By G.L.C., on March 11th, 2009
Minimum wage laws are against the law of supply and demand. Wages are based on the supply of and demand for labor. If the supply is low, wages will be higher and if the supply is high, the wages will be lower. If the demand is high, the wages will be high and if the demand is low, the wages will be lower. The market price of an individual labor’s wage is determined by the supply of and demand for particular skills of that labor. Employers pay the lowest price for the specific skills and labor attempts to find the employer paying the highest.
If the consumer does not value a product in the market, the prices of all factors involved in the production of that product including labor will fall and vice-versa. Real wages will also rise if the workers become more productive.
If the government through legislation raises the wages, the demand for labor will fall and some labor will not have any employment. It is more likely that the less experienced and young workers will be the ones at the receiving end. Minimum wage legislation prices the least employable out of the market and makes them unemployable. If an employer feels that a worker is not likely to produce at least the value of the wage paid to him.
Increase in minimum wages pushes up the cost of individual businesses. Most businesses will pass on the increased in the wages to the end consumer.
Minimum wage legislation will inevitably create unemployment. The ones who are most affected are those at the bottom of the economic pyramid. Labor valued by employers at less than the mandated minimum are likely to be unemployed. It increases unemployment amongst the young and unskilled.
The most obvious beneficiary of minimum wages legislation are unions and their members. The median weekly wage for union members is higher than for nonunion workers. How successful an union is depends on its ability to maintain high wages and job security for its members or else it will loose its members. To obtain higher wages, it becomes necessary to exclude some labor from the market. Only a small percentage of the population will be benefited by increase in the minimum wages. This benefit comes at the expense of the least experienced, least productive, and poorest workers.
Supporters of minimum wage legislations claim that without minimum wages employers would drive down the wages to extremely low levels which would make it very difficult for the workers. This is just not true. Many businesses pay higher wages than mandated by law.
Increasing the minimum wages will not result in an increase in the real wages. Although minimum wages have been fixed over the last few years, the average pay in the United States had been increasing steadily. This is not due the efforts of the policy makers in Washington DC. Any attempts to increase the minimum wages would have a negative impact on the economy. It will affect the capacity of the economy to generate prosperity for the less skilled.
Instead of trying to influence minimum wages through legislation, the government could do very well to ensure a booming economy in which lots of businesses are opening and expanding thereby increasing the demand for labor which in turn increases the wages.
By Trace Mayer, on March 11th, 2009
At Casey Research, we are trying not to be overly pessimistic, but there’s no denying the mass of bad news coming to us from all fronts: the forces of collectivism are using the cover of the crisis they largely created, aided and abetted by capitalism’s quislings, to roll over the individual.
Even so, contained within the dire reportage is also some very good news for you personally.
THE BAD NEWS
As fully anticipated, with its first budget plan, the Obama administration has fired a salvo into the side of the productive classes. For those of you who are not U.S. citizens, feel free to use Team Obama as a proxy for what is likely to occur where you reside.
Yes, we expected the $1.75 trillion budget deficit, which will, by the time all is said and done, come in a lot closer to the $2.5 trillion number anticipated some months ago by our Chief Economist Bud Conrad.
Yes, we expected the government to begin raising taxes, which they are proposing to do with vigor – starting with an increase of $1.4 trillion on the people who earn in excess of $250,000 a year. “Right on!” shouts the mob, on the way out the door to burn Porsches.
For no other purpose than to keep the record straight, it’s worth noting that thanks to the government’s steady dose of inflation, $250,000 today will only buy you 77% of what it would have in 1998… and 56% of what it would have in 1988.
A decade from now, given the inflation rate we expect, the dollar’s purchasing power will erode by another 50%, and probably a lot more than that. In fact, at the current rate of money creation, by the time the dust settles, $250,000 might be the annual wage commanded by burger flippers.
But, hey, look at the bright side, at that point everyone will be rich!
The further details of Obama’s budget plan are a hodgepodge of this and that, some of which we even agree with (like cutting business subsidies). On the whole, however, the overarching mandate appears to be to thrust the hand of government, like some motion picture kung fu villain, deep into the heart of American enterprise.
And government’s expansion is far from over. The news continues to pour in…
- Citigroup to get another $25 billion bailout from the U.S. Treasury.
