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Thursday, April 3, 2008

Reader Mail #46

I liked this post on Check Your Premises, where he links to these two lists of quotes on anarchy.

They were sort of interesting. On the other hand, reading a list of pro-anarchist arguments makes me think "Tell me something I didn't already know."

I liked this post on Econospeak.

I should figure out a way to lose a few billion dollars so that I can get rewarded with a few million for my efforts.

I liked this quote on Question That.

Anyone who is capable of getting themselves into a position of power should on no account be allowed to do the job.

The correct attitude is "positions of power should not exist at all". Nobody should be in a position to use violence to impose their will on others.

Someone was googling "can you win against the irs?" By the time the IRS is taking you to court, you've already lost. If you hire an attorney to defend yourself, you can't recover the legal expenses if you're acquitted. If you defend yourself sui juris, that is risky. Judges tend to discriminate against defendants who defend themselves.

The best strategy for defeating the IRS is agorism. People should focus on generating wealth that isn't automatically reported to the IRS for taxation.

Someone else was googling "why does an oligopoly keep cash". By keeping cash reserves, management is protected from business cycles. During the bust phase, the oligopoly can buy out competitors cheaply, solidifying its market position. During the boom phase, the oligopoly builds up cash reserves.

By holding cash reserves, the corporation loses ground to inflation. However, cash reserves mean that the oligopoly isn't dependent on the financial industry to provide financing during an economic bust. An oligopoly receives FAR GREATER government subsidies than the purchasing power it loses due to inflation.

I liked this post on no third solution.

the system is beyond broken, and can’t be reformed from within

This is one key point of agorism. It is impossible to reform the current economic and political system. It is time to start over with something else.

David Z talks about Peak Oil. I saw an interesting article. People were predicting that the British economy would collapse soon as coal reserves were exhausted. This was before the discovery of oil and its use as fuel.

"Peak Oil" and "global warming" are phony environmental causes that are used as an excuse for increasing State power.

I liked this post on George Washington's blog. Some people say that fighter jets were ordered to stand down on 9/11. The normal procedure would have been for them to intercept the hijacked airplanes. This procedure was not followed.

It's wrong to obsess about 9/11. It distracts people from other, more effective, forms of resistance (i.e. agorism).

Are the 9/11 conspiracy theorists really a bunch of pro-State trolls?

I liked this post on to herd or not to hard. George Carlin argues that prostitution should be legal.

There's one general test for all these "non-crimes". Without government, would it possible to prevent people from doing this? If the answer is "no", then it isn't a crime. If a group of people can do something in private without injuring anyone else, then it's NOT A CRIME.

For example, pollution *IS* a crime without government. The victims of pollution have a valid tort claim against the polluter. In many ways, the government SHIELDS polluters, protecting them from the consequences of their crime.

I liked this post and this post on Distributed Republic. It's about how investment banks abuse the financial system.

The financial system is *DESIGNED* to be exploiting by large banks. When executives at large banks exploit loopholes in the financial system, their reaction is "Good! The US financial system is functioning as intended!"

Suppose a large corporation has $10B in debt. Suppose their credit rating decreases. Suppose this causes the market value of their debt to decrease from $10B to $9B. The corporation can now book $1B in profits! Its liabilities have decreased from $10B to $9B!

People responsible for issuing mortgages were very skilled at gaming the system. The "mortgage approval" process was completely automated. They knew exactly how much they needed to "fudge the numbers" to get a mortgage approved.

The mortgages were usually sold immediately after being issued. This meant that the person approving the mortgage didn't care if the borrower paid back his loan or not. The person approving the mortgage only cared about collecting his commission for writing the loan.

This is the usual "Agent-Principal problem".

Such abuses are BUILT INTO the rules of the economic and political system. Don't blame people for abusing the system. Blame the corrupt system. If everyone else is abusing a corrupt system, you're placing yourself at a disadvantage by being honest.

Suppose one company was responsible when issuing mortgages. Their market share would have decreased. Due to "market forces", this company would have been driven out of business during the boom.

I liked this post on the Agitator. A prosecutor in Texas said that anyone who writes an article advocating for jury nullification is committing a crime.

I liked this post on out of step. It's about the TV series "Jericho", which I haven't watched. It's interesting to see a TV series that discusses the issue "Is the government legitimate?"

I liked this post on Overcoming Bias. Many religions keep their members under control by keeping special information secret. The religion of "banking" is particularly abusive in this regard; people would revolt if they knew how the monetary system really worked.

Science does not keep secrets from the general public. If scientific knowledge were a carefully guarded secret, then would people take science more seriously?

I liked this post on rec.humor.funny, about the $600 "tax rebate".

We need to keep that money here in America . . . so the only way to keep that money here at home is to drink beer, gamble, or spend it on prostitution. Currently it seems that these are the only businesses still left in the U.S.

People think of the tax rebate as a gift from the government. Actually, it's a partial return of stolen property.

Suppose the government printed $600 of new money and gave it to everyone. What would happen. It would merely cause inflation. However, wealth is unevenly distributed. Such an inflationary rebate would benefit a poor person in debt more than a wealthy person. Of course, the wealthy person doesn't mind such trinkets for the poor; most wealthy people already use State violence (directly or indirectly) to line their pockets.

This post on the Picket Line was interesting.

Responding to a Picket Line post a few days back, FSK wrote:

If you pay taxes, you are as responsible for war as the soldier who kills people. If you pay taxes, you are directly responsible for every bad thing government does. Paying taxes is immoral.

On the other hand, John T. Kennedy once argued to me:

Paying taxes doesn’t make you a collaborator any more than handing your wallet over to a mugger does.

David Gross says these two attitudes are contradictory. I disagree.

If you agree that "Taxation is theft", then it becomes a question of tactics. I pay taxes on my income from my corporate/slave job, because resisting taxes on that income is impractical. The taxes are automatically deducted from my paycheck, and my income is automatically reported to the IRS. I have savings in my checking account and brokerage account that I don't want the IRS to seize.

If there were a mature agorist economy, I would gladly work there instead of a corporate slave job. Lacking any agorist business opportunities, I'm doing the next best thing. I'm increasing people's awareness of agorism. Eventually, there will be a critical mass of aware people and I'll be able to start a free market trading group.

I agree that "taxation is theft". I'm looking for a way to defend myself against the mugger demanding my wealth.

I'm cooperating with the mugger now. That doesn't mean I'll cooperate in the future!

I'm able to call State tax collectors by their proper name, thieves. Once you achieve enlightenment, it's a question of tactics instead of goals.

Once a free market economy gets started, anyone who works in the slave economy is directly contributing to my oppression.

David Gross says this article on tax resistance is pathetic. I agree.

That pro-State propaganda advises people to:

Hand out leaflets making the connections between the war and our growing economic crisis here at home. (See below for resources.) You can distribute this material at your local post office, at busy transportation hubs during rush hour, and in other locations where you can talk with people.

If the leaflets were well designed, that wouldn't be a waste of time.

I prefer the blogging venue. I can reach the most people for the least personal effort. I'm not in the mood to aggressively spread the truth right now. I'm content to let interested people find my writing.

Hang banners that link the war to the economic crisis from major highway overpasses.

That sounds pointless. Does anyone remember seeing "Ron Paul" highway banners? Those sure were effective, weren't they?

Organize a day of calls to local radio talk shows, and get folks to write letters to the editor of your local newspapers.

This is pointless. Radio talk shows and newspapers are controlled by pro-State propaganda artists. They won't air your call or publish your letter. If they were interested in telling the truth, they would have done so by now.

Be sure to call your representatives and your senators in Congress and urge them to use their power to bring all of the troops home!

I'm sure the staffer who reads your letter will make an entry in some database and then discard your letter.

Order and distribute our new "It's the War Economy, Stupid!" stickers in your community.

That also sounds pointless.

Unless you're educating people about agorism, war tax resistance is pointless. People need to understand "Taxation is theft!" People need to understand the immorality of income taxes, which convert everyone to government slaves. People need to understand why the Federal Reserve is responsible for a corrupt monetary system. People need to understand that government regulations stifle competition and subsidize large corporations.

