Debt, Entitlements, and Economic Decline

I'm travelin' down the road and I'm flirtin' with disaster
I've got the pedal to the floor, my life is running faster
I'm out of money, out of hope, it looks like self-destruction
Well, how much more can we take with all of this corruption
--Molly Hatchet

It took until near the end of the third presidential debate before a moderator questioned the candidates about their positions on the federal debt and the entitlement programs that are its primary drivers. That the question took so long to be asked reflects the sorry state of the State.

As expected, neither candidate proposed or debated fresh ideas on debt or entitlement program reduction. In fact, both candidates, by either direct reply to the debate question or by indirect implication from previously stated platform policies, intend to champion entitlement program expansion should they occupy the big chair.

Our Thelma and Louise moment draws ever closer.

Targeting Assange

"People should not be afraid of their governments. Governments should be afraid of their people."
--V (V for Vendetta)

Few people have done more to expose the crimes, corruption, hypocrisy. lies et al of governments worldwide than Julian Assange, founder of Wikileaks. Similar to Edward Snowden, Assange has become a true enemy of the State.

US officials, including Secretary of State Hillary Clinton, have had conversations about eliminating Assange:

Now, it appears that the statists are working in concert to shut him down. Whether they are successful remains to be seen.

Regardless, Assange has opened eyes. If those eyes remain open, then Assange will have created a tremendous legacy.

Incentivizing Supply

"The almanac says it's time to start plantin'."
--Myra Fleener (Hoosiers)

A few years back I was bullish on commodities, including the 'ags'-- i.e., agricultural commodities such as corn, wheat, beef, etc.). The basic thesis was this. Developing countries are going to need much more food as they continue to grow and there is not enough supply to feed the world's growing appetite.

While ag prices certainly had their time in the sun, the last couple of years have brought steadily declining prices. Steady price declines have certainly not been limited to agricultural commodities. See, for example, crude oil.

My mistake was ignoring one of the most fundamental theorems of economics: higher prices incentivize supply. In this article, the axiom is stated in dairy industry terms as "money makes milk."

As commodity prices lifted a few years back, unused capacity that was not economical at lower prices was brought out of dormancy. Moreover, new capacity projects become easier to justify and fund. Substitutes are also sought as buyers, for example, substitute higher priced steak with lower priced ground beef.

The kicker has been uber cheap rates which further motivate borrowing to build more potential supply.

It is possible that the other part of the bullish commodity thesis, high rate of money printing, will at some point overpower natural economic forces and jam prices of everything higher regardless of supply conditions.

Should that occur, however, ags would not be the best place to be. Gold and silver, given their innate characteristics, have proven to be the best plays on monetary debasement throughout history.

positions in gold and silver

Hillarygate's Spreading Stench

"Now, if you're brief is right and it ever reaches the light of day, the president loses any chance of re-election. The men around the president won't let that happen."
--Gray Grantham (The Pelican Brief)

The stench of Hillarygate continues to spread. Newly released FBI documents indicate that a State Dept official sought to pressure FBI agents to change the classification on documents found on Hillary Clinton's private email server in exchange for desirable overseas assignments for the agents.

As Judge Nap observes, this could be viewed as obstruction of justice, tampering with evidence, or straight bribery.

Meanwhile, more fissures are forming among disgruntled agents over the Bureau's handling of the Clinton case. This piece lays out several of the violations of FBI protocol associated with the case and quotes former agents who verify that, had they committed acts similar to Clinton w.r.t. classified info, they would be in prison.

One suggested that Congress should subpoena the ~25 agents involved in the investigation to testify about the direction they received from Director Comey and other higher ups.

While this case may not bust wide open prior to the election, it seems increasingly difficult to see how the Hillarygate cover up will be maintained.

Empty Rhetoric

All my instincts, they return
And the grand facade, so soon will burn
Without a noise, without my pride
I reach out from the inside
--Peter Gabriel

Thomas Sowell discusses selecting candidates based on what they say and what they do when making voting decisions. He has picked a good topic.

There seems to be an entire category of people who prefer to associate with those who talk or write well. It matters not a wit what those talkers or writers actually do as long as they wax poetic in their rhetoric. These people seem easily lured by the pied pipers of politics.

