Liquidate When Near Default

The federal government has a debt nearing $14.3 trillion. It is running a deficit of over $1.3 trillion per year. Its cash flow situation is terrible. It is only a few years given current projections when interest on the debt alone will consume most of current revenues. When a business faces an analogous situation, it will liquidate assets to pay the debt, cut spending so as to at least be break-even, and then perhaps will default if these moves don't stem the tide. The U.S. government should do the same. Would this solve the problem? You can see in the figure nearby that the U.S. government a great deal of land, 30 percent of the land in the United States. Even at very conservative estimates, a sale of land could pay the debt. Suppose the average price of the land is $1000 per acre; there are 650 million acres owned by the government. This means that selling all land at $1,000 an acre would bring in $650 billion. That is only 1/20 of the debt. How can the debt be paid without either defaulting or defaulting via inflation?

Free State Project

Are you familiar with the free state project? The idea is that libertarians would move to a state and become the dominant voting block. The project members voted on which state to begin with and selected New Hampshire.

"There's no better place for freedom-loving Americans than New Hampshire... In a vote that ended in September 2003, FSP participants chose New Hampshire because it has the lowest state and local tax burden in the continental U.S., the second-lowest level of dependence on federal spending in the U.S., a citizen legislature where state house representatives have not raised their $100 per year salary since 1889, the lowest crime levels in the U.S., a dynamic economy with plenty of jobs and investment, and a culture of individual responsibility indicated by, for example, an absence of seatbelt and helmet requirements for adults."

It is too bad Arizona was not selected. Weather is better and the golf is better. I would definitely choose to move to "free" Arizona. But, NH is too cold and snowy for me. Is it possible to begin the Az Free State Project? Could enough people join to place some pressure on the legislature and governor to move toward freedom?

Given the seeming inevitability of democracy to lead to more government and less freedom, is there any hope that liberty can be reached through democracy? If we look at the current crony capitalism of our democratic society and economy, is there an approach that can lead to more freedom rather than more government? We know that competition and free markets result in resources being allocated to their highest value and people purchasing at the lowest possible prices the goods and services they most desire. So, perhaps it is competition with the existing government that is necessary. Perhaps we might set up institutions that are substitutes for the statist institutions. Instead of using public schools, we organize private ones or some type of home schooling. Perhaps we use "bitcoins" or gold rather than Federal Reserve Notes. Are there other approaches?

Markets, morality and truth

In a recent post over at HHN Higgs writes

In economics, as in other areas of life, the pursuit and exploitation of truth depend on freedom. Every cognizant adult knows that virtually all politicians are habitual liars. Too few of us understand, however, that the free market itself is a grand generator of truth, and that, in general, government intrusion of any kind operates to substitute falsehood for this truth, with devastating consequences for the genuine flourishing of social and economic life.


This is, I think, a key component for a discussion about social interaction, individualism and collectivism.

Yesterday I attended the student Philosophy Club meeting at my institution. The topic was a debate - Is Capitalism Moral? I was intrigued to listen to students grapple with this important question.

What struck me was the absence of definitions of operative terms - capitalism, morality, criteria for evaluation . . . and

A remarkable misconception about self interest, organizations and interaction.

The students equated self interest with greed and used a false understanding of Adam Smith's invisible hand as the basis of their misunderstanding. Clearly non of the students had read The Wealth of Nations and, more striking, was the lack of awareness of his first book - The Theory of Moral Sentiments. This ignorance was remarkable in philosophy students, but that is another story.

The second misconception was the belief in corporations as evil malefactors that held monopoly power. Beyond a lack of understanding of monopoly, their comments showed a failure to understand Schumpeter and the power of competition in oligopolistc markets - think Coke and Pepsi and the result on price, quantity and product diversity in the soft drink market.

Finally, a strong confidence in the ability of collectivism was evident - the ability of central planners to improve what the students believed to be negative outcomes in our mixed economy.

While it is encouraging to hear young people interested in discussing this topic it is depressing to witness the result of interventionist ideology (that springs from media, education and government) on beliefs. This short meeting confirms the power that beliefs have in shaping what passes for analysis in young people (and old people) today.

Thoughts on Westboro Church

There is a potential tension in society when ideas come into conflict. This Conflict of Visions (Thomas Sowell) lies at the heart of both civil and tolerant discourse or action as well as violent, ideological, intolerant discourse and action.

A free society protects the rights of all, particularly to articulate divergent points of view, in fact freedom of speech is only necessary when the speech is so extreme that most would find the content and form offensive.

That said, the delicate balance between liberty and responsibility constantly challenges the participants in a free society.

This blog posting could not take place in North Korea.

The political system that emerges to confront conflicts of vision will leave the majority in a state of discontent. Whether the issue is special interest influence in governance (labor unions, military industrial complex, envirornmental activists, large business, etc) or the reaction of elected officials to the conflict, we have a process that is far superior in composition and outcome to the vast majority of the planet - if our biggest problem is labor union unrest or religious expression I suspect an overwhelming number of residents of the People's Democratic Republic of the Congo, Parguary, the country formerly known as Somalia, or 170 other nations would willingly trade their problems/discontents with the fortunate residents of the US.

That said, I wonder what responsibility we have to our predecessors to extent the life of our mostly free and mostly civil society.

Incentives matter

Haitians need permanent solutions, including jobs and education; but many now have no incentive to move.Ask people in these tent cities if they have been receiving regular aid and they will tend to tell you they have not. But, says Mr Bellerive, people always say that. He asked a woman he had seen receiving food the day before, who lives in a camp in the gardens of his quake-wrecked office, why she had said on television afterwards that she had received nothing. “Because it is the only way to make sure people will continue to help,” she replied. Tent dwellers, used to journalists and do-gooding foreigners, are now well-aware that they can play to the media.

Better a tent than a slum

A large but unknown number of people in the camps are choosing to stay in them. Life is better there than in the sprawling, gang-infested slums. Camp-dwellers pay no rent. Nor do they have to pay for sanitation, because latrines are often provided by the aid agencies, or clean water, since that is often supplied by the agencies or by the government. Medical services are also easier to find and, again, probably free, courtesy of agencies like UNICEF or charities like Médecins Sans Frontières. A cholera epidemic makes that all the more vital.

Nigel Fisher, who oversees the UN’s aid operations in Haiti, worries about this. Haitians need permanent solutions, including jobs and education; but many now have no incentive to move. Aid is filling a gap that should be filled by the Haitian state. Unless the government can take charge again, properly providing for its people, Haiti will remain chronically and disastrously addicted to foreign aid.

International views on capitalism

Taming Leviathan...A special report on the future of the state

“We are in a transition from a big state to a small state, and from a small society to a big society.”

The speaker?

A Republican presidential candidate in America?

David Cameron rallying Britain’s Tories?

Neither:

the speaker is supposedly China’s most highly regarded bureaucrat. Last year Ma Hong won the country’s national award for government innovation—a great coup for her department, which is trying to get more non-governmental organisations (NGOs) to take over parts of welfare, health and education services in the city of Shenzhen, just across the border from Hong Kong.

An excellent read . . .