THE 2010-2015 GREEK LAWGIVERS' CRISIS, THE EURO AND CURRENCY AREAS. SHOULD THE EURO ZONE BREAK APART?

So today, editors at Forbes published yet another train-wreck of flawed thinking by Tim Worstall. In The Cause of the Eurozone Crisis Was the Euro: The Solution Is Abolition of the Euro, Worstall tries hard to call for an end to the Euro by blaming its existence for the cause of a what he calls the Eurozone Crisis, which likely he means the the Euro Banking Crisis of 2008 the Greek Lawgivers' Debt Crisis of 2010-2015.




Seriously, I don't understand why Worstall doesn't find another line of work besides trying to write about economies and economics (see more on Tim Worstall right here on Bizarro Theater),

"Even a cursory glance at the economics of this field, optimal currency areas (founded by Robert Mundell) tells us that over such disparate economies a single currency just isn’t going to work." ~ Tim Worstall

Worstall seems not to understand Mundell's Optimum Currency Area Theory at all. Mundell included his theory in a textbook titled International Economics, (1968, pp. 177-186).

Mundell's Optimum Currency Area Theory is one where an authority can stabilize employment and prices over a well-defined region. According to Mundell himself:

• "If the case for flexible exchange rates is a strong one, it is, in logic, a case for flexible exchange rates based on regional currencies, not on national currencies. The optimum currency area is the region."
• "If the world can be divided into regions within each of which there is factor mobility and between which there is factor immobility, then each of these regions should have a separate currency which fluctuates relative to all other currencies."
• "The argument works best if each nation (and currency) has internal factor mobility and external factor immobility."
• "But if regions cut across national boundaries or if countries are multiregional, then the argument for flexible exchange rates is only valid if currencies are reorganized on a regional basis."

In the work, Mundell cites two who he believes has captured the essence for defining the optimum currency area — Meade and Scitovsky.

• "In both cases [Meade's; Scitovsky's ] it is implied that an essential ingredient of a common currency, or a single currency area, is a high degree of factor mobility;"
• "...neither writer disputes that the optimum currency area is the region-defined in terms of internal factor mobility and external factor immobility-but there is an implicit difference in views on the precise degree of factor mobility required to delineate a region."

According to László Andor, European Commissioner for Employment, Social Affairs and Inclusion, in his speech titled Labour Mobility in the EU: Challenges and Perspectives for a Genuine European Labour Market, Europeans have the necessary ingredient of labor mobility.

Free movement of workers began in 1968. Today, it encompasses the labor markets of 28 Member States of the EU and every Eurozone country.

EU nationals have the right to look for work and take up employment in another Member State and to receive assistance from the employment services in the host country when looking for a job.

Countries experiencing the highest increase in labor outflows to other EU countries in 2011-12 were Greece, Spain, Ireland, Hungary and Latvia. Labor outflows went mostly to Germany, Austria and the UK.

So according to Mundell and his theory, the European Central Bank (ECB) ought to make more credit available in Germany, thus pushing up prices in Germany to remove the demand of Greeks from buying German products.  With Greek demand for German goods cut by being priced out, Greeks would then produce the alike, substitute goods on lower prices (lower wages), thus taking up unemployment slack in Greece.

But the problem has been the lawgivers in countries like Greece. As wages are prices, they have kept wages up through massive fake-work, make-work government programs, pensions and welfare. Greeks had been living through a credit bubble, a public sector credit bubble and not a private sector. When that bubble burst — Greek lawgivers couldn't borrow without bailouts — Greeks suffered at the hands of lawgivers rather than commercial bankers.

For those who doubt that Greek lawgivers haven't been the source of the problems for the Greeks, have a look at GREXIT IS NO EXIT. Nigerians export more than three times as much as the Greeks, but only import 1.34 times as much as the Greeks.

So how do the Greeks do it? How do the Greeks pay for those imports? Their lawgivers have borrowed year after year to pay for government agency workers, pensioners and welfare collectees who, in turn, take their Euro borrowings and buy imports from those of other Eurozone countries.

In the countries hit hardest by the Euro Banking Crisis, their problems have been caused by lawgivers borrowing to keep afloat phony economies and thus hampering price discovery. As well, by Mundell's theory, those countries within the Eurozone experiencing trade surpluses need to have their regional central bankers rediscount more and thus pump more credit into those countries, which presumably would jack up prices relative to the Eurozone trade deficit countries. By Mundell's theory, it doesn't matter if Germany and Greece are separate countries as long as the countries operate under the same exchange rate and have factor mobility.

Mundell also said, "Similarly, if factors are mobile across national boundaries, then a flexible exchange system becomes unnecessary, and may even be positively harmful, as I have suggested elsewhere." 

The Euro is a "gold" standard - one rate for an internal common market with factor mobility that requires lawgivers to adjust policy to that standard. The price of that Euro "gold" standard relative to the outside world (other banking systems' cash) fluctuates.

Mundell wrote at a time when countries had fixed exchange rates with bank cash convertible to gold while many called for floating exchange rates with irredeemable cash. Mundell proposed his theory as an attempt to explain international disequilibrium caused by balance-of-payments crises under fixed exchange rates and price fixing by legislators (rigid wage and price levels).

Mundell believed that countries with trade surpluses whose leaders capped bank credit caused unemployment for those living in trade deficit countries because leaders of trade deficit countries had to shrink their economies to restore the imbalance.

Whether one banking system shared among a few countries or countries each with their own banking systems, according to Mundell, the fix for regional disparities is for trade surplus countries to inflate (add bank credits) —

• "In a currency area comprising different countries with national currencies, the pace of employment in deficit countries is set by the willingness of surplus countries to inflate."
• "Unemployment could be avoided in the world economy if central banks agreed that the burden of international adjustment should fall on surplus countries, which would then inflate until unemployment in deficit countries is eliminated"
• "But in a currency area comprising many regions and a single currency, the pace of inflation is set by the willingness of central authorities to allow unemployment in deficit regions."

Under floating rates with irredeemable bank cash, those living in the trade deficit countries would need to pay more for foreign cash of trade surplus countries until BOP equalized. Thus, all inflation would be unneeded as is the fix for disparities between regions under the same banking system.

