Another Reason for Workforce Participation to be Down

One number in the labor statistics department has conservatives all up in a wad – the workforce participation number. These are people who are not in the labor force. I am not an expert in labor statistics, but from a cursory reading of them (they are available here with an explanation here) does not give me alarm about this number.

The way that conservative pundits put it, an enormous number of people have found that the economy is so bad, that they have simply left the workforce – they have given up looking for work. There is, possibly, another interpretation. It might be that conservatives are winning in other areas.

What?

Since the 1970s, the two-breadwinner family model has risen dramatically. However, conservatives have long been critical of this approach for a number of reasons, many of which are detailed in MicroSecession. In brief, having a second breadwinner doesn’t necessarily increase the productive output of the home, it just means that all the household endeavors went from unpaid to paid workers. For instance, if a wife stays home, she takes care of a lot of the housework, and might even mow the lawn. She takes care of the kids when they are home from school. If a wife, instead, works, all of these tasks must be taken care of in some manner – often times by hiring it out. So, you have a second income, but you must pay for cleaning services, yard services, and childcare services. So the second income doesn’t necessarily benefit the family, it just means that you have to pay taxes not only on the husband’s work, but also on the wife’s work.

So, my guess is that much of the reason that workforce participation numbers are down is because women have started taking a more active role in the home. In addition, a new conservative trend has many women heading in this direction in greater numbers – homeschooling.

What the homeschool movement has pointed out is that it is the responsibility of the parents to take charge of their children’s education. Outsourcing this to schools often isn’t cutting it. Therefore, many parents are making the decision to live on a tight budget during the child-rearing years so that the wife can stay home to educate the children.

As someone who is negative on the current economy, I don’t doubt that we have employment problems. Actually, even more than employment problems, we have income problems because the Federal Reserve is debasing our currency, and the federal government is making getting out of poverty bad business (i.e. when someone tries to get out of poverty, they actually lose money when they first begin to work, making starting the journey out nearly impossible).

However, I do think that some of the numbers reflect some amount of healing in society, even as our government is just as bad as ever.

Some Criticisms of George Gilder’s Knowledge and Power

I’ve been reading (actually listening to) George Gilder’s new book, Knowledge and Power, dealing with what he calls the “information theory of capitalism.” The book is, overall, fantastic. I heartily recommend it to anyone, and believe that Gilder provides both an excellent defense of capitalism as well as an excellent understanding of it. Hopefully soon I will write an overview, because it really is good. However, before I forget, I want to cover some of the places where I think Gilder is wrong. Gilder is an optimist. I like optimists. That’s actually one of the things about my book – it’s an optimistic prepare book. However, Gilder often goes beyond optimism to all-out rose-colored-glasses.
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Ranking the Best Options Forward on the US Debt

If you find yourself in a hole, stop diggingThe First Rule of Holes

The problem with the US Debt crisis is that it is hard to talk to people about what the options are without people getting confused. Here is a normal conversation:

Someone Else (SE): “We need to raise the debt ceiling to avoid a default”

Me: “I agree we need to avoid a default. That’s why we should cut spending drastically.”

SE: “Well, we can’t cut spending – they are all for critical services, so we need to increase the debt limit.”

Me: “I am against raising the debt limit”

SE: “What if we default?”

Me: “If that’s the only option, I’ll take it”

SE: “You just contradicted yourself.”

This sort of thing drives me crazy, so here I will lay out, in the order of preference, the various options on the debt default.
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Myths and Truths on the US Debt Default

One of the goals of MicroSecession is to remove ourselves enough from the monetary system so that the idiocy that we see on TV doesn’t adversely affect us. Nonetheless, good governance is still better than bad governance. In that spirit, I want to devote a few posts to the possible pending US Debt default. This first post will be to dispel some common myths about the potential debt default.
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The Left’s Obsession with Money

NOTE – this article is a followup to a previous article on the problems of an economics focused too much on money.

