Tag Archives: Capitalism

Milton Friedman on the problems of government in medical care

This is a rather long lecture by Milton Friedman on the issues of government in medical care.  As it is so long I’m not going to write a lot, but you should watch it because, despite being over 3 decades old, every word is still very relevant.

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Movies that understand economics #12 Sabrina

sabrinaSabrina, the odd tale of a love triangle between two wealthy brothers and chauffeur’s daughter.  It’s a classic love story, despite being a little non-standard in its setup, but it also has a wonderful understanding of the larger motions of economics.  Now I have talked about Sabrina before, and for this very same reason, but I feel the need to bring it up again as one of the movies that really understands how economics and capitalism actually work.

And this is first and foremost due to one little speech in the early parts of the movie that shows the character Linus Laraby (Humphrey Bogart) , and by extension the writer of the film, understood the true and positive nature of capitalism, outsourcing, and globalization.


LINUS LARRABEE: What’s money got to do with it? If making money were all there were to business it’s hardly worthwhile going to the office. Money is a by-product.
DAVID: What’s the main objective? Power?
LINUS: Agh! That’s become a dirty word.
DAVID: Well then, what’s the urge? You’re going into plastics now. What will that prove?
LINUS: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug and you’re in business. It’s purely coincidental of course that people who’ve never seen a dime before suddenly have a dollar. And barefooted kids wear shoes and have their teeth fixed and their faces washed. What’s wrong with a kind of an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?

Capitalism creates prosperity and wealth where none existed before.

In-Defense-of-Globalization

Everyone should read this book.

And while more data is presented even Bhagwati’s book In Defense of Globalization, does not put the power of capitalism so succinctly as Linus’ speech.

Capitalism, business, creation, innovation, this is what rich can bring us through investment and management…
…and occasionally a romantic plot line as well.

This is actually what motivates a lot of people—this is the motivation of Ayn Rand’s heroes that she could never actually articulate in a way that was acceptable to most people—this is why capitalism works, because people love creating things that make the world better AND get paid to do it! You mean I get to do something great AND make a fortune? Sign me up.

The romance, the comedy, the bizarre situations in this movie, for me all is secondary to the beauty of this one little speech. This speech points out quite well that the free market and free trade are what bring prosperity to the whole world.  That in spite of whatever idiotic ramblings of any ignorant leftist, capitalism and investment don’t rob from people they bring what people want and need.

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Movies that understand economics: #7 Morning Glory

Morning Glory

“Daybreak needs what I need, someone who believes that it can succeed. Trust me, I know you don’t have any reason to believe in me, but I work harder than anyone else. I’m in first, I’m out last. I know a shitload more about the news than someone whose daddy paid them to smoke bongs and talk semiotics at Harvard and I devote myself completely to my job. It’s what I do. It’s all I am. I… You can ask anyone.”

At this point I’m pretty sure you think I’m losing my mind (or that I am really desperate to find movies with economic premises)*–how is a silly comedy (that has a romantic subplot, but not enough of one to call it a romantic comedy) going demonstrate economics? Just trust me that I do know what I’m talking about. For those that don’t know the film, Rachel McAdams plays Becky Fuller an inexperienced executive producer who has been given the very undesirable job of bringing the worst morning news show in history up in the ratings…and her genius idea is to bring a veteran hard news anchor, played by Harrison Ford, who doesn’t want to be there, on to the very light news morning show. Hilarity and infighting ensues. But buried in this pure entertainment story are a few economic truths.

innovation

On the left are industries that live under the rules of adapt or die. On the right are organizations that don’t live with that fact…see the difference.

The first is the most basic of all economic principles at the heart of capitalism: adapt or die. The entire central plot is about brining up a failing TV show in the ratings. And the only way this happens is by throwing out old rules and changing the format of the show. This includes more sensationalism, making deals with celebrities that no other show would ever make, having the anchors bicker on air because it brings in more ratings. Adapt or die. Every company on earth (when they’re not being bailed out by morons who don’t understand capitalism) faces this basic principle. And it’s a good thing. As shown in the movie it forces the people on the TV show to adapt, to innovate, to come up with new things that work. It forces the show and the people, people who had previously given up, to come up with new ways of doing things, to be better and create things that work. Adapt or die, it is what turns $50,000+ worth of equipment in 1985 taking up probably half a ton of mass, into your smart phone that cost you $300 and about a pound of mass.

And this ties to the last two movies and the idea of creative destruction. As most companies try to avoid being the victim of creative destruction they have the choice to grow and not die. Which the show in this movie does. It is what drives a healthy economy, the need to survive forces us to grow and produce better and cheaper products.

And tied to this is this principle of adapt or die is the idea of being a leader. No organization or person can grow without being willing to make decisions.

One of the best descriptions on leadership goes as follows:

The difference between a good administrator and a bad one is about five heartbeats. Good administrators make immediate choices … [that] usually can be made to work. A bad administrator, on the other hand, hesitates, diddles around, asks for committees, for research and reports. Eventually, he acts in ways which create serious problems … A bad administrator is more concerned with reports than with decisions. He wants the hard record which he can display as an excuse for his errors … [Good administrators] depend on verbal orders. They never lie about what they’ve done if their verbal orders cause problems, and they surround themselves with people able to act wisely on the basis of verbal orders. Often, the most important piece of information is that something has gone wrong. Bad administrators hide their mistakes until it’s too late to make corrections … One of the hardest things to find is people who actually make decisions.—Frank Herbert, God Emperor of Dune

jimmy carter sex offender

The movie covers the importance of reporting the truth when others won’t.

And the character of Becky Fuller displays this trait perfectly. Within minutes of taking her new job she is bombarded with not only a huge amount of choices but also a grossly inept employee…but rather than saying things like “I’ll get back to you” and consult others she makes choices right there based on her own judgment. And rather than deal with a clearly toxic and useless employee she just fires him because he is absolutely worthless. She makes judgment calls and works with the fallout rather than blaming others. No company, no organization, no individual can progress without this; making immediate choices and working with the fallout. No economy can survive or grow without such leaders. A shame we don’t have anything like that on Pennsylvania Avenue.

*both may be correct to one degree or another, but that doesn’t negate my point about this film.

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Movies that understand economics # 2 The Terminal

The Terminal

 

 

The Terminal.  Given the writers, director, or lead actor, it’s quite frankly a miracle that this movie understands even that money is used to buy things let alone the numerous economic principles it does seem to get.  I’m chalking this up to one of those monkeys at typewriters moments.