So, absent the will to inflate by region in the Euro zone, the Euro zone ought to break up and let floating exchange rates do their work — force prices up of foreign goods as expressed in one's own bank cash.

At the end Mundell concludes, "...the optimum currency area is the world, regardless of the number of regions of which it is composed." By that Mundell means there should be one money and balance of payments would adjust regional difference. In short, Mundell means something like gold as money would be the ideal for the world over.

Legally, Europeans have labor mobility. Culturally, whether they move or not is another matter (see: On the Move, The Economist).



Hordes of illegal aliens, many claiming to be refugees, don't seem to have a labor mobility hang up. For more on the horde invading Europe, check out 2015 EUROPEAN REFUGEE CRISIS. FLEEING THE FAILURES OF TOTALITARIANISM, BUT FAILING TO EMBRACE BETTER WAYS.

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U.S. PROPAGANDA ROLLS ONWARD. Q2 2015 DISPOSABLE PERSONAL INCOME SHRANK AT THE ANNUAL RATE OF -2%

Yesterday's, pro-government workers at the Bureau of Economic Analysis promoted their fiction that "real" GDP is now growing at the annual rate of 3.7% when in truth, the economy shrank -1.5% (see: Q2 2015 GDP FIRST REVISION. THE FICTION OF 3.7% "REAL" ANNUAL GDP GROWTH), the story for individuals gets even worse.

Personal income shrank at the annual rate of -1.9% as measured in the second quarter


Of those who work for a living, the hardest hit have been shopkeepers, restaurateurs and other proprietors whose income ex-inventory and capital depreciation shrank at the rate of -2.3%. The next hardest hit have been wage-earning workers whose compensation shrank at the annual rate of -2.2%.

Of everything, unemployment insurance payouts have shrunk the fastest, falling at the annual rate of -8.1%.

Likely, for those who are lucky enough to stumble upon my work, there are some, maybe even many, who doubt my True Dollar™ method. Owing to cognitive dissonance, they feel the need to defend the lies they accept from politicians, agents of Congress, academics and news media talking heads.

That doesn't bother me whatsoever. My graphs do the ultimate talking. My graphs consistently line up with reality, the reality of everyone's experiences.  Reality never lines up with the claims made by agents of Congress like those of the BEA and agents of the President along with the data and charts they present.

If you look at the Personal Rental Income, and if you thought about what happened after the peak of the Greenspan-Bernanke Great Inflation, the biggest credit bubble in the history of mankind, you would expect rental income to go up as millions of Americans defaulted on their mortgages and reverted to living in rentals. My chart shows that exactly.



Sometimes, confusion hits many because they see that welfare doled by Congress has fallen. They would expect such welfare to have risen during tougher times. In current dollars, that welfare spending rose, but in True Dollars™, that spending fell. Why welfare collectees didn't notice because True Dollars™ prices for the things they buy, like food, have fallen at a faster rate.



If you look at the Unemployment Insurance Income chart, and if you thought about what happened after the peak of the Greenspan-Bernanke Great Inflation, the biggest credit bubble in the history of mankind, you would expect unemployment income to go up as millions of Americans found themselves out of work. My chart shows that exactly.  Now that claims have been exhausted, payouts for unemployment insurance have fallen precisely because there are few left who qualify to make claim for benefits. My chart shows that exactly as well.



These Medicare and Medicaid income charts match reality as well.

You should tell all your family, friends and co-workers about Bizarro Theater. You should stop listening to the silliness propagated by academicians, politicians and those who work in financial news media.

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PARSING YELLEN'S YELLEN-SPEAK BLATHER. JANET YELLEN DECODED.

Today, Fed Res chairman, Janet Yellen gave a speech at the The New Normal Monetary Policy conference sponsored by the Federal Reserve Bank of San Francisco, San Francisco, California. Like her predecessors, Yellen speaks in an obtuse, truly meaningless language that needs to be decoded for anyone to gain meaning.

Luckily for you, I have done that. Here are the key parts decoded for you.



Janet Yellen said: With continued improvement in economic conditions, an increase in the target range for that rate [interbank lending rate] may well be warranted later this year.

What Yellen means: As Fed Res bankers, we decide how to set the Fed funds rate based on measures of profitability for the key banks that comprise the majority of commercial banking sales of the Federal Reserve System.

Janet Yellen said: We'll increase funds rate and its subsequent path will be determined by the Committee in light of incoming data on labor market conditions, inflation, and other aspects of the current expansion.

What Yellen means: We'll increase the FFR based on banking sales expansion and for no other reason.

Janet Yellen said: I will also discuss why most of my colleagues and I believe the return of the federal funds rate to a more normal level is likely to be gradual.

What Yellen means: The current FFR remains at an abnormal level. It is going to take a long time to restore the FFR to a normal level.

Janet Yellen said:  The Committee is now giving serious consideration to beginning to reduce later this year some of the extraordinary monetary policy accommodation currently in place.

What Yellen means: We're going to continue quantative easing (buying securities, mostly those from Congress), but perhaps not buy as much as we do now.

Janet Yellen said: Of course, we still have some way to go to reach our maximum employment goal.

What Yellen means: As bankers, we're not concerned if millions never get jobs. We seek to have enough employment to expand sales of banking products of our member bankers of the Federal Reserve System.

Janet Yellen said: The unemployment rate has not yet declined to the 5.0 to 5.2 percent range that most FOMC participants now consider to be normal in the longer run.

What Yellen means: We're trying to psy-op you into believing that a 5.2% unemployment rate, which means the ratio of those who looked for work in the last four weeks to the sum of those aforementioned with those who have jobs.

Janet Yellen said: But I think we can all agree that the recovery in the labor market has been substantial.

What Yellen means: It looks like there are enough people working for our bankers to offer more credit.

Janet Yellen said: I am cautiously optimistic that, in the context of moderate growth in aggregate output and spending, labor market conditions are likely to improve further in coming months. 

What Yellen means: I hope things better but we are not making our plans based on that.

Janet Yellen said: I think consumer spending is likely to expand at a good clip this year given such robust fundamentals as strong employment gains, boosts to real incomes from lower energy prices, continued increases in household wealth, and a relatively high level of consumer confidence.

