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July 29, 2005

What goes up...

Take a look at some of the charts on this page. First look at the chart for the money supply. This is the fuel that supplies the debt our economy is running on. Yes dear reader, our economy is floating on debt. It's what keeps the housing market bubbling. It's what drives the trade deficit. It's the result of cheap money luring consumers into borrowing and spending like there is no tomorrow. When a fish takes the bait, it is because he doesn't see the hook.

Charts

Posted by Ray Hewitt at 11:12 AM | Comments (0)

Don't trust authority

"Just look at us. Everything is backwards; everything is upside down. Doctors destroy health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality." —Michael Ellner

That thought came from a reader quite a while back. It struck me so much that I saved it. On the surface it doesn't make sense, but if we dig deeper it does. I'll start with what I think is one self-evident premise: human self interest. I won't argue that self-interest is intrinisically evil, but it does skew the way we solve problems. There's an old saying: if all you have is a hammer, every problem is a nail.

Doctors are trained to treat injury and sickness. Their expertise in treating injury is hardly debatable; I won't go there. It's in the treatment of disease where their focus on treating symptoms ignores the underlying causes of disease. Reliance on prescription medicine keeps patients coming back for more medicine. It's one of the contributing factors to the rising costs of health care and what prolongs sickness. More on this in later articles.

Lawyers destroy justice by creating a growing body of laws that add to the complexity of life. People are more likely to get trapped in obscure laws, needing legal assistance.

I haven't been to college in a long time, but from what I'm reading they're getting dumbed down. It's in their interest to pass a higher percentage of students. Their dependency on government student loans makes it in their interest to treat their sponsor favorably. It wasn't until after my school years when my positive attitude towards government turned negative.

Freedom and government just plain don't mix. Freedom negates the presence of government interference. People gravitate towards political office because they like to exercise power over others. The growing size of our government in proportion to the private sector does not augur a favorable outlook towards the future of freedom.

Where would the mainstream media be if it didn't have government activities to report about? The're the marketing vehicle for government propaganda.

From my experience, spirituality is synonymous with peace of mind. Peace of mind comes with the absence of disturbing thoughts. You can do things that will distract yourself from disturbing thoughts but they will always come back. I know there are believers who find solace with thoughts of going to heaven, but there are many more who fear going to hell. Religion gives you more to worry about, not less.

The choice is up to you. One lesson is clear: The more you trust authority, the more dependent on them you will become.

Posted by Ray Hewitt at 09:39 AM | Comments (0)

July 28, 2005

Why your money buys less

Rising prices are not caused by greedy businessmen out to rip off consumers. They are caused by corrupt politicians as a means of hiding the true cost of government. The central banking system known as the Federal Reserve system was created to supply extra money when the federal government can't pay its bills by direct taxes. If you or I did it, they would call it conterfeiting and put you in jail. When they do it, they give it a sterile sounding "monetizing the debt," and its all legal and routinely done every day. This extra flow of money into the the general supply has the effect of devaluing the purchasing power of your personal wealth.

When we think about the massive increases in consumer goods and the vast improvements in manufacturing efficiency, prices should be going down en masse. As such, rising prices cannot be a cause of rising prices (inflation); they can only be an effect of the expanding money supply. Said another way: monetary inflation causes consumer price inflation.

This chart is based on the Department of Labor statistics. Note that the rate of decline seems to be slowing down. That's deceptive, because it doesn't include, real estate, the stock market, oil and food. If you think increases in real estate and stocks are good, think again. It still takes more money to buy those assets.

The chart below shows the purchasing power of the dollar trending towards zero. It won't get that far. It is only a question of HOW far.

Posted by Ray Hewitt at 09:59 AM | Comments (0)

July 22, 2005

Economics 101, Part 1

Decades ago I took one course in economics as an elective hoping to learn something. Well, I barely passed it. It turned out to be so abstract, I couldn't relate it to the real world. Economics didn't make sense until I happened upon another school of thought called Austrian economics, which I will discuss more about in future entries. Instead of meaningless phrases and complex mathematics, the Austrians teach about human behavior. While establishment economists advocate money manipulation, the Austrians warn of the harmful effects of dishonest money. For that reason, I don't think they will ever be accepted in the mainstream.

Walter Williams started a series for beginners. I'll pass them on when they are available. Economics for the Citizen, Part 1

Posted by Ray Hewitt at 10:51 AM | Comments (0)

An Avalanche of Debt

"The US welfare state is flat and stony BROKE," says Bill Buckler.
The welfare state is broke

Posted by Ray Hewitt at 09:55 AM | Comments (0)

The Rise to Ruin

Over the years I've developed a list of favorite authors and websites which I hope to introduce readers to. These people are realists. Their independence from government and established media gives them an objecivity they wouldn't otherwise have.

