FOMC Statement and Bernanke’s Finale

The Federal Open Market Committee (FOMC) released its latest statement on Wednesday January 29, 2014.  Its statement was very similar to the previous one in December.
The main thing of interest coming out of the meeting was the Fed’s rate of asset purchases (money creation).  At the last meeting, it was announced that the Fed would “taper” by $10 billion per month.  Instead of inflating at $85 billion per month, it would inflate at $75 billion per month.
With the latest statement, the FOMC announced it would taper by another $10 billion.  So starting in February, the Fed will add “just” $65 billion per month to its holdings.
While this was widely expected, there were growing doubts about the continuation of the taper because of the bad economic news over the last couple of weeks.  The unemployment rate dropped, but it became evident that it was only because people stopped looking for work.
In the last week, the stock market has been doing terrible with news of weakening in China, as well as currency crises going on in various countries.  It seems that a lot of fear has quickly returned, and this time it included investor fears.
This was Bernanke’s final act as Fed chairman.  He will pass over the reigns to Janet Yellen this weekend.  I find the situation quite ironic.
When Bernanke took over from Greenspan, the economy seemed to be booming.  Bernanke has a bad reputation now as a money printer (even though most of it is done digitally and not by actually printing money).  But when Bernanke first became Fed chairman, he actually took a tight monetary stance.  It was under Bernanke’s watch that the Fed stopped inflating and kept the monetary base fairly steady.
It was these actions that triggered the whole crash, but it was not the cause.  Real estate started to go bust and then we hit the fall of 2008 when stocks collapsed and the whole financial system seemed to be on the edge of a cliff.
This was mostly due to the easy money and low interest rate policies of the Fed under Greenspan.  This is what caused all of the malinvestment, including the housing bubble.  Bernanke’s action of tightening is what exposed the malinvestment.  It wasn’t until after the whole financial crisis became evident that Bernanke started to inflate like crazy.
It seems that Bernanke may now be doing to Yellen what Greenspan did to him.  He is setting her up for a fall.  Under his watch, the Fed has more than quadrupled the monetary base since 2008.  It has caused a stock bubble and a huge misallocation of resources.  As the rate of monetary inflation goes down, these malinvestments will be exposed.  If the Fed keeps tapering and sticks to it, then we are likely to see a severe recession.
Bernanke started the tapering just before leaving office.  Now Yellen will have to deal with it.  This isn’t to say that the Fed can’t reverse course.  If the economy starts to get really bad, then I don’t think it will shock any of us if Yellen starts increasing monetary inflation back to $85 billion per month, or even more.
When things finally fall apart, I am glad that it will be someone like Yellen who will take the blame.  She is a Keynesian (or worse) and she believes that more monetary inflation is the answer to most of our problems.  When things go bad, her philosophy can take the blame, just as it should.

State of the Union Propaganda

I have to confess that I did not watch the State of the Union speech.  I will read the highlights.  There are too many reasons not to watch the State of the Union.
First, half of the time is taken up by the entrance, the exit, and the applause.  Maybe it is more than half.  If you are really interested in what is being said, you can probably read a transcript in 20 minutes.
Second, I don’t really want to look at the expressions of the Vice President and the Speaker of the House, who are sitting behind the president.  It doesn’t seem to matter who they are.  I just tend not to like them.  I like them less than the average politician, which is pretty bad.
Third, I don’t believe a word that is coming out of the president’s mouth.  It is not that everything he says is untrue, but anything that I am not sure about, he is probably lying.  I am not just talking about Obama.  I am also referring to his predecessors.  It seems you have to basically be a liar to get to the top position in politics.
A fourth reason I don’t like the whole event is that it is all so phony.  Sometimes just one side will stand and applaud.  Other times, the whole room will stand and applaud.  It is a show for the American people to make them believe that they have real disagreements over critical issues.
The two major parties will disagree over whether to have 50,000 troops in Afghanistan or 70,000 troops (or pick a number).  They will disagree on whether the tax rate should be 36% or 39%.  They will disagree over cultural issues, just to get their bases impassioned.
But then the two parties will agree and hold hands on certain issues such as fighting terrorists, saving Social Security, getting benefits for veterans, and saving puppies from falling trees.  While I may have exaggerated on that last item, Obama could have mentioned it in his speech and everyone would have felt compelled to stand.
The politicians of both major parties are in complete agreement over making government bigger and more powerful.  They will frame it in different ways to appeal to their bases, but don’t be fooled by the rhetoric.
And that leads me to my fifth point about why I don’t pay attention to the State of the Union speech.  Most of what is said, even if it were well intentioned, will likely never happen anyway.
I can remember Bush talking about partially privatizing Social Security.  It was all rhetoric in an attempt to placate his base.  He knew this would never happen and he had no intention of it happening.
The State of the Union speech is nothing more than campaign propaganda.  The president will attempt to take all of the credit for all of the good things happening.  He will also blame all of the bad things on the opposing party for being “obstructionist”, or difficult to work with, or too rigid.
It doesn’t seem to matter who is president.  And even if the same party controls the presidency and both houses of Congress, the president will still try to blame the problems on the other party.  It happened under both Obama and Bush.
I will read the headlines to make sure I didn’t miss anything important, but that is unlikely.  It is even more unlikely given that Obama is a lame duck now.  Even if he had anything interesting to say, I wouldn’t believe it anyway.