What Yellen means: If gasoline prices remain low, this will free up discretionary spending from those who buy gasoline now.

Janet Yellen said: But overall, I anticipate that real gross domestic product is likely to expand somewhat faster than its potential in coming quarters, thereby promoting further gains in employment and declines in the unemployment rate.

What Yellen means: I hope that real GDP grows even though there is little potential for it.

Janet Yellen said: In assessing the actual strength of the labor market and the broader economy, we must bear in mind that these very welcome improvements have been achieved in the context of extraordinary monetary accommodation. 

What Yellen means: Without quantitative easing, the economy would be far worse than it already is.

Janet Yellen said: While the overall level of real activity now appears to be much closer to its potential than it was a year or two ago, the economy in an "underlying" sense remains quite weak by historical standards, for the simple reason that the increases in hiring and output that have been achieved thus far have required exceptionally low levels of short- and longer-term interest rates, reflecting a highly accommodative stance of monetary policy.

What Yellen means: The true potential of the economy is quite low. So, real sales are matching that quite low potential. The economy is in bad shape. It's weak. We know it. Don't you?

Janet Yellen said: Interest rates have been, and remain, very low, and if underlying conditions had truly returned to normal, the economy should be booming.

What Yellen means: If this economy were legit, we would have boom times give dollar strength and low oil prices. But because the economy isn't legit, we continue with quantitative easing and these horribly written speeches that I must deliver in public to convince you otherwise.

Janet Yellen said: Inflation as measured by the price index for personal consumption expenditures has been running below the FOMC's longer-run goal of 2 percent for a number of years, and on a 12-month basis is currently 1/4 percent. Some of the weakness in inflation likely reflects continuing slack in labor and product markets.

What Yellen means: Our bankers aren't selling enough credit instruments because many Americans who could work aren't working. Lacking income, they can't service debt if credit were offered to them.

Janet Yellen said: On balance, I therefore think it is appropriate for monetary policy to remain accommodative for some time, fostering an environment of tightening labor and product markets that, together with stable inflation expectations, will help move inflation up to 2 percent over the medium term.

What Yellen means: We're going to keep with quantitative easing until enough start ups cause serious competition to existing sellers of products. We hope that happens and  if it does, real hiring will happen and the economy will go back to normal. Besides, we don't have any other plan. We don't know what to do otherwise.

Janet Yellen said: The Committee's decision about when to begin reducing accommodation will depend importantly on how economic conditions actually evolve over time. Like most of my FOMC colleagues, I believe that the appropriate time has not yet arrived, but I expect that conditions may warrant an increase in the federal funds rate target sometime this year. 

What Yellen means: The economy is still a wreck. And if I say I expect maybe we could raise the FFR, it appears to you that we're in charge and everything is under control.

Janet Yellen said:  The near-zero setting for the federal funds rate has facilitated a sizable reduction in labor market slack over the past two years and appears to be consistent with further substantial gains. A modest increase in the federal funds rate would be highly unlikely to halt this progress, although such an increase might slow its pace somewhat.

What Yellen means: We're afraid if we were to raise the FFR, no hiring would arise.

Janet Yellen said: That said, we must be reasonably confident at the time of the first rate increase that inflation will move up over time to our 2 percent objective, and that such an action will not impede continued solid growth in employment and output.

What Yellen means: We're not raising the FFR until our bankers growth of credit products increases.


Janet Yellen said: A substantial body of theory, informed by considerable historical evidence, suggests that inflation will eventually begin to rise as resource utilization continues to tighten.

What Yellen means: Business execs will seek credit to outbid competitors for commodities when enough firms have entered markets. When that happens, our bankers shall be selling banking products at the rate we seek.

Janet Yellen said: With respect to wages, I anticipate that real wage gains for American workers are likely to pick up to a rate more in line with trend labor productivity growth as employment settles in at its maximum sustainable level.

What Yellen means: Employers won't pay higher wages until they buy and put to use more capital.

Janet Yellen said:  But the outlook for wages is highly uncertain even if price inflation does move back to 2 percent and labor market conditions continue to improve as projected. For example, we cannot be sure about the future pace of productivity growth; nor can we be sure about other factors, such as global competition, the nature of technological change, and trends in unionization, that may also influence the pace of real wage growth over time. These factors, which are outside of the Federal Reserve's control, likely explain why real wages have failed to keep pace with productivity growth for at least the past 15 years. 

What Yellen means: We don't care if Americans see an increase in real wages.  We care only if there is enough working with discretionary income to buy banking products.

Janet Yellen said:  I have argued that a pickup in neither wage nor price inflation is indispensable for me to achieve reasonable confidence that inflation will move back to 2 percent over time.

What Yellen means: Our bankers will sell products at the rate we want, eventually.

Janet Yellen said: That said, I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken, if market-based measures of inflation compensation were to fall appreciably further, or if survey-based measures were to begin to decline noticeably.

What Yellen means: We're keeping the FFR where we want it, anytime.

Janet Yellen said:  But the prescription offered by the Taylor rule changes significantly if one instead assumes, as I do, that appreciable slack still remains in the labor market, and that the economy's equilibrium real federal funds rate--that is, the real rate consistent with the economy achieving maximum employment and price stability over the medium term--is currently quite low by historical standards.

What Yellen means: We're keeping the FFR where we want it, anytime, and by that, we mean we're continuing with quantitative easing for awhile yet.

Janet Yellen said:  Under assumptions that I consider more realistic under present circumstances, the same rules call for the federal funds rate to be close to zero.

What Yellen means: As of now, there will be no change to the FFR. It's staying near zero.

Janet Yellen said:  The FOMC will, of course, carefully deliberate about when to begin the process of removing policy accommodation. But the significance of this decision should not be overemphasized, because what matters for financial conditions and the broader economy is the entire expected path of short-term interest rates and not the precise timing of the first rate increase. 

What Yellen means: We're going to talk about raising rates, endlessly talk about it. But when we do, it's not the first rate increase that you should care about, but the last one, because the last one means the economy shall be in recession again after a recovery. However, we're far from having any recovery.

