Posted on 10/18/2008 6:58:57 PM PDT by RKBA Democrat
You are recognizing the difference between credit cards and charge cards, aren’t you?
Let me posit two very different ways of doing business, the capitalist American way, and the communist Soviet way, during the Cold War.
America paid its productive scientists well, and the better they performed, the more they were paid. However, this soon reaches the point of diminishing returns, when more money reaches a “marginal” state. That is, if someone is being paid $500k a year, yet how much more motivated will they be if offered a bonus of $1000? Probably much less than someone who earns only $30k a year.
Russia, however, knew that it could never match what America paid its scientists, so it did the opposite: it started by utterly impoverishing them.
When all you have to eat every day is two thin bowls of vegetable soup and a slice of black bread with a lump of butter on it, you can be extremely motivated to work hard just for a luxury like a cooked potato.
Things like having a blanket on your bed when it is cold out, a pair of boots without any holes in their soles, glorious woolen socks, etc., can be powerful motivators.
Different ways of doing business, capitalist and socialist.
Obama, being a socialist, is far more concerned with “equality” than results, to the point where both success and failure are discouraged, in favor of mediocrity. Unfortunately, add to that the fact that socialist systems invariably demand progressively more resources, while providing fewer and fewer services in exchange for them, and you start to see a severe problem.
That is, Obama is *more* concerned about reducing the wealth of the wealthy, via taxes, than actually increasing tax revenues, which he would hope is the side effect. Al Gore once referred to the wealthy as “the winners of life’s lottery”, so Obama is not unique in this way.
At the same time, Obama imagines the poor to be “losers”, whose lives are also unsuccessful because they are below average, and must be elevated, whether they deserve it or not. This is the fundamental assumption of welfare. Not, surprisingly, “to help people to help themselves”, but solely to normalize them to the rest of society.
No distinction is made for creativity, hard work, talent, or anything like that, because humans are not seen as essentially different from herd animals. As long as everybody does the same thing, it is good, whether it is happily grazing, or running off a cliff. What is not good are those who stray and act independently, no matter what they do.
This is why socialists of all types get utterly thrilled with large numbers of people doing group exercises together, all eating in the same cafeteria together, all sleeping in large barracks together, all wearing uniforms, etc. Oddly enough, they adore the uniformity of the military, and frequently try their social experiments on the military; while at the same time utterly despising them as people.
An important example of socialism often touted by socialists is Sweden, but they neglect to mention that only half the Swedish economy was ever socialized. The profitable arms industry was outside of socialist rules, which was the only way socialism could function for so long, as the socialist run half of their economy was in ruins.
But it continued to greedily consume more and more national resources until even the arms industry could no longer support it. So finally, their socialist Prime Minister, Olaf Palme, decided to kill the goose that laid the golden eggs, and socialize the arms industry as well. The long suffering arms industry had enough, and Palme was assassinated by a violent lunatic, likely at their behest.
Palme’s great sin, typical of socialists, is that they have zero pattern recognition. It is beyond their ken to even imagine that socialism just doesn’t work, ever. Anywhere.
Well, the current economic crisis is finally forcing the obvious, that additional spending will not cure the problem, instead it will just make it worse. But neither the Republicans nor Democrats yet realize this simple fact.
In Obama’s case, there just won’t be more money to spend, and nobody will be willing to subsidize US debt anymore, so he will try inflation, just decreeing that money exists, but inflation will exactly match every new dollar he creates, just like during Jimmy Carter’s time. That failing, and with taxes far beyond the Laffer curve already, he will try some kind of wealth confiscation scheme, like a tax on *having* wealth, not just new income.
That will be disastrous, because the vast majority of wealth isn’t liquid, it is leveraged investment. Bill Gates only has $58 billion in Microsoft stock. But if he ever begins to sell his stock, the price will drop so fast that he will lose $5B for every $100M he is paid. And in the process, he will wipe out the fortunes of numerous other billionaires and millionaires.
In fact, Gates’ charity is designed to be a buffer for his fortune. It can only, must only, deplete 10% of its value every year, but this prevents a catastrophic fall in stock price. In addition, it gives him a whopping big tax write off.
