Archive for January 2017

Stay Tuned for Writing Wednesday   1 comment

I have an interview with a debut science fiction author whose book publishes February 3..

Posted January 31, 2017 by aurorawatcherak in Uncategorized

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An Open Letter to New WordPress Bloggers   Leave a comment

Susie Lindau's Wild Ride

Dear New WordPress Bloggers,

Thank you so much for following my blog! I’m so glad you’ve decided to become a part of my blogging community. Or have you…

an-open-letter-to-new-wordpress-bloggersA few of you left comments. You are so good at what you do! That’s exactly how you build a blogging community. You are on your way to being a successful blogger. I always respond and try to stop by your blogs to read and comment. Here’s the thing: Most new followers never stop by the Wild Ride. EVER. 

Some new bloggers have an itchy index finger. They click to “Recommended,” and hit “Follow, Follow, Follow,…” all the way down the list. How do they handle so many new email notifications? They probably turn them off. What about the Reader? It may resemble a Twitter feed when following thousands. Whoosh!

A properly built WordPress blog is structured with real connections with…

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Posted January 31, 2017 by aurorawatcherak in Uncategorized

This is What You Asked For   Leave a comment

Exactly what are you freaking out about? Yeah, change is scary! Conservatives discovered this in 2009 as something as intimate as medical insurance and the care it pays for was hijacked by the progressive elements of our country who suddenly had all three branches of government marching in lockstep together over a cliff. taking our grandkids’ ability to choose their own economic path with it. As they piled $12 Trillion in debt onto the existing $9 Trillion in debt, took over 1/6th of the American economy, and dropped drones on American citizens whose politics they disagreed with, progressives wanted to know why we were upset.

Now it’s your turn. Do you understand now? No! Why aren’t I surprised that you don’t see this as two sides of the same tyrannical coin?

Image result for image of donald trumpRight now it seems like half the country is debating Trump’s psychological state, intelligence, actions and intentions, impact and ramifications. Well, at least people are paying attention. I’m guessing prescriptions for Luvox are on the rise. I should check that my retirement account has bought stock in Abbott Pharmaceuticals.

I find Trump somewhat entertaining, though I tend to watch him through my fingers, like a little kid watching a horror movie. His exercise as power as “the leader of the ‘free’ world seems crazy in way too many ways, but then he gets some things right, so I don’t know that I’m not (partially) on his side.

I’m not shocked to find that the exercise of state power is dangerous, evil, unfair, limitless and abusive. Why does it surprise anyone else? Did you folks not live through the Obama administration?

This is not a party thing. I’m a non-partisan. I started out, technically, as a Democrat, spent some time as a functional Republican and am now a libertarian headed toward anarchist, having never actually been a member of any political party. So my critique here is not aimed at the Democrats or the Republicans. Our government, regardless of what party is “in charge” right now, has spent decades eagerly creating a massive, debt-slave-funded domestic bureaucracy chained to an equally massive and abusive foreign policy. Through the public schools and the use of secular religious holidays, they’ve promoted arrogance and aggression around the world, largely supported at home. Every president has conspired against the Republic’s founding principles, slowly chipping away at the Constitution, turning it into a parchment barrier. We the People haven’t been in charge of the country we supposedly self-govern for just about a century. Our government has repeatedly swerved drunkenly between the two ditches of Marxist-flavored totalitarianism and Fascist-flavored authoritarianism so often that this shouldn’t come as a surprise to anyone … except the dumb-downed American public who prefers reality television and sound-bite news over serious political philosophy discussions.

Seriously, people! Read a history book sometime!

Image result for image of anti-trump riotsThe politically active in both parties have all labored diligently to create the problems that are part and parcel with statism, which folks on both sides of the aisle are now blaming Trump for.

Hypocrites, wake up and smell the burning coffee. It’s not Trump’s fault. He’s merely exploiting the monster we created. This is the government you’ve been trying to create, so don’t act surprised that it’s here. That includes Alaskans, who happily take federal tax redistributions and then whine about federal overreach. That money comes with strings. Why are you surprised to discover that strings bind?

Large swathes of angry people who apparently paid no attention to anything other than fleeting headlines and cat memes have come alive in their frustration. Oh, my god! Our president is a narcissist who puts his ignorance out on Twitter. Dogs will be mating with cats any day now! Really? You didn’t hear Obama say “Elections have consequences” and then proceed as if the “other half of the country” didn’t have any say in government? Once people got over their “I’m not a racist so I have to vote for the black man” stupor, they were bound to “set things right” by voting for the other end of the spectrum.

Trump, compared with Hillary and Gary Johnson, is apparently the best America can produce through an election. Some of us saw that coming two decades ago when it was Clinton against Bush 1 and we voted for Ross Perot because the lesser of two evils was unacceptable to us.

