Economics 101 By Longknife

Posted: 03/12/2010 by Lynn Dartez in Land of The Free

In response to questions and comments from friends and acquaintances and to try to explain why the over-educated but under-experienced idiots that infest the halls of gov’t are doomed to failure, I will try to explain simple, observable economic facts, as opposed to pie-in-the-sky economic “theories” so much beloved by the enemies of freedom and those that simply want to steal the fruits of the productive citizens for their own use.

101.1   Money and wealth are not the same.

Money is a medium of exchange. It represents some value, real or imagined, by both parties in any exchange (trade). That is all, period. It can be a string of seashells or beads, tally-sticks, gold or silver coins, or bits of pretty paper. Real money should be a ‘store-house of value’ meaning that there is some real value physically attached to it. This is obvious in the case of gold and silver coins, or any metal coins for that matter, they have a ‘melt-value’ based on the value of the metal within. The issuing agency, gov’t, or king can be utterly destroyed and these coins will still have recognizable value, perhaps less than at time of issue, but also possibly more.

The values of beads or seashells are different, but still physically represent labor and skill necessary to find, shape, drill, and string them. Man, and especially woman, has prized such baubles since our most primitive origins; and what women desire, men will try to provide, whether the beads are bird bones or emeralds, the value is whatever the parties involved decide.

The tally sticks are more complicated, a stick or small board is carved with notches and symbols to represent certain goods, and the stick is then split lengthwise. The holder of goods (trader, merchant, or ‘banker’) keeps one half and the ‘seller’ (depositor) takes the other. The tally stick represents the goods, whether a buffalo hide, 10 bushels of corn, a pig, whatever. The ‘seller’ can carry his half of the tally stick until he decides to trade for something he wants, the ‘buyer’ of the tally stick can then take it to the holder of the goods, match the halves and collect the goods he so desired. There is an element of trust involved, but as long as all parties were more or less equally armed, whether stone-axes and flint tipped spears, or broadswords and long bows, so-called primitive societies tended to be honest. Honor and reputation were prized above quick, dishonest profit, justice was swift and un-appealable, and you may need the whole-hearted co-operation of your fellows against some truly evil enemy only 2 ridgelines away.

Paper money was a practical improvement on the tally stick. The issuing agent (king or bank) printed bills of known value, guaranteed by bullion reserves. The bill was a promissory note that the bank promised to redeem in gold or silver coin on demand. This is honest money as long as the bank does not print more money than it actually has bullion to cover. Banker and kings, in their arrogance and overconfidence often printed more paper money than they could cover; sometimes much more, which leads to inflation: the paper is not fully covered by bullion or assets of the bank, therefore worth less than face value in bullion and must be discounted in value according to the perceived value at the time. In other words it takes more face-value paper money to purchase an article than it’s cost in honest coin.

The next development was when governments decided to issue (print) money that was based on nothing tangible, only the “credit” of the issuing gov’t. This is called ‘fiat’ money. A dishonest or ineffectual administration or its central bank can destroy the value of its currency in a very short time. This can and has been done to create panics that allow knowing and prepared groups to greatly increase influence, ownership, and control over the resulting gov’t. Knowledgeable conspiracies intending such cheating and disinvestments of their citizens, must make it a priority to disarm and divide their citizens and subject them to maximum control by gov’t ‘coercive force’: bureaucracies, police, courts, and the military. Unfortunately the ‘US dollar’, issued by the Federal Reserve System, has not been backed by any real assets since 1964 when Democrat President Lyndon Baines Johnson took us of the silver standard. Previously Democratic President Franklin Delano Roosevelt had taken the dollar off of the gold standard in the early 1930’s, The Federal Reserve System, which is not Federal but privately owned by the member banks, which has no reserves, as recently demonstrated by this massive taxpayer financed bailout, but is certainly a system to steal the taxpayers blind. They privatize (keep) profits, but socialize (make the taxpayers pay) losses. What a deal! More about them later.

Wealth, real wealth, are the things that make your life more comfortable, or at a basic level even possible. A home is wealth, whether a teepee or a McMansion, if it is owned outright. Land that you can farm or develop is wealth. Tools that you know how to use from an axe to a D-9 bulldozer, from a frying pan to a 747 airliner, all are wealth if you can use them to make your life better. The field that grows the corn, the mill that grinds it, the chickens that lay the eggs, to the stove that bakes the cornbread, even the mixing bowl, all are wealth.

101.2    Wealth is created by labor aided by proper tools (capital). Everything that we need and use is either grown, mined, or manufactured, or most often some combination of the three, and then must be transported to where it is needed.

