Monday, 2 January 2017

Friedman and blatant sophistry

Hendry told Ericsson that:
The graph in Friedman and Schwartz … made UK velocity look constant over their century of data. I initially questioned your plot of UK velocity–using Friedman and Schwartz’s own annual data–because your graph showed considerable nonconstancy in velocity. We discovered that the discrepancy between the two graphs arose mainly because Friedman and Schwartz plotted velocity allowing for a range of 1 to 10, whereas UK velocity itself only varied between 1 and 2.4.
Hendry went on:
Testing Friedman and Schwartz’s equations revealed a considerable lack of congruence. Friedman and Schwartz phase-averaged their annual data in an attempt to remove the business cycle, but phase averaging still left highly autocorrelated, non-stationary processes.
As Hendry puts it in the interview:
Margaret Thatcher – the Prime Minister – had instituted a regime of monetary control, as she believed that money caused inflation, precisely the view put forward by Friedman and Schwartz. From this perspective, a credible monetary tightening would rapidly reduce inflation because expectations were rational. In fact, inflation fell slowly, whereas unemployment leapt to levels not seen since the 1930s. The Treasury and Civil Service Committee on Monetary Policy (which I had advised in … had found no evidence that monetary expansion was the cause of the post-oil-crisis inflation. If anything, inflation caused money, whereas money was almost an epiphenomenon. The structure of the British banking system made the Bank of England a “lender of the first resort,” and so the Bank could only control the quantity of money by varying interest rates.
In the book by J.D. Hammond (1996) Theory and Measurement: Causality Issues in Milton Friedman ‘Monetary History, published by Cambridge University Press (page 199) you see the letter that Hendry wrote to Friedman on July 13, 1984. In part it said:
… if your assertion is true that newspapers have produced ‘a spate of libellous and slanderous’ articles ‘impugning Anna Schwartz’s and … [your] … honesty and integrity’ then you must have ready recourse to a legal solution.
Friedman never sued!
As Hendry notes in the interview:

One of the criticisms of Friedman and Schwartz was that is was “unacceptable for Friedman and Schwartz to use their data-based dummy variable for 1921—1955 and still claim parameter constancy of their money-demand equation. Rather, that dummy variable actually implied nonconstancy because the regression results were substantively different in its absence. That nonconstancy undermined Friedman and Schwartz’s policy conclusions.
Friedman and Schwartz (FS) have claimed (page 624) that their UK money demand model was constant (that is, stable in its estimated parameters):
… more sophisticated analysis … reveals the existence of a stable demand function for money covering the whole of the period we examine.

As HE showed – it was certainly a fudge in the FSs models. They wrote that FSs models were not constant once the evidence was properly considered and that the:

… inferences which Friedman and Schwartz draw from their regression would be invalid … [due to biases]
They also report a range of problems with the FS models.
In conclusion they say:

Taking this evidence together … [the FS preferred model] … is not an adequate characterization of the data and is not consistent with the hypothesis of a constant money-demand equation … none of the relevant hypotheses could have been tested by Friedman and Schwartz … without their having obtained a rejection …
Excerpts from here
For those unfamiliar with the notion of money velocity, here's Asher Edelman (aka Gordon Gekko) explaining it in under a minute.

Wednesday, 28 December 2016

"Germany's record trade surplus is a bigger threat to euro than Greece"

Interesting (or rather, boring by now) how Germany is allowed to break Maastricht rules, but the Periphery is immediately stomped if it does. Wanting to be a net importer of Aggregate Demand is fine, but allow the Periphery to be a net exporter of Aggregate Demand for Christ's sake. Recirculate the money. Recycle the funds back into the system - otherwise you force people in the Periphery to spend from private debt, which they can no longer due because they're tapped out & are seeking to deleverage. And imposing on them austerity (aka pro-cyclical fiscal policy) isn't going to help the Periphery, and in the long run it's not going to help Germany either. Things as they are only contribute to higher poverty and unemployment and only benefit extremist parties and the corrupt establishment who's making a killing in the process.

