Tag Archives: economy

The Government Can- Tim Hawkins

http://www.youtube-nocookie.com/embed/5u03KAcEbEo?rel=0

Mortgage Crisis – 60 Minutes Episode

60 Minutes Story on Mortgage Crisis

Gold as the Silent Witness

Dan Norcini writes:

I wanted to post some brief comments to let some of the newer readers understand why many of us believe that there is a war being waged upon gold by the Central Banks of the West.

Let me start this off by quoting from none other than former Fed Chairman Alan Greenspan more than 40 years ago:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard

What the former Fed Chairman was then saying was that absent a gold standard or some device for restraining the unlimited creation of fiat money, there was nothing to impede monetary officials from engaging in such activity to the extent that it would ultimately set in motion a process of inflation, which is really just another name for the erosion of the purchasing power of a nation’s currency by debasing it. Inflation was and is in essence, the transfer of wealth from one class to another.

Today we have the Fed engaging in the very process that Greenspan warned against back then. We also have the BOJ and the ECB effectively doing the same thing to an extent.

Unlike Silver, Gold is the main metal that most analysts and commentators look to when attempting to decipher whether or not inflation is a serious problem. That means the reference point of gold has become a target for Central Banks which want the world to believe that they can create unlimited amounts of funny money with absolutely ZERO impact on inflation levels. In other words, that they can conjure up wealth and produce prosperity with the electronic equivalent of a printing press and produce no serious inflationary impact by so doing.

A rising gold debunks their hubristic assertions to the contrary for it stands as a silent witness testifying against them. This is the reason the yellow metal is despised by so many Central Banks. It mocks their policies and displays their folly for all the world to see. Central Bankers, being the demigods that they are, will tolerate no rivals to their claims of economic omniscience. You see they have actually come to believe that it is their own wisdom and foresight which enables them to see through the fog that hinders and impedes our economic progress and that they are in a unique position to provide the rest of us with lasting prosperity. They attempt to do this by basically providing or withdrawing liquidity as they in their wisdom judge best and by the setting or manipulation of interest rates.

Those of us who believe that it is free market capitalism and the industry and efforts of mankind that produce wealth and prosperity would beg to differ but that is another story altogether. I would add that it is my opinion that the world would be better off without this plague of locusts that actually devour a nation’s wealth but the fact is that they are here.

While they are here gold will attempt to move in such a manner that it either blesses or curses their policies. Now we all would love to have our policies approved by the vote of the market but what about those times in which the market frowns on our course of action and refuses to smile upon it? Why this is but a simple matter – attack the messenger! If one can somehow manage to keep the price of gold under wrap so that it does not move sharply higher then one can attempt to make the claim that inflation is not a serious problem. The comments usually go something like this:

“Well Jerry, we are looking at the gold price and from what we can see, that while it is definitely higher, it is not soaring out of control. The market may be pricing in some gradual inflation but the action in the gold price is telling us that any fears of inflation getting out of control are definitely unwarranted. Besides, we all agree that some inflation is a good thing because the alternative is deflation and no one wants to see that”.

Imagine Fed Chairman Ben Bernanke testifying before Congress saying that the current rise in prices of many goods is only “temporary” and “relatively modest” if the gold price were soaring beyond $1650 and higher! Do you think anyone would take anything that the Chairman said seriously? Copper can soar higher and most will not notice it. Even if it does, it is generally explained as a positive because we are told it is a sign of strong economic growth ahead. Crude oil and energy prices can rocket higher and that can be attributed to geopolitical unrest among oil producing nations. Food can rise sharply and everyone notices that but such things are often explained away by citing weather conditions, supply constraints, etc. but a rising gold price? How does one explain that away?

