Author: White Whale

Patently, the Stimulus was in large measure intended as a slush fund for various projects that couldn’t get funded if named. Consider that some $6.4 BILLION went to 440 Congressional districts that don’t exist.

Where could that money have gone? That is no clerical error. Let’s consider some possibilities. First, it seems virtually certain that that money will find its way into the hands of various leftist activist groups, like ACORN. It will fund the agitation (which we might define as “resentment building”) of community organizers.

It could, with some care, quite easily find its way into various lobbying and election funds. It can be disbursed to individuals, then recontributed in amounts small enough that no documentation is needed.

It could be used to fund political research that is used for “message refinement”, which is to say lying more skillfully, based on more complete knowledge of what people want to hear.

It could be used for outright bribes of key officials in influential positions, which may not take the form of outright payments, but maybe contract preferences, or jobs for family and friends, or vacations, or houses, or boats.

Or, if one wants to take a more conspiratorial, paranoid stance (the foregoing, regrettably, all seems eminently plausible for a disciple of Saul Alinsky), what about high tech spying tools? Software to map social networks, to discern patterns of internet use and thereboy isolate political “deviants” (non-leftists)?

What about the paranoics obsession: mind control? Hear me out: what if technologies could be developed that were able to alter behavior patterns through subliminal elements in your computer or TV? It apparently worked for selling popcorn. Frankly, getting Obama elected in the first place was a triumph of deviousness. What if those same people now had tens of millions to play with in labs?

As an example, look at this piece.

No doubt, most Americans don’t want to think about these things, but I will offer a historical reminder: Communism happened. It is happening today in North Korea and Cuba, and has been used to deny basic human rights to a billion Chinese.

It’s a reasonable question, again, assuming my own views will prove, if tested, to be most correct.

The obvious first response is that many economists are idiots. We have, to this day, Nobel Prize winners arguing that we can spend our way into prosperity. How is this possible? Maybe they are bought; more likely is that are smart enough to make the puzzle so complicated that they can get counter-intuitive–and wrong–answers.

Whatever the cause, I do want to point out one thing: it seems to me that inflation and full employment are related, but that the causal arrow needs to be reversed. Specifically, I believe inflation causes full employment. How is inflation created again? Through money creation, which is used to fund industrial expansions.

Now, how the investment banks benefit from fiat money is obvious. They get something for nothing. This tool, though, is also used by people who do actually make things.

Let us take as an example a business startup in China, which we are told is getting ready to go into high inflation. A young man marries the daughter of a prominent local Communist Party official. You have to be connected to them, from what I can tell, to get anything done. You can bribe, you can kiss their ass, but you need their support, since no one has any rights in China not granted them at the whim of the ruling elite.

This young man wants to start up a shoe factor. Our official loves the ideas, makes a few calls, and poof he has a business license (you can’t be on any shit lists and get a license), and $10 million “Mao’s” in startup capital. That money is from the Chinese equivalent of the Federal Reserver. It just “prints” the notes.

Our young man works hard, and the factory succeeds. He employs 100 Chinese, who pay two thirds of their money or so in taxes, and he is now rich. The business is now his, and self sustaining, and he pays the money back.

Yet, this money was created from nothing. Therefore it added to the money supply. Therefore it is inflationary. This is basic. A year or two or five down the road, the effects of this policy hit, and the workers money now purchase less than it used to. So wages rise, and we are told their employment is what caused the inflation.

This gets it backward. Perhaps this correllation is what has confused so many people. Once you learn the lingo, and calculus, and especially once you start reading recondite treatments by economic theorists, common sense flies out the window. That’s how people still believe in Marx, and how Paul Krugman has a job.

We were all taught in school that 2-3% inflation is normal, and needed to balance production, employment and everything else. This is wrong.

As I have said a number of times now, inflation is a means of wealth redistribution. Why don’t we notice this?

As Hazlitt argued in his classic “Economics in one lesson”, a key error that many or most economists make is to forget about opportunities lost. In the “broken window fallacy” of Bastiat, as retold by Hazlitt, what everyone misses is that the shopkeeper could have bought SOMETHING ELSE with the money he spent fixing the window.

Likewise, what we miss with inflation is what we now can’t buy. We miss all the things that our money could and should have been able to purchase, if it had not been devalued.

Let me be clear: Wall Street bankers buy very real estates from the proceeds of profits enabled by the same mechanism that causes inflation, which is fiat money, money from nothing, money which competes with money already in existence, and lowers its value. But in the moment of creation, that part which contributes to inflation changes hands.

