News just came out that the national Debt will grow by two trillion dollars more than the white house expected in the next ten years, it was projected to grow my 7 trillion but not they project 9. My response, “ohh only two trillion more, wait roughly 15% of the GDP of the ENTIRE AMERICAN ECONOMY in a single year, now realized after a minor accounting error, talk about a budget out of control… WHAAHAHHH!”

The kicker is the white house didn’t even expect this. Their reckless spending has reckless spending of its own, and that spending had children. The white house is spending faster than the American people can produce. If this continues for another 3 years Americans will be eating pinecones to survive, and paying 98% of their paychecks to the govt. to pay off their debt. I don’t know about you but I don’t like pinecones. Where did that two trillion go anyway, into thin air, ejected into space, how do you not account for TWO TRILLION dollars.

Forget a housing crisis, and sub prime mortgages, Americans are in a serious spending crisis. The president that got elected because people thought he could fix the economy has “changed” things. Instead of worrying about the economy, the most popular excuse in America right now, we will worry about survival as a country. Our currency will face something like the German Deutschmark after World War one. Where a wheelbarrow full of cash = one loaf of bread. People will be migrating to Canada and Mexico. Our illegal immigration problem will be the only thing solved.
Don’t even think about paying the interest on that debt.

The best financial advisors will tell you to get out of debt. That is the first step to financial freedom and wealth building. Why at a time like this would any intelligent person decide to spend even more than the country has? A country moving backward, becomes more enslaved to debt, it is our very freedom at risk. This spending is on the account of the American citizens freedom.

What this means for our economy
We as Americans have to act! We can no longer sit and hope, we have to act. Write letters to our congressmen, get involved in this crap no matter how much we prefer not to. Like it or not this is our problem, deal with it now, before it gets worse. Get creative, think, America, Lady Liberty is in distress. Something must be done now! Protect our country from a domestic Enemy, America make a sound.

Big Government + Universal Health (insurance) = Efficiency (Not!)

“Barak Obama wants universal health care, health care for the entire universe, isn’t that a little much for the American tax payer?” -SNL

There is a reason Americans across the country are incensed, at this proposition. Comedy aside, Americans are having enough trouble trying to make ends meet, forget getting ahead. Obama’s proposed health care (actually govt. insurance) would be the dagger in the heart of a hurting America. California is at the point of desperation, because of their careless spending.
This reminds me of a quote from J.R.R. Tolkien’s Lord of the Rings; “The quest now stands on the edge of a knife Stray just a little and it will fail.”
We can make it out of this, if we can get the federal government to stop spending money that we don’t have. We the American taxpayers are all in serious debt, and the feds are looking to increase it. Look at the widgets on this site to see for yourself.

When you find yourself in debt, would you be more conservative in your spending, and pinch every penny in order to get yourself out of it? Or would you keep spending, or spend more because the debt seemed un-payable? This is a mentality of our federal government at the moment.


Spending who’s hard earned money?
Don’t buy into the idea of the “Government’s money.” It all comes from the American taxpayer, and the debt is our liability. This is our hard earned dollars, not magic cash from somewhere over the rainbow. Where is consumer protection, or children’s rights? The debt is a burden that will be passed down to the coming generations. Do tomorrow’s children have the right, not to be born indebted for what our generation was careless on spending?

What does this mean for our economy?
In a world obsessed with being green, and leaving our world healthy for its children of the future, the old green dollar is being abused. Will there be any wealth left in American two generations from now? Anything left for your grandchildren to inherit? Or will they be inheriting a liability, born into debt? These are the unfortunate truths we have to face in this day and age. The choice: to be frugal and fruitful, or failed and in fear of the future.

I apologize if this post seems harsh, reality sometimes is.

Income Distribution (Young, Old)

This seemingly fancy term is misconstrued often these days. Not to be confused with distribution of wealth. The distribution of income is just this: Some people earn a higher salary than others who make less. When you hear distribution of income it is usually involved in some discussion about how the rich make “so much more money” than the rest of us. It sounds intelligent and is used to persuade those who don’t know the ins and outs of the term. It is part of the argument that makes Americans feel entitled to that money the rich have.

The economic Truth is this; the difference in the distribution of income is not the rich vs. the poor. Instead it is the older vs. the younger Americans. An example is this a person working in his/her 40’s has had at least 20 years more experience, education, or training than a 20 year old. With this experience, education, or training they are more skilled laborers, and should be compensated thusly. This same worker in their 40’s has had years to develop clientele, gain understanding of their field, and develop a network.