Moreover, this same group seems to readily make enemies of people who speak or write words deemed 'offensive'--as if words themselves were vehicles of injury. Except in rare cases, words do no harm unless individuals choose admit the rhetoric and take it personally.

To these people, it seems, words speak louder than action.

Rogue to Ruin

"Gentlemen, whenever you have a group of individuals who are beyond any investigation, who can manipulate the press, judges, members of our Congress, you are always going to have in our government those who are above the law."
--Nico Toscani (Above the Law)

Chatter getting louder that many inside the FBI are outraged over the how the Hillarygate scandal was dismissed by top bureau management.

As we have noted previously, things will get interesting if conscientious agents decide to go rogue and go public.

Explaining Our Deplorable State

"But again, truth be told, if you're looking for the guilty, you need only look into a mirror."
--V (V for Vendetta)

From Herbert's essay discussed in yesterday's post, here's a passage that well captures today's political environment:

"In presence of unlimited power lodged in the hands of those who govern, in the absence of any universal acknowledgment of individual rights, the stakes for which men played would be so terribly great that they would shrink from no means to keep power out of the hands of their opponents. Not only would the scrupulous man become unscrupulous, and the pitiful man cruel, but the parties into which society divided itself would begin to perceive that to destroy or be destroyed was the one choice lying in front of them."

All the more interesting when one considers that this was penned in 1885.

Those scratching their heads and wondering how our political affairs have evolved into such a deplorable state need only look in the mirror. As we have relaxed limits on the constitutional powers delegated to central government, then there is more power to grab. Factions will become increasingly motivated to capture and retain that power using whatever means possible.

The other implication is that until or unless restraints are re-applied to central government, then expect the deplorable state of politics to worsen.

The Right and Wrong of Compulsion by the State

In violent times
You shouldn't have to sell your soul
In black and white
They really, really ought to know
--Tears for Fears

Wonderful essay written in 1885 by Englishman Auberon Herbert. Like contemporaries such as Bastiat, Spencer, and Sumner, Herbert focused on the issue that is still central today: the extent to which the state, defined primarily as a democratic majority of people, can legitimately exercise power over human action.

In fact, he suggests that this issue, one captured by the following question:

"Have twenty men--just because they are twenty--a moral title to dispose of the minds and bodies and possession of ten other men, just because they are ten?"

is perhaps the most important question that an inquiring mind in pursuit of truth can consider.

I happen to agree.

Slant Walk

Christy Wills: There is no right and wrong. There is only opinion.
Brantley Foster: You know, in some states you can get arrested for saying that.
--The Secret of My Success

The blatant media bias related to this presidential election cycle continues to shake heads and raise eyebrows.

Continue to hope that the overt slant wakes ever more consumers of information up to viable alternatives.

Protectionism as Bogus Contracts

Do you want to know how it feels?
Do you want to know that it doesn't hurt me?
Do you want to hear about the deal that I'm making?
--Kate Bush

Interesting article arguing that protectionism amounts to various bogus contracts that buyers (consumers) never agreed to with sellers (protected producers). No law prohibits producers from demanding that customers patronize their business for long periods of time. Of course, buyers are free to say no.

In order to make such a contract remotely interesting to buyers, sellers would have to offer exceptionally favorable terms--such as very low prices. This is because buyers would not bind themselves into such a long term deal for nothing.

We see very few contracts of this nature. The explanations are that a) sellers are unwilling to lower prices to the point where buyers are willing to lock themselves in for long periods of time, and/or b) sellers see the long term costs of locking themselves in as outweighing the long term benefits.

This is why workers have no valid ethical or economic complaint about losing jobs to other workers foreign or domestic, or to machines for that matter. They may have contractually locked in employment guarantees over long periods of time with employers if they were willing to make concessions such as working for significantly lower wages. Instead, they choose higher wages with the associated risk of job loss if working environments change.

Yet, when buyers shift some of their patronage to foreign sellers, domestic producers (both owners and workers) insist that government intervenes to force consumers to continue to purchase domestic output despite no corresponding reduction in prices or wages charged by the sellers. In fact, in many cases the opposite occurs--prices and wages increase under protectionist cover.

There is nothing remotely legitimate about this insistence. Domestic producers favoring protectionist policies are merely seeking to use the strong armed government agents to enforce bogus contracts that consumers have not signed.