 

But one of the clearest moments that this movie demonstrates economics is with the concepts of incentives, opportunity costs and comparative advantage.  Yes I know your brain is probably already trying to run away…but stay with me for a second.  In the film Victor Narvoski is held in the terminal of JFK airport because of a snafu in regulations.  He has no money, but can’t leave. But he finds that there is a system in the airport whereby returning a cart for luggage to the dispensers where they originated will give a quarter for each cart.  The quarters are offered as incentives to perform this mildly annoying task (the same reason your salary is an incentive to do all the parts of your job, even the parts you don’t like).  However, to most of us, a quarter isn’t a big incentive, thus we have no reason to waste our time putting the thing back for just a quarter (this is opportunity cost, the idea we can use resources only once, in this case, time, and we will probably get more satisfaction out of reading, or sleeping or just resting than we will out of a quarter).  However, Victor has a huge incentive to get quarters, because quarters mean food.  Also, because he doesn’t have anything else to do, whereas most people in an airport do, he has a comparative advantage over them, he can spend time getting lots of carts and returning them, whereas other people do not.  Incentives drive everything, if you don’t have the incentive to do something, it won’t get done…which is probably why Welfare shouldn’t offer about 45,000K a year in benefits…because if you do offer that much in benefits no one has any incentive to work if they can’t make more than that.

One of the things that The Terminal implicitly understands is the incredibly harmful nature of government, bureaucrats and arbitrary rules. The movie literally begins with a group of Chinese immigrants with fake passports being captured (why were they running…probably because China is a despotic hellhole, what will happen when they’re sent back?  Well if they’re lucky, death. Real refugees are seldom so lucky from a nation that has actually crucified people in the last century.)  This is what governments do, they hurt people. (Let’s not even talk about how ICE’s primary function seems to be keeping refugees and qualified workers out of the country while ensuring that welfare seeking illegals and cartels can get through.)  Of course this whole movie is about one power hungry bureaucrat making a man’s life a living hell…because they can.  And if you think such a mentality just exists in movies, ask the millions of people who are now without health insurance because one brainless bureaucrat believes she doesn’t work for the American people. What does this have to do with economics?  Everything.  Governments are needed for  economies to maintain a civil and criminal court system; to catch, prosecute, and incarcerate criminals who violate the rights of others; to maintain contract laws; to ensure a bare minimum of regulation to ensure a functioning economy…but when bare minimum use of power needed to make the system work ceases to be the goal, and it switches to power for the sake of power (which is what every petty bureaucrat wants) then economies cease to work.  Case in point back to the quarters for carts things…the idiot in charge of the system would rather pay someone (at New York City union rates, which is probably more than anyone who reads this earns) rather then let a man earn money for food.

 

The film is filled with examples or stories of people’s lives being ruined by bureaucrats. And it should be noted the general sense of fear that everyone has towards them.  (Luckily there is also a scene that explains exactly what you should do to all bureaucrats.)
And this whole situation is caused by the fact that no one anywhere in this bureaucracy was willing to use common sense for an unusual situation.

 

One final point I would like to make about economics shown here is the seeming nature of chaos in an economy.  Most people look at economics, at the flow of money, of stocks, of property, goods and investments…and see chaos.  It’s much like the terminal of an airport.  It seems like pure chaos.  But the fact is everyone in that airport is going somewhere with a plan, a departure time, and a destination.  It has the appearance of chaos but there is a very well defined order, it’s just that the normal limits of the human mind can’t see it.  The same is true of economies…lots of people see economies and see only chaos and disorder and believe since it is so disordered there needs to be more control to make it run better.  Let me ask has DHS and the TSA made an airport better?  The same is true of economies—just because you can’t see the order doesn’t mean it is not there, and your attempting to control chaos that doesn’t exist will always, always, always backfire.

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Movies that understand economics #1 Bedazzled

Elliot Richards: “This doesn’t prove anything. I could have done this myself. I even had to pay for it.”
The Devil: “There’s no such thing as a free lunch.”

Now unfortunately the nature of Hollywood and the fact that it exists on a different plane of reality (one where the economy is run by unicorns and movies that make 50 million above cost somehow were losses) a lot of the economic facts of this series are going to be more accidental truths stumbled upon by the writers and directors than intentional bedazzledmoves to show us how real economics works. However, I might be able to say that director Harold Ramis, who brought us Groundhog Day with its clear understanding of the idea that all skills can be learned with time and effort or what is really valuable in life, and Ghostbusters with its very insightful moments that the EPA is populated by dickless idiots and correct observations like, “You’ve never worked in the private sector, they expect results.” But who knows, maybe I’m reading intent where there was none…regardless, the movie Bedazzled, the story of a hapless loser who sells his soul for seven wishes from the Devil, does offer us some excellent economic lessons.

1. TANSTAAFL
Anyone familiar with Robert Heinlein’s classic The Moon is a Harsh Mistress should find the acronym above very familiar. TANSTAAFL. There ain’t no such thing as a free lunch.

It’s one of the most basic lessons of economics. EVERYTHING has a price. Even if you don’t pay for it now or even ever…someone will pay for everything.

Our clueless hero, Elliot Richards, in Bedazzled learns the hard way that just wishing for things doesn’t work (despite the Devil warning him very clearly that there is no such thing as a free lunch).

Everything you want comes with a cost. And whether it is time, effort, blood and sweat…or just your soul…every cost will be paid. And I think this movie is very clear about this.

Richards: I don’t want another wish. […] I really don’t want it.
The Devil: What do you mean you don’t want it, you get seven wishes.
Richards: Well there are things that I want but nothing you can give me.
The Devil: What is that supposed to mean?
Richards: Well um last night when I was lying in jail I was talking to this guy. I realized that wishing just doesn’t work. All my life I’ve wished to be better looking, to be richer successful, talented, whatever. And I always thought wouldn’t it be great if someone could just wave a magic wand and make that happen. Well, I realized that it just doesn’t work by magic.
The Devil: I think I’m going to be sick.
Richards: I’ve been starting to think it isn’t really how far we go in life anyway, it’s how we get there that really matters.