Agriculture isn’t only farming and ranching, but also forestry and proper harvesting of its products, fishing, hunting, and even picking blackberries. Mining also includes oil and natural gas extraction. Manufacturing covers everything from Grandma’s quilting and canning garden produce to Boeing’s airliner factories. Most production must be moved from where it is produced to where the consumer wishes to use it, therefore efficient transportation is very important, unfortunately two of the most efficient, shipping and railroads, have been grossly curtailed in this country by unions with gov’t support. If gov’t interferes, regulates, and taxes unnecessarily with any of these activities, it willfully prevents the creation of wealth and thereby impoverishes its citizens.

Wealth must be created. When politicians talk about ‘redistribution of wealth’ they really mean taking money from the productive (taxes) and giving it to their favored, but unproductive, constituents. This is really government-sponsored theft, and of course the gov’t will have to take $4 or $5 for every dollar that ‘redistributed’, for administrative costs and to pay for the coercive force necessary to enforce the theft (collect the taxes). Another method recently used was to give houses with huge mortgages to people without the assets or income to afford the payments. Since the down payments were insufficient to even cover the transaction costs the ‘buyers’ had no equity or investment so foreclosure is only a minor inconvience to them not the economic catastrophe that it is to responsible homebuyers. The taxpayer-financed bailout will cover the losses to the financial institutions, the politicians have another crisis to pass laws about, and the only losers are the taxpayers, investors, other homeowners, and our Constitutional republic. The real estate market is still booming in Washington, D.C.

101.3   Producers and consumers.

People are consumers, and most are producers. Those that produce more than they consume are useful citizens. Those that consume more than they produce are, in effect, parasites. This, of course, is an oversimplification, many people aid in the marketing of goods; from the cashier who sells you the loaf of bread all the way back to the commodities trader that sold the contract that guarantees the farmer a price for his wheat before he even plants it, the equipment salesman that sells the farmer a tractor, and the banker that arranges the financing. In our very complex society these services are necessary for efficient marketing, but they do not actually produce a single grain of wheat. These people that facilitate commerce are not parasitic per se, but they can be. Those that willfully and intentionally obstruct our domestic production, while enjoying the fruits of our economic system (often at public expense) are enemies, our deadly economic enemies, and should be recognized and treated as such.

Government is a necessary evil, but even the most benevolent gov’t produces nothing. If they protect our borders, tax imports, maintain an efficient low cost postal system, maintain roads, etc., all the things described by our forefathers in the our Constitution, then gov’t is not onerous and actually aids the citizens in the production of wealth. Unfortunately the gov’t we have had for many years does few of these positive things and at all levels their bureaucracies, regulations, and agencies curtail and discourage real productivity, often for no reason. Sometimes the mindless enforcement of poorly written legislation is actually counter-productive to the intent. Bureaucrats are often incompetent, don’t understand their jobs or the regulations they are supposed to enforce are easily frustrated, so the easiest answer is “No”, and the typical response to any question or problem is obstruction. Our gov’t now encourages a population of all races and classes that does not even recognize, much less respect the need for a society to produce wealth. We are taught the myth of “free trade”, that there will always somehow magically be the food, clothes, manufactured goods, oil, and whatever else we want without domestic production. And everyone will get enough “mail-box money” to pay for it all. It is simply not possible! For the last two decades there has been an appearance of some success of maintaining this facade because the major industry has been the creation of debt, also corporate export of industry produced short-term profits to support large domestic admin staffs. Debt, especially unsecured debt created for political purposes, has broken the bubble of an economy based on arrogance, faith, and habit, that had been gutted of its real value by union greed, corporate reaction, and political maneuvering for power and ideology. We are now suffering the results, and will continue to do so until we get some leaders that understand simple facts of economics and human behavior.

People who want their fast-food hamburgers and color TV’s, but willfully vote for politicians that pass laws that unnecessarily obstruct domestic production are personally responsible for the shrinking economy and economic collapse. The politicians responsible for these laws, regardless of the excuses of protecting the environment, worker safety, unionism, or equality are guilty of malfeasance, possibly treason, or are so brain dead that they should be institutionalized for their own protection.

101.4    Economics vs. economic theory

When the typical couple sit down to write up the next month’s budget and shopping lists they naturally consider the needs and desires of their children, and the dog, the cat, and/or other pets. But, they do not let them vote! The children and pets are dependents, though dearly loved, they are still economic liabilities that lack the experience, responsibility, and often the common sense to make good economic decisions. If given the vote the children and pets outnumber the parents (producers) and can force bad decisions. A diet of cookies, candy, Pepsi, Ken-L-Ration and Fancy Feast would the likely result. This is a simple and obvious example of sound economic practice, but totally beyond the understanding of the economic mavens inside the Washington beltway.

