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Being Conservative

The last several years there has been an increasingly identifying label among the youth and the new politically aware.  Not exclusively to America’s youth but primarily so, I think.  They have chosen to rally around slogans like End the Fed or bellicose chants about liberty or the constitution.  They tend to label themselves as libertarians and followers of their cult-like figure, Congressman Ron Paul, MD.  Dr. Paul, in the majority of his ardent followers, considers him akin to our founding fathers, especially, Thomas Jefferson.  I contest both as Dr. Paul’s economic and foreign policy are simply inappropriate for such a diverse nation and in how a nation such as America needs to interact with foreign powers.   The essay is not intended to be an analysis of Dr. Paul but of what is libertarian and what is conservative.  Of course, the founder of the modern conservative movement is none other than William F. Buckley, Jr. and his economist friend that helped to propel economic policy along more conservative lines, Milton Friedman.  Supporters of Dr. Paul always retort with the line that Buckley and MF were self-described libertarians.  Nothing could be further from the truth.   There is a blurring or sharing of conservative values/issues amongst the libertarian crowd.  If you were to create a Venn diagram there would be a mutually inclusive set of values; however, there would be a much larger exclusive set.   Inclusive values such as the belief in the foundations of our great Republic: life, liberty and the pursuit of happiness.  They also included love of country, family, fiscal restraint and individualism.  Where they dramatically depart is in methods of restoring fiscal conservatism and more pointedly, foreign policy both military and economic.   Libertarians have a decidedly isolationist overtone to their outlook on our dealings with foreign nations.  They simply want a mass retreat both fiscally and economically. They seek to end, overnight, all foreign aid.  They seek an immediate cessation of all conflicts in which the American military is engaged, no matter the costs, both politically and militarily.  They simply want to retreat from the modern world.   Our great ocean barriers were defeated with the advent of ICBM’s and silent running SSN’s[1]. Plus, the onslaught of international terrorism that knows no borders and has no respect for anyone whom is not a complete clone of themselves.  Here is a marked difference in what is libertarian and what being conservative means.  WFB hammered into his students/followers that, knowing full well that conservative tenets positively correlate with our founding fathers intent and our federal constitution, that it should not encourage us to become dictators to those who are less enlightened than ourselves or did not have direct or indirect access to the great conservative writers/philosophers.[2]   Being conservative does not mean that we dictate our policies and beliefs to the less knowing masses.  It means just that that we align ourselves with our foundations as a sovereign nation knowing full well that as our nation grew we naturally had to yield more and more pure individual liberty.  Example:  A family living in western Ohio Valley circa 1750 had absolute and unlimited liberty.  They could go or come, buy or sell, be drunk or sober with no regard of their neighbors, for they had few if any. They could literally walk out their front door and shoot their rifle to the horizon not knowing or caring if they were to hit a much distant neighbor.  They could raise a drunk and...
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Gold Standard Pros vs Cons

Advantages of the Gold Standard The gold standard limits the power of governments to inflate prices through excessive issuance of paper currency. The gold standard makes chronic deficit spending by governments more difficult, as it prevents governments from ‘inflating away’ the real value of their debts. High levels of inflation are rare and hyperinflation is impossible as the money supply can only grow at the rate that the gold supply increases.  (However, the Great Depression began while USA was still on the gold standard). Disadvantages of the Gold Standard A gold standard leads to deflation whenever an economy using the gold standard grows faster than the gold supply.  Deflation rewards cash savings and punishes debtors.  Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. That undermines the financial system. Deflation also robs a central bank of its ability to stimulate spending. Deflation is difficult to control, and is a serious risk to a growing economy. The total amount of gold that has ever been mined has been estimated at around 142,000 metric tons.   Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $8.3 trillion is in circulation or in deposit. Therefore, a return to the gold standard would result in a significant increase in the current value of gold, which may limit its use in current applications. For example, instead of using the ratio of $1,000 per ounce, the ratio can be defined as $2,000 per ounce effectively raising the value of gold to $9 trillion. Following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence monetary policy could no longer be used to stabilize the economy in times of economic contraction. Monetary policy would essentially be determined by the rate of gold production. Fluctuations in the amount of gold that is mined could cause inflation if there is an increase or deflation if there is a decrease. The gold standard may be susceptible to speculative attacks when a government’s financial position appears weak.     Free Market Currency A currency is a truer measure of countries worth because it includes the value of land, commodities, all assets of perceived value and statist value of a central government’s policies. A Currency is easier to conduct trade between nations. The value of one countries currency in relation to another country is known instantaneously due to trading activity in the currency markets. Statists use monetary policies to finance deficit spending in the mistaken belief that the unit of monetary measure never changes.  In actuality; the value of a currency changes in the market place making the markets a better judge of the true value of a countries financial strength in comparison to other countries. Interesting thoughts Fairness is a little understood concept which recent research in primate behavior is demonstrating itself to be part of the social fabric.   This research is showing that fairness is a driving force for social interaction.  As a species, man creates laws and regulations to create fairness.   The financial markets are an attempt to create fairness in monetary value.  Interestingly, there is no way to truly define fairness because of the complexity of the issue as a man-made perception and all attempts to do...
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Changing the Tax Code

