Posts Tagged ‘economics’

Economists Argue For “Growth Through Cost”

Friday, July 14th, 2017

Almost all Leftist theory is highly convoluted and articulated, but when you drill down into it, you find fundamentally mistakes about how the world works incorporated at its core as assumptions.

For example, economists fundamentally misunderstand the nature of economies when they argue that open borders will provide us with a $78 trillion windfall:

“Open borders would make foreigners trillions of dollars richer,” observes Mr Caplan. A thoughtful voter, even if he does not care about the welfare of foreigners, “should not say…‘So what?’ Instead, he should say, ‘Trillions of dollars of wealth are on the table. How can my countrymen get a hefty piece of the action?’ Modern governments routinely use taxes and transfers to redistribute from young to old and rich to poor. Why not use the same policy tools to redistribute from foreign to native?” If a world of free movement would be $78trn richer, should not liberals be prepared to make big political compromises to bring it about?

…Workers become far more productive when they move from a poor country to a rich one. Suddenly, they can join a labour market with ample capital, efficient firms and a predictable legal system. Those who used to scrape a living from the soil with a wooden hoe start driving tractors. Those who once made mud bricks by hand start working with cranes and mechanical diggers. Those who cut hair find richer clients who tip better.

I admit to some sleight-of-hand editing here in that I placed the conclusion of the article first, and then stuck the actual argument after it. The argument is this: poor people move to rich countries, and earn more money, so those rich countries are now richer.

Spotting the flaw in this logic is not hard, if you are not relying on the idea of one-dimensional categories. Each of those newcomers displaces a native worker and incurs a cost through the wages they must be paid. Even if the native workers move up a level, like from ditch-digger to clerk, this does not change, and in fact gets worse because they also must be paid higher salaries.

Economics is not a zero-sum game but it is not an infinite blank check either. To make new wealth, you must introduce new productivity and a new market. Creating an artificial market for labor, as these economists propose, simply takes from what is existing, recycles it through a scheme, and then claims to have created wealth because the money is in motion.

We might call this “economic growth through cost”: if new workers show up, and you need to pay them, then this constitutes economic “growth” but the economists do not mention the secondary and tertiary effects which obliterate that growth and send the society into a downturn, nor that the growth was only on paper in the first place.

Their thinking resembles another bad economic theory, broken window theory:

The broken window theory states that a broken window adds value to the economy because a replacement must be purchased and that puts money into the economy. Under this type of theory, politicians “create jobs” with regulation and welfare money grows the economy. It is the basis of our new hybrid of socialism and capitalism that relies on re-financialized debt, or the selling of obligations as if they were of positive value.

In other words, if you need more money, just break something and then someone will have to be paid to work on it. This is crypto-socialism at its most obscure, in that the idea is that externalities of socialized cost — a broken window — somehow produce wealth instead of seeing them as what they are, which is a loss of wealth through obligation to pay for something that does not generate future income.

The same is true of immigration. It does not generate future income at any significant level, and instead, simply takes from the existing society and then forces that society to pay its underqualified people even more money, which creates an internal circular Ponzi scheme that guts the society by building a consumer economy on an underclass, at which point quality descends and the middle class is destroyed by taxes that pay for this increasingly-needy underclass as it collapses.

Societies destroy themselves this way. In order to avoid class warfare, which always arises from lower castes against higher, they bribe the lower castes with subsidies. This simply delays and worsens the problem by making the underclasses swell, and this group does not understand things like the government running out of money. “Just print more!” they will say and consider themselves wise for doing so.

Economists are like scientists: they have no special magic; they are simply people who went through degree programs. At that point, their only obligation is to sell themselves, which means coming up with a theory that tells people what they want to believe. Some try to balance this with reality, but the vast majority, as in all human groups, do not.

In advancing theories like the above, they engage in something we might call “the fundamental fallacy,” which is the belief by human beings that they can do whatever they want and it will not have any negative side-effects (unintended effects) on the world; the world will remain as it was when they were children.

That mentality allows them to make the mistake of cutting open the goose that laid golden eggs. Their goose is the Western European population of America, which by not doing the same stupid stuff every other group was doing, made a prosperous nation and staffed it with intelligent, moral and capable people.

Economists of the “let’s get famous” variety ignore that the source of America’s wealth, like Europe’s wealth, is its people, and not just any people, but those with the grit and foresight to make this place out of wilderness populated by uncivilized third world people. America’s wealth came from its human raw material, and this is not an infinite resource, because as it is diluted, it loses its power.

When you read between the lies, this fawning article about the “free” $78 trillion that economists just found lying on the sidewalk — the article literally begins with that metaphor — starts to become clear as not free money, but free costs, while removing the source of your wealth. They have hoodwinked people for generations with this type of shell game theory, but maybe not for forever.

Trump Was Elected By People Who Realize How Leftist Policies Wrecked Our Economy

Saturday, May 13th, 2017

Despite the media barrage about how Donald Trump was elected by angry impoverished white people “clinging to their guns and religion,” it seems that the suburbs elected him, meaning that the upper half of the American middle class, who are more aware of how economies work and what types of policies succeed, were instrumental in his victory:

As compared with most Americans, Trump’s voters are better off. The median household income of a Trump voter so far in the primaries is about $72,000, based on estimates derived from exit polls and Census Bureau data. That’s lower than the $91,000 median for Kasich voters. But it’s well above the national median household income of about $56,000. It’s also higher than the median income for Hillary Clinton and Bernie Sanders supporters, which is around $61,000 for both.

These people are more likely to run their own businesses or be in positions where decision-making is needed, and because they are accustomed to handling money and productivity, they know roughly what works and what does not. The world is only beginning to awaken to what a disaster the combined Obama and Clinton economic and social policies have been for America (and most of them, wanting us to be weaker, have a vested interest in not speaking up).

In particular, they see how immigration and the welfare state have destroyed real wages for the American worker:

Over the past year average hourly earnings have risen by 2.5%. Unfortunately, the consumer-price index, a standard measure of inflation, rose by 2.4%, meaning the average worker’s purchasing power hardly grew at all.

This is no aberration. Since 2010, hourly wages corrected for inflation have risen at barely 0.5% a year. The official statistics back up reports that Americans are working harder than ever just to stay even.

Since the depths of the Great Recession, household incomes have increased steadily—not because wages are rising, but because Americans are working more hours. A longer view reveals the limits of these gains. Nearly eight years after the official end of the recession, median household incomes aren’t much higher than they were when the recession began, and they remain a bit lower than in January 2000. For families in the middle, it has been a lost two decades.

It was a bad enough disaster that we doubled the workforce by sending women to work, but immigration is even more of a disaster, driving down wages.

On top of that, Leftist social policy requires a welfare state and wealth redistribution, and this means that the top half of the middle class pay almost all of the taxes, which are then gifted to underclasses in order to “prime the pump” through consumer spending.

For every dollar spent in business, a chunk is taken out through taxes, regulations, lawsuits, unions and other Leftist favorites. This slows business, but even more importantly, passes costs on to the consumer at the same time it restricts their wages.

Americans are not starving, but they are not living, either. They are spending all of their time at work, engaged in activity of dubious actual value, in order to keep from being sucked under into the downtrodden class of people with no prospects and little future.

How The “Service Economy” Created A New Liberal Elite

Monday, May 8th, 2017

Sometime in the 1990s, when America switched to “globalism” and a “new world order” as its great hope, the American economy changed. It stopped rewarding production, and instead began to reward those who specialized in converting existing assets into services which could be sold to consumers.

This continues to this day. For example, someone might develop an app for a phone that helps sell more cellular phone minutes, or invent a money market fund that returns better than average percentages. They might design a new version of a consumer device to be made in China and sold here.

These jobs resemble sinecures more than anything else because, with the huge staff and redundancy at most large American businesses, people need to go through a credentialing process in education and then repeat the procedures they learned there. Thought and analysis have been replaced by measurement and documented methods.

Once one gets into one of these jobs, it is possible to be minimally competent and still make a lot of money, mainly because the organization behind these individuals has an incentive to succeed, and so all of the associated workers contribute enough to achieve the basics. The lone thinker has been replaced by the hive mind.

This has created a situation where those who are obedient to the system and go into the latest trends and waste their youthful years going through the motions are rewarded, where everyone who tries to just live a normal life finds themselves marginalized and excluded:

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.

Many have realized by now that our economy resembles a Ponzi scheme, which is why it is so dependent on growth through globalization and immigration to bring in new consumers. We are selling membership in our society as a way to keep its economy afloat.

The downside of this is that we have set up a Soviet-style system where only those who are good at the system itself get ahead, and others — who may simply not want to participate in this soul-killing experience — are excluded and written off.

Those then suffer the policies of the new Elites who, having replaced the WASP elites, base their claim to wealth not only production but on services, which essentially mean consumer services, or pushing paper around to re-sell existing assets and by generating attention for those assets, creating increased demand for them and basing their value on that, not a calculation of utility and actual value.

Some would say this is the end result of usury. Others might point out that it is what happens when a government dedicates itself to funding a permanent underclass and requires an economy which will generate activity that can be taxed in order to pay for that. In other words, a socialist-capitalist fusion made toxic by diversity.

Diversity may go down in history as the death of US/EU. It gave the state a mandate it could use to justify any increase in power, namely that it was still fighting WWII against that evil racist elitist sexist homophobic transphobic patriarchal Hitler guy, and so the state grew.

With that, the state became a big part of industry, and since it was a service, most others followed suit. The result is that we have too many people doing too much which is irrelevant, and very few things that actually make money, with almost everyone chasing those few outlets as a means of profit to escape the mess.

If people seem to be fearful and shaky around you lately, it is perhaps because no one expects this can go on forever. We know that “re-financialization” of the type described above is the sign of a dying industry, not a thriving one. And so we struggle on, waiting for the crash.

An Economic Argument Against Equality

Tuesday, April 18th, 2017

We know that there are practical arguments for the failure of equality on a biological level, namely that it eliminates striving for improvement and creates a downward pressure — averaging — instead. If we look at equality on an economic level, we see that this problem replicates itself in a different form.

Equality means that mediocrity is equal to superiority in terms of social value. This makes mediocrity more efficient because it requires more work and attention to achieve superior results. If the outcome is the same, choose the approach that requires the least amount of work; through this mechanism, the mediocre becomes superior to the superior, at least as far as the individual is concerned.

This economic efficiency explains the soft drinks, fast food, junk mass culture, mediocre appliances, inept bureaucrats, mentally lazy voters and other aspects of the blighted modern landscape: when no one is interested in quality, people do not lose jobs or income for being mediocre, and since that gives them more time for themselves, they become active apathists who deny reality.

At a mathematical level, far below the delayed consequences to biology and social order, equality prioritizes the efficiently bad. Whatever is easiest to do wins out over quality; quality, in fact, becomes an impediment, because it is an unreturned cost. Equality is a bias against quality.

With this thinking in mind, it makes sense to replace food with rehydrated soy product, and to serve people carbonated sugar water instead of real beverages. The simple, repetitive song becomes more important than the symphony. Easy-to-understand lies are more effective than complex, less dramatic truths.

Our civilization has undone itself with the idea of equality. However, through this economic analysis, we also see why individuals choose equality: they are guaranteed acceptance, inclusion and validity without having to prove themselves, which means that for them they achieve greater efficiency through mediocrity. Do the minimum, and reap the full reward.

Over time the efficiency of this approach breaks down because it reduces the value of social participation. A dying society where every person is a selfish promoter of mediocrity has little to offer, but once it was a thriving civilization, and then its carnies, snake oil salesman, sycophants, priests, neurotics, parasites and enemies joined together to leach out its value.

Much of human activity for the past several centuries has involved concealment of this simple logical fact. When there is no distinction for doing things the right way, you get less done the right way and more — across the board — done to a minimum standard. This naturally causes social order to unravel and makes people bitter, hateful and prone to take all they can and give nothing back.

As we come out of the centuries of spaced-out delusion, we can again face these simple but prevalent truths about equality. At that point, our only decision is whether we want to encourage mediocrity or superiority. There is no other option.

Anatomy Of A Failed Bet

Monday, March 27th, 2017

Democracy is run by desperate people. They know the basic idea of democracy, equality, is the opposite of truth. They are aware how poorly the system works. And so they cast desperate spells, weaving fond illusions for people to follow like the light of truth, hoping that these promises pan out or that they are out of office before they crash.

This was the case with the Clinton presidency. The dot-com boom seemed to be happening, so Clinton opened up the gates to make it easier to get loans, both through a “fast money” policy and relaxed regulation on lending. This was like a quarterback throwing the ball downfield: up, up into the air it went, traveling long with a lazy spin, and then it slammed to earth without being catch in the early 2000s.

Our most recent gamble, besides that the resurrected dot-com boom through social media would make us all wealthy geniuses, has been taking diversity from moral obligation to foundation of the market. Government imports an underclass to keep government powerful and destroy the majority which might otherwise oppose it, and then dumps welfare money on this underclass so they spend it on consumer goods.

Like Clinton’s economic policy, this allows Leftists to claim that “demand-side economics” are working because of the large number of people interested in owning US dollars, debt and loans. And like every Leftist policy, this one is a scam, designed for its controllers to reap the reward between when the plan is implemented and its crash, decades later.

Right now, we are seeing this gamble fail because the great diversity initiative has failed early, before when similar scams with our own people would have failed. The new citizens are not able to support growth like the old citizens, and so consumer spending is crashing like MH370:

“It’s not Trump,” said one downcast store-owner recently. “It’s not the economy. Something else is happening. People aren’t spending.”

This week, Credit Suisse downgraded the retail sector, saying the outlook had become bleaker than it had anticipated in large part because of events in Washington and through discussion of “whether we think the risks of the border adjustment provision in the House corporate tax reform proposal are fully reflected in apparel and retailing stocks”. Other analysts have shown similar pessimism.

People are not spending because they do not have any trust. We have also created an underclass that spends on a few types of items but has no money for anything else. Millennials and those who follow them have been reduced to being permanent apartment-dwellers, and they buy nothing but cell phone plans and takeout food. The core of our consumer economy has self-destructed.

This is of course the result of the Clinton and Obama policies that took a brief holiday during the Bush II administration but then resumed their 1960s-era ideals: tax and spend, then use “social justice” to justify spending on the underclass, who will then buy iPhones and use Facebook and make us money, just like those Muslim immigrants in Europe were supposed to pay taxes to keep social welfare going.

Unfortunately for the Left, there is no way to keep a Leftist economy going. Demand-based economies create a huge permanent underclass with a few very rich people, and at that point, the level of taking is greater than the level of making, and they collapse just as ours has. In addition, apathy reigns because dependence on the State has made people into solipsistic little blobs as happened in the USSR.

Expect more of this collapse because of a factor of acceleration: the internet. People do not like paying exorbitant taxes, and they positively hate going to diverse and thus chaotic shopping malls, so they stay home and watch movies on demand on their 72″ televisions while ordering online. The malls are going away. So are the small stores. The future is Walmart, Amazon and Costco.

In the meantime, they are making more failed bets to keep you distracted. Automation is looming, so they promise a Universal Basic Income (UBI) so you keep going to your cube McJob. They talk about the “gig economy” and all the wealth that will come from future virtual gadgets. But deep down, no one is fooled except the credulous lower half of the middle class, who are easily baffled by “experts.”

No economy can run on this basis. Its death is not just certain but impending, and this is why lawmakers are trying to pass parasitic laws so they can capitalize on this system, use that money to buy something of actual value, and get out before the collapse. You little people are just doomed. But at least we will have died as we lived: democratic, diverse and socialistic.

Two Methods Of Funding Your Civilization

Monday, November 7th, 2016


Associated Press reports on a small city run according to libertarian principles, including this momentary glimpse of clarity on the options for funding a human settlement:

Their use of cash to pay for infrastructure has depleted reserves and left the city unable to produce the kind of investment income that for years helped hold down taxes.

What this does not tell you is that for cities to do this, they must be recklessly in debt. Their entire value is controlled by investments over which they have no control, and this strategy requires them to borrow money and pay it off in small increments instead of having wealth they can apply directly.

This strategy is used by the American government, which is $20 trillion in debt, and many financial managers think it is intelligent. After all, the monthly payments are low, and borrowing enables them to do things today and defer paying for them until tomorrow.

Smarter minds realize that this strategy creates out-of-control debt which, while the cost may be lower now, defers actual costs into the future, effectively passing them down to future residents. It also means that if the investments go south, the city will find itself not only bankrupt but collapsing from lack of cash because it will no longer be able to borrow.

We can see the end results of this strategy through what happened to San Bernardino, California when it declared bankruptcy:

The city filed for bankruptcy in 2012, blaming a loss of tax revenue, high-priced employee pensions, and a city charter that separated the cost of police and fire salaries from the city’s ability to pay. It’s now nearing the end of its time under court protection, having negotiated settlements with its biggest creditors, including pension bondholders owed about $90 million. Final approval on a plan to reduce debt by about $200 million could come as early as next month when the city is due back in court.

San Bernardino is an outside case with a number of other problems, but that shows an acceleration of time scale, not an exception. All of the cities who follow the Leftist tax-and-spend model are forced to borrow themselves deeply into debt, and eventually the bill becomes due. Like the Baby Boomers, most voters prefer to party today and pay tomorrow, but the end result is that when tomorrow comes, it is a cataclysmic crash instead of simply hard times.

The Libertarian suburb may have finally enforced the reality principle. It may not be able to afford all the nice things that make voters happy this way, but perhaps it should not be able to. Maybe government should be smaller and fiscally responsible instead of a “gift-giver” that ends up in bankruptcy.

Similarly, Donald Trump promises to enforce this principle on the world if elected. He will force other nations to pay for their own defense, which means that in turn, they will not be able to afford the luxurious social welfare benefits programs with which they have bought votes for so long. Socialism will finally collapse in those countries.

These realist efforts can help return the world to sanity. No one feels good, existentially, about leaving a vast debt for the future. Once in the debt hold, there is not much people can do to escape it. Our governments have pursued this path to the expense of future generations, and made us bigoted against the possibility of future as a result.

Obamacare is How Leftists Flunk Math

Thursday, October 27th, 2016


Social systems operate on principles that roughly approximate physical systems described by physical laws. The mathematics used to model these systems approximate the mathematics used to solve physical problems.

Like the fictional Theory of Psychohistory proposed by Hari Seldon, physical analogs can be used to predict future events. One example of this is the actuarial mathematics used by insurers to predict the future state of human populations. This can be seen as the application of statistical mechanics to a human rather than a molecular population.

These populations consist of their customers. These customers of health insurers may or may not experience unfortunate life events at certain intervals of time. These events cost the health insurer money. The health insurer establishes prices to cover these events. The prices are a combination of the likelihood of an event and the cost to the insurer should any event occur. So what happens if by fiat you suddenly increase the number of people insured, the number of events covered and the likelihood of an individual member of the population suffering a covered event? Obviously, if you are Barack Obama, the cost curve bends in the right direction from sheer will to power. In nations outside the Magic Kingdom of Equestria, this simply isn’t the case. Even Bill Clinton, bless his heart, accurately describes the Desert of The Real.

“So you’ve got this crazy system where all of a sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half,” he said, describing a long-time conservative appraisal of the law.

In other words, covering more people, who get sick more often for a greater number of conditions can only do one thing to the price of a health insurance policy. It can only increase that price. In Liberal Wonderland, this becomes a problem Republicans must solve. Liberals typically say that when the people rebel against their pet schemes. It’s then that the people get told not to believe their lying eyes.

Famous Physicist Enrico Fermi taught at The University of Chicago. He would rather see a fool suffer rather than suffer one in silence. He once famously told a student “That was so bad that it isn’t even wrong.” The HHS has just released a report which deserves a similarly harsh condemnation. Amerikans can now check out all the options, as they tell us below.

“Thanks to financial assistance, most Marketplace consumers this year will find plan options with premiums between $50 and $100 per month,” said HHS Secretary Sylvia M. Burwell. “Millions of uninsured Americans qualify for financial assistance, and so could as many as 2.5 million Americans currently paying full price for off-Marketplace coverage. I encourage anyone who might need 2017 coverage to visit and check out this year’s options for yourself.” Thanks in large part to the Marketplace, in early 2016, the share of Americans without health insurance fell to 8.6 percent, the lowest level in our nation’s history. This year’s Open Enrollment offers the chance to build on that progress and further improve access to care and financial security.

I’m going to do the lovely and talented Sylvia M. Burwell a favor and assume that this content was dishonest rather than wrong. You see, people don’t enter the Obamacare marketplace during open enrollment to improve access to care and financial security. They go in the marketplace to avoid paying fines. Put a gun to the consumer’s head and he’ll tell you loves Egg McMuffins if that is the answer you came seeking. There is a technical name for an insurance policy that you have to buy or else. These are known as protection rackets. They are famously unavailable from reputable firms. The jail sentences combined with the power of the RICO statutes make them a suboptimal marketing strategy. Government suffers no such impediment thanks to the Supreme Court.

There are some logical solutions to this. The nice guy one involves paring this disaster back and limiting the stealth public option to catastrophic events. Cut the Obamacare requirements back to events that cost above some threshold that most average Amerikans could never afford and only cover events that are more expensive. Then there is the condign human desire to teach these rat bastards a lesson on why the USSR was dumb not just wrong.

So how does this work? The GOP tells the Dems they are expected to write a repeal law that will get rid of Obamacare and the GOP will not bother discussing it with the Dems until they produce a repeal bill that meets the GOP criterion as good enough. Cucks exist. That won’t happen in my lifetime. What a shame.

The solution we’ll get made to eat in a #Hillary administration is the bailout. Something is done to make insurers continue to participate and the individual mandate remains in place. The losses are made up via taxation and the fines for non-participation are ramped up so that enough healthy people get tossed into the parasite pool. In effect, the number of sham policies that “compete” to be “chosen” is irrelevant. It will be single payer by a much goofier name.

Obamacare is how the left flunks math. A significant number of these people actually believed “If you like your doctor, you can keep your doctor.” All of the basic logic I laid out about how actuaries price insurance is mumbo jumbo to them. If Jedi Obama promises to bend the cost curve today is the day the levels of the ocean will no longer rise. Magic fails in math class. It does so in reality. The man behind the curtain knows this well.

Explaining “Trickle-Down” Economics

Friday, October 7th, 2016


The phrase “trickle-down economics” has been flying around the airwaves lately, so it is worth explaining what it is. As with most terms of Leftist invention, this misnomer is designed to imply that the wealthy gain more wealth and small amounts of it “trickle down” to the rest of us.

The idea behind trickle-down economics is to raise the wealth of the economy as a whole, which both lowers costs and increases the actual value of currency (i.e. what you can buy for it). This creates greater purchasing power for the citizen than giving them direct benefits such as welfare, which adulterate the value of currency because its basis is debt or at least, an end-user spending model where those benefits do not create force multipliers in the economy as investments in infrastructure would do.

Your average liberal is shocked by this. People need money; why not give them money? The answer is that money has no fixed value. It is worth only the value of what is backing it, in the conservative view, or what people will do to acquire it, in the liberal view (demand-based economics). Also, time passes. If we spend money now in a way that does not make more money in the future, we lower its actual value.

Think of it this way. Farmers Jim and Joe are both poor and starving. If we cut regulations, unions and lawsuit risk, the companies that make farm equipment will thrive, increasing competition. This consistently drives down prices. At this point, Farmer Jim can take a loan, get the equipment, and then have a thriving farm.

If instead we follow the liberal model and subsidize Farmer Joe, he gets money which he spends immediately on survival, which means that the wealth flows to those at the end of the supply chain, usually retailers. This does not increase wealth substantially as they have no incentive to improve under this system. Further, Farmer Joe is left with no possibility of ever making his farm sufficient.

The Soviet Union collapsed — as have other economies like Cuba and Venezuela, both of whom would be thriving under a halfway sane economic policy — for a number of reasons, but a big one was no investment in its citizens. As a result, nothing improved, and no one had any incentive to do better. A kind of economic and social heat death resulted.

As a third option, classical European civilization had a different idea: entrust the wealth and power to those who are proven to be good leaders of good ability and moral character. That way, they can increase wealth and use it to acquire land, then hire the others to work this land and return money. This model could also work with industry.

Civilization faces constant threat because it must always expand or die, unless it focuses that energy on expansion of a qualitative level instead of a quantitative (i.e. “more”/”larger”) one. This requires concentrating wealth, but by putting it in the hands of the good or at least the competent, everyone benefits. The Leftist model is the opposite, which spreads the money thin and then fails because it cannot concentrate wealth to achieve growth in quantity or quality.

Leftists like to attack trickle-down economics as welfare for the rich, when it really is a cessation of interruption of the process of making wealth multiply. They style it as the big guys crushing the little guys, forgetting that little guys depend on the big guys for jobs, currency value, stock value and products. We can discard the Leftist critique on that basis.

Libertarians often talk about the concept that “a rising tide lifts all boats.” When a society is productive, and minimizes the amount of money it siphons from the productive to the unproductive including government and welfare, its value increases because wealth concentrates and can be applied toward force multipliers such as technology, organization or quality improvement.

The ideal of civilization proposed around here, the four pillars, emphasizes hierarchy for this reason. Socialism dissipates wealth and the ability to apply ourselves. Hierarchy puts the thriving at the top and lets the rest of us benefit, which although it is indirect avoids the boom/bust cycle of regulated economies.

Nothing of this level of complexity will make it into the debate, even at the highest levels of business and academia, because much as they dissipate wealth, Leftists also dilute accurate thinking and make it both taboo and baffling to the normal citizen when it is spoken. You might as well step down out of a UFO and say “Klaatu barada nikto” as advocate trickle-down economics, even if it is the only workable model.

Can Philosophers Keep Politics And Economics Apart?

Saturday, September 3rd, 2016


Organized society mostly promotes separation of Church and State, as well as separation of powers such as between legislative, executive and the judiciary. This separation prevents for the most part corruptive enterprises also known as white collar crime, whereas (in other cases) sometimes the opposite is required i.e. to integrate, coordinate or to provide seamless operations.

An additional function requiring more separation these days is “economics and politics” while another function requiring less separation is “philosophy and politics”.

These functions can be combined in a continuum as follows:

Politics  Philosophy  Economics

Philosophy both separates politics from economy and serves as the balancing point between the two. We can see this in current Western civilization.

Imagine that politics decided to implement the liberal-democratic ideology for all countries. Initially this leads to fair economic growth and most people are happy because one benefit punted by this ideology, was that it will increase the middle-class. This would also lead to stability in the populace that would benefit both lower and upper classes.

But after a few generations, some people became unhappy because the economy is not good. Corporations cannot make money, so economists initiated the quantitative easing “experiment” to see if that will help. Since money was no object for corporations anymore, they promptly attempted to revitalize the middle-class. Then this failed too.
The problem is that the middle-class does not want money. Then pressure on corporations increase even further and that depletes the middle-class even further. Investors get agitated and put pressure on politicians, but politicians do not realize they have to change their ideology, so they go dark.

Disentangling oneself from this mess allows a more focused view. Politicians are feverishly playing their own “system” while economists are feverishly playing another “system.” This is getting so bad nowadays, that politicians become economists and vice versa, while everybody loses.

One way to keep them all honest (and wealthy) is to insert unbiased philosophers inbetween.

Take a specific example such as the European Union. It is a monetary union separated from its political union. Being a monetary union means businesses get priority, this allows for the importation of cheap labor from Africa. However, this is not politically tenable, leading to a serious growth in political opposition that may actually break the monetary union apart.

A philosopher-king can impose a mediating force. Neither economics nor politics alone can solve this situation, since economics will sacrifice all other disciplines for lowest cost and highest efficiency, and politics rewards what is popular at the moment.

Instead, we need a continuously monitored stabilizing factor. Philosophy looks at what is true, not what humans want to think is true or what benefits some but not all aspects of society, as economics does. By virtue of peering into long-term consequences, and their effect on civilization as a whole, philosophy mediates the extremes of politics and economics, which ultimately should be seen as tools toward the ends that philosophy defines.

When we removed the power of the kings, we took away the arbitrary strong power required to say “this is the right thing to do, even if it will not appear that way for centuries or millennia.” This is what philosophy does: it compares truths, and finds the most realistic ones, and matches them up with our rarely-articulated inner desire for greatness, meaning, mystery and significance.

