Worldwide Growth is Stagnating, and Everyone has a Theory.

The central banks of the world are explaining worldwide economic stagnation on insufficient aggregate demand. For some reason people do not have enough money to buy things and drive the economy, or people are frightened and choose to save instead of consume.

Their solution is lower interest rates, or negative interest rates, to make more money available, discourage saving, encourage borrowing and increase demand.

Other academics say that we need an engine of growth, in the 1970 it was a computer revolution that was followed by innovation in networking (the Internet), than globalization and liberalization of China, then sophisticated financialization of assets. Now we are out of new prods to growth.

I would say it is plainly evident that growth naturally occurs. It is the natural state of free people if they have relatively low corruption, rule of law, private property and contract. The United States from 1800 to 1900 moved from agrarian ex-colony to  one of the most powerful and largest economies in the world with no policy directing growth, no central bank, no business incentives, no master plan. In fact I would say there was no national goal to grow the economy or become a world economic power at all. It was simply free individuals trying to better their lot that made things better for everyone and made a powerful economy.

So why the stagnation today? Obviously the conditions for people to better their lot have deteriorated.

There is more official corruption. There is less incentive to better you lot and invest in producing something if you are not secure in enjoying the results of your efforts.

The rule of law is being eroded. When I was in law school, if the professor wrote a hypothetical on the exam, there was basically a correct answer. Common law develops by actual cases coming before courts and the decision made in each case becomes the rule for future similar cases. One could tell objectively what a future set of facts should result in given knowledge of the prior cases.

Only in Constitutional Law as that not true. In Con Law there were not Rules you could outline from the cases, there were balancing tests. The Court instructed future judges to balance, for instance the value of the category of speech against the societal costs. What would they weigh “value of speech,” how would they weigh “societal costs?”

Compare and contrast to the rule from Regina v. Dudly and Stevens. Four ship wrecked sailors facing starvation kill and eat one so that the others could live. After an improbable rescue, murder charges are brought. The defense is necessity. If they had not killed one sailor all four would have perished. The rule of the case: necessity does not justify killing. Verdict, Murder. The only things that justifies taking the life of another is self-defense. Ironically if Richard Parker (the boy killed by Dudley and Stevens) had turned the knife on them and killed them both he might have been acquitted of murder. One thing you have to glean from this case is application of a rule without respect to emotional considerations. The seamen endured 28 days in an open boat thousands of miles from land with no hope of rescue. The boy Parker was weakest and likely to die first anyway. The court that condemned Dudley and Stevens even noted “Other details yet more harrowing, facts still more loathsome and appalling, were presented to the jury, and are to be found recorded in my learned Brother’s notes.”  There was no balancing of the interests of Dudley and Stevens against the interests of Parker. There was no subjective holistic attempt to provide cosmic justice. There was a rule of law, necessity does not justify murder. Anyone could discern it and apply it. You could tell if the court was correct or not.

As a matter of fact, there was an institution capable of weighing the intangible relative factors outside of facts the law was able to consider. The Queen of England pardoned Dudly and Stevens.

 

Alt-Right is Asian and Jew Supremacist

Contrary to official distortion, the Alt-Right ≠ White Supremacist.  As a matter of fact, from my research it appears the Alt-Right = Asian and Jewish Supremacy.

The salient feature of Alt-Right belief appears to be that IQ tests measure something real, and that something has a high correlation with success in most fields, probably even in living a successful life itself.

Of course some consequences of that belief are troubling to the Left and to the establishment. The establishment says that all groups would do equally well if there were a level playing field. Under that view, if a racial or gender identifiable group does less well than other groups it cannot be due to differences in average abilities but must be due to ugly acts of the majority peoples.  These ugly acts unjustly hold down people who deserve more success.

If IQ were a measure of something real and consequential, and if the distribution of high IQ in different groups were unequal on average, than there is an entirely different explanation for  the different outcomes. Suddenly the majority is not necessarily collectively ugly and unjust.