The only reason that gold has a sustained price rise is because of a lack of confidence in the monetary system. It does not rise sharply because of such things as jewelry demand or industrial demand – it rises when fear, distrust, doubt, suspicion and uncertainty over Central Bank policy reigns. It rises when REAL interest rates are negative and investors understand the insidious process of currency debauchment practiced by these monetary authorities is underway. It thus cries aloud and issues a warning to those who can hear it and what it shouts displeases many Central Bankers because they are among those who while they despise its message, are all too keenly able to hear that message.

Thus the messenger, the prophet, the oracle, must be silenced or at the very least, his message blunted, toned down, marginalized, trivialized by whatever means possible. The mechanism employed to do just this is a subject for another time and place. Suffice it to say for now, without the efforts by the monetary officials of the West to discredit gold, it would be trading considerably higher. Even at that however, the ancient metal of kings refuses to go quietly and docilely into the night. It will yet have the final say.

Utah House stamps gold, silver as legal tender

From The Salt Lake Tribune:

By Lee Davidson

The Salt Lake Tribune

First published Mar 04 2011 12:14PM
Updated Mar 5, 2011 12:04AM

It may not fold as conveniently as dollar bills, but the Utah House took a first step Friday to recognize gold and silver as legal tender.

It voted 47-26 to pass HB317 by Rep. Brad Galvez, R-West Haven, and sent it to the Senate. The measure would recognize as legal tender gold and silver coins issued by the federal government — not just their face value, but also their value in gold and silver or to a collector.

It also would order the state to study whether Utah should establish an alternative form of legal tender, such as one backed by silver and gold.

“This is a step in preparedness, a step in security,” Galvez said, “that allows us to be able to help hold up our economy as the dollar continues to shrink.”

Rep. Ken Ivory, R-West Jordan, said, for example, that a 1960s John F. Kennedy half-dollar coin — 90 percent silver — would have bought three gallons of gasoline with its face value in the mid-60s. But the value of the silver in it today would buy about five gallons of gas, while the face value of the coin would buy only a fraction of a gallon.

Ivory said the bill is “a way for us to preserve for the citizens of Utah … the purchasing power of the money they hold.”

The bill would not require anyone to accept gold and silver coins as legal tender. It also would exempt the sale of such U.S. coins from state sales taxes and from capital-gains taxes.

Rep. Steve Eliason, R-Sandy, a certified public accountant, opposed the bill, saying it could create tax loopholes. He said people seeking to escape capital-gains taxes on other assets — such as gold bullion — might be able to do so by selling it for coins under the bill.

“Government Motors” sells just 281 Chevy Volts in February, Nissan only moves 67 Leafs

This is what happens when central planners try to run the economy – they do not have the ability to know the desires and motivations of millions of individuals.

From Green.Autoblog:

Peruse Chevrolet‘s February sales release, and you’ll notice one number that’s blatantly missing: how many Chevy Volts were sold. The number – a very modest 281 – is available in the company’s detailed data (PDF), but it apparently isn’t something that GM wants to highlight. Keeping the number quiet is understandable, since it’s lower than the 321 that Chevy sold in January.

Nissan doesn’t have anything to brag about here, either (and it avoided any mention of the Leaf sales in its press release). Why? Well, back in January, the company sold 87 Leafs. In February? Just 67. Where does that leave us? Well, here’s the big scorecard for all U.S. sales of these vehicles thus far:

  • Volt: 928
  • Leaf: 173

Ouch. The big questions, of course, revolve around one word: “Why?” Is ramping up production still a problem? Is demand weak? Are unscrupulous dealers to blame? When will sales start to climb? And what are these numbers doing to plug-in vehicle projects at other automakers? We don’t know all the answers, but for more on February auto sales, click here.

[Sources: General Motors, Nissan]

Filed under: EV/Plug-in, Hybrid, Chevrolet, GM, Nissan, AutoblogGreen Exclusive

Tags: auto sales, breaking, electric vehicle, leaf, leaf sales, plug-in hybrid, volt, volt sales

Utah Considers Return to Gold, Silver Coins

From FoxNews:

By Stephen Clark

Published March 03, 2011 | FoxNews.com

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It’s been nearly 80 years since the U.S. stopped using gold coins as legal currency, and nearly 40 since the world abandoned the gold standard, but the precious metal could be making a comeback in the United States — beginning in Utah.

