Tuesday, September 30, 2008

Congress Did the Right Thing Today

This was a big day for our country! When my wife told me the result
of the vote on the phone, I said, "There's hope for the republic
yet." The wise men in Washington thought they had it in the bag, and
democracy won for once. After eight years of watching democracy die,
we had a hopeful sign today.

One of the best parts of the whole scene was Nancy Pelosi's speech
just before the vote. For five days, leader after leader on the Hill,
on campaign, and at the White House said, "We have to set aside our
differences for the sake of the country. Let's put aside the partisan
acrimony of the last years and act in a bipartisan spirit to save the
economy." Then what did Pelosi do? She stuck it in the Republicans'
face just before the vote! She blamed the mess on them and made it
clear the Democrats would ride in to save the day. These are not the
words of someone who believes she might lose the big vote. Not long
after that speech, with the noes stacking up during the roll call,
she and her lieutenants are scurrying around with their cell phones
trying to secure enough votes to pass the bill. What leadership!
Ninety-five Democrats voted with the Republicans to defeat the
legislation. Pelosi didn't even know it ahead of time.

One could say a lot about the vote, the deteriorating economic
situation, and the efforts of government officials to address it.
I'll just comment briefly on a column Steve Pearlstein published in
the Washington Post. I've liked his analysis as we go through these
interesting times. When I saw the title of today's column, They Just
Don't Get It
, I thought, "He can't be that condescending. That's not
like him!" Well, he wasn't condescending in tone, but the column did
indeed suggest that if people realized how serious things are, they
would not have told their representatives to vote against the so-
called bailout. Here is the message I wrote to Steve in response to
his article:

Your last sentence is the key to your whole article:

"But it is a measure of how little trust remains in both Washington
and Wall Street that voters are willing to risk a serious hit to
their wealth and income rather than follow their lead."

Voters don't trust Washington and Wall Street because they aren't
worthy of trust. This economic crisis has been developing for a long
time, and we can wait a few more months until we have new leadership.
Never throw good money after bad. The current leadership proved
itself unworthy a long time ago. Voters were right to reject their
leadership now.

My representative, Democrat Stephen Lynch, voted with the opposition
on this one. He stood with only two other members from the
Massachusetts delegation. He may have voted with his seat in mind,
but in fact his seat is secure. His district is solidly Democratic.
He stood on principle, and they are the right principles. Hooray for
courageous congressmen! Through this whole terrible war in Iraq, they
have been spineless wonders. Now at last both Republicans and
Democrats had a chance to repudiate the White House as well as their
own leadership in Congress, and they did it. They picked the right
issue and they did the right thing.

Saturday, September 27, 2008

Buy a Toyota

All right, I know I get impatient when hear these same old arguments,
and they just don't make any sense. I mean it, they don't make any
sense, and people keep repeating them as if they do.

Take this argument about the trade deficit. It is based on economic
nationalism, an incorrect conception of the nation. The nation is not
an integrated economic unit. The idea that the nation acts as an
economic unit is an incoherent concept. Yet we hear that we are a
debtor nation, and our indebtedness is tied to our so-called current
account, or balance of payments. And the balance of payments is tied
to the balance of trade.

Well let me tell you, these numbers and these concepts are
meaningless in our global economy. A government can be in debt. A
family can be in debt. A business can be in debt. A nation can't be
in debt. What is a nation, from an economic point of view? A nation
doesn't make purchasing decisions. Individuals, families, businesses,
and governments make purchasing decisions. Nations don't decide to
borrow money. Individuals, families, businesses, and governments do.

It makes no sense at all to track balances of payments or balances of
trade, unless you think the nation is an important economic unit. But
it's not. From a global perspective, it doesn't matter if I buy a
Toyota or a Ford. I just want a reliable, safe car - one that gives
me good value for the purchase price. I don't care whether a company
in Japan or a company in Detroit benefits from the purchase. Why
should anyone else care? The companies want to make money and the
purchasers want a good car. How is the nation a relevant actor in
this transaction? Why do we care at all whether the money I pay for
the car stays in the United States or not?

Here is a telling instance where we don't bother to track current
accounts. No one knows the balance of trade between Massachusetts and
North Dakota. No one cares. No one knows the balance of trade between
any two states. There's a good reason for that. The states aren't
economic units. They're taxation units and regulatory units, but
they're not economic units that make purchasing and borrowing
decisions. We don't bother to track their balance of payments,
because to track those numbers for units that don't make such
decisions is meaningless. We're only interested in those numbers for
units that have revenues, expenditures, and debts. Households,
businesses, and governments have revenues, expenditures, and debts.
States don't. Neither do nations.

