Article comparing free markets to social democracy

This is a good article that explains why Europe's strategy of high social welfare stifles economic innovation and is a net detriment. Here is an excerpt:

Keeping America's Edge

The United States is in a tough spot. As we dig ourselves out from a serious financial crisis and a deep recession, our very efforts to recover are exacerbating much more fundamental problems that our country has let fester for too long. Beyond our short-term worries, and behind many of today's political debates, lurks the deeper challenge of coming to terms with America's place in the global economic order.

Our strategic situation is shaped by three inescapable realities. First is the inherent conflict between the creative destruction involved in free-market capitalism and the innate human propensity to avoid risk and change. Second is ever-increasing international competition. And third is the growing disparity in behavioral norms and social conditions between the upper and lower income strata of American society.

These realities combine to form a daunting problem. And the task of resolving it turns out not, by and large, to be a matter of foreign ­policy. Rather, it compels us to consider how we balance economic dynamism and growth against the unity and stability of our society. After all, we must have continuous, rapid technological and business-model innovation to grow our economy fast enough to avoid losing power to those who do not share America's values — and this innovation requires increasingly deregulated markets and fewer restrictions on behavior. But such deregulation would cause significant displacement and disruption that could seriously undermine America's social cohesion — which is not only essential to a decent and just society, but also to producing the kind of skilled and responsible citizens that free markets ultimately require. Moreover, preserving the integrity of our social fabric by minimizing the divisions that can rend society often requires ­government policies — to reduce inequality or ensure access to jobs, education, ­housing, or health care — that can in turn undercut growth and prosperity. Neither innovation nor cohesion can do without the other, but neither, it seems, can avoid undermining the other.

Judge Andrew Napolitano on Glenn Beck Show

Great show with guest host Judge Andrew Napolitano:

The Ultimate Argument Against Socialism

David Hume gave a good explanation for why socialism is a bad idea 250 years ago:

An Enquiry Concerning the Principles of Morals:

But historians, and even common sense, may inform us, that, however specious these ideas of PERFECT equality may seem, they are really, at bottom, IMPRACTICABLE; and were they not so, would be extremely PERNICIOUS to human society. Render possessions ever so equal, men's different degrees of art, care, and industry will immediately break that equality. Or if you check these virtues, you reduce society to the most extreme indigence; and instead of preventing want and beggary in a few, render it unavoidable to the whole community. The most rigorous inquisition too is requisite to watch every inequality on its first appearance; and the most severe jurisdiction, to punish and redress it. But besides, that so much authority must soon degenerate into tyranny, and be exerted with great partialities; who can possibly be possessed of it, in such a situation as is here supposed? Perfect equality of possessions, destroying all subordination, weakens extremely the authority of magistracy, and must reduce all power nearly to a level, as well as property.

We may conclude, therefore, that, in order to establish laws for the regulation of property, we must be acquainted with the nature and situation of man; must reject appearances, which may be false, though specious; and must search for those rules, which are, on the whole, most USEFUL and BENEFICIAL. Vulgar sense and slight experience are sufficient for this purpose; where men give not way to too selfish avidity, or too extensive enthusiasm.

Who sees not, for instance, that whatever is produced or improved by a man's art or industry ought, for ever, to be secured to him, in order to give encouragement to such USEFUL habits and accomplishments? That the property ought also to descend to children and relations, for the same USEFUL purpose? That it may be alienated by consent, in order to beget that commerce and intercourse, which is so BENEFICIAL to human society? And that all contracts and promises ought carefully to be fulfilled, in order to secure mutual trust and confidence, by which the general INTEREST of mankind is so much promoted?

Examine the writers on the laws of nature; and you will always find, that, whatever principles they set out with, they are sure to terminate here at last, and to assign, as the ultimate reason for every rule which they establish, the convenience and necessities of mankind.

