AMERICANS ARE COMMITTING (ECONOMIC) SUICIDE DAILY WITH IPHONES AND IPADS

Americans gain little from trade with Third World countries. Americans are letting their futures get ripped away for a few trinkets like iPads and iPhones.


This is what happens:

 ✘ Foreigner owners of factories produce goods with lots of labor and little capital — very inefficient.

 ✘ Because foreign production is inefficient — low capital, little output per person — even though total output is high because of the sheer size of the workforce — wages of foreign workers are low.

 ✘ Because the cheaper imports not made with much capital per worker undercut the return to American capital, new capital investment slows in the USA.

→ Capital is the source of wages. If there is no capital and no return to capital, there can be no wages paid. Higher wages comes from higher capital spending per worker.

 ✘ Less capital per American means lower wages.

✘ Lower wages means lowering living standard masked by being able to buy cheaper foreign products.

✘ US-based financiers transfer their investments from ever falling returns on USA based capital to foreign countries.

✘ Eventually, all high-paying jobs in the USA disappear.

✘ Income inequality continues to widen as USA-based rich financers get richer on a growing world economy.

✘ Americans get substantially poorer.

✘ Foreign workers go from abject poverty to working-class poor.

1. Reciprocal free trade only works with foreigners whose capital spending per citizen is about the same as ours. This is authentic free trade. 
2. Under a system of Free enterprise with true free markets competition with authentic free trade, it becomes harder for some Americans to become obscenely rich. Almost all Americans are better off. Far fewer Americans are extremely better off.
3. Without Third World tariff-free imports, Americans living standards forever rise under capitalism.
4. Without Third World tariff-free imports, Americans would gain much higher incomes to afford to buy iPads and iPhones built right in factories right in the USA.
5. With Third World tariff-free imports, Americans living standards forever fall because capitalism falls in the USA but rises elsewhere.

Look at it this way with easy-to-get math. Let's make big assumptions like capital is uniformly spread over each worker and yields a uniform output.

• USA: $1,000 @ 10 workers = $10,000 output
• CHINA: $100 @ 1000 workers = $100,000 output

In the USA, workers get $100 worth of capital to use. While in China, workers each get $10 worth of capital to use.

American workers are 10 times as efficient as Chinese workers are. Yet, Chinese workers can produce ten times as much. As costs are much lower for Chinese (wages and capital outlays), the Chinese can accept lower winning bids (prices) for the same products.

There is no way Americans can compete. It's because of labor and not capital that Americans can't compete with the Chinese. The net result is simply a destruction of American industry until Americans get reduced to Third World status.

Conclusion:

✓ Americans become much more like Third World workers while Third World workers rise up a bit.

✓ Wage rates get equalized the world over but at much lower levels.

✓ Ownership of capital gets concentrated in ever fewer hands — there are more super-rich but fewer relative to total population.

And when unrestricted immigration happens — immigration where the foreign-born population exceeds 5% of the USA-born population — this only accelerates the fall in wages. For more on that, read my works. If you read these works, you will understand fully what has been happening to Americans and our economy:

• SOPHIE'S CHOICE OF CAPITAL OR LABOR. A FREE-MARKETS LIBERTARIAN BECOMES AN ANTI-CAPITALIST AND PERPETUATES AN ECONOMICS MYTH
• ILLEGAL IMMIGRATION. WHY IT'S BAD FOR YOU AND A BOON FOR ANTI-CAPITALISTS.
• JASON X AND LEW ROCKWELL'S CULT OF MISES. ANOTHER EXAMPLE OF WHY AMERICANS ARE IN BIG TROUBLE.

And here are a few works on politicians running for the presidency and what they say about all of this:

• MARCO RUBIO CLAIMS THAT AMERICANS ARE STUCK WITH ILLEGAL ALIENS. THE ROOKIE U.S. SENATOR RUNNING FOR PRESIDENT CLAIMS CONGRESS IS POWERLESS TO DEPORT ILLEGALS.
• RAND PAUL GOES FULL RETARD, SIDES WITH DEMOCRATS AND TURNS HIS BACK ON WORKING-CLASS GENERATIONAL AMERICANS
• WHY TRUMP IS WINNING. THE REST ARE INTERNATIONALIST SELLOUTS WHO STAND AGAINST WORKING-CLASS AMERICANS.

The most recent proposed trade deals — the Trans-pacific Partnership and the Transatlantic Trade and Investment Partnership are not even free trade deals.

TPP and TTIP are treason by other means. TTIP would turn over control of the USA commercial regulatory mechanism to the EU bureaucrats in Brussels, essentially. It would erect huge barriers to entry that protect U.S. mega corporations from upstarts at home who would best them with new technology and thus render the extant capital structures of these mega corporations obsolete — the creative-destruction that makes authentic free-markets capitalism thrive.

If these supposed reciprocal trade deals were good for all Americans and not merely for the shareholders of a handful of mega corporations, 100 senators would vote aye. There would be no need to vote in a rule that lowers the passing vote to 51 votes and kill the procedure for amendments. That is what trade promotion authority (TPA) is all about.

Think about it.

The bogus rules changes arise strictly because bad senators who want these deals need camouflage for their re-election. With these deals, they can say the didn't vote for deals like the Trans-pacific Partnership but still be for such deals merely by abstaining or voting nay.

All of these senators want these deals, all 100. All 100 work for the internationalists and not their states' legislators. That is why the 17th Amendment needs repealing.

If you think the economy is bad today, if TPP and TTIP pass, never again will Americans have high-paying jobs. There will be generation of all races and not merely blackies, including tens of thousands of healthy males every year, who will never work. They will live cradle-to-grave on welfare. 

Life will become as it is in France right now.

Americans have been digging their own financial graves since the 1990s by trading with China, the Mexico part of NAFTA, CAFTA-DR and the like. It's great for internationalists and mega-capitalists but not so great for working-class Americans.