Instead of buying a lawnmower, we actually bought a drawer for a desk for a Congressman or a banker. We lost this money, but since the system is so complex, very few see this. But bankers–and I mean here the really big, many, many billion dollar banks that get the bailouts when they fail, and the profits when they succeed–understand this.

Here is another way of putting the gulf between Capitalism proper, and Inflationism: bankers borrow money to make-create–money; Capitalists borrow money to create real goods and services. We can only consume the latter.

It is interesting to ponder what the cultural effects of being a nation of borrowers, rather than a nation of savers, have been. Clearly, it has been the policy of the bankers behind the Federal Reserve to, in effect, get us addicted to easy money, to spending more than we make. What they want is a nation that is constantly making interest payments, but never paying off their debts.

If not one of the effects of never thinking in the long term frivolity? A sense of tenuous and superficial pleasure in material things, that never quite scratches the itch, because you haven’t earned them?

Does not a sense of dependency emerge? One thinks of the movie “Brazil”, where Michael Palin’s character instructs the protagonist not to hold out too long, lest it affect his credit rating. Our credit ratings: surely this is a point of vanity, to “earn” the right to spend considerably more than you make?

Is any amount of money enough to avoid bankruptcy, if you spend just a bit more? Are the foreclosure rates less in the swank neighborhoods than the poor ones? Probably a bit, but there have been many, many bonfires of the vanities lately.

Does easy credit not alter our perceptions of what to value, what to pursue? Does it not alter it in slight but real ways in the direction of materialistic acquisitiveness?

Worth pondering.

Here is what I propose: a Federal law is passed directing all States to find or construct a gold depository, and to print up paper notes that meet the best spec’s currently available to deter counterfeiting. Within a time window of, say, one month, all dollar bills in circulation are to be turned in, and will be replaced with State bills in exactly equal amounts. Those dollars, in turn, are used to buy gold. This would apply as well to bank balances.

Obviously, the price of gold will go up, and some speculators will make a lot of money. So be it. The money used to buy the gold is the new State bills. This will be mildly inflationary, since you are paying out what the gold is worth, plus the money you give to the depositor. This means you are paying out slightly more than what the gold is “worth” (if I thinking correctly: this is a complex system, and obviously I may have overlooked some important variable, but you have to start somewhere).

Now, money creation is what banks do now, anyway. They can loan out 9x what they have in actual reserves. This is where inflation comes from in the first place.

This is not a bank, though: it is a State agency that directs all the banks to turn in their actual assets for new State money. And once the transition is done, they have little to do but guard the building. No further action is needed.

The actual price paid for the gold doesn’t matter, because in my view what we need to do is make it “special” gold. Once it is bought, and physically placed somewhere secure, it is now, say TEXAS gold. Texas gold is special because its price never changes. It is always worth exactly as many notes as were issued against it.

What many economists seem to miss (and, again, I am here claiming to be smarter than people who have won the Nobel Prize, so take this with a grain of salt, but think it over carefully, and follow what I am saying and look to see where, if anywhere, I err in my logic) is that THERE IS NO VALUE TO ALTERATIONS IN THE QUANTITY OF MONEY. None.

None of us want money. We want what money will buy: houses, cars, trophy brides, golfing trips. Thus free markets in gold don’t help. Gold can be mined, and added to the supply, which dilutes it. There is no value in this. Self evidently, the market for gold will not go away; people still need to get married, and make good with the wife on her birthday. But in this scenario gold, per se, is no longer MONEY.

What needs to happen is that the quantity of money needs to be fixed. What will happen over time is that our collective purchasing power will continually increase, since it is no longer being siphoned off by the Federal government through the hidden tax of inflation, and no longer buying oceanfront properties for banking executives.

Now what does this do to banks? If the quantity of State bills is fixed, then you can’t make loans with money you don’t have. Thus, they will be required to lend real money. This will decrease greatly the quantity of money loaned. We can anticipate an economic crash when this happens, because what we see, today, isn’t real. It is smoke and mirrors. It is problem spreading like the ocean of oil in the Gulf, polluting everything.

THERE IS NO PAINLESS WAY TO FIX THIS PROBLEM. But big boys and girls take their medicine, no matter how bad it tastes, because they know–or the adults in the room know–that it is NECESSARY.