CHANGING THE TAX CODE ORIGINAL PROGRESSIVE, FLAT, FAIR, VAT, Originally the country collected its revenue through fees, tariffs, and fines, etc; a system that worked well for over a hundred years. In 1913 that changed with the ratification of the XVI Amendment which instituted the progressive income tax. Most Americans and even most politicians will admit that our current tax code is a monstrosity and is too complicated to understand, interpret and follow. Recently, noted economist Arthur Laffer’s group announced in the Wall Street Journal that the cost of compliance and compiling the tax and collecting the tax exceeds $431 billion! Let us be realistic, any real reform of the code is a political process so no matter how brilliant, simple, or effective a new proposed method of laying and collecting taxes faces the gauntlet of special interests, 535 men and women with their own agenda. Also, you have more than 330,000 CPAs, Public accountants, Enrolled Agents, and Attorney’s whose income would be dramatically impacted by the simplification of the IRC. The current IRC or system, the Progressive tax, was established by Title 26 of the United States Code. It is comprised of more than 9,000 sections, thousands of regulations, hundreds of bulletins, and revenue rulings, plus settled Federal Tax Court precedents. Was this by design or has it become burdensome over the years as various sections were added and edited to accommodate a new idea from some member of Congress. There hundreds of sections that provide tax credits or tax payer subsidies if a tax payer behaves in certain ways or purchases certain goods. There is little doubt that understanding the code and being able to comply with it can be a daunting task requiring top professionals to prepare an individual’s tax return. Most experts agree that this current system must be reformed; the debate centers on an adequate alternative that is politically acceptable to our leaders and the people. The Fair Tax was first conceived in the 1990’s and has recently gained support amongst some members of the Tea Party Movement. The basic idea is to eliminate the 16th Amendment (a HUGE obstacle, and very costly process that could take YEARS) and replace it with a tax on all consumption: including day-to-day purchase of food, sundries, and large items like homes and cars. The proponents believe that the taxes accrued in manufacturing products will magically disappear and thereby reduce the overall cost of goods sold. That is simply a major flaw in their idea. There are few if any taxes accrued during manufacturing until the end unit. Fair tax is flawed for a number of reasons: 1. In manufacturing a company or entity large or small does not manufacture the entire product at one site, in one process, or without outside parts and supplies. Taking manufacturing a computer: There are manufactured parts on site that are fabricated from other parts, then parts are assembled, plus there are purchase parts outside of the corporation such as microchips, memory chips, wire harnesses, etc. These purchased items from outside suppliers will have the Fair tax applied. At Raytheon the average product line is comprised of 70% purchase parts. So the theory, which is the entire foundation of the Fair tax, is violated. (Not to mention dealing with other nations including Indian Reservations). 2. It is anti-Consumption. Modern economies are very complex but rest on capital formation, allocation various resources and consumption of goods and services from inside the country and...
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A Conversation with a Teamster Driver about Minimum Wage...

The Costs of Minimum Wage is an INCREASE in Unemployment By Thomas J. Zaleski, Economist Real conversation with a Union (Teamsters) driver from California: The conversation took place on the golf course in Tucson, The Gallery. At the time, the Gallery was members only, and $250 per round. I was the host. Foursome was $1,000.00. Year: 2004 summer before the election. The foursome was me, my older brother (IT guru), Truck driver and my biggest client, a patriot and retired USAF Col. The truck driver was ‘retired’ on full disability at age 51. Was collecting a pension from the Teamsters AND Social Security disability. Truck driver played gold FIVE DAYS PER WEEK while on FULL disability. I did NOT broach that subject/hypocrisy. Conversation went like this (remember I paid $1,000 for golf): Bush and YOU Republicans are greedy and are working against the working man. We deserve a fair wage and the minimum wage is too low. It is all Bush’s fault. I stated that the minimum wage CAUSES and increase in unemployment. He of course protested that fact. I demonstrated that by artificially (against the desires of the employer) increasing wage costs increased COGS; thereby, reducing profits which pushed the demand for cost decreases via less labor and/or more innovation/mechanization. I asked what a ‘fair’ wage was and who determined the definition of what fair meant? He was initially dumb founded. We examined the local costs of housing (rent), car expenses, food, etc. He agreed that $20,000 was a ‘fair’ wage. The Federal Minimum Wage at that time was $5.15. The price of a McDonald’s Big Mac was[1] $3.00. I immediately trapped him via these numbers. I stated that IF the minimum wage was $10 ($20,000 which is about $10 per hour per 40 hour work week {actually $20,800}). Therefore the costs of McDonald’s labor from the low end would increase by nearly 100% (actual increase would be 94.1748%. I asked, would the near doubling in price of a Big Mac mean that they would sell more or less Big Macs? Again, a dumb look came across his face. The price of Big Mac would necessarily increase by at least that percentage. Would you pay $5.82 for a Big Mac today? He said no, that he could NOT afford that high of a price. I asked another smart ass question: Should McDonald’s NOT make any profit? He said their profits are too high and that the CEO makes too much money. I stated, with facts, that the number one cost drive of the price of any item is material and labor and that the ‘CEO/Management” costs were typically less than 1% (true) of the total costs. So WHERE would McDonald’s be FORCED to cut costs? Labor. Minimum wage INCREASES unemployment, period! I trapped him again with this: HOW can a young man support a FAMILY on just $20,000 per year? What about wife, children, etc. Shouldn’t the minimum wage be closer to $32,000 (about $15.38). He gave up as he knew the costs would continue to rise. Eventually he had nothing to say. My older brother said don’t EVER argue with my baby brother, he is always...
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EPA Runamok

The Obama Administration knows full well that they CANNOT pass their radical agenda through congress, so they utilize executive orders, federal agencies and other mechanisms for implementing their slow, but steady destruction of the free market. One must understand that in the liberal mind-set, capitalism is not fair. A CEO like Jamie Dimon that makes $10 million a year is greedy; however, Rap Stars and Beyonce making $100 million a year is not greed but good success. Since when does government get to judge what is good success, bad success, or success at all? The continuation of this over stepping by regulatory bodies must end if the economy is to return to full...