For more on that, see: TRANS-PACIFIC PARTNERSHIP OF ESTABLISHMENT INTERESTS TO SCREW YOU OVER


Look, I like fruits from the Caribbean like the next guy. We would have gotten those cheap all the same.

Anything not grown in the USA should come duty-free into the USA, stuff like coffee.

We should have free trade with countries that are comparable in terms of economic development as measured by capital per capita. That makes sense.

If the Norwegians are better at making digital sensors, then Americans should stop and use capital elsewhere to make something more efficient.

But Americans can never compete with Third World countries who can throw a mass of labor at the production problem.

Foreigners should be forced compete against Americans through efficiency under capitalism as capitalism is the only way to get a high living standard. What is killing the USA and our economy and capitalism itself is importing goods taxes-free from third world countries whose means of competition is a mass of workers with little capital.

That is why import taxes (tariffs) should exist.  Import taxes ought to be levied at the rate of the inverse of the ratio of foreign per capita GDP to USA per capita GDP. So for example, because Canadian GDP per capita is $50,271 while American GDP per capita is $54,629, a tax of 7.98% should be levied on imports coming from Canada

Here is the math:

(1 - ($50,271 ÷ $54,629)) × 100 = 7.98%

Likewise, Mexican GDP per capita is $10,361. So a tax of 81% should be levied on imports coming from Mexico!

I wrote about how trade should be done in this one:

WHY TRUMP IS WINNING. THE REST ARE INTERNATIONALIST SELLOUTS WHO STAND AGAINST WORKING-CLASS AMERICANS.

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MARKETS EXIST ONLY BECAUSE OF PRIVATE PROPERTY. THERE ARE NO LEGIT MARKETS UNDER SOCIALISM OR COMMUNISM.

Today, in the comments on popular blog I read this whopper of silliness:

"Markets are created to establish prices."



Believing that "markets are specifically established to determine prices," forces one to believe that investors have plowed billions into distribution centers, stores, work hours of cashiers and stockers of a supermarkets chain merely to put food on shelves to display offers on shelf tags.  Of course, investors create supermarkets to trade property in food and other merchandise for property in cash and credit in purchases and sales.

The trading of property is the only reason why markets exist. In purchases and sales, individuals trade property, which is the right of ownership and never the things owned. Organized markets arise to facilitate purchases and sales of property for property.

Price quotation arises as an effect of highly-organized markets (think NYSE or COMEX). However, price quotation isn't a cause.

Price is a trade rate that reflects quantities in ratio.

Further, price results from expected future profit. For if no one believed he could earn income tomorrow beyond his expenses of eating, he would buy nothing today.

Academia economists with their pseudo-science of economics actually believe people exchange utilities for utilities. In their laughable theory, they believe a man will exchange only up to the margin of his satisfaction. Their comical theory is so incomplete that economists fail to consider that buyers also account for the bidding strength or weakness of the one with whom they are trying to strike a deal. 

The basis of commerce, which is what men do, is the trade of property in pursuit of profit.  

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STAKEHOLDERS OVER EFFICIENCY AND PROFITS? FAMOUS CEOs SEEM QUITE CONFUSED ABOUT THEIR JOBS.

So today, Forbes editors published a work by a guy named Steve Denning titled Salesforce CEO Slams 'The World's Dumbest Idea': Maximizing Shareholder Value. In the work, Denning commits the fallacy of appeal to authority many times first by quoting popular CEOs who have expressed their silly beliefs in public and then by citing an impractical, academician theorist.

The CEOs quoted who include Jack Welsh (ex-GE), Jack Ma (Alibaba), John Mackey (Whole Foods), Mark Zuckerberg (Facebook) and others who reveal themselves to be quite wrong precisely because they don't know what the word value means. Value is a ratio that expresses a rate of exchange.

When one of those things is cash or credit denominated in cash, all should know that ratio by another name. All should know it as price.

When Denning writes, "led firms to pursue the extraction of value, rather than the creation of value" it seems clear that Denning himself is confused about what what value means. In short, no one nor any firm can extract exchange. Exchange arises because each of two parties believes he is getting the better end of the deal.

Likewise, no individual by himself nor any firm by itself can create value. Value requires two parties as all trade does. Value arises from exchange.

The purpose of a firm is to survive to perpetuate trade. Firms survive by at least breaking even.

The entirety of trade, also known as commerce or buying and selling, ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade.

At less than break even, anyone would stop trying to produce property. No one works at a loss.

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created can trade arise between two persons.

The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth.

Profit is the name of sales at prices set by winning bidders less the outlay spent to acquire property for those sales. Profit signals potential return to increasing capitalization to gain efficiency and thus higher profit, lest competitors come to the party with better capitalization.

So in the end, CEOs must be stewards of their firms' capital, which is property put to making stuff, so they can consistently produce wealth, which is property at the moment of actual purchase and sale, to perpetuate trade in pursuit of profit.

Should profit arise, firms then can return shares of that profit to shareholders in the form of dividends, which is the only reason why investors hold stocks — for the income. Stocks represent ownership in the capital structure of any firm.

Speculators buy or sell stock either going long or short because speculators play on price movements of stocks. Far too many conflate speculators with investors.

All proper, positive action by individuals or representatives of individuals, such as corporations, is enlightened self-interest. Only by acting for oneself in recognition of doing right by others can anyone thrive in the long-run.

For-profit corporations don't exist for philanthropy or do-gooder meddling or any other sentimental foolery expressed by some CEOs. The clue to anyone who needs it is right there — for-profit.

As well, corporations don't exist for the false concept of "stakeholders". Corporations don't exist for employees nor citizens and especially not legislators and their agencies of government.

Corporations exist for producing property to trade in pursuit of profit on behalf of shareholders. Corporations exist to work for the same reason every individual works — producing property, which is work sold to an employer or customer in pursuit of profit, which is income less outlays.