The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal government as legal currency in the state. The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.

The legislation, which has 12 co-sponsors, would let Utahans pay their taxes with gold and also calls for a committee to study alternative currencies for the state. It would also exempt the sale of gold from the state capital gains tax.

The bill cleared a state legislative committee on Wednesday, the first of 13 similar bills in statehouses across the country to do so. If the bill clears the House, it would have to pass the Senate before the governor could sign it into law.

Attorney and Tea Party activist Larry Hilton, author of the original bill, said he doesn’t foresee any roadblocks.

“There’s enough uneasiness going on in the economy to trigger people to feel that, hey, having a little Plan B, kind of a backup system, is not a bad idea,” he told FoxNews.com.

The U.S. used some version of the gold standard from 1873 until 1933, when President Franklin D. Roosevelt outlawed the private ownership of gold amid the Great Depression. An international monetary system based on a gold-exchange standard continued until 1971 when President Richard Nixon stopped the U.S. from redeeming dollars for gold altogether.

Critics of the gold standard say it limits countries’ control over its monetary policy and leaves them vulnerable to financial shocks, such as the Great Depression. But supporters argue that the current financial system’s dependence on the Federal Reserve exposes the value of U.S. money to the threat of inflation.

Rep. Ron Paul, a longtime critic of the Federal Reserve who has called on a return to the gold standard, has praised Hilton’s efforts.

“Efforts such as yours in states around the country highlight the importantance of returning to sound money,” Paul wrote in a letter to Hilton. “Even if such efforts fail to achieve legislative success on their first try, their importance lies in bringing to the public’s attention the problem of the ever-weakening dollar and the necessity of returning to a sound monetary system.”

Hilton said the bill before the House doesn’t go as far as his original draft, which was more sweeping, including recognizing more than just U.S. minted coins and more details on specific tax treatment. But he said he’s willing to take it step-by step.

He also said he’s not pushing to restore the gold standard in the U.S.

Federal Reserve Chairman Ben Bernanke this week dismissed the notion of the gold standard returning to the U.S.

“It did deliver price stability over long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold,” he told the Senate Banking Committee. “So I don’t think it’s a panacea.”

Bernanke also said that gold couldn’t return as the world standard because there’s not enough gold in the world to effectively support the U.S. money supply.

Hilton said he’s taking a positive approach to the issue.

“This is not an anti-dollar issue at all,” he said. “We want to strengthen the dollar. We think by introducing gold and silver of our nation’s history, by injecting that into the debate is very healthy for our policymakers.”

Jeff Bell, a policy director for the Washington-based American Principles in Action (APPIA), which helped shape the Utah bill, told FoxNews.com that passage of the bill would send a message to Washington and other states.

“People sense that in the era of quantitative easing and zero interest rates, something has gone haywire with our monetary policy. But people are afraid to say it,” said Bell, who was an adviser to Ronald Reagan’s 1976 and 1980 presidential campaigns. “If one state recognizes gold as a valid currency, I think it would embolden people not just in other states but in Washington.”

Bell credited Tea Party activists for advancing the legislation this far. Rep. Brad Galvez, who introduced the legislation, is a freshman legislator backed by the Tea Party.

“Saying we now recognize gold as money is a big step forward,” he said.

Twelve other states have offered similar proposals: Georgia, Montana, Missouri, Colorado, Indiana, Iowa, New Hampshire, South Carolina, Tennessee, Washington, Vermont and Oklahoma.

What Charlie Sheen and the US Economy have in common

They are both self-destructing as they deal with addiction and excessive partying according to Peter Schiff:

SILVER OUTWEIGHS GOLD

by Peter Schiff

Peter Schiff

In the world of precious metals, silver spends a lot of time in the shadow of its big brother gold.

