Reader Mail #7 - The Beatings Will Continue Until Morale Improves

I can tell that some people who work for GM read my post on "Analysis of UAW and GM Contract", due to a spike in the number of visits from Michigan and Ohio, where many GM factories are located. I even got some visits from GM itself.

My post on Student Tasered at Kerry Speech has generated relatively many (2) reader comments, although not many pageviews according to Google Analytics.

On Student Tasered at Kerry Speech, an anonymous reader says:

This one is similar, worse, and seems to have been buried:

http://www.wndu.com/home/headlines/9793807.html?pollSubmit=y&submit=submit&oid=1&mr=1&cid=6500&pid=9794147#

Cop pushed city councilman to the ground from behind, then pummeled him while he was face down.

Cop then claimed the councilor swung at him first.

The video was pulled from youtube, claiming copyright complaints by the station.

It does seem suspicious that the news station didn't allow the video to be published on YouTube. Personally, I think that "fair use" should apply for a brief clip, especially if it's newsworthy and unavailable from other sources.

I heard of that story. I'm all for red market workers fighting with each other. I only get offended when red market workers harass people who do productive work.

It's like a story about two drug dealers getting into a fight and one shoots the other. Why should I care?

Any story that leads to people having less confidence in the government is fine with me.

The background of that story is that the city was having budget problems. The city councilman was suggesting completely eliminating the local police department as a solution. Apparently, the councilman and the local police have a prior history of confrontations.

The fundamental issue with a monopolistic police force is that there's no accountability when they misbehave. Even if you're fortunate enough to catch the abuse on videotape, there's still no guarantee of fairness. At some point, people have a right to say "I'm not paying taxes to support an illegitimate abusive police force". Of course, the illegitimate abusive police force has a different opinion on forcing people to pay taxes.

I read somewhere that's the primary reason for government-paid police: tax collection. All other functions of the police are secondary.

I found another interesting site. It's an online discussion forum dedicated to cops. Allegedly, a lot of the posts are by cops bragging about the bad things they've done. Personally, I think the "multiple competing vendors" approach to police is far superior to the current system.

On Student Tasered at Kerry Speech, another anonymous reader says:

I think this video will be used as a 'threat' to any would be non conformists...the iron fist under the velvet glove is showing.

I do not see why the police themselves could not use common sense, let the guy have his say and move him out quietly without a struggle. It is very disturbing that no one objected... The Police State is already here.

I find the most offensive part of the incident to be that the other members of the audience didn't object.

The police were just following orders. One of Kerry's aides told the police to detain and eject that student. Police are trained to blindly follow orders without questioning them. Who is more to blame? The policemen, or the person who ordered them? I say both, equally.

"I was just following orders" is never a proper justification. It doesn't matter if you're a guard at a concentration camp, a tax collector, or tasering a loud student. (and don't invoke Goodwin's law on me here) The entire problem is that people say "I was following orders" or "I was just doing my job" and use that as justification for doing bad things.

Under proper common law, people are always held individually accountable for their actions. Under common law, "I was following orders" is never a valid defense. The only forms of law that apply in the USA today are contract law and admiralty/military law. Common law is no longer relevant. Under military law, a policeman following orders has absolute immunity from prosecution.

At these political speeches, the questions are ALWAYS screened in advance. You only get to the podium if your question is approved. The student might have deviated from the script; he didn't ask the question he said he was going to ask.

Quite frankly, I think that asking tough questions of the President and members of Congress is a complete and utter waste of time. They aren't going to answer tough questions like "Are all forms of taxation theft?"

If I were asked to judge this case, I wouldn't impose any further penalties on the student, and I would fine the policemen for their misconduct. I'd say a fine of 1-2 months' salary each would be sufficient, but I would not require any further penalty against the policemen such as requiring them to lose their jobs. (Of course, in a truly free market, people could refuse to be customers of police agencies that employed those officers. Residents of that city have no choice but to continue paying the salary of those officers, under threat of further police violence.)

On the Ron Paul Forum, someone asked:

Why did the US abandon the gold standard?

This can be answered in three words: The Federal Reserve.

The Federal Reserve itself forced the US off the gold standard, due to the Compound Interest Paradox. Once the Federal Reserve was created, debt-based money and the Compound Interest Paradox had the full force of law. The USA was still nominally on a gold standard. People didn't realize how badly they had been cheated and didn't immediately demand to convert their paper dollars to gold. With debt-based money, debts were guaranteed to grow exponentially over time, guaranteeing an eventual default of the gold standard.

