Passing on the Savings

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What's In It For Me?

So suppose the Republicans actually follow through on the premise that they would rather the country collapse than suffer rich people to pay taxes? What will happen?

Everyone agrees at least that interest rates will rise and the dollar will fall. But interest rates are like energy prices. They are built into every other price somehow. If they rise, it seems like prices should rise generally. But interest is a transfer of wealth from borrower to lender. If rates rise, that should increase the amounts transferred.

My impression, is that the relationship between borrowers and lenders is that in general lenders have more money than borrowers. If it were any other way, the borrowers wouldn't need to borrow and the lenders wouldn't have anything to lend. So one can say that in general interest is a transfer of wealth from the poor to the rich.

And the Republicans' obduracy in Congress, if it leads to higher interest rates, is almost certain to benefit the rich at the expense of the poor. Isn't that a surprise to find the Republicans pursuing such a policy? Who would have thought it?

As the dollar falls, as surely it must with trillions of recently created dollars floating around, the price of imported goods must rise. Which is further inflation.

How does the government, usually through the Federal Reserve Board, fight inflation? By raising interest rates. That should not be too hard, considering that interest rates - to banks at least - are now less than zero. I.e. zero less the inflation rate.

But the reason the rates are zero - to banks - is to keep money flowing by banks borrowing for free so they can lend at low interest rates so borrowers can invest and buy and sell. That is, to keep the economy from stopping. Less politely, to keep it from collapsing. Which it nearly did in 2008 and 2009.

So the economy faces the risk of inflation if nothing is done, if interest rates are kept low. And as we have seen in earlier decades, particularly the 1970's, that once started, an inflationary spiral can be hard to stop, very hard.

Conversely, if interest rates are raised, either by the Federal Reserve raising them, or by the Republican sabotage of the national economy, we could fall back into a deflationary spiral. As the example of Japan in the 1990's has shown, once a deflationary spiral starts, almost nothing can stop it. And the attempts to slow it down leave the government with staggering amounts of debt afterward.

Assuming I were a Republican and thus so selfish that I were willing to destroy my country and impoverish its people rather than pay even a token amount of taxes on my income and assets, which disaster would I prefer to inflict on my country?

A deflationary spiral would mean that prices would go down so the cost of living would be less. Or would it? It would mean that costs incurred by corporations selling goods would go down. Prices would only go down if they lowered prices in response, if they passed on the savings to their customers. That is, if the market were really competitive rather than oligopolistic. In short, do falling producer price really mean falling consumer prices?

Oddly enough, even during the recent sharp retreat in consumer demand, there were almost no price reductions. Instead, there were special offers, things were 'On Sale', there was this gimmick and that, all of which were ways to disguise price reductions. This was so they would not have to admit to either the price reductions nor the inevitable price increases when consumer demand returned.

For goods in which the demand is less elastic, i.e. in which the consumer has fewer choices and little opportunity to simply not buy the product, e.g. medical care, pharmaceuticals, utility bills, food staples, and the like, the corporations have simply pocketed the difference and passed on none of the savings from falling costs.

So does supply-and-demand economics, the marketplace setting prices, really work in real life? In a word, NO.

Though I am no economist, my guess is that the Adam Smith model of the free market only works if every buyer and and every seller has identical economic power. Since that happens exactly never, the free market model is a theoretical construct that never actually happens. The ideology of the Republican Party and of free-market conservatives generally, is based squarely on this fantasy.

In short, if there were a serious deflation, my pension and the rents from my house would be seriously diminished. My stocks would go down. My mortgage would remain the same. The cost of living, though disguised, would not fall significantly. I would be screwed.

Conversely, if there were a serious inflation, my pension would rise about the same amount, the rents from my house would rise about the same amount, my stocks would rise about the same amount, and prices would rise about the same amount. Travel would probably not become much more expensive because though the dollar would be worth less, there would be more of them.

BUT my mortgage payment, which is a fixed rate mortgage, would NOT go up. Paying this is by far the largest expenditure I have. More than half of every dollar I get goes to paying it. If the inflation were severe enough, the mortgage might become just another bill like the utility bill - noticeable, but not crushing.

So it is in my interest for the party bickering to go on forever, for the deficits to grow ever-larger, for interest rates to rise ever-higher to keep the Chinese lending us money for the ever-larger debt.

