Tag: economics

Reclaiming our heritage

The God-Emperor comes out swinging hard against free trade and anti-American globalism.

My fellow Americans,

On Monday, I signed a Presidential Proclamation declaring this to be “Made in America Week.”

We believe that our country is stronger, safer, and more prosperous when we make more of our goods and our products right here in the USA.  When we purchase products Made in America, the wealth, revenue and jobs all stay in our country – to be enjoyed by our people.

Since we first won our Independence, our Founders and many of our greatest leaders have promoted that we should afford a special level of protection to the products and goods manufactured within our borders.  They understood that as a nation, we have common bonds with our fellow citizens and common obligations to each other.  Making and buying made in America products brings us closer, and strengthens the ties that link us all together.

For too long, our government’s policies have punished production in America while rewarding and encouraging the movement of production overseas, which is totally ridiculous.  The result has been the loss of numerous industries, the decimation of entire communities, and years of sluggish growth and flat wages.

Throughout American history, our nation’s best leaders have believed in the importance of protecting our domestic industry.  This includes every President on Mount Rushmore.

George Washington encouraged Americans to produce their own goods so that our young nation could become truly independent.

Thomas Jefferson wrote that Americans should choose products made in America whenever possible – and by the way, I’m asking you to do that.

Abraham Lincoln warned that abandoning the policies that protect American industry would “produce want and ruin among our people.”

Theodore Roosevelt stated in his First message to Congress that “Reciprocity must be treated as the handmaiden of protection.”

James Monroe called on our nation to “cherish and sustain our manufacturers.”

James Garfield said of our nation’s manufacturers: “To them the country owes the splendor of the position it holds before the world.”

William McKinley believed that when America protects our workers and industries, we “open up a higher and better destiny for our people.”

And Calvin Coolidge stated that protecting American industry “enables our people to live according to a better standard… and receive a better rate of compensation than any people, anytime, anywhere on earth, ever enjoyed.”

We are now, under the Trump Administration, reclaiming our heritage as a manufacturing nation.  We are fighting to provide a level playing field for American Workers and Industries.  Other countries will cease taking advantage of us, believe me.

We are going to build works of beauty and wonder – with American hands, American grit, and American iron, aluminum, and steel.

No longer will we allow other countries to break the rules, steal our jobs, and drain our wealth.  Instead, we will follow two simple but very crucial rules: We will buy American and we will hire American.

Already, we have created over a million new jobs this year – and doing even better than anticipated.  We are just getting started – believe me, we are just getting started.

For every job that comes back to this country, and every factory that reopens, and every town that is revitalized, we aren’t just restoring American wealth, we are restoring American pride.  We are restoring America’s future – a future where millions will be lifted from welfare to work, where children will grow up in safe and vibrant communities, and where our nation will stand stronger than ever before.

And most importantly, it will be a future in which you – our citizens – always come first.

Thank you, God bless you, and God bless America – we are truly making it great again.

The cost of Black America

If you are a white American, over the course of your lifetime the federal government will, on average and on your behalf, transfer $384,109 of your wealth and income to a single black individual.

According to the data derived from the 2014 federal budget, the average annual net tax/benefit broke down as follows:

  • White: -$2,795
  • Black: +$10,016

Over the course of an average 79-year lifespan, a white individual contributes a net $220,805 to the system, whereas over the course of an average 75-year lifespan, a black individual receives a net $751,200. However, since there are 4.6 times more whites than blacks in the USA, the black share has to be divided among the various contributors to sort out a one-to-one comparison.

So, the net cost to the average White American of the average Black American is $384,109. Married? That’s $768,218. Got 2 kids? That’s $1,536,436. 4 kids? Now we’re talking $2,304,654 lifetime.

Diversity is expensive. Now you understand why you won’t have much of an inheritance to leave to your children. Do you really think it’s worth it? And then, those natural conservatives to the south, the Hispanics, will surely improve the situation, right? After all, immigration helps the economy! Well, not so much.

  • Hispanic: +7,298

In fact, because there are more Hispanics in the USA than Blacks, Hispanics are already a bigger cumulative net drain on the economy, $411,950,000,000 to $389,710,000,000. Needless to say, the ongoing demographic change from a predominantly white society to a less productive, less white one can be expected to have even more serious negative effects on the long-term economic prospects of the United States that it already has.

