The False Primacy of Politics over Markets

Why Must Politics Have Primacy?

Back in 2010, German Chancellor Angela Merkel was making a major push for “the primacy of politics over the markets.” To a far greater extent, the entire doctrine of Keynesian economics which is now crashing against the rocks of high government debt levels and broad economic reality, is founded on the notion of the primacy of politics: that politics must have such primacy.

My question: why?

The Rebirthing of Nations

A New Dawn?

So, I hadn’t posted here in a long time. I have good reasons – life, learning how to be a webmaster of a small corporate site owned in part by family – but in addition, I write about strategy. This Libya mess hasn’t had much. Now, however, we get a clear indication of where this is going in the future: the rebirthing of Libya, the first among many perhaps in what promises to be a new era of worldwide instability.

Sun Tzu: Regular and Elite Forces

Let’s talk us some Sun Tzu here. He went over regular vs. irregular forces and tactics, but let’s apply this to modern circumstances.

The Right Tool For The Right Job

Irregular forces… well, for our very modern purposes, let’s call them elite forces.

That is, forces with a selection of manpower, equipment, training, doctrine, and leadership that renders them superior to regular forces, especially by the old “pound for pound” measurement.

Pound for pound, the elite force can whip any regular force it meets. If numbers are equal, the elite force will win virtually all the time.

Therein lies the problem.

Pound for pound, a panther might be fiercer than the lion, but the lion will still win because its overall power is greater.

Pound for pound, the elite force might be fiercer than the regular forces, but the regular forces, being far more numerous, will surround the elite force, bombard it with artillery, whittle down its numbers from the inevitable damage, and finish it off and utterly destroy it. It’ll be messy, but it’ll get done.

Therefore, an elite force cannot defeat a much larger, minimally competent regular force. While capable of doing horrific damage on a narrow front, the vulnerability is great.

How, then, to use elite forces?

I have realized the truth of this circumstance.

You must use regular forces and elite forces simultaneously, but separately.

If put together, the elite soldiers will be resented by the regular soldiers, and the regular soldiers scorned by the elite soldiers, and ruinous tests of courage will take place between them. (Read: Fistfights, brawls)

Elite forces will be held back if they serve alongside regular forces as a unit, and their advantages will be diminished and drowned out.

Regular forces cannot keep up with the elite forces, therefore a unified command either brings the elite forces to heel (to their ruin), or pits elite forces against the enemy without coordination (to their ruin).

What to do, then?

Elite forces require regular forces to mask their movements and permit them to do maximum damage to the enemy.

That is, only a large regular force can act as a decoy for an elite force. A small regular force is too fragile to do this for long, but a sufficiently large and resilient force can securely draw the enemy’s attention and allow elite forces – which can operate outside of the regular order of battle, and which can operate even when cut off from the commander – to carry the fight to the enemy.

Regular forces are indispensable to elite forces, not because they are more capable, but because they are complimentary.

Just as it is foolish to attempt to win with conventional tactics alone, so it is foolish to attempt to win with irregular tactics lacking the distraction and masking caused by the actions of regular forces.

Only when the two work together, not in unison but complimentary to each other, can elite forces repeatedly attack sections of the enemy on favorable terms and rout them utterly. This causes chaos in the enemy’s order of battle.

I believe that this is what works. I can come up with various examples, and in the future, I plan to, but I felt it’s good to get this out now and just let people stare at it a little while.

This Is Why The US Has Freedom of Religion

From the Daily Telegraph (UK):

Druidry has been recognised as an official religion in Britain for the first time, thousands of years after its adherents first worshipped in the country.

The Druid Network has been given charitable status by the Charity Commission for England and Wales, the quango that decides what counts as a genuine faith as well as regulating fundraising bodies.

It guarantees the modern group, set up in 2003, valuable tax breaks but also grants the ancient religion equal status to more mainstream denominations. This could mean that Druids, the priestly caste in Celtic societies across Europe, are categorised separately in official surveys of religious believers.

