Obama Puts the Economic Cart Before the Horse

In the following article, Peter Schiff deconstructs a lot of the myth behind Obama's economic plan in his typical, easy to understand yet revelationary style. Enjoy.

by Peter Schiff
www.europac.net

Obama Puts the Economic Cart Before the Horse

In his first televised speech before Congress, President Obama asserted that prosperity will return once the government restores the flow of credit in the economy. It may come as a surprise to him, but an economy cannot run on consumer loans. Furthermore, credit stopped flowing in the U.S. for a very good reason: there was no more savings left to loan. Government efforts to simply make credit available, without rebuilding productive capacity or increasing savings, are doomed to destroy what’s left of our economy.

The central tenets of Obamanomics appear to be that access to credit will enable people to borrow money to buy stuff, the spending will spur production and employment, and thus the economy will grow. It’s a neat and simple picture, but it has nothing whatsoever to do with how an economy works. The President does not understand that consumption is made possible by production and that credit is made possible by savings. The size and complexity of modern economies has obscured these simple concepts, but reducing the picture to a small scale can help clear away the fog.

Suppose there is a very small barter-based economy consisting of only three individuals, a butcher, a baker, and a candlestick maker. If the candlestick maker wants bread or steak, he makes candles and trades. The candlestick maker always wants food, but his demand can only be satisfied if he makes candles, without which he goes hungry. The mere fact that he desires bread and steak is meaningless.

Enter the magic wand of credit, which many now assume can take the place of production. Suppose the butcher has managed to produce an excess amount of steak and has more than he needs on a daily basis. Knowing this, the candlestick maker asks to borrow a steak from the butcher to trade to the baker for bread. For this transaction to take place the butcher must first have produced steaks which he did not consume (savings). He then loans his savings to the candlestick maker, who issues the butcher a note promising to repay his debt in candlesticks.

In this instance, it was the butcher’s production of steak that enabled the candlestick maker to buy bread, which also had to be produced. The fact that the candlestick maker had access to credit did not increase demand or bolster the economy. In fact, by using credit to buy instead of candles, the economy now has fewer candles, and the butcher now has fewer steaks with which to buy bread himself. What has happened is that through savings, the butcher has loaned his purchasing power, created by his production, to the candlestick maker, who used it to buy bread.

Similarly, the candlestick maker could have offered “IOU candlesticks” directly to the baker. Again, the transaction could only be successful if the baker actually baked bread that he did not consume himself and was therefore able to loan his savings to the candlestick maker. Since he loaned his bread to the candlestick maker, he no longer has that bread himself to trade for steak.

The existence of credit in no way increases aggregate consumption within this community, it merely temporarily alters the way consumption is distributed. The only way for aggregate consumption to increase is for the production of candlesticks, steak, and bread to increase.

One way credit could be used to grow this economy would be for the candlestick maker to borrow bread and steak for sustenance while he improves the productive capacity of his candlestick-making equipment. If successful, he could repay his loans with interest out of his increased production, and all would benefit from greater productivity. In this case the under-consumption of the butcher and baker led to the accumulation of savings, which were then loaned to the candlestick maker to finance capital investments. Had the butcher and baker consumed all their production, no savings would have been accumulated, and no credit would have been available to the candlestick maker, depriving society of the increased productivity that would have followed.

On the other hand, had the candlestick maker merely borrowed bread and steak to sustain himself while taking a vacation from candlestick making, society would gain nothing, and there would be a good chance the candlestick maker would default on the loan. In this case, the extension of consumer credit squanders savings which are now no longer available to finance other capital investments.

What would happen if a natural disaster destroyed all the equipment used to make candlesticks, bread and steak? Confronted with dangerous shortages of food and lighting, Barack Obama would offer to stimulate the economy by handing out pieces of paper called money and guaranteeing loans to whomever wants to consume. What good would the money do? Would these pieces of paper or loans make goods magically appear?

The mere introduction of paper money into this economy only increases the ability of the butcher, baker, and candlestick maker to bid up prices (measured in money, not trade goods) once goods are actually produced again. The only way to restore actual prosperity is to repair the destroyed equipment and start producing again.

