May 2010

29 May 2010

“Animal rights” is one of the great fads of our time. It has bound weak consciences with a false view of creation.

This week, a video hit documenting abuse on an Ohio farm. Farmhands are shown repulsively cursing as they beat cows. The outrage poured in internationally. A domineering, regulatory mindset was on display in spades: Put the farmer out of business! Increase regulation! Stop eating dairy!

It’s good, of course, to expose people who abuse animals. I doubt these people show compassion to people, either. People have always loved animals for good reason: they are a fascinating example of God’s creativity and brilliance. Animals bless us in so many ways. Most of us have affection for our pets. Many years ago, a huge moth flew into a room where I was talking with my former pastor. My pastor scooped it up in his hand, opened the window, and let it go, saying something like “we should spare God’s creation when possible.” Most of us don’t wantonly kill creatures.

Many have made the excellent point that the people protesting the beating of cows often support the slaughter of infants in abortuaries. One’s moral priorities do reveal the heart’s darkness. However, Christians should also consider the intent of the groups who exposed these cruel farmhands. The goal of vegan-friendly groups like Mercy for Animals and the Humane Society of the United States isn’t to prosecute a few wrongdoers, but to introduce more farming regulations. They’d love to end animal farming altogether, but if they can’t do that at least they can make it so expensive that people can’t afford it. This is an unbiblical, evil intent which flows from rebellion against the Creator.

Christians in general need to be more concerned about individual liberties, particularly now that our government is spending much of the nation’s economic output and running up unpayable debts. Interest groups and politicians use events like this cow beating to seek unlawful government power over citizens. The government has been increasingly binding us with silly legalisms that the Pharisees would think idiotic and regulations that Joe Stalin would consider overkill. Cities force us to waste money recycling. New York City has banned trans-fats. Government at all levels is now trying to regulate salt content. The federal government wants to regulate carbon, which is like trying to regulate nitrogen. It’s an idiotically corrupt money-making scheme.

Walter Williams has noted that anti-smoking crusades started in the 1960s with advocates pushing merely for a non-smoking area on planes. Today, smoking isn’t only banned on planes, it’s banned in all private businesses in many states (including Ohio). Government works this way. It gets a foothold, then grows like a cancer.

Remember, they don’t need to seek outright bans on anything. Regulation does wonders to making stuff less accessible. Regulation and “higher cost” are synonyms.

27 May 2010

For years the financial services industry has instructed us to salt away 10% of our income and watch it grow. They send us brochures showing sweater-clad retirees hanging around a golf cart. Yes, friends, through the miracle of compounding, even a man of modest means can become a millionaire.

They don’t tell you that while your money may compound, the government is stealing your savings through the “miracle” of inflation. At best, you’ll stay even. The question is this: What will a million buy you in a few decades? It’s not the amount of money in your pocket that matters, it’s what that money can purchase. All other things being equal, a man with $1 in an economy where candy bars cost $.05 is wealthier than a man with $5 in an economy where a candy bar costs $.80.

A financial advisor may can show you that saving pre-tax money can save you a lot of money over the years. Consider their assumptions, however. First, most 401Ks have limited investment options. They are heavily geared toward investing in U.S. bonds, U.S. stocks, and the U.S. dollar. What if inflation effectively wipes out the value of the dollar? Most 401Ks allow no means of hedging in foreign currencies or hard assets such as commodities, real estate, etc. Second, you have to pay taxes on the money once you withdraw it, and when you don’t know what tax rates will be then. They could be much higher. Third, there are penalties that come from withdrawing early, which means that you have less control of your assets. (One hook financial companies give young people is this idea that if they just set up the automatic investing every paycheck, they don’t have to think about it. Well, you can do that with individual accounts. You can set up online bill pay to “pay yourself” by sending a check somewhere automatically each month. There’s nothing magical about a 401K or IRA. People still can and do withdraw money from them. It just costs a lot more.)

I think the biggest issue with 401Ks and IRAs is that they are a sitting duck for a financially-strapped government. Consider the ready-made government pitch if we have another major downturn: “Look at how your mutual funds have fallen! You trusted Wall Street (it’s their fault!) and look what happened! This is why we are graciously stepping in. Your monies will now be safe and secure, transferred to government securities with a guarantee to pay.” This will entice people who, for good reason, distrust the advice of their financial adviser and yet don’t know what else to do with their money. A lot of people are in this boat.

This is how the government works. What Gary North calls “kicking the can” i.e. pushing the day of reckoning downstream, is often accomplished by pulling panicked people out of a small pool and dumping them into a large pool with promises of government security. “Don’t worry, you won’t drown! We have lifeguards on duty.” Because the government is a studiously irresponsible, however, it just sets up the the risk of a wider-ranging disaster (witness the U.S. financial system).

