The New Camelot? I Sure Hope Not!

I've seen a few references this year about the Obama Administration being the new "Camelot," referring of course to the JFK Administration which had that nickname. When I hear that, I wonder to myself if the person using the expression has actually read the King Arthur story. Those of you who have read the story will know where I'm going with this; for those who haven't, it's not pretty. The story ends with a dead King Arthur and a kingdom collapsed in ruins. The story is really about the end of the Golden Age.

At the time of this writing, unemployment is approaching double digits, and the deficit is above a trillion. The national debt is in the trillions. Sooner or later, if deficit spending at the current rate continues, and there's no indication that the budget can be balanced any time soon, the interest on the national debt will exceed the tax revenue that can be collected. At that point there will be two options: default on the debt or print money to pay the interest. Either option would be disastrous. So maybe there's something to this Camelot analogy after all.

Bring Back Craftsmanship

The biggest current worry right now in my area is whether GM and Chrysler can survive the current recession. As we all know, it's not just the auto industry that's affected, and some are wondering if we aren't living through the second Great Depression. No one really knows for sure what's going to happen. We could get deflation, or rising national debt could send us into hyperinflation if not handled properly. Some of us even have the idea that the whole thing was built like a house of cards to begin with.

That's what I want to talk about today. Let's start with the auto industry. Obviously, the industry relies on people buying new cars. The problem is, people don't necessarily need new cars; they need reliable transportation, which can also be provided by a well-maintained used car. So steps are taken to encourage people to buy new cars they don't really need. Customers having extra money and available credit are just two of the cards in the foundation of the house of cards.

Now let's talk about the stock market. In theory, stock prices are based on things like P/E ratios, but in practice the biggest influence on prices is the ratio of people who want to buy to people who want to sell. The long-term upward trend that lasted up until about a year ago was therefore largely driven by incoming investments being larger that withdrawals, which turned out to be the load-bearing card of the lower layer.

Now let's move on to quality. A trip to the local supermarket, electronics store or auto dealer will put you in front of a variety of products, all of which are attractive-looking and have a base level of quality. The food is tasty and usually won't make you sick (at least not right away); the electronics are fast and flashy; the cars as well.

Closer examination reveals a different picture. Many of the food products have ingredients like MSG and corn syrup, which are thought by some to be harmful, and are in any case not as tasty as the ingredients they substitute for: in the case of MSG, more flavorful base ingredients, herbs and spices; in the case of corn syrup, cane sugar. The electronics and appliances generally work well, but they are often sold along with an extended warranty, almost as if the manufacturer expects them to break just after the normal warranty expires (this actually happened to me with a dryer). The situation with cars is similar, though a lot better than it used to be.

Now compare this to life before the Industrial Revolution. Food was all organically grown, and corn syrup, MSG and canola oil nonexistent. Tomatoes were eaten fresh only when they were harvested; the leftovers were canned. Metal tools were handcrafted. Houses were built with timber frames instead of two-by-fours with just enough wood to prevent the house from falling over.

I'm not suggesting, however, that we undo the Industrial Revolution and go back to hand-woven clothes and horse-drawn carriages. Instead, I put this question to you: how can we combine modern prosperity and medieval craftsmanship?

I Understand You're Tired, but a Tax Revolt's not the Right Answer

Don Cooper has a good post on LewRockwell.com expressing general disgust with government and recommending a tax revolt. I wholeheartedly agree with his sentiments, but a tax revolt is the wrong answer. Not because it wouldn't work, but because it addresses the problem at the wrong level. While it's true that government couldn't exist without our financial support, our ideological support is much more important. What's worse, we can see our money going to taxes (or at least some of it), but most of us have no idea that our beliefs and values are the foundation of government.

The primary question of politics is this: should decisions be made by individuals for themselves, or by a smaller group of individuals for everyone? Most people claim to believe the former, but when push comes to shove, invariably favor the latter. This is the core of the problem. Government exists and is powerful because we want it to exist and be powerful. Until we change our minds on this, tax revolt, "throw the bums out", etc., won't work.

There's also quite a bit of denial surrounding this issue. For example, some of us believe that everything would be O.K. if only we put everything back the way it was in the 50's. Others believe that everything would be all right if only we got the right people into office. Both groups of people really believe in government; they just disagree with the current implementation.

Really fixing things requires as a prerequisite withdrawing our beliefs and not just our tax dollars. If this is done, a tax revolt is irrelevant except that it may speed up things. If it is not done, a tax revolt is irrelevant at best.

Gullible or Cynical?

The title of this post links to an article by Paul Hein on lewrockwell.com about the current economic situation and what's being done about it. Mr. Hein has an idea about the situation which has also occurred to me, although in a different context:

Moreover, the Keynesian idea of stimulating the economy via government spending is not new. It’s been tried before; it never works. Doesn’t the current generation of whiz kids know this? Do they never talk to anyone save themselves?