The sad truth is that the productive capacity of the American economy is now largely in tatters. Our industrial economy has been replaced by a reliance on health care, financial services and government spending. Introducing freer flowing credit and more printed money into such a system will do nothing except spark inflation. We need to get back to the basics of production. It won’t be easy, but it will work.

President Obama would have us believe that we can all spend the day relaxing in a tub while his printing press does all the work for us. The problem comes when you get out of the tub to go to dinner and the only thing on your plate is an IOU for steak.

www.europac.net

Meet Obama's Residual Iraq Force

It is the noble, humble attitude of the soldier training the Iraqis in this video that will embody the spirit of Obama's residual force of "non-combat troops" in Iraq.

IVAW is Armed and Dangerous in New Hampshire!

Not only is there an IVAW member here (James Schmill) enjoying the lack of laws prohibiting open-carry in the state of New Hampshire at the Liberty Forum, we also scored some free press for IVAW at the Wilson Hill Pistol Club! (more photos on facebook here)
If they think all of us are pacifists, they might find out the hard way that's not the case! There's been a lot going on here in New Hampshire. Our first day here, we got up early to rally in support of HCR6 at the New Hampshire State House.

I gave my speech today as part of the forum and received a standing ovation. It blew me away. To be able to contribute something of value to such a savvy and educated crowd felt like quite an achievement. I'll post video if I see some.

There is so much going on here I'd love to post about, but it's well past my bed time and it all starts again tomorrow morning, bright and early. It's great to feel surrounded by people here that really feel like, "my people."

Speaking of which, the following article was written by a fellow member of my local Ron Paul Meetup in Santa Fe just for our listserve, but it was so well-written, I have to share it with you here. Frank Martin only insisted that I include his email address so you can send feedback to him directly: frank@fundimensions.com

The Lifeline of Capital, and Its Greatest Enemy

Capital is what makes it possible to produce, to employ labor and to extend credit. Capital consists of the accumulated surplus of production, in the form of machinery, buildings, transportation, communication, and so forth, together with factors of nature, such as land and labor. Capital is created primarily from unconsumed production, but also from homesteading natural factors of production.

Wages and materials must be paid out of capital, since it is usually impossible to sell production soon enough to meet payrolls. Capital is used in the production process, in the form of methods and equipment that amplify and extend labor. Finally, capital is converted to money which can be lent, either for purposes of consumption, or (more commonly in a free market) for the conversion to other forms of capital, to be used for expanding or creating new means of production.

Capital is the only thing between us and a life of subsistence farming, or hunting and gathering. Economically, these ways of life would mean rapid death for most of the people on this planet, and an end to civilization and all that it provides in art, literature, and thought. Ontologically, it would be a contraction of human possibility in a scale unmatched even by the Dark Ages.

Government is the enemy of capital. Government seeks to appropriate capital without a prior corresponding act of production, which free markets generally require, so the existence of government acts to decumulate capital. Even when government, ex post, produces something with the capital it has appropriated, it has produced something which the free market either would not produce at all (the production of "bads", such as war), or it has engaged in production to a degree more or less than the free market would have chosen. This is also the production of "bads", since the result is either a surplus, so that actors of production are wasted, or a deficiency is enforced by monopoly, and so demand is unmet.

The economic stimulus programs being conducted by government now are further assaults on capital. Government itself is stimulated substantially: one of the few prosperous ares of the country right is the Washington, DC area, and here in New Mexico, government wages have and are rising substantially. But to the extent that these programs stimulate spending as they are designed to do,the result is consumption (decumulation) of capital. While the consumption may be matched by new production, this production itself involves consumption- of materials, labor, of the useful life of plants and equipment. Without the prior corresponding act of production, the net result is still one act of consumption more than that of production. That act of prior production is missing when the government simply puts money in people's hands to spend.

The progressively greater regulation of free markets by government further diminishes capital, by adding to the costs of production, while contributing little or no additional value to the consumer. If the value of these things was economic, it would not be necessary to regulate them into existence.

