Saturday, October 29, 2011

Peter Schiff at OWS

Peter Schiff who I like and often listen to his radio show, went down to the occupy Wall Street and had a few conversations with people there. Reason TV documented the event. This is only 20 minutes of the 4-5 hours that he was there, but it is very interesting.

One lady he spoke to claimed she was in the 1% which should mean that she makes over 350k a year, she then claimed she only pays 10% in taxes. I don't know how she pulls this off, if she earns a regular income she would be in a marginal rate of 35% even with deductions, it is hard to believe these would cut 25% off of her rate, she would also have to pay medicare tax which is 3% on all her earnings (between her and her employers contributions) and about 13% for social security on the first 107k (which may be a large percentage of her income or may not be, we don't have enough info for that). Then she most likely pays state taxes, sales taxes, property taxes, and various other taxes. Perhaps she is a not working for a paycheck and gets her money through capital gains, then she would pay a rate of 17% (plus the other less commonly sited taxes I mentioned). So the only thing that seems clear to me is that she is either lying or has paid a professional tax accountant or lawyer a lot of money to find loopholes, not commonly used tax deductions, and tax shelters, so that she can avoid higher taxes. Normally I would not care, but it seems hypocritical when she is then out there saying others should pay more.

I also do not like this Warren Buffett meme at all. First off it is not true that he pays less in taxes than his secretary, but even if it were true, this is solely because he has actively created a pay structure designed to avoid paying taxes, again I would not care, but he advocates for others who cannot get the same pay structures and tax shelters, pay a higher rate.

Last thought, at the end a lot of people claimed they were capitalists and supporters, but if that is actually true then they have terrible PR, because what I see is a lot of jealousy of success, a blood lust for higher taxes on anyone more successful than them (even though I am not sure what these people believe will be done with any additional revenue, because I expect it to go to more wars, more prisons, and more injustice once handed over to the government), and a plea for more handouts from the government.

Tuesday, October 25, 2011

Ron Paul is right, end the student loan program

Ron Paul wants to get rid of the federal student loan program, and I fully support him on this.

Student loans might work out for some, but many students find they enslave them in debt before the student even knows what they are doing or how these loans will effect their futures. It is my belief that colleges base their tuition rates on how much students can pay, so as the government grants and loans more money to students, the tuition increases proportionally and the students are harmed more and more and led further into a life of perpetual debt, the colleges benefit and the students are harmed by this cycle. Debt is indentured servitude as far as I am concerned, and should be avoided as best as you can, it restricts your choices and worsens your standard of living in the long run.

Recently Steve Jobs died, he dropped out of college, but imagine if he had not dropped out and had graduated with massive debt, he would not have been able to start apple, he would have been forced to get a job at a corporation in order to have the steady high income job he would have needed to repay the loans. By not having that debt burden over his head, he was able to be more entrepreneurial.

One big problem with these loans is that the amount of money someone needs to live on while going to college, has no bearing on what they will be able earn once out of college, so a person getting an engineering degree where they have a good chance of being able to pay the loans back, is able to borrow the same amount as the person getting a degree in art history, where the jobs are few and the pay is virtually non-existent. This creates a situation where people are leaving college extremely in debt and unable to find work that pays enough to repay their loans. I think without the government interference banks would be much more careful in who they loaned to and for how much. I don't think student loans would disappear in a free market, but I do think they would be lessened and those people who qualify for them would be in serious degrees with a high probability of good job prospects in the future.

[Side tangent] One thing that is curious to me about this whole debate over student loans is that I have had many friends and co-workers who have vocally complained about the credit card companies sending their kids a credit card while their kid is in college, even when that kid has no job! They think this is completely irresponsible behavior on the part of the credit card company (and I agree), but at the same time almost all of those kids are going tens of thousands of dollars into debt on student loans, which is much more irresponsible than a thousand dollars in credit card debt. [/Side Tangent]

Tuesday, October 18, 2011

Adam Vs. The Man on the occupy DC crowd

It should be a good sign when people are upset enough at the current state of things that they are willing to take to the street, but I am having a mighty difficult time getting behind this "Occupy" movement and it is representatives like this that are the reason. If you think the corporations exert too much influence on the government and since the government has a monopoly on violence this leads to bad results because then the corporations also exert a monopoly on violence by using the government, these corporation use that power the government has against their would be competitors, they use it to get favors and tax money, etc., the solution is not to grow the government so the corporations can by proxy have even more power. The solution is to reduce or eliminate the power the government has so the corporations have nothing to gain by bribing politicians.

Tuesday, October 11, 2011

starvation is not a good strategy for punishing "corporate farmers"

I had a brief conversation with a co-worker this morning that bothers me. He is a liberal type and a big supporter of this Occupy Wall Street thing, and during our conversation he referenced the “99%” and the “1%” to prove his point. However, the only point I really got from it is that he does not understand economics at all. 

He asked if I had heard about the fact that crops were rotting due to “illegals leaving Alabama” and what I thought about it. I told him I think it sucks and it is an extremely sad day for America when crops are not harvested due to political blundering based on racial hatred and economic ignorance. He said he thought the “rich corporate farmers” deserved it because they had been mistreating immigrant farm hands for years and all they had to do was pay better and there would be dozens of unemployed Americans lining up to take those jobs. 

