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Open thread for questions and answers!

23 January 2010

Ask any questions about geopolitics.  We’ll all attempt to answer.

Post any notes or citations.  We’ll all comment.

Per the FM site’s Comment Policy, please be brief (250 word max), civil and about geopolitics (broadly defined).

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21 Comments leave one →
  1. 23 January 2010 4:35 pm

    Sent by email: “Why you think Mark Steyn is profound?”

    FM reply: Insight is found on the fringes, amidst the trash and madness, far more often than on the NYT pages of the New York Times. Steyn speaks for people who see their culture being washed away. Our sophisticates see no problem in that, giving their love to other things that they consider higher. They believe that defending our culture is an illegitimate goal (much as is raising one’s children to follow one’s beliefs).

    For an extreme version of this see Thomas Frank’s book What’s wrong with Kansas, deploring the ignorant masses who value their spiritual beliefs above their material interests. Frank, of course, considers his values to be of the highest kind — and beyond questioning, certainly by rabble.

    In their distain our intelligensia look away from the base activity below. Perhaps this accounts for their frequent surprise at events driven from below.

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  2. fubar permalink
    23 January 2010 6:28 pm

    One of the “fringes” of culture is people in the 60’s left/counterculture that departed from that perspective, not to return to traditional/right/conservative perspectives, but to other perspectives that “transcend and include” both left and right. In broad terms, these are referred to as “integral” perspectives. Integral paradigms are holistic and seek “complementarity” between the rational and spiritual aspects of consciousness. Such synthesis contrasts with the “deconstruction” that is characteristic ofpostmodernism.

    Some integral perspectives, such as Ken Wilber’s, are acutely critical of problems (including theoretical problems) with postmodernism (multiculturalism, pluralism, relativism). This became controversial in discussions of the “mean green meme” several years ago. Integralists see “paradigm regression” (backwardness/degeneration/corruption/stasis) happening within both conservative and liberal areas of culture. The goal of integration/holism is to reduce conflict between otherwise “warring” paradigms.

    For instance, the Transpartisan politics movement seeks to identify areas of common good that could be used as the basis for an “alternative” political possibility.
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    FM reply: I think you could say much the same of Christianity, Islam, or Buddhism.

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  3. Christopher W. permalink
    23 January 2010 7:35 pm

    How DO we pay off the National Debt, or at least get it down to reasonable levels?
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    FM reply: That is a secondary problem. When the ship has a hope, plugging the leak must come first. Pumping it out comes second. In this case, the “leak” is a consequence of our dysfunctional political system, of which we are the primary component. Fixing that makes many other things possible, in many possible ways.

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  4. Albertde permalink
    23 January 2010 8:53 pm

    Raise taxes (especially a national and state VAT or GST) and cut the military.

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  5. 23 January 2010 8:58 pm

    I don’t have the economics background to go beyond hypothesis in the following; but I would very much like to see someone who does either confirm this analysis, filling in the details that would make it sound, or refute it and explain where I’ve gone wrong:

    It is typically said that the degree of inequality of income and/or wealth in a society can pose social, moral and political problems, but that it does not represent an economic problem. Intuitively, it seems to me that income inequality is directly connected to the rise of “casino finance”; which, when widespread, entails serious economic dysfunction. As inequality increases, more of the money in a system is held by people with greater personal worth. Now, a family with an income of, say, $25,000 per year probably spends about $25,000 a year. A family with an income of $25,000,000 doesn’t spend $25,000,000 — it looks for ways to invest a large part of that income. And the whole point of investment is to earn money.

    A classic investment earns money because it enables a new business, or an expansion of an existing business, that makes a profit, which directly or indirectly comes from consumer purchases; but as more money is concentrated in fewer hands, more capital seeks a profit on an ever smaller proportion of consumer spending. What happens when the amount of money seeking to make money through investment exceeds the “carrying capacity” of the underlying “real” economy?

    Stuffing $25,000,000 in a mattress is not a very attractive option; nor is investing it in “real” business, because the pool of good borrowers is shrinking since there’s not enough demand to support further expansion of consumer-fronting business. Since there is no “real” investment worth pursuing, the gap is filled by speculation — aka “casino finance.” Even allowing for the risk, gambling becomes more attractive than classic investment.