 

Gold, with its high price-to-weight and distinctive yellow tint, has always occupied a special place in the human psyche. To many people across many ages, gold is simply the ultimate form of money – and, as a long-term, stable store of value for one’s personal wealth, I agree it’s hard to beat.

However, rare circumstances are aligning today that I believe will make silver the true champion of this bull run.

WHAT’S DRIVING PRECIOUS METALS?

Gold and silver are both benefitting from a perfect storm in the sector.

Dollar devaluation means that much of the ‘gains’ we see are really just losses by people holding dollars. In other words, if your dollars lose 50% of their value, it’s going to take twice as many of them to buy the same ounce of gold.

But the rally is based on more than simple inflation. Precious metals are regaining their role as the ultimate reserve asset. That means many, many more people are buying and holding these metals than at any time in the last thirty years.

Another factor is the rise of emerging markets and decline of developed markets. As billions of poor Asians, Africans, and South Americans lift themselves out of poverty by embracing the free market, the US is plunging itself into poverty by rejecting it. This means there are a mind-boggling number of new customers for jewelry, savings, and industrial products that require precious metals – and that we are becoming less and less able to outbid them for these resources with our dollars.

SILVER’S DRIVING FASTER

If the world were going to hell in a hand-basket, then I would expect gold to outperform silver. However, it is only the developed economies that are on the rocks – and only the US that faces true catastrophe. Thus, we have seen silver outperform gold for the last eight years.

The market is telling us that while uncertainty reigns supreme, the global economy will prosper in the years ahead. While gold most effectively insures the investor against economic devastation, silver offers both a shield against monetary turmoil and exposure to market growth.

THE KEY: INDUSTRIAL DEMAND

This is because silver is both a precious metal and an industrial metal. Gold is mostly precious, copper is mostly industrial, but silver strikes a fine balance between the two. And it seems as if this moment in history is perfectly suited to this balance. We are facing not only the prospect of the collapse of the international monetary order, but also the largest industrialization process the world has ever seen.

While in a past era, wood, steel, or oil would have been the most critical commodity, today silver is used in everything we hold dear: iPhones, flat-screen TVs, batteries, solar panels, etc. Asia – the new heart of the global economy – is accumulating gold, but they’re consuming silver. That makes both metals good bets, but likely gives silver the edge.

It’s safe to say the future depends on a steady supply of silver. This burgeoning demand is reflected in the latest figures: global demand for silver is about 890 million ounces a year, while global mine production is about 720 million ounces a year. We’re actually consuming scrap to make up the difference. And unlike gold, which tends to remain in a recoverable state as coins or jewelry, a large quantity of silver is ending up in trash dumps – where it is essentially lost forever.

As long as the emerging markets continue to trend toward freer markets, and consumers the world over continue to demand computers, electronics, and green tech, silver should only become more scarce – and thus more valuable. I think these assumptions are pretty safe to make.

CAN THE WORLD THRIVE EX-US?

Of course, if everyone agreed with me, silver would already be worth hundreds of dollars an ounce and there wouldn’t be any profit to be made on the trade. Fortunately, there are a couple of bogeymen in the financial media scaring the majority of investors away from silver so far.

First, some analysts still believe – bless their hearts – that the US is really going to pull through this time into a sustainable recovery. After being duped by dot-coms and then housing, they are all aboard the Treasury Express back to Bubbletown. Unfortunately, as in the previous two cases, the current low interest rate environment is merely masking an underlying economy that is vastly more rotten than it was even a decade ago. The unemployment rate is a key signal that this time, Bernanke’s magic medicine won’t work.

A second cohort sees that the US is doomed, but still thinks we will drag the rest of the world down with us. This is the school that holds that despite our persistent current account deficits and monumental external debt, the world economy “needs” the US consumer to drive growth. As I alluded to in my book, How An Economy Grows And Why It Crashes, this is like a plantation master claiming his slaves need him around to consume the fruits of their labor, or else they wouldn’t have anything to do. Well, the results are in: after an initial panic rush into dollar-based assets, emerging markets are back at full sprint while the US is still limping along.

