How Much Did TARP Really Cost?

Every time I see State comedians tell this joke, I get offended. They say "TARP was profitable for the taxpayers. Hooray for the State!" The banksters profited from TARP, nobody else.

According to this page, TARP's cost was $25B. That's still misleading. You have to account for the "time value" of money.

State comedians say "TARP paid out $n and collected $m. m>n. Therefore, TARP was profitable." Or, they say "m is only slightly less than n. Therefore, TARP wasn't that much of a ripoff."

The fallacy is that you should look at returns and not absolute gain. If you spend $700B and collect $770B two years later, your actual return is 5%. That's a pathetic return compared to gold or silver. If you spend $700B and collect $675B two years later, that's pathetic compared to true inflation.

Suppose a business is in really bad shape. They can't raise money from any private investors. They beg/lobby/bribe/threaten the government and get a bailout "investment". By definition, that investment is on worse terms than what any private investor would get. Even if it turned out well, the investment was still a bailout/gift.

I get very offended when State comedians proclaim "Taxpayers made a profit off TARP!" or "TARP didn't cost much!" They are looking at nominal gain and not rate of return. Compared to a real investment, TARP returns were pathetic, even if there was a nominal gain.

It's amusing how State parasites give evil things nice-sounding names. "TARP" makes it sound beneficial, like covering a baseball field when it rains. "TARP" means "Troubled Asset Relief Program". Why don't they call it the "Financial Underwriting Contingency Kitty"? That would be a more accurate name. Fancy names like "TARP" and "quantitative easing" hide the fact that they're printing new money and giving it to the banksters.

TARP was a huge ripoff. I'm offended when State comedians say "It wasn't that bad."

Should You Boycott Amazon.com Over Wikileaks?

There was an amusing debate on lewrockwell.com. Under pressure from the State, Amazon.com kicked Wikileaks off its servers. (Amazon.com lets people rent space on its servers. That's "Amazon Web Services".)

Some people are calling for a boycott of Amazon.com, in protest. Lewrockwell.com makes money off "Amazon affiliate links". They're advocating to not boycott Amazon.com. (If you put a link to Amazon.com on your website, and people click the link and later buy, then you get a commission.)

Someone pointed out "There are more people who would boycott Amazon.com for *NOT* kicking Wikileaks off their servers, than there are people who would boycott for censoring Wikileaks."

Amazon.com executives have an obligation to their shareholders. If they took a moral stand they might lose their business. It isn't worth antagonizing State terrorists. Amazon.com wouldn't be accused of "Hosting Wikileaks on their servers." State terrorists would find some other excuse. The laws are so vague that anyone could be accused of breaking them.

Suppose you boycott Amazon.com and buy from X instead, paying the same price or slightly more. The amount of taxes on the transaction is approximately the same. The State makes the same revenue, whether you buy from Amazon.com or from another State-licensed business. (Amazon.com has been helping people avoid sales taxes on transactions, exploiting a legal technicality.)

If you really want to hurt State parasites, you have to work off the books. If you work as an agorist, assuming a 50% income taxation rate, you're denying the State a huge chunk of your labor, even if you later buy from a State-licensed business.

Even better, as the agorist economy gets more sophisticated, there will be alternatives to Amazon.com. Now, you probably incur a financial loss or inconvenience if you boycott Amazon.com. An agorist store would have lower prices and higher quality, because they're bypassing all State taxes and regulations. If you work as an agorist and purchase goods from other agorists, then you're really hurting the State.

If you decide to boycott Amazon.com over Wikileaks, you aren't accomplishing much. As long as you work on-the-books as a wage slave, the State is stealing your labor. As long as you buy from a State-licensed business, State parasites get a cut of the transaction.

Cliff Lee And The Time Value Of Money

Cliff Lee is negotiating a new contract. One negotiating issue is "Does he get 6 years or 7 years?".

When you consider inflation, $20M seven years from now is worth a *LOT* less than $20M right now.

Assuming 10% inflation, 0.9^7 = 0.48. With 10% inflation, the 7th year of the contract is worth less than half current money.

Assuming 20% inflation, 0.8^7 = 0.21. With 20% inflation, the 7th year of the contract is worth approximately one fifth the value of current money.

