GDP Uber Alles & the Unsustainability Factor, Part II

Globalist and free traders often assume as set of facts exists and then proselytize those assumed facts to first world economies that unfettered trade in goods and services and free movement of capital, technology and ideas are givens in the world’s globalized economy. The failure to assume these facts they warn, will lead to less production, less prosperity, and overall socioeconomic decline. It is here in part II that an economic alterative is proven as plausible. In fact, we will see how first world economies are indeed exploring economic alternative to unfettered trade and economic outsourcing. This reversal will have profound implications for the global economy.

It was in part I (here) that I expounded on and criticized America’s existing suicidal free trade policies. 

A summary of part I: American businesses outsource Americans jobs to save a few dollars on the cost of production over a period of time. They can send the parts to India, China, or any other country overseas and get labor rates that reflect the level of success in that country, which allows them to then save more money and put more in their pockets. Moreover, companies aren’t outsourcing to help the business. They’re doing it to increase their own profits and make more money for themselves.

Outsourcing is nothing new. It has been around for centuries, and has always allowed for businesses to save money while helping to create jobs. However, it was never intended to completely replace the jobs of people who were already getting things done, and has had a detrimental impact on the domestic, micro-level economy because of its use in this manner.
In a time when jobs are already scarce, the economy shaky, many companies will immediately find a way to run their business smarter, faster, or cheaper. 

All of these three things eventually lead to outsourcing, because someone else, somewhere in the world, is willing to work harder for less money than the American employee. This is great for business because it saves money and helps businesses succeed, but it is terrible for the American citizens who rely on these jobs to live their daily lives in peace and security. 

A similar Wall Street Journal report last April found that America’s largest multinational corporations outsourced more than 2.4 million jobs over the last decade, even as they cut their overall workforces by 2.9 million.

The top reason for companies to outsource was to “reduce operating costs” (46 percent of respondents). Only 12 percent of respondents said their reason for outsourcing was “access to world class capabilities.” This means companies are outsourcing to save themselves money, not make better products.

In Search of a (New) New Trade Theory

Almost all new groundbreaking products and designs were initially made in America. Because the size of the American market it was worth producers to find ways to lower costs and produce more of the product. We once had a monopoly on everything from cars, steel, and computers, to now high-tech design software and products (with commercial and military application) As a result, America has been the most self-sufficient republic in history.

So why has the US been sheading jobs, closing factories and putting to pasture entire industries? (As it stands now, American car manufactures are fighting for their lives). The answer is ideology and free traders decided to “fix” what wasn’t broken.

Over time it was decided by the gurus of trade that it would be beneficial to outsource production to other countries and import the products once made here, back to the US. This doesn't mean that the US lost its ability to produce the product; rather it was stripped of its ability to do so.

The reasoning behind this was that in the meantime, US producers would find newer products to introduce into the American market. Those who lost their jobs from outsourcing could simply pick up and become a cog in the production of newer products.

Then after they have successfully done this, the rug would be jerked out from under the poor peasants again…then the product life cycle is repeated. Of course this is not what at all happened. Entire communities were decimated. Old steel towns and mining communities are faded memories; nothing now but Norman Rockwell paintings. The people? American employment has suffered a net loss since the 1970s.

Instead we have received “diminishing returns.” That’s economic-speak for someone got screwed. The outsourcing did not produce a net gain for the American worker. It has lowered real rage rates, and mass illegal immigration and other kinds, has accelerated income inequality. Most American jobs now go to immigrants.

Specifically mentioned is the phenomenon of outsourcing tech-savvy jobs that were once secure in America. The ease of flow of information and communications along with a growing number of educated and technically skilled populations in countries like China and India, could pose a threat to high skilled workers.
That's right. Even the the top earners, the ground breakers are not safe from the "fix'n.

If the labor market expands in India and more American businesses seek out the abundance of labor at lower costs, the labor market in American contracts.

In other words, rapid advances in productivity of foreign labor due to better education lowers wages in the US, and raises sector unemployment. These factors are enough to outweigh the positive benefits of international trade for America.

