I was just thinking about Trumpsky’s comments. About how other countries should pay the US for defending them. About how much we pay for defense, and his rationale for spending more.
He’s a fool. You probably knew that, but maybe someone will explain.
The US, to the best of my knowledge, never spent a dime to benefit other nations.
Ponder that carefully.
The money was for our benefit primarily. If it also helped them, great.
Consider Germany; we spent quite a bit keeping folks like me there in the mid to late 20th Century, in my case on various hilltops waiting for the Soviets to roll across the border. So why did we do it?
Think how many men and women we had in the armed forces, how many machines we bought, and how much this nation spent fighting WWII. Just off the top of my head, I think we had around 7m people in the armed forces.
But not now. We don’t maintain a huge standing army, and that results in an enormous savings. I’ve seen it called the ‘peace dividend’.
Why?
Because we have allies. They have men and women in uniform, machines, ammunition, you name it. They maintain armies which allows us to keep ours relatively small.
Sure, we might want them to spend more, but even that has limits. If they expand their armed forces too much, the temptation is there to use them. Sort of what a number of American presidents have done, send troops to fight in wars against nations that had not attacked or even threatened the US.
What we’ve bought with our alliances (including NATO, whose nations are closest to our immediate threat, Russia) is peace and savings. Also security.
Someone should explain that to the guy who works more on his golf game than on governing.
Posts Tagged ‘Economics’
On Alliances
March 19, 2017Democrats, Economics, and Me
October 14, 2015I noticed something last night. Hillary Clinton doesn’t even know what capitalism is. Really. When asked a question, she went on about small businesses. Those are entrepreneurs, not capitalists.
Bernie Sanders calls himself a ‘Democratic Socialist’, but to be honest, he favors the social safety net, not socialism.
As for me, you’re going to have to find a new description. I’m not socialist, I’m not capitalist. But at the same time, I’m not totally against either of these, so long as they’re only part of the economic system. Part, because there are advantages to be gained from those, and other systems.
Begin with private enterprise, AKA entrepreneurship. Someone sees a need, starts a business, begins making a living. Maybe they even hire an employee or two. Pretty much every candidate at least pays lip service to this, even if they don’t know what it is.
Toss in capitalism. If the opportunity is large enough, that entrepreneur can take in a partner who has money, or several thousand ‘partners’. They’re using surplus money to earn more money. Set up a means of selling or buying the shares they own in a company. Now you’re using ‘capital’, and this is ‘capitalism’. So far, so good; but like communism, unrestricted capitalism must be regulated lest it gain control of the entire system.
Restricted capitalism works fine. It earns money for investors, but isn’t allowed to damage the economy. We need more of that. When a capitalist company moves jobs offshore, because that way they make more profit, they damage the economy. We need a system of regulating this, but short of a major tax overhaul it won’t happen. We can’t keep a corporation from relocating to where it will, either to increase profits or to shelter income from taxes; what we can do is tax each corporation based on access to the American economy. You sell here, you pay taxes here, regardless of where you claim to be based. It’s called a gross-receipts tax system, and it can cancel the advantage that corporations currently have.
Meantime, regulated capitalism works well enough for domestic corporation that can’t offshore, things like the gas company.
Finally, there’s socialism. Socialism can be part of the social contract, part of the social safety net. Socialism is direct government ownership or investment in part of the economy. Socialism does what capitalism won’t do, it funds non-profit activities. Used properly, socialism can be the ‘governor’ that regulates the economy. Make the government the employer of last resort. Lose your job? Work for the government. Do what the CCC and WPA did during the 1930’s. All the money paid to workers is immediately spent, generating more economic activity. When the economy picks up, people take better-paying jobs. But no one has to fear going homeless because he/she can’t find a job. And we’ve surely got things that need to be done in this country.
Education and healthcare are two fields that are currently capitalist, but that need to be socialist. Simply put, they’re too important to be provided only to those with money.
So how do we pay for socialist enterprises and the social safety net? Simple: Quantitative Easing, the same system that was used to bail out the big banks at the end of the Bush presidency. It’s how the Fed creates money, electronically. No printing of currency, just an electronic message generating a balance that banks can use. Or, for that matter, the Social Security Administration can use. Or a new Civilian Conservation Corps. The only thing the Fed needs to keep an eye on is inflation. Economists such as Paul Krugman have written that we need MORE inflation to stimulate the economy.
Unlike efforts such as the Trans Pacific Trade Agreement, this doesn’t rely on any other country to help us keep our economy stable. We can do it ourselves.
So: I favor a balance of private enterprise, capitalism and regulated capitalism, socialism, and a social safety net for individuals.
Not socialist, not capitalist. I think you’ll need to come up with a better descriptive phrase for me.
Philosophy, and Economics
June 4, 2015I find it interesting to consider academic expertise, in economics as in most other disciplines.