My thoughts on MGTOW

I only recently heard about MGTOW (men going their own way). At first, I was led to believe that it's about men wanting to stay single for various reasons (because of financial reasons, because they're not interested in sex etc). Instead, what I found in most of these videos is men bitching about gold diggers. So far so good, but then they enter into all this sophistry about history, gender, and culture. And while they do so, they betray their ignorance and vitriol. Needless to say, the sexism and double-standards are obvious. Guess a lot of people want to "Make women great again", when men controlled women's vaginas. They think that the biology of women is somehow incompatible with societal tranquility. Ironically, these people seek to bring back the patriarchal system, while at present, the patriarchal marriage and alimony laws are the things that are fucking them in the ass so badly. Just look at Dave Foley. His account shows clearly the inequity of these laws.

Tuesday, 20 December 2016

Examples of your typical fascist logic:

-"Yes, spreading culture and ending racism in Ethiopia is so horrible"

-"Fascism could be easily improved without personality cult (Duce). It requires a Politburo with several equally entitled people in the leadership. We must learn from past mistakes."

-"I think that in addition from a Rex elected by the People, a new fascism should also have a Senate with Patricians to occupy the high offices and govern under the supervision of the King, and an Assembly for the Plebeians to aprove or disaprove of the Senate's Laws.
Just like it was during the Regnum Romanum, that in my opinion was the purest form of Fascism."

-"Impossible! Fascism is Hierarchical. The Leader is the best man in the country for the job. He rises through a hierarchy of merit. Workers work. Leaders lead, and the best leader leads us all. The first Fascist Leaders may have inculcated a personality cult, but only in opposition to enemies, who also had their cults, of democracy and materialism. But an order of merit would be self-perpetuating, after it is established."

-"Real Fascism just works! the same can never be said about demoncrazy and capitalism and their brother the bolshevism"

-"When men were real men and women were real women. The perfect lifestyle: God, His Word, family, and work with purpose, something today's societies lack."

-"I know. What a great time for the Italian people! I wish us Americans got along better with the fascists..."

-"The problem was that Mussolini ended Stresa and allied with Hitler, if he had continued in the allies fascism would still be a savior ideology until today"

-"I would say the issue was not Hitler. Weren't it for Churchill and the zionist jews he conspired with, Germany and Italy would both be quite well off today. But that's just my opinion."

Wednesday, 23 November 2016

There are only 3 types of Government

There are only 3 types of Government (mechanically-speaking):
-Transition phase between the two

Wednesday, 26 October 2016

How to fix Syria

Make the West & its allies (Israel & Saudi Arabia included) stop funding islamic fundamentalists. Strike a deal with Assad (basically, don't prosecute him and his cronies). Send out the Army Corps of Engineers from all NATO members to Syria, to rebuild it in something like half a year (if people aren't shooting at them). Then put the refugees on planes and trains back to Syria. Naturally, this goes against the agenda of any hawk, regardless of political colour. Peace in the Middle East = the formation and consolidation of regional power blocks, and no empire wants that. But that's the only real pragmatic solution I see. You might call it wishful thinking - and it probably is, but it's a lot better than trying to integrate them in Europe. It will simply lead to political instability, and we'll end up with a divided continent, with regimes in power that won't shy away from using extreme means to "bring things under control."

Wednesday, 12 October 2016

Elevating Trump, the DNC's strategy all along

Richard Moser absolutely nails it. Original kudos to Wikileaks of course.
Read the whole thing here:

Force all Republican Candidates to lock themselves into extreme conservative positions that will hurt them in a general election…
The variety of candidates is a positive here, and many of the lesser known can serve as a cudgel to move the more established candidates further to the right. In this scenario, we don’t want to marginalize the candidates, but make them more ‘Pied Piper’ candidates who actually represent the mainstream Republican Party. Pied Piper candidates include, but aren’t limited to:
Ted Cruz
Donald Trump
Ben Carson
We need to be elevating the Pied Piper candidates so that they are leaders of the pack and tell the press to [take] them seriously.

