06 August 2009

Romer on inflation

The White House economic advisor, Christina Romer, reveals philosophy on the underlying cause of inflation (here).
She signaled little concern about inflation, adding that deflation was a greater worry, in her view.

"Inflation doesn't just come from nowhere. It comes from an economy overheating," Romer said. "And we are so far from overheating I think we have a long time before we really have to worry about inflation."
A brief jaunt around the web (for instance, at wikipedia) should convince you that government spending and/or government printing of money is at least a strong "inflationary pressure".

Economists come in different flavors, I know:
Money supply is also thought to play a major role in determining moderate levels of inflation, although there are differences of opinion on how important it is. Monetarist economists believe that the link is very strong; Keynesian economists, by contrast, typically emphasize the role of aggregate demand in the economy rather than the money supply in determining inflation. That is, for Keynesians, the money supply is only one determinant of aggregate demand.
Turns out that if you look at the cause of aggregate demand, you will find this:
Demand-pull inflation is caused by increases in aggregate demand due to increased private and government spending, etc.
So, (if you subscribe to Keynesian economics) government spending will increase aggregate demand which will cause inflation (specifically demand-pull inflation), never mind the direct influence of monetary supply on inflation. Granted, the overall inflation rate may not explode since we will probably experience some "supply shock" through all this recession, but Romer is (IMHO) either ridiculously inept or collusional to redefine the root causes of inflation as she has here.

If you are not convinced, consider the experience of a chief federal reserve officer on his recent trip to China:

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

[sarcasim] Maybe China (who holds 6.7% of all U.S. treasury securities) should have a sit down with Romer who could assure them that printing money has nothing at all to do with the value of the U.S. dollar--it all depends on how "hot" the economy is. [/sarcasm]

13 July 2009

A New Supreme Court Justice? A New Hero.

My new political hero, Senator John Cornyn, makes his opening remarks concerning Judge Sotomayor's approval to the Supreme Court. Speaking as a member of the judiciary committee and a former Texas Supreme Court Justice, he teaches principles of legislation, the Judicial branch, and outlines two paths a judge can follow--questioning which Judge Sotomayor would follow. You can read his remarks here. You will understand more clearly what a Supreme Court Justice is obligated to do.

A key principle when discussing the approval of a new court justice is that our Constitutional Framers provided a government of the people and by the people. We, The People, are to make the laws. In order for this to be the case, We, The People, must be able to collectively choose our laws, which we do in a representative fashion. Since Senators have a limited term, as do members of the House, we can elect those who share our views and reject those who don't, and in that way, govern ourselves--choosing representatives who will make laws according to our collective voice. This ensures that our laws will ultimately represent the will of the people, be it good or evil. They will only be as good and just as We, The People, really are. The role of a Judge then, is not to legislate from the bench, insulated from public opinion and vote (as with a Supreme Court Justice whose position is for life). The creating of laws is reserved to the people, and their representative group. Instead, a Justice is to apply the law, and where unclear, seek to judge according to the intent of the law. They are not to change the law, or to create new laws. They are not to limit our constitutional freedoms (by which constitution their authority is provided), but are to be limited by that constitution. With that in mind, we are better prepared to evaluate the statements and opinions of Judge Sotomayor in order to know whether or not she would vote to uphold the constitution and honor the voice of the people (i.e. laws passed by the congress) or if she would trample under foot We the People and the Constitution by which our government and the Judgment seat legitimately derives its power.

Listen to John Cornyn's remarks here:

04 July 2009

Global Cooling?

5 years later, evidence is still evidence

From 1993 to 2003 rising upper ocean temperatures were used to substantiate rising global temperature claims which were predicted to continue monotonically (one direction, without hitting a maximum or minimum) and indefinitely. Al Gore and his followers attribute increases in global temperature to increasing levels of carbon dioxide. Global levels of CO2 (which plants thrive on) have risen since 2003, no thanks to Al Gore--"Since the release of An Inconvenient Truth, Gore’s energy consumption has increased from an average of 16,200 kWh per month in 2005, to 18,400 kWh per month in 2006." (http://www.businessweek.com/innovate/NussbaumOnDesign/archives/2007/02/gores_carbon_fo.html). Despite this, ocean temperatures have actually decreased as the earth's radiative balance has been negative from 2003-2008. In other words, based on the indicated research (see below) the earth has radiated more heat into space than it has absorbed from the sun from 2003-2008 indicating a decrease in global temperature over this time period, and disproving the monotonic global warming trend allegedly resulting from atmospheric carbon dioxide levels (see Al Gore's, "An Inconvenient Truth" for more on these claims. Beware of shady science).

