We Have the Euro, Why Not the Opec?

The US Dollar is currently the world's reserve currency because Opec insists on receiving dollars for the oil it sells. This has artificially propped up the value of the dollar because all other countries have to buy dollars to purchase oil.

Those countries which have positive oil reserves, like Norway, or now Brazil that lives on ethanol and doesn't import oil, tend to have stable economies with solid reserves and a valuable currency, while those who are energy importers must rely on manufacturing to create dollar reserves to stay financially strong, like China. And America finds itself constantly losing jobs to foreign countries because its currency is propped up by the scarcity and value of oil itself, so we are in a depression, so now the Federal Reserve is creating more dollars and loaning them out at super low interest rates to get jobs going back in our country again.

But recently China, and now the entire G20, has expressed worry about the dollar's value in the future because the Federal Reserve has increased the amount of dollars in the world by $15 Trillion made out of thin air during the past year. The whole world worries their dollar savings, all the T Bills owned by China for example, will deteriorate in value to less than half its current purchasing power, because the Fed is creating so much new currency. Even Opec now complains that the price of oil should be kept at $100 a barrel, a new "fair" value.

As a result, the G20 is calling for a super currency, a basket of currencies that would become the new reserve currency. But unless that currency is backed by something of value, as the dollar now is essentially backed by oil, no one will feel that currency has any value.

So I propose that the new super currency to be created be called the Opec, and that it be valued at the level of 100 Opecs equals one barrel of sweet light crude oil on the dock of an Opec country, ready to ship.

Why not ask Opec to create that currency thus replacing the dollar as the world's reserve currency? The Opec could be created in the same manner the Euro was created.

But because the Opec would be backed, essentially, by the sum total of all the oil left in the world, it would become similar to a gold backed currency because there is something real that it equates to, i.e. 100 Opecs equals one barrel of oil. And, if you think about it, what this currency really is, is a money based on therms of energy, (more later on that).

Everyone in the world would know that the Opec will have value in the future, because oil is getting more and more scarce. As oil becomes more scarce, other countries buying the Opec would find that they have to pay more of their own currency to acquire the Opec. The exchange rate would be set by the market, and initially the Opec would probably be equal to the US Dollar thus giving Opec their $100 barrel an oil number to start.

But what if the Federal Reserve creates another $15 trillion out of thin air when they should only really be increasing the supply of dollars by the percentage growth rate of the US Economy? Well, in all likelihood, the Opec would trade to $2 or even $3.

The only way for more Opecs to be created would be for more oil, or its equivalent, more energy, to be discovered. Which brings us to the fact that the Opec would essentially be a currency equivalent to the cost of energy. And my argument is that with an energy backed currency, we would be halfway between a precious metal backed currency, (awkward) and a paper currency backed by nothing, (dangerous) and this would be a very good thing.

Why is gold backed currency awkward? For years, peopled argued against gold backed currencies, because it seemed a silly waste of people's time to go dig up a scarce metal from the ground for the sole reason that everyone knew gold was hard to find so therefore they all agreed it had value and they would go to work today for a piece of it, then put it under their mattress and sleep well at night, knowing that in the middle of next winter it could buy them food or water or a lump of coal. Go figure, you'd think people would only work for food or water or coal, but those are hard to store and carry around to buy stuff, hence the need for money, gold, and hence the need for paper money which is light, cash, and hence the development of the entire banking system, electrons created out of thin air and only as valuable as you trust the keeper of the bank, (I don't).

But back to gold, why go to all that effort? Why not have all those skilled miners doing something of value? That is a good question, and it is a good argument against gold, but what I propose is, we actually value our money on something that is being dug out of the ground which we all agree does have value? Oil!

With an oil backed currency, everyone could feel safe knowing they have Opecs in their bank account that can be exchanged for a barrel of oil two or five or twenty years from now, well, until the world runs out of oil.

And in the meantime, we could progress in our development of alternative energy, so that in the future we could have a currency based on a therm of energy, so that when a person did some work and got paid, they would know that all the energy producers of the world would give them one therm of energy in exchange for the therm unit of currency, maybe if solar catches on, the unit of currency in the future will be the Sol.

I like the Sol, in one sense it's endlessly abundant, but humans can't do anything with it now except farm or sunburn. But converted by solar panels it becomes a therm of energy, something we all recognize as being of value, and something easily measured, and therefore a unit of exchange, which is all money really is, a unit of exchange that everyone agrees on.

But because solar power is not here yet and we need to learn to walk before running, and since we can all agree that during the next twenty years oil is going to be pretty valuable, why not create the Opec?

Could more Opecs be created, by a scientific breakthrough that made energy half as expensive, like a solar breakthrough? Yes, absolutely, but wouldn't that be preferable to the Federal Reserve instantly creating nearly $15 Trillion out of thin air this year alone?