Trump is unique in fulfilling his campaign promises. Go, Trump! I may not agree with some of the promises, but I applaud a politician who actually listens to the concerns of the people who put him in office. He has so far been using executive power to shrink and reverse legislation. For the first time in my cognizance, we have a president appointing actual people with skills and/or passions to posts of government, rather than throwing someone in there based on patronage. More importantly, he’s inserting these people into agencies that they have criticized in the past … suggesting they might actually work to improve those agencies. How unusually experimental! That’s never been done in my lifetime … not in the US anyway.

Bureaucracies don’t reform themselves. They require a change in leadership for that to happen. The world will not end if government is reduced, if bureaucracies are reformed, if we treat our allies as if they are business partners rather than younger, stupider siblings in need of our “wise” guidance. Could Donald Trump turn out to be power-hungry and corrupt, an icon of an arrogant emperor. Oh, yeah!

But why should we be surprised by that. He wouldn’t be the first president to succumb to the power of the presidency. He’ll only be the first one in recent decades where we the people widely recognize those characteristics in a president. This is nothing new. Power corrupts and the absolute power of the US presidency tends to corrupt absolutely. Just check out Obama’s executive orders during his last days in office. If you’re honest, you’ll see what I mean. What we are watching today is how an all-consuming state behaves. You just liked it better when Barack Obama was doing it to advance of your agenda. The thing is, the other half of the country didn’t like it then, so they voted to change directions.

Fascism seems to be the label so many upset people want to place on Trump, but let’s be honest — our government has long been a crony capitalist state, able, willing and eager to take by hook, crook and force, whatever it wants from any citizen or non-citizen alike. The last president who didn’t do that was Calvin Coolidge. This is old news. We were a fascist state under Obama as much as under Trump and Hillary Clinton owes a lot more to Wall Street than Trump does, so it wouldn’t have been any different if she had won.

If you love the glory of the state, then Donald Trump ought to be your president, because he is the perfect man to lead a robust, arrogant state. I suspect he might also be the perfect president to destroy it.Certainly those riots in the street in an attempt to circumvent the republican principles of American democracy makes it look like a possibility. Trump may well become the nexus of what brings our house of cards down in a resounding crash. And, I don’t see that coming civil dissolution as a necessarily bad thing.

The era of bread and circuses has been headed toward collapse for a long time, but it is going away. Maybe we’re done with throwing rocks at one another, we’ll admit it’s time for an amicable divorce. The blue states can take their stuff and the red states can take their stuff and we can move to two or 50 separate households, or maybe the cities can go it alone until they realize they need the rural resources in order to survive.

Image result for image of freedomHowever, we do it, it leaves us with a fresh opportunity to find better ways to live. Maybe not bossing our neighbors (foreign and domestic) around will once more come into vogue. It’s possible that without the government nanny to decide what is right behavior and who can have what or how much, we’ll actually learn how to talk to one another again. Imagine cooperating as communities instead of tearing each other apart through the proxy of federal agencies. We could seek our own desires and fulfill our own needs, yet also help our neighbor from our prosperity rather than the government’s hand in our pocket.

Yeah, I’m stopping there because I don’t want to sound too much like John Lenon. Let’s just take a deep breath and pause for a moment and realize that the state has been headed to this crisis for a long time and now that we’ve arrived at the destination, we shouldn’t be surprised, but we ought to be prepared for what could come after ….

The chance for actual freedom … if we’ll embrace it … if we can keep it.

“Stablizing” Commodities   1 comment

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series of posts on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here. Although written in 1946, it still touches on many of the issues we face in 2017, particularly the fallacies government economic programs are built upon.

 

Attempts to lift the prices of particular commodities permanently above their natural market levels have failed disastrously so often and with such media attention that sophisticated pressure groups, and the bureaucrats upon whom they apply the pressure, seldom openly admit that is their aim. At least initially, the propose something more modest.

They have no wish … to raise the price of commodity X permanently above its natural level. That … would be unfair to consumers. But it is now obviously selling far below its natural level. The producers cannot make a living. Unless we act promptly, they will be thrown out of business. Then there will be a real scarcity, and consumers will have to pay exorbitant prices for the commodity. The apparent bargains that the consumers are now getting will cost them dear in the end. For the present “temporary” low price cannot last. But we cannot afford to wait for so-called natural market forces, or for the “blind” law of supply and demand, to correct the situation. For by that time the producers will be ruined and a great scarcity will be upon us. The government must act. All that we really want to do is to correct these violent, senseless fluctuations in price. We are not trying to boost the price; we are only trying to stabilize it.

Reading that reminded me of the lamas in SimCity, by the way

There are several methods for “stablizing” commodities, but in America, we favor government loans to farmers to enable them to hold their crops off the market. Most people find the arguments for these loans to be pretty plausible. Farmers dump all their crops on the market at harvest time, which drives the prices to their lowest level. Speculators take advantage of this to buy the crops themselves and hold them for higher prices when food gets scarcer again. It is said the farmers suffer because of this because they speculators get the advantage of the higher average price.

