Singapore has long been authoritarian capitalism's 'City on a Hill.' The city is thriving, efficient, clean, a financial center, one of the world's largest ports, has the highest quality of life in Asia, has the world's fastest growing economy, and is commonly rated as the least corrupt government in Asia. Singapore is democratic, in the sense that they have elections, but only one party (People's Action Party PAP) has been in control since 1959.
Despite nominal democracy, Singapore is the living counterargument to the assertion that authoritarian governments cannot succeed and oversee thriving modern economies. Opposition party candidate Chee Soon Juan describes the democratic process in Singapore with a decisively negative outlook. All TV stations and other news outlets are run entirely by the government. All unions are overseen by government officials. A single family runs the Government Investment Corp. (controlling most of the enormous financial reserves), the largest Telecom company, the finance ministry, and of course, the all powerful prime minister position. Add to that the notoriously PAP sympathetic judiciary, and you have total one party control.
How are they so successful without western values? There are several unique aspects of the Singapore system.
First is the real estate system. Land development in Singapore is almost exclusively controlled by the government, with over 85% of the population living in government housing. Unlike the West, there is no stigma to living in government housing and almost all the residents are above the poverty line. Controls on rents and fees, government income guidelines for admission, and no secondary market for property helped Singapore's enormous financial sector survive the great Recession. When property is leased at steady rates instead of sold, there is no room for speculators and thus Singapore's banks did not get doused by underwater mortgages like the rest of the developed world. (Of course their investments in Western Banking institutions did suffer losses). Still, Singapore emerged from the recession with the fastest growing economy in the world in 2010.
Second, the pay for the ministers. Singapore's elected officials are the highest paid in the world. The government argues (quite convincingly) that highly paid officials are key to the efficiency and corruption free status of Singapore. Indeed, Singapore's government is consistently rated either the world's least corrupt or among the least corrupt by the World Bank and Transparency International. They are also rated in highly in rule of law, at least when it comes to contract and copyright protections (personal and political freedoms are another matter.)
All of the above information seems to indicate that Singapore is an ideal model for China and other aspiring authoritarian capitalist nations. Indeed, Deng XiaoPing was in part inspired by Singapore to institute his initial market reforms, and the recent local elections in China are loosely based on the Singapore model. In my opinion, the Singapore model does not hold the answers for China or most other authoritarian nations because of the unique circumstances that have enabled Singapore's system to enjoy such great success.
Size is perhaps Singapore's greatest advantage. With a population of just 4.5 million, living on a series of islands just off the tip of the Malaysian Peninsula, Singapore is both tiny and densely populated. Though land reclamation projects are ongoing, Singapore will remain a blip on the world map. The small scope of Singapore allows the national government to directly supervise and discipline every governmental minister. This tight control helps to ensure that corruption is minimal. In a sprawling rural-urban country like China, it is impossible for the national government to effectively supervise rural or far-flung government offices. The government is simply much too large. Also, in a country as populous and expansive as China, there is no way to pay ministers in a manner comparable to Singapore. The result is that local government officials in China will find the rewards of corruption very tempting given the low risk of being caught and losing their small government salary. Controlling elections will also be much more difficult in China for the same reasons. The National Government simply cannot keep an eye on all the moving parts in the same way that Singapore can.
Singapore's second advantage is the unique real estate system. This system does more than prevent the inflation and collapse of real-estate bubbles, it is a tool of control. Opposition leaders claim that the PAP threatens voters with the potential loss of their government controlled housing, leading voters to support the PAP. Even if this is not true, government owned housing creates government dependency. People are just instinctively unwilling to vote against their meal ticket. In places like China, the cat is already out of the bag. Private developers control most of the real-estate and citizens buy their homes outright. Under a private real estate system, citizens feel secure that the government cannot evict them, raise their rates, or find them ineligible to continue living under the same roof. Seizing homes from citizens is out of the question, and everybody knows it. This loss of control means that it would be much more difficult for the Communist Party to maintain dominance under even nominal democracy. Also, it would be a mistake to underestimate the importance of avoiding housing bubbles like the one that devastated the West. Such a collapse in China (thought to be possible by some analysts--not me), would certainly prove a challenge to the continuing control of the CCP, especially if democratic institutions were in place.
Singapore's example demonstrates that authoritarianism and capitalism are not mutually exclusive and can mix with great success. Those in the West who cling to the myth that Countries must embrace multi-party democracy and liberal social values to move past middle-income status are clearly wrong. Unfortunately for authoritarians, Singapore does not provide a good model for larger more rural countries whose real estate systems are privatized. Autocrats who seek wealth to mix with their power might find success, but they will need a system tailored to the individual needs of their country. There's only so much they can emulate their City on the Hill.
A few resources:
http://money.cnn.com/magazines/fortune/fortune_archive/1997/08/04/229722/index.htm A pro-Singapore viewpoint from the Prime Minister.
http://www.singapore-window.org/sw03/030916sj.htm An anti-Singapore view from the opposition leader.
http://en.wikipedia.org/wiki/Politics_of_Singapore A great resource with details about structure, ministerial pay, transparency, times and dates, economic rankings and much more.
http://en.wikipedia.org/wiki/Public_housing_in_Singapore Interesting stuff about Singapore's unique housing arrangements.
http://the-diplomat.com/2010/04/08/china-will-get-real-democracy/5/ Classic Western viewpoint that democracy is needed to become truly successful.
Wednesday, November 24, 2010
Tuesday, November 23, 2010
IMF Creates Moral Hazards...On Purpose!
Someone I respect once said, 'Even a Blind Dog Finds a Bone...Sometimes'. That's what happened in the New York Times recently. Landon Thomas Jr. (could your name sound more pretentious?) dares to consider the unthinkable...Default Better than Bailouts?
http://www.nytimes.com/2010/11/23/business/global/23default.html?pagewanted=1&_r=2&hp
None other than the well known socialist Robert Rubin was quoted as saying, "Holding bondholders harmless contributes to moral hazard and increases risks elsewhere." Of course he (author of the Mexican Bailout in Clinton's time), believes that bailouts are worth the cost. Not surprising from someone who wants the government to have access to an endless fountain of virtually free money.
What moral hazard you ask? That's simple enough. The moral hazard of bailouts is that banks and other large investors who hold the bulk of the bonds for Greece and Ireland today and Argentina and Russia before, are not forced to accept haircuts on their bad investments...namely the sovereign bonds of countries who are not solvent. Those who took risks will get paid the upside gains, while somebody else (mostly taxpayers) will take the downside losses. And you wonder how George Soros never loses money?
What 'risks elsewhere'? That's more complicated. The risk is that no overspending government will ever learn their lesson. They will never run out of willing lenders to feed their politicians' insatiable appetite for handouts, vote buying, power expansion, and general greed. No matter what the debt level, bondholders will never stop lending to a proliferate government because they know that the IMF will never allow the bondholders to take a haircut. The more indebted the government, the better. Why? More indebted governments pay higher returns, and they will never be allowed to fail.
The IMF hardly goes out of its way to make bondholders wary of buying high-yield bonds. I'll note here that the IMF is run by bankers from large countries who hold a large percentage of sovereign bonds and are therefor aiding themselves and their cronies (with taxpayer dollars). The IMF recently issued a staff paper entitled, “Default in Today’s Advanced Economies: Unnecessary, Undesirable and Unlikely.” In it they laid out the arguments against allowing those who took risks to take losses. Amongst the arguments, Greece and Ireland are running large current account deficits, which means that if they default on their obligations, they will still need to borrow money. They would have no access to bond markets because they are bankrupt.
What if Greece and Ireland did default? Well, they would have to run balanced budgets. Could you imagine the horror? Balanced budgets for advanced economies? That's like asking a shopaholic to live within a budget. It's totally inhumane. Can you imagine the cuts in services? The tax burden to actually pay for all the luxuries citizens have demanded from their government? Torture is still illegal under the UN right?
The only fair prescription for the ills of indebted economies? Make the risk taking bondholders take losses. Make the over-borrowing governments suffer. Only then can we avoid the same mistakes in the future.
http://www.nytimes.com/2010/11/23/business/global/23default.html?pagewanted=1&_r=2&hp
None other than the well known socialist Robert Rubin was quoted as saying, "Holding bondholders harmless contributes to moral hazard and increases risks elsewhere." Of course he (author of the Mexican Bailout in Clinton's time), believes that bailouts are worth the cost. Not surprising from someone who wants the government to have access to an endless fountain of virtually free money.
What moral hazard you ask? That's simple enough. The moral hazard of bailouts is that banks and other large investors who hold the bulk of the bonds for Greece and Ireland today and Argentina and Russia before, are not forced to accept haircuts on their bad investments...namely the sovereign bonds of countries who are not solvent. Those who took risks will get paid the upside gains, while somebody else (mostly taxpayers) will take the downside losses. And you wonder how George Soros never loses money?
What 'risks elsewhere'? That's more complicated. The risk is that no overspending government will ever learn their lesson. They will never run out of willing lenders to feed their politicians' insatiable appetite for handouts, vote buying, power expansion, and general greed. No matter what the debt level, bondholders will never stop lending to a proliferate government because they know that the IMF will never allow the bondholders to take a haircut. The more indebted the government, the better. Why? More indebted governments pay higher returns, and they will never be allowed to fail.
The IMF hardly goes out of its way to make bondholders wary of buying high-yield bonds. I'll note here that the IMF is run by bankers from large countries who hold a large percentage of sovereign bonds and are therefor aiding themselves and their cronies (with taxpayer dollars). The IMF recently issued a staff paper entitled, “Default in Today’s Advanced Economies: Unnecessary, Undesirable and Unlikely.” In it they laid out the arguments against allowing those who took risks to take losses. Amongst the arguments, Greece and Ireland are running large current account deficits, which means that if they default on their obligations, they will still need to borrow money. They would have no access to bond markets because they are bankrupt.
What if Greece and Ireland did default? Well, they would have to run balanced budgets. Could you imagine the horror? Balanced budgets for advanced economies? That's like asking a shopaholic to live within a budget. It's totally inhumane. Can you imagine the cuts in services? The tax burden to actually pay for all the luxuries citizens have demanded from their government? Torture is still illegal under the UN right?
The only fair prescription for the ills of indebted economies? Make the risk taking bondholders take losses. Make the over-borrowing governments suffer. Only then can we avoid the same mistakes in the future.
The IMF's Kahn: Hero or Villain?
Here's a few thoughts given to a group of bankers in Germany about the latest EU developments from IMF President Dominique Strauss-Kahn...sidebar...could that dude have a name that sounded more European?
http://www.imf.org/external/np/speeches/2010/111910.htm
Kahn (sounds like a bad guy from a lame action movie, but I digress), uses endless code language to avoid controversy because his agenda (if widely recognized) would be wildly unpopular. We will see more of this phenomenon below.
Kahn suggests that fiscal policy should be run by the EU rather than by national governments. "When the agenda is driven by the center, things happen. Think of the single market program, or of monetary union. But when the agenda is left with the nations, things stall." While the Kahn would never admit it, this is a closeted attack on democracy. One that I support...