In fact it would be far preferable, because for the Opec to lose value, energy would have to get cheaper, which would mean in essence that our technology was making it cheaper for everyone to live, meaning, prices would drop as technology improved, just as the price of computers has constantly dropped as discoveries have been made in computing. And I haven't seen anyone complain about that.

The Opec. A good idea if I say so myself.

G20 Super Currency? Don't forget silver

When I began this blog, I recommended silver. At that time it was around $9. It has quietly risen to 13 plus in 3 months and I have not lost faith in it.

China is pressing for a world reserve currency and cautioning the US not to borrow so much money that they devalue the US Treasury bond.

Yet at the same time we learn that the Government has rejected GM's plan, and have pushed out Waggoner, GM's CEO. As long as the recession continues, there will be more and more borrowing to have the government spend our way out of depression ala owning GM.

Is the government good at running a private enterprise? Look no further than the post office to answer that question. Therefore, I doubt that the government's intervention in GM is going to come to any good, and only Ford will remain as a viable, independent US auto company.

But if GM goes bankrupt, another wave of layoffs is going to stimulate even looser lending by the FED, who have recently promised more than $1 Trillion in Treasury bill and FNMA backed securities to be purchased this year.

Currently, yields on FNMA backed 30 year securities are around 3.9 percent.

The US consumer, housing and the economy will not recover until 30 year Jumbo mortgages are under 5%. Only then will refinanced homes with lower payments become a source of spending money for the US. This should happen by this fall as the recession continues. By 2010 demand should be raging for everything from houses to remodels to cars and solar panels. Then we should see demand pull inflation rearing its head as the super supply of the dollar causes it to drop in value.

Will the fed tighten in time to rein in the economy, or will the fear of a depression linger so long we have inflation over 10%? I think the fed will stay too loose too long.

Will the world create a super currency? I don't think so, it's in everyone's interest to keep their currency low and improve their economy by selling cheap products to the world markets.

Without a super currency and with an over supply of dollars, I think gold will be at least $1500 by 2010 and silver at least $20. These two metals are already the super currencies that China wants. US citizens are going to vote with their feet as they see inflation occurring and each buy a little precious metals position.

But a flash flood is built one small rain drop at a time, and if enough people buy a "little precious metals position", it is going to push precious metals to new highs. And don't forget penny mining stocks. They are currently the buy of a lifetime. Don't forget, some mining stocks went up 1,600 times in value in the late seventies. And this time, inflation is going to be worse. $500 invested now in CDE, MDW, UXG and especially STVZF, all stocks I own, may well pay off your house mortgage in 4 years.

The Winter Cow

We went hunting for cow elk in New Mexico in January on the Vermajo ranch owned by Ted Turner. I had the honor of taking the first shot between the three of us, my son Louie and friend Bill. A driving snowstorm began on the first morning of our hunt while we were with the guide in his truck at a tire shop in Raton, buying new tires because one had gone flat the previous day. The people from Arkansas who we had dined with the night before had gone on and on about seeing elk and how wonderful the weather was, but that was not to be the case for us as we headed out into four inches of snow on the road and a heavy dump coming down from a windy sky.

We had never hunted here before and had no idea what to expect, but I felt there was a lot of pressure on me to get an elk and get the skunk off the hunt. We'd already missed our first early morning hunt buying tires, and Louie wanted to get home to his wife of less than one year. Adding to the pressure was the fact that we saw a mountain lion, a huge one, just half an hour earlier, and the guide stated that he thought the lion might have pushed a lot of the game out of the immediate area.

That turned out not to be a problem however, the ranch is 535,000 acres, but I was not used to hunting such a large property, so when we spotted a single cow elk browsing in the trees five hundred yards off the road, I didn't hesitate in saying I'd shoot it and help the guide drag it back across two icy streams. That would give Louie and Bill two and a half days to bag two more elk and put us on pace for getting home when we'd planned.

Louie videotaped as we stalked within 240 yards and I shot from behind some brush. I thought our stalk had been successful, the animal was totally undisturbed. One shot with the 338 Win Mag Remington my son's had given me for my 60th birthday was all it took to dump the cow elk. She struggled for less than a minute, then collapsed dead.

It was a long hike to the elk and we had to ford two streams to get there, fortunately both no more than six inches deep. At first I thought I'd shot a nice animal, but when I got closer, I was dismayed to see how old and bony she was. She had one tooth left, and when the guide gutted her, it was apparent there was very little meat on her. However we tagged her and dragged her out.

The next day the butcher said the elk was inedible, that she was diseased and the marrow was white and milky, a sure sign of disease. We called New Mexico Fish and Game because we were worried about Chronic Wasting Disease, but they assured us that the animal probably had a blood worm which made her deaf and blind as well.

