The Other 10 Percent

Finally, Glenn Beck is being consistent!

I will accept, or at least have some respect for, any philosophy or set of beliefs so long as it is consistent. Most philosophies fail this simple test. Glenn Beck has excelled at failing this simple standard. But no longer!

In defending his statement that 10% of Muslims are terrorists, Beck states that 10% of people will believe anything. Ten percent of people don't believe in the moon landing, 10% of people are birthers, truthers, what have you. Basically 10% of people are crazies.

Separately, in explaining why his audience will usher in a bright future, Beck has estimated his audience at 30 million people:

We have 30 million people in our footprint. 30 million people [if you count Beck's combined TV, radio, book and event audience this is not an unreasonable number]. That’s ten percent of the population. Here’s the good news. This ten percent is going to be the shelter for the other ninety percent. This ten percent will be the leaders of tomorrow…this is the group, this ten percent will be the ones when all hell goes to hand-basket and everyone on the left and the right are yelling and arguing and trying to pull you into camps…maybe literally. You’re going to say…don’t go, everything’s fine, don’t worry we can take care of eachother. We’re Americans, we’re better than this. [Emphasis added]

 So there we have it:

1. 10% of people will believe anything
2. Beck's audience is 10% of the people

The conclusion is obvious

The Concert of Europe

The EU certainly has many things said of it, some going as far as to say that it is repeating the Tower of Babel . Today, however, I read a historical parallel I have never seen before: that the EU is in fact a mirror of the Congress of Vienna. Of course, the Congress of Vienna, it makes perfect sense. Think about it:

Who headed the Congress? von Metternich

Who heads the EU? Van Rompuy

Eerily similar isn't it? The similarities are endless! As the linked comparisson states:

The parallel between 1815 and 1945 is interesting as both years marked the defeat of a tyrant whose armies had totally destroyed the societies and countries of Europe, rewriting laws, relationships, and creating a new society.

OK, not sure that Napoleon and Hitler really form a fair comparison; seems like Hitler was somewhat of the antithesis of the Napoleonic Code, but I can see some parallel. What else?

The goal of the Congress of Vienna was the complete removal of any trace of Napoleon’s activities – putting Europe back to where it was before the French revolution. Not only were the Germans defeated in 1945 but the Allies reestablished all the old boundaries and governments. It took many years before the event that we would consider equivalent to the Congress of Vienna occurred. The Treaty of Rome created the Common Market in 1956 to make it impossible for another war to occur in Western Europe. Both major treaties were reactionary events as they put things back to where they were before the periods of war and both were extremely successful for a long time. 

Um, no.

Yes, the Congress of Vienna sought to remove all traces of Napoleon, and turn back the clock of Europe. The Congress sought to, and did, somewhat arbitrarily redraw the map of Europe, reestablishing separate and feuding states. This is very much a reactionary thing. Von Metternich aimed at establishing a balance of power in Europe among different nation.

By contrast, the EU was the opposite of reactionary. The Common Market reduced the barriers between countries. The EU has sought to lessen the effect of national borders, increasing the mobility of people and property. Rather than establishing a balancing of power, the EU seeks to unite powers. In essence, the EU is the antithesis of the Congress of Vienna. Rather than seeking to divide up Europe, the EU is established to unify it. Yes, the form of that unification is up for debate (a super state, a federation, a liberalized common market, etc.) but it is a unification nonetheless. The Treaty of Rome and the EU in general is not seeking to "put things back where they were before the period of war". The European Idea is the to move things away from the way they were, the counter to the reactionary Congress.

Just because both the Congress of Vienna and the Treaties of Rome, Maastricht, and Lisbon involved the countries of Europe getting together to accomplish something does not mean that they are parallels. If anything, the goals of the EU are much more in line with the views of Napoleon than von Metternich, but that might not be the best pro-EU argument...       