To quote the original author: “The negative fiscal impact of blacks and hispanics is significant. All of this discussion of a “national debt” and “deficit” is primarily of function of blacks and hispanics. Without them, we would be running budget surpluses today, even when keeping the military the same size.”

Mailvox: Free trade and private debt

A college student asks if there is a link between the two:

Over the years in which the US has abolished trade barriers and enacted a multitude of international free trade agreements we have experienced a massive increase in trade deficits, national debt, as well as personal debt. I can see the obvious connection between free trade trade, trade deficit’s and national debt but is there a connection between free trade and the rising PERSONAL debt? If so what is this connection? Furthermore if we had trade barriers in place would Americans not still have rising personal debt as they instead spend the same amount on domestic products rather than international? 

There is certainly a correlation between increasingly free trade and private debt, but I doubt the relationship is a causal one. For one thing, the decline in private debt which began in 2008 was neither caused nor echoed by a similar decline in free trade.

The economic logic also doesn’t support a causal link. Private debt is mostly linked to big-ticket items such as homes and cars. Free trade in goods is mostly neutral on the former and negative on the latter with regards to debt. While the free movement of peoples would tend to increase debt, more people being able to take out more loans, that’s not going to alter the debt per capita rate much, for obvious reasons.

One of the major components of private debt is education-related debt, and that has nothing to do with free trade. So, I would say there is no meaningful link between free trade and private debt.

Kraonomics

It occurs to me that we’re going to need a new name for this debt-based economics that is gradually coming to the intellectual fore. And we’re going to need an introductory book to it, given that Steve Keen’s severing of the link between micro and macro renders almost completely irrelevant all those Robinson Crusoe stories meant to illuminate the first foundations of the microeconomy.

Everything you know about economics is wrong. Also, everything the professional economists know about economics is wrong.


That may sound arrogant. That may sound crazy. It is certainly a very strong statement. Nevertheless, it is true, because math does not lie.


You see, professional economists make one single very important assumption that underlies their entire profession. This one assumption underlies all of their models, all of their statistics, and all of their fundamental understanding of their studies of human action. They assume that demand is cumulative. What that means is that they assume your preferences, and my preferences, and everyone else’s preferences, can be added together to make one giant set of preferences which can then be utilised in their calculations.


Or, to put it in a way that those of you with an economic background will recognize, they assume that all individual demand curves are a) stackable and b) follow the same downward-sloping trajectory.


As it happens, this is not true. What is more, this has been known to not be true since 1974.


Of course, it would be excessively brutal to follow that up by dropping the Sonnenschein–Mantel–Debreu theorem on them without warning and a considerable amount of explanation.

I have elected to call this debt-based economics “kraonomics”, from the Greek χρέος, or chréos, which means “debt, duty, indebtedness”. Why that particular spelling? For one, English-speakers will instinctively read the pronunciation correctly. For two, never use accents when you can avoid it. For three, as Psykosonik fans are aware, I always prefer using a “k” to a hard “c” or “ch”. And for four, it suggests just a hint of the chaos theory that it almost certainly requires.

On a tangential note, I wonder how many people noticed perhaps the most intellectually exciting note of the recent Brainstorm with Steve Keen. The professor mentioned, almost off-hand, that he was currently reading the work of one Robert Prechter. It strikes me that whatever comes out of the meeting of those two brilliant minds is almost guaranteed to be significant, revolutionary, and mind-blowing.

Just for starters, it may well be that outstanding private debt is a more useful metric for measuring social mood than the stock markets.

Open Brainstorm with Steve Keen

Last night, we held a Brainstorm with Steve Keen and discussed his new book, Can We Avoid Another Financial Crisis? And his answer was clear: that depends upon what you mean by “we”, kemosabe. TL;DR: in a global context, no, we cannot avoid it, but it should be about half as bad as 2008. And we’ll probably get 6-12 months of warning from his model.


As usual, Professor Keen was brilliant, informative, and entertaining. And now that he’s embarked on a paper relating to David Ricardo and free trade, I don’t think he’ll object to me posting the email he sent me a few months ago when I asked him about the implications for free trade of the demand-based break between micro and macro caused by the Sonnenschein-Mantel-Debreu theorem. Or, as I memorably renamed it last night, Sonnensomething-Niederbopp-Whatever.

In this context the key point of the Sonnenschein-Mantel-Debreu theorem is not the failure to derive a demand curve, but the inability to represent the interests of everyone in a single country using a “Community Indifference Curve”, which is an essential part of the Hecksher-Ohlin model of free trade, which has of course supplanted Ricardo’s original model.

