Sunday, November 23, 2014

Marcus Garvey's Analysis: Blacks Dealing with Communists, Socialists and Union Workers

Marcus Garvey's famous critique of Blacks dealing with Communists, Socialists and Union Workers, and the like.  Enjoy

Atlanta Penitentiary, ca. July 1925
by Marcus Garvey


If I must advise the Negro workingman and laborer, I should warn him against the present brand of Communism or Workers' Partizanship as taught in America, and to be careful of the traps and pitfalls of white trade unionism, in affiliation with the American Federation of white workers or laborers.
It seems strange and a paradox, but the only convenient friend the Negro worker or laborer has, in America, at the present time, is the white capitalist. The capitalist being selfish--seeking only the largest profit out of labor--is willing and glad to use Negro labor wherever possible on a scale "reasonably" below the standard white union wage. He will tolerate the Negro in any industry (except those that are necessarily guarded for the protection of the whiteman's material, racial and assumed cultural dominance) if he accepts a lower standard of wage than the white union man; but, if the Negro unionizes himself to the level of the white worker, and, in affiliation with him, the choice and preference of employment is given to the white worker, without any regard or consideration for the Negro.

White Unionism is now trying to rope in the Negro and make him a standard wage worker, then, when it becomes generally known that he demands the same wage as the white worker, an appeal or approach will be made to the white capitalist or employer, to alienate his sympathy or consideration for the Negro, causing him, in the face of all things being equal, to discriminate in favor of the white worker as a race duty and obligation. In this respect the Negro if not careful to play his game well, which must be done through and by his leaders, is between "hell and the powder house."

The danger of Communism to the Negro, in countries where he forms the minority of the population, is seen in the selfish and vicious attempts of that party or group to use the Negro's vote and physical numbers in helping to smash and over-throw, by revolution, a system that is injurious to them as the white under dogs, the success of which would put their majority group of race still in power, not only as communists but as whitemen. To me there is no difference between two roses looking alike, and smelling alike, even if some one calls them by different names. Fundamentally what racial difference is there between a white Communist, Republican or Democrat? On the appeal of race interest the Communist is as ready as either to show his racial ascendancy or superiority over the Negro. He will be as quick and eager as any to show the Negro that he is white, and by Divine right of assumption has certain duties to perform to the rest of us mortals, and to defend and protect certain racial ideals against the barbarian hordes that threaten white supremacy.

I am of the opinion that the group of whites from whom Communists are made, in America, as well as trade unionists and members of the Worker's party, is more dangerous to the Negro's welfare than any other group at present. Lynching mobs and wild time parties are generally made up of 99 ½ percent of such white people. The Negro should keep shy of Communism or the Worker's party in America. Since they are so benevolent let them bring about their own reforms and show us how different they are to others. We have been bitten too many times by all the other parties--"Once bitten, twice shy"-Negroes have no right with white people's fights or quarrels, except, like the humble, hungry, meagre dog, to run off with the bone when both contestants drop it, being sure to separate himself from the big, well fed dogs, by a good distance, otherwise to be overtaken, and then completely outdone. If the Negro takes my advice he will organize by himself and always keep his scale of wage a little lower than the whites until he is able to become, through proper leadership, his own employer; by so doing he will keep the good will of the white employer and live a little longer under the present of things. If not, between Communism, white trade unionism and worker's parties he is doomed in the next 25, 50 or 100 years to complete and general extermination.

The Negro needs to be saved from his (?) "Friends," and beware of "Greeks bearing gifts." The greatest enemies of the Negro are among those hypocritically profess love and fellowship for him, when, in truth, and down in their hearts, they despise and hate him. Pseudo-philanthropists their organizations are killing the Negro. White men and women of the Storey, Joel Spingarn, Julius Rosenwald, Oswald Garrison Villard, Congressman Dyer and Mary White Ovington type, in conjunction with the above mentioned agencies, are disarming, dis-visioning, dis-ambitioning and fooling the Negro to death. They teach the Negro to look to the whites in a false direction. They, by their practices are endeavoring to hold the Negroes check, as a possible dangerous minority group, and yet point them to the impossible dream of equality that shall never materialize, as they well know, and never intended; at the same time distracting the Negro from the real solution objective of securing nationalism. By thus decoying and deceiving the Negro and side-tracking his real objective, they hope to gain time against him in allowing others of their race to perfect the plan by which the blacks are completely destroyed as a competitive permanent part of white majority civilization and culture. They have succeeded in enslaving the ignorance of group of so-called "Negro intellectuals" whom they use as agents to rope in the unsuspicious colored or Negro people. They have become resentful bitter toward the Ku Klux Klan, and use the influence of their controlled newspaper (white and colored) to fight them, not because they so much hate the Klan, where the Negro is concerned, but because the Klan, through an honest expression of the whiteman's attitude toward the Negro, prepares to him himself.

This hypocritical group of whites, like Spingarn and Storey, have succeeded an earlier group that fooled the Negro during the days of Reconstruction. Instead of pointing the Negro to Africa, as Jefferson and Lincoln did, they sought to revenge him, for the new liberty given him, by imprisoning him in the whiteman's civilization; to further rob his labor, and exploit his ignorance, until he is subsequently ground to death by a newly developed superior white civilization. The plot of these Negro baiters is wretched to contemplate, hence their hatred of me and their influence to crush me in my attempt to save the black race.

