Wednesday, October 30, 2013

Drugs, Murder & the Conspiracy of Ignorance by Rick Kelo

Drugs, Murder & the Conspiracy of Ignorance 
by Rick Kelo

We know one thing about America: there are more gun murders than other developed countries.  We don't often consider why.  Not in an honest way.  There's a professor at Harvard named Chris Argyris.  He drafted a famous theory on learning called single & double loop learning and it goes like this: humans look at ways to improve the existing system, but rarely step back and ask if this we should even be doing this in the first place.  We rarely look at our underlying assumptions and revisit them to see if they are correct.
So let's look at murder.  The real problem of the murder rate in America is the War on Drugs and the violent street gangs it has spawned.  I'm going to explain this situation in a way that scarcely anyone has considered it.  
First let's start with the visible effects: murder & gun violence.  Gang related homicides involve the use of a gun 92% of the time. We've long known that murderers have some unusual statistics about them, but scarcely have we examined the backgrounds of the murdervictims:
Source DOJ
So, from above we know that if you look at the major proportion of murders the real problem of murder in America is criminal on criminal violence.  But why?  Let's go back to the War on Drugs.  Look at the very  name.  Wars are waged to save our lives against a threat that has come to destroy us!  Now let's call the "War on Drugs" what it really is: the Prohibition on Drugs.
The situation becomes real clear, real quick when you look at our choices to outlaw drugs from that perspective.  Prohibition.  A prohibition on drugs creates a barrier to entry.  In order to operate in that industry you must now have airplanes, speed boats, a distribution network, etc.  So the effect of a prohibition is that it gives a monopoly to drug cartels.  But this is nothing new to America, when we had a prohibition on alcohol it gave a monopoly to the Mafia.  We had the same spectacle of street violence then that we do now with the drug prohibition.
Now let's look one step further at the monopoly of violent street gangs that has occurred due to the drug prohibition.  50.7% of prisoners in federal prisons are there on drug related offenses.  It is in this system that we institutionalize people and provide a breeding ground for gangs.
As for the real purpose of the drug prohibition, to reduce drug usage, do you feel it has worked?  Drugs are available in every city in America.  Also the cost of having a shipment of drugs intercepted puts economic pressure on drug cartels to make the biggest amount of money possible for each drug shipment since the risk is the same every time.  So instead of smuggling bulky drugs like marijuana its more economical to invent and import harder and harder drugs where the sale price is much higher per square foot of shipping space needed.  No different than how America saw the rise of moonshine during Prohibition.  Has anyone tried to sell you moonshine in your lifetime now?
Then there's drug usage.  The drug prohibition does not seem to have reduced demand; in fact, it seems to have increased it.  In Holland, where marijuana is legal to be used by adults the drug usage rate is half what it is in America.
What would be different if drugs were legal?
  • Violence would fall sharply because people would no longer be forced to settle disputes themselves.
  • People would be able to buy drugs for which they're sure of the quality.
  • The monopoly on drug sales given to cartels would end.
  • Because of this the price of drugs would fall.
  • America's prison population would fall by more than half.
  • The murder rate would fall sharply, as would the amount of murders committed with guns.
  • Hard drugs would begin to disappear.
  • Drug usage rates would fall.

Tuesday, October 29, 2013

Police on Gun Control: 96% consensus By Rick Kelo

Police on Gun Control: 96% consensus 
By Rick Kelo

Recently 15,000 police officers were surveyed about their opinion on the proposed gun control legislation being debated in Congress.  The survey was conducted by; a niche law enforcement site with over 20% of all the police officers in America as members.
The survey touched on major areas of the current gun debate, and police views on whether these laws would be effective at doing what their political proponents claim they are designed to do.  Results are cited below including police opinions on assault weapon bans, magazine size restrictions, private gun sales conducted without background checks and more.  The complete survey is available for review here.
95% of police believe a 10 round magazine law would not reduce violent crime.

11% of police believe eliminating private gun sales that don't require background checks would lower crime. Page 4 of survey. 