- Treasury officials work on bailout plan for auto parts manufacturers.
- President Obama exploring automatic workplace pensions and an expansion of unemployment insurance.
- AIG, now a government lap puppy, takes another big loss, and is again looking to its master for another handout.
- Speaking of lap puppies, Fannie Mae, has lost another $25 billion and is looking for $15 billion more from the Treasury. The value of this zombie institution’s net assets is now a negative $105 billion, and eroding. Great investment of your tax dollars, eh?
- Then there’s the new administration’s cap-and-trade green tax… a stunning new initiative that will bring many U.S. businesses to their knees.
There is more, so much more, including a $638 billion reserve fund for healthcare reform in the president’s budget that loudly broadcasts that, “Yes, we’re going there.” There being nationalized health care.
However, there’s also some good news to be found in the way things will be.
THE GOOD NEWS
My fellow citizens of planet Earth, it is now abundantly clear that the trend toward socialism in all its many disguises is about to, once again, shift into high gear.
We’ve been here before, encouraged by the words of Karl Marx, a distinctly unsuccessful individual (to read his life story is to read of almost unending misery, poverty, and discontent) but a decidedly successful phrase-coiner, knocking the world off its axis with his “From each according to his ability, to each according to his need.”
While no one with any real sense of history, not to mention economics, can take any overt joy at the prospect of the dark clouds of collectivism looming high in the sky above us, there is, if you pay close attention, a very big opportunity in all of this.
Namely, we are now presented with a relatively rare chance to see with some clarity into the future.
Imagine if eight years from now you could step into a time machine and zip right back to this very moment. How much money do you think you could make?
Well, just because the chattering masses have the blinders on as they march forward to their collective penury doesn’t mean we need to join them. And, if we are even a little bit careful, we won’t.
So, what is it about the future we can now see? Some broad strokes…
- Currency depreciation.
- More taxes.
- Rising interest rates.
- A price capitulation in real estate, with a collapse in commercial.
- Exchange controls (now that Team Obama is raising your taxes, you don’t really think they’re going to let you pick up your wealth and leave, do you? The window for global diversification will soon be closing.)
- The return of mega-labor unions.
- Trade wars, shooting wars, and other forms of heightened geopolitical tension.
This is a topic we are discussing at greater length, backed up with specific recommendations, in the March edition of The Casey Report, released on March 3. Among its many highlights, Doug Casey has contributed an article titled “Street Fighting Man” about the prospects for social unrest.
Provided you keep your personal wealth profile low (there was a reason Sam Walton, founder of Walmart, drove a beat-up pickup truck), your financial powder dry, and, maybe most important of all, retain your sense of humor, the opportunities in the unfolding crisis will be abundant.
Whatever you do, don’t be complacent about what’s coming.
We are long past the point where doing nothing is an option. Review your personal finances, cut out unnecessary expenses, talk to your accountant about tax planning, and, if you’re a U.S. citizen, consider moving at least some of your wealth out of the country while you still can (but please, don’t try to hide it… that’s a fool’s errand). If you own gold, only you and your spouse, if you have one, should be aware of it.
Ask yourself, “If I just dropped in from eight years in the future, what measures would I take?”
Now, take them.
There is no time to lose in taking the necessary steps to preserve (and multiply) your wealth. The best way to do so is going with the flow and playing the trend… a strategy that can pay off handsomely, even in an economic crisis.
By Bhagwad Jal Park, on March 10th, 2009
I’m an avid reader of history. I’ve read a lot of it from various cultures over various time periods. Chinese, Indian, Russian, Roman, Norse, and Greek. I’ve also read just about every single major piece of mythology that exists on Earth, and I have come to an interesting conclusion – No matter what the changes in the Environment are, no matter how much mankind has ‘achieved’, the human condition has not changed.
What I mean by this, is that the net sum of happiness and misery in the world has remained more or less the same. In spite of our economic success, our inventions, and our knowledge, man is still the same person, facing the same problems (albeit in different ways), and dealing with them in the same way. The only thing that really seems to have changed, is the relatively less amount of outright injustice, like slavery, or witch hunting.
But witch hunting has not ended. It happens every day, when we need a scapegoat. It’s toned down of course, but it’s not ended. Humans never change.
