Is USA is under recession?

Right since January 2008, a liquidity crunch was experienced by the non-financial companies and individuals and that resulted in job cuts. The average job loss of USA for the eight months was 81,900 job cuts per month by September 2008, during the last four months, it was 483,500 per month. Unemployment rate caused consumer spending to fell by 3.8% in the three quarters of 2008 and in fourth quarter it fell by 36% below the final quarter of 2007.Hence, the National Bureau of Economic Research’s Business Cycle Dating Committee declared that the US economy is in recession since January 2008 .

The mainstream economists and media pundits suggest that the cause of a recession is the tight money policies and raised interest rates by the Central government that results in liquidity crunch and causes job cuts, declining consumer spending and hence a recession . They thus support that stimulating the economy with easy money, governmental loans, huge stimulus packages and lowering interest rates may help the economy in bringing the boom again. The idea suggests that the Market cycles of Boom and Burst originates from the central bank action of expanding the money flow in the market and contracting it. They suggest that proper stimulus packages and government spending over the common welfare programs can easily sooth the situation by allowing more currency to float in the market. Plus, they suggest that such common welfare spending also help in improving the life of standards of common populace.

Failure of Obama’s Stimulus Packages

The idea of mainstream economists is absolutely flawed and this can be easily seen with the failure of the economic stimulus given by the Bush government and supported by the new government of Obama.

It should be clear that a Burst or a recession occurs because there was a boom in market. A boom obviously is the period when an economic sector is unnecessarily provided easy loans, higher profits and more support by the authorities and central government to cause high rise in prices that creates a false demand in the market and causes inflation. That is, the downturn, or the depression or the recession is exactly because of the Central bank, not because it started tightening the financial sources, rather it is because of malinvestment initiated by previously created credit resulting from central bank . Mainstream economists also suggest that the market will recover and the prices will inflate again if further easy money is provided through government spending, ridiculously huge stimulus packages and other similar tactics. They believe that by doing so, the stock market will again start rising high. Yet, with all economic stimulus provided, stocks as a broad group are down since last ten years . That is, economic stimulus and credit policies of Central bank failed since last 10 years.

It is also important to understand the reason of liquidity crunch. A liquidity crunch occurs only when the present amount of money in the market, which is nothing but a means of exchange, is malinvested in those sectors that are facing false demand or boom. Since the money was malinvested in supplying the false demand, it gets trapped. Lenders don’t get their loan back and they suffer liquidity crunch. Thus, the reason of a recession is the easy credit policies by the government and central bank that causes Boom in the market. When the wrong policies of the government and central bank fail, the market suffers recession.

Recession is not the problem, it is the cure of the problems of Malinvestment

Thus, recession can be defined as a cure to the ill-policies of government and central bank that caused boom in certain sectors such as housing market. Because of that boom, easy credit policies, subsidies, easy lending and many other government and central bank caused factors, the prices soars to extreme high and causes inflation and money gets trapped in malinvestment. As the recession acts as a cure to this situation of extreme falsehood, it starts decreasing the extent of false demand and tries to bring the market to its actual true situation. The prices start declining and the economy starts recuperating from the illness of false heights.

Since recession itself is the cure of problems of malinvestment that were caused by the government and central bank’s ill easy money and credit policies, it cannot be cured by further stimulus. The stimulus will only sustain the recession for longer periods until all the malinvestment is not neutralised and the economy comes in a situation to achieve sustainable growth . The idea can also be substantiated with the expectations of Housing economists who expect that over the next 10 or 20 years, the prices in realty sector may start rising again on an average, but that rise won’t be as much as the average rise was during the past decade . Obviously, because of easy money and mislead credit policies caused a boom in housing market and created a false demand that consequently resulted in unsustainable boom. As a neutralising phenomenon, the market forces caused liquidity crunch to cure the malinvestment. Until the malinvestment will not neutralise, market will not gain sustainable growth. Stimulus package can only delay the time for achieving the sustainable growth. The stimulus also failed to provide any help in improving the job market, the unemployment rate is still 9.7% in the month of May 2010 , while it was 6.9% in 2008 .
Now with the problems of liquidity crunch still persisting, even the retirees are looking forward to find jobs . The situation shows that expensive stimulus may also push US towards the same fate that the Greece government and public are suffering right now.

Robert Lucas supported the idea of Ben Bernanke to reduce the interest rates . Every sane minded person will support the idea. In fact, the government or the central bank should not have the power to decide or dictate the interest rates. Interest rates should be decided by the free market proponents freely as per the time requires and permits. Yet, till how long will the central bank and government let the market enjoy the falsehood of stability on the basis of stimulus, what will happen when the central bank and Obama administration will look forward to take the stimulus back? Only then the market will again step forward towards curing the malinvestment caused by bad credit policies and only after that cure the market will be in a position to attain a sustainable growth.

One thing to note about the use of the word “exploitation” as a bad is the literal definitions that we can look up (1) to utilize, esp. for profit; turn to practical account; (2) to use selfishly for one’s own ends; and (3) to advance or further through exploitation; promote. So we can look and say that it isn’t a bad in any sense of the word. Being utilized in order to create or promote; and with definition two, we can say that both the laborer and the factory owner exploit each other, the former doing so by using the capital investment the latter built up in order to make a living.

Just to go over a few of the vicious cycles of exploitation—used in the negative sense in which it is generally used — and the real implications in such a mentality.

(Il)legal Immigration as Exploitation

Because we each belong to our country and it belongs to us, citizenship is of the utmost importance in choices for employment. If an illegal comes into our country—and to some, even a legal immigrant—looking for work, he is taking jobs that belong to us as a country and a body of homogenous people and giving it to an alien who is now considered to have “stolen” this job from good, hard working, local men. This is laying claim on another man’s labor—that is, the capitalist who has gained the money using his physical body in order to employ people is now told that he may not do with his productivity as he pleases.

When immigrants go through the process of legal immigration and assimilate into a culture, the majority of people agree that this is a good thing. Having borders and an immigration process already presupposes the idea that the land here is, again, owned by all of the citizens and the government of the country. On one hand, practically speaking, 300 million people or the “government” cannot own property because nobody has the exclusive right to use and dispose of and responsibility for the maintenance of such property belongs to no one. Let’s just take the argument at face value though: the government via consent of the governed owns all of the land within the borders—this is called land tenure. As a citizen, when you agree that the government owns all of the land (because surely, nobody is saying “aliens can come here as long as they stay only on private persons lands”) you are then inherently accepting that you do not own your property.

Employers are by fact of minimum wage laws taking advantage of immigrants. I believe there is enough information on this site to cover all of the things that are wrong with minimum wage laws, from its creation of unemployment to laying claim on another’s person body because what you think a “living wage” ought to be.

Capitalists exploiting Workers

This is the most easily debunked idea of exploitation ever. We know that the reason that capitalists reap a profit while workers earn wages it because of the formers ability to suspend current consumption for future consumption and also his willingness to take the risk of losing his investment. But let’s call this beside the point for a moment. The more important thing is that both parties, the employer and the employee, are entering into a voluntary contract. That is to say that all involved have decided that the parts they are playing in the transactions are more than just mutually beneficial, but that both think that they are getting the better part of the deal otherwise they would do something else with their time. If the capitalist thought that his money was worth more than what value the worker will bring, he would instead keep his money. If the worker believed that his time would be better spent doing something else, or believed his wages to be truly “unfair,” he would use his hours and energies differently in order to pursue the best he can. In a free society, no man accepts a job or wage he doesn’t want.

Money and Banks as Exploitation

Photo by swisscan, available under a Creative Commons Attribution-Noncommercial-Share Alike License

But can money really be evil, or bankers really exploitive in a free society? Money is a common medium of exchange, and banks work as both a storehouses for this medium of exchange and also an intermediary between lenders and borrowers; that is, lenders are savers who use time deposits as a way to signal to bankers it is okay to lend out the money and then gain interest due to their suspended consumption and borrowers agree of their own volition that they are willing to pay interest on such borrowed money because of their current consumption.

Are the lower class being taken hostage by the higher class by virtue of the fact that they need money now and cannot save and those who have planned, suspended consumption (saved) are now able to provide that needed money to those who are less well off than them? When we phrase the proposition like this, it seems ridiculous that being able to provide what is necessary for one is the equivalent of harming them. Perhaps it is the bankers themselves who are harming the whole of humanity outside of that profession by providing a safe place for people to keep there money and a way for those more fortunate to lend to those less fortunate for a profit to both the bankers and the saver, whilst the borrower is stuck with footing the bill of their gain?

One really important thing to notice about this is that the person who has the time deposit and the person who takes out the loan do not have to know each other. This is one of the more obvious mechanisms that makes the capitalist system more blind to race, class, color, creed, etc. Of course if a bank wanted to serve only blacks or only men, this would take a chunk out of their profits and that profit is exactly what they are in the business for. But what about the man who had saved? Although some people do live off the interest of their accounts, I think it is safe to say that is not the case more often than not. The person certainly does want the interest, but what if this man is a Protestant anti-Semite, a womanizer who finds anybody who harms their persons through the use of drugs and alcohol the scum of the Earth as well, as the rest that aren’t like him? It would exclude a huge amount of people from being able to borrow from him to start up a business, buy a house, or even have a payday loan to get through the week. But if the bank does not have any exclusionary practice, he will not be specifying that the loans made with his money must be to this or that type of person (which sounds like a hard thing to enforce anyway). So what we actually see here instead of a minority being excluded or taken advantage of is the banker allowing a voluntary transaction between two people who would not normally associate otherwise and all parties benefiting from it!

