A Very Real Argument That We As A People Are….

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Posted on 31st May 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Karl Denninger

That’s done.  As in baked, cooked, finis.

Let’s just look at the charges and specifications of late, shall we?

  • Big US and Global Banks have admitted (that is, have been convicted) of multiple criminal offenses over the last several years.  partial list can be found here; let me remind everyone that an ordinary person who commits three felonies, even if some of them are very minor in comparison to any of the listed ones here in impact and they take place over a period of decades, goes away for life under long-existing three strikes laws.  All four of the banks listed in that dissent have three or more “convictions” and thus all of them should be dissolved as they are obviously incapable of modifying their behavior.  Nonetheless literally tens of millions of Americans and American corporations not only refuse to stand and demand that these charters be revoked they voluntarily do business with one or more of these firms!
  • We have a medical and insurance industry in this country that routinely, on a daily basis, engages in behavior that can easily be described as meeting the criteria for fraud, bid-rigging, racketeering and routinely uses the threat of both bankruptcy and violence by government goons to get what it wants.  This “industry” routinely, for example, bills for things they didn’t actually do, sends people bills for hundreds or thousands of dollars for someone sticking their head in a door and saying “Hello”, allows “off-plan” doctors to treat people without their consent exposing them to thousands (or tens of thousands!) in unauthorized charges and then enforces those “charges”, takes drugs off the market that they produce so that the only remaining options are those made by the same company but are under patent and more.  The single most-common cause of bankruptcy in this country is medical debt incurred as a direct result of these practices and these practices are where the so-called “need” for Obamacare, that is now resulting in demands for 50% premium hikes in some markets for the next year, came from.  Yet we, as a nation and as a people, routinely consent to this crap and allow these corporations, institutions and individuals to continue their outrageous acts of pillage daily.

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Thoughts from the Frontline: The Last Argument of Central Banks

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Posted on 11th November 2014 by Administrator in Economy |Politics |Social Issues

Thoughts from the Frontline: The Last Argument of Central Banks

By John Mauldin

 

For a central banker, deflation is one of the Four Horsemen of the Apocalypse: Death, Famine, Disease, and Deflation. (We will address later in this letter why War, in the form of a currency war, is not in a central banker’s Apocalypse mix.) It is helpful to understand that, before a person is allowed to join the staff or board of a central bank, he or she is taken into a back room and given DNA replacement therapy, inserting a gene that is viscerally opposed to deflation. Of course, in fairness, it must be noted that central bankers don’t like high inflation, either (although, looking around the world, we see that the definition of high inflation can vary). In the developed world, 2% inflation seems to be the common goal. You wouldn’t think that 2% a year is a significant change in the overall price structure, but the panic among economists that would ensue with a 2% price deflation would border on hysteria.

Inflation and deflation are often topics of discussions as I travel, but I find that there is general confusion about what inflation and deflation actually are. This is understandable, since many economists don’t agree on the definitions, so they are often talking about totally different phenomena. In this week’s letter I have for you a brief essay on the topic of deflation. Depending on your view, you might find some of my thoughts controversial, but I will try to make my case clear, at least. Please note this is the 30,000-foot view and is nowhere close to definitive. If you want great detail, I suggest you get my good friend Gary Shilling’s latest book on deflation (of four that I know of), called The Age of Deleveraging. (It’s only $11.49 on Kindle.)

Definitions of Inflation and Deflation

Generally speaking, there are two schools of thought about inflation. The Austrian school of economic theory, founded by Ludwig von Mises, sees inflation as an increase in the money supply and deflation as a contraction in the money supply. Somewhat similarly (but not entirely!), the monetarist school of economic theory tends to see money supply as the chief determinant of GDP in the short run and of the price level over the long run.

Mainstream economics (generally Keynesian) tend to refer to rising or falling prices as inflation or deflation. They tend to see deflation as a general price decline, often brought about by reductions in available credit, money, or reserves or by the government’s restraint of spending programs.