Saving vs. Paying Off Debt

Money management can be a tricky subject.  Everyone’s situation is unique, but there are a lot of situations that are similar and can often be an issue of debate on how best to handle them.
For instance, let’s say that someone has $50,000 in savings in a bank account (with no other significant savings and assets) and also has $50,000 in student loan debt.  Should the person use the savings to pay off the student loan debt?
From a numbers standpoint, it is far better to pay off the debt, assuming that the interest rate is higher than what the money would be earning in the bank.  At today’s rates, it would be safe to assume that the interest rate on the debt will be higher.
The problem here is the uncertainty of the future.  Let’s say the person lost his job and could not find other work right away.  He would need an emergency fund.  So in that situation, he would be better off with $50,000 in the bank and student loan debt.
If he had used up all of his savings to pay off the debt, he wouldn’t have any cushion.  He might end up using credit cards, ultimately making his situation possibly worse than having the original student loan debt.  Or worse, he might end up living in virtual poverty until finding a new job.
Of course, if the person had a low paying job and had very low living expenses, then maybe using a good portion of the $50,000 to pay off the debt would be a good idea.  The person figures that if he loses his job, he can probably find another one quickly due to the already low wages.  Or maybe he lives with family and knows that he would not be out on the street if he lost his job.
Again, this just shows that each situation really is unique.
Another interesting scenario is if someone has an employer-sponsored 401k plan and also has credit card debt or student loan debt.
Let’s say that someone has $20,000 in credit card debt and has to choose on whether to contribute to his 401k plan.  If he contributes, he will get a 5% match from his company.
While some people see the 5% as free money that should not be turned away, it is also hard to argue with the concept of getting rid of credit card debt first.  If the person can only make the minimum payments on the debt, then perhaps he is better off not contributing to the 401k for a while and getting the debt paid off, assuming he is disciplined enough to do so.
If you put money into a 401k, you are really locking up your money.  You can’t really access it in most cases.  If you lose your job, you could take a withdrawal, but then you would pay taxes and a penalty on top of it.
It is also important to acknowledge that there is an emotional aspect about money management.  It is not all numbers.  Most people will gain great satisfaction from paying off their credit card debt.  It is like new found freedom when it finally happens.  And having credit card debt can be a great burden and cause some people a lot of emotional stress.
Even if contributing to a 401k is better in terms of the numbers, it might be worth the emotional benefit of getting rid of the credit card debt.
So while there isn’t always a right answer to certain questions about money management, the right answer often lies in the emotional well being of the person.  Every situation is unique and every person’s attitude and personality are different.
If you are ever having trouble making a financial decision, figure out which one will help you sleep the best at night.  In most cases (not all), that will be the best decision.

