A Future of Debt Slavery

debt-slavery

On July 6, Mises.org published another article on the Greek crisis, this time suggesting how the taxpayers of the country are heading towards what they termed “Debt Slavery”. The idea stems from the actions that the Greek government and the IMF have taken by “kicking the can down the road”.

The IMF referred to the Greek default as “in arrears”, instead of calling it what it really is when they missed their payment on their debt. This is just another political ploy that does not address the problem for what it is. Additionally, the Greek government continues to dangerously ignore the plain facts of their crisis, as banks continue to close and depositors are unable to gain access to all of their money. These are just some of the consequences to their reckless actions.

But, after all of these decisions are made and more debt is incurred, the future taxpayers are left “on the hook” for their irrational actions. And as it now stands, Greece owes the ECB more money than the entire deposits of the Greek banking system. You can see how this is going to turn out and how this is becoming a generational problem. A problem that will enslave future generations into a debt trap that they had no part in. The Greek citizens today are claiming theirs now, and leaving it to the future generations figure out the solutions.

Read the Mises Daily article: Greek Taxpayers Facing a Future of Debt Slavery

The Anti-Capitalist Culture

anti-capitalist-protest

On July 8th, Mises.org published an article regarding the Greek financial crisis and made the suggestion that the biggest problem that Greece suffers from is an “anti-capitalist culture”. The suggestion was made that the culture in that country is one that embraces fiscal and economic policies and practices that are contrary to sound economics. Culturally, the people of Greece live in a way (with the effects of socialized government) that stand in the face of the classic capitalism.

We can see that attitude beginning to permeate further into our own American culture, where capitalism has to be defended over and over again, despite being responsible for the increased standard of living that Americans enjoy today. I have noticed over my life time this idea becoming more and more of a mainstream idea. But, the fact remains that capitalism is the only system known to man that has rescued from poverty and improved the lives of common people. Socialism, which is the favorite alternative of opponents of capitalism does not accomplish that feat. However, we hear from our gracious leaders how capitalism destroys society and that it only benefits certain small segments of the population. Nothing can be further from the truth. In fact, socialism is the system that produces that very outcome. But, never mind the proven history of societies and nations when you want to advance a false narrative.

While the United States is not yet close to becoming a Greece, the same narrative that has plighted the Greek culture today, that of capitalism being an enemy of the common man, could work to destroy that system that allows man to pursue his own separate interests to the full ability that he chooses. And I invite you to read the article at Mises.org.

Read the Mises Daily article: Greece’s Biggest Problem Is Its Anti-Capitalist Culture

Briefs: The Economics of Pokemon®

pokemon
Pokemon® is a game that I know little about. My six year old son, however knows a lot about it and talks frequently about the phenomenon of rare Pokemon® cards. He kept talking about how these rare cards cost a lot of money. I seized the opportunity to teach him his first lesson on economics: the basic lesson on price, using the principles of supply and demand. I first asked him he knew why these rare cards cost so much money (as if I expected him to say yes). He obviously said that he did not know why and so I proceeded to explain why.

I explained to him that the price of anything (in this case the price of rare Pokemon® cards) is controlled by the how much of it is available to buy (supply) and number of people who want to buy it (demand). This, of course assumes that we are operating in a free market economy. When there are a lot of people that want to buy something of which there is little supply of, the price will tend to increase and that something will eventually be considered to be “expensive”. Conversely, if there are a few people want something that there is a great abundance of, the price will decrease and that something will eventually be considered to be “inexpensive” or even “cheap”. Rare Pokemon® cards (and anything desired that is considered rare) fall into the category of something many people want of which there is little of. In this case desired rare items, people are willing to pay more for something that there is little supply of, because they know that they are competing with a lot of other people that want the same limited amount of the desired items. People who are selling the items know this and are incentivized to sell the items for an increased price. This is the reason why rare items are generally expensive in price. Consumers and their free choices determine the price of items.

It’s not too difficult to understand this idea and how the price of something is affected by supply and demand. This applies not only to rare Pokemon® cards, but also to virtually every good and service that is not regulated by governments and organizations. Even my six year old gets it now…I think.

Briefs: Incentive

incentive

An important factor in the study of economics is incentive. Incentive is defined as a thing that motivates an someone to perform an specific action. Obviously, there are different types or categories of incentives. Social or moral incentives are built on a persons character, where the motivation is the desire to do what is deemed to be the right thing to do. In economics, incentives are technically referred to as remunerative incentives, where the motivation is for some material benefit, usually money. Some economic incentives include profit, reduced prices, and wages.

An employee’s incentive to work is generally the expectation of a wage or salary. His incentive to work harder at his job or to take on extra responsibility is the expectation of a raise, or some other extra material benefit (perhaps even keeping his job altogether). He wouldn’t accept the proposition of the extra work without the expectation of a extra future benefit. And the employer knows that, also. The incentive for him to even sacrifice other leisure activities to further his education is the expectation of even more future material benefit, usually in the form of money, but maybe in the form of job security or leverage to find another job, if he is let go of his current job. With any economic incentive, there is an expectation of a future benefit (usually material) to the one the incentive applies to. The incentive of a sole business owner to hire a person to manage the finances of the business is the expectation that it will free up some of his time to expand his business or to focus on the current customers to maintain his clients. The incentive of a business owner to hire 40 full-time workers is expectation of the profit that those 40 workers will earn for the business, in one capacity or the other.

Incentive is one of the backbones of free market economics, as opposed to a socialist economic model where incentive is reduced or eliminated and the spiral of inefficiencies and waste rule the day.

Economics is life.