Friday, December 25, 2009

Merry Free-Market, Hard-Money, Libertarian Christmas!

and don't trust the government.

There are lessons to be learned from Christmas some two thousand-plus years ago, according to a merry (and heart-warming) piece written by Lew Rockwell eight years ago.

The Economic Lessons of Bethlehem (or Who Was the Inn Keeper?)
(Llewellyn H. Rockwell, Jr., 12/22/01 [emphasis is mine]

There's no room at the inn so they had to stay in a stable. (Cruel inn keeper!)

Far from being cruel, the inn keeper offered what he could to satisfy a customer. As a money-making private businessman, he would have no reason to turn away "this man of royal lineage and his beautiful, expecting bride."

"In any case, the second chapter of St. Luke doesn’t say that they were continually rejected at place after place. It tells of the charity of a single inn owner, perhaps the first person they encountered, who, after all, was a businessman. His inn was full, but he offered them what he had: the stable. There is no mention that the innkeeper charged the couple even one copper coin, though given his rights as a property owner, he certainly could have.

"It’s remarkable, then, to think that when the Word was made flesh with the birth of Jesus, it was through the intercessory work of a private businessman. Without his assistance, the story would have been very different indeed. People complain about the "commercialization" of Christmas, but clearly commerce was there from the beginning, playing an essential and laudable role."

Why were they in Bethlehem to begin with?

Because of the Roman emperor's decree that everyone be counted and taxed.

"It was because of a government decree that Mary and Joseph, and so many others like them, were traveling in the first place. They had to be uprooted for fear of the emperor’s census workers and tax collectors. And consider the costs of slogging all the way "from Galilee, out of the city of Nazareth, into Judea, unto the city of David," not to speak of the opportunity costs Joseph endured having to leave his own business. Thus we have another lesson: government’s use of coercive dictates distort the market."

What did Three Kings (or Three Wise Men, and Lew points out they are usually mutually exclusive) give?

Did they give the new parents some debased Roman coins? No. They gave them frankincense, gold, and myrrh. They give them hard assets of high value.

"These were the most rare items obtainable in that world in those times, and they must have commanded a very high market price.

"Far from rejecting them as extravagant, the Holy Family accepted them as gifts worthy of the Divine Messiah. Neither is there a record that suggests that the Holy Family paid any capital gains tax on them, though such gifts vastly increased their net wealth. Hence, another lesson: there is nothing immoral about wealth; wealth is something to be valued, owned privately, given and exchanged."

Herod wanted to know where Jesus was so that he could come and adore him.

Was that true? Not really. He wanted to kill him.

"...Roman Emperor's local enforcer, Herod. Not only did he order people to leave their homes and foot the bill for travel so that they could be taxed. Herod was also a liar: he told the Wise Men that he wanted to find Jesus so that he could "come and adore Him." In fact, Herod wanted to kill Him. Hence, another lesson: you can’t trust a political hack to tell the truth."

When they learned of Herod's plan to kill the newborn, what did Wise Men and the Holy Family do?

Were they resigned to the reality that the government did whatever it wanted anyway and there was no point in resisting? Hell no. Three Wise Men went home without telling Herod, and the Family fled.

"The Wise Men, being wise, snubbed Herod and "went back another way" – taking their lives in their hands (Herod conducted a furious search for them later). As for Mary and Joseph, an angel advised Joseph to "take the child and his mother, and fly into Egypt." In short, they resisted. Lesson number four: the angels are on the side of those who resist government."

"In the Gospel narratives, the role of private enterprise, and the evil of government power, only begin there. Jesus used commercial examples in his parables (e.g., laborers in the vineyard, the parable of the talents) and made it clear that he had come to save even such reviled sinners as tax collectors.

"And just as His birth was facilitated by the owner of an "inn," the same Greek word "kataluma" is employed to describe the location of the Last Supper before Jesus was crucified by the government. Thus, private enterprise was there from birth, through life, and to death, providing a refuge of safety and productivity, just as it has in ours."