Janet Yellen said:  the Committee's decisions will be data dependent, reflecting evolving judgments concerning the implications of incoming information for the economic outlook. We cannot be certain about the underlying strength of the expansion, the maximum level of employment consistent with price stability, or the longer-run level of interest rates consistent with maximum employment. Policy must adjust as our understanding of these factors changes.

What Yellen means: We will raise the FFR when we see the necessary, legit improvement in the economy.

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AIN'T THAT AMERICA FOR YOU AND ME. TRUE PRICES OF RESIDENTIAL REALTY OFF ALMOST 50% FROM PEAK CREDIT

So today at always must-read Mish, Mike Shedlock says that housing has peaked this cycle in New Home Prices: Are they Really Up this Year? Homebuilder Freebies: Reduced Closing Costs, Free Pools; Housing Has Peaked This Cycle. Is Mike Shedlock right? Not only is Mike right, but if only he knew by how much, he would be shocked.



According to the U.S. Department of Commerce, Census Bureau, median sales price for new houses sold in the USA hit a peak at US$285,600 at the end of April, 2014. The median sales price for new houses sold is up US$23,000 from the previous peak hit at the end of February, 2007.

According to those at Zillow, the median sale price for all houses, new and used, came in at US$207,000 at January 2008 and for August 2014, US$215,000. The median sale price for all houses, new and used, is up US$8,000.

By percent priced in U.S. dollars, median prices for new houses sold are up 8.8% over the last seven and a quarter years, rising at an annual rate of 1.2%. For all houses, new and used, median prices have risen 3.9% over the last seven years, rising at one-half of one percent (0.5%) a year.

Should anyone be wowed over this? All prices get denominated in cash. In the seven years since peak credit of Q4 2007, cash is up a whopping 62.6%, rising at an annual rate of 7.2%. Federal Reserve buying units are up 103.4% since peak credit Q4 2007, rising at an annual rate of 10.7%.

True prices tell a different story. The true median price for new and used houses sold has fallen a whopping -48.6% falling at an annual rate of -9.1% a year over the last seven years.

In true prices, peak median price for new houses sold came at the end of Q4 2006. The true median price for new houses sold has fallen an eye-blackening -47.1% falling at an annual rate of -7.9% a year over the last seven and three-fourths years.

Nothing has changed in the greatest depression of all-time.

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THE FANTASY PERFORMANCE OF BETTER CARS AND TRUCKS SALES HYPED THIS WEEK ON YOUR LOCAL BIZARRO THEATER STAGE

So the other day a staged performance went down across America on the stages of Bizarro Theaters everywhere. This time, the show was auto sales.




First, know that data reported on the stages of Bizarro Theaters were annualized. Annualized data made sense in the days of money (gold coin)  and an American population of farmers who had to wait to sell crops after harvest before securing income to buy things. In those days, so called country bankers sent deposits to New York City to earn interest before calling back those deposits as harvest time neared.

Today, farmers can get credit anytime to buy cars, trucks and vacations. As well, the percent of population involved in farming amounts to almost a rounding error of total population.

Nonetheless, the hype over auto sales data comes from a reported 16.8 million sales of cars and light trucks. This count is being touted as the fasted pace of sales since February 2007.

But what is the reality?  As I preach always, numbers are meaningless without context. Yet, on the stages of Bizarro Theaters, that is all you see, staged nihilism propaganda.

To understand what is going on, you need to see car sales in context of the civilian population, specifically the civilian non-institutional population aged 16+ and more importantly, the prime age work adults.

Let's have a look. To read these charts, the lows are the better numbers. The Drive ratios compare how many Americans there are for each new car and light truck sold.




Both the Drive 16 ratio and the Drive 25 to 54 ratios tell us something else. 




To remove the effects of the Greenspan-Bernanke Inflation Bubble, the largest credit bubble in American history, let's look at historical high sales average between the Nixon and Clinton presidencies. 

To match the historical high sales average between the Nixon and Clinton presidencies, monthly cars sales would need to grow a stunning 28.6% based on current population count of driving age Americans, 16 and older. Monthly car sales would need to grow a staggering 33.2% for prime age working Americans.

Now let's look at the Drive ratio for workers.


Monthly car sales would need to grow a staggering 36.9% for actual working Americans to match the historical high sales average between the Nixon and Clinton presidencies.

As a percent of GDP, motor vehicle sales look horrible. The Obama highs barely touch the Carter and Reagan lows Americans suffered between 1980 and 1982.

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THE FACTS OF EVERYTHING MANKIND. REALITY. TRUTH. LIFE.

SOCIETY

• Before society there are only individuals. 
• Society is merely individuals as strangers who form association through property for mutual benefit of trade, self-interest and self-expression. 
• A society of property is the only kind of society that can arise among strangers, each who pursue self-interested goals.
• Property means right of ownership in things of matter, in things expressed from the mind and body, and in action to be done in future. Property does not mean the things owned. 
• Property is a bundle of rights  — right for possession (Jus Possidendi), right for using (Jus Utendi), right for destroying, alienating (Jus Abutendi), right for recovery when found in the wrongful possession of another (Jus Vindicandi).

