Israel to increase budget deficit; risk economy for buying votes

Today’s Israel Hayom Newspaper: Deficit Widening goes to Government for Vote.

Netanyahu, the fiscal conservative, has decided that it’s a good idea to spend even more money that Israel doesn’t have. Why? Because people want stuff without paying for it. See this clip below from the newspaper.

This is a poll of Israeli citizens. From top to bottom:

Haviv Banai (55): I am against raising taxes. It’s best if they take more money from the tycoons so we wouldn’t have to go into debt.

Eli Lavi (58): If the State needs more money, it’s better to raise taxes rather than widen the deficit.

Doctor David Yishai (57): The economic situation is good and we can relax a bit. We need widen the deficit and not raise taxes.

Doctor Eldad Berkowitz (48): We must not under any circumstances widen the deficit. Be we must not raise taxes either on those who are buckling under the pressure.

Sarah Keidan (56): We don’t need to widen the deficit, but we can raise taxes on the rich and high income earners.

Ra’anan Kahta (33): The State needs to honor its payments and we can only do that by widening the deficit or raising taxes. The treasury will need to find creative ways of getting more money into its coffers.

What’s astounding here is that nobody suggests that perhaps the government should just spend less money. It’s an option that doesn’t even exist according to everyone polled. You either raise taxes or go into debt. If the State says it needs money, then whatever – it needs money and we cannot dispute that.

What about halving the salaries of every Knesset Member? They earn what, 44,000 a month or something? They can’t survive on 22,000? how about every government employee has to pay for his own car and gasoline, just like I do, instead of the government paying for it. How about they pay for their own flights to cockamaymee events where they blow air at people? How about we eliminate the entire Shlav Bet army program from new immigrants where we waste time doing nothing for six months at 50,000 shekels a worthless soldier?

How about limiting the number of ministers in the government? How much do they make a month for doing nothing? Nobody here thinks of these things, because they are all government slaves.

Netanyahu is doing this now because he wants the people yelling in the streets for things from the government to shut up, so instead of cutting his salary, he’s endangering everybody’s income. What happens when you go too deep into debt? Ask Greece. They seem to be doing fine.

Advertisements

Get rid of Stanley Fischer and end the Bank of Israel

Economic Policy Journal led me to an article in the Times of Israel talking about how African central bankers are on their way to Israel to figure out why our economy isn’t as screwed up as everyone else’s. The answer is, we don’t borrow as much as everyone else. Instead, we just tax Israeli citizens to the point that they think something’s wrong if their mortgage payments go down for some reason.

Many of the average Israelis who I talk to from time to time when economic crisis becomes the subject line believe that we are safe because we have this genius at the helm whose name is Stanley Fisher who is all-knowing and omnipotent and can save us from any crisis. It’s human nature to attribute all the good to one tangible point that you can see. This is the essence of the emotion that leads to idolatry.

There is nothing amazing about Stanley Fisher, except for the fact that he refuses to use his power of printing money AS MUCH as other central bankers. He’s relatively better than most central bankers precisely because he does very little. So what I can tell these Africans who are checking out Israel’s central bank is:

  1. Don’t have a central bank.
  2. If you insist on having one, then just let it collect dust and don’t use it.

Let’s do an analogy here: After the Continental Army won the Revolutionary War, American colonists were begging for George Washington to be their new king. We think that’s crazy, but they knew no better. Get rid of King George, install a new King George. The idea of separation of powers was foreign to them. Even Alexander Hamilton, the guy on the $10 bill, wanted a king, and criticized the Constitution for lacking a provision for a monarch. Hamilton, by the way, was also a proponent of a Central Bank of the United States. Coincidence?

Washington, thank God, refused to be King, and instead we got the Constitution and separation of powers.

Fast forward to today and we want one guy to be in charge of everybody’s money. We think that if we don’t have this one guy in charge, everything will be anarchy. Just like the colonists thought that if you had separation of powers, you’d have anarchy. So we want to crown King Fisher as head of our central bank. We cannot conceive of not having a central bank, just like the Colonists could not conceive of not having a King.

How would money work without a central bank? Very simple. Competition. Different firms would rise coining different monies, and the one that is most trustworthy with the best purchasing power would be the one used in the end. It would probably end up being backed by some metal, if not be that metal itself. No one would use a fiat paper currency if they had the choice not to use it.

So…get rid of legal tender laws, take taxes off gold and silver, and let people use them as money like mankind has been doing for thousands of years. You don’t even have to “get rid” of the central bank of Israel per se. You just have to take away its monopoly control over the money supply and let competitors put Fischer out of business.

Fischer, by the way, was Ben Bernanke’s thesis adviser at MIT. Now the student controls the value of the dollar. The teacher controls the value of the shekel.

I say forget them both. I own gold and silver, something Ben and Stan can’t print away into oblivion.