Thursday, December 24, 2009

Merry Christmas!

Wolfgang Amadeus Mozart "Regina Coeli" (KV276)

Despite the dismal news and commentary I post on this blog, I believe in human aspiration - aspire to achieve, to become, something higher than lowly, earth-bound self. I am not a Christian, but when I hear the music like this I believe in the ultimate goodness and nobleness of human beings, along with the composer who wrote the music and the performers throughout the ages who have sung the explosively joyous opening chord to praise the "Queen of Heaven".

Monday, December 21, 2009

Supreme Court Guts Due Process Protection

while our attention is diverted to anything but this.

Supreme Court Guts Due Process Protection
(12/20/09 naked capitalism)

"Reader Walter passed along this distressing sighting from Chris Floyd’s blog. American civil liberties were gutted last week, and the media failed to take note of it.

"The development? If the president or one of his subordinates declares someone to be an “enemy combatant” (the 21st century version of “enemy of the state”) he is denied any protection of the law. So any trouble-maker (which means anyone) can be whisked away, incarcerated, tortured, “disappeared,” you name it. Floyd’s commentary:

"After hearing passionate arguments from the Obama Administration, the Supreme Court acquiesced to the president’s fervent request and, in a one-line ruling, let stand a lower court decision that declared torture an ordinary, expected consequence of military detention, while introducing a shocking new precedent for all future courts to follow: anyone who is arbitrarily declared a “suspected enemy combatant” by the president or his designated minions is no longer a “person.” They will simply cease to exist as a legal entity. They will have no inherent rights, no human rights, no legal standing whatsoever — save whatever modicum of process the government arbitrarily deigns to grant them from time to time, with its ever-shifting tribunals and show trials.

"It is hard to overstate the significance of this horrid decision. The fact that the Supreme Court authorized this land grab says we no longer have an independent judiciary, that the Supreme Court itself is gutting the protections supposedly provided by the legal system. Per Floyd:
"In fact, our most august defenders of the Constitution did not have to exert themselves in the slightest to eviscerate not merely 220 years of Constitutional jurisprudence but also centuries of agonizing effort to lift civilization a few inches out of the blood-soaked mire that is our common human legacy. They just had to write a single sentence."
It is not just about torture or indefinite detention of "enemy combatant". As the article says at the end, ANYONE can be deemed "enemy combatant" if a President of the United States and/or his underlings so declare:

"Yves here. The implications are FAR worse. Anyone can be stripped, with NO RECOURSE, of all their legal rights on a Presidential say so. Readers in the US no longer have any security under the law.

"Roman citizens enjoyed a right to a trial, a right of appeal, and could not be tortured, whipped, or executed except if found guilty of treason, and anyone charged with treason could demand a trial in Rome. We have regressed more than 2000 years with this appalling ruling. "

On the December 14, 2009 Order List of the U.S. Supreme Court, this is the one line that says the court has declined to hear the case and will let the prior ruling stand:



Sunday, December 20, 2009

Rozeff: A 400 percent (and Higher) Excise Tax

America on the verge of mass insanity, says Professor Rozeff. The professor is talking about that stupid plan in Congress to tax all stock, option, futures transactions, which I have discussed on this blog here.

A 400 Percent (and Higher) Excise Tax
(Michael S. Rozeff, 12/21/09 [emphasis is mine]

"The Wall Street Journal brings more bad news. A headline reads "Lawmakers Weigh a Wall Street Tax." The first mention of this was in October. The proposal has not died as Congress seeks new ways to finance its profligate spending. Both houses are considering legislation.

"The tax would fall on financial exchanges of all kinds. It is not a tax on Wall Street. It is a tax on anyone who buys and sells securities.

"James Tobin originated the notion in the 1970s. Larry Summers supported it. Robert Kuttner supports it. That’s three Keynesian economists right there. It must be a bad idea."