91% of police believe a ban on assault weapons would have no impact on crime or increase crime. Page 3 of survey.

33% of police say mental health checks reduce mass shootings. Page 6 of survey.

Police opinions on how to best reduce mass shootings. Page 12 of survey results.

Monday, October 28, 2013

Global poverty is falling, so what's the problem?

This is an interesting article.  It talks about what parts of the world account for the overall reduction in poverty.  Its in China & India where we have seen the lot of the ordinary person improve recently.  But why?
And the authors come to an interesting conclusion:
"What's the answer? Growth. In the 1960s and 70s India was infamously stuck in a rut of slow growth, a mediocre 2 percent a year often. Then, in the 1980s, it began opening up, and in the 1990s New Delhi scrapped much of the old socialist set of controls. By the mid-2000s, India was growing at around 9 percent."
Underlying the discussion about eliminating poverty is the fact that - in all of human history - there's never been a more effective method for reducing poverty than the free market system.

Friday, October 25, 2013

Guns vs. murder: Facts, Statistics, Data By Rick Kelo

Guns vs. murder: Facts, Statistics, Data 
By Rick Kelo

The hard questions:
  • Why are gun ownership rates higher in rural areas, but murder higher in urban areas?
  • Why are gun ownership rates highest among whites, but murder rates highest among blacks?
  • How can there exist countries with very high gun ownership rates but very low murder rates if they correlate (Switzerland, Israel, Finland, New Zealand)?
  • How can there exist countries with gun bans or very low gun ownership rates but very high murder rates if they correlate (Mexico, Russia, the British Virgin Islands)?
  • Can Europe's low murder rate be attributed to its strict gun control laws?

Correlation: The degree to which two or more attributes or measurements on the same group of elements show a tendency to vary together.
Now how does correlation come into play with gun control?  I will look at guns & crime inside America and as America compares to other nations.  
There have been a few articles written like this that attempt to gerrymander their graphs to small X & Y ranges to make differences across the spectrum seem more pronounced.  I will not do so.  I also will include all the basic data needed for a statistically analysis including the r-squared value.  
So here's what I found as it relates to America by itself:
  • The higher gun ownership, the lower the murder rate.
  • The higher gun ownership, the lower your chance of being murdered by a gun.
This is a graph of all 50 states + DC.  Gun ownership % on the bottom.  Y axis is either murders on the first graph and below it murders committed by a gun.  The black line shows you that the more guns the lower the murder rate and the fewer murderers used a gun.

As it relates to Europe it is a fact that the murder rate in Europe is lower relative to America's.  What can we infer from this?  Is their a causal relationship between Europe's strict gun control laws and its low murder rate?  Here's what I found:
  1. The murder rate in Europe was already at an all time low BEFORE gun control laws were enacted.  These gun control measures had no impact on reducing murder.  
  2. Once the UK enacted its gun ban, murders went up.  Going to use someone else’s graph for this one but verified their numbers at:

Now, let’s go one final step further.  Many articles on this topic cite the International Homicide Rate so here it is from Wikipedia here it is laid along side Wikipedia’s gun ownership page.  The finding is that more guns in your country, less murder.  Worldwide:

From Harvard Journal of Law & Public Policy: "We assert a political causation for the observed correlation that nations with stringent gun controls tend to have much higher murder rates than nations that allow guns. The political causation is that nations which have violence problems tend to adopt severe gun controls, but these do not reduce violence."

The conclusion: With gun availability and murder there is a negative correlation, meaning where there are the most guns murder rates are the lowest, and where there are the least guns murder rates are the highest.  What I find is that the greater the presence of guns the less murder.  However, not to the point of statistical significance where we can say with any certainty that guns reduce murders.  However, the inverse is also true: it is impossible to make a scientific claim that the presence of guns is a cause of homicide or increases the prevalence of homicide.


