Where does money come from? More economics (on the way to Zion and Utopia)

by: Stephen Marsh

April 28, 2011

Most people asking that question actually want to know where wealth comes from.

What they really want to know is how wealth is obtained.  Ok, I will answer all three questions.

Wealth comes from retained earnings. That is, the source of wealth is the creation and retention of value.  Fields of grain, viens of ore, ziff (a term that means “stuff” or “things” and that includes crafted goods and works of art).  That definition of wealth doesn’t answer much, the real question is, where does increased wealth come from.

  • leverage improvements
  • exploitation [which may or may not mean what you think it means]
  • comparative advantage
  • specialization and trade

Leverage means using a lever to multiply force or effectiveness.  A plow gives a farmer leverage.  An ox or a horse to pull the plow gives a farmer leverage.  A horse collar (so the horse can pull harder — with his or her shoulders — without choking) gives a farmer leverage.  Baseline progress in wealth and standards of living come from ever improved leverage.  Greater leverage makes labor all the more valuable.  Inventions of all kinds are forms of leverage.

Exploitation means making  use of natural assets.  It can mean learning to fish when no one fished before.  Farming the land when no one knew about farming.  Switching to a better crop (which may also involve leverage) or a better meat animal.  Solar panels, windmills, dams and strip mining are all different examples of exploitation.

Comparative advantage.  If I can make 4 chairs or 4 loaves of bread a day, and you can make 40 chairs or 100 loaves of bread, you are better off making fewer chairs and more bread and having me only make chairs.  We will have more total production by sharing.  It does not take an absolute advantage (you have that over me in this example), just a difference in the percentage effectiveness of what we do to make it possible for both of us to become wealthier by specialization and trade.

Specialization and trade.  If I specialize I can increase my comparative advantage.  Specialization is part of the key to modern wealth.  If someone does everything, they will not do any particular thing anywhere near as well as someone who specializes.  But to make any of that meaningful, we have to have trade.

That is how value is created so there is some left over to create wealth from what is saved.

Wealth ends up in the hands of particular people in the following ways:

  • They create the wealth by manufacture (by use of their levers, exploiting a resource, or specialization).
  • They take a portion of the wealth by facilitating trade in one way or another.  A sales person, a stock broker, a merchant — all of them function as social lubricant that allows trade to occur and as trade creates value, those who reduce the friction in trade increase social value — and that means that they can accumulate a portion of that value for the service they provide.
  • By economic rents.  Owning the right to levers or resources to be exploited and by charging others.  An equipment rental company, a patent holder, an oil and gas lessor, all rents.
  • By kleptocracy.  Straightforward theft of wealth from others who have accumulated it.  Whether by direct force (e.g. a bank robber) or indirect force (e.g. graft or corruption, fraud or similar means) this is an anti-lubricant process.  Any method of gaining wealth someone does not understand looks like theft.

The prior economic lesson and this one kind of help focus on how utopias are built and how the tend to fail from economic forces (and how some have survived many generations), though that takes one more discussion. Once I’ve covered the third set of principles (which will be a discussion, in part, of libertarian marxism), then it is a bit of social discussion (since even an economically sound utopia will fail if it is a parent’s dream and a child’s nightmare) and I’ll be ready to go onto something that I’ve thought a fair amount about over the years.

But what economic concepts do you think are important?  Did this help you understand what wealth is and how people make it?

Oh, as for money, the Greeks invented standardized coins.  So, in a way, money comes from the Hellenic world.  More next week.

73 Responses to Where does money come from? More economics (on the way to Zion and Utopia)

  1. Dan on April 28, 2011 at 7:42 AM

    increased wealth also comes from inflation, which allows for the creation of more measured units (like dollars) to spread out among a wider group.

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  2. Mike S on April 28, 2011 at 8:09 AM

    This is very true. In medicine, I not only do just orthopedic surgery, but I actually only do one small portion WITHIN orthopedic surgery. I do the same thing over and over and over. And the majority of orthopedic procedures I haven’t don’t for over a decade.

    This can be annoying to patients, because when they are seeing me for the knee, for example, I won’t also see them for their wrist. But you become really good at what you do and very efficient. Additionally, outcomes have been shown to be better in surgeons who do the same thing over and over.

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  3. Stephen M (Ethesis) on April 28, 2011 at 8:25 AM

    Dan, inflation just changes the measuring units, but it doesn’t change the amount they can buy.

    I was expecting you to note that the missing way of obtaining wealth is redividing the existing pie (e.g. the fight between unions, management and owners for who gets what from the revenue stream).

    That can be kelptocracy, or not, as it does not create wealth, just controls the distribution of it.

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  4. Stephen M (Ethesis) on April 28, 2011 at 8:25 AM

    Mike — great example.

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  5. Howard on April 28, 2011 at 10:00 AM

    Money is created by the efficient conversion of raw materials and knowledge into useful goods and services.

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  6. Dan on April 28, 2011 at 10:04 AM

    Stephen,

    My view is that there is only a finite supply of monetary value in any given system. So if 100% is equal to the sum of the whole, how that 100% is broken up is determined by numerous factors, including inflation. Some argue that inflation has reduced the value of one measuring unit (like the dollar) without accounting for how, with inflation, that lower valued unit can now be given out to more people. If out of 100% you break it up into 100 units of 1, only 100 units exist in the system, thus conceivably only 100 people can obtain at least one unit. If you break up the 100% into 1,000,000 units, then conceivably 1,000,000 people can obtain at least one unit. If you break up the 100% into 1,000,000,000,000 (trillion) units, conceivably up to 1 trillion people could obtain at least one unit. While John Rockefeller’s $1 billion net worth in the early 1900s is now equivalent to $50 billion or something, far more people are wealthier now than they were back then because inflation created more units within the 100% system allowing for greater distribution.