SILVER IN A DOLLAR COLLAPSE

Just like a Hollywood celebrity, we in the US spent our time at the top of the world – and soon let our status get to our heads. And like a celebrity, our adoring fans the world over will be quick to forget us as we fall from the limelight and deal with our powerful addiction to partying and cheap money. To survive the next decade in America, you are going to want an asset that is in demand globally, but is also free from counterparty risk here at home.

I recently did an interview with a group that is making a film about living in America in the year 2019. The premise is that inflation is rampant, the economy is in shambles, and groups are springing up that do all their trading in silver rounds. While I think their timeline is quite generous, this is a fairly accurate picture of what lies ahead.

Not only does silver appreciate while sitting in your safe due to overseas demand, but it also comes in units that are ideal for use as a common trade unit. Two or three ounces of silver can buy you groceries for a week. By contrast, just try to eat an ounce of gold’s worth of vegetables before they spoil. There are fractional gold coins and bars, but they carry very high markups.

None of us have had to think about these things in our lifetimes, but it is not abnormal in history. Soon, understanding precious metals will be as much a survival skill as knowing how to change a car tire.

THE GOLDEN RATIO

I always say that every investor should have at least 5-10% of his portfolio in physical precious metals. Of that, the proportion allocated to gold vs. silver depends mainly on risk tolerance. Silver tends to be more volatile than gold, so silver investors must have the discipline not to liquidate their stash at the first sign of a correction.

I generally advise a ratio of 2:1 gold-to-silver in the average portfolio. More aggressive investors can push it to 1.5:1 or beyond.

Year-to-date, silver is up 5 percentage points more than gold, and I expect that trend to continue. It’s important to understand that in this fast-changing world, silver is no longer runner-up.

AP IMPACT: Past government medical testing on humans revealed

From Washington Times:

ATLANTA (AP) – Shocking as it may seem, U.S. government doctors once thought it was fine to experiment on disabled people and prison inmates. Such experiments included giving hepatitis to mental patients in Connecticut, squirting a pandemic flu virus up the noses of prisoners in Maryland, and injecting cancer cells into chronically ill people at a New York hospital.

Much of this horrific history is 40 to 80 years old, but it is the backdrop for a meeting in Washington this week by a presidential bioethics commission. The meeting was triggered by the government’s apology last fall for federal doctors infecting prisoners and mental patients in Guatemala with syphilis 65 years ago.

U.S. officials also acknowledged there had been dozens of similar experiments in the United States _ studies that often involved making healthy people sick.

An exhaustive review by The Associated Press of medical journal reports and decades-old press clippings found more than 40 such studies. At best, these were a search for lifesaving treatments; at worst, some amounted to curiosity-satisfying experiments that hurt people but provided no useful results.

Inevitably, they will be compared to the well-known Tuskegee syphilis study. In that episode, U.S. health officials tracked 600 black men in Alabama who already had syphilis but didn’t give them adequate treatment even after penicillin became available.

These studies were worse in at least one respect _ they violated the concept of “first do no harm,” a fundamental medical principle that stretches back centuries.

“When you give somebody a disease _ even by the standards of their time _ you really cross the key ethical norm of the profession,” said Arthur Caplan, director of the University of Pennsylvania’s Center for Bioethics.

Some of these studies, mostly from the 1940s to the ‘60s, apparently were never covered by news media. Others were reported at the time, but the focus was on the promise of enduring new cures, while glossing over how test subjects were treated.

Attitudes about medical research were different then. Infectious diseases killed many more people years ago, and doctors worked urgently to invent and test cures. Many prominent researchers felt it was legitimate to experiment on people who did not have full rights in society _ people like prisoners, mental patients, poor blacks. It was an attitude in some ways similar to that of Nazi doctors experimenting on Jews.