    In The Price of Casino-Like Finance Is Higher Than We Think (link from a previous Fabius Maximus entry), Maxine Udall describes some of the reasons an economy heavy on casino finance isn’t just unpredictable, but inefficient in both short and long term allocation of resources, including human resources.

    A corollary to my hypothesis would be that remedies for regulatory ineffectiveness, or any of the other “causes” proposed for our latest crisis, would miss the point. If the ultimate driver of dysfunctional speculation is excessive inequality, that can only be repaired by mechanisms that correct the imbalance and then assure that wealth flows downward in balance to its flow upward.

    Can anyone here either validate that with sound economics, or else refute it and explain the error?
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    FM reply: What you are discussing is political economy. And rightly so. Our economic problems result from our dysfunctional political system, of which we are the primary component.

    “inequality of income and/or wealth in a society can pose social, moral and political problems, but that it does not represent an economic problem”

    Exactly so. But political problems cause economic problems. In other words, politics is determinative — as philosophers have said going back to Aristotle.

    “If the ultimate driver of dysfunctional speculation is excessive inequality”

    That’s far too broadly stated. The excess speculation results to a large degree from weakening of the post-Great Depression regulations enacted in the major western world. Such as Basel II, the global accord regulating banks. And in the US, the Glass-Steagall Act of 1933 (repealed in 1999).

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  6. anna nicholas permalink
    23 January 2010 9:11 pm

    I suppose its a lot easier to decide where to put your money , by looking at share price graphs on a screen , and buy or bet on them . Then you can go party , or get a suntan on your yacht .
    The alternative being to look at X’s book s, drive to their factories , observe their managers and toilet cleaners , count shoppers buying their products , go see how much time their trucks park up at burger vans , etc etc before deciding to invest.
    Or , persih the thought , set up a whole factory yourself , toilets , flood risks ,trucks , planning laws ,unions , etc .
    Nah , leave that to some poor lowly sap who has to borrow the money , work all hours and carry the risk .

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  7. Highlander permalink
    24 January 2010 3:08 am

    To what extent do you see the questions of energy supply (not just oil) driving the United States foreign and war policy? And to what extent are the questions and answers concerning national energy simply kept from “we the people”?
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    FM reply: Great questions. For the first, assured access to oil is an important factor in US foreign policy. But only one thread, even for the invasion of Iraq — as described in Stratfor’s analysis of US reasons for invading and occupying Iraq (4 March 2008). People love single-factor explanations, although they are almost always insufficient.

    As for your second question, we can only guess. For example, does the CIA know when the Saudi’s oil production will peak (see When will global oil production peak? Here is the answer! (1 November 2007). In general, by guess is that the government (as an aggregate, or entity) knows less about our national energy strategy than an informed layperson. For example, the Dept of Enegy does astonishingly little research into measuring US coal reserves — let alone global coal reserves.

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  8. slapout9 permalink
    24 January 2010 4:28 am

    FM your Econ analysis is pretty sound, for some actual hard economic data and analysis go to James G. Galbraith wbsite listed below and look up the Inequality thread under his {University of Texas} Inequality Project. He is one of the few ecocnomist who has been studying this for years.
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    FM reply: Thank you for the link to the Inequality Project! Inequality and social mobility (an ugly combination) have been frequently discussed at the FM website. Here are some articles from those posts:

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  9. Grimgrin permalink
    24 January 2010 7:57 am

    FM: This may seem cynical, but I am genuinely curious. Where does your optimism come from? The upbeat tone of this blog is one of the more remarkable things about it.
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    FM reply: I believe faith in our future is part of the debt we owe to our ancestors whose work and blood build this nation. I believe it is an illusion — mere complacency — that a people can survive and prosper upon belief only in what can be proven. Gravity, the Pythagorean theorem, appetite, and greed do not suffice. Without faith in each other — in the American project — there is just surrender, as amply demonstrated in the discussions about America on the FM website.

    Now faith is being sure of what we hope for, being convinced of what we do not see.”
    — Hebrews 11:1

    “Most people will never know anything beyond what they see with their own two eyes.”
    — Nightcrawler, in the film X2

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  10. Thomas of NY permalink
    25 January 2010 5:43 am

    What are the likely results of the recession deepening (e.g. it turning into a double dip recession)?