Free traders and the globalist who finance them have never denied there will be losers and hardships. However, the gains made by free trade outweigh the losses. They’ll point to rising GDP as a result, yet never consider falling wages, a stubborn unemployment rate and growing welfare numbers.

They presume the jobs lost for the low skilled workers are inefficient for producers in the first place. Therefore, the low skilled will have to discover a new trade. Smith, Ricardo, and Heckscher-Ohlin would argue the low skilled would move to another sector in the new economy. They must assume the invisible hand will help get them there.

Toward Splendid Self Sustainment 

Autarky is not a realistic option. Should America, however, hypothetically speaking, exist under autarky, she would do just fine. Already with this point we are at disagreement with the existing dogma on free trade.

Starting in 2008, the growth in cross border capital flows has fallen substantially compared to the 20 previous years. As a result, free movement of capital, at least compared to the era before 2008, has tightened if not become restricted. For a better explanation, consider globally what happened to Cyprus when explicit capital controls were implemented to prevent capital flight. These pressures on capital movement are a significant departure from recent historical policy. In fact, even the IMF has accepted controls to limit volatile cross-border capital flows.

Despite the negatives from the preceding section, America still produces nearly 20 percent of the world's output with roughly 5 percent of the world’s total population. Considering that China is mostly a poverty-ridden, backward country with over a billion mouths to feed, America is in far better shape than its chief competitor.

For the reasons opposite of China, America’s economy has access to a large domestic market. Because of widespread affluence, and a large (if not shrinking middle class) she is less exposed (read less dependent on other markets) to trade (around 15% of GDP) than other large economies. Even after the financial crisis, American households still hold a substantial net worth in excess of US$70 trillion.

Her fertile plains feeds a land of over 300 million people; and yet, its surplus crops is enough to remain the world’s leading food producer. In grain alone, she exports half of the world’s supply.

She rich is minerals, natural gas and even oil. Considering her technology and industrial know-how, it is an embarrassment of riches. Consider that America is shackled with draconian regulations against mining, drilling, and exploration and yet she still is a world’s leader in energy in spite of her government.

The dollar, though weakening greatly, is still the world’s reserve currency. Some 60 percent of global-wide investments are held by the dollar.

America’s antagonists may threaten to bail on this system, even kill the dollar in the process. All the US has to do is threaten to let it die and the nonsense talk ends abruptly. That is because there is no other reserve currency, and no other market or economy big enough to replace the dollar. Who will guarantee to those countries that hold US debt, securities, etc? Most of the world’s global trade is denominated in US dollars. Not even China, all of Asia, even with the help of Russia, can change that anytime soon.

She knows this, too. In fact, Nixon’s floating currency idea was premised on this outcome. She can retreat from cluttered or chaotic global issues at anytime she desires. Afterward, she can still maintain low interest rates to reduce the cost of servicing debt. This allows for higher levels of borrowing, meaning it creates wealth and churns out multipliers from thin air.

If the dollar devalues (by devaluing I only mean internationally or in foreign holdings. Because of America’s large domestic market and near guarantee of foreign or foreign backing, a devaluing of the dollar would have little impact on the American citizen) that fact also reduces the level of government debt, by decreasing its value in foreign currency terms. A weaker US dollar boosts exports and potentially erase or ease trade imbalances.

A weaker dollar can also boost domestic production while encouraging a shift of production bringing manufacturing and assembly work back into the US. The effect would be job growth, more revenue for the government to pay down the large US budget deficit. A healthy shift to a more closed/or self sufficient economy is historically and politically consistent with America’s natural inclination toward isolationism. However American isolationism has always had another side to the coin. She has, at least since 1898, simultaneously focused on protecting the nation’s economic self-interest and expanding and defending US power and influence. The tightrope act has looked schizophrenic at times, however that is a different subject.

Might we be seeing growing evidence and reason end this blind obsession to globalization? Greater integration is as dangerous is it is beneficial. Perhaps that is why we are seeing growth in trade and cross-border investment being reversed.