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What Friends of Freedom Can Learn from the Socialists — To Win Freedom! by Richard M. Ebeling

Richard Ebeling writes:

On March 14, 1883, a German philosopher living in exile in London passed away. When he was buried three days later in a modest grave where his wife had been laid to rest two years earlier, fewer than ten people were present, half of them family members. His closest friend spoke at the grave-site and said, “Soon the world will feel the void left by the passing of this Titan.” But there was, in fact, little reason to think that the deceased man or his long, turgid, and often obscure writings would leave any lasting impression on the world of ideas or on the course of human events.

That man was Karl Marx.

Advocates of liberty often suffer bouts of despair. How can the cause of freedom ever triumph in a world so dominated by interventionist and welfare-statist ideas? Governments often give lip service to the benefits of free markets and the sanctity of personal and civil liberties. In practice, however, those same governments continue to encroach on individual freedom, restrict and regulate the world of commerce and industry, and redistribute the wealth of society to those with political power and influence. The cause of freedom seems to be a lost cause, with merely temporary rear-guard successes against the continuing growth of government.

What friends of freedom need to remember is that trends can change, that they have in the past and will again in the future. If this seems far-fetched, place yourself in the position of a socialist at the time that Marx died in 1883, and imagine that you are an honest and sincere advocate of socialism. As a socialist, you live in a world that is predominately classical liberal and free market, with governments in general only intervening in minimal ways in commercial affairs. Most people—including those in the “working class”—believe that it is not the responsibility of the state to redistribute wealth or nationalize industry and agriculture, and are suspicious of government paternalism.

How could socialism ever be victorious in such a world so fully dominated by the “capitalist” mindset? Even “the workers” don’t understand the evils of capitalism and the benefits of a socialist future! Such a sincere socialist could only hope that Marx was right and that socialism would have to come—someday—due to inescapable “laws of history.”

Yet within 30 years the socialist idea came to dominate the world. By World War I the notion of paternalistic government had captured the minds of intellectuals and was gaining increasing support among the general population. Welfare-statist interventionism was replacing the earlier relatively free-market environment.

The socialist ideal of government planning was put into effect as part of the wartime policies of the belligerent powers beginning in 1914, and also lead to the communist revolution in Russia in 1917, the rise to power of fascism in Italy in 1922, the triumph of National Socialism (Nazism) in Germany in 1933, and the implementation of FDR’s New Deal policies in 1933, as well.

Socialism triumphed during that earlier period of the last decades of the 19th and early decades of the 20th centuries because while socialists advocated collectivism, they practiced a politics of individualism. They understood that “history” would not move in their direction unless they changed popular opinion. And implicitly they understood that this meant changing the minds of millions of individual people.

So they went out and spoke and debated with their friends and neighbors. They contributed to public lectures and the publishing of pamphlets and books. They founded newspapers and magazines, and distributed them to anyone who would be willing to read them. They understood that the world ultimately changes one mind at a time—in spite of their emphasis on “social classes,” group interests, and national conflicts

They overcame the prevailing public opinion, defeated powerful special interests, and never lost sight of their long-term goal of the socialist society to come, which was the motivation and the compass for all their actions.

The Lessons for Freedom

What do friends of freedom have to learn from the successes of our socialist opponents? First, we must fully believe in the moral and practical superiority of freedom and the free market over all forms of collectivism. We must be neither embarrassed nor intimidated by the arguments of the collectivists, interventionists, and welfare statists. Once any compromise is made in the case for freedom, the opponents of liberty will have attained the high ground and will set the terms of the debate.

Freedom advocate, Leonard E. Read, once warned of sinking in a sea of “buts.” I believe in freedom and self-responsibility, “but” we need some minimum government social “safety net.” I believe in the free market, “but” we need some limited regulation for the “public good.” I believe in free trade, “but” we should have some form of protectionism for “essential” industries and jobs. Before you know it, Read warned, the case for freedom has been submerged in an ocean of exceptions.