TRADE

• Trade is about trading property for profit and nothing else.
• Only when property gets created, can trade arise between two persons. 
• The name for property put to making stuff is called capital.
• The name of property created by capital and yet to be sold in a purchase and sale is stock (inventory).
• The name for property put to purchase and sale for cash and credit is wealth.
• The name for property that can be sold to satisfy debts is asset.
• The name for property pledged against a debt is collateral.
• Buying power is the means by which anyone can acquire the wealth wanted after selling away wealth produced in surplus and not wanted, whether that wealth is embodied in a finished product or work through time.
• 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.
• Profit is the source of earned buying power.
• The Law of Prices governs prices.
• The Axiom of Profit governs producers. 
• The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price.
• The Axiom of Profit holds the sum of sales on winning bids must at least equal the cost of production otherwise the producer goes to ruin.
• Trading wealth as property in cash and credit in a purchase and sale for wealth as property in things determines the extent of markets. 
• A trade is a purchase and sale for cash or credit, which can be settled by cash.
• No one has money as money is coined metal by weight and fineness and can exist without banking or government.
• Money does not exist anymore and hasn't for decades.
• In the days of money, money extinguished both cash and credit.
• Everyone trades with bank credit in purchases and sales.
• Today, because of the legal tender designation for cash, cash lets anyone settle contracts straightaway.
• Bank credits and cash constitute buying power.
• Bank credit consists of deposits and cash, which are evidences of deposits circulating in perpetuity.
• Cash is printed, circulating bank credits. 
• Cash consists of banknotes issued by a centralized authority.
• Cash stands as a money substitute.
• Cash exists as a money substitute precisely because politicians have decreed legal tender status for cash.
• Cash cannot exist without banking.
• Legal tender cash cannot exist without government.
• Gresham's Law reveals why cash has crowded out money.
• Without doubt, doing the work of money does not make something money. 
• Credit does the work of money and no one would ever say credit is money.
• Anyone who possesses cash has bearer negotiability, also said as currency.
• Bearer negotiability means the right of ownership in a thing gets passed along with honest possession in every sale or every exchange, that is, the property and the possession are inseparable.
• Inflation is a rise of bank credit beyond trade needs.
• Inflation happens first, and then deflation thereafter, always. 
• The damaging effects of inflation become revealed when the growth of credit outstrips the growth of output owing to credit being priced too cheap.
• Inflation leads to the profit squeeze when the sum of sales on extant prices set by winning bidders is below the outlay for production. When many awaken to their lacking the means to pay bills, this leads to crisis and subsequent collapse of trade. This collapse all know as recession or depression.
• Banking crises always happen at peak inflation right in the midst of prosperity.
• Labor is the working man's capital. 
• Work done is the working man's wealth, which she or he trades for wages, most often in the form of bank credits and less so for cash. 
• Wages paid is wealth traded away to hire work.
• Labor makes property. Capital makes property efficiently.
• Labor absent capital is living at bare subsistence. 
• It is to capital that profit can arise owing to efficiency of surplus output. 
• Wages and capital are interlinked.
• True wages move in lockstep with true capital spending per capita of prime age working adults (25-54).
• Only in proportion as labor becomes pricier that it becomes profitable to use cheaper methods (capital) to amplify labor.
• Increasing returns to capital arise when true wages go up. 
• There are no means by which living standards can better that do not involve the increase in wealth per capita of prime age workers.
• The reward for overcoming loss with property at-risk is profit. 
• It is a way for a people to ensure resources are being used properly and products being made that those who are efficient want.
• Price is an objective ratio that expresses a rate of trade of a trade quantity for cash or credit denominated in cash. 
• Value is an objective ratio of exchange in swap, which most know as barter. 
• Price and value arise from the same concept, except one has cash as one economic quantity for another. 
• Both are rates of trade, of exchange.
• By objective, we mean that someone not a party to a trade can observe the swap. 
• There isn't anything subjective about it. 
• Prices get set by double auctions, an English auction and Dutch auction happening at the same time.
• In an English auction, the highest bidder wins.
• In a Dutch auction, the lowest bidder wins.
• In most job markets, inter-employer competition has employers engage in English auctions (highest bidder wins) for workers, while inter-worker competition has workers engage in Dutch auctions (lowest bidder wins) for jobs.
• Where the winning bidders of employers and winning bidders of work seekers intersect, that is the clearing price, which, when it involves work, we call it a wage.
• In credit-as-capital markets, inter-lender competition has lenders engage in Dutch auctions (lowest bidder wins) for borrowers, while inter-borrower competition has borrowers engage in English auctions (highest bidder wins) for jobs.
• Where the winning bidders of lending and winning bidders of borrowing intersect, that is the clearing price, which, when it involves credit, we call it a interest.
• Both rent and interest to the capitalist are shares of profit paid in parts as a hedge against loss. 
• Trade, or commerce, or real economics has correspondence with both practical and theoretical civil jurisprudence as well as accounting.

PROGRESS

• Capitalism means living by using property that yield goods during production to produce a surplus of another product and hoping to sell that surplus for a price such that the sum of sales exceeds the cost to gain those sales.
• Said another way, Capitalism means living by using capital in pursuit of ongoing exchange of buying power.
• Poverty is the default starting status for all humans.
• Bare subsistence means consuming as fast as producing.
• Tribalists the earth over, whether in history or in contemporary times live by bare subsistence precisely because they believe in communal ownership and reject property.
• All progress, which is the moving away from bare subsistence, which is another way of saying poverty, has come from shifting away from the tribe and toward the individual and specifically through property, which is the right of ownership and never the thing owned.
• The entire progress of people from the savage state of tribalism to clans and from clans to feudalism and from feudalism to burghers / bourgeois and thus individualism has been the advent of property (right of ownership) moving from all to the individual. And once property of the individual has been established, the furtherance of progress has arisen solely from the diminution and mitigation of uncertainty in the face of risk.
• Competitive commercialism has raised all of mankind through all time above bare subsistence.
• True progress comes from enlightened self-interest.

PROSPERITY

• People escape poverty and enter into authentic prosperity through efficiency of wanted production. 
• It is through efficiency that leads to surplus and surplus that creates credit that leads to exchange, lifting others to specialize and become efficient, which sows the seed for forever ongoing prosperity.