That post on the Picket Line refers to this wiki. I decided to stop contributing to wikis, preferring the blog format instead. If you like any articles on my blog, you may copy part or all of them elsewhere. I'd appreciate a link back, but that isn't mandatory.

There was one interesting page. It's the "International Convention for the Suppression of the Financing of Terrorism". Is that an agorist trading group or a government agency?

He also talks about "Nuremberg Principles". A policeman or government employee who enforces an illegitimate law is as responsible as the politician who wrote the law. "I was following orders" is never a valid defense. It especially applies to policemen. Unfortunately, most policemen don't have the intellectual capacity to realize that many of the laws they're enforcing are wrong.

There was another interesting quote. If you have a comfortable middle-class lifestyle, you aren't going to risk jail time resisting taxes. Agorism is a philosophy that would be most attractive to poor people. Unfortunately, most people don't have the ability to understand the complicated issues of tax resistance.

I have a decent middle-class lifestyle. However, my wealth is FAR LESS than it would be in a truly free market. As a very productive worker, the State severely restricts my opportunities.

Making a Nazi Germany analogy makes one subject to a "Goodwin's Law Fallacy". I read that, in Germany, the Jews who resisted the Nazis had a *FAR GREATER* survival rate than those who passively followed orders.

I think we probably agree more than we disagree when it comes right down to it, but I’m too impatient to wait for the perfect solution. I’m eager to start right now with less-perfect but still practical solutions

Agorism is still an imperfect, but practical, solution. All you need is a few trustworthy trading partners and you can get started.

I liked this post on no third solution.

Almost all that any politician says on any topic other than political strategy should be treated with even less respect than would be accorded a professional circus-clown’s speculations about string theory. - Don Boudreaux

More precisely, a politician should be treated as a complete fool on every subject *EXCEPT* "How to get elected to public office."

I liked this post on Liberty is My Homie about NYC taxicab medallions. In NYC, there is a fixed number of licenses to operate a taxicab. The right to drive a taxi is called a "medallion". The medallions can be bought and sold; one recently traded for $600k.

Most medallions are owned by taxicab corporations, not individual drivers. The "medallion" system benefits the medallion owners at the expense of workers. If you want to drive a taxi, you have no choice but to buy or rent a medallion.

There have been some reform attempts to increase the number of medallions. However, the medallion owners are the recipients of a massive State subsidy. They can always profitably lobby to quash reform.

This is the typical "Distributed Costs and Concentrated Benefits" scam. The cost of the medallion monopoly is paid by anybody who rides in a cab. The beneficiaries are the medallion owners.

If taxis were the only industry that did this, it would be less cause for concern. *EVERY* industry is regulated in such a fashion.

I liked this comic on Megatokyo.

only the dead can't think anymore

By my standards, 99.9%+ of the "human" population are living zombies. Unless you understand concepts like "Taxation is theft!", you aren't really conscious.

I read a study that said, for most people, the thinking portion of their brain shuts down when they discuss politics or economics. This *ESPECIALLY* applies to economists!

That makes me wonder. Does the thinking portion of my brain shut down when I read someone pro-State trolling?

In this post on the Picket Line, David Gross is confused.

He's quoting me writing:

If you pay taxes, you are as responsible for war as the soldier who kills people. If you pay taxes, you are directly responsible for every bad thing government does. Paying taxes is immoral.

I stand by that statement. I don't live by that standard *YET*. There are a lot of practical obstacles to starting a free market trading group. First, I need to educate a critical mass of aware people. This is what I'm doing now. Then, I need to actually start trading.

David Gross also says that I'm willing to take a pay cut to work in the free market. That's not entirely true. I'll only work full-time in the free market if it's in my rational self-interest. I'll only work full-time in the free market when it pays an equal or greater salary than my corporate/slave job *AFTER TAXES*, INCLUDING all hidden expenses of a corporate/slave job. Until then, I'll work part-time in the free market and full-time in the corporate/slave economy.

If I earn $40/hr in my corporate/slave job, I only need to earn $20-$25/hr in the free market. Taxes are THAT BIG OF A RIPOFF! There are plans to raise taxes, especially Social Security and Medicare. I hope those taxes are hiked, because that would be a greater incentive for working in the free market!

There are other advantages to working in the free market. I'd have more flexibility choosing my work hours. I wouldn't be at risk for a "layoff" causing me to lose all my income. As a free market worker, I'll have MUCH MORE personal freedom than in a corporate/slave job. That's also worth another $5-$10/hr or more. I would be willing to take somewhat of a pay cut for free market work, because there would be non-financial benefits. For example, if I didn't have to commute 2 hours per day to/from work, that would be like a pay raise.

I plan to experiment a few hours/week with free market economic activity. I'll be doing it as hobby/entertainment until it's a serious source of income. For now, I'm content to work for $0/hr in my blog. My blog is a form of free market economic activity. I'm getting feedback on my thoughts that are unavailable via any other venue. I prefer the "blog" format to the "Forum/wiki" format, because other formats are vulnerable to pro-State trolls disrupting the discussion.

It's unclear that the value of my blog's work is $0. Some sources say that a blog is worth $50 for every regular reader. If you assign a value of $n to each regular reader, the value of my blog increases as the readership increases. According to Google Analytics, I had over 2,000 Absolute Unique Visitors in March, and the trend is increasing. I probably won't "monetize my blog" directly via Google Adwords. Adwords doesn't work well on political blogs, because the ads tend to be opposite of the blog's content. I may "monetize my blog" indirectly by using it to help me set up a free market trading group. I estimate the size of the Remnant to be 1M-6M people; that's a lot of potential readers for my blog.

Just because I pay taxes NOW, doesn't mean I'm a hypocrite! I *WANT* to avoid paying taxes. There are a lot of practical obstacles to working in the free market.

There is another point that David Gross is missing. I work as a financial systems programmer. My work has an economic value of zero, yet I'm paid more than zero! As long as the true value of my work is ABSOLUTELY NOTHING, working in the slave economy DOESN'T HELP THE BAD GUYS AT ALL! Fortunately, almost all the corporate/slave jobs I've ever had or interviewed for HAD AN ECONOMIC VALUE OF ZERO! (The most noteworthy exception is interviewing at Google. Should I be glad they rejected me? Tools like Blogger probably hurt the bad guys more than they help them, even though Google is collecting statistics on how I use Blogger.)

Is it immoral to work for the bad guys if you know your work is completely useless?!

I prefer to work in the free market, without sacrificing my personal lifestyle. It isn't practical for me to do this *YET*.

I'm not following David Gross' strategy of intentionally living in poverty just to avoid supporting the bad guys. That strategy is pointless.

Besides, accumulating capital *NOW* lets me invest it in free market businesses later. For example, suppose I decide to start a free market clothing business and need to buy $10k in equipment. That's a substantial capital outlay, but if I have savings I can afford to risk it.

Suppose I decide to start a free market gold/silver trading group. Access to capital makes it easier for me to function as a free market gold/silver dealer.

Suppose I decide to quit my job to work full-time in the free market. If I have substantial savings, that reduces my risk if I can't earn sufficient free market income.

David Gross makes another interesting point. If a person is unaware that "Taxation is theft!", then can you blame them for paying taxes?

Once you read my blog, you can NO LONGER feign ignorance of "Taxation is theft!" I discovered agorism by researching Ron Paul's campaign and related issues. If I was able to search around on the Internet and discover agorism, any reasonably intelligent and curious person could also discover agorism. With increased writing about agorism on the Internet, it's getting *EASIER* to discover agorism, not harder.

There are several classes of people that we are discussing.

1. Someone who never considered the possibility that "Taxation is theft!" They don't have the intellectual curiosity to search the Internet and discover agorism. Do these people qualify as human?

2. Someone who read about agorism, but dismissed the philosophy as stupid/infeasible/wrong. These people are fools or pro-State trolls. Do these people qualify as human?

3. Someone who understands agorism pretty well, but hasn't made the transition to practical agorism yet. I fall in this category. I *WANT* to make the transition from theoretical agorism to practical agorism. Does anyone want to join the experiment?

4. Someone who understands agorism *AND* actually practices agorism part-time. There may be some people with off-the-books profitable hobbies/businesses. They fall in this category. I don't know any practicing agorists.