The European Diktat

Barry Eichengreen has an excellent article about the Irish bailout, comparing it to German reparations after WWI. I would like to expand on this point with further analogy to the post-WWI world.

The main issue for Ireland is that it has too much debt (remember, debt is a practical issue, not a moral one) and even with reasonable growth it will not be able to handle this debt burden. Now, when a borrower borrows more he can handle, he should suffer for that, so that he and other borrowers know that you can't borrow too much. When a lender lends imprudently, he should suffer for that, so that he and other lenders learn you can't lend imprudently.  The Irish bailout, however, seeks to impose costs only on the Irish people (the borrowers) while leaving the lenders (bondholders) untouched. Europe is telling Ireland that it must pay a heavy debt.  This is unreasonable. This is the European diktat.

A much more sensible solution, as mentioned in the linked article,  is for the Irish debt to be written down, while Ireland also imposes fiscal austerity. This way the burden on Ireland is reduced, but both borrower and lender still pay a cost. Not only that, as it currently stands, the Irish have no incentive to improve their situation and pay back the debt, as I will explain.

First, however, let's compare this situation with the post-WWI world. The Allied nations had borrowed immensely from the US to pay for the war. At the end of the war the Allied nations sought to link reparations from Germany to the war debts they had with the US, but the US refused to write down the debts, which was part of the reasons reparations on Germany were so high. On the matter of reducing war debts Calvin Coolidge famously said "They hired the money didn't they?" These war debts and reparations were a terrible burden on post war Europe. Still, the debtor nations sought to have the war debts reduced.

In 1923 Britain, in a desire to be as responsible as it could, accepted a deal with the US to settle the debts at 80 cents on the dollar. The French waited longer and eventually settled in 1926 at 40 cents on the dollar (ratifying the settlement even later in 1929). Italy also waited and settled the debts at 24 cents on the dollar. [Source: Lords of Finance] The takeaway here should be twofold: that an overly burdensome debt will likely eventually be written down, and that the longer you wait the greater the chance of a lower write down.

At the time J. M Keynes encouraged Britain to wait longer for a better deal "in order to give them [the Americans] time to discover that they are just as completely at our mercy as we are at France’s and France at Germany’s. It is the debtor who has the last word in these cases."

Keynes was exactly right on this. It is better to write down a debt and receive a part of it then have the debtor  default and realize even less. With too much debt, high unemployment, ands severe austerity and tax hikes, what incentive do the Irish have to work harder and pay back the debt? They would be better off making the situation worse and forcing either a default or a write down of the debt. That is, they have an incentive to be disruptive, or even destructive. Ireland may well go for Katastrophenpolitk, much as Germany did with reparations. As the situation gets worse in Ireland, it will fuel things getting worse in the EU, which will encourage the EU to move to write down debts, which would benefit Ireland.

This is nothing new, it is the classic debt overhang problem. If the economy in Ireland grows then it is not the Irish people who will benefit, since so much will go to pay off the debt. The Irish people will have to deal with lower wages, higher taxes, and still have to make the debt payments. The benefits accrue to the bondholders and not the "equity holders"--the citizens of Ireland. So you would expect the equity holders to "under invest"--work less. Better for the Irish people to be disruptive, worsen the situation, and force the EU to write down debts. This is the essence of Katastophenpolitk.

But this is a terrible outcome for everyone, worse still because as we saw with Britain, France, and Italy, its likely that the debt will be written down in the end anyway. On the way, however, we will have a languishing Irish economy, as well as other European economies. We will have growing resentment towards the EU, growing nationalistic feelings, growing conflict. Katastrophenpolitik is a form of brinkmanship: pushing the situation to the verge of disaster in order to gain an advantage. Ireland is being overburdened with debt, if the situation get worse in Europe then this debt will be reduced, so let's make things worse! Is this the strategy we want for Europe?

No!

Better for the debts to be written down now, as reasonably as possible, without having to go through the damage to European unity. It seems overwhelmingly likely that the debts will be written down anyway, so why not do this sensibly? It is alright to risk the European Idea for something, but to ruin it for nothing?

