Monday, November 1, 2010

What Is Really Going On

This is really about the most popular feature we put on here at the bureau, with readership increasing from the normal two or three up into the mid ten. As per usual, it is just an attempt by the analysts at the bureau to guess what is going on by reading between the lines.

We have some guiding principles, starting off with the fact that nearly everyone is telling some sort of untruth or half truth. This is based on the assumption that a few of the actors are mendacious, a few of them lazy, and an awful lot of them are credulous morons. One of the most important facets of a good lie is that the intended audience sincerely wishes to believe it to be true.

For instance, the ongoing smearing of Iran comes to mind. Certainly, Iran is playing at being a foil to the US, and certainly, Iran has made its lack of love for Israel clear, but certainly, it has done very little to act on either of those impulses.

We can start with the enrichment of fissile material, which many argue is indicative of its intent to wipe Israel off the map. The bureau does not concur with this analysis. Iran is engaging in the exact same thing Pakistan engaged in, that North Korea dabbles at, and that is acquiring a deterrent to a very viable threat.

The US provided Iran with notice when they attacked Iraq that the US will not brook those who stand up to the US for long. So, in order to remain independent, Iran must defend itself, meaning it must acquire powerful weapons.

The US, however, continues its hamfisted interventions and halloweenish saber rattling, alternatively trying to kill its way into hearts and minds and trying to threaten and bully its way into compliance. These policies have nearly ruined the state of Pakistan, leading to a schism in that government that threatens world security because they do have nuclear bombs.

As a short aside, one of the commonly used heuristics to determine the motivations of the various actors in this, the big game, is the basic assumption that we, as humans, are very much alike. We may approach acquiring our needs in different ways, but we have the same basic needs. As a result, the habit the US has acquired of killing and torturing innocent people in the name of suppressing terror seems to have been remarkably effective as a recruiting tool for those very people that we are trying to suppress.

How does it work? Well, it starts with a serious disdain for our fellow man, such as shown by military contractors killing locals for sport. It morphs into policies of spiriting people off for 'rendition', which turns out to be a horrifically bad idea. It ends when the whole world can see the utter lack of moral fortitude present in our policies, which clearly place the preservation of our precious skins above the wholesale slaughter of their young men.

It turns out that arguments in favor of torture are utterly silly and seem seated in a wish to believe torture effective. Too many Bond movies may be responsible, where the hero threatens some despicable half wit and thus gains the knowledge necessary to win the day. In reality, tortured people tend to tell you what you want to know.

That is an important fact that must be emphasized: tortured people tell you what you want to know, not necessarily what is true. When tortured, some young terrorist is just as likely to invent very intricate stories of conspiracies to do grievous harm as he is to tell the truth, that he hung out with some disreputable incompetents and had nothing at all going on.

In other words, we told him he was a big shot, we tortured him using fearsome methods into believing he was a big shot, and he may even pass a lie detector test with his confessions, but they are still likely to be false.

Ask a true interrogator what the most effective way to get intelligence is, and he will say to wine and dine the target, to become close friends, to spend time, and then to simply record and correlate. Once the target has been arrested and spirited away, the target is useless for further intelligence gathering. If the target is carefully groomed, the target can continue to provide useful intelligence for a very long time.

In closing, to warp back onto Iran and Pakistan, imagine being in their shoes. I know it is hard, since Americans seem completely serene in their moral superiority, but our government took young men from nearby countries and tortured them. Most of these young men had actually done nothing wrong.

Our government has killed over a hundred thousand people so far in the global war on terror. If you figure an average family size of five or so, that's four hundred thousand potentially very pissed off people. Given the population size of the average middle eastern country, that's a significant number, and it's not even considering the extended family.

To win a hearts and minds victory, the occupying force has to be utterly fair and has to be seen sacrificing itself to promote the local security. We have not been fair at all, and our troops ride around in armored trucks and shoot at anyone who gets too close. Now wonder they hate us...

Friday, October 29, 2010

Yikes!

To those of you who still read this blog, the amount of mild sensationalism has become commonplace. However, now we must consider the probability of far greater sensationalism coming down the pike.

There is a growing feeling amongst the population that the fed controls the economy, and, believe it or not, investors are seriously worried the fed will not inflate adequately.

When it seemed that this was a possibility, when Bernanke seemed to be indicating he would not aggressively pursue quantitative easing and swaps, the stock market went down. When a new rumor came out that he would keep the amount of cash flowing into the economy at the same level, stocks recovered.

Odd as it may seem to anyone schooled in economic theory, this seems to be the accepted wisdom of the day. Inflation in money inevitably leads to inflation in price, and we are seeing that right now. Food prices seem to have jumped about 20% of late. Due to a lot of factors, it is not unreasonable to expect that food prices will probably jump more, but that is not part of this diatribe.

So, the accepted wisdom is that we're seeing inflation in food prices, mild inflation in raw materials but deflation in assets. To 'fix' this, Bernanke is expected to engage in greater monetary inflation, which will lead to more of exactly what we're seeing.