5. Someone who practices agorism as their full-time job. I don't know anyone who qualifies. Some occupations, such as drug dealer or prostitute or gambling ring, may qualify as free market workers. How sophisticated are black market workers? I don't have any personal experience in black market industries. I want to focus on the grey market.

6. People like David Gross who intentionally live near the poverty line to avoid having taxable income. Even if a substantial % of the population converted to this philosophy, it would not hinder the bad guys much. Without any wealth at their disposal, these people are not a threat.

Ideally, suppose around 2% of the population started practicing agorism. Due to their efficiency, they might control 10% or more of the nation's wealth! At some point, sophisticated agorist protection agencies would develop. Eventually, it might become feasible to shut down the State as a criminal conspiracy. It might not be shut down globally, but the monopolistic State police might completely lose control of certain areas. For example, police are frequently afraid to enter certain poor neighborhoods. Once some areas are free, freedom spreads quickly. Once the free market establishes a base somewhere, it can profitably sell to outsiders.

In order to be successful, you have to create a pool of wealth *OUTSIDE* the control of the bad guys. The only way to achieve this is via free market economic activity.

It is *NOT* sufficient for me to go around saying "Taxation is theft!" If that's all I ever do, then I am a hypocrite. At some point, ideas must be put into practice or they're useless.

Even though I haven't put my ideas into practice *YET*, that doesn't mean I won't implement them in the future. The accusation that I am hypocritical preaching agorism is interesting. Unless you have a free market job offer that pays at least as much as my corporate/slave job after taxes, that is an invalid accusation.

Agorism is a new philosophy for me. Some people who read my blog claim it is also a new philosophy for them. At some point, free market trading groups should develop.

I'm eager to build a free market economy. I'd like to be so successful that I could start hiring other people to join me.

David Gross makes an appeal to Christian principles. Christianity is a pro-slave religion. Christianity is a popular religion/brainwashing technique, because it trains people to accept abuse. Arguing against government via Christianity is like arguing against income taxes by reciting the 16th amendment.

David Gross also discusses briefly the legal arguments against the income tax. Making legal arguments against the income tax is fighting the bad guys on their turf. It is much more important to say "Taxes are immoral" than "Income taxes are really illegal". After analyzing it, I conclude the legal status of the income tax is incredibly confusing and complicated. The legal arguments against the income tax are:

  1. The 16th amendment was never properly ratified.
  2. The income tax violates other provisions of the Constitution, such as the ban on involuntary servitude and the right against self incrimination.
  3. When the income tax was ratified, "income" meant dividends, rents, capital gains, and corporate profits. In the early 20th century, "income" meant "passive income". Wages were not considered part of income. "Income" was redefined to include wages *AFTER* the income tax was ratified.
  4. Your employer is required to automatically report all income to the IRS and automatically withhold taxes. An employment agreement should be a private contract and none of the government's business. Unfortunately, all corporate employers follow this regulation. Management of large corporations receives massive government subsidies, so they won't rock the boat on the taxes that feed their profits. Small business owners aren't going to risk their business to fight the IRS.
There is actually one legal argument in favor of the income tax. It is the "Strawman corporation". Look at your driver's license, bank statement, or any other government document. Your name is always in ALL CAPS. Suppose my real name were Fsk Fsk. There's a corporation called FSK FSK. My property is actually really owned by the FSK FSK corporation. When I receive W-2 wages, it's a "corporate profit" for the FSK FSK corporation, and therefore taxable!

Suppose I made an arrangement with my employer to be paid in cash off-the-books. If I deposit that cash in my bank account, it becomes a corporate profit for the FSK FSK corporation and therefore taxable.

This corporation with the same name as you, except in ALL CAPS, is your "Strawman corporation". It is uniquely identified via your Social Security Number, in case two slaves have the same name. The Strawman Corporation is created when you sell your child into a lifetime of slavery. A birth certificate is really a document signing away your child as government property, and the Social Security Number is the State assigning a unique tracking number to its property. The Strawman Corporation is destroyed when a death certificate is filed. The individual is the sole trustee and beneficiary of the property owned by the Strawman Corporation. The individual can be punished for "tax evasion", because that's fraudulently using your Strawman Corporation.

Using the "Strawman Corporation" trick, income taxes are justified because they're actually corporate profits for your Strawman Corporation. The Strawman Corporation is a loophole that works around the concept that "income is only dividends, rents, capital gains, and corporate profits". Your W-2 wages really are corporate profits for your Strawman Corporation.

[The bit on "Strawman Corporation" deserves its own separate post.]

He also suggests that taxes is like repaying a debt. Adhesion contracts are not valid. I was born in a particular location. Other people spent resources educating/brainwashing me and feeding me until I was an adult. That does *NOT* impose on me an obligation to turn over 50%+ of my productivity for the rest of my life to a handful of people who use that wealth to line their pockets. The mere coincidence of me being born in a particular location does not entitle a specific handful of people to declare themselves my masters.

Just because a slave accepts a meal from his master, does not mean that he accepts his slavery. I can use State roads, even if I think paying taxes to support roads is immoral. I can accept my corporate/slave job, because it's the most practical alternative right now. Once aware of my status as a slave, if I didn't seek freedom, I would be a hypocrite. I am thinking of ways to win my freedom. Agorism is the only resistance strategy that has a nonzero chance of success.

Can you name a resistance strategy that's more likely to succeed than agorism? Can you name a resistance strategy besides agorism with a nonzero chance of success?

I want to make the transition from theoretical agorism to practical agorism. I would like to do so, at least part-time, eventually. As a scientist, the only way to test my theory is to perform an experiment. You cannot conclude "agorism doesn't work", unless you have a handful of people who tried it and failed. Even then, you can't conclude "agorism doesn't work", because the correct conclusion may be that the techniques need to be refined more. The most plausible explanation for "agorism didn't work" is "State enforcers discovered it and arrested the participants".

Suppose I were tricked when I was 18 into signing a contract agreeing to a lifetime of taxes/slavery. Such a contract is invalid and could be revoked at any time.

I stand by my original statement. If you voluntarily pay taxes, you are responsible for every bad thing the government does. However, it is acceptable to see the gun, pay the mugger now, and plan for ways to avoid the mugger later. That is what I am doing. I am currently in the "planning ways to avoid the mugger" phase of tax resistance. I am not yet at the "evade the mugger" phase of tax resistance, although I hope to get there in a few years.

I am looking for the optimal tradeoff of "fight the State without sacrificing my personal lifestyle". Once a free market economy gets started, I predict the productivity gains will be SO GREAT that I would be easily able to work there full-time for a higher after-tax salary than in my corporate/slave job.

David Gross' strategy of refusing to pay taxes on income already reported to the IRS seems stupid and silly to me. He is watching helplessly as the IRS seizes money from his checking accounts. I cannot follow David Gross' stupid strategy because (a) I have substantial savings I don't want to lose and (b) I'm not a complete and utter fool.

I'm starting to wonder about David Gross. Compared to agorism, his tax resistance strategy is pathetic, although he's ahead of other sources. When David Gross says "intentionally live in poverty to avoid income taxes", is David Gross a pro-State troll?

I've been following this thread on, regarding my post on Real GDP Growth has been Negligible Since 1990. I signed up for an account so I could post, but that subforum is blocked to new accounts! (****ing forum software). I decided to PM the original poster:

I signed up for an account. I'm blocked from posting due to forum rules, so I'm PMing you instead. This thread has been driving some traffic to my blog, so I noticed it via Google Analytics.

I wrote about this thread a little in Reader Mail #45. I made an updated version of my post with 2006 GDP data. This time, I used the price of gold in addition to M2 as my inflation index. If you use gold as your index of inflation, the US economy is shrinking at a rate of 8%+ per year.

If you believe "Gold is money", then it's fair to use gold's price as your inflation index. There may be short-term fluctuations, but over a 5+ year period, gold's price should track true inflation closely. Even though the price of gold has spiked, the price of gold/silver, gold/oil, and gold/copper is relatively unchanged. I don't see any evidence that a "price bubble" is developing in gold.