What then, I am forced to ask, has our economic success really provided us with? It has eased our lifestyle. But is that so important? I have become so soft and weak, that I wonder if it’s a boon, or a curse. Has it set me free? Not at all. The free market has removed the explicit forms of control, and has replaced it with insidious ones like subtle advertisements, and peer pressure.
In fact, our economic system has turned into a monster. In intelligent, living monster, with a life of it’s own, and it’s own interests. It was created to serve humans. It was created painstakingly, to make our life more secure. But like the fantasy novels, where the robots that man has created, become self aware, and rebel against mankind, the economic system has turned around and enslaved us.
What food does this monster eat? The food is our desire. The economic system is greased by the money that circulates due to purchases that people make. If people never bought anything, companies would go out of business, and the building blocks of the system would be destroyed.
If the beast stayed within it’s limits, and provided for mankind what mankind actually wants, then it is indeed a great boon. But the beast has it’s own life. It wants more and more, and so, ensures that we are bombarded with things we don’t need, convincing us that it is essential to our happiness. Such is it’s perversity, that it even makes spend what we do not have through credit cards.
To say that we are in control, is a fallacy. Each one of us is powerless in the face of the giant corporations that rule our lives. We’re like worker ants. We imagine that we’re serving ourselves, but all the time, we are doing exactly what we are required to do, dutifully, and even joyfully. The corporations themselves are slaves to the even bigger forces of the share market, and external forces like government regulations, taxes, and oil prices.
The more we think about it, the scarier it becomes. We are so insignificant in front of this beast, who nonetheless needs us, that it’s frightening. Is there a way out? Probably not. For that, all of mankind must mature, and evolve spiritually. But as mentioned in the beginning, man is the same, and always will be.
By Trace Mayer, on March 10th, 2009
COMPETING PARADIGMS
During an interview with Contrary Investors Cafe on 24 February 2009 I discussed both gold backwardation and silver backwardation. After the interview I was asked why more commentators are not discussing this issue. I do not know.
Regarding money there are two competing views: (1) money is determined by the market or (2) chartalism which asserts that ‘money is a creature of law.’ Governments can only manage money if they create it. Obviously, the market determines money because money existed before governments were created.
Regarding gold there are two competing paradigms: (1) gold is a commodity and (2) gold is money. Paradigm (1) asserts that gold is a hedge against inflation and there is no monetary demand for gold. On the other hand, paradigm (2) asserts that gold is a hedge against currency collapse and the primary demand for gold is monetary. I subscribe to the second paradigm and assert that at all times and in all circumstances gold remains money.
WHAT IS SILVER’S ROLE
Under which paradigm does silver fall? Is silver a commodity or is silver money? For a commodity to be money its primary demand must be monetary.
Like gold for thousands of years silver functioned as money in the market. The term dollar, as used in Article 1 Section 9 Clause 1 and the Seventh Amendment of the US Constitution, is defined as 371.25 grains of fine silver under Section 9 of the Coinage Act of 1792. Governments stockpiled billions and billions of ounces. However, on 24 June 1968 the United States government defaulted on their silver certificates. Over the decades silver, like gold, has been demonetized in ordinary daily transactions. Supposedly there are large stockpiles of gold in central bank vaults. Unlike gold there are no reported large above ground stockpiles of silver stashed in central bank vaults. Additionally, a large portion of silver demand is industrial as it is used in cell phones, refrigerators, dental equipment, computers, etc.
Therefore, it appears that silver is confused about its role. In other words, silver functions as a commodity and as quasi-money.
FIVE WEEKS OF SILVER BACKWARDATION
While similar there are differences between future and forward contracts. For example, future contracts are traded on exchanges, use margin and are marked to market daily. In contrast, forward contracts are generally traded over-the-counter (OTC derivatives) and are not marked to market. Therefore, forward contracts are subject to greater counter-party risk than future contracts.
Because the primary reason backwardation arises is counter-party risk and because forward contracts are impregnated with greater counter-party risk than future contracts therefore it is highly likely that backwardation would appear in the forwards markets before the futures markets.
This is precisely what has happened. While the COMEX silver futures contract have not been in backwardation the LBMA Silver Forward Mid Rates have been in backwardation for five consecutive weeks. Of particular interest is the 6 month contract.
