Friday, July 17, 2009

Tyranny of the Majority

The Founding Fathers of the United States detested democracy. The prevailing thought among them was that direct democracy was essentially mob rule, where one interest, merely by having a slight majority, could despotically impose their will on rest of the people. The term often used to describe this situation, coined by Alexis de Tocqueville in his Democracy in America is "Tyranny of the Majority."

Over the years, the American Republic has been morphed from a representative form of government into a more direct, democratic one. For example, in the original Constitution, the House of Representatives was meant to represent the people of each state, and the Senate was designed to represent the state legislatures. The Senators were chosen by the state legislatures, not by direct vote of the residents of the states. This relates directly to the founders' concept of Federalism, and that the states were essentially sovereign nations that needed representation in the federal government. This was changed by the 17th Amendment to the Constitution in 1913.

This change, along with several others generally and the rise of two party politics specifically, has reduced the insulation between government decisions and the people as engineered in the original Constitution. This sets up a situation where the majority in Congress can realize its tyranny on the minority.

Our country is undeniably polarized. Look at any Presidential election in the last 20 years...the winner is never separated from the loser by more than five percent, and often half that. Popular vote totals are often even closer than electoral vote counts. That should set up a situation where the middle ground is straddled closely, and little radical change in either direction occurs.

However, the exact opposite is true. When asked if people want federal bailouts, cap and trade legislation, or federalized healthcare, the results are usually close. Yet the current Congress, because there are a majority of one party, have been ramming through the most radical expressions of all of these ideas that they can conceive. Why? Because they have learned how to tyrannize the minority. This is not representation, it is an outright hijack of government to serve one group's agenda.

I don't have any illusions that things would be any less fair under Republicans (though I will say that things seem to be more civil when they are in charge), and that's the problem. The overall system is broken, and nearly half of the people in this country feel completely unrepresented and without a voice. This can only end badly. Like revolution badly, if people feel pushed hard enough.

I believe the answer is a return to original Constitutional principles, including scaling back federal power in line with the concepts of Federalism as designed in out system. Without that no citizen has any real protection from federal power. Even if you like what the government is doing right now, it is only a matter of time before that beast turns against you.

Monday, July 6, 2009

The Massive Inflation of Our Money

I am not an economist, and I really don't want to be. It's dreadfully dull stuff, and my eyes start to defocus after about ten minutes of reading on the subject. Unfortunately it's something we all need to pay attention to, especially in the current depression. And yes, it is a depression.

Here is a link to a much more lucid explanation of the inflation of our money supply than I could ever write:

"How Much Money Inflation" by Howard S. Katz

The key in the above article is the fact that the money supply is larger than the Fed reports, due to the fact that banks (with the consent of the Fed) routinely "reclassify" deposits in order to remove them from the money supply. From Katz' article:

This process of reclassifying bank demand deposits as time deposits is the fraudulent part of the new procedure. Despite the fact that both are called deposits, time deposits are fundamentally different from demand deposits as follows:

  • A demand deposit is money given to a (banking) institution that does not earn interest and can be withdrawn by the person who gives it (the depositor) whenever he wants (on demand).

  • A time deposit is money given to a (banking) institution that earns interest but cannot be withdrawn except after giving notice for a defined period of time (usually 90 days). A time deposit at a bank should be thought of as similar to a certificate of deposit. You can't get your money out for a certain period of time, but while it is there, it earns you interest.

Because of these differences, economists, for many centuries, have classified demand deposits as money but have said that time deposits are not money. A simple example will illustrate the point. Money is that economic good which can be used to buy things. Suppose you go to the store and see an item that you want. If you pull out your checkbook, which is a demand deposit, it will be accepted as money. But if you pull out your passbook to the savings account, then you will politely be told to take the passbook to the bank and get money for it. The passbook is not money (because of the time restriction on it), and you cannot buy things with it.

So even though these deposits are payable as money, they are not counted in the money supply. When they are counted as they should be, Katz reveals that:
Calculating from the end of May 2008 to the end of May 2009, the US money supply has grown from $1.37 trillion to $2.34 trillion. This is an increase of 70%.
So the money supply been inflated by 70% in one year. That reduces the purchasing power of a single dollar by 70%, as that many more dollars chase the same number of goods and services. Our prices have not reflected that yet because there is a lag as that extra money filters throughout the economy. Once that happens though, severe price inflation is inevitable.

I have heard that the Fed plans to pull that money back out of the economy in order to "cool off" the economy before the huge inflation hits. However, that requires perfect timing, and nobody seems to be able to explain how contracting the money supply in an economy where the major problem is a lack of money for lending is going to "help" things. It seems that the Fed has locked itself into a Morton's Fork of either having huge inflation or a powerfully contracting economy, and neither is a good solution.