    What conditions do you think will need to be met for viable reform to be made in the system? Will it necessitate a viable third party to be formed or can reform be made with the current two parties that are available?
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    FM reply: A second decline in this recession probably means a larger and more painful decline than the first. We’re in year 3 of the recession. Reserves exhausted, some families, businesses, and even nations have slide to the edge — and will go over in another downturn. Likely short-term consequences:

    * Accellerating numbers of unemployed, foreclosures, bankruptcies (both individual and business).
    * Collapse of tax revenue and skyrocking expenses, hence large increase in the deficit.
    * Massive electoral change in the November elections. Since the Republican Party has adopted Andrew Mellon’s liquidationist policies (i.e., gone barking mad), this might have disasterous consequences.
    * Breakup or (less likely) radical reformulation of the European Monetary Union.
    * Japan pushed to or even over the brink. We cannot reliably guess what that means.
    * The effects on China are impossible to forecast.
    * Obama either collapses (as Hoover did after 1930), or (less likely IMO) rises to meet the crisis.

    In this scenario we cannot see into 2011, and 2021 is an unknown country. This is why the government is doing everything in its power to stabilize the economy (deficits be damned). Another leg down means many more links in the economic machinery break, and we cannot easily repair them. Prevention is a far safer course.

    As for reform, I don’t know. Nobody can see into the heart of another person, let alone into the heart of a people. All each of us can do is try out best to push America forward. I don’t see the need for a third party, as it seems easier to capture one of the existing two major parties (as has been done several times during the past century).

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  11. slapout9 permalink
    25 January 2010 2:24 pm

    Link to Bill Still Radio Interview on Monetary Reform. The Root Cause of the problem. “Cash Flow” with James Martinez
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    FM reply: I don’t listen to radio. And if he says “monetary reform as the root cause of the problem”, it’s probably not worth listening to. First, single-factor explanations are usually absurd for large and global phenomena. More iimportant — financial bubbles (and busts) are an enduring feature of market-based economies (disproving the simple folks who believe gold-based currencies solve all ills). In the 18th century were the frontier land bubbles (the South Sea Company and the Mississippi Company). In the early 19th century were the railroad bubbles. I suspect the 22nd century will see even more interesting ones.

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  12. slapout9 permalink
    25 January 2010 3:39 pm

    FM, try it you might like it because he points out the fallacy!!! of the Gold Bugs argument and what can be done about it.

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  13. Pluto permalink
    25 January 2010 6:23 pm

    Not sure I agree with you on #10, FM. The primary reason I’m hesitant is that I foresee the US government riding to the rescue again with several trillion dollars in semi-random stimulus. That will delay (and probably make worse) the scenario you describe.
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    FM reply: Perhaps. But I doubt that another (third?) major stimulus bill will be passed until we see that another downturn has begun. That is, of course a guess.

    Alternatively, Congress might realize in March or April that the economy is recovering, but in a jobless way that means likely defeat for many incumbants in November — and so they pass another stimulus. I consider this scenario unlikely. Esp after the Mass Senate upset, which will embolden the Republican liquidationists. As President Hoover wrote in his Memoirs, Andrew Mellon (his Secretary of the Treasury) had…

    “… only one formula: liquidate labor, liquidate stocks, liquidate the farmers, and liquidate real estate…. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

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  14. Ryan permalink
    27 January 2010 6:19 pm

    What is the cause of anti-Americanism? Do you believe in the American dream? How important do you think disillusionment was in the decline and fall of the Soviet empire, or the failure of the Socialist dream? What do you think about the unnoticed standard of living increases? Some homes now takes thirty year’s wages (not counting eating, or other expenditures), while in the fifties, homes only cost three years wages.
    * Money and Inflation 1950’s
    * There’s No Fuel Like An Old Fuel

    Japan did everything they could to stabilize their economy, and citizen participation (young people simply choose not to be employed) is declining over there. If I didn’t know any better, I’d say their whole society is declining.
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    FM reply: The simple answer is that much of this is not correct.
    * Energy prices have risen as we’ve exhausted high quality, easy to obtain reserves (not “running out”, but still forcing prices up).
    * Comparing cost of good and living standards over different eras is VERY difficult. First, wages have also risen, so a comparison of nominal prices tells us almost nothing. Second, many goods have improved in quality (a 1950’s vs. 2010 car in terms of fuel economy, safety, entertainment systems, and lifespan). Third, the basket of goods we buy has changed. What was the price in 1950 of advanced cancer treatment? Treatment of glaucoma?