Between the Ku Klux Klan and the Morefield Storey National Association for the Advancement of "Colored" People group, give me the Klan for their honesty of purpose towards the Negro. They are better friends to my race, for telling us what they are, and what they mean, thereby giving us a chance to stir for ourselves, than all the hypocrites put together with their false gods and religions, notwithstanding. Religions that they preach and will not practice; a God they talk about, whom they abuse every day--away with the farce, hypocrisy and lie. It smells, it stinks to high heaven. I regard the Klan, the Anglo-Saxon Clubs and White America Societies, as far as the Negro is concerned, as better friends of the race than all other groups of hypocritical whites put together. I like honesty and fair play. You may call me a Klansman if you will, but, potentially, every whiteman is a Klansman, as far as the Negro in competition with whites socially, economically and politically is concerned, and there is no use lying about it.

Saturday, November 8, 2014

Why The Theory of Money and Credit Is More important Than Ever - Richard M. Ebeling - Mises Daily

Why The Theory of Money and Credit Is More important Than Ever - Richard M. Ebeling - Mises Daily

A key quote from the article: "Money is a market-based and market-generated social institution that spontaneously emerges out of the interactions of people attempting to overcome the hindrances and difficulties of direct barter exchange."

Thursday, October 30, 2014

Böhm-Bawerk’s Critique of the Exploitation Theory of Interest - Robert P. Murphy - Mises Daily

Böhm-Bawerk’s Critique of the Exploitation Theory of Interest - Robert P. Murphy - Mises Daily

Eugen Bohm-Bawerk's critique of Karl Marx's labor theory of value was revolutionary. His introduction of the notion of time preference was one of the great innovations of economic thought. Many other Economists built upon his framework, as he developed various theories regarding the abstract notion of the natural rate of interest. Eugen Bohm-Bawerk's work is highly relevant, as all aspiring Economists should read.

Wednesday, October 29, 2014

What's the Right Minimum Wage?

Proponents of the increasing minimum wage seek to assist those who need to earn more money. While this is a noble claim, does raising the minimum wage actually help those individuals? 

At the core, the employee's wage is simply a "price" on labor. Similar to a price paid to purchase an item at the store. Analyzing that purchase there are two parties: The Buyer and Seller of the item. This is similar to the notion of hiring an employee, as there are two parties in this transaction: The Employer and the Employee. The Employer is "purchasing" the labor services from the Employee. 

When folks are shopping at the store for an item, they typically are seeking an item that has a lower price, not a higher price. Conversely, the person selling the item is seeking to sell their item at the highest price possible, as compared to the lowest price. Voluntary exchange between actors in the labor market is no different. The Employer is seeking to pay the employee at the lowest wage possible, and the employee is seeking to push for the highest wage possible. 

How does this fit into Minimum wage? 

Keep consistent with the purchasing the product analogy, let us suppose that the TV's lowest price is $300, as they are selling like hot cakes. The Stores cannot keep the TV's on the shelf due to the increased demand. If the local government says that all TV's most be sold at $1000 per unit, what happens? The sales will decline, and more TVs will sit on the shelves, and they will be unsold. This same phenomenon happens in the labor market. If the agreed wage between employer and employee is $8.25/hour, and the minimum wage is raised to $15/ hour, the employer must make a decision. The employer can lay off that employee, have the employee work fewer hours, or purchase capital equipment to do some of the work, or a combination. 

The net effect of raising minimum wage is that there is extra labor being unused, just like the TVs in our analogy. This translates into higher unemployment in those specific labor markets that make those lower wages. 

In closing, minimum wage increase does not assist or help the poor; it simply makes matters worse, increasing unemployment in those labor markets where they need the most financial help.  

Wednesday, October 22, 2014

Boom and Bust: The Explanation of the Business Cycle

Ludwig von Mises' analysis of the business cycle may provide an insight to the Real Estate Crash from 2008. It also can provide insight into the prior Stock Market Crash in the late 1990s. Its an excellent write up by the late Murray Rothbard.

Mises’s Contribution to Understanding Business Cycles - Murray N. Rothbard - Mises Daily

Monday, October 13, 2014

Ep. 4 of 5 - Comparative Advantage and the Tragedy of Tasmania

A Critique of, "Sports Stadiums: Temples to Crony Capitalism"

Sports Stadiums: Temples to Crony Capitalism - Salmaan A. Khan - Mises Daily

I reviewed Mr. Khan's article regarding sports teams. While quite entertaining, and I agree with part of his premise, it still had some material worthy of deeper analysis. I will lay out the pros and cons of the article.

Pros: I agree with the writer's overall premise regarding sports stadiums. Sports stadiums, typically not in all cases, are financed with govt debt instruments: i.e Bonds. However, this is similar to how other "public goods" are financed. The tax incidences, for the construction of these structures, are shifted to the tax payers, the current ones, and to the tax payers in the future.  In this sense, the tax payers fund these structures, and many tax payers are not season ticket holders, or owners of the football franchises.

It is also note worthy to point out that the stadiums are leased to the football teams, as they pay rent towards its use each season. The Ticket sales, concessions, and etc cover this cost. As any economics major should know, that rent is simply the return of capital of the initial investment.. Many arenas are used for other purposes too, and those events pay the city for the arena's usage. Most football franchises do not "own" the arenas/stadiums.  Since this is true, the stadium's construction is not a subsidy to the team per se.

The issue with this sort of model is that the structures are not created from the out-spring of the "free market". The arena or stadium, like other public goods, is constructed by Government Fiat, and not from a true sense of actors "utility seeking".  This makes for market mis allocation of resources, or as economists call this "dead weight losses". The costs of construction skyrocket, scarcity of materials also cause the prices of inputs to construct the arena to increase, even onto those who will never attend an event or game! However, these individuals are still paying the bill for the stadium's construction via taxation.