So when we talk about inflation/deflation, it is important to know whether we’re talking about monetary inflation or price inflation. As we have seen recently, a rising money supply is not necessarily accompanied by rising prices (although there is a certain long-term rhythm to the two different measures).

When I talk to the general public about deflation being something to be avoided, I get confused looks. Don’t we like it when the price of something goes down? Who doesn’t love a sale on something they want to buy? Since the beginning of the First Industrial Revolution, the general tendency for the prices of manufactured goods (in real inflation-adjusted terms) has been to go down as productivity has gone up. This is what Gary Shilling and others refer to as “good deflation.”

You can actually have solid productivity, GDP growth, wealth creation, a general increase in the standard of living, and a buoyant economy during a period of overall price deflation such as we had in the late 1800s – if it is the good kind of deflation.

What is the difference between good deflation and bad deflation? Good deflation is the general fall in prices that comes from an excess supply of goods due to increased productivity and product improvement. From 1870 to 1897 wheat prices fell from $1.06 to 63¢ a bushel, corn from 43¢ to 30¢ a bushel, and cotton from 15¢ to 6¢ a pound. Most of the time farmers received even less for their crops.

While farmers blamed all sorts of people for their falling prices, the primary cause of their problem was overproduction resulting from increases in the acreage of farms and increased yields per acre due to improved farming methods, as well as the advent of railroads that made it easy to get produce to Eastern markets. A farmer had to produce more just to stay even. It didn’t help that global competition from Argentina, Russia, and Canada was added into the mix, as increasingly large oceangoing steamboats made international transportation cheaper and ended an era of American agricultural export advantages.

This period of time saw one-third of farmers move to the cities for other work as they lost their employment on small family farms. That trend in falling farm employment continued until recent years, and farming has seen even greater increases in productivity (yield per acre) in recent decades. Farm and ranch families are just 2% of the US population today. Only 15% of the US workforce produces, processes, and sells the nation food and fiber. Today’s farmers produce almost three times more food with 2% lower inputs than farmers did 60 years ago. A third of American agriculture is strictly for exports.

The late 1800s was a particularly contentious period of history in the United States as farmers blamed railroads, bankers, and industrialists for their problems – a situation not unlike the income inequality debate we have today. And while falling prices weren’t fun for the farmers, the general public enjoyed lower food costs and higher-quality food.

The easiest way to illustrate this trend in the modern area is by looking at the cost of a gigabyte of storage. You can see an interactive version of this chart here. Prices for a gigabyte of storage dropped from $500-700,000 in the early 1980s (depending on what you were buying) to about $0.03 today. Put another way, a gigabyte cost about 2 million times more 35 years ago than it does today. And it has fallen by 50% every few years. The good deflationary fall in prices for data storage has enabled all sorts of industries and products, creating millions of jobs. And we could find dozens of other, similar products whose prices have been falling dramatically.

Measuring Inflation/Deflation

Each month we are greeted by the announcement of the Consumer Price Index (CPI), telling us what the level of general price inflation has been for the previous month and year. I’ve written about CPI extensively in past letters, but basically we need to understand that the CPI is an artificial amalgamation of the prices of various products and services. The composition of the CPI has changed significantly over the last 40 years. As John Williams at Shadow Stats demonstrates, if we used the same measurement methodology that was in force during the Reagan years or the early Clinton years, inflation would be almost 4 percentage points higher now than it is currently calculated to be.

Contrary to some commentators, I do not see this is a conspiracy to mislead investors or consumers, or to slow down the rise in Social Security payments. We should all be grateful that there is a small band of economists who are consumed by the details of what inflation actually is. They go to conferences and vehemently argue with each other (well, vehemently for academic economists) over arcane topics that would bore 99%-plus of the population. They are passionate about trying to find the proper measure of inflation.

My personal feeling is that the adjustments that have been made in the calculation of inflation are generally quite reasonable, if somewhat controversial. With the prices of electronics and many other manufactured goods falling over the decades, how do you measure inflation in those items? Or rather deflation? I still spend about the same amount for a new phone today as I did 10 years ago, but my new iPhone 6+ is a major improvement over the Motorola flip phone I had 10 years ago, by any standard you want to apply. Both could make phone calls, but that is about where the similarity ends. Am I getting better value for my money? More bang for the buck? Absolutely.