The “rich” and the “poor” are very often referred to, as they are different people. This is true for some, but the majority of Americans in the bottom 20% of the income bracket are the same to be in the very top bracket within the next 16 years. This is accounted for largely by students, and those developing skills as previously mentioned. It is not uncommon for most Americans in the top 5% to be 45 years old and up. It the year 2000 those households in the top 20% worked twice as much as those in the bottom 20%, which primarily indicates both mom and dad work among those in the top 20%. (information from the U.S. census)

What this means for being Economically Sound

Do not be deceived by the media or politicians who talk about the distribution of income to be an emotionally charged argument against a class system. This is America; the difference in income is actually the young and the old. So when they talk about taking all that extra money away from the rich and giving it to the poor. They are talking about your retirement, taking money away from mom and dad and giving it to their college kid. Weird when put in context, like lies usually are. This economic fallacy has been exposed and brought into the light, the hip-hop light. Therefore be economically sound, and don’t be persuaded by this distribution of income argument.

Minimum Wage

The first hip hop video blog, enjoy.

The Importance of Prices, and sharing?

We use prices everyday but we don't think about what they mean. Prices simply reflect an abundance or a scarcity. They also play a very important role of allocating resources (meeting a demand with a supply.) What does all this mean? Well lets take a closer look.

As you know from my previous post, prices are a big difference between socialism and capitalism(free market economy.) They are also a main reason socialism Always fails.
The Last premier of the Soviet Union Mikhail Gorbachev once asked British Prime Minister Margaret Thatcher: How do you see that people get food? The answer was she didn't, prices did that for her. Those British people ate better than the Russians, even though the British have never grown enough food to feed themselves in more than a century. Prices bring them food from other countries.

To explain this next part i will refer to "Basic Economics" by Thomas Sowell.
Sowell writes; If the government were to come up with a "plan" for "universal access" to beach-front homes and put "caps" on the prices that could be charged for such property, that would not change the underlying reality of the high ratio of people to beach-front land.
With a given population and a given amount of beach-front property, rationing without prices would now have to take place by bureaucratic fiat, political favoritism or random chance-but the rationing would still have to take place. Even if the government were to decree that beach-front homes were a "basic right" of all citizens, that would still not change the underlying reality in the slightest.

Prices are like messengers conveying news, in the case of beach-front property its bad news.
(Because of the scarcity, the price is higher. This is necessairy for rationing, the price is set by the demand of the market.)

Prices not only guide consumers, they guide producers as well. When all is said and done, producers cannot possibly know what millions of different consumers want.
While a free market system is sometimes called a profit system, it is really a profit-and-loss system and losses are equally important for the efficiency of the economy, because they tell the producers what to stop producing. Without really knowing why consumers like one product rather than another, producers automatically produce more of what earns them a profit, and less of what is losing money. Although the producers are only looking out for themselves and their companies' bottom line, nevertheless from the standpoint of the economy as a whole the society is using its scarce resources more efficiently because decisions are guided by prices.

Something to keep in mind: The efficient allocation of scarce resources which have alternative uses is not just an abstract notion of economists. It determines how well or how poorly millions of people live.
From the standpoint of society as a whole, the "cost" of anything is the value i has in alternative uses. The cost of building a bridge are the other things that could have been built with that labor and material.

Now back to the U.S.S.R to illustrate another point. The Russians admitted this information. The production enterprises in the U.S.S.R always ask for more than they need in the way of raw materials, equipment, and other resources used in production. They take everything they can get regardless of how much they need, and don't worry about economizing on materials. After all nobody at the top knows exactly what the real requirements are, so squandering makes sense. Among the resources that get squandered are workers. Economists reported that from 5 to 15% of the workers in the majority of enterprises are surplus and are kept "just in case."
The consequence was that far more resources were used to produce a given amount of output in the soviet economy as compared to a price-coordinared economic system, such as that in the United States. Citing official Soviet statistics, Soviet economists lamented:
We use 1.5 times more materials and 2.1 times more energy per unit of national income than the United States. We use 2.4 times more metal per unit of national income that the U.S.

In a price-coordinated economy, employees and creditors insist on being paid, regardless of weather the managers and owners have made mistakes. This means that capitalist businesses can make only so many mistakes for so long before they have to either stop or get stopped-whether by an inability to get the labor and supplies they need or by bankruptcy.
In a feudal economy or a socialist economy (which is pretty much an oxymoron, socialist economy), leaders can continue to make the same mistakes indefinitely. The consequences are paid by others in the form of a standard of living lower than it would be if there were greater efficiency in the use of scarce resources.