Image result for image of commodity stabilizationHazlitt didn’t find support for this argument either in theory or experience. He saw the speculators as the best friend of farmers. Farm prices fluctuate and the risks of that instability must be born by someone. In the 1940s, it was the commodities speculators who bore the risks. The more competently they were at speculating, the more help they were to the farmer. Speculators serve their own interest precisely in proportion to their ability to foresee future prices. The more accurately they foresaw future prices, the less violent or extreme were the fluctuations in prices.

Speculators buy crops when farmers sell crops and they keep on buying them until there is no future opportunity for profit. They sell when they think the price is right. This results in stabilizing the price of farm commodities year round. Because speculators take the risk, farmers don’t have to. Investigations had shown that the speculators had actually subsidized the farmers by storing the crops at their own expense.

What happens when the State steps in and either buys the farmers’ crops itself or lends them the money to hold the crops off the market, creating an “ever-normal granary”? The privately organized free market is performing this function well without government interference, but now the farmer is encouraged, with taxpayers’ money, to withhold his
crops excessively. Politicians want the farmers’ vote, so they place the “fair” price for farm products above the price that supply and demand condition justify. Buying is reduced and this begins to distort the market.

Excessive stocks are held off the market, temporarily securing higher prices than would otherwise exist, but later creating much lower prices than would otherwise have existed. The artificial shortage built up this year by withholding part of a crop from the market means an artificial surplus next year.

Image result for image of commodity stabilizationSomething like this happened with American cotton. They piled up  an entire year’s crop in storage and destroyed the foreign market for US cotton, thus overstimulating the growth of cotton in other countries. The bureaucrats were warned it would happen before they undertook the program, but when the inevitable problems emerged, they insisted they would have happened anyway.

The loan policy is usually accompanied by or leads
to a policy of restricting production, thereby creating an artificial scarcity. In nearly every effort to “stabilize” the price of a commodity, the interests of the producers have been put first. The real object is an immediate boost of prices. To make this possible, a proportional restriction of output is usually placed on each producer subject to the control.

Assuming that the control can be imposed on an international scale, it means that total world production is cut. The world’s consumers are able to enjoy less of that product than they would have enjoyed without restriction. The world is just that much poorer. Because consumers are forced to pay higher prices than otherwise for that product, they have just that much less to spend on other products.

The restrictionists usually reply that this drop in output is what happens anyway under a market economy, ignoring a fundamental difference that Hazlitt had already discussed in earlier chapters. In a competitive market economy, it is the high-cost and inefficient producers are driven out by a fall in price. In the case of an agricultural commodity it is the least competent farmers, or those with the poorest equipment, or those working the poorest land, that are driven out, while the most capable farmers on the best land do not have to restrict their production. On the contrary, if the fall in price has been symptomatic
of a lower average cost of production, reflected through an increased supply, then the driving out of the marginal farmers on the marginal land enables the good farmers on the good land to expand their production.

In the long run, there is no reduction in the output of that commodity and the product is then produced and sold at a permanently lower price. If that is the outcome, then the consumers of that commodity will be as well supplied with it as they were before. As a result of the lower price, they will have new money left over to spend on other things. The consumers, therefore, will obviously be better off. Their increased spending in other directions will give increased employment in other lines, which will then absorb the
former marginal farmers in occupations in which their efforts will be more lucrative and more efficient.

When government interfers, however, the efficient low-cost producers are not permitted to turn out all the output they can at a low price. The inefficient high-cost
producers are artificially kept in business. This increases the average cost of producing the product. It is being produced less efficiently than otherwise. The inefficient marginal producer are artificially kept in that line of production, continuing to tie up land, labor, and capital that could much more profitably and efficiently be devoted to other uses.

Yes, as a result of the restriction scheme the price of farm products has been raised and “the farmers have more purchasing power.” They have got it only by taking just that much purchasing power away from the city buyer. We’ve looked at this senario before. To give farmers money for restricting production, or to give them the same amount of money for an artificially restricted production, is no different from forcing consumers or taxpayers to pay people for doing nothing at all. In each case the beneficiaries of such policies get “purchasing power.” But in each case someone else loses an exactly equivalent amount. The net loss to the community is the loss of production, because people are supported for not producing. Because there is less for everybody, real wages and real incomes must decline either through a fall in their monetary amount or through higher living costs.

If an attempt is made to keep up the price of an agricultural commodity and no artificial restriction of output is imposed, unsold surpluses of the overpriced commodity continue to pile up until the market for that product finally collapses to a far greater extent than if the control program had never been put into effect. Or producers outside the restriction program, stimulated by the artificial rise in price, expand their own production enormously. This is what happened to the British rubber restriction and the American cotton restriction programs. In either case the collapse of prices finally goes to catastrophic lengths that would never have been reached without the restriction scheme. The plan that started out so bravely to “stabilize” prices and conditions brings incomparably greater instability than the free forces of the market could possibly have brought.