There are so many fallacies with his train of thought that I hardly know where to begin. First off, I believe there is no such a thing as an illegal person. People are people, and that is all, it doesn't matter if their moms expelled them on one plot of land or another, they are people and deserve the opportunity to contract to work for whomever they want, wherever that job is, and for whatever wages are agreed upon. To me this is the only moral position, because to oppose this position means you do not believe people should be able to work for whom they wish, live where they wish to live, and earn as much as they can doing what they wish to do. 

Looking at this from an economist perspective and not just the moral perspective it is also hard to understand his position. I am having trouble understanding how higher prices for food because some was left to rot in the fields is good for anyone. The farmers have to compete on a worldwide level and if their costs are too high then they will be unable to export food around the world and in many cases there is not enough demand in the US to accommodate all of the food that is grown here. This limits the amount of pay a farm hand can earn, however from everything I have read the pay is based on productivity and is generally well above minimum wage. The pay is also high enough to convince immigrant workers to leave their homes in Mexico and other places and travel thousands of miles for the work, often times making enough in a few months to allow them to move back to Mexico in the non-harvest season and living without the need to work. That does not sound abusive to me, you work for five months a year really hard, and then don't need to work the rest of the year. 

I also have to really question this idea that the farmers effected by this are all wealthy corporate farmers. Many of these Alabama farmers are small time operations with fewer than 100 acres. 100 acres will not make you rich, many are vegetable farmers who receive very little or nothing in farm subsidies. I would rather buy my sweet potatoes from Alabama, but if there is no one to harvest them then I will get them from South America. I don't even know where they come from when buying from the grocery store. How on earth is this a good thing? Are people really this short sighted? They are willing to starve or suffer higher prices for food just to punish some supposed rich corporate farmers? 

If you really are against corporate farmers, the answer is not to restrict immigration, but to be more selective in who you buy food from. Find small farms, buy from local sources when available, buy from co-ops where you know exactly where the food comes from. Buy a cow or a section of a cow from a local farmer and store it in your freezer. Punishing whole communities, punishing hard working people who are looking for a better life is not the answer. It would also be good to advocate a cessation of farm subsidies and the government encouraging large corporate farms in their farm policies. 

I also don't see Americans lining up for these jobs at any wage, harvesting is a skill learned over time. Even if Americans would be willing to do the work, they are unskilled at it and therefor would be less productive. This means the level of pay they make is low, since they are not paid by the hour, but by how productive they are. It also creates the need for the farm owner to find more employees than typical due to the lower productivity of each individual employee. 

Tuesday, October 4, 2011

Interest rates so low, Obama must hate old people who want to live on retirement savings!

I feel sorry right now for all of my baby boomer aged friends. I am sure they believed they might be able to retire or take it a bit easy and live at least partially on income from savings. At 1% interest I don't see how any of them could have even close to enough money to make this a reality.

Low interest rates are only good for wealthy people with a lot of debt, and governments. Wealthy people can gets loans at the low rates and tend to invest in ways that will pay a greater dividend then the artificially low rates, so they like it. Governments, like low interest rates because they can borrow more for less and it makes it easier to balance their budgets, but to me this is a negative, it encourages both wealthy investors and governments to borrow in excess and place bets on the future with that money, the wealthy tend to be successful at this and they wind up even richer, the government tends to be really shitty at this and they wind up bringing down countries in this manner. Farmers seem to like low interest rates as well. The reasons here are two fold, one reason is that most farmers live most of the year on borrowed money, borrowing to plant and pay living expenses until harvest and paying off the debt after harvest. The second reason is that commodities tend to perform well compared to interest rates under conditions like we have today, especially when food price increases are outpacing interest rates.

Low interest rates aren't good for old people or poor people. They are not good for middle class people with low debt, or high savings, they aren't good for companies that hold cash or are trying to accumulate capital to invest in new equipment instead of borrowing for new equipment, etc. Poor people do not tend to have levels of debt, since they earn so little it is hard for them to obtain credit, if they do have any debt it is typically in the form of a credit card and the interest they pay on that is very high even when other rates are low, so they don't tend to benefit. Old people are hit the hardest by low interest rates, they tend to seek out stable investments like treasury binds and bank CD's and when these pay an interest rate that is lower than the rate of inflation they are losing money every year. Low interest rates seem to be a mixed bag for middle class young people, on one hand they may benefit if they are buying a house or other large purchase, on the other hand they lose when they save money. Overall I think it is a negative for nearly everyone.

In a free market, which we do not have, interest rates are determined like everything else, by supply and demand. When savings rates are high and there is a lot of money saved looking for people to borrow it, interest rates fall. When lots of consumption is going on very little savings is happening, interest rates increase since there is very little savings available for lending out. This natural back and forth is a beautiful thing, unfortunately it has been distorted beyond all recognition by the federal reserve and the government and people are truly suffering under these policies.

Who is standing up for Peter these days?

I am feeling crankish about politics lately. I think I am feeling very frustrated because I have so many friends who can clearly see many problems, however they keep looking at the government as the solution, and they seem to completely ignore the role the government played in creating the problems in the first place. Until people are willing to stand up to the government and tell them that they have no more authority over them, that they do not have the consent of the governed, that they are no longer allowed to steal from Peter to pay Paul, then it is all just pointless politics. Instead all I hear is that one side says they don't want the government to steal from Peter to pay Paul, instead they want the government to steal from Peter to pay John, the other side says that paying Paul is better than John, nobody is saying “hey, what about Peter, what gives you the right to steal from him and pay any of these other assholes?”.