How, then, will banks make money? The old fashioned way: they earn it. They pay interest on deposits, and loan that money out at higher rates. They make fewer loans, but fewer go bad. We turn back into a nation of savers.

Pie in the sky? Maybe. But when we crash, a lot of crazy ideas will start looking good. We need to have a plan, and this is my suggestion.

This is the term I think I like best to describe what I try to do. I don’t like philosopher or intellectual. Those words conjure in my head a person sitting in a corner, watching static images, and trying to connect them in static ways. What is needed is a sense of dynamism, of motion, added to thoughts, such that they are seen as cascades of ever-shifting but approximately organized flows of water.

At one point I considered coining a word where the Greek word for “approximate” was substituted in the middle of philosopher, such that the result meant “lover of approximate truth/wisdom”, but that is ungainly.

It is the case that most large, complex problems require the use of abstraction. This is necessary in our modern society. And it is necessary that we have people who do it well: hence “thought worker”, who is someone who, at the end of the day, can point to bridges built, to concrete plans of action which can then be implemented or modified as needed.

Are there Chinese agents trying to steal the secrets of our government at this moment? Of course. Are they trying to steal the secrets of our industry? Of course. We know this.

But must we assume that the stupidity of our current crop of kids is part of a grander designe? Clearly, there are many Marxists at our universities, since none of those people have ever had to accomplish any large concrete task in their lives. At least many of the Communists of the 50’s and 60’s had some sort of military service, like Obama’s grandfather.

Systems in motion are defined by their principles. Various principles which simply evolve on their own can have enormously disruptive effects. Thus, the principle of No-God, itself, has a disruptive effect on all aspects of society, in that it leads to feelings of meaninglessness, helplessness, alienation, depression, and–to the point here–avoidance. You develop this mechanism by which unpleasant thoughts are avoided, and one way of doing this is to develop this reflexive (think rubber hammer and knee) thought pattern which systematically avoids the conclusions you drew before.

In many respects, I think much of the Left, for over the last century, can be defined, first and foremost, as a mental “technology” meant to avoid the despair of meaninglessness, itself caused by rejecting everything which could not be proven, and which appearted contingent–which is to say all religion and all human culture.

The Nihilists, for example, did not need to celebrate Christmas. They recognized the calendar was contingent, and an artifact of the Church and a Base-12 numbering system. You don’t have to say thank you, and you don’t have to pray. You don’t have to get up early and work all day. You can lie around, and sponge off of others (note the “nihilists”–the name given them by their opponents–were basically hippies without the positive vibe).

This sort of thing is the result of crappy thinking. Religion taught us that codes of behavior were somehow encoded in the cosmos, that there is a natural social pecking order, some meant to be in control, some to feed them. Obviously, this was a lie. Yet, it does not follow from this that there are no rules that can be seen in human social systems, that there is no approximate cause and effect. Plainly, courtesy yields dividends, as does hard work, and having SOME type of calendar. The details don’t matter.

The ideas of God, too, as they have arisen around the world yield dividends as well. I think it can be shown prayer works, that we survive physical death, and that a limitless source of energy and order underlies our physical universe.

All of these things start with perception though. You can never cease moving perceptually.

A fly flew in the window of my car the other day. It took it about two minutes of bumping and failure, but it eventually found the other open window, and escaped. A nihilist is a fly who gets trapped, sits on the seat trying to think his or her way out, and dies of hunger.

It is manifestly the case that many, many secret conspiracies have been hatched and brought to fruition. Think of the spies we caught during the Cold War; or the secret agreement between the Soviet Union and Germany to carve up Poland; or the assassination of Lincoln, where attempts were also made on the lives of the Vice President and the Secretary of War the same night. If you study history long enough, it becomes clear that at times organized efforts are made in secrecy to accomplish results which appear, but the roots of which remain hidden.

Arguably, the creation of the Federal Reserve could be called a conspiracy. It was done in silence, and a PR campaign was launched in which both sides of the debate were stage managed carefully, such that virtually everyone involved was either a player, or was tricked.

At the same time, in all types of thinking, it is important to stop where you need to stop, to not go too far. One must always remain agnostic with respect to things you simply don’t know, and have no realistic means of knowing.

All living systems are in constant motion. Given this, it is important to remember that, say, the Masons may have played a prominent role in our Revolution (not unreasonably supposition, given that George Washington and Ben Franklin were both Masons), but then faded in importance. A group can be prominent in one century, and fade in another. Or the people in a group may evolve their goals. Or they may be fractured and in internal conflict, with one faction leaning one way, and another a different way. They can change their minds completely. Key leaders may die. They may simply lose interest.