Samuelson’s defence of doing so is frankly comical, and also highlights one of the two key weaknesses of the model: it only works if income or wealth is compulsorily redistributed to equalise the “ethical worth” of every dollar earned/possessed, and he thought this was a reasonable assumption. From “Social Indifference Curves”, Paul Samuelson, 1956

  1. It is shown that the various defenses which have been offered for the use of community indifference curves are all open to some serious questioning.
  2. The Scitovsky community indifference contours are shown to be “minimum social requirements” contours of total goods needed to achieve a certain prescribed level of ordinal well-being for all. The dual properties of the Figures Ia and Ib, relating points in the commodity and ordinal-utility spaces, are demonstrated.
  3. By means of mathematical reasoning or by the demonstration of intersections of Scitovsky contours, a fundamental impossibility theorem is proved: Except where income elasticities are all unity and tastes are absolutely uniform for all, it is proved to be absolutely impossible to solve for unique market price ratios in function of market totals; hence, we must lack collective indifference curves capable of generating group demand.
  4. All this is shown to entail the nonoptimality of any shibboleth rule which once and for all and independently of changes in technology and taste data predetermines the initial distribution of income or endowments.
  5. Since most “individual” demand is really “family” demand, the argument can be made that such family demands have been shown to have none of the nice properties of modern consumption theory. However, if within the family there can be assumed to take place an optimal reallocation of income so as to keep each member’s dollar expenditure of equal ethical worth, then there can be derived for the whole family a set of well-behaved indifference contours relating the totals of what it consumes: the family can be said to act as if it maximizes such a group preference function.
  6. The same argument will apply to all of society if optimal reallocations of income can be assumed to keep the ethical worth of each person’s marginal dollar equal. By means of Hicks’s composite commodity theorem and by other considerations, a rigorous proof is given that the newly defined social or community indifference contours have the regularity properties of ordinary individual preference contours (nonintersection, convexity to the origin, etc.).

This is the key problem from the demand side: free trade is only universally of benefit to a given nation if the gains are shared; this requires redistribution mechanisms in addition to the market, which both don’t exist, and contradict the model of free competition if they were to be implemented.

The key problem for the supply side is easily stated: How do you turn a wine press into a spinning jenny (to use Ricardo’s examples). The standard model assumes the costless reallocation of capital between industries in response to a change in relative prices caused by reducing tariffs. But this is impossible. Capital is physical and attuned to specific industries. Free trade therefore makes obsolete some capital in a protected industry, while making that in a benefited industry more expensive, but not more productive.

The wind blows in my empty wallet

Even if you never go to Japan, you have to love the fact that it exists. Where else would you find a kawaii metal song about low wage rates.

OH SWEET FOX GOD! It only gets better.

Isn’t this a renge spoon for ramen?
YOU CAN SCOOP UP THINGS WITH IT!
What else besides ramen can you scoop?
YOU CAN SCOOP UP THIS WORLD FROM DARKNESS!
Because the world is a bowl of chaos, right?

Even the Guardian gets it

This is one of the few times you will see me approvingly quote an article from The Guardian:

Even as their world came apart, the bankers clung to denial. By August 2007, the flagship hedge fund of Wall Street’s most prestigious firm was tanking fast – and what explanation came from the man at Goldman Sachs? “We were seeing things that were 25-standard deviation moves, several days in a row.” The bank was getting hit by events that were only meant to happen once every 100,000 years – and they were happening every day of the week. Given a choice between blaming their models or reality, Goldman’s bosses held the world at fault.

You know the rest because, a decade later, you and I are still paying for it. How the banks died, the world economy collapsed and most of us got poorer. How the financiers, mainstream economists and regulators were so detached from reality that they swore blind that such a catastrophe was impossible – even while it was under way.

Their reputation has never recovered. And as an economics journalist, I look across at politics and see the same process at work. Brexit, Donald Trump, Jeremy Corbyn: time after time, the political class has completely failed to understand the world they were governing, policing and analysing. Allow me to be blunt: our political crisis is also a crisis for our political class. And it is one from which I doubt they can recover.

At each major fork in the road, they have sped off down the wrong turning, while decrying the other as unimaginable. Each time, they have crashed.

That is because the maintream economic models, on which so much of the social policy of the last 45 years has been made, are wrong. But the wealth of too many powerful and well-connected individuals relies upon the continuance of the system built on those false models for anyone to make any substantive changes until the whole thing collapses. As it inevitably will, sooner or later.

