Wednesday, December 18, 2013

Republicans and Scrooge

For this holiday season, we need to remember an old story by Charles Dickens, a Christmas Carol. A large chunk of the population of this country has the feeling that everything they have they have a right to and don't have any responsibility to share anything, and can pay their employees wages as low as they want.

Sunday, December 15, 2013

The cost of denial

The best literary examples of denial and believing that everything is perfect revolve around Denethor in The Return of the King. The first is that he wouldn't accept that Mordor was now a threat and was trying to govern the country of ten years previously, and the second was that his son Faramir had become a brave adult, which ultimately led to Denethor's death when he couldn't handle the truth due to such a huge gap between the world he wanted and the world he was in. Such behaviour caused him to commit suicide, and is a good reminder that people need to recognize reality and not live in the world of wants, but live in the present and dream for the future. Such behaviour destroys relationships (Denethor-Faramir) and people.
This form of denial also exists with politicians with the right wing in Europe and the United States refusing to admit that laissez-faire economics is ineffective at creating growth, and climate change deniers.

Friday, December 13, 2013

Why is Canada doing better than America?

Today I found a great article on the BBC talking about how Canada has a much lower unemployment rate than most European countries and now has a shortage of labor for the booming oil sands in Alberta.

This made me wonder why Canada is doing so much better than the US and Europe and what the underlying differences are between the three major economics (Europe is for obvious reasons more fragmented but their economy is in recession as a whole and that is where people are coming from).

Looking at the underlying features between the US and Canada they are very similar. They have extremely similar labor laws, extremely similar proportions on who works in what industries, and almost every other major figure is similar except for three important features:
  1. Canadians are paid more at the lower wage levels.
  2. Capital Gains are taxed at a progressive rate in Canada, but not in the United States.
  3. It takes only a day to start a business in Canada and they are ranked by the World Bank as the best country in the world, meaning competition in the private sector.
These three features are why Canada is doing so well right now and are finding such a developed economy.

The first point, higher wage levels, means that there is a higher demand for goods and services in Canada at the local level nationwide than in the US or Europe. The US is having a lagging economy right now, almost certainly due to lower consumer demand. Wal-Mart and other retailers are not finding people to purchase their services which is contributing to poor economic performance. Companies cannot stay open if no one will buy their product. Canada doesn't have this problem because everyone working full-time can survive. This helps small businesses and the entire economy.

Taxing capital gains as regular income solves the problem of the government not losing a lot of money during a recession, which keeps deficit low. However, I can't observe a difference in the stock markets so it doesn't dissuade people from removing their money from the market.

The United States has a similar sector makeup, and the oil boom is isolated to Northern Alberta, and the United States is also having an increase in drilling in different regions. But Canada's entire economy is doing better than the US and Europe, so blaming the oil boom is not enough, since it accounts for less than 19% of the economy.

So, the response of the stock markets is the same, the sector makeup is the same, all but one major feature of these economies I find are comparable, and that feature is distribution of wealth.

After the recession in 2008 the rest of the world came back (except Europe, but only after the implementation of austerity) and there was high demand for goods and services. The average Canadian is paid more than the average American, their distribution of wealth is a lot more equitable, close to what Americans want actually. Because of this difference, the change in economic spending wasn't so large in these other countries. a lot of America's economic growth of the past 40 years was also based in a lot of lending, through a system of government incentives for people borrowing for houses, and schools, which is more than other countries that have seen more steady growth. When the economy collapsed, millions of workers were laid off, and demand struggled. Without massive incentives to change this fact and increase the quality of life we will continue to see a major shift in economic growth. Nick Hanauer (an entrepeneur) made a TED talk talking about how the economy is an ecosystem (I'm paraphrasing) and that it requires transactions to be made, and when one large group of people are unable to make the transactions the entire ecosystem/economy falls apart. Other developed countries don't have this problem like us, and it is the only major characteristic that separates the US and Canada.

If we want to see growth and faster recoveries from recessions we need to increase our economy from the bottom so more people can participate, because no entrepreneur can start a business in a market where there is no demand. This is the reason the American economy is stagnating. It is also similar to the reason why the European economy is in depression, because millions of people have had their income taken from them and the aggregate demand curve has collapsed, leaving firms new and old with no demand, decreasing employment, and decreasing GDP, creating a cycle that has been feeding on itself. Western Europe (which has had large economic ties for the past 40 years) is now divided between north and south (though it hasn't always been to the same extent) between the employed and the unemployed, and this has reduced demand for goods and until they find that people in Southern Europe have opportunities restored, I have little doubt Europe will remain in recession. Other major economies are still growing at increased rates (as long as they didn't implement austerity).