Sunday, 2 October 2016

Disappointing article from The Jacobin on the UBI


Here's my take on it.

The article mixes in a number of faux-problems. Firstly, it assumes that Government must increase taxes somewhere and or cut funding from somewhere else in order to implement the UBI (regardless if it's livable or not).

Secondly, it assumes that with more leisure time, people will be more emancipated and be more engaged socially and politically. An ironic consequence might be that reactionaries will gain in free time too (and be more engaged in social activism of a different kind), leaving things more or less neutral.

Thirdly, it brings in ethics in a very flawed manner. "While a basic income would compensate those who spend countless hours doing unpaid reproductive labor, men who don’t engage in reproductive labor would receive the same amount." By this line of reasoning, old people might not be deserving of the UBI because they don't engage in 'reproductive labor', or they don't engage as much. Never was a fan of LTV lingo.

Number 4, it assumes that we can have the type of social relations humans used to have in hunter gatherer societies. "By shortening working hours, a basic income expands the realm of freedom and encroaches upon the realm of necessity, taking us closer to a society where we can hunt in the morning, fish in the afternoon, criticize in the evening, and wash dishes after dinner." Yeah, no. The realities of cities is very different. If you're in the countryside and you own land, things might be different. But so long as you have the phenomenon of private rent seeking, stemming from private ownership over natural monopolies (over non-man-made things, such as land, forests, rivers, minerals etc) - then the hunter gatherer society can't be revived.

And finally, it assumes that capital can only turn a profit by exploiting people. That's just not true. And as for capital flight. Man, they can't leave with the land. Ok? What matters is the land, its riches, and its people. Not someone's nrs on an electronic balance sheet.
"The only way out is to continue producing even if one can’t make a profit. Thus, an LBI would sooner or later force onto the stage the age-old question of the ownership of means of production."
Alright, so we can deduce from this that Government owning the means of production doesn't need to make a money profit to operate industry and infrastructure. So why then is the UBI fiscally incompatible without tax increases and or budget cuts?
Now, if you're die hard on ethics, then the UBI isn't for you. Why? Because why should the rich, the uber rich, and the moderately well off get an extra income, unlike the poor who have none?
In case you don't know. I'm not big on ethics. I'm interested in whatever gets the job done. That being said, I'm not a Machiavellian. Genocide today to achieve utopia tomorrow is not my credo. Onwards...

It would be better to implement the Freeland reform, in which Government takes ownership of all the land and natural monopolies, leaving man-made things (like buildings) in private possession. This alongside Universal Health care should be the top priorities in my view. The BIG and the JG can take a back seat. Unemployment is caused by Government money taxation, anyway, and it's exacerbated by the inequitable flow of funds within the economy. Through money taxation, the Government creates a pool of unemployed from which to draw labor so that it can provision itself. If there's an excess of unemployed, there are two options. 1) for the Government to hire them (see the JG). 2) for the Government to lower the tax. Instead of preserving the highly inequitable flow of funds from high MPC households to low MPC households - let's do away with the FIRE sector in its entirety. Have asset side discipline for the banks and provide a public banking option ONLY, which would issue loans to consumers and business without interest. We'd eliminate the drag and inequality in the economy, produced by compound interest and mortgage debt.
In conclusion, I want to say this. Regardless of what you implement, regardless of how good it may be - at the end of the day, people are fucking stupid. And they're everywhere in every strata. Stupid rich people. Stupid middle class people. Stupid poor people. Stupid working people. Stupid unemployed people. Stupid men. Stupid women. Stupid trans people. Stupid heterosexuals. Stupid homosexuals. Stupid theists. Stupid atheists. Etc. At the end of the day, that good system which was in place will erode, and people will allow it to fall because they're fucking stupid and greedy.
I'm not being a fatalist here. I'm simply using Ibn Khaldun's theory on society.