Currently, the economists who determine inflation see that increase in value as an actual drop in inflation, and they use a somewhat controversial methodology called hedonics to adjust the prices of a myriad of products for quality. If anti-lock brake systems are now standard whereas before they were optional, then by this doctrine the price of your car went down. (Those who are interested can google hedonics and get a wealth of information on the definition and the controversy.)

Housing is a big component of our spending. Should we use actual housing prices or what the inflation economists call “owner’s equivalent rent prices” as our measure of housing cost increases? If we had used actual housing prices during the 2000s, the inflation figures would have gone through the roof, suggesting to the Federal Reserve that they should be raising interest rates rather than lowering them or keeping them too low. And again, if we had been using actual house prices to calculate inflation during the Great Recession, the economy would have been seen as being swamped by serious deflation. There would’ve been even more weeping and wailing and gnashing of teeth.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

Important Disclosures

Education — All Bubble and No Champagne

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Posted on 31st July 2015 by Administrator in Economy |Politics |Social Issues

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champagne

Education in the United States is a disgrace. Education is all bubble and no champagne. It should be viewed as one of the biggest tragedies ever imposed by government, perhaps even including the violence of war.

For aspiring entrepreneurs, there is an opportunity in this post. Make yourself a lot of money while making most of the country very happy.

Government runs education like it runs everything else — terribly. Whatever government “fixes” it makes worse!  It mucks things up at all levels. Education is an easily demonstrated government example of ineptness that need not be.

The tragedy of the education system is that it destroys lives. Generations of poor are condemned to stay poor without proper education. Schools in poor neighborhoods are sub-standard, guaranteeing no escape. This outcome is considered political collateral damage. Politicians, especially Democrats, find it politically expedient to write off lives to placate constituents. Some say creating more ignorant people is good for the political class.

education_notA Long Time Ago

I recall having a discussion with a school-board member over forty years ago in Upstate New York. Yes, the education problem was apparent then and has only gotten much worse. She was excited about the reforms that the local school board was adopting.

After listening to her enthusiastic litany of changes, I explained that similar changes had been heralded for the prior twenty years with the intent of “fixing” things. Similar reforms had produced no results except a continuing downtrend in educational metrics. I opined that the simple mission of education was to educate and that this mission was compromised by all the tertiary functions that schools and teachers were burdened with. She agreed that education/learning was the primary and overriding objective.

Then we discussed some of the non-educational functions included in the laundry list of what schools were supposed to provide — indoctrination, homogenization, driver-ed., self-image enhancement, etc. etc. Agreement between us on these issues was more common than disagreement, although I was stubborn in my belief that elements in the new program addressed none of these.

Somewhat frustrated, she asked what it would take to convince me that schools were improving. I answered simply: “Sixteen year-olds in the fifth grade.”

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War Isn’t Actually Pointless

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Posted on 29th July 2015 by Administrator in Economy |Politics |Social Issues

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War Isn’t Actually Pointless

warpointless

People often say that war is pointless, and it must be admitted that their argument is a good one:

What was gained in Iraq and Afghanistan? Things there are just as bad today as when the Western armies rolled in. And the threat to the West seems no less. To what end were all those people killed, mutilated, and terrorized?

What was the point of all the kingdom-versus-kingdom wars? Borders shifted left; borders shifted right; but the daily lives of the farmers, bakers, and traders mostly went back to normal after all the death.

And so on.

Even in the case of World War II – our best “wild man must be stopped” scenario – the facts don’t actually bear out the effectiveness of war. Yes, I’m very glad that Hitler was stopped (had I been there, I might have undertaken to kill him myself), but in full honesty, we must also admit that while the war stopped Hitler, it also made the world safe for Stalin, who went on to kill more people than Hitler ever did.