The document even addresses the claims made by the Romans about Druids committing human sacrifice, but finds “no evidence of any significant detriment or harm” arising from modern beliefs.

It notes that although there are only 350 members of the Druid Network, a BBC report in 2003 claimed as many as 10,000 people followed the ancient faith across the country.

Be glad that in the United States, your religion does not need to be recognized as “official” by the government. The IRS has to actively prove that a church with tax exempt status is violating the restrictions on that status… but you can always waive the status and just practice your religion any way you want to.

When you get into things like hate laws that are used to punish insults to religions, what’s an official religion (and can claim heresy as an insult and a provocation) starts mattering a lot more.

Protect that freedom of religion while you have it.

The Head Of the CBO Is Dead Wrong

I Couldn’t Ignore This Stupidity.

Go ahead and check this out on Bloomberg, but the key parts will be shown below.

A permanent extension of Bush-era tax cuts would provide a temporary boost to the U.S. economy and then become a drag on growth by pushing up interest rates, the head of the nonpartisan Congressional Budget Office said.

Douglas Elmendorf said extending all of the breaks due to expire at year’s end would increase demand in the next few years by putting more money in consumers’ pockets.

He says that like it’s a bad thing.

I mean, seriously, hasn’t the main argument been, we need to increase demand? Isn’t that a Good Thing anymore?

There’s more.

Over the long term, he said, the tax cuts would hurt the economy because the government would have to borrow so much money to finance them that it would begin competing with private companies seeking loans. That, in turn, would drive up interest rates, Elmendorf said.

“The problem is that if those tax cuts are not accompanied by other changes in the government budget and are simply funded through borrowing,” the borrowing “crowds out other private investment in productive capital — in the sorts of equipment, the computers, the machinery, the buildings — that are the source of long-term economy growth,” Elmendorf told the Senate Budget Committee today.

“That connection is less visible, and I think thus less apparent in most people’s intuition, but it is no less important for being not-so-visible,” he said.

I see that he is trying to be cute, to offer up what is essentially a supply-side idea that the real source of long-term economic growth is private investment in productive capital (the “supply” part).

Note that those who are concerned about the government crowding out private borrowing say that it’s already happening, but at any rate, this seems to me to be a disingenuous argument. Totally aside from that…

It’s Just Stupid.

I mean, seriously? Raising demand is bad? News flash: if the economy improves due to raised demand, we won’t have to worry as much about borrowing! For that matter, a country on the upswing has people rushing to throw money at it since they know they’ll recoup the investment.

Totally aside from that… this is the same logic with the $30 billion loan support program for small businesses. By and large, small businesses are NOT borrowing, because businesses borrow to EXPAND. When your production is already under capacity due to a lack of customers and orders – that is, due to a lack of DEMAND – there is no point in borrowing more money.

Let the big, bad corporations and the Mom and Pop businesses worry about how to borrow money from the private sector after the economy is back on track and their profits – and the lure of more profits – provide a genuine factual basis for borrowing and expansion.

One More Thing.

Incidentally, I realize the CBO has priced the expiration of the tax cuts for “the wealthy” (and small businesses with gross over 250k yearly – my best assessment of news reports is that there is simply no reliable statistical information publicly available to say how many businesses this includes) into its budget projections. Congress and the White House have similarly factored it in, deciding that the government has a right to that money and speaking of how the nation cannot afford to give a tax cut over and above… the raised level of taxes that will soon arrive as a result of inaction.

They have priced it in, but ordinary families have not. In fact, ordinary people are aghast at the lack of an extension for even the middle class, in addition to a reversal of relief from the Alternative Minimum Tax (AMT) and other “trap” provisions in the tax code that snare the middle class.

In other words, we are not discussing the cost of a “tax cut.” We are discussing the cost of not going through with a heavy tax increase, of which one component is raising the base income tax on the wealthy. (The AMT will surely squeeze a lot more than a simple base rise would.)

In other words, we are discussing raising taxes in a recession, and being proud of it.