I invite those seeking a better understanding of trade and business to start here WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE right here on Bizarro Theater.

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EUROPEANS HAVEN'T LEARNED A THING IN 100 YEARS

So the doubling-down on political stupidity begins. European parliamentarians laid down sanctions against the Russians over Ukraine. The Russians took their time, but have decreed counter-sanctions against European-sourced produce. Now, European parliamentarians plan on doling welfare, with borrowed bank credits, of course, to those EU citizens hurt commercially by the Russians.



If European political leaders hate the Russians so much and truly want to cripple the Russian economy to bring Russians to their knees so they turn on their leader Putin, then why don't they stop buying natural gas from the Russians today, right now?

Why not cut off the Russians from Euros or dollars or however those natural gas contracts get settled?

If European leaders truly want to scold the Russians, and if European leaders had courage, this is what they would do. It's simply hypocritical to pick and choose as if from a menu, which products can be bought and which products become banned.

Europeans should have embraced the secession of Luhansk and the secession of Donetsk. As well, Europeans ought to have embraced the secession of Crimea. Yet, if Europeans political fools were smart, which they are not, without doubt so, rather than placing sanctions on Russians, they ought to place sanctions on Ukrainians to pressure Ukrainians to accept these changes.

In WE WANT TO BE FREE. UKRAINIANS WANT WHAT IS RIGHT. FREEDOM.  I wrote,

It's not so much about territory. It's about people. The political establishment hates losing people because they hate losing the ability to control property of others and thus the ability to scoop up taxes, which are an unearned share of profits taken by force if necessary.

Yet, why should some Ukrainians' freedom count more than others? Ukrainians are killing other Ukrainians to decide which group of oligarchs shall lord over themselves. How stupid are Ukrainians? When shall they awaken?

And if the Europeans were really smart, they would have sought to bring the Russians into the fold of the EU right after the fall of the Berlin wall. Further, Europeans should have brought the Russians into NATO while having the USA exit NATO.

After all, EU exists today precisely because of a trade union for coal established between the French and the Germans in the aftermath of World War 2 as the means to keep French and Germans from ever fighting each other again. Can you imagine what a Eurasian Economic Union would have done for the 649.7 million living from the Bay of Biscay to the Sea of Okhotsk?

Europeans ought to be embarrassed for their political posturing and behavior. Rather than trying to poach the Ukraine from Russians, never which should have been the goal, Europeans should have worked hard to enter in union with the Russians. One would think Europeans could look back at their own 100-year history contrasting the horrors of wars and the benefits of trade unions.

On the 100th anniversary of World War 1, it is clear that Europeans have learned nothing.

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OBAMA GIVES THE OK FOR MORE TERRORISM AGAINST RUSSIANS

President Urkel Obama has OK'd another round of sanction against Russians. This time Obama has approved of attacks against those Russians who earn their living through the firms Rosneft and Novatek.

Rosneft is the largest oil producer in Russia. Novatek is a  natural gas producer, primarily.

Let no one in America lose the significance of Obama's action undertaken from advice of his brain trust.

When someone or a group attacks individuals in effort to get those suffering from attacks to pressure their politicians for changes to political policy, all English speakers have a word for such attacks. All English speakers call those attacks by the word TERRORISM. Such is the picture-perfect definition of terrorism. Terrorism means living by striking terror into individuals to get them to pressure their politicians for change in political policy.

One would think in light of 9/11, no politician in the United States of America would be so stupid as to stoop as low as those who attacked and slaughtered 2,752 Americans through something as cowardly as terrorism.

Sanctions amount to terrorism. There is no getting around it. Harming individuals in hopes they turn on their own politicians is the exact purpose of every terrorist alive and of every terrorist who has ever lived.

Presidents ought to act and act decisively in the best interests for all Americans and not merely those profiting from oil or those profiting from banking through a unified Europe and so on.

Obama has the authority to send troops to Ukraine. Obama has the authority to order air strikes against so-called Russian-leaning "separatists" in Eastern Ukraine. So why does Obama act so cowardly, so gutless, so unmanly, so anything but presidential?

Why does Obama act like a terrorist? 

Why are untold and unwarranted taxes blown for military if presidents fail to use the weapons of war when negotiation fails?

Yet, what everyone should truly ask himself or herself is this:

Why should Americans care if five million or even 20 million Ukrainians become ex-Ukrainians and join up with the Russians? 

Americans are not affected by such a change at all. American politicians care because their financial bankers who have a vested interest in expanding the European Union or who have a vested interest in seeing Russians become weaker make them care.

What does anything about the Ukraine have to do with you? Nothing.

The more competition American firms face, the more efficient those firms must become and the lower the prices you shall see over time.

You should hope that many Russians rises to challenge American firms in commerce. You should hope that Germans do as well. You should hope that Indians do, that Brazilians do, that firms from people the earth over do.

The more firms competing for your wages, the more firms competing to hire you, the better your living shall become. The more firms that rise up and push aside government protected firms, such as the USA-based Fortune 500 firms, the better your living shall become.

Capitalism rocks. Crony politics sucks.

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WHO NEEDS A CAR AND A 747 WHEN YOU CAN'T BUY A GALLON OF GAS?

So yesterday, a dialogue of sorts opened up between Tim Worstall of Forbes as well as the Adam Smith Institute and myself. Forbes published a piece of work by Worstall in which Worstall makes these claims about gasoline prices in America:

• "Futures speculation doesn't change the price of gasoline one whit"
• Americans do not set the price of gasoline in the USA
• The global balance of supply sets the price of gasoline in the USA 
• Futures trading does not affect the price of physical commodities
• David Ricardo rendered an Iron Law of One Price 

Worstall addressed me and said this bit of foolery,

"[A]t the more general level gasoline prices are set by the international price of crude oil. If this were not true then gas prices would not move in lock step with that price of international crude. Given that they do therefore they must be so influenced...There are significant gasoline exports from the US: so the market is so integrated."