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  7. Ethesis (mobile) on April 28, 2011 at 5:44 PM

    Dan, I did not see you as a monitarist like uncle Milt. ;)

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  8. Dan on April 28, 2011 at 7:26 PM

    Stephen,

    I keep telling people I’m a moderate guy…not sure why they don’t believe me…

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  9. Geoff-A on April 29, 2011 at 1:15 AM

    The question we need answering is how an average wage earner can acquire wealth. In Australia the best way is to invest in property because we have a housing shortage so housing prices increase by more than 5%/year.
    I realise that America has an excess of housing so whether this will work for you, I don’t know.
    An example;I buy a block of land worth $250,000, with a deposit of $25,000 then build a $200,000 house on it. When finished the house is valued at $550,000. I can rent it for enough to cover the mortgage, rates, insurance.

    If the property increases by 5% (average growth for last 100 years) that is $27,500 retuirn on my $25,000 initial investment.

    I retired at 55 with $3million in property which I refinance every couple of years and have supported my wife and self now for 8 years by this method. I have too many assetts to get a pension.
    To me this is the value of wealth, to have it support you.

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  10. Jon on April 29, 2011 at 4:49 AM

    Inflation is another form of kleptocracy. A method used to empower the elite that have political connections with those that create the wealth since the initial creation of the money goes to those that are already wealthy.

    Nothing is created with inflation, just destroyed. This is why so many people must worry about inflation and the destruction of their savings over time. This affects the poor disproportionately.

    Without inflation there would be, for the most part, deflation. Deflation would increase the wealth of the person without doing anything. Money can be split infinitesimally and so inflation is not needed. As the money is split prices will continue a downward steady trend. This would, of necessity, help the poor more than the wealthy since everyone would benefit from this, especially those that save their money.

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  11. Stephen Marsh on April 29, 2011 at 5:50 AM

    Geoff, there is an entire additional area of gaining wealth that has to do with grabbing onto a part of the economic pie that is expanding.

    That is an entirely additional essay.

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  12. Stephen Marsh on April 29, 2011 at 5:56 AM

    Perhaps remaining separate and “chosen” was nice in the Old Testament time, but Christ didn’t hang out with the religious leaders of His time. He hung out with the riff-raff, the troublemakers, the looked-down-on, etc.

    No, Christ was not hanging out with the Zealots (who were the troublemakers and riff raff, often translated “robbers” in the KJV) or the “enlightened” (translated Sadducee) or the self-righteous (translated Pharisee).

    Further, he did not reject money, but used it.

    Interesting how that sort of thing can segue together.

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  13. Dan on April 29, 2011 at 8:26 AM

    Jon,

    Without inflation there would be, for the most part, deflation. Deflation would increase the wealth of the person without doing anything. Money can be split infinitesimally and so inflation is not needed.

    You’ve got it exactly backwards, though I wouldn’t expect more from Mises crap. Deflation decreases the wealth of the vast majority because it reduces the quantity of measurable units, thus making fewer units to spread around in a given system. Ironically, this creates more wealth in the hands of the few and less wealth in the hands of the many. If you split money infinitesimally that’s called inflation Jon. Every time the central bank prints more money, it is splitting money, creating more dollars which reduces the value of each dollar but allows that dollar to be spread out to more people. Deflation cuts back the amount of dollars in a given system, thus reducing the spread of the dollar to more people. How can you guys at Mises have it completely backwards? I mean, seriously, this isn’t that hard. It is fairly simple math.

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  14. will on April 29, 2011 at 8:40 AM

    By kleptocracy; or, taxing the makers and giving to the takers.

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  15. Jon on April 29, 2011 at 10:36 AM

    No, it is deflation. If you have a hard currency, let’s say 1 lb of gold. You have ten people, split it up, then everyone has 1/10th, then let’s say there are 20 people, split it up then everyone has 1/20th. Yes, people would have to get used to lower and lower wages (or the same wages) every year since the value of the money is worth more and more, that’s called deflation, when the value of the money increases.

    So let’s see an example of this in real life. Here is a man from India that has successfully opted out of the fiat currency system with others and his life is much better for it. As he says “…the dinar & dirham represent a moral movement of absolute individual freedom.

    http://www.youtube.com/watch?v=nNtIsSWVJBI&feature=player_embedded

    It would be nice if we lived in a free market where the monetary system was decided by the people rather than the ruling elite that blind the masses and tell them it is for their own good, but really it is for the elite’s (politically connected) own good.

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  16. Will on April 29, 2011 at 11:24 AM

    Dan/Jon:

    Inflation is going to be the final death blow to this economy, with Obama and his spend happy liberals leading the charge. You cannot borrow 188 million dollars an hour that you cannot ever pay back, and not have eventual consequences. The irresponsible spending by Obama without the corresponding increase in production will result in inflation. Not just inflation, but hyper-inflation – the Weimar type inflation in Germany in the early 1900’s that lead to the rise of Hitler; or prices 50 percent per month like in Zimbabwe just recently. This means a loaf of bread that cost S1.88 this month, will cost $2.82 next month; $4.23 the following month and $32.12 by the end of the year. We will pay the consequences of this irresponsible spending. Like the Prophet Brigham Young said, we will need a wheel barrow full of money to buy the basics. This is what people that understand basic economics have been warning about since Obama took office. It is going to make the economic problems we are encountering look like a picnic.

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  17. Mike S on April 29, 2011 at 11:56 AM

    I’m not sure why it is always “Obama and his spend happy liberals” that is referenced. (Disclaimer: I have trended Republican, although actually voted for Obama)

    The borrowing increased substantially on Bush’s watch. Bush got us into expensive wars that “Obama” is continuing to fund. The banking catastrophe was inherited by Obama, but largely occurred on Bush’s watch and under his regulatory people. Bush inherited budget surpluses from Clinton and ran roughshod over them.