Everything comes with a cost. And any time you think that there is something without a cost that you are getting something for free…be very worried because that is where the costs are the highest. Because it is often either being paid for by someone else…or it is taking something away from you that is more valuable (but less tangible) than just money or property. And, in the long run, the soul pays all debts.

Even with charity. Someone gave you a hundred dollars out of charity…it still costs them a hundred dollars and the loss of the opportunity to spend it on something else…now they may get paid back in the psychological happiness that comes from personal charity, but they will get paid back. And you will pay the cost of feeling either indebted to that person or to be worthy of the act of charity. (It’s why a welfare state is so dangerous, it strips the act of charity of all the psychological benefits and costs and merely costs the middle class their money to pay people who will not work for a living.) and thus will never “earn” anything or appreciate it and they will in the end be the bigger looser.

There Is No Such Thing As A Free Lunch.

2. Contract Law is Sacrosanct (and always read the contract)

deal with the devil

This is what a deal with the Devil looks like.

Modern society and economics is based on contract law. Be it anywhere from the social contract to your cell phone contract. And, all pun intended, the Devil is in the details.

The Devil: “Let’s look at your contract.”

It is part of the joke that the contract for Elliot’s soul is a 2,000+ page legal document printed in small font legalese. (Pro tip…anytime any kind of legal document is 2000+ pages it is the work of the Devil and should not be signed or passed).

Obamacare regs

This something worse than a deal with the Devil.

Contracts are so important that even the Devil has to abide by them, as there is an escape clause in Eliot’s contract, and as much as she hated it, she had to obey it. (Another pro tip: don’t trust anyone who fails to honor contracts; they will screw you any chance they can find.) That’s how important contract law is, even the Devil follows it. Modern economics are based on contract law and to all the anarchists out there who think you can run an economy without contract law necessary to enforce it, you’re beyond stupid. Anarchy at it’s best.

The other point here that the movie makes clear is that you should always read the contract. If you don’t read the contract and just wait to see what’s in it only after you have entered into it, you will always, always, always get burned….as Elliot finds out in how badly his wishes turn out…and as America is finding out right now.

3. Trade is only an exchange of value for value.

The Devil: Seven utterly fabulous wishes for one piddling, little soul?
Richards: […]“If it’s so useless then how come you want it so much?”

One thing to understand about modern economics is that in any legal, consensual exchange both people must receive what they consider an exchange of value for value (in fact an exchange only take place when both parties feel they are improving their situation). And if people want something, or are willing to give you something, then that means you are exchanging something of value.

True this is a variation on the free lunch principle, but it needs repeating.
If someone is willing to give you free phones or food or promises of healthcare you may want to ask why they’re giving you these things and what they want in return…and what the long term consequences of such an exchange are.

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Why Obamacare is terrible on every level.

Obamacare regs

So those 11 million words are what you have to comply with.

I was recently asked why Obamacare is so bad…

Where to start?

 Let’s start at the Constitutional Level.

Obamacare requires that every person in America buys insurance.  This was done because without doing it every insurance provider in the nation would begin losing almost immediately and rather than lose money they would just go Atlas Shrugged on us and close shop…but by having everyone on insurance they at least still make a small profit, but only because you’ve forced millions of people who don’t need insurance onto insurance (but even then only by making everyone pay increased premiums).

The problem with this is that the Constitution gives the government no power to force people to buy something (in fact forcing people to do something against their will is expressly prohibited in the 5th Amendment’s protection of private property, and 13th Amendment).  They enforce this mandate by penalizing you if you don’t buy insurance.  Again, no Constitutional authority to do this.

Now the Supreme Court and Obamacare got around this by saying this penalty isn’t a fine, it’s a tax (the strangest tax in history, but still a tax). The problem with this is Constitutionally taxes have to originate in House of Representatives and Obamacare originated in the Senate.

So either it’s forcing you to buy something, and is unconstitutional, or it’s a tax in which case the bill was not passed in a constitutional manner.

Either way it’s unconstitutional.

Then let’s go to the idea of rights.  

The entire basis for this law is that you have a right to health care.   

This is silly.  Traditionally rights have been considered things that you are born with or you would have even if there was no civilization around.  If you’re alone on an island you still have the rights to life, liberty, property and the pursuit of happiness.  In society no one has the right to take these away from you, which is why these are called negative rights—you have them and no one can negate them.  Even if someone has the power to do so no one has the ethical, moral, or political basis to take away by force your negative rights.  Ethical government is based on the idea that, being a part of society, you give up a very small amount (not so small these days) of your rights to protect the vast majority of them.  At least in the ideal.

The right to health care is what’s called a positive right.  The idea that you have a right to certain things that you would not have without others, that you have not and cannot provide for yourself, and that others are required to provide for you. Health care is one of these.  The idea that you have a right to living wage, whether you earn it or not. 

Now, personally I don’t think there has ever been a good argument for positive rights, but the bigger problem is that positive rights always infringe upon negative rights.  If you have the right to a living wage, then others must provide, and thus must have their property taken away, to provide your living wage.  Thus you have no right to property if you have the right to a living wage.  If you have a right to health care, then doctors and nurses must treat you or any medical issue (not only life threatening ones, hospitals and doctors were required to treat life threatening issues by law even before Obamacare) whether you can pay or not.  This means a doctor cannot choose to not take you as a patient.  Thus the right to healthcare means doctors do not have freedom of choice and thus do not have the right to liberty…I believe that’s called slavery.  Now you think this may be an extreme example, but whenever positive rights have become laws you see fewer protection of negative rights without exception throughout history.

Then we have the pragmatic problems with Obamacare. 

Obamacare creates massive amounts of regulation (11 million words of regulations ).  This encourages more doctors to leave the system, and more highly qualified potential doctors and other medical professionals to not get into it ().  It slows research, it reduces the amounts of medical equipment that can be used.  It raises prices.

Also when something is free or perceived as free, as in the case of Obamacare, you always get people wanting more of it.

This will cause more people to go to the doctor (remember there will be fewer of them) for more minor issues.  This will cause longer lines and less efficient care, thus treatment quality will go down, and mortality rates will go up.  This can be seen in any country with socialized medicine where you see such things as gout go months without treatment (whereas it is almost always immediately caught here) or where due to the wait, limb amputation as a result a diabetes is vastly more common under systems like Obamacare than it has been in the preObamacare American system. (These are just two examples.  Every disease gets worse under socialized medicine).