So, that was why I was able to get within a couple of hundred yards, she was blind and deaf and trying to stay alive eating with one tooth in a blinding snow storm. I wasn't allowed a new tag, that was my hunt and elk for the year, so as I continued to hunt with Louie and Bill I started to think that all I had done was act as a mercy killer for this poor old cow elk.

It was almost one year to the day since my mother had died, and I couldn't help think of her because she had many of the same problems as that poor old cow. My mother had been unable to eat or drink in the end, and had more than anything else simply wasted away. It was awful to see her suffer and die slowly but there was nothing any of us could do, and to her credit, my mom retained her faculties almost to the last, so each day we had with her allowed some time to recall memories and talk about her life and the world.

But I have to admit that helping that old cow elk leave the world so quickly satisfied a hollow place in my heart that had been carved out by my mother's death. There is a terrible toll placed on loved ones when death is lingering. Each day that goes by might be the last, and all life is placed on hold until the death comes as a release from a painful vigil.

That poor old cow was alone, unable to stay with the herd any longer, unable to see, just grazing on grass in a thicket of trees, making an effort to stay alive long after any reason to live had gone by in previous springs and summers of bearing and feeding young ones.

Maybe I cheated that mountain lion out of a meal. Predators go after the easiest prey. If I did, I apologize to the mountain lion, though I think I saved him in the long run from indigestion and disease himself, so in the end I helped out two animals, though both will never know.

It was a different hunt, but this has been a different year.

Silver and Recommendation Updates

Silver has made a nice move upwards since I originally advised accumulating the physical metal. It is now holding over $13 an oz. on the spot market, and physical silver seems to be demanding a premium of $2 an oz. or more when you can find it. This metal should continue to climb as more and more money is spent by the US Government in an attempt to turn around the economy and we could see silver crossing $15 by this summer. As long as interest rates remain low, there is very little penalty in holding gold and silver, and if inflation takes off again, which it has to sooner or later, gold and silver will continue to climb.

One correction, I don't think the silver/zinc battery is going to make it into the auto industry after all. A Melbourne company has evidently come up with a better battery using less expensive materials, more later when I have information.

Another correction, more information is coming out now on the preferred shares sold to the gov't by various banks. In some cases it has been revealed that the shares are to pay interest and have a date of repayment. Honestly, if this is the case, then why all the secrecy about the terms and cost? Usually people are secretive when they don't want you to know the details of something because you will not have a good opinion of what they have done, so naturally, secrecy breeds suspicion.

Why these TARP actions were not a matter of public record, and why the Treasury Secretary required protection from criminal prosecution, I will never know.

Where did the Tarp Money Go?

I argued against TARP and was upset when it was approved. So far, roughly half the money has been doled out and I did some research as to where it has gone and how it has been used.

There is an excellent report on the internet. It shows who got what so far, roughly 300 billion has been given out. This report is at http://www.propublica.org/special/show-me-the-tarp-money

So we can see who got the money, but how has the money been used? No one knows! The GAO has written a report stating that unless the Treasury steps up efforts to monitor where the money has been used, that in general, the institutions consider the money fungible, meaning it can blend in and be hard to track, and at least one institution publicly has said they won't keep track of its use separately, meaning it could actually be used to pay manager's bonuses.

What? I thought there would be penalties against this? It turns out, according to a fellow blogger in his article on this, http://www.dubrawsky.org/wordpress/?p=172, that a last minute rule change was made by the Oval Office, and that the penalties for paying executive bonuses would only apply if banks sold toxic assets to the Treasury. But if they didn't sell toxic assets, there was no restriction on bonuses, in fact no restrictions on the use of the money at all, and it could be kept secret, and Paulson would not be held criminally liable for doling out the money!

So that explains why Paulson had the Treasury buy preferred stock from the banks instead of buying their troubled assets, because then legally the banks could do whatever they wanted with the money. Which the GAO says they are powerless to find out because the law didn't require reporting, because it was crafted originally to only buy TARP assets, but was changed at the last minute!

So was it changed and the congress voted on it again and no one read the bill the second time around? Or was it approved and then the President changed it? My bet is that no one bothered reading the amended bill and no one caught this enormous loophole because from what I know of the law, the President can't change the wording of a bill, just sign or veto it. Regardless of the mechanism, this borders on the criminal, even if it was all done properly and legally.

Are you upset? I am! This is $300 Billion of our money! And you know what I think happened to most of the money? Here's the trail I suspect. Treasury gives Bank $40 billion and Treasury gets preffered stock, which has no voting rights and no assurance of paying a penny back to Treasury, meaning, if the Bank had given Treasury a couple rolls of Charmin instead of preferred stock, it would have given us something of value!