Marxism or communism, the economic theory of total gov’t control of production, distribution, the economy, and practically everything else has been a failure everywhere it has been tried, with the exception of China. Communism in China has been so modified that ole Karl probably wouldn’t recognize it as Marxist. The basic premise of Marxism is, ‘from each according to his ability, to each according to his need’. Which means that you, the worker, are supposed to work as hard, as efficiently, and as diligently as you possibly can every day, while some politically connected sit-on-his-ass commissar decides what your take-home pay will be. Even the most motivated, brainwashed retard quickly figures out that he gets no more return for extra effort, so that as long as he appears to be working enough to avoid being disciplined, sent to the gulags, or shot; he that does the least – wins. This is the seed of its own destruction. Marxism is so anti-American, even anti-human that Marxist economic theorists are no longer given credibility anywhere except large universities and the Democratic Party. Socialism is the better mannered daughter of Communism, but the real difference between ‘democratic socialism’ and ‘totalitarian communism’ is simply control of the coercive force (police, court, and military) and the political will of the apparatchik. When asked about the difference between a liberal and a socialist, I answer that in today’s political climate there is none. Today’s ‘liberals’ are no longer about personal freedom and tolerance, but are dedicated to ‘political correctness’, power, and gov’t control, total control. In fact, many of today’s American liberals are closer to the murderous Soviet commissars than the most vocal European socialists.

Other modern economic theories popular in Washington are based on gov’t creating ‘money’, by borrowing from investors and trading partners or simply printing it and, through the ‘magic’ of book-keeping entry and Federal Reserve rules and practice, ‘borrow’ it from the Fed. The taxpayers, of course, are responsible for paying the interest, and the interest will increase very rapidly as inflation destroys the value of the dollar. Investors are not stupid and will demand collateral for further loans to a failing gov’t. As I write this (3/1/09) news is breaking that Hillary Clinton as Sec of State, with Obama’s approval has offered the Chinese, Eminent Domain over the property of American citizens as collateral against gov’t debt and further loans. This is an unthinkable usurpation of power by the executive branch to any Constitutionalist, but business as usual in Washington, with no mention in the mass media.

Longknife 21

Seadrift, Texas

  1. Longknife 21 says:

    Since the Federal Reserve System (Not Federal, and no Reserves) was instituted, the value of the US dollar has been reduced to the point that todays dollar has the puchasing power of about 4 cents in 1913.
    If you buy property or investments and later sell them, you are taxed on the “appreciated” selling price. Another way the gov’t robs you, when the increase in the number of dollars only indicates the decrease in the VALUE of the dollar.
    This is why I call CDs – Certificates of Depreciation, because even though you get more dollars at maturity the total purchasing power is less than the purchasing power of the original dollars at the time of buying the CD. And to add insult to injury, you must declare the numerical increase as a ‘Capital Gain’ on your income tax form.
    Raped and then beaten for bad behavior.

  2. Lynn Dartez says:

    Your Welcome Longknife. We all do our own part and you know that as so many others. Thanks for writing the Article.

  3. Mike Payne says:

    Longknife 21,
    An astute observance and explanation of basic economics. It is a shame that so much of America fails to see the truth is what is occurring with our economy. It is also a shame that so much wealth is wasted by our government in trying to redistribute that wealth. Our money has lost almost all it’s value and is in fact a representation of debt, not money. Thanks for your post and hopefully many will see it and gain some knowledge from it. God knows our country needs it.

  4. Longknife 21 says:

    Thanks for posting this. I believe that most of your readers know and understand these simple truths, but sometimes have a problem explaining them to others, especially those with Higher Educations. I wrote this ignoring all the ‘theory’, just sticking to historical and observable facts. In the year that has passed since I wrote this, we have watched our economic condition get worse. Mainly because our ‘Leaders’ try to govern on theory rather than reality.
    All are welcome to use any of this in any way they wish, whole or in part, with or without credit. My only wish is to re-industialize America, to again see a productive economy with a stable currency. If our currency is backed only by faith and hope, there must be real faith and a reasonable hope. No more of this ‘speechifying’ in public with ‘back-room deals’ that rob the taxpayers, debase our currency & saving, and sell our children into economic bondage.
    When the citizens discover the robbery by Goldman Sachs & others on the Treasury and taxpayers, with the complicity of the Obama Admin, perhaps that will fuel the Reawakening in America that will lead to Restoration.

    I am NOT an economist. I have no ‘real’ college degree, only an Associate Degree in Aviation Maintenance. But I was an aviator, instructor, mechanic, equipment operator, machinist, draftsman, construction worker, & farmer.
    Also a Combat Veteran, capitalist, and blue-water sailor & fisherman. Experience does count.

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