Along with the economic benefits of global free trade, it is just as acceptable to consider the cost and simply asks: Is it worth it?

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Liberal Hypocrisy: Deaths caused by EIT's 0...deaths caused by drone strikes...3,674.

Since last year's ambush report released by Senator Dianne Feinstein,  accused the CIA of committing some fairly odious acts against terrorist operatives, the fallout that was supposed to follow has  generally been an empty nothing. Call it the 'thud of silence'. Nevertheless, the protesting malcontent crowd was pretty ginned up and raucous in their usual slacktivist ways. (For further situational awareness may I recommend going on Twitter and typing in  #TortureReport to observe the rabidity. If there observations don't make you laugh they sure as hell will make you cry laughing.)

Ironically though this little nugget below doesn't seemed to have done much in the way of motivation for the brain deficient lemmings on the American Left. 

The most consistent and era-defining tactic of America’s post-9/11 counterterrorism strategies has been the targeted killing of suspected terrorists and militants outside of defined battlefields. As one senior Bush administration official explained in October 2001, “The president has given the [CIA] the green light to do whatever is necessary. Lethal operations that were unthinkable pre-September 11 are now underway.” Shortly thereafter, a former CIA official told the New Yorker, “There are five hundred guys out there you have to kill.” It is quaint to recall that such a position was considered extremist and even morally unthinkable. Today, these strikes are broadly popular with the public and totally uncontroversial in Washington, both within the executive branch and on Capitol Hill. Therefore, it is easy to forget that this tactic, envisioned to be rare and used exclusively for senior al-Qaeda leaders thirteen years ago, has become a completely accepted and routine foreign policy activity. 

Thus, just as you probably missed the tenth anniversary—November 3, 2012—of what I labeled the Third War, it’s unlikely you will hear or read that the United States just launched its 500th non-battlefield targeted killing. 

As of today, the United States has now conducted 500 targeted killings (approximately 98 percent of them with drones), which have killed an estimated 3,674 people, including 473 civilians. Fifty of these were authorized by President George W. Bush, 450 and counting by President Obama. Noticeably, these targeted killings have not diminished the size of the targeted groups according to the State Department’s own numbers.

No outrage, nor gnashing of teeth, no nothing...just hypocrisy. 

Maybe we should drop another $40 million and investigate this administration and see how heinous and insidious this program really is, because it sure as hell has killed a lot more people than any recently used EIT has. 

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Abysmal Record: The Catholic Church has failed to behead one heretic this year!

From studying the Catholic Catechism to reading the vaunted words present in the Code of Canon Law to Aquinas's Summa Theologica, there were hours upon hours of Catholic fun in the Elliot household. But nothing ever compared to the fun that we had attending the Church's local beheadings of heretical members!!! 

I even remember a year when everyone was in lock step with Rome which created a deficit in heretics and worried Church elders that they might have to cancel the Christmas Day beheadings. It was horrible! It wasn't until a local priest and faithful member of the Diocesan order, Father Patrick O'Malley, had a remarkably genius idea; have a heretic lottery, that the festivities were saved. It as simple, the first five names drawn would be beheaded. Needless to say we all were eager to participate. Although there were claims of cronyism when the local Monsignor was the first name drawn. I still think the beheading lottery was rigged!!! But all in all, it did work out well, we had a great time and Father O'Malley after the Monsignor's beheading was appointed to the position. 

But I digress...

Now it seems under the inept leadership of Pope Francis,  I report with great sadness that the Catholic Church in its lack of support for "intolerance and extremism" has failed to behead ONE heretic!!! What the hell!!!

From Catholic Vote,

For the most intolerant and extreme religion in the world, this is a rather embarrassing statistic. 

It appears that the Catholic Church, widely recognized as the most uncompromising and dogmatic among the world’s major religions, is about to close out the year without executing a single person. 

As everyone knows, the Catholic Church is a religion of strict doctrine, ruling every aspect of each individual Catholic’s life from the Vatican with an iron fist, while at the same time relentlessly imposing its beliefs on the rest of society. 