GOVERNMENT

• Government evolves from society. 
• Government springs forth to enlarge the circle of strangers in society of property.
• Never does society evolve from government. 
• Before government there is society. 
• As a creation of strangers of a society of property, government is supposed to exist only for protection and certification of property so that men can engage in trade, which is the purchase and sale of property, rather than war among each other. 
• Government is supposed to exist to protect any individual at random and his property from a mob, whether foreign or domestic, who seek to dispossess him from his property unjustly either through the of force stealing or through rhetoric.
• Government is supposed to exist to certify claims about property to ensure truth about property. 
• The necessity of government arises because of rogues who feign willing participation in society, a society of property.
• Defensive governance, the kind whereby men come into harmony to protect property and thus echo the goodness of nature, is the only justification for governance of any kind.
• Legit government is about the administration of justice. Justice arises in maintaining right and redressing wrongs.
• Laws are unneeded for justice. 
• Law is secondary and unessential.
• Men of government through law impose duties and rights upon strangers in society of property and well as themselves acting as the government.
• Some of those duties include paying income taxes. 
• Some of those rights include fulfilling greedy desires. 
• Through liability, anyone is free to pursue right of action in civil fraud. 
• Men of government reserve to themselves right of prosecution in criminal fraud.
• Liberties and rights are not the same. 
• Right and power are not the same. 
• These words are not synonyms under law. 
• Liberties are acts of doing what one pleases, acts one can do without being prevented by law. 
• The sphere of legal liberty is that sphere of activity within which law is content to leave oneself alone.
• Liberty is when the law allows to one's will a sphere of unrestrained activity. 
• Liberty is the absence of duty imposed upon oneself. 
• Liberty is what you may do innocently.
• Right is when law limits the liberty of others on one's behalf. 
• Right is what others must do on your behalf, that is, their duty.
• Power is what you can do effectively. 
• Power is when law assists one actively in making one's will effective.
• You use your liberties without protest from the law. 
• You enjoy your rights through law by controlling the acts of others for your behalf. 
• You use your powers with active assistance from the law in making itself the instrument of your will.  
• One with disability lacks power to determine the legal relations of others (authority) or the ability to determine one's own (capacity). 
• When politicians don't establish law giving themselves authority (power) to do X and then do X against anyone, they have violated your civil liberty.
• Customary rights deals with customary law, which is any rule of action to which men voluntarily conform their action. It involves de facto observance. 
• Customary rights of customary law do not have the nature of civil law since the essence of civil law is recognition of a state in the administration of justice.
• The absence of law in the presence of government is liberty, not anarchy. 
• Anarchy means no government at all. It means without (a) an overlord (archy). 

POLITICS

• Politics is the art of using rhetoric to steal property.
• All political doctrines are doctrines of control. 
• The spectrum of political doctrine looks like this, from Left to Right:Communism ↔ Socialism ↔ Syndicalism ↔ Oligopolism ↔ Fascism
• There is no room for individualism on that spectrum.
• The debate of political doctrines is debate about which property should be impaired or stolen, who must suffer the consequences and who gets to do the the stealing and impairing.

POLITICIANS

• Politicians and bureaucrats get their property by confiscating it from others.
• Politicians can only take by implied force from the efficient and dole to the inefficient.
• Never in the history of humans have politicians lifted people from poverty. 
• When the day comes that all others rid themselves of politicians is the day that mankind shall enter into Utopia.

RETROGRESSION

• Greed is wanting property in stuff without having to trade for such fairly. 
• It is greedy for anyone to seek buying power without producing wealth in surplus that others are willing to trade to get in a purchase and sale, under condition of honest dealing.
• The picture perfect definition of greed is striving to get something for nothing from someone else, without giving up something wanted in honest exchange or in honest trade of purchase and sale. 
• Getting welfare, getting subsidy, swindling people by fraud — all accurately express the concept of greed. 
• Welfare takers, subsidy takers, fraudsters, all share one driving trait, a trait that nullifies character within them. They are all greedy to the core.
• Today, government, the creature, has superseded its creators. 
• Illegitimate government usurps power and starts shuffling people's property against their wants for the sole purpose of maintaining power over all.
• Men of government through law grant rights to fulfill greedy desires as a means to secure and enlarge their grip on power.
• Expressions of right in fulfilling greedy desires include welfare taking and subsidy taking. 
• The more who are dependent on welfare and subsidy for their livelihood, the more support they give to those holding power.
• Specific examples of the greedy include recipients of TANF, SNAP, Section 8, Medicaid, Medicare, Social Security, farm subsidies, Pell Grants, all workers of agencies engaged in doling the former as well as all workers in agencies regulating industries, which inhibit new entrants through inhibition of capital formation. Such agencies include the FDA, SEC, FAA, FCC.
• Men of government through law impose liability for those who operate outside the framework of subsidy and welfare to fulfill their greedy demands. 
• In all forms of illegitimate government you see socialistic, bureaucratic welfare, which, immorally retards man's progress as it inhibits individuals who receive such welfare from discovering who they are and what are their talents. 
• All problems arise when some usurp power through government to advance themselves by stealing or impairing the property of others, rendering government no better than rogues.
• Through the power of specific welfare Crony Politics, Crony Governance and Crony Regulatory Capture arise.
• To overcome the Axiom of Profit, politicians give subsidy to politically-connected producers or give welfare in the form of buying power to some consumers.
• Without property, the bundle of rights that include possession, use, destruction, transfer and recovery from wrongful possession, there cannot can not be liberty.
• Activist governance, the kind whereby politicians can dictate what one can do with property, reduces property to mere privilege. 
• At bedrock, activist governance is what is wrong with American life today.

IGNORING THE FOREGOING

• Without learning that wages are prices, that profits provide surplus buying power to buy anything else, that prices provide signals for potential return to increasing capitalization to gain efficiency and higher profit, that capital is the property of production and that wealth is the property of purchase and sale, no one can profit.
• Without trade, no one can know about money and credit and how central bank action affects the measure of their contracts as well as their saved buying power. 
• Without trade and theoretical civil jurisprudence, no one can know how taxation-provided welfare violates the social compact. 
• Without trade and history, no one can can know how welfare is the source of power, which lets politicians wage foreign wars of weapons and domestic wars of law against citizens.

IN THE END

• Mankind advances through individuals, property and the drive to hedge against loss and that alone. 
• Mankind falls into retrogression when reverting to neo-tribalism in whatever form, such as self-conceit, pseudo-scientific socialism or totalitarian socialism, which all know as communism.