Worstall's beliefs are quite absurd. Worstall believes that crude oil prices set the price of gasoline. Worstall tries to defend the false belief that input prices set output prices. In so doing, Worstall expresses the fallacy that costs set price.

It was Worstall's beloved David Ricardo who is well-known for having started that fallacy. It is Karl Marx who is well-known for perpetuating that fallacy in is his foolish “Labor Theory of Value”.

If it were true that crude set gasoline, that is, if the fallacy of costs set price were true, then why do refiners go out of business? Why do retailers go out of business?  Why wouldn’t businessmen merely charge costs to avoid bankruptcy? Why wouldn’t businessmen merely raise prices at will to cover increasing costs to avoid bankruptcy?

Crude oil prices do not set gasoline prices, ever. Gasoline prices for gasoline bought by retailers are set by futures markets players. To believe anything else is to reveal profound confusion on the matter.

Futures speculation sets prices of refined gasoline purchased by retailers. At the delivery date of a futures contract, someone must take physical delivery of that refined gasoline at the settlement price of the contract.

The entire purpose of futures speculation is to set prices of commodities. In so doing, futures markets players keep the flow of gasoline to retailers both in times of glut and in times of shortage.

Speculation into graded contracts creates a steady, active market for property of all kinds without respect to on-the-spot winning bids for what is on offer at any moment. The purpose of organized futures speculation is to give rise to consistent profit from transmuting property as capital into property as wealth under efficiency.

Gasoline retailers are price takers of the gasoline price set by futures markets players. Oil refined into gasoline is the product they sell at retail. Gasoline retailers are retailers the same as supermarket operators who sell milk, eggs, bread, meat.

All prices adhere to the one and only true law that governs all of commerce — the Law of Prices. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price.

It is drivers alone who buy gasoline who set the retail price from their winning bids.  Once futures players set the price of gasoline for retailers, retailers try to make a go of it by accepting prices set by drivers who buy gasoline.

The whole trick of business is producing so that one can adhere to the Axiom of Profit on given prices set by winning bidders. The Axiom of Profit holds the sum of sales on prices set by winning bidders must at least equal the cost of production, otherwise the seller goes to ruin.

If drivers drive less, buying many thousands fewer gallons of gasoline, retailers shall be forced to accept lower winning bids for what they have on offer.  For some, owing to inefficiency, they shall sell at a loss and get forced into bankruptcy. That is the great Axiom of Profit in action.

In 1994, there were 202,800 retail sites for the sales of gasoline. In 2012, that number had fallen to 156,065. The total number of sites has fallen -29.9% falling at a rate of -1.4% a year.

Thus, it can be seen that between 1994 and 2012, many retailers could not make a go of it profitably on extant prices for gasoline set by futures speculators. Therefore, these unprofitable retailers exited the field.

Worstall is quite wrong about all of it, as usual from my experiences reading his work. Perhaps Worstall should find another occupation as he seems to be wrong, consistently on all matters of commerce.

Reality thoroughly contradicts Worstall. As to prices of gasoline, the EIA reports prices in the USA differ by region. As well, Bloomberg reports prices for gasoline differ by country. Thus, it can be seen there is no fictitious global balance of supply and demand that sets the price of gasoline in the USA as Worstall so wrongly believes.

Further, imports of refined gasoline can come into the USA profitably only if outlays to refine elsewhere are low enough such that when combined with transport outlays, foreign producers can at least break even on prices set here in various regions of the USA. As can be seen here by PADD (Petroleum Administrative Defense Districts) region, most foreign exporters of crude to Americans do not also export gasoline likely because it is not profitable to do so.

David Ricardo never wrote about an “iron law of one price.” Germans academicians stuck Ricardo with the phrase, “the Iron Law” and they did so because Ricardo had written something about wages only and not other prices.

Specifically, Ricardo claimed there is a tendency for population to rise as soon as wages would rise above bare necessaries to sustain living thus. This thought became known as the "Iron Law of Wages."

Worstall tries to make an appeal to authority by mentioning Bank of Sweden laureate, Paul Krugman. According to Worstall, Krugman claims futures trading doesn’t affect the price of commodities.

Krugman is an expert in academic economics. However, Krugman appears not to know anything about commerce.  Like Worstall, Krugman is a shop-talker and not a man who deals in profit and loss from selling stuff. Krugman works at think tanks and he teaches.

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SOPHIE'S CHOICE OF CAPITAL OR LABOR. A FREE-MARKETS LIBERTARIAN BECOMES AN ANTI-CAPITALIST AND PERPETUATES AN ECONOMICS MYTH

So today on Forbes, Jeffrey Dorfman, a professor of economics at The University of Georgia, who touts himself as a "free market, libertarian" presents a quite false Sophie's choice description of labor vs capital, which plays well to the misinformed masses. Such labor vs capital silliness is is standard fare for economists. 

Dorfman argues that Americans don't have high-paying jobs anymore because 1) automation is killing the middle class, and 2) lower interest rates causes a substitution of capital for labor and thus the cause for automation over workers.

Dorfman says that Americans are living in a "dumbbell economy, where most of the jobs are at either the lower or upper end of the income spectrum, with few jobs left in the middle class." Dorfman started his argument that capital in the form of automation is killing jobs and a cause of low pay and that more capital makes for fewer "middle class" jobs. In short, Dorfman is a pro-capitalist arguing against capital!

Because Dorfman is an academic economist, he is fooled by economics. As I show in Why is the Economy So Horrible? Because Academia Economics is Fake, Dorfman's false beliefs fail to surprise me.

Before the industrial era, almost all Americans were poor, barely living above bare subsistence poverty. Almost all were farmers who traded little. 

Farmers had little capital. There were hand tools and maybe a few plow horses. 

The few "wealthy" Americans were those involved in shipping. Ships of shipping, of course, are capital.

