Tag: economics

Already at trade war

Cuckservatives, and economically maleducated conservatives, don’t realize that the fact one is not fighting a war does not mean one is not already engaged in one:

In retort to Trump pointing out a necessary shift in trade position (a shift to put American interests first – a shift to stop the dependency on cheap import goods – a shift to use China’s dependency on access to our market to OUR advantage) Jeb Bush came back with an example of Boeing manufacturing.

Donald Trump, responding to Jeb’s Boeing example, pointed out China is forcing Boeing to open a manufacturing plant in China.  As typical from a candidate who is unfamiliar and unbriefed on the issue Jeb looked back incredulously and said:

    “C’mon man”…

There you have it.  There’s the disconnect.  Almost everyone missed it.  There, in that exact moment, is the spotlight upon all that is wrong with a professional political class; globalists dependent on Wall Street for their talking points.

Trump was 100% correct.

But the issue is bigger.

Not only is China demanding Boeing open a plant in China, the intent of such a plant provides an opportunity to explain why Trump is vitally important – and time is wasting.

China is refusing to trade with Boeing if the company does not move.  Why? It’s not about putting Chinese people to work, it’s about China importing their research and development, Boeing’s production secrets, into their country so they can learn, steal and begin to manufacture their own airliners.

This is just how China works.  In time, Comac, a state-owned, Shanghai-based aerospace company will then use the production secrets they have stolen, produce their own airliners, kick out Boeing, undercut the market, and sell cheaper manufactured airplanes to the global economy.

Boeing, the great American company that Jeb Bush thinks they are, becomes yet another notch on the Asian market belt.

All of those Boeing workers, those high-wage industrial skill jobs that support the American middle class, yeah – those jobs lost.   And the cycle continues.

Theory, logic, and fifty years of free trade experience all demonstrate the same thing: free trade impoverishes a wealthy nation and lowers its per capita wages toward the global average. And those are just the negative economic consequences. No amount of magical thinking and repeated chants of “ricardosmith ricardosmith” are going to change that.

If you want to go into more detail on the subject, read the relevant chapter of Cuckservative: How “Conservatives” Betrayed America.

THIS depression

I remember, when after publishing The Return of the Great Depression in 2009, various critics used to cite various “green shoots” reports in an attempt to taunt me for being incorrect. “What depression?” they would ask mockingly.

“Just wait,” I would tell them. “We are in the early stages of a depression that is bigger than the Great Depression.” Seven years later, even rosy-goggled mainstream economists like Brad DeLong are admitting that the situation is historically dire.

Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a “Great Malaise.” This week, he followed up on that grim prediction, saying, “We didn’t do what was needed, and we have ended up precisely where I feared we would.”

Joe Stiglitz is right.

In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.

I was wrong. He was right. Future economic historians may not call the period that began in 2007 the “Greatest Depression.” But as of now, it is highly and increasingly probable that they will call it the “Longest Depression.”

You don’t say…. Remember, while I am certainly capable of being wrong, I am well-read, well-educated, and significantly more intelligent than the norm. So, even if I am wrong, I usually have a fairly solid set of facts and logic behind the position I am expressing.

Perhaps more importantly, and unlike most of those who opine on such matters, I have no dog in the hunt. While I would very much like the economy to be booming, I am not financially dependent upon saying so.  While the measures that Stiglitz and Krugman were pushing were absolutely and utterly wrong – the “extraordinary, sustained and aggressive policies to rebalance the economy” would have only made things worse, as what was needed was a huge round of bankruptcies to clear the zombie debt – they were right to observe that the Neo-Keynesian measures utilized were doomed to be ineffective.

I wish I had been wrong about the Great Depression 2.0. But I wasn’t. And, as even Nate will likely admit now, I was also right about the global economy falling into worldwide deflation.

Unfortunately, this tends to indicate that I am likely correct about the world rapidly heading towards large-scale 4GW, including multiple civil wars, across more than one continent.

Open borders theory failed

Considering how badly mainstream economics has failed with even a partial implementation of the free movement of people, imagine how bad it would be if the globalists ever got their way and established a borderless world:

  • Immigrants make up 13 percent of the US population and 17 percent of the workforce. 
  • The number of Americans not in the labor force last month totaled 94,103,000.

It’s all there in Cuckservative, specifically, the chapter on economics and immigration. Free traders, you are wrong. There is no need to resort to quoting Smith, Ricardo, Hazlitt, or Mises. I know them better than you do.