People's reaction to your post illustrates why I stopped contributing to online discussion forums. It's too easy for a bunch of fools/trolls to shout down one sensible person. It seems that the trolls were making you doubt my claim "M2 is a more reliable measure of inflation than CPI".

Since Reader Mail #45, there have been other interesting comments in that thread.

I'm astonished when people say "The CPI is a fair and unbiased measure of inflation". That shows a level of political sophistication equal to the statement "We have always been at war with Eastasia."

I tried searching on the Internet for exactly how the CPI is calculated. I could not find the EXACT FORMULA. The details are carefully hidden, on purpose.

More than 10 years ago, the CPI was calculated using a basket of goods HELD CONSTANT OVER TIME. Now, the CPI is calculated using a complicated re-weighting formula. Some people have recalculated the CPI using the old methodology, and they get inflation figures that are closer to the one I am using (M2 and gold).

There is a political incentive for CPI to understate true inflation. Many payments, such as Social Security, are indexed to the CPI. A Congressman was grilling Ben Bernanke about inflation. He said "I only care about CPI-inflation. I am not discussing other measures of inflation."

Here is an illustration of the "dirty tricks" that are used to bias the CPI downwards. Suppose that one year, the price of beef rises 20% while the price of chicken rises 2%. The CPI calculators will say "People will switch from beef to chicken. Therefore, the 'meat' component of CPI rises 2%." Next year, the price of beef rises 2% while the price of chicken rises 20%. The CPI calculators will say "People will switch from chicken to beef. Therefore, the 'meat' component of CPI rises 2%." In this manner, the CPI understates the true inflation rate.

Money supply inflation does not lead to uniform price inflation. Therefore, the CPI can be manipulated via reweighting tricks.

The complicated reweighting formula causes the CPI to understate inflation. Even worse, the weights are calculated retrospectively. On January 1, the CPI calculators don't say "These will be the weights for this year!" Instead, on December 31, the CPI calculators look at last year's prices and say "These are the weights we chose for last year!" This allows the people who choose the CPI weights to have selection bias.

I don't know if the CPI is reweighted annually or quarterly. My guess is quarterly, because that maximizes the amount of abuse.

If you insist "CPI is a fair measure of inflation", I'll offer you the following trade. I'll pay you CPI+2%, and you pay me the return on a gold investment. Is that a fair trade? If you believe the CPI measures inflation properly, then this should be a great deal!

[The bit on CPI deserves its own separate post.]

One troll says "Austrian Economics redefines terms used by Keynesian Economics. Therefore Austrian Economics is wrong." This is invalid reasoning. What if Keynesian Economics is wrong? Keynesian Economics become popular *AFTER* the USA abandoned its free market, with the creation of the Federal Reserve and the income tax. Keynesian Economics is pro-State propaganda designed to justify fiat debt-based money and State intervention in the market.

"Redefining terms" is necessary when the standard definitions are wrong. If one of your assumptions is "CPI is an accurate measure of inflation because Ben Bernanke says so", then you're a fool or troll.

M2 or the price of gold is a MUCH BETTER measure of inflation than the CPI. I know how M2 is calculated. If you believe "gold is money", then gold is a reasonable inflation index. It's hard to manipulate the gold price too much, because I can buy gold and demand physical delivery!

The statement "printing new money doesn't lead to higher prices" is absurd.

The financial industry has a unique perk. They get to print the money that everyone else uses to trade. Via the Compound Interest Paradox, the financial industry insiders enslave everyone else.

Someone wrote "Japan printed a lot of money, yet had deflation." I'm not familiar with the details of Japan's economy. If "Japan's inflation" is calculated using a biased measure like the CPI, then it really is possible for the yen-CPI to be decreasing while prices in Japan are actually increasing.

If you really want a sensible discussion of economics, you should start your own blog. I got tired always addressing the same pro-State troll points over and over again. Even on the Ron Paul Forum, there were a lot of people trolling "The Federal Reserve is great!" and "Income taxes are necessary!" On my own blog, I feel no obligation to pro-State trolls. On a discussion forum, if you call someone out for pro-State trolling, they will claim the moral high ground, saying they're merely expressing their opinion.

In a neutral forum, all opinions should be respected, even stupid ones. I am under no such obligation in my own blog!

Most people are subconsciously pro-State trolls. State brainwashing is incredibly pervasive.

The original post has only generated a few hundred pageviews, but it's my #3 most popular post!

It's incorrect to say "Not many people read FSK's blog. Therefore, FSK is wrong." I don't have the ability to broadcast the truth on a mainstream media source. (In fact, that could be dangerous, if too many people realized the truth simultaneously.) I'm slowly "climbing the long tail", growing my readership at a reasonable rate.

The concept of "core CPI" is nonsense. It's "CPI, excluding all the things that are increasing in price rapidly".

Don't let the pro-State trolls confuse your thinking! It's hard to tell if they're merely clueless people, or professional propaganda artists planted to disrupt discussion. On a photography forum, it's unlikely but possible. On a widely visited Ron Paul discussion forum, it's a practical certainty that professional propaganda artists infiltrated the forum. If spreading propaganda is your full-time job, then it's very easy to troll a bunch of Internet forums, looking for discussions to disrupt/infiltrate!

The original author of that thread then posted an edited version of my PM. He said that his favorite bit of Reader Mail #45 was:

One pro-State troll said (paraphrasing)

The initial poster said that FSK's analysis is valid. Two people have responded saying that FSK's analysis is wrong and misleading. Two is greater than one. Therefore, FSK is wrong.

That's the whole problem with democracy, summarized.

For some bizarre reason, the poster replaced all instances of "pro-State troll" with "pro-State person". If person and troll are equivalent, then does that mean I'm not a person? What am I then?

Joshua has left a new comment on your post "The Black-Scholes Formula is Wrong! - Part 1/12 - ...":


Your article is interesting, as you have observed something most people miss:

Provided the stock market outperforms the risk free rate (which tends to be the case), the expected return of calls is significantly above the risk free rate and the expected return of puts is significantly below the risk free rate. This is particularly true of further out of the money puts/calls.

This does _NOT_, however, mean that equity options are mispriced. Black-Scholes is based on an arbitrage argument, not directly on the expected return. The relationship you observe:

price = exp(-rT) * (Risk-neutral expectation)

is a theorem regarding risk-neutral valuation, but not the primary motivation for the Black-Scholes equation.

Indeed, if options were priced so that their expected return is zero (I suspect you think this is the "fair" price), then there would in fact be an arbitrage opportunity whereby one could earn more than the risk free rate by buying/selling options and delta hedging them.

Also, note that calls and puts are far more leveraged investment vehicles than the underlying instrument itself. If one were to invest by buying calls (or shorting puts), you would indeed outperform the risk free rate provided the underlying did also, but you would do this at the expense of assuming more risk (variance in your returns). Thus you are merely collecting a risk premium. You aren't really getting anything for free. You can verify this yourself by looking at the Sharpe ratio for these investment techniques.

Your comment makes almost no sense. I can tell you work as an economist/quant/communist.

The put/call parity formula guarantees that the expected gain priced into the option is equal to the risk-free interest rate. The Federal Reserve keeps the risk-free interest rate artificially low compared to the fair free-market interest rate. This is a massive subsidy of the financial industry, paid by everyone else as inflation.

Absent this massive Federal Reserve subsidy, the risk free interest rate would approximately equal the expected return of a straight stock investment. In a *FREE* market, the expected return priced into an option would approximately equal the expected return of the underlying asset. I did not say that the correct value to use for "expected return" is 0%. Also, I never used the formula "price = exp(-rT) * (Risk-neutral expectation)" in my article. I use r="actual expected gain in stock", not r="risk-free rate".

If I were a large bank or hedge fund, buying options is almost equivalent to replicating them via a delta-hedging strategy. As an individual investor, I don't have the perk of being able to borrow at the risk-free interest rate.

You're missing the fundamental injustice of the economic system. Large banks and hedge funds can borrow at the risk-free interest rate. As an individual investor, I cannot directly borrow at the risk-free interest rate. Buying options allows me to effectively borrow at the risk-free interest rate.