Under the automation of industrialism, true wages or "real" wages if said by economists rose and rose substantially. As Americans added machinery, which, of course, is capital, workers' buying power as expressed in true pay rose.

In effort to lift his specious "dumbbell" argument, Dorfman points to yard workers, retail shelves stockers, neurosurgeons and movie stars as workers whose work can't be automated while work "rules-based" work as accountants, travel agents, bank tellers, can have their work automated with computers. Yet, the dumbbells Dorfman lifts are quite like the ones President Obama has been seen lifting. Such is for the weak.

Academician economists like Dorfman claim that wages should fall when cap spending rises and wages should rise when cap spending fall. 

To economists, wages vs capital is the Sophie's Choice of economics! In short, economists like Dorfman argue in favor of Luddites (and thus Socialists)!

Academician economists fail to see reality. They think only with their hollow theories, which fail to match real-world reality. 

Wages and capital are interlinked. Wages are a consequence of producing wealth under efficiency. The more wealth produced and gained by each worker, the higher wages can rise.

High capital spending causes high wages. Wages rise when capital spending per worker rises. 

Jobs that fetch low wages are such jobs with little capital needed to amplify the work. Yet, jobs that fetch high wages are those that take much capital to do the work.

The cap spend for yard work is tiny. Lawnmowers and leaf blowers are cheap. Many lawns can be mowed and cleaned in a day by using no-skill workers and super cheap capital.

The cap spend for neurosurgeons is much. Surgical rooms are filled with an abundance of one-of-a-kind equipment and slew of pricey technicians. A surgeon can operate only on one brain a day, maybe two.

The cap spend for movie stars is much. Movies require pricey cameras, pricey sets, pricey editing machines, and slew of pricey technicians. 

The cap spend for accountants, travel agents, bank tellers is low. Computers are cheap. Pushing data through fiber optics is even cheaper. 

Only in proportion as labor becomes pricier that it becomes profitable to use cheaper methods (capital) to amplify labor. Capital spending arises because of likely increasing returns to capital. 

THE CHART SOCIALISTS AND POLITICIANS DON'T WANT YOU TO SEE AND THE CHART THAT SHOWS ECONOMISTS DON'T UNDERSTAND COMMERCIAL LIFE

Here, you can see charts for true wages and true capital spending flowing in lockstep. True wages have been falling for years in lockstep with true capital spending per prime age worker, those between 25 and 54. 

During the Clinton Good Times, wages rose. Wages fell thereafter. Workers enjoyed a small return to growing true wages during the final inflation of the Greenspan-Bernanke Credit Bubble, the largest bubble in American history.

In general, true prices have been falling for decades. And as a wage is a price, so too have true wages been falling. In Prices have been Falling for Years! Inflation? Major Deflation has been Underway Since 2007. So Why Does Life Seem Harder? I show you charts of prices for all kinds of goods falling and for years 

The Dorfman claim that entrepreneur-adventurers ask themselves "Should they hire people or should they automate?" never has reflected commercial reality. The true question is this: Is there a dearth of workers or is there an abundance of workers?

The growth in prime age working adults in America has been tremendous, up 45.3% since 1980. And not-so-coincidentally, true wages have fallen 41% and capital spending has fallen 49.5%!



True cap spending has been falling for years in America for heavy industry. Yet, cap spending for R&D and software has been rising. 



Check out the True State of the Union, Private Sector Capital to see more charts.

In You Are Going to Wind Up Working in a Gas Station. Capitalism is Dying, Americans, I show you a table of true wages for various occupations since 2000. You can see that wages rose during inflation of the massive Greenspan-Bernanke credit bubble and then fell substantially during deflation of that bubble precisely because more credit led to more capital spend and less credit to less capital spend.

All trade is about trading the right of ownership (property) in stuff, completed work or future payments in purchases and sales for profit. All of the names mankind uses for property (right of ownership) — capital, wealth, asset, collateral, stock — are names of property in various states — production, trade, estimation, deals of credit, potential sales.

Heed my dictum. Labor makes property. Capital makes property efficiently. 

All trade gets governed by one true, infrangible law and one axiom — the Law of Prices and the Axiom of Profit. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer set the price. The Axiom of Profit holds the sum of sales must at least equal the cost of production or the producer goes to ruin.

As I explain in Poverty and Envy, there is profit and loss for everything. We calculate profit or loss by subtracting outlays from income. No one works at a loss, whether wages less living expenses for workers or income less outlays for firms. In the absence of intervention, some things would not get sold for long as the sum of sales could not yield a profit.

Entrepreneur-adventurers are smart laborers. Entrepreneur-adventurers arise because of capital. 

Without capital, there is little reason to organize workers. Without capital, everyone lives at bare subsistence. 

All producers get constrained by the great Axiom of Profit. Capital becomes a factor in production only if in using capital, workers can produce property in stock or in work cheaper than by producing property in those things without capital. 

The capitalist buys a share of the profits from the entrepreneur-adventurer by selling cash and credit in a purchase and sale. Such a trade can arise only if the entrepreneur-adventurer can enlarge profits to cover his cost of capital and enlarge income to cover his cost of labor. In short, the permanent use of capital arises only under increasing returns whereby application of capital yields a proportional increase in output.

Little variation exists in the muscularity among individuals. Thus, little variation arises in the output owing to hand labor alone. However, with capital, variation is manifold according to various application of technology leading to degrees of efficiency.

With small production — hand labor — consumption is small precisely because low wages can only afford low payouts. In proportion as a market enlarges — more product on offer to many with low wages — wages can rise for those who make more product on offer. More product on offer only can come from efficiency achieved with capital amplifying labor.

Significant production of property to become wealth requires capital. As proportion of wealth produced by labor falls, the actual amount the laborer gets rises. More wealth produced leads to a higher living standard for those producing it. In short, capital leads to better living. 
Never are workers robbed by capital. Workers gain by capital. This is so not because capitalists are generous, but because entrepreneur-adventurers only can use capital under increasing returns.