    While Obama does have some liberal spending policies as well, with which I disagree, to lay all of this fiasco at his feet shows very little insight.

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  18. Dan on April 29, 2011 at 12:26 PM

    Mike,

    As if much insight ever came from Will or Jon.

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  19. Jon on April 29, 2011 at 12:27 PM

    And don’t forget the federal reserve. There the fascist organization at the lead of all this.

    Also, one more point on fiat currency. I wouldn’t necessarily say it is bad. What makes it bad is that it is a monopolistic system that favors the well connected. If there was a free market for money would there be fiat currency? I don’t know, maybe. But if there were when the printed the money instead of going to the rich, I’m sure it would be evenly distributed among everyone, or else they would opt for something else. History tells us that people would prefer a hard currency though since then it is easier to tell if you are being swindled.

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  20. kristine N on April 29, 2011 at 12:47 PM

    Taxation is not kleptocracy. That would imply the government does nothing to benefit us with the money it takes in, which is patently false.

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  21. Dan on April 29, 2011 at 12:47 PM

    Jon,

    No, it is deflation. If you have a hard currency, let’s say 1 lb of gold. You have ten people, split it up, then everyone has 1/10th, then let’s say there are 20 people, split it up then everyone has 1/20th. Yes, people would have to get used to lower and lower wages (or the same wages) every year since the value of the money is worth more and more, that’s called deflation, when the value of the money increases.

    Jeez…

    1 lb of gold split in equal shares among ten people. Let’s quantify the shares at $1 each. So 1lb of gold is equal to ten dollars equally distributed to ten people. The value of each $1 is one tenth of 1lb of gold. Ten more people come into the system and the 1lb of gold has to be split up again, devaluing the worth of each of the original ten’s values. The devaluing of a monetary item is called inflation. Every time you split the original value into more pieces, it reduces the value of each individual piece. Each individual piece is no longer worth what it was when there were only ten pieces. If you break up the value of the 1lb of gold too fast or into too many pieces, you get hyperinflation, but if you do it at a steady rate, essentially at the rate of economic growth, the rate of inflation keeps the economic growth from getting too far ahead of itself and possibly into a recession or depression where the money supply gets smaller, or in other words where even if you have twenty people, the 1 lb of gold is now split into 18 pieces. This is deflation and is generally horrible for economic growth. Only 18 people can possibly trade their piece of gold while two starve because they have none.

    Inflation is not bad. In fact inflation has been at the root of the massive growth of America’s wealth over the last century. Consider that a television in 1950 cost $300. According to The Inflation Calculator (google it if you wish), $300 in 1950 is $2686 in today’s money. In other words, to buy a television in 1950, you had to pay almost $3000. You can get a television today for less than $100 which in 1950 would have been $11. The devaluation of the dollar through inflation has allowed wealth and materials to reach a far greater percentage of the population than ever before.

    Y’all argue of the dangers of hyperinflation but don’t even mention that today’s inflation rate is 2.68% which is quite a good rate. This rate is affected by monetary supply, supply and demand, and so on. It’s nowhere near the rate of Zimbabwe (some hundred thousand percent or more). In other words, Jon and Will and all their conservative kind are simply preying on fears and not basing their arguments in actual reality.

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  22. Dan on April 29, 2011 at 12:50 PM

    The problem we face today is that the salary of the middle class American has NOT kept up with inflation. You can thank that on the rich stealing from the middle class.

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  23. Mike S on April 29, 2011 at 2:22 PM

    It is easy to point the blame at leaders, bankers, etc. The problem is US – collectively as Americans.

    When 30% of the Las Vegas real estate market is NOT people who actually want to live in the homes, but people who want to make a quick buck “flipping houses”, there is something wrong. Sure, someone back in New York had an easy money policy which made this possible, but no one forced people to speculate in real estate. No one forced people to draw money out of their houses to buy a boat or a big screen. No one forced use to have a national savings rate of -1% for 2 decades as a people. You CANNOT have a negative savings rate long term.

    Similarly, people can complain about taxes (which I do) and about various “pet programs”, but at the end of the day, the vast majority of the money is coming back in a wealth redistribution scheme. The taxes of the upper 10% pay cover 70% of federal government income. The bulk of this is redistributed back out in social security, Medicare, Medicaid, welfare of various types, etc.

    So, to say the paying of taxes is “kleptocracy” is also wrong. Gore isn’t worth $100 million from anything made from our taxes. He made his money from people who paid to hear him preach doom and gloom about the environment. He made his money talking about carbon credits and such. People voluntarily gave him this money.

    It’s easy to make boogeymen out of people. There is certainly a lot of corruptness around us. But the fundamental problem is ourselves. We want universal healthcare, but with someone else to pay for it. We want our social security checks to keep coming, but for someone else to pay for it. We want our food stamps. We want to have babies on Medicaid. We want easy qualification for low payment mortgages. We want bigger cars.

    And we got it. We just don’t like the price tag now.

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  24. FireTag on April 29, 2011 at 2:37 PM

    Dan:

    You have to be kidding, right? You do understand the difference between money and goods? Inflating the money supply may lubricate the exchange of goods (it’s easier to carry around coins than sheep), but there is certainly no limit in the number of monetary units that can be exchanged in any practical sense. If the money supply goes back to zero, all we lose is the lubrication, not the goods.

    There is an optimal amount of lubrication under any set of economic conditions that central banks shoot for. Too little, and the economy freezes up. People don’t get their needs met because they can’t exchange what they have for what they need (trade and specialization) Too much inflation, and people get hurt because their money gets outbid by other money, and the losers get left behind, needs unmet.

    I haven’t been limited in monetary units since I was a kid picking up empty pop bottles from the side of the road and returning them to the store for 2 pennies a bottle. If you think Bernacke is setting monetary targets on the basis of wealth distribution effects, you’ve joined the anti-Fed conspiracy.

