On “Russian propaganda”

Last week’s column seems to have raised the ire of some folks. They seem to lack the ability to distinguish between a rationale and a justification. This is not a new problem, particularly when it comes to military action. This same sort of allegation was made by Rudy Giuliani against Ron Paul in 2008. Giuliani claimed that Paul’s assertion of US meddling in the Middle East leading to the attacks of 9/11 was somehow “blaming America.” This is of course ridiculous. As Stephen M. Walt of Harvard University (international affairs) explains, “‘strategic empathy’ isn’t about agreeing with an adversary’s position. It is about understanding it so you can fashion an appropriate response.”

 There is no path to peace until you understand what motivates your adversary. It has been suggested that Russian concerns over the eastward expansion of NATO is mere wartime propaganda – an invented pretext to justify the invasion and reintegration of Ukraine into the former Soviet empire. Perhaps. But this is a mighty long con if it is. NATO expansion was understood to be extremely antagonistic toward Russia by multiple senior US defense officials over 12 years ago. The current CIA Director, William Burns, stated in 2008 in a memo to Condoleezza Rice that, “Ukrainian entry into NATO is the brightest of all red lines for the Russian elite (not just Putin). In more than two and a half years of conversations with key Russian payers…I have yet to find anyone who view Ukraine in NATO as anything other than a direct challenge to Russian interests.”  He further stated that offering Ukraine NATO membership would “create fertile soil for Russian meddling in Crimea and eastern Ukraine.” This man literally predicted Russian actions over the next 12 years. If that is not understanding your adversary I don’t know what is.

The idea of Ukrainian NATO membership as a provocation is not some Russian propaganda invented 5 minutes ago. The seeds were planted 30 years ago. On February 9, 1990 President George H.W. Bush promised Soviet Premier Mikhail Gorbachev that if the Soviets would withdraw their troops and allow German reunification they would not expand NATO “one inch eastward.” Some claim such a meeting or agreement never took place, or that it did but because it was an oral agreement and not written it “doesn’t count” but this is both absurd and untrue. Written minutes of this meeting were found just last month (February 2022) in the British National Archives.             

In closing, to be unequivocally clear – Russia’s invasion of Ukraine and the murdering of innocent civilians is wholly unjustified. Even if we accept at face value that NATO membership of Ukraine is the proximate issue for Russian aggression, there are a multitude of other routes by which this could have been addressed. That being said, the US and her NATO allies are not without blame. If you think your adversary might be crazy or irrational, it’s unwise to provoke them. Of course it’s a lot easier to be provocative when you know you won’t personally bear any of the consequences of your actions. 

Democracy in Action

Democracy is held as the apotheosis of governance, the pinnacle of societal organization that replaced a long succession of failed predecessors (monarchy, oligarchies, dictatorships, etc). Its sine qua non is the peaceful exercise of power and authority. But that peaceful guise is an illusion. Those who submit to the majority’s wishes do so not out of a noble love for democracy, but rather out of fear of its enforcement. Democracy, after you strip away all the slogans and grade-school platitudes, is a proxy for violence. 

            When a country wages war against another (Russia vs Ukraine) this is democratic enforcement in action. Consider: Russia aggressively occupying Ukraine is no different than a newly elected political regime imposing its intentions upon resistant members of a populace who did not vote for them or who didn’t vote at all (a null vote being a vote against all candidates). Happens all the time. Don’t pay your taxes, sell products that are “illegal”, fail to close your business when ordered to do so – in comes the fully armed SWAT team, guns drawn. Those decrying Russia’s actions in Ukraine would nod approvingly had there been an election in Ukraine and Russia and the losing side just happened to be everyone in Ukraine (not too dissimilar to every US presidential election). Internalized violence against one’s own citizens (no offense Canada) is laudatory under democratic regimes. Externalized violence against another country’s citizens is condemned vociferously. There is no difference other than the existence of imaginary lines.

            To be clear, the point here is not to suggest that one country invading another is “ok”. Quite the contrary. Aggression is reprehensible. Just as reprehensible as the mob rule otherwise known as “democracy.” Democracy is the veneer of civility that conceals the sociopath’s instinct to rule (libido dominandi). When the ruled resist, the veneer cracks, and the aggressive nature of the presumptive rulers is revealed. 

