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Prior to WW2 maybe 15% of North Americans were middle class. The middle class consisted of doctors, lawyers, small business owners, business managers, engineers . . . and still does. Prior to WW2 the middle class had live-in servants. For example, read the best selling book, "Cheaper By The Dozen." The father of the family, as I recall, was a time and study man, no rocket scientist, and they had servants. Half the people who came through Ellis Island - which is half our relatives - went into "service," became servants.
80% of North Americans prior to WW2 were the working class, the working poor, and still are. Why do most of the people in the working class - the servant class - think they are middle class? Because the politicians tell us we are middle class? Which of this years candidates has addressed a speech to the working class?
Now days Americans have bought into the "anyone can grow up to be president" line of baloney. The "I can be rich" line of baloney. The vast majority of Americans think they are smarter than average. No one thinks of himself as working class except our recent immigrants.
Is it because now days a young person needs two years of junior college to get a high school education? Fifty years ago a kid went to a community college ne junior college because he couldn't afford a real college or didn't have the grades for a real college. These days a kid goes to a community college to learn high school basics and "graduates," thinking that he is a college graduate?
The harm in this, besides the waste of time and money? College graduates deserve to become rich. College graduates don't need a labor union. College graduates - except apparently teachers - are to smart to join a union. Those people who came through Ellis Island, there was two things they knew: they were working class and they needed the protection of a labor union.
What happens when 80% of Americans complete high school and 80% of them are junior college "graduates? Then a garbage truck driver will need a high school diploma, maybe even 2 years of junior college, but the job title will be "Recycle Specialist," not "garbage truck driver." 80% of all Americans will still be the working poor.
This captures how I feel much of the time:
There are so many things wrong with the entire statement that I’m about to go all fetal-position and question my own understanding of words.
Here's the particular context, but it doesn't really matter.
Instapunk on Obama good parts version.
Obama's following approaches cult status. He is the kind of political figure who can do absolutely everything wrong, fail at every task to which he puts his hand, and still retain the devotion of those who have projected onto him their wildest utopian fantasies. [...] Obama is a symbol. [...] The optimistic right fears him too little. So does the pessimistic right.
Obama is a one-man Trojan Horse, an apparent peace offering filled with implacable instruments of vengeance. Nothing could be clearer than that the Democrats and all their allies hate their Republican and conservative opposition. They will not be content with electoral victory. They need annihilation. [...] After Bush, they were no longer interested in governing. They wanted revenge.
His major acts as an independent adult were to form alliances with a racist black nationalist preacher tied to Louis Ferrakhan, join the inveterately corrupt Chicago Democratic political machine, intimidate his electoral opponents into quitting the race before election day, ally himself with a radical sixties political terrorist for the purpose of funnelling money to 1) educational programs designed to radicalize minority students and 2) a renegade national organization in the business of promoting minority voter fraud and minority access to fraudulent mortgage contracts.
His internet-based campaign finance "bundling" operation has devised ways of receiving foreign moneys, even from places like Iran, which cannot be called to account. He has succeeded in demonizing all who question his negligible qualifications and dubious political partners as racists. He has been ruthless in using left-wing tactics to suppress and/or libel specific accusers and accusations, including mass phone and email attacks undertaken by his own campaign managers -- and ambiguously sponsored groups whose more extreme statements can be disavowed if necessary.
So the man who has, apparently, convinced a majority of us that he is the only one capable of bringing us all together is, in reality, the one who has the best possible training in eliminating all his -- and his sponsors' -- political enemies. He will have the full support of a veto-proof Congress as he sets about the task of denying free speech (on "hate" grounds) to his enemies [...]
No wonder high-profile conservatives are scrambling for cover. It won't be pretty when the Obama DOJ starts investigating Sarah Palin for malfeasance in office as Governor of Alaska.
Four years of this will not be undone by any congressional electoral rebellion. Pbama's legacy will make Carter's look like the first attempts of an amateur graffiti vandal.
Apocalyptic stuff. We will almost certainly get the opportunity to see how well this prediction pans out.
And now Krugman has the Nobel in economics.
Make no mistake, the Weathermen were SDS-hijacking, dirty, statist, communists, and Bill Ayers is a sell-out hack, but things need to be put in prospective.
People seem to forget that the Weathermen NEVER KILLED A SINGLE CIVILIAN, SOLDIER, OR POLICE OFFICER. The only people their bombs ever killed were some of the Weathermen themselves.