Basis of using ocean temperatures

Since the oceans are a much better thermal sink than the atmosphere, and thus a better indicator of the earth's temperature (for example 2.6 meters of sea water has the same capacity to hold and store heat as the entire atmosphere above it), ocean temperature readings give a better idea of global warming/cooling trends than air temperatures. So, if you're looking to know if the earth is actually absorbing more energy than it is radiating back into space--which will ultimately determine long term temperature trends--we should focus study on ocean temperatures. In any case please read my sources as listed below. I plan to investigate the peer-reviewed articles upon which these claims (as I've presented them in summary) are based. Feel free to join me in verifying these claims by checking the sources in Energy and the Environment and other cited sources. For your convenience I'm pasting in the sources below, but here are the articles that originally caught my interest.

Article: A little bit of this and a little bit of that, with a little rant added in.
By Mike Goad

Article: The Global Warming Hypothesis and Ocean Heat
6 05 2009; Guest Post By William DiPuccio

Political Application

Before we pass legislation that will undermine the economic prosperity of a country already facing great economic distress, shouldn't we be sure we are addressing a real problem, i.e. global warming, with our political moves.

References from articles

Cazenave, A., et al., 2008: “Sea level budget over 2003-2008: A reevaluation from GRACE space gravimetry, satellite altimetry and Argo,” Glob. Planet. Change, doi:10.1016/j.gloplacha.2008.10.004.

Douglass, D.H., J.R. Christy, 2009: “Limits on CO2 climate forcing from recent temperature data of Earth.” Energy & Environment, Vol. 20, No. 1&2, 178-189 (13).

Hansen, J., L. Nazarenko, R. Ruedy, Mki. Sato, J. Willis, A. Del Genio, D. Koch, A. Lacis, K. Lo, S. Menon, T. Novakov, Ju. Perlwitz, G. Russell, G.A. Schmidt, and N. Tausnev, 2005: “Earth’s energy imbalance: Confirmation and implications.” Science, 308, 1431-1435.

IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change[Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M.Tignor and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. See www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-spm.pdf

Levitus, S., J.I. Antonov, J. Wang, T.L. Delworth, K.W. Dixon, and A.J. Broccoli, 2001: “Anthropogenic warming of Earth’s climate system.” Science, 292, 267-268.

Loehle, Craig, 2009: “Cooling of the global ocean since 2003.″ Energy & Environment, Vol. 20, No. 1&2, 101-104(4).

Pielke Sr., R.A., 2008: “A broader view of the role of humans in the climate system.” Physics Today, 61, Vol. 11, 54-55.

Pielke Sr., R.A., 2003: “Heat storage within the Earth system.” Bulletin of the American Meteorological Society, 84, 331-335.

Pielke Sr., R.A., “A Litmus Test For Global Warming – A Much Overdue Requirement“, climatesci.org, April 4, 2007.

Pielke Sr., R.A., “Update On A Comparison Of Upper Ocean Heat Content Changes With The GISS Model Predictions“, climatesci.org, Feb. 9, 2009.

Willis, J.K., D. Roemmich, and B. Cornuelle, 2004: “Interannual variability in upper ocean heat content, temperature, and thermosteric expansion on global scales.” J. Geophys. Res., 109, C12036.

Willis, J. K., 2008: “Is it Me, or Did the Oceans Cool?”, U.S. CLIVAR, Sept, 2008, Vol. 6, No. 2.

* William DiPuccio was a weather forecaster for the U.S. Navy, and a Meteorological/Radiosonde Technician for the National Weather Service. More recently, he served as head of the science department for St. Nicholas Orthodox School in Akron, Ohio (closed in 2006). He continues to write science curriculum, publish articles, and conduct science camps.

28 June 2009

Why healthcare will become more socialized

The previous post was enlightening in many ways, very well written. As I read it, it occurred to me that there is one reason the proposed plan will never happen.

Allowing the free market to operate more with healthcare may improve healthcare, but it would eliminate tons of jobs.