Academics study the past as a general rule, examining the thoughts of those considered to be seminal thinkers. By the time they do, they already have fixed ideas about any number of things. Since they study under the direction of a perceived expert, that person will inevitably color their thinking. If the professor rejects Marx, for example, chances are the student will too. A few professors are more interested in developing thinking skills, but not all.
The result seems clear to me.
How many modern academics are themselves seminal thinkers? Is it not more common that they study and perhaps contrast, compare, and at most combine? How many will depart from orthodoxy?
I take a different approach; I examine a number of thinkers from the past, but also those currently writing. I look at Joseph Stiglitz, Paul Krugman, and Ha Joon Chang, among others, and find interesting points in their work that seem pertinent to me.
But in the end I find my own approach, that a mixed economy is to be preferred over any single approach. All have some merit, if applied rigorously, but such application is never ‘pure’.
For example, the supposed benefits from competition vanish as soon as an economic organization grows large enough. International trade is supposed to be beneficial…but there’s no such thing as ‘free trade’, because trade is never between equals. Government intervention is supposed to be bad, but without it, the system cannot endure. And so it goes.
I don’t think an academic is prepared to step outside the bounds. His career, his life’s work, is tied up in his thinking.
I own to some of the same rigidity of thought, but for a different reason. I have a mature, maybe even overly mature, philosophy that encompasses not only economics but also politics, government, international relations, and much much more.
There are few new tricks for this old dog to learn…and no desire at all to roll over and play dead.
Economics, and Criticism of David Ricardo’s Theories
May 20, 2015This first appeared in a conversation on Facebook. My correspondent is a professor of economics who is also the author of a textbook on that subject. He favors Free Trade, and cites the theories of David Ricardo. The following is my reply:
I consider the following criticisms of Ricardo’s ideas, which seem germane to me. Note that I came up with my own criticism independently, based on my analysis of current conditions in the US.
“As Joan Robinson subsequently pointed out in reality following an opening of free trade with England, Portugal endured centuries of economic underdevelopment: “the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of the industrial revolution”. Robinson argued that Ricardo’s example required that economies were in static equilibrium positions with full employment and that there could not be a trade deficit or a trade surplus. These conditions, she wrote, were not relevant to the real world. She also argued that Ricardo’s theory did not take into account that some countries may be at different levels of development and that this raised the prospect of ‘unequal exchange’ which might hamper a country’s development, as we saw in the case of Portugal.[16]”
“The development economist Ha-Joon Chang challenges the argument that free trade benefits every country:
Ricardo’s theory is absolutely right—within its narrow confines. His theory correctly says that, accepting their current levels of technology as given, it is better for countries to specialize in things that they are relatively better at. One cannot argue with that. His theory fails when a country wants to acquire more advanced technologies—that is, when it wants to develop its economy. It takes time and experience to absorb new technologies, so technologically backward producers need a period of protection from international competition during this period of learning. Such protection is costly, because the country is giving up the chance to import better and cheaper products. However, it is a price that has to be paid if it wants to develop advanced industries. Ricardo’s theory is, thus seen, for those who accept the status quo but not for those who want to change it.[20]”
Ha-Joon Chang’s comment implies stasis in economics, which may an analytical ideal but is rarely if ever seen in the real world. Natural conditions change, market needs change, labor influences change, rates of exchange change, political influence changes, international relationships change. Some of the changes cannot be predicted, nor can they be prevented.
Instead of free trade, I advocate a mix of free trade, but with critical national industries protected. Note the part about international relationships; simply put, handing our manufacturing sector over to foreigners who might be friendly today, less so tomorrow, is dangerous. It’s not manpower that wins wars now, it’s technology and equipment. Note how readily the IS militants, even though outnumbered, manage to kick the butts of Iraqi government forces. Technology takes time; manufacturing complex systems, then training people to use them effectively, can take years. Handing a capability over to benefit a few in the short run is madness in the long run. Stability is not guaranteed.
I also suggest that part of a mature economy must be turned inward instead of outward. To this end I believe making socialism part of the national mix, in which the government becomes the employer of last resort in a downturn. I advocate Quantitative Easing not to protect banks but to strengthen the nation by investing in infrastructure. Note that China is using her temporary advantage in balance of trade to do just that.
Bottom line: I think that overall Ricardo was wrong, and that overreliance on his theories now is economically damaging and dangerous from a security standpoint.
Economics: Crashes, Recoveries, and Recent History
May 8, 2015I keep seeing the denials. Whenever good economic news comes out of Washington, some claim it’s propaganda, that it’s all lies by Obama.
As if a president has time to collect the data, to analyze economic trends.
Yesterday I got involved in a discussion with a man who doesn’t believe statistics such as what was reported today, that America enjoyed fairly-healthy job growth last quarter.
But I also see signs on doors, Help Wanted. Look around, you’ll see those too. Go on, look for yourself. Are those signs lies?
Stores close, Others open. It’s part of the cycle. Long term trends are different.