Ari Abramowitz & Jeremy Gimpel betraying their belief in Feiglin for a knesset seat

I don’t normally use the word “betray” because it’s very strongly negative. It sounds bad. But this is what it seems that Abramowitz and Gimpel are doing by running in the Bayit Yehudi (Jewish Home) list for Knesset. See their event here. I wouldn’t come out with such strong words if the two were not Feiglin supporters to begin with. I wouldn’t say that anyone currently in Bayit Yehudi is “betraying” anyone, because they never believed in Jewish Leadership in the first place. They believe in complaining while earning big tax money salaries.

I don’t know if Ari and Jeremy were Likud members in the past, but I’ve seen Ari at Feiglin events and I’ve heard of a loose connection between him and Manhigut Yehudit. But if they were, they are no longer. All they need, says the event, are 1,000 signatures of people to join the Bayit Hehudi party to secure their names on the list.

These 1,000 people they are looking for will get them something like the 4th or 5th slot on the list, maximum. They are also 1,000 people who will not be able to vote for Jewish Leadership in the Likud party, the party that actually rules the country. 1,000 more Likud members would be an enormous push in the direction of real Jewish Leadership for Israel. Ari and Jeremy could make that happen, but they have decided that getting a realistic slot on the Likud list is next to impossible for them, so they can more easily get that tax money Knesset Member salary (since that’s all it would be, as Bayit Yehudi is a totally irrelevant party) by joining an irrelevant party.

How irrelevant? Well, the Ulpana was just evacuated, and the “Jewish Home” party did nothing about it. Its leader is still in the government. So would Ari and Jeremy had they been on the list this time. So much for saving Zionism.

Ari, Jeremy – stop wasting your influence on your own political ambitions. Use it to bring those thousand people you need in to Likud instead of into your own political futures. You believe in Manhigut Yehudit, and you believe in Moshe Feiglin. So do the right thing and ditch the sector mentality.

Nobody has a right to health care

I was watching Bloomberg News yesterday. I would embed the video but I can’t find it after a 20 minute archive search. The video snippet was an interview of some guy that was saying that the Supreme Court would not overturn Obamacare. It wasn’t his prediction that interested me, but rather his principle. During the interview, he said something like this:

Once we decide that health care is a fundamental right, then implementing it is only a question of finances.

He is correct of course. If health care is a right, then government has the responsibility of providing it. The game then becomes how. The problem is his premise. Health care is not a right. The reason health care is not a right is that it requires somebody else’s services, and nobody has any right to anybody else’s services.

Suppose there are not enough doctors to provide enough health care services to everyone. If everyone has a right to health care, then by extension the government can force people to become doctors who do not want to be doctors. If everyone has a right to health care, then the government should make statistics regarding how many doctors the State needs to treat X amount of people. Factor in population growth, and medical schools will be forced to graduate a certain quota of doctors at minimum to provide for everyone else’s right to health care. If they fail to meet this quota, the administration should be put in prison for not providing for other people’s fundamental right to health care. Universities, by extension, will be forced to have X students take pre-med courses. If they do not meet their quota, the will have to force students who do not want to take pre-med courses, to indeed take them. If they don’t, these students should go to prison, because they refuse to provide for other people’s fundamental right to health care.

You can see here that assuming health care to be a fundamental right interferes with the actual fundamental right to liberty. People actually DO have a right to be free, and not imprisoned because they do not want to provide for other people’s health care.

Life, liberty, and equal treatment under the law are the only fundamental rights we have. They are fundamental rights because we were all created equal by God, and God created us to be His servants, not man’s servant. The right to one’s life is not the right to take something from someone else. It’s the right to not have something taken from you.

The right to one’s liberty is not a right to take something from someone else. It’s the right to not have something taken from you.

The supposed “right” to health care is indeed the right to take something from someone else. If we assume health care to be a right, then life and liberty are gone.

Health care is a service. It must be payed for voluntarily like any other service.

 

233% custom embroidered teddy bear tax

Long ago, around February or so when my daughter Dafna Betty was born, my cousin Ginny decided to send us a gift from America. We told her not to do anything that crazy, but instead to buy something from Israel, because sending something from America is asking for trouble. A few weeks later I got a package slip notifying me that something was waiting for me at the post office and that I would have to pay 274 shekels to see what it was. That’s about $70.

I didn’t even bother to even attempt to pick it up because I wasn’t going to pay the government anything for my right to accept baby gifts, certainly not 274 shekels. And where the heck did that number come from anyway? Who decided it was 274, and why?

Eventually my landlord, with whom I share a mailbox, told me that the post office was getting angry because I wasn’t even acknowledging that I owed them 274 shekels, and that I should tell them what to do with the gift. I responded that I really didn’t care what they did with it, I’m not paying them anything.

Eventually, I had to go to the post office to pick up my glasses I ordered from China for $10 which work great. Glasses are about 20 times more expensive here, money I’d rather not spend. I got lambasted at the post office by the woman who told me I was taking up room in her post office because I never picked up my other package. I said I didn’t want the other package. She asked why. I said because I don’t want to pay the customs fees. I didn’t even know what was in the package or who sent it.