It's pretty simple, really: if the price of subsistence rises, the cost as a percentage of income rises, leading to a reduction in disposable income, leading to a reduction in the purchase of capital goods, leading to a reduction in the price of those capital goods, otherwise known as price deflation. It's like trying to get a bigger ham by blowing air up a pig's butt. All you get is pig all over the place.

It's simple, really. A given family makes, say, $5000 a month. They pay, say, $1000 in food. This is not unrealistic. An increase in food cost of just 20% is another $200. Now they pay $1200. As I have pointed out before, all activity is at the margin, and, in this case, their margin is $200 narrower. So, instead of spending $1200 on a new TV, which they would have paid for on their credit card, $200 a month every month for six months, they have to make do with the old TV. There is a reduction in the purchase of capital goods.

This relates to the housing market, as well. As the cost of subsistence rises, the amount of money available to pay for mortgages goes down. This is one of the pernicious effects of inflation, that people who were previously stable financially suddenly find their margins thin to nothing and thus must sell capital goods to free up cash flow.

If you can't sell your house because, for instance, it is upside down in one of the worst housing bear markets in history, you either cut other spending or you walk away from it. Neither is good.

So, in the exact case where people will see their disposable income go down and thus reduce capital spending, the stock market goes up. Oh, well.

Sunday, October 10, 2010

Aliens Among Us

This is actually a twofer installment, as there are two common uses of the word aliens, one meaning those not of this country, and the other meaning those not of this world.

Recently, a Vatican scientist and an Air Force (USAF, retired) officer both predicted the arrival of aliens (pointy eared green variety) some time this coming decade. The Bureau has decided they are potty and probably unreliable, and that the sudden increase of serious discussion of space aliens is a part of the grander cyclical nature of idiocy that has gripped man as surely as death and taxes.

The other type of alien is becoming an endangered species. As the economy here continues to sputter and plotz, many of the illegals are going back home and fewer are coming over. One thing is certain, though, and that is that Republicans will take credit, calling it a result of their increased enforcement...

Saturday, September 25, 2010

Another Update

We at the bureau periodically write about what is going on behind the scenes based on the idea that we have very vivid imaginations and enough hubris to think we can read between the lines from the news.

Well, first up is the religious right. We try to remain light-hearted in the face of these people, but it is difficult. It is often amusing to hear arguments propounded by those of this particular political bent, knowing with absolute certainty that the arguments have no basis in fact.

Probably the most depressing of this sort of thing in recent history is the so-called 'ground zero mosque', which is neither at ground zero nor a mosque; it is a proposed location some two blocks away from ground zero.

One of the few things we know for certain about the founding fathers of this country is that they had no intention of ever letting religion in any way enter into government policy. So strident was their concern that it was the first thing they put into the bill of rights.

So, from a strict constitutional perspective, or from a perspective that any reasoned student of history would assume the founding fathers espoused, the building of this mosque is a non-issue. Also, the Jesus of the New Testament certainly does not seem to care about other religions except to periodically point out that being a member of some religious club did not automatically result in salvation, as in the parable of the good Samaritan, with which most of us ought to be familiar.

Further, Jesus told his followers to 'turn the other cheek' over things of far greater import than the possibility that some Muslims might have less distance to travel to get to their religious meetings. All this is easily summed up in a slightly misapplied quote from Jesus, 'truly, they have their reward'.

See, Christians are supposed to be concerned with things in heaven, 'so heavenly minded they're no earthly good' as was wittily put by some pastor in the long lost memory of the editor. Instead, they're combating illegal immigrants, arguing for torture of people who may or may not at one point have been sympathetic to terrorists, and so on, clearly not things the 'Prince of Peace' would occupy himself with.

This post has already descended into a rant, but the point is that there is little in the way of truth or fact entering the discussion on the religious right. This being said, the left is also quite lost. Much has been said in the left about how moneyed interests have manufactured the tea party movement, for instance.

See, the left is pretty certain it knows what should be done, and any reasonable person would agree with them. So, their first effort was to paint the tea partiers as unreasonable. The problem with this argument, of course, is that there are just too many tea partiers and many people personally know at least one, knowing that the one they know is not actually crazy.

When the attempt to paint the tea partiers as crazy fringe kooks beached itself heavily on a pile of facts obvious to everybody, they decided that the tea party movement was primarily driven by corporate funds, which, of course, is just silly. The demented nature of some of the commentators on the left appears to force them to not even be able to admit that there is a large body of people simply fed up with the overbearing, overweening, overlarge federal system, and are tired of the continuous bloating.

The internet has helped a lot, and the fact is that many of these movements are not classic centralized managed political movements but rather self-organizing and self-perpetuating because the average voter no longer trusts their leaders. Put simply, the tea party movement itself shows that a significant minority, possibly a majority of people in the US do not listen to their putative leaders anymore, whether conservative or liberal.

Yes, the tea party is not listening to the conservatives, either. The tea party has no interest in making itself about religion, sensing that to be a mistake. The hijacking of the conservative movement by the religious right gave us eight years of GW Bush.

Instead, there are a lot of moderate religious people, who believe in rights rather than in forcing the government to adopt a particular religion. Also, there are quite a few people in this group who are apostolic christians, a group that believes that religion has no bearing in governance but that governance must be moral and ethical, as well as respective of personal rights.

