Thursday, January 19, 2012

There's Only One Way Out of This Mess

(my apologies in advance for the font. I have no clue why it's doing this)

I very much dislike writing for posterity. It indicates that at the point in time I was writing something, society was so brainwashed, so ignorant, and so stupid, that I had to resort to writing down something to provide a historical record that, “yes, I know what the hell I’m talking about.” And “yes, you people were so galactically ignorant back then, that now, with hindsight, what I predicted has come true, and you must feel awfully stupid for not listening to me.” I of course am not talking about you fellow Cappy Cappite readers, matter of fact this post will probably bore you because it is something you, I, and everybody with an ounce of brain know. But I’m going to spell it out anyway, not just to have a historical record permitting me an “I told you so” in the future, but to perhaps crystalize our thoughts about economics, politics, etc., or perhaps to precisely and succinctly make our case.

Right now, whether you are on the left or the right or in the spineless “inbetween,” we can all agree that the economy sucks, the future of the US is crippled, and nobody is happy with the direction the country is headed. The solutions deployed thus far are largely Keynesian in nature where we take money and resources from one group of people OR we borrow it from the future and give it to other groups of people in the hope of “jump starting” the economy. This strategy is the “status quo” because Keynesian economics is drilled day in and day out into young economists’ brains from high school into college and into their careers.

So when it’s blindingly apparent that the Keynesian stimulus has failed, because Keynesianism is so entrenched you get the idiotic, “We just didn’t do ENOUGH of it. We need MORE stimulus. We need MORE taxes. We need MORE government intervention.” And then the layman on the streets says, “The government needs to do something.”

However, let me suggest an alternative strategy. One not based on “sloshing money around the economy” in the hopes it all of the sudden “jump starts” and we have a booming 1940’s America once again.

Production-based economics.

You see, if you permit me to just wipe clean your brain of what you think you know about economics and politics, and start from the ground up, I believe I can provide you a much clearer and (MUCH) simpler model in how economics works.

You must understand, first and foremost, what an economy consists of. An economy consists of one simple thing – production. Specifically the production of goods and services. It’s a boring term “goods and services,” but if I said:

“Martinis, Ferraris, clothes, video games, Ipod’s, cell phones,etc, etc,” much more exotic stuff, you can see where people are incented by production.

We want STUFF. That’s all economics or any economy in the history of the world has been about. STUFF.

If you don’t believe me, perhaps an example that will prove it AND teach you a very important lesson about money.

If I have a wad of $100 bills and I release it at a crowded state fair, what do you suppose will happen?

A riot will happen, that’s what. People will scramble and knock each other out of the way to get that money.

But what value does the money have? What can you do with a $100 bill?

Functionally nothing. A $100 bill is a piece of paper with ink on it. It has no more value than a scrap of paper or garbage on the ground. But people instinctive, viscerally, and most likely, violently will scramble for it. Not necessarily even thinking about why they are punching the teeth out of grandma to get another $100 bill, but because their brain unconsciously knows full well it can buy STUFF with that $100 bill.

In short, the success of an economy is not based on how much money it prints, but rather how much STUFF it produces. Money is merely a tool by which to convert your time into a medium or tool that you can purchase STUFF with.

Related to STUFF and production is another aspect people don’t think about and that is innovation.

Innovation is the creation of new, better and more-kick-ass STUFF. Vaccines, faster planes, better computers, or whole new inventions we haven’t even thought of yet. Innovation is arguably even more important than an economy’s mere volume capacity to produce stuff, because it allows an economy to produce better stuff with less time and resources. Take for example automobiles. Before hand you travelled by horse or on foot. Transport of goods and services relied on beasts of burden or canals and boats. But with the combustion engine we could now haul TONS more STUFF, further distances and at a fraction of the cost. The benefit was more STUFF delivered to more people AT A CHEAPER PRICE. The innovation of the combustion engine benefited not just its inventor and the “evil corporation” that made it, but made prices lower for everybody thereby increasing standards of living for all people (ie-why do you hate Wal-Mart so much when it’s done the exact same thing today?)

It is these two things – the ability to produce stuff and the ability to create NEW stuff – that determines how successful, rich and prosperous an economy and a people are.

Now, assuming you believe what I laid out above (and if you don’t, then I can’t convince you because you’re psychotic, insane or just intellectually dishonest and there’s no reason trying to convince you), ask yourself how today’s current government policies help promotion the production of stuff and the innovation of new stuff?

The answer is, it doesn’t.

Matter of fact it punishes people who produce stuff or dare to create or innovate new stuff.

The current government policy is not to promote economic growth, but is instead based on spreading out what stuff we make now more “fairly” or “equitably.” It also foolishly assumes spreading out the “stuff” will somehow magically result in an economic boom.

The problem is look at who the policies reward and “punish.”