Yet for some reason the Catholic Church has had an abysmal year at the chopping block, failing to kill a single one of its billion-plus members for failing to live in strict adherence to her teachings. On top of that, the Vatican has put to death exactly zero people from other religions for refusing to convert to Catholicism. 

Even some followers of Islam, universally known as a religion of peace and tolerance, have found time on the weekends to behead a few non-believers. And yet the Catholic Church, far from resembling anything having to do with peace or tolerance, has taken incompetence to a whole new level when it comes to imposing its beliefs. 

Sure, 2015 is a new year and all, but let’s face it. When it comes to intolerance, we’re pathetic.

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Steve Scalise: To speak or not to speak to EURO...that is the question.

If you are politically active and/or informed then you should have heard about the fallout from Congressman Steve Scalise speaking engagement at a David Duke--former Grand Wizard of the Ku Klux Klan--created white-separatist group back in 2002. If you haven't heard about this then you are living under a political rock. 

The group in question which is known as EURO (European-American Unity and Rights Organization), held a "civil-rights" workshop for white folks in mid-May of 2002 at the Metairie base hotel known at the time as the Landmark--now known as the Best Western Plus, Landmark Metairie.  (For full disclosure, I have may or may not have been inebriated a time or two in this facility. But this alleged inebriation was not celebrating nor in support of any hate-groups. Just allegedly celebrating my God given right to get allegedly inebriated.) Scalise as Louisiana State Rep allegedly spoke to EURO members under the auspice of discussing tax-policy with his constituents. 

On December 28th of last year, Lamar White Jr., the proprietor of a Louisiana based liberal political blog, uncovered this little nugget.  White's examination of the white-separatist/neo-Nazi forum 'Stormfront' uncovered a 2002 post from a now deceased member named Alsace Hebert. In this post, Hebert confirmed Scalise's presence at the meeting. He pointed out that Scalise discussed "ways to oversee gross mismanagement of tax revenue or “slush funds” that have little or no accountability" and "graft within the Housing and Urban Development Fund."

Now...to Scalise's credit he has not denied being present at this meeting but has since denied any knowledge of the group's white-separatist or Neo-Nazi ties or intentions. He stated that he only had one staffer at the time and if someone called for him to speak at an engagement he would simply go and speak; evidently not vetting or their requests for his presence.

Being from Louisiana and more specifically a former resident of the New Orleans for about twenty- nine years, I can confirm personally that I know of David Duke by his insidious reputation. In the region, he is a dark urban legend of sorts. However, I have never heard of EURO or any of of Duke's other organizations until this controversy. That being said there is a small possibility that Scalise may not have known either, but considering his political awareness of the area that might be a difficult fact for some folks to actually believe. 

Since all of this has come to light and after Scalise's denial of any knowledge of EURO's racist objectives or even who they were, David Duke's political advisor, Kenny Knight was recently reported as claiming that Scalise didn't speak to the EURO contingent but to a civic association prior to the meeting.

From Nola.com,

Kenny Knight, a longtime political adviser to Duke, said Scalise spoke at a meeting of the Jefferson Heights Civic Association -- not affiliated with the European-American Unity and Rights conference that was held in the same Metairie hotel -- two-and-a-half hours before the white nationalist event started. 

[...]

Knight said he rented and paid for the hotel conference room for the European-American Unity and Rights Organization, a group founded by Duke. Since he had already paid for the space, Knight said, he decided to also hold his local civic association meeting at the Metairie hotel. He stressed that the two gatherings were not connected.

"Steve Scalise did not address a EURO conference. ... The conference was two-and-a-half hours later," Knight said.

This point is also confirmed by Knight's former girlfriend Barbara Noble.

Barbara Noble, who was dating Knight and said she attended the meeting, also said Wednesday that Scalise spoke to the civic group, not EURO.

Scalise apologized this week for speaking to the EURO group, although he said he was unaware of the connections or the group's white supremacy ideology. Scalise has come under fire from some Democratic leaders and others, including calls for him to step down from his leadership position.