Gold and Bonds are Moving Together

On Thursday, January 23, the Dow sank over 175 points, losing more than 1% on the day.  While it was a bad day for the overall stock market, it was a good day for bonds and gold.
The 10-year yield went down to 2.77%, meaning bond prices went up.  Meanwhile, gold went up almost 2% to go over the $1,260 per ounce level.
Stocks were supposedly down because of fears over a slowing economy in China.  But while that news is interesting, I would like to focus on bonds and gold.
It is noteworthy that they are moving somewhat in tandem.  This has not always historically been the case.  In the 1970’s, during a period of increasing inflation, gold performed well and bonds performed poorly with increasing interest rates.
In the 1980’s, things switched up.  As inflation fears faded, gold went down and interest rates also went down, driving bond prices up.
It has only been in the 21st century that the two have been more highly correlated.  Gold finally started to do well again at the turn of the century, after having been a terrible investment for the previous 20 years.
Meanwhile, bonds continued to do well, as interest rates went to historic lows.  While bonds have not done as well as gold over the last 12 to 14 years, they have still been a decent holding.
As stocks went down on Thursday, investors turned to both bonds and gold.  One thing that the two investments have in common is that they are both sought after for safety.  When investors are fearful, they will tend to go to one or the other.
The difference is that fearful investors will turn to gold when the fear is inflation.  Investors will turn to bonds for safety when the fear is recession, depression, or deflation.
While Thursday’s market in no way makes a trend, what if investors continue to sell stocks?  Where will they go?
Right now, it looks as if they may be undecided.  Perhaps a better way of stating it is that different investors are fearful of different scenarios.  The people buying gold are worried about more Fed inflation and a depreciating currency.  People buying bonds are worried about another major downturn in the economy.
We don’t know which ones will turn out to be right.  Maybe both bonds and gold will continue to do well.  Or maybe Thursday was a trick and we will see stocks regain their footing and eventually surge to new highs.
2014 could be an interesting year.  The Fed has created quite a mess with all of its so-called quantitative easing, which is nothing more than creating money out of thin air.
If the economy hits another major downturn, will we see the 1970’s again with rising inflation and rising interest rates?  Or will we see 2008 again with a major recession and relatively low price inflation and low interest rates?
If stocks do poorly in 2014, it will be interesting to see who wins the battle for the money looking for safety.  Will it be the bond buyers or the gold buyers?  Maybe it will be both, at least in the short run.
UPDATE:  As an additional note, this post was first written on Thursday night.  Following that, on Friday, January 24, the stock market tumbled even more.  Bonds were up again and gold was up slightly.

The Importance of the NSA

The National Security Agency (NSA) has been in the news ever since Edward Snowden exposed government documents showing that the NSA has been spying on virtually all Americans and collecting massive amounts of data.
Some Americans don’t think it is that big of a deal.  They figure that as long as they are not doing anything illegal, then they have nothing to worry about.  To a certain extent, they are probably right.  As long as you are not a major target, then your electronic communications and telephone conversations will likely never be seen.  There aren’t enough people at the NSA to look through billions of pieces of data coming through every day.
With that said, this is a critical issue in regards to liberty, and really the future of our society.  If the NSA is allowed blanket spying on everyone, then the people at the NSA are in charge.  They are practically running their own dictatorship.  The people there are more powerful than the president, the chair of the Federal Reserve, or any of the members of Congress.
You might say that Congress can always revoke funding or tighten restrictions on the NSA.  While technically true, is this really realistic?  If the NSA has been collecting data on all members of Congress, only those with truly nothing to hide would dare oppose the NSA.  The NSA can bribe almost anyone that it chooses.
How many congressmen live a clean enough life that they would be willing to oppose the NSA and risk having everything exposed to the public?  It doesn’t even have to be as bad as doing something illegal.  It doesn’t even have to be cheating on a spouse or getting drunk at a party.  It could be anything.  It could just be conversations about other individuals that you wouldn’t want others to hear.  It could be a medical condition that you would prefer not to be known.
How many people are there in this world that would be willing to make public knowledge everything he or she has said and done in their life?  Almost everyone wants some kind of privacy and everyone has their embarrassing moments.
The NSA is a giant monster right now that needs to be destroyed.  Edward Snowden tried to do a favor to the American people by telling them about criminality inside the government.  Yet some are actually blaming Snowden for being a traitor.
Yes, he was a traitor to the U.S. government that was engaging in criminal behavior.  To the American people, he was trying to be a patriot and a hero.
The only way to stop the NSA now is to shut it down.  You can’t tinker around the edges, as Obama’s speech indicated, and expect anything significant to change.  It seems that the NSA is essentially running the country now and the only possible way to stop it is by massive opposition by the general population.
There needs to be so much pressure put on Congress and Obama that they fear the public opposition more than they fear the NSA and the secrets they hold.  There is no other way.
Americans have been told what their own government is doing.  This is not about terrorism vs. security.  This is about liberty vs. tyranny.  Terrorists are not a threat to liberty unless the people are tricked into believing that terrorism is the biggest threat.
The biggest threat to the American people is their own government, just as we have seen so many times in history.
Just because you supposedly have nothing to hide, it doesn’t mean that you have nothing to fear.  The government has a monopoly on the use of force, yet many people will worry more about a company obtaining their private information than the government.
A private company can only harm you by doing something criminal or by handing over your data to the government
If you are going to be fearful of something, it should be the entity that can use force against you and get away with it.