The default on the gold standard occurred in 1913, when the Federal Reserve was created. The ability to redeem dollars in gold wasn't suspended until 1933. The Great Depression, which was caused by the Federal Reserve, was blamed for the default. Greedy speculators were blamed for the default on the gold standard, and not the Federal Reserve.

Before the Federal Reserve was created, there still were panics and boom/bust cycles. Before the Federal Reserve was created, the "bank panics" were intentionally caused the international banking cartel. The boom/bust cycles enabled banks to confiscate wealth when people were unable to pay their debts. If you control 95% (or even 20%) of the world's money, it's very easy to create boom/bust cycles. All you have to do is withdraw your balance in physical gold to create a bust, and make lots of fractional reserve loans to create a boom. Of course, once you control 20% of the world's money, your ability to create boom/bust cycles very rapidly makes the total rise to 95%, 99%, or more, until you're The Supreme Leader of Humanity.

In a truly free market, with completely unregulated banking, you cannot have boom/bust cycles. Interest payments from trustworthy banks would be an incentive against gold hoarding. Even if one person held 99% of the gold, truly free fractional reserve banking would multiply the gold not under his control. If fractional reserve banks do not offer "demand deposits", which is fraudulent, they cannot be bankrupted if customers all simultaneously demand withdrawal. Without "demand deposits", a bank can slowly pay off its depositors/creditors, and match its collected interest payments with its obligations. Fractional reserve banking coupled with demand deposits is fraudulent, because the bank is technically insolvent at any given time if all customers simultaneously demand withdrawal.

There are a couple of problems with a "gold standard", from the point of view of someone who wants to loot and enslave the entire world.

Under a "gold standard", interest rates cannot fall below 0%. Otherwise, people would just hold onto their physical gold. With fiat money, you can have negative interest rates. Currently, M2 is growing at a rate over 6.5% per year, while the Fed Funds Rate is currently 4.75%. That's negative real interest rates of -1.75%. If you use M3 instead of M2, the picture is a lot worse.

Under a gold standard, "money in the bank" is a sound investment. You're guaranteed to hold your purchasing power over time, provide the bank doesn't become insolvent and the red market doesn't default on the gold standard.

With fiat debt-based money, the rate of interest that depositors are credited is always less than the true inflation rate. A "safe" checking account is a lousy deal, because you're guaranteed to lose out to inflation over time. People think that a money market account or a bond investment is "safe", but it's actually guaranteed to lose your purchasing power, due to the effect of inflation. When wealth is confiscated from someone, it winds up in someone else's pockets. In the case of inflation, the primary beneficiaries are the financial industry and large corporations.

By abandoning the gold standard and taxing gold and silver transactions, people are effectively banned from using fair money. If you want to legally use gold and silver as money, the tax treatment makes it impractical. If you want to use fair money, your only option is to work off the books.

With fiat debt-based money, inflation is built into the economic system. Further, people believe that inflation is less than the true inflation rate. Phony manipulated statistics like the CPI are frequently cited. More reliable statistics are ignored, such as M2 or the suppressed M3. According to the CPI, inflation is 2%-3%. According to M2, inflation is 6.5%. M3 is no longer publicly available, but some people estimate M3 would be growing at a rate of 10%-15% if M3 were still reported.

With inflation, people can get an annual raise of 3%-4%. They believe their purchasing power is larger, because the number on their paycheck is bigger. However, if you properly adjust for inflation, salaries are decreasing.

With fiat debt-based money, you can have negative real interest rates. This steals from everyone holding savings accounts or bonds, typically the average person. This wealth is then transferred to the financial industry and large corporations.

Before the Revolutionary War in the USA, credit-based fiat money worked very well. Taxation, counterfeiting, and propaganda discredited credit-based fiat money. The original US government was forced to be on a gold standard because most of the world's gold was controlled by the international banking cartel. Even though the US had won its independence, it still had monetary dependence on the European international banks who controlled most of the world's gold. At that time, gold could only be obtained via a loan from an international bank. Gold came with debt-strings, because you could only obtain it via a loan. Credit-based fiat money issued directly by a government runs contrary to the international banking cartel's goal of economic enslavement of everyone. Debt-based fiat money enslaves everyone under a crushing debt burden via the Compound Interest Paradox. Under a gold standard, when a handful of people control most of the gold, gold always comes with debt strings and the Compound Interest Paradox applies. Regulation of fractional reserve banking restricts the ability of non-cartel banks to multiply the gold not under the cartel's control.