Look, I thought this thought but, seeing someone else write it – not to engage in partisan politics, I won’t link, but… the idea is, Democrats are now willing to forgo job creation and economic revival. I’m stopping short of impugning their reasons. The fact is awesome enough in its raw stupidity that it requires no application of malice.

Supply Without Demand Is Ruin

Incidentally, to the extent supply-siders would actually support the idea that demand is irrelevant because supply creates it, that is a stupid and ruinous idea.

Broadly speaking, I’m not quick to support simply throwing money at people, but I’d support throwing money at people a lot faster than spending it in spectacularly wasteful ways that don’t give people the visceral feeling of a free lunch to encourage spending. That’s not really the point here.

The fact you have a factory means nothing if it is idle because you have no customers.

Therefore, a tax increase to support the government’s bloated finances just so that it does not “compete with private business” in borrowing years down the road is openly sacrificing the present for the future.

Look… keep your mind in the here and now, young Padawan. Do not be mindful of the future at the expense of the present.

The present is bad. To admit that not raising taxes would be beneficial in the short term is to make a mockery of the criticism of the long-term “problems.”

Without demand, none of us can do business, period. Without increased demand, few of us can do good business.

Let’s recognize that fact and drain the ideology from the issue. If we want prosperity, it must begin with allowing the economy to heal.

This won’t do it. This is actually choosing to continue the pain in order to create a politically appealing public lashing of the “wealthy” without the slightest regard for the consequences.

I still despise partisan politics in general, but my goodness, I never thought that a party going to the polls would actually choose to shun economic improvement because it doesn’t fit a redistribution agenda.

Pastor Jones Made Superstar By Gen. Petraeus

Setting The Record Straight

In four days, the fact that Pastor Jones’ Koran book burning event was made a sensation in America has been erased from the collective memory of the news media.

Four days.

Actually, I was getting the sense of this back on Thursday, so that would make it three, but that’s nitpicking.

Somehow we have entered a period of navel-gazing in which we express shock – shock!! – that the media picked up this story, as if General Petraeus had never said anything. Thus is he held blameless and the mainstream media is held responsible for having made a sensation out of Pastor Jones, an extremist Christian with a tiny congregation who demanded too much wool from his flock and was thus chased out of Germany a while back.

This blame is thoroughly misplaced.

Yes, the book burning was news in the Middle East, and had been since a condemnation by a major Islamic university in Cairo, said by some to be the closest thing they have to a Vatican for Islam (sui generis). That’s not the point.

Petraeus made it news in the United States.

And why shouldn’t he have? Here you had a serving general, in uniform, the anointed head of U.S. forces in Afghanistan, essentially our Proconsul for the Asian theater, arguing that this book burning was a national security threat aimed at the men and women in uniform of the armed forces of the United States of America.

And you’re trying to tell me that it’s not news?

What is this nonsense?

Now, I’m not a fan of what Gen. Petraeus did. At all. Distasteful as this might be, it is a sacred right of Americans to perform actions of religion and politics that are distasteful to others. No faith has a right to have its holy books preserved against all harm under the law, as Sharia law demands. That is not the U.S. Constitution that Gen. Petraeus is sworn to uphold. His job is to defend the right of Americans to practice any religion, or none, not to pontificate on the wisdom of doing so, and certainly not characterizing the practice of freedom of religion and freedom of speech as having shades of sedition, treason or the act of an enemy combatant.

That’s when the media ran with it, demanding, and receiving, piles of condemnations from the Secretary of State, the President of the United States (echoing Petraeus’ words initially, then expanding to argue that burning holy books is un-American and contrary to the principles upon which America was founded, which is a bad joke considering what the Vatican thought of the heathen protestants of the Americas, and vice versa), and a whole legion of other figures lining up. We had the ambassador of Pakistan demanding Glenn Beck condemn it (though Beck already had). Even Sarah Palin asked that the pastor stand down, as if this was a military nation-at-war issue.

So now we have a bunch of hand-wringers moaning over how the terrible mainstream media made a sensation out of Pastor Jones. In the process, in the vast majority of cases, Gen. Petraeus’ unwise media intervention has simply vanished into the ether, after three to four days only.