The fact of the matter is that their theory was put to the test. And it failed. They are every bit as wrong in that particular regard as Marx and Keynes and Friedman were about the Labor Theory of Value, the General Theory, and monetary theory.

For decades, people opined about free trade and the free movement of peoples based solely on theory. Now, we have sufficient data to assess their predictions, and contrary to what many of us expected, (and I include myself in this regard), the free traders turned out to be completely wrong.

That doesn’t mean that autarky is the correct answer or that there are not significant problems with government-limited trade, but free trade has not only impoverished the nation, the free movement of people element has already put a number of nations in risk of extinction.

No, they shouldn’t have

Outsourcing your money to a self-interested outside party seldom ends well:

Finland should never have signed up to the single currency union, according to its foreign minister.

With the northernmost euro member now set to become the bloc’s weakest economy, the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Timo Soini, who is also the leader of one of three members of the ruling coalition, the anti-immigration The Finns party, says the country could have resorted to devaluations had it not been for its euro membership.

The comments come as a former foreign minister gathers signatures in an effort to force the government to hold a referendum on euro membership. While polls still show most Finns don’t want to go through the process of exiting the currency bloc, there are signs that a plurality of voters think they would be better off outside the euro….

Without the option of currency devaluation, the government has calculated that Finland needs to lower its labor costs as much as 15 percent to catch up with its main trade partners, Sweden and Germany. Finland’s economy has shrunk for the past three years and Nordea, the biggest Nordic bank, predicts further contraction in 2015. Finland will be the weakest EU economy by 2017, when it will grow at less than half the pace of Greece, according to the European Commission.

Translation: when you can’t devalue your currency and share the burden equally throughout the entire nation, you have to pay all your workers less even though their expenses will remain high. So, instead of a devalued currency, you’ve lowered the quality of life of pretty much everyone who works for a living.

The sad thing is that this was all entirely obvious, and was in fact predicted, by many economists critical of the Euro. But social mood always trumps the naysayers who are battling the zeitgeist.

The Euro will fail eventually. This is not in doubt. The only question is how bad it has to get in the member nations before they reclaim their financial sovereignty.

The price of free trade

Remember when the idea was that offshoring all the manufacturing jobs would lead to better, higher-paying jobs in technology? Yeah, about that….

The IT workers at Cengage Learning in the company’s Mason, Ohio offices learned of their fates game-show style. First, they were told to gather in a large conference room. There were vague remarks from an IT executive about a “transition.” Slides were shown that listed employee names, directing them to one of three rooms where they would be told specifically what was happening to them. Some employees were cold with worry.

The biggest group, those getting pink slips, were told to remain in the large conference room. Workers directed to go through what we’ll call Door No. 2, were offered employment with IT offshore outsourcing firm Cognizant. That was the smallest group. And those sent through Door No. 3 remained employed in Cengage’s IT department. This happened in mid-October.

“I was so furious,” said one of the IT workers over what happened. It seemed “surreal,” said another. There was disbelief, but little surprise. Cengage, a major producer of educational content and services, had outsourced accounting services earlier in the year. The IT workers rightly believed they were next.

The employees were warned that speaking to the news media meant loss of severance. Despite their fears, they want their story told. They want people to know what’s happening to IT jobs in the heartland. They don’t want the offshoring of their livelihoods to pass in silence.

The Web-based workers that the Cengage employees are training to take over their jobs are believed to be in India. Cognizant applies for thousands of H-1B visas annually, and is one of
the top three users of the visa, according to government data. Cengage
employees reached for comment didn’t know what visa, if any, the
contract workers in their offices were using.

There are four things you need to keep in mind if you are an ardent free trader:

  1. The arguments justifying free trade have always been entirely theoretical, not empirical. In this way, they are no different than the incorrect pre-scientific logical conclusions that were subsequently proven to be false by modern science. At the time they were formulated, inexpensive shipping, the free movement of capital, and the mass movement of labor were unknown.
  2. The USA historically enjoyed its fastest periods of economic growth under protectionist, restricted-immigration periods.
  3. The post-WWII growth was not the result of any trade or economic policies, but a positive application of Broken Window theory. Every other industrial nation had its industrial capacity smashed, so the US benefited from an intrinsic infrastructural advantage for around 25 years.
  4. Free trade levels all prices throughout the market. That’s why a cashier in Miami gets paid about the same amount as a cashier in Portland. Even if free trade increases the overall amount of global economic growth, in doing so, it necessarily reduces wages and standards of living in the wealthier nations to bring them more in line with the wages and standards of living in the poorest nations.