Democracies (run by the rabble) reward politicians who promise government benefits and beneficial rules. This is why labor markets slowly become closed stagnant abominations filled with rules to protect the workers of the past at the expense of the workers (and the society) of the future. A politician promises to require every company to provide a pension plan...the workers who vote for him are thrilled, but those who do not yet have a job are less likely to find one because fewer companies can afford to pay for the pensions, healthcare, vacations, disability, and various other costs imposed on companies by politicians for their populist appeal. At its core, the EU is fundamentally undemocratic. The EU is an amalgamation of policy wonks and career bureaucrats who have never won a referendum from the rent-seeking masses. That is what makes the EU fundamentally better qualified to manage fiscal policy. As much as I dislike bureaucrats, there is no doubt that wonks are much more realistic and far-sighted than the average voter.
He goes on to suggest that Southern Europe is uncompetitive because "denial of opportunity is harming the economy." He is cryptically referencing the barriers to entry created by stifling regulation designed by politicians at the behest of established corporations to ward off competition from upstarts. An EU fiscal management and regulatory regime would be far less susceptible (though by no means immune) to the lobbying efforts of corporations seeking to thwart competition by creating rules and regulatory policies that punish small upstarts. Why would the EU be more immune? Because they do not rely upon companies for campaign donations, and ideally would be forbidden from accepting gifts and jobs from corporations over which their regulatory authority extended.
Like any villain seeking something unpopular, Kahn uses veiled references to his real agenda. He points out that the European "labor market institutions tend to reward privileged insiders at the expense of excluded outsiders." This is undoubtedly a reference to the very popular job-for-life laws, restrictions on firing workers, and other business regulations that discourage the hiring of new people because the company will then have to provide the new employee--in addition to all the old employees--with a job for life (or else pay stiff penalties for releasing them.) These state mandated benefits are gravy for those who have a job, but punish those who do not (meaning future workers who are not yet voting--or unemployed who in many cases do not understand the rules of cause and effect).
Ultimately Kahn proposes a 'Common Labor Market' where the rules of the workplace are made universal throughout the EU. He also proposes centralized control over fiscal policy. As he says, both of these would help Europe advance because nations simply cannot be relied on to create sound fiscal or regulatory policy...making too many barriers to entry, workplace regulations, and spending promises to be sustainable in the long term.
You might think from my analysis that I favor the Kahn's proposals to give more power to the EU, and you'd be right...after all, I am an advocate of One World Government. Kahn proposes something that sounds great to a true Internationalist, a true globalization enthusiast, and something that will bring us one step closer to total unity...something I totally support. What's the problem? With all his hand-in-hand cooperation with the EU on the bailouts of Greece and Ireland (and possible future bailouts), it seems clear that Kahn is positioning himself for a leadership position within the same organization under which he would consolidate power. Just like any masterminding arch-villain, he is creating a dominion to rule.
Call me paranoid, but I'm always suspicious of people who seek power.
http://www.imf.org/external/np/speeches/2010/111910.htm
Kahn (sounds like a bad guy from a lame action movie, but I digress), uses endless code language to avoid controversy because his agenda (if widely recognized) would be wildly unpopular. We will see more of this phenomenon below.
Kahn suggests that fiscal policy should be run by the EU rather than by national governments. "When the agenda is driven by the center, things happen. Think of the single market program, or of monetary union. But when the agenda is left with the nations, things stall." While the Kahn would never admit it, this is a closeted attack on democracy. One that I support...
Democracies (run by the rabble) reward politicians who promise government benefits and beneficial rules. This is why labor markets slowly become closed stagnant abominations filled with rules to protect the workers of the past at the expense of the workers (and the society) of the future. A politician promises to require every company to provide a pension plan...the workers who vote for him are thrilled, but those who do not yet have a job are less likely to find one because fewer companies can afford to pay for the pensions, healthcare, vacations, disability, and various other costs imposed on companies by politicians for their populist appeal. At its core, the EU is fundamentally undemocratic. The EU is an amalgamation of policy wonks and career bureaucrats who have never won a referendum from the rent-seeking masses. That is what makes the EU fundamentally better qualified to manage fiscal policy. As much as I dislike bureaucrats, there is no doubt that wonks are much more realistic and far-sighted than the average voter.
He goes on to suggest that Southern Europe is uncompetitive because "denial of opportunity is harming the economy." He is cryptically referencing the barriers to entry created by stifling regulation designed by politicians at the behest of established corporations to ward off competition from upstarts. An EU fiscal management and regulatory regime would be far less susceptible (though by no means immune) to the lobbying efforts of corporations seeking to thwart competition by creating rules and regulatory policies that punish small upstarts. Why would the EU be more immune? Because they do not rely upon companies for campaign donations, and ideally would be forbidden from accepting gifts and jobs from corporations over which their regulatory authority extended.
Like any villain seeking something unpopular, Kahn uses veiled references to his real agenda. He points out that the European "labor market institutions tend to reward privileged insiders at the expense of excluded outsiders." This is undoubtedly a reference to the very popular job-for-life laws, restrictions on firing workers, and other business regulations that discourage the hiring of new people because the company will then have to provide the new employee--in addition to all the old employees--with a job for life (or else pay stiff penalties for releasing them.) These state mandated benefits are gravy for those who have a job, but punish those who do not (meaning future workers who are not yet voting--or unemployed who in many cases do not understand the rules of cause and effect).
Ultimately Kahn proposes a 'Common Labor Market' where the rules of the workplace are made universal throughout the EU. He also proposes centralized control over fiscal policy. As he says, both of these would help Europe advance because nations simply cannot be relied on to create sound fiscal or regulatory policy...making too many barriers to entry, workplace regulations, and spending promises to be sustainable in the long term.
You might think from my analysis that I favor the Kahn's proposals to give more power to the EU, and you'd be right...after all, I am an advocate of One World Government. Kahn proposes something that sounds great to a true Internationalist, a true globalization enthusiast, and something that will bring us one step closer to total unity...something I totally support. What's the problem? With all his hand-in-hand cooperation with the EU on the bailouts of Greece and Ireland (and possible future bailouts), it seems clear that Kahn is positioning himself for a leadership position within the same organization under which he would consolidate power. Just like any masterminding arch-villain, he is creating a dominion to rule.
Call me paranoid, but I'm always suspicious of people who seek power.
Sunday, November 21, 2010
We all Hate Propaganda...But What is It?
In the argument section of FP magazine, there is a rather dubious and predictable piece warning of the dangers foreign government sponsored propaganda infiltrating Google News.
http://www.foreignpolicy.com/articles/2010/11/19/the_autocrat_s_algorithm?page=0,0
Joshua Keating is very worried about Americans being exposed to propaganda. He's worried because Google News doesn't sort out propaganda, quoting a professor in an obvious expert capacity as saying 'is Google News doing the right thing for us by prioritizing that state broadcaster?' Oooh, scary, google is providing search results that prioritize original reporting, local content, and frequently read sources. (Naturally these tend in some cases to lean to the advantage of state run media who are the sole news providers in some locales and some populations.)
What's the problem here? People won't know propaganda when they see it? It's Google's job to prevent us from reading what Keating believes is propaganda? We're all just little sheep waiting to be warped by whatever perspective is the top result on Google's search?
Is it possible to give people any less responsibility for their own ideas? JK implicitly contends that individuals are incapable of recognizing bias when they see it. While stupidity is a reality for many people, at least Google news gives many different biases (giving us the best chance to be aware of the bias of any given perspective.)
Keating regales us with stories of unfair reporting in Russia, which mysteriously (and he seems to imply suspiciously) show up in the Google News rankings. In the news about the Russian arms dealer Viktor Bout recently extradited from Thailand to the US, JK gives two examples of headlines: (Typical U.S. headline: "Alleged 'Merchant of Death' Pleads Not Guilty." Typical Russian headline: "Bout was psychologically pressured during flight to U.S.")
Alleged Merchant of Death v. Psychologically Pressured During Flight. Which of these has a strong bias?
If your answer was both, then you're catching on. The truth is American media is also biased, in a predictably pro-American government fashion. Of course the American media will use the phrase 'Merchant of Death', while the Russian media will use a personalizing name and sympathetic concepts like psychological pressure. I am by no means implying that the respective biases are morally equivalent, since I believe protecting a crony of the Putin regime who sells illegal weapons to pariah states is deserving of very little sympathy. I am implying that both sides have an entrenched bias. The only way to bring the world closer, is to expose the bias of all sides, even the American side. JK and the vast majority of American media believe that they are above any bias...a contention that is so absurd it makes me grimace. The American media certainly has more diverse perspectives than most state-run medias, but even the most opposed perspectives carry common threads of bias that someone who has never consumed foreign media might not recognize.
Therefor, let me be the first to thank Google for the service of providing every perspective, without using some high-minded know-it-all to rank what is biased and what isn't. The only way to make progress toward truth is to be exposed to opposing points of view. Google (and many others) are doing a great service for mankind. My only complaint is the difficulty of being considered amongst Google's news sources. The requirements for number of viewers and repeat viewers is problematic for small, but genuinely independent sources of news and opinion.
http://www.foreignpolicy.com/articles/2010/11/19/the_autocrat_s_algorithm?page=0,0
Joshua Keating is very worried about Americans being exposed to propaganda. He's worried because Google News doesn't sort out propaganda, quoting a professor in an obvious expert capacity as saying 'is Google News doing the right thing for us by prioritizing that state broadcaster?' Oooh, scary, google is providing search results that prioritize original reporting, local content, and frequently read sources. (Naturally these tend in some cases to lean to the advantage of state run media who are the sole news providers in some locales and some populations.)
What's the problem here? People won't know propaganda when they see it? It's Google's job to prevent us from reading what Keating believes is propaganda? We're all just little sheep waiting to be warped by whatever perspective is the top result on Google's search?
Is it possible to give people any less responsibility for their own ideas? JK implicitly contends that individuals are incapable of recognizing bias when they see it. While stupidity is a reality for many people, at least Google news gives many different biases (giving us the best chance to be aware of the bias of any given perspective.)
Keating regales us with stories of unfair reporting in Russia, which mysteriously (and he seems to imply suspiciously) show up in the Google News rankings. In the news about the Russian arms dealer Viktor Bout recently extradited from Thailand to the US, JK gives two examples of headlines: (Typical U.S. headline: "Alleged 'Merchant of Death' Pleads Not Guilty." Typical Russian headline: "Bout was psychologically pressured during flight to U.S.")
Alleged Merchant of Death v. Psychologically Pressured During Flight. Which of these has a strong bias?
If your answer was both, then you're catching on. The truth is American media is also biased, in a predictably pro-American government fashion. Of course the American media will use the phrase 'Merchant of Death', while the Russian media will use a personalizing name and sympathetic concepts like psychological pressure. I am by no means implying that the respective biases are morally equivalent, since I believe protecting a crony of the Putin regime who sells illegal weapons to pariah states is deserving of very little sympathy. I am implying that both sides have an entrenched bias. The only way to bring the world closer, is to expose the bias of all sides, even the American side. JK and the vast majority of American media believe that they are above any bias...a contention that is so absurd it makes me grimace. The American media certainly has more diverse perspectives than most state-run medias, but even the most opposed perspectives carry common threads of bias that someone who has never consumed foreign media might not recognize.
Therefor, let me be the first to thank Google for the service of providing every perspective, without using some high-minded know-it-all to rank what is biased and what isn't. The only way to make progress toward truth is to be exposed to opposing points of view. Google (and many others) are doing a great service for mankind. My only complaint is the difficulty of being considered amongst Google's news sources. The requirements for number of viewers and repeat viewers is problematic for small, but genuinely independent sources of news and opinion.