If we say money in and of itself is “the root of all evil” then what we are literally calling evil is indirect trade. If a five-year-old and a ten-year-old trade each other because one has an apple and wants and orange, and the other has an orange and wants an apple, do we call this evil? No. What if we use pebbles as a money because the five-year-old doesn’t like apples so he wants to keep his orange, so the ten-year-old offers him 3 stones for the orange that he can then turn around and use to buy a banana? This is “money,” or what we call evil.

What would a world without trade mean and how far would it extend? Will we call it evil if my mother trades her most recent issue of Cosmo for my sisters most recent issue of Glam? Well, we can say that without a question, this possibility wouldn’t even arise because such publications take a massive amount of division of labor which would not come to fruition in a tradeless world. May my sister who hates doing the dishes trade with my mother who hates doing laundry? Let’s assume family trade is okay. This means each family will have to become self-sufficient. The serious repercussions of such a world and its effects on our standard of living are unfathomable.

Photo by Storm Crypt, available under Creative Commons Attribution-Noncommercial-No Derivative License

But what does exploitation, or to use more apt words: debasement, perversion, misuse and injustice really mean? Where is it that we see these things actually happening?

To go to war on a citizenry who has done no harm accept to live in an area of land monopolized by a state mechanism that is now clashing with another government is exploitation. To agree with an employer that you will work enough to earn the salary he has promised of $82,000, with a marginal tax rate of 25% in the US taken from your check to benefit people you know not and projects you know not, because of some social contract you’ve never seen or signed is exploitation. To tell a person from one territorial monopoly where they may move their body as if you lay claim on it is exploitation.

Only when we live under and with coercive forces may we actually see what it means to take advantage of and to demoralize persons and their spirits. When we step in between two persons and tell them what to do with their bodies, their energies, time and property and act as if we have a righteous claim to usurp some one else’s volition because we don’t trust individuals ability to do what is in their best interest, we are crossing the line between moral and immoral, creative and destructive, humanity versus inhumanity. And only when we realize that we do not have to allow ourselves to be subject to these sorts of transgressions will we live in a world free from “exploitation”.

The Machinery of Freedom: A Guide to Radical Capitalism: David Friedman

David Friedman, the freer son of Mr. Milton Friedman wrote this excellent work in 1973. Milton Friedman himself is known as one of the premier economist with Libertarian and anti-Keynesian approach. Yet, David Friedman is way apart from his father. One may feel that David Friedman learnt Economics not from his father, but from the Genius Ludwig Von Mises himself(UPDATE: Just to clarify, he did not). Machinery of Freedom contains a range 48 excellent essays that will not only entertain and provoke your mind to think rationally, but provide you a lot more to think and explore by your own. The essays are short and ranges from defence of property rights and private property to strictest modes of anarchocapitalism. He discusses the exploration of private law enforcement in a free society to great extent and provides a good look on the issue. You will certainly have a better understanding of a model of Free Society after reading the book. The wonderful thing is David Friedman seems to be hugely influenced by Ayn Rand. His assumption, that mostly people are rational and if someone is irrational, he will loose in the free society and the loss will be the teacher to achieve rational behaviour.

The Two Treaties of Government: John Locke

The founding father of classical liberalism or Libertarianism, John Locke still remains the most influential philosopher and thinker of all times. Although, his first treaty seems to be obsolete now, because the first treaty was the direct and vehement opposition to the irrational and obnoxious support of Robert Filmer to Monarchy who claimed that, men are naturally slaves and hence monarchy is the only justifiable government. The Second treaty of the book makes it a grand work. One can find the most systematic and logical defence of Individual Liberty in that book in such an inspiring way that will make you say that John Locke is way better than Aristotle.
The book was written in 1680, yet it is not obsolete. Even now, most of the governments throughout the world keep harassing individual liberty on the name of democracy. The book makes one learn the true nature of proper Miniarchy.

Atlas Shrugged: Ayn Rand

One can find no better book on Individual Liberty, Rationality and clarity of conscious other than this great Magnum Opus of Ayn Rand. Fountainhead lays the foundation of libertarianism and Atlas Shrugged stands on it as the basic structure of Free Society. The book is still one of the largest selling books throughout the world even after 53 years of its publication. The book is timeless, it will never die, it will never loose its shine and ability to make minds sharper, better, proper and rational. The book clarifies most of the dilemmas of a common reader living in a world where totalitarian governments are harping on controlling the masses, where the individual is faceless and individuality is curse. Atlas Shrugged shows you who is exploiter and who is being exploited and leaves you to decide whether you want to be the exploiter, or will you accept being exploited. The book prompts you to strike against the exploiters. The book fills you up with the energy and idea of liberty for your own self. Fountainhead and Atlas Shrugged are the best books one can ever read. Ohh by the way, have a reality check, feminists cannot accept these books. Ayn Rand has mocked feminism, just like all other form of collectivism, and being a woman, I am grateful to her for doing that.

Economics in One Lesson: Henry Hazlitt

Nothing can be better than this marvel by Henry Hazlitt, the American Philosopher and economist. The book has the potential to make you learn the actual economics of practical life and practical world in most easy way. The book makes you love economics. Hazlitt, through his immense simplicity explains how Free Market promotes efficiency and how government interference in market ruins the system and creates chaos. Time will Run Back and Economics in One Lesson are the two books that will not only answer all your questions regarding inflation, price control, minimum wages, unions and every other thing that influence your daily life, but will also provide you an assurance that the things can be better. The book leads you to start thinking and striving for Liberty to make world better.

Human Action: Ludwig Von Mises

Ludwig Von Mises is undisputable founding father of Austrian Economics. He along with Ayn Rand is the founding father of modern libertarian approach too. Human Action is the book that will clarify all the illusions about the stories of communism, socialism and collective welfarism. His explanation of Industrial revolution and 2nd world war and the economic effects of the situation are revolutionary. There are many who keep giving excuses for Capitalism and Individual Freedom, the frontier fighter for the sake of Individual Liberty and Human moral rights was Ludwig Von Mises.
He was undoubtedly the best philosopher of 20th century along with Ayn Rand.
In Human Action, he introduces Praxeology as the major foundation of social sciences and economic laws. He further ascertains that economic laws can only be arrived at by means of methodological individualism. He was vehement opponent of positivism, or materialism as a foundation of social sciences and morality. He was one of the truest Individualist, Rationalist and Objectivist. The major theme of all his books is inflation and monetary economics and the rational comparison between Free Society and Government controlled society. Once he said

Efforts to realize Socialism lead only to the destruction of society. Factories, mines, and railways will come to a standstill.

The failure of USSR makes him the sage who knew the future. His work on theoretical Business Cycles explains all the causes of repeatable Depressions.

The Wealth of Nations: Adam Smith

Everybody knows a little or more about this famous book by Adam Smith. He was the first to explain the importance of social distribution. His example of story of pin-making is used every now and then. People write a lot about the “Invisible Hand” and murk up the essence of the book. The book clearly states that government is redundant and it should let the market free.

The Animal Farm: George Orwell

George Orwell was one of the best Dystopian. His book 1984 is world famous along with Aldous Huxley’s “A Brave New World”. One can easily see how both of these writers used and criticized the Pavlovian learning and conditioning, and how they showed the world that the way it is going through will lead to certain destruction. Orwell used to say that 1984 was written to change the view of the people about the society they should try to create. The book is a masterpiece undoubtedly, but The Animal Farm is much better book on my scale. The Animal Farm is direct attack on the egalitarianism and collectivism. The Animal Farm, along with 1984 and Aldous Huxley’s “A Brave New World” should be read to understand why government is evil, and why people should not sacrifice individualism for the illusionist welfarism.

The Law: Bastiat

Frederick Bastiat was one of the most prominent economists of 19th century who proposed and supported Laissez-Faire system and Individualism strongly. Amongst his all great works, The Law is one of the best. The book suggests the proper nature of Law and the role of legal bodies in a Free Society. The book was published in 1849, the same year when Frederick Bastiat passed away. The book suggest that the proper role of the law is the protection of Individual right, Liberty, defence of life and property. Bastiat and John Locke are the founding teachers of Property rights and Individualism; they are major inspiration behind all forms of Libertarianism.

Free to Choose: Milton Friedman

We started the list with the book of David Freidman on radical libertarianism; we will end with a book by his Father Milton Friedman. The Nobel Laureate, prominent libertarian and opponent of Keynesian economics discusses the Government sponsored education in this book along with many other issues. With his easy logic, he explains how and why big governments are a curse, a big problem. Obviously, he accepts that small governments are smaller “problem”. He shows that government-sponsored education is not improving and they cannot improve. The book is a classical approach for the defence of human freedom against the state.

There are many other books that excellently explain individual liberty and the reason to defend it; I might have missed a few of them. The mentioned above are those that I consider the best ones at the moment.

What is Prostitution?

Prostitution involves buying and selling of sexual services, it is simple act of mutual benefits between two consenting individuals without any compulsion.
Having sex is not a crime; exchange of money is also not a crime because there is nothing wrong or illegal in exchange of money between two individuals. So, why is it illegal?

