The Real Fiscal Cliff

fiscal cliff cartoon

“Uh oh! We better stay on the current path.”

Even before the last balloon hit the floor at President Obama’s victory party, the media had already shifted its focus to the looming fiscal cliff. The chorus call from the mainstream media is that our political leaders need to “come together” to “compromise” so that we can avoid going over the cliff. Failure to avoid the cliff, they say, will be a disaster.

But what exactly is the fiscal cliff? It’s a roughly $600 billion yearly deficit reduction through tax increases and discretionary spending cuts starting in 2013. To be more specific, it’s about $400B in tax increases, $100B in spending cuts that aren’t actually cuts but a reduction in the amount the spending will increase, and about $100B of estimated revenue from economic growth. You can find out the exact numbers elsewhere. Wikipedia has a good summary. The purpose of this post is to add some perspective on what the fiscal cliff really means in the greater scheme of things. Continue reading

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Election Day Primer

I was hoping to post this yesterday but ran out of time. Better late than never. For my American readers (ha) who have yet to vote may I offer some food for thought?

Vote your conscience!

Your vote isn’t going to swing the election one way or another. Even if you gather a hundred of your friends and have them vote with you it won’t swing the election. And unless you live in one of the eight or so swing states it won’t even mater if you gather up 1000 people to vote with you. The President is elected by the electoral college and in most states, the outcome is set in stone.

The whole Red Team vs. Blue Team is just psychological BS propaganda that has been programed into us by the media and entrenched interests. Don’t fall for it!

If you really think Obama is the best man for the job then by all means vote for him. Same goes for Romney. I, for one, think there is maybe 5% difference between them. I would urge people to look into the third party candidates and find the candidate that best matches their beliefs. The chart below shows how one of those candidates, Gary Johnson stacks up to Obomney.

Continue reading

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“Price Gouging” During a Disaster is Good

Natural disasters are terrible any way you slice it. Hurricane Sandy was a particularly devastating storm for people in the Northeast. My heart goes out to those people affected by the storm, especially those who have lost loved ones. Having grown up in New Jersey, I still have many friends who live in that area, including a cousin who’s in-laws have a house on the Jersey Shore that is underwater. Some of their neighbors’ houses were completely wiped away by the surge.

Aside from the obvious personal and financial damage from the storm, one downside of natural disasters that particularly irks me is the inevitable bad economics and political grandstanding that fills the airwaves after such an event. It bothers me because it is a self-destructive response that has real negative consequences on people’s lives and that it is completely avoidable if people only took the time to understand basic economics.

There are the Keynesian economists like Paul Krugman who jump at the chance to decry that the storm, while bad, will at least stimulate economic activity, so there is a bright side. This dumb idea, known as the “broken window fallacy” has been well explained and debunked by economists like Bastiat and Henry Hazlitt.

Then there are the big government lovers who pound the table that we need to expand FEMA and other federal programs to aid disaster victims. These include the politicians who like to show how caring and generous they are by pledging to spend (other people’s) money to help the victims. But as Katrina demonstrated, FEMA is just another bureaucracy that hinders real aid from occurring. The government programs for flood insurance subsidies and other programs create a moral hazard that encourages people to build in risky areas. The topic of how Federal programs for disaster victims are negative to society and how the free market can, and has, handled disaster relief much better could fill a book and is not the point of this essay.

The topic I want to address here is “price gouging” because it always comes up, and it seems so obvious to people that raising prices on essential goods when people are already in a desperate situation is just evil. In fact, far from being evil, it is simply a market response that helps get goods and services to people who need them most as efficiently as possible. Continue reading

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Liberty Newswire – 10/20/12

[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]

Weekend watching addition of the newswire. Reading is for weekdays. The weekend is for kicking back, relaxing and taking in your daily dose of liberty through video. Below are some great videos explaining the real mandate of the fed, the real reasons for the growing wealth disparity, and the bullying power of government. Continue reading

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Unleashing An Education Renaissance

My design studio recently sponsored an inspiring event produced by Raaya Design called Protothon: Designing Hands-on Learning Experiences. Roughly twenty participants including educators, designers, parents, and even some elementary school students broke into teams of 4-5 to brainstorm on a variety of topics related to education. The topics ranged from creating learning games, to re-imagining the future of education. The groups then used some quick prototyping techniques to develop and then present their ideas to the other groups.

Unfortunately, I wasn’t able to see all of the presentations, but the ones I did see were packed with creative ideas and solutions. There was a really cool collaborative learning game where teammates took turns rolling dice like cubes. One teammate could add or multiply and the other could the subtract or divide the numbers on the dice until they reached a target number. Another project involved designing a more open community campus where various learning areas were centered around a courtyard and interspersed with working businesses such as a doctor’s office or a general store. The parents and students could use the businesses and the students could learn about and even help run them.