Just what the government planners mean by free trade in this connection I am not sure, but we can be sure of some of the things they do not mean. They do not mean the freedom of ordinary people to buy and sell, lend and borrow, at whatever prices or rates they like and wherever they find it most profitable to do so. They do not mean the freedom of the plain citizen to raise as much of a given crop as he wishes, to come and go at will, to settle where he pleases, to take his capital and other belongings with him. They mean, I suspect, the freedom of bureaucrats to settle these matters for him. And they tell him that if he docilely obeys the bureaucrats he will be rewarded by a rise in his living standards. But if the planners succeed in tying up the idea of international cooperation with the idea of increased State domination and control over economic life, the international controls of the future seem only too likely to follow the pattern of the past, in which case the plain man’s living standards will decline with his liberties.

Posted January 31, 2017 by aurorawatcherak in economics

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After A Good Week … Epic Fail!   Leave a comment

So Donald Trump had a good first week in that he took first steps to keep quite a few of his campaign promises … more than I can remember any other modern president doing so early in his presidency.

I didn’t agree with all of his actions, but I cheered quietly that he remembers who elected him to the Oval Office.

And then he got around to addressing Muslim countries. https://www.washingtonpost.com/news/fact-checker/wp/2017/01/29/trumps-facile-claim-that-his-refugee-policy-is-similar-to-obama-in-2011/?utm_term=.669acacd5f48

Image may contain: 2 people, meme and textObama did do something similar back in 2011, but Trump’s executive order is much more stringent. I agree that there needs to be a tightening of refugee visa screening. Currently, we essentially trust the UN vetting process on whether we’re allowing people into our country. We should not be doing that. And once inside the country, we should be keeping a closer eye on these folks. The wife in the San Bernardino case should have been caught in the screening process as should the older brother in the Boston case. They weren’t refugees per se … which means the government had a lot less pressure to just let them in and yet the screeners missed their obvious terrorist ties because …. The refugee screeners are much more likely to miss the truth because there is so much pressure to rescue people from difficult circumstances. We need to slow down and be smart.

Since terrorism is not a state-based threat, it’s probably ridiculous to do this by country. Yes, it would slow down the rate of refugees coming into the country. It might also slow down the rate of terrorists entering the country.

So a judge has ruled that the Donald can’t do it his way, and that was a right decision, but let’s be clear here. An enhanced screening similar to what Obama put in place in 2011 for Iraqi refugees needs to exist for all Muslims coming from any state … and that includes European states … and resources need to be directed toward checking the refugees already in the country … because it’s the smart thing to do. We have got to get over the idea that we trust people until they shoot up a night club or workplace. People seeking access to the United States need to receive actual vetting … which the UN does a shoddy job of, because it’s not their their friends or family who will be killed if they’re wrong.

And that is an entirely separate issue from what Trump did on Friday. That was ill-thought-out. But I’m going to continue to be fair about Donald Trump and not bash everything he does. I don’t think he’s the devil and the more people try to portray him as such, the more I feel sympathy for him.

Stop freaking out, folks! This is what a change of direction in governance looks like. I know you didn’t care in 2009, but this is why the Teaparty gathered peacefully in parks and waving signs. It just didn’t matter so much to you because the change was what you wanted … regardless of what it did to your neighbors. Now that you’re no longer in charge of the reins of power, why do you believe that gives you a right to destroy property and threaten people’s lives or circumvent the democratic process?

How the Price System Works   1 comment

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series of posts on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here. Although written in 1946, it still touches on many of the issues we face in 2017, particularly the fallacies government economic programs are built upon.

 

The whole argument of “Economics in One Lession” could be summed up by the quote at the top of each of my articles.

Hazlitt thought it foolish and misleading to concentrate attention merely on some special point without considering what happens in all. The major fallacies of economics stems from a persistent and lazy  habit of thinking only of some particular industry or process in isolation. These fallacies pervade the arguments of the hired spokesmen of special
interests, but even economics are often caught up in the arguments.
The fallacy of isolation supports “production for-use-and-not-for-profit” school of thought, with its attack on the allegedly vicious “price system.” Adherents of this school will claim that the problem of production is solved by scientists, efficiency experts, engineers, and technicians. These folks could create anything you want in practically unlimited amounts, but the world isn’t run by engineers. Oh, no, the businessmen get involved and they think only of profit. They order the engineers to create stuff only so long as there is profit in doing so, leaving the wants of many unsatisfied and the world crying for more goods.

Image result for image of price systemThe central error here is a failure to see that all industries exist in relation to other industries. Every important decision made affects and is affected by decisions made in other industries.