The final facet of pricing i want to cover in this post is. The face that people demand more at a lower price and less at a higher price may be easy to understand, but it is also easy to forget.
In our society we have begun to believe certain fallacies. For example we blame high prices on "greed." People then speak of something being sold for more than its "real value," or of workers being paid less than they are "really" worth.
To treat prices as resulting from greed implies that sellers can set prices where they wish, that prices are not determined by supply and demand. It may well be true that some -or all-sellers prefer to get the highest price they can. But it is equally true that buyers usually wish to pay the lowest price that they can for goods of a given quantity. More importantly, the competition of numerous buyers and numerous sellers results in prices that leave each individual buyer and seller with little leeway.
Here is a great example:
When some natural disaster like a hurricane or a flood suddenly destroys many homes in a given area, the price of hotel rooms in that area may suddenly rise, as many people compete for a limited number of rooms, in order to avoid sleeping outdoors or having to double up with relatives or friends, or relocate outside the community. People who charge higher prices for hotel rooms, or for other things in short supply in the wake of some disaster, are espically likely to be condemed for "greed," but in fact the relationship between supply and demand has changed. Prices are simply performing one of their most important functions-rationing scarce resources.
If prices had remained at their previous levels after the disaster, a family of four might well rent two rooms, one for the parents and one for the children. But when hotel prices shoot up well beyond their usual level, all four family members ma crowd into one room in order to save money, leaving the other room for other people who have likewise lost their homes and are equally in need of shelter. If the government imposed price controls on this hotel, then the first to get to the hotel would take up more space and leave less of others, leaving more without a place to stay.

In short prices force people to share weather or not they are aware of sharing.

Coming soon, Price controls the exciting kind.

Capitalsim vs. Socialism, Who's side R U on?

The lines of capitalism and socialism are blurred in our society today. So let me spell it out, cut and dry definitions, straight up.

Capitalism: or a free market economy
An economic system in which the means of producing wealth, and wealth itself are privately owned.
This is another way of saying private ownership of resources (land, labor, capital, and entrepreneurship.) In this system the distribution, pricing, income, production, supply of goods, services and commodities are set by voluntary private decision due to market demand.
Government's role is limited to enforcing the basic rules to protect the market. Although the government can provide goods and services where necessary (ex. natural monopolies, national defense.)
The system is based on incentive, and that is the force driving one to produce a better product at a lower price. Prices are set by the demand and supply in the market.

Another key component of capitalism is markets close to perfect competition.
Here are key characteristics of perfect competition.

Many buyers/Many Sellers – Many consumers with the willingness and ability to buy the product at a certain price, Many producers with the willingness and ability to supply the product at a certain price. (Many defined by five hundred or more sellers.)
Easy Entry/Exit Barriers – It is relatively easy to enter or exit as a business in a perfectly competitive market.
Perfect Information - For both consumers and producers.
Firms Aim to Maximize Profits - Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit.
Homogeneous Products – The characteristics of any given market good or service do not vary across suppliers.

It is possible in very few markets to achieve perfect competition due to the slight manipulation of these above principles. (None more obvious as Perfect Information.)

Summary of Capitalism:
-Private ownership of resources
-Incentive based system
-Decision is in the hands of the voluntary individual - Freedom
-Works best when markets operate near perfect competition

Socialism: or a planned market economy
An economy with public/government ownership and administration of resources and the means of producing wealth. Also the centrally planned distribution of goods and wealth. Characterized by equal opportunities (or means) for all citizens, compensation is based on what is fair and decided by the central planning body.

Another characteristic is wealth and power are distributed more evenly based on the amount of work expended in production.
The governing body decides the goods and services to make and provide, how they are to be produced, the quantities, and the sale prices. (A headache of details)
In a Socialist economy there is no/zero competition.

Summary of Socialism:
-Public ownership of resources, and wealth (this includes the media)
-Centrally planned production and distribution
-No competition and no incentive (which leads to poor quality and efficiency)
-No freedom for individuals to chose

There you have it Capitalism and Socialism bare bones. Free market verses the planned economy. If you wish to contemplate some examples of each look to the U.S.S.R. for socialism. Then the USA before 1913 when the 16th Amendment was passed and the income tax was first instated. Today America is defined as a mixed economy, but is progressing closer to Socialism.
Thoughts...