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  25. FireTag on April 29, 2011 at 2:54 PM

    Dan: Re 21:

    All four factors in the OP account for the lowering of the price of a TV better than “inflation”. My Dad used to make his living repairing TY’s in the 1950’s. When was the last time you had a TV repaired?

    Wealth is NOT created by inflation except for the lubrication effect discussed in the OP as a facilitator of trade.

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  26. Will on April 29, 2011 at 3:36 PM

    Firetag:

    Dan is a pure ideologue, a librarian by trade. Like Obama and most college professors, they have never had jobs where they had to make payroll (with their own money) and they have never had to keep a business running. In short, they have never had to generate wealth. Book knowledge perhaps, but no practical knowledge gained by application of such principles. Herein lies the problem in our country or nation is lead by a leftist ideologue.

    Mike S.

    Obama, and the democrat controlled congress, has put more on the nation’s credit card that Reagan, Bush Sr., and the first 7 years of Bush Jr. combined. And keep in mind, the Dems controlled the house and senate for most of this time. Clinton did a good job, but also had a republican controlled congress. Agreed, Bush 43 had spending problems, especially near the end. THE problem is entitlements that consume 60 percent of the total income with current debt service (minimum credit card payment) of 414 Billion per year (the total GDP of Norway)
    As it stands with the current spending (signed off largely by democrats) we are borrowing 188 million dollars an hour. Do you really think this is sustainable? Do you really think we are not going to pay the price at some point?

    I could solve the budget problem in one second by doing the following: take the percentage each organization had last year and apply that percentage to the current income. That is what the organization gets and they have to figure out what to do with the short fall.

    We need people that will spend our money like it is their money.

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  27. Dan on April 29, 2011 at 3:39 PM

    Firetag,

    Yes, I understand the difference between money and goods (though in some cases, the money is the goods). I wasn’t disagreeing with Stephen’s post. I was merely adding that inflation is also one place where money comes from.

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  28. Dan on April 29, 2011 at 3:40 PM

    We need people that will spend our money like it is their money.

    Then what the hell are you doing voting Republicans? Silly boy.

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  29. Dan on April 29, 2011 at 5:45 PM

    Will,

    Like Obama and most college professors, they have never had jobs where they had to make payroll (with their own money) and they have never had to keep a business running. In short, they have never had to generate wealth. Book knowledge perhaps, but no practical knowledge gained by application of such principles. Herein lies the problem in our country or nation is lead by a leftist ideologue.

    Hmmm, Milton Friedman never ran a business. In fact, he was a college professor. He obviously wouldn’t know a thing about how to keep a business running. He obviously never had to generate wealth. No practical knowledge by application of the principles.

    Hmmm, Friedrich Hayek never ran a business either. In fact, he was also a college professor. He obviously wouldn’t know a thing about how to keep a business running. He obviously never had to generate wealth. No practical knowledge by application of the principles.

    Certainly we shouldn’t take them seriously. Ah, I know who we should listen to: Donald Trump!

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  30. Mike S on April 29, 2011 at 6:26 PM

    Will:

    Your numbers are misleading. Why did you only include 7 years of Bush 43. Did his last year not count? Whatever happened that year was the result of his leadership over the prior 7 years. And absolute number mean nothing due to inflation.

    For more specific FACTS: When Clinton took over the White House, the debt represented 66.1% of the GDP. When he left, it represented 56.4%.

    When Bush took over the White House, the national debt represented the 56.4% of GDP left to him by Clinton. When he left, it was 83.4%. This is HUGE.

    So, I don’t know why you’re trying to pin all this on Obama.

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  31. Ryan on April 29, 2011 at 6:29 PM

    “No, Christ was not hanging out with the Zealots (who were the troublemakers and riff raff, often translated “robbers” in the KJV) or the “enlightened” (translated Sadducee) or the self-righteous (translated Pharisee).

    Further, he did not reject money, but used it.”

    Very, very tenuous position here, not to mention the definitions/translations you use. Very few people experienced a worse tongue lashing than the money changers, and more than a few of Christ’s words (in the Bible) deride the very use of money you say he condoned (Luke 12 for but one example).

    LDS have a remarkable ability to profess belief in the “gospel of prosperity” while spinning the scriptures to fit their own preset mindset.

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  32. Ryan on April 29, 2011 at 6:32 PM

    Geoff A:

    You said:

    “I retired at 55 with $3million in property which I refinance every couple of years and have supported my wife and self now for 8 years by this method. I have too many assetts to get a pension.

    To me this is the value of wealth, to have it support you”

    Is the value of wealth to “support you”? I wonder if there might not be better uses for it…

    Certainly, it’s undebatable that the reasons you mentioned are supported and taught by the Church but I wonder if the gospel would provide different definitions or explanations…

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  33. Mark N. on April 29, 2011 at 6:40 PM

    If one has the wherewithal to “speculate”, then it’s a sure sign that one has too much money. :-)

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  34. Will on April 29, 2011 at 7:07 PM

    Mike,

    I am not a fan of Bush, nor am I putting all of this on Obama. What I am saying is that Obama created more debt in 3 years than 15 of the past 16 years of Republician rule. I was demonstrating how bad Obama’s spending is — he is creating permanent damage to our economy. If you can’t see that, then you are not as bright as you come across.

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  35. Mike S on April 29, 2011 at 7:40 PM

    Here is the problem:

    President Bush’s budget request for 2009 was $3.1 trillion. This included $1.89 trillion on mandatory programs (ie. Social Security, Medicare, Medicaid/CHIP, Interest on debt, and other mandatory things). This also included $1.21 trillion on “discretionary spending”, of which over 50% was for Defense and the “War on Terror”.

    Bush estimated that they would collect $2.7 trillion in 2009, for a deficit of $400 billion.