Fraud, due to increased bureaucracy, will also increase.  You will end up paying for this through increased premiums and taxes.  

obama-care-chart

Welcome to Obamacare…can you find your way to a doctor…or will you just fall into the pit of Despair?

You will also have the problem of price control boards.   Now, we have always had these in one form or another (but they got really annoying after the government created the dreaded HMO…that’s right the biggest thing people hated in healthcare before Obamacare was also a government created debacle).   You buy a certain level of insurance and the insurance company says that due to the level you have bought we will pay X amount of dollars, but no more.  This becomes an issue with experimental treatment and long-term problems like cancer.  The insurance will pay for your pain meds, as they are required to by your policy, but they will not pay for expensive chemo and radiation (not because they’re heartless but because they would go broke if they paid for everyone who didn’t pay the premiums for that level of care). If you want more coverage, you can always buy more.  The problem with Obamacare is that government price control boards are going into place and will say what you can and can’t have for treatment, if you are in the government exchanges.  The difference here is if an insurance company denied to pay, you could always pay out of pocket, under Obamacare the price control board’s decision is final (if try to pay out of pocket you are again subject to fines, and rationing will have made these procedures already more expensive which makes already expensive procedures astronomically unreachable, so it’s the same thing as making them illegal).  This is why they have earned the moniker “death panels” because if they deny your claim, you die…if the insurance company denied you, you still had other options and it was up to you if you wanted to spend your life savings on buying those extra few months. 

The unfortunate effect will be that as medical prices rise, what is covered by the price control boards will contract drastically.  Thus even more things will become deadly.

Not to mention with the above fact that people are more likely to go to the doctor, which means even if they aren’t sick they’re more likely to go to a waiting room where someone is sick and catch something.  And remember antibiotics are slowly becoming worthless.  Yeah that bodes well. 

There are a lot of other ways it will ruin the medical profession, but I think you get the point.

Finally the economic reasons why it’s bad.

 Ignoring the fact that higher death rates may have some negative economic effects…it’s just bad in every way for the economy.

Obamacare requires businesses with a certain number of employees to buy insurance at a certain level for their employees.

As premiums rise, as I stated above, this means it becomes more and more expensive to hire an employee. If you earn $45,000 plus benefits right now, it actually costs your employer around $60,000 between salary, benefits, and social security to employee you. As premiums rise so does the cost of employing each person.

Whether businesses care about their employees or not, they first have to stay in business.  They are hesitant to hire new people as new hires also cost money for training and you usually aren’t getting the full effect of the employee for a few months until they get into a rhythm with the system of your company.  So you’re taking a loss with each new employee even before Obamacare.  The raised premiums then mean with each new employee will have to provide more for the company to be worth their total cost.  Thus you tend to fire the lower performers because you’re not getting your money’s worth. So fewer people hired, more people fired.  Also since you have to provide fewer benefits for part time workers than full time, you are more likely to hire people only part time.  We have seen all of this over the last few years.

Small businesses are hurt too because a small business can only grow to a certain size before it has to provide benefits.  So when it reaches that point, a business can either not grow, which hurts economic growth, or suddenly provide full medical coverage…and no small business at that size can afford to make that immediate jump in the cost of each employee.  Again we have slowly seen the effects this has on the economy.

This leads to overall negative ripple effects in prosperity, take home pay, innovation, research…it creates a bad economy all around.

And we’re already seeing all of this on a massive scale. 

So to sum up, it’s unconstitutional, it’s unethical, it’s leads to bad medicine, and it leads to a terrible economy.  

What makes it worse is that actually less government (removing the restrictions on research, removing the restrictions on insurance companies crossing state lines, a thousand other small things) could actually improve medicine, medical costs, and the economy.  And Republicans have proposed these numerous times despite the media saying they have no idea of what to replace Obamacare with.

Anything anyone wants clarified?

Obamaapocalypsocareageddongate

And, sadly, this is an understatement of how bad things are going to get under this law.

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Filed under Capitalism, Congress, Conservative, Constitution, Debt, Economics, Evils of Liberalism, Government is corrupt, Government is useless, Health Care, Long Term Thinking, Obama, People Are Stupid, politics, Taxes, Welfare

Why Are American Health Care Costs So High?

I was going to do a response to John Green’s mostly accurate but slightly misleading video “Why Are American Health Care Costs So High?”…but I really can’t beat Lee Doren’s response on “How the World Works.”

I would merely point out that while Doren is correct that we could go to out of pocket to help reduce prices, we could also get rid of the laws that created HMO’s and allow insurance companies to cross state lines.  All of this would further increase competition and drive down costs even more.

Also John Greene makes a comment about tort reform only reducing health case costs by a fraction of a percent in Texas.  What he fails to mention is that it has also drastically increase survival rates for patients.  So tort reform led to more people living at lower costs.  I don’t think dismissing them out of hand as he does is all that bright.

The Original Video

(I’m not going to include all of the links Doren references because he deserves the hit count that will come from having to go to his Youtube page to find them.)

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Basic Math for Liberals

I am tired of arguing with idiots about unemployment numbers.  Stupid people (liberals) seem to think that so long as the unemployment numbers drop that this shows the economy is growing. Now I know those of you who know something about economics and statistics are about to have an aneurism over how stupid that is, but let me go over the basics of how we get unemployment numbers…and what you should really be looking at.

Minimum WageNow I’m going to try and use round numbers to help make this as simple as possible (and I’m going to gloss over a few complexities so we can get to the heart of the matter).

Let’s say you have a population of 200,000 people.

100,000 people want a job.  That means you have a job participation rate of 50%.

Now let’s say that 95,000 of those people looking for a job have a job, and 5,000 of those people don’t have a job.  That means your unemployment is 5%.  And let’s say of those 95,000 employed, 5,000 (5% of the those in the work force) of those are working at part time jobs but want full time jobs.  These people are called underemployed. The underemployment rate is the unemployment rate plus those who are underemployed.  (Under employment is usually calculated as the percent of underemployed plus the rate of unemployment, but to keep the numbers separate and simple we won’t add them together here).

Now, what idiots look at is the unemployment rate.  This is dumb, and let me explain why.

Let’s say the government does something monumentally stupid (so, status quo) like raise the minimum wage.  This will cause employers to pull back on hiring.  The first thing that will happen is that employers will either through firing the most inept or through simple attrition (when somebody leaves you don’t fill their position).  This will cause the unemployment numbers to go up.  Let’s say that there are now only 94,000 jobs, or an unemployment rate of 6%.  And idiots will be rightfully concerned…but not for long.