Knight went on later to say that he "was not a member of EURO and did not arrange for any speakers at the 2002 conference," and that "He only booked and paid for the room as a favor to Duke, a personal friend whose campaigns he had worked on in the late 1980s and early 1990s." The allegation here is that Scalise was not even remotely connected to the EURO conference but that he was there to speak to the Civic Association as Knight alleges.

This claim can be rudimentarily confirmed by a brochure for the event I found on Snopes.com. It  doesn't show Scalise as a booked speaker for the "civil rights workshop" or indicate any connection between him and EURO. Conversely though it does show Knight addressing the workshop which should leave some suspicions as to his claim about the depth of his ties to EURO.

Photo credit: Snopes.com (Whip Backlash)

While no one has openly come out in the MSM specifically stating that Scalise is a supporter of David Duke, EURO, white-separatist or neo-Nazi movements the allegation that is underpinned is that he is sympathetic.  That to me is rather an uninformed observation. Nazi organizations are more focused and concerned about the Jewish influence on America and the white culture than any other group, Jews are their enemy number one. Blacks, Hispanics, etc are periphery adversaires, granted they are still looked upon with disdain and contempt, but of a lesser importance to our not-so-friendly neighborhood hatemongers. Conversely, Scalise is a fairly well known supporter of Israel and Jews in general.

From his personal Facebook page back in July of 2014.

and again from this past holiday season about two weeks before all of this arose,

This is not a confirmation that Scalise had no intimate knowledge of EURO's ideology just to say that it is rather strange for a man of Scalise's belief system, which is in direct contradiction to that of EURO and David Duke, to be knowingly associated with their ilk. However it would be a fair accusation to allege that Scalise was being a political opportunist and just didn't give two shits who he was really addressing, if in fact he did speak to EURO directly and not a civic association as reported earlier.

Regardless of what Scalise's intentions and knowledge were the damage to his political capital as the House Whip and to the GOP in general has been fairly extensive. As the Whip his legitimacy in the area of command and control of the House could be potentially diminished before he get's any chance to actually execute his duties. If pressure does continue to build, it is totally plausible that he will resign the position. For the GOP this situation allows Democratic operatives to push the narrative that they are "old-white racists" looking to bring back slavery with a complicit media to act as the avenue of production. None of this is to say that the GOP should really be worried because the Dems would have done this regardless.

How this unfolds should be prototypical; Democrats screaming about how racist Republicans and Conservatives are and the GOP looking for the first rock to hide under. In other words, just another day up in the Beltway.

Addendum: The semi-liberal (?) blog 'Scholars and Rogues' has a similar and well researched take on the Scalise situation, linked here.

Addendum (2): In the abovementioned post I indicated that I was suspicious about Kenny Knight's claim that his involvement with EURO was periphery at best based on the flier I obtained from Snopes. According to a new report Knight was evidently involved to a great degree than he first indicated to reporters.

The David Duke associate who disavowed membership in a white nationalist group linked to U.S. House Majority Whip Steve Scalise was at one time an officer in that group, according to public records. Kenny Knight told NOLA.com | The Times-Picayune on Wednesday that he was not a member of the European-American Unity and Rights Organization, but documents filed with the Louisiana secretary of state's office list him as treasurer of its predecessor, the National Organization for European American Rights, in 2000.


Further, a May 16, 2002, news release on an an archived version of EURO's former website, www.whitecivilrights.com, lists Knight as "EURO Louisiana State Representative Kenny Knight." The release says Knight was expected to address the group's May 17-18, 2002, conference...

If you look at the photo of the pamphlet above, it does explicitly state that Knight is indeed addressing the EURO workshop. Not that Knight's credibility was the greatest to begin with but this does blow an even bigger hole in his previous story. 

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HAPPY 2015!!!

Happy New Year fro all of us here at PCT!! I hope your New Year's Eve night celebration was fun as hell and safe!! 

My head is still ringing from mine....ugh, hangovers.

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President Obama's admission to being in a perpetual campaign mode?

On December 18th the President did a softball interview with NPR. While reading the transcript I came across an admission which I thought was an interesting testimony to his philosophy on governance. 