For starters, all the bad debt needs to be written off. It will never be repaid. But writing off the bad debt means the bankrupting of almost every major bank in the world, and the financial elite would rather see the world collapse into disease, famine, and war than accept the just consequences of their idiotic actions.

This is the Great Depression 2.0

On the plus side, it appears the Keynesian interventions have managed to successfully “smooth out” the business cycle.

The following are U.S. GDP growth rates for every year during the 1930s…

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years…

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.

This isn’t quite right. I ran the numbers and the average for the 1930s is 0.53 percent, whereas the 2010s average is 1.17 percent. So, it’s both better and worse than the author wrote. Meanwhile, despite the anemic GDP “growth”, the stock market has hit new peaks and optimism is high.

And that sound you hear is everyone familiar with socionomics rooting around in their closets looking for their crash helmets.

Alt-Retard economics

Having seen and heard a few economically illiterate morons pop up and advocate NATIONAL SOCIALISM as some sort of answer to globalism and free trade, I decided that I would take the five minutes required to demonstrate that national socialism is A) not a coherent economic theory or program, B) not a viable economic system, and C) structurally doomed to fail even faster than the current US system is today.

A) National socialism is not a coherent economic theory.

“The basic feature of our economic theory is that we have no theory at all.”
– Adolf Hitler

B) National socialism is not a viable economic practice.

USA 6-year budget deficit to revenue, 2010-2016
26.8 percent

National Socialist Germany 6-year budget deficit to revenue, 1933-1939
62.9 percent

C) National Socialism was structurally doomed to fail even faster than the current US system is today.

Both the current US system and the historical Nazi systems were dependent upon credit booms. But the Nazi debt-spending was 135 percent worse than the USA’s insanely profligate ways. The ad hoc National Socialist economics meant that the Nazis either had to surrender to the bankers on whom they had declared metaphorical war or engage in material imperialist war to acquire the resources to pay off their rapidly growing debts.

Anyone who advocates national socialism as an economic solution is either totally ignorant or literally retarded. It is even less credible than libertarianism, free trade, or globalism. Frankly, to call it “retarded” is probably a little too generous.

Mailvox: disproof vs positive claim

RS asked about tariffs and wages:

In your second presentation on Free Trade you said that Hazlitt was erroneous in claiming that tariffs would reduce wages in America and you pointed to the fact that wages have reduced since 1973 event though tariffs have largely been eliminated. In any event, I think that the reduction in wages for American workers since that time is due to the large scale importation of foreign workers which seems orthogonal to tariffs.

It is false to claim that tariffs reduce wages. While it is true that the two primary reasons for reduced American wages are a) twice as many women working than before and b) the importation of foreign workers, the fact is that reduction of tariffs has not increased wages. Perhaps more to the point, wages in China have risen from 445 CNY to 67569, most of this prior to the relaxation of tariff rates in 2010.

It is difficult to separate the various effects, but the point is that we do not see the inverse tariff/wage relationship upon which Hazlitt in part bases his case.

Meanwhile, DH found himself troubled by the thoughts my previous Darkstream raised:

Your recent dark-stream is quite thought provoking. I had difficulty putting my mind at rest enough to fall asleep until way past my usual bedtime. The points you made resonate with me as true, however the argument is left begging for more.

Your reaction to comments stood out as thought provoking as well. While I do not consider myself to be particularly bright on an absolute scale, I have no idea what my I.Q. is. I find it does not require a great deal of intelligence to be frustrated with and isolated from most of those around me.  I relate to your frustration, though I wish it didn’t keep you from completing your thoughts.

Even if we could distill all the best aspects of every “ism” into one best of all “isms”, it would not be accepted upon pain of death either by the elites or their devoted subjects.

The point that I am making is not that communism is good or desirable. It is merely that global free markets and individual sovereignty is incompatible with the survival of both nation and family. It is not an accident that so many globalists are childless individuals with unusual family situations; even the modestly successful expat communities tend to be mostly populated by rootless transients upon whom one can hardly expect to successfully build a society, let alone a civilization.

What passes for global society is intrinsically parasitical, if not downright predatory, and therefore cannot possibly serve as a sound foundation in itself. Globalism requires that cows first transform themselves into wolves, and then, after that impossibility is successfully accomplished, learn to eat grass.