            Should we then, as outsiders, get involved in the Russia-Ukraine conflict? Quite simply, “no.” Not because it’s tolerable for bullies to get away with naked aggression, but rather because there is no “we” here. There is no United States. There is no Germany. There is no Canada. Only people. To say that “we” should intervene on behalf of Ukraine is to say that if your neighbor gets involved in a bar fight you should order your children to intercede. This is absurd. If YOU want to help then YOU are free to get on a plane and take up arms in Ukraine. Likewise you are free to welcome Ukrainian refugees into your home. However, you have no moral authority to compel anyone else to engage in these actions. This applies to sanctions as well. Sanctions are not “peaceful”. They are an act of war, and a stupid one at that. They never harm the leaders. They only harm third parties on both sides (to whit: Italy and Belgium are asking that proposed Russian sanctions not include luxury goods as it would harm their respective economies). US sanctions killed a million Iraqi children in the 1990s. Former Secretary of State Madeline Albright thought it was “worth it.” Tell me how that is not an act of war (and a hideous one at that)? Sanctions presuppose a paternalistic mindset on the part of a country’s rulers, as though harming citizens is like harming their children. They are not their children. They do not care. Sanctions always miss the mark. They punish the individual who has no power or culpability while those responsible easily work around it with their connections.

            So what should be done? A good start would be dismantling NATO. The impending admission of Ukraine into NATO is Putin’s issue. This should not be surprising given the repeated broken promises of Bush, Clinton, Bush, and Obama to halt the eastward expansion of NATO. Had Soviet leaders promised stop the expansion of the Warsaw Pact in South America but instead allowed it to slowly creep over the decades up through Latin America and today Mexico was poised to join, does anyone honestly believe American leaders would not feel a demilitarization of Mexico was warranted? 

            NATO is an anachronism that serves no purpose other than to antagonize Russia and increase the odds of pulling the world into WWWIII (given NATO’s WWI-style defense pact wherein an attack on one member is considered an attack on all). Its entire mission is bellicose, in contrast to the UN (of which Russia is a member) whose mandate is one of only peace. Dissolving NATO or at a minimum renouncing any possibility of Ukrainian membership would undermine any pretext Putin has for continuing this current conflict. Or perhaps reconsider what a newly elected Putin suggested back in 2000 – Russia joins NATO. #DefundNATO

Pet Project

When we think of extreme regulatory overreach what typically comes to mind? Healthcare, energy, transportation, finance, right? It would probably surprise most to learn that the contents of your fish tank are also a compelling state interest. The government is not only quite concerned with what you put in your aquarium but is equally fixated on the verbiage and layout of associated product labels. California, for example, imposes labeling standards related to the size, location and format of the content designation, that just like their automotive emission standards, invariably get imposed on every one else (manufacturers do not want to have multiple variants of the same product for different states). Next we have the various state agricultural agencies that rather obtusely extend their regulatory standards for farming into one’s ornamental aquarium. This is often done under the guise of “consumer protection” but mostly it is just folks that don’t seem to understand there is a difference between a cornfield and Nemo’s artificial domicile. Under the law products that help maintain freshwater aquarium plants are technically fertilizers. Products that nutritionally benefit non-plant species are considered feeds. This lack of nuance in the regulations then exposes manufacturers to a panoply of inane rules governing the formulation products, how the product may be described on its label and in sales literature, and even the precise layout and format of the content description. 

And that is just the state governments. The Federal government’s effects fall into the seen/unseen category (stress on the “unseen” part). The EPA and FDA regulate pesticides and medicinal products respectively. The regulatory apparatus there is so onerous that most companies simply throw their hands up and avoid those categories entirely. As a manufacturer I can tell you that there are a number of products in those categories that could be introduced that would benefit the hobbyist, but, they will never see the light of day as it simply not worth spending hundreds of thousands if not millions to gain approval for a product that sells for under $10. 