Why?  Because the first ones hit by minimum wage increases are young people who, without experience aren’t worth the higher wage the employer has to pay, and older people. Those who have a business are not willing to put in the money for training as it will not work as a long term investment.  And since these groups know they can’t get a job they will either continue living with mom and dad or go live with their kids and just stop looking for work.  Let’s say 2,000 people just give up looking for work. So that now means you have 98,000 looking for work, and 94,000 with a job.  Guess what unemployment is DOWN TO 4.1%  !!!! Isn’t that great! Raising the minimum wage lowered unemployment from 5% to 4.1%!!!  Of course since the participation rate dropped form 50% to 49%, that means that 1,000 fewer people are employed now, but the unemployment number dropped!

And then it gets worse. The rise in minimum wage causes inflation (as it always does) and that means companies that aren’t employing minimum wage positions will have to lay off employees or use attrition practices.  So they lay off 1,000 employees. Now we’re at 98,000 looking for work and 93,000 employed.  Back to 5.1% unemployment.  But don’t worry those 1,000 will soon find minimum wage jobs and kick out 1,000 other less qualified people from those jobs. So now you instead of 5,000 people underemployed, you now have 6,000. Underemployment has jumped from 5% to 8.8%!  But don’t worry because another 1,000 people are probably going to give up looking for work (probably more actually but let’s keep the numbers nice and round).  So now only 97,000 want to be employed.  Oh look unemployment back to 4.1% and underemployment is now only 6.1%.  It’s a miracle the unemployment numbers and underemployment numbers dropped.  Things must be doing great!

But no.  In this situation while the unemployment rate started at 5% and dropped to 4.1%, that masks the fact that there are 2,000 fewer jobs. And a 1,000 more people are earning less than they would like.  (And let’s ignore the inflation that’s going on and the fact that most of the other employed people probably aren’t getting raises – but their personal costs just went up.)

So we can see the unemployment rate is very misleading and what is important, first and foremost is the participation rate and followed by that the underemployment rate.

So when Obama touts the unemployment numbers are down keep in mind a few things.

The participation rate is at its lowest level since 1978! From a peak of just over 67% we are down to just over 63% (a 4% drop, keep in mind my example only included a 1% drop).  And this drop in participation does not seem to have come anywhere near to an end. 

 

Second keep in mind that underemployment (this is the calculation of both those underemployed and those unemployed) has gone from 7.0% in 2000 () to 17.4% (a 10% increase, and my example only had 1.1% increase).

So don’t tell me that the economy is doing well because the unemployment number is down. It’s not.  It’s doing terribly.

And it’s not just raising minimum wage that does this (and yes raising minimum wage always does this)…it’s regulations and taxes and oversight and red tape.  All government action increases the factors that make employers want to hire fewer employees. And this may be not so great for depriving people of income, hope, and jobs….but as we’ve seen it can be great for getting the unemployment numbers down. I mean if everyone would just give up looking for work, we could have 0% unemployment.

 

 

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Movies that show the rich as good #1 Cash McCall

James Garner Cash McCall“I don’t belong in the better circles. I’m a thoroughly vulgar character. I enjoy making money.”—Cash McCall

The last and best movie that shows the rich as good.

But as this is a more obscure movie let me give you some details. The movie is a romantic-comedy that follows millionaire (eh, this is 1959, in 2013 dollars it’s probably billionaire)  (and perceived playboy) Cash McCall, played by James Garner as he attempts to woo Lory Austen (Natalie Wood).  The story is boy meets girl, boy falls in love, boy loses girl , boy chases, boy gets girl, boy loses girl, boy gets girl back.  It’s sweet, but nothing spectacular.

What makes this movie stand out is the title character and his business dealings.  Cash has a reputation:

“Cash McCall. I know the type.  Vultures.  Jackals.  They prowl around looking for a good company that’s having a little difficulty buy it up for practically nothing and then start pulling it to pieces.  Close the plant down, spin it off for a tax loss.  They throw a whole community out of work just to make a fast buck.”

This is the opinion of consultant Gil Clark whose sees McCall as only someone who buys up companies and liquidates them for profit.  Now I have previously gone over why there is nothing wrong with this, why a healthy economy needs this form of creative destruction to survive (yes it would be better for the original owners if they could realize their company is already dead and sell it off in a way they want to, but usually a company only gets in that state when sentimentality supplants reason).  However when Clark first meets Cash McCall not only his resentment clears he learns some interesting things about Cash McCall.

Cash: I’m sort of a second hand dealer.  I buy old tired companies, whip them into shape, then sell them again.  What’s your line of work.

Gil Clark: Corporations Associates.  We’re management consultants.

Cash: That’s a prissy way of saying efficiency experts, isn’t it?  I mean you go out to a company with a slide rule and Ouija board, sit off to one side, in the shade, and tell them how to run it by the book.

Gil: We can usually see more from the sidelines than they can from the middle of the field.

Cash: Well that’s nice, it’s like going to a ball game and having the player pay you.  They pay you pretty well I hear.

Gil: Sure our fees are big.  But when we charge our clients thousands we usually save them millions.  And we have a waiting list a mile long because my firm operates strictly on the level.

Cash: And do you know why it operates that way. … Because I own it.

And this is our first introduction to the businessman that is Cash McCall.  From here we see that yes he makes money, he likes doing it.  But he doesn’t just do it by buying bad companies and liquidating them.

The tax structure we have nowadays sets everything up like pins in a bowling alley.   You take your small manufacturer cashmccalllike Mr. Austin—the only way that he can cash in is by selling out.  And the tax situation, or rather because of it, the country is full of Mr. Austin’s.  I’m sorry Gil, I don’t make the rules, I just play the game.  “I get a wallop out of taking  a shaky company and bracing it up.  Taking it apart and see that it runs again…but then after six months all the fun’s gone out of it.”  So he runs a business of consulting, of management, that takes good ideas that need help, gives them the help they need (maybe selling off the parts that are beyond help to those who can make use of them) and then leaving the company again to go forth and make profits.  If that sounds a lot like Bain Capital, and its former President to you, then you might understand why I’ve had such a hard time getting back to this series of blogs and finishing it when this should have been done back in early November.