Capitalism, Collectivism, and the Third Way
Nigel Meek provides a fascinating, scholarly, and insightful review of Maurice Glasman's Unnecessary Suffering: Managing Market Utopia. I cannot oppose such fantastic analysis, but I hope I can add something.
http://libertarianalliance.wordpress.com/2010/11/20/nigel-meek-on-maurice-glasman-a-new-labour-peer/
First, a quick review. Glasman seeks to find a 'third way' between state control and unfettered free markets. His basic strategy is to accept private property and market competition while rejecting unlimited managerial prerogative, the commodification of labor, and profit maximization as the primary driver of economic decision making. He seeks something called democracy in the workplace. The supposed problem with the free market is the 'compulsion' in the form of the labor contract. The labor contract is supposedly compulsory (a common theme amongst the rabble) because the boss holds the means of subsistence for the employee.
Meek's objections to categorizing this activity as compulsion are valid of course: voluntary exit is possible, lower forms of employment are always available, and one employer cannot compel another to refrain from hiring a fired employee. I would add my own:
It is the individual's moral duty to ensure that they are worthy of being hired and/or retained. If an individual makes herself indispensable by means of hard work, creativity, leadership, or special skills, then firing is not a sentence of starvation...not in a modern dynamic capitalist economy. Not by a long shot. If an individual fails in her personal responsibility to herself i.e. fails to wholeheartedly pursue success in her chosen field of work, then she has earned the fate she receives. Why should those who have lived up to their personal moral actualization be forced by gunpoint to support a morally deficient person? If productive individuals choose, they can of course provide support for whomever they like, but the morally successful should not be subjected by threat of imprisonment to surrender property to the morally deficient.
In response to Glasman's claim that private charity cannot meet modern need, Meek argues that the state has crowded out private charity, which explains the reason modern charity is not sufficient to cure all of society's ills. This is undoubtedly part of the problem. Another, perhaps larger reason for insufficient charity is the welfare system's habit of rewarding idleness. If large swaths of the population are content on the welfare rolls two things happen: First, those on welfare are not properly incentivized to maximize their potential as contributors to society, the economy, and their own happiness. Second, others who are not happy in their current jobs are drawn toward the lifestyle of the idle instead of retraining, moving to a more promising economy, or even seeking promotion and reassignment within their own corporation. In a world that incentivizes such behavior, there will never be sufficient voluntary charity to cover all of those on welfare. Nor should there be. Only in a world of coercion will the productive subsidize the unproductive to such an unhealthy extent.
Glasman would replace the socialist nation with a collection of “vocational organisations, public libraries, universities, artisan institutions and municipal government.” He suggests that this is his 'third way', his middle ground between socialism and pure capitalism. After all, it does not result in a top-down dictation of economic activity and also does not emphasize the individual as the primary actor in the economy. Meek is absolutely correct when he says that there are only two types of relationships, coercive and voluntary. The free market is the only way to ensure that all relationships are voluntary (and of course many similar institutions to those that Glasman reveres would exist under a voluntary association scheme). As Meek notes, all of these social organizations proposed by Glasman would have the implicit backing and funding of the state and would have their rules take the force of law. Thus, membership will be coercive rather than voluntary.
Meek also points out Glasman's strawman attack against 'market utopianism' which describes a society " in which self-interest is the only acceptable form of rationality." Meek points out that a surprisingly large amount of time is spent in capitalist societies working for something other than economic self-interest. I would argue that this is neither surprising nor revolutionary. Economic self-interest is but one aspect of something far more fulfilling, something I prefer to call enlightened self-interest. You can look at other posts on my blog for more details, but enlightened self-interest is the pursuit of happiness...something that includes love, family, health, wealth, intelligence, and knowledge. Under a true free market, people would be free to pursue all aspects of happiness without the tax burden that forces many of us to work an undue amount in pursuit of only one aspect of happiness (wealth).
Meek's overarching point is one about the wisdom of the U.K joining the EU. He argues that the EU is founded by Roman Catholics who are motivated by thinking similar to Glassman's, while the UK's Protestant leanings are much more individualist. While I agree with the general proposition that the EU represents an outgrowth of Roman Catholic thinking, I disagree that all member states of the EU can be categorized as a monolith. Some are overtly statist, some were former Soviet states where statism and Catholicism are unpopular, and none of the EU states have unanimity of opinion. Neither for that matter, does Britain. There are plenty of genuine socialists and even Catholics in Britain, who are quite distinct from Meek's broad characterization of the Anglo-American individualist sympathizers who supposedly come from a more protestant tradition than the EU.
That said, I loved Meek's analysis, and I will be seeking him out in the future.
http://libertarianalliance.wordpress.com/2010/11/20/nigel-meek-on-maurice-glasman-a-new-labour-peer/
First, a quick review. Glasman seeks to find a 'third way' between state control and unfettered free markets. His basic strategy is to accept private property and market competition while rejecting unlimited managerial prerogative, the commodification of labor, and profit maximization as the primary driver of economic decision making. He seeks something called democracy in the workplace. The supposed problem with the free market is the 'compulsion' in the form of the labor contract. The labor contract is supposedly compulsory (a common theme amongst the rabble) because the boss holds the means of subsistence for the employee.
Meek's objections to categorizing this activity as compulsion are valid of course: voluntary exit is possible, lower forms of employment are always available, and one employer cannot compel another to refrain from hiring a fired employee. I would add my own:
It is the individual's moral duty to ensure that they are worthy of being hired and/or retained. If an individual makes herself indispensable by means of hard work, creativity, leadership, or special skills, then firing is not a sentence of starvation...not in a modern dynamic capitalist economy. Not by a long shot. If an individual fails in her personal responsibility to herself i.e. fails to wholeheartedly pursue success in her chosen field of work, then she has earned the fate she receives. Why should those who have lived up to their personal moral actualization be forced by gunpoint to support a morally deficient person? If productive individuals choose, they can of course provide support for whomever they like, but the morally successful should not be subjected by threat of imprisonment to surrender property to the morally deficient.
In response to Glasman's claim that private charity cannot meet modern need, Meek argues that the state has crowded out private charity, which explains the reason modern charity is not sufficient to cure all of society's ills. This is undoubtedly part of the problem. Another, perhaps larger reason for insufficient charity is the welfare system's habit of rewarding idleness. If large swaths of the population are content on the welfare rolls two things happen: First, those on welfare are not properly incentivized to maximize their potential as contributors to society, the economy, and their own happiness. Second, others who are not happy in their current jobs are drawn toward the lifestyle of the idle instead of retraining, moving to a more promising economy, or even seeking promotion and reassignment within their own corporation. In a world that incentivizes such behavior, there will never be sufficient voluntary charity to cover all of those on welfare. Nor should there be. Only in a world of coercion will the productive subsidize the unproductive to such an unhealthy extent.
Glasman would replace the socialist nation with a collection of “vocational organisations, public libraries, universities, artisan institutions and municipal government.” He suggests that this is his 'third way', his middle ground between socialism and pure capitalism. After all, it does not result in a top-down dictation of economic activity and also does not emphasize the individual as the primary actor in the economy. Meek is absolutely correct when he says that there are only two types of relationships, coercive and voluntary. The free market is the only way to ensure that all relationships are voluntary (and of course many similar institutions to those that Glasman reveres would exist under a voluntary association scheme). As Meek notes, all of these social organizations proposed by Glasman would have the implicit backing and funding of the state and would have their rules take the force of law. Thus, membership will be coercive rather than voluntary.
Meek also points out Glasman's strawman attack against 'market utopianism' which describes a society " in which self-interest is the only acceptable form of rationality." Meek points out that a surprisingly large amount of time is spent in capitalist societies working for something other than economic self-interest. I would argue that this is neither surprising nor revolutionary. Economic self-interest is but one aspect of something far more fulfilling, something I prefer to call enlightened self-interest. You can look at other posts on my blog for more details, but enlightened self-interest is the pursuit of happiness...something that includes love, family, health, wealth, intelligence, and knowledge. Under a true free market, people would be free to pursue all aspects of happiness without the tax burden that forces many of us to work an undue amount in pursuit of only one aspect of happiness (wealth).
Meek's overarching point is one about the wisdom of the U.K joining the EU. He argues that the EU is founded by Roman Catholics who are motivated by thinking similar to Glassman's, while the UK's Protestant leanings are much more individualist. While I agree with the general proposition that the EU represents an outgrowth of Roman Catholic thinking, I disagree that all member states of the EU can be categorized as a monolith. Some are overtly statist, some were former Soviet states where statism and Catholicism are unpopular, and none of the EU states have unanimity of opinion. Neither for that matter, does Britain. There are plenty of genuine socialists and even Catholics in Britain, who are quite distinct from Meek's broad characterization of the Anglo-American individualist sympathizers who supposedly come from a more protestant tradition than the EU.
That said, I loved Meek's analysis, and I will be seeking him out in the future.
Thursday, November 18, 2010
The Myth of Texas v. California
Joel Kotkin of Forbes wrote an interesting if rather unoriginal analysis of the differences between Texas and California. It hits all the familiar notes about pro-business v. anti-business policies and the reasons for the differences between the population and employment trends in both states. While I agree with the pro-market assumptions behind the analysis, I must say that I think articles like these really overstate matters and serve as punching bags for intelligent liberals.
http://blogs.forbes.com/joelkotkin/2010/11/15/california-suggests-suicide-texas-asks-can-i-lend-you-a-knife/
I've said before, and I'll indubitably say it again, but I criticize allies more than ideological adversaries because in a way, those who take up 'my side' in a debate are a general reflection on the reasonableness of my own positions. This also helps keep me from falling in with a groupthink crowd that sees every piece of evidence as proving more than it does. I'm going to destroy Kotkin without even mentioning that the real problem in California is the absurdity of Prop 13 which gives way to much power to the morons who rule through elections.
Kotkin notes that over the last decade the population of California has fallen 1.5mil while the population of Texas has risen 800K. We all know that California has the perfect weather, beautiful scenery, beaches, forests, mountains...but how many of those people moved because of the relatively low population density and land prices in Texas? How many of those people moved because of a 'hostile business climate' and how many were just looking to go somewhere where income was similar and housing prices were a fraction of California's astronomical rates?
Kotkin also points to STEM (Science and Tech jobs), Texas adding 80K since 2002 while CA has added just 17K. Two points, first these are tiny numbers that hardly scratch the overall population trend. Second, these numbers are completely explained by the fact that CA still possesses the highest concentrations of tech jobs of any state in the country. (a fact mentioned in Kotkin's next paragraph). It's hardly a surprise that a similar economy far behind in a particular job sector would gain more jobs in the sector over a given period...it would be far more surprising if CA were somehow able to increase its large advantage.
Kotkin moves on to suggest that California's focus on adding green jobs is a delusion, based on unlikely expectations that the federal government will subsidize these industries or pass 'draconian regulations.' I expect Green Energy to be the wave of the future, and though government subsidies would probably accelerate the process (IMO-at unacceptable externality cost)...still, having a government policy of paving the way for modern energy sources is hardly a delusional strategy.
He accuses Gov elect Brown of intending to 'force' Californians into apartments rather than houses. This is absurd on its face. Another example of excessive hyperbole in the service of a pseudo-free market cheerleader. It makes us all look bad.