Monday, 26 September 2016

How pro-immigration policy is a boon to capital

I began thinking about this after I watched Bernie Sanders early in the campaign talk about immigration policy in an interview. And he said that pro-immigration policy is a right wing policy. He argued that it serves to bring down worker's wages. At first, I disagreed strongly with him. But after giving it more thought and putting the matter into a larger context, something which Sanders didn't do, I nonetheless came to his conclusion. And later on I was well surprised by George Galloway's stance vis-a-vis the Exist referendum; and his motivation was very reasonable in my opinion. Galloway said that the last straw for him was Greece (of how it was treated by the Troika). And he maintained that a sovereign country ought to be able to decide on its own immigration policy. When I heard him say that, I immediately thought about Palestine under British mandate, which was precluded to decide on its immigration policy. We all know what happened. Lots of American and European immigrants came in and settled down. The British Empire promised the land to both sides. Then they retreated. Conflict erupted. Might made right. And the Palestinians were screwed over by both the Arab powers and the British.

Now, to the issue at hand.

Let's take into account the other side of the balance sheet, namely, the countries from which people are emigrating from. Regions in these countries are being depopulated through this phenomenon. I shall use my country (Romania) as an example. A significant portion of the adult population has left the country to work abroad. Most of them work, others steal and beg, what can you do... They left their children in the care of their grandparents. The consequence of this massive emigration takes a heavy toll on families, and children in particular. The grandparents are too old to take care of them, or the grandparents don't work or have very low pensions... and bringing up the children is very hard. Sure, the money the parents send back home helps out, but it's not enough. And households have it particularly worse in the rural regions or in towns in which the local industries are dead. To offer up my personal view, I don't like the fact that Romanians are emigrating just to find work that pays well, when they could be working here - and the gods know this country needs a lot of work. Now, let's look at what happens in the countries who are the desired choice of immigrants.

How does capital benefit off them?

Well, more people in creates more demand to be covered and consequently, higher saving desires. More people willing to take on jobs for lower pay decreases labor's bargaining power and puts downward pressure on wages. So capital benefits from an inflow of non-skilled workers, skilled workers, and workers of higher specialization (such as doctors, for instance). In my country, there is no law which precludes public school graduates to leave the country immediately after they obtained their degrees. So the Romanian government covers the cost of their training, while countries in the West reap the benefits of that free training. So on the one hand, you have depopulation, and on the other, you have overpopulation - which in turn gives birth to racial and ethnic tensions, which in turn give birth to the usual debate between right and left - which split the middle class. And that debate most of the time is plagued by various views on morality, while the mechanics side of it, which produces actual effects, is lost in translation. So overall lower labor costs for capital makes it easy for Western firms to compete with producers from developing countries.

Romania, for instance, has been a net importer for a long time. The country imports a lot of things which could produce domestically, while it exports natural resources like timber (mostly illegally cut), minerals, and fuels. Recently in my country, foreigners may acquire land. Our hospitals are understaffed, underequipped, and underfunded. While more and more doctors are leaving the system, seeking to emigrate, with the students hot on their trail. Now, don't get me wrong. It's only natural for people to go out and seek the best life for themselves and their families. That's not what the issue is about. The issue is about pro-immigration policy being in fact a pro-capital policy, to the detriment of labor. Capital wins economically, or financially if you will. And it also wins politically, because it manages to divide the working class via identity politics. It exploits racial and ethnic tensions. Make no mistake, the mainstream left is also interested in keeping people divided, keeping capital on top of the hierarchy, defending rent seekers and economic parasitism. Hear out Michael Hudson in this great speech of his.

One way of dealing with this, in my opinion, is for Western governments and international organizations to take steps to reverse this process. One way of doing it is to promote full employment in the South and East, so that people will have an incentive to return to their homeland - and enjoy a good living there. It strikes me odd to concentrate so many people in one particular major region, instead of having them spread out and maintaining a comprehensive network between countries/societies. The problem of immigration will be solved once full employment will be the norm in every country. So when the mainstream left says, oh, we welcome immigrants. It's going to be great. And when they're asked about money. They'll say, oh, we'll cut here and there, increase tax there and over there, we'll have a balanced budget, lower government debt, and it will be great for both domestic labor and immigrants. When they say that, it's utter bs. It won't work. They won't deliver on their promises, and from their failure, the right will profit in the polls, and nothing's going to change - it will only get worse.