Cons: The writer conflates the notion of the NFL being Non-profit as some sort of notion the league avoids taxes, and therefore, the entire NFL is subsidized. This is false. First of all, the NFL is a non-profit, as it is a 501 C 6. But, simply because it is a non profit, does not mean it does not pay taxes. The NFL is taxed on every dime, as  Jeremy Spector, NFL outside tax counsel, Partner, Covington & Burling LLP states here:

"Every dollar of income that is earned in the National Football League -- from game tickets, television rights fees, jersey sales and national sponsorship -- is subject to tax. None of this income is shielded in a tax-exempt entity. Instead, the NFL's 32 clubs pay tax on all of these revenues."(Spector, 2013)

The NFL home office is a non-profit, and it is able to keep its non-profit status simply because it does not engage in business activity, as Jeremy Spector states here:

"Claims that the NFL is using a tax exemption to avoid paying the tax due on these revenues are simply misinformed. The confusion arises from the fact that there is one small part of the NFL, unrelated to all this business activity, that is tax-exempt: the NFL League Office. The league office is the administrative and organizational arm of the NFL and does things like write the rules of the game, hire referees, run the college draft, negotiate the collective bargaining agreement with the players, conduct player safety research, and run youth football programs.

The league office acts as a trade association for the NFL clubs. It establishes rules and standard practices for its members, develops programs to help them run their operations more efficiently and profitably, and promotes the business in the broader community. Trade associations are nonprofit organizations. They don't engage in any business activity. As a result, they are exempt from being taxed under section 501©(6) of the federal tax code." (Spector 2013)

Secondly, the notion that the NFL league office is a 501 C 6 does not mean that other tax payers are "subsidizing" its existence. While one can attempt to make this argument with the construction of Sports Arenas, even though it will be incomplete also, the NFL is not being subsidized solely due to its non profit status.  Logically speaking ,this is tantamount to stating that if one utilizes a tax deduction, his/her neighbor is "subsidizing" the person using the deduction. This is risible. Moreover, it assumes that the property belongs, at first, to the Government. This is also nonsense.

In closing, his article, while entertaining, still needs more detail and clarity with this issue.  It has too many hyperbole style statements like, "The NFL is running one of its own games on the public, and as one of the most subsidized non-profit organizations in American history, the NFL excels at tackling the American taxpayer. It should be of no surprise that with its religious-like following, the NFL receives the same tax-exempt status as a church, exempted under the IRS 501 (c) 6 code from paying federal taxes. ", and less substance and factual analysis.  I do agree with the writer's analysis with regards to the construction of these stadiums and arenas. They are financial boondoggles, and the mis allocate resources, on the tax payer's dollar.

Additional Reading

Here is the entire analysis by Jeremy Spector from his interview:

"Every dollar of income that is earned in the National Football League -- from game tickets, television rights fees, jersey sales and national sponsorships -- is subject to tax. None of this income is shielded in a tax-exempt entity. Instead, the NFL's 32 clubs pay tax on all of these revenues.

Claims that the NFL is using a tax exemption to avoid paying the tax due on these revenues are simply misinformed. The confusion arises from the fact that there is one small part of the NFL, unrelated to all this business activity, that is tax-exempt: the NFL League Office. The league office is the administrative and organizational arm of the NFL and does things like write the rules of the game, hire referees, run the college draft, negotiate the collective bargaining agreement with the players, conduct player safety research, and run youth football programs.

The league office acts as a trade association for the NFL clubs. It establishes rules and standard practices for its members, develops programs to help them run their operations more efficiently and profitably, and promotes the business in the broader community. Trade associations are nonprofit organizations. They don't engage in any business activity. As a result, they are exempt from being taxed under section 501©(6) of the federal tax code.

Because the league office does not receive income from game tickets, television contracts and the like, its tax exemption does not apply to any of the profits earned in the NFL overall. All the money-making activity is conducted by the for-profit, taxable teams. The NFL has never contended that its business activity is a nonprofit endeavor. Similarly, and contrary to what some have asserted, the NFL's stadium financing program does not depend on the league office's tax-exempt status, and the bonds issued in connection with that program are not tax-exempt bonds.

Some have suggested that the league office's tax-exempt status is the result of a "loophole" in the tax code. This is incorrect. While section 501©(6) does mention professional football leagues as exempt organizations, the NFL League Office and other professional sports leagues were exempt from taxes long before this provision was enacted. This provision was inserted in the tax code when the NFL and the AFL merged, simply to ensure that professional football players could continue to receive their pensions from the newly merged league without jeopardizing its existing tax status.

The IRS first determined that the NFL League Office qualified as a tax-exempt trade association in 1942. And as recently as 2009, the IRS conducted an extensive audit of the league office and concluded that it was fully in compliance with the laws governing tax-exempt entities. If the federal agency responsible for raising tax revenues had instead thought that there was money being earned by the league office that should be subject to tax, or that the tax exemption was improperly protecting other NFL revenue from tax, or that the league office should not be tax-exempt at all, it would not have hesitated to reach any of those conclusions. However, the IRS gave the league office a clean bill of health.

Given the fundamental distinction between the for-profit, taxable teams and the nonprofit, tax-exempt league office, recent criticism of the NFL for trying to escape tax on its revenue is misleading because it ignores the crucial fact that all of this revenue is already subject to tax. None of the NFL's profits escape tax by virtue of the league office's tax exemption."

