Avoiding the Fiscal Cliff – Booo!

Fiscal CliffI’m probably the lone-voice who is opposed to stopping the so-called “Fiscal Cliff” of 2013. Yep, I want to go over the fiscal cliff.

For an exhaustive understanding of the ramifications of both stopping and allowing the fiscal cliff to occur I’d highly recommend the Wikipedia article. It’s complex, long, and not easy to process. I’m going to try to summarize why I think going over the fiscal cliff is the better choice but please read the article and come to your own conclusion.

First a quick understanding of what the fiscal cliff entails. Basically, if the US doesn’t extend the debt ceiling then, by law, a series of automatic budget cuts take place along with the end of various tax-relief schemes. These budget cuts and tax-relief abatements are projected to reduce the current level of federal debt by 50% in one year. That is not enough. Even with the automatic cuts we will continue our debt spiral just at a substantially reduced rate. On the other hand, if we avoid the fiscal cliff then we reach 100% of GDP indebtedness in 2021. That means, if there is a resolution to the fiscal cliff, the United States will owe more than the entire GDP of the nation by 2021.

It is argued that we must avoid the fiscal cliff to stop a short-term recession. This is the sort of policy that got us into a debt mess in the first place. It all started when President Reagan came into office during the Stagflation years of the late 1970’s. We started to spend our way out of every potential recession. At that time, when President Carter left office, we were $700 billion in debt. We are now over $15 trillion in debt and, even with the fiscal cliff penalties, will continue to dive more deeply into that state.

The fiscal cliff penalties involve cuts to programs everyone likes. There are cuts to the military, cuts to social programs, cuts to education, cuts to everything. There are more taxes for virtually everyone that currently pays taxes. Either we accept these hardships now or we face nastier ones down the road. One side wants more taxes and the other less spending but neither can stomach both. This nation was founded as a Representative Republic. This form of government works because of compromise. Without an absolute dictator or a super-majority it is impossible to implement dramatic change. That’s intentional. Dramatic, one-sided change is rarely long-term good news for anyone, even those forcing through the legislation.

I’m not suggesting the fiscal cliff ramifications are good news but I’m saying that continuing on our current fiscal path will bring worse consequences down the road. We will eventually face an inability to pay our debt. This will result in all the consequences of going over the fiscal cliff and more. We are simply putting our head in the sand and then patting each other on the back on what a great thing we just did. This is madness.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
Current Release: The Sword of Water
Next Release: The Spear of the Hunt

Elastic Currency and National Debt

Elastic CurrencySome time ago when I first starting blogging here on WordPress I wrote a post about the Gold Standard. In it I tried to explain the concept in its most simple form. Today I’m going to try to explain the term of Elastic Currency. These two terms are linked together as monetary policy siblings and a thorough understanding of both concepts is a precursor to being able to fully understand the financial problems that face the United States.

As with my Gold Standard article I’m not going to get too technical nor am I going to make too many suggestions as to whether or not this policy is best for the country and the world. I think it’s important to understand the concepts and only after that can people make informed decisions about the financial future of the United States.

The idea of Elastic Currency is that a central banking institute can expand or contract the amount of money available to lending institutions based on economic conditions. This is deemed to be important for two linked reasons. The history of economies throughout the world is a history of boom and bust cycles. These cycles bring tremendous hardships to nations and the goal is to alleviate the pain of these events.

In a boom/bust cycle a particular item becomes attractive to buyers which spurts a speculative interest in those sorts of items. Be it dotCom, Housing, or whatever. Basically people find that they can purchase the product and then sell it later for a profit. This fuels the boom. More and more people purchase the product which drives the prices higher and higher generating further profits and more speculation. The boom “bubble” grows and grows until the product is selling for far more than it is worth. Then, all the people holding the product at the end are bankrupted when people suddenly stop buying. This destroys economies because the people can’t pay back the money they’ve borrowed and the people who loaned the money also go bankrupt. Thus, there is no money to loan others and we enter bust.

The idea behind Elastic Currency is that a central banking institute recognizes a boom cycle is going on and reduces the amount of available currency to loan and tempers the speed and size of the bubble which bursts with far less grave consequences. Likewise, during the ensuing bust cycle the banking institute allows more money to become available for loans thus paving the way for new growth by those who played it safe and did not engage in the boom but would otherwise be shut out by the lack of available loans.