Thursday, October 24, 2013

Stolen German Gold & an invisible $11 trillion (AKA Why No Inflation?) By Rick Kelo

Stolen German Gold & an invisible $11 trillion (AKA Why No Inflation?)
By Rick Kelo

Ever been to Area 51?  I haven't, but this feels like a story just about equivalent to one from there.  Except it involves money... and power... and a ton (actually 1,500 TONS of gold) ... and the assumption those never corrupt.  Here goes: so one of the foundational concepts in economics goes: print money, cause inflation.  And print money we have.  But where's the inflation?  There have been some minor upticks in consumer prices but there hasn't been any real inflation to speak of.  Why though?  Paul Krugman believes there is no inflation because his editorial column is genius and everyone else is an idiot.  The TEA Party believes Barack Obama had the Secret Service kidnap the inflation.  The truth may be even stranger?!
Somewhere just south of $13 trillion dollars.  That was the total cumulative cost of all the money spent, borrowed or committed in the US economic bail-out according to Bloomberg.  Out of that total about $11 trillion went through the banking system.  But how much exited that system is another question.  

Firstly, we know that for the first time in American history the Federal Reserve is printing money, giving it to banks, then incentivizing the banks to NOT put it in circulation by paying them interest to keep it at the Fed.  The technical term is "Excess Reserves," which is banker terminology for "We are Dumb-Asses."  I have attached (left) a graph of the growth of Excess Reserves as provided by the St. Louis Fed.
Now pictured next is the monetary base which is currency & banking reserves combined.  So if this quantity of money is printed by the Fed, but a good portion is never put into circulation then it won't have any impact on prices.  Right?  However a good deal of it has gone into circulation, yet consumer prices haven't changed.  So what gives?

Where is the inflation?

The theories are broad and numerous:
  • It is labor based and there are no wage pressures upward because of the large supply of cheap labor in the global labor markets (read: outsourcing)
  • Because the recovery has been weak inflation is weak
  • Business is sitting on too much cash and not spending it so its their fault
  • There's no inflation because the velocity of money is so unexplainably low
  • And so on they go

What do I think?
$11 trillion passed into the banking system.  So there's no doubt there's been a huge inflation of the money supply.  There's also no doubt there's been a puzzling absence of inflation in consumer prices but that's not everywhere.  But that doesn't mean that inflation is not occurring.  It just means it hasn't yet worked its way into consumer goods.  And I believe the Federal Reserve is far more aware of it than they will ever make public.  

Enter The Theory of The Stolen Gold
Little known to almost everyone the Federal Reserve babysits the gold reserves of other nations for them.  Why?  Well why not I suppose.  Germany is the world's second largest holder of gold.  A few months ago the Germans decided it was high time they conduct a physical inventory (called an audit) of their gold.  Since it is all just sitting inside a bank vault at the Federal Reserve it should be easy enough to count, right?  Wrong.  The Federal Reserve refused to admit the Germany auditors.  
Rightly pissed off the German's said... presumably in German... "Screw you, we're taking our gold back home to Germany!"  
To which the Federal Reserve replied: "Jawhol.  We'll have it ready in 2020."  
Say what?!  Why not tomorrow?  Could the impossible be true?  Did the Federal Reserve spend Germany's money?  That's not terribly likely, but perhaps they loaned it out.  Also a grave breach of their obligations, but the only explanation as to why the Federal Reserve would not surrender the gold was that they don't have it.  Well well... let's circle back to inflation shall we.

What do I think (Part 2)?
Let's think of where we've seen prices inflate so far.  If we could only follow that $11 trillion perhaps we could see where it had gone.  Wherever it's gone its surely driven up prices in those areas.  So where have we seen this price inflation so far?  
  • Gold prices have very recently been at a record high.  
  • The stock prices in the US stock markets are at record levels.  
  • The price of oil is sitting around $100/barrel.