Ron Paul on Montel Williams

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Part 2:

Ron Paul on CNBC responding to questions on Fed Audit

Ron Paul explains why Fed transparency is necessary:

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Part 2:

An Open Letter to the Federal Reserve

Great article, via Fool.com:

An Open Letter to the Federal Reserve

By Matt Koppenheffer and Morgan Housel

Dear Ben Bernanke and distinguished members of the Federal Reserve:

We are writing today to formally solicit your help in obtaining approvals to start a new bank holding company, Money Unlimited. We of course understand that the approval process for a new bank is typically done through the FDIC, but as the Federal Reserve plays a crucial role in our business plan, we hope that you can expedite the process.

First, let us assure you that we will start from day one as a very well capitalized institution, with no need to raise outside capital. While actual cash is on the lower end of the spectrum, we both own stock portfolios that we plan to use as collateral for our banking operations. Our current holdings include Berkshire Hathaway (NYSE: BRK-B), Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO).

For the purposes of this application, we are choosing to mark these assets to model rather than to market. Our basic assumptions include 7% U.S. GDP growth, 12% global GDP growth, a 4% U.S. unemployment rate, rising corporate profitability, U.S. debt repudiation, and the end of cloudy days.

In addition, Matt owns a home in Las Vegas. Though this asset is currently considered "under water" based on market valuations, a house down the street just sold for slightly more than Zillow.com said it was worth. We extrapolated that gain into infinity and determined the housing bust is simply a figment of the media's imagination.

Now the good news: Without getting into the complexities, our models show our combined net worths at just over $1 billion, all of which we'll use as capital for Money Unlimited. We hired a 22-year-old right out of college who's pretty darn good with Excel. He assures us it's a conservative figure.

While neither of us has any "formal" banking experience, our time-tested business model more than compensates for this apparent shortfall. As with Goldman Sachs (NYSE: GS), which was recently made a bank holding company, we have no plans to engage in actual banking operations such as deposit-taking and lending. That stuff just sounds hard. Regulators are always all, "You need to lend money to people who can pay you back." We'd rather just avoid that whole sticky situation altogether.

Instead, we're going to leverage our borrowings from the Federal Reserve to create a massive, money-spewing trading operation.

It's quite simple, really. We're going to borrow money from the Federal Reserve at 0%, then lend it back out to the U.S. Treasury at 3%. The Treasury can then use that money for fantastic programs like Cash for Clunkers. If we leverage our $1 billion asset base 20-to-1, we'll pull in $600 million in year one without breaking a sweat.

Because we want to do what's right for the economy, we plan to keep operating expenses to a bare minimum and limit our bonuses to $20 million each for the first five years. By plowing the remaining money back into the bank -- and, of course, leveraging it at 20-times -- we'll be able to grow like a weed. Assuming you folks at the Federal Reserve continue to do your part by lending money at 0%, we expect to clear $120 billion in assets in five years flat.

And don't worry about us. We understand that hard work and tangible economic contributions need to be rewarded, so in the sixth year of operation we both plan to take $500 million bonuses and use company money to buy ourselves private jets.

Money Unlimited will offer other significant benefits to the economy as well. We'll compete against banking organizations such as Goldman Sachs, JPMorgan Chase (NYSE: JPM), and Citigroup (NYSE: C), who are no doubt engaging in similar practices. (Have you seen their earnings?) Plus, we'll allow other banks to buy credit defaults swaps against us. As any financial professional worth his salt can tell you, this "increases liquidity" and helps small businesses. We can't tell you exactly how that works, but salesmen who wear shiny cuff links and talk really fast tell us it's true.

But helping the economy isn't all we're about. As Goldman Sachs' CEO Lloyd Blankfein recently put it, this is "God's work," and we certainly don't disagree with that.

Before long, the founders of Money Unlimited expect our trading operations will become so large that we will be considered "too big to fail." While some may consider this a concern, we disagree. There should be more competition among "too big to fail" institutions so that the risk of a Chernobyl-type catastrophe in our financial system is spread more broadly.

Thank you for your time and we look forward to your help obtaining a speedy approval for Money Unlimited.

Sincerely,
Matt Koppenheffer and Morgan Housel

Everything the Government Runs is Broke