Lastly, and most offensively, Kotkin suggests that TX is more than willing to 'hand CA the knife' to 'commit economic suicide.' If a person does not realize that TX and every other state is economically, politically, socially, and morally invested in CA's success...then they hardly understand the vast similarities that bind two of the world's largest economies. Even as a die-hard libertarian, I am not rooting for any American state (even liberal loony-toons) to fail. After all, CA is still a closer ally in the war for freedom than any foreign country beyond perhaps Canada. Rooting for CA to fail is unacceptable, and I do not believe it is the dominant opinion of people in Texas.
If you're going to argue for my position, you're going to need intellectual rigor. Otherwise, I'm going to despise you for giving the adversary an easy punching bag which the unsophisticated mob will associate with my position. Hey Kock-Kin! Quit trying to find ways to use oversimplified arguments to advocate a predetermined worldview...let the collectivists monopolize that crap!
http://blogs.forbes.com/joelkotkin/2010/11/15/california-suggests-suicide-texas-asks-can-i-lend-you-a-knife/
I've said before, and I'll indubitably say it again, but I criticize allies more than ideological adversaries because in a way, those who take up 'my side' in a debate are a general reflection on the reasonableness of my own positions. This also helps keep me from falling in with a groupthink crowd that sees every piece of evidence as proving more than it does. I'm going to destroy Kotkin without even mentioning that the real problem in California is the absurdity of Prop 13 which gives way to much power to the morons who rule through elections.
Kotkin notes that over the last decade the population of California has fallen 1.5mil while the population of Texas has risen 800K. We all know that California has the perfect weather, beautiful scenery, beaches, forests, mountains...but how many of those people moved because of the relatively low population density and land prices in Texas? How many of those people moved because of a 'hostile business climate' and how many were just looking to go somewhere where income was similar and housing prices were a fraction of California's astronomical rates?
Kotkin also points to STEM (Science and Tech jobs), Texas adding 80K since 2002 while CA has added just 17K. Two points, first these are tiny numbers that hardly scratch the overall population trend. Second, these numbers are completely explained by the fact that CA still possesses the highest concentrations of tech jobs of any state in the country. (a fact mentioned in Kotkin's next paragraph). It's hardly a surprise that a similar economy far behind in a particular job sector would gain more jobs in the sector over a given period...it would be far more surprising if CA were somehow able to increase its large advantage.
Kotkin moves on to suggest that California's focus on adding green jobs is a delusion, based on unlikely expectations that the federal government will subsidize these industries or pass 'draconian regulations.' I expect Green Energy to be the wave of the future, and though government subsidies would probably accelerate the process (IMO-at unacceptable externality cost)...still, having a government policy of paving the way for modern energy sources is hardly a delusional strategy.
He accuses Gov elect Brown of intending to 'force' Californians into apartments rather than houses. This is absurd on its face. Another example of excessive hyperbole in the service of a pseudo-free market cheerleader. It makes us all look bad.
Lastly, and most offensively, Kotkin suggests that TX is more than willing to 'hand CA the knife' to 'commit economic suicide.' If a person does not realize that TX and every other state is economically, politically, socially, and morally invested in CA's success...then they hardly understand the vast similarities that bind two of the world's largest economies. Even as a die-hard libertarian, I am not rooting for any American state (even liberal loony-toons) to fail. After all, CA is still a closer ally in the war for freedom than any foreign country beyond perhaps Canada. Rooting for CA to fail is unacceptable, and I do not believe it is the dominant opinion of people in Texas.
If you're going to argue for my position, you're going to need intellectual rigor. Otherwise, I'm going to despise you for giving the adversary an easy punching bag which the unsophisticated mob will associate with my position. Hey Kock-Kin! Quit trying to find ways to use oversimplified arguments to advocate a predetermined worldview...let the collectivists monopolize that crap!
Quadrennial Defense Review
The 2010 Quadrennial Defense Review, hardly a bastion of progressive internationalist thinking, included this little nugget, 'The rise of China, the world’s most populous country, and India, the world’s largest democracy, will continue to shape an international system that is no longer easily defined—one in which the United States will remain the most powerful actor but must increasingly work with key allies and partners if it is to sustain stability and peace. Whether and how rising powers fully integrate into the global system will be among this century’s defining questions, and are thus central to America’s interests.'
http://www.defense.gov/qdr/images/QDR_as_of_12Feb10_1000.pdf
Must work with key allies and partners? Immediately after mentioning the two largest of the rising actors? 'Whether and how' these rising power integrate will be central to America's interests? Sounds like America's interests are centered on including China and India in alliances and partnerships. That's music to my ears, especially considering Hillary Clinton's latest run-in with Chinese leaders. I believe that the best response is to ignore calls for a 'containment strategy' and instead focus on each of the problems as distinct incidences of disagreement with merits separate from other disputes.
http://www.defense.gov/qdr/images/QDR_as_of_12Feb10_1000.pdf
Must work with key allies and partners? Immediately after mentioning the two largest of the rising actors? 'Whether and how' these rising power integrate will be central to America's interests? Sounds like America's interests are centered on including China and India in alliances and partnerships. That's music to my ears, especially considering Hillary Clinton's latest run-in with Chinese leaders. I believe that the best response is to ignore calls for a 'containment strategy' and instead focus on each of the problems as distinct incidences of disagreement with merits separate from other disputes.
The South China Sea: Divided by Rhetoric?
Pieces like this are all too common in Chinese Media... http://english.people.com.cn/90001/90780/91343/7103900.html
This People's Daily article is in response to the announced deployment (which later was cancelled) of the USS George Washington to the Yellow Sea after the Korean battleship sunk last Spring. The article says amongst other things that, 'The American Nation [believes] its leadership in the world, which is bestowed by God, is undeniable.' The same article describes 2010 Naval Operations Concept as 'Gun Boat Diplomacy' which is summed up nicely by this 'If you do not obey me, I will flex my muscles first. Then, if you do not behave better, I will teach you a lesson with my fists.'
The article goes on to say that the 'so-called projection of power is obviously for war rather than for peace.' While American rhetoric toward China occasionally borders on incendiary (see my piece on currency), this is the Chinese state run media making a virtual accusation that America is seeking war.
The Chinese military, the PLA, is somewhat more restrained, but still lately have said some worrying things about the relationship with America. At the Int'l Institute for Strategic Studies in Singapore General Ma XiaoTian said that while he favored more bilateral military cooperation with the U.S. "there are three main obstacles in the development of military relations: the first is the sales of arms to Taiwan, the second is the intense spy and patrol behaviours of US planes and ships in South China Sea and East China Sea, and the third is the "2000 National Defence Authorization Act," adopted by the United States Congress in 2000, as well as the "DeLay Amendment", adopted a year later. So we feel that, if anyone has been setting up barriers to cooperation, it is certainly not us.'
The issue of Taiwan is unfortunate, and in my opinion, intractable as both sides have entrenched on irreconcilable positions. On the bright side, relationships between Taiwan and the mainland get better every year and there is a growing glimmer of hope that some form of reunification may solve this problem in the medium term.
The issue of the South China Sea, though it has officially been claimed by China since 1992, has not until recently been seen as an important roadblock to cooperation. As has been well publicized, China recently asserted that its claim to virtually all the South China Sea is now a 'core interest.' This is basically a declaration that China's rather expansive UNLOS claims cannot be negotiated.
Of course, That hasn't stopped the U.S. from trying to negotiate, Secretary Clinton recently told ASEAN that resolving these territorial disputes was a 'leading diplomatic priority'. Reportedly, ASEAN foreign ministers are negotiating an agreement that calls for the disputes to be handled peacefully. Let's hope that these efforts are successful, because these shipping lanes are the lifeline of commerce in the world's fastest growing economic region.
The issue of the 2000 Defense Act is a distraction, a minor (and idiotic) law barring 12 particular kinds of cooperation between the Chinese and U.S. militaries. This rule should be eliminated immediately so that it can no longer be pointed to as an example of U.S. hypocrisy when calling for China to ingratiate itself into the international community. I hate seeing things like that used in the Chinese media to stir public opinion against America.
If General Ma is understood to be the moderate (and he is certainly moderate compared to the tone of the Chinese domestic media), then we should work to promote his priorities as much as we can without giving a window for more demands. Offering even a small 'concession' on something like the Delay Amendment could be trumpeted in international circles as a good faith gesture, encouraging or even directly trading with China to make a concession of their own (something like pledging to follow the will of an international arbiter on the question of international law in the South China Sea).
This People's Daily article is in response to the announced deployment (which later was cancelled) of the USS George Washington to the Yellow Sea after the Korean battleship sunk last Spring. The article says amongst other things that, 'The American Nation [believes] its leadership in the world, which is bestowed by God, is undeniable.' The same article describes 2010 Naval Operations Concept as 'Gun Boat Diplomacy' which is summed up nicely by this 'If you do not obey me, I will flex my muscles first. Then, if you do not behave better, I will teach you a lesson with my fists.'
The article goes on to say that the 'so-called projection of power is obviously for war rather than for peace.' While American rhetoric toward China occasionally borders on incendiary (see my piece on currency), this is the Chinese state run media making a virtual accusation that America is seeking war.
The Chinese military, the PLA, is somewhat more restrained, but still lately have said some worrying things about the relationship with America. At the Int'l Institute for Strategic Studies in Singapore General Ma XiaoTian said that while he favored more bilateral military cooperation with the U.S. "there are three main obstacles in the development of military relations: the first is the sales of arms to Taiwan, the second is the intense spy and patrol behaviours of US planes and ships in South China Sea and East China Sea, and the third is the "2000 National Defence Authorization Act," adopted by the United States Congress in 2000, as well as the "DeLay Amendment", adopted a year later. So we feel that, if anyone has been setting up barriers to cooperation, it is certainly not us.'
The issue of Taiwan is unfortunate, and in my opinion, intractable as both sides have entrenched on irreconcilable positions. On the bright side, relationships between Taiwan and the mainland get better every year and there is a growing glimmer of hope that some form of reunification may solve this problem in the medium term.
The issue of the South China Sea, though it has officially been claimed by China since 1992, has not until recently been seen as an important roadblock to cooperation. As has been well publicized, China recently asserted that its claim to virtually all the South China Sea is now a 'core interest.' This is basically a declaration that China's rather expansive UNLOS claims cannot be negotiated.
Of course, That hasn't stopped the U.S. from trying to negotiate, Secretary Clinton recently told ASEAN that resolving these territorial disputes was a 'leading diplomatic priority'. Reportedly, ASEAN foreign ministers are negotiating an agreement that calls for the disputes to be handled peacefully. Let's hope that these efforts are successful, because these shipping lanes are the lifeline of commerce in the world's fastest growing economic region.
The issue of the 2000 Defense Act is a distraction, a minor (and idiotic) law barring 12 particular kinds of cooperation between the Chinese and U.S. militaries. This rule should be eliminated immediately so that it can no longer be pointed to as an example of U.S. hypocrisy when calling for China to ingratiate itself into the international community. I hate seeing things like that used in the Chinese media to stir public opinion against America.
If General Ma is understood to be the moderate (and he is certainly moderate compared to the tone of the Chinese domestic media), then we should work to promote his priorities as much as we can without giving a window for more demands. Offering even a small 'concession' on something like the Delay Amendment could be trumpeted in international circles as a good faith gesture, encouraging or even directly trading with China to make a concession of their own (something like pledging to follow the will of an international arbiter on the question of international law in the South China Sea).
Sunday, November 14, 2010
QE: Does Ben Bernanke Seek Power?