The bill that has been introduced in the House would tax stock trading at 0.25% of transaction amount, and 0.02% on options, futures and other derivatives. I(it's not hard to guess who lobbied for lower tax for derivatives - Vampire Squid anyone?) The government's argument is that the tax is so small that ordinary investors won't be affected by it. I strongly disagree, as I've written in my previous posts, and Professor Rozeff also shows how costly this tax actually is:

"A well-known broker charges $7 a trade in any size and provides a more than satisfactory complement of other services. If a 0.25 percent tax goes in, the cost of a $10,000 trade becomes $32. The tax is 3.57 times the brokerage cost of $7. This is an excise tax of 357 percent on this size trade. For a $100,000 trade, the cost is $257. The tax is 35.7 times the cost of $7. The excise tax rate is 3,570 percent."

He notes that in the 1960s the cost to trade was very high, with commissions making up a large part of the cost (1%). After a few decades of efforts by industry participants, the cost to trade has come down significantly. But now the government wants to turn back the clock 40 years so that they can grab more from citizens.

The first $100,000 worth of transaction would be tax-exempt, according to the House bill. But guess what? Even a small-time investors/speculator can use up that exemption in one day, if not in one hour. How? Just by buying, say 100 shares of Google at $594, selling it the next day when it pops up to $620. Roundtrip transaction of $121,400 to net $2600 profit. Now you will have already exceeded your annual tax exemption allowance in just one roundtrip trade.

More importantly, though, Professor Rozeff points out the detrimental effect of the tax on stabilizing the financial markets:

"This tax is as bad as a capital gains tax. The latter discourages investors from moving capital around freely. It discourages risk-taking. It discourages moving out of less and into more productive projects. The tax on financial transactions does the same.

"This tax makes markets far less liquid. There will be fewer buyers and sellers. Bid-ask spreads will rise steeply."

"Lawmakers probably do not realize that a large fraction of the capital stock of corporations is carried by short-term speculators, due to the uncertainties of business. Turnover is high on many stocks because of unwillingness to hold long-term positions under conditions of high uncertainty. If short-term speculators are driven from the market, as this tax will do, then long-term speculators will have to take and hold the stock. They will demand a higher risk premium as they are made to depart from their preferred portfolio holdings. This will drive up capital costs to corporations. This will slow down capital accumulation and growth. This will lower employment and wages.

"Low transactions costs bring both uninformed and informed investors into the market. But the uninformed tend to be weeded out because they lose money. With a transactions tax in place of this size, the informed traders will also be far more reluctant to trade. The bounds within which prices trade will become that much larger. They will become all the worse as signals of value to corporate managers. Investors who attempt to buy and sell in quantity or rapidly will find prices changing due to their own trades, even if they possess no special information."

The professor then quotes a passage in the Wall Street Journal article which quotes the trading tax's advocates and calls it baloney and claptrap:

"The Journal article dutifully reports a mass of lies and totally erroneous ideas of the advocates of the tax:

"Congressional advocates describe the new tax as a matter of fairness: Taxpayers bailed out Wall Street, so Wall Street must help rebuild the economy and shore up the government’s shaky finances. Some experts say the tax also might help reduce market volatility."
"Is it fair to tax innocent investors and brokers who have worked to bring down costs? Is it fair to label them as "Wall Street?" Is it fair for the government to have paid off big banks and the likes of Goldman Sachs in the first place? Is it fair to turn around and then tax investors as if they were the ones who were responsible for doing something wrong? Can such a tax rebuild the economy?"

The answers are no, no, no, no, and big NO.

The article ends with these sentences:

"America seems to be on the verge of mass insanity as Congress comes up with increasingly bad legislation. Can nothing stem the irrationality of American society and government?"

I don't know, Professor. It's not just Congress either. The president wins Nobel Peace Prize for expanding a war, the Federal Reserve chairman is "the man of the year" for bailing out big banks around the world at the expense of the U.S. taxpayers.