SO WHAT?
What does all this mean? Well, I think the backwardation reflects the market’s uncertainty of silver’s role as money. The chronic silver backwardation began on 8 December 2008, the same day I wrote about gold in backwardation, and silver was priced about $9.60. Currently silver is trading about $13.82. Predictably, the gold/silver ratio is narrowing. If the backwardation persists it will be interesting to see if silver’s price in illusory FRN$ continues rising.
In my opinion, as the great credit contraction grinds on and intensifies the commodity silver will reassert itself as money and eventually currency. As I mentioned during the interview with Contrary Investors Cafe what would be really interesting is if the central banks decide to start hoarding silver!
 In the meantime it may behoove those who are bullish towards silver to increase the pressure on physical silver delivery. For example, I purchased some beautiful Austrian philharmonics at the Cambridge House Investment Conference and Silver Summit over the weekend. The beautiful coin cost $20 which was an amazing $5.50 over spot.
While there are cheaper ways to purchase physical silver bullion, like GoldMoney, these huge premiums over spot beg the question: What is the real silver price? With the specter of counter-party risk driving silver into backwardation if there is a failure to deliver then it will likely cause the silver price to shift from the COMEX just like a failure to deliver would cause the gold price to shift from the COMEX.
Bottom line: Do not get caught with your paradigms down!
By Erica Tesla, on March 9th, 2009
Security in the digital realm can seem very abstract. Anytime you lock up something in the physical realm, you have a tangible object to be locked up, an equally tangible lock, and the key for that lock. The key can be physical or not – contrast a key you slide into a door lock with a series of numbers in combination that opens the chain lock around a bicycle. In the digital realm you secure data, or stored information. The lock itself is a computer algorithm. The key is a series of numbers, letters, and symbols known only to you. Each of the digital components of security is more abstract than its physical counterpart, with the possible exception of the key, which we can conceptualize as a combination for a combination lock.
However, digital security uses economic principles which are very similar to those used by physical security. In both cases, the foundation of the security is to provide two disincentives to potential thieves: first, make it difficult to take your stuff by locking it up; second, reduce the perceived payoff for successfully breaking your lock. How well your security measures work depends on how well it performs each of these tasks.
For example, having a single, simple password shared among all of the computers and computer users in a household provides a weak level of security. A simple password, such as a short word out of the dictionary, is relatively easy to “break” using brute force – trying each word in the dictionary, for example. The payoff in this situation is also larger than it could be, since that single password is all that is needed to provide access to several systems and several users’ data on them. Overall, this is very much like using a single cheap bike lock to lock up the whole family’s bikes; a little brute force with a bolt cutter later, and all the bikes are gone.
This is why security professionals advocate difficult passwords that combine letters, numbers, and symbols; it’s why they say passwords should be changed often and should never be shared. If your lock is sufficiently difficult and time-consuming to break and it protects a small enough set of information, the payoff won’t be worth the time and the risk – and your potential thief will look elsewhere.
By Trace Mayer, on March 9th, 2009
 On 3 March 2009 in the space of a few hours the Armenian dram evaporated from about 300 per dollar to about 400 per dollar and 275,000 drams per ounce of gold to approximately 365,000 drams per ounce of gold. This rapid 30% currency poofing is like when the Kazakhstan currency went poof but without the strategic geo-political considerations. Nevertheless, extremely ominous financial troubles stir in Eastern Europe. One knows the conditions are dire when Armenian Prime Minister Tigran Sargsyan advocates using the Russian ruble as a stable currency.
As fiat currencies represent the common stock of nations; Armenia’s future is omnious. Trend Capital has reported that Ogtay Hagverdiev, of the Azerbaijani Cabinet of Ministers Economy and Finance and Credit Policy Department head, said. ”It will take time to restore the country’s economy. A revolt among the people may begin in the meanwhile.”
The Armenian government may soon default. Rising prices, the effects of inflation, will soon begin. Shortages, a common effect of currency problems, may appear. Civil unrest may follow like in Iceland, Greece and China.
JUNCTION POINTS
Large buildings in urban environments are often constructed in such a way to reduce the effects, such as sound, of the outside. It can be inspiring to sit in perfect silence without any sound to be heard coming from the bustling outside streets. How is this silence possible with the hustle and bustle of a metropolis only a few yards away?