Throughout the movie we see a businessman who is frank with the people he is dealing with, always honest with people, always gives them a chance to back out, and never takes advantage of someone.  Yes he will hold information back, that’s called business, in business information is worth a lot and you don’t just give it away for free…but it is never information that he acquired through illicit means and was always there if someone else wanted to get it, they just didn’t have the foresight to do so.   And because of this he constantly gets blamed for somehow being underhanded as seen in this conversation.

Gen. (ret.) Danvers: I consider you a pirate and a blackguard

Cash: I’m well aware of how you feel about me and I just can’t find it in my heart to blame you.

Danvers: In your what?

Cash: Because I don’t have any particular affection for you either.

Danvers: Is that why you’re out to ruin me.  Is that why you’re out to destroy the Scofield Instrument Corporation?

Cash: No one has to ruin you or your company General…not as long as you’re around to save them the trouble.

Danvers: You managed to get your hands on a company I practically supported for years.  Sixty percent of its product.  And the minute you’ve got it you refuse to supply me with molding parts.  What are you up to McCall?  Extortion?

Cash: I hope you won’t mind my saying it General but for a military man you don’t have either a logical mind or a very good memory.  You do have one very good military talent though, you’re very good at passing the buck.

Danvers: Now just what’s that supposed to mean?

Cash: This isn’t the first time it’s happened.  About a year ago I sold you a cabinet factory, Padua Furniture Company, a first rate shop you got it at a good price.  Now if I remember correctly, you thanked me warmly for letting you have it.

Danvers: Indeed I did.  I don’t always recognize a thief the first time I see him.

Cash: But when you found out you’d been offered the same shop a year before at half the price you started shooting off your mouth about how you’d been robbed by Cash McCall.

Danvers: You’re damn right I did.

Cash: Of course you didn’t recognize the fact that a year before it wasn’t worth half the price you paid me for it.

And this is typical of reality. Good businessmen create wealth where none existed before in a very short amount of time…but because other people can’t understand how a little intellect and a little hard work can make something that was previously worthless worth a fortune, they assume that the only explanation is something underhanded and deceitful.  That they’ve been robbed.  And while this is a common tale (again see the election of 2012) only idiots don’t understand that it is actually virtue and ethics that create value in the long run.  That it is only honest people like the character of cash mccallCash McCall, who when accused of being a crook stands his ground and will not merely conform to what the public or his advisors want, the consequence be damned he has his own personal integrity to consider first and foremost (still this sounds very familiar).  And this is why I love Mitt Cash and this film.  It shows that all too often the people who produce things are seen by the public as crooks, that the ones who create wealth are only seen as stealing it by the envious people, that those who bring prosperity to the most are derided falsely as taking from others.

“I get a wallop out of taking  a shaky company and bracing it up.  Taking it apart and see that it runs again…but then after six months all the fun’s gone out of it.”

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Detroit, liberalism at its finest

Obama Detroit

Sadly, he doesn’t have a city….he has a country.

The fall of this city reads like the story of the Twentieth Century Motor Company.  Large government spends, overregulates, gives into unions at every turn, hampers business at every opportunity, a deference to cronyism without any concern for free markets, corruption, all leading to the destruction of a city that still has all the infrastructure necessary for growth. And the worst part is that this can be easily, EASILY reversed.  Lower taxes, remove regulations, gut the bureaucracy, open up school choice, tell the unions exactly where they stick all their whiny demands.  It would be a slow growth at first, and the city would need to redirect every single cent they get to police to clean up the dangerous streets of Detroit first (although allowing open carry and remove the restrictions that allows law abiding citizens to procure weapons to protect themselves could solve that problem, criminals tend to go where the targets are easy and a well armed populace is not that) and fix the crumbling infrastructure second.  If the city did these things and let the free market and individual choice drive the way the city would be thriving again within a decade.

But we know they won’t do that.  And so the city will continue to decay.

 

But I’m sure if you asked idiots like Paul Krugman or Barry the answer would clearly be that we just didn’t spend enough money and we didn’t regulate enough.  Because that’s always the problem for liberals.  Government is never the problem and always the solution, even though they don’t have a single shred of evidence to back that claim up.




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Is Capitalism Humane?

The great Milton Friedman on the ethics of capitalism.

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A Tyranny by any other name would be just as terrible…Why Communism, Fascism and Socialism are really the same thing.

“You can’t call Obama a socialist!”
“You can’t call Obama a communist!”
“You can’t call Obama a fascist!”
“You don’t know what words mean!”
“Obama’s a moderate!”

I’ve heard all of these. All of these statements are incorrect. Why are they are incorrect? Because they like to play fast and loose with the meaning of words. They like to ignore that often in political philosophy there are ideal systems and there are pragmatic realities. That there are actual actions and there is PR. There is where the society is headed and where it is now. And liberals will always use the definition you’re not actually using in context.

For instance if you say that France is socialist, they’ll point out that some industries haven’t been nationalized thus it is not a socialist nation it’s a mixed economy. You’re looking at the fact that France is headed in that direction and the pragmatic reality, they’re looking at is where it is now. If you complain that Debbie Wasserman Schultz is a Communist, they’ll point out that she hasn’t endorsed this or that policy from Soviet Russia. You’re looking at where they’re heading and what their ideals are, they only look at the words spoken so far and not making logical connections as to motives. You point out there is no difference between complete Socialism and complete Communism in reality; they’ll start talking about ideals and the utopia to come.

So let’s clear some things up.

There is the Communist Utopia, that place where government dissolves and everybody lives together in a global commune and sings “Kumbaya” and does their best and the shmoo run wild providing all our needs. This place never existed and never will exist on a national or international level. It can work with small groups of people who willingly join, but like pure democracy, it tends to fall apart when the group gets bigger than a couple dozen. This is what liberals claim they mean by socialism, but they forget that this pipe dream requires full and complete ideal Socialism first, even in their own arguments. They just think that the tyrannical government can somehow also be perfectly benevolent and will magically give up power when it has accomplished its goals (in a way no tyrant ever gave up power). And of course this is all silly anyway because history has shown without exception that the system ideal Communism really likes is anarchy, which only ever leads to post-apocalyptic wastelands.