Assuming 30% inflation, 0.7^7 = 0.082. With 30% inflation, the 7th year of the contract is wroth less than one tenth the value of current money.

If you look at the price of gold, silver, or other commodities, true inflation is 20%-30% or more.

Instead of accepting a 7th year on the contract, Cliff Lee could ask for a higher salary and fewer years. If he invested the difference in gold or silver, a shorter contract with higher salary per year is worth more than a longer contract.

Cliff Lee and his agent aren't considering true inflation, when they wrangle for a 7th year. The club's owners are almost definitely considering inflation. (However, many businesses aren't seeing their income rise with true inflation. As the economy collapses in hyperinflation, businesses will see their income rise slower than true inflation. Still, a professional baseball team has a State-backed monopoly. They get to borrow at preferred rates of only a couple percent. They get the government to build them a stadium, paid with tax-exempt bonds and subsidized by other taxes.)

When you account for true inflation, a long-term fixed-salary contract is worth less than it seems. Really, you should use a "gold clause". If you're going to get paid $15M seven years for now, you should instead ask for whatever 1000 ounces of gold is worth in seven years.

When the President and Congress defaulted on the gold standard, the declared that gold clauses were illegal. If someone included a gold clause in a contract and instead paid the FRN-equivalent, you could not sue them for breach of contract.

I tried looking up the law. It wasn't clear if "gold clauses" were re-legalized, after gold ownership was declared legal again. I don't know of any actor or celebrity who included a "gold clause" in a long-term contract. You could ask for a gold clause in a contract, but you may not be able to later sue for breach of contract.

Another interesting point is what happened to A-Rod. He had "deferred salary". When the Rangers declared bankruptcy, he lost a lot of that money. If you sign a long-term contract with the team, you are an unsecured creditor, if the team later declares bankruptcy.

When you consider true inflation, the 7th year of a long-term contract is worth a *LOT* less than it seems.

What Is The President's Lawmaking Role?

The President struck a "tax cut" deal with Republicans. Democrats in the House refused to pass the President's deal.

Due to the Senate's filibuster rule, Republican Senators get to veto any law or spending bill. With 41 Republican Senators, they can block any law via filibuster, if they all vote the same way. That means the Democrats must compromise with Republicans, if they want to pass any laws. The Democrats could impose the "nuclear option" and change the filibuster rule via a majority vote. Starting in January, Republicans are going to have a majority in the House, giving them veto over any laws or spending without filibuster tricks.

Technically, the President only has one lawmaking decision. He can sign a law or veto it. That's it. That's all the President gets to do.

The President can exercise discretion regarding enforcement of a law. The President can use his pardon power to stop people from being prosecuted for breaking a law. The President can try to persuade Congressmen to do what he wants. However, the President doesn't get to write laws. He can only sign or veto.

President Obama is missing the point. The President does not write laws. The President only gets to decide whether to sign or veto a law passed by Congress. If you take a literal reading of the Constitution, "sign or veto" is the only lawmaking decision the President may make.

Value At Risk (VaR)

In my wage slave financial programmer job, I spend a lot of time making VaR calculations (VaR means "Value At Risk").

VaR is an easy-to-calculate risk measure that provides an illusion of risk management, while being completely meaningless. Almost everyone in the financial industry uses VaR.

For liquid securities, like stocks, VaR is defined and calculated via a historic back-test. For example, VaR usually is the 99th percentile loss, over a year historic period, assuming it takes 1 day to liquidate the position. In that case, you would look at 1 year of historic price data, ~250 trading days. The 99th percentile would be the average of the 3rd and 4th largest loss. This makes VaR very easy to calculate.

Almost everyone in the financial industry uses VaR. Do you see the fallacy?

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VaR is the 99th percentile loss. However, that remaining 1% can be pretty bad!

Suppose your trading system makes $1M 99.1% of the time, and loses $1T 0.9% of the time. The VaR risk is zero. VaR explicitly encourages large banks to abuse their "too big to fail" status, by ignoring the small chance of a huge loss.

Due to the "fat tails" problem, that remaining 1% will occur more often than your model predicts. For example, a 10 year historic back-test of housing prices would not have predicted the crash. In that 10 year period, housing prices always went up.