So, the tea party contains a wide spectrum of religious people, and irreligious people, conservatives to moderates, even some liberals, and is populated with lots of average Joes with decentralized, almost anarchic organization.

The point of this post, to wrench this screed back on topic, is that the primary argument put forward on a regular basis on this site, that what is happening does not correlate well to what is being seen in the news, is, hopefully, now clearly so. With little effort, the reader can scour the internet and find hundreds of different stories and theories, all of them contradictory, which is healthy. Yet the government is harassing anti-war authors, calling them terrorists. Or, maybe they are terrorists...

Monday, May 17, 2010

The Inherent Value of Money Fallacy

This pernicious fallacy is once again raising its confusing head. The most recent instance I have seen is the argument advanced by conservatives that illegal immigrants send money home and this somehow affects the economy.

Oh, boy, where to start? First of all, money does not now represent actual value. Value is a metric we each assign money. For instance, my son believes, firmly, that the value of a dollar is around one fifth of a toy car. I disagree. I find that the value of a dollar is about two fifths of an energy drink. I also find the value of a dollar to be a certain percentage of my time, as I have a day job.

While the dollar value is different to different people, the number is not, and here is where the fallacy arises. We conclude that if we transfer the dollar from one person to another, its useful value will stay roughly the same. This is the fundamental fallacy of socialism, or any redistributionist system.

In the case of the illegal immigrant, however, the argument is particularly stupid, as it shows an epic misunderstanding of fundamental economics. Specifically, that dollar is the property of the US government and has no value outside of the United States. In other words, it is only legal tender in the United States. People outside the United States trade dollars because they know they can use them to buy useful things from the United States, not because there is any inherent value in a dollar.

If the illegal immigrant were sending, say, gold or some other precious good to his relatives, the argument might hold, but it would be more difficult to make because the immigrant would have had to purchase or acquire the gold or precious goods to send in the first place, which would have been economic activity in the US, weakening the original argument. However, some sort of valuable thing being sent to relatives in another country would definitely represent a reduction in the national wealth of the US. Why this doesn't matter I will explain a bit later. However, the dollar is not an inherently valuable thing.

The reason I'm stressing this point is that illegal immigrants work in the US, send their dollars home to, say Sweden (or wherever; not picking on anyone...), and their parents then convert the dollars to whatever the local currency is. The resultant dollars go into a bank where people who wish to buy things denominated in dollars may purchase them to do so. Once they buy something in dollars, the dollars are back home, in the US, circulating in the economy once again. In other words, the only difference between having an illegal spend money in the country and having one send the money home is how long it takes for the money to once again circulate.

Since the dollar was made in the US, it must always come back to the US sooner or later. On a macro scale, were the exports of the United States to continue to decline, at some point, the value of the dollar not in the US compared to those exports would go down. In other words, if the number of dollars floating around in the world economy stays the same but the amount of goods exported goes down, the goods would become more expensive, driving more exports and vice-versa. This is the price curve in action. In this case, the amount of dollars floating in the world economy has gone up, but the exports have not reacted yet, so dollar exports have become relatively more expensive. This means, over time, that demand for dollar-denominated exports will rise, causing an increase in manufacturing in the US to meet the demand.

So, not only does the illegal help his family back home, not only does he provide his country with much-needed hard currency, but he also stimulates the US export business. This is 'win-win'.

And, now for the case of the valuables being sent to the home country. First of all, the game is not zero sum; valuables are being injected into the economy at a fairly steady rate. Second, the increase in economic stature in the country the illegal came from is worth the valuables, as we generally pour plenty of economic aid into the types of countries illegals come from.

The other point is that an increase in wealth in a country generally leads to an increase in economic activity, which leads to an increase in consumption, which leads to an increase in importation, which will lead to an increase in demand for goods, which is pretty much what we have above. Of course, since the valuable goods are not dollars, they can be 'spent' anywhere in the globe, but any time they are spent, they will bid against activity in dollars. The increased economic activity will always drive increased exports.

One of the fun little facts is that the more people there are working productively, the higher the 'velocity' of money, meaning the more often it changes hands between its bouts in the government, and thus the greater the economic output. This will be true, at least, until we get a VAT. Anyway, the more people there are working, the greater the demand for goods and services, and the less those goods and services cost, leading us to my final point:

Any person working, for any amount, is producing in exchange for value. This means that an illegal working is producing value for his/her employer at the same time as gaining value for his/herself. This is an important point because even when illegals are 'taking jobs' they are producing value. That value will be 'spent' sooner or later on other value, leading to job creation, as it is value that would not otherwise have been there. What I'm trying to say is that the illegal earns and must spend, while his employer produces and must sell. Since the total cost of production is lower because of the illegal taking less money, the production is more efficient, and there is more to go around. This means generally better lives for everyone. The ability to gain a better life is directly linked to the rate at which people in an economy are gainfully employed in for profit enterprise.

Of course, the above clearly implies that, given true free trade, it wouldn't matter if the illegals worked in their country or ours, but that is a discussion for another time.