Government deficits represent pure consumption and loss of capital. Government says "I will spend this money, claiming goods and services in return for it, without any prior act of production by myself or by the victims of my taxation." The loss of capital in the economy is exactly reduced by the amount of the deficit. The money is then used to produce "bads", which require further depletion of capital ("goods") to ameliorate.

It is this assault on capital, together with the production of bads, that make government the greatest enemy of peace, prosperity and civilization. The solution is widespread acknowledgement of the parasitic character inherent to government (even, and especially, of democracies), and the replacement of government with free markets in the production of security, justice, infrastructure and other so-called "government services." Failing this, we advance to economic collapse and the destruction of civilization.

The author acknowledges the contribution to this text of Economic Recovery Requires Capital Accumulation, Not Government 'Stimulus Packages' by George Reisman and Democracy: The God That Failed by Hans Herman Hoppe.

Regards,
Frank Martin
Author, FUNDimensions Fundraising Software
Apple Certified Help Desk Specialist

And finally, the following video was made with the audio of a speech delivered by Ron Paul on the floor of the US Congress recently. It seems the most strident non-interventionist in the Congress is a Republican!

IVAW Austin Pulls Off a Great Winter Soldier

Allow me to start by saying congratulations to the Austin Chapter of Iraq Veterans Against the War for pulling off an amazing local Winter Soldier event last weekend. Thanks to everyone who helped me out along the way to get there, to our Code Pink allies who helped with housing, to all of the allies who helped make this event possible, to Doug Zachary for hosting, and to the Austin Chapter for inviting me to participate. I posted some photos from the event on facebook here.

One of the highlights of the day was the much anticipated testimony from Brandon Neely about his time as a prison guard at Guantanamo. The actual testimony has not been posted yet, but after he spoke to the AP, two of MSNBC's sillier talking heads picked up on the story. The first video is of Keith Olbermann's segment which sets up the second video of his interview "twenty minutes later" with Rachel Maddow. His testimony is like pulling the sheet off of the elephant in the room that we had all been feeling around and thought was an elephant, but weren't quite sure. But as with 99% of the times that we suspect the government of wrongdoing of one kind or another, despite the denials by politicians of what is under the sheet, the elephant was right there all along. And yes, I mean that the reality of Guantanamo is as bad as we all suspected.

Although all of the testimony was well-presented and a welcome addition to the growing body of evidence condemning the Global War O(f) Terror, there was one other standout that was particularly insightful. Ronn Cantu, president of the Fort Hood Chapter until he recently got himself and his four top organizers honorably discharged early, testified about how an Iraqi becomes a detainee. His thorough explanation of the process will make it very clear how exactly we are making enemies fast than we can kill them.

Here's a video with some shots of the march and some clips of speeches at the rally, including mine.

The next day we went to the grand opening of the Under the Hood Cafe. Under the Hood is carrying on the tradition of the Oleo Strut by providing a place for vets and active duty guys to have a true free speech zone where they are welcome to question authority, hang out, shoot the shit, and get help with legal or personal issues they might be facing as a consequence of their service. I posted another album from Under the Hood on facebook here.

And one more parting shot for all you Obama voters out there . . .

I couldn't resist . . .

Get it yet?

Constitution Revolution Trailer - Calling All Remaining Patriots!

Something big is coming with this . . . get ready.

We are coming together to make it clear that as a movement, we are young, we are strong, we are calling for no less than a revolution, and we are not going anywhere until we get it. Consider this our muster. It is time to stand up and be counted.

Obama Pushes Back Iraq Timeline

Is anyone reading this surprised? I sure hope not, but I'll bet some of my liberal friends who endorse the concept of interventionism (and like good Democratic Party ditto-heads support a 17,000-troop surge in Afghanistan) are willing to forgive President Obama going back on his campaign promise. Even as aides say that he is trying to end the war by removing “all combat troops,” or at least reclassifying a remaining residual force of at least 30,000 troops as “non-combat,” Obama just announced that he is pushing back his promised timeline by three months.