I still claim that options are mispriced, EVEN FROM THE POINT OF VIEW OF A BANK OR HEDGE FUND. If you re-calculate the Black-Scholes formula using the CORRECT VALUE for "expected gain of the stock", you would observe that the actual delta is greater than the "hedging delta" that most options traders use. All options traders are miscalculating their hedges, but their error winds up working in their favor in the long run. For this reason, the "Sharpe Ratio" of a hedged options trader is ACTUALLY GREATER than the model predicts. This money is the Federal Reserve subsidy of the financial industry.

Calculating a "theoretical Sharpe Ratio" is not the same as calculating it with actual market data! When you calculate a Sharpe Ratio for an actual options trader, they receive returns FAR IN EXCESS of what they theoretically "deserve".

Even if you're hedged, these slight errors accumulate over time into real money. You're confused about the way calculus works. Adding up infinitesimal errors DOES accumulate to a real amount, when you take an integral.

It's very frustrating to see economists and quants show a lack of basic understanding of calculus. If you change the expected return of a stock, it DOES affect the option price, EVEN if you hedge (correctly or incorrectly). Since the option itself is positive-expection and your hedge is negative-expectation, your hedging strategy affects your expected return.

With an actual options trader, margin requirements are a factor. A hedged options trader receives MUCH MORE FAVORABLE margin terms than an unhedged trader. However, the profit-maximizing variance-minimizing hedge is not what professional options traders normally use.

Most economists/quants/communists say "The economics texts I read say this is true. Therefore it is true." They are unable to question assumptions or repeat a calculation themselves.

There's another error in your comment. I usually buy 2.5 year LEAP options that are 50% out-of-the-money. If the stock merely rises at a rate of 10%/year, I will suffer a 100% loss. I need the stock to rise at a rate of approximately 20%/year to break even. Fortunately, inflation is around 20%/year, so this isn't an unreasonable assumption. The further benefit is when I get a 100% increase or more. In that case, I get a huge windfall.

I don't just need the stock to outperform the risk-free interest rate. I also need to make up the "time value" of the option. I need the stock increase enough to offset the volatility-component of the option price. My expectation is positive, but my variance is HUGE.

sean has left a new comment on your post "The Black-Scholes Formula is Wrong! - Part 6/12 - ...":

The error with this thinking is assuming that the risk profiles are identical for the risk-free interest rate and the stock market. Axiom #1 must be assumed, as the author points out, for purposes of arbitrage. Axiom #7 is the correct assumption, empirically speaking over a long enough period of time, but it is not a law. The actual stock market return over any given period of time may be far less than the interest rate, and indeed may be negative. Higher risk accompanies higher rates of return.

From other assumptions I've seen in this series, the Author seems to have a serious blind spot when it comes to risk profile.

Nothing brings out the pro-State trolls like an honest discussion of economics!

I've received more hate mail for my posts on the Labor Theory of Value and the Black-Scholes Formula than any other topic!

As the above commenter, I can tell you're an economist/quant/communist.

You're showing a failure to understand basic probability. Suppose that over a 5-20 year period, the expected gain of a stock investment is 15%/year. That also means that over each individual 1 year period, the average expected gain of a stock investment is 15%/year. If you know a priori that certain years will have a greater or lower expected return, you can easily make a fortune.

I don't know in advance what the Federal Reserve is going to do. If I assume that the stock market outperforms the risk-free rate by 5%-10%, this should hold over ANY time period, whether it's 1 day, 2 years, or 20 years. I don't have any inside information that tells me what's going to happen.

The reason stocks outperform bonds is that the Federal Reserve is subsidizing interest rates, keeping them artificially low. A bond investor is *GUARANTEED* to lose out to inflation.

What do you mean by "risk"? When you account for inflation *CORRECTLY*, putting your saving in a money market account is the MOST RISKY thing you can do. If you keep your savings in cash, you're GUARANTEED to lose out to inflation.

You say "FSK does not understand risk profile." Define "risk profile". It sounds like you mean "Risk profile is a sophisticated concept understood only by economists/quants/communists".

I'm pointing out that you shouldn't just analyze the risk (standard deviation) of a derivative transaction. You also should analyze the expectation. If your underlying assumptions are wrong, no amount of calculations will yield a meaningful answer.

I'm sure that the financial institution you work at is frequently bailed out by the Federal Reserve.

Diogo has left a new comment on your post "No-Interest Contracts":

Was Alan Greenspan really as dumb as he looks in creating the late housing bubble that threatens to bring the entire Western debt-based economy crashing down?

Was something as easy to foresee as this really the trigger for a meltdown that could destroy the world’s financial system? Or was it done, perhaps, "accidentally on purpose"?

"How stupid is Alan Greenspan?" is a very interesting question.

At one time, Alan Greenspan was a strong advocate for a gold standard. I heard a rumor that he once dated Ayn Rand. Sometime before he was appointed Federal Reserve chairman, did he have a castration/lobotomy?

Alan Greenspan inflated to escape the "dot com" crash, which was exacerbated by the 9/11 terrorist attacks. Money supply inflation does not lead to uniform price inflation. Most of this newly printed money found its way to the housing sector. I doubt that he saw this specific bubble forming, but he must have known he was causing a bubble SOMEWHERE.

Periodic price bubbles are guaranteed by the rules of the US monetary system. It doesn't matter who is Federal Reserve chairman. Playing by the rules of a defective monetary system, the Federal Reserve has *NO CHOICE* but to cause periodic boom/bust cycles.

A more interesting question is "Does Alan Greenspan know the corrupt nature of the US monetary system?" My guess it "yes", but it's hard to be sure.

This leads back to my favorite theory. The Supreme Leader of Humanity is intentionally manipulating things so that the current economic and political system collapses.

Diogo has left a new comment on your post "Reader Mail #45 - What Time is it?":

I know that you are aware that the monetary system is a scam. What I meant was: the same people that owns the commercial banks, owns the central banks. So, it’s a single body. That’s why they work so well. They are just two departments of the same company.

When I said that there’s no liquidity problem, I meant now, with this «subprime crisis». It’s just a scam to inject more trillions dollars and euros made out of thin air.

I read your «the Compound Interest Paradox». I agree with it. And, of course, banking is the crime of the past four centuries. At least.

In one sense, the subprime crisis is a phony crisis. The Federal Reserve can *ALWAYS* bail out large banks, by printing new money and giving/loaning it to them. However, printing a whole bunch of new money and giving it to a few people is INCREDIBLY damaging to the economy.

Most large corporations are effectively a branch of the government. The same people who control large corporations also control the government. The financial industry and the media industry are the ones that wield the most influence.

All the large banks and central banks are ultimately controlled by the Supreme Leader of Humanity. Large corporations have "interlocking directorships". Similarly, the Supreme Leader of Humanity uses many layers of interlocking secret societies to cement his control.

Anonymous has left a new comment on your post "The Comment Moderation Scam":

While I agree with you it is with reservations. If you ever have the unfortunate experience of visiting a unmoderated/uncensored message board, it quickly gets into 'swearing' and trading 'insults' not discussion...this is why some moderation is necessary, however this can turn into censorship as you rightly point out.

I never suggested "unmoderated is optimal". I was saying that "moderation" can be used to hide "censorship". For example, Wikipedia's policies read like a censorship manual rather than a "free open discourse" manual.

Most mainstream media sources function in the "censorship" role rather than "filter spam" role.

A blog is the ultimate "uncensored" media format. My blog is partially censored. I eliminate obvious spam. I ridicule the pro-State trolls, who usually give up and skulk away. If a pro-State troll doesn't like my opinion, they can form their own blog!

I gave up with discussion forums. The vast majority of people are clueless pro-State trolls. This makes it very hard to have a sensible discussion in an open forum. The pro-State trolls are almost always in the majority. Even worse, professional disinformation agents will usually infiltrate a high-profile forum.

Wikis are also a problem. If they have high traffic, like Wikipedia, you have the censorship problem. If they're low traffic, then why bother to write when nobody is reading?

gilliganscorner has left a new comment on your post "The Comment Moderation Scam":

I used to leave comments on the, a Canadian newspaper, before abandoning it to the same trolls or fools that showed up time after time.