    (2) “What is the cause of anti-Americanism?
    What do you mean by “anti-Americanism”? In popular discourse this tends to mean “views that I don’t like.”

    (3) “{Japanese} young people simply choose not to be employed
    This is not substantially correct. Japan’s economy is in decline due to deep structural reasons and a demographic collapse. Note that we’re doing almost exactly what they did to stabilize their economy, so I suggest you hope those measures work (as Richard Koo explained at the start of our recession).

    (4) “while in the fifties, homes only cost three years wages.”
    True but grossly misleading. Median wages in 1950 were aprox $2500, the median home price was $7400 (source). But wages were so so low that most people were not able to save for the 20% downpayment AND qualify for a mortgage — which is why the Veteran’s loans so boosted the rate of homeownship. Increased income and wealth has led to asset inflation, affecting home values.

    (5) “What do you think about the unnoticed standard of living increases?”
    I don’t understand what this means.

    Like

  15. Caledonicus permalink
    27 January 2010 9:00 pm

    In regard to our dysfunctional political system; is it merely a reflection of Plato’s argument against Democracy? As I recall, he said that in a democracy the citizens will feed on the public treasury until it is empty, then they will borrow ever larger sums on the credit of the public treasure to keep the feed coming.

    It seems to me that we are in times similar to the last days of the Roman Republic, where the “optimates” were only concerned with conserving their wealth and power, and the demagogues only concerned with getting in on the action. Will it take a Julius Caesar to fix our problems? Is a man on a white horse ever the answer?
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    FM reply: The saying you quote is apocryphal. It’s usually attributed to Alexander Tytler, but in fact was manufactured in the 1940’s and 1950’s. Plato said nothing like this. For an account of the origin of this story see “The Truth About Tytler” by Loren Collins (there are many very similar other accounts of this history). But that does not mean that your analogy to the Roman Republic is wrong. I recommend reading “Caesar: A Biography” by Christian Meier. He shows how the Roman people had grown weary of governing themselves. It was must a matter of who would take over the job.

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  16. Davis permalink
    28 January 2010 5:22 am

    Where’s a safe place for my money through all of this?
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    FM reply: Wrong site for that question, as here we do only gepolitics. I recommend prayer.

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  17. Ryan permalink
    29 January 2010 6:37 am

    What do you mean by “anti-Americanism”? In popular discourse this tends to mean ‘views that I don’t like.’
    Why foreigners don’t like America? Particularly Europeans?

    This is not substantially correct. Japan’s economy is in decline due to deep structural reasons and a demographic collapse. Note that we’re doing almost exactly what they did to stabilize their econoy, so I suggest you hope those measures work (as Richard Koo explained at the start of our recession).”

    How is it not correct? Their youth chose not to search for a job. Thus not counting for unemployment. Although it doesn’t help their country that their labor pool isn’t being joined by what few young adults they have. Japan’s stimulus policy managed to decrease labor demand and expand their economy. Just like our jobless recovery.
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    FM reply: None of this makes sense.
    * Your first sentence is a non sequitur, as neither you nor I mentioned “foreigners.”
    * As for Japan, do you have any evidence that “their youth chose not to search for a job”?
    * On what basis do you say that the stimulus policy of Japan and US decreased labor demand? Every economist I know says the opposite (to varying degrees), as has a large body of research.

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  18. Ryan permalink
    31 January 2010 12:56 am

    I will make this very simple for you to understand. Why has anti-Americanism become so widespread, particularly in Europe, who were fairly pro-American? I could understand why Iran is anti-American. I can’t understand why, say, England is anti-American. I have clarified my question. That is what I’m asking.

    Monthly Results December 2009 Japan labor force survey. Go to labor participation rate by age, and download the excel sheet.

    If you have excess time, here is a nice economics paper on the Japanese labor market by the university of Ohio. “Issues Facing the Japanese Labor Market“, Yoshio Higuchi and Masanori Hashimoto (Prof Economics, Ohio State U), unpublished working paper, draft date 10 June 2004. Tables here. {FM note: rather than just the URL, I’ve added the full citation, and a link to the tables}

    Most economists have no idea what happening. Classical economics was disproved by the Great Depression. Keynesian economics reigned up until the seventies when the impossible oil crisis occurred. More recently, neo-classical economics was disproved… by the Great Recession. It would be funny, if the livelyhoods of so many weren’t dictated by voodoo guesswork.

