Tuesday, June 19, 2012

"Good" Government

The litmus test for "good" government action is: Does this action violate anyone's individual rights in the name of privileges or manufactured rights? Yes? Then the government has planned a crime. Conspiracy charges anyone?
One simple truth that could be endlessly reiterated, and effectively applied to nine-tenths of the statist proposals now being put forward or enacted in such profusion, is that the government has nothing to give to anybody that it doesn't first take from somebody else. In other words, all its relief and subsidy schemes are merely ways of robbing Peter to support Paul.
from Henry Hazlitt's Man vs. The Welfare State
One of the key words in that passage is "robbing." Government is literally stealing your money to finance social engineering.

And that's just government's redistribution schemes. The government has invented rights like the right to live in a state that bans prostitution, or "protects" us form unlicensed physicians. Those manufactured rights violate the rights of others to do whatever they want to do, as long as that work or behavior does not harm another person.

And control of careers leads to another form of theft. Government steals opportunities from individuals, by outright banning potential jobs or by making the cost of entry too high for many to attempt. Tack on to that the testing and interview requirements for many occupational licenses that limit additional numbers of individuals able to enter occupations beyond any manufactured "safety" standards, after individuals have already invested in government-mandated training to enter those occupations.

Thursday, June 14, 2012

Your Bank is Bankrupt

I'm sorry to inform you of what you could figure out for yourself, if you put together the basic economics you were hopefully taught in high school.

There is a 99% chance that your bank is bankrupt. The same goes for any other deposit and lending institute you patronize. And if your bank existed before you were born, then it was bankrupt then, too. That is true because of the practice and policy of fractional-reserve lending.

For example, banks lend out ten-times what they have taken as deposits. So for every 1 dollar that a bank takes as a deposit, that bank lends out an additional 9 dollars. 

I'm not against fractional-reserve lending as a practice. It was done privately among Dutch (hopefully, I've got the nation right) goldsmiths, and they seemed to have done fine with the method.

A goldsmith knew the risk that depositors might show up one day with receipts for more gold than the goldsmiths had on hand. Either the goldsmith had insurance, backing from other goldsmith to cover a shortage, or an escape plan. The depositors knew that they had to trust the goldsmith. Were the depositors wise to fractional-reserve lending? Maybe, not at first, but that was the risk of putting ones commodity in another's hands.

What does bother me is this: With government backing, banks are allowed to exist in a condition that is insolvent. Banks cannot even satisfy the return of deposits to 20% of their depositors (Of course, they could get maybe that much from the Fed, which they can turnaround and lend about 8-times that amount, once they satisfy "calls" on deposits. But the Fed might balk at 30%.). The Federal Deposit Insurance Corporation (FDIC) does "insure" each account for $100,000 (Oops, that was raised to $250,000 in 2008. Current depression - er, recession, er downturn, er collapse - fueling bank run fears?). But no private insurance company would take such risks of insuring businesses that are so close to failure.  A private insurance company would risk going bankrupt itself. 

No, only a government "corporation" with unlimited supplies of tax revenues and manufactured money could back such insolvency. And in the end, citizens of the United States - and the world - will pay, when inflation responds to all that extra money.


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