Why Are Americans Wealthy?

While the U.S. has been in a period of slow growth lately, there is no question that Americans are the wealthiest people in the world, at least when considering major countries.  It is possible that a few small countries such as Switzerland and Hong Kong may have more wealth per capita.
There is a lot of misunderstanding about the reasons for this wealth and it spreads across the political spectrum.
The left simply does not understand capitalism and therefore cannot understand the reasoning for great wealth.  Some, like Obama, attribute it to government.  But this doesn’t make much sense, because there is government activity in virtually every country in the world.  The only way this reasoning is possible is to say that the U.S. government is somehow more efficient, wiser, and more benevolent than all of the others.
Many on the left will say that Americans are rich at the expense of the rest of the world.  They will say that Americans consume the greatest percentage of the world’s resources.  Actually, it is true that Americans are the biggest consumers, but they are consuming things that have either been produced by Americans or have been obtained through trade.
This is really where the left fails to understand capitalism.  They think the only way someone (or some country) can get rich is at the expense of others.  They do not understand the basic concept that we don’t live in a world of limited wealth.
They do not understand that wealth can be increased through increased production.  They think that there is a wealth pie that should be divided up equally (unless they are talking about themselves).  They think the pie can’t grow.  They think there is limited pie to go around.  They don’t understand the pie will grow under capitalism.
Now, there are also those on the left who think that America is wealthy because of the American empire.  They think America is rich from occupying other countries and stealing from them.
These people aren’t completely off base, but they are mixing cause and effect.  The only reason that the U.S. government can have such an interventionist foreign policy is because it has a lot of resources to draw from.  This is because of American wealth.  But it would be a huge mistake to think that wars and occupations are any kind of a financial benefit to Americans.  It may be a benefit to certain sectors that make military equipment, but as a whole, it is a net loss for Americans when the government tries to run the world.  Does anyone really think that the wars in Iraq and Afghanistan have been any kind of a financial benefit to the American public?
On the other side of the coin, some conservatives, and even some libertarians, mistakenly think that America is wealthy because of the great freedom that we have today.
While there is certainly still some semblance of a free market in the U.S., it is far away from what it once was.  Overall, the gap has narrowed, if not closed completely, between the U.S. and many other major countries.  Is there really much difference between the U.S. and Canada, New Zealand, and Australia?
In fact, in terms of economic liberty, countries like Hong Kong and Singapore are far freer than the U.S.
I think some people forget to remember the history of the U.S.  The 19th and 20thcenturies saw phenomenal growth.  People living in the year 2000 would have had almost nothing in common with people living in 1800.  The difference in living standards is amazing.  People living in 1800 would have had far more in common with those living 2,000 years before them.
So, during the last two centuries, Americans created an amazing amount of wealth.  It is incredible what compounding growth does over time.  And while the U.S. is no longer as free as it once was, Americans have been able to keep most of their wealth and even continue to grow it, even if at a much slower pace.
In conclusion, capitalism should get credit for Americans being relatively wealthy.  But it isn’t so much the capitalism of today, as there is a lot less economic freedom than there once was.  Instead, we should credit over two centuries of capitalism, along with an entrepreneurial spirit that still remains today, even if to a lesser extent.

Is the Trans-Pacific Partnership Good for Liberty?