In the latest economic crisis, we're told by sober experts that we've
been living beyond our means. Economic decision making units can live
beyond their means because they decide to do so. Nation are not
economic decision making units, and they cannot live beyond their
means. National governments can decide to borrow money or inflate the
money supply if public expenditures exceed tax revenues, but nations
as a whole can't live beyond their means. It's just not a coherent
way to think.

Let's say you took the Johnsons in Minneapolis, the Harrisons in
Seattle, the Olsons in Miami, and the Sullivans in Boston. Throw in
the Andersons in Albuquerque and the Dawsons in Denver to increase
the number of households to six. With an average household size of
four, we have twenty-four people in our group. Now suppose we
calculate the balance of payments for these six households. Their
annual income averages $60,000, each household carries so much debt
and pays so much interest, and so on. Why should we care about those
figures? We don't, and there's a reason we don't. These four families
have no economic relationship except that they happen to live in the
United States. Their money-making, purchasing, and borrowing
decisions have nothing to do with each other. In no way do they act
as an economic unit.

Now suppose we throw in a few more families: one from Osaka, another
from Bangalore, a third from Venice, and a fourth from Cairo. Now we
have ten families. This group of ten families is no more or less
coherent as an economic group than the original six. They're just ten
economic units that have nothing in common except that they share the
same planet. That's the point. We want to understand the economic
decisions of actors that actually make decisions. Why would we care
about numbers that aggregate the economic behavior of groups that
have no decision making power whatever?

What's the conclusion here? What's the summarizing point? Let's look
at numbers that affect real decisions. People who cite the trade
deficit have a reason. They say that when we buy more than we sell
overseas, that's bad for the nation. They say that it's bad for the
nation because we're shipping dollars overseas, which makes us
poorer. It's especially bad because they lend the dollars back to us
to cover our profligate spending, so now we're in debt to the people
we've been buying from. It's all balderdash. First of all, it's not
bad to ship dollars overseeas if we're getting so many good things in
return. We buy those goods because we get good value from the
purchases. We'd rather have the reliable car than the money. Thank
heavens, we say, that the Japanese make such good cars.

Now about the borrowing: we don't necessarily go into debt to buy the
Japanese car. If we do borrow to pay for the car, the loan isn't
necessarily held by a foreign bank. If the loan is held by a foreign
bank, who cares if the interest rate is fair? Yes, shipping dollars
overseas makes it easier to loan large amounts of money to the United
States government and United States banks. You can't blame the trade
deficit for those loans, though. If U. S. institutions want to borrow
money and foreign banks have cash because exporters have deposited
their profits with them, why shouldn't they loan it to us. Now we've
benefited twice: we have all those high quality cars on good terms,
and we have access to relatively cheap credit as well. Moreover, not
one decision maker in this chain has been coerced or tricked into
making a choice contrary to his or her interests.

Economists and politicians worry about this chain because we don't
want people and institutions here to be in debt to foreign banks. But
why? Why do we care who holds our loans? I just want the bank that
holds my home mortgage to treat me fairly and honestly. Whether the
bank's owners live in the United States or elsewhere doesn't affect
me at all.

The worriers have one big ace up their sleeves. What if we go to war,
they say? Then economic nationalism makes sense. We have to have
energy independence because our enemies could cut off our oil supply.
We have to cut down our foreign debt because our enemies could cut
off our credit. We have to become self-sufficient in every way,
because if we go to war that's the only way we can survive. If you
want to base all of your economic policies on the possibility that
you'll go to war, without even knowing who your enemies are, go
ahead. It doesn't look like a wise path to me.

The fact is, these ideas about economic nationalism go so far back
it's hard to trace them. We all know about mercantilism, the first
organized form of economic nationalism. People took a lot of pride in
their nation - they saw their nation as their extended family as it
supplanted the tribe and the clan. No wonder they wanted it to do
well economically. No wonder they took notice if other countries did
better. No wonder they wanted their current account to show a
positive balance at the end of the year. Let the gold pile up in the
treasury, for gold is good. We are a rich nation.

Things don't work that way anymore, Dorothy. The gold in our treasury
is an economic throwback, that's for sure. Who's to say that the
Japanese are better off than we are, when they have a lot of money in
the bank and we have millions of Toyotas to transport us all around?
By people's decisions, we have the cars we want and they have the
money they want. If General Motors can't make a profit, that's not
your neighbor's fault, it's not Toyota's fault, and it's certainly
not the United States' fault. It's not a sign of weakness, either, or
a sign of living beyond our means. No one has made a bad decision
here, except for the managers at General Motors, of course. But for
their poor stewardship, they might have competed successfully with
their brothers in Tokyo.

