Bad Argument

I've read and talked to a lot of people whom are opposed to the recently passed healthcare legislation. Often, they have really good points as to why it's no good and won't achieve its ends. However, there's a defense that even many respectable economists use that I believe is lame. That is, that

"a clear majority of Americans oppose this healthcare bill."

Brushing aside the fact that we have no idea if a "clear majority" opposes this or not because most people haven't ever talked to a pollster in their lives, this argument is fundamentally flawed. It rests on the premise that majorities mean something, that if a majority of Americans wanted this bill, then it'd be OK.

It means that the mass genocide of Jews in the late '30s and early '40s was OK only if a majority of Germans gave the thumbs up; that bombing the WTC was only OK if a majority of extremists agreed; and that Chinese communism is justified only if most of its citizens don't mind.

This is clearly ridiculous.

Majority opinion confers absolutely no legitimacy upon any argument whatsoever. Even if 100% of all people believed that healthcare legislation was right (and thus could lower costs), or that protectionism was good for them, or that 2 x 1 = 89, they are still in every case wrong. It doesn't matter how many idiots they have on their side.

Strawberry Fields Forever

TBO: "Wholesale prices that were $17 to $19 for a flat of eight containers have now fallen to $5 to $6 a flat, Grooms and Parke said. Parke said some farmers have tried shipping berries to stands to sell on consignment, but if they only return $3 a flat on each shipment, they lose money on each deal."

No, it's greed, according to Yahoo!. Apparently, the right thing for everybody to do is run at losses; let's just produce things that nobody wants to pay for. Or at least that's what the homeless shelter folks would have us do. In a way, though, they are a loss that society is running itself. They know no better.

In other news, I spoke to a German family at work today. I overheard them speaking their native tongue, and not knowing what it was at first, I inquired about their nationality, and followed up with a terrific joke. The conversation went like this:

Me: "What nationality are y'all?

German Father: Jocularly, "We're German. Is that OK with you?"

Me: "Well, sure, I guess we can all forgive and forget, right?"

German Family: Silence.

The parents looked stunned and confused. The children just looked confused. Did he really say that?

Yes, yes I did.

In Other News...

In the neon circle: What's in the bill is irrelevant now. Not like anybody besides the privileged political class and wealth looters need to know the 'benefits,' anyway.

In the red: Notice that there has never been a "Pepsi shortage" or a "sock shortage?" Yet when an entire populace of a state is made to fund public utilities, we face blackouts, shortages, congestion, and overall piss-poor quality relative to most other goods consumed freely. Even in the light of this, they still got 216.

What a joke.

Deflation vs. Malinvestment

Reading through an investor's newsletter this morning, I came across snippets that almost contradict each other. I'll explain that. But it's as though some (most) mainstream investors and academicians want to have the cake and eat it too. It's like me going to work, hoping it's not busy, and still making bank; it ain't happening.

This guy says: "Now, there is no exact way to determine the right size of the money supply. It definitely needs to grow each year by at least the growth in the size of the economy, the population, and productivity, or deflation will appear. But if money supply grows too much then you have inflation." [Emphasis mine]

He clearly injects the deflationary bogey, and of course doesn't explain the implications of it, but instead implies that it is clearly and at all times bad and catastrophic, which is emphatically untrue. We'll see why here:

"More than five million homeowners are behind on their mortgages; There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the jobless; The private capital stock is growing at its slowest rate in nearly two decades; Roughly 30% of manufacturing capacity is sitting idle; Nearly 19 million residential housing units, or about 15% of the stock, is vacant; Commercial real estate values are down 30% over the past year; The average American worker has seen his/her level of wealth plunge $100,000 over the last two years, even with the recovery in equity markets this past year; Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash" [Emphasis mine]

I've highlighted the words and phrases that are ubiquitous in any recession that the Fed (or any central bank) has presided over, those being 'unemployed, low stock growth rate, idle capacity, vacancies, decreased values, decreased wealth, decreased credit.'

I have studied under the school which says that if you fear deflation, and combat it with low interest rates and artificial injections of liquidity in the market, you're going to get all of the bad things associated with bad investments, namely, idle stock, underemployment, and lower asset values. You cannot avoid the former without encountering the latter.

Deflation is not bad per se (Ask the 1880s). There is no reason to believe that long-term deflation is anymore pernicious than long-term inflation. I've simplified it, but succinctly put, expectations matter. More on that here.

4,051 Decks of Cards

were used to make this incredible structure. I couldn't embed that particular video, but here's another of the same man:

Wake Me Up Tomorrow

"The Federal Reserve is currently rolling over all maturing Treasury securities, but in the future it may choose not to do so in all cases."

From Bernanke's testimony on the Fed's exit strategy, before the Committee on Financial Services, U.S. House of Representatives, in Washington, D.C. on February 10, 2010.