The Trans-Pacific Partnership, also known as TPP, is a trade agreement that originally included just four countries – Chile, Brunei, New Zealand, and Singapore.
Since that time, there have been negotiations for expanding the membership among 8 different countries, plus a couple of others showing interest in joining.  The negotiating countries include the U.S., Canada, Mexico, Australia, Peru, Vietnam, Malaysia, and Japan.
The TPP has similarities to other trade agreements that the U.S. has been involved in, such as NAFTA.  Unfortunately, some people are misled to believe that these agreements are pro-liberty and pro free trade.  It is interesting that the biggest opponents of these agreements often come from libertarians and the far left.
Just like most government laws and most international agreements, there are some parts worse than others.  There may even be some positive aspects about it.  Unfortunately, any positives that the TPP may offer are more than offset by the negatives.
The first clue is that the negotiations and proposals regarding the TPP have been largely secretive.  What is it that these politicians don’t want the public finding out about?
There is a false impression that the TPP and other trade agreements promote free trade.  But it is really just managed trade.  It is possible that some aspects might improve trade conditions if a country already has strict regulations and high tariffs.
But we can be reasonably certain this isn’t a free trade agreement, just the same as others like NAFTA.  Why do you even need an agreement for free trade?
The only reason that free trade wouldn’t exist is because government is preventing it.  So if the government wants free trade, it just has to stay out of the way.
You don’t need for a government to pass a law saying that the tax rate will be 0%.  It can simply repeal the taxes already in existence.  So you also don’t need a government enacting an agreement for free trade.  It simply just has to get rid of its regulations and tariffs, and free trade will be in existence.
There are other aspects of the TPP that may be worrisome.  There are provisions relating to intellectual property rights.   Ironically, some of these provisions are only known because of Wikileaks.
This is a subject that has much disagreement amongst libertarians and conservatives.  Ironically, it has been some leftist U.S. politicians who have come out the strongest against the TPP and its provisions on intellectual property.
While the subject of intellectual property is a subject for another day, it looks as though some of the worst aspects of U.S. law would be inserted into the TPP, such as strict patenting laws for medicines.
Do you really think the U.S. government is trying to help the general public, along with the people in foreign countries?  Or is it more likely that the U.S. government is trying to help big pharmaceutical companies (as one example), which have full-time lobbyists in Washington DC?
In conclusion, while it is possible there may be a few positive aspects of TPP, it will be mostly negative.  This doesn’t represent free trade and it is not a liberty friendly agreement.  It is a partnership between politicians.  If it were such a great thing for the general public, then they wouldn’t be so secretive about it all
The good news is that there is opposition from both sides of the political aisle.  Some people may not be opposing it for all of the right reasons, but it is still opposition.

What’s the Deal With Water Conservation?

I am having difficulty figuring out the hype over water conservation.  It is pushed by the establishment media.  It is taught to kids in school.  Or perhaps brainwashed into their minds is a better description.  In some places, you can only water your lawn on certain days of the week.
First, nobody needs to tell me how to use my water or give me an incentive to supposedly save water.  I pay my water bill each month.  That is my incentive.  I am not going to unnecessarily water my lawn because I don’t want to pay a huge water bill.  I am only watering my lawn so that my grass doesn’t die.
My next thought on this subject is on the whole idea of saving water.  Where are we saving it?  Water evaporates into the air and falls back down in the form of rain.  It actually works really well as a filtering system.  You get clean water falling from the sky.
I am no scientist, but I don’t think massive amounts of water are disappearing from the earth.  It may get redistributed from some areas to others, but there is no shortage of water on earth.
This leads to my next thought and that is that two-thirds of the earth is covered by water.  Again, why is anyone supposedly worried about a shortage?  I understand that you can’t drink salt water, but even with that there is wonderful technology that can actually remove the salt to make the water usable.  It may not be cheap to do, but there is no shortage.
At some price, water is available.  While it does fall from the sky, it is not a free resource, unless you can collect your own rainwater or if you have a well.  But at some price, there is plenty of water to go around.
This leads to the most important point of all regarding water conservation.  In most places, it is government that is in charge of supplying water.  If there are any shortages, that is clearly the reason.  If water were like other goods provided in the marketplace, there would be a valid price system that would allocate resources and find equilibrium for supply and demand.
This means that some places would pay more for water.  If you live in a remote area or if you live in a dry climate, you can likely expect to pay more for water.  But the higher price will mean that people in those areas will conserve more because of the incentive to spend less money.  In addition, the higher price will provide a signal to suppliers to shift more resources – in this case water – to the areas that need it most.
It is quite symbolic of government that water conservation is pushed.  When the government gets involved in something, there is usually rationing.  Think about medical care.
Meanwhile, in the voluntary market sector, we see the opposite.  Do you ever see bottled water companies telling you to limit your purchases to save water?  That would be ridiculous.  Bottled water companies want you to buy their water.  If they have a low supply of water for some reason, they can simply raise their prices.
Whenever you see shortages and rationing, think government.  It is no different with water.  It is no different with medical care.