Keep in mind also what the Weathermen were fighting against. The the United States government was engaged in a bloody, immoral, and idiotic war of imperialism. Before the Weathermen started blowing up unoccupied buildings, American pilots like John McCain were slaughtering scores of women and children with bombs of their own.
"Pallin' around with terrorists" my ass. Sarah Palin's the one associating with a known terrorist.
I was poking around the Friesian web site when I came across this article that jogged my memory. The topic is criticism of Poppers philosophy of science, and in particular falsification.
To put some context to the first sentence please remember that Popper himself had already assumed and explicitly addressed the issue of "explaining away falsifying evidence".
Here we have the interesting case of an actual event that falsifies Kuhn's theory of science. I'd forgotten about it.
"Kuhn's critique contains a considerable element of truth, since people, scientists included, often do just see what they want to see, and it is possible to explain away falsifying evidence. On the other hand, anomalies are often recognized that are inconvenient to a theory, and most scientists are now aware that if the theory cannot ultimately accommodate them, then a new theory will be necessary. And then there is the Great Devonian Controversy. Once all the major geologists recognized that there was no unconformity in the sequence, and that there were plants in the lower strata, there simply was no existing theory that could accommodate the facts. Thus, we had a situation that, in Kuhnian terms, was impossible. The evidence could not be interpreted to sustain any existing theoretical views.
The situation was sometimes discussed by participants in what sound like modern terms. Thus, John Phillips, professor of geology at King's College, in London, wrote to De la Beche that his discovery of certain plant fossils, "is a fact to be introduced into the induction, not an anomaly to be frightened at" [p. 223]. Here "anomaly" would mean just what it means now: Some fact inconsistent with a received or desired theory. As "Baconians," both Phillips and De la Beche think that the appropriate theories will be produced by "induction" from a sufficient catalogue of facts. Neither Kuhn nor Popper could agree with that old "Baconian" view of theories, but Kuhn and deconstructionists cannot allow that an anomaly all by itself could potentially falsify a theory, rather than vice versa. But in the Devonian Controversy, the anomalies overthrew all the theories."
I had a discussion with a commenter called Midwesterner at Samizdata back in March that will give a fairly good idea of my understanding of fractional reserve banking. I thought it was a useful exercise for both Midwesterner and myself, and is one of those rare occasions on the internet where there was a changing of minds.
Midwesterner had posted a comment which included a hypothetical situation and his interpretation of it.
"Let's you and I play Monopoly™ some time and see how it works.
Lets say nine players start with 100 dollars each and all sales are done at open auction (simulates the market). Democratic vote will decide which players may engage in fractional reserve lending (simulates politics). Everybody else can only lend hard currency.
Lets say four players and I collude to engage in preferential treatment of each other. We five can use fractional reserve the other four cannot.
To keep it simple, let's say the other four colluders (in the real world, a couple of dupes would, too) all deposit their money with me and I lend it back to them. We have an initial kitty of 500 dollars (mine and their $100 starting stakes). By practicing fractional reserve lending I can actually loan them by the tenth deposit/loan cycle a total of $1785.25 (5 x $357.05) . This assumes that the player they spend the loan with turns around and deposits the money with me. So the five of us now have $1785.25 to bid against the other four players $400. We could actually have almost $1000 each if we managed to ring every last cent out of the system. By borrowing for all of our expenses and depositing all of our receipts, one can see how quickly the game would shift to the five of us with each lap around the board.
Players not in the lend/borrow/lend/borrow/.../... system have $100 each to spend. People in the system have $357.05 each to spend. Needless to say, a little collusion goes a long way. Separating the players from the dupes in this example makes the racket a little more obvious."
So what would be your answer to this and why? Do you think you would be able to give an explanation that would convence Midwesterner of your position?
Well surprisingly, I was able to convince him that in fact he was wrong, and along the way this exercise lead me to realize some things that were implicit in my beliefs but that I had never explicitly derived.
This was a series of comments exchanged on fractional reserve banking that also touched on anti-empiricism in Austrian Economics.
Turns out the only dupes in the system were those holding the bank accounts and accepting the bank notes and not the non-participants.
Here's my first salvo:
Their are restrictions on who can collude which prevents the collusion from being as easy as you make it out.
First off they have $500 between them. No matter how they lend the money out to each other there is still only $500.
When they borrow they must have access to the possibility of buying an asset with a revenue stream in order to service any loan they may take out to buy that asset. However in your example there are no assets with revenue streams.