Why?  Well one idea is that the $11 trillion that entered the banking system has only been lent out to businesses or stayed institutional.  That it hasn't been put into consumer circulation yet through the normal avenue of home loans.  So if you're a business what do you do with that money?  You either invest it (read the stock market) or buy some type of capital good.  Suppose, for a moment, that the Federal Reserve is well aware of massive price inflation occurring in some areas of the economy but not yet in others.  Perhaps they've decided to try to stop that inflation from spilling out of these areas by acting in the only area they could: gold prices.  So you loan out some of that German gold to the various investment firms, and they buy assets like stocks.  The effect is that the price of gold drops, which it has recently, and the price of other asset classes rise, which they have as well recently.
Only that leaves dangling above our heads the sword of Damocles... when all this price inflation finally filters into consumer goods will the Fed be able to reverse it?  Given how much Excess Reserves will have to be depleted before a benefit is felt it could be a rough ride in the next couple years ahead.

Wednesday, October 23, 2013

Trickle-down economics

John Maynard Keynes says in “The Means to Prosperity” writes that: “taxation may be so high as to defeat its object… Given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the Budget.”

It is not widely known that demand side economics calls for tax cuts in certain circumstances just like supply side (aka "trickle-down") economics.

The term “trickle down economics” is not generally used in a way that examines the actual economic theory.  It is mostly used as a political catch phrase echoed by opponents to tax cuts.  And it is a political catch phrase used by people interested in how wealth is redistributed not in how wealth is created.  

This nation is at a point where it is facing both the specter of increased taxes, increased inflation, and sustained unemployment.  It is simply inevitable that the massive debt spending under the Obama & Bush administrations must be paid for somehow.  The best way to pay for any national debt is to grow the economy – to make more money; raising taxes is never preferable as it slows growth.

Any time we discuss cutting taxes the topic immediately degenerates into very moralistic class warfare, since 50% of the nation pays no income tax.  It is the perception that a tax reduction to the half that pays taxes only benefits that side.  The fear is that cutting taxes on the rich will force the government to cut social programs, or have to raise taxes on the poor and so on. 

In truth, though, the economy is not a zero sum system.  Cutting taxes raises prosperity in the whole system, and it has a multiplicative effect.  If the system were zero sum, then economic growth wouldn’t happen and we’d have the same size economy we had a year before, a decade before, and so on. 

Cutting taxes doesn’t just increase everyone’s wealth by the amount of the tax cut either.  Take for example the 1920s: the US enacted across the board tax cuts, but including cuts for millionaires.  When we did that the amount of tax revenue coming in increased so much the country was able to pay down the national debt by 25%.

The confusion between debating a tax cut versus debating an entire economic system is quite wide-spread.  It sounds a lot easier to rally the masses for a politician to say they are against an intangible bugaboo like "supply side economics" or "trickle-down" than to say they are in favor of raising taxes.

The whole use of that term in populist vernacular is a flawed attempt, in nearly every instance, to avoid a policy based discussion on tax policy. 

Milton Friedman: “Keep your eye on one thing and one thing only: how much government is spending, because that’s the true tax.  If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the form of inflation or in the form of borrowing. The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income, and if you do that, you can stop worrying about the debt.”

Tuesday, October 22, 2013

Human Freedom: the untold cause of it all by Rick Kelo

Human Freedom: the untold cause of it all 
by Rick Kelo

Rousseau: "Man is born free, and everywhere he is in chains."

I disagree with Rousseau.  Most of the history of mankind I don't believe man has been born free.  When we look back on all of human history until just very recently the person at the top of society told the rest what to do.  Its only very recently that the common citizen dictates their demands to the government.  Why the change?
Modern man (from a biological standpoint) came into existence about 200,000 years ago.  But historians seem to think that it was 50,000 years ago that man began behaving modernly (had developed culture, writing, etc).  Then some 8,000 years ago we learned how to plant crops which started us down the road to a sedentary lifestyle.  Now a bunch of us could live in a relatively small space instead of having to wander all over creation.  Here's an abbreviated summary of where we've been:

DespotismTribalJuntaSlavery or BarterMetals
TheocracyMagistratesDivine Right
Feudal SocietyMartial LawSovereigntyManorialism, GuildsCoin
ConfederacyCity StatesOligarchyMercantile, GuildsBank Note
TotalitarianismMartial LawSingle PartyPlanned EconomyMoney, Bank Note
Republic, LiberalismFederalSeparation of PowersFree MarketCredit, Paper, Gold Standard

Its only in the last couple hundred years that people actually became free; most people; the average man.  That's just an eye-drop in the lake of time when you think about 50,000 years.  Sure the few rulers of their societies have always been pretty much free to do what they wanted whether they were the government rulers or the clergy.  But the average person never was until just recently.
I see only one reason: the rise of capitalism.  Until free markets emerged the common man was the serf, the peasant, the slave.  BUT under capitalism he became the consumer.  Never before had the common man had the power to shape the world around him through his economic freedom.  Now he decides what shall be manufactured, what quality and quantity, and so on.  PLUS the consumer also decides who he will make into a millionaire.  He votes with his dollars and chooses the person who best understands his position and provides the product that meets him there.   
This was, from my examination, the turning point.  No longer were the masses treated like they were too stupid to know what was "best".  No longer did they need a noble, or a chief, or a priest or some other totalitarian figure to tell them what they needed. And I think it is that taste of freedom that has propelled mankind forward.  The power of hundreds of millions of people finally free to each pursue their own individual self interests as they see fit.  And with that taste of economic freedom mankind demanded he be given his other civil liberties to go along with the first civil liberty he ever gained: economic independence.

Monday, October 21, 2013

Fact-Free Crusades: Gun Control

This particular article is about proposed gun control legislation, and I will pull a few excerpts below.  But it raises an excellent overall question: People argue political discussions based on assumptions, emotions, and rhetoric.  Is that ever going to convince someone on the other side of the discussion from you?  Why not try facts?

Here are a couple extracts from Sowell's article:

  • Have the media outlets that you follow ever even mentioned that some studies have produced evidence that murder rates tend to be higher in places with tight gun-control laws?
  • Many people who have never fired a gun in their lives feel qualified to impose legal restrictions that can be fatal to others.
  • Criminals remain armed in disregard of such laws
  • No one talks about is that guns are used to defend lives as well as to take lives.
  • Leniency toward criminals has long been part of the pattern of gun-control zealots on both sides of the Atlantic.

Defense vs. Social Programs as you've NEVER seen it before

Debt is spiraling out of control and slowing the growth of the US economy.  Most of America has accepted the fact that government spending must be cut. The real issue is in what way?  The debate seems to center between cutting military spending and cutting spending on social programs.  So, without prejudging based on which party rhetoric supports which position, I hope seeing the organized the facts & data allows people to consider only the merits of each case. 
One must make their own conclusion from the facts.

Some things at issue are:
  1. The War on Terror is now the longest running war in American history.
  2. Foreign wars are expensive.
  3. Social programs have grown without check for some time now.
  4. There are 46 million Americans on food stamps, 4 million on welfare, and an additional 73 welfare programs beyond those two.

The facts around the size of the military:
  1. Defense spending is 19% of the national budget.
  2. The wars in Iraq and Afghanistan from 2001 to 2013 have cost $1.3 trillion.
  3. The cost of the War on Terror has been 4.4% of federal spending in that time period.  
  4. The military has decreased in size almost 50% since 1982.  
  5. The Army went from 172 combat battalions to 100; the Navy from 536 ships to 288; the Air Force from 4,355 fighters to 1,990. 

The facts around social programs are:
  1. Social programs account for 61% of the national budget.
  2. There are 75 welfare programs (listed here).
  3. According to the 2010 US Census 110 million Americans are taking some form of government welfare payment out of these 75 programs.

My conclusions from this are that our social programs were designed so liberally that even with 2/3 of the budget of the wealthiest nation on the Earth they're not solvent.  No matter how we might feel about the topic of caring for the disadvantaged the sheer size and growth of this area is an unavoidable fact.

