Check out the Aussies, will ya?  They’re getting the crazy idea that lowering taxes will create a financial incentive that will ultimately increase their revenues!  What’s next, an understanding of how supply and demand works?  From Oz:

Australia will reduce the amount of tax overseas investors pay on dividends from managed funds to 7.5 percent to encourage investments in real estate trusts.

The tax, currently 30 percent, will be cut to 22.5 percent in the year starting July 1; 15 percent the following year; and 7.5 percent the year after that, Treasurer Wayne Swan said in his first budget in Canberra today.

“These arrangements will make Australia’s withholding tax rate one of the most competitive in the world,” Swan said. “The arrangements will ensure Australian property trusts are well placed to attract foreign investment.”

Australian money managers oversee more than A$1.4 trillion ($1.3 trillion) in assets, and that is forecast to exceed A$2.5 trillion by 2015, Swan said. Foreign investors account for only 3 percent of fee income, he said.

We could do something like that here in America that will attract foreign investors by the boatloads.  It’s called the FairTax.

Warning to any socialist or otherwise Big Government advocates: the following information may disrupt your worldview.  Unless, of course, you’re impervious to facts, in which case you may feel little to no discomfort at all.  From Hot Air:

In the aftermath of the Northridge earthquake, California needed to take quick action to repair damaged freeways to restore order to traffic in the Los Angeles area — or at least as much order as one can get in the region.  Instead of using Caltrans to repair the destroyed overpasses and roads, the state government waived volumes of regulation to allow outsourcing to the private sector.  The result?  The contractor restored the roads and bridges in months instead of years, and at a fraction of the cost that Caltrans would have incurred.

Minnesotans learned a lesson from that when the St. Anthony Bridge collapsed last August into the Mississippi river.  The rebuilding project may finish as much as three months ahead of schedule, thanks to a series of financial incentives and the hands-off management by MnDOT:
…
The project has had its share of detractors ever since Flatiron won the contract.  It was the most expensive of the bids, but the state chose it for its overall package.  If they can deliver a high-quality bridge three months earlier than expected, no one will spend much of that extra time criticizing the contract award.

Like California, this proves a lesson in free-market power to solve problems efficiently, and in the long run, less expensively.  Instead of running the project themselves, the decision by MnDOT and the legislature to outsource the project applied the skill and experience of the private sector to a critical part of the traffic infrastructure.  The early completion of the project will save millions of dollars in traffic inefficiencies and relieve stress on parts of the local traffic system that weren’t designed for the loads that the bridge’s failure created for them.

Perhaps at some point, people will learn to harness the power of the private sector more completely for future public efforts as well.  If we started to apply this lesson to non-emergencies as well as emergencies, perhaps we would have fewer of the latter.   When we incentivize succes, we succeed.  When we incentivize bureaucracy, we get red tape, delays, and frustration.

Imagine that…the private sector doing better than a Big Government bureaucracy at solving problems!  But hey, let’s go ahead and have the government manage our health care, right?

(Updates at the bottom of this post!)

As you all know, I am a huge proponent of capitalism.  No economic system has done more for the world in terms of lifting standards of living, giving opportunities to move up the economic latter, and representing true individual freedom and liberty.  In short, capitalism rocks, and everything else sucks.

Having said that, I ask this question geniunely and sincerely: Is this what capitalism really is?  From the Washington Times:

Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher. Meanwhile, some Americans are stocking up on staples such as rice, flour and oil in anticipation of high prices and shortages spreading from overseas.

Their pleas did not find a sympathetic audience at the Commodity Futures Trading Commission (CFTC), where regulators said high prices are mostly the result of soaring world demand for grains combined with high fuel prices and drought-induced shortages in many countries.

The regulatory clash came amid evidence that a rash of headlines in recent weeks about food riots around the world has prompted some in the United States to stock up on staples.

Costco and other grocery stores in California reported a run on rice, which has forced them to set limits on how many sacks of rice each customer can buy. Filipinos in Canada are scooping up all the rice they can find and shipping it to relatives in the Philippines, which is suffering a severe shortage that is leaving many people hungry.

What in the hell is wrong with this picture?  There isn’t a single reason that people in the United States of America, the single greatest country in the history of the world, should be stocking up on food items!  Continuing: 

“Something is wrong,” said National Farmers Union President Tom Buis, adding that the CFTC’s refusal to rein in speculators will force farmers and consumers to take their case to Congress.

“It may warrant congressional intervention,” he said. “The public is all too aware of the recent credit crisis on Wall Street. We don’t want a lack of oversight and regulation to lead to a similar crisis in rural America.”
…
In addition, the diversion of one-third of the U.S. corn crop into making ethanol for vehicles has increased prices for corn and other staples such as soybeans and cotton as more acreage is set aside for ethanol production. (Yeah, thanks for that, treehuggers! - Ed.)