The real tragedy is that this dilemma was entirely preventable. By taking an interventionist attitude to the problems in the markets, the federal government seems determined to drive the economy off a cliff. An early determination to let the free market work and punish companies (including public companies like Fannie Mae and Freddie Mac) that were engaged in foolish speculation could have allowed the markets to recover quickly, albeit with some pain to investors. But the Fed's unwillingness to allow any pain in the economy has doomed us all to far more than we would have otherwise had to endure.

As a pilot, I like to make aviation analogies, and this is a perfect opportunity for one. When an airplane gets too slow the wings stall. This means the wings lose lift and cause the airplane to sink quickly and the nose of the plane will drop toward the ground. For a non-pilot, the natural reaction is to pull back on the stick to pull the nose up and stop the dive. However, this merely slows the plane more and deepens the stall, until it falls right into the ground. However, if back pressure on the stick is relaxed, the plane stays nose down for a bit and gains enough speed to start flying again. The pilot can then smoothly pull the plane out of the dive gracefully, losing minimal altitude.

The government is pulling back on that stick for all it's worth. As this economic stall becomes worse with each day, those in government act puzzled and mumble about how maybe just a little more back pressure will solve it. The complete lack of faith the government is showing toward market economics and the lessons of history is unfortunately causing those of us along for the ride to look out the window and remark, "gee, those trees down there sure are getting big fast..."

Thursday, July 2, 2009

Why Animals Don't Have Rights

Ever since I heard of the concept of "animal rights," I knew that it was flawed and false. The problem was, I could never really say why I felt that way. Recently this came up with a friend of mine (he argued for, I against), and I was forced to try to articulate why animals don't have rights. I did a good job, and in fact by the end of the discussion my friend said "okay, that makes sense." I'm not sure he agreed with me, but he at least could not refute my logic, which is good enough for me. I'll attempt to reproduce and expand a bit on my reasoning here for you to use in your discussions.

First off, we have to define what we mean by "animal rights." Most proponents don't really have a firm grasp on this beyond a vague notion that animals should be respected as people are. While there are some that think that chimps should have voting rights (in spite of their inability to read a ballot) and all sorts of other insane notions, most animal rights activists stick to an idea that animals should be free to do as they please. In this view the animals should be as free as people to roam about and do their animal things unmolested and restrained by humans. After all, animals are organic creatures just like people and should therefore enjoy the same rights...

The problem here is that rights are not based on biology. If they were, we'd have to apply the equal protection clause of the Constitution to every petri dish full of virus cultures. After all, they are based on DNA just as we are, so they must have the same right to go about their viral business. This is on its face rather ridiculous; a virus is nothing but a protein coat surrounding a DNA core. It can't even reproduce without forcefully taking over the machinery of a host cell.

I have coined a term to describe what rights truly are based on, which is "reciprocal responsibility." What does that mean? Reciprocal responsibility means that you, as a holder of a particular right, are held responsible for respecting the similar and equal rights of others. You have a right to free speech, but you must respect both another's right to free speech, and must not misuse your right of free speech against another (in slander, for example). You have a right to keep and bear arms, but you must not infringe on another's right to bear arms, nor shall you use your arms in unjustified force against another. This is reciprocal responsibility. A violation of reciprocal responsibility opens you to criminal and civil liability. No right exists without this attending responsibility.

A mountain lion asserted its "rights" to this man:

The problem with animal rights is that animals are incapable of recognizing and respecting reciprocal responsibility. If left completely free, animals would habitually engage in acts that would be criminal if performed by human beings. Bears and cougars would attack (assault) people. Dogs would defecate on (vandalize) people's lawns. A million other "criminal acts" would be perpetrated by animals, in violation of others' rights. This leads to one of two outcomes:

1) Humans and animals would necessarily have to have different standards of behavior. Acts against persons or property that would be criminal for humans, would be allowed for animals. In other words, animals would have superior rights to humans. We'd be constantly cleaning up after the criminality of animals, and would effectively be enslaved to creatures that didn't have a second thought to us and our rights (which undoubtably do exist). This is backward, to put it mildly.

2) To protect us from the criminal acts of animals, we'd have to imprison animals that "break the law." Since animals don't have the reasoning ability to make rational choices, most animals would eventually end up imprisoned for breaking the law. So we'd be locking up all these "freed" exactly does that respect their "rights?"

The concept of "animal rights" is an enviro-fantasy based on a misguided and ill-considered desire for animals to be happy. We have a responsibility to animals, not to mistreat them or cause them undue pain or suffering. There are, and should be, laws against animal cruelty. But to ascribe "rights" to animals goes against the concept of reciprocal responsibility which is inherent in the very definition of rights. Those who cannot respect rights cannot hold them...ergo, no rights for animals. Sorry PETA.