If private retirement accounts are nationalized by forcing people into government securities, we’ll be witnessing Social Security redux. In effect, all of the money you save will be borrowed and spent by the government. They will leave you with an IOU. All entitlements hinge on a promise to pay. In true Ponzi fashion, the government is promising you that it will find future suckers to pay you when your time comes. Remember, it has already spent all of the money you’ve paid into FICA.

Financially, it isn’t going to work. The government will forfeit on its obligations mainly through inflation since it’s the sneakiest way to do it, but it will also use means testing (i.e. penalizing responsible savers), and raising the retirement age. This means that your effective return is going to be a lot less.

What can one say in favor of 401Ks and IRAs? Well, the government could legislate in favor of retirement plans and at the expense of individual accounts. Also, in certain legal actions, your retirement money may be exempt. In other words, it may be a form of risk mitigation to have some money in retirement vehicles. However, you have to balance that against the risk of confiscation.

When I was younger, I was suckered in by the employer matching on a 401K, but many employers are no longer matching. If I was starting out today, I wouldn’t bother with a 401K. I’d save my money on my own. You don’t need a quasi-government program like a 401K or IRA. Save it in individual stock accounts, real estate, commodities, or use it to build your ability to produce income (Gary North is big on pushing people to focus on producing income as much or more than than protecting their assets; I’m coming around to his view.) Save your money in things a desperate government will find harder to get its hands on. I’m not going to give investment advice here, except to say that Peter Schiff’s Little Book of Bull Moves in Bear Markets is a better place to start than Kiplinger or Money magazine.

21 May 2010

Ronnie James Dio, the man on the silver mountain, died earlier this week. His lyrics were sometimes loathsome, but I always admired his incredible pipes.

One of rock’s oddities is the 1980 collaboration between Dio and Kerry Livgren, the blonde guy from Kansas who wrote Carry On and Dust in the Wind in the late 1970s. Livgren was a new Christian when he wrote and recorded a solo album called Seeds of Change (Livgren’s autobiography of the same title is worth a read if you can find it). On Seeds of Change are two songs with Dio on vocals: Mask of the Great Deceiver and To Live for the King. Look past the cheesy, early 80s orchestration and it’s interesting stuff.

15 May 2010

Envy is a constant of human nature. So is a desire to steward other people’s money, whether they like it or not.

We’ve been hearing a lot lately that almost half of all citizens pay no income taxes. This, it is said, leads to a populace that is more open to tax hikes.

Indeed, tax hikes are sometimes palatable when people are told that only the rich will pay. Why should people be living the high life when I’m struggling to get by?

Those who vote to increase the burdens of “the rich” need to realize something: the joke’s on you. Supply side economists are right about one thing: wealth does trickle down. A prosperous society with a large middle class has more wealth to go around. In the material sense, which is all that matters to the world, the poor benefit from nicer schools, deluxe shopping centers, green space, more security, incredible inventions such as computers, and inexpensive food. Meanwhile, the trees have been kept equal by hatchet, axe, and saw in Cuba. What have they given the world lately? How are the poor doing there?

Still, tax hikes are politically unreliable. They can be dangerous to a politician seeking re-election.

Regulations aren’t dangerous. With every new scandal, the solution is always “more regulation.” The voters agree: “Someone needs to keep an eye on xyz.”

The obvious truth is that regulations lead to the same end as a tax hike: the diversion of wealth from productive to unproductive use (namely, enriching the government and its trough-feeders) and the hampering of the creation of new wealth. The business owner who has to comply with minimum wage laws, health care mandates, handicapped parking spots that sit unused 98% of the time, and a hundred other things must pass his costs along to his customers. He can’t eat all of the costs. Moreover, every small businessman regularly calculates the real worth of keeping his business open. If he can make as much money as a grunt for someone else, then maybe he’ll decide that the freedom of owning a business isn’t worth the hassle and the risk. This hassle increases with every increase in regulations.

The Federal Register is now over 75,000 pages long. Can you think of one item in your home that isn’t regulated by the government in some way? I can’t. Consider all the time and money your workplace spends in various forms of regulatory compliance.

One last thing: Leftists always like to tell us how much they hate corporations, but their confiscatory politics ensure a world of big corporations. The large companies have the economies of scale to comply with the high taxes and the mounting pile of regulations. In fact, large companies often like regulations. They have cozy financial relationships with the government. They like the idea of hamstringing their smaller competitors.

I’d rather the Federal Register be two pages long… double-spaced.