Most Debt isn’t “Real” but You`re still Screwed

Everything you think you know about money is a lie.  Well, mostly.  What they teach you in school is a fairy tale about barter and gold and silver coins and how great it is that we now have the magical, rational system called the Federal Reserve which makes everything work!  No one explains how money is “created” and who benefits and who gets screwed.  Let’s just say that none of you reading this are likely to be getting any benefit.

Just as we imagine we know how money “works,” we typically think we understand what credit and debt mean.  Sadly, most people carry quite a bit of debt and so do most large institutions like our national government.  But who lends us this money and how come they never seem to run out?  Ever notice that?  It is always your credit score that determines whether there will be a loan, never whether they have the money to lend you in the first place.  Where is all this money coming from?

The simplest model of a loan is where person A has something of value and agrees to lend it to person B, if that person agrees to pay them back, typically with a little extra for their trouble, otherwise known as interest.  When we think about a bank lending money, we imagine it working the same way.  Because people deposit money in a bank, they are able to lend out a certain portion of those deposits, allowing them to earn an income, as well as paying their depositors some nominal interest.  But that`s where things get complicated.

It is true that banks are required to keep a small percentage of deposits “in reserve,” mostly for accounting purposes, but they lend out the vast majority of them.  And, when those funds are lent out, where do they go?  In almost all cases, they end up being deposited in another bank.  So guess what?  Now that the second bank has additional reserves on hand, they can now lend out more money,  And that money ends up in another bank.  And so on.  And so on.  So the money the individual depositor worked for has now been multiplied many times over by the banking system, even though nothing productive was done other various accountants entering figures in a ledger.

Not so surprising now that banks always seem to have money, is it?   And that’s not even the best part.  No, the real magic involves how the interaction between central banks and the Federal government ends up creating even more money out of thin air.  I will try to explain that process in part two of this article but, for now, recognize that all money is created from debt and particularly from US Bonds, almost just like the ones Grandma gave you. Again, that money comes into existence, not because some valuable resource was found or created but simply with the stroke of a pen.

Curiously enough, you and I may be receiving “funny money” when we take out a loan but the things we buy with that money are very real (usually) and the interest and principal you have to pay back are very real (always.)  But who are we actually paying back?   Why do certain people and institutions get a lien against our assets and future labor when they, in fact, didn’t lend us anything “real?”  It’s quite a racket and, yet, the structure and stability of our whole system is build on this racket.  

The old saying about the national debt was that it was no big deal because we owed it to ourselves.   Maybe so up to a point.  But isn’t it equally valid to say of all debt that it is no big deal because banks lend us resources they don’t actually have to lend in the first place?  And then expect us to pay it back with our blood, sweat and tears?  But that’s none of my business, right?

We`ll continue our fearless foray into speaking truth to power next time as we discuss the national debt and the Federal Reserve and who the wins and who loses in our current system.  Until then, thanks for reading and have a great week!

Rethinking Scbools

The word “public” is a peculiar one.  It is often synonymous with “government” and rarely in a flattering way.  Few aspire to live in public housing, use public transportation or, God forbid, be represented by a public defender.  Yet, when attached to education, it inspires almost blind loyalty from so many people.  Public education, whatever it’s flaws, is part of the bedrock of our democratic society and educating our children is, if not priority one, then very close to it.  Well, that’s what they always taught us in public school anyway.

Of course many of us were blessed with good public schools and gifted and caring teachers who changed our lives. We learned to get along with people  from different backgrounds and with different ideas.  Furthermore, many of us have close friends and family members who have dedicated themselves to education, people who frequently go above and beyond the job requirements and volunteer their time and resources to better reach their students.  Many genuinely qualify as heroes. Like must heroes, they are rarely adequately compensated for what they do.

Sadly, these heroes often toil away in subpar facilities that resemble a maximum security daycare.  Schools are no longer expected to merely teach children reading, writing, arithmetic, history and science.  They are frequently expected to provide children with healthy meals, discipline and psychological support, things traditionally provided by families.  In many cases, schools are simply a way to manage children, figuring out how to make them into adults who can maneuver their way through the  (mostly) nonsensical bureaucracies they will encounter along the way.  

It is odd when you think about it but the fundamental shape of the school experience hasn’t changed much in the past century.  The model of a teacher in front of a group of students united only by age and geography, expected to “instruct” or “educate” them, is still the dominant one.  I suspect there are also still overpriced textbooks and maybe even those horrific chalk boards around as well.  With all the advances in technology, there is almost no area of life that closely resembles the way it was a hundred years past.  But we still have those little desks, those concrete walls and those long hallways scented with corkboard, construction paper and glue.