Unless you PERSONALLY have access to all the data, you’re believing someone else’s report. And all those reports, including mine, are based on second-hand information. They’re no more than opinion, in other words. My opinion? I base it on evidence, not solely on government reports.
Those reports some are so quick to doubt are read by a bunch of nervous traders. The stock market…looked at that lately? It reflects the nation’s economic health very closely, and there’s a lot of our economic history to be read there. Companies that are publicly traded must file quarterly reports. They must report changes in their work force, up or down, whether their earnings will meet expectations, things like that.
Don’t like the government reports? Just watch the stock market. Traders know. They have to, or they lose their ass.
Now go back and look at long term market trends. Look at what happened during the last years of the Bush II presidency and what has happened since.
The market almost crashed. Banks almost went bankrupt, the entire financial house of cards almost fell. Bush and his supporters bailed out those same big banks and insurance companies with gigantic gifts of public money.
This is history. It’s not opinion. It happened. The economy sank into the Great Bush Recession. OK, that’s my name for it; I want to remind people of what happened and who was in charge at the time.
You can find the reports, and some of you will even remember when these events took place, now that I’ve reminded you.
No bailouts under Obama. Instead, rising employment. More consumer confidence. The stock market rise has reflected that. The nervous traders settled down and paid more for stocks, because they expected the values of traded companies to go up. That has continued since Obama became president.
Evidence, not opinion.
I call it the Great Obama Recovery, because I want people to remember who was in charge of this part of our economy history too.
Loved Bush II, hate Obama? OK. Personally, I’ve got issues with both of them. But I try not to let that blind me to facts. I look at the evidence.
Government reports, and also what the stock market is doing. That market reflects our economic history, for those who are willing to look at long-term results.
Why the Global Warming Protests Matter
September 26, 2014I’ve been having a very interesting conversation via email with a gentleman who doesn’t share my concern with the effects of climate change. AS a result of the conversation, I condensed my own concerns into a reply; I thought they were worthy of republication here. Herewith my reply to David:
One thing I can’t agree with, your implicit assumption that our economic/political/social climate will continue on much as it has to this point. Purveyors of fossil energy will continue to buy politicians, people will protest, but ineffectually, change will continue to happen but not have significant effects.
I think at some point we’ll understand that our survival is a species is in question.
The basic problem is that we’ve outbred our habitat. We’ve managed to come up with enough technology and science to hold back mass starvation for a time, but in my view that solution is ever-more precarious. Despite science, we still depend on nature; we’ve substituted agriculture for hunting/gathering, herding for hunting, greenhouses for natural growing seasons, aquaculture for fishing, even hydroponics…but none of them, even in concert, can feed seven billion people. Those cereal grains I mentioned in an earlier post, the ones that feed a species, grow outdoors, and if the rains don’t come the crops will fail. If the rains do come, so do insects and weeds, the plants that compete with the ones we are seeking. Poisoning the insects also poisons bees needed for pollination (natural systems are just that, systems; disrupting them has side effects, rarely beneficial, and usually long term). Using natural systems as aids works better long-term, but isn’t economically competitive; that’s why small farms with horses/cows/goats/sheep lose out to factory farms with chemical fertilizers and tractors.
And because of our fascination with personal economics and profit, we as a species opt for short term gain instead of choosing long term stability.
Warming of the planet is one aspect of what we’ve done; we’ve also poisoned the land, occasionally short term but then there’s Chernobyl and the as-yet-undefined Japanese nuclear disaster. There are huge pools of spilled oil residue that yet remain in the Gulf of Mexico, islands of floating trash the size of Texas, subtle shifts in ocean chemistry/temperature that are destroying coral reefs (nurseries for entire ecosystems), poisoning of the land by metal residues from mining and industrial operations, tons of nuclear waste that we can’t dispose of safely and that continue to grow in size, atmospheric changes in addition to land and water changes, accelerating rates of species extinction…
We don’t know the extent yet of what we as a species have done, but much of what we see isn’t promising. Indeed, it’s at least troubling, and may have reached alarming.
The people who protest global warming may not know everything I’ve listed, but I suspect they have a visceral understanding. It’s why they hope to force action.
And those are only our failings when dealing with nature. What about the things we as a species do to each other? The East has tried collectivism while the West celebrates entrepreneurship and capitalism. As a result, we’re all managing to screw part of our population, a kind of Darwinian selection driven this time not by nature but by our own competitive instinct. Just consider: in this richest of nations, arguably most advanced of major nations, homelessness is endemic, as is hunger. War goes on constantly, virtually world-wide, even if it simmers at a low level rather than flaming up; people fight over the scraps rather than attempting to work out sharing.
People know.
They understand that the day we join the dinosaurs is approaching, and that by our own actions we bring it ever closer.
Pity the Poor Fed
February 12, 2013Economics, 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.
Political Economics in the 21st Century
January 12, 2013Written 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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