Because of capital, workers can consume more than they could ever produce absent capital. It is owing to capital that all material progress arises. Revivalist Preachers of Born-Again Socialism like Thomas Piketty simply don't understand capitalism and thus reality.

For more on this, check out  Capitalism. Because without it, You Would be Living as a Bare Subsistence Savage and Elites Seek to Punish Workers with a Consumption Tax, or a Tax on Workers' Wealth.

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IF YOU DRIVE A CAR, I'LL TAX THE STREET. IF YOU TRY TO SIT, I'LL TAX YOUR SEAT. MR. WILSON. MR. HEATH.

There are only three kinds of taxes regardless of the guises politicians pitch the gullible to disguise the tax. There are taxes on wealth, there are taxes on capital and there are permission taxes.

With the rise of Born-Again Socialism revivalist preacher Thomas Piketty, there have been howls for taxes to get levied.

In ELITES SEEK TO PUNISH WORKERS WITH A CONSUMPTION TAX, OR A TAX ON WORKERS' WEALTH, I reveal the sneaky effort of some who seek to claim a consumption tax is not a tax on wealth.

Behind every tax scheme of every politician is a this: You don't have right to your property gained by profit in trade and they lack the duty to keep their hands from your property. 

Said another way: You have the duty to surrender all of your property to the amount that politicians say you do.

Wealth Taxes

Wealth is the name given to property put to purchase and sale for cash and credit. Any tax levied on property in a purchase and sale is a wealth tax.

Wealth taxes go by these names — income tax, capital gains tax, payroll tax, gift tax, estate tax, excise tax, as well as the family of ad valorem taxes such as sales tax, goods and sales tax, land tax, declared worth tax, car registration tax, legal filings tax.

Businesses get taxed on net sales, which are sales less expenses. Unfairly, workers get taxed on gross sales. Workers don't get to deduct their expenses incurred to produce their sales, which is defined as work.

So-called negative income taxes aren't taxes at all. Such is welfare. It's not full freight welfare. It's subsidy welfare, or that which subsidizes the inefficiency of workers who qualify to receive it based on an arbitrary benchmark of income.

A Capital Gains tax is a tax on income derived from the sale of an asset, most often ownership in a firm, which gets called stock or equity, or ownership in a debt owed by a firm, which gets called bond. As a capital gains tax is an income tax, it is a wealth tax.

Payroll taxes to fund social security are wealth taxes as such taxes get levied on income. As always, all taxes on income are taxes on wealth since such taxes get levied on sales in purchases and sales of wealth for wealth.

Payroll taxes that force workers to purchase unemployment insurance all the same are wealth taxes, regardless of the intent. As always, income taxes are wealth taxes. Payroll taxes are wealth taxes.

Excise taxes are taxes levied on the quantity of property being traded. Typical excise taxes are fuel taxes of gasoline and diesel, alcohol taxes on the quantity sold, tobacco taxes on the quantity sold.

Sales taxes as well as GST (goods and services tax) are known as ad valorem taxes since taxes get levied on the sum paid in a purchase and sale. Sales and GST taxes are taxes on wealth. 

Any tax on either unimproved land or improved land also is a tax on wealth whether as a one-time levy or as a recurring levy and also get consider as ad valorem taxes since the tax gets levied on a claimed fictitious resale price. 

Other sneaky ad valorem taxes include taxes on so-called declared worth of things such as car registration fees, taxes on property in chattel sent through mail, tariffs on imports or exports, taxes on cash or bank credits transferred to foreign bankers, taxes on legal document filings related to purchases and sales such as realty deed transfer filings.

Gift taxes and inheritance taxes (also said estate taxes) are among the most pernicious kinds of taxes as such are direct swipes of property by politicians.

When someone gives a gift to another, the gift giver relinquishes property in what is given without pay. As it is a gift, a trade fails to arise as all trades consist of property for property, specifically, wealth for wealth.

Capital Taxes

Capital is the name given to property put to produce work or stock. Any tax levied on property used to produce work or stock is a capital tax.

A tax on capital would be a fee paid to license a dump truck that hauls gravel to pave roads since the dump truck is the capital. If the tax levied levied on the weight of the truck, it is an excise tax. If the tax gets levied on the estimated sales price of the vehicle, it is an ad valorem tax.

A tax on capital would be a fee paid to pollute the air during the blasting of pig iron with pure oxygen while producing steel since the blast furnace is the capital. A tax paid on the tons of pollutants would be an excise tax. A tax paid on the pig iron before its conversion into steel would be an ad valorem tax.

A tax on capital would be a fee paid for a building permit since the labor put to building is capital. 

Permission Taxes

Permission taxes are taxes against the property in oneself. These are the strangest kinds of taxes. 

One kind of permission tax is a marriage license, which is a levy for a legal filing. Another kind of permission tax is a driver's license for personal use.

Permission taxes levied as licenses to do work are capital taxes. So a permission tax for a driver's license for commercial use is a capital tax. A fee paid to have a restaurant inspected before opening is a capital tax. A fee paid for any kind of license authorizing work is a capital tax.

VAT — Value Added Taxes

A VAT (value-added tax) is a wealth tax, though wrongly, many believe such taxes are capital taxes. The key to understand the difference between a wealth tax and a capital tax is this: 

A wealth tax gets levied on what you are trying either to own to rid yourself thereof. A capital tax gets levied on what you own already.

For the seller of product, if the seller bears the burden, a VAT is a wealth tax. A VAT tax can work like a capital tax if the buyer of bears the tax and uses what is acquired in a purchase and sale as capital in production because such a tax inhibits using capital.

Often, a VAT gets levied as an ad valorem tax.

Here are the Beatles in a cartoon!

Here are the Beatles performing their song Taxman.