Bank takes money and buys... Treasury Bills! Safe investments, they loaned it back to us, the people that gave it to them all in a panic to save them from owning toxic assets, (which the Banks were not forced to invest in in the first place mind you, they took a risk and lost, so we, well, we said, oh no that's awful, rich guys can't go broke, and just gave them money).

So the bank invests their $40 Billion at 3% in T bills and that gives them a tidy $1.2 Billion in income. Guaranteed!With safe profits coming in, I'm sure the executives will get their bonuses and salaries! No work involved in the messy business of helping people avoid foreclosure, just one call and the money is safely tucked away with the Federal Government guaranteeing interest payments.

This is what I think happened. That's why nothing has happened with home mortgage rescue and the economy. The banks loaned it back to the Treasury, i.e. us, and now we're paying interest to the Banks on the money they were given.

I can't prove that this was how the money was used, but no one can prove how the money was used at all, according to the GAO.

Write to your congressman. Maybe something will happen with Obama now in office, although from what I have seen in life, it's a little difficult to become unraped after the event.

Free at Last, and Can Barrack Save the Economy?

I never thought that Martin Luther King's words, Free at Last, would apply to me, but today, watching President Obama sign the Executive Orders closing down the torture facility at Guantanamo Bay, I realized that indeed, they did.

While Guantanamo tortured people, and while our tax money was paying for it, we were all in danger of being illegally arrested and tortured, and we were all responsible for any such act by virtue of paying our taxes. I have friends who have spoken to me about living in Germany during Hitler's rule. They all say that they had to turn a blind eye to the events around them, for if they objected, they could be the next one detained and taken away.

Fortunately, enough people did not turn a blind eye to our torture and illegal detention, and now our President has taken a big step towards restoring our rights. I hope that he continues until the Patriot Act has been completely reversed. After all, as Al Gore pointed out so wisely, during the height of World War II, when our nation's safety was in peril, nothing like the Patriot Act existed.

In fact, the only time in our country's history when Habeus Corpus was suspended was during the Civil War, and Lincoln later said he deeply regretted having done so.

Free at last, free at last, good god almighty, we're free at last. It seems so ironic to me that it has taken the brave action of a Black president to begin to free both Blacks and Whites from the shackles of the Patriot Act. Let us hope he continues down this path until all violations of the Constitution are eliminated.

I am confident he will, but can he do the same with our money and save our economy?

Some of the most fundamental problems that our economy have can be traced to the legitimizing and institutionalizing of laws and ways of doing business in both the Clinton and Bush administration. In an earlier blog, I tried to demonstrate that it is cheaper to pay a laborer to work in China than it is to maintain a slave in America. While tongue in cheek, I remain convinced that we must have tariffs against low wage countries and insist on a manufacturing minimum wage in countries that import into the US. Note that I am not asking for a universal minimum wage in those countries. That would cripple their economies. What is needed is a minimum factory wage that can be tinkered with, until we end up with manufacturing returning to America and full employment occurring here as a result.

Will Obama be able to go this far? Will he be able to institute change on a worldwide basis? Will his advisors even tell him that such a core issue needs addressing in order to return our country and then the world to prosperity?

I'm not sure. So far most of the bailout programs have had little benefit. Banks given money have refused to lend it, because they worry their clients will default anyway. I have to believe that a large part of the money that has been given to lending institutions under TARP has simply been used to purchase Treasury Bills, the only safe "loans" available in most bankers minds. This is an odd and non-productive recycling of the TARP funds which really only guarantees that the highest executives in the Banks won't run out of earnings to pay their salaries, the rest of the world be damned.

However, if Obama and the Fed are really committed to turning around the economy, I have to believe they are going to keep on trying new programs and throwing more and more money at the problem until something works. On Nov. 25th of last year, the fed announced they were going to buy $500 billion worth of Fannie Mae, Freddi Mac and Ginnie Mae backed mortgages, and another $100 billion worth of debt issued by the Federal Home Loan Banks, Freddie Mac and Fannie Mae.

So far they have spent approximately $15 billion buying these mortgage backed securities, home loans at 4.5% and 5% for 30 years. I feel that this program will bring rates down with aggressive buying, and will result in all credit worthy homeowners being able to get new first mortgages up to approximately $417,000 (the current limit) for about 4% by this spring and summer. However, so many houses that are owned by credit worthy customers are worth far more than this, so it is going to take a change in the loan limits to really have a deep impact on this country.

I suggest that the limit on FMAC and other loans be raised to at least $800,000, if not higher, so that people can refinance their homes and save a significant portion of their monthly expenditure.

The Fed's hope in doing this is that people will go out and start buying things again; cars, sofas, televisions, computers. It is interesting to note that in Japan, when their real estate bubble burst about 10 years ago, there was little interest in buying real estate and all the above. They have had low rates since and no end to their recession. Japanese save more than any others.