I'd say that's enough for now, wouldn't you? Someday you might draw a
diagram to illustrate the chain you describe above. If people can see
the diagram, they'll understand your analysis and criticism better.

Friday, September 26, 2008

We Were a Democracy

We are a democracy.

Let political parties say what they like, but end propaganda by
elected officials, using public money to pay for it.

Let religious organizations be active in political arguments, but
stop public leaders who use religious organizations to advance their
aims. No to claims of moral authority that derive from religious
beliefs.

Let us defend ourselves against our enemies, but say no to torture,
no to illegal wars, no to occupations, and no to prison camps.

Let political leaders offer persuasive arguments for what they would
like to do, but no to fear mongering, panic, lies, distortion, and
intimidation.

Let us maintain our system of distributed power and shared
responsibility - squash the theory of the unitary executive.

Let us restore the Senate and House of Representatives to a place of
strength and influence. We don't want a compliant legislature that
bends to the executive's will.

Let us keep freedom alive in every way. We won't tolerate security
measures that give the government more power, and that put people in
more, not less danger.

Let us set an example of freedom for our friends and our enemies. End
now the aggression, intimidation, fear, and every other way we have
lowered our standing in the world.

We are a democracy, or at least we were. We were admired everywhere,
now we have truly lost all we held dear.

Hitler's Rise to Power

Proverbial Wisdom from Around the World

As They Say in Zanzibar, by David Crystal

In this captivating tour of humanity's received wisdom, one of Britain's best-known and best-selling authorities on language, David Crystal, brings together more than 2,000 delightful proverbs from 110 countries--the first new book of world proverbs to appear in nearly eighty years.

Here readers will find proverbs they have known all their lives--such as
"Everything comes to those who wait" and
"Once a crook, always as crook"
--alongside such lesser known gems as
"One generation plants the tree, another gets the shade" (China) or
"When two elephants tussle, it's the grass that suffers" (Zanzibar).
Indeed, one of the great virtues of this volume is that Crystal serves up proverbs almost certain to be unknown to the reader, providing many fresh and wonderful surprises. Readers will find shrewd and incisive sayings from virtually every continent, ranging
from Finland ("Even a small star shines in the darkness")
to Ethiopia ("The smaller the lizard, the greater its hope of becoming a crocodile")
to Japan ("Too much courtesy is discourtesy").
Loosely following the method of Roget's Thesaurus, which groups words with similar meanings, Crystal has gathered these proverbs in 468 fields such as sameness and difference, small amount and large amount, thus placing similar and antithetical proverbs in close proximity. In addition, there are more than thirty side panels on special topics, such as proverbs in Shakespeare ("Brevity is the soul of wit"), biblical proverbs ("Pride goeth before destruction"), and much more.

Proverbs are fascinating in what they tell us about another culture's view of life. Each proverb in this book adds a tiny bit more to our understanding of the world's cultural diversity, and thus helps us grasp more fully what it means to be human.

THE WISDOM OF THE WORLD:
A coconut shell full of water is a sea to an ant (Zanzibar)
Don't call the alligator a big-mouth till you have crossed the river (Belize)
A bit of fragrance always clings to the hand that gives you roses (China)
They dread a moth, who have been stung by a wasp (Albania)
God heals and the doctor gets the money (Belgium)
The nail suffers as much as the hole (Netherlands)
When you sweep the stairs, you start at the top (Germany)

Thursday, September 25, 2008

Journler Entry

We are a democracy.

Let political parties say what they like, but no to propaganda by
elected officials, using public money to pay for it.

Let religious organizations be active in political arguments, but no to public leaders who use religious organizations to advance their
aims. No to claims of moral authority that derive from religious
beliefs.

Let us defend ourselves against our enemies, but no to torture, no to
illegal wars, occupations, and prison camps.

Let political leaders offer persuasive arguments for what they would
like to do, but no to fear mongering, lies, distortion, and
intimidation.

Let us maintain our system of distributed power and shared
responsibility - no to the theory of the unitary executive.

Let us restore the Senate and House of Representatives to a place of
strength and influence - no to a compliant legislature that bends to
the executive's will.

Let us keep freedom alive in every way - no to security measures that
give the government more power, but that don't make people safer.

Let us set an example of freedom for our friends and our enemies - no
to aggression, intimidation, fear, and all the other ways we have
lowered our standing in the world.

We are a democracy. Or at least we were.

Friday, September 19, 2008

A Melancholy Man of Letters

A Melancholy Man of Letters - WSJ.com: "It is an interesting question whether a person who thinks that he is on the brink of insanity is indeed so."