Each of us, given the constraints on his time, must try to become as informed as possible about the case for freedom. Here, again, Read pointed out the importance of self-education and self-improvement. The more knowledgeable and articulate we each become in explaining the benefits of the free society and the harm from all forms of collectivism, the more we will have the ability to attract people who may want to hear what we have to say.

Another lesson to be learned from the earlier generation of socialists is not to be disheartened by the apparent continuing political climate that surrounds us. We must have confidence in the truth of what we say, to know in our minds and hearts that freedom can and will win in the battle of ideas. We must focus on that point on the horizon that represents the ideal of individual liberty and the free society, regardless of how many twists and turns everyday political currents seem to be following. National, state, and local elections merely reflect prevailing political attitudes and beliefs. Our task is to influence the future and not allow ourselves to be distracted or discouraged by who gets elected today and on what policy platform.

Let us remember that over the last hundred years virtually every form of collectivism has been tried—socialism, communism, fascism, Nazism, interventionism, welfare statism—and each has failed. There are very few today who wax with sincere enthusiasm that government is some great secular god that can solve all of mankind’s problems. Statist policies and attitudes continue to prevail because of institutional and special-interest inertia; they no longer possess the political, philosophical, and ideological fervor that brought them to power in earlier times.

There is only one “ism” left to fill this vacuum in the face of collectivism’s failures. It is classical liberalism, with its conception of the free man in the free society and the free market, grounded in the idea of peaceful association and individual rights. If we keep that before us, we can and will win liberty in our time—for ourselves and our children.

The Hampered Market – A Case Study

The following article shows how taxation and legislation interfere with the desires of people and how these people must redirect their resources to achieve their desired ends. These diverted resources are resources that cannot be directed to more productive means thus lowering the standards of living for all involved. The concepts “specialization of labor” (also known as “division of labor”) and “comparative advantage” explains how people tend to specialize in their productive endeavors so that they can trade their surplus production with others. For example, a shoe maker can make better shoes than a bread maker and vice versa so they focus on their respective specialties and then trade with each other when they need the others’ products.

In the story below, this woman very well may rather spend her time doing something she is better at instead of growing tobacco but the high cost of buying manufactured cigarettes forces her to become a tobacco grower. This deprives the world of her productive talents in those areas that she is better suited. At the very least, it deprives her of her valuable time that she could have devoted to leisurely activities.

From NYTimes.com:

Now in Brooklyn, Homegrown Tobacco: Local, Rebellious and Tax Free

By MANNY FERNANDEZ

The cigarettes Audrey Silk used to smoke — Parliament Lights — are made at a factory in Richmond, Va. The cigarettes she smokes these days are made and grown in Brooklyn, at her house.

Ms. Silk’s backyard is home to raspberry and rose bushes, geraniums, impatiens and 100 tobacco plants in gardening buckets near her wooden deck. Inside her house, around the corner from Flatbush Avenue, in Marine Park, she has to be careful stepping into her basement — one wrong move could ruin her cigarettes. Dozens of tobacco leaves hang there, drying on wires she has strung across the room, where they turn a crisp light brown as they age above a stack of her old Springsteen records.

She talks about cartons and packs in relation to crops and seeds. Planted in 2009, her first crop— 25 plants of Golden Seal Special Burley tobacco — produced nine cartons of cigarettes. Ms. Silk would have spent more than $1,000 had she bought nine cartons in parts of New York City. Instead, she spent $240, mostly for the trays, the buckets and plant food.

But for Ms. Silk, 46, a retired police officer and the founder of New York City Clash (Citizens Lobbying Against Smoker Harassment), a smokers’ rights group, it is not just about the money. It is about the message. In the state with the highest cigarette taxes in the country, in a city that has become one of the hardest places in America to find a place to smoke, Ms. Silk has gone off the grid, growing, processing and smoking her own tax-free cigarettes from packets of seeds she buys online for about $2. She expects to produce a total of 45 cartons after planting two crops — the first in the summer of 2009, the second last summer — and estimates that she will have saved more than $5,000.