Do you know what kind of discomfort it brings me to find myself somewhat siding with these “more regulation” types?!?  Me, the free market neo-libertarian capitalist!  But again, is this speculator-induced plague a legit part of capitalism?  Continuing:

The upswing in prices has been exaggerated by the massive influx of investors and speculators seeking to profit from rising prices for corn, wheat, oil, gold and other commodities. Big Wall Street firms and hedge funds have taken huge positions in futures markets that once were dominated by relatively small operators such as farmers and grain-elevator owners.
…
“During such turbulent times, it is tempting to shoot first and ask questions later,” Mr. Lukken said, but he contended the commission should be “cautious” about doing anything to curb speculation. He and other regulators argued that speculators add volume and liquidity to the markets, which makes them operate more efficiently and helps farmers and other players.

What a crock of bovine feces!  Speculators add nothing to the equation but higher prices for the entire freaking world!  It may “help farmers and other players”, but it doesn’t help consumers, particularly low-income  consumers who have no choice but to pay higher prices for food so they don’t starve!  The commodities market was working just fine until these big money speculators took it over.

I have absolutely no problems whatsoever with investors sinking their money into stocks, bonds, T-bills, mutual funds, etc.  But isn’t there something just awfully perverse about flooding a market they were never a part of in order to convince producers of food and oil that situations are more dire than they really are, all in order to drive those prices up and make a tidy profit while the rest of us suffer?  Isn’t capitalism based largely on supply and demand, and in the case of these parasite speculators, aren’t they disrupting that model that has served humanity well for centuries?

Here’s an analogy: Let’s say I come over to your house and breathlessly warn you that a fire is rapidly approaching your house (even though I know it’s not true).  Fortunately for you, I just so happen to have bought a firehose (that I paid $10 for at The Firehose Store).  I will sell you (or lease you) the firehose for $100.  After a convincing sales pitch, you believe me and say “Wow, $100 is kinda steep, but I need to save my house!  OK, I’ll take the hose.”  The fire never comes, and I just profited $90 off of feeding you a load of crap.  I created my own lies-based wealth, and I added nothing of value to your life’s equation.

Was that a normal case of “supply and demand”?  No!  Demand was artificially, and knowingly so, inflated by the speculator in order to make a profit.  That, my friends, is what is happening right now with this commodities market speculation, especially with food and oil.  Speculators pump their money into the commodities market by buying low, they convince the producers that conditions suck in order to get the prodcuers to jack their prices up, then they sell high and profit off the mess they created.  Speculators helped create the real estate mess by driving the price of homes up to irrational levels, and the correction came, hurting a bunch of people in the process (after most speculators cashed in first, though).  Not content with having damaged the real estate sector, they’re now setting their sights on inflicting pain and suffering on the food and energy sectors.  So I ask again: Is this really what capitalism is about?  Frankly, I don’t think so.

This isn’t a class warfare argument.  In my view, I’m defending capitalism, not damning it.  What say you, my friends?

UPDATE (04/24/2008 - 03:00 P.M. EST):  I see that some in Congress share my views.  Congressman John Larson (D-CT) is proposing a ban on oil contract speculation.  I say that we shouldn’t stop at oil, but include food as well.  Basically, speculators never actually buy the commodity.  They buy the contracts, then turn around and sell them for an artificially inflated profit.  Larson is proposing to stop that on the oil side of the commodities shell game, saying that if you want to be an oil speculator, you have to actually buy the oil product.  Excerpt:

“People shouldn’t be allowed to speculate purely with paper, fluctuating and driving the cost of oil, especially when we have adequate supply,” Larson said during a news conference in the Capitol complex. “And demand, in fact, has gone down because of the crunch that everyone finds themselves in.”

Gene Guilford, executive director of the Independent Connecticut Petroleum Association, said most Americans don’t realize that the daily setting of prices for oil, natural gas, electricity, gasoline and diesel fuel contracts takes place on worldwide commodities exchanges, led by the New York Mercantile Exchange.

He said over the last five or six years investment banks, hedge funds and pension funds have forced up demand in the contracts above and beyond the basic rules of supply and demand.

“It’s the financial-services industry in this country that over the last few years has started telling the American people and the Congress of the United States that supply and demand no longer matter,” Guilford said. “When supply and demand no longer matters, then the marketplace no longer works the way it was supposed to work.“

“Amen!” to that last sentence, which addresses the question of this post.  A ban such as Larson’s could go along way to stopping those scumbag speculators once and for all.