Posts Tagged ‘Socialism’

You are only hurting yourselves, you imbécile.

As of last night, it appears there is agreement on bailing out Greece.  Between Europe and IMF (which depends on the US for 25% of their funding), Greece will get about $150B worth of loans (paying a 5% interest rate)  in order for them to meet their current debt obligations (private investors demand an 8% interest rate given the risk) and internal needs.  In return for these loans, Greece has bitten the bullet and will dramatically cut salaries and pensions… temporarily.

I think it important to state a few facts about Greece.

• They rank second from the bottom on the Index of Economic Freedom (highly socialized economy).
• They import 3x more than they export (net users).
• Their government has overspent tax revenues by at least 15% each year for the past 5 years (spent more than produced).
• They have a debt level that is at least 125% of what they produce in a year in GDP .
• Public services account for 40% of their published GDP (so about half of their “GDP” is value productive).
• 42% of those between 55-64 are employed versus 52% in Europe and 62% in the US (few work).
• Tax rates on income are some of the highest in Europe (over 40%)
• Their fertility rate is below replacement rate (i.e. aging population that retires early).
• Their government spends over 12% of their GDP on pensions, double the US, second only to Italy at 15%.

So, with that little amount of information, what is the likelihood that Greece can pay off these loans?  Remember, in the agreement as formed last night, Greece only needs to get their spending down to 103% of their tax revenues by 2014.  In other words, they will still spend more than they make.

Now on to the dramatic cuts.  Riots were all the rage over the weekend as pensioners and union employees protested the expected cuts in entitlements and the anticipated rise in taxes.  The question that hit me was, who are they protesting against?  It’s a democracy from what I understand.  They are the ones benefiting from the large promises they made to themselves (early retirement, large pensions, free healthcare, etc) from which they are the sole providers of the funds for those promises.  Their government officials only act as the transfer agents; taking tax dollars from the few that work and place it into the hands of all in the form of entitlements.  Most likely, they are protesting that their guardians, their providers, are no longer able to borrow money to pay for promises that had no reasonable economic foundation supporting them.

I was struck by a quote in this article,

“These are the harshest, most unfair measures ever enacted. That is why our reaction will be decisive and dynamic. You can’t always make the workers pay for the results of failed policies,” Stathis Anestis, spokesman for Greece’s largest umbrella union, GSEE, told The Associated Press.

I find this to be very circular:  People are protesting because they cannot fund the promises they made to themselves.  (I just don’t see how this loan solves anything or how this ends well for anyone).

This is worth reading…

A friend just sent me this piece.  It’s one thing to talk about personal freedom and the need for individual responsibility from someone that was, in the eyes of many of my socialist-leaning friends, lucky or in the right spot at the right time.  It’s another to hear it from someone that lived within the government assistance programs.

Here’s a little lesson in engineering.  Start with an above ground pool, perfectly still with the surface of the water completely flat.   Let’s say that the pool had a window on the side so that you could see the water level and you place a mark where it currently stands.  Now, let’s place a small boat into the pool.  When you do, the boat sits in the water, not on top of it.  The water that the boat displaces is spread to the other parts of the pool.  The water that makes contact with the bottom of the boat is lower, right?  What about the remaining water in the pool?  When you go back to the window, you will see that the level of water within the pool has risen, maybe not a lot but it is higher.  What you have done is spread the displaced water (that which was where the boat now sits) to the other areas of the pool.

Let’s take this farther.  You want the boat to be larger and to sit lower in the pool so you build a bigger boat and make it heavier.  You will have succeeded at making the boat sit lower and for the water that touches the bottom of the boat to be lower.  Go back to the window and you will see that the water level of the remaining free water (meaning no boat sitting on top of it) has risen even higher.

There.  you have finished lesson one of CIRCLE’s unaccredited marine sciences course.  What, you don’t see this as practical knowledge since you have no above ground pool or a desire to put a boat into the one you have?  Well, this is something that can be applied to other systems.

Take healthcare.  Replace the pool with our healthcare economy.  Think of the surface of the water as the prices paid for all healthcare services.  Think of the boat as Medicare and Medicaid.  The water level under the boat is the price levels set by the government for healthcare goods and services (remember, their prime goal is to lower the price of those services that are currently available in the market but because they are big, they can use their size to demand lower prices, similar to taking on more weight within a boat).  So, when the government pressures healthcare facilities and providers to take less, what happens to the those that reside outside of the government program?  Or in the case of the pool analogy, the people that reside outside of the boat?  Remember, the heavier the boat, the higher the surface water moves.  Your answer should be (if I have done my job) is that we, those reside outside of the government system, pay higher and higher prices.  Do you think there is a direct link between the more people on government healthcare and overall healthcare inflation?  I do.