And without Stalin and a strong USSR, would Pol Pot have been able to kill a fourth of the population of Cambodia? Would Mao have been able to rack up the greatest death toll in human history… as much as Stalin and Hitler combined?

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Potemkin Party

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Posted on 27th July 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jim Kunstler

How many of you brooding on the dreadful prospect of Hillary have chanced to survey what remains of Democratic Party (cough cough) leadership in the background of Her Royal Inevitableness? Nothing is the answer. Zip. Nobody. A vacuum. There is no Democratic Party anymore. There are no figures of gravitas anywhere to be found, no ideas really suited to the American prospect, nothing with the will to oppose the lumbering parasitic corporatocracy that is doing little more than cluttering up this moment in history while it sucks the last dregs of value from our society.

I say this as a lifelong registered Democrat but a completely disaffected one — who regards the Republican opposition as the mere errand boy of the above-named lumbering parasitic corporatocracy. Readers are surely chafing to insert that the Democrats have been no less errand boys (and girls) for the same disgusting zeitgeist, and they are surely correct in the case of Hillary, and indeed of the current President.

Readers are surely also chafing to insert that there is Bernie Sanders, climbing in the opinion polls, disdaining Wall Street money, denouncing the current disposition of things with the old union hall surliness we’ve grown to know and love. I’m grateful that Bernie is in the race, that he’s framing an argument against Ms. It’s My Turn. I just don’t happen to think that Bernie gets what the country — indeed what all of techno-industrial society — is really up against, namely a long emergency of economic contraction and collapse.

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Forget Banks – GMOs Are The New “Too Big To Fail’ System

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Posted on 26th July 2015 by Administrator in Economy |Politics |Social Issues

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Authored by Mark Spitznagel and Nassim Nicholas Taleb, originally posted at The NY Times,

Before the crisis that started in 2007, both of us believed that the financial system was fragile and unsustainable, contrary to the near ubiquitous analyses at the time.

Now, there is something vastly riskier facing us, with risks that entail the survival of the global ecosystem — not the financial system. This time, the fight is against the current promotion of genetically modified organisms, or G.M.O.s.

Our critics held that the financial system was improved thanks to the unwavering progress of science and technology, which had blessed finance with more sophisticated economic insight. But the “tail risks,” or the effect from rare but monstrously consequential events, we held, had been increasing, owing to increasing complexity and globalization. Given that almost nobody was paying attention to the risks, we set ourselves and our clients to be protected from an eventual collapse of the banking system, which subsequently happened to the benefit of those who were prepared.

The fallacies used in the arguments against us at the time were as follows:

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Hoisington Review and Outlook – Second Quarter 2015

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Posted on 24th July 2015 by Administrator in Economy |Politics |Social Issues

Outside the Box: Hoisington Quarterly Review and Outlook – Second Quarter 2015

By John Mauldin

In today’s Outside the Box, my good friend Lacy Hunt of Hoisington Investment Management reminds us that since the 1990-91 recession, the 30-year Treasury bond yield has dropped from 9% to 3%, a downward move nearly identical to the decline in the rate of inflation, which fell from just over 6% in 1990 to 0% today. Therefore, Lacy says, “(I)t was the backdrop of shifting inflationary circumstances that once again determined the trend in long-term Treasury bond yields.”

During that 25-year period, though, there have been nine significant backups, when yields rose an average of 127 basis points, despite weakening inflation. Lacy attributes these periods to an “intermittent change in psychology … a strong sentiment that the rise marked the end of the bull market, and a major trend reversal was taking place.”

It’s happening again today, Lacy asserts; and he ticks off four misperceptions that have pushed Treasury bond yields to levels that represent significant value for long-term investors. They are:

  1. The recent downturn in economic activity will give way to improving conditions and even higher bond yields.
  2. Intensifying cost pressures will lead to higher inflation/yields.
  3. The inevitable normalization of the Federal Funds rate will work its way up along the yield curve causing long rates to rise.
  4. The bond market is in a bubble, and like all manias, it will eventually burst.