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ELITES SEEK TO PUNISH WORKERS WITH A CONSUMPTION TAX, OR A TAX ON WORKERS' WEALTH

Tim Worstall is a Fellow at the Adam Smith Institute, which exists as a think tank to promote libertarian and free market ideas. Worstall also writes for Forbes.

Today, Forbes published a work of Worstall's in which Worstall rather stupidly claims a consumption tax is not a tax on wealth. Worstall wrote, "This is rather the point of it in fact: it (consumption tax) entirely exempts wealth from taxation." 

Worstall does not know the first thing about wealth. Wealth is the name given to property put to purchase and sale for cash and credit. 

A consumption tax is a tax on spending on goods, whether chattel or services. Said another way, a consumption tax is a tax on wealth. That is all it ever can be.


The word consumption enters into economics from the Physiocrats. Most economic historians consider the Physiocrats as the first modern economists. The Physiocrats were Frenchmen (Quesney, Turgot, Le Trosne, others) who sought to justify taxation on merchants and financiers while justifying no taxation on farmers. 

In their explanation of a trade, which they called exchange, the word the Physiocrats wrote was consommation, which Englishmen translated as consumption. By consumption, the Physiocrats meant the purchase of something after first gaining the means by selling something else.

Le Trosne said, 

"There is this difference between an Exchange and a Sale, that, in an Exchange, everything is consummated, or completed (consommé) for each party. They possess the thing which they desired to procure, and they have only to enjoy it.

"In the Sale on the contrary, it is only the purchaser who has attained his object, because it is only he who is in position to enjoy. But everything is not ended for the seller.

"Exchange arrives directly at its object, which is consommation (consumption, completion). It has only two terms, and is ended in one contract. But a contract in which money intervenes is not consommé (completed, consumption), but it is necessary for the seller should become a buyer, either himself or by the interposition of the person to whom he transfers the money.

"There are, therefore, in order to arrive at consommation (completion, consumption) which is the ultimate object, at least four terms and three contractants, of whom one intervenes twice."

To the Physiocrats, the trading away of wealth in the form of cash or credit for wealth as products after the cost of production, which they called the produit net, is what they meant by consumption. Thus, the Physiocrats knew at least two kinds of wealth — products of the earth and money. 

Wealth is anything that can be bought or sold. Socrates said so in his dialogue known as the Eryxias. The Romans said so. English jurists of courts since the 1700s have said so. So too have American jurists.

Worstall conflates both capital with wealth as well as production and trade. 

Capital is property put to making stuff.  The name for property put to purchase and sale for cash and credit is wealth. 

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created, can trade arise between two persons.

Production is the use of capital to create property in potential wealth, which all know as stock or inventory when in chattel form, or to create property in actual wealth, which all know as work, in services form. 

Trade is the purchase and sale of property as wealth.

Labor is the poor man's capital. Work sold for wages is wealth. Wages acquired in a purchase and sale of work for wages is wealth. 

So too, is the same for the firm. Machinery and labor are the capital of the firm. Product sold for income is wealth. Income acquired in a purchase and sale of product for income is wealth.

Inventory (stock) is property that has potential wealth and derives from capital. Inventory never sold, though still property, is loss. Inventory does not become wealth until traded. 

Production uses capital. Trade requires wealth.

Until trade happens, nothing is wealth. Though someone has property in a beat-up, used bicycle that goes unsold while on offer at a lawn sale, because the bicycle remains unsold, the used bicycle never becomes wealth. 

However, when bought new in a purchase and sale, the bicycle became wealth of the seller and the cash or credit used to buy the bicycle became wealth of the buyer.

If someone has property in say a house, a banker might consider such property an asset — property that has potential to gain a street price in a purchase and sale. And as such, a banker might consider the asset as collateral, which is property pledged against debt owed on credit borrowed. 

Worstall then goes on to further embarrassment when he writes, "What a progressive consumption tax does do is tax the returns to capital that are then consumed." Brushing aside his horrible grammatical expression, "does do," Worstall reveals that he does not understand commerce and business.

When a capitalist invests, a capitalist uses his wealth to buy a right of action to a share of profit, if any, earned by a firm run by an entrepreneur.  The return to capital is profit. And all profit is income.

Credit capitalists use cash and credit as capital to produce income earned from the shares of profits purchased from entrepreneurs. The credit capitalist lends credit at interest because that is the product the credit capitalist sells.  

In trade, wealth trades for wealth. So credit is the wealth the capitalist sells in a purchase and sale to buy a right of action. The right of action is wealth the entrepreneur sells in a purchase and sale to buy credit.

In his tirade against capitalism, silly-minded Thomas Piketty has said, "...the past devours the future," stealing his famous quip from another Frenchman, philosopher Henri Bergson. Yet, as I show in Thomas Piketty, Revivalist Preacher of Born-Again Socialism. The Second Great Awakening of Socialism has Come to America, wealth in the present that becomes capital creates the future.  In short, the present creates the future! And that is what capitalism and credit is all about. 

Income is the name given to property in cash or credit acquired in a purchase and sale for other wealth. An income tax is a tax on profit and thus the return to capital, but it isn't a tax on capital. It's a tax on wealth. All income taxes are taxes on wealth.

All income is the same, whether gained by the purchase and sale of work for cash and credit or gained by the purchase and sale of rights of action to future profit for cash and credit.

As I say in Interest, Capitalists and Futuristic Time Cops, for a theory to be useful and closer to truth, it must apply equally to many things observed. In agreement, de Fontenay said, "Wherever there is a revenue you perceive capital. The theory of revenue must be the same for all classes of human production." 

Income gained from capital gains is not different at all from income gained by labor. As bad and immoral as income taxation is, as long as income taxation is going to exist, then capital gains should be taxed at the same rate as ordinary wages and salaries precisely because all income is the same.

