The benefits of being married to the right person.

Man, I beat Dr Helen by two day with a reference to John Galt, but Dr Helen gets the instalanche. Oh well, I guess being the instawife has its privileges. Then again, maybe it was my own incompetent linkage skills that prevented the post from being a worthy read.

Spread the Wealth

Obama is going to spread the wealth. Oh joy indeed. Happy days are here.

It sounds good in practice, but generally, when people try to spread the wealth, they spread poverty instead.

Someone should tell Obama that American wealth is currently in the process of being destroyed, and more is at risk of being destroyed. Furthermore, the mere suggestion that the government may take wealth increases the risk to holding assets which might be confiscated. The increased risk devalues those assets. In essence, wealth is destroyed simply by increasing the expectation that the risk to holding those assets has increased.

In this case, the asset in question is expected future income. Obama is making it clear that he intends to make it less profitable for the wealthy to engage in the work necessary to produce that future income. This decreases their incentive to engage in this work. It also decreases the incentive for the wealthy to consume today based upon the reduced income they expect to generate in the future.

Obama is already making America poorer. I am betting it will only get worse.

America Wake Up!

McCain is proposing economic policies that will help you preserve the value of your wealth. Obama is proposing economic policies that will hasten the destruction of your wealth.

Depression versus a recession

Greg Mankiw writes:

There is no official designation of depression. Traditionally, milder contractions are called recessions and more severe contractions are called depressions, but there is no official word on which is which.

A recession is an economic downturn caused by a substanial decrease in the expected rate of inflation. A depression is an economic downturn caused by a substantial contraction in the money supply where people's expected value of wealth decreases instantly due to the money multiplier effect going in reverse.

Unless the destruction of wealth can be quickly stopped and reversed, America is heading for a depression.

Who is John Galt?

Who is John Galt? And, where is he? America desperately needs someone who can save capitalism in America.

For those who do not get the John Galt reference, it comes from Ayn Rand's Atlas Shrugged.

Update: When I originally wrote this post, I apparently copied the wrong link into the "Who is John Galt" question. That link has now been corrected.

For the greater good of Republicanism

Steve Kornacki writes:

After eight years of George W. Bush, Republicans need to decide who they are and what they stand for. Nothing would jump-start that discussion more effectively than a drubbing next month.

That may be the case, but the biggest loser in such a scenario would be the American people as the Democratic party would have unchecked ability to radically alter America's capitalist system. I prefer preserving America's wealth and capitalist system to sacrificing it for the greater good of the Republican party.

Depression fears

Lee Ohanian gets it, but has not yet quited figured out the importance of what it means:

Will we duck a depression? We will if the principles of economic growth -- increasing the incentives to work and save, promoting competition, and fostering economic openness -- are maintained. This is the most important lesson we learned, the hard way, from the 1930s.

I agree with that, but the problem is he said this earlier in his article:

...there is a real danger that even a moderate recession, along with the current perception of an economic crisis, would lead to calls from various quarters for bad economic policies -- policies that tend to either pander to special-interest groups, benefiting relatively few at the expense of many, or raising taxes, particularly on the nation's most productive citizens, many of whom create jobs through their own enterprises.

Well, the Democratic Party is on the verge of a possible electoral landslide, and they are the party that is more likely to "pander to special-interest groups, benefiting relatively few at the expense of many, or raising taxes, particularly on the nation's most productive citizens, many of whom create jobs through their own enterprises". Lee Ohanian has yet to put these facts together to see how perilously close we are to the next depression.

McCain and Economics

McCain did an awful job last night making his economic case. Republicans are offering people wealth. Democrats are threatening to take away people's wealth. How hard is it to make that argument. All Republicans and free market advocates need to find some one who can make that argument and can make it in a hurry. Shout it from every mountain top. The wealth of our nation is at risk like it has never been before. Why aren't Republicans and free market advocates engaged in self interested fight for economic survival?

Look at your 401K plan

Megan McArdle thinks that you should not look at your 401K plan:

How to handle the crisis in your 401K. Don't look. Seriously, don't look.

I respectively disagree. I think you should look. When you look, ask yourself the following questions:

• How did this happen?
• What can be done to prevent your 401K from losing anymore value and help it regain value as quickly as possible?
• What can be done to prevent it from happening in the future?

How did this happen? Ever since the last depression, the Democratic party has believed that interventions into the free market produce positive gains for society. The Republican party has believed that the Democratic party was wrong, but has not forcefully fought for its own political philosophy. The Republican party accepted political defeat and compromise rather than fighting for victory because they rationalized that society could bear the small costs that defeat and compromise entailed.

However, the crisis shows that both parties were wrong. Past minor interventions into the free market has produced a major cost and risk to the wealth of society and its citizens. Additionally, the government is currently limited in its ability to respond to this crisis because it allowed much of its wealth to be inefficiently spent by lavishly subsidizing non productive members of society.

