Paper money, Paper Tigers

A Political Rant

I have been spending a lot of my free time lately trying to wrap my mind around economics and trade policies. This isn’t as easy as economists make it sound. There is no empirical science to the process. In fact, that is the greatest lie that I have found about economics, it isn’t a black and white world. Now I know that most people understand that there are different theories about how an economy should work. The thing that I think eludes many of us is that within each theory is a theoretical framework that is itself based on even more theories.

For example: Many people are freaked out that we have a huge trade deficit with China. Being freaked out about the trade deficit is part of a theory of why that is something to freak out about. The thinking goes that America is losing manufacturing jobs and those are good jobs that we don’t want to lose. No one could argue that the loss of high paying jobs with benefits is a good thing. The reason that we have lost these jobs is because companies are going to places like China to produce goods at a cheaper cost. So those are the facts of the case. There is no disputing these as facts. Now we get to the theories on the matter; as a result of this, America will slowly devolve into a third world country as our dollar diminishes and our job market becomes more and more service and retail based (jobs that pay less with less benefits). Pat Buchanan points out in his book, “Where the Right Went Wrong” that this trade policy is tantamount to economic treason on the part of our government. He believes that America needs to manufacture it’s own goods and keep the jobs here as we did for two hundred years previously. This is all well and fine, but the fact is, Americans can’t afford stuff made by Americans anymore. The reason that companies went overseas is because they had to stay competitive with the stuff that was already coming in to our country from other countries. There is a belief that we can tariff those goods and force American companies to stay here. Ironically Adam Smith (Wealth of Nations) had an idea about what this would accomplish over two hundred years ago, this would simply hurt the poorest of Americans by making the simple commodities of life even more expensive, combined with the taxes we already pay this seems hardly to be in the interest of Americans and more in the interest of our debtors.

There is also a belief that there is only so much money and wealth in the world and that if another country is getting wealthier that that means another country will be getting poorer. Now the thing is, this may or may not be true. There are more factors in the mix of why America may be in some kind of financial trouble than just our trade arrangements with China. In fact, I’m starting to believe that China is a big distraction to the real problem. I don’t think that China is a threat to us, financially or otherwise. We are in debt to China for the goods that they give us. Think about that. Can China make us poor by giving stuff to us? We can refuse to continue in this way, we are not obligated to continue to take things on credit and China could quit thinking that we are good for it as well. The fact is, it is mutually beneficial. Maybe we should look at who raises the most stink about this stuff and look at their motivations. The Federal Reserve makes a lot of stink about it. I wonder why?

But I can’t go on and on and expect anyone to care. I think that what I’m trying to get to is the nature of money. China is not buying gold from us for our debt to them, they are buying money that is capable of becoming merely paper. China holding dollars and securities based on those dollars means that they are in effect buying our debt. This should make us happy because it means that the dollar that everyone is freaking out about is good enough for the Chinese. They must have a lot of confidence in the American dollar. They must think that we are doing something right. And we are. We are doing a lot of things wrong on the flipside and that is what we should be focusing on, not China.

I have been going through PJ O’Rourke’s book “On The Wealth of Nations” which is an overview on Adam Smith’s economic polemic “The Wealth of Nations”. I have been falling in love with the founding fathers and the pioneers of governmental and economic theory as it relates to a free country. We really don’t need to read much of today’s hacks unless they are rooted in these amazingly brilliant men. These old guys were really into freedom. They were really not into government doing much of anything. You see, almost across the board they had this notion that was started by a man named John Locke. Locke believed that people, all people had the sense to know what was beneficial to them. This notion evolved into the idea of “self interest rightly understood”. If left alone, people would do what was good for them, and in turn this would be good for the people around them. Simply put it works like this. If I’m poor and I want to eat, I realize I need to produce something that someone will want and trade with me, or I need to find someone to work for, and that means I need to have something they need in skills or brute strength. Pretty simple isn’t it? And then there is the notion of division of labor. If I want a loaf of bread I can raise the wheat, grind it, make a loaf and there you go. The loaf only took me about four months to make. But if we have some that raise the wheat, some that grind it and some that bake it, I can simply go to the store and have a loaf in about five minutes. We all get something out of it. This is called a free market. But the problem comes when there are those who produce nothing. Of course a merchant and a waitress produce nothing, but they are part of the process of trade. But politicians, bankers, and others of this sort really produce nothing. Their existence is necessary, but it should be limited not dominant. When the merchants and bankers get too much power they become dangerous, they become people who would make the general populace their slaves. Our labor will benefit them and not ourselves. The less a government messes with our freedom to make a living and own our property and do with it what we shall the better off we are. Adam Smith was livid about property rights because he grew up in a feudalist state in Scotland. He was appalled that all the land was kept by the wishes of people who had been dead for hundreds of years. He would be equally livid over someone telling someone that they can’t farm their land because of the future generations that need wet- lands. Either way, it is a tyranny of those that aren’t in possession of life in the here and now.

I was thinking about all of this and I wondered why so many artists are communist or at the least socialist in their thinking. Where is art if there isn’t any disposable income? Where is art if there is no middle class? I think we need to abolish the National Endowment of the Arts so that artists can get more clarity about how economics and art are related.
Yeah, I said it was a rant didn’t I?

Support Ron Paul and make a noise about him. We need someone like this guy now. Watch “Freedom to Fascism”. Read some books about our Constitution and our Founding Fathers. There is good reason to have pride in our heritage. I’m not saying that there weren’t mistakes, but man there has been some really good successes too. If modern political theory, foreign policy, economic foolishness, and Constitutional buggery are getting you down, just go back and find common sense again in the simple institutions that we started with.