The answer lies in the construction. For example, an inner building can be built within the walls of an existing building with the walls of the inner building connected to the outside building at only a few junction points. This will greatly limit the effects of the hustling and bustling metropolis.
The investor can learn a lesson. The reduction of junction points with businesses, organizations and governments can greatly reduce various risks to one’s capital and their effect on one’s personal life. If the relationship is no longer mutually advantageous then any attachment through junction points should be easily severed.
Defining one’s throughput and then implementing the Theory of Constraints thinking process can be extremely helpful in developing the Four Hour Workweek. This may allow one the freedom to live where, when and how they want. The transitions accompanying the great credit contraction will provide tremendous opportunity for wealth generation and accumulation. Being able to understand the environment will allow one to swim with, not against, the current.
As the great credit contraction grinds on more fiat currency illusions, like the Armenian dram, Kazakhstan tenge or British Pound, will evaporate either wholly or partially. As poet John Greenleaf wrote, “For all sad words of tongue and pen, The saddest are these, ‘It might have been’.”
I am sure many Armenians, Kazaks and British, who had their life savings evaporate, wish they had a last plane account with an institution like GoldMoney where they could have kept their cash balances in a tangible asset because no matter what happens with its fiat currency price the gold or silver is still there. When these currency devaluation events happen, and a golden sword of Damocles hangs over the US Dollar, it is extremely fast.
By B.P.T., on March 6th, 2009
There is no numerically specific definition of a crash but the term commonly applies to steep double-digit percentage losses in a strong market index over a period of several days. Whether you realize a direct or indirect impact, the recession affects you in one way or another. It’s become a dangerous snowball that began with the weeding out of weak or overexposed businesses. As USA faces a visible recession in current times, it is evident that economists are in overdrive to review the fiscal statistics and give expert opinions. The stock markets have already created a panic situation in the country. The biggest lenders are now facing a cash crunch and for the first time they are also admitting it. Recessions have the tendency to touch sore spots of business. Those which are no longer viable are shut off. Even the strongest feel the cracks in the face of an earthquake. The markets are disrupted and the effect is shown by even the millionaires.
Of U.S. households worth $1 million or more, 55 percent are concerned they will not have enough assets to maintain their lifestyles. Most of them are of the opinion that they have reduced all sorts of extra expenditures weather on cars, clothes or Jewelry. Over seventeen percent of the millionaires took hits to their portfolios of more than 40 percent. An internet report conducted by an organization revealed that over 60% millionaires are unhappy with their financial advisers and they will discontinue giving any work. Millionaires have blamed the government and the Wall Street for the current situation.
With the market crunch, it of course has some intense effect on the inflation rate, which is not good for anyone, not even for millionaires. Less money coupled with higher costs means dangerous times. Because of the credit crisis, millionaires are facing difficulty getting approved for more loans or credit from the bank for their new ventures. Ken Lloyd, 47, Vice President at Morgan Stanley said, “I never imagined a financial Armageddon would happen in my lifetime and I think the forces of evil are winning.” He recently bought his retirement home, a 100 year old Craftsman, in San Diego and wonders how he’s going to pay for it. He ponders out loud how many companies will approach flat-line before it’s all over. In a protracted recession only the companies with strong brands and lots of cash on their balance sheets will have sustainability.
More than 75% of the millionaires are today of the opinion that they will be more aggressive in their financial dealings, negotiating harder than ever with vendors, customers, employees and business partners. They are of the view that they will leverage their personal and professional networks more than ever in order to persevere in the face of economic adversity. Some experts believe that there is a 20-25 percent decrease in the stock market left to go. As the value of the dollar falls, the American dream is going bust for many. Whether it is the shoe maker or the food chain or cola giants or even real estate developers, the earning potential has been cut.
By Dan McLaughlin, on March 6th, 2009
“The Audacity of Hope” is a catchy phrase with important implications. It is good to hope, to look forward boldly in anticipation of better times, to have a positive outlook that is open to opportunity. But, just as it is not a good idea to run around in the dark with a sharp butcher knife, it is also not a good idea to boldly pursue policies with blinders on, while wielding dangerous economic weapons.