Most of the critics against the legalization of prostitution usually claim that if prostitution is allowed freely, the strong evil men may force women to involve in prostitution.
Forcing anyone to do anything is an obvious crime, force or compulsion is simply against the individual rights of any civilized society, but prostitution does not involve any force or compulsion on anybody, it is simple exchange of money for the service provided with mutual agreement.

Sex as a Trade

Preparing for work

Prohibition never helps

Prohibition never helps

Legalization reduces crime rate

Prohibitionists suggest that legalizing prostitution may increase crime, but the facts say opposite. Serious crimes, such as rapes, homicides, robbery, kidnapping are noticed to be increasing because of prohibition. Countries that allow prostitution as legal activity do not suffer from high frequency of violent crimes. Canada, France, Israel, Singapore, United Kingdom all allows prostitution and all have lower crime rates than the crime rates in US.
After being charged with a sex-crime, a woman faces the social stigma and she becomes unemployable and hence forced to get involved with further criminal acts. Once she is jailed, it becomes impossible for her to gain any other means of living and that enforces her to work as prostitute for longer than they otherwise would. The experience of jail further makes women prone to get involved in other serious crimes.
When police bans brothels, motels or other places where prostitution might generally be practiced, prostitutes find themselves forced to work in neighbouring streets and hence spoiling the neighbourhood. The dangers for prostitutes also increase many folds and they find themselves unable to care for health and safety precautions. Such prostitutes can easily be soft target for serial killers and sociopaths.
Better way is to legalize prostitution in certain areas of cities where the prostitutes and their clients may work in safe environment.
Other criminals who consider prostitutes and their customers as easy target to rob, blackmail, or rape also remains unchecked. Many a times, even the corrupt police also engage in corrupt exploitation of prostitutes. Thus, the criminals realize that prostitutes or their customers are most unlikely to report to police and that provides them an incentive to commit crimes against such people.
If prostitution is legalized, such people would not flinch from reporting any criminal activity against them and that will reduce crime rate.

Legalization promotes health care

Prohibition causes health hazards. Because of laws against prostitution, most of the prostitutes often find themselves forced to involve in unsafe sexual activities. They cannot go for medical help too because of the fear of police. Prohibition on prostitution thus increases the probability of unsafe sex and the spread of sexually transmitted diseases like syphilis, gonorrhoea, Chlamydia and herpes. If prostitution is legalized, the prostitution can be monitored and medical facilities can be provided to them and that will control the spread of such diseases.
A public health review of World Health Organization states:

“In Kenya, where the importance of chancroid in HIV transmission was first described in the late 1980s, interventions targeting sex workers and STD patients were implemented. Reported condom use by sex workers has since increased to over 80% in project areas and the incidence of genital ulcers has declined. Chancroid, once the most common ulcer etiology, now accounts for fewer than 10% of genital ulcers seen in clinics in Nairobi, Kenya.
In Senegal, HIV prevalence among pregnant women has been below 1% for more than a decade. A strong multisectoral response, an effective STD control programme and early legalization of prostitution have been credited for this low level. Special clinical services, for example, offer regular examination and treatment for registered sex workers. Not only has there been a significant decline in STD rates among sex workers and pregnant women between 1991 and 1996, but genital ulcers are also no longer common and chancroid is reportedly rare.”

It is very reasonable to legalize and regulate prostitution and medically monitoring the sex-workers and hence providing a safe environment to their client. Legalizing prostitution will also encourage the sex-workers to learn more about health issues, and ways of prevention. Canada, France, Denmark, Israel, Singapore and many other countries that have legalized prostitution have much less number of people living with HIV AIDS and the number of deaths due to HIV when compared with the records of US.

Legalization of Prostitution and Social Condition

The societies that have allowed prostitution as a legal activity are providing much better social environment for the individuals. Countries like Canada, France, Denmark, Israel etc are spending much more of the percentage of their GDP on education and health-care than what US government spends. The suicide rates in such countries is also lesser.
Legalization of prostitution promotes individual liberty and privacy; it also provides a way for the poor to alleviate their situation. In a free society, it makes no sense for the government to dictate people, specially the poor one that they cannot take money in exchange of the service they are willing to provide freely. Legalizing prostitution will also promote the privacy of individuals about their intimate relations and it will reduce the stigma the sex-workers suffer.
Prohibition on prostitution causes a lot of wastage of resources. The law-enforcement bodies that devote a lot to monitor the prohibition on a harmless activity in between consenting adults can be used for better works and prevention of serious crimes. That will certainly help the society to reduce the crime rate and establish peace. Legalization will also reduce the police corruption and dangers of underground industry and provide safety for the sex-workers against organized crimes.

Conclusion: Prostitution is such an activity that harms nobody. Legalizing prostitution will serve the society in better way because that will tend the police to direct their efforts towards preventing and solving actual crimes which involves clear exploiter and victims and that will help the cause of justice. Legalizing prostitution will also help in improving the health care and social condition of United States.

Socialism Trickle up Poverty

“I worry that in resolving this financial crisis perhaps we are sowing the seeds of the next crisis…next crisis could be a currency or a fiscal crisis,” Subbarao said.

India is no new to the threat of extreme debt and bankruptcy. India faced the similar situation in 1990 when Indian government was forced to accept liberalization. Obviously, nobody would like to have a repeat of 1990 fiscal crisis. Yet, it is a possibility. To reduce that risk, Indian government strictly needs to control its expenditure and reduce the burden of welfare state, that is, government need to disinvest further.

The Fiscal Crisis of Euro Zone

The evidential repercussions of governmental expenditures and debt burden on the Euro zone countries are a matter of thought for financial world. The crisis began in Greece and is expanding to Spain and Portugal. It would be foolhardy to believe that the crisis will constrain itself to the weaker economies of Europe alone.
In 2008, when Pakistan faced bankruptcy due to its fiscal debt, economist warned that Ukraine, Kazakhstan, and Argentina could also slide into a downward spiral towards bankruptcy, and to that list, now we have added Greece, Spain and Portugal. Ex-IMF chief economist Simon Johnson openly stated that the UK should also be considered in the category of nations at the verge of bankruptcy because of huge governmental fiscal deficits. There is no reason to doubt the ex-Chief economist of IMF because of the fact that the euro-zone governments are predominantly welfare states with extreme high fiscal deficits year by year. The budget situation in all European countries is extremely weak with no hope for a manageable budget any soon. The government obviously provides huge welfare benefits for the citizens in shapes of free-education, Universal Health Care systems and other socialistic patterns that obviously increase huge collective wastage of resources produced by citizens.
Simon Jones said, “They seem to show no awareness at all that much of Europe is facing a serious crisis and it’s not limited to Spain, Greece and Portugal, it’s also going to include Ireland. I think Italy is also very much in the line of fire. There’s a very serious crisis inside the Euro zone.”
The only way for these economies to avoid the situation of bankruptcy is to reduce their fiscal deficit to minimal and that is possible only by reducing the governmental expenditures, i.e. by restricting government to very limited or no power to interfere with market.
During the Global Meltdown, when the government of major countries were announcing “economic stimulus” for the market, socialists were claiming how the Market is unable to be free and needs governmental help. I mentioned how the Economical Stimulus are not a Cure it is Venom . The current situation throughout the world is evidential proof for that opinion.
The world is still to learn a simple fact that there is no such thing as a Keynesian free lunch, that government does not produce anything, and whenever it robs individuals of their wealth for the purpose of welfare of society or nation, such crisis evolves to brutalize every individual.

US, the most powerful Borrower

Larry Summer once asked in US Congress “How long can the world’s biggest borrower remain the world’s biggest power?”
The question signified its strength when Moody’s Investors Service cautioned that the triple A credit rating of the US could not be taken for granted.

President Obama has also dreams of Universal Health-care and Free Education for US citizens.

The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

Such huge national debt increases the fears of default and currency depreciation, and an immediate hyperinflation that push up real interest rates. The higher interest rates drag down the growth further while the private sector also suffers the burden of debt. In addition, to pay back and avoid bankruptcy, government tries to increase revenues by confiscating private property, increasing taxes that in turn dilapidate the private sector completely causing extreme unemployment, poverty, food crisis, riots and complete chaos.
According to International Monetary Fund, the developed countries need to manage their fiscal deficit within a decade in order to avoid defaults. Worst condition of nations under debt is of Japan and UK, than Ireland, Spain, Greece and at sixth place, is US.
Conclusion: The economic stimulus proved out to be venom; the western countries are now in a deep fiscal crisis while India and China are facing the huge inflation problems. The collective welfare statist ideology is wrong at its base and the world need to understand that the only cure for the Market is Freedom from any sort of Governmental interference.
With such huge debt burdens, the governments now need to heed the libertarian urge for free market. Governments need to restrict their welfare programs. There should be no government interference in market. Governments now need to work for reduction of expenditures and reduction of debts.