"Now you've got Republicans in a position where it's not enough for them simply to grind the wheels of Congress to a halt and then blame me. They are going to be in a position in which they have to show that they can responsibly govern, given that they have significant majorities in both chambers. And, you know, what I've said repeatedly is that I want to work with them; I want to get things done. I don't have another election to run."

More often than not the POTUS has been criticized for being in a perpetual campaign mode rather than actually governing. In his own words, he seems to have indicated that these criticisms have an air of legitimacy to them.

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Merry Christmas!!!

From Politics and Critical Thinking to you and yours!! 

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The Age of New Nationalism

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…(A Tale of Two Cities (1859)

A spectre is haunting the world — the spectre of nationalism. In many nations around the world, its citizens as well as its governments are turning toward nationalism. Finally looking inward, finally rebelling against the international community which doesn’t exist except in the minds of Western liberals, and returning to that pure concept of ethnic self-rule for the fixes that ail their countries [1].

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A Big Mac Is More Than Tasty, It's A Brilliant Economist

Tasty and cram-packed with cement cholesterol for your arteries, McDonalds' Big Mac has been nation wide since 1968 the binge food of choice for drunks and tokers alike. 

And why shouldn't it be? The Big Mac consists of two 1.6 oz (45.4 g) 100 per cent beef patties, American cheese, "special sauce" (a variant of Thousand Island dressing),iceberg lettuce, pickles, and onions, served in a three-part sesame seed bun.

Aside from these measurements, the Big Mac also serves as a cutting edge analytical indicator for economist, social scientists, and general social sentiment. That point should be obvious considering that McDonalds has restaurants in 116 countries around the world. 

 Big MacCurrencies or Big Mac Price Index

Fist to mention is that McDonalds’ Big Macs are not traded between countries, but are sold to individuals and marketed as tasty, consumer convenience. McDonalds has certainly kept with KISS (Keep It Simple, Stupid) along the way.

As mentioned, there are McDonalds restaurants operating in over 116 countries around the world. This gives economists a strategic web of information about local Big Mac prices, which then can be compared with a given foreign exchange rate or rates that provide indications to changes in currency exchange rates. For example, the The Economist covers some of these concepts in “Big MacCurrencies” (The Economist). 

Here is how the methodology is used, which is similar to what I have explained: 

“Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two currencies should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our “basket” is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued." 

Application 

So, for example, if country X prices its Big Mac at 14.50 to the cost of country Y’s currency exchange rate of 5.00, (5.00 /14.50 = 2.90) suggests that it would cost $2.90 to purchase a Big Mac in country X for country Y. This does not tell us much without the final part of the equation. 

Let’s assume that the local price of a Big Mac in country Y cost 2.50. However, when calculating the exchange rate, the price for a Big Mace in country X is actually .40 more. Economist would judge that country X’s currency might be over-valued against the currency of country Y. 

For the cost of the Big Mac in country X to equal the price of the Big Mac in country Y, country X’s currency would need to appreciate from 14.50 to 12.50 against country Y’s currency. Using the same formula it looks like this: (5.00 / 12.50 = 2.50) which is equal to the price of the Big Mac in country Y.

Here is another example from The Economist to close, “the average price of a Big Mac in America in July 2013 was $4.56; in China it was only $2.61 at market exchange rates. 

So the "raw" Big Mac index says that the yuan was undervalued by 43% at that time” (The Economist, The Big Mac index). Big surprise there. Red China loves Big Macs and devaluing its Yuan against the Buck. 

References 

The Economist (2000). Big MacCurrencies. Retrieved from http://www.economist.com/node/305167

The Economist (2013). The big mac index. Retrieved from http://www.economist.com/content/big-mac-index

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GDP Uber Alles & the Unsustainability Factor

This is part 1 in a series of America's economic decline and useful policy alternatives for the future.

Hijacking America

In light of the growing concerns that plague the future stability as a nation, Alexander Hamilton’s “Report on Manufactures” is a fitting for an introduction. The wisdom in these words should strike a tone to our ears even more so then they did when they were read for the first time to the House of Representatives in 1791.

