How much money can we print?

Yesterday the Federal Reserve released doom and gloom comments to the markets.  It seems that they believe the answer to the lack of cash in American’s pockets is to print more money, (rates have been cut by 3.25% since September 2007) so that there is more cash to go around.  Fortunately they measure inflation in a way that makes us appear to have little or no inflation, so they are able to lower interest rates and pretend it does not affect consumer prices. 

Unfortunately, America’s economy is highly dependent on oil, which is traded in dollars, making the Fed’s decisions to devalue the currency even harder on citizens as they attempt to buy the same goods today and tomorrow with an ever depreciating dollar.  Perhaps Americans should start saving their money in Euros until the Federal Reserve gets out of inflation denial.

Backyard ethanol?

Twenty percent of US corn production has been diverted to produce ethanol, and it is being heavily subsidized to get it up to speed. Now E-Fuel corporation wants you to make ethanol in your backyard from either sugar or liquor. In an article in Scientific American the company asserts that it takes 14 pounds of sugar to make 1 gallon of ethanol and the company will provide you with bulk rate sugar for between 15 and 30 cents per pound.

If my math is correct, that means that just the cost of the input, excluding the cost of the $10,000 machine, water, and electricity, is between $2.10 and $4.20 per gallon. In the same article the company states that one of its main objectives is for customers to be able to produce ethanol for about $1.00 per gallon. This seems to be unattainable until you consider the possible dilution of the ethanol (the same article states that 65% ethanol is acceptable to fuel an automobile, suggesting water for dilution).

Considering dilution the best possible cost is between $1.37 and $2.73 excluding the cost of the machine, electricity, and water. This also assumes that the company delivers on its promise to provide a source of sugar at the rate of 15 to 30 cents per pound. This may not solve our energy independence issues overnight, but it is at least a step in the right direction, putting power in the hands of the people.

How ethical is corporate taxation?

Nothing said here will bring an end to corporate taxation, but I would like for a minute to pretend that it is negotiable to examine its legitimacy and the effects of the system in place.  Our founding fathers waged war with England for taxation without representation, but when we levy taxation against non-voting entities that is exactly what we get.

The corporation is a legal liability shield and capital raising device used to run many American businesses, however, without real people (employees, shareholders, vendors, customers) this legal entity is just a shell.  Most citizens are persuaded by politicians to look at corporations as merely a shell rather than to look at them for the sum of their real-people parts.  Thus, taxation of no one in particular is better than taxation of a specific person, so corporate taxation is popular.

This does not come without side effects as taxation without representation is not entirely true.  There is not legally sanctioned voting representation, so representation comes through the back door with lobbying, political contributions, and good old-fashioned bribery.  The result of taxing a non-voting entity with much money and power is a lot of unethical behavior brought about by the structure of the system.  The answer is not to police the unethical/illegal activity further, but to examine the system that produces it.

An excellent tenant of good government is transparency.  This is another problem with corporate taxation – the taxation of no one in particular.  Who really pays corporate tax (the corporation of course)?  The real people involved with the corporation must pay the tax in some way shape or form, because the shell in and of itself has no income or wages to tax.  The shareholders pay with decreased stock appreciation and lesser dividends.  The employees pay with lower wages and lesser benefits.  The vendors pay with lower profit margins themselves.  The consumers pay with higher prices used to subsidise the tax.

The lack of transparency imposed by corporate taxation may be the worst of all as the government is able to raise revenues with little to no legal accountability.  The group paying the tax is ambiguous, so it is hard to unite an ambiguous group to oppose tax increases or to help in drafting better tax policy (except for the opposition from the corporations themselves).  The opposition comes in the form of lobbying and bribery, which ends up being rather effective, but further muddies the ethical considerations and transparency of government.