Unfortunately the Federal government is poised to introduce even greater regulatory burdens not only on the aquarium hobby, but on the entire pet care segment (fish, bird, reptile, small mammal) as well. The US House has just approved the COMPETES Act of 2022 (H.R. 4521). This act includes modification to the infamous Lacey Act that would drastically decrease species variety present in your local pet store by empowering the US Fish and Wildlife Service to impose even greater regulatory burdens (beyond those that already exist) on interstate transport of what some view as “problematic” species (previously they could only regulate importation into the US). Why they would need oversight of interstate transport of species that can’t even be imported into the US is unclear. This seems to be more of a pretext for expanding their authority for its own sake. Even more shockingly the existing ban on importation would be flipped from a blacklist to a whitelist method wherein ALL species would be banned for importation unless specifically whitelisted. The process of whitelisting would no doubt be lengthy, bureaucratic, and expensive. This is then effectively a near total ban on everything except goldfish and guppies. And it’s not solely for fish that are affected. This includes birds and reptiles as well. If this bill becomes law (the Senate is gearing up to vote on it as is, or reconcile it to their S.626 version introduced last summer) it would have a similar effect on the pet hobby that one might observe were we to ban all sports except tennis, or, ban all cars except the Ford Focus. With the loss of biodiversity and variety the pet hobby will whither and die and in a few years people will wonder why the only thing fish you can buy at Petsmart is a goldfish.

If you feel compelled to tell Congress “no” on these modifications of the Lacey Act (excise or modify Section 71102) please see this page for more details and simple contact form for your state’s Senators. 

Variant of Hope

Fauci has seen his shadow – and so we are on course for another 6 weeks of ineffective overreactions on account of the latest “variant of concern.” The media is gleefully reporting that this Omicron variant of Covid-19 is poised to wreak havoc. These same media nags are also happy to inform us that the blame for all new variants rests squarely with the unvaccinated. As usual the truth is the exact opposite.

            Evolution is not driven only by mutations. It also requires selective pressure to work its magic. Emergence of dominant variants will occur more quickly in the vaccinated than the unvaccinated because of selective pressure. Here’s why. The vaccines we have do not prevent transmission (no sterilizing immunity).  Any transmission that does occur will necessarily be enriched in variants not recognized by vaccine-derived antibodies. 

            To be clear, variants can arise in both vaccinated and unvaccinated hosts. The difference is that artificially applied selective pressure (vaccine-derived antibodies) will immediately favor any non-targeted variants. Such variants aren’t necessarily less lethal, rather merely unrecognized. However, in the unvaccinated only natural selection is active. Natural selection when applied to pathogens tends to weaken them. Viruses that give their host the sniffles pass on their genes. Viruses that kill their host don’t. Upshot: natural selection favors non-lethal variants, artificial selection does not.

            The counter-narrative suggests that the unvaccinated are a cauldron of variants spilling onto their otherwise variant-free vaccinated brethren. When these variants hop to a vaccinated host, then the vaccine antibodies act as a sieve, blocking the original variant and allowing the newer ones to pass on. This is just wrong. The only difference between a vaccinated and unvaccinated host is that a vaccinated host will block the alpha strain. That’s it. They will both foster an equivalent degree of variants. Those suggesting otherwise believe fear and shame are a cudgel to manipulate the masses into compliance with the fantasy of “zero Covid.” 

            Another common myth is that the Omicron variant arose in largely unvaccinated South Africa. This idea is a case study in logical fallacies. First, correlation is not causation. Second, observation bias is not reality. If ants invade your home and you discover them in the bathroom that doesn’t mean that’s where they entered. Nobody was looking for “omicron”. Then someone happened to discover it first. Now everyone is looking for it — and lo and behold it’s everywhere! The only way to justify travel bans and renewed lockdown measures is to pretend that Omicron is “spreading quickly” because it is being discovered everywhere. Funny how governments always choose the interpretation of reality that maximizes their power.

            Although intuition suggests what is good for the individual must also be good for the group, this is not always the case. For example, antibiotics benefit an individual with an infection, however mandating them as a universal prophylaxis would be catastrophically bad. This is also true of mask mandates where moral hazard effects overwhelm whatever tiny benefits a mask may provide to an individual. With the Covid-19 vaccinations we see the same individual vs. the collective bifurcation. Evolution’s effects lie dormant for the individual but are emergent within a collective.

            With a non-sterilizing vaccine the proper strategy is to give it only to the very small subset of at-risk individuals (however so defined). These will be a tiny minority of the population so any individualized selection toward some variant will not come to dominate.