Then there is practical Communism. Soviet Russia, Maoist China, North Korea, Cuba. This has near complete control over all aspects of the economy. They have numerous laws in both social and economic sectors. They are enforced with viciousness by police who basically answer to no one. The governments are controlled by a small cabal of people who have control of everything and while there may be the pretense of elections, the outcome is always the same. Slave labor and murder of citizens is how the populace is kept in its place. And all the time this is called socialism (because this is ideal socialism, although like in ideal communism, there is this foolish belief that it will be a perfect utopia where everyone is happy).

Strangely enough, this is almost identical to another form of government known commonly by a different name, but which saw itself as socialism. Specifically I’m thinking of the National Socialist German Worker’s Party (Nationalsozialistische Deutsche Arbeiterpartei), of course known more commonly by the abbreviation, Nazi. But what exactly is the difference? Control of the economy? Check. Control of social order? Check. Slave labor? Check. Death camps. Check. Power of an unelected elite, no rule of law, state sponsored atheism*, no protection of natural rights.

That about sums it up.  But I'm always open to being proven wrong...How in any practical way is communism different from fascism or from what socialist say they want?

That about sums it up. But I’m always open to being proven wrong…How in any practical way is communism different from fascism or from what socialist say they want?

Check, check, check, and check. You know what the difference is between Fascism and Communism? It’s not in the type of government you have, it’s in the propaganda. Communism promises you a utopia where everyone is equal because they have done away with class, and every terrible act is justified to accomplish this greater good. Fascism is completely different in every way. Fascism promises you a utopia where everyone is equal because they have done away with everyone from a different heritage, and every terrible act is justified to accomplish this greater good.

There’s also a type of fascism that replaces race with religion, but most religions don’t work well with this because most religions argue that the human soul is divine, hence it works against fascist/communist principles that glorify only the whole and degrade the individual. In fact I can think of only one traditional religion that denies the divinity of the human soul and requires you to submit absolutely to the will of God.

Now I guess you could have something really bad which uses the racism of fascism and the class warfare of communism, and the religious overtones of Islamofascism, in one…oh wait, we do have that, it’s called North Korea. Otherwise known as the worst place on Earth.

There isn’t any practical difference between Communism in practice, Socialism in theory, and Fascism. They have the same means, the same methods, the same procedures. And they all have the same result. Suffering. Mountains and mountains of suffering. So, yes, calling someone by all three names is correct because all of them boil down to the lack of liberty in the name of the greater good.

‘But, but, but,’ I can hear the leftist whine now, ‘fascism is ultra-right not ultra-left.’ Okay, one, join the 21st century, the single axis right-left thing has been replaced by two and three axis plots of political leanings…and on those communism and fascism are pretty close to each other. The only reason some original idiot put fascism on the right was because they equated the love of country of the right wing America and Britain (which was based on the ideals of the nation) with the love of nation seen in fascism (which was based on things like race and ethnicity, you know the exact opposite of ideals). So let’s chalk up another moment in idiocy for political scientists.

‘But, but, but,’ they whiners will continue…and then they’ll bring up what we typically call socialism, the mixed-economy, and they’ll say that works. And the problem here is that the mixed-economy model covers a whole wide range of economic systems. Let’s start as the most free, the mixed-economy that leans towards capitalism (America in more recent history). Typically this tends to work and create prosperity. Then you moved to a truly mixed economy that are truly using a bit of capitalism and a bit of socialism (Israel, Poland, Mexico, France) depending on a lot of factors such as resources, culture, infrastructure, terrorism and crime issues, etc., this can work decently or not, but it tends not to create truly thriving and flourishing economies. Then you have your socialist leaning mixed economies like Greece (yeah they’re doing well) or India and China (where the media likes to focus on some people doing well, but somehow the socialism is still providing not much prosperity to the masses). But since all of these are called mixed-economies, idiots like to point to the successes of the capitalist leaning ones or the ones that benefit also from strong cultural issues, and use that as a justification for the socialist policies. However, this is silly, because when you line up countries by how economically free they are versus the prosperity there is, has always been, and will always be a strong relationship between economic liberty and prosperity. In fact there is a strong relationship to a lot of things we like (standard of living, life expectancy, low corruption) that comes with more economic freedom.

Yes maybe one country listed as a 67 by the Heritage scale of economic freedom isn’t doing as well as one rated as 57, and maybe one country did better one year even though its numbers dropped a little in that year, but as I said there are a lot of other factors that effect this or that individual nation but overall, every country does better the more economic liberty it has. So when socialists try to tell you about the joys of the mixed economy, point out that actually those benefits are what comes from capitalism not the socialist aspects of the mixed economy.

Now I could get into the fact that only capitalism within a Classically Liberal republic (or as close as we have gotten to it) has been shown to offer real protection of rights and real prosperity, but you’ve seen me do that before…or that cronyism, which is really a form of the socialist mixed economy, creates a lot of problem that capitalism gets blamed for, even though it has nothing to do with capitalism, but those are a bit off topic from my original point.

So back to my first quotes.

“You can’t call Obama a socialist!”
“You can’t call Obama a communist!”
“You can’t call Obama a fascist!”
“You don’t know what words mean!”
“Obama’s a moderate!”

Yes, I do know what those words mean. Now it would take a whole other blog to PROVE that Obama’s attacks on the free market and natural rights qualified him for those appellations, but I trust your common sense to make the prima facie case on your own, because I think it’s fair to say that every action he has taken over the last 5 years has moved us away from the benefits of capitalism and more and more toward the economic nightmares of socialism/communism/fascism. The only real question is, is it intentional or just gross idiocy?

Types of Government

*Yes, the Nazis just like every form of Communism embrace, encourages, and enforces state run atheism.

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Movies that show the rich as good #2: Meet Joe Black

“Should I be afraid?”
“Not a man like you.”

Meet Joe Black is a great movie for several reasons. A powerful love story. An insightful look at what life is about. And oddly enough a story about a businessman making sure his life work remains great. (Also the only time in history the IRS was even tangentially heroic…and not, you know, worthy of the treatment at the end of Braveheart).

Meet Joe BlackNow some might think that the story about the businessman trying to keep hold of his business when he knows for certain he will die in the immediate future is really a secondary plot line—that the love story of Death (Joe Black) and Susan is far more important than Anthony Hopkins business tales. And people who edit movies for TV and in-flight movies would agree with those people. However the director Martin Brest thought that it so ruined the movie that he got the Director’s Guild to agree that his name could be removed from the cut without the business story line—the Director’s Guild receives hundreds, some years, thousands of requests to have directors names removed because the director was unhappy with the result…virtually all of them are denied.* So that this was granted tells you that this plot line involving Hopkins’ character of Bill Parish is absolutely important.