Look, I was an ardent theoretical free trader for decades. I know the pro-free trade arguments better than you do; my father gave me Free to Choose to read when I was ten years old. But the fact is, the theoretical arguments are incorrect; the conclusions their logic predicted have turned out to be observably wrong.

And perhaps you remember what I wrote about how half of all young Americans will have to leave the country in order to find work under a true global free trade regime?  The stage for that is already being set.

Offshore outsourcing is having “a fairly strong impact” on IT employment, said Janulaitis. Students coming out of college are facing trouble starting a career “and a lot of that is driven by jobs that are taken by non-U.S. nationals in our economy, and a lot of that is H-1B [visa holders],” he said.

Economics and science fiction

But I repeat myself. Speaking first of the latter, all three QUANTUM MORTIS novels are now available for free for Kindle Unlimited and Amazon Prime subscribers. If you were vaguely curious about them, but not enough to actually go out and buy them, here is your chance to test drive them. I’d particularly recommend checking out QUANTUM MORTIS: A MIND PROGRAMMED, which is the literary update and remix of my all-time favorite SF novel, THE PROGRAMMED MAN.

From an Amazon review: “Space Noir. That’s what this is. It’s a classic spy vs spy tale, but this time the stakes are much higher and there are enough twists and turns to make a Finnish rally driver happy.”

QUANTUM MORTIS: A MAN DISRUPTED and QUANTUM MORTIS: GRAVITY KILLS are also available via KU.

And for those who are more interested in economics than in science fiction (to the extent that one accepts the idea that the former is not a subset of the latter), here are the first week’s readings in my draft econ curriculum. Don’t ask me where you can find the texts, if you can’t figure out how to do that, you needn’t bother with the readings.

1. What is Economics    

  • RGD Introduction
  • MURPHY Part 1 Lesson 1
  • HAZLITT Part 1-1

RGD: The Return of the Great Depression, Vox Day
MURPHY:  Lessons for the Young Economist, Robert Murphy
HAZLITT: Economics in One Lesson, Henry Hazlitt

Out of date and out of touch

For once, the Washington Post is correct about the complete cluelessness of the Republican establishment:

The dirty little secret in Republican politics these days is that the longtime pillars of the party — politicians and ex-politicians, major donors and the consultant class — are further removed from the views of the GOP base than at any time in modern memory. They simply do not understand what the heck is happening within and to their party.

John Sununu, a former New Hampshire governor and longtime GOP hand, is one of the few who is willing to admit just how clueless he is about, among other things, the rise of Donald Trump and Ben Carson. Here’s what Sununu told the New York Times’s Jonathan Martin:

    I have no feeling for the electorate anymore. It is not responding the way it used to. Their priorities are so different that if I tried to analyze it I’d be making it up.

Sununu is far from alone in GOP  ranks. Think about how most establishment Republicans saw this race playing out: Jeb Bush gets in, raises a ton of money and blows everyone else out of the water. By this point in the year, most of the consultant class would have predicted that Bush would be solidly in first place in most of the early states and simply polishing his policy résumé for the general-election fight to come.

But the truth that Martin exposes via Sununu is that the old ways of doing things in the Republican Party have changed significantly since even George W. Bush was elected in 2000 — running, it’s worth noting, essentially the same campaign his younger brother is right now. Strategies — get big (in terms of organization), tout electability and inevitability, keep yourself close enough to the center that you can be viable in a general election — that once were fail-safe just don’t work in this electoral environment where the dominant sentiment of voters is anger about everything.

The social mood has shifted. What works when the voters are generally optimistic does not work when they are increasingly fearful, angry, and desperate. It’s fun to speak knowledgeably of Ricardo and wax eloquent about how immigrants are enriching the economy when you’re pulling down six digits at the office, but the cruel realities of supply and demand are a little more likely to strike home when you’ve been out of work for 18 months and haven’t had an interview in your last ten job applications.

What we’re seeing is an establishment that is out of sync with reality because they believe the false media narrative about the state of the union, whereas the grass roots has been forced to confront it.

They should have started with him

Ben Bernanke says financial executives should have been arrested and charged with crimes:

With publication of his memoir, The Courage to Act, on
Tuesday by W.W. Norton & Co., Bernanke has some thoughts about what
went right and what went wrong. For one thing, he says that more
corporate executives should have gone to jail for their misdeeds. The
Justice Department and other law-enforcement agencies focused on
indicting or threatening to indict financial firms, he notes, “but it
would have been my preference to have more investigation of individual
action, since obviously everything what went wrong or was illegal was
done by some individual, not by an abstract firm.”