    So, Obama inherited this budget for 2009 when he entered office. People can argue how much influence the President actually had over regulation of securities, so maybe it’s not anyone’s “fault”. But if you are going to assign blame, it certainly occurred on Bush’s watch with regulators that he appointed.

    Because of the mortgage crisis, actual tax receipts for 2009 were actually $2.1 trillion, or $600 billion LESS than Bush expected. So, yes, there ended up being a deficit of $1.4 trillion in Obama’s first year in office, but how you are attributing this to Obama’s policy is beyond me. It is a budget that he inherited. And the shortfall in taxes was MUCH bigger than Bush or anyone in Congress expected.

    Now, fast forward to 2010. Now it’s Obama’s budget. His budget request was $3.55 trillion. Of this, $2.17 trillion was for MANDATORY programs, again including Social Security, etc. Of the “discretionary spending” request of $1.38 trillion, over $660 billion of that was just for Defense to continue the wars that Bush 43 started. And, because of the continued financial crisis, tax receipts were only $2.217 trillion.

    So, yes, there was a deficit in 2009 and 2010. The one in 2009 was driven by Bush’s budget request. And the deficit in 2010 was NOT because of anything that Obama did, but was a result of increased mandatory spending, defense spending, and decreased tax revenues secondary to the continuing mortgage crisis that occurred on Bush’s watch.

    Overall, I’m not sure where you are getting your information. Obama did NOT have “3 years” of debt. He inherited Bush’s budget for 2009. He submitted a budget for 2010 that was driven by factors that he inherited. He does have a bit more control over this year’s budget, which is currently under negotiation.

    So, your “facts” are wrong, and are not much more than scaremongering. I don’t really care how “bright” I come across, as I’m not really saying anything more than repeating publicly available information. People who hate Obama may choose not to be “fact-driven” but just “emotion-driven”.

    I prefer actual facts. And, to be honest, I don’t really care whether you agree or disagree with the facts or not. They are what they are.

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  36. Mike S on April 29, 2011 at 7:45 PM

    Ryan:

    You stated in response to GeoffA:

    Is the value of wealth to “support you”? I wonder if there might not be better uses for it…

    Certainly, it’s undebatable that the reasons you mentioned are supported and taught by the Church but I wonder if the gospel would provide different definitions or explanations…

    I think Geoff is merely following the example taught to us by our Church leaders. We, as a Church, have only spent an average of $13-14 MILLION per year on humanitarian needs. But we spent over $3 BILLION on a mall with “profits” from business income. Instead of spending this on charity, the Church leaders’ argument is that they are trying to “build up money” so that they can use it to help people “someday”.

    When the Church spends 200x as much on a for-profit mall as they do on humanitarian spending in a year, I don’t think you can fault Geoff for following their example.

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  37. Dan on April 29, 2011 at 7:50 PM

    Mike,

    So, your “facts” are wrong, and are not much more than scaremongering. I don’t really care how “bright” I come across, as I’m not really saying anything more than repeating publicly available information. People who hate Obama may choose not to be “fact-driven” but just “emotion-driven”.

    Well said.

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  38. Will on April 29, 2011 at 9:11 PM

    Mike,

    It is you that is overlooking factual information. Consider the following:

    The 2009 budget was proposed by Bush, but implemented by a democrat controlled congress. Moreover, the stimulus and amendments (over a trillion) in 2009 that added to the budget deficit were the handy work of Obama and the democrat controlled congress. More importantly, the Mandatory programs you are talking about are the handy work of the left, as follows:

    Social Security 2011 budget: $730 Billion
    (passed in 1935 By a Democrat as President and both houses of congress controlled by Democrats)

    Medicare 2011 budget: $492 Billion
    (passed in 1965 By a Democrat as President and both houses of congress controlled by Democrats)

    Medicaid 2011 budget: $271 Billion
    (passed in 1965 by a Democrat as President and both houses of congress controlled by Democrats)

    Total Big Entitlements 2011 budget: 1.5 Trillion compared to revenue of 2.5 trillion, or 60 %. Sixty percent of our income is spent just covering Social Security, Medicare and Medicaid.

    The massive increases in spending since 2007 were implemented by Democrats and a fiscally liberal Bush, who was a horrible president. Obama and the Democrats could have balanced the budget if they so desired. They had total control of the Government. So yea, I put most of the problem on Obama and the liberal friends.

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  39. Will on April 29, 2011 at 9:22 PM

    The 2011 data (revenue and expenses) can be found on page 156 of the official 2011 outlays on the following PDF:

    http://www.gpoaccess.gov/usbudget/fy11/pdf/budget.pdf

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  40. Stephen Marsh on April 29, 2011 at 10:04 PM

    Ryan:

    Very few people experienced a worse tongue lashing than the money changers, and more than a few of Christ’s words (in the Bible) deride the very use of money you say he condoned

    How is that inconsistent with what I said?

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  41. Mike S on April 29, 2011 at 10:42 PM

    Will:

    Obama and the Democrats could have balanced the budget if they so desired.

    Seriously? In 2010 there were $2.217 trillion in tax receipts. There were $2.17 trillion in mandatory programs alone. There was another $660 billion in defense spending. There was around $600 billion in EVERYTHING else combined.

    So, if you were President, what would you have done? Keep the mandatory spending and cut the entire defense budget and everything else? Would you have cut Medicare, and if so, how would you have rationed it? Would you have cut social security checks to senior citizens? Would you have fired half of all of the soldiers protecting our freedom?

    This is a quite serious question – what would you do if you were Obama and inherited Bush’s wars, a 75+ year old social security program, a 45+ year old medical program, interest on debt run up by your predecessors, and everything else? Would you just gut everything?

    And, just as an aside, if you look at the timing of the stimulus money you are attributing to Obama, here is a clipping from an article from Jan 16, 2009:

    The Wall Street Journal writes, “The Senate cleared the way for President-elect Barack Obama to access the second half of the $700 billion financial rescue fund, alleviating some concern on Wall Street by setting the stage for another infusion into the weakening financial sector.