“It’ll make the antismokers apoplectic,” said Ms. Silk. “They’re using the power of taxation to coerce behavior. That’s not what taxation is supposed to be for.”

There are no federal, state or city laws prohibiting New Yorkers from growing tobacco at home for personal consumption. Still, Ms. Silk has kept her homegrown tobacco a secret for the most part since she planted the first crop, though she has offered cigarettes to her boyfriend and a few neighbors. This month, however, she changed her position on keeping quiet, after the City Council approved a bill banning smoking at parks, beaches and pedestrian plazas.

“The only way we’re going to win now, since you can’t reason with the irrational, which is the City Council or any lawmakers,” Ms. Silk said, “is you have to take the position of giving them the finger.”

Though she has become more vocal about her tobacco, she remains apprehensive. She said that she worried that antismoking advocates and the Bloomberg administration, which pushed to ban smoking in restaurants and bars, would make homegrown tobacco their next target. “We fear that the antismokers are so hysterical that if they start finding that people are doing this, they would craft a law to make it illegal,” Ms. Silk said. “I’m waiting for the black helicopters to start flying over my yard.”

Jim Johnson, the president of Seedman.com, the company based in Mississippi that supplied Ms. Silk with her seeds, was not surprised to learn that the Golden Seal tobacco had done well in the Brooklyn sunshine. He said that tobacco would grow anywhere there were about 100 frost-free nights, and that he even had customers in Alaska. Mr. Johnson said tobacco was “a very tough, resilient plant.”

If there are other New York City smokers growing tobacco at home, they appear to be keeping it to themselves. Ms. Silk does not know anyone else in the city who does so. But they are out there: Mr. Johnson estimated that last year, he had more than 1,000 tobacco-seed customers in the New York City region.

Ms. Silk sat in the house she shared with Bingo, her dog, and Albert, her parrot, and pulled a cigarette from a Parliament Lights pack. “Don’t let this fool you,” she said. “I put my roll-your-owns in here. I just saved all my old Parliament boxes.”

Ms. Silk was smoking loose tobacco she had bought. She is in a lull in production: she finished smoking her first crop and has been too busy to prepare her second. The delay works to her advantage. “If I want a better flavor,” she said, “the longer I can leave it, the better it is.”

Growing tobacco saves Ms. Silk money, but costs her time.

She has to plant the virtually microscopic seeds in trays indoors and then, weeks later, transplant them to buckets outside. She waters the plants daily until they grow to be about five feet tall, with big leaves that droop from the stem. “Like elephant ears,” Ms. Silk said of the leaves. “That’s why, when people joke around and say, ‘They’re going to think you’re growing pot,’ I’m like: ‘I’m sorry. There’s no one mistaking this for pot.’ ”

Then there is the processing: washing leaves in her kitchen sink, drying them over the downstairs tub, hanging them in the basement, storing some in boxes she keeps in a walk-in closet, removing the middle vein from each leaf, forming bricks out of about 25 leaves and feeding those bricks into a hand-crank machine for shredding. After planting her 2009 crop, Ms. Silk had to wait several months before smoking her first cigarette from it. The authorities, she added, should not be concerned that she might be illegally selling her cigarettes.

“I make meatballs,” Ms. Silk said, by way of explanation. “My recipe is a four-hour ordeal. My biggest loved ones do not get any. When I have to put a lot of work into something, I don’t share.”

The 100 plants from her second crop are not much to look at now: mostly bare stems standing upright in the cold. Still, her Brooklyn tobacco is a source of pride, as both a green-thumb accomplishment and a political statement. She has even named her garden in honor, or dishonor, of someone important in her life: not her boyfriend, her dog or her parrot, but her mayor.