Dan Denning reports that the Chinese people are getting a stronger taste for liberty. Marc Faber gives us some economic history with regards to the corruption of paper money, and assess our inflationary future.

The Rise to Ruin

Posted by Ray Hewitt at 08:48 AM | Comments (0)

Quote for the Day

The path of least resistance and least trouble is a mental rut already made. It requires troublesome work to undertake the alternation of old beliefs. Self-conceit often regards it as a sign of weakness to admit that belief to which we have once committed ourselves is wrong. We get so identified with an idea that it is literally a "pet" notion and we rise to its defenseman stop our eyes and ears to anything different. -John Dewey

Posted by Ray Hewitt at 06:58 AM | Comments (0)

July 21, 2005

Credit Expansion

This author explains the Federal Reserve's credit process with charts and graphs, making the trends easy to recognize. Though he believes prices and interest rates are headed higher, there are so many variables I don't think we can be sure which way they will go. The Federal Reserve can be counted on to expand the money supply at the first scent of recession, but that doesn't mean consumers have the capacity to keep borrowing. The only thing we can be sure of is that this credit expansion has finite limits.

I'm not talking about a recession like the kind we've had during the past 50 years; those were babies. This monetary expansion process has been going on for 70 years; it's the mother of them all. A major correction is inevitable, but we can't predict how or when it will unfold. Whatever happens, debt limits your options.

Interest Rates are Headed Higher in the Long Term

Posted by Ray Hewitt at 08:08 AM | Comments (0)

July 20, 2005

Deep Debt

You say you are borrowing against the equity on your home. You say your credit card debt is slowly creeping upward. You say you can't make ends meet without borrowing a little each month. Well you are not alone. Like shit, the American economy is in deep debt. I strongly advise anybody who will listen: reduce your spending and debt while there is still time. I'm not exaggerating when I say that never has the world economy seen so much debt at one time. Good times don't last forever. This article puts it in broader perspective. The Great Debt

Even the Wall Street Journal is concerned: When the Bills Come Due, Then What?

And from MSNBC Homeowners place faith in 'exotic' mortages

Posted by Ray Hewitt at 08:42 AM | Comments (0)

July 19, 2005

Debt, Delusion, Deception

Our economy seems to be humming along quite nicely now. But if we look deeper, it's underpinnings are shaky. You won't find this kind of analyses in the mainstream media. All they'll give you is happy talk.
Debt, Delusion, Deception


Posted by Ray Hewitt at 07:13 PM | Comments (0)

July 18, 2005

Why Are They Killing Us?

Too often, I meet people who think muslims are out to get us. They haven't forgotten 9/11, and now the London bombings. There is no argument that they were extreme criminal actions; but there are three sides to every argument: the objective side and the two opposing sides.

It serves to remember a critical aspect of human nature that brings to bear on this War on Terror: self preservation. In that regard, if you beat up on someone long enough when they are cornered, it is only a matter of time before they have no other alternative but to strike back.

American foreign policy makers first took an interest in meddling in the Middle East with the founding of Israel in 1948. It wasn't until after three lost wars with Israel, did the Palestinians turn to suicide bombing.

In the 50s, our CIA backed the coup against Iran's popularly elected prime minister. From there, the Iranians suffered almost 30 years of brutal oppression under the Shah. Following his overthrow, Iranians took American embassy members hostage, an incident that brought Jimmy Carter much embarrassment.

To counter the Iranian fiasco, the US under Reagan supplied Saddam Hussein with weapons to fight Iran. This was also when he committed massive cruelties against the Iraqi people. It wasn't until he went too far by invading Kuwait that Bush Sr. pushed him back into Iraq.

During the post Gulf War period, our policy makers conceived a two point strategy to pressure the Iraqi people into overthrowing Saddam Hussein. Euphemisticly called "flyovers," the idea was to bomb their water treatment and sanitation infrastructure. Additionally, the US got the UN to impose trade sanctions. Estimates run to the tens of thousands of deaths due to disease. The Saudis allowed our military to build a base in their country from which to launch the flyovers. 15 of the 9/11 kamikazes were Saudis.

Patrick Buchanan asks Why Are They Killing Us? The answer is told in a study done by the author of Dying to Win; The Strategic Logic of Terrorism.
"[S]uicide-terrorist attacks are not so much driven by religion as by a clear strategic objective: to compel modern democracies to withdraw military forces from the territory that the terrorists view as their homeland. From Lebanon to Sri Lanka to Chechnya to Kashmir to the West Bank, every major suicide terrorist campaign – over 95 percent of all incidents – has had as its central objective to compel a democratic state to withdraw."

Posted by Ray Hewitt at 11:45 AM | Comments (0)

July 14, 2005

The Wisdom of Butler Shaffer

Butler Shaffer is one of those writers that grew on me. His articles are a touch long but he produces some throught provoking insights.