He also offers a
detailed rebuttal to critics who argue the government could and should
have done more to rescue Lehman Brothers from bankruptcy in the worst
weekend of a tumultuous time. “We were very, very determined not to let
it collapse,” he says. “But we were out of bullets at that point.”

Still,
he does acknowledge some missteps by the Fed. Analysts were slow to
realize just how serious the economic downturn would become, and he
faults himself for not doing more to explain to Americans why it was in
their interests to rescue the financial firms that had helped cause it.

Needless to say, I will be reading and reviewing this book in the near future. And I will be very, very, very surprised if Mr. Bernanke manages to convince me that he is doing anything except whitewash his record. The idea that it was essential to rescue the financial firms that are still preying on the American economy and weighing it down is simply nonsensical. The Federal Reserve didn’t succeed in anything except kicking the can down the road and ensure that the next crisis will be even more severe.

Denying supply and demand

The US Employment-Population Ratio and Labor Force Participation Rate continue to fall:

A record 94,610,000 Americans were not in the American labor force last month — an increase of 579,000 from August — and the labor force participation rate reached its lowest point in 38 years, with 62.4 percent of the U.S. population either holding a job or actively seeking one.

The EPR is down to 59.2 percent. Imagine how many of those 94.6 million Americans could find jobs, and how much their wages would rise, if the 59 million post-1965 immigrants were repatriated.

You had ONE job

If the central banks eliminate cash, people will no longer need banks:

It has long been believed that when it comes to interest rates, zero is as low as you can go. Who would choose to keep their money in the bank if they had to pay for the privilege?

But for the people who control the world’s money, this idea has recently been thrown out of the window. Many central banks have pushed their rates into negative territory and yet the financial system has still to come to an abrupt end.

It is a discovery that flips on its head the conventional idea of how authorities could respond to future economic crises; and for central bankers, this has come as a relief.

Central bank policymakers had believed they had run out of room to support their respective economies, with their interest rates held close to the floor.

Traditionally, it was thought that if you wanted to boost the economy, the central bank would reduce its interest rates. Normally, the rates offered on savings accounts would follow, and people would choose to spend more, and save less.

But there’s a limit, what economists called the “zero lower bound”. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.

What is happening now should not – according to conventional thinking – be possible.

As central bank rates have turned negative, the rates offered on bank deposits have followed. Yet rather than stuffing cash under mattresses, people have left their money in the bank or spent it.

Nowhere is the experiment with negative rates more obvious than among Nordic central banks. Sweden – the first to dabble with negative rates – is perhaps the prime candidate for such experimentation.

The country already has high savings rates, the third highest in the developed world according to the OECD and, despite growing at healthy rates, there appears to be plenty of slack left in the economy to prevent an overheat.

Unemployment is unusually high for an advanced economy at more than 7pc, still well above its pre-crisis levels of sub-6pc. Crucially, the Riksbank’s mandate suggests that such a radical experiment is necessary. Policymakers have battled with deflation since late 2012, and with inflation at minus 0.2pc in August, it remains well below the central bank’s 2pc target.

To a great extent, the Riksbank’s hand has been forced by the plight of the eurozone. A tepid recovery in the currency union has required the European Central Bank (ECB) to bring in ever-looser policy.

As the ECB’s actions have weakened the euro against Sweden’s krona, the cost of importing goods into Sweden has fallen, and weighed down on inflation. The Riksbank has had to cut its own rates in response in an attempt to avoid deep deflation.

Sweden’s flexible approach to monetary policy has won it the plaudits of leading credit ratings agency. Standard and Poor’s recently reaffirmed the country’s triple AAA sovereign rating, remarking on the benefits it derives from “ample monetary policy flexibility”.

Noting that the Riksbank had introduced both negative interest rates and quantitative easing, S&P said that “should inflation rates stay low or the krona appreciate materially, the central bank could lower the repo rate further”.

Many City analysts believe that the Riksbank will continue cutting, reducing its key interest rate to minus 0.5pc by the end of the year. Switzerland’s is already deeper still, at minus 0.75pc, while Denmark and the eurozone have joined them as members of the negative zone.

It shouldn’t surprise anyone that people are willing to accept low negative interest rates. After all, banks began as institutions that charged people to hold their gold for them. It wasn’t until they began creating money by handing out multiple certificates of ownership that they needed to start paying “interest” rather than receiving “fees”.

However, banning cash will go too far; the reason people use “money” is that it is less of an annoyance than barter. In their desperate attempt to remain profitable in a deflationary environment, banks are taking the risk of rendering themselves irrelevant.