Mainstream media's function is to:
1) Be a propaganda agent for the state by manufacturing common public opinion.
2) Bring the audience to the advertiser.

I wrote a more detailed post about it here

Comments are a mechanism keep readers on the website longer, in hopes that they will absorb or click on the advertisements presented in the page. I am not sure how successful this is...I have trained myself literally not to see the ads.

That is wrong. You should train yourself to SEE the fnords. The danger isn't the explicit advertisements. The "advertisements disguised as content" are the real problem. Fnord-vision is dangerous! Once you see them, you'll realize the massive crime that has been committed!

Page metrics are gathered in the hopes of impressing future advertisers: "We have an average of N readers on our site, staying on average for X minutes! That is why we are effective in ensuring your message gets out!"

A long while ago, before I started blogging, a story was published about bank profits. I wrote several comments, detailing how banks are legally counterfeiting money. I explained how fractional reserve banking works and what the long range impacts were.

At first, I had the usual knee-jerk kickbacks from the trolls or fools. But then something happened I did not expect. A conversation started with myself and about 5 other people. The trolls tried to inflame the discussion, but we ignored them. They left!

Other people who were lurking on the conversation started commending me on my civility and stated that they "had learned something".

I wanted to save the conversation later, but the news agency purged the comment section for that story. I never saw that happen with other stories comment section. I was censored.

I've heard many stories of "inappropriate content" being censored. Another interesting website to review for censorship is Wikipedia. Frequently, they don't purge the edit history, so you can see what was censored if you're diligent. Wikipedia is a "mainstream" source now! It has the same biases and flaws!

Your story is just one more datapoint. From my point of view, it's incredibly obvious that mainstream news sources are hopelessly biased.

As a blog, I can't cover "breaking news" faster than other sources. However, I can provide analysis that other sources miss. That's the key component missing from mainstream news sources: a *SERIOUS* analysis of key issues.

A mainstream news source will *NEVER* say "Are income taxes a good idea?" or "Should there even be a Federal Reserve?" There's continuous talk about the health care problem, but no mainstream news source writes "Should the government and AMA artificially restrict the supply of doctors? Should there be government licensing requirements for doctors?"

For my blog, I have full control over the content. Even though Google behaves like a "mainstream" media source, if they started censoring blogs it'd be too obvious. Surprisingly, according to Google Analytics, my blog ranks well in search. Google search is driving quite a bit of traffic to my blog. (If Google's search engine were pro-State biased, then I would be receiving far less traffic.)

I told someone (via E-Mail), "If you keep your savings in a money market account, you'll be ruined by inflation. It's like writing the government a check for 10%+ of your savings every year."

Stephen has left a new comment on your post "Real GDP Growth Has Been Negligible Since 1990":

I think you made a mistake in the second sentence of the the fifth paragraph. You say, "M2 was $6408.4 trillion in January 2005..." However the link you give shows a January 2005 amount of 6410.9 (NOT SEASONALLY ADJUSTED) I am not quibbling with the slight discrepancy between 6410.9 and 6408.4. The link you give says,


The way you have expressed it makes the money supply seem to be 6.4 quadrillion dollars.

I really enjoy the blog and your insights.

Yes, that's a valid typo. Why aren't more people reading the updated version of that post? Apparently, the post title is key. Here's my SEO tip. In Google search, keywords in the post title are weighted FAR MORE than the body of the post.

Pretty soon, the money supply WILL be stated in quadrillions of dollars! M2 is growing at a rate of only 7%/year, but reconstructed M3 is growing at 15% or more. All that extra M3 money should show up in M2 eventually, or am I missing something?

Ineffabelle has left a new comment on your post "Do Aliens Exist?":

As far as the fnords go, there are actually several generation X "conspiracies" whose members decided in the late 80/early 90s to infiltrate the media and advertising fields. Due to Baby Boomer control of the top tiers of those industries, they have only met with limited success so far, but they do exist and attempt to create "counter fnords", fnords so obvious that it breaks the trance.
One such group is bOPffor.

This could easily be reconciled with the Alien control theory, in that some aliens wanted these groups to exist.

I googled it. It's spelled "BOpFFOr", which stands for "Black Ops Fed Fraternal Order". These two links were interesting. That's a secret society I hadn't heard mentioned before.

I'm getting pretty good at spotting BS/propaganda quickly. Some parts of those links on BOpFFOr passed my BS meter. Even in a single article, I'm getting better at separating the true parts from the lies/propaganda/errors.

I liked this quote:

we had to monitor leaks of ultrasecret information into the press and popular culture

How do you know I'm not secretly working for such an organization (perhaps without my full conscious knowledge)? In a certain sense, agorism is the *MOST SUBVERSIVE* information that could be potentially leaked. "Taxation is theft!" is an obvious fact, but not many people are consciously aware of the scam.

This line of reasoning is interesting. There *ARE* people who scour the media and Internet looking for people leaking "dangerous" information. They are prepared to kill anyone who publishes information contrary to their goals. They should have noticed my blog by now. The fact that they *HAVEN'T* made some kind of hostile move toward me, can be interpreted as meaning they approve of what I'm doing.

For example, it's one thing for me to say "Zero Point Energy exists". If I posted the specification of a working zero point energy generator, that would be sure to get a visit. It probably would take me 10-20+ years of research to come up with a working zero point energy generator, with no guarantee of success. Without a free market economy, I couldn't profitably sell them.

This gets back to my frequent question: "What is the Supreme Leader of Humanity trying to accomplish?"

For example, some people say "The Matrix" is nonfiction. "The Matrix" is a carefully leaked fnord. (I actually haven't seen "The Matrix". It's on my list of things to do.)

Diogo has left a new comment on your post "The Dallas Mavericks and Bloggers":

Can you explain me why the Central banks refinance credits to banks for a period of between 1 day and 1 week? What’s the point to inject money only during one day or week?

This comment more properly belongs on The Monetizing the Debt Scam.

There's two reasons. First, it gives the Federal Reserve finer control over the money supply. Second, it makes it very hard for a casual observer to figure out what's really going on.

I only write about the Federal Reserve, but my comments apply to *EVERY* central bank.

Diogo is referring to this list of Federal Reserve repurchase arrangements, in contrast with this list of Federal Reserve outright bond purchases. (Those links are very technical!) The former are "temporary open market operations", and the latter are "permanent open market operations".

For a "permanent open market operation", the Federal Reserve is making an outright purchase of Treasury Notes. This permanently increases the money supply, until the bonds mature and the Federal Reserve redeems them with the Treasury. In my post on "Monetizing the Debt", I primarily refer to this type of operation.

The "temporary open market operations" are repurchase agreements, typically with a term of 1-30 days. The Federal Reserve agrees to buy Treasury Notes or other securities and then sell them back a few days later. These actions only temporarily increase the money supply. The money supply will shrink again in a few days when the repurchase agreement ends. Then, the Federal Reserve will make another repurchase agreement, temporarily expanding the money supply again.

For example, the Federal Reserve could agree to buy Treasury Notes with a face amount of $1B for $998M and then sell them back a week later for $999M. (I didn't bother calculating exact prices that make sense.) Based on the purchase/sell price, there's an implied interest rate, typically the Fed Funds Rate.

Suppose the Federal Reserve decided that it needed to:

Week #1: Increase the money supply by $20B.
Week #2: Decrease the money supply by $5B.

Using permanent operations, the Federal Reserve would:

Week #1: buy $20B of treasury Notes
Week #2: sell $5B of treasury Notes

However, with "temporary" operations, the Federal Reserve would

Week #1: make a $20B repurchase agreement lasting 1 week
Week #2: make a $15B repurchase agreement lasting 1 week

These two "permanent" operations and "temporary" operations are logically equivalent.

The Federal Reserve makes a guaranteed riskless profit whenever it prints new money to expand the money supply. However, when the Federal Reserve sells treasury Notes or does a reverse repurchase agreement, the Federal Reserve *LOSES* money. For bookkeeping purposes, it's preferable to restrict operations to profit-making activities.

The "permanent" operations are easier for a casual observer to follow. The "temporary" operations are complicated repurchase agreements. They're incredibly difficult to follow. Even though the Federal Reserve is obligated to publicly disclose its activity, the repurchase agreements are sufficiently complicated that they're incomprehensible.