We are frequently told that the problem lies in funding: we simply don’t spend enough on education.  The statistics don’t bear that out.  We are spending more on education but, sadly, less on teaching and learning.  We have continued to add layer upon layer of administration, bureaucracy and compliance personnel.  Not surprisingly, the growth in those officials has coincided with increased state and federal aid to local schools.  Money never comes without strings attached.  So we must now hold teachers and schools “accountable,” a lazy ass word designed mostly to pass responsibility to those who have the least power.  Welcome to mandated “common core” and proficiency exams, a guarantee that schools will teach to the test, not for the student.  But as long as state and federal bureaucrats and teachers unions keep their jobs and their authority, all will surely come out right.  Or will it?

Much has been made of the particular level of incompetence possessed by our new Education secretary.  Of course hers is a political appointment and a political payoff, like most minor cabinet offices.  It is quite likely she will promote policies that favor her own prejudices and they may indeed turn out to be worse than the status quo.  I will reserve judgement for now.  I have also heard the very general statement made that she simply “doesn’t know how to educate your children.”  Undoubtedly that is true.  But neither do I and neither do you and neither does anyone else because that is impossible.

People aren’t machines.  We are all different and respond to different types of teaching and training.  There can be no one size fits all approach to education.  The old saws of “scientific management” have largely been invalidated, though sadly not abandoned.  Even medicine is beginning to grasp that treatment has to be tailored to the individual patient and advances in research are making that possible.  The future of schools must take those same insights into account.  The marvels of modern computer technology and the developing field of virtual reality has the potential to open up entirely new worlds to our children, allowing them to advance at their own (but likely accelerated) pace and go as far and as fast as their mind can take them.  But those are simply examples and, undoubtedly, some good schools and teachers are already far ahead of me in developing these and other alternative learning techniques.

So what is my conclusion?  What should be done?  How can things be “fixed?”  You should already have figured out that I do not have the answers but I do have some ideas.  First, I believe we need to devolve authority back to local units of government and parents, not because they will always make the right choices but because they will make different choices and perhaps experiment with different models of learning.  Second, parents and families have to be committed to their children’s education.  Without that, no system can hope to succeed.  Thirdly, private alternatives should be encouraged.  The notion that the only way we can educate children is with government-run schools is a prejudice.  After all, while government provides assistance in feeding children, food is grown privately.  And providing kids with nutrition is pretty important too.   Finally, let’s start paying good teachers and stop paying administrators.  Sorry, but I am sure they can find equally useless jobs in the private sector.  After all, they have plenty of experience.  

Regardless of your thoughts on these matters, I think we can all recognize that the current system of education is benefitting neither students nor teachers and needs to be reformed.  That will require us all to reflect much more on rethinking our schools.  Thanks for following along and taking the time to read this.  Much more controversial thinking to come.  Have a great week!

Outside the Box

Not a great deal of substance here on the blog of late but the next few weeks will change that.  And, as the title suggests, we are going to think (way) outside the box.  We are going to take on a number of controversial topics.  I am going to suggest that we need to seriously rethink several institutional arrangements that we tend to accept as gospel.

Lest you think this is just going to cover the usual libertarian touch points, I suspect you will be surprised.  And I doubt there will be much of any mention of our current supreme leader because, while he may purport to be an agent of change, he has said nothing much about the topics that will be discussed. 

So what are we going to talk about you ask.  How about education?  How about the very idea of debt/money?  How about what we mean by property and why it is wrong?  Yeah, that will be a good start.  It is time to let my brain go wherever it will.  Regardless of how much one tries to be intellectually honest, we are all susceptible to allowing our arguments to become mere apologia.  Google Saint Thomas Aquinas if you aren’t sure what that is.  He was very good at it.

I can’t guarantee that this journey will take us somewhere good.  We may find ourselves in the intellectual equivalent of a flea bag motel but hopefully we will learn something along the way.  Look for Chapter 1 on Thursday night.  Until then, have a great week!

More Random Ramblings

You know, when you Google “logic,” you get an entire page dedicated to the rapper of the same name and that’s it.   That may say a great deal about where we are as a society.

I was reminded again this past week that the casino is one of the few places I can think of where you see every type of person gathered together in one place and there are very few problems.  Perhaps the solution to most conflict in the world is complimentary alcohol?