It will never be popular to propose a plan that eliminates jobs, even if it is for the greater good, we are too short-minded and impatient.

27 June 2009

Health Care Reform: A Solution


In a burst of enlightenment and drawing upon discussions in which I've previously taken part, I've formulated the concept for a solution to the health care and health insurance problem. While this may seem simple, it employs the necessary principles to force prices to their appropriate market levels, and all this without a government takeover.


There are two key components I bring to the table: First, let the market bring prices down by empowering patients to make all decisions, including their choice of doctor, the procedures they will receive (provided they will pay the price), medicine they will purchase and so on. Second, since insurance companies are allegedly responsible for much of the health care fiasco, reduce the role they play in order to reduce the problems they create. In reality, this is a business model as much as it is a solution. Also, I do not claim that these ideas are original.

How to make things cheap

Competition. Competition for business, competing for customers--that's what drives prices down in a free market--not policies, not regulation, not higher taxes. When businesses compete for customers, they will lower their prices to a value somewhere between what it costs them to provide the service and the price at which you will pay for it--and you're only willing to pay as much as the lowest bidder offering the service you desire at an acceptable level of quality.

The dilemma with insurance and government

There are four principle entities in the market. Computer purchase examples of each: A) When you buy a computer for yourself, with your own money, you look for a good price and a good computer, because you will be left to deal with both. Your choice with determine your satisfaction with the product and the dent left in your bank account. B) If you get a computer but are not paying for it (as with college students whose parents agree to pay for any computer their child chooses) then you will get a good computer, but not necessarily at the best price. C) If you are (like the parents in this scenario) buying for someone else, you are most concerned about the effect on your bank account, not the quality. So, if you actually communicate with your child, you may encourage them to shop carefully, or set a price cap. D) If you are buying a computer for someone else, using money from someone else, you neither care very much about the price or the performance and quality of the computer. You're not going to shop around.

Governments fall into class (D), they are purchasing services they don't use with someone else's money, so they are not concerned with price or quality. This leads us to wonder, so how would a government health care plan give us high quality service at a low price when this group has the least incentive for either low prices or high quality?

Insurance companies are somewhat more difficult to classify, but essentially, once they have you as a customer and your payments become their money, they are in class (C), paying for the care of others with their money. Whatever you don't spend, they keep. Your insurance policy is similar to a parent's love for their child (although likely less generous). It is the only reason you get anything. Because an insurance policy is not as complete and generous as a parent's love, they are concerned more about profits than the quality of your service. They will not insure that you get the best service, but it will be at a reasonable price to themselves. They do have overhead costs though, so insurance companies still add extra cost to health care. Because you pay their salaries, prices will approach the highest level you are willing to pay while profits fill the gap between their costs for your care and your payments.

In summary, government is definitely not the solution and insurance companies appear as a necessary evil.

Addressing the dilemma

So how do you do it? How can you drive prices lower while improving quality (which is the banner of the President Obama's government plan)? Two things: 1) Patients should be able to pay more money to receive better procedures. This is a necessary part of any free market. 2) Reduce the role of insurance companies in providing health care. If their overhead costs are part of the problem, reduce their role. Instead of complete plans for all medical needs, we can simply create savings accounts (independently or as part of some more comprehensive insurance plan) to cover our predictable health care needs. (Wouldn't that motivate us to live more healthily if at the end of the year, we could spend whatever excess money was available in our account). For the less common yet financially devastating health problems, we can seek out providers who will insure us for only the high cost treatments. Of course, our level of coverage will be commensurate with the agreement we enter at the start, which will reflect the price we are willing to pay. You only pay for the coverage you want. That would be a good business model: pay for the coverage you want. You want maternity insurance, choose that. If you want cancer insurance including radiation, chemotherapy and options for a surgery of your choice, check the box. If you don't want coverage for treatments under $1000, then check the box and don't pay for it. In this way, you are only insured for what you want and what you can afford. You can use your own savings to cover procedures not included in your plan. You may decide to forego a new car to afford better treatment options in your insurance plan. You will make the choices. Since you will be paying directly for most routine doctor visits, you will be totally free to choose your doctor at his or her going rates. You will determine the kinds of choices you have for insured treatments when you establish your insurance plan with your insurance provider, if you choose to purchase a plan.