    Now share your large body of research.
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    FM reply: By the numbers.

    (1) “I will make this very simple for you to understand. … I have clarified my question. That is what I’m asking.”

    Not only have you not clarified your question, you never explained — as I asked in comment #14 — what you meant by “anti-Americanism”. Instead you’ve raised more questions. Why do you believe “anti-Americanism” has become more widespread than before? Or even that it is widespread? Do fewer people wish to immigrate here? Does American culture have less appeal, as measured by sales of our cultural products (e.g., movies, music, books)? There are polls suggesting that our government, esp our foreign policy, has become less popular. But America is not its government.

    (2) Comment #14: “{Japanese} young people simply choose not to be employed”

    You cite as supporting evidence the December 2009, table 12 – Labour force participation rate by age. Which shows that labor force participation has increased in all age segments 25-65 years old. Except the age 15-24. Participation in that age bracket has dropped in all western nations for generations, as young people stay in school longer. More went to high school, rather than working at 15. Then more went to college. Now more get advanced degrees. Your characterization of this as is bizarre.

    (3) “If you have excess time, here is a nice economics paper on the Japanese labor market by the university of Ohio”

    First, it’s by a professor plus someone else not in the OH directory (student?), not “by the university.” It is an unpublished paper which dismisses the conventional explanations — a 20 year rolling recession — in favor of guessing (pp 8 -12). Their guesses are not even supported by their own data (which you forgot to include, to which I added the link). Neither graph he cites shows a trend. Labor force participation ages 20-24 (figure 2) has been in a range since the late 1970s. Arrests for Violations of Criminal Law (figure 3) has been in a range since the mid-1980s.

    (4) “Most economists have no idea what happening.”

    This is too broad and bizarre to warrant reply.

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  19. Ryan permalink
    31 January 2010 9:26 am

    (1) Now I know what you want me to clarify. Why do more people in foreign countries disapprove more of the US and it’s citizens?
    (2) Different evidence then. Table 17 shows unemployment rising.
    (3) You can’t cite your large body of research approving on the economic stimulus? I guess I have no reason to cite anything after this, given your own standards.
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    FM reply: This is getting silly.
    (1) This assumes a fact not in evidence. Before answering “why”, please show some evidence that “more people in foreign countries disapprove more of the US and it’s citizens.”
    (2) Rising unemployment after a 20 year rolling recession does not prove that “{Japanese} young people simply choose not to be employed.” There was high unemployment in Japan in 1946 — were they choosing not to be unemployed then as well?
    (3) Such research has been discussed many times on the FM website. See the reference page Financial crisis – what’s happening? how will this end? Esp note Economists discuss the impact of the stimulus on our recession (6 October 2009). There has been much published since then, but the subject is too well-understood to warrant discussion here.

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  20. Ryan permalink
    1 February 2010 6:48 am

    1. Well. How do you know our government is less popular? You contradict yourself, I think. People tend to associate governments with their people.

    2. Oh. I’ll clarify that. I mentioned the unemployment just as proof of the failure of the Japanese stimulus. If you knew the definition of unemployment (a major concept in economics), it is people seeking work, without finding it. I think I may have been wrong on Japanese youth becoming lazier.

    3. Economic growth continues. But you forget unemployment. I suppose you are happy with alot of desperate unemployed people eyeing the employed? My point has been that those stimulus plans do not improve employment figures.
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    FM reply: I’ve tried, but to no avail. Your just nattering on, making no sense. We’re done here.

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  21. Ryan permalink
    16 February 2010 7:05 am

    After further much thought, would this help you? “America’s Image Slips, But Allies Share U.S. Concerns Over Iran, Hamas“, Pew Global Attitudes Report, 13 June 2006

    Stagflation was considered to be impossible under Keynesian economics. The idea that markets would regulate themselves was perpetuated by neo-classical economics. Time and time again, economic theories are disproven by a major crises.
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    FM reply: I doubt that you can find any professional article or textbook that said “Stagflation was impossible.” The possibility of a massive shock in the price of a vital commodity AND flawed government economic management was not considered, hence there was assumed to be a predictable relationship between GDP and inflation. Nor do economists consider Keynesian economics to be the theory of everything. It’s the just current state of economic theory. The universe is big and there are many variables in life.

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