YOU

• By accepting what others have told you as your beliefs, whether they had innocent or sinister motivation, you have lost all reign over yourself. 
• These beliefs that your imagination has inspired with power over yourself are ghosts who haunt you and control your soul, your self, your being.
• Being indoctrinated has been called the false self by many sages over time.
• When you take public opinions as your own, you let the world live within you. You stop living for yourself.
• You becomes possessed by others.
• Duty is faux virtue. 
• Conduct undertaken for show never could be virtue.
• Taking what another says is your shame if you reject doing what they claim is your duty is to enslave your free will.
• It is to stop living for yourself.
• There are many who claim they know what is your duty better than what you know for yourself to be true.
• You lack duty to fight the wrongful wars started by politicians.
• You lack duty to pay the bills of others.
• You must buck the crowd and do what others are not doing.
• Never should you imitate anyone.
• Imitation forces you to be self-conscious, fretting over whether or not you are imitating right.
• You must come to see the Bizarro Theater all around you.
• When you are dominated, when you let yourself get controlled by outside influences, you have lost the way. 
• You have become a zombie.
• An exorcism rids you of specters, shadowy tempters, ghosts of control, demons which haunt you.
• You can start over.
• You can make yourself anew.
• You can rescue yourself from errors of thought and action.
• You can trade your lesser motives for an all-encompassing motive.
• You must rise up and gain your independence.
• You gain independence by believing from your beliefs rather than trying to believe from thoughts given to you from others, their thoughts trying to masquerade as your beliefs.
• You must reject prevailing opinions, prevailing customs, conventionality. 
• You must reject the pull to adhere to the ethos. 
• You must reject conformity.
• You must become loyal to yourself.
• You must become a crypto-independent. 

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BUT I SPENT 150 HOURS HANDCRAFTING THAT OIL ON CANVAS! OR THE LABORER'S SILLY THEORY OF VALUE.

The story shown in the picture below is typical of most who, though, constrained by reality, fail to see reality. Thus, they suffer. Their faces emote their anguish much like the old woman painted by the Dutch master, Rembrandt.

Though the story is touching, it's fallacy. The fallacy is Ricardo's labor causes value theory, which foolish socialists like Marx took up. The fallacy was put to bed more than 160 years ago.

Labor has nothing to do with prices. Prices get set by winning bidders. 

Take two people. One can spend one million dollars buying equipment and mining rights to mine for gold and after all that effort only find an ounce of gold. Another could find gold while walking spending exactly nothing. 

Is the ounce of gold worth a million because that is what the miner paid, what it cost him to get? No!

Right now, both the miner and the finder could get $1242.80 (as of 2014.Jan.30) for selling that ounce and that much alone. Why? The price gets set by winning bidders against all gold on offer for sale right now.

The miner put in time, effort, dedication, smarts, training, and much more. The finder put in nothing.

Or say someone has inherited purported fine-crafted gold jewelry from a dear lost relative and melted that jewelry down to support a meth habit, the gold in that jewelry would fetch at the same rate of all gold, $1242.80 an ounce. Once again, no outlay was made for that gold coming into the methhead's possession as property.

All prices adhere to the one and only true law of trade, the Law of Price — the winning bids of purchase and sale in the face of what is on offer sets the price. Prices get set by winning bidders who possess the means — these days legal tender cash or credit — in the face of what is on offer.

If no one bids for anything made, no matter how skillfully done, it's worthless. If bids are below cost, oh well. That is an signal that most everyone in a society of property deem the work worthless and a waste of resources. The artist should find other work.

Labor is the poor man's capital. The expression of skills through time, which is called work, is a product.  Labor is the outlay to turn something into property and nothing more. Only things of property can be bought and sold in purchase and sale for cash or credit.

Trade is predicated on property and profits and not effort and skill. Anyone must gain property, which is the right of ownership and never the thing owned, before enjoying or possessing a thing. If anyone fails to buy something to gain property in it, but instead takes it, that is called stealing. 

Anyone can buy stuff because that one has produced profit (earnings) in past and has been rewarded or others expect another shall produce profit in future, which we call confidence, and thus give credit to another. 

Profit arises because of property others want to possess under the constraint of the great Axiom of Profit —  the sum of sales must at least equal the cost of production, otherwise the producer goes to ruin. And of course, the sum of sales arises from the quantity of things sold times price. And price gets set by winning bidders of purchase and sale in the face of what is on offer.

So the whole trick of producing property in pursuit of profits is to produce what others want, to be in service to others. And that is what being in society of property is all about,  the only society in which strangers can live, even when government has grown to take control of that society and has distorted all relationships of man with man in society of property.

If labor were what caused price, then why can Apple earn a premium on iPhones relative to all other touch screen phones? Why aren't Apple execs accepting bids ( charging ) for what it cost them to get the phones made? 

If labor set prices because cost were to be the cause of price, then why does anyone go out of business? Labor has nothing to with price. Prices get set by winning bidders who must first gain property in something before they can use it.

No one works at a loss (Wages - Living Expenses or Sales - Outlay) unless politicians swoop in and subsidize that one with Section 8, SNAP and the like. When politicians give  workers welfare to subsidize their living, in effect, politicians subsidize firms that can pay wages precisely because of welfare given to workers (see: GREEDY CAPITALIST COMPLAINS ABOUT UNEMPLOYMENT INSURANCE EXPENSE AND QUITS HIS BUSINESS and Wile E. Coyote, Campground Businessman Super Genius).

Any worker gets paid to produce. His or her wage arises against the lack of willingness of another slightly better and smarter, who absent what she or he is doing, could bid lower than the worker being more efficient at living or could bid higher than the worker being able to produce more in any time span.

All the same, prices get set by those willing to cough up the cash or credit to buy. Sellers must accept those bids to get sales. Would-be sellers can refuse those bids and earn nothing. They can hold back inventory in hopes of future bidders bidding up prices.

People fail to appreciate the role of marketers and those in advertising who help to present products to those who most willingly can appreciate how a product can fit within their lives.

Marketers are quite like commodities speculators in the respect of pushing prices along to keep prices high enough so that manufacturers, be that automated or hand-crafted, can live to make another day, and yet against each other, low enough so that many can enjoy the fruits of others.

It's too bad that many perceive, wrongly, that marketers are "middlemen" who are little more than tricksters and knaves. Marketers keep people in business.

The successful stick to their knitting as it were and hire marketers to get them the best price possible. The reward for doing so is a share of the increase.

To savages, a Rembrandt likely would be worthless compared to spears. The savage wouldn't know he could sell the Rembrandt to someone who would esteem it and buy thousands of spears.

Yet, where art gets esteemed by others, it is the winning bidder who sets the price for a Rembrandt as nothing in trade ever can violate the Law of Price, the same as nothing can violate the Laws of Thermodynamics or the Law of Gravity. So even a one-off like a famous artwork sells, not because of purported scarcity, but because someone else has property (right of ownership) in it.

