Monday, November 16, 2009

Use of the federal Whip

How do you explain the bias against Capitalism? Art Carden tries to give an Answer. He is clear and somewhat concise, a wondrous thing from the von Mises’ devotees. Any system of economy adopted will run into problems, simply because the Whole is infested by humans. They cause problems, especially the Ones who hope to create a Power base within the system. Understand that it is never the economic system, but the individuals who manage it, which run it into the ground periodically. Every economic system can function to some level of performance, else it still would not be around. Which is the Best? The One which got an A+ on the last Market Day.

I would give James a proper Citation, if only I could remember How to spell his name. The Message, though, is well explained. The Tax system does subsidize Debt, while it penalizes alternate forms of Investment. This leads to an over-Investment in Debt, which actually slows normal Investment because of the high Prices generated for Investment resources. Readers should understand that economies are not so much Market-driven, but are a balancing act where proper performance is dependent upon Inputs and Outputs being in balance; not only between them, but within themselves. Interference in that balance leads to less than optimum performance. Right Now, the Debt drag is cutting into economic performance, because there is too much Debt which must be funded through repayments–those later producing too much drag upon Profits for adequate production levels. That is How we have arrived at this position in the economy, and more Debt will not help; don’t get me started on the horrors of Debt finance through Inflation, I turn Mean and Spiteful.

James Hamilton gives Us a very decent Post about the tendency of Commodities to rise and fall together. I favor the Concept that Investors utilize Commodities as an Investment class, and the splash into Commodities comes always with a relative Drop in the Equities, Treasury Interest rates reduction, or erosion of the American Dollar. This places Me in conformance with Tang and Xiong, and I agree with Smith that much of the hoarding occurs outside the United States. I have serious doubts about the later’s claim that these Investors lack an outside market for these Commodities. Here is the relative Problem: Successful foreign purchase of Commodities will universally lead to foreign sale of such Commodities; a Situation which will place added pressure on the American economy. I think it is as dangerous as Hamilton believes for the federal government to ignore this Trade. My Solution would be to make the federal government a Trader in the Commodities Markets, buying when Commodity Prices lower, and selling when Commodity prices seem too high; the later only to domestic Consumers of said resource. lgl

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