Right now we do not champion the producers or innovators of society. We champion the losers. All of our efforts and focus is on people who are unemployed, underemployed, old, aging, decrepit, oppressed, disadvantaged, blah blah blah. And so we tax people who produce stuff and transfer it to those who don’t produce stuff.

I am not commenting on the morality of whether those NOT producing stuff deserve it or are oppressed or somehow deserve the transference of stuff. I am merely pointing out the fact that we are transferring stuff from producers to non-producers. And whether there is a moral imperative to do so, is irrelevant to this point. The fact people who produce stuff in this society are taxed for producing more stuff means they are punished for doing so. And because the act of producing or innovating or creating is punished, the incentive to continue to do so is impaired.

You can see this come to a head with the hypocrisy of your typical OWS protestor. They all want jobs, but they want to tax the “evil corporations.” They all want the stock market to go up so their 401k or pensions are fully funded and increase in value, but they want corporations to “pay their fair share.” It is ignorance like this that allows such idiots like Barack Obama to get into office because they merely have to advocate transferring wealth from producers to non-producers to buy the votes to put them into office. But this strategy has a cost – it impairs the engine of the economy to the point of stagnation by destroying any incentive the producers have to keep on producing.

And so the more you protest and demand producers pay for your stuff, the more corporations will move offshore, set up plants in foreign countries, and the more the “evil rich people” will invest outside the country or just outright pick up and leave.

There is of course another option, and frankly it’s your only option. To grow ourselves out of our economic problems. To take the focus off of the non-producers, the “poor,” the “old,” the “disadvantaged,” the “oppressed” and put the ball back into the hand of the producers and innovators and pray to god they are able to reinvigorate the economy.

This, unfortunately, means no more free food for teenagers that couldn’t keep it in their pants. This means no more rewarding idiotic and stupid behavior like bailing out companies or having the government finance companies that never had any intention of making a profit. This means no more government money for idiot 20 somethings who major in hobbies that ultimately produce no stuff. This means requiring the millions of people who just laid on their backs with their hands out expecting the producers to carry them from cradle to grave NOT all of the sudden get an epiphany and realize they should get off their lazy asses and join the productive crowd (no, we know you’re too lazy for that).

But rather, you go on a diet and so if you are collecting some form of a government check, you CAN’T afford the latest Iphone or fanciest car. That if you are collecting a government check, instead of eating out at restuarants all the time, you instead scale back to ramen and let the much-needed harsh lesson of poverty and hunger kick your lazy ass into a job or school so you can join the producers. The money saved would instead go to the producers who would create those jobs you’re all clamoring for and instead of just sloshing around money in the economy, hoping your morons get your heads out of your asses and start voting and working in a way that helps the country and economy grow, brings the economic reality VERY CLEAR to you so you realize what kind of responsibility you have.

Of course there will be howls and cries about how “unfair” this approach would be. And how “can you take the food out of my 6 babies’ from 7 different fathers’ mouths.” But two simple points:

1. There is no other choice. The system is bankrupt and the currently policies pursued by the government are not sustainable. You think you’re in poverty NOW? Just wait until there is NO government check. And even if there was a government check, imagine if there is no food in the isles to buy because the producers of the food decided to just up and quit or move their operations overseas?

2. This option is actually going to result in an even better standard of living. The reason why can be beautifully pointed out by North Korea vs. the US. North Korea is a communist country. They went down the road of championing the losers and punishing the producers. You would think with such an approach, poverty would be wiped out in North korea, but it is the poorest country on the face of the planet bar some craptastic countries in Africa. While the US, at least originally, rewarded the champions, rewarded the producers and more importantly, rewarded the innovators. And while as a percentage the US didn’t transfer as much wealth from the rich to the poor, in being able to create new and better stuff as much cheaper prices, even the “poor” in the US are infinitely wealthier and lead better lives than the “rich” of North Korea.

In short, we have two options. We can keep going the route we have been, demanding other people pay for our stuff, feeling sorry for ourselves and finding whatever rationale to take other people’s stuff (sexism, racism, ageism, nepotism, conspiracy, classism, woeismeism, etc.) and you can naturally expect the amount of stuff being produced stagnate or decline


We can focus on the production of stuff. Revolutionize the US economy back to it’s 1880’s-1950’s heyday. And produce so much stuff that it DWARFS the debt and our current economic problems. We don’t worry about “oh, well Jimmy has $5 more than Steve and so that’s unfair.” You get off your ass, you quit bitching about how “unfair” life is, you start voting in people who are “Pro-Producing of Stuff” and the US booms once again, making stuff so cheap and plentiful we all make effectively $250,000 and our “poor” is considered to be those making “only” $50,000 per year.

I know which one I prefer. And what’s funny is it’s the only option that’s going to work. Because your only other option is to fail and continue on into poverty and mediocrity. Or to quote Robert Mitchum from the Longest Day:

“Only two types of people that are going to stay on this beach. Those that are already dead, and those that are gonna die. Now get off your butts!”