In Saving a Dying Corpse, he points out that the State invented the war on terror to take advantage of American herd behavior.

In What is to Become of the State, he argues that "the American political system is in a state of turbulence, from which only one of two outcomes seems likely: either for it to reorganize itself into a more orderly system, or to experience entropic collapse." The more likely outcome is collapse.

If you have some time, peruse through his Archives.

Posted by Ray Hewitt at 03:18 PM | Comments (0)

July 12, 2005

Government Counterfeiting: Part 3

In part two, I outlined four scenarios which affect the movement of prices. Only the first has dominated our economy for the past 60 years. That is, prices have been increasing because the money supply is expanding faster then the economy can generate new goods and services. This cannot continue forever as we shall discuss in part 4.

In an ideal economy, the money supply is reasonably stable. When it is, the relative expansion of goods and services causes prices to go down, making money more valuable with time. This increases the incentive to save. In turn, savings provide the funds for new investments.

Deliberate monetary expansion has an inverse affect on consumers. As consumers anticipate losses in the purchasing power of their savings, they lose their incentive to save for the future and increase their incentive to borrow for the present. This is exactly what has been happening for the past 60 years. Without savings, new money provides the funds for new investment. The charts below tell the picture. Note the accelerating rates at which they are sloping.


As the money supply expands

Total consumer debt expands

Gross Federal Debt expands

And the Personal Savings Rate falls.

Posted by Ray Hewitt at 09:37 AM | Comments (0)

July 11, 2005

The Trade Deficit

The trade deficit has been in the news for so long that to many of us, it has lost any meaning. Nothing ever happens; so we're lulling into thinking it's meaningless scare talk. I used to think that way, but not in recent years. Unfortunately because our trading deficit has been so chronic for so long, it's been increasing lately at explosive rates. This article explains in more detail: What's Behind the Trade Deficit Numbers This is one of the consequences of Federal Reserve counterfeiting.

Posted by Ray Hewitt at 01:36 PM | Comments (0)

July 09, 2005

The London Bombings

Excerpts from Nobody Attacks Civilization

"You can't win a war unless you know who your enemy is, know why he is your enemy and know what his objectives are. Only then can you properly direct your military and political forces to combat him successfully.

"You can't have a war against terrorism because, as many people have pointed out, terrorism is a tactic employed by people who have no real military power. It is not an entity. There is no worldwide terrorist organization.

"But in the meantime, remember that terrorist attacks are primarily media events. You still have more to fear from the flu or accidents than you do from terrorists."

Posted by Ray Hewitt at 10:49 AM | Comments (0)

July 08, 2005

Government Counterfeiting: Part 2

To see how the Federal Reserve's policy of creating money affects prices, let's look at a simple equation.

General price level = Quantity of money / Quantity of goods and services

It is impossible to solve this equation with real-world numbers because of the enormous complexity of the data. We are interested in the relationship. First, let us be aware that price changes are not uniformly distributed. Second, we notice that a change in the money supply causes a direct change in the general price level; and a change in the quantity of of goods and services causes an inverse change in the general price level. Let's look at the impact of the variations.

1. Increase money while goods and services stay constant = higher prices. Though the Federal Reserve purportedly asserts it is fighting inflation, it is the exclusive cause of inflation. Consumers have been led to think that higher prices are an inevitable consequence of capitalism. The effect on consumers is to anticipate higher prices. So they spend and borrow more and save less. Present statistics show that Americans are in debt to the hilt and have stopped saving.

2. Decrease money while goods and services stay constant = lower prices. This is the Federal Reserve's worst fear. Prices cannot go up indefinitely. After long periods of increasing the money supply, a credit contraction is the inevitable result that leads to a serious recession. It's happened before and it is going to happen again.

3. Increase goods and services while money stays constant = lower prices. The drop in prices of computers is a good example when improvements in productivity increased faster then the general price level. In a world of stable money, the vast improvements in productivity and the expansion of goods and services would cause prices to go down; money would become more valuable. Historical records show that in the times before the Federal Reserve, prices actually did come down.

4. Decrease goods and services while money stays constant = higher prices. Such a situation would describe an inflationary recession such as what occured during the Carter presidency. The Federal Reserve is limited to making money available for borrowing. Money does not enter into circulation until it is borrowed. When credit reaches a limiting threshold, consumers have to curtail their borrowing and spending.

5. When the supply of money changes in proportion to the supply of goods and services, prices don't change. Just because prices seem stable, it doesn't mean that the economy is stable. We could have rapid monetary inflation or contraction while the price level seems stable.This happened during the depression of the 30s.

If this seems confusing, it is because it is confusing. All that consumers see is relative changes in prices and interest rates without knowing why. In the next part, we will examine the effect of the Federal Reserve on business cycles.

