At the same time, government wages and benefits have dramatically increased.

Why is this significant?  Because all government payments come from taxes, which are ultimately derived from productivity in the private sector.  So as the private sector shrinks relative to the public sector, the burden on the private sector increases, and the overall stability and sustainability of the system decreases.

Of course, individuals who receive paychecks from the government pay income taxes, just as private sector employees do. So to an individual it may appear as though the distinction of government or private pay in unimportant. But that is an illusion. At the end of the day, 100% of government-based pay has to come from somewhere, and the only place it can come from is taxes. The only method the government has to increase its payroll is to increase taxes.  (Even borrowing money just means increasing taxes later.)

By contrast, private company pay comes out of private earnings. A company can increase its earnings by becoming more efficient, producing more products, producing higher-margin products, expanding into new markets, etc.  And every dollar a private company generates creates more than a dollar of value in the economy.

Why is this?  Economics 101: someone was willing to voluntarily pay that dollar for some good or service.  That means, to that individual, the good or service was worth more than the dollar, and to the manufacturer of the good or service, the dollar was worth more than the manufacturing materials and effort.  So both sides benefited from the exchange.

By contrast, virtually nobody believes they are receiving more benefit for their taxes than what they pay.  If they did, they would voluntarily pay more taxes (to increase the benefit).  You may think taxpayers should value the benefits higher, but empirically they do not.  Hence, to the taxed individual, taxation is actually a destruction of value.  (Measuring the value created through the use of the taxed revenue is difficult, and reconciling any potential value creation to the government beneficiary against the destruction of value to the taxed individual has been proven to be impossible.)

So what does this all mean?

Private wages can effectively increase forever–limited only by the creativity and toil of people in the private sector.  But government wages can only increase as a function of increased taxes, which in turn depend upon those private wages.  So when private wages decrease, and public payments increase, the system can quickly become unstable.

Economist David Henderson of the Hoover Institution at Stanford University explains it nicely:

People are paid for being rather than for producing.

Which sounds great if you’re the one being paid.  But not so much if you’re the one doing the paying.

The title refers to the creation of the US Federal Reserve Bank, which took place at a then-secret meeting in 1910 (later confirmed by the participants), at a resort on Jekyll Island, just off the coast of Georgia.

Most of us grew up thinking of the Federal Reserve as a quasi-government organization that helps stabilize our money supply. How it does that is often a bit of a mystery, although it involves interest rates, and possibly reserve requirements. And it isn’t always clear what the relationship is between the Federal Reserve and the US government.

Griffin argues that, in point of fact, the Federal Reserve is a private cartel created by the banks, with the sole purpose of maximizing bank profits. Inherent in its design are the seeds of periodic financial disaster (and inevitable, eventual collapse), which result in a massive transfer of wealth from depositors and taxpayers to bank executives. This is not an accident; it is the way the system is designed.

While this may seem an extreme view, Griffin’s evidence is undisputed, his logic is sound, and his arguments are highly convincing.  Much of the banking system which is ordinarily difficult to understand becomes extremely clear and transparent when viewed through this lens.

The energy business (more specifically the oil industry) can be split into two main areas: Upstream and Downstream. The Upstream business acquires “crude” oil (the raw material removed from the ground), while the Downstream business takes the crude oil and “refines” it, turning it into a finished product that end users want to purchase, and sells it to them.

Upstream

The Upstream business deals with finding and acquiring oil from the earth.  These are the “wildcatters” who use geological sciences, predictive modeling, and other means to find underground locations where there is likely to be a lot of oil.  Often, that oil is in an area of the world that is difficult to get to, either for political or engineering reasons, or both. It may be in an area that has a lot of political unrest, or a corrupt government, or simply a government that is hostile to the energy industry. Or it may be very difficult to access, such as deep underneath an ocean plate.

The Upstream business unit must make financial arrangements to get legal access to the underground oil, then must acquire the necessary equipment to access the oil, and finally must actually drill for and extract that oil. These are huge capital-intensive operations that can often cost many tens of billions of dollars.  And unfortunately, the lead time is so long to get the rights to drill, as well as to line up the equipment, that by the time they are able to drill, the market price of the oil they intend to extract may be too low to justify actually removing the oil.

Then there is the uncertainty they face about the type and quality of the oil they will extract.  Since some oil is easier to process than other (depending upon contaminant, for example), and some oil produces more of the more desirable and expensive final products,

However, once they have extracted the oil, the Upstream business can sell it on the open market for the going rate, which fluctuates daily.

These can often be highly profitable businesses, but they are subject to a lot of market risk, since the global market price of oil is often unknown when the businesses need to make key expenditure decisions.  The key to this business is the ability to find the best sources of oil, manage risk, and time your operations so that the market price of crude oil is as high as possible when you are ready to sell it on the market (typically right after you’ve extracted it).

Downstream

The Downstream business acquires oil on the open market from someone who has already extracted it. They know what quality oil they are getting, and what they can make from it (different grades of gasoline, jet fuel, diesel, kerosene, etc). Their job is to refine the oil into a variety of finished products, package it up, ship it to its destination, and market and sell it.

These businesses are highly competitive, and require extremely careful operational efficiency.  They are typically not as profitable as the Upstream businesses, but the business is often more steady and predictable than the Upstream businesses are.

Companies

There are a handful of “supermajors” or “big oil” companies who have both significant Upstream and Downstream operations. These include ExxonMobil, Chevron, BP, ConocoPhillips, Royal Dutch Shell, and Total, SA.

There are also many Upstream-only companies, such as Occidental, XTO, Anadarko, and so on.

There are also a handful of regional Downstream-only companies. However, the downstream market has largely consolidated, with most of the well-known brands belonging to one of the major integrated energy companies.