Hazlitt invited his readers to consider Robinson Crusoe, stuck on his desert island. His wants would be endless.He’s needs shelter, food, water, warmth, protection from animals and someplace to sleep. It is impossible for him to satisfy all these needs at once because he lacks time, energy, and resources, so he focuses on the most pressing need first.

Thirst would be the most important need. He hollows out a place in the sand to collect rain
water, or builds some crude receptacle. When he has provided for only a small water supply, however, he must turn to finding food before he tries to improve this. He can try to fish; but to do this he needs either a hook and line, or a net, and he must set to work on these. But everything he does delays or prevents him from doing something else only
a little less urgent. He constantly faces the problem of alternative applications of his time and labor. A Swiss Family Robinson, perhaps, finds this problem a little easier to solve. It has more mouths to feed, but it also has more hands The father hunts; the mother prepares the food; the children collect firewood. But even the family cannot afford to have one member of it endlessly doing the same thing, regardless of the relative urgency
of the common need he supplies and the urgency of other needs still unfilled. When the children have gathered a certain pile of firewood, they cannot focus on increasing the pile. One of them must be sent for more water. The family too has the constant problem of choosing among alternative applications of labor, and, if it is lucky enough to have acquired guns, fishing tackle, a boat, axes, saws, and so on, of choosing among alternative applications of labor and capital.

In a survival situation, it would be ludicrous for the wood-gathering member of the family to complain that they could gather more firewood if his brother helped him all day, instead of getting the fish that were needed for the family dinner. Division of labor would imperil survival.

Believe it or not, there are folks who ridicule the recognition of such illustrations as “Crusoe economics.” Often those who do the ridiculing are the ones who most need to learn the lesson.

Related imageConsider modern society. There are thousands of different needs and wants with varying levels of urgency. Society solves this interconnected web of conflicting desires through the price system which constantly changes the inter-relationships between costs of production, prices and profits. Prices are fixed through the relationship of supply and demand. When people want more of an article, they offer more money for it. The price goes up. This increases the profits of those who make the article. Because it is now more profitable to make that article than others, the people already in the business expand
their production of it, and more people are attracted to the business. This increased supply then reduces the price and reduces the profit margin, until the profit margin on that article once more falls to the general level of profits in other industries.

Conversely, the demand for that article may fall; or the supply of it may be increased to such a point that its price drops to a level where there is less profit in making it than in making other articles. It could even be that the price falls so low that the producer suffers an actual loss in making it. “Marginal” producers (those that are less efficient or whose cost of production is higher) will be driven out of business altogether. The product will now be made only by the more efficient producers who operate at lower costs. The supply of that commodity will cease to expand and might even drop. This process is the origin of the belief that prices are determined by costs of production.

The doctrine, stated in this form, is not true. Prices are determined by supply and
demand, and demand is determined by how intensely people want a commodity and what they have to offer in exchange for it. It is true that supply is in part determined by costs of production, but what a commodity has cost to produce in the past cannot determine its value. That will depend on the present relationship of supply and demand. But the expectations of businessmen concerning what a commodity will cost to produce in the future, and what its future price will be, will determine how much of it will be made. This will affect future supply.

There is constant tension between the rice of a commodity and its marginal cost of production, but the cost of production does not directly determine the price.

Image result for image of price systemThe private enterprise system is comparable to thousands of machines, each regulated by its own quasi-automatic governor, all interconnected and influencing each other, so that they act like one great machine. This is similar to how the relative supply of thousands of
different commodities is regulated under the system of competitive private enterprise. When people want more of a commodity, their competitive bidding raises its price. This increases the profits of the producers who make that product. This stimulates them to increase their production. This sometimes leads others to stop making some of the products they previously made, and turn to making the product that offers them a better return. This increases the supply of that commodity at the same time that it reduces the supply of some other commodities. The price of that product therefore falls in relation to the price of other products, and the stimulus to the relative increase in its production disappears. If the demand falls off for some product, its price and the profit in making it goes lower, and its production declines.

Image result for image of price systemAnd then ill-informed people denounce the price system, accusing it of creating scarcity. Why, they ask indignantly, should manufacturers cut off the production of shoes at the point where it becomes unprofitable to produce any more? Why should they be guided merely by their own profits? Why should they be guided by the market? Why do they not produce shoes to the “full capacity of modern technical processes”?

The production-for-use philosophers subscribe to a form of “scarcity economics,” stemming from looking at one industry in isolation. They’re paying a lot of attention to one tree while ignoring the forest.

Yes, we need shoes, but we also need coats, shirts, trousers, homes, plows, shovels, factories, bridges, milk and bread. It would be silly to focus only on shoes when hundres of more urgent needs go unfulfilled.

In an economy in equilibrium, a given industry can expand only at the expense of other industries, but often shrinkage in one industry releases labor and capital to be invested in other industries.