There is a fear that the same thing will happen in our country. I do not think that this fear is warranted however, and that is because of the fact that in Japan, their population is gradually shrinking, and in the US, by virtue of natural growth as well as illegal immigration, our population is expanding.

I have spoken with immigrants who have told me that the high minimum wage in Oregon, now over $8 an hour, has brought a large number of illegal immigrants into our state to work because they can make so much more than they can in Arizona, New Mexico etc. where minimum wage is far less.

That fact has helped ameliorate the real estate downturn in Oregon, because the bottom of the rental market in this state is holding up nicely, and it is probably due to crowding into a house or apartment by illegal immigrants. If enough people making $10 an hour decide to rent a house, they can pay high rent as long as they can tolerate living with each other.

These illegal immigrants will continue to flood into our country, especially if Obama carries out his pledge to raise the minimum wage to $10, a move I heartily endorse. This flood of immigrants will bolster the real estate market and in combination with the Fed's 4% loans and current low rate of new housing starts, now around 550,000 a year, the lowest ever since WWII, I think we should see home prices rebound nicely, and once they do we will see cars, sofas and other items start to sell.

So I am confident that these initial changes will turn our economy around, at least to begin with. But we can not continue to count on home building and low cost refinancing to keep our economy growing. We need manufacturing back in our country. Perhaps the alternative energy industry, one that Obama insists he will cultivate, will take up the slack, along with manufacturing in America the new alternative energy cars of the future.

So, will Obama turn our economy around? Yes, I think he will, more quickly than most expect, and when it does happen, I think we are going to see inflation coming back, because all that money originally given to the banks under TARP will suddenly come flooding out in the form of new loans when everyone realizes almost overnight that they are going to miss out if they don't get in on the action and snap up the last of the cheap recession priced goods and houses.

In the end, we're going to see worse inflation than we ever have before, because I firmly believe it is impossible for the Fed to do the right thing early enough in any recession in order to prevent inflation down the line. People often say running the Fed is like being at the tiller of a large ship. Unfortunately, as long as a ship is headed for the rocks, it is politically impossible to turn the rudder the opposite direction, even when the Captain knows he has already started a long slow turn that will take him past the rocks, and that now he should be steering towards those same rocks so that he doesn't run into the shallows further along his course. I think the Fed will keep rates too low now and for too long, and in the end we'll have inflation.

Gold and mining stocks are close to historic lows, with some companies who are debt free selling at a stock price equal to their cash on hand. These bargains won't last long, and they should have massive appreciation during the next five years as the economy recovers. I feel that Obama and the Fed will reward you handsomely if you invest in this sector. Thank goodness we are still free to buy gold and silver.

Is a Chinese Worker Cheaper to Employ than a Slave in America? or Why We Need an International Manufacturing Minimum Wage

Are Chinese Laborers Cheaper to Employ than a Slave in America? Or, Why We Need an International Minimum Wage of at least $3 an Hour.

Intrusive Authorial Note:

Of course, slavery was abolished long ago in the United States and I totally abhor slavery. I use it as an extreme example here to point out the fact that wages are so low in China that they have a destructive effect on our economy similar to the slavery which helped destroy the middle class of Rome. Instead of outsourcing, wealthy Romans took middle class jobs away by having slaves that did the same work, and thus undermined Rome's economy by throwing the middle class out of work. I am using slavery only as a tongue in cheek example of how we will never be able to compete with Chinese labor, (read India, Taiwan, etc. labor and all loosely referred to herein simply as China).

For years, manufacturing jobs have been leaking away to China. There is no economic incentive for any single US consumer or any single US manufacturer to buy American or keep jobs in our country. The people who shop at Wal Mart do so because they offer the best price. The people moving jobs to China do so because they can’t make things cheaply enough in America to sell at the low price Wal Mart shoppers demand. While this makes perfect, rational economic sense on a micro level, it makes no sense at all when it comes to the survival of America on a macro level.

Prior to the Presidential election there was a lot of debate about bringing jobs back to America. Everyone agrees the middle class is slipping away and we are becoming a nation of rich and poor. Now President elect Obama has to come up with a way to do this. Can he do it? How will he do it? Is there some way that the driving force of Capitalism, essentially, self-interest on a micro level, which so far has worked on a macro level to take jobs away from Americans, be harnessed to achieve this goal? Yes, there is, using a pro-trade tariff system, combined with a mandatory international manufacturing minimum wage. Why and how does this work? Read on.

A simple way to get jobs back to America would be to lower American wages until they are competitive with Chinese wages. Then jobs would come flooding back into our country and we could all say, “Booyah! Mission accomplished!”