Also, I read somewhere that the money created by "temporary" operations counts in M3 but not in M2. I'm not sure where the money created by "permanent" operations winds up.

On most days, the Federal Reserve acts to increase the money supply. The Federal Reserve will very rarely make a "reverse repurchase agreement", decreasing the money supply. The Federal Reserve will very rarely sell Treasury Notes; it's usually a buyer. At any given time, the Federal Reserve owns about 10% of outstanding government debt. Via fractional reserve banking, banks then create 90% more money to buy the remaining government debt.

That's the answer. The repurchase agreements obfuscate the details more than outright purchases. Also, repurchase agreements allow the Federal Reserve to exert finer control over the money supply.

It's all about the Compound Interest Paradox! Due to the Paradox, the money supply is *INCREDIBLY* unstable. The Federal Reserve must go through complicated contortions to keep the Fed Funds Rate at its target. The Federal Reserve must be careful to neither create too much, nor too little, money.

The Fed Funds market is only available to a select group of large banks. Only they have the privilege of directly trading with or borrowing from the Federal Reserve.

quasibill has left a new comment on your post "Reader Mail #45 - What Time is it?":

1) You're certainly correct about my typos - as I've recently noted, it's something that occurred during the transcription from Word to blogger. I have no answers on the how or why of it.

2) As for the proposition post, I think you may have missed the point - I don't disagree with your "critique" to the extent that I understand it. Perhaps after you read the follow-up we can have a discussion on the point I'm trying to make.

Did you mean this follow-up to this post?

The problem lies with your definition of "capital". It appears that "capital" is another word that needs to be "tabooed".

Instead of saying "capital", let's replace "capital" with what it really means.

Suppose I own a free market business. Let's say I hire you make 1 unit of product per hour, using tools I own. You are a skilled worker, and the free market dictates your salary is 2 ounces of silver per hour. Suppose the free market dictates that the product sells for 4 ounces of silver per unit. The free market interest rate is 2%. Due to the risk of operating a business, I should earn a return of slightly more than 2% on my investment in my equipment (otherwise, I'd just loan out my savings at the free market interest rate). You work 2000 hours per year.

Question: How much do my tools cost?

I've given you enough information to figure it out!

My profit is 4000 ounces of silver per year. I need to earn at least a 2% return on investment. Therefore, my tools are worth approximately 4000 * (1/.02) = 200,000. If tools were available substantially more cheaply than 200,000 ounces of silver, you would buy your own tools and compete with me, borrowing at 2% if necessary. If the tools cost more than 200,000 ounces of silver, I would shut down my business, sell my tools and invest the proceeds elsewhere.

This calculation holds in a free market only!

Let's do the calculation in a communist society like the USA.

Your fair wage is $30/hr. You still produce 1 unit per hour. I can sell the product for $60/unit. My profit is $30*2000 = $60,000/year. However, I have 100,000 employees doing the exact same job as you; my total profit is $6B/year.

However, my industry is heavily regulated. I spend $200M/year on compliance with regulations and overhead. My actual profit is $7.8B/year. Wall Street gives me a P/E ratio of 20, so my business is worth $156B.

I have a monopoly/oligopoly. Instead of paying you $30/hr, I can choose to pay you only $20/hr. You have no choice but to accept the wage I offer. Instead of charging $60/unit, I can charge $80/unit. My customers have no choice but to buy from me. Even if I have a handful of competitors, they're doing the exact same thing I am.

You can say "I'll start my own business." $156B/100,000 is $1.56M. That's a nice business if you can get 1/100,000 of my market share.

However, you'll have to pay quite a bit on overhead. It may not be the $200M I spend, but it'll be at least $50k-$100k.

As you pointed out, you can't raise capital. If you keep your savings in a money market account, you get ripped off by inflation. If you go to a bank and try to borrow, you'll be charged 8%-10% or more, or be outright denied the loan. If I need to borrow to crush smaller competitors, I can easily borrow at 5%-6%.

Under a gold standard, it's much easier for individuals to accumulate capital. Under a gold standard, real interest rates can't fall below 0%!

Accumulating capital via the stock market is problematic. You're subject to market fluctuations. Stock investments might not even outperform inflation!

Suppose you could raise capital and start manufacturing. My product is on the shelves of Wal-Mart and I can advertise to attract customers. How are you going to attract customers? Where are people going to buy your product? You can sell directly yourself, but that's more overhead!

The rules of the economic system are distorted in favor of capital and biased against labor! Individuals can't profitably form competing businesses to established oligopolies. Further, even if you're the "first mover" in a new market niche, there's no guarantee that a better-financed competitor won't squeeze you out.

Agorism is the only way to break the cycle. By avoiding income taxes, you avoid having your wealth stolen to finance large corporations. By using sound money, you avoid having your savings eroded by inflation.

You can't directly blame the capital owner! They're merely following the rules of a corrupt economic system. If they didn't abuse it, someone else would have! The blame properly lies with the rules of the economic system itself, rather than the specific people abusing it for their own benefit. After all, the CEO of Wal-Mart didn't set up a corrupt economic system; he's merely best at exploiting it for his own benefit!

Back to the original point, what is "capital"? Is "capital" a business whose market position is backed up by government violence and funded by negative real interest rates? Is "capital" the knowledge of useful manufacturing techniques? Is "capital" land and tools? Is "capital" a piece of paper with a number printed on it?

In an economic system where all property is stolen property, nobody can rightfully claim to be the owner of any capital!

In a *FREE* market, I don't think a business can get a permanent sustainable competitive advantage. In the present, most established businesses have a sustainable market position because they're shielded from competition by the State. In a free market, if management gets lazy or incompetent, they *WILL* face competition. In the USA, nearly *EVERY* established industry is shielded from competition. It is *THEORETICALLY* possible to form competing businesses, but in practice, it's incredibly difficult.

Stephen has left a new comment on your post "The Strawman Fallacy":

This is not the correct use of the term Straw Man.

This is what wikipedia says, "To "set up a straw man" or "set up a straw man argument" is to describe a position that superficially resembles an opponent's actual view but is easier to refute, then attribute that position to the opponent (for example, deliberately overstating the opponent's position)."

I've seen both descriptions used in various locations. I don't consider Wikipedia to be an authoritative definitive source.

What you're saying is very similar to my definition. When I say "The Strawman Fallacy", I mean attack the weakest point of someone's argument or the stupidest thing someone ever did. For example, "Don Imus made negative remarks about Rutgers basketball players. Therefore, Don Imus should not have a radio show." That is invalid reasoning. If Don Imus said something really offensive, that by itself is insufficient justification for refusing to listen to his radio show.

You say "Give a similar argument and refute it." For example, you can argue "In the present, all roads are built and maintained by the government. Therefore, a stateless society fails because nobody will build the roads." That is invalid reasoning. If that's your argument against agorism, you're using your version of the Strawman Fallacy.

Your version of the Strawman Fallacy is very similar to my definition.

Here's an example using a real situation.

Whenever two or more people are debating illegal immigration the side opposing it will give reasons such as; The drain on social services, Bringing down wages for the jobs illegals take (thats where those "great deals" from contractors come from), or Not learning English and creating a "parallel society" of spanish-speaking only Americans. The side in support of illegal immigration will then inevitably respond with; America was founded by immigrants, We can't deport millions of illegal immigrants, or You're a racist.

As an anarchist, my attitude towards "illegal immigration" is that it's irrelevant. If you don't recognize national borders as legitimate, then there's no such thing as "illegal immigration".

In the context of a Communist society like the USA, people living in the USA have a higher standard of living than the rest of the world. "Illegal immigration" is diverting State resources from one group to another group.

These are all examples of Strawman arguments because they respond to points not raised or even related to the points made by the first side.

Having said that,

Attacking someones weakest points is the easiest way to defeat them.

Dismissing strong, well-reasoned points is stupid and lazy.

Its also how most so called debates on TV News, both Presidential and otherwise, are conducted.