I was in Iraq on a Civil Affairs Team. We were not “combat troops.” Too bad no one told the guys who were shooting at us. One of the most common causes of death suffered by American troops in Iraq is IEDs, which often take out the driver of a vehicle. You think it will be any comfort to the families of soldiers who die after Obama removes all the “combat troops” from Iraq (and replaces them at least in part with more mercenaries) that their perished loved ones were classified as “non-combat?”

The excuse offered is nothing new. After listening to “ground commanders,” (like Bush listened to Petraeus!) Obama has agreed to give them more time to cement security gains, strengthen political institutions, and make sure Iraq does not become more unstable again. Wasn't that what “THE SURGE” was for? Aren't we the cause of the instability? Raise your hand if you still think Obama is going to give us any kind of substantive, principled CHANGE in our foreign policy.

From the article in the New York Times, there is a direct anonymous quote that is very telling: “'The president has been struck by the fact that there has been a meeting of the minds in a lot of ways among his military advisers about what would be a safe and responsible way to redeploy our troops while protecting our interests in Iraq,' said a senior administration official, who spoke on the condition of anonymity because no decision had been announced.” This means that the Obama administration accepts the premise that it is appropriate to use force in Iraq to protect “our interests.” This is the fundamental immorality of our foreign policy.

All of this amidst a backdrop blowback denial. According to another recent New York Times article, after four years at Guantanamo, Abdallah Al-Ajmi was released into Kuwaiti custody, as there was no evidence to convict him on. The Kuwaitis tried him but also released him after a full acquittal. American officials were disappointed, but expected him to, “move on, to put his Guantanamo experience behind him, to get a job and settle down after his time in one of the toughest prisons on the planet.” Yeah, right. Last March he killed 13 Iraqi soldiers near Mosul with a suicide car-bomb.

I learned from my time in Iraq, that by the very nature of the occupation, we are making enemies faster than we can kill them. The dynamics in Afghanistan are the same. We must get over the idea that people in the middle east are going to be any more grateful for our government's intervention abroad than we are of it at home. Through both ground assaults and drone attacks, Obama has already killed dozens of Pakistanis. Do you think the brown people that we continue to dispose of so carelessly care about the skin color of our president? No. They were burning his effigy in protest next to Bush and the American flag before Obama even took office. Although I have no fear of a loving God, Jefferson's famous words are very appropriate. "I tremble for my country when I reflect that God is just, that His justice cannot sleep forever."

Photo from AP Photo by KM Chaudary: Pakistani protestors chant anti American slogans after setting on fire the effigies of U.S. President George W. Bush, center, Republican Tom Tancredo, left, and U.S. Presidential hopeful Barack Obama, right, at a protest rally in Lahore, Pakistan on Sunday, August 5, 2007. Protesters criticized to Tancredo and Obama for allegedly making irresponsible statements on military strikes against Muslims and bombing on the Islamic holiest sites, Mecca and Medina.

Whatever It Takes

Hofstra Update - Police State Out of Control, Out of Touch With Reality, and Out of Excuses

Iraq Veterans Against the War and supporters have come to water the tree of liberty. Our work is far from done. While I still firmly believe that our most effective weapons for change are nonviolent, if you think this revolution will be a bloodless one, you have already been proven wrong.

Thomas Brinson, a good friend of mine, fellow Veterans For Peace member, and Long Island resident sent out the following letter after meeting with a representative of the Nassau County Police Department Internal Affairs Unit. Apparently, the mounted officer who trampled a group of people on the sidewalk, leading to Nick Morgan getting his face stepped on by the horse in question and Nadine Lubka getting her nose broken on the pavement, is claiming that he was going into the crowd to save one of his fellow foot-soldiers in riot gear. The idea that one of the riot cops from the line that was beating back protesters was trapped in a peaceful crowd is ludicrous. This phantom robocop, was of course not wearing a name-tape because it, "could be ripped off and used as a weapon." If this doesn't make your blood boil, I don't know what would.

Of course, we are still working on Nick and Nadine's civil suits and I will keep you posted here on any progress made.