Let's remember that the Great Depression produced by the Roaring Twenties was not solved in the US by the New Deal. The New Deal alone wasn't enough to do it, because the program simply wasn't big enough - and Keynes told FDR this in his letters, telling him that he's not spending enough. When finally the US Government spent enough, it was because of war motivations. So the decision to enter WW2 was the political motivation to pursue fiscal policy for full employment.

Wednesday, 21 September 2016

Churchill was a genocidal maniac

"Churchill was a genocidal maniac. He is fawned over in Britain and held up as a hero of the nation. He was voted ‘Greatest Briton’ of all time. Below is the real history of Churchill, the history of a white supremacist whose hatred for Indians led to four million starving to death, the man who loathed Irish people so much he conceived different ways to terrorize them, the racist thug who waged war on black people across Africa and in Britain. This is the trial of Winston Churchill, the enemy of all humanity.


Bengal had a better than normal harvest during the British enforced famine. The British Army took millions of tons of rice from starving people to ship to the Middle East – where it wasn’t even needed. When the starving people of Bengal asked for food, Churchill said the ‘famine’ was their own fault “for breeding like rabbits”. The Viceroy of India said “Churchill’s attitude towards India and the famine is negligent, hostile and contemptuous”. Even right wing imperialist Leo Amery who was the British Secretary of State in India said he “didn’t see much difference between his [Churchill] outlook and Hitler’s”. Churchill refused all of the offers to send aid to Bengal, Canada offered 10,000 tons of rice, the U.S 100,000, he just point blank refused to allow it. Churchill was still swilling champagne while he caused four million men, women and children to starve to death in Bengal."

Thursday, 1 September 2016

My review of this brilliant non-fiction title


by Jacques COULARDEAU & Ivan EVE

Grab the ebook here:

Review by Serban V.C. Enache

Note: this piece was considered ineligible for publishing by the reviewers at Indialogs for the following reasons: "This review is written in a colloquial, non academic style and it is full of personal opinions, inappropriate for an academic journal. It seems more a journalistic insight."

The Review itself:

This book tackles the New Silk Road from a number of different perspectives, historical, social, economic, and from the standpoint of geopolitics. The reader is given a background regarding the Old Silk Road – its human cost and the socio-economic implications in the present, typified by what is called Post-Traumatic Slavery Disorder and Post-Traumatic Slave Syndrome.

We learn about the 13 centuries of slave trading done by the Muslim powers, and of the Trans-Atlantic slave trade, which lasted 300 years, but produced approximately the same number of casualties. We learn about slavery in India and about the slave-trade in the Indian Ocean. That it had existed since probably the emergence of agriculture, something like 12,000 years ago. Slavery existed in America before the arrival of Europeans. And the book concludes that slavery was and still is a global or universal phenomenon. Religious motivations for slavery are also highlighted, alongside the changes in thought and values, from Judaism to Islam, and of course, Christianity.

It’s always a pleasure to read an objective take, no matter how brief, on slavery. Because there are myths flowing around out there, which claim that slavery and the slave trade are purely an invention of “the white man”. And these two evils are not only an invention of secular institutions and practices, but they are also enshrined in mythology, dogma, religion. To sum it up in a humorous expression, treat thy neighbor as thyself if he’s not a foreigner or a heathen. But if he is, then kill the bastard or take him in thralldom.

I wholeheartedly agree on how the authors tackle the issues of Post-Traumatic Slavery Disorder and Post-Traumatic Slave Syndrome. They insist on a process of proper information and open dialog. And they emphasize the requirement of meritocracy. If we are to have true equality and meritocracy, then the rise and fall of individuals within the hierarchical system of any civilized society must occur based on their own merits, not based on favor or prejudice. Any system or policy that’s designed to ignore a merit-based argument in favor of a non-merit-based argument can only be of a discriminatory nature. One cannot be granted favor without someone else receiving an injury as a consequence. One is either an egalitarian, or one’s not. One either believes people should be judged based on their own merits, or one believes that they should be judged based on favor or prejudice. Like the authors, I count myself among the former.