As far as it relates to defense there's certainly an opportunity to gain some savings to the federal budget as the last war wraps down.  However, there are fewer fund available proportional to the spending problem caused by social programs.  From a Constitutional stand-point protecting the nation is government's first job.

Sunday, October 20, 2013

America's 77 Welfare Programs Listed by Rick Kelo

America's 77 Welfare Programs Listed by Rick Kelo

List of Welfare Programs in America in 2013:
Cash Programs:
  1. Supplemental Security Income.
  2. Earned Income Tax Credit
  3. Refundable Child Credit.
  4. Temporary Assistance to Needy Families.
  5. Title IV–E Foster Care.
  6. Title IV–E Adoption Assistance.
  7. General Assistance to Indians.
  8. Assets for Independence.
Medical Programs:
  1. Medicaid.
  2. State Children’s Health Insurance Program.
  3. Indian Health Services.
  4. Consolidated Health Centers/ Community Health Centers.
  5. Maternal and Child Health.
  6. Healthy Start.
  7. Refundable Premiums and Out of Pocket Subsidies under the Patient Protection and Affordable Health Care Act. 
Food Programs:
  1. Food Stamps Program.
  2. School Lunch Program.
  3. Women, Infant and Children Food Program.
  4. School Breakfast.
  5. Child Care Food Program.
  6. Nutrition Program for the Elderly, Nutrition Service Incentives.
  7. Summer Food Service Program.
  8. Commodity Supplemental  Food Program.
  9. Temporary Emergency Food Program.
  10. Needy Families.
  11. Farmer’s Market Nutrition Program.
  12. Special Milk Program.
Housing Programs:
  1. Section 8 Housing (HUD).
  2. Public Housing (HUD).
  3. State Housing Expenditures.
  4. Home Investment Partnership Program (HUD).
  5. Homeless Assistance Grants (HUD).
  6. Rural Housing Insurance Fund (Agriculture).
  7. Rural Housing Service (Agriculture).
  8. Housing for the Elderly (HUD).
  9. Native American Housing Block Grants (HUD).
  10. Other Assisted Housing Programs (HUD).
  11. Housing for Persons with Disabilities (HUD).
Energy / Utility Programs:
  1. Low Income Home Energy Assistance.
  2. Universal Service Fund—Subsidized Phone Service for Low Income Persons.
  3. Weatherization.
Education Programs:
  1. Pell Grants.
  2. Title I Grants to Local Education Authorities.
  3. Special Programs for Disadvantaged (TRIO).
  4. Supplemental Education Opportunity Grants.
  5. Migrant Education.
  6. Gear-Up.
  7. Education for Homeless Children and Youth.
  8. Leveraging Educational Assistance Partnership (LEAP) Program.
  9. Even Start
Training Programs:
  1. Job Corps.
  2. Youth Opportunity Grants (under the Workforce Investment Act).
  3. Adult Employment and Training (under the Workforce Investment Act).
  4. Senior Community Service Employment.
  5. Food Stamp Employment and Training Program.
  6. Migrant Training.
  7. YouthBuild.
  8. Native American Training.
  1. Title XX Social Services Block Grant.
  2. Community Service Block Grant.
  3. Social Services for Refugees,  Asylees, and Humanitarian Cases.
  4. Title III Aging Americans Act.
  5. Legal Services Block Grant.
  6. Family Planning.
  7. Emergency Food and Shelter.
  8. Healthy Marriage and Responsible Fatherhood Grants.
  9. Americorps VISTA.
Child Care & Development Programs:
  1. Headstart.
  2. Childcare and Child Development Block Grant.
  3. Child Care Block Grant (under Temporary Assistance to Needy Families Program).
Community Development:
  1. Community Development Block Grant.
  2. Economic Development Administration.
  3. Appalachian Regional Development.
  4. Empowerment Zones, Enterprise Communities, Renewal Communities.
  5. Urban Development Block Grant