A Simple Formula

MIAMI – How do we know if new programs will make the economy better… or worse? Here’s a simple formula:

 

W = rv (w-w – w-l)

 

That is, wealth is equal to the real value of win-win exchanges minus the loss from win-lose exchanges. Yes, dear reader, it’s as simple as that. Like a whittler working on a piece of wood, we’ve shaved so much off, there is nothing left of it… except the essential heartwood.

 

When devising a win-win, be careful not to let it go bad-bad.

 

And now we can use it to see how Trump’s changes will affect the economy. We’re down here in the southern tip of Florida showing a group of eager colleagues from Brazil how we do business.

“I’ve been reading your Diary,” said one. “But I’ve noticed you seem to make a lot of your readers mad. Is that really a good idea? Aren’t you driving away potential customers?”

“Uh… who knows?” we replied, taking the high road. “The Diary is free. But readers pay in something more important than money: time. We try to make it worth their time by looking at what might go wrong.”

 

Unlimited Funding

What could go wrong? Our bubbly stew of observations over the last few weeks has cooled and congealed into an extended hypothesis:

 

  1. The fake-money system was set up by the feds in 1971… even free-market economist Milton Friedman was in favor of it.
  2. It turned out to be the best thing that ever happened to Friedman’s nemesis: Big Government. It provided almost unlimited funding to the insiders. They used it to build a “Deep State” – an unholy alliance of money and power, a “shadow government” that runs the country no matter who you vote for.
  3. These insiders used the fake-money system to transfer trillions of dollars from the mostly middle-class Main Street economy to themselves and their cronies.
  4. And now they control the government and its money.
  5. Donald J. Trump says he aims to “drain the swamp.” Perhaps he is sincere. If so, he has a hard row to hoe.
  6. Bear markets in stocks or bonds are both overdue. And after the longest expansion since the ’30s, a recession must be headed our way, too.
  7. Even if these things don’t happen, the swamp critters could still prevail.

 

The new president did take a step in the right direction when he pulled out of the Trans-Pacific Partnership (TPP) trade deal. He took another step when he suspended further implementation of Obamacare. According to a report in The Wall Street Journal, he has frozen any measure that would “burden individuals, families, and insurers.”

 

The UN learns that Trump wants to cut its funding

 

Draining the swamp is shorthand for eliminating those burdens. It is the only way to Make America Great Again, at least economically. Recently we heard that he is planning to cut funding to the UN. Another good move. If the power and wealth of average Americans is to increase, the power and wealth of the swamp critters must decrease.

 

Wealth Formula

You’ll recall: There are only two ways to get what you want. Your first option is to make a win-win deal with others, where you give something in exchange for something you want.

You have a cow. Your neighbor has a chicken. You give milk. Your neighbor gives you eggs. “Capitalism” is just an elaboration of that exchange. And all government policies – QE, Dodd-Frank, trade tariffs, tax rates – everything – can be measured by it.

Do they make these win-win exchanges easier or harder? The other way to get what you want is to take it without giving anything in return. You shoot your neighbor’s cow and roast it for dinner. The neighbor complains; you shoot him, too. That is a win-lose deal. You win. He loses.

 

Example of a win-lose situation

Cartoon by Gary Larsen

Perverse Incentives

Win-lose deals do not create wealth; they merely transfer it. The math is easy. A win is a plus. A lose is a minus. A plus added to a minus equals zero (1 + (-1) = 0). The world’s wealth doesn’t increase. It can’t. Because the gain came at someone else’s expense.

Of course, there are transaction costs and perverse incentives involved. The neighbor, fearing you may kill his cow, doesn’t bother to raise it. Or he may erect a high wall to keep you away from his livestock. Or he may kill his cow, just to avoid having it stolen from him. Or kill you.

All of these things destroy wealth because people get less of what they really want.

 

For the sake of completeness – example of a lose-lose situation.

