Depriving Government of Loot
As an extension of my posting regarding the question of a recession, I have another point to add.
As I previously stated, consumers will react to whatever the media reports. If, driven by inaccurate data published by the government, the mainstream media reports the economy to be in recession, consumers will seek out lower cost alternatives such as Wal-Mart. This sets up a feedback loop:
Assume that the typical Wal-Mart does $500,000 in sales per day. I happen to think that this is a very low estimate, but I use it only as an illustration. I have seen reports that I consider reliable that Wal-Mart saves the average consumer 15% on purchases over other retailers. As such, if Wal-Mart did not exist in a particular community, those consumers would spend $575,000 for the same goods. Let us also assume that the local sales tax is 7%. Sales at the Wal-Mart would net $35,000 per day in taxes for state & local government. That is $5,250 less tax than would be generated if the Wal-Mart did not exist. That is about $2,000,000 less in tax per year. There are 20 Wal-Mart locations here in the Phoenix metropolitan area – that is $40 MILLION less for government.
This reduction in tax revenue gets reported as even more grave economic news thus driving more business to Wal-Mart and perpetuating the feedback loop.
Various reports (which I cannot verify) indicate that Wal-Mart Same Store Sales (SSS) has risen by 3% to 4% in the past year while Target SSS has declined by about 7%. This evidence supports my contention that there is not less economic activity per se, but rather that economic activity has shifted from higher priced vendors to vendors who offer better value.
Not that I mind any of this. I own Wal-Mart stock and I am tickled pink whenever government is deprived of loot.
Reefer Madness
The movie Reefer Madness (1936) was produced in 1936 as a propaganda film to warn The Public about the evils of marijuana.
Aside from its inaccurately portrayed stoners as drug crazed fiends hell bent on violence, it did get one thing right. In one scene, a school principal goes to to beg a federal official for help. The fed says:
“But do you realize that marijuana is not like other forms of dope. You see, it grows wild in almost every state in the Union. Therefore, there is practically no interstate commerce in the drug. As a result, the government’s hands are tied.”
Did somebody amend the Constitution in the last 70 years and not tell me about it? Or, did the Federal Government just start ignoring it?
Is it a recession?
“It’s a recession when your neighbor loses his job; it’s a depression when you lose your own.”
- Harry S Truman
The above quote, while technically inaccurate, fairly well describes how most people view “the economy”. Few Americans have even the slightest notion of what “the economy” is, much less its actual condition. They rely more on what the media tells them than what they actually observe. Current dogma tells us we are in the worst economic times since the Great Depression.
Definitions
Definitions of “recession” abound. An article published in The New York Times (1975) defined a recession as “two down quarters of GDP”. This definition is the one I hear used most often by “the mainstream media” (MSM). It is lacking in that it does not define how much negative growth is needed to constitute a recession. Is it 5% or 50%??
The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in the economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales.” NBER is a non-government, not for profit group that I generally admire. However, even their definition is somewhat lacking. The use of the words “significant” and “few” in their definition is vague and give too much wiggle-room.
Both of the above definitions rely on Gross Domestic Product (GDP). I am not confident relying on GDP as a metric since it is subject to manipulation. In the US, GDP figures are computed by the Bureau of Economic Analysis (BEA) which is part of the US Department of Commerce. This organization, like all government entities, is subject to political pressure from elected officials, all of whom have an agenda. GDP is the sum of Consumer spending, Government spending and Investment (C+G+I for all you Keynesians). Most government spending, by definition, is non-productive spending. As such, with enough government spending, GDP could be seen as increasing while the real economy stagnates.
What Is Seen and What Is Not Seen
At best, GDP as published by the Federal Government is an estimate. Since I am unable to find any reliable information about the methodology used, I can reasonably assume that much of this data relies on reports compiled by the various state revenue departments. Each month, retailers must report to their states their volume of business and remit the appropriate tax payments. However, there are a number of states that do not have sales taxes. Therefore, figures for their Gross State Product must be arrived at using other methods of estimation.
As for the other two components, Government Spending and Investment, I can only speculate that this is nothing more than a guess. Given the amount of waste, fraud and abuse that is incurred in government spending, I fail to see how government spending figures can be accurate. As for the Investment component, the vast volume of money moving in and out of the investment market in any period of time makes estimates unreliable.
All of the above represent “what is seen”. I postulate that “what is not seen” is a very significant part of the economy. As taxes and regulation increase, businesses and individuals contrive methods that leave no paper trail of their economic activity.
- The shadow economy, black market or underground economy. This describes methods of doing business outside of the ever watchful eye of government. Most of these transactions take place using cash or barter. When this happens, there is no reporting to government. Therefore, these amounts cannot be included in GDP calculations.