The “war on poverty” has been a miserable failure, in spite of the trillions of taxpayer dollars spent over the last 4 decades. The “war on drugs” is another expensive failure on all fronts. Central planning in American education has resulted in a very expensive system that is failing our children. Ask any supporter of the welfare state, however, and the ongoing failures of government programs result only from not throwing enough money at them. It doesn’t matter what miserable results from whichever government program, the only proposed solution to the problems is more money stolen from taxpayers.
In the real world, if a private business or association is not successful, it either changes the way it does business and serves people or it takes a one way trip to the business graveyard. Bankruptcy and failure ensure that bad ideas or inefficient, unproductive systems don’t keep sapping life from the productive sectors of society. That is the way that society progresses and economies advance.
Not so with government. It seems that the bigger the failure, the more support it gets. We have been victims of expensive stimulus plans for some time now. Remember the cure-all about a year ago? If only the wise politicians could take enough money from taxpayers to redistribute to taxpayers, they could jump-start the economy. Not enough. More billions prop up banks and failing businesses. Between the Federal Reserve Bank, FDIC and the multiple stimulus spending plans, the toll is now in the multiple trillions of dollars.
With all of the smart people purportedly hanging out in Washington DC, you would think that they might realize that, if you take a dollar from Joe and give it to Frank, and a dollar from Frank and give it to Joe, you really haven’t stimulated either. Worse yet, if you take a two dollars from Frank, give one to Joe and keep one to feed the beast, you have actually de-stimulated and made the whole economy less productive.
Stimulation is the fundamental reason that this country and the world are in their present sad state of affairs. Central banks try to stimulate economic performance at the beginning of an economic boom by pumping counterfeit money into the economy and lowering interest rates below the market rates. That stimulation only distorts the real economic incentives. The inflation devalues the dollar and creates bubble economies, where certain sectors inflate at a quick pace, giving the illusion of rapid real growth. In the present case, artificially low interest, specific homeowner incentives, government subsidized mortgages and ownership programs, and requirements for banks to offer loans to risky borrowers combined for the deadly combination that exploded into the current meltdown.
Those same smart people in our nation’s capital choose to ignore the obvious, and instead, throw trillions of dollars of good money after bad. Instead of fixing the core problem, they play political games for fun and profit. It is hard to believe that hundreds of the most well connected and powerful people in the country can be so willfully ignorant. That is, hopefully, the case, however, because if it isn’t, it means that, instead, they are willfully malicious. They consciously hurt the people they pretend to help.
Audacity, in the positive sense, means boldness or daring. It is a characteristic of effective leaders.
There is, on the other hand, an old saw among seasoned airplane pilots: “There are old pilots and there are bold pilots, but there are no old bold pilots.” Audacity is sometimes the precursor to disaster, because it substitutes cockiness for clear thinking, and throws caution to the wind. In this time of crisis, our leaders have thrown caution to the wind. They are flailing in the dark so they can say they are doing something. They are prescribing poison as the antidote for poison. They don’t think about the ramifications and, instead, rely on knee jerk reactions, which will ultimately multiply the problems they themselves have created.
Wouldn’t it be refreshing if our politicians would have the audacity to actually think for a change?
By J.D. Seagraves, on March 5th, 2009
When Illinois Governor Rod Blagojevich was arrested by the FBI on charges of corruption, he was allegedly seeking to sell Barack Obama’s soon-to-be-vacated U.S. Senate seat. Although the Constitution requires that special elections be held in the case of a vacant House of Representatives seat, it vests the power of appointing fill-in senators to the governor of the given state. Unfortunately for Blagojevich, there are federal laws prohibiting the outright sale of these gubernatorial tickets to D.C.
The response to Blagojevich’s arrest was universal shock and dismay—or feigned versions thereof. After all, is it really that surprising that a politician would put his own self interests ahead of his constituents’? Isn’t that what congressmen and senators do every day in Washington? In fact, there’s a case to be made that Blagojevich is truly a rare breed: an honest politician.
The Sad Reality
FBI tapes allegedly catch Blagojevich saying how “valuable” a U.S. Senate seat is. A senator has more resources available to him than even a large-state governor, Blagojevich said, and if someone didn’t want to give him something “of value” in exchange for the appointment, he was going to just take it for himself.