This is a simple and appealing argument, (especially when we hear about those guys in Detroit who are getting $70 plus an hour). Surely, if US workers would agree to work at a more reasonable wage, we could get manufacturing jobs back into this country.

Is it possible? Let’s start at the lowest pay scale possible and see if American labor can compete with Chinese labor. I can’t think of a pay scale cheaper than nothing, i.e., slavery, so let’s look at the cost of making something in America with slave labor and see if that could be competitive with Chinese workers. If not even slaves in America could compete with Chinese workers, then obviously, something else will have to be done to bring jobs back to America.

So, how much do those industrious Chinese workers get paid?

According to payscale.com, the average factory worker in China makes 15 Chinese Yuan an hour. And the Yuan is worth 15 cents. So the hourly wage of the average manufacturing worker in China is $2.25 an hour. That’s $390 a month.

(With an eight hour, five day, work week and 4.33 weeks a month on average, a Chinese factory worker is paid at least: $2.25 X 8 X 5 X 4.33 = $390 per month. Maybe more if he works six or seven days, but we’ll assume the same as an American work week. )

Even $390 a month might be too high, there are many reports that workers living in dorms and eating free company food work for $100 a month in China. But let’s assume that payscale.com has it right and that there’s also no added perks to this wage like health insurance or accident insurance.

$390 a month is very competitive with a US minimum wage worker. Current Federal minimum wage is $6.55 an hour, soon to go to $7.25 an hour in July, 2009. Even at $6.55, that’s a horrific $1135 a month in the US, almost three times the cost of a worker in China! No wonder so much stuff is made in China. But since we’re trying to compete, let’s see how slave labor compares to Chinese labor and once we find out if that is competitive, we can ratchet up those wages until American factories are humming once again!

A slave has two cost components, initial cost and maintenance. To analyze the monthly cost of purchasing a slave, you have to compare what is called the opportunity cost of your money of buying a slave to the return you’d get from a safer investment, like putting that money into a CD in a bank at 3%. That tells you what that slave is really costing you to buy on a month to month basis over the long haul.

What would a slave cost today in America? Well, we can use the price of a slave in 1800 in America and adjust for inflation. According to the website below, in 1800, the average adult male slave cost $381.

http://eh.net/Clio/Conferences/ASSA/Jan_00/rosenbloom.shtml

(It’s interesting to look at inflation as a side note, because it turns out there really wasn’t any inflation between 1800 and 1971. But in 1971 we went off the gold standard and now prices are at least 10 times what they were in 1971, according to:

http://mwhodges.home.att.net/inflation.htm#1800)

So the inflation adjusted cost of a slave in 2008 would be $3,810. At a 3% opportunity cost, that’s roughly $120 a year or $10 a month. We are certainly off to a good start here! That’s way under those pesky industrious Chinese. We’ll have jobs back in the good ol USA before we know it!

Ahh, but don’t forget slave maintenance. Things that pop to mind are food, shelter, water, utilities and some sort of shabby but adequate medical care. Speaking of medical care, there’s nothing like the wonderful free emergency room system we now provide our minimum wage workers! No sir, America is top notch medically speaking. If you have a cold in Sweden, that’s a free doctors visit. By golly in America, if you have a cold, that’s an emergency and you just have to wait in line behind the other emergencies like heart attacks or crash victims. But you wait those long hours with a certain sense of respect for your malady. It’s an emergency!

We’ll look at the medical costs later, first the slaves need to eat.

Food: I don’t think a person can live on less than 2,000 calories a day, and even if that were rice and beans, I can’t imagine food costing less than 50 cents a meal because food is not cheap in America. So, 500 calories a meal, 4 meals a day, $2 a day for food, $60 a month. Wow, food must be more expensive in America than China!

Shelter: Despite the recession, housing is still expensive in America. You can’t get much cheaper than a tent from Wal Mart, that runs about $200. But it wouldn’t last more than a year with a family of four running in and out, so figure $25 a year per worker, $2 a month for a tent.

And you’d have to allocate some land for this purpose. In America about the cheapest land you can find is still $3,000 an acre, so figure adding in a septic field for waste and a well, you’re going to have to put each slave tent on at least a twentieth of an acre of land., so about $150 for the land, but that septic and well gets expensive fast, probably a good $20,000 total for 20 families, so $1,150 for land and utility system per slave, and since this is a capital expense, it represents an annual opportunity cost of $35, a cost per month of $3.

So far so good, we’re only at $75 a month and headed down the home stretch!

Utilities: We won’t need heat or cooling, because tents are not useful in cold climates, we’ll have to have all our jobs somewhere warm, but not too warm because tents get hot at night. Somewhere south of Ohio but north of Louisiana can become the new slave belt, a perfect replacement for the rust belt!