I’m pretty sure it is established fact that Ashkenazi Jews  and North Eastern Asians as  groups have average IQ test scores above those of other racial/ethnic groups.  So if you want to talk about which race/ethnic groups an adherent of the Alt-Right would expect to excel in a fair contest, it would be Asians and Jews.

Noted With Pleasure

Every so often I come across a turn of phrase on the Internet which I really enjoy. So I thought I would post about some of them.

First we have Patrick J. Buchanan:

 

In the 19th century, power meant control of the means of production; today, power lies in control of the means of communication.

Along the same line, Mencius Moldbug:

All decent, reasonable men are horrified by the idea that the government might control the press.

None of them seem concerned at all that the press might control the government.

Of course the present state of affairs where the megaphone controls the people with guns and handcuffs is strange. Probably it is due to some old institutions functioning well enough to preserve democracy combined with other institutions decaying enough to bring on unlimited government power. With so much power at stake it seems almost capricious to have the vote determine who wields it.  Almost like having a dice roll determine who will be absolute dictator.

This state of affairs cannot continue long. The power is too great an attraction.  There are now no limits on the federal government.

The media, or press, presently have a large amount of power, but very shortly I expect “rougher elements” will have more say, and the press will become an instrument of propaganda for whomever runs the government.

The United States Federal Government is not Broke.

I used to be upset about the amount of money the United States Government (USG) is borrowing, and promising to pay in the future. National Debt is about $20 Trillion. Add unfunded liabilities, like Social Security, Medicare and Medicaid, and the total may be $126 trillion.

Since the entire output of our nation, all business, everything is about $18 trillion per year, we seem to be in deep dodo.  Many commentators say that default or massive inflation to inflate away the debt is inevitable.

Its like an individual having debt 7 times his annual income.  If you income was $ 200,000 pa, you debt would be $ 1.4 million dollars! Holey Mackerel.

Yet I know lots of people who have under $500 thousand pa income and a $2 million house (with a $2 million mortgage).

The issue is, they have very large debt, but they have very large assets. Most homeowners with massive debt only get in trouble if the value of their real estate assets takes a dive, then in essence they then have massive debt and little assets.

Lots of countries with lots of debt have very little in value of assets. The government of Greece has some really nice islands that they would be loath to sell. Otherwise the purchasing and debt service power of Greece is mainly its ability to tax its citizens.  You can’t get blood from a stone. They are in the situation the USG would be with $126 trillion obligations and a $18 trillion economy to skim money off of. You ain’t going to get anywhere  for decades.

The USG, however, has lots of assets.  It has the largest gold reserves of any nation by far. Unfortunately all the gold in Ft. Knox is worth less than a half of one trillion dollars. A drop.

The USG is a big landowner: The Federal Government owns nearly 650 million acres of land – almost 30 percent of the land area of the United States. What so you think 30% of the land in the USA is worth if sold at auction?

The USG ownes about $128 trillion in energy resources.

 

 

Thank Goodness The Government is Helping us Afford Housing, Education and Health Care.

The Government has many programs to help us acquire affordable housing, affordable health care and affordable higher education.

Thank goodness.

Think how painfully expensive these things would be if we let the free market deliver them, like we pretty much do with food, household consumables, clothing, shoes, transportation, electronics and energy.

What thirty year old has not run up $ 50,000 of debt to feed, house and clothe themselves for the last four or five years? You know, like the debt they had to run up in order to get a undergraduate degree and be taken seriously in the job market.

Who does not rage over their weekly grocery bill like they do over the payroll deductions and the unaffordable co-pays for health insurance  that recently appeared?

Who is not driven to despair each time an article of clothing or an automobile wears out and they need to buy a new one? Like they are when they discover that it is time to buy a house and a house in a safe neighborhood with decent schools is beyond their reach. Not a luxurious house, just in a safe neighborhood with decent schools.

What’s that? You say food, clothing, transportation, electronics and energy are not very expensive relative to our paychecks. Exactly.