So, some may say that we should all reside under the boat so we, too, can get lower healthcare rates.  Well, if only that were true…

Let’s go back to the pool (metaphorically).  Let’s take a large object that covers the entire inside of the pool and start placing lots of weight on it.  Does the water go down?  If you have a tight seal on that, no, but the object doesn’t go down either.  Ok, let’s make it so some of the water can leak out, making it easier to have the object drop within the pool.  Where does the water go?  Over the side and out of the pool, forever.

Go back and apply this to healthcare.  The water in the system represents our healthcare economy.  Water leaving the pool is analogous to money leaving the healthcare economy.  Where does it go?  Some of it may go to other investment opportunities but much will just cease to exist.   The money that resided within the healthcare economy, prior to us pushing it out of the pool, was used to pay doctors so they could pay off student loans.  It went to pay the nurse or technician so they could sustain their living standard.  It was used to invest in research and development projects to bring to market better value added goods and services.  In essence, it went to make more money that would reside within the pool.  But we kicked it out by forcing the water level down.

That is how I think of the debate on Universal Healthcare.  If you force an unnatural monopoly ( the large object that covers the pool) onto people they will avoid it at all cost.  You may be comforted in paying lower fees now (sitting lower in the boat), but you have dramatically taken away the funds needed (the water within the pool) to make advances and to support those that provide the services.

Today is voting day in Massachusetts.  It appears to be a fierce fight between two big-government politicians (and Joe Kennedy, no relation to the late senator).  Many think that Mr. Obama wants Coakley to win so that he can push through a very unpopular healthcare reform bill. I think otherwise.

I think he wants Brown to win. Why? Because by having R’s have 41 votes, he will be freed from the ultra liberal shackles (no slavery pun intended) of Reid and Pelosi.  He will finally be in charge rather than having to bow to a few bi-coastal congressmen.   With this new found freedom comes an ability to push through a more “balanced” and “fair” healthcare reform bill that is just as intrusive, just as reliant on centralized government manipulation as the one currently being proposed.  The big difference will be in the way the press and congressmen on both sides present it.

Both sides will shake hands, slap each other on the back, do a high five, or some other self congratulatory masturbation celebrating their ability to “cross the aisle” in the name of protecting the people of America.

In the end, Obama saves his first term, Congress becomes a little more functional (unfortunately), and we suffer under an increasing weight of centralized government manipulation.  Congratulations!

I’m not an athlete but I do know that the best way to slow down during a race is to turn your head and look at your competitor.  I hear many say that, in the end, it is a race against yourself so push hard and focus on the finish line.  I wish someone would give that advice to our current government.  From our Supreme Court Justices referencing international laws to our current administration looking to Europe for healthcare reform, I see so much time being spent looking at those behind us.

Did I offend anyone?  Sorry, but for those readers outside the US, I hate to be the one to tell you that your nation’s progress toward individual freedom lags the US (there may be argument from Singapore, Australia, NZ, and a few others, but I feel comfortable in defending my statement).  I can’t take credit for it, it’s just a fact that the US fought for independence from tyranny in the late 1700′s and has led the movement against oppression since.  This is the part of the world where those desiring freedom of expression, freedom to succeed or fail, freedom to think as an individual, freedom to pursue unlimited success, etc have come for centuries.  The US has grown to be the largest economy very quickly due to the relatively low barriers placed in our way by the whimsical acts of authoritarians.

So, why is our current administration looking to those that lag for ideas on how to advance our society?  Does Tiger Woods look to the golfer in 30th place and try to copy his swing?  Does Bill Gates try to copy the strategy of the executives of Kodak, Digital Equipment, NCR, or Unisys (for those that aren’t into technology history, those are all failed tech companies)?  No, they are the laggards, the losers.

Whomever was the one to propose the single-payer healthcare plan (aka the government-option, aka co-op plan, aka socialized medicine) should have been laughed out of the room immediately for suggesting something that those that are losing talent (brain drain of UK in the 80′s), that grow much slower than us (Europe GDP has been anemic compared to ours), and that offer little in advancement of personal freedom (class segmentation in UK, France, India) have adopted.  The response should have been “Are you nuts?  Why do we want to go backwards?  We (the nation) have fought long and hard to obtain and maintain our individual rights and you want to suggest we take a step back?  Oppression is oppression no matter what name you give it.  Get Out!”

So, my recommendation to our government, look forward, not backward.  Advance freedom, don’t rescind it.  Leverage the skill and knowledge base that collectively makes up our healthcare society rather than alienating it and risk losing it.

Are you sick of hearing about the Healthcare reform bill?  I am.  Unfortunately, endurance is called for as this is a very important topic for all of us.  Since we have heard so much from all the politicians in DC, it might be time to hear from someone that will be impacted (severely) by their actions.  A few great quotes are:

I took a different path, seeking a cancer vaccine. One had been developed at Stanford University 12 years earlier that had given 90% of patients very long remissions and cured some entirely. Unlike chemotherapy, there were no severe side effects.