I say this since many people tend to have this–in my view naive–view that there is some sort of “them” out there. What I personally think happens is that interests– for some period of time, to some greater or lesser extent–can become shared. What I have called Inflationists want to make more and more money off of money they create. Socialists want to spend money they don’t have. Industrialists want access to easy money, since if they can grow faster than inflation, they still win.

The way to counter conspiracies, however one may frame them, is simply to remove the incentives to cheat, and where possible the means.

The money facing anyone who would want to bring down the Federal Reserve is astronomical, but I choose to believe, for example, that not all beneficiaries of this process are necessarily interested in our national demise. They are just greedy, and indifferent to the suffering their greed causes others. But need this remain that way forever? Can one not hope that among the ranks of the Inflationists there might still remain genuine patriots, or decent human beings, who have hitherto viewed the priviledges their cartel offers them as the spoils of superior intelligence?

I hope so. No system can endure that is filled with bad human beings, and any system which is filled with good ones can evolve in positive directions. The two are always mixed in different ratios, but one can hope ours has not devolved too far. I may of course be wrong, but there is no need to infer any indomitable or uninfluencable force out there. People are people. Some of them are sons of bitches, but not all of them.

I was thinking about this today while working out: Marxists foresee a period of time in which the proletarians (by which we should understand “non-intellectual”) will need to be ruled by their betters, the so-called Dictatorship of the Proletariat. After that, in some magical fashion, a workers utopia will evolve.

Yet, how will this happen? What Marx is describing, implicitly, is a self organizing system, where the “workers” get together and create something beautiful, noble and lasting. Yet, the presupposition of the self organizing system is ordered motion in each of the parts. The individuals in the collective need, each, to be operating as sentient agents, and the whole goal of dictatorship is to STRIP them of initiative and the capacity for independent thought.

Thus, the means and purportedly desired result are at loggerheads. Marx never thought it through; nor do his followers, who as intellectuals themselves tend to view all ideas as equal, since they can be thought. People who have actually accomplished something, though–say building a bridge–understand that ideas are NOT all equal, that there are many wrong ways to do things, and that failing to plan is planning to fail. Obviously, failure is the legacy of all utopians to date, and this was both predictable and preventable.

I think the reason that Libertarians failed to see–assuming I am right, of course–that a precisely defined amount of money is desirable is that they want as little government as possible. Yet, too little means chaos. If we allow money to expand and contract, then real purchasing power likewise goes back and forth in ways that can be manipulated.

If we posit, as I did in a previous post, that what is desirable is NO CHANGE in the money supply, and MUCH CHANGE in the supply of material goods, then that is a function of the government.

Let us call the opposing poles Capitalism and Inflationism, where inflation is a means of wealth redistribution (perhaps, it is the outcome, but the net effect is the same, so it doesn’t matter).

What is the means to fix this problem? We abolish the Fed–which prints all our money–what then? Libertarians think that a market will evolve for money, where everything gets sorted out. I see no value in this, since it does not fix, formally and finally, the underlying problem of fluctuating money supplies.

My proposal is that each State print its own currency. You take any dollars you have now, and exchange them for new ones on a certain date. Any money in your bank account automatically transitions. You transition from Federal Reserve Notes, to, say, Texas Reserve Notes.

We need gold in vaults. Who pays for it? This is the question I am having trouble with. Banks? And what is the proper role of banking? Right now, they in effect loan “on margin”. They loan out money, in the expectation that all the depositors will never demand their money at once. Part of the role, now, for the Federal Reserve is to make short term loans so that their books are balanced at the end of each day. Who does that in the future? The States? Does that not replicate on a smaller scale the same problem?

One general statement that can be made is that banks, like any other business, need to be free to stand or fall as businesses. I am not opposed to States providing something like the FDIC to prevent panics, but perhaps we pass laws that state that the Board of Directors and CEO of any firm that uses that money go to jail for 5 years. We get the protection, but we disincent risk taking with other peoples money.

I’m still working all this out. You can see my method in these blog posts. I just take a thought, ponder it, chew it, move it around, stretch it, bounce it, throw it in the air, drop it in water, and somehow through the process it expands, and gets more clear. I use logic to jump from stone to stone where I can, and dream the big perceptions. It usually seems to work out, I think. Unless I am being stupid, which one must always remember is a real possibility.