There is also a worrisome phenomenon occurring, particularly in the USA, in which unpopular speech is being censored, not only by right wing reactionaries, but by left wing progressives as well. The latter are called mockingly as “regressive leftists” or “the regressive left”. I will quote the Thomas Jefferson Center on this issue.1

"An epidemic of anti-speech activity swept across the campuses of American colleges and universities in 2015 and shows little sign of abating in 2016. Not long ago, these same institutions were at the vanguard of First Amendment issues; students demanded—then made powerful use of—expanded speech rights on campus, and administrators held academic freedom sacrosanct. These positions reflected a shared understanding that intellectual inquiry requires an environment in which debate is uninhibited, robust, and wide-open, even if it occasionally results in unpleasant or offensive exchanges.

Today, however, the focus seems to be on limiting rather than promoting the open exchange of ideas. Students who once protested to have their voices heard now seek to silence those they disagree with or find threatening. Meanwhile, university administrators appear locked in a competition to determine which school will take the toughest stand against offensive, unpopular, and hurtful speech. First Amendment principles have given way to identity politics, trigger warnings, and so-called “safe spaces,” and the Free Speech Movement has, at many colleges, become the Anti-Speech Movement.

Since 1992, the Thomas Jefferson Center has awarded Jefferson Muzzles to those individuals and institutions responsible for the more egregious or ridiculous affronts to free speech during the preceding year. Our usual practice has been to select eight to twelve recipients each year, reflecting the unfortunate reality that threats to free expression regularly occur at all levels of government. This year, however, we were compelled to take a different approach.

Never in our 25 years of awarding the Jefferson Muzzles have we observed such an alarming concentration of anti-speech activity as we saw last year on college campuses across the country. We are therefore awarding Jefferson Muzzles to the 50 colleges and universities discussed [...] both as an admonishment for the acts already done and a reminder that it is not too late to change course."

Afterwards, the book presents the Old Silk Road proper, the ancient network of trade routes that were central to economic and cultural interactions among different regions of Asia, connecting the West and East from China to the Mediterranean Sea. The religious implications associated with the various countries and trade interests are also approached (Buddhism, Hinduism, and Islam).

We learn from that ancient epoch and we’re moved to the 15th century, to Admiral Zheng He, his great fleet of merchant ships – and the reader learns of his visits to foreign lands. Most notably, his repeated journeys into India, Africa, and Arabia.

Past that point, the book moves the reader into the present and reveals great information regarding planned investments in new port infrastructure and upgrades, new trade routes, cross-judicial and economic cooperation between countries for safety and development. Figures regarding freight capacity and throughput are given for some key trade nodes in China, Africa, Singapore, Hong Kong, Dubai, and South Korea.

The authors make important observations, especially regarding China. This nation isn’t placing its eggs in the same basket. The Chinese are preparing different scenarios. China is open to the Indian Ocean. In maritime trade, it’s investing in the port of Colombo and in Hambantota. It is developing the hub-and-spoke model; but China is also developing alternatives to it. To reach America, the railroad option via the Behring Strait. To reach Europe, via the Arctic approach and westward along its ancient route – by linking virtually the whole of Europe through railways, down to Spain.