Wow, I just read a defense of the independence of central banks by Ben "BB QE" Bernanke. I will hit the highlights, and explain why I think Bernanke is such a fraud, though I agree with his central premise (and disagree with well-meaning libertarians like Ron Paul), that the Fed Reserve should remain independent from policymakers in Congress.
This exercise in hypocrisy would be hilarious if it weren't such a serious issue. What's sad is that I generally agree with all of the points Bernanke makes, especially since his arguments seem systematically designed to discredit his own actions as Chairman of the Fed. Here's the link if you want to read it yourself.
http://www.realclearpolitics.com/articles/2010/05/25/central_bank_independence_transparency_and_accountability_105733.html
The first argument Mr. QE proposes is absolutely true. "To achieve both price stability and maximum sustainable employment, monetary policymakers must attempt to guide the economy over time toward a growth rate consistent with the expansion in its underlying productive capacity. Because monetary policy works with lags that can be substantial, achieving this objective requires that monetary policymakers take a longer-term perspective [than politicians] when making their decisions." I agree. We know that politicians only think about short-term considerations like getting elected, and couldn't care less about the mess that their successors inherit. There is no doubt in my mind that if Legislators or even Executives were given direct control over the Central Bank, monetary policy would become a direct tool in the re-election of politicians. Central Banks simply must have a longer time horizon to remain effective. As Bernanke says, 'political interference...lead[s] to both a less stable economy and higher inflation.'
Of course, Quantitative Easing also leads to both a less stable economy and higher inflation. QE is the process by which the central bank (in this case the Fed) buys government bonds in secondary markets from private banks to increase the bank's reserve ratio...the amount of money the bank has 'in reserve.' This allows the banks to lend much more money into the economy. For example, if law requires that banks keep 10% of the value of loans in reserve, then for every $10,000 of debt purchased by the Fed, the bank can loan another $100,000 to businesses, or (as usually happens in times of high uncertainty) buy more government debt. This drives down the interest rate that the Federal Government pays on its debt, while driving up the amount of money available in the marketplace for loans. Theoretically, this is an emergency measure used only when deflation is a real threat, since monetizing the debt is quite literally creating money from air.
The practical impacts of QE are many, but here are some of the most interesting. First, QE allows the government to continuing borrowing money indefinitely with little risk of paying more in interest to service its debt. In fact, at the present time, the interest rate on U.S. treasuries is at the lowest point in years at precisely the same moment that the % of debt to GDP ratios have skyrocketed far beyond historical norms. Why? QE.
Second, QE is directly and intentionally inflationary. Inflation has thousands of impacts, including serving as a hidden tax on unsophisticated savers, increasing competitiveness of exporters (a stated Obama policy goal), and perhaps most importantly decreasing the real value of the massive government debt and deficit which increase every year no matter what political party is in charge.
Interestingly, Bernanke states that "the costs of undue government influence on the central bank's quantitative easing decisions could be especially large, since such influence might be tantamount to giving the government the ability to demand the monetization of its debt, an outcome that should be avoided at all costs."
Hah! So true...and yet so frightening. Lets take a moment to consider a few aspects of the timing of Bernanke's first and second rounds of QE.
QE1: Just after Barack Obama was elected in Nov 2008, BB announced the first round of QE which he then amped up in Dec and again in March 2009. Shortly afterward, Obama announced that he was renominating the 'politically independent' BB for another 4 year term starting Feb 1, 2010. Of course we know that for a government, especially a liberal government with ambitions as large as Obama's absolutely must have a low interest rate on debt, otherwise deficit hawks will begin to howl and independent voters just might listen.
QE2: Just after the Nov 2010 elections (sound familiar?), BB announces that he is set to embark on yet another round of QE. Why might he do that you ask? After all, it will be the president elected in 2012 that will decide whether to keep him in his position of power. Well, he just might be worried about those short term political implications that he argues (and I agree) should not be used to make monetary policy. Consider this: If the economy and employment make a recovery (even short term spike that is ultimately damaging in the long term), then Obama (who knows that there will be no second stimulus) will likely...secretly...credit BBQE for his contribution to Obama's re-election, thus ensuring that BB will be reappointed. Even if Obama is not re-elected, the savvy politician who replaces him will know that BBQE has his back, especially since BB might well repeat his antics after the election in 2012 to help aid the incoming president in the same way he aided Obama.
If my allegations are true--and there's no guarantee that they are, then BB QE is a total fraud and knowing liar. If this is central bank independence, then I'd hate to see what integration looks like.
George Will had a very interesting point to add, which I'm embarrassed I didn't think of myself.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/17/AR2010111705316.html?hpid=opinionsbox1
This article discusses the Fed's dual mandate of price stability and full employment which was first granted in 1977. Not only does the goal of full employment conflict with the goal of price stability, but mandating the Fed to seek full employment is an explicit and intentional politicization of a supposedly apolitical independent force. This adds credibility to my fears that BB QE is both aware of his political clout and exercising it in the pursuit of his power. After all, if full employment is every politician's goal (and right now it ought to be), then BBQE's goals are directly aligned with those of the politicians. The full employment mandate for the Fed dramatically increases the likelihood that the FED is not independent, but is actually another arm of government, working for the political goals of its Board of Directors.
See why I'm so worried about all those problems that BB talked about if the Central Bank isn't independent?
This exercise in hypocrisy would be hilarious if it weren't such a serious issue. What's sad is that I generally agree with all of the points Bernanke makes, especially since his arguments seem systematically designed to discredit his own actions as Chairman of the Fed. Here's the link if you want to read it yourself.
http://www.realclearpolitics.com/articles/2010/05/25/central_bank_independence_transparency_and_accountability_105733.html
The first argument Mr. QE proposes is absolutely true. "To achieve both price stability and maximum sustainable employment, monetary policymakers must attempt to guide the economy over time toward a growth rate consistent with the expansion in its underlying productive capacity. Because monetary policy works with lags that can be substantial, achieving this objective requires that monetary policymakers take a longer-term perspective [than politicians] when making their decisions." I agree. We know that politicians only think about short-term considerations like getting elected, and couldn't care less about the mess that their successors inherit. There is no doubt in my mind that if Legislators or even Executives were given direct control over the Central Bank, monetary policy would become a direct tool in the re-election of politicians. Central Banks simply must have a longer time horizon to remain effective. As Bernanke says, 'political interference...lead[s] to both a less stable economy and higher inflation.'
Of course, Quantitative Easing also leads to both a less stable economy and higher inflation. QE is the process by which the central bank (in this case the Fed) buys government bonds in secondary markets from private banks to increase the bank's reserve ratio...the amount of money the bank has 'in reserve.' This allows the banks to lend much more money into the economy. For example, if law requires that banks keep 10% of the value of loans in reserve, then for every $10,000 of debt purchased by the Fed, the bank can loan another $100,000 to businesses, or (as usually happens in times of high uncertainty) buy more government debt. This drives down the interest rate that the Federal Government pays on its debt, while driving up the amount of money available in the marketplace for loans. Theoretically, this is an emergency measure used only when deflation is a real threat, since monetizing the debt is quite literally creating money from air.
The practical impacts of QE are many, but here are some of the most interesting. First, QE allows the government to continuing borrowing money indefinitely with little risk of paying more in interest to service its debt. In fact, at the present time, the interest rate on U.S. treasuries is at the lowest point in years at precisely the same moment that the % of debt to GDP ratios have skyrocketed far beyond historical norms. Why? QE.
Second, QE is directly and intentionally inflationary. Inflation has thousands of impacts, including serving as a hidden tax on unsophisticated savers, increasing competitiveness of exporters (a stated Obama policy goal), and perhaps most importantly decreasing the real value of the massive government debt and deficit which increase every year no matter what political party is in charge.
Interestingly, Bernanke states that "the costs of undue government influence on the central bank's quantitative easing decisions could be especially large, since such influence might be tantamount to giving the government the ability to demand the monetization of its debt, an outcome that should be avoided at all costs."
Hah! So true...and yet so frightening. Lets take a moment to consider a few aspects of the timing of Bernanke's first and second rounds of QE.
QE1: Just after Barack Obama was elected in Nov 2008, BB announced the first round of QE which he then amped up in Dec and again in March 2009. Shortly afterward, Obama announced that he was renominating the 'politically independent' BB for another 4 year term starting Feb 1, 2010. Of course we know that for a government, especially a liberal government with ambitions as large as Obama's absolutely must have a low interest rate on debt, otherwise deficit hawks will begin to howl and independent voters just might listen.
QE2: Just after the Nov 2010 elections (sound familiar?), BB announces that he is set to embark on yet another round of QE. Why might he do that you ask? After all, it will be the president elected in 2012 that will decide whether to keep him in his position of power. Well, he just might be worried about those short term political implications that he argues (and I agree) should not be used to make monetary policy. Consider this: If the economy and employment make a recovery (even short term spike that is ultimately damaging in the long term), then Obama (who knows that there will be no second stimulus) will likely...secretly...credit BBQE for his contribution to Obama's re-election, thus ensuring that BB will be reappointed. Even if Obama is not re-elected, the savvy politician who replaces him will know that BBQE has his back, especially since BB might well repeat his antics after the election in 2012 to help aid the incoming president in the same way he aided Obama.
If my allegations are true--and there's no guarantee that they are, then BB QE is a total fraud and knowing liar. If this is central bank independence, then I'd hate to see what integration looks like.
George Will had a very interesting point to add, which I'm embarrassed I didn't think of myself.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/17/AR2010111705316.html?hpid=opinionsbox1
This article discusses the Fed's dual mandate of price stability and full employment which was first granted in 1977. Not only does the goal of full employment conflict with the goal of price stability, but mandating the Fed to seek full employment is an explicit and intentional politicization of a supposedly apolitical independent force. This adds credibility to my fears that BB QE is both aware of his political clout and exercising it in the pursuit of his power. After all, if full employment is every politician's goal (and right now it ought to be), then BBQE's goals are directly aligned with those of the politicians. The full employment mandate for the Fed dramatically increases the likelihood that the FED is not independent, but is actually another arm of government, working for the political goals of its Board of Directors.
See why I'm so worried about all those problems that BB talked about if the Central Bank isn't independent?
孔夫子and Chinese Culture
When I ponder Chinese culture, the words cultivated acquiescence come to mind. The Chinese have a very old culture, but the dominant philosophies and customs that I witness on a daily basis strike me as dull. The variety of cultural backgrounds, daily disagreements over fundamental assumptions, and immense variety of thought found in America are simply absent in China. This has both positive and negative results for the culture and the people, and I will explore them here.
Part of the difference can be explained by the fact that China is a developing, as opposed to a mature, economy. People simply haven't had enough time to adjust to the lightening quick changes that happen on a monthly, even daily, basis all around them. They haven't adopted the basic escalator courtesy of standing aside when someone wants to climb. They follow the rules of the road only when it is convenient (driving on the sidewalk, the wrong way on one ways, and even the wrong way through the bike lane are all common occurrences, and don't even get me started on the insanity that seems to infect every single bicycle rider). I believe these things will come with time, as the young people have a much greater sense of the importance of these basic rules than the older generations.
Another difference is the universal acceptance of social dogmas. I have interviewed a large number of students and it is striking to me how commonly I get almost identical responses. What is your favorite book? The women give me pop culture junk from England and America. The men either have never read a book for pleasure or have the same answer. "论语" Lun2Yu3 by "孔夫子" Kong3Fu1Zi3, The Analects of Confucius by the western name. What did he teach you? To be loyal to my friends, my family and my country. To be an honest man.