I also predict that Canada saw a reduction in their GDP growth in 2012 because they are so heavily tied to the American economy which hasn't been growing as fast as we need to.

We need more avenues to the middle class so everyone with the skill and will can be as well off as possible. It will be a huge boom to our country's economy.

Sources: economic growth by country where available Summary of distribution of wealth TED Talk

Sunday, December 8, 2013

Austerity is turning out to be Merkel wasting German taxpayer dollars

I am reading this article and the one thing that comes to my mind is none of this had to happen. Everything that has happened with the European economy over the past few years was always completely unnecessary and all of the responses have been wrong.

If we review the European economy in 2008 the picture was very different. Greece and Germany (the "model good" and "model bad" economy the media loves to talk about) were doing just about as well in their economic statistics, and one wouldn't anticipate anything that Merkel has turned out to be for the world.

Then the economic collapse of the world happened. Greece and the United States had been having good economies for a good long while on paper, and all three had been running annual deficits since 2001 when the so-called "fiscal conservatives" were in power in these countries.

The reason Greece had a deficit in the first place is that the government didn't have income to pay for the goods and services people in developed countries expect. It is the same in every country where some people get all the benefits of being in the country but hide their money in income tax free countries to avoid paying money. This was why they had a deficit and besides that one factor, everything else in 2009 was not looking unusually terrible. All of the countries in the EU were looking really good.

Today there are riots on the street in Greece and Spain because their economies is so poor today.

The EU government (led by the European People's Party, EPP, the right wing organization) decided the solution to the lack of revenue for the government to provide countries was to fire millions of public workers and somehow through magic this was going to balance the budget.

But the problem was that firing millions of employees was going to dry up their spending, and the contraction expanded to the private market, which is why Spain and Greece have unemployment rates north of 20%. The only major change over the past few years has been the austerity, with crashing demand for services and businesses folding as they are unable to get income to stay afloat as the economy contracts which feeds on itself.

The European Union government took a situation that was not ideal and turned it into a depression.

What should have been done is look at the issue, Greece needs to keep borrowing more money to pay the previous borrowers which means the interest will be compounded, and if Greece was ever unable to get borrowers (which I am unaware of any time this has ever happened, it sure didn't happen to Japan with their Debt/GDP ratio over 200%, the highest in the world) it would mean they would need to find some way to pay creditors, but this wasn't happening. If Greece wanted to pay off its debt it would need to find a way to cover the debt (which is preferable and keeps a high credit rating) or write it off (and no one would ever lend to the Greek government again). The solution then is to find revenue to cover expenses. This is not what the EU Parliament mandated however, and Greece has found their economy contract in an epic proportion, because they tried to screw a screw with a chainsaw.

Greece today has a demand curve that has shrunk which means there is no money to be made by starting a business (which is how economies grow) and it needs to grow somehow.  Being part of the Eurozone, it is represented in parliament and the decisions with the central bank are made together, and as long as the EPP controls parliament they are unlikely to do measures that will move the demand curve north so that starting businesses becomes profitable. People won't start making businesses in Greece if they are basically destined to fail. They need to adopt Keynesian economics and expand the demand curve by hiring unemployed Greeks and Spaniards so that it becomes profitable to start businesses because that is the only way the economy will grow.

On top of all these mistakes the northern states now need to subsidize the southern states to grow their economies so the EU can stay strong, which will waste French and German taxes on something that never had to happen. Fiscal conservatism at its finest.

Unless if the EPP wants to destroy the EU, and if that is the goal they are doing exactly what they would want to do, because continuing austerity from parliament will turn into so much apathy towards the north and parliament (and the majority of Europeans live in the North) which has the potential to divide the European Union. The resentment has the possibility of being a powerful force to drive Golden Dawn and other xenophobic parties into power in Greece and Spain (think Franco) on the anger towards Northern European governments which will be bad for the world.