In order to minimize costs and maximize the quality of health care, you must maximize the choices of the consumer. You can only truly and permanently increase their choices as you increase their accountability. Otherwise, you will face shortages and rationing. If you want more choices in your health care, search out companies that offer flexible health care policies that give your more choices. As consumer choice increases, prices will fall and quality will improve. That will all occur naturally through the work of Adam Smith's invisible hand.

26 June 2009

Don't trust the president, White House says

Friday, June 19, 2009

U.S. Sen. John Cornyn, R-Texas, made the following statement after the Associated Press reported that the White House said "the president's rhetoric shouldn't be taken literally" on health care.

"On Monday, the President ‘promised' the American people, ‘If you like your health care plan, you'll be able to keep your health care plan, period.' Today, the White House told the American people that they cannot, and should not, take President Obama at his word."

"A promise that can't be taken literally is not a promise at all. Americans with private health insurance want to keep it - they literally want to keep the insurance they have - and they should be able to do so. The American people like President Obama personally, and they want to be able to trust him. But when his own White House admits that the President's rhetoric is detached from reality, the President erodes that trust."

20 June 2009

Congressman Michael McCaul on the Economy

The following is from the economy section of Michael McCaul's web page. He is the congressman representing the 10th District of Texas. Find out who your congressman is by using the link in the Tool Box of the sidebar for writing your congressman. Then, instead of writing him, just google his/her name to find his/her web page.

Quoting Michael McCaul's Web Page:

The economy continues to be our nation's primary challenge. There is no doubt that something needs to be done to rebuild our nation’s economic engines. But history has proven that we cannot spend, borrow, and tax our way to prosperity.

Giving away your hard-earned tax dollars to companies that made poor and often unethical business decisions, and spending your money on pork projects that don’t create jobs only serves to grow our national debt. Economists share my concern that we are headed toward hyperinflation: prices will go up, the value of the dollar will decline, and interest rates on credit cards and mortgages will skyrocket. If we continue down this path, it appears that our children will be worse off than we are or their grandparents were. It’s not supposed to be this way.

I support a budget plan that will move Americans toward prosperity without spending record amounts of taxpayer dollars and without increasing the tax burden on families and businesses. Especially during a recession, our priority should be to help businesses succeed by creating a business-friendly environment with reasonable tax burdens and responsible regulations that won’t stifle job creation. Minimizing the tax burden on families will allow them greater flexibility to make ends meet. Lowering the Capital Gains tax will encourage private investment in our financial markets.

At the beginning of 2008, I stopped requesting earmarks. Earmarks are valuable tools for our communities, but the system is susceptible to waste, fraud, and abuse. I have asked the Democratic leadership to make the earmark process transparent for every American to see. The system should be 100% transparent as to the sponsor and recipient and subject to an up or down vote in the House. Until that happens, I continue to ask my colleagues on both sides of the aisle to join me and not take part in the system.

I will continue to stand up for your tax dollars and cast my votes in favor of economic prosperity.

17 June 2009

Health Care Reform

As House Democrats have begun to work with President Obama to bring the American people a Health Care Reform plan--a government option--socialized health care--freedom conscious citizens have expressed deep concern. If this forming plan becomes law, it will arguably represent the largest step toward socialism in United States history.

In a simple barter economy, two parties exchanges goods and/or services of equal value. In a (free) market, goods and services are brought to the market and exchanged for other goods and services of an equal value, although the trade is done indirectly by using "money" as an intermediate good. Health care is one of many goods and services available in our market. If health care is classified as a human right rather than as a service, then when health care is provided universally without regard for individual contributions to the market then the market is no longer free. When the distribution of goods and services is controlled centrally, rather than by the individual choices of the citizenry, the free market is lost being replaced with a communist-style centrally directed "market." The foundation of choice and accountability in a free market--such that you can get from the market something generally regarded as equal to what you bring to it-- is essential to the foundation for a prosperous economy and for human productivity.

Communist countries like The People's Republic of China and Vietnam have recognized the benefits of a free market and have "reduced state control of the economy in order to stimulate growth" (wikipedia). In our frenzied economic and manipulating political climate, President Obama and other politicians have increased political control over the economy, delaying a natural economic recovery from ails produced by previous government interventions in the economy (such as policies to increase home ownership beyond natural market levels, resulting in the excess demand and finally the housing price fallout of 2006-2009) as well as perhaps many other causes.

