When I was a child, I fancied myself a great scientist.  I would go around making "solutions" out of household and barnyard items.  A little dish soap, a dash of pond water, fresh-cut grass and a few dead bugs shaken over horse manure and voila - some magical solution to achieve an unspecified agenda.  Perhaps it was a cure for cancer or a new form of rocket fuel that would take men to Mars.  Only time would tell.  I would store the solutions in used pop bottles in our garage until someone found them and threw them away. You may say this ritual resembles witchcraft more than it does science, and you would be right.  But, in my primitive mind I was emulating all of the key aspects of science - put things in a test tube (pop bottle) and swirl them around.  I thought I was conducting good science because I was going through the motions of what I had observed on TV.
Hayek warned against making this mistake in this eloquent Nobel Prize Lecture, The Pretense of Knowledge.  He was talking about economics, but I think his message can be applied more broadly.  Don't assume the work you are doing or the study you are conducting is correct or meaningful because it mimics those you have seen before, and don't assume that the values you are measuring are pertinent because they are the ones you can measure.  Be critical of others who have made this leap.  Keep these considerations in mind and you will be able to guard yourself against much flimflam from economists, scientists, doctors, lawyers, mediums and experts of all kinds.

Cold, Soft Cash

You will occasionally hear old-timers use the phrase "Cold, Hard Cash".  This is clearly an expression of a bygone era as our cash no longer can be misconstrued as "hard" in any way.  The fiat bugs (they call us gold bugs) have managed to destroy the currencies of the world by pegging them to the ever fluctuating index of bureaucratic whim.
"How can you say the dollar is weak?" people often ask me me, "After all, it is thumping the Euro (or the Peso or the Canadian dollar) this week."  This would be like concluding that my nephew is getting shorter because my niece is going through a growth spurt.  In order to draw meaningful conclusions about the value of cash or the heights of youngsters, we need a stable, standard reference.

Today's James Taggart

While reading Peter Schiff's excellent article on gold investment, I realized that the real James Taggart is alive and well.  The following is an excerpt from that article focusing on the Oracle of Omaha's less than honest, politically charged rhetoric of which we should all now be familiar.
[Warren Buffet] has been in the press since last August claiming that he pays less taxes than his secretary – and urging Congress to pass a "Buffett Rule" mandating a 30% minimum tax on millionaires. The natural reaction is to say, "If you want to pay more, go ahead." But Buffett has gone on record saying that it's not enough for him to lead by example, and demanding that all of America's well-off bear the burden of Washington's reckless spending binge.

The problem is that Buffett's entire argument is constructed on deception. Buffett is rated as the third richest man in the world for managing the nearly $393 billion in assets, and he highlights that he pays only pays 17.4% of his income in taxes. But this is because he earns less than 1% of his annual wealth from his salary, while over 99% is earned as the largest shareholder of Berkshire Hathaway. Buffett claims that he discounts his Berkshire holdings because he plans to give it all to charity when he dies. So, it's not that the tax rates are so low, it's that Buffett plans to give away 99% of his wealth.

But even accounting for this clever accounting trick, Buffett is still grossly understating his personal tax burden. He owns roughly 1/3 of Berkshire's outstanding shares, the profits from which are subject to a 29% corporate tax rate. Last year, Berkshire paid $5.6 billion in taxes – and the IRS says they owe $1 billion more! In addition to corporate taxes, Buffett is also subject to an additional 15% capital gains tax on his stock when he cashes out, not to mention any future estate tax, leaving many to conclude that his share of taxes is certainly higher than his secretary's.
Ayn warned us that we would have to save Capitalism from the capitalists.  She is turning out to be more prescient than we could have imagined.

The Great Fiction of Our Time

The great fiction of our time is that the actions of the merchant consist of a prospective science.  The fact of the matter is that the core of business is educated guessing in a constantly changing environment.   Every price is an exercise in close-ology.  No single price, product or release date is "optimum" but together they make up the harmony of human existence - billions of people working together to get by the best they can.  This chaotic system cannot and should not be controlled, constrained or otherwise molested.  When the well intentioned bureaucrat tries to outguess a nation of guessers we end up in a infinite regress or uncertainty and with a long history of destruction.

I Pledge Allegiance

I pledge allegiance to no flag nor the republic for which it stands.  I recognize the tradition of sovereignty of the states making up that republic, and therefore, do not consider it to be indivisible.  I reject the concept of the nation state being created, inspired, sanctioned or otherwise "under" a god.  Leave me only the "liberty and justice for all" - that is all I believe in and all the allegiance we need.

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