Coming soon: the importance of Prices

-(Sources, F.A. Hayak, Adam Smith, Thomas Sowell, Wikipedia.)

Wealth is for the Wealthy

There is a prevailing issue in our American idea of wealth, and i don't know where we went wrong.
Somewhere along the way we have gotten this idea that, if someone is wealthy its because they have taken things away from the rest of us. This is almost entirely false.
Sure there are nasty people who create pyramid schemes, and there are thieves. But the prevailing majority of the wealthy are that way for a good reason. These people are the people who pinch their pennies and work really hard. These people are people who didn't allow themselves to get into debt. This allows them to save their money and invest, instead of making payments and staying behind. These people made sacrifices, like comfort and having brand new things.
This leads me to a question for all Americans; do we believe that someone who works hard to earn their living and lives frugally should be aloud to keep accumulated wealth? I say duh, but many of us are inclined to say no. Why is that you say? Because we have this idea that wealth is finite. We think of it like rare baseball cards, there are only so many Babe Ruth cards in circulation. This is what gives those cards their value. This is not how wealth works.

There are a specific number of dollars in circulation yes, but there is not a limited amount of value in this world. The saying "it takes money to make money," is right on. When an entrepreneur opens a business it takes money. They might have saved up for it, or they might have taken out a loan. Either way it took money to make money.

This is where understanding wealth gets exciting. When resources are correctly used to meet a demand with a supply, when that balance is achieved, you end up with more value that you started with. This will be better explained with an example. Lets say i have saved up enough money to open a coffee shop. Lets say it cost me $250,000 to start the coffee shop.
After six months of booming business i break even, because people love my coffee that much. Two years later my coffee shop is bringing in $400,000 a year in net income. Now the question is asked how much can i sell this business for? Well it depends on who would be buying it from me, but chances are i can make a sale at $1,000,000.(These numbers are completely for example are are not intended to resemble a coffee shops real monetary values.) Now if you consider my initial investment of $250,000, and the sale of the coffee shop at $1,000,000. I have a gain of $750,000, that is delicious profit my friends.

Not only did i come out on top, but the surrounding community did also. Now they have high quality coffee to drink at reasonable prices. Because of this they were able to focus on their work better than before and are more productive. Each individual who is a regular to this coffee shop also enjoys the friendly greeting from the baristas making their coffee. Then thay start their work day in a good mood which also helps them get more work done in less time, then they have a sense of pride in their accomplishment.(I might be getting a little carried away, but its possible.) All this to say that each individual customer that is effected positively creates more value because of the good or service. This community therefore has more value, and the standard of living goes up. This is an example on how wealth encourages more wealth. Another valid point to observe is all the employees of the coffee shop, now they are making radical lattes and white mocha frappachinos. Before this there was no job for them, now they can earn a living. Their income will now get spent in that community and pay local taxes for schools and roads... and so on

I hate/love to point this out but when government creates jobs they don't create wealth 99% of the time. Some of their jobs are necessary, some could be done by private companies. Here is the main reason, these jobs are not run efficiently because the "owner" is not footing the bill, the people are, you and I. There is no incentive for those jobs to be economical, because there is no competition. For an owner of a business who doesn't have to pay the bills, why would he search for the best price on materials. Why would he require a level of excellence from his employees. Their is no incentive, and our entire system is built on incentive. Socialism has no incentive, everyone remember the USSR and how high quality all their buildings and equipment were? Nothing but the best(little sarcasm) things falling apart and exploding left and right. That was socialism my friends. Government run anything ultimately is inefficient, look at the railroads, and the education system that has mysteriously lost millions over that last few years.
The reasons are the tax payers(that's us) are paying, and the government has no incentive.

So to the strange ones out there who would prefer the government taxes them 80% and then acts in their best interests, you should know the best interests of the government is to let the wealthy keep their wealth. Because that will grow the GDP and the standard of living for all of America. A growing desire to live off of the state was a chief reason the Roman empire fell.
Would you rather not have to make any decisions, or would you like to live somewhere things are growing? How nice would it be to turn on the TV today and hear "the American economy is booming as usual!"

Let the wealthy keep their wealth, it does not belong to us. Redistribution of wealth = stealing.
This leads to the death of capitalism, so keep her alive, thrive, incentivise.