Vicious Virtues

Writing in Poor Richard's Almanack, Ben Franklin declared "Rather go to bed supperless than rise in debt."

What a wonderful representation of what are often called the  "Victorian virtues" (though the Almanack was printed prior to the reign of Queen Victoria). Debt is morally repulsive, not only to be personally avoided, but is a sin to pass on to one's children.If we could only return to this ideal, the future, the character, and the dignity of America would be restored.

The only problem with this, however, is that it's nonsense. There is nothing morally odious about debt in and of itself, or about borrowing for the future.

Consider Ben Franklin's aphorism. Which seems better: to go to bed hungry and wake up weak and unable to work as well, or to borrow against tomorrow's income so that you can eat and wake up strong enough to work? Suppose that if you eat one loaf of bread you can work enough to earn two loaves of bread and that right now you are hungry and have no bread. What is the moral dilemma about borrowing enough money to buy one loaf of bread, eating it, and then working enough to earn two loaves and paying back the debt? If debt is morally wrong then you shouldn't borrow even if you can pay it back. So it must be nonsense that debt is morally wrong in and of itself.

Now consider a working parent who has a child. This parent currently has a business which produces $100 a year worth of income, and he will pass on this business to his child next year. Now this father has the opportunity to invest $200 in improving his business and once he does the business will produce $200 a year worth of income. This parent doesn't have the money but can borrow it and has to repay the loan over 2 years, paying half each year. This means that the second payment will be made by his child, and so he is borrowing from his kid. Let's compare taking the loan and not taking the loan:

Year:                               1          2          3        4   ...
Income without loan:     $100    $100   $100   $100 ...
Income with loan:         $100*   $100*    $200   $200 ...
*$200 income produced - $100 loan repayment =$100 income

So in year 2 when the child takes over the business he is no worse off than had the father not taken the loan out, but every year thereafter he is better off. Clearly the parent should take out the loan, even though the child has to pay some of it back, because the loan is used to make the child richer. But if it morally wrong to borrow from our kids, from the future, then this parent should not borrow and not make his child richer. Is that virtue?

It should be clear that there is nothing morally wrong about debt or borrowing from the future. The issue is whether the debt is being used toward something productive (earning more bread, making your child richer). It's not a moral question, its a practical one. 

In truth, the fact that we have borrowing and debt is a sign of virtue: people are willing to lend others the resources necessary to improve. To be morally against debt is to tell people that even if they could do better, it is better that they don't. "Yes, you could borrow some food today and pay it back tomorrow, but you'd be a better person if you didn't." Is this virtuous?

Yet this is the basis on which we are told by some that governments shouldn't borrow, because it is morally wrong. It is perfectly reasonable to argue that governments shouldn't borrow money because they don't put them to productive purposes, that they will borrow $100 and only produce $90. That's fine point to make and one I think is very right. But that means the issues isn't the morality of the debt but the productivity of it.

The argument should be about what the government does with money it borrows, not whether or not it is moral for it to borrow. If the argument becomes "debt is morally wrong" then we have turned virtue into something vicious. We have consigned people to whatever their present circumstances are and nothing more.

Constituting God

Slogging through Glenn Beck's book Broke I have finally reached the chapter I knew would be there. Yes, I have finally reached the part where Glenn Beck talks about the need for a religious revival in America. This conclusion stems, oh so rationally, from the fact (FACT!) that our rights comes from God.

That's part of the Constitution you know.

Not only that, it should be obvious that our rights come from God. This much should be evident from the long history of the bible.

Who can forget wise Prime Minister David?
Or the republican reign of President Solomon?
But this is a Judeo-Christian land, so let us not forget the more gentile persuasion, such as Jesus's oft quoted remark "Render unto the Premier that is which is the Premier's, and render unto God that which is God's"

Oh but the history of religion is the very history of consent of the governed!