Even if there were if any back and forth lending and purchasing occurs betwen the 5 colluders then the net benefit to them is zero.
The non-colluders could always decide to lend to each other also. So there is no asymmetry of fairness there. Nice player a could lend to nice player b who happens to buy a performing asset with the money. He then provides a with part of his revenue stream to service the interest on the loan. Player a no longer has the money he lent to b. He only has a promise to pay it back based on the revenue stream. So a has less cash on hand. As long as a understands this and doesn't think he can just retract the loan at any time then there is no problem.
Any "collusion" that occurs between the five colluders requires one of the colluders to lend and one to borrow with a net gain in cash of zero. Of course colluder c1 is not going to lend to c2 out of the goodness of his heart. He going to want proof that c2 can pay him back with interest.
So your model here is not sufficient to capture the nuances of the issue of fractional reserve banking. It's not merely that every schmoo on the street is harmed by people lending money to each other. There is something more that goes on.
Hint: There is a problem if and only if any player a lends to player b with b buying a long term capital asset that only has a revenue stream sufficent to pay back the loan, while telling a he has the capability to pay him back fully with cash out of hand he doesn't have.
This however is a fraud between a and b and doesn't involve the other people, and gives a no ability to bid up prices in the economy. Player a may overspend on his budget based on his mistaken trust in player b but that's only his problem when he runs out of cash and b can't pay him. That does not effect any person who is not lending to player b.
There's no reason why a bunch of players might cooperate, not collude which is a loaded word, to pool their cash on hand, just in case any one of them has an emergency.
I leave it to you to figure out how banks play a role in this."
BTW, there was another good article on Samizdata on the role of China in this crisis. It's something I recognized more than a decade ago. I've commented in that post also and although it's a rushed comment I think it would be helpful for anyone who doesn't understand why some people oppose loosening credit as a response to the crisis.
Remember these comments in the second article are not polished in a way that makes them easy to understand, unlike the comments to the first article. Repeatedly explaining this will help me understand why people can't grasp the argument and I will improve it.
I understand the causes of this problem, I understand the current situtation, and I understand the proper "solution". Getting anyone else to grasp it is another matter.
You often hear that the privileged are at fault for inequality because they selfishly tolerate poverty, thus preventing minorities from getting an education, good housing, proper health care or a decent paying job. Look at the Indians on reservations, living at subsistence levels.
For example the Colville Indian Reservation in Okanogan County Washington which ranks in the top 10 in a five-year average of alcohol-related traffic fatalities, and juvenile arrests for alcohol violations. Okanogan County had 62 drug- or alcohol-related deaths out of 367 total deaths in 2006.
“-- Addiction knows no bounds,” said Ben Descoteaux, behavioral health program manager for the Confederated Tribes of the Colville Reservation. He said income levels are more likely to play a role in addiction problems. “If you look at the economic data of the county, or the unemployment rate — those figures are some of the highest,” he said.
But, what would happen if poverty were to be wiped out?
With annual revenues from casinos and other businesses that have topped $1.4 billion, the tribe provides each of its 3,300 members with an income of about $120,000 a year, a free education and a guaranteed job. And many college-educated Seminoles are coming home to work in the tribe's Hollywood headquarters.
Despite these positive developments, young Seminoles die at an alarming rate from drug overdoses, alcohol-involved car crashes and suicide.”
The stunning thing about this situation is that the life expectancy of tribe members actually decreased since casinos began operation. The average age of a Seminole at death has dropped from 59.7 years old in 1997, similar to the rate on many reservations, to 48.5 in 2007, an analysis of state records shows.
“A recent spike in accidental deaths among tribal members, along with a troubling school dropout rate and an eroding work ethic, is linked to growing prosperity, many Seminoles believe.
Simmons, who as a teenager went through years of drug use and rebellion, said she sees a correlation between money and excess.
Or how it affects the real economy. (This is part of my general ignorance of / disbelief in macro).
In micro, a common technique is to look past the money to the stuff. For example, if someone prints a bunch of new dollars (inflation), then we don't have any more wealth. More dollars chase the same resources, and prices go up, but we aren't any better off. In fact, the people closed to the new dollars (the spenders, the first receivers & re-spenders) benefit at others expense. Similarly, government spending always comes from somewhere, so to act as though it "stimulates" the economy when in reality it just moves spending from one place or time to another is bogus. It's not about money, it's about the allocation of resources.