I should note here, that Confucius is now widely believed to be too weak. A part of the nationalistic narrative here is to fight against foreigners who have systematically repressed and weakened China for the last few centuries. Confucius is a good moral philosophy, but he is soft on foreign policy...a mistake most young people would not approve of these days.
Here are a few widely held beliefs in China:
-Always drink hot water, drinking cold water will make you catch a cold.
-Certain foods should only be consumed in soups.
-Certain foods should only be consumed for breakfast.
-Wearing too little clothing in the winter will make you sick.
-These weird suction cups things at the spa will take away your illness.
-It's totally cool to shoot off thousands of noisy fireworks at any time, like 6am or 12am, or at random intervals throughout the day.
-Burning trash on the sidewalk is an acceptable disposal technique.
The list goes on and on...
The point isn't that the Chinese have some different idiosyncrasies from western cultures, that's totally to be expected. What's unexpected is the virtual unanimity with which these practices are viewed as either acceptable or mandatory. Let's take a few examples of American idiosyncrasies:
-Oversized vehicles
-Christianity
-Football (American Football)/Nascar etc...
-Hot dogs
-Social pariah status for wearing clothes on consecutive days
-America is the greatest country and only does good.
For each of these American customs, it is not difficult to find an American who objects, loudly and sometimes angrily. Plenty of people will tell you that driving an SUV is bad for the environment, that Football is pointless and barbaric, that hot dogs are disgusting and bad for your health, and there are even a few who will object to Christianity's vice grip on every aspect of our government and social institutions. Many people like me just ignore the silly de facto ban on wearing clothes too often and there are plenty of more nuanced opinions of America's role in the world (as well as the America=Evil crowd that shares the lack of nuance of the prevailing view, but still does not agree).
In my experience, people in China simply do not question the prevailing social norms. Perhaps we can consider it a uniquely western tradition to question prevailing propaganda, or perhaps it is a uniquely Chinese/Eastern tradition to accept propaganda. I don't know the answer to that, but I can say that I believe Confucius (used by the ruling party for the purpose of preserving the status quo) is both a symptom and a cause of the lack of Chinese resistance to authority.
The legend of Confucius takes place in about the 4th century BCE (Before Common Era). Like other religious or socially worshipped texts, Confucius's work was compiled centuries after his death by disciples and those who wished to use his philosophy to elevate their own social standing. Here are two examples of translated passages from Confucius. I did not translate these, they were done by the Stanford Encyclopedia of Philosophy. http://plato.stanford.edu/entries/confucius/
Confucius, at home in his native village, was simple and unassuming in manner, as though he did not trust himself to speak. But when in the ancestral temple or at Court he speaks readily, though always choosing his words with due caution. (Lunyu 10.1)
When at court conversing with the officers of a lower grade, he is friendly, though straightforward; when conversing with officers of a higher grade, he is restrained but precise. When the ruler is present he is wary, but not cramped. (Lunyu 10.2)
To me these quotes represent the mindset that the Chinese Government hopes to impose upon its citizens through education, propaganda, and socialization. A mindset of fitting in, of not making waves, of not speaking out in the presence of social superiors, of restraining your thoughts and actions to fit a mold of decency that also happens to preserve the current social order. Let's look further...
The concept of 仁 ren2, or just Ren. This concept is related to compassion and altruism. Cultivating this characteristic is often an exercise in self-deprecation. In my opinion, to the extent that self-deprecation facilitates honest reflection upon one's mistakes, it is a good thing. But to the extent that self-deprecation means sacrificing one's own happiness to serve others, I believe it is destructive to the actualization of an individual. Confucius teaches that devotion to parents and older siblings is integral to the concept of Ren. I too believe that family should be valued and loved as these relationships aid an individul in achieving contentment and fulfillment, but to what extent must we serve a parent who has destroyed him or herself? Confucius would have us sacrifice our lives out of duty. I believe there is a threshold we should not cross when sacrificing our time and well-being in pursuit of aiding a self-destructive person, even if that person is a parent or sibling.
Next let's take a look at Confucius' political philosophy. This requires us to look at two concepts 正名 zheng4ming2 and 德 de2. Zhengming is the concept that rulers should live up their rank by exhibiting De or virtue worthy of someone entrusted with leadership. Starting at the top, if a ruler exhibits virtue, then his deputies and the masses will ultimately follow suit. The way to maintain virtue is by practicing 礼li3, or just Li. Li includes the rituals and ceremonies of sacrifice and humility to recognize the contributions of ancestors (which Confucius credited with all the wisdom that he taught). The complex interactions of the aristocracy were practiced in reciprocal toasting and gift giving that bound the aristocrats in a mesh of mutual obligations and loyalties. Thus the entire system was based on honestly and earnestly participating in the ritualistic social give and take that created mutual indebtedness throughout the aristocratic class. If a leader was failing it was because he was not honestly partaking of Li, or the rituals. To this day, those rituals and relationships are the foundation of the Chinese business and government communities and people work tirelessly to ingratiate themselves to others and develop useful relationships. These relationships are known as 关系 guan1xi4.
Here's what strikes me about Confucius' political views. There is no hint of the western concepts of natural law, human rights, consent of the governed, or right to revolt against bad leadership. If there is a bad leader, he should be replaced by the person who has cultivated the best relationships amongst the existing aristocracy, not a person chosen by a popularity contest of the masses. In fact, Confucius distrusted the artful speech and self-aggrandizement that is necessary to win the masses, considering it a violation of Ren. This means Confucius stands directly opposed to democratic development. He also believed that Ren governed an individual's entire life including their relationships with family, teachers, and government. By extension, one should sacrifice for the leaders of the country much as one would sacrifice for one's own family. There is no room for questioning the leadership of your father, your teacher, or your government. If you cannot question your teacher, or your media, or your leadership, then everyone comes to believe the same things. Everyone is educated to become an ideological and ethical clone. It's little wonder that the Communist Party (post-Mao and his insanity) embraced Confucius so whole-heartedly.
I'm sympathetic to Confucius in a lot of ways. First, I'm sympathetic to the pro-family ethos, subject to the limitations discussed above. Second, I've never been an unabashed proponent of democracy as it encourages delusional sycophants to promote demagogues into leadership positions which they have no idea how to manage. The demagogue's only interest is to promote their own power by continuing to score points with the vast swath of morons who voted for them. This is destructive in a lot of ways, including the perpetual over-promising and under-funding that has trapped Western governments under enormous entitlements and crippling debt. China, because it is still a developing economy without the weight of past commitments, and because its leaders feel little need to buy votes from the peasants, has an incredible surplus that it can spend at will to improve the country, and preserve the social order. In some ways, Confucius promotes something closer to what I might advocate in a perfect world, leaders promoted based upon a consensus of the elite. Of course, I wouldn't define elite quite the same way that the group-think ivy league liberals would, but I digress. The real question is, at what cost does the system come?
Creativity is devastated under the Communist Party. This is for several reasons. First, Confucius and the educational system assume that all knowledge comes from ancestors (as did Confucius), and thus there is little need for creative breakthroughs that forge new ground and discover new knowledge. Second, by teaching that respect for social and family superiors is the ultimate value and defending the moral suasion of the existing leadership, the system encourages people to accept the decisions of the Politburo without critique. This encourages people to find reasons to excuse the behavior of government and cultural authorities rather than find ways to improve. Third, the emphasis on social harmony above the importance of the individual is in violation of basic human instincts and dissuades people from seeing themselves as distinct from their society, discouraging them from following their own thoughts down paths of thought that have not been socially sanctioned. Confucianism itself thus encourages group think at the expense of creativity. I won't go into it here, but we all know that creativity and groundbreaking discoveries are the basis for scientific and economic breakthroughs. China has a long way to go in this department.
Ultimately, the striking uniformity and lack of individuality of thought in China can be linked directly to Confucius and the nationalistic exploitation of his philosophy that is the predominant educational philosophy in modern China. Groupthink is both the natural result of his philosophy, and a self-perpetuating cause for continuing the social orders of the past. On the whole it is difficult to say whether cultivated acquiescence can be considered evil, as it certainly helps keep China both stable and peaceful. The cost is the creativity and individuality we so value in America, the creativity that drove the creation of every aspect of the modern world.
Part of the difference can be explained by the fact that China is a developing, as opposed to a mature, economy. People simply haven't had enough time to adjust to the lightening quick changes that happen on a monthly, even daily, basis all around them. They haven't adopted the basic escalator courtesy of standing aside when someone wants to climb. They follow the rules of the road only when it is convenient (driving on the sidewalk, the wrong way on one ways, and even the wrong way through the bike lane are all common occurrences, and don't even get me started on the insanity that seems to infect every single bicycle rider). I believe these things will come with time, as the young people have a much greater sense of the importance of these basic rules than the older generations.
Another difference is the universal acceptance of social dogmas. I have interviewed a large number of students and it is striking to me how commonly I get almost identical responses. What is your favorite book? The women give me pop culture junk from England and America. The men either have never read a book for pleasure or have the same answer. "论语" Lun2Yu3 by "孔夫子" Kong3Fu1Zi3, The Analects of Confucius by the western name. What did he teach you? To be loyal to my friends, my family and my country. To be an honest man.
I should note here, that Confucius is now widely believed to be too weak. A part of the nationalistic narrative here is to fight against foreigners who have systematically repressed and weakened China for the last few centuries. Confucius is a good moral philosophy, but he is soft on foreign policy...a mistake most young people would not approve of these days.
Here are a few widely held beliefs in China:
-Always drink hot water, drinking cold water will make you catch a cold.
-Certain foods should only be consumed in soups.
-Certain foods should only be consumed for breakfast.
-Wearing too little clothing in the winter will make you sick.
-These weird suction cups things at the spa will take away your illness.
-It's totally cool to shoot off thousands of noisy fireworks at any time, like 6am or 12am, or at random intervals throughout the day.
-Burning trash on the sidewalk is an acceptable disposal technique.
The list goes on and on...
The point isn't that the Chinese have some different idiosyncrasies from western cultures, that's totally to be expected. What's unexpected is the virtual unanimity with which these practices are viewed as either acceptable or mandatory. Let's take a few examples of American idiosyncrasies:
-Oversized vehicles
-Christianity
-Football (American Football)/Nascar etc...
-Hot dogs
-Social pariah status for wearing clothes on consecutive days
-America is the greatest country and only does good.
For each of these American customs, it is not difficult to find an American who objects, loudly and sometimes angrily. Plenty of people will tell you that driving an SUV is bad for the environment, that Football is pointless and barbaric, that hot dogs are disgusting and bad for your health, and there are even a few who will object to Christianity's vice grip on every aspect of our government and social institutions. Many people like me just ignore the silly de facto ban on wearing clothes too often and there are plenty of more nuanced opinions of America's role in the world (as well as the America=Evil crowd that shares the lack of nuance of the prevailing view, but still does not agree).
In my experience, people in China simply do not question the prevailing social norms. Perhaps we can consider it a uniquely western tradition to question prevailing propaganda, or perhaps it is a uniquely Chinese/Eastern tradition to accept propaganda. I don't know the answer to that, but I can say that I believe Confucius (used by the ruling party for the purpose of preserving the status quo) is both a symptom and a cause of the lack of Chinese resistance to authority.