            The political establishment is plowing forward without any regard for the unseen future consequences of their policy of universal vaccination. This is the danger of letting politicians rule the world: their bias is to favor short-term solutions that are “seen” while ignoring long-term consequences that are “unseen”. Short-term actions get them re-elected. Long-term consequences are a problem for future Homer. The only silver lining is that variants such as Omicron represent a new hope – an end to Covid as it evolves into the common cold. 

Competing Interests

Last week the head of a large US corporation met with his peers from other leading firms in the same industry. Although the stated goals of the meeting were a direct violation of federal anti-trust law, they nevertheless held the meeting with fanfare and total impunity. These powerful CEO’s set the ground rules for a price-fixing scheme. They believed it was in the best interests of their industry to establish a price floor for their services. Competition, they feared, would result in a “race to the bottom,” possibly bankrupting many of them. 

            It’s hard to fathom how such an event could have taken place with zero outrage from the political and media class. Indeed, this meeting was celebrated widely. So who were these shameless captains of industry and how did they avoid prosecution? It’s easy to get away with breaking the rules when you’re the one making and enforcing them. The meeting in question was the annual G20 summit. One of the primary outcomes of this meeting was a conspiracy to set a global 15% minimum tax rate on “big business” (whatever that means). The participating governments constitute a literal cartel: “an association … with the purpose of maintaining prices at a high level and restricting competition”. 

            It is a peculiar irony that governments pay lip service to the ideas of “free and fair competition” and “monopolies bad” but then exempt themselves from this very ethos. They have a literal monopoly on violence (law enforcement) and theft (tax collection) within their borders. Competing mail delivery, police, courts, and schools are either prohibited outright or de facto through the crowding out effect of direct taxation for these “services.” The one recourse people have to escape these monopolies is jurisdictional competition. Move to where the policies and taxes are better. States and counties often vie with one another to attract businesses and citizens through more favorable tax treatment. But it seems that option must now be circumscribed, at least at the national level. These governments (mainly the US) are afraid that their onerous policies and taxes will drive businesses into the open arms of the competition – that is, other states/governments. But a price fixing cartel will stop that right in its tracks. This is a desperation ploy, pure and simple. Attempts to tax unrealized gains or this “taxexit” short-circuit only signal the ruling elite are running out of revenue options to offset their decades of profligate spending.

            If the left were intellectually honest they should oppose these supranational agreements. Why? Because it directly nullifies that which they profess hold most dear: democracy. Citizens voted in their representatives. Those reps are tasked with deciding what they think is best for THEIR country (not others). But now those representatives’ voices will be ignored in favor of the wishes of the ruling class oligopoly. Are these democracy worshipers truly indifferent to the idea of the US undermining democracy in foreign lands with their heavy-handed tactics? If China had leverage to influence US domestic policy they would not be so apathetic?

            The US’s globally dominant market position should be used to lead the way toward economic prosperity. It reflects poorly on the US regime that they would use this influence instead as a bludgeon to threaten and coerce others into submission. Were the US to eliminate all corporate taxes it would spark a renaissance of investment and growth as companies expanded and hired workers. We had just a tiny taste of this with the Trump corporate tax cuts. Imagine the impact if those taxes were eliminated entirely! The massive increase in productivity would improve the standard of living for everyone worldwide as other countries followed suit. Every dollar taxed is a dollar that can’t be used to hire a worker, build a new facility, or invest in new equipment. The more you tax the less you can have of all three. Taxes are truly a zero sum game.

Imagine

The lesson of September 11, 2001 is an uncomfortable one. Facing the truth of that lesson may be avoided, but doing so only prolongs and expands the harm that is to come. Removing the bulb behind the “check engine” light does not fix the engine. The cold hard reality is that our government, whether through malice, indifference, or ineptitude, has and will continue to sacrifice the lives of innocent Americans on their quest toward peace via worldwide domination. It is a fool’s errand. 

The lives lost on that fateful day were a direct consequence and culmination of over forty years of American (and allied) meddling in the affairs of the Middle East. This is not “blaming America” – but it is however blaming those in government who supported these incursions. It is blaming those individuals who formulated and enacted these policies. A patriotic reflex will compel most to reject such claims outright. The error in that reaction is in equating the concept of a nation with the actions of its governing body. “America” is not its leaders. 