One idea that I thought was super cool was transforming the grade level system into a “badging” system. Instead of students being grouped according to age and taking a fixed curriculum each year, students would receive badges when they mastered a certain topic. Some badges such as grade level reading and math would be required for graduation. Students could learn at their own pace with students at their skill level as opposed to their age level, with the end goal being mastering the material. Advanced students could knock out their basic badges and then move on to fun and interesting badges of their choice like multi-media or science projects. This reminded me of Cub Scouts, where it was actually fun to learn a new skill and a friendly competition to earn badges.

The passion and excitement of the participants was immediately evident. It reminded me a lot of the thriving tech and entrepreneurial culture here in San Francisco and Silicon Valley. Teams were (to use a stale, overused cliche) thinking outside the box. They were building off of each other’s ideas, smashing down existing paradigms and building whole new ones from scratch. They had no vested interests and few limitations from pre-conceived notions. They simply asked, “what are the possibilities for education?” And in six short hours, these twenty strangers had come up with numerous ideas that were vastly superior to our current system.

The whole experience just reinforced my belief that there is no shortage of extremely intelligent, creative, dedicated, hard-working, conscientious people trying to solve the problems we face with education in America. And while new to me, apparently many of these ideas from the Protothon (and many other great ideas) have been floating around education circles for years. So why is our education system in such a sorry state? Continue reading

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Liberty Newswire – 9/13/2012

[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]

Fed Chairman Bernanke Announces New Fed Policy

Welcome to this week’s special global money printing orgy edition of the Liberty Newswire. Today is Fed Day, the day when one bald, bearded man comes down from the mountain and decrees what fate will befall the global economy. This man holds the power to move mountains (of money) with the mere sound of his voice.

For those who missed it, today the Federal Reserve pledged to keep interest rates near zero until 2015 and continue it’s operation twist. In addition, it pledged to print $40 billion a month (or more as needed) to buy mortgage backed securities until the end of time or the economy recovers, whichever comes first.

In response, the stock market, gold, silver, oil, and pretty much everything else priced in dollars shot through the roof. Long dated treasuries fell as perhaps investors are finally starting to realize the money printing means inflation which is bad for fixed income.

But the US isn’t the only country printing, stimulating, and otherwise trying to debase their currency. The articles below shed some light on the Fed’s actions and the actions of governments and central banks around the world in their race to the bottom. Continue reading

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An Investment that Counteracts Government Stupidity

In many of my posts on the economy I’ve explained why I believe Governments around the world will continue to print money to try to paper over past and future deficits and avoid a deflationary credit collapse. This monetary inflation will lead to rapidly rising commodity prices.

I don’t generally give stock advice on Liberty Insight, but in my latest article on Seeking Alpha titled, “How Sandstorm Makes You a Private Equity Investor“, I discuss two natural resource companies that should thrive in a period of rising energy and commodity prices. Continue reading

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Understanding Gold Pricing

Cartoon by Mark Hill for Merk Funds.

Readers of this site know that I am a proponent of owning physical gold and silver as a way to protect your savings in today’s bizarro world economy. If you’ve been considering diversifying into gold, I believe now is a great time to jump in.

The gold price has risen by double digit percentages for the past 11 years, but lately has been in a holding pattern.  Gold is exactly where it was one year ago today. (It’s had a very bumpy ride along the way.)  In that time, there have been major developments in the world economy that are all very bullish for gold. To name a few:

  • U.S. Government debt has continued to soar with no end in sight.
  • Central Banks around the world have been printing money like crazy.
  • The crisis in Europe is boiling over.
  • The Fed has expanded the duration of its balance sheet through “Operation Twist”.
  • Various economic indicators are rolling over bringing the Fed closer to QE3.
  • Nations such as China, Japan, Saudi Arabia, India, Russia, Brazil, Iran, Australia, etc. are establishing bi-lateral trade agreements to remove the U.S. dollar from their trade.
  • Real interest rates continue to fall.
  • And the list goes on…

But how do you put a value on gold? Continue reading

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Liberty Newswire – 3/21/2012

[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]

This week’s newswire includes “Big Brother” in Italy and America, boomerang babies, the real reason for high gas prices, and a peek into the future of municipal defaults. Continue reading

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The Greek Bailout in 3000 Words or Less


Unless you’ve been living under a rock, you know that Greece is in a bit of a pickle. You’ve probably seen videos of riots, read headlines of an on-again-off-again Greek bailout, maybe even spent a few minutes contemplating how the situation in Greece may affect you. If you haven’t, I don’t blame you.

I, myself, have spent way too much time reading news about the Greek bailout, reading analysis of news about the Greek bailout, and analyzing that analysis of the Greek bailout, in an attempt to figure out what it all means for the global economy. I’ve been meaning to weigh-in, but with contradictory news coming out seemingly hourly, I’ve been hesitant. Now with a bailout deal officially agreed upon (for the time being) it’s time to present Liberty Insight’s take on the Greek bailout.

Liberty Insight reads and summarizes all this crap so you don’t have to. So, without further ado, here’s everything you need to know about the Greek bailout. (Technocrats love using acronyms so I’ll try to spell them out as they are introduced.) Continue reading

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