An answer presents itself to me, and I should probably keep mum about it, but I won’t. Here goes: the powers that be WANT the economy to fail. Why? That’s a good question, but I can only speculate about the answer. What is clear, however, is that economic collapse seems guaranteed if the stimulus package is implemented, and those advocating it must surely know it.

I suspected the same type of thing at the inception of the Iraq war. I noticed that our current enemies were people we had supported in the past, and noticed a trend. I concluded that if our leaders consistently pursued policies that led to results that were the opposite of their stated goals, then they must have a different set of real goals.

That idea may appeal to the "tinfoil hat" crowd, but after thinking about it, I realized that the failed policies could be explained without conspiracy theory. Ideology alone was sufficient to explain everything. People can be controlled far more effectively with ideology that anything else, because they think that whatever they do as a result is their own idea. Also, because most people would rather be right than solve their problems, ideology insulates people from the effects of opposing evidence. If you don't believe this, try pointing out to a fundamentalist Christian that there are two conflicting Noah's Ark stories in the Bible. Or try mentioning to a climate-change believer that Greenland was warm enough to support farming in the Middle Ages.

Of course, all of this isn't to say that there isn't a conspiracy. There may be, but even if there is, it's really ideology that's running the show.

Paved with Good Intentions

It has been a very common belief among liberals that if only we could get the right people into office, everything would get better. Now that Obama, who by consensus is "the right person," is in the White House, we'll get to find out if that belief is true. If the new equal pay law is any indicator, the answer is "No."

On the surface, the law seems like a good idea. Why should men get paid more than women for doing the same job? It is a good intention, but there are a couple of problems with it. The first law of economics is that people respond to incentives. So let's look at some incentives.

At a typical company, some of the workers are very dedicated. They care about their job, learn as much as they can about the business, and go the extra mile to make sure the job gets done right. Other workers, on the other hand, just want to get paid and do just enough and just well enough not to get fired. In a perfect situation, the dedicated worker gets paid more than the slacker, and gender has nothing to do with it. In real life, sometimes there are discrepancies, and if this new law gets strictly enforced, some companies who happen to have skewed pay distributions for whatever reason will face fines and/or lawsuits. Some other companies will see this happen and decide that it's easier and safer to just pay everyone the same for the same job, with maybe some allowance for length of time worked and education. So the dedicated worker will get the same pay as the slacker and both will know it. The only way for the dedicated worker to be rewarded is to seek a job at another company with a higher pay scale. So now we have different companies with different pay scales, and there's bound to be some uneven distributions here too. The next step, if government really wants to pursue the matter, is to set pay rates by profession. Now some bureaucrat in Washington is deciding what you get paid, and ability and dedication have nothing to do with it. Is that what you want? And what happens to productivity among the dedicated workers who can't move up to the next pay scale at another company?

Next problem: laws are enacted congressmen with good intentions (let's be generous), but implemented and enforced by a different set of people. The people implementing and enforcing the laws don't necessarily have the same intentions. And, as you have seen from the example above, intentions can't always be implemented because people have the annoying habit of pursuing their own best interest to the extent allowed. It's not a "slippery slope," it's just unintended consequences.

So what's the answer? Well, if women are really paid less than men for the same work, they should be in greater demand from a profit and loss standpoint, and the discrepancy will be corrected by employers who naturally want to get the best employees for the least amount of money. The answer is to ask the question: what is it that stops this from happening?

A Better Economic Stimulus Package

At the time of this writing, we here in the U.S. face double-digit unemployment and record national debt and budget deficits, with no sign of any of the above ending any time soon. An economic package that will ease the near-term pain is being discussed. Justin Raimondo, the antiwar.com guy, has made an excellent suggestion for a stimulus package that won't increase the deficit. But we're not advocating that here because it's reactionary, and we're in tune with modern economics.

Instead, I say that the economic stimulus package being discussed doesn't go far enough. If we really owe the money to ourselves, and China, Saudi Arabia and Japan will really loan us as much as we need, why stop there? Why not go all the way and give every household in America a million dollars? That would really stimulate the economy. Consumer spending would skyrocket. It's not real money right? Like my friend at work says, it's all abstract anyway, and worst case, we just repudiate the debts and start over with a new currency. It could work, couldn't it?

If you've been following along, you could reasonably conclude that you've been led down the garden path. Let's not talk about the obvious hyperinflation this program would cause. After all, nobody I talk to about this seems to believe that it could happen here. Let's talk about the recipients of the stimulus money. If they do the right thing with the money, namely pay off their debts and invest the rest, they will be in position for a modest income for life. They won't work any more, and, talk all you want about jobs being moved offshore, there is still plenty of work here that needs to be done. On the other hand, they could do what most people who win the lottery do: spend all of the money and end up broke again. In this case, the economic stimulus will be temporary at best, and the money will end up in the hands of the wealth as usual.

Now you may think that it's harmless to do these things as long as they're not done to such an extreme level. Most people would agree with you. But at what point does it become extreme enough to be harmful? Is a trillion-dollar deficit really moderate enough to be harmless?