Friday, April 10, 2009

Government: The Oldest Confidence Scheme

For a number of years I worked at starting a business and investing in real estate. One of the chief challenges with which business men have to deal is the deception and manipulation of confidence men and women. Elderly people fall prey to confidence men who offer prizes for cash and Internet sweepstakes, but seasoned, high level executives fall for them as well. The Madoff scandal is but the most glaring of history's confidence schemes. In 2001, Sam Waksal convinced Peter Dolan, then recently appointed CEO of Bristol Myers Squibb and Waksal's friend (as was the also ill-fated Martha Stewart) to invest $2 billion in Imclone. According to the Wharton School of Business:

"But in December, the Food and Drug Administration rejected ImClone's application for Erbitux's market approval. ImClone's stock is now trading under $10 a share and its former chief executive, Samuel Waksal, was arrested in June on charges of conspiracy, perjury and insider trading. Authorities are investigating whether Waksal tipped off his friend, Martha Stewart, also an investor in the company, to sell shares just prior to the FDA's December ruling."

The annals of business are replete with stories of confidence schemes.

But government offers confidence schemes that are even bigger and of more malicious scope than does business. For example:

-Chinese, Soviet and Cuban governments came to power on the promise that communism would make their comrades' lives better. After decades, tens of millions of victims murdered by these governments, and one mismanaged enterprise after the other, the comrades were as poor as ever. The communist countries could not develop.

-In America, the Great Society programs of Lyndon B. Johnson claimed to be an important tool to help the poor and minorities. Today, 21% of inner city black teenagers are unemployed. Poverty has not been eradicated, rather income inequality has grown.

-Social security claimed to help the economic security of the elderly. Yet today, the economic value of social security contributions is far lower than the economic value that taxpayers contribute. Politicians transferred benefits to politically vocal constituencies in the 1970s and earlier. The result is that today's taxpayers pay for the retirement of previous generations, while seeing their own recede into the ever more distant horizon.

-Military strategy. Government claims expertise with respect to military strategy. Defense is the one area where no one denies that government ought to play a role, although the left believes it should be a smaller role than the right. But in Vietnam and Iraq, the military refused to heed the advice of William S. Lind and Thomas X. Hammes as to the importance of Fourth Generation Warfare. The result was botched strategy, thousands of Americans killed unnecessarily and at least hundreds of thousands of Vietnamese and Iraqis killed unnecessarily.

-Central banking. The biggest scam. I have blogged about this elsewhere. The idea that economists are better equipped to judge how much money the crooks at the Federal Reserve Bank ought to print is a funny idea. Add to it the laughable claim that the money ought to be given to bankers, and the bankers ought to have the power to expand the counterfeit money five fold in order to "help the poor" is unquestionably the biggest financial scam in the history of mankind.

-Government operations. In the 1970s I had the privilege to work as an office temp in New York City's Department of Social Services. I was still in college. My job was to type forms for medicaid claims. The office as a large, 20,000 square foot room with at least 100 employees, maybe more. I was typing the forms, but when I looked up, not a single other person was working. Everyone else in the office was standing around talking. Not a single employee at a typewriter. Then, a group of them came to my desk and stood around me. One started saying that it was ungodly to work because Jesus said to give unto God what is God's and Ceasar what is Ceasar's.

This occurred just before the mayoralty of Edward I. Koch, the Democrat who advocates lots of additional government programs. The DSS continued unaffected during Koch's 12-year mayoralty.

It is difficult to get to the bottom of all the thieving, stupidity and incompetence in government operations. One example was FEMA's handling of the New Orleans Hurricane Katrina a few years back. The Democrats, with their usual incompetent finger pointing and refusal to look for real causes, blamed the hurricane on Bush. But there is hardly a competently run agency in state and federal government. They are all mismanaged scams.

But, of course, the confidence men cum politicians do not discuss the mismanagement, waste, misallocation of resources and failed regulation. They do not tell you that they are helping the rich through their regulatory and monetary scams.

Rather, they tell the American people that they are helping the poor and the general population.

The American people are suckers. They are suckers to allow 50% of their income to go to federal and state taxes to be squandered on the garbage that politicians oversee.

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