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18 December 2008: Recession
I put together two things I already knew to figure out what happened to bring about the current recession.
First, money is claim checks. Money is not the purpose of the economic system. Money is the purpose of the financial system. The purpose of the economic system is to produce and distribute goods and services
Money makes the world go round. Money is a claim on resources. If an employer has money, the money can be used to hire workers. The employer gives the money to the workers, and the workers then use the money to claim some of the product they and other workers produced.
Second, borrowing creates money. If you don’t believe that, just look at what banks do. Suppose you put $1000 in the bank. Then the bank lends $1000 to Mr. Z. You still have $1000 in the bank. Everybody else who put money in the bank still has what they put in. And Mr. Z has $1000 that he didn’t have before.
What happened is that a lot of money was generated by borrowing that was secured by mortgages. The mortgages turned out to be no good. The money disappeared.
We still have the same resources we had before. We have just as many workers, just as many trucks and factories, and just as many goods on store shelves waiting to be bought. But the claim checks for these resources disappeared. Workers are laid off, trucks and factories stand idle, and goods sit unsold on the shelves.
We just lost the claim checks. That’s all. Send the old man a comment on this article
17 December 2008: Disrespect and disability
A letter in this morning’s New York Times argued that it’s not appropriate to make fun of a person’s physical disability. I absolutely agree with that. I also agree that a physical disability has nothing to do with a person’s intelligence. Even some mental disabilities do not affect intelligence. I forget what the joke was, but the punch line is “I may be crazy, but I’m not stupid!”
But the letter writer went on to say that disability has nothing to do with “ability to perform on the job.” Now that’s a ridiculous claim. In my dictionary, the prefix “dis-” means not, absence, or opposite. Disrespect means lack of respect, disability means lack of ability. A blind person, just for instance, couldn’t perform at a proofreader’s job.
Let’s get this perfectly clear. Disabled people do not deserve disrespect. But neither can they claim that they are not dis-abled.
And speaking of disrespect, another letter writer complained that it was disrespectful of an Iraqi journalist to throw a shoe at a President of the United States. The truth is that many Iraqis consider the U.S. occupation to be an act of terrorism and Bush to be a terrorist leader. Another fact is that according to President Bush, the proper way to deal with terrorist leaders is to hunt them down and kill them, preferably with unmanned missiles. So throwing a shoe at President Bush is, from an Iraqi point of view, the least he deserves. Send the old man a comment on this article
30 November 2008: How much stimulus?
I’m looking at an article by the Nobel-laureate economist Joseph Stiglitz on the Opinion page of today’s New York Times. He’s claiming that the government needs to spend at least $600 billion to $1 trillion over the next two years as an economic stimulus. He bases this estimate on an estimate that at least 5 million jobs have to be created.
Never mind where he gets the 5 million jobs number. That many jobs, at an average of $40,000 a year, comes to $400 billion over two years. Why does Stiglitz need so much more than that?
I guess it’s because he wants to give the money to the financial geniuses instead of paying it to workers directly. The financial geniuses keep a lot for themselves. Even the money they’re getting now isn’t being put back into the economy; it’s being used for acquisitions, mergers, etc., etc.
We’d get more bang for the buck by throwing it onto the sidewalks than by giving it to investment banks. Send the old man a comment on this article
20 November 2008: Health care the hard way
I’ve been away celebrating a grandchild’s coming of age, so I haven’t had time to be angry. But I’ve been thinking about this for a while.
I’ve been reading about Commonwealth Care and Commonwealth Choice, the programs Massachusetts adopted to make sure everybody has access to health care. They give me the distinct impression that we as a nation have got ourselves into a mindset that prevents us from seeing the obvious.
I mean, look at how we provide everybody with fire protection. We don’t ask people to call their favorite fire company when they have a fire, get a bill from them that they don’t understand but have to pay, and then get their insurance company to pay all of the fire company’s bill except for a copay. We have publicly funded fire companies.
But here’s Massachusetts, with a commitment that everybody should have health care coverage, perpetuating the overly complicated wasteful bureaucratic system we’ve grown into. Employers that have provided health care plans for their employees should continue to provide them. Employers that haven’t provided health care for their employees may have to. People who don’t have employer-provided coverage have to buy private plans if they can afford to. People who can’t afford private coverage (as determined by their income) get subsidized plans at a cost that depends on their income bracket. If their income is more than the limit for some bracket they have to pay hundreds of dollars more for health coverage in the next bracket, so for some people, the more they earn the less they keep. Most can choose among many different plans, which differ in how much they cost up front, how much they cost later, and which health care providers (e.g., doctors) they can have access to. And each health care provider (e.g., doctor) has to deal with the multitude of plans that their patients are enrolled in.
It would make much more sense to provide health care for all and pay for it out of income taxes and payroll taxes. Most of these taxes are carefully crafted so that the more you earn, the more you keep. The cost to the government would be simply covered by increasing the income tax and payroll tax amounts.
Eliminate the copay. It won’t stop rich people from going to the doctor, and it might stop poor people from going.