Economic Freedom Index

The 2014 Index of Economic Freedom has been released by the Heritage Foundation.  Notably, the United States has fallen outside of the top 10 of the most economically free countries, coming in at number 12.
The top spot is held by Hong Kong, which has held that spot for 20 consecutive years.  The top ten countries are as follows:
  1. Hong Kong
  2. Singapore
  3. Australia
  4. Switzerland
  5. New Zealand
  6. Canada
  7. Chile
  8. Mauritius
  9. Ireland
  10. Denmark

I think the rankings are somewhat subjective, although many of the measurements are objective.  It is hard to say if the criteria used capture all of the important factors of a free market economy and also if the weighting of each measure is appropriate.
But overall, I think the index is a decent benchmark of figuring out the degree of free markets and property rights in different countries.
While the U.S. is now out of the top 10, it is important to realize that it is still by far the richest country in the world.  But if you measure on a per capita basis, then the U.S. is not the richest.  For example, Singapore has a much higher GDP per capita.
Although government in general has grown beyond belief in the U.S., there is still a lot of wealth from what was accumulated in the past.  And while taxes and regulations are burdensome, there is still a strong rule of law, even if the law isn’t always good.  There is also a strong tradition of property rights and a general appreciation for entrepreneurship and free trade.  For these reasons, it is still an attractive place for investors.
I appreciate the Index of Economic Freedom because it is an easy way to show that free markets work and socialist and centrally planned economies don’t work.
It is always hard to show evidence of capitalism working within a country, or the opposite, in showing that central planning is destructive.  In the U.S. there are so many variables with monetary policy, taxation, government spending, regulation, etc.  They are often all moving in different directions.  When something goes wrong in the economy (or something goes right), it is hard to pin the blame or credit on any one particular thing.
With the Index of Economic Freedom, it is clear cut that the countries that are more economically free are generally much better off.  The people have a much higher standard of living and there is far less poverty.
If you look at the places that are ranked worse than 100 on the index, you can quickly realize that these are absolutely miserable places to live, at least for the most part.  They are countries with little in the way of strong property rights and they all have the characteristic of having oppressive governments.
It is not that all governments do not try to be oppressive, but it is obvious that the economically free countries have governments that are generally the least oppressive and kept somewhat in check.
The next time one of your friends is pushing for more government central planning, point out this index and ask your friend where he would rather live.  The countries in the “free” and “mostly free” categories are generally going to be the most attractive places to most people with any sense.

Economics is Real World

It can sometimes be frustrating to have an economic discussion with people who have little interest in economics.  Well, I say they have little interest in economics, but they are quick to prescribe their own solutions to poverty and human suffering.  They are quick to give their own suggestions on how to centrally plan an economy.
I’ll give an easy example.  Someone will complain about the high unemployment and the need for the government to help those who can’t find a job.  In steps a free market economist who suggests that we repeal minimum wage laws.  The economist provides an explanation about how when the government does not allow prices to reflect supply and demand – in this case the price of labor – it disrupts the market clearing process.  In this case, keeping wages artificially high will lead to an oversupply of labor (unemployment).
The central planner will respond that he is not interested in graphs and discussions of supply and demand.  “We are living in the real world and there are real people who are suffering at this very moment.  We can’t be concerned with economics.  We have to be concerned about the human suffering.”
Talking about economics with someone who has no interest in economics can be like talking to a rock.  Actually, talking to a rock would be less frustrating, because at least the rock can’t respond with something ignorant.
I understand that most people do not find economics interesting and that is fine to a degree.  But if they have no interest, then they should stop pretending how best to use the government to bring about a more equal and so-called compassionate society.  They should stop supporting politicians who have these grand ideas of using government to centrally plan and supposedly improve people’s lives.
Economics is dealing with the real world.  When a free market economist points out that minimum wage laws tend to cause higher unemployment, it doesn’t mean that fake people are unemployed.  It is real.  Real people are needlessly suffering because of those who want to impose their ways on others.
Minimum wage laws prevent two consenting parties from agreeing to a contract.  It makes certain jobs for certain people illegal.  It says that someone who can get a job for $6 per hour is not allowed, even if there are no jobs available at the minimum wage.  It is real people who face this.
I think there are a couple of ways to address this problem.  First, do not cede the moral high ground.  Taking a position of liberty and free markets is the moral position.  You are advocating a voluntary society without the use of force or the threat of force.
In the case of minimum wage laws, you are not willing to use the force of government to prevent a voluntary contract between consenting individuals.
A second important point is that you should insist that you are taking the most compassionate position.  It is a free market economy that will produce far less poverty and human suffering.
In the case of minimum wage laws, eliminating them is the compassionate thing to do.  This will allow people to work who want to work.  It will allow young people and unskilled people to get a job and work towards something better.  It will allow them to get experience and better themselves.
In conclusion, some people will never be convinced, no matter how much reason and common sense you throw at them.  But there are some people who are open-minded who may understand that a position of less government and more liberty is actually the moral position and the compassionate position.
We should not be intimidated by those who claim that we are not compassionate.  It is the policies of the central planners that have led to so much misery and unnecessary suffering.