Cultural Economics

I watched most of "Life and Debt" tonight, in my ongoing search for information regarding the IMF, World Bank, etc. It's a documentary about IMF and World Bank loans that are often granted on harsh terms and with less regard to the borrower's interest as compared to the lender's (remember, these loans are for the specific purpose of advancing the borrower, not the lender). Also probed was globalization and the opening up of Jamaica's ports in conjunction with the devaluing of Jamaica's currency, and how these actions destroyed many domestic industries. All the while, the movie is narrated by a woman who has an obvious disdain for western culture and wealth.

But, it was a good experience. I wasn't convinced by its anecdotal evidence of the evils of free trade. However, I was intrigued by how much the U.S.'s protectionist policies (subsidies & tariffs) adversely affected Jamaica's wellbeing (e.g., Chiquita and Dole bananas are protected Latin American imports). Also intriguing, the IMF insisted upon devaluation based upon their snap shot of the world market, in order to boost Jamaican domestic industry relative to the rest of the world. But because Jamaica is so dependent on exports, many domestic industries (and citizens) suffered in the long term.

And it goes on and on. The video was mildly educating, more so for people who are already familiar with the system, to give them a human emphasis on textbook economics.

I'm coming to see economic development more and more something that cannot be forced upon people. IMF and World Bank loans, whether they come with strict conditions or not, tend all the more to destabilize global resource flows: there are just too many variables to account for. On the one hand, you can devalue a country's currency to stimulate domestic industry, but on the other hand, doing this will destabilize domestic industry. Or, liberating trade barriers subjects smaller economies to un-liberated trade barriers of large countries, hurting the small countries all the more; this is, of course, not an argument against opening up trade barriers, but instead against protectionism as a whole. However, now you have an entire community of folks who think that free trade impoverished their culture. Are you better off in the grand scheme of things?

Also interesting in my studies of these organizations is how efficiently (that is, inefficiently) knowledge can travel between agents at the top level to the people that they're trying to help. You have westernized, government-sponsored loan agencies attempting to help third-world, non-english speaking cultures. There's so much that can and does go wrong, and yet, the IMF and World Bank are still here.

A Follow-up

I want to make it clear that cutting the salt intake of Americans is not the aim of an "industry crackdown." It's simple: people who aren't dieing from high blood pressure-related complications will die from something else. After all, people must die at some point. Thus, life-sustaining care will manifest itself in some other area, and that's something that the study doesn't take into account.

Let me reiterate: let's assume that the tax on salt would indeed cut salt intake by 6 percent, and "[result] in 327,892 fewer strokes and 306,173 fewer heart attacks." Let us assume further that the cut in salt consumption would make many high blood pressure medications superfluous, saving the government money in these areas insofar as people use government assistance programs and the like. This is not unreasonable, per se, and I wouldn't debate it.

But we must consider that often, individuals with high salt intakes have a bad diet to boot, and there arises a whole caboodle of problems that, frankly, kill people. If we're still talking about people who use the government dole to pay for their medical care, there's no reason to believe that a new set of complications wouldn't be covered by such aid. Worse, still, is if people live longer while on government medical aid; costs haven't decreased in such a scenario.

The problem with this study is that it's just a snapshot of the state of things minus people with high blood pressure. This is understandable, but no less fallacious, considering the impossible task it would be to map out all the other scenarios and ways that people could die if not from high blood pressure-related complications, and how these paths would affect medical costs for the government.

It's like justifying a tax on tobacco by citing lower medical costs. But that's dubious, if smokers die at a younger age, requiring less medical care than otherwise, thus saving money in the long-run.

So, it isn't about costs. It never was/is/will be about costs, because the government multiplies the cost of anything it breathes legislation on.

Instead, this is about control. Every damn thing they do is about controlling every facet of your life.

The Elephant and the Ant

This is why you don't give anybody the authority to take your income and monopolize arbitration.

"Working with the food industry to cut salt intake by nearly 10 percent could prevent hundreds of thousands of heart attacks and strokes over several decades and save the U.S. government $32 billion in healthcare costs, U.S. researchers said on Monday."

The U.S. government wouldn't have to save a damn dime in healthcare costs if it wasn't in the entitlement field in the first place.

"The team estimated that a government-industry effort could cut Americans' salt intake by 9.5 percent."

There is no "government-industry effort" when the former party has compulsory jurisdiction over the latter. As Thomas Sowell put it, "When there is a partnership between an ant and an elephant, who do you suppose makes the decisions?"

The writers of this article know that the above is true, because just a few lines later they write,

"By contrast, a tax on salt would cut salt intake by 6 percent, resulting in 327,892 fewer strokes and 306,173 fewer heart attacks, the team calculated... If cooperation is not voluntary, new regulations on sodium content of processed and prepared foods might be necessary..."

With this said, I must observe that conservative pundits are too late when they talk about the dangers of giving more control to the government over our health matters. This article clearly proves that they already have too much control.