Folks,

I met yesterday with Sgt. Rich Harrison of the Nassau County Police Department Internal Affairs Unit concerning the statement I submitted following the fracas at the October 15th Presidential Debate at Hofstra. He is in charge of an ongoing NCPD investigation into what happened. I've attached my statement which is both an eyewitness account of what I saw as well as an analysis of why I believe the NCPD behaved as they did toward our peaceful, nonviolent protest.

Essentially, I reiterated and emphasized the following from my testimony:

* We were following police orders to back up across Hempstead Turnpike and up onto very limited sidewalk space at the southeast corner of California Street after the nonviolent civil disobedience action of IVAW that had previously been negotiated with NCPD.
* The BSO (Bureau of Special Operations in unidentifiable Robocop gear) initiated the violence by coming up on the sidewalk to forcibly arrest Geoff Millard who from what I could tell did nothing to merit arrest.
* In the scrum that followed Nick and others were injured by a mounted policeman who came up on the sidewalk densely crowded with peaceful, nonviolent IVAW members and their supporters.
* That it is my strong opinion that Geoff was targeted because of his high profile as a national leader and spokesperson for IVAW.


Sgt. Harrison revealed the following:

* that Bill Perry's You Tube videos were a prime source for his investigation, to include the extraction of numerous still photos from the videos in his file
* that the horses were spooked by the numbers of shouting people and the flashing lights from cameras; they were not and perhaps should have been outfitted with shields to partially blind them
* that a decision was made to keep Hempstead Turnpike open to traffic, which was the rationale to disburse the crowd that was much larger than had been anticipated
* that it was perhaps a tactical error to try to force the crowd up onto a restricted sidewalk area with little space for egress in that the corner of Hempstead and California is mostly blocked by walls and shrubs with only one three-foot sidewalk leading diagonally away from the corner
* that the mounted policeman whose horse injured Nick made an individual decision to go up on the sidewalk into the crowd because he thought he saw a BSO Robocop down on the ground in trouble — his motivation was to protect the cop and move the crowd away from him
* that in a democracy it is unfortunate and needs to be addressed the non-identification of the heavily armed BSO Robocops — that they don't use nametags for safety reasons (they could be ripped off and used as a weapon) and that the coveralls are not individually assigned to members of the BSO unit but are randomly worn by different members at different actions.
* that he is hopeful that his final report will result in better training of both mounted police and BSO units.
* that Nick's notice of claim in a civil suit against the NCPD is most reasonable and appropriate, compared to many artificially inflated claims made by many citizens injured by the police during arrest actions


When he asked me what I would recommend and like the report to address, I responded with the following:

* Re-examine the protocol to confront peaceful, non-violent protestors with a show of extraordinary force from the get go -- perhaps in a democracy it would be more prudent to hold the mounted police and BSO Robocops in reserve until the tactical situation dictated their deployment.
* Re-examine the decision to use force, ie the mounted police and BSO Robocops physically pushing into the crowd, with no prior warnings to clear Hempstead Turnpike
* By whom and what motivated the decision to initiate the forcible arrest of Geoff Millard, a prominent national spokesperson for IVAW, who with other IVAW members and supporters was peacefully following police orders


It is still my strong personal belief that just like the preventative detention arrests of activists, charging them with local anti-terrorist crimes, as well as the arrest of Amy Goodman and her associates at the RNC in Minneapolis, this action was strategically intended to send a strong message to veteran protestors — we the state and the forces of law and order have the power, and we will use it against you, so be good little, loyal citizens, and shut the F up!

Would appreciate it if you could pass on this information to Geoff and Nick — I don't have current emails for them.

Respectfully submitted,

Thomas Brinson, Founding Facilitator
Long Island Veterans For Peace, Chapter 138
SPC Raheen Tyson Heighter Memorial Chapter
VFP National Board of Directors
VVAW Long Island Contact
II Corps Vietnam, 67-68
Peacekeeper, Nonviolent Peaceforce,
Mutur, Trincomalee, Sri Lanka, 2003-2005

To All Members of the Military, Law Enforcement, & Intelligence Services from Gary Franchi

Gary Franchi is calling on you to honor your oath to the Constitution over your illegal orders, and when necessary to bring our government back within the bounds of the Constitution. I couldn't have said it better myself.