    He WASN’T EVEN PRESIDENT, and was going to access the second half of the rescue fund that was ALREADY PASSED. So, even though the $700 billion was passed while Obama was President-elect, you’re pinning it on him.

    I honestly and truly don’t understand your logic.

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  42. Mark N. on April 29, 2011 at 10:48 PM

    Ah, yes, I remember those halcyon days of “total control” of the government by the Democrats. Every day, it was more of the same from the Republicans: if the Democrats couldn’t work up a 60 vote supermajority, the Republicans would threaten to filibuster, which effectively gridlocked the Senate.

    Total control of the government, indeed.

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  43. Dan on April 30, 2011 at 7:21 AM

    Mike,

    You shouldn’t try to access Will’s logic. His position is not based on rational thought but furious hatred. He throws Bush under the bus now who he calls “a horrible president,” but I’m quite certain he voted for this “horrible president” in 2004 even though most of Bush’s greatest mistakes occurred in his first term. Will decries the overspending of Medicare but voted FOR the Republicans who passed Medicare Part D in December 2003 (including Paul Ryan, and I’ve always been curious why no one asks Paul Ryan why he voted in favor of the unfunded Medicare Part D…) knowing full well exactly what they did. He does not base his position on logic but on conservative propaganda.

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  44. Will on April 30, 2011 at 8:47 AM

    Mike,

    They are in charge, if they can’t balance the budget then who the hell can. I don’t care if it is mandatory or not. I told you the solution: take the percentage each department gets and apply it to the current income and let each department figure out how to cover the short fall.

    Either we pay the price now, or we will pay the price later. If we continue the current course we will not be able to solve the problem. Maybe it is already too late.

    Dan

    I pick the lessor of two evils, and Bush was the lessor of two evils when compared to Gore. If I had my choice, I would put the First Presidency and 12 in charge. They would set our financial house in order with the same conservative principles they use to guide the Church — one of the most financially stable organizations in the world because of the conservative principles.

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  45. Dan on April 30, 2011 at 8:57 AM

    Will,

    If I had my choice, I would put the First Presidency and 12 in charge.

    You always have a choice, you silly boy, to put whatever name you want on a ballot. But you chose to back Bush, twice. You have no right to now complain about the person you chose, and then re-chose.

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  46. Mike S on April 30, 2011 at 9:48 AM

    Will:

    So let me get this straight. In 2010, the “shortfall” was around 35%. You propose just cutting everyone by this much and letting them “figure out how to cover the shortfall”.

    Take an elderly couple getting around $2000/month in Social Security. They spend $700 on rent, $300 on transportation, $300 on food, $200 on medical care and $500 for other necessities. They are just getting by. Under President Will, they now get $1300 a month and just need to “figure out” what to do. Which of their needs would you propose they cut out? And no generalities – specifically – what would YOU cut?

    And Medicare is cut 35%. Which 35% of people do you suggest don’t get care? Do you propose an age cut-off after which they die? Do you propose only fixing 65% of hip fractures? Would you include your mother or grandmother in the 35% that just lay there with a broken hip or in the 65% that get it fixed? Are you willing to sacrifice your mother for this goal? Yes or no.

    How about the military? Do we “fire” 35% of the service men and women?

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  47. Mike S on April 30, 2011 at 9:52 AM

    Will:

    And regarding the First Presidency and 12 in charge, you think the country’s finances are opaque now, wait and see what would happen then. We’d get a report once a year saying to trust them, the accounts balance.

    And suppose we followed the same ratio for spending that the Church does. It is estimated that they take in $3-4 billion a year in tithing (probably higher, but who knows?) They spent $3 billion on malls in SLC and Ogden to make the area “nicer”. They spend an average of $15 million a year on humanitarian needs.

    Now, scale this to the $2-3 trillion the government takes in. Using the same ratios, we would spend $2 TRILLION on really nice buildings in Washington DC, because we wouldn’t want it to look bad. And look how many people they would give jobs to building luxury condos overlooking the White House. And for the poor in the country, they would spend $15 billion.

    Hmmm. Doesn’t really seem to work.

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  48. Will on April 30, 2011 at 10:18 AM

    Mike,

    #46

    In general, do what those of us that can’t print money have to do when our incomes are decreased. States, companies, families and individuals are dealing with cut-backs due to reduced revenue, why shouldn’t the government. Specifically, here are some suggestions:

    Social Security

    Raise the retirement age for those from 55
    to 65 to 75; those from 45 to 55 to 80; those from 35 to 45 to 85; and those under 35 to 90. God said ‘thou shall labor all the days of thy life’. He works his prophets until they die. In other words, it seems retirement wasn’t part of his plan.
    Some cuts would be necessary for those currently on the social security dull. They may have to turn to their families, or combine their resources and live together like college students; or, as suggested ‘labor all the days of thy life’.

    Medicare

    Someone else’s health bill is not, or should not be my responsibility unless I choose to help them. I shouldn’t be forced to pay for someone else’s bill. They can turn to family, friends or faith for help. If they can’t find help, I guess it’s their time to go. If they lived the way they should, they are going to a better place.

    Military,

    Buy less. Phase out weapons and people with early retirement. Don’t bring in anyone new until we recover. Bill South Korea, Japan and Germany for our protection — hell, for that matter, bill the rest of the world. If they don’t like our protection, then pull out. Pull out of Iraq and Afghanistan and use a smarter approach with terrorists.

    #47

    Your logic is horrible. Are you really a doctor, or just play one to make yourself sound smarter?

    Those are income producing properties downtown – investments. If done right, they should generate wealth, not consume it. This would provide more resources to help the needy.

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  49. Mike S on April 30, 2011 at 10:46 AM

    Will:

    I think we’ll just agree to disagree.

