Zeal For Truth

The first thing anyone who studies human history will notice first is that, despite varying times, places and cultures, societies and individuals fall into predictable repeated patterns. So when I say that I am going to make predictions, I want it to be understood that I am merely looking at two things: 1) what has empirically happened in the past, and 2) what logically follows from economic theory.

The Housing Market
I have already mentioned that I think buying a house right now, on the whole, is an especially dumb financial move. There are always exceptions based on local markets and circumstances, but the market has not bottomed out yet by any means. The biggest indicator of this is the fact that the Federal Funds Rate has not yet been raised to deal with inflation.

The current housing problems are due to a shifting of various financial bubbles and the fallout of malinvestment from the last fed-created bubbles. The biggest factor in housing prices is the supply and demand of debt. All of this uncertainty in housing has been caused without the price of debt rising significantly. If the Fed feels that it needs to stave off inflation (as Ben Bernanke has been inflating the dollar like mad) then the first thing they are trained to do is raise interest rates. Remember, it was only a drop in interest rates of about 5% that created the housing bubble. Imagine what a raise of 5-10% will do!

In fact, this housing slowdown is in spite of declining interest rates. This signals that the market is literally perched on the edge of a cliff, and as soon as inflation becomes a bigger priority, housing will be one of the first casualties.

There is no question that if the Fed decided to fight inflation the way that their models tell them to: by raising rates, we will see a significant drop in the real value of homes. If the economy is still sour when this happens, then this fall will be augmented by struggling families looking to sell the house that has become a noose around their necks.

Inflation and Increased Economic Controls
Food and energy prices (ironically not considered at all as part of the inflation equations by state economists) have been shooting up. The value of the dollar has been plumetting. Gold is hovering around $900 and ounce. These are all demonstrating that inflation is here. This is Bernake’s philosophy of inflation:

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

In other words, we may see an amazing amount of inflation in the coming decade because this is the philosophy that is now behind the printing presses. This means your gas, food and energy costs are only going to go up and up and up and up.

In every period of high inflation, even the most recent one in the US, governments always try to then control the economy through wage and price controls. From Richard Nixon to Diocletian 1700 years ago, governments, after destroying their currency, will blame “greedy capitalists” for raising prices and prescribe that it is essential for them to take control over the price system and legislate prices from on high.

Rather than bring stability, this move shifts the chaos from the economy to real life. Massive shortages ensue as goods will not be produced and sold at a loss to businessmen. Large companies will begin to fold (the small companies already went bust from the inflation) and basics like gas and food, which were originally just expensive, now are unavailable. Crime increases as men get more desperate to feed their families. Depending on how long the government controls prices, and how effective they prosecute, society begins to degenerate.

Unfortunately, the framework is in place for these kind of controls with state and federal “anti-gouging” laws and public sentiment currently whipped up against corporations and businessmen.

Wars and Rumours of Wars
Growing discontent in the population either requires war on the population itself or war on an external entity. In my church last week, I was appalled to be treated to, instead of a sermon or bible study (normally what we go to church for), a 40 minute political video on the “Islamic Threat” and how these evil towel-heads are going to run all over truth, justice and the American way. The other racial group this “threat” was tied to was Mexicans, who are “invading” our country and “sympathize” with the violent extremism of “all” Muslims.

If the government decided not to war on us when the effects of price controls are felt, then these groups are definitely easy targets. They also have the benefit of being a different culture and race - which is a historic enemy of governments going down this path.

Even with gas prices rising almost solely because of inflation from our government, the anti-Arab emails are flying around with pictures of the wealth in Dubai. We are setting ourselves up as a nation of looters, who may justify wars of booty-sacking the Arabs who practice that evil capitalism and are threatening our freedom with their greed. Again, governments tend to augment this racism by encouraging these wars - as wars provide the best justification for economic control, and temporarily provide the public unity to go along with a centrally planned economy.

I am not saying the US is going to turn into 1930’s Germany. What I am saying is that as government looks to gain more and more control of the economy (even for benevolent reasons) the unintended (but easily predictable) consequences tend to compound. Most people realize that we are moving in the wrong direction, but most people are also afraid to conclude that “the wrong direction” doesn’t lead to infinity - that eventually we arrive at the wrong place.

Right now we just have the beginnings of inflation and a housing market teetering on the brink. But depending on how the government decides to “solve” these problems, we may find ourselves in deeper and deeper trouble as history repeats itself once again.

At the end of last year, a major network (ABC) finally ran a small piece on the shameful situation with organ shortages touching on the only workable solution to the problem: allow a free market. The piece follows below:

In the US, 15 people per day die waiting for a transplant. They can spend their money to buy caskets, tombstones and funeral services - but they cannot buy the organs that will save their own life.

Reason outlines the basics:

The normal way to handle shortages is to let prices rise to the market-clearing price. With organs, it might work this way: A cadaveric donor’s family might be able to sell their dear departed’s organs to patients who need them. Better yet, consenting living donors would be able to bargain with transplantees or their insurance companies for the sale of, say, a kidney or a piece of liver (both can be surgically removed without causing much permanent harm to the seller). But there is nothing resembling a market in human organs in the United States.

This argument is thoroughly explained (as well as the history of the issue) in a 2005 lecture by David Kaserman.

Why the Opposition Doctor?
Consider why doctors (specifically medical unions) are opposed to the practice. They will say it is because they fear for the health of sellers and buyers. Sellers might lie about their medical history to make money, or get taken advantage of to get out of financial trouble.

But really, look at the deal the medical establishment is currently getting: in an organ transplant operation - doctors get paid, hospital gets paid, insurance companies gets paid, medical supply companies get paid and the other professionals associated all get a piece of the action. But the person who first supplied the organ can only legally get a pat on the back. If he gets paid, he goes to jail.

Remember that medical unions are just as protectionist as other unions. In fact, it could be argued that the medical unions have even more power than groups such as the Teamsters and the NEA. The AMA and local medical unions have been successful at outlawing most of their competition in labor, maintaining a shortage of “qualified” labor, keeping their profits and prices very high, preserving the tremendous profits and shortages of drugs and colluding with the government to build the tremendously inefficient TPA model that most private and public health care systems utilize.

In essence, the doctor is not your friend here. He wants to maintain his extra special privileges and profits - and he doesn’t want to complete for it. He wants it by using the guns of government enforcement - all in the name of protecting your health.

Opposition by Others
There is a lot of opposition to the practice for non-medical professionals because the idea of buying and selling body parts feels icky. But why? What is icky about people barely hanging onto life, or chained to large machines and expensive medical treatments having an opportunity to buy an organ that someone else was willing to part with?

This argument is was taken to it’s logical conclusion by J.H. Huebert:

Some might say that legalized organ sales would cheapen us, or put a price tag on human life. But if we’re thinking that way, why stop at organs? Why allow doctors to charge anything for saving lives? Why allow grocers to charge for food, also essential to life? We allow prices for those things because we understand that otherwise, we wouldn’t have nearly enough of them.

Imagine the kind of markets that could be created. Part of one’s life insurance policy could be that upon an untimely death, one’s organs would be sold to pay for funeral costs, a child’s education or towards a charitable organization. The fact is that money would encourages donations - in the present scenario, they are discouraged. The need far outweighs the available supply.

The fact is, even if we do not like what people chose to do with their own bodies and property, we have no right to go in with guns blazing and throw them in jail.