The Afghanistan withdrawal is the first glimmer of hope. However, that hope is tempered by the reality that 20 years of manufacturing enemies through countless bombings will only serve to ensure that more innocent American lives will be sacrificed in the coming blowback. It is not a question of “if”, but rather “when”. And on that day Bush, Cheney, Obama, Trump, Biden – all, will be as culpable as anyone pulling a trigger. 

In order to achieve peace one must be open to empathy with their adversary. Empathy unlocks the path to understanding. Peace is achievable once you understand what motivates your adversary. If those in power had heeded the words of Ron Paul so many years ago, then we would be much closer to a lasting peace today: 

“Imagine for a moment that somewhere in the middle of Texas there was a large foreign military base, say Chinese or Russian. Imagine that thousands of armed foreign troops were constantly patrolling American streets in military vehicles. Imagine they were here under the auspices of “keeping us safe” or “promoting democracy” or “protecting their strategic interests.”

Imagine that they operated outside of US law, and that the Constitution did not apply to them. Imagine that every now and then they made mistakes or acted on bad information and accidentally killed or terrorized innocent Americans, including women and children, most of the time with little to no repercussions or consequences. Imagine that they set up checkpoints on our soil and routinely searched and ransacked entire neighborhoods of homes. Imagine if Americans were fearful of these foreign troops, and overwhelmingly thought America would be better off without their presence.

Imagine if some Americans were so angry about them being in Texas that they actually joined together to fight them off, in defense of our soil and sovereignty, because leadership in government refused or were unable to do so. Imagine that those Americans were labeled terrorists or insurgents for their defensive actions, and routinely killed, or captured and tortured by the foreign troops on our land. Imagine that the occupiers’ attitude was that if they just killed enough Americans, the resistance would stop, but instead, for every American killed, ten more would take up arms against them, resulting in perpetual bloodshed. 

The reality is that our military presence on foreign soil is as offensive to the people that live there as armed Chinese troops would be if they were stationed in Texas. 

Shutting down military bases and ceasing to deal with other nations with threats and violence is not isolationism. It is the opposite. Opening ourselves up to friendship, honest trade and diplomacy is the foreign policy of peace and prosperity. It is the only foreign policy that will not bankrupt us in short order, as our current actions most definitely will. The sad thing is, our foreign policy WILL change eventually, as Rome’s did, when all budgetary and monetary tricks to fund it are exhausted.”

Ron Paul, 2011

2012 Ad based on this speech

The shape of things to come…

The ultimate test for any scientific hypothesis is its power of prediction. Correctly predicting future events demonstrate one has a true understanding of the subject. An objective analysis of the lessons of history and the impact of a state-centric societal structure can reveal some obvious patterns as well (e.g. fear, rather than reason, as a driver of policy, groupthink pushing out minority opinions resulting in a monoculture of thought, etc.). I am willing to make some predictions based on these patterns:

By January 1, 2032 the following listed items will be generally accepted as true. To be clear I do not merely mean some obscure source will publish supporting information. I make the stronger claim that these predictions will become the dominant mainstream narrative. Just as everyone who was originally cheering for the Iraq invasion now acknowledges it was a colossal mistake, so too will opinion flip on Covid-19 over a similar time frame (8-10 years)

1) Long term studies and comparative statistical analysis will reveal that Covid-19 was not the apocalyptic threat we were led to believe initially. Differential analysis of a variety of non-pharmaceutical interventions will show that these measures had no impact on the course of the virus. In other words, cases soared and plummeted exactly as they always have in prior pandemics with no mitigation measures (see Hope-Simpson, 1981)1. It was always going to be a 0.05% global death rate no matter what. 

2) It will be proven that masks actually enhanced the spread of the virus. The mechanism will be shown to be an aerosolization of concentrated viral particles by those wearing masks for extended periods. Pundits will navel gaze and suggest “in the future” we should never assume our intuition is correct and that it is important to analyze trade-offs before implementing policy. There is a 10% chance this claim will not bear out because it will be revealed that masks were entirely superfluous because the dominant infection vector was a fecal-aerosol route (in layman’s terms, it was in the farts)2.

3) The Covid-19 spike protein will be proven to be the toxic agent for certain individuals with a particular set of biological markers that can be tested for. It is only after giving the spike-protein laden vaccine to 3 billion people does a pattern of oddly consistent cardiac issues emerge and it is realized other parts of the virus would have been safer targets for triggering an immune response. Oops. Guess that is what happens when you rush a vaccine to market without really understanding the target pathogen.