Changing views of Climatologists

The stratospheric vapour is easing out Global Warming

The Growing Glaciers

Despite all hullabaloo of global warming, the glaciers are growing all around the world. How is that possible that IPCC issues an unauthentic report about the disappearance of Himalayan glaciers, while the scientists from other group make a documentary about how the Himalayan glaciers are ever increasing since the last three decades?
Here is a list of 12 glaciers that have not heard the news about Global warming. They are growing and growing fast.
It is a fact that the fake calls of apocalyptic dangers of global warming are not going to pay the socialist set of environmentalists any success. Yet, it would also be wrong to say that climate is not changing, climate is always changing and so do the human beings and other life forms. We evolve with time we change.
Professor Ian Plimer (University of Adelaide) in his book “Heaven an Earth” explains why CO2 cannot be a cause of global warming; here is a transcript of his scientifically recognized book Heaven and Earth.
Despite the 21st century decrease in global temperature, we are perpetually warned of dangerous global warming. Every evening one can see a disturbing documentary over some news channel showing some absurd claims (just like that of IPCC claims of disappearing Himalayan glaciers etc.) all these environmentalists and green activists obviously want us to believe that if we try to live a happy, healthy prosperous life, we will be no better than the devil ready to cause havoc on earth. Obviously, they want the governments to control us and force us to sacrifice ourselves, our progress for the greater cause of saving the environment from the alleged threat of global warming.

Alternative solutions for alleged global warming

In the book Super Freakonomics the author argues that even if CO2 is causing global warming and if global warming is a real threat, then also it is not necessary that governments all around the world need to enforce draconian laws and cuts in carbon dioxide emission that would cost many trillions of dollars and will force the poor to be poorer. Rather some better geo-engineering solutions can be adopted to keep the earth cool despite the increased concentration of green house gases in the atmosphere.
Just like the present water vapor in the stratosphere can actually cause the globe to cool down irrespective of increased concentration of carbon dioxide, engineers can pump sulphur dioxide in stratosphere by a suspended hose using helium balloons. There can be numerous ways to actually control any global warming if it is occurring at any dangerous rate, but the fact is, since the 21st century, the earth is cooling off.
The environmentalists knows that it would be hard for them to contend at the issue of global warming because the evidences are totally against them and hence they are playing the new trick. Now days, the catastrophe lovers does not shout for Global Warming, rather they call for Climate Change. Climate change is a reality, climate keep changing since ever and forever. Mainstream economists, along with scientists and engineers, are increasingly joining in the climate change debate as technical experts, with the prospects of lucrative funding ultimately paid for through coercive taxation. The evolution of the climate change debate mirrors the almost universal support of economists as expert technical advisers for central banking and Keynesian policy prescriptions such as Cap and Trade policy etc.
Conclusion: Global warming is gradually proving out to be another fake call of the socialists just to dishearten the freedom loving individuals and to force common public to suffer under governmental duress and keep thinking that freedom is sinful and progress is evil. We need to save ourselves from such unholy misguiding tirade of socialist environmentalists, economists and media persons who are trying to baffle public to enforce governmental control over their life, liberty and pursuit of happiness.
Update: A good article against Global warming fraud in “Open” : http://www.openthemagazine.com/article/international/the-hottest-hoax-in-the-world

Indian Environment Minister Jairam ramesh says:: There is a fine line between climate science and climate evangelism. I am all for climate science but not for climate evangelism. I think people misused the IPCC report,” Ramesh told a news channel here.
Stressing that the IPCC’s weakness was that it didn’t do original research and derives assessments from published literature, the minister announced a climate change panel for India. Economic Times

Noble Laureate Obama, A Pacifist

Mahatma Gandhi on Wars

As Obama reverberates himself as being a disciple of Gandhi, we should look at Gandhi’s attitude about Wars. Gandhi ji was obviously against staging any war, he was a supporter of Non-violence, yet there was not a war that he did not support. He supported all the wars in his life time. The apostle of peace Gandhi himself supported British in the Boer War, Zulu War, WW1, WW2.
In 1914, Gandhi himself joined British army as volunteer for the Ambulance corp. to serve the injured Indian and British soldiers at Zulu war. One may understand his compassion for the suffering of soldiers; he was not taking part in active violence.
Yet, in April 1918, Mahatma Gandhi urged Indian youth to take part in British army as war recruits. Perhaps to show his support for the Empire and help his case for India’s independence, he deemed it necessary to take part in the war. He might have considered it as pacifist way of non-violence, that is rather than fighting against the British rulers, let the Indian youth fight for the British Empire and in turn demand or beg independence as reward. It should be mentioned that while he openly demanded Indian youths to help British army in World War1, he felt aghast when some Indian youth tried to protest against British brutality on Indians “violently” and because of that, he took his Non-cooperation movement back in 1922. Obviously, Gandhi was strictly against any form of violence against British Empire by Indians, yet he was ready to recruit Indian youths to kill enemies of British empire, including the Zulu protesters. For Gandhi, the most necessary peace was, peace of Indians against British Empire.
For Gandhi, the pacifist form of war in order to establish and sustain peace was non-violent, hence although he urged Indian youths to fight and die in battle grounds for British Empire, he also maintained that Indian youths must not fight against British rulers in India, because that would be direct violence, and that was not acceptable to Gandhi. Why was Gandhi ready to recruit Indian youths to “co-operate” with British Army in Imperial wars, while he himself was launching the Non-cooperation movement?
During the WW2 again, Pacifist Mahatma Gandhi again favored offering Indian moral support to British army in 1939 when Nazi Germany invaded Poland. Obviously, it seemed right decision as Nazi Germany obviously was violent. Yet, when other leaders of India objected Indian youth’s inclusion in British war, Gandhi declared that India could not be party to a war ostensibly being fought for democratic freedom, while that freedom was denied to India itself. As the war progressed, Gandhi drafted a resolution demanding for British to Quit India. Obviously, his pacifist support for British army during the wars became the saddle of deal for Indian independence. Gandhi realized that British Empire would be exhausted after the two consecutive world wars and hence he declared that even if some Indians directly fight violently against British Empire, he would not take his Quit India demand this time as he did after the World War1.
He knew it was the ripe time to force exhausted British Empire to Quit India.
Thus, it can be seen that if Obama mentions that he took his inspirations from Mahatma Gandhi, he does not sound hypocrite or wrong.

Changing standards of Noble peace prize community

Mahatma Gandhi was nominated for Noble Peace prize many a times, but he was rejected every time. The last time Gandhi was nominated, the Noble prize committee rejected Gandhi because of his known support for Indo-Pak war.
Based on a telegram from Reuters, The Times, on September 27, 1947, under the headline “Mr. Gandhi on ‘war’ with Pakistan” reported:

“Mr. Gandhi told his prayer meeting to-night that, though he had always opposed all warfare, if there was no other way of securing justice from Pakistan and if Pakistan persistently refused to see its proved error and continued to minimise it, the Indian Union Government would have to go to war against it. No one wanted war, but he could never advise anyone to put up with injustice. If all Hindus were annihilated for a just cause, he would not mind. If there was war, the Hindus in Pakistan could not be fifth columnists. If their loyalty lay not with Pakistan, they should leave it. Similarly Muslims whose loyalty was with Pakistan should not stay in the Indian Union.”

That became the reason for Gandhi’s rejection for Noble price of peace.
Yet now, when every body is familiar with Obama’s support for Afghanistan war, when Obama himself argues and justifies his decision to escalate combat against Afghanistan on the platform while receiving the Noble price, nobody really think that he should not get a Noble because his support to wars.
Maybe now, the Noble Committee agrees that War is necessary for maintaining peace and that preventive war are a part of establishment of peace. Obviously, this is a change in the attitude. Gandhi was rejected the Noble for his support to war against Pakistan in order to keep peace, while Obama has been given Noble despite of his support to war at Afghanistan to keep peace.

How Gandhian Idea would help Afghanistan Situation?

Pacifism of Gandhi suggest that the native Afghans should openly help US troops in order to fight against Taliban and Osama Bin Laden and after the end of Taliban and Osama Bin Laden, the Afghans should peaceful demand evacuation of US troops from Afghanistan. That is the appropriate way and it will ensure the non-violence of Afghans supporting US army against Taliban. Gandhi might have urged Afghan youth to recruit themselves along with US troops to fight against Taliban. A Gandhian may request Indian government too, to help US army to fight against Taliban as a “pre-emptive non-violent measure to maintain peace.”