So it is that time again when everyone gets worked up about confirming a President’s cabinet secretaries.   After that, they are rarely heard from again.   If you can’t remember the last person who held the job, it probably isn’t very important.

When you stay home sick for a few days, you learn a lot about TV channels.  Apparently the Discovery Channel is about discovering moonshine, the History Channel is about the history of junkyards and barns and the Food Network is about kids competing to make the best cupcakes?

One of these days, I will attempt a more ambitious blog post but, in the current environment, I feel like it would be like trying to play the cello during a Metallica concert.  I doubt anyone would even hear.

Enjoy the rest of your week and thanks for reading!

Immigration and the State

I’m happy to see so many people concerned about the the free movement of peoples around the world and how big a human rights issue it is.  I will lovingly remind you that all governments regulate their borders, most far more aggressively than the US.  In fact, the very nature of the modern nation-state is its insistence on controlling the comings and goings of people on its territory.  The previous administration also deported millions of people and patrolled the border and denied visas to people it didn’t like.

If you disagree with that, I welcome you to the world of libertarianism, the only philosophy consistently supporting the free movement of all people and opposing the nation-state.   Keep in mind that that also means dismantling all the government programs you often like and devolving those functions to smaller, local units of government or to the private sector.

Think about it.  Hope all of you are well and have a great week!

How You Won’t Stop Trump

  • Mainstream liberalism and conservation are about as useless against Donald Trump as a bow and arrow against a tank.  And, yet, I still watch bemused as the establishment and their allies in the mainstream media fill their quivers and prepare for battle.  So smug they are in their cute Robin Hood costumes.  So clever as they attack, always believing that this time they have landed a fatal blow.  Yeah…not so much.  Here`s the problem:  people no longer believe you, even when you are telling the truth.  The most fervent Trump supporter stopped believing you years ago and so did many of us who are, at best, ambivalent about our new President.  Hell, the times many of us find him most palatable is when he insults you and tells you to get lost.
  • You know best of course and the rest of us are idiots if we don’t tow the line.  That is a feel good message for all those people who agree with your agenda of big government liberalism and political correctness but it convinces no one else.  You are merely speaking to the converted who now comfort themselves as being so much smarter than the riff raff who know no better.  Sadly, you are merely talking to yourselves.   
  • Not that the conservative mainstream has fared much better.  They have now decided to carry water for a President whose idea of limited government is that decisions should be limited to him.   So many who opposed him for good reason have now discovered how delightful he is.  No need to worry about budget deficits or civil liberties because this is a guy who can get things done and, hopefully, get me reelected.  
  • Of course this man is, at best, a political naif and demagogue who simply says whatever he thinks his audience wants to hear and, at worst, a genuine fascist in the original sense of the word, not because of his supposed racism which is nonsense.  He claims to put America first but, sadly, that means a sort of 19th century protectionism and 20th century xenophobia that will accomplish nothing but will provide plenty of cheers from his adoring crowds.
  • No, the best defense against this or the next Trump (or Obama, if you prefer) is one which strips the Presidency of its executive privilege and power and returns America to a more modest State ruled by a cautious legislature and a deferential judiciary, one whose President takes the secondary role imagined by the Founding Fathers.  But you won’t hear that on CNN.

Things That Make Me Go Hmmmm

So taxing people who may or may not support a particular program to pay for it is compassionate and suggesting that those people who support it should be the ones who fund it is cruel and callous?

So it is selfish if I allow people to make their own decisions in life but it is purely altruistic if I force them to live the way I believe is right?

So the same people who aren’t smart enough to make their own choices become magically endowed with the wisdom to choose for others when elected to office?

So it makes perfect sense that people in Maine, Texas and Oregon have the same President but people five miles across the border in Mexico or Canada are aliens?

So great tragedies are sure to come to pass if an 18 year old has a beer but behavior altering prescription drugs are fine for 8 year olds?

So if Doctors, Lawyers and mechanics are so good at their jobs, why are there so many of them?  Think about it.

So if America chooses to intervene in the affairs of another country, that’s building a better world but if another country chooses to intervene in our affairs, it is an act of war?

So it is perfectly acceptable for people to be a fanatic about a meaningless sporting event but not for people to be fanatic about supporting freedom and justice?

So if all the time and energy that we expend protesting one another’s politics were spent on fixing the problems in our world, would that be a good idea?

So if I ran out of things to say for tonight, would that be a good or bad thing?  

Hmmmm