Fortunately for my soul, I am not quite that selfish. I plan to live in the United States for the rest of my life and I would prefer that it not be a social and economic wreck, neither in my time nor after.

So what I would like to see would be for Anders Breivik to escape from prison in Norway, and come to the US and kill everybody in Congress. And then for the next Congress to raise taxes, reduce expenditures, and eventually balance the budget.

p.s. Hi, FBI. Just kidding about killing everybody in Congress. It's a metaphor for the 2012 elections. Get it? Really. Just kidding.

Hey, wait. I am in Canada - I can say anything I want. Go get 'em Anders!

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More to me than to you

Victory of the Borg

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Numbers Matter

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With all due respect for the victims of both, 93 defenseless people have been murdered by a lone madman in Norway in the past few days. 1,600 defenseless people have been murdered by the regime in Syria in the past few days. Compare the coverage and world reaction to each.

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Close, But No Cigar

[James Dean, 1956]

In his Dead Pool selections for 2010 Harvey had Amy Winehouse as number 8 on his list of croakers. Today she bit the big one at the age of 27, which would have given Harvey a monumental 73 points. But it was not to be. Not on either of our lists for 2011.

But there is always next year. Question for next year's list - does Charlie Sheen, age 46, own a motorcycle?

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How Bad Is Oslo?

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The destruction appears to be so general that it is hard to understand what happened. But from the video the building fronts appear to be bashed in rather than out, so the blast was on the street rather than inside. The incinerated cars suggest that it was a coordinated series of car bombs.

The fact that there was a shooting attack at a government party youth camp at the same time makes it almost impossibly unlikely that the motive was not terrorism.

There are lots of crazy people in the world and there is as yet no evidence that this was a jihad attack. But an awful lot of the crazy people whose craziness takes the form of bombing public places are jihadi Muslims. Norway is more than 10% Muslim and it is a very real likelihood that the attack was perpetrated by jihadis.

According to the New York Times,

Earlier this month, Norwegian prosecutors filed a terrorism charge against Mullah Krekar, the Iraqi-born founder of the Kurdish Islamist group Ansar al-Islam, who is accused of making death threats against the head of Norway’s Conservative Party, Erna Solberg. Mr. Krekar co-founded Ansar al-Islam in 2001, but said a year later that he no longer led the group, which is listed as a terrorist organization by the United States and United Nations.

If the attack does turn out to have been done by jihadis, the irony will be palpable. Norway has been foremost among Western countries in its anti-Israel and pro-Palestinian policies.

I remember being on a bicycle trip in Norway in 2001 during a diplomatic crisis there. From CNN in my motel room I followed it for several days.

A Palestinian who had murdered two Israelis applied for asylum in Norway on the ground that he would be subject to persecution if he were turned away. His asylum petition was granted. Israel and the United States protested. The Norwegian government deflected, saying it was an immigration service administrative decision and they could not change it. Whereupon the newly inaugurated Bush administration sent the US Navy to conduct war games off the Norwegian coast.

The message, I am pretty sure, was not that the United States was going to invade Norway, but rather that the US was serious about it and that it was not a routine diplomatic note. I think the further implication was that if the decision were not changed, that Norway would be informally suspended from membership in NATO.

Which would have meant, among other things, that if Russia had wanted to establish an equally informal sphere of influence over Norway's all-but-empty northernmost territory of Finnmark (Norwegian Lappland) and the arctic island of Svlabard, the Norwegians would have been on their own to do anything about it.

The government got the message, the person who granted the asylum petition was transferred to other duties, and the Palestinian murderer was extradited.

The lesson of Oslo in 2011 is the same as was learned at such vast cost at Munich in 1938 -- appeasement doesn't work.

One could well say there is another lesson as well. Oslo is where the Oslo Accords were negotiated and signed in 1993. These were the "Land for Peace" deal between Israel and the PLO. Israel conceded the land - much of Judea and Samaria and all of Gaza were handed over to the newly-constituted Palestinian Authority. Jericho, Ramallah, Qalqilyah, Gaza, and many other cities got Palestinian governments. And got nothing in return. There was and is no peace and no diminution in Palestinian hostility. Nor a diminution in their teaching hostility and delegitimization to their children.

So the earlier lesson of Oslo is that negotiating with people who are negotiating in bad faith is worse than not negotiating.