- I have a second hand report of at least one employer who has “laid off” his employees. While they are collecting unemployment compensation, the employer has hired them back “under the table”, paying them in cash rather than through a government monitored system. This skews published unemployment rates as other economic indicators.
- The emerging world of internet sales greatly diminishes the amounts of sales tax revenues collected by the states. Who knows how many millions of dollars in PayPal transactions take place each hour, most of which are unreported.
While these factor constitute a large portion of my opinion of the state of “the economy”, there is yet one more tale-tell sign that tells me things are not as bad as The Great Depression: my own perceptual abilities.
– I see just as many people in restaurants as I did two years ago.
– The number of idiots talking on cell phones while driving has not gone down.
– High-Def televisions are flying off store shelves.
What I have not seen are:
– Lines of people waiting outside soup kitchens.
– An increase in the number of people holding “will work for food” signs.
This isn’t to say that some people are not hurting as a result of an economic downturn. There are:
– Mortgage brokers who formerly provided loans to people who were not credit worthy
– Construction workers who build houses to be sold to the un-credit worth
– Auto workers who produced cars that nobody would buy
In my observation, any slowdown in the economic activity of the US has been primarily limited to industries that have behaved badly. All the rest of the hype is just so much Bullshit!
Some Things Never Change
Click Here to watch this 1933 NRA Promo
I got a kick out of this! The phenomenon of the Hollywood Left backing a Socialist President is nothing new. Take a look back at 1933.
For those of you who are victims of government education, the NRA was the National Recovery Administration – the bureaucracy that oversaw the administration of the New Deal law that set prices, wage rates and production levels.
Pay close attention to the exterminator character. The actor playing the role is Moe Howard – you probably know him better paired when with his sidekicks Larry and Curly. How appropriate that the government employed “Stooges” to advocate the Socialist agenda.
Article 1, Section 8
I have found a new favorite web site – www.opencongress.org – which allows anyone to create a profile and set up legislators, pieces of legislation and issues to track.
Article 1, Section 8 of the US Constitution enumerates only 18 powers which Congress has. The good folks over at opencongress.org have sub-divided those into a mere 4,754 issue categories. I’m so glad congress holds to their oath to “protect and defend the Constitution against all enemies, foreign and domestic“.
Iditarod
Last year, I went to Alaska. As part of my preparation for the trip, I watched many of the Alaska themed television shows. The topic of one of these shows was the Iditarod.
This famous dog sled race is run each year in March – dozens of mushers and hundreds of dogs make the 1,000 mile + trey through the frozen Arctic landscape.
Last year’s shows made it sound as if the dogs were running along in the Mohave desert. What, with Global Warming and all, the snow was already beginning to melt in March!
Well, I too became inspired to enter the race. I have decided to enter the first all chihuahua team. Comprised of 61 Chihuahuas, my team should be able to outrun even the most experienced dog sled team. Training has already begun – for three hours each day, I turn the heater off in the office so that Gracie will get used to the cooler temperatures; the thermometer here in the office has been known to dip down to 74 degrees! Brrrrr….
That is only one part of the training; as for myself, I have been watching coverage of the 2009 Iditarod. Unlike last year, instead of warm temperatures and melting snow, they are reporting cold and icy conditions. What changed? Could it be that Global Warming has subsided? Is the planet getting cooler? Maybe!
On February 20, 2009, Bloomberg.com reported that the US National Snow and Ice Data Center had underestimated the Arctic ice sheet by 193,000 square miles (that is about the size of California!) due to a “glitch” in satellite sensors. According to a report in The (UK) Guardian, 2008 was the coolest year of the decade. There are many, many more reports like this; all you have to do is seek them out.
The “Gorey” myths about Global Warming may melt away under the heat of scientific scrutiny, but the Arctic Ice is here to stay. Don’t worry Gracie, there are plenty more years of Iditarod races ahead of us!
2009 Inflation Rate
I just wanted to let you know that I am on record as predicting that the inflation rate for 2009 will be at least 8%.
Milton Friedman won the Nobel Prize in Economics in 1976 for “for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.”
He is probably my Number Two modern hero. He taught the world that “inflation is always and everywhere a monetary phenomenon.” This means that whoever is in charge of the printing press that makes money, controls the inflation rate.
I have noted that M1 has increased drastically over the past 6 months. M1 is the total of “Currency, traveler’s checks, demand deposits and other checkable deposits” – in other words, the money supply.
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
Note that from 2004 to 2007, January to December of each year say a change in M1 of less than 6%; sometimes, the change was even negative. Contract that with 2008. M1 jumped 16% from January to December!
Friedman also taught me that from the time the treasury starts to inflate the currency (ie. print more money) till an impact is noticed in the marketplace is about 6 months. That is exactly where we are now. Watch for prices generally to increase soon.