But all Obama sees is that “Bill Gates has $58B that I want to spend.”
Uh. Yeah. I worked for such an institution for a long time.
Whether or not socialism "works" depends on what exactly it's supposed to do. Socialism is a way of filching people's capital for other people's benefit. As such, it works very well until the capital being filched either leaves or is depleted.
In many fields, there are two key price levels: an upper level above which new investment is worthwhile, and a lower price level below which even existing investment is no longer worth using. In a free market, prices will tend to be close to the upper level, since people will invest until it ceases to be worthwhile. If the government sets prices by fiat (necessary for a single-payer system) it can force prices to be just above the lower level. This will work until more investment is needed, whereupon prices will have to increase to a level significantly beyond the old upper threshold in order to encourage sufficient investment to get things going again.
For example, in medicine, the upper threshold for doctors' wages would be the point where uncommitted people would think it worthwhile to go to medical school. The lower level is the point at which even someone with medical training would likely decide he'd rather work elsewhere. If the price is set between the upper and lower levels, existing doctors will remain in practice until they retire, but no new doctors will replace them when they do. Things will work fine until too many doctors retire, but when they do it will be necessary to spend a lot of money to encourage people to go to medical school to replace them.
Whether or not socialism "works" while it's leeching off the fruit of productive labors, it is certainly effective at what it does.
Socialism actually does work in one specific circumstance, when everything needed for survival has to be rationed. However, when anything is in such abundance that it does not have to be rationed, socialism breaks down, because it is inherently less efficient.
This puts socialists in the uncomfortable position of having to be pessimists in an inherently optimistic country. They have to argue that “we are running out”, that “there is not enough”, and that “we are going to have to learn to do with less.” They cannot agree to plenitude, because with abundance, there is no need for socialist anything.
I like to point out every now and then that democracy’s most powerful selling point is not freedom and liberty. It is efficiency, the best known way to use the decision making process. Coincidentally, freedom and liberty are side effects of this efficiency, helping to keep it efficient.
Importantly, this efficiency can be seen, even by uneducated, rural peasants. Its hallmark is voting. In China a few years ago, a national TV station ran a game show that demonstrated voting. Within a few days, despite a strong prohibition against it, when local political officers would issue orders, somebody in the group would chime in, “Let’s vote on it!”
Quickly, some of the smarter political officers gave it a try, and found out that not only was the consensus opinion consistently smarter than their ideas, but by running with it, his group’s efficiency and motivation was better and they were rewarded for it. This is how democracy spreads invisibly, like a virus.
Capitalism is the very heart of democracy, for a similar reason. Every person is their own decision maker, to determine their own needs and when those needs are sated. In capitalism, the concept of “opportunity costs” has to always be taken into account, so people must choose how to spend their time and money. Production is based on demand, not opinion.
All of this is extraneous to socialism, so it is ignored by socialists, who instead want to dictate production and consumption, invariably inefficiently.
Consensus-building is a good decision-making process. Simple majority voting is often a very bad decision-making process. There is no reason to expect the quality of decision-making via majority vote to be any better than the quality of the median decision-maker. If the median decision maker doesn't have any clue about the shape of supply curves, electoral decisions won't be made based upon sound economic principles.
Or I could pay off the house, then invest the monthly house payment (say $650/month since your example was $100k loan) for ten years.
10 years down the road, I’ve owned my home for a decade with little/no risk and I’ve got $100k built up in the investment.
Fooling myself? I’ll take that deal any day.
I may be missing something, but if the $100k you invested had only doubled after 10 years, that would be a 7.2% rate of return. How does that net 8-9%?
If you can poay off the house in 11 and then have the same amount of money in your surrender value and have a death penalty, wouldn't you come out ahead with the IUL program.
Your investment doesn't start until you have the house paid off.
Ten years down the road your insurance policy would have more than doubled. Also you can take out more equity and repeat. The interest payment is deductible and simple interest, while the insurance is compounding.
Equity is not safe, nor liquid and it has no rate of return.
If you don't need a tax deduction and you want to wait ten years to invest $650 a month. Have at it.
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