Archive for May, 2011

It is sometimes said that the cure is worse than the disease; however, sometimes the cure IS the disease.

I was working in a benefits office of a large university and there was a lady who got a customer service award.  The story was told that employees would call the benefits office frantic that the doctor told them they didn’t have coverage.  She would scramble about and get them a confirmation of coverage, contact the carriers…fix everything.  That is great customer service.  The VP of Benefits turned to me and said, “The problem is that she was the one that forgot to enroll them in the first place because she is three weeks behind.  If she’d do her job, there would be no need for her great customer service responsiveness.”

Protection and Security:

The government is spending trillions on our security.  They are fighting ongoing wars in Iraq and Afghanistan; they are wiretapping us domestically; they are tracking us on our cell phones, monitoring us on Facebook; groping us as we go through airport security; censoring/blocking website they deem inappropriate, etc., etc.

Let me simply point out who it is we need protection from (hint:  it is not terrorists):

If we look at human history, the story is rarely of the government protecting its people from some external threat.  History teaches us that the threat of tyranny comes most often from the government itself. The framers of the Constitution had this concept specifically in mind when they created our government:  Limited government (see the 10th amendment) to protect us from the government.  We have the right to bear arms so the government cannot disarm us in case we would like to overthrow the government (yes, that is what the founding fathers had in mind).

I previously mentioned that if the financial sector’s main purpose is to assess and hedge risk and they themselves are the largest risk, then the only sensible solution is to pack up and go home.  Similarly, if the government’s aim is to protect us then they would be best served by doing almost nothing….since history shows over and over that the government itself is the largest threat to our freedom.

Saving the economy, Inflation, and the Fed:

We are told the Fed needs autonomy and power to intervene in the economy to save the economy.  As President Bush said, “I’ve abandoned free-market principles to save the free market system.”

That is a great story (and a bizarre quote).

I will ask why the economy needs saving in the first place? The Fed created easy money that fueled an asset (housing) bubble.  The government spends unfunded trillions on war that creates a budget crisis.

The government creates the economic conditions from which we need to be saved.  Indeed, they are the largest player in the economy and thus the one most able to create imbalances which cause crisis.  Very few other players have the market power to create a deep business cycle.  Very few other players could ever be considered rule makers or market movers.

Consider inflation.  Inflation is not caused by a rise in prices; it is not caused by increasing wages.  Those are symptoms, not causes.  It is caused originally by some expansion of the money supply (indeed there could be no inflation without an increase in the money supply).  The government/Fed controls the money supply.

When the government tells us it is fighting inflation, it is mainly fighting itself, since they are the party that must take the initial steps.  The government gets to create and spend money now when it is worth more and when it leaks out into the general economy as inflation we spend the money later when it is worth less.  Inflation is a tax on savings.  The tax goes to the government to spend now when the money is still worth more.

Similar to the situation with protecting us, the government is the primary cause of economic crisis and inflation, from which it then proposes to save us.


I actually think politicians are generally well intentioned (though not always); they have their beliefs and they fight for them on a political stage (which means lots of messy compromises).  Problem is, even if you have your beliefs, you are often wrong.  Strength of belief does not equal likelihood of correctness. See the Dunning-Kruger effect.

There is simply a powerful incentive to DO SOMETHING when there is a crisis, even if you are attempting to save yourself from yourself.

My question is:  Do the politicians realize any of this? I hope they are simply poor students of history, or willfully ignorant and are just trying to help.  If they realize it (even some of them), then my view of mankind is dimmed.

What do you think?

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I think Facebook is going to make it.  They will not be a flash-in-the-pan like Friendster or MySpace.  They are in it for the long haul.  And I don’t think it is because of any purposeful brilliance of their business plan.

Let’s walk through the logic:

When I was growing up I thought the government had a file on everyone.  I thought they knew everything about us.   I did not know about transaction costs at that time.  After working in corporate America for a while I realized it would take almost as many people as there are in the US to do the work to keep a file on everyone in the US.  In short, it would be an administrative nightmare….and that is just keeping the files updated, not parsing all/any of that data.  That is also assuming people wouldn’t have a privacy/civil liberties fit that the government knew pretty much everything about them.

No doubt the government would like to know everything about you and no doubt such information is exceedingly difficult/sensitive to maintain:  Enter Facebook.

We are doing it for them, complete with correspondence, our friends and their contact information, attached pictures, our location (if using Facebook on a mobile device), what we are doing in real-time, etc.  This is the greatest intelligence database the world has ever known. It would take an army of CIA agents working around the clock to know this much about me…just one person.  We are voluntarily handing over information the government would never be able to collect on its own.

Granted I bet terrorists don’t use Facebook (probably no @terrorism feed update “About to bomb something! LOL! TTYL!”), but their friends/family might.  Or at least the government would like them too. And there is lots of other information the government might want that would be on Facebook:  like people reporting zero income but going to Vegas every weekend; people on SS Disability mowing their lawn, etc.

And that is why the government will promote the use of and support the business of Facebook.  And Facebook will cooperate (government has direct access to everyone on Facebook, whether or not you have friended the government), because there is no better business plan than being a government necessity (ask Amtrack, automakers and the airline industry).

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