Lacy builds a strong case that fundamental economic forces are exerting downward, rather than upward, pressure on inflation. It’s a contrarian view – certainly not mainstream at this moment – but considering that Lacy has been right for well over 30 years, consistently pointing out through the nine periods when everybody was proclaiming the end of the bond bull market that the fundamentals were still pointing in the direction of lower interest rates.

I’ve had some late-night discussions with Lacy trying to figure out what would make him a bond market bear, and we have discussed what it would take for rates to truly rise long-term. I look around, and right now I don’t see those conditions.

Inflation is close to zero (as measured by the CPI) over the last 12 months. Commodity prices are back where they were 13 years ago (Bloomberg Index in chart below). The Fed is on track to, maybe, kind of, sort of, timidly, slowly raise interest rates starting sometime this fall, with Janet Yellen suggesting in her latest testimony that September might be the date. If trading runs to form, that will make the dollar stronger and put further pressure on price inflation. Just because rates go up on the short end of the curve does not mean the long end will follow. The tail does not necessarily wag this dog.

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Word Formulas Are the Wrong Path

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Posted on 21st July 2015 by Administrator in Economy |Politics |Social Issues

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Word Formulas Are the Wrong Path

formula

Recently, an argument was made that libertarianism is okay with hate, since a word formula that libertarians like, the non-aggression principle, or “NAP”, didn’t exclude hate.

Therefore, I’ve concluded that it’s a good time to address the subject of word formulas and rules. And I’ll begin by being explicit about this:

Word formulas are the path to destruction. They are the wrong path.

Word formulas are the province of academia and politicians, of people trying to prove things. They are part of the “winning” game, which goes nowhere except to support domination.

Again, I will be explicit:

Liberty and life are not about proving other people wrong and proving ourselves right. That is the wrong path, and it leads back to bondage.

The case I mention above is one of many, and I’m not interested in attacking the person involved, whom I believe to be a decent man. I’m trying to make a point, not to “win.”

Why Word Formulas Fail

Liberty is a means, not an end.

Liberty matters because it is a condition in which life flourishes. And that’s all.

Our goal is not to achieve liberty; it is for life to flourish.

Hate, as you must know, is the enemy of flourishing life. So, if a “libertarian” word formula preserves hate, something is wrong somewhere. And the problem here is not the specific word formula, but all word formulas.

Words are necessary tools of communication, but they are imperfect symbols of reality and are easily abused. If then, we use these imperfect symbols in formulas and then claim that they define the most crucial things, we place the symbolic above the real, and we lose our bearings.

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‘MH17 crash used by US to break Russia’s relationship with Europe’

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Posted on 20th July 2015 by Administrator in Economy |Politics |Social Issues

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©  Igor Maslov
The crash of Malaysian Airlines Flight 17 has been used to enforce sanctions against Russia and is fundamental to Washington’s efforts to break the Russia-Europe relationship, Paul Craig Roberts, former assistant secretary of the US Treasury, tells RT.

RT: It’s been a year since the downing of Malaysia Airlines flight MH17 in eastern Ukraine, which claimed the lives of all 298 people onboard. Eastern Ukraine was a war zone at the time – yet the Ukrainian authorities haven’t closed the airspace, allowing civil flights over the area. What was behind their inaction?

Paul Craig Roberts: I think they intended for the airliner to be shot down. The latest evidence is that it was shot down by air, by a Ukrainian jet fighter using a missile. This is the best evidence we have at this time. What is suspicious about this is that the instant that the airliner was reported to have been shot down, the entirety of the Western media was already programmed to blame Russia. Before there was any evidence, before there was any explanation, we had all of the Western media blaming Russia – even the BBC, which used to be a respectable news organization. So this suggests the whole thing was preplanned.

And if you look at the development of this we see that Ukraine has not released any information about its contacts with the airliner. And we see that Washington, which had a spy satellite directly over the area at the time, refuses to release its information. So the only information we have comes from the Russians, and the Russians say that if this had happened on a ground-to-air missile, this Buk system, that their radar in Rostov would have picked it up and yet it shows no such happening.

