Saturday, September 27, 2008

[small government] some of the fiscal issues

Tiberius Gracchus asks:

James how can you have a 'smaller government' and eliminate finance - please explain.

Little bit of a misunderstanding over terms here, specifically "finance". Let's also call the concept "limited government". The role of this government can be expressed thus:

Small government is a night watchman. A skeleton crew. A tiny institution restricted to defending our lives, liberty, and property.

Translated into real terms, it means maintaining armed forces, a police force, criminal and civil courts and provision of services, from old age pensions to rubbish collection. It's legislative function is limited - if it ain't broke, don't fix it and its executive function is to ensure that the constitution/bill of rights is protected. The judicial function is to adjudicate on whether this is being done or not.

The U.S. system of the three branches is a good one.

Where the system breaks down is in Trusts and Monopolies, which are the natural consequence of the capitalist way. It is in the nature of a free market to collude and price fix, for the big players to merge and take over. This is the central dilemma. How far can this right to trade be restricted.

I don't see a compromise here as "the thin edge of the wedge" - all systems are a compromise in the end and adjust to realities and new circumstances. Total freedom in the marketplace leads to Monopolies and thus to the military-industrial complex which then presumes to run "the State".

Therefore, the constitution must address this issue of Monopolies and Trusts somewhere within its provisions and other aspects of free market economics. There is an argument which holds that to restrict trade a little is to support and defend trade in general. So yes, we put in anti-Trust laws.

Other than that, government stays out of finance excepting in one particular way - the minting of money based on an agreed commodity, not on fiat paper. The government, the caretaker government does that - not a Fed of top financiers, not a CFR or Trilateral - a small government directly elected by the people.

Having done all that, the government, in its representative capacity, has one other role - to promote small and medium business through its caretaker role. They can act as an agency in this respect, drawing together the knowledge base, advising and helping, not taxing the cr-p out of small business.

So, Tiberius, I meant eliminating the big finance.


Anonymous said...

Ya know, it really pisses me when badly run companies go with the begging bowl to governments, er taxpayers for bailouts, when they were THE DELIBERATE ARCHITECTS OF THEIR OWN DEMISE

This film deals with the reasons for the existence of the auto industry.

What also pisses me is the fact that the guilty parties in the film are headlined to build such a vehicle in the UK, but with such REDUCED, DUMBED DOWN TECHNOLOGY.

When are we going to be free from this crap?

Do they think we are too dumb to remember?

This from the USA

Try googling "Wanta Plan"

Anonymous said...


Gracchi said...

James I'm confused. Lets say you had a gold based currency and an anti-trust law- would that eliminate derivatives or betting on commodity prices or unwise mortgage lending- maybe I'm being stupid but I'd like to hear more about the direct relationship to banking in this. For instance when you say you'd stop big finance would you make big banks against your anti-trust law- but then would you apply the same to other big companies and how do you define banks- would any big investor who has a disproportionate impact be a bank- is AIG a bank?

Finally why do the economists not in the vast global conspiracy not agree with you- what are their arguments and why are they wrong?

Sorry lots of questions but I just want to get at what's going on here.

James Higham said...

disproportionate impact

That is the operative word - disproportionate, not in the degree of profitability but in the amalgamation and in price fixing.

Economists don't agree because they are part of the system and know no other. Witness the current results of the lending institutions and economists' inability to agree. I don't put much store by these economics.

Sometimes people can be so clever they miss the most obvious and simple principles.

In detail though in a post later today or tomorrow morning, Tiberius [not that I have answers but at least I'm free of the fashion of the economic thought of the day].

James Higham said...

Gold, by the way, is not necessarily the commodity of choice. How about silver or copper? Something middling expensive and which, though difficult to mine enough of, will still be available. Of course, the fixing in silver would need to cease.

"Mine production remains by far the largest component of silver
supply, normally accounting for around two-thirds of the total
(last year was higher at 71%). However, mine production is
not the sole source; the others being scrap, disinvestment,
government sales and producer hedging." [GFMS]

Short selling, derivative contracts, leverage, fee structures and liquidity impact on price fixing and I'll address those later.

Anonymous said...

Gracchi is pissing with you.

Stop digging the hole.

James Higham said...

Hole? :)