Resting Up For Two Months On The Road: My Eduvacation in Costa Rica

I just landed in San Jose yesterday and I already have a sunburn! This place it beautiful. If you're a fan of the TV show “Lost,” (or you've seen an episode even if you didn't like it) you've probably noticed a distinct vividness to the cinematography. A certain vibrancy in the visuals. Well, Costa Rica is like that in real life. The show is primarily shot in Hawaii, which I've visited, but it doesn't match the kind of color in the air vitality of Costa Rica.

It also happens to be one of the most libertarian countries in the world with arguably the most successful libertarian party in the world: Partido Movimiento Libertario de Costa Rica (Libertarian Movement Party of Costa Rica or PML, link to google translated page). Costa Rica is naturally fertile soil for the philosophy of freedom with a naturally libertarian culture and a constitution that eliminated the military in 1949. This global first was made possible by a revolt in response to a military coup, but also by the strength of provincial militias and the relatively high rate of gun ownership. Thanks to the proportional representation system, the PML already controls 6 of 57 seats in the National Assembly.

Don Rasmussen of r3VOLution Consultants (formerly with the Ron Paul Presidential Campaign and Campaign For Liberty) invited me down here to learn about the PML and get some R&R before my next long stint on the road. Last night we hung out with his “Tico family” that hosted him years ago when he was here as an exchange student. I got to meet and converse extensively with Carlos Aguilar Leon, a young up-and-coming libertarian activist. His mother, Ricios Leon Dobles, who I also met, is a former vice-mayor of Heredia. With the exception of their current beach-head in the national legislature and lack of an oppressive two-party system, their movement is very similar to ours, with the same social hurdles, ideological obstacles, resistance from the benefactors of big government, and the same unwavering commitment among those at its core to the values of liberty.

The PML was founded in 1994 by Otto Guevara. In their 2006 election, he received 8.4% of the popular vote in his bid for the presidency against the popular former president and Nobel Peace Prize winner Oscar Arias. That's a tough race for a libertarian, but 8.4% is far better than any of Bob Barr's most deluded supporters could have hoped for, and well above the 0.4% that Barr actually took. Guevara is a Harvard graduate, and has previously served in the Costa Rican National Assembly. Don and I are very excited to be meeting with him tomorrow as ambassadors of the American freedom movement. Read Don's article about Costa Rica and the PML at The Freedom Revolution.

Meanwhile, back in the homeland, there is a serious effort underway to get Peter Schiff to run against Chris Dodd for his US Senate seat. It looks like it would be tough race, but the line up of Schiff's puritan philosophy of a true free market against Dodd's corrupt version of corporatism would be juicy enough to make it a race worth supporting for our movement. For those of you wondering about his positions outside of the economy, take heart in this quote from the man himself: “I have no faith in government. There is no evidence that they're going to do the right thing.” I guess that makes him one of us! If you haven't yet, please pledge to contribute to the Schiff money-bomb scheduled for February 21st. You can use the widget at the top-right of this page or click here to go straight to their site.

We do plan to get a couple days of surfing in (embarrassing photos to come) before I fly back home, but then it's back to business. I'll be in California for a week, San Diego, LA, and San Francisco before visiting my Mom for her birthday on Valentine's Day in Pebble Beach. Then on to Colorado for a week. Ok, yes, I will take a day or two for Ron-ski and get some snowboarding in. Then Texas for the Freedom and Liberty Movement State convention. I went to their regional convention in Houston a couple weeks ago, and the way they are organizing there from the bottom up before there is even a name for the new organization let alone a structure is truly amazing. I will also be helping out with Winter Soldier Austin on February 28th. Then it's on to DC for a few days for a workshop, then up to Nashua for the New Hampshire Liberty Forum and on to an event at Kent State. Then I'll be in St. Louis supporting Matthis Chiroux resisting deployment at his US Army separation hearing. Then of course, back to DC to mark the sixth anniversary of the war in Iraq, and finally, back to Santa Fe. Did I mention that I will be driving the whole way?