So I think the reason that we can’t get to the bottom of this is that it’s been used against Russia by Washington in order to break off Russia’s relationships with Europe. It’s the foundation of the sanctions and it’s part of Washington trying to break up the political and economic relationships between Russia and Europe. In my opinion, all the evidence we have, as of this time, supports no other conclusion.

 

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Social Justice Bullies: The Authoritarianism of Millennial Social Justice

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Posted on 18th July 2015 by Administrator in Economy |Politics |Social Issues

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Via Medium.com

Social justice, as a concept, has existed for millennia — at least as long as society has had inequity and inequality and there were individuals enlightened enough to question this. When we study history, we see, as the American Transcendentalist Theodore Parker famously wrote, “the arc [of the moral universe]…bends towards justice.” And this seems relatively evident when one looks at history as a single plot line. Things improve. And, if history is read as a book, the supporters of social justice are typically deemed the heroes, the opponents of it the villains.

Theodore Parker (via Wikimedia commons)

And perhaps it’s my liberal heart speaking, the fact that I grew up in a liberal town, learned US history from a capital-S Socialist, and/or went to one of the most liberal universities in the country, but I view this is a good thing. The idea that societal ills should be remedied such that one group is not given an unfair advantage over another is not, to me, a radical idea.

But millennials are grown up now — and they’re angry. As children, they were told that they could be anything, do anything, and that they were special. As adults, they have formed a unique brand of Identity Politics wherein the groups with which one identifies is paramount. With such a strong narrative that focuses on which group one belongs to, there has been an increasing balkanization of identities. In an attempt to be open-minded toward other groups and to address social justice issues through a lens of intersectionality, clear and distinct lines have been drawn between people. One’s words and actions are inextricable from one’s identities. For example: this is not an article, but an article written by a straight, white, middle-class (etc.) male (and for this reason will be discounted by many on account of how my privilege blinds me — more on this later).

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How to Speak to the Brainwashed

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Posted on 16th July 2015 by Administrator in Economy |Politics |Social Issues

How to Speak to the Brainwashed

brainwashed

Last week, I posted an article entitled “Man Is Not Always Blind.” And quite understandably, I received comments from readers who disagreed. After all, when you are surrounded by people who wish to not see – who hate you for trying to make them see – it is natural to take that opinion.

(And since the word is so often fitting, I will go with “brainwashed” to describe those who wish not to see.)

But rather than debating “Is it getting any better?” I’d like to move on to actually making things better. And that means talking to people.

So, since there is something of an art to speaking to the brainwashed, I will direct the rest of this article to that art.

To Begin

Let’s start by removing the divide: You and I have made the same mistakes these people are making. We may be a few steps ahead of them in leaving the swamp, but we started in the same swamp with them.

In all of human history, there may be no greater conditioning system than our modern government schools (including all the private schools that follow the same pattern). From infancy to adulthood, it affects most human minds in the West. And I dare guess that 98% of my readers bear its scars.

So, you must start by understanding that these “brainwashed” people have spent a huge portion of their lives inside a massive mind-warp. Don’t be too quick to toss them aside. Learn patience. Breaking out of their mold is scary, and it takes time.

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The Future Costs Of Politically Correct Cultism

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Posted on 16th July 2015 by Administrator in Economy |Politics |Social Issues

Submitted by Brandon Smith via Alt-Market.com,

I rarely touch on the subject of political correctness as a focus in my writings, partially because the entire issue is so awash in pundits on either side that the scrambling clatter of voices tends to drown out the liberty movement perspective. Also, I don’t really see PC cultism as separate from the problems I am always battling against: collectivism and the erasure of the individual in the name of pleasing society. Political correctness is nothing more than a tool that collectivists and statists exploit in order to better achieve their endgame, which is conning the masses into believing that the group mind is real and that the individual mind is fiction.

Last year, I covered the PC issue in my article “The Twisted Motives Behind Political Correctness.” I believe I analyzed the bulk of the issue extensively. However, the times are changing at a pace that boggles the mind; and this is by design. So, it may be necessary to square off against this monstrosity once again.

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