I’d like to add that there are many ideas on the table, ready to be carried out with Chinese help. For instance, a second Panama Canal in Nicaragua, to connect the Pacific and the Caribbean (albeit voices of skepticism and dissent haunt this proposal).2-3 The Brazil-Peru transcontinental railroad – a massive undertaking meant to link via rail the Atlantic coast and the Pacific coast, and thus open Brazilian exports to Asian markets.4 There are also plans for China to create an alternative transcontinental route from Brazil, through Bolivia and Peru.5

Deals between India and China are also underway. Collaboration on atomic science, especially regarding the thorium-based nuclear reactor and the Chinese pebble-bed solid fuel 100Mw demonstration reactor.6 It’s also important to note that atomic power still remains an important outlet of investment and energy generation with near zero CO2 emissions, particularly when looking at 2 billion souls seeking to attain western living standards. India holds around 25% of the world’s major thorium reserves, and it is actively developing the thorium fuel cycle.7-8

Coulardeau and Eve take special note of India and Sri Lanka, and do not dismiss them from the greater scheme in the wake of such big projects like the Trans-Pacific Partnership deal – which, for political reasons that the authors identify, are left outside by the main geopolitical power. We’re referring of course to the USA.

Globalization is a multi-door street, but some doors are bigger and wider than others. Such free trade agreements can only push for lower sovereignty at the regional and national level, enforce strict intellectual property laws, and diminish the collective bargaining power of labor. Supposedly, consumers and firms are the ones who profit from such deals – but history shows that’s not really the case everywhere all the time. Otherwise protectionism would not have resurged in the West. And Britain would not have practiced protectionism to grow its own industries first, before projecting the comparative advantage doctrine (whilst ignoring absolute advantage) upon others through threat of violence and outright war.9 I am, of course, referring to the British Empire’s bloody tally in imperialism and colonialism. The exploitation of India’s people and the artificially-induced famines, and the Opium-wars with China leap to mind.

The so-called race to the bottom is a true phenomenon. It manifests itself when governments of signatory countries (pacts of free trade or ‘fiscal responsibility’) implement policies meant to keep domestic purchasing power lower & living standards low, in the hope of gaining market share for their export-oriented enterprises. These countries are thus deliberately keeping their domestic levels of Aggregate Demand low, and they rely on imports of Aggregate Demand from abroad in order to keep their economies working (albeit with considerable unused capacity to spare).10 Aggregate Demand means income plus the change in private debt.11 Private debt inflation adds to Aggregate Demand – it translates into more spending, more sales, more income. While private debt deflation (what much of the world is experiencing after the Great Financial Crisis of 2008) decreases Aggregate Demand – it translates into less spending, fewer sales, less income. Accounting-wise, every net exporter of goods and services is a net importer of Aggregate Demand and vice-versa. Spending is income. Debt is equity. All government debt in the world represents world-wide private sector financial savings (equity).12-13

Issues of flags of convenience are explored in the book, alongside those of safety. Ships and harbors require protection. Merchandise requires tracking. Elements of corruption, bureaucracy, and the relationship between capital and labor must not endanger the flow of goods and services, or add undesired and unnecessary costs to it. The authors state that what’s required for true security is the existence of an international agency, with satellite monitoring capabilities, and with the legal mandate and military means to combat terrorism, human trafficking, drug smuggling, and illegal weapons trade. Whether one is personally in favor of globalization or not, the soundness of the above proposition is indisputable.

I believe the many countries involved in the New Silk Road must follow the two principles behind the Peace of Westphalia of 1648, which ended successfully 150 years of religious war and established the notion of co-existing sovereign states; peace between them being reached through diplomatic congress.14 The first tenet said that for the sake of peace, the crimes of all sides must be forgotten. While the second tenet maintained that foreign policy must be carried out with the “interest of the other” in mind. What relevance do these Westphalian principles have on our present imperfectly globalized world? It is geopolitics that makes or breaks progress. That makes or breaks nations. That promotes war and strife, or peace and development. And it is precisely this lack of Westphalian sovereignty among nation states today, as well as the desire to severely outsource national and local sovereignty to super-state bureaucracies, that endangers the peaceful process of globalization – and turns it into a deliberate phenomenon of exploitation carried out by financial interests for the interest of financial elites, rather than for the shared benefit of countries as a whole.