Libertarian Idea on Pre-emptive Wars

Unlike Pacifists, a libertarian does not believe in preventive wars. A libertarian cannot support an attack on a nation or a person on the name of defensive necessity. The right to self-defense does not mean to attack first in order to remove any chances of being under attack. Libertarian sense of Self-Defense necessarily means No use of Violence at first but full right to defend yourself within your limits if you are being attacked. An Indian libertarian might not have thought of fighting for British Empire and than to argue for his own independence. Rather he would have preferred to fight against the British Empire, as they were the invaders, attackers because self-defense is not a right, it is basically a duty of a freedom lover, a Libertarian, or a Libertarian might have simply adopted non-cooperation in all accounts, including no-operation for British Empire in their wars too.
Unlike a pacifist Gandhian, a libertarian will oppose Obama’s decision to increase troops in Afghanistan and will demand a sudden end to all war fronts, just like Ron Paul did during his famous Libertarian speech “What If” in assembly — 

The Socialized Medicines

The idea behind socialized medicines is the forced economic equality of citizens, i.e. no matter you have earned money, you cannot have any better medical treatment than the lazy person who never thought of earning and saving for his medical security. Thus, the socialization of medicines is not only the abolition of causality of individual efforts and his earnings; it is abolition of the cost in spending of income.
As visits to doctor are free to individuals while the taxpayers collectively pays for them in socialized system, each individual realizes the benefit of his visit to the doctor, while millions of taxpayers pays for the visit. Obviously it is an insignificant amount, thus every individual is encouraged to take advantage of the system without considering the wastage. As a result, the number of visits to doctor increases abruptly. The absence of cost to the individual patient results in an enormous increase in the medical tests, hospitalization and surgeries performed, most of which remains unnecessary and that adds to the cost of system furthermore, also the system requires a huge bureaucracy to administer it and that further increases corruption and the cost to the collective. The result of the system is simply to raise the fees of doctors and medical facilities and to create scarcity of hospital beds and doctor’s time. The redundant medical tests and surgeries performed often delays the meeting of genuine needs of the patients and many a times, it becomes impossible for the patient to actually get the required treatment.
To solve out these problems, government thoroughly bureaucratize the medical field by controlling the doctors’ wages and price control of medicines, government also restricts doctors from practicing freely. Ultimately, the profession of doctor and medicines becomes unattractive and unprofitable and the talented individuals prefer not to opt for it. That further creates scarcity of efficient doctors. As government has no rational way to determine the necessary treatment in any individual case, the doctors starts denying the necessary treatment for the people, thus increases corruption.

Socialized System against Advancement of Technology

My Healthcare My Choice

Increase in Bureaucratic Corruption

As the Free Health Care System results in enormously increased demand of services and scarcity of doctors, medical facilities, hospital beds and resources, the medical sector becomes the free zone for political and bureaucratic corruption. As politicians and government official realizes that government cannot satisfy the demand of citizens, they start taking advantages of the situation through bribery, frauds and corruption. In order to contain the spending on collective medical care of whole populace and to increase the profits of the corrupt politicians, bureaucrats and government officials’ including doctors, government begins denying and prohibiting necessary medical procedures too to the common person. Not only the medical advancement is reduced and opposed by government, it also starts denying medical services to those citizens whom the government considers as only marginally valuable to the nation, such as infants or aged. As aged and infants does not pay any additional tax to the government budget, while their necessary demands of medical are high, they suffer neglect. On the other hand, government keep increasing taxes on the taxpayer citizens on the name of trying to provide necessary treatments for the poor, old and infants. Thus, the same socialized medical system that begins with an aim to provide funds for medical care of poor, infants and aged, turns out to be a sacrificial citadel for them.
To believe that there can be something like “free lunch” is a great mistake. If government promises for free lunch, no one should be surprised to find out that it increases malnutrition and starvation. He may find himself on short rations of government in order to have fund for those whom the government considers more valuable than him on social and political priority. Thus, such socialized free-health care, or free-education for all, or free-lunch, food, water for the poor and underprivileged often proves to be phoney, corrupt and inefficient. Yet, government keep propagandizing such issues and programs just in order to keep its hold on political power and vote bank of the masses. Ultimately, all this increases extreme corruption in the system, and poverty and scarcity of resources and services for the masses. In order to reduce and ultimately remove the problem of corruption in India, Indians need to realize the irrationality of collectivism and to abolish it instead of abolishing the causation and cost of individual earning and living.
Huge number of such socialized programs including Universal Medical Care, Education for All, food for al, minimum wage rates and employment for all run by government in India are the actual cause of extreme corruption that we Indian suffers.
The POTUS Barack Obama and his Democrat comrades are also trying to push such forced economic equality on US citizens by means of luring the citizens and propagandizing such socialized programmes of Universal Health Care, Public education for all and many other such programmes. Obviously, their motive is to gain political mileage and promising vote bank to maintain their ruling power. Yet, the American citizens should realize the irrationality of such collective systems and prefer not to be the victim.

Division of Labour and Benefits of Talent

A division of labour system provides enough space and incentive for the individuals occupied in different sets of knowledge of specialization and sub-specializations to devote all their human intellect and efforts to not only use the current knowledge but also to discover, invent and innovate new ways and knowledge to increase production. Division of labour enables a society to use the benefits of geniuses to the maximum extent, while it provides maximum incentive for the genius to use his intellect in development, innovations and entrepreneurship. In a collectivist society, this is not possible, as the genius in such societies, along with other common individuals, must devote most of his time in attaining self-sufficiency first. In India, some decades ago and even at present, division of labour is not definitely present; most of the young students devote their time to achieve degrees from governmental education system in order to gain some or any sort of job in government or private service sector. Hardly anyone devotes his intellect and abilities to any set of specialization of knowledge based on his interest and abilities. Hardly anyone think of devoting his time in research works and furthering knowledge, hence, Indian society lacks innovators. That doesn’t mean that Indian society is or was incompetent of innovations and inventions in present or past, the lack of it only represents the partial slavery imposed by the collectivist system and socialist government under which, the genius amongst the collective is wasted upon. Even if some genius struggle such situation and still manages to radiate his intellect, he never gains the full essence of his own efforts and hence is lost due to the lack of incentives.

Division of labour increases the efficiency of learning process in connection with production by making education and communication and all activities concerned with transmission, storage and development of knowledge into specializations.

Division of labour and consistency with freedom

Private ownership of the means of wealth production is the fundamental pre-condition of the pursuit of self-interest. Division of labour essentially depends on private ownership of means of production, which is based on the nature of gains of free division of labour. The most important ones are the multiplication and transmission of knowledge and benefits of the talented. The rational idea of private property ownership comes out from the fact that individuals possess unique independent minds, which permits and necessitates them to have separate independent knowledge and to make independent judgements, decision, and act on them with his separate independent calibre. In a free society every individual gains from the fact that other people possess knowledge that he does not and an intelligence separate and often much greater than his own. To maintain maximum benefits, it is necessary that others be able to acquire and apply their knowledge in production on their own initiative with perfect decision making freedom, without having his approval, orders, permissions or license, as he would be certainly unable to give in any rational way as he necessary lacks the knowledge and intelligence that would be required to make such decisions. To act, work and produce, people must possess material means of actions and production, In order for them to act independently from one another, they must possess wealth independently from one another that is there must be private property, including private ownership of natural resources and other means of production. Private property rights are essential condition for proficient production, prosperity and more importantly individual freedom as it provides maximum space for efficient usage of resources in virtue of producing wealth hence eradicating poverty of masses.

Private property rights are essential condition for proficient production, prosperity and more importantly individual freedom as it provides maximum space for efficient usage of resources in virtue of producing wealth hence eradicating poverty of masses.

In his Biography, Greenspan wrote that he has always harbored nostalgia for the Gold Standard which guaranteed price stability. Further, he wrote that he doesn’t see the likelihood of its return in the near future and it is a necessary cost for the existence of the welfare state. What is this statement intended to mean? It is certainly that the Federal Reserve creates money out of thin air to fund the welfare state.Moreover,Greenspan got it all wrong.Price stability is both unachievable and undesirable. As Friedrich Hayek had once written ,the “impossibility of achieving in practice an absolute stabilization of the level of prices in a dynamic economy has been proven time and again.”

When he was asked in a recent interview whether he was wrong, he replied-“Well, partly.”
“A critical pillar to market competition and free markets did break down,’ Greenspan said. ‘I still do not understand why it happened.’” “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” Was this the man who wrote this about the 1929 Crash that “The excess credit which the Fed pumped into the economy spilled over into the stock market — triggering a fantastic speculative boom.”? He blamed the fraud of Enron, WorldCom and Global Crossing on “infectious greed”. Wasn’t it Greenspan who wrote for the Objectivist Newsletter that “it is precisely the ‘greed’ of the businessman or, more appropriately, his profit-seeking, which is the unexcelled protector of the consumer?”
The greatest crime that Greenspan had done was not his inflationary policies during his term. It was that he “admitted” that his belief in enlightened self interest was wrong! Greenspan was just passing the blame to the market. Surely, this man is a hypocrite!

Venezuela is currently suffering from severe shortages in the supply of various goods, in particular rice. The nation reminds us of the erstwhile USSR in this aspect, as it does in many other perspectives. Only that direct physical force against the masses has not been let loose yet. Venezuela has been reeling under the impact of shortages in the supply of various goods since 2003, and now the crisis has hit rice supply as well. Keeping up with propaganda records, Chavez has launched a propaganda tirade against private suppliers. He has accused private suppliers of hoarding supply of rice. There could be a certain element of truth in it, suppliers could indeed be hoarding supplies to a certain extent. But that’s definitely not where the fundamental problem lies. The causal problem of this crisis lies in price-controls which have grown in size ever since 2003.

I will first explain the economic basics of prices, and then lead into the cause of shortages, inflation and hoarding.

What are prices, and what do they say? The price of a product simply shows how much money you should give up to obtain it. Then, what do you prices say? And why do prices of commodities change so often in markets? The answer is, people are willing to give up different quantities of money for the same homogeneous product at different points of time. This might sound vague, so lets get on with an example.

You are given 3 bags of rice. You have a particular preference scale based on your individual liking, and it shows those immediate needs that you would like to satisfy with the three bags of rice. The first immediate need that you fulfill with a bag of rice is to feed yourself. So, the first bag of rice goes to feeding yourself. You decide to use the second bag of rice to make some cakes. The third bag goes to feed your pet dog. This explains your preference scale. Your highest valued purpose is to feed yourself, followed by making some cakes, and finally feeding your dog.