Reference:Coburn, T., & Spector, J. (2013). Should the NFL Have Nonprofit Status?. U.S. News Digital Weekly, 5(48), 14.

Friday, October 10, 2014

Ep. 1 of 5 - The Hockey Stick of Human Prosperity

Dr. Don Boudreaux has a series of 5 videos that covers some basic concepts of economics.

Inside September’s “Born Again” Jobs Report

David Stockman breaks down the jobs numbers. Key Excerpt:

"Specifically, the Great Recession resulted in the loss of 5.7 million or 8% of all breadwinner jobs in the US economy. As is evident in the graph below, all of the gains since the recession ended in June 2009 are born-again jobs, representing barely half of the original loss. The truth is, the American economy still had nearly 3 million fewer breadwinner jobs in September than it had at the 2007 peak and almost 4 million fewer than the high water mark back in 2001.

A decade and one-half of rampant money printing—-during which the Fed’s balance sheet exploded from $500 billion to nearly $4.5 trillion or 9X—-has thus been no blessing whatsoever for main street households, even as Wall Street has been gifted with opportunities to scalp prodigious windfalls from two giant financial bubbles."

Good write up by David Stockman. Read the article here:

"Inside September’s “Born Again” Jobs Report"

Monday, October 6, 2014

The Foundation of Economics

What is the foundation of Economic activity? Is it exotic formulas and mind boggling mathematical calculations? Many "experts" would lead us to believe this. Economics is based on the notion of human behavior or human action. Economic thinkers believe that all human action is purposeful, and it is about utilizing certain means to obtain ends or goals. Since we only have 24 hours in one day, we must economize those wants. This, by default, creates a priority ranking of things we find that are important. This is known in economics as a utility ranking. As one goes down this "utility ranking", it moves to something that is more valuable to less valuable. This also leads us into the Law of Diminishing Marginal Utility. This law is one of the fundamental laws of Economics. Here are some reads to explain this concept in more detail:

What Can the Law of Diminishing Marginal Utility Teach Us? - Thorsten Polleit - Mises Daily

Diminishing Marginal Utility: It's A Law

Marginal Utility Is Not Rocket Science

Friday, September 26, 2014

"Regulate It First, Learn About It Never "- Gary Galles

Regulate It First, Learn About It Never - Gary Galles - Mises Daily

"People are generally aware of the positive power of compound interest when deferring consumption in favor of productive investments. But more important when it comes to public policy is the destructive power of compound ignorance."

Critique of "The NCAA Racket" by Andrew Syrios

The NCAA Racket - Andrew Syrios - Mises Daily

While Mr. Syrios provides some valid points, the overall article is filled with mis direction, missed points and mis understanding.

This is an incomplete analysis, as it accepts the false premise pushed forward by the main stream media. While I have no issue with the analysis with the corporate cronyism that takes place with the construction of Sports Arenas, Stadiums, or Convention Centers, it mixes in many notions that are not logical, and do not pass the economic sniff test.

First of all, lets address the notion of Mr. Shabazz(UCONN' Men's Basketball Star) "going to bed hungry",  Mr. Shabazz does starve at times not because the school choose not to feed him, but simply because he makes that choice. Think about it: How does one build a successful athlete, thus a successful athletic program by starving the athletes? Utilization of any logic, this point of "starving the athletes" makes no sense. Moreover, the NCAA allows for the student athletes to receive the same meal plans as the other students.   This comment of "going to bed hungry" does not imply that the NCAA or UCONN seeks to starve him. This is just as risible as saying, "I am a Economics Major at UCONN, and I sometimes go to bed hungry." Does this mean that the Econ dept is starving its students?

Secondly, athletes are paid. Their wages are simply paid with the barter of tuition, room, board(meal plan), books, etc in exchange for their athletic skills.  If the athlete thinks he/she is worth more money, he/she will go pro. Since most draft picks do not make the big money, the market wage of the aforementioned benefits is their true market wage. Let us take the example of UConn. If you take the out of state and the in state totals of $50k and $25k, the average tuition, fees, etc come to $38k per year. This is the trade off, thus the "wage" the student athlete receives.

Thirdly, most Universities are not "making a profit" from college athletics. As per the Knight Commission's study on College Athletic programs, only 7-10 College athletic programs actually break even or make a profit....without subsidies. With subsidies from student fees, and the like, that list grows to a whopping 12-15. Side note: All "profits" are ephemeral, as they are simply the rents on the initial investment into the program, net the natural rate of interest.

Lastly, the writer creates a false equivocation with stating the NCAA has the power to block out competition, as he compares the NCAA to the Government. Yes, it is a cartel, but it is a very specific sort of labor/management relationship...the writer fails to mention the monopsony relationship that exists. These athletes have a special labor skill, as they are speculating that the athletic program will help them improve their skills to "go pro". So, an athlete will choose a program that has the best coaching staff, best facilities, best academics(cough couch), excellent TV exposure, etc etc.  There is limited competition simply because there exists very few individuals who can perform these skills at the highest level.

In closing, When a high school prospect leaves school, there are no armed guards whisking them off to UCONN and starving them simply to play basketball. This entire polemic regarding the NCAA making money off the student athlete is a watered down Marx Labor theory of value, which has been debunked countless times. I do agree with the writer that the NCAA/Athletic programs should stand on their own merit, and not get tax payer subsidies for the construction of stadiums and arenas. I also propose that there should be a separation between academics and athletics, as these two should never be mixed. I am curious on why the Yankees do not perform research on the cure for brain cancer?