Further, "a big bank failed today" automatically is going to be a day in the 1% tail. The VaR distribution is based on a "typical" day. If you actually need it, you're already in the 1% tail.

VaR is easy to calculate. It provides the illusion of risk management, while actually doing nothing. Almost everyone in the financial industry uses VaR. Therefore, the risk manager keeps his job if he also uses VaR. VaR underestimates "tail risk". VaR explicitly encourages banks to abuse their "too big to fail" status. A small chance of a huge loss won't be included in a VaR calculation. The "fat tails problem" means that extreme big losses occur more often than your model predicts. A historic back-test probably won't include the extreme event that happens in the next crash.

Will Ron Paul Get The Monetary Policy Subcommittee Chair?

In January, the Republicans will be a majority in the House. Every committee chairman switches from being a Democrat to a Republican.

There's a subcommittee that oversees Federal Reserve monetary policy. Normally, that subcommittee deals with trivial things like commemorative coin designs. They don't grill Ben Bernanke much. Ron Paul is the most senior Republican on that subcommittee. He is scheduled to become chairman.

The Republicans could use a parliamentary trick to cheat Ron Paul. They could move a more senior Republican to that subcommittee and make him chairman. They could shuffle subcommittee responsibilities. They could deviate from tradition and nominate someone else to become subcommittee chairman. Normally, the most senior (longest-serving) Congressman on a committee gets to be chairman.

Being a Congressman is a lot like World of Warcraft. Your influence is based on how long you're a Congressman. In World of Warcraft, your character's power is based on how long you've been playing. A Congressman's influence is based on "time in Congress" and not his actual ability.

It seems that Ron Paul will get that subcommittee chair. It would be amusing, to see him grilling Ben Bernanke. Normally, when Ron Paul interrogates Ben Bernanke in committee meetings, CNBC cuts to a commercial.

I'm noticing a lot more anti-Federal Reserve opinions. It's on many blogs. It's even showing up on more mainstream websites. Some Congressmen other than Ron Paul are criticizing the Federal Reserve.

I'll review the anti-Federal Reserve arguments. The Federal Reserve is one big price-fixing cartel. By keeping interest rates artificially low compared to true inflation, the Federal Reserve subsidizes banks and large corporations. Via the Compound Interest Paradox, everyone is enslaved under a crushing debt burden. Inflation steals from productive workers, giving the profits to the banksters and other insiders. Inflation benefits insiders who print and spend the brand-new money. The Federal Reserve's operations aren't free. Everyone else pays the cost via inflation.

I've never seen the mainstream media criticize the Federal Reserve as accurately as I have. A detailed criticism of the Federal Reserve is more subversive than anything Wikileaks will ever publish.

It seems that Ron Paul will get the Federal Reserve subcommittee chair. I'm noticing more anti-Federal Reserve sentiment. The full truth still isn't published in the mainstream media.

Mohamed Osman Mohamud

This story is interesting. The FBI arrested Mohamed Osman Mohamud in Oregon for a bombing plot.

His defense is "The FBI tricked me!" Undercover agents prodded him and provided him with a fake bomb.

This is an important issue. When do the police cross the line from preventing crime to encouraging crime and entrapment? Would he have tried a bomb plot, if he were not encouraged by the FBI?

By "catching" a terrorist, the State police justify their own huge budgets.

Did the FBI trap the defendant? On the other hand, he was dumb enough to fall for it. For example, an undercover policeman probably could not convince me to try something violent.

The police have a monopoly. It doesn't make much difference if they do a great job or have a lot of waste. Even if this investigation/entrapment/arrest was wrong, it doesn't make much difference. The police point this out as evidence "We're doing a great job! Be grateful the State is there to protect you!"

Was Mohamed Osman Mohamud a prospective terrorist that the FBI caught? Was he a fool trapped by the police? On the one hand, the police were too aggressive. On the other hand, he was dumb enough to fall for it.

This is one defect in the current criminal justice system. The FBI has no options to "help" Mohamed Osman Mohamud other than throwing him in jail. It would be nice if there were a way to prevent crime without jailing him. That would be the advantage of compensation-based justice instead of punishment-based justice.

Technically, he didn't injure anyone. It would be nice if there was a less severe way to prevent crime, other than jailing him for the rest of his life.