The price of a Rembrandt arises not because it is rare (scarce), but because of rivalry of bidders, only one of whom can win with the highest bid precisely because that one has the most cash or credit, which he is willing to sell in a purchase and sale, to buy a Rembrandt. 

Egghead Ph.D. academicians, who call themselves economists, long ago realized the error of Ricardo. Rightly, they came to see that labor is not the source of value (price). Yet, the next round of economists decided to commit their own fallacy and from which they base their entire myth of economics, that of scarcity and utility cause value (price). See my work WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE to discover in less than 3 minutes, why economics is bogus, a myth, a b.s. story.

Utility as a source of price (value) is quite false as it imbues into things intrinsic value. Scarcity as a source of price also is quite false. 

The earth is awash in water, but men are successful sellers of bottled water right next to giant lakes and rivers. Why can do they do so? Bottling creates property. 

Many would believe that a Rembrandt is worth much because he is dead and thus can not make any more. So any Rembrandt is a one-off. Yet, millions have watched and learn to paint from Bob Ross, each creating their own one-offs. Each one being unique makes each one scarce. Each Joe Blow also is a one-off. 

Yet, no one trawls garage sales bidding outrageous sums for the one-offs of the Joe Blows of our world. 

And so, because economists believe from false premises, their conclusions are false, necessarily so, even when remaining logically consistent from false premises to false conclusions. It doesn't matter if that neoclassical school is the Keynesian school or the Austrian school. 

There is no escaping reality. Anyone can only deny reality. 

Enjoy some Rembrandt!

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GUNS, DISEASE AND THE WIZARD OF OZ. WHY ARE AMERICANS WASTING TIME AND MONEY WITH OBAMACARE AND CRIME?

Ask anyone at random how many deaths happen in America each year and even what is the head count of Americans. Likely, you will fail to hear numbers that come close to the ballpark.

It's rare when a legal gun owner uses a legal firearm in the commission of a crime. It's so rare, that it isn't even worth mentioning statistically.

As well, murder by any kind of gun is so small relative to deaths in America that talking about guns and death isn't even worthy of discourse (6/10 of 1%)

Yet, 24% of all Americans who die each year die of cancer and another 24% die of heart disease. 30% die of heart disease or strokes.

It's safe to claim that about 32% of all deaths each year have habitual cigarette smoking, lack of exercise and poor diet as causal factors.

Using 2012 figures, with  313.9 million Americans producing a GDP of $15,680 BILLION, Americans spend $2,728.3 BILLION on medicine, of which politicians tax and spend $1,705.18 BILLION by force of law. With the number of deaths near 2,309,212 Americans, Americans spend $1,181,493 PER DISEASE DEATH!

This number alone shocks, considering that life expectancy improved a scant 4% over time in 22 years! What a waste of money.

It gets even worse when looking at spending on policing and justice relative to crime deaths. Using 2006 spending of $214.5 billion, a whopping $14,292,600 has been spent PER CRIME DEATH!

Killing rival drug dealers is competition by other means. It is owing to prohibition of recreational drug use that many murders happen each year in America. Simply, decriminalizing the sale of drugs would cut down an already insignificant number of crime deaths. Yet, many Americans working conjured jobs — cops, judges, jailers — would find themselves clueless as how to earn an honest, real living.

The most expensive medicine comes about because persons are trying to stave off the inevitable, their own deaths. Except, most expect taxpayers pay for their gluttonous, slothful sins by giving them a moral hazard bailout later in life, which all know as Medicare.

As well, Obamacare violates everything about insurance, turning insurance into a credit card for persons who fail to live healthy. Insurance exists to payout on losses. 

Real insurance works like car insurance, people who put themselves at greater risk of loss pay more than people who play at living safely. Mandating the young and fit pay high premiums for the obese, the chronically overweight, the lazy, those who habitually smoke cigarettes, well, that turns insurance into credit cards for people who want to live longer at the expense of everyone else.

Almost all lack valid beliefs about reality on every topic imaginable. For almost all, their beliefs are not their own. Their beliefs come from the idiot box, the boob tube, the great OZ of opinion making.

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GOOGLE. SERGEY BRIN, LARRY PAGE. INNOVATORS OR ACQUIRERS?

Google? Innovators or acquirers? 

Almost every important Google product, execs at Google bought outright. For their own, homegrown products, Google execs have bought other firms to make their products work. 

• YouTube came from YouTube for $1.65 billion
• Blogger came from Pyra Labs

• Android came from Android for $50 million
• Motorola Mobility (cell phones) came from a spin-off of Motorola for $12.5 billion

• Picasa came from Picasa 
• Picnik came from Picnik

• Maps came from Where 2 Technologies
• Earth came from Keyhole
• Latitude came from Dodgeball
• Panaramio came from Panaramio

• Docs came from Upstartle's Writely
• Spreadsheet came from 2Web Technologies' XL2Web
• Sites came from JotSpot

• Feedburner came from Feedburner for $100 million
• Google Analytics came from Urchin Software

• Offers came from DailyDeal for $114 million

• Voice came from Grandcentral for $45 million

• Groups came from Deja News

Primarily, Google is an electronic billboard advertising business. Everything that goes into Google's key business would not exist and could not work without acquisitions. 

AdSense, a key product offering, came from a mash-up of Applied Semantics, Sprinks, dMarc Broadcasting, Adscape, Teracent, Invite Media, Admeld.  Google's billboard model came from Doubleclick on the desktop and Admob for mobile.

YouTube couldn't run without key acquisitions of YouTube itself along with On2, Omnisio, fflick.

Almost everything that goes into G+ to make it cool has been acquired by Google execs. 

• GTalk voice came from Gizmo5 for $30 million
• Hangout came from Marratech
• Hangout also came from Meebo for $100 million

And now Google has swallowed well-liked and easy functioning Bu.mp. 

Google is more like Berkshire Hathaway rather than an inventor and seller of products. It is hard to make the case that a couple of grad school nerds who hit life's lottery and became billionaires are innovators.

Enjoy the big list of acquisitions by Google execs.

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