The legend of Confucius takes place in about the 4th century BCE (Before Common Era). Like other religious or socially worshipped texts, Confucius's work was compiled centuries after his death by disciples and those who wished to use his philosophy to elevate their own social standing. Here are two examples of translated passages from Confucius. I did not translate these, they were done by the Stanford Encyclopedia of Philosophy. http://plato.stanford.edu/entries/confucius/
Confucius, at home in his native village, was simple and unassuming in manner, as though he did not trust himself to speak. But when in the ancestral temple or at Court he speaks readily, though always choosing his words with due caution. (Lunyu 10.1)
When at court conversing with the officers of a lower grade, he is friendly, though straightforward; when conversing with officers of a higher grade, he is restrained but precise. When the ruler is present he is wary, but not cramped. (Lunyu 10.2)
To me these quotes represent the mindset that the Chinese Government hopes to impose upon its citizens through education, propaganda, and socialization. A mindset of fitting in, of not making waves, of not speaking out in the presence of social superiors, of restraining your thoughts and actions to fit a mold of decency that also happens to preserve the current social order. Let's look further...
The concept of 仁 ren2, or just Ren. This concept is related to compassion and altruism. Cultivating this characteristic is often an exercise in self-deprecation. In my opinion, to the extent that self-deprecation facilitates honest reflection upon one's mistakes, it is a good thing. But to the extent that self-deprecation means sacrificing one's own happiness to serve others, I believe it is destructive to the actualization of an individual. Confucius teaches that devotion to parents and older siblings is integral to the concept of Ren. I too believe that family should be valued and loved as these relationships aid an individul in achieving contentment and fulfillment, but to what extent must we serve a parent who has destroyed him or herself? Confucius would have us sacrifice our lives out of duty. I believe there is a threshold we should not cross when sacrificing our time and well-being in pursuit of aiding a self-destructive person, even if that person is a parent or sibling.
Next let's take a look at Confucius' political philosophy. This requires us to look at two concepts 正名 zheng4ming2 and 德 de2. Zhengming is the concept that rulers should live up their rank by exhibiting De or virtue worthy of someone entrusted with leadership. Starting at the top, if a ruler exhibits virtue, then his deputies and the masses will ultimately follow suit. The way to maintain virtue is by practicing 礼li3, or just Li. Li includes the rituals and ceremonies of sacrifice and humility to recognize the contributions of ancestors (which Confucius credited with all the wisdom that he taught). The complex interactions of the aristocracy were practiced in reciprocal toasting and gift giving that bound the aristocrats in a mesh of mutual obligations and loyalties. Thus the entire system was based on honestly and earnestly participating in the ritualistic social give and take that created mutual indebtedness throughout the aristocratic class. If a leader was failing it was because he was not honestly partaking of Li, or the rituals. To this day, those rituals and relationships are the foundation of the Chinese business and government communities and people work tirelessly to ingratiate themselves to others and develop useful relationships. These relationships are known as 关系 guan1xi4.
Here's what strikes me about Confucius' political views. There is no hint of the western concepts of natural law, human rights, consent of the governed, or right to revolt against bad leadership. If there is a bad leader, he should be replaced by the person who has cultivated the best relationships amongst the existing aristocracy, not a person chosen by a popularity contest of the masses. In fact, Confucius distrusted the artful speech and self-aggrandizement that is necessary to win the masses, considering it a violation of Ren. This means Confucius stands directly opposed to democratic development. He also believed that Ren governed an individual's entire life including their relationships with family, teachers, and government. By extension, one should sacrifice for the leaders of the country much as one would sacrifice for one's own family. There is no room for questioning the leadership of your father, your teacher, or your government. If you cannot question your teacher, or your media, or your leadership, then everyone comes to believe the same things. Everyone is educated to become an ideological and ethical clone. It's little wonder that the Communist Party (post-Mao and his insanity) embraced Confucius so whole-heartedly.
I'm sympathetic to Confucius in a lot of ways. First, I'm sympathetic to the pro-family ethos, subject to the limitations discussed above. Second, I've never been an unabashed proponent of democracy as it encourages delusional sycophants to promote demagogues into leadership positions which they have no idea how to manage. The demagogue's only interest is to promote their own power by continuing to score points with the vast swath of morons who voted for them. This is destructive in a lot of ways, including the perpetual over-promising and under-funding that has trapped Western governments under enormous entitlements and crippling debt. China, because it is still a developing economy without the weight of past commitments, and because its leaders feel little need to buy votes from the peasants, has an incredible surplus that it can spend at will to improve the country, and preserve the social order. In some ways, Confucius promotes something closer to what I might advocate in a perfect world, leaders promoted based upon a consensus of the elite. Of course, I wouldn't define elite quite the same way that the group-think ivy league liberals would, but I digress. The real question is, at what cost does the system come?
Creativity is devastated under the Communist Party. This is for several reasons. First, Confucius and the educational system assume that all knowledge comes from ancestors (as did Confucius), and thus there is little need for creative breakthroughs that forge new ground and discover new knowledge. Second, by teaching that respect for social and family superiors is the ultimate value and defending the moral suasion of the existing leadership, the system encourages people to accept the decisions of the Politburo without critique. This encourages people to find reasons to excuse the behavior of government and cultural authorities rather than find ways to improve. Third, the emphasis on social harmony above the importance of the individual is in violation of basic human instincts and dissuades people from seeing themselves as distinct from their society, discouraging them from following their own thoughts down paths of thought that have not been socially sanctioned. Confucianism itself thus encourages group think at the expense of creativity. I won't go into it here, but we all know that creativity and groundbreaking discoveries are the basis for scientific and economic breakthroughs. China has a long way to go in this department.
Ultimately, the striking uniformity and lack of individuality of thought in China can be linked directly to Confucius and the nationalistic exploitation of his philosophy that is the predominant educational philosophy in modern China. Groupthink is both the natural result of his philosophy, and a self-perpetuating cause for continuing the social orders of the past. On the whole it is difficult to say whether cultivated acquiescence can be considered evil, as it certainly helps keep China both stable and peaceful. The cost is the creativity and individuality we so value in America, the creativity that drove the creation of every aspect of the modern world.
Friday, November 12, 2010
Currency Noise: The Chinese Watch America Bluster
Glorified liberal simpleton economist Paul Krugman made waves in March when he suggested threatening China with a 25% surcharge on all imports to the United States, after a remarkably amateur reading of the global trade imbalances. http://www.nytimes.com/2010/03/15/opinion/15krugman.html
This perceived threat to China's currency and the stability of the international market prompted some business groups in China to ask me for an analysis of the likelihood of a U.S. trade war. In March 2010, I wrote this article at their request, so some of the details may seem superfluous to more knowledgeable followers of American Politics. The most recent round of Quantative Easing has certainly thrown a new factor into the currency debate, but I will address that in a separate article. All of the predictions in this article have held true, and I think they will continue to hold true for the foreseeable future.
This perceived threat to China's currency and the stability of the international market prompted some business groups in China to ask me for an analysis of the likelihood of a U.S. trade war. In March 2010, I wrote this article at their request, so some of the details may seem superfluous to more knowledgeable followers of American Politics. The most recent round of Quantative Easing has certainly thrown a new factor into the currency debate, but I will address that in a separate article. All of the predictions in this article have held true, and I think they will continue to hold true for the foreseeable future.
The Obama Perspective on Renminbi Revaluation
I. Introduction: Treasury Department’s April Report on Currency Manipulation
Under the Trade Act of 1988, duties are imposed on the Treasury Secretary of the United States April 15th, 2010 . No country has been identified as a manipulator by this process since 1994 when China April 15th 2009 , and October 15th 2009 , the Obama administration did not designate any currency manipulators. The Obama administration most likely believes that China
II. Issues impacting the Obama Administration and Treasury Secretary Tim Geithner on their pending decision about currency manipulation.
a. Domestic Political Pressures on the Obama Administration
i. Unions and Union Sympathizers
The President’s political party, the Democratic Party, relies upon the support of unions (lobbying groups who represent organized labor). Union leaders are resolutely in favor of protectionist measures such as tariffs to punish China China
Economists allied with the Democratic Party such as Paul Krugman of the New York Times and Morris Goldstein of The Peterson Institute for International Economics have recently issued reports and newspaper articles providing support for Union arguments that a weak Renminbi serves to undermine the job market in the United States. Paul Krugman, a Nobel Laureate perhaps the most prominent Democratic economist recently called for an imposition of a 25% tariff on all Chinese goods until the RMB was allowed to revalue. This was widely viewed as a rather dramatic event, and it has helped to galvanize public opinion in support of political action against China
ii. Political Weakness and the November Elections
It is widely believed that the Democratic Party will lose a large number of elections this November. Democrats are searching for ways to rally voters in support of the Democratic Party. The weak economy and high unemployment numbers are the primary reason that Democrats are expected to lose. Democratic Economists blame unemployment partly on the ‘unfair’ advantages obtained by China China
iii. Economy and Joblessness
The economy in the U.S. China U.S. China U.S. U.S. China China China
Still, Obama would certainly like to see a revaluation of the RMB because it is believed that a revaluation would improve employment numbers in the U.S.
b. Domestic Legal Considerations
i. Letter by Congressmen
A Letter written March 15, 2010 by U.S. United States U.S. China
There is a proposed bill in the U.S. Senate that would legally require the U.S. China
A powerful Senator named Charles Schumer has said, “Now more than ever, there is a consensus to finally confront China
Attaching a controversial policy like retaliation for currency manipulation to a spending bill that must be passed for the government to function (“must-pass”) is a common tactic to pass unpopular legislation. As Chairman of the powerful Senate Finance Committee, Schumer is in a position to carry out his threat, but it is far from clear that he will do so. The Obama administration holds considerable influence over the Senator and it is unlikely that Schumer would propose legislation that Obama opposes.
ii. WTO rules for Trade Protectionism
Included in the Congressional letter is a call for the Secretary of Commerce to file a lawsuit with the World Trade Organization (WTO) claiming that China’s currency manipulation is a protectionist measure that triggers the WTO rules on countervailing duties, “China’s exchange rate misalignment meets all three parts of [the countervailing duty] test and therefore merits the WTO-permitted application of countervailing duties.” Any international lawyer could tell you that it is very difficult to trigger the standard for countervailing duties, and this case is very unlikely to qualify. The WTO would almost certainly rule against the United States U.S. U.S. China U.S.
c. Geopolitical Cooperation on Matters of Strategic Import
It is clear that labeling China
i. Unease by American Allies in EU, Brazil
Some members of the EU and the community of nations are upset with China
ii. Iran
The Iranian regime is a top concern for U.S. U.S. Israel Iran China China Iran China
iii. Climate Change
The Obama administration is committed to bringing about international action on climate change. Such action will be impossible without the cooperation of China China China China
III. Chinese Considerations in Revaluing the RMB
These considerations are important to the Obama Administration’s decision on whether to label China
a. Inflationary Impact of U.S.
Prolific deficit spending in the United States and China
b. Japanese Lesson
In the 1980’s, the U.S. Japan China China
c. Protection of Image
It is known to all that a strong government cannot afford to bow to pressure. China U.S. China China China China China
IV. Conclusion and Forecast of Upcoming Actions
a. Market Predictions
Currently, the market predicts the RMB will appreciate in value at approximately 2.9% in the next twelve months. While the market is not always correct, it is a truly objective indicator. Since the market concurrently believes that any action to force China China China
*This claim is based on many statements from managers of investment firms and foreign policy analysts.
b. An Alternative U.S.