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Today and Tomorrow

Yesterday I crossed the continental divide between the waters of the Swift River that flow north and west, eventually into the Yukon River and the Pacific, and those of the Rancheria River that flow north, eventually into the MacKenzie and the Arctic Ocean. It should have been a minor tourist factoid but it wasn't. It was exhilarating. It made the wind fresher and the sky brighter to be up on a mountain pass dividing two parts of the world. It was also reassuring that I had gotten to the top and that it was all downhill from there.

Today has been a rest day at the Rancheria Lodge. It puts the "run" in rundown, the "shab" in shabby, and the "funk" in funky. It has reputedly been here since 1942 when the highway was built. And looks like it.

Tomorrow will be a longish day and then Thursday I should be at Watson Lake. I am little by little coming to have more stamina and leg strength. My heart rate recovers to lower levels more quickly. So the road therapy if one may call it that, is beginning to work.

Plus it is a good trip. It is nice now and again to take a season away from the madding crowd, to put behind the daily dailiness of daily life and get away, to be among white spruce and poplar, the road and the true blue sky.

Tomorrow I am going to get back on my bicycle and begin once more to ease on down, ease on down, ease on down the road.

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"One of the..."?? There're more?

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Flotilla Fun

Why Evan Longoria is in the big leagues and you aren't....

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Reflections on the Revolution

[Louis XVI making his final appearance on the French stage, with Robespierre in a supporting role]

Along the way I have been sometimes listening to books-on-CD. One of them was volume one of a two volume biography of John Adams. Adams had been, along with Franklin, part of the commission to Paris to get French aid for the Revolution.

At a time when Washington's army was being driven from the field by the redcoats for lack of gunpowder, Louis XVI sent 60 tons. It saved the Continental Army, and the Revolution, from certain destruction. This is never mentioned in conventional histories of the Revolution.

Adams pleaded for, and got, French naval support to keep the British armies separated and unable to be re-supplied. This too was instrumental in the war. It was why the British army attempted to march overland from Canada to New York rather than going by ship. In the course of which they were defeated at Ticonderoga. Not in our textbooks.

Louis le bien-ame, did more. He sent a field army commanded by le comte de Rochambeau to join Washington and the Continental Army. In the final and decisive battle of the war, at Yorktown, there were 8,000 soldiers of the Continental Army under Washington and 7,000 French regulars under Rochambeau, and 2,500 militia. Opposing them were 8,000 British soldiers under Cornwallis.

Cornwallis' army was unable to escape or get reinforcements because a French squadron commanded by Admiral de Grasse had defeated a smaller British fleet under Graves and blockaded the coast.

Cornwallis, outnumbered and trapped, surrendered to both Washington and Rochambeau. Very much not in our textbooks and complete news to me, who consider myself historically well-informed.

One can well imagine that the legend of Lafayette has been magnified in proportion as the fact of Rochambeau has been deliberately forgotten. Young Lafayette brought himself and a handful of adventurers to America. He served as an officer of American soldiers and led the expedition that was defeated in Canada. That was a grand gesture.

The comte de Rochambeau had 40 years of military experience when he arrived. In addition to giving Washington excellent advice, he brought an army, at least as well trained and equipped as the Americans and certainly better-paid, and a fleet at his back. That was considerably more than a gesture.

It is deliberate forgetting and misrepresentation for us to remember Lafayette and not Rochambeau. That we remember and teach our children about Lafayette and not Rochambeau is to make an empty pretense of gratitude to France for our independence. It is a falsification of our history. French aid was not a gesture.

Seen thus, the American Revolution and republic were as much a product of French intervention as of American resistance. Which puts a very different cast on the origins of the Republic and thus of its nature. Seeing our republic as merely an artifact of the clash of foreign empires makes it considerably less edifying than the more familiar narrative.

One can wonder about the wisdom of a hereditary absolute monarch aiding a republican revolution. The popularization of republican ideas and ideals in France by the American Revolution did not in a specific sense cause the French Revolution. Louis himself did that - by his unwillingness or inability to impose and collect taxes on the wealthy.

But once the Estates-General met, it was the ideas and ideals popularized by the American Revolution that made it a runaway horse that could not be stopped or even restrained. In a very real sense it was Louis' aid to American revolutionaries in 1775 that put his neck in the guillotine of French revolutionaries eighteen years later.

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