Choice is yours



Anonymous said...


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Anonymous said...

I do believe, as a jealous Canadian, that American entrepreneurs are the most creative and innovative in the world. Just get out of their way!

It will not be entirely easy, of course. David Goldman writes, perceptively, that after WWII much of the world was Communist, and much of the rest was embroiled in political turmoil. So America had the benefit of most of the capital and human capital that fled communism and chaos. That benefit has ended, and its main effect was to convince brainless, leftist people that running an economy was easy.

But you are correct - America made its way in the 1880-1950 world, before it benefitted much from capital flight and human capital flight, competing against the best that Europe and Asia had to offer, and winning - in mineral production, in cars and trucks, in aviation, in petroleum, you name it. Let us see that once more!

John Lewis

TJ said...

Bang on cappy. I live in sakatchewan and it's booming. Problem is most of the wealth comes from the ground[oil,mining] We don,t really make anything and we should be. This creates a false sense of growth that most people don't acknowledge and will eventually spell trouble.

Captain Capitalism said...

Hey Anon,

Yes, it's been happenign to me too.

Any recommendations? I've eliminated some advertising, but any way to scan a blog?

Anonymous said...

Hey TJ,

Getting that stuff out of the ground and doing it efficiently and then using it.....

That counts as "making" something.

Anonymous said...


For 20 years I have used "stuff" as the basis of economic discussions with my friends, relatives and children. Good for you to get it this simple.

A point I always make is that the more people we have producing stuff the greater the real wealth of the people because everybody can have more stuff for the same number of personal working hours.

The government produces almost no stuff (except defense, courts, police and some teachers) so most government employees destroy wealth.

The macroeconomic multiplier of government spending disappears in a pass of gas when you analyze an economy in terms of stuff.

Anonymous said...

To each according to his needs, from each,...ahh, screw that! Give me more stuff that someone else built or earned while I was playing in university!!!

Pat Sullivan said...

Hey Captain,
that was a well done posting. But lets face it, nothing is going to change. The reforms you listed all make perfect sense. Until the USA hits the debt wall, and that day is not very far away, nothing will change. In the Washington culture, they regard a reduced growth rate in government spending, to be a government cutback. They think they can keep borrowing trillions from China, forever into the future. It`s kind of like the Romans believing they could never loose to the barbarians. Well Alaric sacked Rome, and the citizens of Rome were in shock.

Robert of Ottawa said...

A fine rant; needs a little editing, but on the ball.

Aaron said...

Jeez, Cap, you know if you hit the nail on the head so many times in a row you end up pounding it through the wood right?

Anonymous said...

Alas, poor Keynes.

Keynes never wanted perpetual deficit financing. He just thought that during an economic crisis, the government should deficit-finance until the economy recovered on its own. Then, presumably, they'd repay the loans.

"Keynes believed that once full employment had been achieved by fiscal policy measures, the market mechanism could then operate freely." (

That's closer to Ron Paul than to the hyperinflationists that run governments today.

Rowan said...

I enjoyed this post Capt but there are other issues at work.

Even if men were free to produce, why would they?

I'm working on my own software company part time and follow lots of software startup blogs etc. There's a very strong trend forming, so many young men don't want to build big successful companies that employ people, they want a passive stream of income, Tim Ferris style.

It's not because they're lazy, it's not because they don't like their work and it's not because they can't build a big business. It's because they have no incentive. Why do people build billion dollar companies?

I don't quite know.

I suspect for many, outside of the Steve Job's of the world it's due to some social duty and prestige.

Young men lack strong families, strong male role models, have no real community, no sense of place or national identity.

In Britain we have something called 'positive descrimination' which is why many of my Engineering friends have been looked over in favor or dirt cheap imported Indian workers. All the female Engineers from my Uni got great jobs immediatly to meet gender quotas. Go to any large British city and try to spot the White person. Young men are starting to opening talk about 'the problem'.

Raised by a single mother in a city where everyone's faceless, where being a straight white male is the greatest sin possible. No real identity or direction... Punished for producing? What's the solution?

Simple. Produce enough for yourself and do whatever the f**k you want. I've got friends and associates in 20+ countries! Just last week my longest friend who's 26~ quit his IT manager job, sold his house, dumped his f**king sofa and started a web design business. He must be making only a fraction of what he used to make but now he's location independent and going to Canada for a year.

I'm aiming to end up in China. I'm also going to register a new company in Hong Kong when I fly through this Summer to avoid business taxes in the UK on moral grounds. It's very cheap and easy.

I'm starting a blog btw, will make a well written and more factual post about this.

Anonymous said...

Ah captain, I think this post has Font utilization crankiness kondition (yes, it's a German malady).

But you only have a mild case of it. When it's really bad it swaps in and out of "kidprint" and "comic sans relief".

The solution is more Rumpie.

Sydney Carton said...

Did you check out the sweet video review on Amazon? Is that someone you know?