Thursday, September 4, 2014

The Unseen Costs of the Minimum Wage

The article titled, "The Unseen Costs of the Minimum Wage " by Josh Grossman  from Mises Daily, explains the "seen" and "unseen" costs of minimum wage laws. It is a form of price control, as it shifts and alters the supply of labor in the marketplace.

A Key excerpt:

"By raising wage rates, the public can see their states’ minimum-wage earners making more money. This is the factor that is seen. What is unseen is the number of jobs destroyed or citizens who would have been able to obtain jobs if the minimum wage were never raised in these states in the first place."

Davis-Beacon Act of 1931 is an example of a special type of minimum wage act, as it make it more difficult for lower skilled laborers. A video explaining this:

Friday, August 29, 2014

The Myth of the Unchanging Value of Gold - Joseph T. Salerno - Mises Daily

The Myth of the Unchanging Value of Gold - Joseph T. Salerno  breaks down the importance of having a commodity based monetary standard.

An Excerpt from the article:

"When money is conceived as a measure of value, the policy implication is that one of the primary objectives of the central bank should be to maintain a stable price level. This supposedly will remove inflationary noise from the economy and ensure that any changes in money prices that do occur tend to reflect a change in the relative values of goods and services to consumers. Thus, for mainstream economists, stabilizing a price index based on a basket of arbitrarily selected and weighted consumer goods, e.g., the CPI, the core CPI, the Personal Consumption Expenditure (CPE), etc., is a prerequisite for rendering money a more or less fixed yardstick for measuring value."

Life Insurance Myths Debunked: Whole Life

The common refrain from most mainstream financial experts is that Whole Life is too expensive, too costly, its a bad "investment", etc etc. Most of these reasons are false, as it demonstrates the lack of knowledge and understanding on how Life Insurance Contracts are engineered, constructed, and priced by Insurance Companies. This understanding does not fit into a pithy TV or Radio Soundbite, so it is understandable why there is so much confusion surrounding this topic.

I was reviewing an article titled, "5 Common Whole Life Myths, Debunked", and I also provided some replies to the posters of this article. NOTE: It is assumed that most of these posters are agents/or financial advisory types.

Here is some of the posts and my responses to those posts(The original posts are italicized):

ahardester- you have pay the salesman, the administrative costs to issue the policy and general overhead prefund reinsurance costs..

Robert Williams Jr
Ahardester's post is false. You must meet the IRS guidelines for the definition of the life insurance contract during the first several years of its existence. Placing 100% of the funds in a Whole Life Policy and pulling 100% of the funds out in less than 5 years acts as an Endowment. Most financial services reps know Endowments are illegal as per the IRS and TAMRA,DEFRA etc. The first several years covers that expense to ensure the insurance contract is just insurance contract not an Endowment.

Prior to the 1980s, Endowments were used heavily, the various tax acts in the 1980s removed this product out of the marketplace. This notion holds true for all permanent life products, as the surrender charges are high upfront.

Think about it: How would the insurance company leverage its assets if these long term contracts were that highly liquid in the first 0-5 years of its existence? Each policy holder would simply place money in a contract, and then remove the cash. The Insurance Company would be unable to loan out money for commercial developments, purchase bonds, etc etc. They would be unable to expand their portfolio to pay future claims. It makes no sense. This is why the surrender charges exists, the insurance company must look at all the funds and all the insureds. Its not some zero sum game.

Keep the policy contract for longer than 10 years, report back. The results are staggering. I have of no client who complains after 10 years regarding their permanent life insurance contract. Focusing on the first several years is horrible analysis of a permanent life insurance contract.

However, if you need the cash right away(e.g less than 5 years), it makes no sense to purchase any permanent life insurance contract, annuity, 401(k) plan and the like. It is a long term proposition. If this is a concern, utilize a different financial vehicle, like your savings at a credit union or a brokerage account.

In short, that post is a fallacious critique of a permanent life insurance policy, as it is tantamount to saying that a Porsche 911 is a poor vehicle because it can not carry hay in the back seat. Buy a pick up truck.

One of the biggest myths is that the cash value is "your money". It's not. It was never intended to be. It's there to support the death benefit and all the guarantees of the contract while also providing a profit to the company. Can you use it? Yes, but you should never borrow cash value that you can't pay back in a short time. The interest rates on loaned out cash value are hardly a bargain. And, if you don't pay the interest, it is added to the principal of the loan. Agents that don't fully understand and explain how a whole life policy works are doing the policyowner a great disservice and it results in questions like those that Hollywood poses. The author of the article owes Hollywood a proper response.

Robert Williams Jr
"The interest rates on loaned out cash value are hardly a bargain. And, if you don't pay the interest, it is added to the principal of the loan."

This too is slightly false. Most loans are done on a net or "wash" basis. With whole life policies, they are direct and indirect loans also. The loan interest rate is done with simple interest, as it does not reduce your compounding of the cash value. At death, the loan is taken off the death benefit.

"One of the biggest myths is that the cash value is "your money". It's not. It was never intended to be"

Ipso facto, this is correct. It is the beneficiaries' money. However, as the owner of the policy, one controls the cash value. Similar to someone who is a member/owner of a LLC. The Cash value is the over-payment of premiums in the earlier years, yet in the later years the corridor of insurance(The Net between the Cash Value and the Death Benefit) shrinks, making the actual amount for the insurance company to "pay out" at death smaller.