Combine this with Fox News’ refusal to cover the book burning (if it happens) and the AP’s promise of preemptive self-censorship (no images of the burning, no audio), and a crazy MSNBC segment where Pastor Jones was cut off from a live feed without being able to say a word, leaving the other side of the debate with a nice speech and the host saying they hope the Pastor reflects on these words and “we don’t need to hear any more,” and well…

Just which rights and freedoms are we defending in Afghanistan, again?

Seems to me we’re throwing them away so fast, no one will ever need to succeed in snatching them from our grasp.

P.S. The book burning is stupid, stupid, stupid… but in America, unlike Canada and many other countries, the man has a right to do it. Perhaps not much longer, the way all this is going…

Prosperity As A Broader Goal

Wealth is held by individuals, but prosperity is a high level of wealth across society at large.

Prosperity is not, and cannot, be equal or utopian. It need not be in the other direction, but absolute equality in wealth isn’t likely to work out.

Identifying prosperity as a strategic goal leads to several corollaries:

• Freedom allows the enjoyment of wealth large and small.
• So far as possible, freedom should be maximized.
• So far as possible, the creation of wealth should be encouraged.
• Redistribution of wealth is not a priority.
• Equalization of society is not a priority.
• Every effort should be made to encourage bottom-up prosperity.

Now, about that last point.

Bottom-Up Prosperity

Simply put, people should be able to make a profit with the least means possible. Barriers to entry into small business should be low. Government regulation should be the minimum possible. Taxation should be limited as far as possible.

It’s not a matter of handouts or redistribution. It’s a matter of empowering people to make money themselves.

This leads to:

• Pride in one’s work
• Higher quality of effort
• Greater creativity

These are the things that add value, not only to products, but to society itself.

Personal wealth is obviously a goal for people in business, but insofar as the broader world can be influenced by us, it is mutually beneficial for prosperity to be a goal for society.

Prosperity is something that should be beyond reproach, but sadly, this is not so. It is something that should recognize that both supply and demand, both labor and capital, play crucial roles in creating prosperity, and both must exist for prosperity to exist, but sadly, this is discarded in favor of political jockeying on a wide scale.

To me, it’s rather simple. It got simple when I studied the issue and discovered it to be so.

Prosperity: The Most Benefit For Most People

Making prosperity a goal is to hold the general interest, the societal interest, above any particular section thereof for the purposes of creating big-picture, wide-ranging policy.

Being simple does not make it easy. In fact, I find it hard to believe much of anyone will agree with what I have written. It is a hard lesson for some. But, I see no point in not writing what I have come to believe over years of studying these issues.

About that Lockerbie Bomber Release…

Quoting here:

The note added: “Nevertheless, if Scottish authorities come to the conclusion that Megrahi must be released from Scottish custody, the US position is that conditional release on compassionate grounds would be a far preferable alternative to prisoner transfer, which we strongly oppose.”

Mr LeBaron added that freeing the bomber and making him live in Scotland “would mitigate a number of the strong concerns we have expressed with regard to Megrahi’s release”.

The US administration lobbied the Scottish government more strongly against sending Megrahi home, under a prisoner transfer agreement signed by the British and Libyan governments, in a deal now known to have been linked to a pound stg. 550 million oil contract for BP.

It claimed this would flout a decade-old agreement between Britain and the US that anyone convicted of the bombing would serve their sentence in a Scottish prison. Megrahi was released by Scottish Justice Secretary Kenny MacAskill on the grounds that he had three months to live, making his sentence effectively spent.

My bolding.

You know, if he was released on compassionate grounds, he had served the entirety of his legal sentence. It didn’t flout the agreement; the Brits/ Scots just moved the goal posts of what the U.S. had agreed to, breaking the spirit but not the letter of the words.

It still stinks to high heaven, doesn’t it?