4) The DTAP vaccine will be shown to be the primary reason those under age 24 were nearly universally immune to any serious consequences from Covid (as all children must get DTAP for school). Following this revelation the various Covid vaccines will be pulled from the market and a general (and safer) DTAP vaccination is used for anyone concerned about Covid.

5) Additional longer-term studies will demonstrate that Hydroxychloroquine and Ivermectin are effective agents in attenuating symptoms of Covid and preventing death when given at the proper stage of infection. No one will apologize to Trump.

6) The driver’s license/state ID will emerge as a de facto “Vaccine Passport” as impositions by the federal government (TSA) for proof of vaccination will merge vaccination status into the REAL ID system. Driver licenses will henceforth require annual renewals, as it will be necessary to show proof of your annual Covid and flu shots. Since a driver’s license/state ID is already required for a myriad of activities (work, banking, loans, leases, travel, but not voting, that would be racist) it will be trivial for the Federal (or state) governments to push onto the citizenry new annual vaccines. Politicians can then innocently claim this is not a “vaccine passport”, rather an “enhanced drivers license.” Once politicians discover they can mandate behavior by making one’s ability to interact in the world contingent on compliance with their dicta, then there will be no end of the items that will henceforth be linked to one’s drivers license (“to renew your license this year requires a minimum Social Credit Score of 80”). 

7) The “lab release” theory on the origin of Covid will transition from fringe conspiracy theory to generally accepted as a reasonable hypothesis and eventually proven as definitely true. Whoops! This one is happening in real time. 

My only caveat to these predictions is that I may be overestimating the time frame. I originally predicted on these pages in February 2019 that Jussie Smollet would be shown to be a liar within 6 months; the actual time frame? 6 days. So it would not surprise me if most of these come to pass within 4 years or sooner. We shall see. In the meantime see if you can beat the Covid quiz at: www.covidchartsquiz.com

The Capitol Gains

Most people may have no idea what capital gains are, but they’re darn sure they need to be taxed more. Biden’s rhetoric on that topic is straight from the populist playbook: “Why, it is so unfair that the rich pay lower rates on capital gains when you, dear sir, must pay a much higher percentage on your paycheck!” 

            First, he tells us that “the rich” are not paying their “fair share,” whatever that is supposed to mean. But in fact, the top 1% of earners pay nearly 40% of all income taxes. Their average tax rate is two to three times higher than all other tax-paying groups. They pay more in taxes than do the bottom 90% of all taxpayers combined. Even though their share of total income is 21%, they pay almost double that as a share in taxes (40%). Exactly how much would be enough to qualify as a “fair share”?            

            Capital gains tax rates of 15% and 20% (we’ll ignore the Obamacare NIT 3.8% surtax for now) are said to amount to some kind of “loophole” or “giveaway” to the wealthy. But crucial context is missing here, namely the historical reasoning behind these rates, which are based on two factors: risk, and double taxation.

            Let’s tackle risk first. Wage income is risk-free. As long as an employee does his job he will always receive his paycheck. Employers do not withhold wages or discount them based on the performance of the business that week. They do not lower them if the product that the employee helped to produce fails to sell as expected. Capital gains, however, are derived entirely from investments that are 100% at risk. What would be the incentive to risk one’s savings in useful investments only to have the government (as proposed) take up to 50% (including state taxes)?

            Note that the government itself risks nothing, yet reaps a reward (in the form of capital gains taxes) from every winner while leaving every loser hanging out to dry (if all of your investments lose money the government doesn’t give you a tax refund). From the government’s perspective capital gains taxation is literally a game of “heads I win, tails you lose.”

            The second fact that the “loophole” claim ignores is that capital gains are already diminished due to prior taxation on the source of the invested funds. Wage income is taxed once (until subject to a sales tax, but this only lends support to the idea of abolishing one or the other). However, capital gains come already diminished by previous taxation. Suppose a worker earns $100 in wages. After taxes (federal, state, FICA, etc.) she now has $60. She invests that $60 in some speculative venture (stocks, real estate, etc.). After a few years that $60 investment grows to $120, so she sells it in order to enjoy those gains. But had the original $100 not been taxed she would have been able to invest the full $100 and thereby seen it grow all the way to $200. So the original taxation has already diminished her returns on that investment by $80. 