What can be done to prevent your 401K from losing anymore value and help it regain value as quickly as possible? In the next election, vote for politicians who advocate a free market governing philosophy. Hope that they adhere to the governing philosophy of purging inefficient regulations and cutting taxes and spending.

What can be done to prevent it from happening in the future? Continue to support politicians and political parties that advocate a free market governing philosophy. Additionally, become immune to those who would use your compassion against you. Are these individuals showing compassion towards you by arguing that you should willingly forsake your own wealth for the benefit of those who in many cases do not need the assistance of the government?

Finally, Megan McArdle says

...selling into a massive liquidity crisis is a pretty bad idea. Selling in a panic because your assets just dropped 30% is almost certainly a bad idea.

That is only a good suggestion if the market has already hit the bottom, or is very near the bottom. I am not certain how close we are to the bottom, but I am convinced that if the Democrats gain more political control, and do not get religion on free markets, the market can almost certainly go lower.

Mike Huckabee was right

Many mainstream Republicans hated Mike Huckabee because they felt he was an anti-capitalist populist. However, there was a truthfulness to Mike Huckabee's populist rhetoric. Unfortunately, Mike Huckabee did not know how to make his rhetoric acceptable to the main stream free market advocates who dominate the Republican party.

Mike Huckabee's populism should be embraced, because it has a truthfulness to it, and it is also the most politically popular way to defend capitalism available.

A Conservative Civil War

Paul Waldman is salivating over the impending conservative Civil War:

...all the pillars that have held up conservatism for so long are crumbling. When the dust settles, it will be difficult to know just what it means to be a conservative.

Unfortunately, if conservatives do not come together, Paul's words may be prophetic.

Is a conservative who doesn't proclaim the perfection of the free market and the evil of government still a conservative?

America has not had a truly free market economy since the late 1920's. Conservatives first must rally to save capitalism. Once the future of capitalism is safe and secure, conservatives must work to purge the perverse incentives that have precipitated this crisis and that continually confiscate wealth from the American people.

What about a conservative who thinks his comrades ought to quit yapping about gay marriage and get into the 21st century?

Libertarians are being used by the gay community to advocate non libertarian policies. It is the libertarians who need to wake up to this, and they need to stop letting the gay community use them. Libertarians should support gays but only where that support leads to an advancement of libertarian principles. Libertarians should be in alliance with paleocons on most policy issues that the gay community is trying to advance.

What about a conservative who wants to accede to the public's desire for a less bellicose foreign policy?

Due to the state that America's finances will be in for the foreseeable future, all conservatives should essentially advocate more or less an isolationist foreign policy.

The Death of Capitalism

Daniel Gross writes:

Just as happened in 1932, it's possible that the Republicans' incompetence and bullheadedness in managing a financial crisis could lead to Democrats controlling both the White House and Congress.

This sentiment should strike fear in the heart of every free market advocate who reads it. Before the Great Depression, America had a classical free market economy. America was almost a libertarian utopia. After the Great Depression, America slowly became a socialized paternalistic big government nanny state.

If the financial crisis gets worse, and the Democratic party increases its political control, capitalism as we know it may not be able to survive. Saving capitalism should be the goal of all those who ideologically believe in free markets. If that means a bailout needs to be passed, then so be it.

Update: Megan McArdle says it better than I do:

It is worth noting, in answer to the libertarians who are wary of government intervention in the economy, that if there is a serious crash, we will get even more government intervention in the economy--and intervention that is much less to our liking. That cost has to be weighed in your assessment.

Financial crisis resolved?

Hugh Hewitt writes:

If, as appears likely, the two parties which are on opposite sides of a deep ideological divide can work together to resolve a crisis and then immediately return to throwing hammers at each other for five weeks, this will be as great an example of the wonders of our system that can be imagined.

Now that the crisis has been resolved (hopefully), libertarians, conservatives and all those who embrace free markets need to work to save and restore capitalism in America. The stakes are now to high to allow the paternalistic socialist state to continue acquiring more control over the economy and the lives of American people.

Those who embrace free markets need to sell the concept to the American people that the cost of this bailout need not be equally borne by all members of society. Instead, it could more productively be borne by the least productive members of society (i.e., the do nothing civil servant bureaucrats, parasitic accountants and lawyers, upper middle class welfare king and queen college professors, wealthy foreign allies who do not adequately pay for their own defense, dead beat home owners that caused this crisis, monopolistic corporations who gain government induced economy of scale advantages through laws and regulations, etc).

These are tough arguments to make, and undoubtedly, free market advocates will be accused of having no compassion. However, free market advocates need to frame the debate around the concept of having compassion for the hard working Americans who are being asked to borne the cost of solving a problem that they did not create. Free market advocates can win these arguments and save and restore capitalism in America, but they need to get to work ASAP.