Incompressible

Prices rise over time. Today, people call this general increase in prices, “inflation.” In the past, however, when the government created new money, people said the government was inflating . Whenever the government inflated the amount of money, there was a general rise in prices. Before we discuss inflation, it is important that we have a firm grasp on what money is. Before there was money, there was barter, or direct exchange – my wooden club for your piece of sharpened flint, or my goats for your daughter. Direct exchange is problematic because, among other things, you may not be able to find someone who wants to trade what you want for what you have. At some point, people began to engage in indirect exchange. I want bread and I have candles, but the baker doesn’t want candles. So, I ask the butcher if he wants some candles in exchange for some meat. If he agrees, I can exchange candles for meat. Then, I can exchange the meat for the bread that I actually want. The ...

Consider this, if every woman on planet earth has two children, the human population will essentially flatten to a constant (it would decline very slowly). For the sake of this discussion, let us define human survival as "replenishing the current population" - neither increasing nor decreasing it. Survival is achieved exactly when the human population does not decrease. On this view, let's think of two children as a woman's "expected contribution" to human survival. Of course, this is a fantastical criterion, but note that our genes are obviously hardwired to maximize reproductive success to assure survival. If they were not so hardwired, we would not be here today. For each woman who chooses not to contribute her two children, some other women must pick up this burden if the human population is to be replenished. If half of all women were to choose to have no children, the other reproductive half would have to have 4 children on average in order to ensure h...

A common misconception about finance and economics is that those who give a loan are abusing (hence the term "usury") the borrower by charging him interest. However, it is easy to see that this notion is both naive and wrong. Let's say I have $100 in my pocket. I can either keep the money in my pocket or spend it on something. Now, let's say you come to me and ask to borrow $100 for one month and I agree. However, if I give that $100 over to you, then for one month (until you repay), if I see something I want to buy - perhaps on a clearance sale that will be gone in a day - I have to forgo that purchase because you are using my money for the time being. Once the month is up, you repay me my $100 but it has cost me to allow you to use the money. Perhaps I could have saved $20 on a pair of boots that were marked down but sold before you gave me my money back. In that case, I have borne what economists call  opportunity cost  because I lost an opportunity to save some mo...

Here is  an article  discussing a book on a fascinating event in the history of WWI. This event underlines the fact that war is solely the consequence of the existence of the state. The state  is  war. I am reading Machiavelli's  The Prince  and he inadvertently makes the case that the state is war in section XIV "What a Prince Should Do Regarding the Military", where he says: Thus a prince should have no other object, nor any other thought, nor take anything else as his art but that of war and its orders and discipline; for that is the only art which is of concern to one who commands. And it is of such virtue that not only does it maintain those who have been born princes but many times it enables men of private fortune to rise to that rank; and on the contrary, one sees that when princes have thought more of amenities than of arms, they have lost their states. And the first cause that makes you lose it is the neglect of this art; and the cause that enables you to acquir...

Butler Shafer - a columnist at LewRockwell.com -  described  his disgust while staying in San Francisco during a Navy Blue Angels demonstration in an article written several weeks back. The first time I read it, I felt he was being a bit of a whiner - almost everybody loves to see stunt airplane performances... so what if it irritates Butler Shafer? But one of the things he discusses is the double-standard between rules on private sector and government air safety. There is a double-standard between private and government performance of stunts,  or  levelling of houses  in residential neighborhoods with jet fighter aircraft during routine training flights. If this had been a private jet, we would read something like, "Nike Corporate Jet Kills US Immigrant Family" and we would hear of lawsuits being filed against Nike, Leer, and so on. But since this was the Marines, why, the father  ought  to forgive the pilot for saving his own skin while letting the jet hurtle, unguided, int...

Here is a  disturbing article  from today's New York Times. Obama is apparently really planning a New New Deal (I'm crossing my fingers and hoping this is all very exaggerated). But I wanted to talk about one specific line from the article, "His address on Saturday followed the report on Friday indicating that the country lost 533,000 jobs in November alone, bringing the total number of jobs lost over the past year to nearly 2 million." So where did these jobs go? Did they just evaporate into thin air? There were 2 MILLION things that one year ago needed to be done, but today no one can afford to pay someone to do. This is very difficult for me to believe! To me, it seems to be fallacious to speak of jobs as if they are some kind of product, e.g. "The government vows to create X new jobs by this time next year" or, as above, "Y jobs were lost during the last Z months." Jobs are neither a good or service, they are a contract between an employer and ...

Anthony Gregory takes on the Federal Reserve in this terse but to-the-point  article . In a few short paragraphs, he summarizes the arguments which debunk the myth that the Federal Reserve is something other than the engine of corporate fascism, the enemy of all free people. Here's a quote: "Then there is the idea that the Fed keeps the booms and busts in line. This is another total reversal of the truth. In a normal market setting, savings and inflation would be in harmony. The willingness of some to save and the demand of others for credit would work out to an equilibrium and produce the market interest rate. The Fed’s injection of new money into the system undoes this delicate balance. People get cheap credit and invest wildly in projects for the future, but those low rates no longer correspond to high savings. The consumers are still spending like crazy, the investors are investing like mad. This is what causes booms and eventually busts. When years later, people have not ...