In response to these caught-on-tape comments, U.S. Attorney Patrick Fitzgerald said this was a “sad day for government.” Sad, indeed, for the true believers in civics-class propaganda, for the true nature of the state was exposed. Now they’ll be quick to “make an example” of Blagojevich and return to business as usual: doing exactly what he was trying to do, just more covertly.
Why Are Senate Seats so Valuable?
But why is a U.S. Senate seat so “valuable?” Senators are paid $169,300 a year, but this is not the “value” to which Blagojevich was referring. No, the true “value” of a senate seat is measured in the millions—maybe tens or even hundreds of millions—of dollars; and that’s because senators routinely engage in the selling of favors. They call it something else, of course, but make no mistake about it: extortion and receiving bribes are a senator’s primary activities.
Remember how the $700 billion bailout was defeated in the House of Representatives only to be passed, overwhelmingly, by the Senate just a few days later? Why is it that congressmen were so much more willing to listen to the will of the people than U.S. Senators were? Could it be because senators’ statewide campaigns attract bigger money that has to be repaid in the form of votes? Only by bribing a senator can a few thousand dollars be turned into millions—after all, the Senate isn’t spending its own money…it’s spending yours!
Is What Blagojevich (Allegedly) Did Really That Bad?
So we’ve established that the mock horror at Blagojevich’s indiscretion is unwarranted. His only “crime” was being blasé about the true nature of government. In fact, maybe it would be better if politicians were, like Blagojevich, more out in the open with their buying and selling of favors.
In his classic book, Democracy: The God That Failed, Austrian economist Hans Herman Hoppe makes the case that monarchy is a better form of government than democracy. Although Professor Hoppe himself is an anarcho-capitalist, he sees monarchy as preferable to democracy because kings took pride in the “ownership” of their countries. Since they were able to pass on their kingdoms to their heirs, they didn’t loot as aggressively as democratic rulers—who, by comparison, “rent” their kingdoms—do today. Blagojevich was simply trying to collect a rental fee.
Just a Symptom of a Greater Illness
“This conduct would make [Abraham] Lincoln roll in his grave.” That was another whopper from Attorney Fitzgerald. Lincoln, of course, was a corporate lawyer who believed strongly in Henry Clay’s “American System” of central banking, protective tariffs, and corporate welfare—the system of looting that now makes senate seats so valuable. And it was Lincoln’s invasion of the South that led to the abolition of state sovereignty, a fait accompli with the passage of the 17th Amendment, which ushered in the direct election of U.S. Senators. I hardly think “Honest” Abe—who illegally suspended habeas corpus, jailed Northern dissidents, shut down opposition newspapers, and unconstitutionally assessed an income tax and printed the nation’s first fiat money to fund his war—would be half as outraged as the modern punditocracy pretends to be.
Indeed, in all of the feigned horror misses the point: U.S. Senate seats are too valuable. The way to fight corruption is to make them less valuable, and the way to do that is to take power from the federal government and give it back to the states and the people. A good start would be the repeal of the 17th amendment, which would return the election of senators to the state legislatures. This way, senatorial candidates would serve in their original role as “ambassadors of the states,” and would be looking out for state interests, not always seeking to expand federal power (and thus, bribery income). Blagojevich is a corrupt politician, to be certain, but his corruption is just a symptom of the larger problem: an unconstitutional and overreaching federal government.
By Thersites, on March 4th, 2009
1. The duty of the government is to protect the rights of the people, not the other way around.
2. The people have the right but not the obligation to dispense of their property as they see fit.
3. Borrowing from the 10th Amendment of the Constitution: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
4. America was built on profit and loss, not profligacy and largess.
5. True laissez-faire capitalism is the surest way to prosperity; the middle path will always lead to socialism.
6. Entrepreneurs and competent business managers make our economy grow, not politicians.
7. For a man or a nation, the responsible fiscal path is to produce more than one consumes, and to spend less than one earns.
8. Every public dollar spent is a private dollar stolen. If a politician tells you that spending is “investment,” ask yourself if you would undertake that same investment with your own money.
9. Equality of condition is not the same as equality of opportunity; our laws are meant to preserve the latter.
10. The safety of American citizens is the single most important priority of the American government.
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