A tax on capital would be a fee paid to license a dump truck that hauls gravel to pave roads since the dump truck is the capital. A tax on capital would be a fee paid to pollute the air during the blasting of pig iron with pure oxygen while producing steel since the blast furnace is the capital. A tax on capital would be a fee paid for a building permit since the labor put to building is capital. 

A tax on capital would be an impact fee to develop one's property in undeveloped land. Undeveloped land goes into making improved land — land with structure on it — to become wealth when sold in a purchase and sale for cash and credit, often obtained through a mortgage.

If only Worstall had read my work, Why is the Economy So Horrible? Because Academia Economics is Fake, he could have disabused himself of many false beliefs. For a guy working for a free-markets, libertarian think tank, Worstall doesn't understand capitalism at all.

For most, obvious confusion rests in that most fail to see property means right of ownership and not what is owned.

• So anyone has property in chattel, which are things. 
• So anyone has property in work produced from the mind or the body, such as a surgeon who sells his surgery skills in operation and buys income. 
• So anyone has property in libability — right of action — against a debtor to whom he has lent credit in a purchase and sale of a share of profit.

The entirety of trade, or commerce, or real economics ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. 

A society is association of strangers who have come together because of the desire to trade — to trade property for property, and when we talk about such property, we give it a name, wealth.

To trade, someone needs to produce property — the right of ownership — in chattel, in work or in rights of action — at surplus under efficiency (sales must exceed cost) to gain profit so to buy property in what is wanted (lacking) and sell property in what is not wanted (surplus). 

Bare subsistence manual labor isn't going to produce much property in surplus, if at all. So, producers take to using property in other things, or that which we call capital, to produce property in surplus, or that which we call stock, in hopes of sale, transmutting that stock into wealth; or if they are selling completed work, then transmuting property in labor, which is capital, directly into property in work, which is wealth of the laborer.

For most, their obvious confusion further gets exacerbated because the dynamics of trade — property in various states — is too much for their minds to grasp.

Most get lost in thinking about trade in the same way that most fail to grasp relativity. Thoughts of changing frames of reference are too hard for most to handle.

Capital is one thing and one thing only. The name for property put to making stuff is called capital. Capital is property of production. It doesn’t get much simpler.

So credit lent becomes capital of the entrepreneur used to buy fixed capital (buildings, equipment) or floating capital (electricity, diesel). So wealth used to capitalize a bank becomes the capital of the banker.

All of the names mankind uses for property — capital, wealth, asset, collateral, stock — are names of property in various states — production, trade, estimation, deals of credit, potential sales.

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42 YEARS BEFORE ADAM SMITH THERE WAS A DUTCHMAN NAMED JACOB VANDERLINT. IF ONLY BEN BERNANKE KNEW ABOUT VANDERLINT.

Yes, it's true. Forty-two years before Adam Smith and his famed, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), a work highly derivative of the Physiocrats and Dudley North (read: Plagiarism), there was a guy named Jacob Vanderlint. Vanderlint had a work published in 1734 titled Money Answers All Things.   

If only Ben Shalom Bernanke, the Ukrainian-American, and former Chairman of the Federal Reserve had read the work of Vanderlint.

Vanderlint's work is concept-dense. To get a good understanding of the work, you need to know quite a bit about English, especially how a Dutchman would have expressed early modern English in 1734.

Right away, Vanderlint lays down what all should know. Money only ever is coined metal by weight and fineness. Anything made from paper never could be money.

Take notice how Vanderlint nails it when he expresses the idea that money is the measure of contract between any two men. In other words, money is the tally of property for property.

Vanderlint stresses again, that money means gold and silver with this follow up passage:

Notice here but a few paragraphs in, Vanderlint lays down the true quantity theory of money: 

Take note Vanderlint lays down the right quantity theory of money and not the bogus one preached by far too many of total money to total goods. The right one is total money to total population. After all, it's one man who trades with another man according to each of their preferences and not according to the amount of goods produced.

Once a man buys all his limited imagination can muster, any sum of buying power in excess of his fulfilled desires only goes to inflate prices through excess bidding.

Here, Vanderlint says the more money per capita, the higher prices shall be. The lesser the money per capita, the lower prices shall be:

And here, Vanderlint shows the true genius inside him as he reveals that bank credit works the same as money (gold or silver coined) and as long as a strict credit to money ratio gets maintained, credit will lift prices and circulate goods as if credit were money itself:

Vanderlint warns that if too much credit raises prices, it shall raise the cost of production and  thus exporters shall need higher prices to cover their costs. Vanderlint further warns that no amount of raising taxes on imports against superior competitors shall change the situation unless the excess credit gets taken away.

Next, Vanderlint goes on to say that when wage earners have money surplus over their necessaries, trade flourishes. In other words, Vanderlint has said that when buying power rises, or said another way, when true wages rises, trade expands:

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In the balance of the work, Vanderlint argues to bring forth more land into cultivation to drop prices for food and drink and thus raise buying power of wage earners. The work is quite impressive even for today as Vanderlint has provided data and cited footnotes.

And truly this is the whole of it. Any policy by central bankers should be such to bring higher return to capital by bringing higher return to workers. For it is workers who buy stuff.

No amount of plying individuals with cash and bank credits is going to do anything but raise prices and enrich already entrenched players. Yet, by doing so, every one is made worse off. 

Ben Bernanke might be a genius when it comes to academia economics, but the man is functionally retarded when it comes to trade, banking and real life.

The worst bit about Bernanke is that you are paying for his personal, social experiment as he applied his fanciful academia egg head theories. 

Americans are now in the sixth year of the Greatest Depression as evidenced by the sixth straight year of true decline in GDP. Bernanke touted himself as an expert in the Great Depression caused by Franklin Delano Roosevelt. 

Had Bernanke only read Vanderlint, Americans might be living in Good Times right now rather than Hard Times.

Vanderlint's genius reminds me of another Dutchman of sorts.

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