The international cartel worked hard to discredit credit-based fiat money at the time of the US Revolutionary war. They worked to discredit Lincoln's credit-based greenbacks. Then, they worked to discredit the gold standard and switched to debt-based fiat money.

Summarizing, the advantages of fiat debt-based money, compared with a gold standard, are:

1. People with savings accounts or bonds are robbed by inflation. People think these investments are safe, but they aren't properly inflation adjusted. Under a gold standard, a person is guaranteed a minimum 0% rate of return after inflation, by holding physical gold or accounts at a solvent bank.
   
2. People can get a pay raise in nominal dollars while their purchasing power is eroded by inflation. People are deluded into believing that inflation is less than the actual rate. Phony statistics like the CPI understate the true inflation rate. Under a gold standard, an increase in the number on your paycheck always leads to the corresponding increase in purchasing power.
3. The "panics" caused by a gold standard were artificially created by the international banking cartel and the Supreme Leader of Humanity. Fractional reserve banking combined with demand deposits is fraudulent, because a fractional reserve bank with demand deposits is technically insolvent at any given time. Since fractional reserve banking with demand deposits is an inherently unsound system, someone who controlled a large percentage of the world's gold can cause panics at will by withdrawing and converting their balances to physical gold.
4. Negative real interest rates are a massive subsidy to the financial industry and large corporations. If the average person wants to borrow, they have to borrow at a substantial premium to the Fed Funds Rate. Large banks can borrow at the Fed Funds Rate. Large corporations can borrow at a slight premium to the Fed Funds Rate, so they get a large chunk of the subsidy. Under a gold standard, the red market can't subsidize cheap interest rates without spending gold from their treasury. Under a gold standard, interest rates can't fall below 0%.
5. A gold standard is a check against government deficit spending. If people think a government will be unable to pay off its debts with gold, its bonds will start trading substantially below face value. With fiat debt-based money, the Federal Reserve keeps bond prices high and interest rates low by repurchasing government bonds and creating new money.
   
6. With debt-based fiat money, interest payments on the national debt are an excuse for high income taxes.
7. With debt-based fiat money, everyone is enslaved under a crushing debt burden due to the Compound Interest Paradox. There literally isn't enough money in circulation to repay all debts simultaneously.
   

Eliminating the gold standard was a lousy deal for the average worker. It's a great deal for the people who control the large banks and large corporations.

That's the reason a gold standard is routinely decried as evil. A gold standard is "evil" because it protects the average person from having their wealth confiscated by inflation.

Also on the Ron Paul Forum, someone said:

Either you're with the Constitution or against it.

I already answered this question. It's an important point, so I'll repeat it.

No, I don't support the Constitution. It was a flawed model for building a system of government. It's time to move onto the next model for an economic and political system.

Why should the Constitution be a binding contract on me? I didn't sign it. I certainly wouldn't approve of things like the 16th amendment or the Federal Reserve, if given the choice.

Even if we could magically return to a strict Constitutional government, it would degenerate to the current mess again in 20-50 years.

The US Constitution, as a model for a system of government, is already a discredited proven failure. A valid form of government could not have degenerated into the current situation.

If you say "I support democracy.", you really are saying "I have the right to steal from you. By voting, I authorize other people to steal from you on my behalf."

I cannot support an economic and political system where "You have the right to steal from me." is one of the axioms.

On Analysis of UAW and GM Contract, Kevin Carson says:

Thanks for the link, FSK. I think GM workers should have demanded the same rights as any other creditor who got the shaft. One possibility might have been shares of stock to compensate for the amount of their pensions defaulted on. I don't know how much GM stock is held by the corporation, but if necessary every share of it ought to be forfeited to the workers.

I've noticed that the people who tsk-tsk the most about the "unreasonable" levels of auto worker compensation are the same ones who defend skyrocketing executive compensation, with CEO pay growing over the past 20 years from 40 times to 500 times the pay of the average worker. And management salaries today are around 40% of total compensation to labor, as opposed to about 27% in the late '70s. Never hear them blamed for the industry's problems, for some reason. Golly, dya think maybe they get pensions, too?

BTW, it's quite possible that GM will get out of the business of actually making cars. As Eric Husman of Grim Reader blog observed, it's not much of an exaggeration to say the only part of a GM car actually built in a GM plant is the hood ornament. Almost their entire profit stream comes from the auto financing arm rather than production. As Husman also pointed out, most of their profits in "good" years probably comes from the sale of another couple of plants.

Actually, I've linked to Kevin Carson's blog before, in my "Favorite Links" section, but this is the first time I linked to Kevin Carson in the body of a post. I guess those trackback services only count links that occur in the body of a post.