I would rather see the EU work towards getting Greece, Spain and now Cyprus on their feet. Merkel (the de facto leader of the EPP and EU) saying that they will not support Cypriot banks is what really caused the current recession which was completely unnecessary and poorly though out. If someone wanted to destroy the Europe Union they would vote for the EPP because that is exactly what they are doing. If someone wanted to start a fascist revolution the first step would be removing the Schengen Treaty and Council of Europe which will remove the peaceful regional means of communication between national government and remove the peaceful means of reconciliation which can't lead to anything good.

I really hope the EPP is removed from power in the next election after their brutal mismanagement of the world's richest continent. I may be American, but Europe is our strongest ally and largest trading partner and I plan on going back to Europe ASAP, so I have a lot riding on the next election as does everyone in the world.

One extra source:

Thursday, December 5, 2013

RIP Madiba

RIP Mandela, you were the bravest man in the world and my hero. You showed the world that no matter how despotic and fascist the country can be the people still hold power and freedom always wins. To people who believe government is futile you give real proof that there is always the possibility of making the worst situation better. South Africa is now one of the freest nations in the world, and you and your country showed us that everything good is possible. The whole world is South African today, the whole human species has lost our brightest living light.

No matter how much the Apartheid government tried to break your spirit you stayed strong at Robbin Island, and as President showed that democracy does work. You were no African freedom fighter turned dictator, but remained a freedom fighter until your last breath, and that alone makes you the most amazing man in the history of the world.

I never met you, I am much younger than you, but I love you Madiba. You were the best man in the world since Dr. King was assassinated in 1965, and I can't wait for people in the Arab world to follow your adventure and make freedom expand even further. You were my hero, my idol, and my favorite public figure bar nobody. The only other person who comes close is the Dalai Lama, and I await the next great leader of freedom in the world of my generation to appear.

On top of this Warren has said she won't run for president making this the worst day of the year by far. Unless if a strong Left wing candidate appears in the next two years, I'm likely to abstain in 2016 for President, because Clinton is weak, frequently votes alongside the Republicans, as I have already wrote about and I just don't trust her. At least I can mostly trust Christie. I'm not comfortable with Clinton. A bad day for the world.

Tuesday, December 3, 2013

The terrorists won, the PATRIOT ACT is still on the books.

I was reading an article by The Week talking about how al Qaeda is not as much of a threat as it was 12 years ago because it has very little leadership and has become more of a brand name than a fully functional organization.

But one thing I would argue is that al Qaeda has already won. Al Qaeda opposes liberalism (the idea that individuals can make choices) and see America as a respresentative of that liberalism, because our country was founded on it. Al Qaeda wants to implement laws to make it so women can't drive, no religious freedom, and other things that are very common in the nations they are allied to. The goal of 9/11 was to make Americans so scared that we would implement laws to fulfill their agenda. Starting in 1978 with the Foreign Intelligence Service Act the United States government started requiring warrants for international surveillance, and this was increased a lot following the attack on America. With the increased airport security which is extremely intrusive, increased custom requirements with Canada which I doubt has any positive results on illegal materials, warrantless wiretapping on American civilians, and other intrusive limits on American freedom. When the PATRIOT ACT and the other major bills that limited our liberties were passed the terrorists won and they will have won until such bills are repealed by either legislation or courts.

By keeping us thinking al Qaeda is still a major threat we will keep having the warrantless wiretapping, intrusive airport spying, and other limitations on our freedoms, which is keeping al Qaeda's progress in their War on Freedom they have been waging. The only way to win the War on Terrorism is to encourage the expansion of freedom which is exactly what al Qaeda doesn't want. Also, by keeping the telecommunications contracts for the warrantless spying we are continuing to buy billions of dollars worth of equipment from political donors (AT&T, Comcast, etc.) which is the incentive to our politicians to not stand on the infringement of our constitutional liberties.

Repeal the PATRIOT ACT, reduce airport security, open the border with Canada, and fight al Qaeda by making America more free. If someone is dangerous the government can get a warrant, restrict them from flying and buying weapons or other reasonable restrictions that will protect the freedom of the many while protecting us from people being dangerous to others.

If the rest of the world sees us be secure and free they will want to be like us, but as the largest developed nation in the world we need to be the leader and fight al Qaeda by destroying their gains against our freedom. Only then will we defeat their war against our freedom.

The Week