The Eco-Industrial Complex
In 1961, President Eisenhower delivered a farewell address in which he referenced the “Military-Industrial Complex.” He was referring to a system whereby a relationship develops between business leaders (ever seeking the loot easily obtained from government contracts) and the military (ever seeking more expensive and sophisticated weapon systems under the mantle of National Defense).
This speech was delivered just before the Cuban Missile Crisis and at the height of the threat of The Red Menace. Sputnik had recently orbited the earth, children had been taught to “duck and cover” and Civil Defense signs marked the location of fallout shelters. During this era, the hysteria-mongers honed their craft.
Fast forward 28 years (1989) and we see the collapse of the Soviet Union and the Eastern Block. We were promised a “peace dividend” by President George HW Bush resulting from decrease in military spending. This turned out to be nothing more than a political slogan. While spending on defense did decrease, spending by the federal government did not. If properly framed, there is always another “war” to fight.
Just one summer earlier, James Hansen of NASA delivered his infamous Global Warming testimony before Congress. In collusion with Senator Timothy Wirth (D-CO), they conspired to hold the hearings on the hottest day of the year. Wirth said, “We called the weather bureau and found out what was historically the hottest day of the summer. Well it was June 6 or June 9th, whatever it was. So, we scheduled the hearing that day and bingo, it was the hottest day on record”. He further stated, “We went in the night before and opened all the windows, I will admit, so that the air conditioning wasn’t working inside the room”. Don’t take my word for it, view the video from PBS’s series Frontline, episode “Hot Politics” which aired April 24, 2007.
What was the motive of Wirth, et. al.? The answer can be found in a quotation in Michael Crichton’s State of Fear: “But the military-industrial complex is no longer the primary driver of society. In reality, for the last 15 years we have been under the control of an entirely new complex, far more powerful and far more persuasive, I call it the politico-legal-media complex. The PLM. And it is dedicated to promoting fear in the population – under the guise of promoting safety.”
Crichton’s theory, as expressed in a fictional work, is that various pressure groups use government coercion to promote their agenda. This is particularly true for the Green movement; it is the central tenant of State of Fear.
Originally, I intended to write a single post regarding this topic. However, there are so many details and examples to express, that I must open an entire category of posts dedicated to The Eco-Industrial Complex.
In a Foreign Land
I have just finished a vacation in Alaska and Canada that was part land adventure and part cruise. It is amazing how a relaxing vacation can be screwed up by Federal bureaucrats even in a Foreign Land.
First, about Alaska – this state is beautiful. However, it has one very major flaw: it is practically owned by the National Park Service. Brown-Shirted eco-nazis paid a salary from your federal taxes are everywhere. The time spent would have been all the more pleasant if I didn’t have to see them. They were, for the most part, tolerable. However, for an organization charged with the management of the National Forests in Alaska, they showed virtually no aptitude for science.
As an example, a Park Ranger boarded our ship to spend the day helping the Liberals on the cruise to assuage their guilt; if they were learning eco-crap from this official of the US Government it was easier for them to forget that their personal share of the carbon dioxide belched out of the ship for the duration of the cruise was about 6,000 pounds! In any event, the Ranger showed a series of maps with the historic locations of glaciers. We were supposed to be shocked at how far they had ALL receded. That is, until one of the passengers pointed out a glacier that had grown considerably over the past 50 years. The Ranger replied, “That’s just an anomoly” in the casual manner that all eco-whores dismiss FACTS that do not mesh with their Official Party Line.
The strangest part was the return home. The cruise ended in Vancouver, British Columbia in Canada. We cleared US Customs while still in Canada! An entire terminal of the Vancouver airport is dedicated to flights to the US and our friends from Homeland Security are there to dig through your luggage and examine your passport before you even get home to the US. I wonder if there is a similar Canadian facility at the Seattle airport. I think not – the US seems to be the most difficult western country to enter. How happy was I to be harassed by the US Government before I even arrived on US soil. They seem to be everywhere!
Who concocted this scam? How much does the US pay Canada for all this space at the Vancouver airport. Are the customs inspectors even US citizens and if so, do they live in Canada?
Article 1, Section 8
On the second day of our visit to Washington, DC, we were honored to visit the United States Archives. To me, this is the second most holy site in the world (Independence Hall in Philadelphia being first).
I pointed out to my nephew Article 1, Section 8 of the original Constitution. In its hand written format, it occupied 4 or 5 inches on the page. I pointed out to him that this is all that our Federal government is authorized to do, yet, somehow, there are literally tens of thousands of pages of Federal laws, rules and regulations. What profound sorrow Benjamin Franklin would feel knowing that his wise admonition “A Republic, if you can keep it” has been lost.