I can't stand watching mainstream news sources anymore, except as a source of comedy. Even the Daily Show and Colbert Report are full of pro-State propaganda! Fnord-watching is interesting. Once you can see them, it's really disturbing!

I saw Hillary Clinton being interviewed. Her responses consisted *ENTIRELY* of buzzwords. She avoiding saying anything meaningful. When asked about regulation of the financial industry, she cryptically made a remark about "She doesn't want to 'kill the golden goose'." Is there an awareness among some politicians that their gravy train may be coming to an end? If the government restricts economic activity *TOO MUCH*, then at some point the economic and political system completely collapses.

CK has left a new comment on your post "Do Aliens Exist?":

If you were a technologically advanced alien, you might not wish to communicate with lesser beings, or be able to communicate understandably over stellar distances.
Some aliens might not wish to advertize their existence. If there are other beings that behave as humans do in this universe, it would probably be a good idea to not advertize.
Obligation as a concept might not exist in other civilizations. It might be a uniquely human construct. Libertarian aliens would probably wish to trade, if we have anything they want at a profitable price considering the time involved for trade to take place ( unless you are assuming that Einstein's Theory does not hold universally.)

I haven't met any aliens in person (at least anyone who could PROVE they were an alien!). I don't know what aliens would really want.

Maybe it's like that episode of South Park, where life on Earth is a type of alien reality show.

The first alien book ever discovered on Earth was titled
How to Serve Man.
It was a cookbook.

That was an episode of the Twilight Zone! Are you seriously quoting the Twilight Zone as fact?

Born2Code has left a new comment on your post "Do Aliens Exist?":

you are starting off with the wrong assertion. That intelligent life exists on this particular planet.
A historical study of the last 6000 years and the last 8 in particular indicates otherwise.

When you say "last 8 years", are you referring to the President and members of Congress? The actions of President and Congress don't speak for *MY* intelligence.

The "last 6000 years" corresponds with "government was invented 6000 years ago". Government was an bad invention and should be eliminated.

Do I count as intelligent life? As I become more aware, the people around me seem like bigger and bigger fools. It's very frustrating.

Sometime I feel that I'm the only intelligent life form on an uninhabited planet! Some of this blog's readers seem to be improving, but I haven't met any of them in person.

Anonymous has left a new comment on your post "Do Aliens Exist?":

A few questions:

- Exactly how is it "statistically unlikely" that alien life doesn't exist? As far as I know we have no way of computing the likelihood.

That is an interesting point. Until we've found *POSITIVE* evidence of alien life *OR* exhaustively searched a lot of planets, it's impossible to make a determination.

- You allege in another article that somebody is keeping technology from us. We don't need conspiracy theories to know that the state of the world holds back technology, but presumably you think there's some magic unprecedented technology from UFO's. Why do you suspect this and what do you suspect we'd have if there wasn't a conspiracy to hold it back?

How can I know what technology people would have if it wasn't being held back?

I've seen evidence of Zero Point Energy technology being suppressed.

There's some evidence that the pace of scientific progress dramatically slowed around 1913.

There's also evidence that the transistor was secretly developed before it was "officially" discovered.

For some reason, electronics and software have been improving exponentially, while technology in other areas is stagnating. A reasonably free market has developed and electronics and software. Could you imagine the same exponential improvement occurring in other areas?

It's well-known that pharmaceutical companies hold back medical progress. For example, certain beneficial drugs and supplements are suppressed by drug companies. The ban on "stem cell research" is frustrating a very promising area of research. The urgency to ban "stem cell research" comes from its potential success!

Here's another example. When the national ATM encryption protocol was being set, the NSA objected to the specification and demanded a minor change. No reason was given, but the NSA's request was followed. Then, 20-30 years later, a new type of decryption attack was discovered. It would have cracked the original specification but *NOT* the NSA's improvement. The NSA knew about this decryption attack 20-30 years before everyone else.

That's just one area. There's circumstantial evidence that secret research labs have some *INCREDIBLE* technology compared to what the general public knows.

The problem comes from State funding of research. State funding of research *SLOWS* scientific progress. It allows the red market to decide which inventions are disbursed to the general public. There is no true independent funding of research. Universities are dependent on the State for money, which gives the State a veto over what is researched.

The "stem cell research ban" was accomplished by banning Federal funding of stem cell research. A university that conducted "stem cell research" would be ineligible for *ANY FEDERAL FUNDING* at all! A university could *NOT* use its own money to fund the research. Some groups have raised money to do some research, but without State support, it isn't economically viable.

In a free market, research resources would be allocated fairly. Without the State draining a lot of the economy's productivity, there would be more resources available for *REAL* research.

GWilly has left a new comment on your post "The Communist Manifesto's Successful Implementatio...":

Being big & subjecting yourself to the Law does not neccesarily mean you are state owned.

The Land Tax could be viewed as a charge by the state for protecting it from aggressors (which is the states number one & very expensive duty), with the Land being forfeit if you don't pay for it's protection.

This comment is pro-State trolling.

In many ways, corporate leaders choose the members of Congress and regulators. Financial industry executives choose the Federal Reserve employees and Treasury Department workers. Drug industry executives choose the FDA regulators. In almost *EVERY* industry, the regulators are chosen by the industry regulated.

Large corporations are an extension of the government. Their activities are extensively regulated. They receive massive State subsidies. They are shielded from competition by the rules of the economic and political system.

Are you suggesting that taxation is a voluntary exchange? If so, where do I sign up to withdraw my consent?

The State is a monopolistic provider of police "protection". State "protection" functions in the same manner as mafia "protection". If I don't like the price of State protection, can I seek alternate vendors?

The concept of "voluntary social contract" is intellectual sleight of hand. It's designed to disguise the fact that the relationship between slaves and the State is *NOT* voluntary.

You can say "If you don't like it, move elsewhere!" Every country *EVERYWHERE* is following a similar corrupt system. There's no "unoccupied space" where I can move and start a free market.

Actually, the State pays a very *TINY* fraction of its taxes/tribute on *LEGITIMATE* protection. More money is squandered on Blackwater executives than spent on soldiers. War itself is a pointless boondoggle. It's very easy for the red market to start a war and then say "There's a war, we are needed!"

War is the health of the State. You can't say "Government is needed because of war." Government is the *CAUSE* of war. Without the ability to force people to pay for war via taxes, war is *NOT* profitable.

Most policemen waste most of their time enforcing non-crimes. Drugs, prostitution, gambling, money laundering, and tax evasion are *NOT CRIMES*. The primary function of police is *TAX COLLECTORS*! Why should I "voluntarily" pay the cost of my own enslavement?

There were a lot of reader comments this time! It took awhile to respond to all of them. I was slightly concerned that my crackdown on pro-State trolls would discourage commenters.

Responding to a pro-State troll is much harder than responding to a real comment. It's hard to resist my natural urge to coddle pro-State trolls. If you don't like being called a troll, stop trolling!


quasibill said...


I don't disagree with anything you said here. My post is trying to describe why I agree that, in a free market, you can't get a permanent advantage from capital - such advantages will always be fleeting. Hence, the return on your capital investments will, at best, be fleeting (and most of the time might actually be nil, as you might make a mistake, or your investment only allows you to compete at the same profit, etc.)

I'm making the argument that current monetary policy (and to a lesser extent, entry barriers) is a necessary pre-cursor to making capital investment into a sustainable profit generator.

I'm not blaming anyone who labors under the current system except for those who impose the current system upon the rest of us.

Ian said...

Thanks for linking to Question That. The quote under my blog header is from Douglas Adams, author of Hitch-hiker's Guide To The Galaxy and prominent atheist.

The full quote is as follows:
"One of the many major problems with governing people is that of whom you get to do it; or rather of who manages to get people to let them do it to them: It is a well known fact, that those people who most want to rule people are, ipso facto, those least suited to do it. Anyone who is capable of getting themselves into a position of power should on no account be allowed to do the job. Another problem with governing people is people"


CK said...

Actually the first "How to serve MAN ... it's a cookbook", was the punchline ending to a very very old sci-fi short story. I still have the paperback somewhere in my collection. Wasn't quoting it as a fact, just attempting to be slightly amusing.
I assume that the Twilight Zone episode was a retelling of that short story.

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