How it works in Israel is that if you feel the government has wronged you, you can fax in a complaint to an office about why you should not have been required to pay the customs fees. If they feel like giving you the time of day, they will send you a refund. I’m sure this works great. Nevertheless, I didn’t attempt to use this system.

Today I got a phone call from my mother in law who informed me that the gift was in fact two stuffed teddy bears embroidered with the names Tzitzia and Netanya, one for each of my daughters.

Their names are Tzivia and Dafna, but close enough. (Both were born in Netanya so Ginny got that right. And I in no way am demeaning the gifts. In fact, I can’t wait to pick them up when I get to the US because now there’s a story behind them. When Dafna asks me why she has a bear with the name Netanya, I can tell her that she was born in Netanya, and she’ll think that’s pretty cool. No one else has a teddy bear indicating their birth city.) My guess is they’re worth about $30 for the custom embroidery. So the 274 shekels would constitute roughly a 233% custom embroidered teddy bear tariff.

Well, I guess the Israeli government has to try and rip me off for my teddy bear importation. They do have a lot of $100 Katyusha rockets to shoot down with $1 million precision guided missiles. Somebody’s gotta pay for that. May as well take it out on the damn bears.

Hey, at least our budget’s balanced…more or less.

Why the bond bubble will be the final bubble

When I was a kid, maybe 6 years old, my mom got me these giant balloons. I mean huge…huge balloons. It took me maybe 30 minutes to blow the biggest one up. I remember I was sitting in the living room and the balloon was on my legs which were up on the coffee table. I was sitting on a blue couch with flowers in Kendall, Florida. All the sudden I heard the loudest balloon explosion of my life to this day. It reverberated in my ears, and my balloon was gone. I was too stunned by the noise to react.

On March 10, 2000, the Nasdaq bubble popped at 5132.52. That was the highest it ever got, and it’s never even gotten near coming back. The cause of the Nasdaq bubble was the Federal Reserve under Alan Greenspan.

The Fed fueled the Nasdaq bubble by buying government debt for cash it invented out of nothing. That cash was stored in big banks like Goldman Sachs, which then used that cash to buy tech stocks.

Sometime in December 2007, the housing bubble popped. The cause of the housing bubble was the Federal Reserve under Ben Bernanke.

The Fed fueled the Housing bubble by buying government debt for cash it invented out of nothing. That cash was used to subsidize mortgage loans for people who could not afford them. These people used that cash to buy mortgages, which then crashed when these same people defaulted on said mortgages.

Sometime in 2012 or 2013, the debt bubble will burst. The debt bubble was the cause, the actual fuel used for both the Nasdaq bubble and the housing bubble. Without the Fed’s ability to buy government debt with money they invented, neither of those bubbles would have happened.

But each time the bubbles popped, government used its own debt to reinflate the economy. Stimulus, subsidies, what have you. Treasury yields are the lowest in history. The price of bonds is the highest in history. This bubble is not just one bubble – it is a combination of every single bubble since the Fed was born in 1913. It is the bubble that has caused every other bubble we’ve ever had, the bubble that engulfs other bubbles and gets bigger every time a smaller bubble pops.

When this blows, the world’s eardrums will shatter. And this time they won’t be able to use debt to reinflate it.

How would the Eurozone function under a gold standard?

How the Eurozone functions now:

  1. Government of Country A wants money to bribe citizens of A for votes.
  2. Government A goes into debt by selling bonds, and gives money to people of A, and gets reelected.
  3. Government A needs more money, so it sells more bonds, and gives it to people of A.
  4. Government A sells so many bonds that debt surpasses GDP of A. People get worried that A will not pay bonds. Interest rates rise.
  5. ECB buys hundreds of billions in bonds of A to “stabilize the system”, and gives A the money it printed to buy them, in exchange for going even deeper into debt.
  6. A defaults, ECB stops giving them Euros.
  7. A leaves the Euro and prints its own currency.
  8. Currency A plummets in value because nobody else wants it. People of A have nothing to exchange for goods and services. They starve and riot.

Debt is encouraged in a fiat system because in the back of their minds, investors always know the central bank will guarantee the bonds, enabling countries to go so deep into debt that they will never be able to pay it back. How would it work under a gold standard?

  1. Government of B wants to bribe its citizens for votes.
  2. Government A goes into debt by selling bonds for gold, gives gold to people of A, and gets reelected.
  3. Government A needs more gold, so it sells more bonds. But they can’t sell as much since investors are trying to conserve gold rather than keep lending it to A. Interest rates rise.
  4. Investors in A’s bonds are literally running out of gold. They stop buying bonds in order to conserve gold for other purposes.
  5. ECB does not buy any bonds either since ECB does not exist. Gold is money and it is spread around, given in exchange for goods and services.
  6. A’s debt is large, but manageable, because nobody allowed them to go too deep into debt in an attempt to conserve their gold reserves.
  7. A cuts its budget, stops borrowing gold, and begins to pay back its debt in gold by exchanging goods and services for gold. Life is harder, but the budget is eventually balanced and the debt is repaid.
  8. In the next election, people of A elect fiscal conservatives who understand that it is a bad idea to go too deep into debt.