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Idaho's Weekly Journal of Local & National Commentary  Week 1614

 

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by Free Market Duck

Obama's Three Economic Fallacies...or,
Why He Doesn't Get It

Oct 1, 2010

Washington, DC Has anybody else noticed a consistent theme running through President Obama's ideology of state collectivism through which he is attempting to "fundamentally transform America?"  There are three basic economic fallacies uponst which rest Obama's ridiculous programs:

Economic Fallacy # 1:  Wealth is finite,
Economic Fallacy # 2:  Value resides in labor per se, and
Economic Fallacy # 3:  Money is non-collateralized paper or credit.

   Let's blow apart these three fallacies.

   (1) Wealth is not finite.  Wealth is infinite and is the result of transferring ideas into time and labor saving devices or services.  Therefore, contrary to what the Obama socialists think, the rich did not necessarily -- i.e., as a result of free market capitalism -- get rich by stealing from the poor.  Those who did get rich by stealing from the poor or anybody else usually did so with the help of government intervention and by receiving special interest money from the government.  However, the latter describes state collectivism, not free market capitalism.  Therefore, the major basis for Obama's ideology to "redistribute the wealth" rests upon the economic fallacy that wealth is finite.  It is not.

   (2) Value does not reside in any labor or commodity per se.  In economics, value resides in the subjective determination of the consumer.  Value is not an objective fact.  Value is the anticipated service that the consumer hopes to receive in his exchange process and each trader values his/her anticipated service to be rendered differently, i.e. unequally, according to their own prioritized goals.  Exchanges in the market do not take place because they are considered equal by each party but rather precisely because they are considered unequal to each party, each person qualitatively valuing his/her anticipated service to be received higher than what he/she gives up.  Example to prove that value does not reside in labor per se:  a million men dig a million holes in the middle of the desert, rendering no service to anybody.  Their labor has no value whatsoever, even though they have expended tons of work.  The Rolling Stones rock group cut a new CD called "Start Me Up" in 15 minutes in the recording studio and sell 50 million copies, earning a billions dollars.  They have expended very little labor but have -- in the qualitative decision of the consumers -- provided a service the consumers value and will voluntarily pay for.  Therefore, the 2nd major basis for Obama's ideology to "redistribute the wealth" and use government money to finance labor unions such as the SEIU and the AFL-CIO rests upon the economic fallacy that value resides in the expenditure of labor per se.  It does not.

   (3) Money is not just printed paper or credit issued by the government.  Paper money must be an IOU for something such as gold, silver, or some other commodity.  Paper money is a receipt for the real commodity money much like the Pink Slip to your car is an ownership title; but the Pink Slip is not the real car.  Remove the relationship between the paper receipt and the commodity or service for which the receipt was issued and you have nothing but hot air.  And that is exactly what the Federal Reserve, Congress, and the Obama Administration are doing by issuing inflated U.S. Dollars through fractional reserve banking (and not even that, today, since there is no gold or silver used as a reserve) during their "counterfeiting" of our paper money.  Issuing virtual credit through computers amounts to the same fraud.  Therefore, it is an economic fallacy to think that one can "stimulate" an economy into wealth or job production or jump start businesses by inflating paper currency.  Hyper-inflation does nothing but rob everybody of the unit value of their medium of economic exchange while providing billions in economic advantage to those -- the central bank's buddies -- who receive the money first.  Non-collateralized paper money is not gold, is not silver, and is not a '57 Chevy.  It is just fiat hyper-inflated green paper with nifty official-looking government symbols printed all over it. FM Duck

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