So it is no wonder that our rights, as Americans, come from God. Well, it was some wonder to me. See, I always thoughts our rights come from the Constitution. That if rights were given in that document, or specifically forbidden in that document, then that is the rights we do and do not have.

So for example in 1920 when the 19th Amendment was ratified, that gave women the right to vote. This is a right they did not previously had, but after this amendment did. Oh how fortuitous it is that on that date God changed his mind about that right!

Or in 1919 when the 18th Amendment was ratified, Americans no longer had the right to drink intoxicating liquors. I guess God decided to take that right away.

No, God did not decided to grant one right and take away another. Men decided what rights they had under a society of their organization. Under the Constitution people have the ability to decided what rights we have as citizens. If today three fourths of the states decided that we have the right to something, then we would have that right. If today three fourths of the states decided that we did not have the right to something, then we would not have that right.

That is the basic meaning not only of a Constitution, but of a free organization of people. That it is they, and they alone, that can decided what they do and do not have the right to.

Suppose today that God were to declare that "Now therefore hearken unto their voice; howbeit thou shalt earnestly forewarn them, and shalt declare unto them the manner of the king that shall reign over them." (1 Samuel 9)

Would that be acceptable? After all, if our rights come from God, then they are his to take away. I reckon this would, and should, be unacceptable to us.

I plan a post more focused on the relationship between God, man, and freedom, but let me just end this on a quote I have always cared for but can't recall where I first heard it:

"God did not ask us if we wanted to live, why then should he be allowed tell us how to live?"

Being a Mensch

Representative Paul Ryan (R-Wisconsin) has issued a challenge to followers of history and monetary policy:

"There is nothing more insidious that a government can do to its people than to debase its currency," Ryan said."Name me a nation in history that has prospered by devaluing its currency."

Now, this challenge has been taken on by economists using several examples. But I wanted to help Representative Ryan with a more recent example, so as to give him more contemporary evidence.

Besides, this example is a nation that is near and dear to my heart: Israel.

During the recent financial crisis, Stanley Fischer, head of the Bank of Israel (a mensch if there ever was one) responded to the faltering Israeli economy by engaging in currency devaluation. Specifically, Fischer sold Israeli Shekels and bought US Dollars, to the tune of 10% of Israeli GDP.

That is, the Bank of Israel (unlike the Federal Reserve) engaged in direct devaluation of it's money, the very thing Representative Ryan says has never been successful. So how did Israel turn out?

Israel grew at 4.7% in the second quarter of 2010
Inflation was at 1.8%
Unemployment dropped to 6.2%
Israel was admitted into the OECD
Fischer was selected central bank governor of the year by Euromoney magazine
(Source: http://www.jpost.com/International/Article.aspx?id=190878)

Add to this the fact that Israel was ranked as "the most durable in the face of the crises" in 2010 by the IMD's World Competitiveness Ranking which also ranked Israel at 17th out of 58 of the worlds most economically developed countries, rising 7 ranks from 2009. The Bank of Israel also received high marks.

There you are. A nation that pursued a direct policy of devaluing its currency and prospered.

Does that clear things up Mr. Ryan?

Pravda Reports Americans Evenly Divided on Healthcare Reform

Liberal bastion, the Wall Street Journal, attempts to distort The Truth with facts.

The Truth is that Washington jammed healthcare down America's throat, and that Americans reject it. The Truth is that voters have sent a clear message that an overwhelming majority of Americans want to be rid of Obamacare.

And here comes the WSJ to muddy this up with such crude things as exit polls, and numbers. From today's WSJ (page A8):

Congress and the health care law

Repeal it           48%

Expand it         31% 

Leave it as is    16%

So Leave it as is or expand it adds up to 47% vs 48% for repeal. So Americans would seem to be evenly divided on this issue. But that would mean that it isn't antithetical to all things American. That would mean that it wasn't just jammed down America's throat.

And that's just not The Truth.