Now imagine, you have only two bags of rice, and you are to decide what among the different uses of rice you are going to sacrifice. Since you have feeding your pet dog the least important of all uses, you decide to let your dog starve. Now suppose your neighbor has some extra bags of rice in his kitchen and he is ready to sell it to you for some money. How much would you be ready pay for that extra bag of rice which you would use now to feed your dog? You would see if the utility (or use) you gain from that extra third bag of rice is more than the utility you attach to the money you pay to your neighbor for that extra bag. Lets assume you would probably pay $2 to get a third rice bag from your neighbor, and you use it to feed your starving dog.

Lets further assume now that you have only one bag of rice. So you would have to give up on both feeding your dog as well as making tasty cakes. Now again, your neighbor has an extra bag of rice. How much would you be ready to pay for that second bag of rice? The same kind of reasoning as used earlier applies here as well, you would buy the second bag of rice only when the utility you achieve by buying it is greater than the utility you attach to its price. Perhaps you’d be ready to pay $5 to get the second rice bag from your neighbor, to make some cakes.

Now lets go further and assume that you have no rice bags with you. And again, your neighbor has an extra bag to sell. This time too you’d buy the bag of rice only when the utility you gain from the rice bag you buy is greater than the utility that you attach with the money that you spend to buy it. Now, you would be ready to pay almost anything to buy that bag of rice from your neighbor, and that’s because the utility you attach with the bag of rice is your life itself. You would have to starve without that bag of rice.

We have now seen three instances where the price offered to buy an extra bag of rice varies, quite drastically in fact. Economists explain this as the “law of diminishing marginal utility”. Marginal utility of a commodity is the utility that you gain (or lose at times) from an additional unit of the commodity.

This explains why prices change at different moments in the market. When there is excess supply of a commodity in the market, people would have the liberty to use those commodities for less valuable goals, like how you used the third bag to feed your pet dog. So they are willing to pay only low prices. On the other hand, when there is deficit in the supply of a commodity, people are strained to obtain sufficient goods. They are forced to cut down on their frivolous expenses, like your preference to feed your pet dog. The price of the commodity in this case is high. This explains how prices are set in a market.

What the market does is it rations the goods that are available to the most immediate needs by raising prices when supplies are constrained. So, high prices enables everybody to satisfy their most intense immediate demands, while restricting them from using further units of the commodity towards less intense needs.

So when supplies are inadequate, the price of the commodity increases to make sure that the commodity is diverted towards the most urgent needs rather than being wasted in satisfying less intense needs. This means that suppliers would gain lots of profits.

Venezuelan Youth

Governments on the other hand have a very different way of dealing with high prices due to insufficient production of a commodity. They deal with the economic problem with price ceilings. The Government sets arbitrary prices to commodities whose prices are “too high”, and it thinks the problem is solved. But that’s exactly where the problem starts. The lower prices leaves no profits to be gained or even sends firms right into losses, and that discourages firms from increasing production. Witnessing lower prices, consumers demand more of the commodity than they would at the genuine free market price level. That is like, if a sack of rice were available for just 50 cents you’d probably buy hell a lot of rice bags and waste them for weird reasons. We have in hand a very critical situation, production of the commodity plunges due to decreasing profits or outright losses, but at the same time people are demanding more of the commodity. This leads to shortages.

This is what is being experienced in Venezuela because of price controls imposed by Chavez’s government.

The other fact to remember is that price controls which are imposed initially on a a few commodities are spread to other commodities as well. In fact governments are forced to spread the price control regime because of their initial mistake of controlling prices of a few commodities. Why does this happen? When the price of a commodity is arbitrarily set low, people are encouraged to demand more of the commodity but since there is not sufficient supply available, goods are sold to people on a first come first serve basis. This could have a very important side-effect. The supplies do not get diverted to the most intense needs because those customers whose demand for the product is extremely important is prohibited from bidding higher prices for the commodity.

Socialism Or Death - Demonstrating the outcome since 1917

Now coming to the problem of hoarding. First reason why some people hoard supplies is because they are unsure about the availability of future supplies due to chronic shortages. The second type of hoarding is carried out by speculators who expect a higher price for the product in the future when the price control regime collapses, or they might sell the supplies in the black market at prices higher than the government set arbitrary ones. It must be realized that the problem of hoarding is definitely not the cause of the shortage, it is a minor side effect of the real culprit–price controls.

The Venezuelan economy is in the mud, and the price control regime is spreading all over the economy. The system is bound to collapse and cause serious problems to the Chavez government. It should also be observed if Chavez does a Stalin here, to use force against his own people. Reports emanating from Caracas already show the seizure of rice processing units, and also the spread of the price control regime towards other goods like meat, sugar ad other goods. Just another case of price controls bringing disaster.

Venezuela will not be able to reach Socialism because Socialism is an impossible theory, it demonizes the same tools by which pro-Free Market economies achieve efficiency in distribution of resources and satisfies the demand of the market. In the name of achieving more Socialism Hugo Chavez keeps on grabbing more and more power, and this is causing Venezuelan people to lose their Liberties.

The Machines

A very famous economic fallacy that has won a huge number of supporters has been the belief that machines cause unemployment. Such preposterous beliefs which have neither rational justification, nor any empirical validity have been the roots of growth of primitive ideologies, which have called for mankind’s return to it’s “glorious” past.

For centuries men have believed that machines, or technological changes in general, destroy jobs on a large scale, and that they’d have to stay home jobless the next day on. It is true that technological changes destroy particular jobs, at least partially if not completely, but it should also be understood that these technological changes create new avenues of growth which will create new jobs.

The improvement of production techniques and the resultant mass displacement of jobs from agriculture a century ago, might seem like an unacceptable act of cruelty against the masses. But it’s quite the exact opposite, that is, the technological changes have benefited the masses.

More than half of the labor force of North America and Europe was employed in production of food stuffs during the early twentieth century. But today, less than 3 percent of the labor force is required to feed a population that has grown many times more. In fact, in the last century, the population of North America has increased four times, and Europe’s population has roughly doubled, while the percentage labor force required to feed the increased population has shrunk by about 15 times.

It makes sense to track the fate of those displaced workers. The technological change has in fact helped mankind, by releasing labor from agriculture to be used for production in other sectors of the economy. The advantage of technological changes is that it increases the marginal productivity of labor, that is, the quantity of goods a laborer can produce has been increased by the use of machines. This is the only way the living standards of the masses could be improved.

The dislike for technological change could be seen pronounced in the writings of economists of the modern era as well. Their concern is about the Information Technology revolution that has made economies knowledge intensive, and the disparity in wages among the members of the labor force.

But this could be no reason to stop technological growth, since even though there may be differences in relative wages, which in fact is an unavoidable character of economic competition, the real wages of laborers increases due to increase in the total wealth of the particular society. That is the real purchasing power of a laborer’s wage money increases as wealth of the society increases.

This sort of faulty reasoning of economists is the product of undue emphasis on the immediate effects of technological changes, with no heed to their tremendous beneficial effects in the long run.

As Austrian economist Henry Hazlitt says:

“Economics is a science of recognizing secondary consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run”.

Outsourcing Companies

US President Barack Obama has announced his intent at withdrawing tax-cuts to American companies that outsource work to foreign countries. This announcement comes in as one of the many ingredients, of a slew of populist measures that Obama has been churning out since assuming office last month. Policy-makers claim that heaping the tax burden on American companies that outsource jobs to foreign countries could save American jobs.

This sort of an economic policy could be disastrous to general efficiency of the economy and slacken creation of new jobs. One must take care of the fact that work is always there to be performed in any economy, since human needs are without boundaries. We essentially live in a world of scarcity, and any level of increase in the productivity of labor will never suffice to satisfy the immeasurable needs of the society. So the basic point is, labor is scarce, and will always remain the same.

But what are those statistical figures we get as unemployment numbers in government reports? Nobody could deny unemployment does exist. But such unemployment in today’s world is usually a result of government policies which adversely affect job prospects, and in turn efficiency of the economy in the long run. In a truly free market, the only two kinds of unemployment that could exist are frictional unemployment (that is, the temporary unemployment during the period when people search for new jobs) and voluntary unemployment (where people make a voluntary choice not to work).

Talking about outsourcing of jobs and it’s impact on domestic unemployment, it should serve us better first to imprint in our mind that labor is scarce, as already mentioned. The next important step is to understand and trace the consequences of discouraging outsourcing of jobs to foreign countries.

There are three important points to be considered here:
1) The basic reason why companies from developed countries outsource jobs is the availability of cheap labor from developing countries. So this means the products that these companies produce to serve mainly the American consumers become cheaper considerably. This implies that the real purchasing power of an American dollar should increase.

2) The funds that American companies save by employing cheaper foreign labor while compared with high salaries previously paid towards Americans, could be used as investment in other sectors of the economy, or to increase the size of existing industries which would create new jobs for Americans. In the absence of the outsourcing option, the American companies would be forced to spend comparatively more in the already existing industries (that is when compared with costs incurred when foreign labor could be employed), without having a chance to invest in new industries (or expand existing industries) which could create new jobs.