Posted by Ray Hewitt at 03:58 PM | Comments (0)

July 06, 2005

Government Counterfeiting; Part 1

Moral reasoning as defined in my June 28th entry offers a practical frame of reference for thinking realistically. The object of moral reasoning is to catalyze social cooperation and minimize the harms. What is legal is not necessarily moral. This subject is one of those cases.

Imagine if you could go to your local printer and have him make up a generous supply of blank checks. So whenever you were short of funds to pay your monthly bills, all you had to do is write out a check to cash, and deposit it into your checking account. In our fantasy, your banker would accept your check as a legitimate deposit; and by some miracle the checks you wrote out to pay your bills didn't bounce. In a simpler scheme we would have our printer print up fresh hundred dollar bills which we could pass off for real currency.

"But that would be fraudulent," you say -- and you would be right. In essence, this describes the function of the Federal Reserve Bank, currently chaired by Alan Greenspan. When the federal treasury is short the tax revenue to pay its bills, it issues bonds. The Federal Reserve buys those bonds with checks made out in its name. Like magic, it is accepted as currency. The Federal Reserve also has the legal authority to make deposits in its member banks, thereby increasing their lending reserves.

The mainstream media treats this as a necessary function for managing the economy; it is taught in practically every university around the world; and almost every country in the world has a central bank modeled after our own. This system of legalized counterfeiting is done with such insouciance, that the typical unsuspecting citizen could not imagine anything wrong with it. In the next part, we'll examine how it affects us as individuals.

Posted by Ray Hewitt at 10:01 AM | Comments (0)

July 04, 2005

The Politcs of Obedience

Today is the day we celebrate the signing of the Declaration of Independence July 4, 1776. when we declared our independence from Great Britian. I believe that too many Americans have not learned the fundamental lesson why we broke off from Great Britian. The reasons are spelled out in the Declaration of Independence:

"WE hold these Truths to be self evident, that all Men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among them are Life, Liberty, and the Pursuit of Happiness..."

Whether you believe in a Creator or not, the Founders maintained that the right to life, liberty and the pursuit of happiness is inalienable. The Declaration goes on to insist that whenever any "Form of Government becomes destructive to those Ends, it is the Right of the People to alter it or to abolish it, and to institute new Government, laying its Foundations on such Principles..."

Sadly, I tell you that although we are free compared to most other countries, we are not free in the absolute sense as the Founders envisioned. At the turn of the twentieth century, government consumed about one tenth of our national resources. Today it has expanded to about one half, and shows no signs of letting up. I dare say the future does not look promising.

That we feel free is an illusion. Step across the bounds of that ever tighting circle of laws and regulations, and you risk the heavy hand of the State coming down on you. Though you think you can trust common sense, laws and regulation are typically vaguely written and arbitrarily enforced, invisible traps for the unwary.

The typical freedom loving American shrugs his shoulders, thinking there is nothing he can do about it, so he goes along with the crowd. He votes in the hope of change for the better, but nothing gets better. Clearly voting hasn't worked; if anything it endorses the status quo.

I've been down that path until a change of reference dawned on me. When I looked from the viewpoint of my personal integrity, I began to realize that although I can't stop this insidious growth of government, at least I can withdraw from supporting it. If I let the state lead me, all I do is feed its insatiable appetite for more control over my life. But if I withdraw my support as much as I practically can, at least I am not endorsing the crimes of the State against its people and me and my family.

This way of thinking is outlined in more detail in The Politics of Obedience: The Discourse of Voluntary Servitude by Itienne De La Boetie. His fundamental insight is that every tyranny must necessarily be grounded on popular acceptance. Thus the only option resting on an individual is to withdraw his consent.

This is a revolutionary idea on the political front. But just as we have seen how religion has lost its force over hundreds of years, the method of withdrawal is applicable to State power. With proper dilligence, we CAN be free in an unfree society.

Posted by Ray Hewitt at 11:48 AM | Comments (0)

July 01, 2005

Are the drug companies evil?

There is no argument that pharmaceutical medicine has made profound advances in health care, but there is a dark side. First, medicines treat symptoms while ignoring root causes which usually begin with what you put into your mouth. Second, by suppressing symptoms, they allow the original causes to go uncorrected. Third, because medicines are literally toxic, they attack other parts of our bodies. Fourth, the FDA provides a legal umbrella from liability and gives the impression of safety. Fifth, food is your best medicine but it is not patentable, so they don't have profit potential. This is the reason why the pharmaceuticals are obsessed with patentable medicines.
The guiding principle for any consumer should be caveat emptor, buyer beware. The drug companies are just as defensive about the safety of their products as the tobacco companies. If you don't take an interest in what you are putting into your mouth, you can't count on the FDA and the pharmaceuticals to protect you.

These links should at least cause concern.
Are drug companies evil.htm
106,000 deaths a year from drugs
Warning signs

Posted by Ray Hewitt at 11:05 AM | Comments (0)