The Obama Administration has recently been presented an alternative solution by the influential Arvind Subramanian of the Peterson Institute for International Economics. In a March 18, 2009 article in the Financial Times, Mr. Subramanian recommends that the U.S. China China China U.S. China U.S.
c. Political Probabilities
The Obama administration is currently weakened by unemployment and domestic strife. Weak governments often act desperately, especially when their allies are encouraging desperate action. Lawmakers, Unions, Economists, Journalists, and even foreign countries aligned with the Obama administration are strongly in favor of deeming China
Despite this, I believe the Obama administration will follow past precedent and abstain from deeming China Iran China
Priding Myself For Serving Myself
Part 5 of 5 Part Series.
Though many of Rand's followers call themselves Objectivists, I don't really like the term and prefer to consider myself a skeptical individualist who seeks to live according to enlightened self-interest. I'm not after all, a genuine follower of Rand as I view her anti-emotional disposable personal relationships as both disloyal and destructive. I also believe that health and a healthy lifestyle are interwoven and inseparable from genuine personal happiness. Still, this post is dedicated to the actualization to which Rand led me.
I have not read Atlas Shrugged or The Fountainhead or The Virtue of Selfishness in a long time and I will not explain them here. If you want to read those books, you'll have to buy them. Instead, I want to relay how the philosophy of promoting enlightened self-interest above all other considerations impacted my life, my spirit, and my happiness.
As a young adult, I was unhappy, restless and willing to try anything that might grant reprieve from gloom. (See some prior entries in this series for more detail). I lived in a dingy college dorm and my friends were druggees with no eye to the future. I was similarly affected. A high school friend, who was before and again became my closest friend, bought me a copy of Atlas Shrugged. Since I wasn't really interested in school (I got decent grades on absolutely minimum effort and was never motivated), I took a month or two to read and truly understand Atlas Shrugged. Once I did, I consolidated my understanding with later novels and developed what I think is a slightly more appealing philosophy.
I want to explain a few key aspects of enlightened self-interest. Notice that I did not use Rand's term, rational selfishness, for though the two are very similar in result, they elicit much different reactions from a lay person. In colloquial English, selfishness has adopted a pejorative meaning that I do not wish to invoke when labeling myself. Therefor, I will use the term Enlightened Self-Interest. Here are a few characteristics:
1. I live for my own happiness. Happiness requires that I earnestly pursue honesty and trustworthiness.
Believe me, I have not always been honest or trustworthy. There was a time when I stole trinkets for the thrill and took pride in my ability to hoist deception upon unwitting teachers and peers. There was a time when I fantasized about sexual violence and enjoyed shocking people with how little the boundaries of culture constrained me. There was a time when every single person who knew me, knew a different me. Two acquaintances discussing me must've been remarkably confused, sometimes shocked. I was continuously caught in contradictions, always needing to invent a more elaborate story to explain away dubious inconsistencies. It got to the point where I avoided talking to most of my acquaintances for fear that I would not remember which version of me they knew. I grew increasingly isolated since even my closer friends did not trust me. Needless to say, this did not make me happier.
Two influences shocked me out of this downward spiral. One was Rand, whose clarity of thought convinced me that I was betraying myself by continuously making choices that led to my ultimate unhappiness. My daily decisions were the source of my misery. She explained how thinking critically, understanding the value of property, and working hard, were signs of respecting yourself. This realization motivated and clarified my life, I began to think about every decision I made with a goal of promoting my own happiness. The needless lies, petty property crimes, and shock antics were quickly shelved. The self-deception took longer.
The second influence was love. This is one area where I differ greatly from Rand, who saw everything through a go-it-alone type lens. I believe that enlightened self-interest means loving deeply and without reservation. This requires soul-baring honesty, which was quite a chore for me. If you (like most people) are not critical of your own faults, then you are not honest with yourself. If you are not honest with yourself then it is wholly impossible to be honest with others. I failed many times at honesty in that first experiment, but I learned how to make the effort, something that has set me up for success in my most recent relationship. Trusting someone without reservation, a relationship I now hold with three people, enables you to more objectively accept their critiques of your flaws. Objectively analyzing your own flaws is perhaps life's most difficult task, and one of the most important stepping stones to happiness. Valued loved ones can prod you with reasonable criticism, while being there to comfort and aide you as you make mistakes or endure difficult times.
2. I focus on the long term. I plan to be alive for 100 years, given a little luck. Since my goal is to be as happy as possible for as many years as possible, I must consider that my decisions will impact my whole life. Health and family were both somewhat under explored by Rand but are natural results of her philosophy.
Health is necessary for longevity of course, but more than any other single factor, health is necessary for happiness. A healthy brain is an active brain, a creative brain, a happy brain. A healthy lifestyle promotes a healthy brain. It really is that simple. Pursuing health has a number of consequences, but perhaps the most devastating to my old self was the abandonment of drugs, at least as a common occurrence. These days, I rarely drink and never to excess. I rarely smoke marijuana (and only with a vaporizer since it minimizes carcinogens). I never do stimulants beyond mild ones associated with increasing attentiveness for a short and controlled period. Hallucinogens are out. These habits combined with years of strength and endurance exercise and a vegetarian diet have put me in good physical condition, ready to keep my mind strong for the long haul.
Focusing on the long-term also means planning for the arc of my life. I have an adventurer's spirit, but a family soul. As I age, I know that I am quickly approaching the time where I must prepare to have children if I am to achieve one of life's greatest joys. I have adjusted my adventures, business plans, and personal relationships in preparation for this inevitability. I will not stop adventuring, but I can no longer take enormous financial risks, nor switch lives between China and America at will.
In the end, Rand provided a clarifying moment at a critical period of my life. Her unabashed defense of serving one's own goals first and foremost provided a schematic for me to improve myself. I took to heart my responsibility for my choices in my pursuit of actualization, and applied her philosophy to my strongest desires: health and family. I still fail regularly on both personal and professional levels, and I still suffer periods of uncertainty, but I'm confident that I have the tools to continue being the happy person I am.
Though many of Rand's followers call themselves Objectivists, I don't really like the term and prefer to consider myself a skeptical individualist who seeks to live according to enlightened self-interest. I'm not after all, a genuine follower of Rand as I view her anti-emotional disposable personal relationships as both disloyal and destructive. I also believe that health and a healthy lifestyle are interwoven and inseparable from genuine personal happiness. Still, this post is dedicated to the actualization to which Rand led me.
I have not read Atlas Shrugged or The Fountainhead or The Virtue of Selfishness in a long time and I will not explain them here. If you want to read those books, you'll have to buy them. Instead, I want to relay how the philosophy of promoting enlightened self-interest above all other considerations impacted my life, my spirit, and my happiness.
As a young adult, I was unhappy, restless and willing to try anything that might grant reprieve from gloom. (See some prior entries in this series for more detail). I lived in a dingy college dorm and my friends were druggees with no eye to the future. I was similarly affected. A high school friend, who was before and again became my closest friend, bought me a copy of Atlas Shrugged. Since I wasn't really interested in school (I got decent grades on absolutely minimum effort and was never motivated), I took a month or two to read and truly understand Atlas Shrugged. Once I did, I consolidated my understanding with later novels and developed what I think is a slightly more appealing philosophy.
I want to explain a few key aspects of enlightened self-interest. Notice that I did not use Rand's term, rational selfishness, for though the two are very similar in result, they elicit much different reactions from a lay person. In colloquial English, selfishness has adopted a pejorative meaning that I do not wish to invoke when labeling myself. Therefor, I will use the term Enlightened Self-Interest. Here are a few characteristics:
1. I live for my own happiness. Happiness requires that I earnestly pursue honesty and trustworthiness.
Believe me, I have not always been honest or trustworthy. There was a time when I stole trinkets for the thrill and took pride in my ability to hoist deception upon unwitting teachers and peers. There was a time when I fantasized about sexual violence and enjoyed shocking people with how little the boundaries of culture constrained me. There was a time when every single person who knew me, knew a different me. Two acquaintances discussing me must've been remarkably confused, sometimes shocked. I was continuously caught in contradictions, always needing to invent a more elaborate story to explain away dubious inconsistencies. It got to the point where I avoided talking to most of my acquaintances for fear that I would not remember which version of me they knew. I grew increasingly isolated since even my closer friends did not trust me. Needless to say, this did not make me happier.
Two influences shocked me out of this downward spiral. One was Rand, whose clarity of thought convinced me that I was betraying myself by continuously making choices that led to my ultimate unhappiness. My daily decisions were the source of my misery. She explained how thinking critically, understanding the value of property, and working hard, were signs of respecting yourself. This realization motivated and clarified my life, I began to think about every decision I made with a goal of promoting my own happiness. The needless lies, petty property crimes, and shock antics were quickly shelved. The self-deception took longer.
The second influence was love. This is one area where I differ greatly from Rand, who saw everything through a go-it-alone type lens. I believe that enlightened self-interest means loving deeply and without reservation. This requires soul-baring honesty, which was quite a chore for me. If you (like most people) are not critical of your own faults, then you are not honest with yourself. If you are not honest with yourself then it is wholly impossible to be honest with others. I failed many times at honesty in that first experiment, but I learned how to make the effort, something that has set me up for success in my most recent relationship. Trusting someone without reservation, a relationship I now hold with three people, enables you to more objectively accept their critiques of your flaws. Objectively analyzing your own flaws is perhaps life's most difficult task, and one of the most important stepping stones to happiness. Valued loved ones can prod you with reasonable criticism, while being there to comfort and aide you as you make mistakes or endure difficult times.
2. I focus on the long term. I plan to be alive for 100 years, given a little luck. Since my goal is to be as happy as possible for as many years as possible, I must consider that my decisions will impact my whole life. Health and family were both somewhat under explored by Rand but are natural results of her philosophy.
Health is necessary for longevity of course, but more than any other single factor, health is necessary for happiness. A healthy brain is an active brain, a creative brain, a happy brain. A healthy lifestyle promotes a healthy brain. It really is that simple. Pursuing health has a number of consequences, but perhaps the most devastating to my old self was the abandonment of drugs, at least as a common occurrence. These days, I rarely drink and never to excess. I rarely smoke marijuana (and only with a vaporizer since it minimizes carcinogens). I never do stimulants beyond mild ones associated with increasing attentiveness for a short and controlled period. Hallucinogens are out. These habits combined with years of strength and endurance exercise and a vegetarian diet have put me in good physical condition, ready to keep my mind strong for the long haul.
Focusing on the long-term also means planning for the arc of my life. I have an adventurer's spirit, but a family soul. As I age, I know that I am quickly approaching the time where I must prepare to have children if I am to achieve one of life's greatest joys. I have adjusted my adventures, business plans, and personal relationships in preparation for this inevitability. I will not stop adventuring, but I can no longer take enormous financial risks, nor switch lives between China and America at will.
In the end, Rand provided a clarifying moment at a critical period of my life. Her unabashed defense of serving one's own goals first and foremost provided a schematic for me to improve myself. I took to heart my responsibility for my choices in my pursuit of actualization, and applied her philosophy to my strongest desires: health and family. I still fail regularly on both personal and professional levels, and I still suffer periods of uncertainty, but I'm confident that I have the tools to continue being the happy person I am.
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