OMG – First There Was Piketty and Now This …

First, the govt unleashed Piketty, and now they are calling in a favor from their biggest zillionaire donors, to once again distract the masses from the real source of the economic black hole – govt over spending to protect govt jobs, perks, and power. It’s amazing how the good intentions of zillionaire’s and govt can create so many paved roads to hell. Mr. Hanauer, you are right. The solution will not start in Washington, because no one in govt will downsize themselves as long as their careers are at stake.

I have a much easier solution, Nick. Why don’t you and your zillionaire buddies simply STOP bribing politicians for special tax exceptions, reversing banking laws (i.e. Glass-Steagall) that have already lit a derivative nuclear time bomb, and stop lobbying for anti-competitive laws that have given large corporations unfair competitive advantages, causing prices to rise instead of decline with technological improvements. The healthcare lobby is the biggest example of a fraudster industry that is destroying this country. How, you ask? Spending on healthcare has risen 9.3% per year for over 30 years. Put those numbers in your exponential calculator and smoke it! Combine this increase with Defense spending and unsustainable pension payments, and one can begin to understand how yearly govt deficits (and the accumulated interest payments on the debt) are now consuming such a large percentage of our productive capacity.

Nick, if you really want to help poor Americans and this country, then bring an end to the career politician. If you want real reform to start, and the rule of law to be observed, then fight for term limits. Unfortunately, the only thing that  scares a zillionaire more than sheeple brandishing pitchforks, is the rule of law.

The fact that Nick thinks his plan of a higher minimum wage will reduce the demand for govt services is exactly why it won’t happen. The govt will stop anything that reduces demand for its services. However, let’s assume Nick and his zillionaire friends are successful. What makes them think the supply of govt will be reduced with the demand for its services?

The sovereign debt crisis, and the civil unrest it is producing around the world, is the result of Socialism going bankrupt and the govt CHOOSING to hunt other people’s money instead of reforming and reducing its supply. Simply look what states and local govt’s did when the economy contracted in 2008. Instead of downsizing, they increased fees and taxes when tax receipt declined. Hey Mr. big ears and governors, you can’t keep paying an increasing number of pensioners, and the employees that replace them. It’s called a Ponzi scheme! What can’t happen, won’t.

For those that require further elaboration, Mish provides a good sumarized list of consequence from increasing the minimum wage, and his last paragraph pretty much says it all –

Regardless, interference in the free market is not a good thing. Thus, the overall result of a hike in minimum wage must be negative, regardless of what minimum wage advocates suggest.

Instead of recognizing this simple mathematical fact, everyone is collectively choosing to ignore reality and let the country spiral into chaos and violent civil unrest when the govt can no longer sell its debt. Sorry, but just as ZIRP and infinite QE has not worked, as witnessed by the just released huge negative GDP print, increasing the minimum wage will not stop the sovereign debt crisis.

For those that want to believe the negative GDP number was the result of an extremely cold winter, remember that the cold weather also drove a much higher demand for energy. Regardless, only a partisan hack or ivory tower economist could argue that the unprecedented govt intervention and bank salvation policies over the last six years have been good for the economy. Yet, people like Mr. Hanauer continue to collaborate with govt to trumpet the predictable popular policies that do not help the economy. However, they do provide convenient distractions that coincidentally benefit govt. Maybe, we should do the opposite. What do you think, Nick?

As Reagan said, the govt is the problem, and the reason he, Bush, and everyone else has failed to cut govt spending is because career politicians care more about their jobs, perks, and power than anything else. Only if we have term limits can there be any hope of reform and reducing the size of govt.

Nick, you are right about one thing – the pitchforks are coming, because govt will continue sucking off more than their fair share from the productive economy. You surely know that all the billionaires and zillionaires cannot pay for all the govt overspending. Go ahead, demonstrate your philanthropy and donate 100% of your income to the govt. What will govt do next year?

It is govt jobs that have increased at almost twice the pace as the private sector jobs over the last 60 years. The printing of money and increased debt that’s been required to pay for all this govt overspending has devalued the dollar and our purchasing power so consistently over the last half century that we took away the women’s right to stay home so she can help make ends meet.  You’d be well advised to educate the masses on where to point their jabs, instead of misleading them. It shouldn’t be that hard, since only an employee or beneficiary of govt could not see that govt is at the heart of our problems.

Whether you donate your income or govt simply takes it to maintain their own job, perks, and power; where will govt get the money the following years after the economy and tax receipts collapse? The pitchforks are coming, just like in all the other bankrupt countries around the world, because govt’s selfish hunt for other people’s money is unrelenting.

There is a new statistic that says 60% of Liberals don’t feel patriotic. Maybe they would feel more patriotic if they only realized their future donations to govt are the most sincere form of patriotism. For example, once people realize they will be donating their pension and retirement accounts to the govt, I’m sure their feelings of patriotism will swell up in their hearts. When their 2-year treasury note gets automatically converted to a 30-year bond, I’m confident that the feeling they will get from donating their principal to the govt for another 27 years will inspire them to change their vote for patriotism.

This blueprint to avoid debt defaults is exactly what the IMF is considering for Europe. Imagine buying a short-term govt bond for safety during the next financial collapse, and the govt converts it to a 30-year bond with the same interest rate. The IMF and EU are proposing these actions, as well as bail-ins, wealth taxes, and a 10% tithe to govt to save govt jobs, not help the masses. Washington DC is no different. Our debt-to-GDP ratio is just as bad, and even worse when one considers the true amount of debt, and that our true GDP is almost 30% less than advertised due to usage of phony inflation numbers.

Raising the minimum wage is the same thing as raising taxes on the consumers of products and services provided by higher wage employees. The rising cost of raw materials, caused by a devalued dollar and fraudulent energy and agriculture policies passed by govt, are also passed on to consumers. Anyone who has bought groceries or gas knows that everyone in the supply chain will pass on cost, through higher prices, until they no longer can. After the consumer is completely tapped out and downgraded from steak to hamburger, to dog food; then profit margins and quality decline until companies go out of business and take those minimum-wage jobs with them.

Wages are determined by the value they create (except in govt). They cannot be ordained from above, without adverse consequences.  It’s not the wealth of entrepreneurs that’s important – it’s the businesses they create and the jobs that follow! If one wants to provide opportunity to low-income workers and all job seekers, then unleash the unproductive capital and assets hoarded by govt, by cutting the size of govt and making the savings available to small businesses and entrepreneurs, eliminate the anti-competitive laws that protect large corporations, and equally enforce the rule of law.

A citizens standard of living is not impacted if their costs increase faster than their wages – which is exactly what govt and the Fed have been causing for many decades. The establishment wants to keep us on this path, because their jobs, perks, and power are dependent on the status quo. The current cast of clowns in Congress are never going to voluntarily reduce their stay to one, two-year term. However, if we want politicians with real business experience that are less susceptible to bribes and blackmail, then the age of the career politician must come to an end – one way or another!

BTW, I’ll go on the record Nick, the $15/hr minimum wage will mark the top in Seattle’s economy.

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