            To offset this tax burden somewhat (and thereby to encourage investment) the capital gains rate has historically been set lower than taxes on wage rates. In our example, in which a $60 investment turns into $120, a 20% capital gains tax on the $60 gain means $12 in taxes, for an after tax gain of $48. But the Democrats are proposing to DOUBLE the capital gains rate, from 20% to 40%. This would reduce that current system’s $48 gain to a mere $36. 

            Here’s what that means. The entire $60 she invested was at risk of falling to $0. Some investments don’t pan out. Sometimes you lose everything. If people are at risk of losing $60 and stand to gain a mere $36, people will be less likely to engage in such investment in the first place, which decreases everyone’s standard of living. The tax both reduces the investor’s effective return and, to the extent it does not dry up the investment market entirely, tends to shift future investments into far riskier (higher return) ventures to compensate investors for the higher capital gains taxes. A market dominated by primarily riskier ventures is a much more volatile and wasteful one, since higher risk generally means more failures. Junk bonds will become the new standard investment

            If the Democrats were politically savvy and not devoted to ideology above all else they would propose eliminating all taxes on capital gains and setting the corporate tax rate to 0%. We would see an explosion in domestic investment and job creation as companies from all over the globe came to the US to set up shop and expand. This happened to an extent with Trump’s corporate tax cuts, though not as much as we might have hoped. Why? Because no one trusts the US government on taxes anymore. No matter how “permanent” the rates are claimed to be, we all know that just like Lucy with the football, whatever tax regime we have today will likely be different tomorrow. And the Democrats are just proving them right by fiddling with taxes not even three years later.

             Sleepy Uncle Joe is just wrong when he says “fairness” demands that capital gains be taxed the same as wage income. He is either being deliberately deceitful or wholly ignorant. Neither is a good option.

Get Shorty

The GameStop™ short-selling drama is one of those rare events in the news cycle where literally every analysis – from the right and the left – is dead wrong. There is nothing wrong with short selling. There is nothing wrong with individuals or companies coordinating actions in order to drive a stock price up or down. Value is subjective therefore price manipulation is a meaningless term. There is nothing wrong with trading platforms suspending trading, for any reason, or none. Pump and dump schemes are lottery analogues: many pay in to benefit a few. No one deserves sympathy, scorn, or accolades for their actions in these events. This entire affair is morally neutral. It’s no different than card-counters winning big and then getting tossed out of the casino.  

Humans denigrate that which they do not understand and short selling is no exception. We can understand long selling (buy low, sell high) whereas the appeal of short selling is more cryptic. In both cases, however, the goal is profit. Entrepreneurial profit is obtained by accurately assessing consumer demand, that is, understanding a market well enough that one can predict its future. Investing profit is similar. An accurate assessment of a company’s market behavior informs the investor as to whether or not it is being well run. If so, then its value will rise, whereas if not, a decline is on the horizon. Stock trading is in essence betting on yourself: how accurate are your assessments? If you believe a company is well managed then you invest long, whereas if you believe the opposite, then you invest short. The social function of stock speculation is to keep the price (on average) where most believe it should be. Both sides vote in an eternal election guided by profit seeking. That some people profit through this process at the expense of others should not be surprising. Stock speculation is informed gambling, and gambling is a zero sum game. 

If enough people believe a company is poorly managed and act in coordination they can drive the price down to where new ownership can wrest control away from current management and set about repairing the damage. Short selling is the market repairing itself (spontaneous regulation). This price-derived feedback mechanism corrects for misallocation of resources being squandered by poorly run firms. The long sellers should thank the short sellers. They will be the ultimate beneficiaries of an appreciated price contingent on new management adeptly repairing past damage. It is bemusing when such coordinated beneficial market actors are denounced while bleatings about “our democracy” to effect identical coordination in the political arena are lionized. 