3) The availability of cheap labor also means American companies become more competitive and efficient than their counterparts in other countries. It also makes Americans compete and become more efficient. More than anything it makes specialization of jobs, which is the reason for the riches of today’s industrial civilization.

The only thing that policy-makers need to understand is that businesses need to be given the complete economic freedom worldwide to create new jobs at home, and increase living standards of Americans. Any short-sighted measure to save current jobs, will definitely halt growth in the long-run.

May we have our money back, please? Specifically, the £1 billion we donate in aid to India, a country rich enough to enter the space race.

The above discussion establishes that it is beyond any doubts that India suffered because of foreign aids, not only the government squandered the foreign money, but also it caused the national debt and fiscal deficits too. It is also an established and well-proven fact that voluntary foreign investment always helps and reduces poverty on sides of the recipient and the provider too.
So why is Indian government involving Indian Tax-Payers money in donating as Aid for other poor nations? Why not let Indian entrepreneurs and investors provide investment rather than looting Indian tax-payers and providing the robbed money to others to waste it? Why cannot we learn from our own mistakes?
For any government, providing aid to poor nation is more a cause of making impressions and false superiority, but such falsified superfluous acts increases poverty alone. Providing aid to poor nation on account of tax-payers hard earned money is just like making a new Statue of Shivaji to show how impressive a political party is.
Indian tax-payer individuals must oppose any move by Indian government about providing aid to any other nation. Better is providing a free market environment to facilitate investment by Indian entrepreneurs to those poor nations.
Indian government at present is providing aid to Nepal, Bhutan, Srilanka, Burma, Afghanistan and Bangladesh. Such aids surely cause wastage and will increase corruption and poverty. A much Better way to reduce poverty of the Indian sub-continent is, providing a free-market zone in Indian sub-continent, which will inspire and invigorate Indian entrepreneurs, investors and businesspersons to provide foreign investment to those poor countries and hence reducing poverty of whole Indian Sub-Continent.

The thread cited this article “Is India poor, who says? Ask Swiss banks” on Merinews.com which got 25,000 hits in last 6 months, and you can see the clear anger in the comments section of the thread.

DISHONEST INDUSTRIALISTS, scandalous politicians and corrupt IAS, IRS, IPS officers have deposited in foreign banks in their illegal personal accounts a sum of about $ 1500 billion, which have been misappropriated by them. This amount is about 13 times larger than the country’s foreign debt. With this amount 45 crore poor people can get Rs 1,00,000 each. This huge amount has been appropriated from the people of India by exploiting and betraying them.

Once this huge amount of black money and property comes back to India, the entire foreign debt can be repaid in 24 hours. After paying the entire foreign debt, we will have surplus amount, almost 12 times larger than the foreign debt. If this surplus amount is invested in earning interest, the amount of interest will be more than the annual budget of the Central government. So even if all the taxes are abolished, then also the Central government will be able to maintain the country very comfortably.

This article makes me laugh, and when I am done laughing it makes me laugh again. First of all, I won’t even go into the morality of the stolen tax money. In a nutshell if you earned some money with your hard work, and a watch maker enters your house and fixes all the broken and slow watches in your house and then demands money, and if you refuse to pay that money and hide it somewhere, then that is not really stolen money.

Anyways coming to the idea that somehow Indians will be able to get this money out of Swiss banks is stupid. The reason why Swiss banks have their mythical status is something people in India don’t really understand. Its called the concept of “Limited Government”. The govt did not foresee such a status and made laws protecting banks, rather government was restricted in creating any laws regarding enforcing policy on Swiss banks.

Swiss Bank

Similarly, for Indian citizens its really difficult to understand why the Swiss government allows their banks to run their businesses without interference. On the other hand, when I explained one zealous guy who wanted instant invasion on Switzerland to recover the money, that every Swiss national keeps guns, even Tanks in his house, and he will fight for his Nation till death, he instantly realized the seriousness of the situation. In his world, Swiss government refuses to act because they want to keep all the stolen money from the third world countries.

Now lets come to the topic. How to recover the money you claim was stolen from your country, and is kept in Swiss banks?

First of all you have to know whether the money stored there is in Dollars or Swiss Francs or in Rupees. If the money is in non-INR currency(especially dollar), then things are a bit different, and if the money is in Indian rupees, then things are a bit different.

Scenario 1: Money is in Non-INR currency
If the money is in dollars or Swiss Francs, that means this money was sometime in history was converted from Rupees to USD/CHF, then it was stored in that Swiss banks and is invested by the banks. So for all practical purposes that money is gone from Indian economy. Whenever money is taken out of economy, it could be because of people’s savings, or anything else, it reduces the money supply of the country, that means the value/purchasing power of existing currency increases. In simple words, if Alice, Bob and Cathy form an economy, and have $100 between them, with Alice having $50, Cathy having $50, and Bob having no money(for illustrative purposes), but a business proposal. Alice and Cathy can invest $50 each in Bob’s business.
Now what happens is Cathy burns her $50 down(or destroys them), does that mean the economy has lost half of its wealth? No! The economy has not half of its wealth, though the economy has lost half of its money supply, and mainstream Economists will tell you that losing money supply is the same as losing wealth, but its not true.
In the above example, the value of Alice’s $50 will double, that means the price of everything in their economy will come down by half because now there are only half the dollars chasing the same amount of goods. That means effectively it will make no difference to Bob if he receives $100 in a $100 economy, or $50 in a $50 economy.
In the situation of Indian money in Swiss banks, that money has been pulled out of Indian economy, the money supply has been reduced that much and prices in India have been adjusted and reduced that much. Every investment which remained in India became that much more profitable.
Sure if that money comes back to India some day by the people who put it there(no matter how ‘illegal’ it is), it will also benefit Indian Economy because now there is that much more private investment and expenditure in India. Sure the purchasing power/value of existing money and investments will go down, but then there is more money to compete with it.

So when is it not beneficial? I mean there must be some catch somewhere when that much money from the economy goes away. Well there is a catch, when the money comes back, and govt gets it all, then it will be disaster for the economy, because the government will spend it in places where it gets more votes, like building a Pyramid, or providing flying cars to all the poor people in the economy. The free market would not have spent in these places, it totally screws up the investment of the private sector, and reduces their value of investment.

Yes with all that foreign currency you will be able to pay up India’s foreign debt, but that doesn’t really solve the problem. If you hand an alcoholic $1000 who is in debt of $1000, have you solved his alcohol problem? No, you just have solved his debt problem, but soon enough he will rebuild his debt, unless you cure his Alcohol problem. The problem of our foreign debt is Indian govt, even if you pay our debt 12 times, Indian govt will borrow it more and create same amount of debt 13th time.

Scenario 2: Money is in Indian Rupees
If this is the scenario then we shouldn’t even be remotely bothered with that money. Suggestions that with that money we will be able to get rid of our foreign debt in 24 hours is stupid. Do you realize what will happen if $1500 billion worth of Indian currency comes into the economy? MASSIVE INFLATION!
The price of everything will skyrocket. Even if you distribute all that money only to poor people, it will result in hyperinflation, because they will start competing with their money on basic commodities like food and grains. This will cause the commodities price to rise, the middle class will be forced to pull all its money from other goods to be spent on food, that means you can totally forget the sales of Cars, iPhones, even clothing, loan mortgages will be defaulted, houses will go for foreclosure, school fees will not be able to paid. Basically if Swiss bank tomorrow pays all the money back to India, our economy will be screwed with that much influx of Rupees.

Secondly the bigger question in front of us is, do we really need Money from Swiss banks if its in Rupees? We already have printing press in RBI, and they can print $1500 Billion dollars worth Indian rupee anyday Indian people demand. Its not like Swiss Banks have our gold, they have OUR PAPER, the paper RBI printed, they can print more of it.

So how true is the proposition that once we get all our money from Swiss Banks we will be able to draw heaven on earth in India? Well there is not even an iota of reality in what they plan to achieve if Indian government gets the money of the private individuals. Taxes can be reduced to Zero EVEN NOW, and govt will still continue to function through inflation of Money supply.

DISCLAIMER: None of the above given suggestions have my support, all I am trying to do is to use principles of Economics to correctly conclude the patriotic masturbation done by loyal Indians.

The first Irony of the political freedom is the very logic of democracy which just seeks a 50% + 1 as the mandatory majority for any democratic resolution to get through. Even though this tyranny of majority on the free will of the minority defies all logic of individual liberty and freedom, it is still hailed as one of the most fair and just political systems which at any time represents will of the majority of its citizens. For instance we may have voted against the present regime of government, but we still honor outcome of a democratic contest and accept its decision as our own. In American context Barak Obama is president of each and every American irrespective of whom they voted in the election. The moment we accept this as a fact and with our free will decides to follow and exercise democracy, we cannot exonerate ourselves thereafter from consequence of any decision our representatives take on our behalf. Citizens of nations under monarchies, or military dictatorship or for that matter under a communist regimes, where irrespective of the civic freedom, political freedom is considerable negligible, can feign away from this responsibility. It is so that Iraqi citizens cannot be held responsible for the gulf war but American citizens have to shoulder their part of responsibility for the event. It can thus be stated that freedom is a great privilege and power and with it comes great responsibility.