In 1976 it took 3.5 times the average income to buy a house. In 2012 it took 5.0 times the average income to buy a house. Good work.

Is the White House Plagued by Leaks or Fake News

Many are reporting that the White House is leaking like crazy and making it very difficult for the POTUS to get anything done.

The leaks are always by unnamed sources, meaning that there is no way to confirm that there was a leaker or that the reported content was accurately represented. Quite simply, you are taking the word of a reporter, or editor or news organization. You actually do not know their internal policy on validating a reporter who reports a leak. Maybe one or more higher ups somehow check on the story, maybe not.

The whole leak story rests on one thing, the integrity of the press outlet. The press is so partisan now, I believe they would lie to forward their agenda. With reporting of White House leaks, if one report was a lie there is no way for it to be discovered.  A White House official cannot refute it because the leaker’s identity is secret. Another reporter cannot investigate the story because the provider of the information is unknown. Insiders with knowledge that leaked reports are inaccurate cannot even confirm that because they would be leaking privileged information them selves.

So the sole foundation of a reported White House leak is trust in the media organization reporting it.

a camel is a horse designed by a committee

In the early days of the Internet people connected to it over their ordinary telephone lines. They were called POTS lines, standing for “Plain Old Telephone Service”.  It required use a modem, a device like a fax machine that turned digital data into modulations of sound that traveled over voice lines.

Everyone wanted speed, because the connection to the Internet with a modem was painfully slow.

Engineers and others would find ways to make the modem more efficient but for many people to use a device required standards. You would not want you modem to work if you called “X” but fail to work if you called “Y”.  So there was some international agency charged with approving standards for modem protocols. I think it was called something like “IEEE”.

There was v.32 then v.32bis, then something better. One problem was the IEEE always took years to agree on an international standard. People wanted the speed as soon as it was obtainable but the IEEE took years. So the modem manufacturers started selling modems with the latest technical speed booster before standards were agreed upon and put their firmware in flash memory which could be upgraded to the standard if the IEEE got around to it before the next better flavor was invented.

My business got a truly high speed connection to the Internet. A brand new Cisco 2500 router (called 2500 because they basically sold at $2,500) and a CSU/DSU (a sort of digital modem). I leased a dedicated line from the local Bell, no POTS service nothing. Basically dry copper over the phone network so the CSU/DSU did not have to convert digital to analog sounds.

I could not speak cisco, so my connection supplier provided an internet connection up to the Ethernet port of the Cisco. In other words, he programmed the router.

He told me an entertaining story. I can’t remember everything but I got the gist.

Internet Protocol (“IP”) was developed by a US Government agency to connect supercomputers (very expensive and very few) to university, military and government users in geographically distant locations. The point being, it was never developed by an international committee to serve countless masters.  It networked different types of networks together.

It was open source so anyone could use it.

Unix operating system designers started including it because, heck, lots of Unix workstations were in universities and research facilities and it was useful to be able to join the IP networks.

It started growing like crazy and eating every other network protocol. Do you remember Novell? It was not the best networking protocol lacking in security and other enhancements but it was free, had major market share and open development.

My Cisco guru once told me, and this is the point of the story, that people started using Cisco routers to connect using IP to other networks. It was becoming the universal language. European authorities finally said “you may not sell Cisco routers in our countries unless you include the INTERNATIONAL NETWORKING STANDARDS in you operating system.” Our protocols were designed by consensus and are much better than IP but are frozen out by established base. So Cisco included all the IEEE whatever protocols carefully designed by committee and no one used them.

Which means, don’t try to design from authority a perfect or even better standard. In the rough and tumble world a leader will emerge, it may not be perfect or even the best, but it is almost impossible to impose a technologically best solution. The failings of the leading technology will be reduced over time as they are discovered and hurt users.

 

 

 

 

Things that Annoy

Certain canards just get me going.  When I read any of these my blood pressure spikes and I see red, and I seem to be reading a variation of one or another of these all the time.