It is erroneous to conclude, therefore, that a shrinkage of production in one line necessarily means a shrinkage in total production. … Costs of production themselves … might be defined as the things that are given up (the leisure and pleasures, the raw materials with alternative potential uses) in order to create the thing that is
made.

It follows that it is just as essential for the health of a dynamic economy that dying industries should be allowed to die as that growing industries should be allowed to grow. The dying industries absorb labor and capital that should be released for the growing
industries.

The price system solves the enormously complicated equations deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other. It does this quasi-automatically by the system of prices, profits, and costs.

This system is incomparably better than any group of bureaucrats could devise because it allows each consumer to make his own demand. Every day, the consumer can cast a fresh vote, or a dozen fresh votes, for what they want and need. Bureaucrats would try to solve it by deciding what they think is good for the consumer, preferrably with very little input from the consumer.

Bureaucrats do not understand the quasi-automatic system of the market, but they are always disturbed by it, trying to improve or correct it, usually in the interests of some pressure group. In future chapters, Hazlitt looked at some of the consequences of this bureaucratic intervention.

Posted January 30, 2017 by aurorawatcherak in economics

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A Message to My Fans   Leave a comment

January 30 – write a letter to your fans. You might want to check my fellow bloggers and get back with me because this was a hard one.

But I did it ….

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Hi there, fans! Welcome to the blog.

Let me dispel immediately any notion you might have that I am writing from a garret or an ivory tower. There are probably writers who do live like that, but I wouldn’t know because I’m a crazy person who lives in Alaska where reality will push through the walls and freeze you solid if you try to ignore it.

In keeping with Alaska culture, I live a pretty practical life. I have a money job, two kids (both old enough to vote now), a husband and a yellow Labrador who is so cute if you look up “adorable” in the dictionary, you will find a picture of her. We heat with wood and haul diesel as a supplement. In the room where the wood stove blazes away, the walls are lined with book cases, some of them two books deep. Writing is something I do because I can’t not write. That’s not a mistaken sentence. Writing flows from me at every turn and I don’t know how to turn it off.

Fortunately, I don’t want to turn it off. It’s how I entertain myself and how I exorcise my demons and discipline my angels. The side benefit is that I can now share those stories with you.

I try to imagine who my fans are, but it’s really hard to tell based on the reviews on Amazon. I get such a variety. I also write in multiple genres, so I know I have different sorts of fans. Who reads high fantasy anymore? Hey, if you would like to introduce yourselves to me, feel free to drop a line on the blog or hit my email address. I know you’re out there. Someone’s buying and reading the books, but I don’t hear from you, so ….

I hear from fans of Transformation Project – libertarians and conservatives, people who like apocalyptics, some preppers. But again, I love to hear from folks because knowing who my fans are helps me to be a better writer.

A writer really hasn’t reached self-actualization until her writing has been read and appreciated. So thank you! You will never know how much you mean to me. I hope you will show how much my stories mean to you by leaving a review on Amazon, but even if you don’t … know that I smile to myself when I see that someone bought a book or read some pages. Some weeks my jaws ache from smiling and that’s a good feeling.

You’re also welcome to contact me, ask me questions, try to wrestle some hints from me on future plots … or even give me ideas of what you would like me to explore. No promises because manipulating my characters is similar to herding cats, but a writer can never have too many plot ideas and who better to get them from than her fans?

The days are getting longer here. There was still some sunset left in the sky when I left work last night. I went home and did some mean things to the nice people of Emmaus, but I’m also working on a satirical short story for an anthology. We still have 2 1/2 months of winter here regardless of what Phil the groundhog says, so expect to see another book out soon. I’ve got a literary fiction at the beta readers right now. Yes, a literary fiction! I might try my hand at a mystery next.

Thanks for reading … not just my novels, but also my blog posts. Hope you’re all well and curled up somewhere warm reading.

Lela Markham

Posted January 30, 2017 by aurorawatcherak in Blog Hop, Uncategorized

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Stay Tuned for the Blog Hop   Leave a comment

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Learn what I think of my fans.

Posted January 29, 2017 by aurorawatcherak in Uncategorized

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FHA Mortgage Rate Cuts Are Subsidies, Not Tax Relief | Eric Schuler   Leave a comment

This is another related article to the series on Economics in One Lesson.

 

Should renters subsidize home buyers and banks?

Image result for image of a mcmansion next to a small houseThat question may sound rhetorical. But judging by the reaction to President Trump’s action on the subject of the Federal Housing Administration, a surprising number of people would answer it in the affirmative.

Last Friday after the inauguration, the Trump Administration announced that it was canceling a planned 0.25% cut in Federal Housing Administration (FHA) mortgage insurance premiums. The cut had been announced by the Obama Administration less than two weeks earlier, but had yet to be implemented. Thus, Trump’s action was a return to the status quo that existed at the start of 2017.