Let us now examine the nature of freedom, what is its essence, what really constitutes our idea of freedom and how it manifests in our day to day life and society. If you equate freedom to lawlessness, some kind of manifestation of wild, where there are no laws no regulations to follow, we would arrive at rather dubious conclusions out of it. Many war trodden countries of Africa where civic administration has completely collapsed, there exist no civic laws for that matter no traffic laws. You don’t have to stop at every red light that you encounter on the road, and can even get away with a murder for that matter. Will it be then prudent to state that citizens of these seemingly lawless countries enjoy more freedom than countries with democratic set ups like India or America? The answer is an obvious no, and as to why these civic laws and regulations do not infringe our freedom is simply because these laws exist as an exercise of free will and rationality at the first place. As rational human beings we felt the need for these laws and so it was imposed on ourselves and our society. In addition we reserve the rights to amend or remove the laws that are found to be inappropriate or have out lived its utility. We have choice with these laws but once in place we need to follow them, similarly we do have choice with our governance, but once in place we have to bear with it till its allocated period in office is over. There are provisions of impeachments and dissolution of government available in democratic set ups, It is however a rather difficult task and quite out of hand with respect to an ordinary citizen.

The second Irony of democratic political freedom is that although we do have a choice, we do not have choice of action but merely choice of electing representatives who would thereafter act on our behalf. Even though governments do try and sway the public opinion in their favor over major issues of national interest, it is merely a political compulsion rather than political necessity. Political freedom thus essentially manifests in the truest sense in a very brief window. It is the time when we exercise our liberty to choose our representatives and empower them to take decisions on our behalf. Thereafter public opinion acts merely as a subtle pressure on the political forum.

Idealistically we can at this point denounce the very concept of democratic political freedom, and argue that we have indeed got very little on the name of freedom. Pragmatically however we all are aware that democracy is here to stay. It has established itself as one of the most stable and effective forms of governance. Society is not yet grown to accept anarchy and dissolution of state as a viable solution. If we are to accept this fact then the only solution we are left with is to revitalize and strengthen democracies. Find means to plug the loopholes existing in the system and make it as foolproof and workable as possible.

Georg Wilhelm Friedrich Hegel

The applied studies of this concept are popularly known as perception management also quite infamously known as problem- reaction-solution among conspiracy theorist. The point however is not how extensively it has been used the state but the viability of the whole idea and its implication on our freedom. If we are to be denied any part of the information both from thesis or antithesis front our perception of reality will alter dramatically. Our perception further has lacunae which are known in psychological parlance as availability heuristics and confirmation bias. Simply put our minds have a tendency to put one and one together at the first available opportunity and thereafter have a tendency to stick to this idea even when presented with contradicting information. This phenomenon is also brought forth in the popular idiom ‘First impression is the last impression’.
Both America and India, the strongest and the largest democracies in the world have had instances of 9/11 and 26/11 respectively wherein there was an equal failure in the part of intelligence administration and also at the later stages states ability to tackle a developing disaster. The perception of the public was however managed away from these glaring failures of state administration to external enemies, on whom the whole blame was fixed. There is so much of red tape-ism which regulates and at times manages the flow of information between the state and its citizens that it is practically possible for the state to actually do what these conspiracy theorist claim.

How is it then that we can really envisage a more enduring freedom for ourselves? The answer lies in slowly dis-empowering the state. To start with government must have no control over the media. Media must not be state run at all as far as possible and it must be kept insulated from other instruments of state. Media itself however has to rise to the need of the hour and act in an utmost responsible manner. In addition all other instruments of state like judiciary, policing and investigation must be privatised or private players must also be included to prevent state from manipulating these instruments to get public perception in their favour.

It is very necessary at this juncture that we make some modifications to our idea of freedom itself. Most of us tend to carry an 18th century baggage with respect to this concept. To many a people, slavery is when one is chained and made to work like an animal and relatively anything else is more or less freedom. Many others misinterpret self governance to freedom. To most Indians, India was free before the English came and free thereafter. Not many are able to really apply logic and explain how is it that a rule of Indian monarchic ruler better than rule of queen of Britain. Post independence which is also termed as freedom struggle, India happened to inherit the concept of democracy from Britain itself. It is what is now celebrated as the coveted freedom by most. If we have to make progress towards ensuring that our so called freedom has some real viability. If we have our choices marked out clear in light of reason and justice and not on some manipulated emotional or non consequential agenda brought forth by political parties to sway our judgment, we have to first admit the limitation and nature of freedom that have in our hand and thereafter make endeavor to improve upon it by slowly dis-empowering the state and reducing its power to more manageable limits. At this moment we are far away from it and in fact moving in opposite direction. The new anti terror laws in India and patriotic acts in America are instances of such infringement of our freedom to further incapacitating levels. It is for us to decide which way we would like to move and exercise our choice before we are left with none.

Worth Mentioning::So let me suggest a truly audacious hope for your administration: How about a five-year time-out on war - unless, of course, there is a genuine threat to the nation?

“We have to take counter-(measures) and sometimes corrective measures to ensure high domestic demand. While the government is taking fiscal measures, the RBI is taking monetary measures’’

Let us see, will such fiscal stimulus can help economy?
Paul Krugman along with all other Keynesian economist keep stressing how Important it is for government to help market.
The idea of all Keynesian economists is people do not trust in market in the period of recession, and if market is left free in such situation, it will lead market to self-destruction, hence government should save the market.
It is also knows as consumerism. It states that spending of one individual becomes the earning of other person. Thus, spending generates income, so government should influence overall spending and encourage people to spend more. By doing so, recession can be averted.
Keynesian system works upon the theory of Potential Output which is the highest gross domestic product an economy can generate without increasing inflation, in a given pool of resources, that is labor, tools, technology. If the real output or GDP lags behind the Potential Output, government says it is recession.
If demand of products is not enough, it causes economic meltdown, as only some part of the pool of resources is used, other goes on waste or unemployed.
Thus, it makes sense when Keynesians says that government should do its best to maintain the demand as that will end the recession.
So what is Fiscal Stimulus?
Keynesians states that if during a recession consumers fail to spend, then it is the role of the government to step in and boost overall spending in order to grow the economy.
Yet, Government do not produce wealth so how it can increase spending? Government increases currency in the market to increase the liquidity, what it forgets is, currency is not the wealth: currency is just the tool by which we exchange wealth. There should be real wealth in order to increase spending.
Let us say a farmer produces wheat. He exchanges 20 kilogram of wheat for a pair of Kurta (shirts) from a tailor. That is, he funded for two shirts by providing 20 Kg of wheat. Wheat saves the tailor from starvation, on the other hand, Tailor funds for production of wheat by producing shirts for the farmer, which saves him against weather.
Now, the tailor needs rice and pulses too. So in order to buy rice and pulses, he decides to produce more shirts. For that, he needs more cloth, needles, and machine.
To buy more cloth, needles and machine, he pays some more shirts he produced and saved earlier. Thus, to increase his production, he needs to fund it with the real wealth he produced that is the shirts. Yet, if the production of shirt is stopped for some reason and he has no shirt to exchange for further cloth and needles, he would not be able to pay for more cloths. That will abort his idea of making further cloth and he will not be able to buy rice and pulses.
Government do not produce cloths, or rice or wheat or pulses. It produces currency or note, by increasing notes or currency in market, government cannot increase wheat, cloth, rice, or pulse. By increasing currency, it will increase inflation only, or the depreciation of the currency. Here is the explanation.
To increase production, the tailor needed more saved real wealth, that is, the shirts he produced. Similarly, if the farmer wants to increase his production by buying a tractor, he needs to fund his saved wheat, the real wealth in order to exchange for a tractor. Same way, other producers must have final, saved, real consumer goods; real savings, to fund the purchase of goods and services they require. Money is just the medium of exchange it is not wealth.
When government do not produce wealth, how will governmental outlays and stimulus packages will help?
The people government will engage in the all these stimulus programs and bail outs of banks and other non-productive-activities, will further expect compensation. To pay them, government will have to increase tax on those who are still generating real wealth. Thus, it will cause further loot, and will further decrease the potential of producers. Otherwise, government will take foreign help, thus increasing national debt.
India’s fiscal deficit is already high at 11% of the GDP.
It shows that any stimulus package from government in any form will cause further deficit, further problem for India.
What can help is the real wealth stimulus from governmental stores, if government provides market with real wealth, like wheat, rice, cloths etc, it will help, but then, it will decrease the export potential. Increasing currency will not help anybody; on the other hand, it will cause further inflation.
We must not forget that government can invest only that which it robbed from us in form of compulsory taxation.
It is a general belief that Governmental regulations can avert such economic meltdown.
We know along with USA, China is also facing economic slump and so is India. Now China and India both are well regulated economy so the belief is wrong.
American New President Obama is hell bent to revive US economy with his new deal and new stimulus plans. As explained earlier it is all futile and may lead to further closed economy with high tax rates and weaker producers
Singapore on the other hand is easing down with market providing more freedom reducing taxes.
Singapore government has decided to reduce corporate tax. Government has announced property and personal tax rebates for citizens too, that is more freedom.
The new Tax Cuts will lead Singapore closure to Hong Kong and the economic freedom will provide enough attraction for investment in service and manufacturing industries. Obviously, providing market freedom and reducing governmental interference is much better than the Bail Out packages, governmental Fiscal Stimulus programs, and more regulations and increased tax.