Since the cash value grows tax free and compounds, the IRS assists in this process of paying the insurance cost. In this case, one is actually "buying term and investing the difference", but the Insurance company and the IRS are sharing in the risk.

Discussing whole life when writing an article on life insurance for the general public is one thing that has caused people to be so confused that life ownership is now at an all time low!.

The fact is that for 95% of people TERM life insurance is the least expensive and best answer. Term life is used to: insure dependents to replace income, provide financial security for dependents, pay-off a mortgage, fund college, or for final expenses.

The typical profile of a term life insurance owner is someone who is a family breadwinner and has minimal savings. It is critical protection and easy to understand and buy.

One thing you can do is visit an online life insurance site to learn more about life insurance, and the better ones offer free quotes, allowing you to get rate comparisons for most insurance products.

Robert Williams Jr
"The fact is that for 95% of people TERM life insurance is the least expensive and best answer. "

This is a false statement on so many levels. First of all, term life is cheaper, under this one condition: If the insured dies within the policy "term" period. Since Insurance is based on statistics, econometric models and probability, these factors along with risk are some of the factors in pricing insurance. If the policy is "cheaper", then the probability or risk is lower for the insured's death. For example, if a 30 year old purchases a 20 year term policy, of course it will be "cheaper" than a Whole life policy. The probability is lower for the 30 year old to die in the 20 year term, vs a policy contract that runs to age 120.

Secondly, this quote totally ignores the notion of suitability. How does one possibly know what is best for 95% of the people 100% of the time? Is this agent/adviser omniscient? Do they have God like tendencies to know each person's resources, goals, wants, desires, etc? The BEST life insurance contract is the one that functions as promised in the contract and what assists the client to achieve their individual goals and objectives.

A video explaining why Whole Life Insurance is an economic Work Horse:

Thursday, August 28, 2014

Obamacare Rates on the Rise?

PWC(PriceWaterhouseCoopers) performed a study showing an increase of health care premiums for policies sold via the exchange due to Obamacare. An excerpt:

  "In nearly one-third of the 29 states that PwC investigated, premiums will rise by double digits. In Indiana, the average increase will be 15.4 percent. In Kansas, it’s 13.6 percent. Florida’s insurance commissioner says premiums are set to climb 13.2 percent."

Read the article titled, "Obamacare Year Two: PWC Survey Shows Double-Digit Rise In Many States"

Do Big Infrastructure Projects Boost GDP?

Do Big Infrastructure Projects Boost GDP? This question is addressed in a study done by the IMF. Here is a key excerpt:

"The econometric evidence reveals small positive and instantaneous associations between public investment booms and economic growth, but little long run impact. Several aspects of the evidence cast doubt on the idea that past booms triggered or accelerated GDP growth. Most of the positive association occurs immediately; a spending boom tends to be immediately associated with a rise in GDP this year, but not subsequent years."

The Doubling of the National Debt

"The Doubling of the National Debt" digs into the notion of the Federal deficit is declining, but US Government Debt load is increasing. A Key Excerpt:

"The falling deficits sound like good news, but there are two important things to understand about it. First, falling deficits mean that the national debt is still increasing — just more slowly than they previously were. In this case, assuming things play out as projected, that means that instead of trillion dollar deficits adding a trillion dollars a year to the nation’s debt, we now have a half-trillion dollar deficit adding a half-trillion dollars a year to the nation’s debt."

Wednesday, August 20, 2014

Militarization of the Police State: Increased due to 2009 Stimulus Package

Two good links discussing the the militarization of the local law enforcement. The first article titled, Obama Stimulus Program Includes Billions for Cops", covers how the 2009 Stimulus package had items to help increase funding for local law enforcement officials:

"The grants are popular with Democrats, and restoring them was central to Obama's campaign plan to combat rising violence. By tacking the money onto the stimulus plan, Obama avoids having to defend the spending during the normal budget process."

Yet, crime rates, according to Cato Research Fellow Trevor Burrus, have been declining since the 1990s. He makes this point and other points regarding the funding of local law enforcement in this Cato Podcast:

Tuesday, August 19, 2014

Walmart Shakes Up Primary Care—and the Whole System

Walmart Shakes Up Primary Care—and the Whole System

Key Excerpt:

"Insurance is irrelevant to these clinics, which post and accept cash payments directly. Walmart and other businesses outside the government-medical complex increasingly understand that there are opportunities outside those bureaucracies, and healthcare enterprises that operate free of the dead hand of Obamacare can take care of their customers without getting bogged down in the old system."

Militarization of the Police

Here are some excellent reads that provide some different view points from the mainstream school of thought regarding the Police State.

This first article, Police States and Inner City Economics, addresses this issue and some of the issues that have caused the decline of the economics in the inner city areas. A key excerpt:

"The expansion of police prerorgatives has accelerated in recent decades, first with the “War on Drugs,” and then with the “War on Terrorism,” both of which have resulted in what we see today in the form of heavily militarized police forces, asset forfeiture, and an endless list of federal laws that bring long jail sentences, even when no criminal intent is proven."

The Second article, Police Militarization in Ferguson-and your Town, explores the issues surrounding on how the local police are funded to acquire military surplus equipment and the like. A key excerpt:

"Federal grants drive police militarization. In 2012, as I was able to establish in moments through an online search, St. Louis County (of which Ferguson is a part) got a Bearcat armored vehicle and other goodies this way. The practice can serve to dispose of military surplus (though I’m told the Bearcat is not military surplus, but typically purchased new) and it sometimes wins the gratitude of local governments, even if they are too strapped for cash to afford more ordinary civic supplies (and even if they are soon destined to be surprised by the high cost of maintaining gear intended for armed combat)."