  • Capitalism requires low wage workers. This is generally expressed in the context of “why the establishment favors unlimited immigration, both legal and illegal.”  Capitalism requires private property, enforceable contracts, and rule of law. If you have those, then the natural desire of people to better their situation takes over and arranges the things that are present in better arrangements over time.

Japan has few immigrants but a very high first world standard of living. The economy of Japan is stagnating, but that may be because they abrogated the rule of law to prevent their banks from going belly up. One can keep zombie financial intermediaries alive forever with the brute force of unlimited government but you can’t expect the efficient allocation of capital thereafter.

Similarly, I often see “the modern economy relies on cheap energy, with energy getting more expensive to produce the good times are over.” In truth, the cost of various things are sometimes cheap and sometimes dear. If something gets too expensive people substitute other things.  Running a household once required one or more servants. Even poor Raskolnikov had a landlady who prepared meals and tea. When servants became prohibitively expensive, people substituted refrigeration, washing machines, appliances, etc.  Try asking your landlady in Manhattan to do your daily shopping and serve you a snack.

Capitalism, because it embodies freedom, merely rearranges the building blocks available in an order that increases value.

  • Rampant Consumerism is a great evil somehow destroying America.  In reality, consumerism means the average person gets to buy services and things that he very much desires, just as rich people have always been able to.

 

  • Financialization is destroying us.  Truly, I don’t even know what is meant by financialization.  Online sources seem to feel part of it is the increasing size of the financial services part of the economy.  Believe me, I remember when “industrial” was a respected word: The Dow Jones Industrial Average, The US Savings Bonds Industrial Payroll Savings Committee. These names were not accidents, industry was the business of America; bankers were 3-5-3 people, take deposits at 3 percent interest, loan the money out at 5 per cent interest and go home by three o’clock.

Truly, things have changed. The Dow Jones Industrial Average includes Facebook, Amazon and Google, not industries in anyone’s book, maybe it includes Bank of America and Goldman Sachs. Industry created value and bettered people’s lives, but so do other things. Would you like to live in a world with no literature, or musical performances, or interior design services? Anything that satisfies people’s wants or needs is a valid subject of capitalistic enterprise.

Another criticism is over the increased influence of finance institutions over other aspects of business. Under this view, financial institutions and financial elites have way too much influence over the business of America. Just let Henry Ford produce the cars that got America on the road,  not have Steve Jobs forced out of his own company once it went public and the finance people didn’t like the rate of return.

In my humble opinion, (IMHO in the old school Internet) the allocation of capital is the most difficult and the most value adding aspect of a free market. The US Government has allocated capital as it sees fit.  There was the synthetic fuel  corporation under Jimmy Carter.  During the oil embargo who could not better humanity by creating synthetic oil? Well, you haven’t heard of the synthetic fuel corporation because millions of dollars were sunk into it with 100% loss.  Then there is the strategic oil reserve. The US government bought oil when it was expensive and scarce (driving up the cost to taxpayers and to drivers, home owners, and everyone else who used oil). Now oil is overabundant and cheap. The reserve could be filled at half the cost, but the government is thinking of selling a portion of it.  Great investing. The solution to high prices are high prices. The market produced more oil and lowered prices. The government intervention was unneeded, costly and wasteful.

 

 

Govt Regulation Benefits the Large, Established, Powerful and Rich

I used to own Altria, the tobacco company that makes Marlboro cigarettes.

Since 1978 Altria is up 12,000% while the S&P 500 is up 2,000%.  It also pays a 3.4% dividend.  I figured it was selling a legal addictive substance and therefore should make a lot of money.

I lost my nerve when I kept reading about new regulations prohibiting smoking. When I read about no smoking outdoors in parks or no smoking in your own apartment if it was a connected apartment complex, I sold. The business press was assuring me that Phillip Morris International which was all the cigarette business outside of the USA, was a better growth prospect. It did seem to me that the Japanese and the Chinese enjoyed their smoking and had less regulation of tobacco. I owned that for awhile but it lagged Altria by a large margin so I sold that.