I can think of two reasons why people don’t want to provide health care in this simple way. First: they think it’s “socialized medicine” and that makes it bad. Second: they would rather pay a two thousand dollar fee than a one thousand dollar tax, because they hate to pay taxes. Both reasons are foolish Send the old man a comment on this article
8 November 2008: The Guantánamo detainee dilemma
I got angry about this on November 3 but I was interrupted.
An article in that day’s New York Times said the next President will have a problem with closing the detention camp at Guantánamo because some of the detainees -- perhaps many of the detainees -- are dangerous.
What is the problem?
We’re engaged in a “war on terror” and these are “enemy combatants.” So we’re at war and we have an enemy. In a war, being an enemy combatant is not in itself illegal. There are legal and illegal enemy combatants. There’s nothing in between; either they’re illegal or they’re not.
Legal enemy combatants are prisoners of war. They are detained indefinitely because they are dangerous, and while they are detained they are entitled to decent conditions subject to international inspection.
Illegal enemy combatants are innocent until proven guilty. They are entitled to a trial with every reasonable opportunity for their own defense, and they are entitled not to be detained indefinitely without trial.
It’s that simple. No problem. Send the old man a comment on this article
3 November 2008: The FCC vs. the F word
Let’s be perfectly clear about the word we’re calling the “F word.” It’s the word you get when you delete all but the first two and last two letters of the innocuous phrase “full tuck.” See? I didn’t actually write it. Our page is safe.
The story is here on the USA Today website and a different writeup is on the Los Angeles Times website. Back in 2002 somebody used the F word on Fox TV and in 2003 someone else used it on NBC TV. The Federal Communications Commission did not fine the networks because at the time they had a policy of permitting one-time fleeting use of such words. But then in 2004, in an action referring to the 2003 incident, they reversed the former policy. In 2006, referring specifically to the 2002 incident, they declared that any similar incidents in the future would be declared indecent and would result in fines against the broadcasters. Fox and NBC sued in federal court to overturn the new FCC policy and won in a federal appeals court. The U.S. Supreme court will hear the FCC counter-appeal tomorrow.
The FCC says they’re doing this to protect children. From what? How can a word harm children? Words don’t harm anybody. It’s only what the words say that can do harm.
Wait, you say. Isn’t that just like the argument that “guns don’t kill people, people kill people”? No. In fact, if a child gets hold of a loaded gun, and isn’t aware of the danger, it’s the gun that can kill, because there’s no killer pulling the trigger. But words -- that is, single words, not expressing a thought -- can’t kill.
The FCC has a different angle on that. Here’s how the Los Angeles Times described it:
“Any use” of the F-word “inherently has a sexual connotation,” the FCC said. It also banned the use of the word “bulls- - - -er” on the grounds that it “invariably invokes a coarse excretory image.”
There are two fallacies in this argument.
To begin with, the F-word does not invariably have a sexual connotation. It has been used so much, so often, that it has taken on a meaning of its own, or rather a meaninglessness of its own. It’s a particular sort of intensifier, expressing sometimes anger, sometimes amazement, sometimes nothing at all. The sentence “They were F-ing furiously” does, in fact, bring to mind an image of vigorous adult activity. But “They were F-ing furious” says only that they were very, very angry. Similarly, a reference to a “bull sh---ing” invokes an image of an animal relieving itself, but saying someone is “bullsh---ing” suggests only that untruths are being spoken.
The second consideration is whether words can harm children at all. I haven’t seen any credible studies suggesting that children who hear certain words suffer any harm. As far as I can tell, the First-Amendment guarantee of freedom of speech is being challenged on totally false pretenses. Send the old man a comment on this article
28 October 2008: Free market? Self correcting?
Alan Greenspan was “shocked.” The erstwhile Fed chairman said he thought the free market would be self correcting. He thought there couldn’t be a nationwide bubble in housing because the housing market is local. What can I say? Incredible.
Free markets are self-correcting. But we don’t have any. Especially not the financial markets. A free market is one in which there are a lot of sellers and a lot of buyers interacting with each other, none of them big enough to make a difference if they enter or leave the market. There is free entry into, and free exit from, the market. There are no secrets: buyers know what they’re buying and sellers know what they’re selling.
The financial markets are certainly not like that. There are some very big players, obviously, since the government is concerned that just one of them exiting the market could jeopardize the whole financial system. And apparently most of the players, buyers and sellers alike, did not know what the derivatives they were buying and selling really were.
In a free market, sellers will not sell at less than the cost of production, and buyers will not buy anything they could buy elsewhere, or buy an equivalent substitute for, at a lower price. Under those conditions, the market price reaches a stable value. But nobody knew the real “production cost” of the “credit default swaps,” and nobody knew what they were really equivalent to. So the market price had nothing to do with their real value. When their real value became apparent, the market crashed.
The housing market. It’s local, all right. But the market for the money to buy houses is national. And the availability of money has a lot to do with the price.
Your decision to buy or not to buy something depends on how much money you have. The more you spend on some things, the less you can spend on others. If you have more money, you can buy more things, or you can buy more expensive things. And if you can borrow money easily enough, you can buy anything, or everything. If mortgage money becomes easier to come by, nationwide, then people can spend more on houses, and the price of housing goes up, nationwide. A bubble in mortgages causes a bubble in housing.
Greenspan didn’t know that? Incredible. Send the old man a comment on this article