It’s a complicated issue, so it’s easy for politicians and journalists to obscure the reality of what’s going on here and advance a political agenda.

For instance, Senator Chuck Schumer (D-NY) used the opportunity to attack Trump for being a hypocrite. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages,” Schumer said.

If the FHA has to pay out more in default claims than it receives from too-low insurance premiums, then taxpayers are left with the bill.

Meanwhile, left-leaning media outlet The Intercept described Trump’s decision as a tax increase on middle-class homebuyers that helps the banking industry.

Both of these takes are misleading, but it’s not obvious why unless we understand the underlying mechanics of the FHA program.

What Does the FHA Do?

The FHA does not give out mortgages directly. Instead, it offers mortgage insurance to borrowers that protects lenders if the borrower defaults. In other words, the FHA provides a government guarantee that a loan will be repaid.

This government guarantee allows FHA-insured borrowers to get generous and forgiving loan terms that would probably not be available otherwise. Borrowers can qualify for an FHA-insured loan with as little as a 3.5% down payment and with a credit score as low as 580 (on a scale from 300 to 850). In this way, the program extends the opportunity to own a home to more people–people with less savings and/or riskier credit histories.

FHA mortgage insurance is not given away for free. Borrowers pay for the FHA mortgage insurance as part of their monthly mortgage payments, as a percentage of their overall loan.

FHA insured loans expand the pool of potential borrowers and homeowners, in line with the FHA’s mission. At least on the surface, this directly helps those borrowers. To the extent that FHA insurance allows borrowers to access better financing terms than the private sector would offer, the program acts as a subsidy to those borrowers.

In the last crisis, there was no shortage of people who stretched to buy expensive homes and were wiped out later.

The premiums paid to the FHA, by the borrower, offset the value of the subsidy. All things equal, if the insurance premiums are higher, the net value of the subsidy is lower and vice versa. Thus, Obama’s decision would have increased the value of the subsidy and Trump’s decision canceled it.

But the American taxpayer is on the hook if the system fails. If the FHA has to pay out more in default claims than it has received from insurance premiums–because it has charged premiums that are too low–then taxpayers are left with the bill.

A taxpayer bailout is not just a theoretical outcome. The FHA received a bailout to the tune of $1.7 billion as recently as 2013.

Who Benefits?

Image result for image of a mcmansion next to a small houseThe overall impact on borrowers is up for debate, but the FHA program offers clear benefits to interest groups. Reducing the mortgage fee premium would have reduced the size of required monthly mortgage payments, further expanding the pool of borrowers. More borrowers would be able to buy a house, and borrowers who could already afford a house could buy a larger one.

Banks and mortgage lenders benefit from access to an expanded pool of borrowers that comes backed with a government loan guarantee. Real estate professionals and the homebuilding industry would also enjoy the opportunity to sell more and bigger houses to more people. These groups would prefer FHA premiums be as low as possible to maximize their potential customer base.

Lower premiums put the FHA in a less stable financial position, which makes a future bailout more likely.

That said, it is worth debating whether the FHA program is really helping borrowers in the long run. Clearly, it helps them afford something they otherwise could not. That sounds like a benefit, but we must remember that the subsidy is not making the house itself cheaper nor is it increasing the borrower’s income. In effect, it allows prospective buyers to take out a much larger loan, with a lower down payment, than they otherwise could.

If house prices suffer even a modest decline, these same homeowners could quickly find their mortgages underwater (they owe a lender more money than the house is worth). Similarly, they might find themselves falling behind on mortgage payments if they become unemployed. In other words, just because the FHA enables more people to buy houses doesn’t mean that it is prudent for people to buy them. In the last crisis, there was no shortage of people who stretched to buy expensive homes and were wiped out later.

As noted above, the taxpayer is ultimately on the line if the FHA fails. Lower premiums put the FHA in a less stable financial position, which makes a future bailout more likely. Trump’s decision to cancel the premium reduction reduces the likelihood that we will experience another housing bubble bust. Taxpayers have benefited from Trump’s decision to cancel the premium reduction.

Obviously, the best scenario for the taxpayer would be to eliminate the possibility of a bailout by getting rid of the FHA in the first place. The next best thing is having the FHA run in a financially conservative way.

Why Renters Lose

Renters are also unambiguously harmed by the FHA program. And as premiums decline, the degree of the potential harm increases. This occurs in two ways.

First, renters are harmed by the FHA as taxpayers. If the FHA requires another bailout like it did in 2013, renters will have to cover a share of it, as will all taxpayers.

Trump’s decision to cancel the FHA premium reduction warrants praise, not criticism.