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  50. Stephen Marsh on April 30, 2011 at 2:02 PM

    And suppose we followed the same ratio for spending that the Church does. It is estimated that they take in $3-4 billion a year in tithing (probably higher, but who knows?) They spent $3 billion on malls in SLC and Ogden to make the area “nicer”. They spend an average of $15 million a year on humanitarian needs.

    Well, the numbers are wrong, all the way around, unless you consider all the fast offerings spent as non-humanitarian.

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  51. Mark N. on April 30, 2011 at 4:06 PM

    If they can’t find help, I guess it’s their time to go.

    I’m trying to remember: did the Good Samaritan ever say this?

    No, I think it was Dickens, in the guise of Scrooge. As I recall, however, he ended up having a (mighty) change of heart. Most people seem to think that’s the right ending for the story.

    On the other hand, putting the First Presidency and the Twelve in charge of the CIA could be really, really interesting.

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  52. Mark N. on April 30, 2011 at 4:09 PM

    In general, do what those of us that can’t print money have to do when our incomes are decreased.

    I’m only guessing, but I take it you mean “die”, or “live under freeway overpasses”, “become beggers on street corners”, and stuff like that.

    It’s possible this is a bad guess, though.

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  53. Stephen Marsh on April 30, 2011 at 5:12 PM

    Mark N. ;)

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  54. Will on April 30, 2011 at 5:43 PM

    Mark N,

    The government has no business managing these social programs. We have 14 trillion reasons why they should stay out of the social program business.

    The Savior asked us to look after one another, not delegate it to the Government.

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  55. Mark N. on April 30, 2011 at 6:01 PM

    But WE _are_ the government. Governments are just a bunch of people who get together because they have common goals and beliefs and desires to provide for the common welfare, and they get organized because (believe it or not) people believe that things operating under a centralized control of some kind just might be able to pull off some measure of efficiency.

    This doesn’t mean I’m all in favor of some massive government agency running everything; sometimes local control is way better. But at the bottom of everything, We The People are We The Government.

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  56. Will on April 30, 2011 at 6:43 PM

    I have 14 trillions reasons to oppose the federal government managing almost anything.

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  57. Mark N. on April 30, 2011 at 8:06 PM

    The Savior asked us to look after one another

    Does that include some kind of program that will help to level out the wealth gap between those that have more than enough and those who don’t have enough, something that will exalt the poor and will cause the rich to be “made low”? I hope so.

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  58. Ryan on April 30, 2011 at 8:23 PM

    “And suppose we followed the same ratio for spending that the Church does. It is estimated that they take in $3-4 billion a year in tithing (probably higher, but who knows?) They spent $3 billion on malls in SLC and Ogden to make the area “nicer”. They spend an average of $15 million a year on humanitarian needs.

    Well, the numbers are wrong, all the way around, unless you consider all the fast offerings spent as non-humanitarian.”

    Since when were fast offerings considered “humanitarian” in the first place. The Church certainly doesn’t think so and states as much on its own website. Why do we insist on conflating fast offerings with humanitarian aid? Is it to make the humanitarian aid figures more palatable, or give us something to add to the paltry humanitarian figures and make us feel better about something the Church does which is well below where it should be?

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  59. Mike S on April 30, 2011 at 11:17 PM

    On the Church’s Provident Living website, there is a “Welfare Services Fact Sheet”. This is where the approximately $15 million a year in cash number comes from.

    There is a column on the left which lists what I assume the Church is counting. This includes fast offerings in the 5th paragraph down, bishops storehouses in the 6th paragraph down, welfare assistance in the 7th paragraph down, humanitarian relief and development projects with emergency assistance in the 8th paragraph down. Since these are all listed on the sheet, I would assume that they correlate to the figures given on the right.

    If this is not correct, it would be easy for the Church to correct any misinformation by opening up their books. But until that time, we have to rely on the information they DO release, such as this fact sheet.

    And however you want to count it, the $327.6 million in cash donations over a 25 year period is still TEN TIMES LESS than the amount they are spending on a mall.

    Perhaps you have better information as to why fast offerings should NOT be included in these numbers. I would love to see any better information.

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  60. Jon on May 1, 2011 at 2:03 AM

    Will,

    I think you missed the boat on the repub vs dems thing. You must remember that they are two wings of the same bird of prey. Why vote for either if they are taking you the same place?

    You should watch the Simpson’s episode where the people had to vote between the two evil aliens (after they were unmasked), but the people didn’t want to throw away their vote, so they voted for one of the aliens. The people still ended up enslaved.

    As for increasing of SS and medicaid/medicare. You must remember that Reagan increased the taxes on SS considerably and Bush Jr increased either medicaid or medicare higher than any of his predecessors. This must have been why there was so much pressure on the dems to out do him. How could a repub increase spending on a socialist program more than dems ever have?

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  61. Jon on May 1, 2011 at 2:18 AM

    Dan,

    Still blogversating with me. Awesome. The youtube video wasn’t a Mises video as far as I know. It was just a poor man from India that was given the freedom to choose his own currency and chose to use gold and silver. By doing this he has found stability in his life and doesn’t have to worry about the devaluation of his money any more, unlike his American counterparts.

    As for the hand outs of now days in the US, are they not just bread and circuses for the masses as outlined in the book (written in the 1500s) “The Politics of Obedience”? Do not the blacks pay into SS but receive hardly anything from it (since most die before they are of age). Is this not discriminatory?

    As for deflation, remember money can be split infinitesimally. So it is not true that 2 people will be left out. All that will happen is the money will gain more value so people will pay less (in currency) for items and also people won’t will have to get paid less every year instead of more. It’s a psychological thing really. But it is much more fair to do it that way then to split the money by top down economics where the rich receive the cash inflow, spend it before the inflationary effects show and by the time everyone else gets the money it is truly worth less. I don’t know how you can support something that affects the poor so badly.