One of the things that scared me was the FDA (Food and Drug Administration) decided it could regulate tobacco as a drug. I pictured having to go to your doctor to buy a carton of Marlboro.  I should have considered my own advice that government regulation favors the large, the strong, the established and the rich, always.

Now I hear that Altria is going gangbusters. It is quite possible that Altria (Phillip Morris) is benefiting from regulation.

 

Philip Morris stands to benefit from this regulation in many ways. First, all regulation adds to overhead, and thus falls more heavily on smaller firms. Second, restrictions on advertising help Philip Morris’ Marlboro, a brand everyone already knows, by keeping lesser-known brands in the shadows. (Existing restrictions on advertising have already helped Philip Morris in this regard, with an added benefit spelled out in Altria’s annual report: “Marketing and selling expenses were lower, reflecting regulatory restrictions on advertising and promotion activities. … ”)

Finally, if the bill passes and the FDA gets added control over the industry, Philip Morris, more than any of its competitors, will have access to those bureaucrats and agency heads making the decisions. For all these reasons, RJ Reynolds and other tobacco companies oppose the bills Kennedy and Waxman are pushing.

 

TrumpCare Fails!

Big news: Obamacare is not replaced by Trumpcare.

Do you really want one quarter of the economy and your ability to purchase lifesaving and life improving interventions managed by, designed by, and named after a politician who never delivered any health care or ran an insurance company?

Washington had no computer policy yet IBM, Microsoft, and Silicon Valley developed by voluntary organic self-organization. Somehow we get lots of computer provided products at reasonable or free prices.

Washington had no individual transportation policy, yet Detroit grew and produced cars affordable to the average American. This all occured before Eisenhower created a national highway system.

Washington had no entertainment policy (perhaps entertainment was not important enough to deserve Washington meddling). Now we have free and low cost entertainment that is so good the whole world inports our products.

Washington has no kitchen appliance policy, or footwear policy, or vacation package policy, or book and magazine policy, or (until very recently) Internet policy. All those areas are horrible for consumers, right? Oh, wait.

Where does Washington have it flagship policies?

Well there is housing.  Washington had to intervene in the housing market to encourage more ownership and by the right people. Lets see the results. The housing market experienced an unsustainable bubble and then crashed bankrupting all the banks in the country and the Washington backed mortgage finance companies.  Requiring taxpayers to provide millions or billions of their hard earned money to bail out the housing finance “system” (banks, Freddie Mac, Ginny Mae, mortgage backed securities, etc) or face economic collapse.  Nice work Washington.

Lets look somewhere else.

Well there is college education. To help less advantaged students gain a college education, Washington provided guaranteed, non-dischargeable, subsidized loans to anyone who wanted to dream of a college degree. The waterfall of money led colleges to raise prices to soak up all the free money sitting on the table. Washington certainly benefited the colleges – the local college is the only nice place in most declining areas. From Johns Hopkins in Baltimore to Lafayette in Easton, PA, the college is the only thing with money to make a nice appearance.   Of course, the students cannot repay the loans. Taxpayers will have to have their hard earned dollars used to forgive student loans that never should have been made in the first place.

Well there is the retirement system. Washington said, left on your own you would invest in the American economy hoping it would fund your retirement years. Foolish Americans. The American economy is risky – look at 2008 when the stock market lost over 50% of its value in a few months.  Much better to give your money to the USG in the form of payroll taxes and in return for the USG promising to give you lots of money when you retire. While the USG can borrow unlimited amounts at near zero costs to spend anything it wants, this is a good deal. Greece had the same deal when Germany lent it any amount of euros. When repayment became an issue, Greece became a nation of people looking at tree bark for nutrition. If you like the prospects of the social security system, bravo. Most younger people understand that there will be nothing in the social security system for them in the future. It is a scheme of Washington that will end in tears for most everyone.

What next for our technocratic masters in Washington?