The American Dream

I remember growing up in public school, and teachers telling us about the American Dream. They would say "you can be what ever you want!" Or "you can go from rags to riches." They had us read Horatio Alger stories, assuring us that our country makes all this possible. It did, the free market was mostly alive then, and the people of the USA believed in their country.
Today many people have lost belief, and rightly so. I am a hopeful person and i believe you can reasonably become what you want to. In a free market system if there is a demand for the career you yearn for, then by all means meet that demand with the supply of your labor.
In a free market that is how it works. I have however seen it fail for this reason.

Lets imagine a woman named Christy, she loves to collect CD's and share music with her friends. Christy out of her passion for music and CD's decides to open a music shop. She names it "Christy's CD Crib." Christy has no previous knowledge of how to run a business, but she has passion. Christy with the help of friends ans family opens her shop and after a year fails to break even. This is somewhat normal for a new business, it takes time to develop a customer base. Christy's after a year and a half decides she is loosing too much money and cant foot the bill anymore. So she has to fire the employees that are all her friends, and sell this place she has become so fond of.
Her critical mistake was this: the reason to go into business is to meet a demand with a supply. She did not do this, Christy in her passion open a business for herself. She was serving herself not a demand. This can only last while she foots the bill. She also needed to do some market research because sales of music albums from iTunes is off the charts. The convenience of downloading the music you want right now precedes driving to a brick and morter store to buy a CD, no matter how cool Christy is.

All this to get to a much greater issue, in a free market this scenario is possible. In a socialist, or communist market it is not. A few important things happened in this example. First Christy, no matter how ill researched had the choice left to her if she would like to open a business. The second is that she was allowed to fail, which is ridiculously important.
The basic law of economics is this "The allocation of scarce resources, that have alternative uses." The law implies that resources are limited, and they are. A resource can be land, labor, capital, and entrepreneurship. Three of those are self explanatory, capital is sometimes confusing to people. Yet it is just this: goods, or means to produce goods.
Now when Christy opened her "Christy's CD Crib" she was miss allocating scarce resources. (Resources include: her own entrepreneurship, the labor of her workers, the product itself, and the land/building her business was on/in.)

The free market operates best when all resources are being allocated correctly, to make a profit. If Christy was to decide her business was so important and it is a service that her town could not live without she could ask for a bailout. Here is why bailouts are completly the opposit to a free market. For one reason or another her CD business is failing, these resources should be allocated to something productive, not squandered. Yet her local government grants her bailout and she can continue to run her CD Crib. Now two problems immeadiatly immerge, first Christy is no longer the owner of Christy's CD Crib, her township is. Second she is no longer footing the bill for her failure, her neighbors are. So her business that she no longer owns is costing all her neighbors $10 a month. All the while tyeing up resources that could be put to better use elsewhere.
Without the ability to fail, the freedom to chose, and the freedom to privatly own, are lost.

When this happens on a large scale, say AIG the reprecussions on the economy are gigantic. Wonder how much of AIG's bill you are paying? The bailout of 150 Billion dollars can't be that much divided amoung all of America you say.

• Sept. 16: The government extends AIG a two-year loan of up to $85 billion, and gets a 79.9% stake in return.
• Oct. 8: Bailout loans increase to nearly $123 billion due to problems in AIG's securities-lending program.
• Nov. 9: The rescue package increases to $150 billion, including a new $40 billion federal investment.

150,000,000,000/300,000,000(the population of USA roughly) = $500

I don't know about you but im pretty fond of $500. Let them fail (nothing personal), i don't want to waste my resources on their failed company. I also don't want to be forced to pay this $500, but that is the power of government, socialist government. A Government of a free market economy trusts the people with their own resources, it's called private ownership. Socialism is known as public ownership(or government ownership.) Note that for the $85 billion in september the government gained a 79.9% stake in return, also know as purchasing a controling share in the company (only a 51% stake is needed for control.)
When the government owns something that means we all own it, all pay for it. So as AIG continues to fail we continue to pay for it, more and more.

That $500 i now have to give to AIG can no longer go toward my education, there are many other productive things i can do with $500. I could invest it at 5% in a money market account and in a year have $525 instead of $-500. A difference of $1,025.

We have to chose between a business failing or a people recessing to a dyeing economy i always pick a business failing. Lift your head up high make the tough decisions, be a free market man or woman. Don't pay for the loss of your freedoms, don't voulentarly(faliure to act is voulentairy) let the government control you. They have a name for not being free it's called slavery, socialism leads to slavery.
I was tought the American Dream was to chose your life, decide a career, go from rags to riches.
I did'nt realise the tough truth of the day is slavery.