Finally, in order to preserve (and in some cases reclaim) our constitutional freedoms and to promote national prosperity, it is our opportunity to become aware of congressional proceedings and to become involved in learning for ourselves and then educating the public mind, awakening in every American a love for freedom, choice and accountability.

As we come to accept and act upon these values, we will strengthen home, family, state and country, preserving for future generations the freedoms and liberties won by our forefathers.

15 June 2009

HR 1207 - Why Audit the Fed?

Ronald's Report is political, and if you want to contribute, let Ronald's Report know and you can contribute articles.

The Federal Reserve works in secrecy without governmental oversight and having all the power to dictate the value of our money, and how it holds its value over time. HR 1207 is a step in the right direction to end the evils of the Federal Reserve. The Fed can create trillions of dollars and we don't even know where it is spent. Congress doesn't currently have the right to know. That's what HR1207 will provide--the right for Congress to audit the Fed in order to know what the Federal Reserve is doing with trillions of dollars, and to know what deals are being made with foreign countries with regards to our currency. Visit Campaign for Liberty to know more.

Currently, HR 1207 has enough sponsors to go to be discussed and voted on in Congress. Once it passes there, more effort will need to be made to get it through the Senate where Lobbyists are already (and always) hard at work.

21 April 2009

Artificial controls of "compensation"

[warning: this post engages in a little cynicism and sarcasm]

Geithner and co. are trying to figure out ways to match long-term performance and compensation (article here) :
Geithner in his testimony also offered new details on the government’s plans for rules on executive pay for firms that have received taxpayer aid.

The administration plans in coming weeks to release guidelines on compensation limits. The new regulations will be effective immediately, while there also will be a 60-day comment period.

“We will engage in a thorough review of this issue,” Geithner said. “I anticipate that we will look for ways to orient compensation towards long-term performance.” (my emphasis)

I had this really novel idea: when a company goes bankrupt, the executives stop getting compensation. So, an executive/company that looks to the long-term (such as Wells-Fargo who didn't buy many get-rich quick toxic assets) doesn't go bankrupt and companies that engage in shady, short-term practices go bankrupt when the cows come home and times get difficult. So, executives that looked to long-term performance still have a company AND increasing opportunites to do business as short-termers go under. This plan very effectively matches compensation with long-term performance.

The only problem with this idea is that you sort of have to let companies go bankrupt for it to work.

I'm sure Geithner and co. can find a better way through piles of well thought-out regulation that will have no unintended consequences--the kind of ironclad regulation that even the personal lawyers of high-paid executives won't be able to find loopholes in.

18 March 2009

Prophesy Fulfilled

A few phrases could have summarized my feelings about government bailouts.

That which the government funds, the government will control.

Last week, I read in the paper that President Obama got emotional and upset in a news conference (echoing public sentiment) that bailout money from the government (which is from the people) was going to executive bonuses--millions of dollars for AIG executives. So, he is heroically going to try to do whatever he can to get the executives to not receive the bonuses and to prevent the companies from using future bailout installments for executive bonuses.

First the government funds the companies, then it will move towards controlling them. This is the path towards socialism.

If the government was a business, it would be bankrupt. Any businessman would be foolish to put all of its investments in failing businesses, yet, that is what the bailout packages have done--they have invested American tax dollars (whether through direct taxation or indirect taxation (by inflating the money supply--devaluing all of the saved US currency around the world)). It is not a sound investment. The companies that required bailouts are unfit for the market and should have failed and likely someday will. In viable companies--in companies that are fit for the market, bonuses are given based on performance. Obviously AIG has found that their new business strategy of getting profits without a producing products is worth a reward. Is it any wonder that AIG is not cutting it? Is there not wisdom in letting unfit companies fail. Is there not wisdom letting the economy reject the unprofitable companies.

What does this mean to us? This means part of your earnings go to support government selected companies (and executive) which are the same companies that you already rejected by rejecting their inferior products. This means that government is expanding its umbrella of governance ever further into the "private" sector. This represents a large step toward socialism. Socialism represents governmental control and reduced freedom. Socialism represents the end of the American Freedoms and ideals that have helped to prosper us for over 200 years.