But don’t forget garbage hauling. Now that’s expensive. All municipalities have contracts with garbage haulers and our intention here is to bring more jobs to America, not take them away, so I’m afraid that if my garbage costs me $80 a month for a family of 4, we’re going to have to allocate about $20 a month per worker for garbage hauling alone.

So far we’re at a cost of $95 a month.

Now, medical care. Obviously we again are not going to be able to use a slave doctor, because that would cut into doctor jobs. Same problem as slave garbagemen, no way. My extremely healthy daughter who is 20 and fit as an antelope pays $300 a month, and that’s cheaper than what I pay. Oh oh, I’m getting a bad feeling about this whole slave idea and cost cutting, but I want to be realistic. With medical care we’ve jumped to $395 a month.

Oh, and her plan doesn’t include pharmacy coverage. Again, we can’t cheat the pharmaceutical companies out of their due, after all, only with profits in the billions can you invent new drugs. What’s reasonable here? Well Viagra costs about $100 a month, or so I’ve been told. Figure that half the men would have no interest in sex after a hard day of 8 hours slaving away at their jobs, (literally), and you need them to be interested in sex to keep the slave supply up, so $50 a month for medicine, minimum, per worker.

Grand total, $445 a month. That’s discouraging, but wait, maybe shipping costs need to be added in here and having slaves in America would still be profitable!

Oops, I forgot payroll taxes. Payroll taxes? Why? They’re not getting paid! But according to IRS worksheet 437-A, subparagraph 3, “Compensation includes lodging and travel costs when you’re not on the road.” Frankly, I can’t imagine someone less on the road than a slave, after all, that’s the whole point of slavery, it’s the most awful be loyal to your employer program ever invented by humans! So, taxes will at least run 15% for Social Security and Medicare on the $445 a month, so about $70 a month and we’re up to, let’s round it to $515 a month.

But the whole idea of slavery is that it’s not voluntary, so you need to book some cost for keeping the slaves from rebelling.

Who is willing to do this awful work? Well, with Iraq winding down I’m sure such people are a bargain from Blackwater, but how long will that last? They make $100,000 a year because being mean is not a low cost job skill, so $12,000 a month. Probably take four of them to handle 100 slaves, boy this is getting expensive, that’s $48,000 a month or a whopping $480 a month per worker! Sheesh, that number alone is higher than the Chinese worker! Boy, it doesn’t look like we can compete with China, even with slave labor!

Maybe we can sharpen our pencil. What if the Blackwater guys agree that they’re not getting shot at like Iraq. Maybe they’ll work for half pay, something like $240 a month a slave? I know this seems like a lot. Maybe there’s some kind of pharmaceutical invention, that would make it easier to keep a slave. They could call it HappYSlave, kind of a cocktail of Zoloft for happiness, Prilosec for that excess stomach acid caused by stress in the workplace, Viagra, the whole need more slaves thing, and THC to make a worker tranquil. (I’m going to trademark that tomorrow, that’s the capitalist way isn’t it?)

Wait, this isn’t going to work, the drug companies would make this so expensive, it’s a new drug on patent after all, it would probably be cheaper to hire those Blackwater guys at half price.

OK, assuming cut rate slave guarding, we’re up to $755 a month, and now that’s almost double the $391 a month worker in China. How the heck are we going to bring jobs back into America by paying wages to American workers that compete with those paid the Chinese?

And I haven’t even begun to add in costs like:

Polluting in America: There are heavy fines for polluting in America. In China there are no pollution laws. If you want to turn a river into a toxic waste pit that glows in the dark in China, they tell you to pick a color and then say, go right ahead! No one seems to care except the peasants who can’t figure out why their crops are dying, but what the heck, they have no power and other peasants in other places can grow the food.
Slave Owner Therapy: Personally, I’d feel guilty as a slave owner even if I was saving America’s economy and the American worker Booyah! I’d probably spend thousands of dollars at the therapist. Almost impossible to quantify along with pollution but it’s just another ill wind blowing over this program which I have realized can be called:

JOBS AMERICAN WORKERS SLAVERY!!

Or JAWS for short!

Miscellaneous: There’s always a miscellaneous in any budget, clothing, gas to and from the doctors, eyeglasses, Christmas Hams, Easter Hams, Birthday Hams, (consistent gift giving is the corporate ideal).

So, a slave in America would run about $755 a month, and a Chinese worker is happy as a clam at $391 a month. (We assume that clams are happy, I personally don’t know.)

The sad fact is, it just costs too much to do business in America. There’s no way around it, the cheapest labor we’re ever going to have under the JAWS program, which is FREE SLAVES! would still cost an astounding double the Chinese worker.