If such coordinated action takes place on ones property, then one is within their rights to disrupt it if they believe it to be injurious to their interests. Robinhood™ can limit trades, kick users off their platform and otherwise impede site functionality if they desire to do so. Were I such a user I would be quite angry about it – but it would be their right. But it would also be my right to ditch the platform. One can be both angered by the actions of another while understanding one’s “rights” have not been violated. Robinhood™ will likely suffer financial loss due to their actions. And that is fine. Individuals and companies do not have a right to be shielded from the consequences of their actions. State backed governments have created a moral hazard where such protections are expected. We play the game and when we lose we appeal to government to make things more “fair” – for us. We seek anti-trust legislation when those acting in unison might impact our profits. We seek subsidies to protect us from foreign (and sometimes domestic) competition. We seek intellectual property rights to protect us from “unfair” competition. And when those seeking these protection are granted it they become ever more “grateful” to those in power. This “gratitude” helps the political class maintain their grip on power and so the cycle continues. Just sit back and watch. The politically well-connected elites will soon be rewarded with “sensible regulation” to restrict the impact that you, the coordinated individual can have on their interests.

A Time for Mitosis

The fallout from the recent Capitol Hill ((a) uprising, (b) insurrection, (c) coup, (d) rebellion, (e) mostly peaceful protest, (f) all of the above) has ignited a movement of national secession – not of political boundaries (yet) but rather electronic and economic ones. The opening salvo was Twitter’s summary ejection of Trump from their platform. Soon after the right-of-center Twitter competitor Parler was drummed out of the Google Play store, the Apple App store, and it’s entire network infrastructure mothballed by Amazon on their AWS network. They were initially blamed for facilitating communication between those invading Capitol Hill however it turns out Facebook and other platforms were instrumental towards those ends – I’m sure it was only an innocent mistake that Parler was singled out for execution. 

Orwell’s fictional ‘thoughtcrime’ is now real. Those opposing the corporate press’s narrative are no longer merely ‘wrong,’ they are ‘deniers’ and as such a threat to ‘safety.’ But the punishment for ‘wrongthink’ comes not from the state, but instead private actors. The corporate media are shameless in their hypocrisy. Private companies may be forced to bake gay wedding cakes or remain closed during a state imposed ‘lockdown’ but simultaneously have every right to refuse service or employment to Trump supporters. The putative rationalization for such behavior is naturally not ‘censorship’ but rather ‘safety.’ It then becomes a trivial matter to justify any actions if the stated goal is safety. This is how their ideological goals are smuggled in – via the rubric of public safety. Had these platforms responded similarly to the widespread and pervasive violence seen last summer (or when left-wing protestors invaded the Wisconsin state capitol building in 2011) then perhaps this behavior might have been viewed as less pretext and more principle. Fortunately Twitter can’t literally imprison us (yet). The only ‘justice’ they can mete out is one of electronic excommunication with all the due process of a drumhead court. 

“The Net interprets censorship as damage and routes around it”.
John Gilmore

Today’s electronic secession differs from the previous one however. In 1861 it was the wife who tried to leave but was beaten into submission by her jealous husband. Today the wife is kicking the husband out of the house; she packed his bags and put them on the front porch. The left has wanted this divorce for years and now they have their excuse. But rather than bemoan this perhaps we should celebrate it. The first step in acknowledging this farce of a “united” states is to recognize there are irreconcilable differences. Yes the divorce will be difficult but achieving anything of value in life is rarely easy. In many ways this fracturing mirrors the biological reality of the world. Cell division follows a pattern of cellular growth to a point whereupon mitosis begins and the cell sets about dividing. Perhaps a country of 350 million is just a tad too big to expect ideological solidarity. Maybe we are more Balkanized than United and just as Yugoslavia split asunder so should we. Such fracturing of groups is a common process. It is the primary reason there exists hundreds of differing Christian denominations. Within every group disagreements will arise and swell to the point of becoming irreconcilable. The groups then go their own separate and peaceful ways. The irony is that these amicable divisions were possible only because the founding fathers had the wisdom to not bind any single denomination to the state. It is now time for a separation of government and state so that many and varied governments may form freely and peacefully and the people may form political unions of their choosing and not one imposed by their neighbor. There is no principled reason to force people into a political union at this point other than pure sentimentality or nostalgia. 

 This electronic ostracism will inspire a renaissance of new technology, new platforms, and new ways of interacting with one another that will render the current ideological and political subjugation impotent. Impossible? Just recall that no one could have predicted the growing irrelevancy of those former gatekeepers of the pre-Internet world (e.g. publishing, music, shopping, news media, entertainment, etc.). It is only when the powerful abuse their position that they lay the seeds of their own demise.