But then I read in the paper:
Without a mechanism to shed the bad loans on their books, financial institutions may continue to hoard their dollars and starve the economy of capital. Americans would be deprived of financing to buy houses, send children to college and start businesses. That would slow economic activity further, souring more loans, and making banks tighter still. In short, a downward spiral.
Fear of this outcome has become self-fulfilling, prompting a stampede toward safer investments. Investors continued to pile into Treasury bills on Thursday despite rates of interest near zero, making less capital available for businesses and consumers.
Superficially, this makes sense, just like it makes superficial sense that government spending creates jobs. But then I think "look past the money to the stuff."
Before tight credit and after tight credit, the resources in the economy are the same. The people, the skills, the capital, the natural resources - all the same. So how can tight credit slow down the economy? The factory that my business doesn't build means that the factory building resources are available to someone else more cheaply.
In fact, shouldn't the effect be the opposite? If tight credit means higher interest rates, then it encourages saving and investment over consumption. In fact, tight credit cures itself - it raises interest rates, which encourages saving, which provides more credit.
I am especially suspicious of the phrase "hoard their dollars and starve the economy of capital". Dollars are not capital, they are pieces of paper. You could burn them all, and the economy would still have all the capital it had before. Hoarding should just cause temporary deflation, as a lower supply of dollars chases the same amount of stuff.
But maybe I'm missing something about the nature of credit? Please enlighten me.
I ran across this.
…pardon my French, but what the fuck is going on with this?
Maybe I’m missing something. Could someone with a military background please convincingly explain to me how this isn’t as scary as it sounds? Because it sounds pretty damned scary. Or at least the start of something scary.
"Little Guy" hedge fund. If things don't go my way--high inflation, rising cost of credit, risk of unemployment, sons get conscripted, wife isn't allowed to re-enter at the border--make sure my portfolio compensates me accordingly.
John Robb maps it out at Global Guerrillas.
This product occurred to me as I was listening to a podcast of Chapter 13, "Punishment and Proportionality", of Murray Rothbard's "The Ethics of Liberty". I was contrasting Rothbard's discussion of criminal punishments to Randy Barnett's examination of restitution. Why can't I simply use an insurance policy to determine whatever restitution I deem appropriate if I am the victim of a crime?
I would expect to have a list of crimes--robbery, kidnapping, assault, rape, embezzlement--each with a benefit payable that I determine. If I find the thought of being raped particularly heinous, I would choose a larger benefit (with a proportionately larger premium) if I were a victim of that crime. If being the victim of auto theft did not particularly bother me, I could insure for a smaller benefit.
The insurance company would have to base its premium on the risk of the crime occurring, its ability to investigate the crime, to apprehend and prosecute the criminal, and to receive compensation from a convicted criminal. The company would not make guarantees of conviction or punishment to me, in order that they can negotiate a plea bargain with the criminal to recover the maximum compensation from him. The company may be fortunate enough to recover my benefit from the criminal, or they may have to make up the difference from collected premiums.
My benefit should include a lump sum for "psychic damage" which included any desire I had to see the victim punished. The benefit should also include a varying payout related to the financial costs I incurred from the crime--damage to property and medical costs. An administrative cost could be added according to the number of hours I had to spend assisting the insurance company with investigation and prosecution (perhaps in the standard contract I have to provide "all assistance as required by the company" and I can purchase an optional rider to compensate my time above, say, six hours per claim).
I would expect the jurisdictions I was traveling in to also affect the premium. Premiums may be higher in New York State if they had a legal system that was uncooperative to insurance companies, focusing only on making criminals pay "debts to society" and may be lower in Florida if their judges were willing to enter arbitration with the insurance companies more readily. Premiums on the high seas would be related to the insurance company's ability to privately apprehend and recover compensation from criminals.
If insurance companies were motivated to prosecute crimes for the benefit of victims, would victimless crimes be crowded out of the courts? Would insurance companies provide competitive pressure to make government law more efficient?
Would insurance companies become powerful enough relative to governments that they could provide protection against crimes committed by governments?
Would such organizations become coercive? The easiest way to become coercive would be for the insurance company to lobby for licensure and a mandatory market from the government, then use a monopoly position to prosecute "criminals" in such a way as to maximize their profit. What safeguards could protect against this?
Are there laws today to prevent me from insuring myself against criminal injury? Or could insurance companies be a bridge from the punishment/rehabilitation model provided by governments today to a victim restitution model independent of government?