Why? Or as Death puts it:

Joe Black: Bill, why at this juncture are you letting yourself be so concerned by business matters?
William Parrish: I don’t want anybody buying up my life’s work! Turning it into something it wasn’t meant to be. A man wants to leave something behind. And he wants it left behind the way he made it. He wants it to be run the way he ran it, with a sense of honor, of dedication, of truth. Okay?

Because this film shows us that life isn’t just about love. It is about life. The big and the small things (like peanut butter). And this movie shows the depth of love, not just romantic love, but the love of parents and children, of friendship, of siblings, and of life itself. Love is one of those massively important things…but so is accomplishment. In fact, if you look at the needs of people’s accomplishments, achievements, the attainment of goals is, according to psychologist Abraham Maslow and his hierarchy of needs, is the next thing we need to achieve in our quest for Happiness.

Now the liberals out there are probably rolling their eyes when they hear attainment of goals or achievement, as theyMeet Joe Black Dance think that you attain goals you must do so by taking from others. They see a world of static wealth and prosperity, where if I am to be successful another must fail, where if I am to be wealthy another must be poor, where if I am to be happy another must be miserable. Which is why they must tear down the strong, the successful, the happy, because in their warped mind those people are taking strength, success and happiness from others. Reality tends to be quite different. Whereas historically most economic and political systems have done the liberal thing and only shifted money and resources around, or at best created wealth at an astoundingly slow rate…capitalism literally creates wealth where it did not exist before. It takes work, ideas, creativity, individual and cooperation, risk, and planning to create wealth…but capitalism is the only system that can sustain long term innovation to create wealth out of what was previously worthless. Wealth thus has no limit, so long as there is liberty and drive to keep creating it. It parallels the other thing we seek for constantly in life: love. Just because I love my spouse doesn’t mean I have to love my parents, my siblings, or my children, or my friends less…they may all be different kinds of love, but an increase in one does not diminish the others. And the movie is quite clear; we need love in our lives:

Bill Parish: Love is passion, obsession, someone you can’t live without. I say, fall head over heels. Find someone you can love like crazy and who will love you the same way back. How do you find him? Well, you forget your head, and you listen to your heart. And I’m not hearing any heart. Cause the truth is, honey, there’s no sense living your life without this.

To make the journey and not fall deeply in love, well, you haven’t lived a life at all. But you have to try, cause if you haven’t tried, you haven’t lived.

But again back to the Maslow’s hierarchy, life isn’t complete with just love, we also need accomplishment. And the character of Bill Parish certainly has accomplished as the founder and chairman and CEO of a multinational media empire. As he discusses his business he states:

Meet Joe Black ConfrontationSee, I started in this business because this is what I wanted to do. I knew I wasn’t going to write the great American novel, but I also knew there was more to life than buying something for a dollar and selling it for two. I’d hoped to create something, something which could be held to the highest standards. And what I realized was I wanted to give the news to the world, and I wanted to give it unvarnished. The more we all know about each other, the greater the chance we will survive.

Sure, I want to make a profit. You can’t exist without one. But John Bontecou is all profit. Now if we give him license to absorb Parrish Communications, and he has his eye on a few others after us, in order to reach the world you will have to go through John Bontecou. And not only will you have to pay him to do this, far more important, you’ll have to agree with him.

He veers almost into the territory of an Atlas Shrugged hero there…Yes I love making money, but I love making my creation more and you could offer me all the money in the world to scrap what I have built and I would throw it in your face. He is a man of morals which are more important than just money. Which is something else that correct philosophers from Aristotle to Maslow understood, while there are charlatans that can make money, they often can’t keep it going and can’t create. Yeah there are terrible businessmen out there, but the majority of the rich, from the so called Robber Barons to Mitt Romney the rich who come to their money through work and achievement are among the most generous people in the world (Please see Who Really Cares by Arthur C. Brooks for further proof).

And it is this mixture of accomplishment and love and morality that makes the character of Bill Parish so admirable that even Death views him as someone to learn from.

The man from whose lips fall “rapture” and “passion” and “obsession”? All those admonitions about being “deliriously happy, that there is no sense in living your life without” all the sparks and energy you give off, the rosy advice you dispense in round pear shaped tones. […]It requires competence wisdom and experience, all those things they say about you in testimonials. And you’re the one.

And as we see through the course of the movie as he cares for his family and their happiness more than his business, and the achievements he has made more than just buying another day or two of his life, why when right before Death takes him he asks, “Should I be afraid?” The obvious reply to someone who has built and accomplished and loved the only answer can be, “Not a man like you.” Bill Parish stands out as a man who has excelled in every aspect of his life…and it’s amazing that Hollywood would show such a character as being.

Meet Joe Black Death

*If you ever see a movie directed by Alan Smithee, there is no Alan Smithee. That’s the name the Director’s Guild puts on films they allow the real director to distance themselves from. Producers or a studio have to ruin beyond the telling of it a director’s film before this is ever granted.

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Capitalism: The ONLY hope of Mankind

Capitalism is the only system that has been shown to raise people out of poverty. It is the only system that benefits the rich, the middle class, and the poor. It is the only system that can bring a nation out of destitution. It is the only system that works long term. It is the only system compatible with human nature. It is the only system of economics that is ethical. It is the only system of economics that is sustainable because only capitalism creates and encourages the innovation and imagination needs to deal with the constant slew of problems that life brings.

You can either be in favor of Capitalism or you can be an idiot who knows nothing about economics, history, psychology, philosophy, ethics, human nature, politics, reason, logic or facts.











Let me say again…You can either be in favor of Capitalism or you can be an idiot who knows nothing about economics, history, psychology, philosophy, ethics, human nature, politics, reason, logic or facts. That is all.

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Dangerous Right Wing Social Engineering

Now I’m sure that Newt will call this “Right wing social engineering” and has made it all to clear that he will not have anything of its kind in his administration, but I want you to hear this man speak about what actually raises people out of poverty, about what actually creates jobs…and if you don’t like it, hey vote for Obama or Newt, they’re both opposed to this idea.

Now you show me someone else who talks passionately and knowledgeably about capitalism and I’ll consider them.  Until then, Mitt is my man.

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