The demise of the Bretton Woods gold standard in 1971 and the rise of Bretton Woods II is clearly linked to the current level of indebtedness that the United States and much of Europe face. Whether there was another, better, solution is unclear.

So, that’s the main idea of Elastic Currency.

I promised not to make too many suggestions as to fixing the rising debt we face but one thing that I think has been ignored by the Federal Reserve and the financial agencies of other countries is that Elastic Currency can and should be contracted at times. It is not merely a tool to fuel growth but also to temper expansion. The other suggestion is that the Federal Reserve’s job to limit the boom/bust cycle is not to eliminate all bust. Moderate bust is good. It weeds out weak players and allows for the growth of new, vigorous entrants into the economy.

I hope this little essay explains some of the concept of Elastic Currency to my legion of followers. I do not pretend it is an exhaustive treatise on the subject and I recommend a perusal of the Wiki articles linked above for a far greater understanding of the process.

Thanks for listening and feel free to comment below either in agreement or disagreement. All are welcome!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
Current Release: The Hammer of Fire
Upcoming Release: The Sword of Water

Teaser – Science Week – Computers

ScienceYes, amazingly Science Week continues at the behest of my thousands of fans! Tomorrow I take on a subject near and dear to my heart, computers. My personal employment depends on computers and they have changed the world. I’ll look at the early days of computer development and the effect they have on the economy of the United States.

You might learn a few things you didn’t know about men like Bill Gates and Steve Jobs and you will almost certainly gain a new appreciation for a personal hero of mine, Sir Tim Berners-Lee. And let’s not forget everyone’s favorite … Al Gore!

Stay tuned for day four of Science Week!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist

Privacy in the United States – Definition

Privacy
Privacy is a complex issue in the United States. The advent of new technology is changing not only the perceived definition of privacy but also its reality. In this series of blogs I’m going to take on this complex issue and examine how it relates to every citizen of this county and, more generally, to the idea of Libertarianism and free thinking.

As is my want, I’ll start out with the general definition. This is a difficult concept because there is the definition of privacy, the general expectation of privacy, and the actual fact of privacy law in the U.S. Surprisingly, these three things are fairly widely divergent.

First I want to examine simply the concept of privacy. The dictionary seems a good place to start. Sadly, I don’t have a subscription to the magnificent Oxford English Dictionary site but Merriam Webster comes to the rescue.

a. the quality or state of being apart from company or observation

b. freedom from unauthorized intrusion <one’s right to privacy>

I think we are largely talking about definition “b” in this case. Our right to privacy from unauthorized intrusion. The first definition concerns itself more with my individual right to hide in my room typing my blog, writing my latest book, and playing Skyrim.

Now, as to our perception of privacy. An interesting story recently demonstrated that, largely, our sense of what is private does not mesh with reality. I don’t want to get into the details of the story but basically it talks about how our shopping habits, tracked through our credit, debit, and reward cards gives retailers a great deal of information about us.

We think that is private for the simple reason that until the advent of massive database tracking it was impossible for someone to keep track of that much information. Those sorts of databases now exist and combined with identifying tools like reward cards and tracking cookies it is possible for people to not only keep that information but mine it for gain, both yours and theirs.

How does that help me? It helps me everyday when I’m on the computer. Advertisements that interest me show up in my browser, books that correspond to my reading habits show up every time I visit Barnes and Noble or Amazon to check on the rather anemic sales of my books. This sort of targeted advertising will only increase as the technology blooms. When I check in at the grocery story my phone will tell me items on sale that I’ve purchased in the past. When my shirts start to get to be a year or so old  I’ll get an automated message from Brooks Brothers that I need some new ones.

These are the sorts of things we once thought private but are quickly finding out are not. If, say, I purchase an inordinate amount of Bookers Bourbon in a month perhaps I might get a call from an alcoholic center. It’s difficult to say how far this information will go but its safe to say that where there is money to be made the technology will follow.

When you are talking on the cell phone or send an email there is no privacy. That is open line communication and fully non-private. Everything you do on the computer at your workplace, browse the internet, send instant messages to your loved ones, or play solitaire is managed by the Information Technology team at your office. None of it is private.

Every web page you visit is tracked although this is where we start to get into the legal definition of privacy. While certain information is available it is not necessarily admissible in a court of law.