But I couldn’t get the vaccine because the Food and Drug Administration required another trial that would take nine more years. Over-regulation has kept this treatment from patients for 21 years, as some 24,000 lymphoma patients died each year.

and,

I am still here because my care was managed by doctors—not a government agency. My doctors do what the bureaucracy can’t: They see me as a human being.

and,

Patient-as-person will be a lost concept under the new health-care plan, where treatments will be based not upon individual patient needs, but upon what’s best for everyone. So cancer drugs for seniors might take second place to jungle gyms and farmers’ markets—so-called preventive care—which are covered under both the House and Senate versions of the health bill.

A British physician’s take on our government’s move to socialized medicine.  Here are a few of my more favorite quotes.

Where does the right to health care come from? Did it exist in, say, 250 B.C., or in A.D. 1750? If it did, how was it that our ancestors, who were no less intelligent than we, failed completely to notice it?

and,

Moreover, the right to grant is also the right to deny. And in times of economic stringency, when the first call on public expenditure is the payment of the salaries and pensions of health-care staff, we can rely with absolute confidence on the capacity of government sophists to find good reasons for doing bad things.

and,

Universality is closely allied as an ideal, ideologically, to that of equality. But equality is not desirable in itself. To provide everyone with the same bad quality of care would satisfy the demand for equality. (Not coincidentally, British survival rates for cancer and heart disease are much below those of other European countries, where patients need to make at least some payment for their care.)

Read this article…  And then read it again…  And then write the main points on your palm or arm so that when someone tries to convince you that we “need” healthcare reform as presented by our federal government, you have the talking points right in front of you.   Please, please, please read this article.  I have not read anything else that so clearly and logically refutes the arguments being made by our authoritarian leaders.

Two excerpts worth highlighting:

- “A universal plan will reduce the cost of health care.”

Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

and:

- “We need a public plan to keep the private plans honest.”

The 1,500 or so private plans don’t produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn’t we have government-run supermarkets “to keep the private ones honest”? After all, supermarkets clearly put profits ahead of feeding people. And we can’t run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

chron.com

In the Wall Street Journal’s opinion section, Scott Sperling of THL Partners (a private equity firm) defends the current administration’s auto workout plan as a capitalistic approach.  With all due respect, I don’t believe he understands the meaning of capitalism.

Rather than re-inventing the wheel, I present the wikipedia definition of capitalism below;

Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned.  Through capitalism, the land, labor, and capital are owned, operated, and traded for the purpose of generating profits, without force or fraud, by private individuals either singly or jointly, and investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decision in a market economy.  A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers.  In a “capitalist state”, private rights and property relations are protected by the rule of law of a limited regulatory framework.

I believe that the above adequately defines capitalism and further discussion on it would be a waste.

In no way do the actions taken by the federal government (this administration or past administrations) to ‘save’ the US auto industry have any resemblance to 1) the fair trade of land, labor, and capital, and/or 2) the respect for the rule of law.  For him to offer that it is capitalistic because all parties suffered is ludicrous. In his own words, he mentions that the government “demands… …retirees take equity” and that it (government) “used rigorous analysis to make tough decisions.”  Remember, it was Bush and Congress (including Obama) that decided to get involved in the first place by writing a bailout check rather than letting these two (GM and Chrysler) go through the rational and logical process called Chapter 11.  The definition of capitalism does not include a caveat allowing an elected majority the right to dictate terms that go against the rule of law.

Actually, we can go back a little farther and assess some blame on the banks for being willing to fund a leverage buyout of Chrysler by a private equity firm, knowing that said firm has never been self-sufficient, was at the peak of an economic cycle, and had massive fixed labor costs (most of that is not hindsight).  They, under capitalism, have every right to make bad decisions, but they should have to suffer the consequences.  If they did, maybe Chrysler would have been liquidated and GM would have survived, as a major market participant would have been eliminated from the market.  Who knows the outcome since the free market was never allowed to operate.

It may be that the action taken by the current administration was the best solution available to lessen the pain by the largest amount for all parties directly involved, but in no way can it be confused with capitalism.  It was an action taken (forcefully and against the general population of the US) by a body of government elected by about 50% of the population, with the thought (right or wrong) that immediate steps were needed for the good of “society.”  In my opinion, the likely immediate benefits are far outweighed by the lasting implications of this decision, especially, if we resign ourselves into thinking that these actions represent capitalism. 

As mentioned above, maybe this was the best coarse of action, but we need to be honest about it residing outside the basic principles of capitalism.  If we accept Mr. Sperling’s argument, we do ourselves an injustice, redefine the word ‘capitalism’, and bend to forces of those in power, neglecting the rights of Individuals (singly or jointly) to succeed and fail.

