Thursday, April 7, 2011

The Problem

What is happening is this. The government has been overinflating the money supply through a combination of excessive and continuous deficit spending and policies that allow financial vehicles like those packaging subprime mortgages into higher rated investment vehicles to exist.
At the same time, the government has been selling the debt to foreign countries which has an artificial depressing effect on the inflation rate which would normally rise when the money supply is too high.
To the government, this seemed like an infinite money maker which allows them to spend money like it was air even during the worst of times. We like to blame Wall Street for being richer than us, but this overinflation of the money supply is the fuel that pumps up Wall Street wallets no matter where the government spends the money because it all gravitates to those who attract it the best.
The overinflating money supply is also the reason for the increasing gap between the rich and the poor as the excessive money doesn't have enough economy to be reinvested in to find its way back down the chain. This is why our paychecks aren't getting bigger relatively.
But what is worst of all is that the overinflated money supply is too high to be stably supported by the economy resulting in bigger and bigger bubbles and corrections. Our current economic crisis is just the latest repercussion of this economic death spiral.
There is no short term solution to this. We are beyond the point of getting out of this mess without some serious pain, but if we don't tell the government to stop using this infinite money machine, even to pay for the best of intentions like health care, the long term repercussion will be far worse. In our current trajectory, the next economic correction is expected to surpass the devastation of the Great Depression in both absolute and relative measures.

Friday, April 1, 2011

We don't have capitalism

We don't have capitalism if the government bails out and subsidizes big companies.
We don't have capitalism when the government gives monopolies out to companies who only survive from patent to patent.
We don't have capitalism when the government pays farmers to not grow food.
We don't have capitalism when the government heavily subsidizes the health care industry on the demand side.
We don't have capitalism when the government makes contracts to form regional monopolies.
We don't have capitalism when the government subsidizes defense companies so that they can get a piece of the contracts redirected to their home states.
We don't have capitalism when the government protects and coddles industries like the auto industry until they don't know how to survive on their own in the world.
We don't have capitalism when the government subsidizes green industries like ethanol and require quotas on usage which only puts them in line to be the next disaster like the auto industry.
We don't have capitalism when the government raises corporate taxes so high that companies keep their money out of the USA.
We don't have capitalism when the money supply is so overinflated by the government above the ability of the economy to support it that we are stuck in an increasing cycle of bubbles and busts.
We don't have capitalism when the government fails to address the upcoming economic armageddon when the bulk of the baby boomers retire driving Medicare, Medicaid and Social Security, at least, through the roof.
We don't have capitalism when the bureaucratic nightmare that is our legal immigration system pulls limits out of politicians' heads, not set limits based on the economic needs of the country, and basically tells most good immigrants that you'll have better luck if you try to sneak into the country illegally.
We don't have capitalism when the government thinks they can keep pumping up the money supply and keep a lid on it with their feeble regulatory system which can't keep up with the permutations of financial manipulations that the best and brightest attracted to the financial industry are constantly thinking up.
We don't have capitalism when we only talk about how much the government should be spending on us when real money to pay for all that has long disappeared.
People demonize the capitalism that the USA has, but I don't see it because we don't have capitalism.

Medicare and Social Security

Here are the brutal facts for you knee-jerk populists. The reason why health care costs are skyrocketing way beyond the inflation rate is because the government is subsidizing the health care industry on the demand side by huge amounts year after year, and Medicare is the biggest source of this demand side subsidization. As a result of this, affordable health care is being pushed away for more people than those that are being helped. There are two ways to fix this that anyone who didn't sleep through econ 101 can tell you. The first is to gradually, but significantly, decrease the demand side subsidization. This would bring the supply-demand balance closer to normal. The second, but the worse of the two options, is to shift the subsidization from the demand side to the supply side like how the agriculture industry is being subsidized. This has its own problems shown by the agriculture industry, but it does result in lower prices for the consumers.
As for Social Security, since it was never fully funded from conception, it was never designed to handle huge demographic shifts like the upcoming retirement of the bulk of the baby boomers. There will be far more people getting distributions than those paying into the pool, and it will last for decades. You aren't even beginning to imagine the impact if you think that Social Security can be tweaked to handle this. Again, there are two solutions. The first is to gradually phase Social Security out. Those who rely on it now need to still receive money from the those unfortunately won't receive any Social Security benefits until they die off. The second is to make Social Security truly fully funded. This means the government will have to infuse the social security fund with all the actual money people have paid in Social Security taxes. This will make the fund independent of demographic shifts because the money you pay into it is actually yours. This is the least desirable of the two because the amount required to fully fund the Social Security fund is phenomenal, and do you honestly trust the politicians to not touch such a fund?

Thursday, March 31, 2011

BREAKING [APRIL 1, 2011 01:30EST]: President Obama and Congress balance the federal budget

Washington D.C. - It was only yesterday that we heard from the White House spokesman that President Obama had sufferred a minor heart attack after which the president appeared at the podium confirming his good health. Despite some rumours from the fringes like Oliver Stone claiming that the president didn't look like himself, the president took off like a new man unburdened by the problems of the last two years. In an unprecedented move, President Obama and congressional leaders worked all night in the White House to balance the federal budget. When Obama was asked how he was able to bring both parties together so quickly, he half joked that he enticed them with bratwurst. Meanwhile, Vice President Biden was on a goodwill tour in Africa. Although the details are forthcoming on how such a historic agreement was reached, the president outlined the basis of bringing the country back from the economic edge by stating "We've got so many problems, we don't even want to look at them anymore. They just blend together into this great big noise, and pretty soon we can't hear ourselves think. But that's not even the worst part. The worst part is that we think we can't do anything about it, and that's a tragedy because we can. We don't know where to start maybe. Maybe that's what it is, but I have an idea about where we can start. From today, I'm going to make it the responsibility of this government to find a job for every American who wants one."

Sunday, March 27, 2011

Breakdown of Texas State Budget

Just a note to myself where the important breakdown of the Texas State Budget is located:

You will see education takes the largest chunk of the state budget, health care takes second, and effectively transportation takes third. The reason why education operating costs are so high is because of the dramatic increase in operating costs from the 2006-2007 to the 2008-2009 budget of over $15 billion attributed mainly to higher education. The reason why health care is so large is because it's operating cost has been increasing at an alarming rate of $5 to $7 billion per budget cycle far higher than the inflation rate. The reason why transportation costs are so high was because of a spike in operating costs of about $3 to $4 billion between the 2004-2005 and 2006-2007 budgets.