Lastly, a peer reviewed paper titled, "Warrior Cops" addresses this issue. This paper was written in 1999, as it details how much military equipment was given to local law enforcement agencies during that time period.

Wednesday, July 16, 2014

Quote of the Day: Equality vs Freedom

"Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom."~Alexis de Tocqueville

The Immigration "Crisis": Different Presective

This article was written by Mark Thorton Phd in 2007, as it provides a very different perspective from the common mainline thoughts regarding the issue surrounding illegal immigration.

He makes the connection between the Federal Government, The Federal Reserve and the Housing Crisis and illegal immigration.

The article can be read right here, as this is an excerpt:

"The only national problem with immigration lies with government. Because immigrants are relatively poor they tend to pay less in taxes than their use of so-called government services like health care and education, and thus increase taxes on citizens."

A second article regarding this issue is from Joel Poindexter, as it was written in 2011 regarding immigration. Here is an excerpt from this article:

"The only significant impact that immigrants have on the labor market is to increase the supply of labor, which tends to put downward pressure on wages. Everything else equal, the only way an immigrant will be hired over a native worker is if he is willing to accept lower wages. In order to maximize profits, business owners look to pay the lowest wage possible without affecting marginal productivity. If an immigrant is willing to work for less, and he is productive enough, it only makes sense to choose the lower-cost labor. Billions of people the world over make this same decision on a daily basis while shopping for goods and services — it's called bargain hunting."

The rest of the article can be read by clicking the link here..

Tuesday, July 15, 2014

Emergency Fund: 26% of Americans(polled in Survey) do have one

From the LA Times article, "About a quarter of Americans have no emergency savings, poll finds"

Key Excerpt:

"About 26% of Americans have no money saved to handle emergencies, according to a new poll that showed households making little progress over the past year in their ability to deal with financial trouble."

Monday, July 14, 2014

Quote of the Day: Bad Laws

"Bad Laws make socially advantageous acts illegal, and therefore leads to an undermining of morality in general."~Dr. Milton Friedman.

Saturday, July 5, 2014

Stuck in a Bad Retirement Plan? Consider a 72(t)

The 72(t) is a viable option for those who are seeking to roll out of a bad retirement plan. It allows one to roll out monies from a retirement plan(qualified plan) before 59 1/2.

Excerpt from the article:

"In case you don’t know what a 72t distribution is, this is shorthand for the Internal Revenue Code (IRC) Section 72 part t. The most popular provision of this code section, (actually IRC Section 72(t)(2)(A)(iv)), is known as a Series of Substantially Equal Periodic Payments – SOSEPP for short."

Read the rest of the article by clicking here. 

Tuesday, May 27, 2014

Quote of the Day: Slavery vs Freedom

Alexis de Tocqueville provides us the quote of the day:

"Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom."

Wednesday, May 21, 2014

More on Minimum Wage

Here is a pretty good article regarding the minimum wage debate titled, "Why We Should Oppose Both Skynet and Minimum Wage Increases"

Of course, I provided a pithy reply to this article:

"Sober Micro Econ analysis supports the writer's claim. Business owners will make the rational trade off between Capital or Labor-- if the cost of one of these factors rise. Business owners are seeking to get a return on the initial capital invested in the enterprise. If they are charging "market prices" for their goods, they simply can not raise prices to accommodate the increased wages that min wage increases offer. Why? The price of the good is already at equilibrium. Raising the price of the good would be totally dependent on the elasticity of the product, and if there are many competitors, the likelihood of simply raising prices to accommodate this min wage increase is not possible. Subsequently, the owner must either provide a trade off into a capital investment to replace that worker, or lay off workers, or raise the price of some goods, while off setting the price increase by lower prices for another good. In all cases, the business owner takes the brunt of this min wage increase, and it lowers his/her return on the initial capital investment."

Monday, April 14, 2014

Deflation: Is it a "Bad" Thing?

Many mainstream Economists state that deflation is a bad thing, and deflation should be avoided at all costs. This also includes economists from the Chicago School(Milton Friedman for example) and even Keynesian Economists(Paul Krugman) They believe that it should be avoided to the extent of printing more money and expanding the money supply. However, the writer of this article takes a different position.

Here is a quote from the article:

"But we know from experience that, even in the face of falling prices, individuals and businesses will still, at some point, purchase the good or service in question. Consumption cannot be forever forgone. We see this every day in the computer/electronics industry: the value of using an iPhone over the next six months is worth more than the savings in delaying its purchase."

If people choose to save versus consume, is that really a "bad" thing? As the quote states, consumption will occur, as savings is simply deferring consumption into the future.

Feel free to read the article here.

Getting Dazzled by Glitter

Here is an excellent write up on how investors can get fooled by following the "hot" stocks.

Key excerpts:

"A stock that doubles and then loses just 50% is right back where it started. No fewer than 18 highfliers have lost at least 50% from their peak so far this year,"

"For many people, the sight of stocks doubling and tripling or more in a matter of weeks is too great to resist. But in order for a stock to possess “momentum,” as defined by academic researchers and leading investment firms, it needs to have been going up faster than average over the past two to 12 months or so. If it has been on fire for just a few days or weeks, there’s no reason to believe its hot returns will persist, experts say."