    As for people receiving less money every year. Look at people that live near me (a small town in AZ) where most people are blue collar workers, like mechanics, carpenters, electricians, etc. Two of these people have told me how they don’t receive any more money now than when they started in this line of work 30 years ago, it’s the same pay. That means they have been getting paid less every year. They also have to fight off inflation.

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  62. Jon on May 1, 2011 at 2:24 AM

    Mike S,

    The system is important. I do agree with you that it is the people that are the route cause but the system they live in can exacerbate the problem. Like greater and greater system of socialism creates a people that becomes more and more envious, slothful, prideful, etc. In a free market this would be curtailed by natural consequences (referred to as liberty by King Mosiah) and create a more moral people.

    So although I agree that it was individual greed that exacerbated the housing crises it was the system that created a slothful people that took advantage of the system itself. The core greed was that of the bankers that created the federal reserve to begin with.

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  63. Jon on May 1, 2011 at 2:33 AM

    @Mike S,

    Similarly, people can complain about taxes (which I do) and about various “pet programs”, but at the end of the day, the vast majority of the money is coming back in a wealth redistribution scheme. The taxes of the upper 10% pay cover 70% of federal government income. The bulk of this is redistributed back out in social security, Medicare, Medicaid, welfare of various types, etc.

    The free market would return 10 times or more of this amount. This is outlined in the short book “The Politics of Obedience” (written in the 1500s) where it talks of bread and circuses and how the kings would take much more than what they returned to the people but the people loved the king because he gave back to them this paltry amount.

    So, to say the paying of taxes is “kleptocracy” is also wrong. Gore isn’t worth $100 million from anything made from our taxes. He made his money from people who paid to hear him preach doom and gloom about the environment. He made his money talking about carbon credits and such. People voluntarily gave him this money.

    From the OP Straightforward theft of wealth from others who have accumulated it. Whether by direct force (e.g. a bank robber) or indirect force (e.g. graft or corruption, fraud or similar means) this is an anti-lubricant process. Any method of gaining wealth someone does not understand looks like theft. Pretty straight forward to me.

    I don’t argue that Gore doesn’t make some of his money honestly. But he (I would think he wasn’t immune to it) and other politicians have used their positions of power leverage themselves to get more wealth in corrupt ways. One way Gore does this is by trying to get the cap and trade thing going, if it does he’ll be multiple more times wealthy than he is now.

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  64. Jon on May 1, 2011 at 2:37 AM

    @Mark N.,

    Does that include some kind of program that will help to level out the wealth gap between those that have more than enough and those who don’t have enough, something that will exalt the poor and will cause the rich to be “made low”? I hope so.

    It’s called the free market. Remember the ends cannot justify the means if the means are based on a systematic use of violence (or threat thereof) to obtain your purposes.

    God has given an individual mandate to help the poor but has never told us to use violence (or the threat thereof) against one group of people to help the other group of people.

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  65. Stephen Marsh on May 1, 2011 at 3:59 PM

    Mike S — the Church is counting welfare services differently from humanitarian relief.

    You appear to be providing lump sum shorthand that changes the welfare services to a zero, puts the entire value of the real estate redevelopment down as the investment of the Church alone and treats the net expense of buildings and maintenance (keeping the doors open on the chapels and temples) as sinful, somehow because it is not spent as you would have it.

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  66. Mark N. on May 1, 2011 at 5:36 PM

    Since the plan to “make low” the rich and exalt the poor comes from the scriptures, I assume there’s no violence involved. Unless maybe some moneychangers at the temple get a little manhandled somewhere along the way.

    Given that one of the definitions of violence is “an unjust, unwarranted, or unlawful display of force, esp such as tends to overawe or intimidate”, I’m wondering if the action of “shrugging” (as in Atlas Shrugged) wherein the Galt’s of the world intimidate by walking away from contributing to the economy might be counted as a use of violence.

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  67. Stephen Marsh on May 1, 2011 at 5:59 PM

    Mark N. — that is an interesting thought.

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  68. Douglas on May 1, 2011 at 9:45 PM

    For once I’d like to get in on a good thread early and have meaningful input….(sigh)
    Dan is right about inflation being a means of wealth transference. It’s how the influential class intend to profit from the US Gov’t repaying its loans. By increasing the money supply (the primary cause of inflation), the Fed enables the US Gov’t to live well beyond its means and enrich the connected. At this point, we’re seeing the end result, the proverbial killing of the golden-egg-laying goose. Much of the run-up in the past few years, starting with how the Bush Administration chose to deal with the financial meltdown back in ’08, of prices in petroleum and basic commodities (heavily dependent on oil prices), was due not to a ‘supply and demand’ balance (e.g., an unexpected rapid increase in demand for resources that the system couldn’t readily accommodate), but rather a flood of greenbacks with nothing to back them. If I could borrow money to buy a car at, say, 10% interest, and I could repay with dollars that were over the life of the loan worth only 70% of the originated value, I’d be a fool to turn it down, right? And so it is on a far grander scale. The problem is, it cheats those that save and invest.

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  69. Jon on May 2, 2011 at 11:00 AM

    @Mark N.,

    I use the word violence because many liberals don’t accept force as a concept. So, I changed over to violence. The only time violence is OK is when it is your self defense (because someone else is the aggressor). So the Galts maybe using a form of “violence” under your definition it is only in self defense, since the state is the aggressor and the Galts are leaving, I think I would call it more passivity than violence though. I haven’t read Atlas Shrugged so I wouldn’t know. I would say that a person attacking the aggressor is within moral bounds if they are defending their property from theft, granted, I’m not much for violence and think there are better ways to fight back than using violence (in the sense of actual physical harm).

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  72. Sister Wives are Socialist | Wheat and Tares on November 14, 2011 at 10:48 AM

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  73. Mormon Heretic » Sister Wives are Socialist on November 14, 2011 at 2:00 PM

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