In addition, Scotland had no authority to allow this man to leave the country’s borders. (Scotland is not a country; the United Kingdom, however, is.) The U.K. government probably said something like, “Well, he’s been released, his sentence is de facto commuted, we have no grounds to hold him, so *whistling* guess we’ll have to let him go to Libya.” So rather than transfer him to a Libyan jail, the end result was to transfer him to Libya as a free man, which is certainly not what even the Obama administration was privately suggesting (and to this day, refusing to allow the private suggestions to be published so that Scotland can defend itself against public charges by the U.S. Senate).

I’m not sure you can call Straw’s refusing to subject himself to interrogation by a legislative body of a former colony as if the U.K. is a subservient nation (even Canada wouldn’t do that) should be called a “snub” but, the problems are twofold.

• The Obama admin opened the door to compassionate release without grasping the full consequences of that action.
• The U.K. government found a legalistic, back door, backhanded method to massively embarrass and humiliate the American government, flaunting the freedom of a man convicted of killing American citizens.

Not much to say about the people demanding an inquiry so that the convicted bomber can have his conviction expunged from his record because they think the trial was a conspiracy and railroading, except: man, you really can’t please anybody, can you.

Pride as a Thinker

The reason I take lying with statistics so seriously is that it offends my pride as a thinker. To use facts – things that are, in isolation, wholly true – to deceive, misusing them to paint a deceptive picture of a larger situation, is to manipulate and render actual logic useless. By putting garbage in, one gets garbage out, even if the person making the conclusion is behaving perfectly logically… but is unaware of how irrelevant the raw material for the logic is to the actual question.

That such lies are used to promote public policy doubly offends me, for it is not simply a matter of insulting my intelligence, but wasting money that is badly needed where it will do actual good.

Statistics can tell us a great deal about the world, but they can be used to horribly deceive in two ways: a) not recognizing their limits, and b) willfully applying statistics to the wrong questions, ones they were never designed to answer.

If you want an argument treated with respect, you have to be honest and lay your cards on the table, and ensure that you are speaking in a manner that is consistent with the truth.

Note that if the persons concerned had simply argued that the economy is being stimulated by unemployment checks, I would have simply agreed and moved on. It is the argument that these checks are the best money for job creation available that is completely bonkers.

Economics, Lies, and Damned Statistics

This post at Ezra Klein’s online space at the Washington Post is meant as a defense of Nancy Pelosi’s saying that extending unemployment benefits is the best job creation measure out there; that it is the most bang for the buck.

Specifically, it includes this graph.

Let me put this in small words.

THIS GRAPH REFERS TO GDP, AND GDP ALONE.

The part at the bottom says, “$ Change in GDP for Each $ Spent.”

When you mistake changes in GDP for the creation of jobs, there is no saving you. You are off the deep end, you are floating in a different dimension of reality. You are not remotely on the same planet as the rest of us in the real economy.

Unemployment is spent on rent or mortgage, utilities, and food. Of course it is spent and not saved. Is it spent on new cars? No. Is it spent on durable goods? No. How many jobs do you think unemployment check extensions are creating in the banking, utilities, and farm sectors?

Someone should teach these people that in a properly functioning economy, the same money “bounces around” as it is used by each party whose hands it enters to buy more goods from other participants in the economy. Money that is 100% spent, but goes straight back to the banking system, to the utilities, or to federally subsidized industrial sized farms, is far less “stimulative” and far less helpful to job creation and job growth than money that bounces around like a pinball.

It isn’t just a matter of how much of $1 thrown into the economy is spent. It’s what that dollar is spent on.

People who can’t grasp that have no hope of understanding how to help the economy. They will throw money at the problem in manners based on statistics that are, by definition, completely out of touch with job creation. GDP was never meant or designed to measure jobs.  I thought Democrats castigated Republicans under George Bush Sr. for worshiping GDP data in a jobless recovery. Maybe they did, and it doesn’t matter; they need to celebrate everything they can get, just like the Republicans tried to do back then.

The point is, mistaking a proportional rise in GDP for total gainful economic activity relevant to job creation is dumb, dumb, DUMB economics. It screams to me that there is something rotten in Washington, and everyone will suffer for it.

I have nothing against smart stimulus. This isn’t it.