One of the saddest things about the left is that, although they make a lot of noise about “the rich” and similar power brokers, the injustice of money, and other ills and woes, they are actually the most enslaved to money of them all. Don’t get me wrong – there is plenty to dislike in the power structure of modern America. However, whenever I hear the left speak, it usually comes out like this:
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Rethinking Money, Pt 4: Having Sound Money with the Currency We Already Have

This is the last of a four-part series.  The previous installments were:

To recap – the basic idea is that the US government actually has issued silver currency (American Silver Eagles, Morgan Silver Dollars, most change before 1965, etc.).  This money is deemed by the government to have the same value as the worthless paper dollars.  Therefore, you are free to transact with others in silver.  This leads to several practical benefits.  If someone only accepted silver, then their prices would be reduced by about 1/20.  You can then use the government’s dollar devaluation for your own benefit by making purchases with silver but paying taxes with paper money.  You are benefitted doubly if you are paid your salary in silver, because you probably would not have enough income to necessitate filing a tax return.  If you earned $100,000, but were payed in silver dollars, you would only receive $5,000 and fall well short of the taxable income necessary to file a tax return!
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Rethinking Money, Pt. 3: Inverting Gresham’s Law

This is the third part of a series on reorienting our monetary policy from the citizenry rather than the government. See Part 1 and Part 2 first. UPDATEpart 4 has now been posted.

IMPORTANT NOTE: This is not tax or investment advice. These are my thoughts, and I certainly could use input on them. I have not yet implemented any of these things myself, as I am still contemplating them.

What we have discovered is that there is still sound currency (i.e. money based on precious metals) being produced by the US Treasury through their American Eagle program. But why is nobody using it?

The answer to this is called Gresham’s Law, which we have discussed here before. In short, Gresham’s Law states that if the government misvalues one type of currency over another, the undervalued currency will go eventually out of circulation. The reason is that, given the choice, we would rather keep the one that is more valuable, and trade the one that is less valuable. So, eventually, the valuable currency becomes an investment piece rather than a tradable good. Therefore, because eagles are at least 20x more valuable than their face value, they never enter circulation.

However, there is a flip side to this. If the government is recognizing the different units of money as being equal, then using the undervalued money in trade can be a huge savings for taxes, if it is done correctly.

Think of it this way. Let’s say that you went to a store which only accepted silver eagles for payment. However, their prices were 1/20 of that of normal prices. So, rather than pay $200 for a lawn mower, I would pay 10 silver eagles, which have the marked value of $1 each, or $10 total. Now, when I pay tax (assuming a 10% tax rate), the tax is $1, but the merchant only takes silver eagles, so that is one silver eagle.

If such merchants existed, we could switch to sound money by just using eagles instead of Federal Reserve notes! Thus, those who wanted to use a sound money system could, and those who didn’t want to use a sound money system could keep on with business as usual. Note that this can be done without a single change in government policy.

But wait! There’s more! It would be nice to have a way to encourage other people to partake in this system. It turns out that there is a built-in tax advantage to running a business this way. In fact, there’s two! First of all, let’s go back to purchasing that lawnmower. Remember that this is a $200 lawnmower (in Federal Reserve notes), but since the merchant is only taking eagles, he has the price listed as $10. Now, let’s say that although he only takes eagles for purchases, he will accept any form of currency for the tax. So now, to purchase the lawnmower, I pay $10 in silver eagles, but I use a Federal Reserve note to pay the tax! Thus, since the Federal Reserve note is only worth 1/20 of the silver eagle, my sales tax bill is reduced by 95%!

So, in one swoop, we fix the currency and tax system together.

But there is more! Now let’s think about getting paid for our work. Let’s say you make $100,000. What is your tax rate right now? It is between 25% and 28%. What happens if, instead of being paid in Federal Reserve notes, you were paid in silver dollars? What would your income be? It would be around $5,000. This is less than the amount the IRS requires for making a tax return! That’s right, if you were paid in silver eagles rather than in Federal Reserve notes, you would not have to even file a tax return.

So, you can fix the income tax, sales tax, and monetary policy just by switching to silver eagles for your currency!

Now, of course, if many people did this, the government would eventually respond in some way. But, since we are using the money according to how the US Treasury themselves are stamping the money, the only real response would be to do something that made the monetary system closer to sound money, and that is a win for everyone! With citizen’s acting in accordance with the law!

So, if the government does nothing, a small segment of society will have sound money and better tax policies. If the government intervenes, then everybody will have sounder money. A win for everyone!

Now the problem is implementation, and the next post will discuss that issue.