Cartoon by Gary Larsen

 

Image captions by PT

The above article originally appeared as”How to Make America Great Againat the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Making America Great Again – How to Judge Policy”

  • wmbean:

    Any policy that is suppose to do for the individual what the individual should do for himself is always bad policy and will always result in failure of that policy. Any policy that purports to make humans “better” is bad policy and doomed to failure. That pretty much sums up how to judge whether a policy is good or bad.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • 21st Century Shoe-Shine Boys
      Anecdotal Flags are Waved   "If a shoeshine boy can predict where this market is going to go, then it's no place for a man with a lot of money to lose." - Joseph Kennedy   It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if...
  • India: The Genie of Lawlessness is out of the Bottle
      Recapitulation (Part XVI, the Last) Since the announcement of demonetization of Indian currency on 8th November 2016, I have written a large number of articles. The issue is not so much that the Indian Prime Minister, Narendra Modi, is a tyrant and extremely simplistic in his thinking (which he is), or that demonetization and the new sales tax system were horribly ill-conceived (which they were). Time erases all tyrants from the map, and eventually from people’s...
  • Christopher Columbus and the Falsification of History
      Crazed Decision The Los Angeles City Council’s recent, crazed decision* to replace Christopher Columbus Day with one celebrating “indigenous peoples” can be traced to the falsification of history and denigration of European man which began in earnest in the 1960s throughout the educational establishment (from grade school through the universities), book publishing, and the print and electronic media.   Christopher Columbus at the Court of the Catholic Monarchs (a...
  • The Government Debt Paradox: Pick Your Poison
      Lasting Debt “Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008.  “They are opportunities to do big things.”   Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT] Photo...
  • The Forking Paradise - Precious Metals Supply and Demand Report
      Forking Incentives A month ago, we wrote about the bitcoin fork. We described the fork:   Picture a bank, the old-fashioned kind. Call it Acme (sorry, we watched too much Coyote and Road Runner growing up). A group of disgruntled employees leave. They take a copy of the book of accounts. They set up a new bank across the street, Wile E Bank. To win customers, they say if you had an account at Acme Bank, you now have an account at Wile, with the same balance!   BCH, son...
  • The United States of Hubris
      Improving the World, One Death at a Time If anyone should have any questions about whether the United States of America is not the most aggressive, warlike, and terrorist nation on the face of the earth, its latest proposed action against the supposed rogue state of North Korea should allay any such doubts.   Throughout history, the problem with empires has always been the same: no matter how stable and invincible they appeared, eventually they ran into “imperial...
  • Long Term Statistics on AAPL
      Introductory Remarks by PT Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of...
  • Tragedy of the Speculations
      The Instability Problem Bitcoin is often promoted as the antidote to the madness of fiat irredeemable currencies. It is also promoted as their replacement. Bitcoin is promoted not only as money, but the future money, and our monetary future. In fact, it is not.   A tragedy... get the hankies out! :) [PT]   Why not? To answer, let us start with a look at the incentives offered by bitcoin. We saw a comment this week, which is apropos:   "Crypto is so...
  • To Hell In A Bucket
      No-one Cares... “No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week.  “You keep writing about it as if anyone gives a lick.” We could tell he was just warming up.  So, we settled back into our chair and made ourselves comfortable.   The federal debtberg, which no-one cares about (yet). We have added the most recent bar manually, as the charts published by the Fed will only be updated at the end of the...
  • Despite 24/7 Trading: Bitcoin Investors are Taking off for the Weekend on Friday Already
      Crypto-Statistics In the last issue of Seasonal Insights I have discussed how the S&P 500 Index performs on individual days of the week. In this issue I will show an analysis of the average cumulative annual returns of bitcoin on individual days of the week.   Bitcoin, daily. While this is beside the point, we note the crypto-currency (and other “alt coins” as well) has minor performance issues lately. The white line indicates important lateral support, but this looks to...
  • Precious Metals Supply and Demand
      Fundamental Developments There were big moves in the metals markets this week. The price of gold was up an additional $21 and that of silver $0.30. Will the dollar fall further?As always, we are interested in the fundamentals of supply and demand as measured by the basis. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.   Gold and silver prices in USD terms (as of last week Friday) - click to enlarge.   Next, this is a...
  • Janet Yellen's 78-Month Plan for the National Monetary Policy of the United States
      Past the Point of No Return Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it.  This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return.  That's when the cucumber has pickled over and the prospect of turning back is no longer an option.   Depravity and bedlam through the ages. The blue barge of perdition in the...

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com