John Maynard Keynes said that the unregulated movement of international capital endangers that self-governing experiment we call democracy.15 How prophetic his words were, especially if we look at the wealthiest and strongest nation on earth – at the extreme income inequality in the US today, which resembles not a capitalist economy, but a feudal economy.16

In short, if households are doing well, then so are the firms. GDP growth not seen in wage growth appears in profit growth.17 As an adept of Chartalism18, I can tell you that macro fiscal policy is more important to public purpose than trade. Whether a country is practicing free trade or protectionism, so long as it has monetary sovereignty (so long as the national government spends and taxes in its own free-floating nonconvertible fiat currency) it can do away with permanent and involuntary unemployment. The currency sovereign faces no solvency risk. He can never miss a payment.19 The real constraints are of a physical nature; unused physical resources, available labor (people willing and able to work), and know-how.

Brazen corruption, political instability, and natural disasters are conducive to high inflation or hyperinflation episodes for countries, alongside fixed exchange rate regimes with strong currencies. Inflation is not always everywhere a monetary phenomenon, like mainstream (orthodox) theory likes to claim.20 The overproduction of money is always a consequence of a crisis of hyperinflation, never the cause of it. The Weimar Republic had to print (deficit spend) many figures as % of GDP in order to purchase foreign currency with which to make war reparation payments. That money didn’t go to the creation of roads, railways, industries, schools, or hospitals. In Zimbabwe, a favorite example employed by inflation mongers, a number of different factors triggered the hyperinflation episode. First, Mugabe’s failed land reform, which crippled agricultural output. And secondly, persistent political instability and brazen corruption and the need to import more food from abroad contributed to the overproduction of money.21

And of course, in all aspects of human society, one cannot ignore or reject that great element called geopolitics. When powerful interests converge, either deliberately or through random opportunity/chance, the weaker party incurs the terms of the stronger ones.

I would recommend this title to any investor or public servant that is looking to familiarize himself or herself with the historical realities of the Old Silk Road, and with the challenges posed by the New Silk Road in proper context. People seeking to invest in the New Silk Road – either in a specific supply chain, in a particular technology, service, or financial institution – must realize the complexity of this trans-national region and the many competing geopolitical and economic interests within it. Public servants, those placed in key government agencies that hold important positions, must also study carefully this tapestry of interests, challenges, and must weigh all the potential consequences (both positive and negative), if they are to draw up pertinent national policies that take into account not only the interests of wealthy lobbying parties, but also the interests of the common citizens and their natural environment.



2-Michael D. McDonald, Bloomberg, 2015…/china-s-building-a-huge-canal-in…

3-Lily Kuo, Quartz, 2015…/why-is-a-chinese-tycoon-building-a-50-bill…/

4-Brianna Lee, International Business Times, 2015…

5-China Daily, 2015…/2015…/17/content_21031116.htm

6-Fiona MacDonald, Science Alert, 2016…

7-Stratfor, 2016…/gauging-indias-nuclear-power-pot…

8-BBC News, 2006

9-John M. Legge, 2016…/comparative-versus-competitive…/

10-Warren Mosler, 2011…/the-euro-zone-race-to-the-bot…/

11-Steve Keen, 2012…/economics-in-the-age-of-del…/

12-Steve Keen, Private Debt Project, 2016…

13-Bill Mitchell, 2015

14-New World Encyclopedia, 2015…/Peace_of_Westphalia

15-Noam Chomsky, Hegemony or Survival, page 138

16-Laura Tyson, The Huffington Post, 2015…/us-income-inequality-costs_…

17-Anna Louie Sussman, The Wall Street Journal, 2015…/inside-the-fight-over-productivity-…/

18-Bill Mitchell, 2009

19-Brett W. Fawley, Luciana Juvenal, St Louis Fed, 2011…/Why-Health-Care-Matters-and-th…

20-Antonella Tutino, Carlos E. Zarazaga, Fed In Print, 2014

21-Edward Harrison, Naked Capitalism, 2010…/mmt-fear-of-hyperinflation…

Thursday, 25 August 2016

Why Garbagemen Should Earn More Than Bankers

Any sensible person would agree that inter-temporal arbitrage (aka banking) is LESS important than trash disposal. Read this great piece by Rutger Bregman at Evonomics.