From yesterday’s Wall Street Journal page A6…     Europe’s Social Benefits Are at Risk

The article mentioned above describes the growing public debt, the weak economy, and the need to rethink the large social programs that have become the norm within the European community.

To get some historical context for this, you could read the European Commission’s Social Agenda from April 2002.  It opens with ”Since the Lisbon European Council of March 2000, the European Union has focused on raising its performance and transforming itself into the most competitive and dynamic economic area in the world.”  It is filled with wonderful goals, objectives, desires, etc for how to make a better, more prosperous Union.  That’s all good, actually great intentions, but their means to achieve those goals were completely opposed to those objectives.

They mention the dictation of giving workers say on corporate restructurings making job flexibility all but impossible.  (Speaking to some of the companies I am close to, they avoid having facilities in Europe as they would need to get the workers’ permission (almost) to be laid off and then the costs linger for some time afterward).  They mention increasing the pension system and the healthcare system.  All great programs to have but how do you pay for them?

Well, it turns out it’s through higher taxes (which become higher costs to operate in Europe).  And what if companies avoid placing jobs into the Union due to costs of operation being too high?  Then tax revenue growth suffers as economic activity is muted.  In that event, government tax revenue is lower than anticipated and the social program costs are higher than expected (since employment doesn’t hit the objective set as companies shun the area).  Since funds are still required, it leads to higher public funding through other means; public debt. 

Hmmm.  Where are we seeing all that, as described above, occur right now?

There are many people discussing if government threatened hedge funds to take less during the Chrysler bankruptcy.  Implied in these discussions/opinions is that hedge funds are dirty, greedy, evil people looking to profit from others’ misfortunes.  Most definitely some are evil, much like individuals in general.  But what does that have to do with the government’s actions?

That whole discussion misses the point and is completely irrelevant to the fact that the government got involved with the automakers bankruptcy filing and enacted policy, ignoring the Rule of Law.  The fact is the government forced secure creditors (Chrysler made very specific promises to them giving them first rights to all assets in case of bankruptcy) to take less than due to them and gave considerably more to the UAW who were unsecured creditors (Chrysler made promises to them but the union workers were well aware that they were behind the secure creditors in case of bankruptcy).  Who held the secure debt is immaterial to this case as the Rule of Law is not being followed.  And it’s our own government not following it!

If you want to see the unintended consequences of these governmental dictates, please refer to page C2 of today’s Wall Street Journal or to recent comments from Bill Gross of Pimco (the largest steward of debt instruments in the US).  When the government changes the rules after the fact, no private capital will want to align with them to help solve the liquidity problems.  Or, if they do, they will require outsized returns to take on the outsized risks.  This only increases the costs of capital movement, therefore lowers the actual movement of capital which only drives the economic decline farther down.

This is exactly what happened in the 1930′s as the government continued to enact legislation that changed the rules after the fact.  This caused private capital to move/stay on the sidelines.  CEO’s decided to wait to buy new equipment and/or hire.  Capital providers demanded a higher return given the government’s involvement.  Investment, which drives job growth, stalls.  Quality of living drops.

Question:  Why does it matter if a hedge fund owns any of the Chrysler debt?  Does anyone feel it fair to treat them as less-than-equal investors?  If so, how do you want to parse out the good hedge funds (those managing the money for charities and widows) from the bad ones?  Who is to say that one man’s money is more ‘ethical’ than someone elses?  And what does any of that have to do with the government disobeying the Law?

Here is a nice letter responding to the Mr. Obama’s threats to the Chrysler bondholders that refuse to let the UAW steal their assets.  This is just one more example of the government whimsically favoring some individuals more than others.

Courtesy of Freelance Photography

I just had to point out this article.  It talks about violent rallies that occurred yesterday in various countries (those mentioned were all in Europe).  This is so perverse that it needs to be called out.  Those rallying were all anti-capitalist groups; the Greek trade union GSEE, the French union CFE-CGC, the French Socialist Party.  They were rioting, demanding the government do something to get them jobs.  Please remember that all of these countries practice socialism, not capitalism. 

They all have government meddling in their daily lives.  The rioting yesterday shows the depth of their belief in socialism as they were out demanding that the government GIVE them jobs or FIND a solution to what ails them. 

It’s funny to think back 2 weeks to the United States Tea Party rallies where hundreds of thousands came out to show their frustration WITH government involvement.  Let that soak in for a few minutes.  ( One hippopotamus, two hippopotamus, three hippopotamus…).  People in socialistic countries demonstrate to force their governments to find solutions to problems.  People in the United States (an almost capitalistic country, at least in the past) came out to demonstrate for the government to lessen its impact on the Individual. 

I find that poetic.  To state the obvious, the United States has many, many problems that need to be solved.  But what was evident from the Tea Parties were Individuals wanting to control the process to find solutions.  In socialist countries, they rely on groups to demonstrate for a new tit to suck.