Overall, I like Kevin Carson's blog. He has good ideas, but his explanations are sometimes too complicated. I like to repost his ideas in simpler form. I like the idea that "Regulation of unions prevents unions from being effective", which I first saw on Kevin Carson's blog.

However, Kevin Carson doesn't fully understand the role of the Federal Reserve and the income tax. The Federal Reserve and the income tax are primarily responsible for the economic enslavement of everyone. Further, Kevin Carson and other bloggers seem to be mostly writing and speculating. I'm already at the next step. I'm looking for trading partners. I'm looking to start building an advanced grey market economy.

If you take a literal interpretation of bankruptcy law, the claims of pensioners have a higher priority than creditors and secured creditors. For example, the airlines declared bankruptcy and defaulted on their pensions. Technically, the pension plan should have inherited all the assets of the airlines and the creditors would have gotten the leftovers after the pensioners got paid. If this means the creditors got screwed, then it was their fault for lending money to an insolvent company.

Fortunately for creditors (i.e. large banks), bankruptcy courts ignore the law and give creditors higher priority than pensioners. That's one of the rules of the current economic system: Large banks never lose too much money.

Under a fair legal system, all those pensioners should have a valid claim against GM shareholders and management. Under a fair legal system, GM should have set aside money for its pension liability as it was incurred. GM's management and accountants are to blame for not setting aside money as the retiree expenses were incurred.

What do you mean by "shares of stock held by GM should go to the retirees". That's nonsense. The equity of GM itself should go to the retirees. If that means that current shareholders get nothing, then it was their fault for investing in an insolvent company.

I read an interesting article about CEO salaries. CEO salaries started skyrocketing at around the same time the SEC started requiring them to be printed in financial statements. Every company wants to pay their CEO above-average. Publication of CEO salaries led to more severe competition.

The average worker is trained to keep their salary a secret. Many employment contracts forbid you from discussing your salary with your coworkers. The ostensible reason is that if you found out a coworker was paid 20% more than you for the same job, you would be annoyed. Encouraging a culture of "your salary is private" prevents workers from pooling and sharing information. Large corporations aggregate and share customer information. Why shouldn't workers aggregate and share information on employment conditions?

Another problem with CEO salaries is that, in most companies, the CEO chooses the board of directors. Theoretically, the board of directors are chosen by the shareholders and the CEO is chosen by the board of directors. However, shareholders are given a slate of directors and they vote yes/no on the whole slate. If the CEO doesn't like a specific member of the board of directors, then that director isn't going to be renominated when his term expires. It's very hard to get elected to the board of directors as a write-in candidate unless you already control a majority of the shares. Voting doesn't work, whether it's a democracy, a republic, or the shareholders of a corporation.

Further, compensation consultants are hired by the CEO to advise the board of directors on what the CEO's salary should be. This leads to the agency problem Kevin Carson mentions on his blog. After all, the USA is a communist dictatorship. The board of directors aren't spending their own money; they're spending the shareholder's money. Typically, the board of directors collectively own a few percent or less of the total outstanding shares. The CEO of one corporation typically serves on the board of several others, so there's a sense of reciprocity.

Also, high-ranking executives and CxOs get a separate pension plan and medical plan. Their plan is fully funded and held in a separate trust, so they don't lose their benefits in the event of a bankruptcy. Decades ago, the IRS and PBGC ruled that these trusts couldn't pay out benefits until regular employees got paid, but the government no longer pretends to be looking out the average worker.

I think that many large corporations actually destroy more wealth than they create. GM has huge debts. However, GM pays an interest rate of 6%-7% on its debts, even though they're now junk-quality. If GM can pay 6%-7% on its debts, while inflation is 6%-15%, GM is allowed to default on its debts via inflation. GM receives a subsidy of 5%-10% times its outstanding debt each year. This subsidy isn't free. It's paid by everyone else as inflation.

If you actually look at GDP figures properly adjusting for inflation, GDP is barely increasing or decreasing. If you use M2 as a measure of inflation, GDP is barely increasing. If you use the suppressed M3 as a measure of inflation, GDP is crashing. I have planned future posts with the full detailed calculation.

Kevin Carson says that the same people who complain about rising worker's wages are the same ones who say that rising CEO pay is great. Haven't you figured out yet that the mainstream media is completely biased? If you haven't figured out yet that the mainstream "news" media is a comedy source more than an information source, you're living in a hole. Even the Daily Show and the Colbert Report have an obvious bias. Did you see Jon Stewart interviewing Alan Greenspan a week ago? It was pretty disgusting.