Check out more from this article here:

Sunday, April 6, 2014

Quote of the Day:Price Stability

This quote speaks to the notion of stability. Politicians seek to make the economy stable or the Federal Reserve seeks to "stabilize" prices. This objective, prima facie, sounds plausible. However, it really is not as Ludwig Von Mises states here from his epic work, "Human Action" pg 224:

"Human action originates change. As far as there is human action there is no stability, but ceaseless alteration. The historical process is a sequence of changes. It is beyond the power of man to stop it and to bring about an age of stability in which all history comes to a standstill. It is man's nature to strive after improvement, to beget new ideas, and to rearrange the conditions of his life according to his ideas."

Monday, March 17, 2014

The Tesla Tempest

New Jersey is third state that is "banning" the direct sale of Tesla motor vehicles.  The first knee jerk reaction is that "big oil" is behind this action. Perhaps it is. However, the obvious culprit that is lobbying or rent seeking the local law makers to stop this voluntary economic behavior is the Auto Dealer lobby.

The highly respectable and honorable car dealer lobby provides an intriguing claim: These car salespersons are highly concerned about the consumer's interest. These caring and magnanimous car sales persons want Tesla to sell their cars through a dealer distribution channel,  and not directly to the consumer straight from the manufacturer.

How does purchasing a car via the dealer versus direct from the manufacturer "protect" the consumer? Answer: It does not. But, it does provide the other auto dealers protection.  Protection from the newest competitor: Tesla Motors.

Rent seeking or lobbying, provides benefits to a few, and the dispersed cost to others. In this case, the auto dealers, in their zeal to rescue consumers from the nefarious plot of selling cars directly to consumers, benefit while consumers pay the cost for their rent seeking. 

Note: people that want a Tesla vehicle will still purchase one directly from Tesla Motors.

Saturday, March 15, 2014

Thursday, March 6, 2014

Is Government Central Planning Possible?

Here is a fine write-up on the folly of Central Planning as done by the State or Government.

The Minimum Wage Demigods

The State of California comprise individuals who know everyone's unique wants, desires, their available resources and the link. This is demonstrated on their zeal to push for this new minimum wage legislation. Read the story here:  

Wednesday, February 26, 2014

Is Government Worth its Weight in Salt?

A short, pithy read regarding the Governments handling of the snow storm crisis that occurred during the last several weeks. The article is titled, "Government Not Worth It Salt"

Tuesday, February 18, 2014

Externalities: What Are They?

While not recognizable to many based on this academic sounding name, externalities are a common problem that can occur in the "Free Market".  An Externality is a side effect or outcome of two parties performing an economic transaction. The Externality will impact others that are originally not members of the transaction. The most commonly known "externality" problem is pollution. An auto manufacturer can produce cars, yet the exhaust from the manufacturing plant can be emitted into the air.  It should be recognized that Externalities can be positive or negative. Many scholars and thinkers believe that Government intervention is the most effective means of mitigating negative externalities. Is this true? Dr. Bob Murphy goes into deeper detail in this video clip:

Sunday, February 9, 2014

Regulations, Regulations and Regulations

Both sides of the political spectrum love regulations, as they state the following:  "Regulations are good because they protect us from greedy capitalists", or they provide us this line, "We need to reduce regulations, but we need to keep regulations that make sense"? What?

Economic analysis demonstrates that regulations, if they are "good" or "bad", provide an additional cost in the economy. We are told that these regulations are needed to protect us from the "greedy capitalists". This line is rather odd considering that the larger corporations lobby Congress and HELP WRITE THE REGULATIONS! If you are skeptical, see who helped in the formation of Obamacare. 

These larger firms understand the economics behind this action: The increased costs of having regulations remove the smaller firms out of the marketplace, the larger ones can absorb the cost of these regulations. Of course, the larger corporations can afford to pay off the regulators to help avoid any punishment of any regulation violations.

Speaking of the costs:  If one takes the 2002 Sarbanes-Oxley regulation, the explicit economic costs are estimated to be around $1.4 trillion. This is simply one regulation, as there are many on the books.  How does $1.4 trillion benefit us?

Politicians love to trumpet that they want more jobs in the economy. The argument is typically about what marginal income tax rate is optimal for the "rich" and the "poor". While this polemic is being verbally volleyed from one sound bite to the next, no one addresses the egregious amounts of regulations that prevent capital formation.

In short, regulations create economic inefficiencies, as they add costs onto the actors in the marketplace. They simply should be reduced, or in many cases,eliminated.  One would think with the mounting levels of debt, the US. Government would relax many of these regulations.

More on Government Regulations

Here is a great article providing some economic analysis on the impact of Government regulations upon the Health Care sector in the United States Economy. Here is an excerpt from this article titled, "How Government Regulations Made Health Care So Expensive" :

"The lack of competition between hospitals and other health care institutions also limited cost control incentives placed on executives.  The lack of competition between both medical institutions and the doctors that control most of their spending could explain why hospital costs have been inflating twice as fast as even physician fees.  Hospitals are loaded with waste and inefficiency.  For example, a hospital stitch costs more than $500 today."

Yet, we are told that regulations benefit the citizens. What?

Friday, January 17, 2014

More on The Minimum Wage Law

Dr. Walter Block provides some lucid insight on the notion on how Minimum Wage laws impact The Division of Labor. In his article titled, "The Minimum Wage Law", he constructs a polemic discussing the effects of this law if the minimum wage law is increased by Government mandate.

Along with Dr. Walter Block's article, here are some videos discussing the impact of raising minimum wage laws. The first video is from the late Dr. Milton Friedman, and the second video is from Dr. Walter Williams.

Dr. Milton Friedman's video:

Dr. Walter Williams' video: