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Opinions and Authority Figures

February 25, 2013

About education, and thinking, and opinions:

“There are almost as many routes to a Thomas Edison degree as there are students. In a way, that is the whole point of the college, a fully accredited, largely online public institution in Trenton founded in 1972 to provide a flexible way for adults to further their education.

“We don’t care how or where the student learned, whether it was from spending three years in a monastery,” said George A. Pruitt, the college’s president, “as long as that learning is documented by some reliable assessment technique.”

“Learning takes place continuously throughout our lives,” he said. “If you’re a success in the insurance industry, and you’re in the million-dollar round table, what difference does it make if you learned your skills at Prudential or at Wharton?” ”

The above clip from the NY Times caused me to reflect on some of the writing I’ve done and the occasional arguments that have arisen because of that. For too many, I think, academic credentials count for more than the thought behind a concept, even when a brief examination should indicate that there is no relationship between those credentials and what’s being discussed.

In many disciplines, there are schools of thought that emphasize a certain approach. In economics, you were likely to examine trends as a monetarist or as someone who favored taxation as a tool to examine and manage a national economy (at least, when I took economics, that’s changed now in a number of ways, as economics progresses as a science). By favoring one or the other school of thought in a discipline, education forces the student to adopt a viewpoint of what he’s studying and often this viewpoint reflects that of the teacher. As a result, well educated people may often disagree profoundly with other well educated people based on differences in schools of thought.

And for those who have educated themselves outside of mainstream thinking, those same well-educated types might reject any ideas put forward. For those outside the thinking, they rely on those magical letters (PhD) to provide legitimacy…even when the degree was achieved in a field that doesn’t relate precisely to what’s being discussed, as for example someone trained as a tax attorney who’s now going to have to focus on monetary policy because he’s been appointed to the Federal Reserve.

Not that the above has happened; it’s just an illustration. Another illustration might deal with medicine; orthodox medicine, oriental medicine, holistic approaches via herbs….

But I also comment on things like global warming, and the discussion got quite heated (:-)) in one venue. Most people now accept that the planet is warming up, and that human activity is at least partially at fault for this. And so we turn to accepted authority for answers and policy guidance, and never question whether their opinions are really relevant because they were educated and have since done their research before global warming was accepted fact. And we also find that politics and greed enter the discussion, because those PhD’s are readily sold to politicians or industrialists who use them for their own selfish purposes. Confusion is easily exploited for profit by the shortsighted and greedy.

Another area I comment on has to do with dark matter. I thought the mathematics was at fault for a time, but I’ve since changed my mind. It’s the interpretation, not the math, and the assignment of mathematical symbols to real-world data and then manipulation of those symbols without sufficient regard to just how descriptive they are of the data they’re supposed to represent. And there are any number of ‘authorities’ on dark matter out there, PhD’s and academic degrees in plenty, professorships barely behind that…and yet, no one has actually DETECTED anything that could be dark matter. Undeterred, the ‘authorities’ on dark matter soldier on, spending enormous amounts of money and much time down in dark holes in the ground. Somehow, investigation of dark matter apparently is best done down in the guts of old mines. Even when the investigation has so far failed to find anything of significance.

There is no authority on global warming. There is no authority on dark matter. Whatever authorities there are who deal with economics, they tend to disagree with each other to the point where one must question their standing as an ‘authority’. There are just people with opinions, and some of them have advanced degrees. Just not degrees in the topic they’re so certain of. Meantime, it’s up to all of us to actually think about the topics we discuss before we decide to believe, or how much belief we’re going to invest in opinions.

One day there may be true authorities on these subjects. But not yet. As a final illustration, Linus Pauling published an essay regarding the structure of the DNA molecule. He had already received a Nobel for chemistry…and his model was wrong. After Watson and Crick, the discipline began to really take off, and now there are real geneticists and even something undreamed of back then, epigeneticists. But UNTIL Watson and Crick published their hypothesis, there were only people with wrong opinions.

Even if they did have advanced degrees.

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Pity the Poor Fed

February 12, 2013

Economics, and politics. Pity the poor Federal Reserve.

Taxation, and spending. Taxation removes money from the system. Government spending replaces it in the economy. Done right, taxation can slow uncontrolled growth and spending can stimulate a sluggish economy. In so doing, taxation and spending can damp the boom-bust cycles that plagued the economies of nations a century ago. Cycles are still there, just not so damaging as the Great Depression turned out to be. Upturns and downturns we have; but we can generally prevent people from dying due to famine.

But taxation and spending are driven by politics.

Political interest is in turn driven by self interest; how to acquire money, and what is the money you’ve acquired worth? Inflation (adding money to the supply) decreases the value of the money already out there. Inflated money is easier to acquire but invariably buys less. That’s why inflation tends to hit people on fixed incomes, that is incomes that can’t adjust via such things as pay raises, hardest. It also means that people who have acquired money and squirreled it away really hate inflation; that money slowly loses value. Interest paid on saved money helps, but currently interest is actually less than the rate of inflation, so savings in the US lose value instead of gaining.

So politics ties up government as one group urges us to spend more and thereby stimulate the economy. Another group urges that we spend less and not borrow or tax to raise money that’s being spent. These two groups are usually driven by self interest at some level instead of the needs of a rationally managed economy.

And then there’s the Fed. Their purpose is to manage the economy. They attempt to do this by increasing or decreasing the money supply, and have been using something called Quantitative Easing to increase the money supply and thereby stimulate the economy. And even as they do this, politics is working to counter their activities by REDUCING the amount spent by government. Cutting spending is the mantra of the TeaPublicans in Congress, and even the Democrats are buying into this idea. According to Robert Kuttner, the Obama administration is committed to reducing government expenditures by $1.5 trillion over the next 10 years.

Note the problem here, which is the problem of government in general: no flexibility. The reduction is to take place regardless of what the economy is doing. The Fed at least meets quarterly and attempts to make adjustments based on what the economy is doing at the time; but political rhetoric is not so agile. Having convinced your supporters that taxation is the problem or that government spending is out of control, you’re not going to be able to change their minds.

Even if the politicians who use this to get themselves elected really do understand economics. And most of them are about as ignorant as the people who vote for them.

So it’s not so much that the right hand doesn’t know what the left hand is doing in our government; it’s that the right hand is actively countering what the left hand is up to.

Pity the poor Fed.

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More about Cosmology, Mass, and Dark Matter

January 13, 2013

I kept thinking about this. I don’t think astronomers pay enough attention to the time factor when they analyze the universe. I know that they’re aware of it; but do they truly analyze galaxies and other objects based on their assumed age?
Let me illustrate: from our point of view, everything out there is older. We think the universe is about 14 billion years. Our solar system is about 4.5 billion years old. It’s estimated that the sun is somewhere in the middle of its cycle of existence, so for argument consider that mid-level stars such as Sol last about 9 billion years.
Our closest neighbor star is Proxima Centauri, about 4.2 light years. So when we observe that star, a part of a binary system, we’re seeing it as it was 4.2 years ago.
We extrapolate to describe this star, based on what we know of stars in general. That’s what we do with all stars, including our own.
But not much happens in a year, so far as a star is concerned. So we can assume that we’re observing P. Centauri as it is now. By contrast, the most distant objects we’re seeing are protogalaxies and gamma-ray burst objects (structure not defined; just something that’s emitting a lot of energy) that are 13 000 to 13 370 million light years away. So we’re looking at those as they were back when the universe began.
Objects in between are intermediate in age.
Consider a mind experiment, if you will. Say I was to surround myself with people, organized in layers, from about 5 meters to perhaps 1 000 meters. In the first layer, I put teenagers. The second layer would be 20-somethings, and in the third layer there would be 30-somethings, right up to a final layer of centenarians.
I would then try to describe this thing called ‘human’ by looking at those people. Could I truly do so without considering the effects of age?
And yet, that’s what astronomers do. When they describe a galaxy, do they take approximate age into consideration?
Extrapolating from this, can they describe the universe without considering that each ‘layer’ contains objects that are young, middle-aged, and old?
To really describe the universe, I would think that we need to break down the universe according to ‘age’. And since stars age in billion-year time frames, perhaps we could use a hundred-million light-year ‘slice’ of the universe. So anything up to a hundred light years would be about the same age, from P Centauri to 100 light years out. Slice two would run from about 100 to 200 light years. These are only off-the-cuff ideas; perhaps slicing by 500 million years or even a billion years would work better in practice.
The next thing would be to attempt to extrapolate what would likely be happening in those older sections. If we’re observing them a billion years ago, what would they be like in half a billion years? Would they have collided with another galaxy, or most of their bigger stars gone nova/supernova and reformed into smaller stars? Would they have more or fewer star systems within the galaxy?
Do all that, and then we might get some idea of how much mass there really is in the universe.
Say there are X galaxies in that oldest slice, 1 000 mly or more. Say further that there are X+Y galaxies in the slice 900 to 1000 mly distant. Calculate that there are X+?Y galaxies in the 800 to 900 mly slice. Continue until done.
Then graph the numbers. We can decide whether the process of galactic formation is increasing, remaining the same, or decreasing over 100 my time segments.
That, in turn, should give us an idea of about how much normal matter there is in the universe.
I don’t think this has been done. If you’re aware of something along this line, feel free to correct me.

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Political Economics in the 21st Century

January 12, 2013

Written in answer to a series of comments by a friend:

Gavan, I have a different take on this. Those governments didn’t loan money in good faith.
They INVESTED money in US bonds with the expectation that they would be paid back, and that this investment was in their economic self interest. They’ve also been permitted to ride along as the US economy boomed, investing in American companies and even buying some outright. Diversification, in effect the financialization of national economies, has protected all the world’s economies to an extent.
The Constitution requires that we pay our debts. Any bondholder who faces default on American debt has the right to sue in federal court to get paid. And our courts would have no option but to force payment on the debt.
Meantime, we’ve got a political party that’s in the minority but which is willing to stop the US Government in order to force their vision on our politics. And they appear not to care at all whether other nations get paid. Regardless of the Constitution they claim to respect.
But the US is a sovereign nation, not bound by such things as Euro Union entanglements. Many have advocated simply creating money by fiat, as our laws permit (and also the laws of Australia and Canada and Britain, I think). That possibility was always there, and the nations and individuals who purchased US investments knew it when they invested. They did so, invested their money, with no assurance other than the belief that the US Treasury Bonds (German bonds, too) were the safest places in the world to invest. That’s why interest rates, set by auction, are so low on those bonds. Lower, in fact, than the rate of inflation.
So what’s being discussed is an end run around that arguably-insane political party. They, the Republicans and specifically the Tea Party Caucus of the Republican Party, are willing to see the government shut down rather than tax their wealthy sponsors. They also insist on cutting health care and unemployment and pensions paid to old persons, people who’ve been paying into the system for years already. They aren’t really about paying off the deficit, so much as they are about cutting payments to people they consider to be ‘freeloaders’. And the people who are sponsoring them, the real freeloaders who game the tax system to avoid paying taxes, are happy for this to go on.
Congress first votes to spend the money; they then refuse to raise taxes to fund the projects they’ve agreed to spend money on, and also to raise the debt ceiling to borrow money to spend on what they’ve agreed to fund. Get the picture? Only Congress can vote to spend money, and only Congress can set the tax rates. The debt ceiling is a fairly recent maneuver. There are a couple of other Congressional maneuvers they’ve used, as well; our two-party system allows the Speaker of the House, the leader of the majority party in the US House of Representatives, can block legislation from being voted on. He represents the majority, and sometimes a minority of that majority can force their will on the others. That’s what the Tea Party has done. They call it the ‘Hastert Rule’, after a former Speaker.
And so our Congress is paralyzed by this minority.
But there are a couple of ways that the President can bypass them. Rather than shutting down the government, he can either issue scrip coupons that could be bought by exchange houses, who would then make money by discounting those scrip coupons. They would be the ones to profit by Congressional gridlock, while people like me would lose because of the discounting. Or the Treasury could simply mint one or more platinum coins, in any denomination they wished. Those coins would then be deposited with the Federal Reserve, and an equivalent amount issued to government agencies to pay their bills or even pay off the debt. This has the advantage of not incurring any debt at all. Normally this course might be inflationary; but our inflation rate, because of the economic ills of the world, is quite low. Economists such as Paul Krugman, a Nobel winner, think it’s too low. So if the injection of money into the economy via government spending were to slightly raise the inflation level, that would be a good thing if it also stimulated the economy to begin producing.
And the restaurant owner gets paid, too.

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Management, labor, unions; influences on the economic transition.

December 11, 2012

Economic cycles see management (owners, in earlier times; management in the modern age) vying with production for profits. Go back to the beginnings of the industrial age and you’ll find management firmly in control. Political moves and periodic shortages of labor provided changes that weakened the near-absolute control of management. The long term trend has seen empowerment of labor and a diminishment of the control exerted by management. The relationship between the two was changed in the past by such things as disease and war and famine; more recent changes have been based on the rise of labor organizations such as unions.

Let there be no doubt: labor unions came into being as a counter to the power and exploitation of workers by management. We’re seeing some of that again where long-term employees are tossed out with no regard for the years they’ve spent building up a company by their work. Management feels free to make such decisions because once again power has shifted to the management half of the equation.

Unions began as a way to protect workers against the excesses of management. But unions then joined together into large aggregations which were capable of exerting national political influence. What was necessary in the beginning became something that had to demand ever more in benefits for workers in order to maintain power and relevance. A single powerful union could, and frequently did, demand more for employees. Under the umbrella of cross-union agreements, where one union would refuse to cross the picket lines of another, a single union could shut down not only a company but even an industry. In some cases they demonstrated the ability to shut down the national economy by strikes that closed ports or shut down rail services. Military personnel were sometimes used to break strikes. On one occasion, President Reagan acted to destroy a union; he fired all the air traffic controllers who’d gone on strike, and made it stick.

Meantime, unions had exerted a ratcheting effect on the economy. Autoworkers would begin negotiating a new contract for more wages and benefits. During the 20th Century wages were subject to taxation and unions worked to increase benefits such as health care insurance and retirement policies. Such benefits, being not taxed, became popular. The negotiations were between a company, say Ford or perhaps GM, and the Autoworkers Union.  Negotiations  were backed by threat of a strike, and inevitably workers received more in wages and benefits and prices of the product would rise to reflect the new cost structure. Prices would go up on autos, and steelworkers and other unions producing the materials that supported auto manufacturing would also see price raises as their unions demanded more in wages and benefits. And soon it would result in a slight but recognizable rise in prices and compensation across the national economy.  At some point even the national minimum wage would rise.

Unions needed to always demand more. By the late 20th Century, unions had the status of medium-sized corporations. They paid their top leadership salaries in the hundreds of thousands and donated millions to political campaigns. Dues paying members expected that the union would always provide raises in the next series of contract negotiations as well as protection from arbitrary decisions by management. A citation is appropriate here: Largest unions pay leaders well, give extensively to Democrats. The citation is from the Wall Street Journal, March 30, 2011.

A long term trend thus came to fruition. Management used their money and influence to gain power in politics; labor gained influence and power through money and the ability of union management to influence the voting patterns of members.

The economic result of the union vs management contest was to slowly raise prices in the US. The American national economy thus became considerably higher in nominal value, compared to Asian economies and even the economies of Eastern Europe. Foreign governments often resisted raising their own monetary system to true parity, because the differences acted to encourage export versus imports in their domestic economy.  The result of this was to effectively price many American products out of world markets.

Still, the American market was the largest in the world. As American products became more expensive, Asian and European products became relatively cheaper and so gained a long-term competitive advantage in the American market. At the same time, transportation costs were dropping worldwide. Larger ships, fewer crewmen, containerized shipments, computer routing, ever more efficient (and thus cheaper) ports…add this to low labor costs and a new paradigm became possible.

Management regained the advantage. Managers now had the option of evading union demands by simply bypassing the union. A number of strategies were employed in this effort. Outsourcing was one of the easiest; a company could avoid paying higher union wages to janitors and maintenance workers, for example, by laying off employees and contracting with another company to provide the services. There would no longer be any requirement to provide benefits, and usually even labor costs would be reduced. This was a win for management; but those well paid janitors and maintenance workers no longer got salaries that put them in the middle class. They had less disposable income and sometimes not even enough income to sustain mortgage payments or buy items such as new cars. Or even send their children to college. The prospective student thus needed loans to finance education, and paying back those loans in time removed the student from the consumer society for long periods. What went to banks and lending institutions wasn’t available for a house or a new car, or for health insurance or savings.

Offshoring was another option for management. While Boeing was working to move a plant from Washington (a state with union work rules) to South Carolina (a ‘right-to-work’ state, where union power was much reduced), other plants simply closed. Workers lost jobs. The products that had formerly been made by American workers were now being made offshore by workers in various countries: Ireland for a time, then Eastern Europe, and finally in Asia. American companies changed from manufacturers to importers. The goods still came in, but now profits were higher than ever and there was no need to share them with production employees. There was no need to worry about the well-being of foreign workers or rules regarding pollution of the environment. That was the problem of the manufacturing company and the government of the nation where the plants were located.

And management had no reason to consider that they were effectively destroying the American economy that their prosperity depended on. Profits to management was up; the middle class that drove the consumer market shrank. Upper middle class was forced down, and lower middle class became part of a swelling impoverished class.

And unemployment began to rise. As economies contracted, unemployment rose above 10% (and in some Western nations such as Spain and Greece, it went above 25%; Depression levels, in other words). Unemployed workers couldn’t buy; management sequestered much of their swollen income in investments which effectively removed their money from circulation.  Sales dropped across the board.  Bank foreclosures began to rise. Financialization, a major trend in the late 20th and early 21st Centuries, even took a hit as subprime loans were exposed as the junk they’d always been. Banks lost billions.

Unions now began to recognize that they were in a weakened position. New contracts were for less money, fewer benefits. And the negotiations were no longer under threat of a strike, but were driven instead by the threat of closure of the plant and loss of all jobs.

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The Economy: changes and predictions.

December 10, 2012

It may be that the US, along with all the other developed nations, will never again achieve full employment in peacetime. I have concluded that we are in a transition phase between a period when manufacturing required human labor and a period when most labor is done by machines. In such an environment, workers get laid off. For a while, there will be a need for humans to supervise the work of the machines (robots) and maintain them. But as the machines become more sophisticated, even that is likely to vanish. Design of new products is likely to remain a human endeavor for the foreseeable future. Design is after all the process of examining human needs and attempting to meet them with products that humans will find necessary or at least appealing.

Much of what I’ve described in the paragraph above is already happening. Programmers instruct computers about what movements are to be made and when, the robots do those things, and somewhere down the line a human inspects the work. If the robot begins producing substandard work, a human stops the process and a maintenance worker comes in and fixes the robot. In some cases, the robots can self-diagnose. A controller is plugged in, an error message appears to “Replace module C”, and so the maintenance worker does that. It’s very like what happens to your car when you take it into the shop. There’s an error message, a device that will read this, and then a human to replace the defective item. The process is relentless. Every new iteration of robots features new self-diagnostic features. Numbers of human workers are reduced.

But how are those human workers to buy the products that the robots make? That’s the unanswered question. Government is supposed to answer such. Political leaders are expected to see what’s happening now and predict what is likely to happen in the future; certainly company leaders don’t do this. They try to forecast new trends, but the larger picture of the economy doesn’t really concern them.
And governments aren’t very good at this. Like military leaders, they study what has happened before and try to prepare for it to happen again.

History, and lessons from history:

There was a time when major disruptions in economies happened fairly often. Industries came into being, some disappeared. Those who once manufactured buggy whips went out of business, and street cleaners didn’t scoop up manure and take it to a dump. Needs changed. Jobs reflected the new needs.

An example is what happened to farmworkers as mechanization came to the farms. Farmhands got laid off and found that looking for a job at the next farm wouldn’t work, because the farmhands there had also been laid off. Cowboys became obsolete in most areas. Open range gave way to fenced pastures and barns and central feeding points. The displaced labor could move into urban areas and get jobs in manufacturing, and that’s what happened. Soon, with far less human labor but with huge machines to do what human labor had done before, farms and ranches became more profitable and much more efficient.

Even the few remaining farmworkers are likely to see further reductions. Tractors and combines now can be programmed to follow a GPS-directed course, leaving the ‘driver’ to simply look on occasionally to ensure that nothing has gone wrong. In the future the GPS course can be set by radio link, and the machines will drive themselves to the field and begin work. With a position indicator reporting back to the central communication and control device, drivers won’t be needed.

If you doubt this, large tractors and combines already have the GPS control system. All they lack is the ability to receive input and transmit information back via radio link. And the technology that allows a few cars and light trucks to drive themselves over various courses is already in development. Drones are becoming more autonomous all the time. The technology will spread inevitably to farms and to manufacturing.

So where are the excess workers to go this time? As farmhands find themselves unemployed, they’ll be joining the unemployed factory workers.

We in the US have already gone from a society based on middle class prosperity to one of underclass semi-poverty. That middle class was based on workers who possessed the skills to work in manufacturing. The service society doesn’t need such, and pays accordingly. So the middle class is squeezed and overall income drops. A few at the top manage to maintain their income or even see it rise; but this is temporary, I think. Even mid-level workers in the financial and office occupations are facing layoffs and the prospect that they will need to take jobs of less social standing which will also pay less.

That in turn means that people who sold houses and cars and other goods to middle class customers won’t have a market for their goods. The employees of the service economy won’t be able to pay for expensive things. There will be a need for cheaper housing and cheaper cars. Those who provide for these needs will be more likely to do well than those who continue to market to a middle class that is vanishing.

It is a fact that most, if not all, developed nations do not need all of their manpower. As an example, consider Spain. Spanish unemployment currently stands about 25%, and it’s closer to 50% among younger Spaniards. France has much the same; even well-educated French and Spanish citizens now face the prospect of leaving their nations to find work. The question is where to go; all of Europe faces this glut of labor, as does the USA and Canada. With a quarter of Spaniards not working, there is still no shortage of goods or services for Spanish consumers. And some Spaniards, like Americans, are ‘underemployed’; they have only part-time or temporary jobs.

More history: as labor became surplus to domestic needs, it was possible to employ the surplus workers in manufacturing for export. That worked for a while. It’s not likely to soak up all that labor now, though. The markets for exported goods have shrunk as those nations mechanized their own factories. Even cheap-labor nations such as China, which relied on that cheap labor to gain economic advantage, have now seen their cheap labor supplanted by even-cheaper robots and machines.

There is still an opportunity for export, but it must be based on quality rather than price. If something is among the best of its type in the world, people will always want it. Mercedes, Volvo, Lexus, BMW, Porsche; Nikon, Canon, Hasselblad, Leica; Italian leather goods; French fashions and perfumes and brandies. Such products are more expensive, but still find a ready market because they’re superior to domestic products.

There is a revival of craftsmanship and craftsman-made products. Furniture, wooden goods, beers and wines and specialty liquors, art objects all find a ready market. And all command premium prices. People pay the premium prices because the objects are based on quality rather than mass-production.

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Economic Madness

December 7, 2012

Written in response to Paul Krugman’s column in today’s NY Times, Dec 7, 2012:

“The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.

Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.

Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.

Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.”

‘Investment’, above, means by private industry. They’re collectively sitting on some $2 trillion that they won’t ‘invest’ because there’s no immediate guarantee of profit. And by doing so, they guarantee that there won’t be customers for their goods.  It’s madness; but it’s understandable.  That’s what over-emphasis on private economic activity instead of a balance between private and government economic activity gets you.

Only government investment, in the form of stimulus directly to job seekers, can do what private industry won’t. For that matter, if you forced the banks to forgive the debt of all those who are paying back loans, you’d see immediate recovery of the economy.  There is some slight activity, enough to keep unemployment under 10% (I suspect the official numbers aren’t really reflective of those who can’t find jobs, and who have given up for the moment) and underemployment at much higher levels.  But a lot of this economic activity doesn’t go to purchases of goods.  It goes to bankers.  People are paying off existing loans on homes, even when many of those are underwater.  They are paying off credit card balances that they acquired back when credit was easy and people had jobs.  And many are paying off student loans.

Whatever money is being paid to banks and financiers isn’t buying new cars, or new homes, or new clothing, or better food.  It’s not paying for vacations or any number of other things.  And until that debt is paid off, those debtors won’t be consumers.  And they won’t be stimulating the marketing economy through purchases.  We are no longer a manufacturing economy, we’re a service economy; and people who work in service economies don’t make enough to pay off loans very quickly or in many cases pay them off at all.  And unless that changes, we’re on the path to becoming a third world nation.

We’re not, yet; but when we’ve become a nation where most of our citizens work for minimum wage in a store or restaurant or office, do you think we can really afford to pretend that we’re still a nation of wealth and power?

Madness?   Just gave everyone a hundred thousand to spend.  Or just print the bleeping money, hire people to paint lampposts and sweep streets and build a national system of water collection and distribution that would move it from where it’s in excess (floods, such as occurred after Sandy and Katrina and spring snowmelts) to where it’s short, where wildfires and catastrophic drought endangers the nation’s food supply.

Put money not into the hands of banks that won’t lend it, but directly into the hands of middle class people who would spend it and thus revive the economy. They wouldn’t be willing to go work for Walmart or Amazon or McDonald’s at minimum wage, so wages for those place would have to go up. Maybe the executives wages might come down, or at least they’d get skinnier bonuses.  Give money to the spenders instead of the gamblers.  Or in other words, revive the consumer market.

Put ME in charge of the bleepin’ Treasury. I’d print the money, hand it to the government directly (no DEBT! For that matter, here’s an extra trillion, go pay off the Chinese), fund food stamps and employment of teachers and firemen and first responders and hospitals. If private industry wants to compete in those areas, then compete on the basis of quality; provide BETTER services than are available through basic public services.

While you’re chuckling at that concept, think about this: would it be any worse than what the clowns in Washington and New York are currently doing?

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Tax structures, the New Nobility, and Social Inequality

November 30, 2012

We’re really going to have to do something about the overall tax structure. None of the approaches put forward by our political leaders will do enough, so I’ve been considering non-standard approaches.  I think this is what is necessary.

I’ve advocated a gross-receipts tax, which forces companies to absorb all the costs of such things as corporate jets and business lunches rather than charge them off to taxpayers. Current tax policy actually reduces efficiency by reducing competition, something that the capitalist economy claims to love but which capitalist companies do all that they can to reduce. I’ve also allowed for deductions from company tax liabilities for salaries and benefits paid directly to American workers, but only if such were available for ALL employees. Anything paid out in bonuses or stock options to executives would not be shielded from tax. And what’s paid to workers, whether in the form of direct salary or bonus or health insurance or company car, would constitute income that would be taxed to individuals. Equally, if it’s investment income or capital gains, that would constitute income to be taxed, whatever the individual tax rate would eventually be.

So long as all income is considered to be taxable, actual tax rates could indeed be lowered. Our current system taxes only a proportion of income from a narrow range of sources, and this turns out to fall heavily on the middle class and the poor while being a shield for the wealthy.  A shield which allows them to acquire and sequester wealth by selecting whichever source of income will reduce their taxable income.  It’s why there was so much effort by Mr Romney to hide his taxable-income information.  It’s the mechanism that allows certain individuals with multimillion dollar incomes to pay little or even NO tax at all.

Inevitably, our current system leads to more and more inequality and reduces social mobility, a major problem for democracies.

It’s led to a USA which has a few, the new nobility who lack only titles to be considered such, and the many, serfs in effect who are slaves to corporate rule. Who do not even have the traditional rights of serfs who were tied to the land; the new enslaved class can be dismissed through layoffs, ‘turfed out’ if it appears that managerial elites might realize a slight gain in profit by doing so. In such a system, the employee who’s worked faithfully for a corporation for 25 or 30 years has no rights and can now be dismissed, to attempt to make a living when they’re in late middle age, no longer able to start over in a new career.

The Constitution was written to protect citizens from the excesses of government.

There is nothing to protect us from the unrestrained greed that has become the hallmark of the new nobility.

A REAL tax overhaul might the first step in that effort. And along with it, government programs that provide more protection for citizens than is currently available from Social Security or Medicare.

A best approach might be to start with a commission that included not only the members of the new nobility but also representation from the middle and lower classes.  Such a commission would look at what’s fair to those lower classes as well as what benefits those elites who have a system that they can exploit differentially to gain ever-greater wealth.  Such a commission would consider where society should go, and would have the best interests of all American citizens at heart.

It would do what Congress was supposed to do, but what Congress has failed to do.  Our system of laws is in large part a listing of failures by past Congresses.  Failures patched here and there, but with ever more failures tacked on top of past failures and patches.

Perhaps it’s time to consider a real rewrite of the Constitution.

I won’t see any of this in my lifetime. But maybe, if we think about it and force our elected officials to represent VOTERS rather than those who bribe them with ‘campaign contributions’, something like this might be possible in your lifetime.

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Roadways, Microclimates, and the Heat Island Effect

November 27, 2012

I’ve begun work on a hypothesis that’s an offshoot of my experiment last summer. It’s this; while cities are recognized as heat islands and are now being investigated for clues about how the biosphere will react to warmer climates and elevated levels of CO2 and other gases, I think we’ve also created such along our roadway net.
In essence, we’ve been modifying the planetary albedo, and thus the greenhouse effect, by paving streets and roadways. All of these surfaces are dark in color, black to dark gray, and are roughened to aid in traction. As such, they’re absorbers of solar radiation and are more efficient at this than sandy or grassy surfaces.
The ‘heat island’ effect is well known and documented. I’m not aware of any attempt to isolate this as to which percentage of the heat island effect is due to paved roads and alleys as opposed to, say, large buildings.
Meantime, while I was thinking about this, I came to the conclusion that roadways are the equivalent of cities in terms of modification of the planetary albedo. Indeed, cities are by their nature concentrations of roadways but there are equivalent amounts of modified surface sprawling across the continent.
I’ll be looking for evidence of this in the spring. There’s a master’s thesis in this for any student who needs a topic!
I plan to gather data of roadway temperature and the temperature of unmodified dirt a few meters away. The driving surface and any apron on the side of the road are all modified and all absorb heat. I’ll also look at vegetation patterns, if possible. Non-natural vegetation won’t help, and it’s common for highway departments to plant grass seed along the interstate highways. I’ll look for side roads that get the paving treatment but not the other modifications. I can then compare the grassed-over areas with natural areas to look for differences.
I have observed the numbers of forbs that flower in the late summer; they appear to be much more common a few meters away from the paved surface, often across fences that line the roads to prevent cattle from wandering into danger. Conceivably, the heat trapped by the roadways acts to extend the growing season and creates a microclimate that favors these. Goldenrod, a kind of blue daisy-like flower, certain yellow flowers, and pricklypoppies all appear to be more common near roadways than out in the middle of the natural desert area.
For those who don’t live in deserts, you might be interested in looking at your own roadway system. Even in green England and Europe, there might be discernable patterns of vegetation changes. You can write to me if you observe any such: jlknapp505@msn.com. I would be interested in hearing from you regarding your observations!

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Toward a Better Tax Structure

November 8, 2012

Written in answer to a friend; political, but not party-political. Instead, it’s economic theory applied to tax structures.
Ruth, I’m not advocating a flat-tax, although that would be much more fair than the system we’ve now got. Cain wasn’t wrong in his overall idea.
But we’ve ended up with a progressive, then regressive, tax system.
I believe that the best system is a corporate tax system that’s lower than what corporations now pay, but based on gross receipts. And I believe that any company doing business in the US should be susceptible to that tax on a proportional basis. If they sell a million dollars worth of goods in the US market, then they should pay the same taxes to the US government that a company doing business in New Mexico pays. I would have one deduction from those gross receipts; money paid directly or indirectly to employees. Any money remaining that goes to building the corporation or increasing its wealth or assets would be taxed as gross receipts. No more jets for executives or 3-martini lunches as ‘deductions’ and ‘business expenses’. Corporations could still DO those things, but not deduct them. These are all ways that corporations/companies reduce competitiveness.
As for what gets paid to individuals: salaries, retirement benefits, health care, perks, all are income. And all income of any kind forms the tax base. Speaking of health care and retirement accounts, they would be paid into a federally-supervised fund. No more of this situation where a corporate raider can come in and take funds that were intended to pay for employee healthcare or retirement because the investor acquired 51% of the company; that’s one of the things that Bain and Romney did. A better approach would be to increase Social Security and Medicare and make them available to all, despite the howls of the wealthy who would have to help pay for it.
Lots of benefits here; no longer would American companies have to support salaries, health care costs, and retirement costs, and then pass all that on to the consumer. Instead, it would be paid into funds that would be protected possibly by Constitutional amendments.
Individuals would be taxed on a progressive basis just as has been the case since our tax system was adopted. Probably at slightly lesser rates for some, more for the wealthiest. They have more to lose, after all, and American society protects their wealth. So it’s appropriate that they pay into society on a commensurate basis. And income is income; no difference from an hourly wage or a dividend from investment. And no more hiding income by calling it ‘health care’ or ‘retirement accounts’.
So how could one accrue wealth in such a system?
No so easily, for sure. But it would be possible. The guaranteed way would be to invest in growing companies. Currently it’s possible for a wealthy person to buy into GE, say, and wind up paying only 10% of dividends. GE has paid NO taxes for several years, despite profits of billions. Apple too hides much of it’s income from taxation by shuffling it around from corporate entity to corporate entity. Bain Capital did that, too, and Romney directed the operation.
But if you invest in a growing company, then the company will pay out taxes on a gross-receipts basis, but the investor won’t pay any taxes at all on this. So that maximum gross receipts tax, say 15 or 20% as a beginning point, is all that would be paid.
One additional point: the neo aristocracy. We’re going to have to tax estates just as Britain found it necessary to do. Otherwise, the Waltons or their equivalent can sequester giant amounts of money and wealth from the system. That money must be returned to circulation if society is to prosper.
Ideas; what do you think of them? You can post replies to jlknapp505@msn.com or find Jack Knapp on Facebook. I welcome dialogue and constructive criticism.

Posted in Economics, Government, Politics, Uncategorized | Leave a Comment »

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