So, as to the legal definition of privacy in the U.S. There are different laws for public and private figures and I’m mostly going to talk about personal privacy for now. Public figures have less privacy than non-public ones for a variety of reasons.

As far as most of us are concerned, privacy laws essentially protect us from someone finding out information about us to either publicly disclose or use for personal gain. Yellow Journalism and the advent of the easily available cameras spurred many new laws in the past and new technologies are changing the landscape almost every day.

To try and wrap up part one I’ll mention the idea of tort law in the U.S. in regards to privacy. There are basically four areas covered and I’d recommend a long perusal of the Wikipedia article for better information.

  1. Intrusion of solitude: physical or electronic intrusion into one’s private quarters.
  2. Public disclosure of private facts: the dissemination of truthful private information which a reasonable person would find objectionable
  3. False light: the publication of facts which place a person in a false light, even though the facts themselves may not be defamatory
  4. Appropriation: the unauthorized use of a person’s name or likeness to obtain some benefits.

Ok, that’s it for part 1. Tomorrow I’m going to try and take on the history of privacy in the U.S. and how technology has, and is, currently changing it.

As always, Like, Stumble, Tweet, Digg, and otherwise share this information if you think someone else might find it of interest. Comment are always welcome!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist

Anti-Trust Legislation

anti-trustAs a Libertarian I’m largely against government interference in the freedom of people to do as they will. There are limits and one of those is anti-trust laws. These laws are put in place to make sure that competition is waged on a level playing field. This is an area, in my opinion, that separates Libertarianism from Anarchism.

In any case, the purpose of this blog is to talk about why anti-trust legislation is needed. To start things off I’ll talk about the definition anti-trust. I’m going to generalize and a full perusal of the anti-trust Wikipedia article and its linked definitions is a worthwhile study.

Anti-trust laws are designed to stop things like collusion and cartel. Collusion is when a group of people agree to limit open competition. It is usually marked by uniform pricing among competing items. A cartel is an open agreement to set prices at a certain threshold.

A second thing they are designed to prevent is market dominance and particularly monopoly. Both of these situations occur when one supplier controls such a large percentage of a particular commodity that they can set a price as they choose rather than being forced to offer a competitive price by competition.

Acquisitions are also under the purvey of these kinds of laws. If one company attempts to purchase all its competitors then monopoly or dominance ensues. Both of those things hurt the consumers ability to get product at a fair price.

There are host of other anti-competitive practices that include things like dumping; wherein a company forces competition out of the market through cheap pricing, refusing to deal; when a group of companies refuse to purchase from a particular vendor to put them out of business, dividing territories; when two or more companies agree not to compete with one another.

In my mind we need anti-trust laws for the same reason we need laws in the first place. It is human nature to take advantage of a situation in any way possible. One of the pro-capitalist arguments is that it caters to human nature and I agree with this but we must also take human nature into account when we make our laws. Anti-trust laws and general regulation hopefully provide a level playing field against unfair practices that hurt capitalism and the consumer.

If we can apply broad regulation that levels the playing field then the business that is operated most efficiently wins. I think it is important for the business community to understand that some regulation is required to prevent unethical people and businesses from dominating the market and putting all the ethical people out of work.

I’m almost finished here but I think I need to explain what I mean by broad regulation. I don’t recommend legislation that takes every possibility into account because that sort of law is doomed to failure. What I mean is more general types of regulation that simply allow each company to play on the same field.

We have laws that make sure manufacturers put the quantity of material in the food container on the package. This regulation is easy to comply with and understand. That’s the goal of all regulation, simple and cheap to implement for the producer, easy to understand for the consumer. It’s not always easy to achieve but I do think it is necessary to allow capitalism and the free market to thrive.

I welcome disagreement as always!

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Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist

Teaser – Anti-Trust Laws

Anti-trustAfter my Crony Capitalism post a little while ago several fellow Libertarians posted comments in support but mentioned that they didn’t think the government had the ability to create a level playing field through regulation. That this field was created by competition itself.

Tomorrow I’ll share one group of situations where I think federal oversight, in the way of broad regulations, is sometimes necessary in order to have a free market. Why I think unfettered capitalism doesn’t work without a modicum of government oversight.

I’ve got my bunker all prepared for a blast back from Libertarians!

Stay tuned and see you tomorrow!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist