Chinese rate hikes. Passports. Economic Freedom and Civil Liberty

China has been raising interest rates a few times this year. This may be aimed at curbing inflation, because according to their figures, inflation has been rising at the fastest rate in 2 years. While credit has to be given that they are trying to do something about the inflation, I doubt that it will be so effective.

China raises rates but the US is not doing so. This will cause more foreign currency inflow into China to take advantage of the interest rate difference. The Chinese will then be 'forced' (well, they don't have to, but politicians don't know much) to increase their money supply in order not to let their currency appreciate too much. This will cause even more inflation in China. More RMB, higher prices.

What the Chinese should do in conjuction with raising interest rate is to let their currency appreciate. This means that they have to stop printing money! I've read somewhere that China prints US$ 250 billion worth of RMB annually. Which is not good of course. Stop increasing the supply of RMB, and prices in terms of RMB can be controlled. It doesn't matter how much 'hot money' flows into China. There WON'T be inflation if there's no RMB printing. Prices can't rise in terms of RMB if RMB money supply doesn't expand. Also, they should allow the RMB to be traded more freely internationally, otherwise all those RMB is been trapped in China and is causing price increases.

Keynesian Economics should not be taught in schools. Modern economics is a study of how to STEAL from the population. And theft should not be taught in schools. My hope is that one day the world will embrace Austrian Economics. I am not  hopeful that the governments will be the catalyst of this change. Well, maybe they will be, in a way, because they will screw things up so badly that the people will revolt. Austrian Economics preaches economic freedom, something which is sorely lacking in our world today. 

Just the other day on Christmas Eve, I was returning from Malaysia to Singapore. I got stuck at the Woodlands Checkpoint for 2 hours! There were throngs of immigrants and huge amount of hours wasted. In my opinion, passports do nothing but waste resources - time and money. Imagine the millions of man-hours lost at the checkpoints around the world annually. We could have used hundreds of thousands of man-hours, if not millions of hours, to breed fishes and distribute them to the poor and hungry around the world.

One may argue that without passports, there will be a huge influx of immigrants into Singapore, overcrowding an already overcrowded city. That may happen. But what about immigrants out of Singapore? If immigration is easier, people will move out too. There is only so much humans that can be crowded into this island. This wasn't a problem in the past in a passport-less world. I am not sure if it will be a problem now. In every society, there was a limit to how much population the land can support. A natural equilibrium should be reached.

One may argue that passports discourage crime. While I do agree that it does help to some extent, but I feel that the benefit is so minimal given the costs. You spend so much time and money just to prevent a few crimes. There has been research which shows that IDs do not help to prevent crimes or track criminals. 

I love Ron Paul's quote: "Governments are supposed to protect the secrecy of the people, not the secrecy of governments." 

Politicians just love to have control. They need it to further their political agendas and their careers.

If the governments really are so keen in tracking criminals, I have a better suggestion. Issue a barcode to each and every one in the population. To pass through a checkpoint, the immigrant just needs to scan his own barcode, much like how those barcode scans in the supermarkets operate. This will make immigration so much more pleasant, and save so much resources. How about not using any passport or this barcode at all? How about using those saved resources to hire private tracking companies? I am sure without this passport system, private investigative companies that track criminals will flourish.

Why aren't governments doing this on a large scale? Well, I think it is inertia, like Jim Rogers once mentioned in his book. The world just simply adopted the passport system that the British started to use on a large scale during the colonial periods. Before that, the world did fine without passports anyway. In fact, today there are still agreements between certain countries that travellers do not require passports to pass their borders. (Keynesians probably won't like my idea because they will say it destroys jobs - but this argument is invalid. Ah well, that's another topic of discussion)

I like to 'downscale' large issues down to an individual family unit. This helps us to understand things better. When a family is in debt, they need to work harder and save more, not borrow more and spend more (like the Western countries). 

And you will not want your parents to track every single thing you do, you do not want them to monitor which streets you pass through, which malls you visit everytime you go out to chill. You prefer to be left alone to do your own things. 

Why then do people allow their governments to track and monitor them? Why allow them to decide what you can or cannot do? Allow them to decide where you can or cannot go? Why allow them to dictate economic policies? Do they really know much more than us? Are our overlords so much smarter than the rest of the population, that they can know what the ideal interest rate is, which industry will be great, which form of energy is the wave of the future? People will argue that this gives a more stable society, but I think the free market can do a much better job. We do not have a stable world today, with all the business cycles and such.

Have sound money and free market capitalism. That's what will give us economic and individual liberty and stability. When a government fails, the entire nation suffers. When an entrepreneur fails, the damages are limited. Entrepreneurs (and thus the market) are much better judges of which businesses are viable. They spend their time, effort and risk their money for their ventures. Politicians, on the other hand, just need to write legislations and pass laws and then sit back and feel good about themselves.

To end this post:

Republics generally do not last 200 years. They all fail because of implosion of their finances. They self-destruct from within. Economic freedom and civil liberty can prevent this. Central planning and controls and regulations will not work in the long run. The politicians perpetuate the problems, and the population do not wake up until it is too late. This is pretty much what is happening in the US right now.

Anyway, Happy New Year everyone. Wish you more wealth and better health in 2011.