Economics, as a tool and not a goal in itself, has a tendency to burn itself out by dominating the field and then for short-term gain, rendering necessary long-term implements unnecessary. Similarly, politics sacrifices the invisible stability and health of a civilization for panics and trends. Without a balancing factor in the middle, these two positive forces become destructive ones.

This theme appears in all organizations where dark organizational tendencies erupt within. The part stands for the whole, the tool becomes the master, and the short-term obviates long-term needs. Dark organizational might be seen as this process of parasitism, where purpose becomes hijacked by convenience.

As applied to the contemporary Western Civilization, this concept means more than a desire for philosopher-kings: we need a balance, or unison, between the different types of power in our society so they work together toward the same goal. More than fighting political problems on the surface, this promises a saner future by fixing the root of our disorganization.

The Economic Impact of The Reality Deficit

Tuesday, August 16th, 2016

The US Debt Clock measures the extent to which US Government spending exceeds revenues accrued to date. Our current figure is equal to $19,411,632 Million and it will increase noticeably by the time this piece has been published. This is an obvious problem. What is less obvious, is the knock-on problem caused by our government’s current solution. That solution involves our government utilizing an official inflation rate that understates what the common American experiences in daily life. Charles Hugh Smith explains below.

In our household, we measure inflation with the Burrito Index: How much has the cost of a regular burrito at our favorite taco truck gone up? Since we keep detailed records of expenses (a necessity if you’re a self-employed free-lance writer), I can track the real-world inflation of the Burrito Index with great accuracy: the cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.

If we did an Independent Cost Estimate (ICE) on Charles’ favorite burrito under the assumption that the USG was reporting an accurate rate of inflation that applied to all commodities equally, we would believe based on our estimate that the burrito should cost $3.40. If we define the term reality deficit as the delta between an observed cost and a should cost based upon the good faith of the USG annual inflation rate, we get a burrito-based reality deficit equal to $3.10.

Employing some mathematical prestidigitation, we can back out a fourteen-year cumulative rate of inflation equal to 36% for the ICE. The actual rate of increase on the burrito equals 160%. Economists will point out that one data point never defines a trend. Besides, once you’ve added enough Tabasco Sauce, the burrito tastes the same either way. Smith points out that similar reality deficits occur with college education and healthcare. Economists will argue computers and communications systems are cheaper. But as a heckling reporter once told Alan Greenspan; “I can’t eat an iPhone.”

So why would we understate official inflation? To borrow at a lower rate of interest by deliberately underestimating the time preference of money. The lending interest rate will consist of two priced risks. The default risk and the time value of money risk. The US Dollar is the global reserve currency of last resort. This drops our default premium near zero. The US pays the monetary time preference when it borrows internationally. Successfully under-reporting this time preference allows the USG to short customers on Treasury Bond Interest Rates. An artificially low return on Treasury Bonds becomes a form of reverse usury.

So what happens when your paycheck is going up at a notch or two above reported inflation while food and healthcare continue to rise at an accelerated rate? People can’t afford very nice toys anymore. They spend more and more to keep up, so spending diverges from actual economic growth. People also eat their seed corn as their burn rate increases more rapidly than their remuneration. The LA Times cheerleads all of this below.

Consumer spending remained strong in June, increasing 0.4% as incomes continued a slow but steady increase, the Commerce Department said Tuesday. Last month’s spending increase matched May’s, as did the 0.2% growth in personal incomes.

With spending outpacing incomes, Americans saved less in June. The percentage of disposable income saved decreased to 5.3%, the fourth-straight monthly decline.

That difference between spending and economic growth? That’s a negative impact of our current reality deficit. We spend more, get paid less and receive less in real value. We wind up saving less just to live today at the same level of expenditure. So the differential between what the Government admits to in inflation and what we experience in our daily lives is effectively a tax that covers the difference between what the government pays and what the government should pay to borrow money it does not have to cover current year spending.

Unlike the national deficit that will never be paid in an honest fashion, the reality deficit will always be paid in full until such a time that it becomes unaffordable. Once this reality dhimmitude becomes unpayable, the system will collapse. This has recently happened in The Soviet Union, North Korea, Zimbabwe and is currently ongoing in Venezuela. Only a historical illiterate would assume that it will not eventually happen to Amerika as well. Reality reacts really poorly when you fail to pay up the vigorish.

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