itself, of course, is smaller than a basketball and weighs less than five pounds. It stopped transmitting in 1964. But even with the massive expenditure of time and energy to send it into orbit, it cannot break the physical laws which dictate its actions. Vanguard I will eventually succumb to gravity, if not on this Island Earth, on some distant planet.

Tuesday, February 5, 2008

Flexability in Mediums of Trade

As I write this today, the US Federal Reserve Bank continues its printing of fiat currency. Even with the recession setting in and the depression looming, they are recklessly printing the US economy deeper into trouble. The value of one US Federal Reserve Note is just a tiny fraction of what it once was, best illustrated by the number of US Federal Reserve Notes required today to purchase a one ounce $20 gold coin. Every empire built has eventually collapsed under the weight of its own fiscal policies. Just as Rome collapsed trying to finance its empire by debasing the coins of its day, the US will be driven to ruin by the Fed’s printing of US currency. Many foreign countries have seen the writing on the wall and have begun to break their ties to trade in US currency. This lack of faith will decrease the demand for US currency, and further the imbalance of supply and demand for those notes. As demand weakens, value decreases even more. Like mice driven by the Pied Piper’s melody, the population of the US will continue to trade in US dollars right up to the cliff from which they’ll fall to their economic demise. Only those who have been prepared for this eventuality will survive.

Individuals and companies who have taken the steps necessary to make themselves flexible by learning to facilitate trade in other mediums will be affected less by the collapse of the dollar, than those who have continued their dependence on it.

Neither the Federal Reserve Bank nor the US federal government will be willing to do what’s necessary to stop the impending crash. It is their misguided handling which has brought us to this point. It will be up to smart individuals and companies, who are willing to begin the weaning process, to break the inflation/deflation cycle caused by dependence on an unstable medium of exchange. We must begin to picture the value of the goods and services provided against the value of other goods and services based on a fixed, or at least more stable reference point rather than tying them to the arbitrary value of the Fed’s counterfeit money.

Large companies have the technology and knowledge in hand to make such a transition possible, smooth and painless. In house computers and registers can easily have programs built in which could match the value the company places on its goods and services to a fixed reference point. For example, one pair of Champion tennis shoes, Style CW2005D would equal one twentieth of one ounce of gold. Those relatively fixed values could then be converted to the fluctuating values of various currencies. Consumers would then be given the option of their preferred payment method. The old days of, “Will that be cash or charge?” would be replaced by, “Will that be gold, Yen or Euros?” Most US consumers would still prefer to trade in US Federal Reserve Notes and of course the monopoly granted to the Fed by legal tender legislation would make it illegal to refuse payment in FRNs, but the ability of consumers to trade in other mediums could make the average person much more knowledgeable about the nature of money and would help to return the stability to the market which we have lost through the Fed’s tampering.

The fact is that the value of goods and services relative to each other has changed very little. That which has, on the other hand, fluctuated and steadily depreciated, has been the value of the US Federal Reserve Notes. Those who understand this simple equation will have the greatest chance of survival when the value of one FRN finally hits 0.