Well, if we can’t compete with the Chinese labor, how are we going to bring jobs back and rebuild the middle class! Is Obama sure he wants this job? It sounds impossible.

Actually, there is a simple way, and it would get the Chinese worker on the side of the American worker, and it would improve life in China and America and create a new era of prosperity.

We need to enact trade laws that level the playing field. It’s ok to have free trade, however we need a law that says:

ANY COUNTRY SELLING A PRODUCT TO THE UNITED STATES HAS TO HONOR A NEW INTERNATIONAL MINIMUM WAGE LAW FOR MANUFACTURING WORKERS, A WAGE OF $3 AN HOUR, AN 8 HOUR WORK DAY, A 40 HOUR WORK WEEK, A 50 WEEK YEAR.

If a country doesn’t pay its workers at least that much, then we simply add a tax, it’s called a tariff and the Federal Government collects it. It is a charge added to the product price so that the product being sold into America would have a price equivalent to the price it would have if factory workers were paid $3 an hour. And we can spend the entire tariff on feeding, housing and medically taking care of our own laid off workers.

Why not? If the Chinese are going to take away our jobs, we should at least benefit from their being willing to work for us. Right now that cost difference goes into the pockets of the wealthy slave owners, err.. I mean business owners who have outsourced jobs to China.

Wait, does that mean that outsourcing is the same as having slaves? Yes, almost, except it’s even better, because you couldn’t pollute in America if you had slaves, and you don’t need to feel guilty about outsourcing like you would with slaves because the Chinese workers are free. So really, outsourcing is better for business owners than slavery! It’s cheaper and you can sleep at night while breathing clean air and drinking clean water. It’s just catastrophic for the average middle class factory worker and as a result, the entire US and then World economy.

Some free trade people will say that tariffs are anti-trade, and all that happens with tariffs is that the other country retaliates and doesn’t buy the stuff you make. For one thing, most other countries do that to us now anyway so it’s a specious argument. We don’t sell many cars in Japan because they won’t certify them. We don’t sell beef in Korea even though it’s cheaper because the people there want to protect the farmers.

Besides, this tariff is different. It’s not just a stick. It has a carrot for the average Chinese worker—higher wages for the same work!

Instead of retaliating and not buying stuff from us, the Chinese worker will get paid more for his labor, have more to spend, and possibly will end up buying more from America, not less, so that this tariff is a pro-trade tariff.

And don’t forget, now that an American worker will have his job back, he’ll be able to buy more goods from the Chinese. Everyone benefits! Even the slave owners… business owners.

What will happen if these laws are enacted? Very quickly, the Chinese workers will demand that they get paid their $3 an hour. They’ll say it makes no sense to have a tariff going to idle Americans when they could be making more money.

Their leaders will have to agree, and so will big business since they can’t just stop making things in their shiny new factories in China. Nope, profits will simply drop, and Chinese workers will make more money. But how does that help the American worker?

At some minimum wage in China, (and I don’t know what it will have to be, maybe more than $3 but that’s a good start), there will be no advantage to make some products in China any longer. New factories and jobs will come back to this country because shipping will be cheaper or quality will be better or they find that advertising made in America sells more goods.

With this basic underlying structure of a foreign minimum wage for manufacturing, and then tinkering with the number, we’ll bring jobs back to America until we’re at full employment, which should be the purpose behind this entire exercise. America’s economy drives the world’s economy. Only when America is at full employment does the rest of the world benefit to the maximum.

Now, if we get to the point that we have full employment, and find we’re getting cost inflation because we can’t keep up with demand, we can always reduce the Chinese minimum wage level we enforce. That way, American jobs and full employment in the US comes first, not the bottom line of businesses, but the bottom line of America, which has to be full employment. It’s fine that we’re the superpower policeman of the world and our markets drive the world economy, but the one thing we have a right to insist on is full employment in America for carrying those dual burdens.

Capitalism is a way of people behaving in their own self interest. But sometimes countries need to do things on behalf of their citizens so that the good of all, in this case full employment in America, comes about.

Will this be bad for China? I don’t think so. Employed Americans will buy more stuff, both made in America and China. In the end, businessmen will find they are making larger profits, because in the end, everyone will have a relatively good paying job. You can imagine how higher wages would help the Chinese economy.

And what about the future when robots become prevalent? If we don’t enact full employment laws now, someday the wealthy will own robots that don’t need medical care or food. On that day even the Chinese, if we don’t pass laws that prevent it, will find themselves out of work.

Who will business then sell products to when the whole world is unemployed? To the robots that don’t buy anything? This is the future, and beyond that future, we will some day have the Matter Replicator from Star Trek. You just stand by it and press some buttons and voila, new shoes are made from carbon and hydrogen and oxygen.

Who will own the Matter Replicator? It better be everyone, or someday, we’ll all be slaves.