Second, renters end up paying rental prices that are inflated by the FHA. The mechanism here is less obvious, but no less real. Recall that the FHA enables people to buy homes they could not afford otherwise. This results in a higher demand which drives up housing prices. And as housing prices rise, rent prices follow. Presumably, without the FHA program, housing prices would decrease and renters would pay lowers amounts in rent each month.

This leads us to the most perverse effect of the FHA program. Generally speaking, renters tend to be poorer than homeowners. Similarly, renters who are unable to afford, or have such poor credit histories that they are ineligible even for, FHA loans are poorer than homebuyers who are able. So when the Housing Administration benefits home buyers and banks at the expense of poor renters, the result is an upward redistribution of wealth from the poor to the less poor. As insurance premium rates decrease, instances of upward redistribution increase.

So finally, we arrive back at our original question:

Should renters subsidize home buyers and banks? Or said another way, should the relatively poor subsidize the relatively rich?

Whether you identify as a libertarian, a progressive, or somewhere in between, the answer should be no.

And it follows that Trump’s decision to cancel the FHA premium reduction warrants praise, not criticism. Knowingly or not, he just prevented an unjust system from becoming more unjust

Source: FHA Mortgage Rate Cuts Are Subsidies, Not Tax Relief | Eric Schuler

Corinth in History   Leave a comment

Image result for image of corinthSecular history verifies and clarifies the impression of the city of Corinth offered by Luke (Acts) and Paul (1 and 2 Corinthians). Politically, Corinth was the capital city of the Roman province of Achaia, a territory including nearly all of Greece, which is why Gallio, the proconsul of Achaia, was in Corinth and heard the charge against Paul. Geographically, Corinth was so strategically located its prosperity was almost assured. It was situated on a plateau overlooking the Isthmus of Corinth, two miles from the Gulf. Nearby Acrocorinth, a 1900-foot mountain, acted as a citadel for the city, a fortress so secure it was never taken by force until the invention of gunpowder. It contained an inexhaustible water supply in the fountain of Peirene. A temple of Aphrodite, the goddess of love, sat on the summit of Acrocorinth. At the base of the citadel stood the temple of Melicertes, the patron of seafarers.

Located on an isthmus, Corinth became a crossroads for both land and sea trade. Located between two large bodies of water and two land areas, Corinth was virtually surrounded by the Mediterranean Sea. Were it not for the isthmus on which Corinth was founded, the southern part of Greece would be an island in the Mediterranean Sea. Goods exchanged between the north and south would normally be shipped by land through Corinth.

Much of the sea trade of the Mediterranean from east to west also passed through Corinth. To the west of Corinth was the port city of Lechaeum on the Gulf of Corinth. On her east was the port of Cenchrae on the Saronic Gulf. These acted as ports of call for ships. Travel across the isthmus and through Corinth was generally considered safer than the 200-mile voyage around Cape Malea, the most dangerous cape in the Mediterranean.

To avoid the distance and danger of the journey around the Cape of Malea (now called Cape Matapan), goods would be unloaded at one port, transported across the four-mile strip of land (through Corinth), and reloaded on the other side. Smaller ships were actually transported with their cargo over the isthmus by means of rollers. Consequently, the isthmus was named the Diolkos, “the place of dragging across.” Nero had planned a canal to join the Aegean and Ionian seas, and he even began construction in A.D. 66. The three and one-half mile canal was finished in 1893.

So Corinth became a great commercial center. Luxuries from all over the world were available and so were the vices of the world. These evils did not all have to be imported, however. The temple of Aphrodite had 1,000 cult prostitutes who sold themselves in the name of religion. The Greeks of the day used the verb “corinthianize” to describe an act of immorality. “Corinthian girl” was a synonym for prostitute.

Estimates of the population of Corinth range from 100,000 to 600,000 and it was a very diverse city with an ancient history and a vibrant present. The site had been inhabited since the 4th millennium BC. Alexander made Corinth the center of a new Hellenic League as he prepared for war with Persia. In 146 B.C., the city was destroyed by Roman soldiers because it led the Greek resistance to Roman rule. All the males of the city were exterminated, and the women and children were sold as slaves. The city was rebuilt by Julius Caesar 100 years later, and eventually became the capital of the province of Achaia. Many of those who settled in Corinth were not Greeks. Roman soldiers retired there after receiving their freedom and Roman citizenship in addition to grants of land. A variety of nationalities settled in Corinth, enticed by the prospects of economic prosperity. A good number of the immigrants were Jews.

… this mongrel and heterogeneous population of Greek adventurers and Roman bourgeois, with a tainting infusion of Phoenicians; this mass of Jews, ex-soldiers, philosophers, merchants, sailors, freedmen, slaves, trades-people, hucksters and agents of every form of vice … without aristocracy, without traditions and without well-established citizens. William Barclay, The Letters to the Corinthians, rev. ed. (Philadelphia: Westminster Press, 1975), p. 2.

Posted January 29, 2017 by aurorawatcherak in Christianity

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