“If one nation were in a condition to supply manufactured articles on better terms than another, that other might find an abundant indemnification in a superior capacity…And a free exchange, mutually beneficial, of the commodities which each was able to supply, on the best terms, might be carried on between them, supporting, in full vigor, the industry of each... But the system which has been mentioned is far from characterizing the general policy of nations. The prevalent one has been regulated by an opposite spirit. The consequence of it is, that the United States are, to a certain extent, in the situation of a country precluded from foreign commerce.”

According Leslie Gelb, president emeritus of the Council on Foreign Relations wrote, “No nation with a massive debt has ever remained a great power.”

What nation was she referring to? The United States of America. US heavy industry has largely disappeared, having moved to foreign competitors, which has cut deeply into its ability to be independent in times of peril. Its public school students trail their peers in other industrialized countries in math and science. Not because American kids are born more ignorant, it is because of our education system, our fractured politics, bilingual and multiethnic classrooms, which slow progress and advancement. Nonetheless, we are losing our ability to compete in the global economy. Entire generations of Americans read barely at a grade school level, know almost no history, basic science, and next to nothing in geography.

Political Science professor, Robert Cape, of the University of Chicago, ads an equally bleak diagnosis, “America’s relative decline since 2000 of some 30 percent represents a far greater loss of relative power in a shorter time than any power shift among European great powers from roughly the end of the Napoleonic Wars to World War II. Indeed in the first decade of the Second American Century, a net zero new jobs were created. The average American household earned less at the end of this decade than at the beginning. American savings and investment accounts are lower and the dollar is worth less, unemployment is higher, and 50,000 plants and factories shut down (Meyerson, Washington Post, 2010).

We now buy abroad, what we used to produce here at home, for nearly all of our daily items, this includes critical technology for infrastructure and defense (termed Advanced Technology Products). Reason we routinely run a half trillion-dollar trade deficit, causing James Buchanan to quip, “China today has the trade profile of an industrial and technological power while the manifest of U.S. exports to China, aircraft excepted, reads like the exports of the Jamestown Colony to the Mother country” (Suicide of a Super Power).  

Vincent Law nails this point perfectly.

The entire free trade theory willingly recognizes that there will be winners and losers. But the net benefits we are told, will clearly outweigh any costs. But the costs are there, and often times will not be counted as easily as units of coal exported and units of cheap chinese junk imported. Unemployment leads to depression, destruction of the nuclear family unit, mass relocation, ghost cities, and disproportionate strain on different sectors of our society. And only the elites and (the token scholarship minority) who get the top tier education can get their foot in the door of the lucrative booming “services” sector of the economy (read: consulting, finance.) It is precisely these folks who are told all throughout school that international trade is GREAT, outsourcing is SUPER, and that a rising tide lifts all boats.

Mark Drajem for Bloomberg ticks off a depressing list of lost jobs in semiconductor and electronic components (42%), communications equipment (48%), and textile lost an astonishing 62%. These depressing figures caused Auggie Tantillo, executive director of the American Manufacturing Trade Action Committee to say, “Running a trade deficit for natural resources that the United States lacks is something that cannot be helped, but running a massive trade deficit in man-made products that America can easily produce itself is a choice—a poor choice that is bankrupting the country and responsible for the loss of millions of jobs.”

Who did this to us? We did this—The American voter through ignorance, the American politician from the influence of lobbyists. We believed in the new creed: “plenty for today, wait and see about tomorrow.” And we have invited the whole world to the party, promising welfare and entitlements for life, mortgaging it all for a future generation to pay, arrogantly thinking the paradigm of consuming more than we can produce will forever be sustainable.

Unless you are a part of the tiny fraction of Americans at the top of the food chain, you have no economic freedom in which to speak. Do not confuse the recent American capitalist creed that because you have freedom to spend along with consumer choice, you have economic ability. You do not. You are a surplus commodity.

Since1970, the American economic way of life changed forever. Our economy altered at light speed from industry and production to services and the financilization of everything. The short analyses reveal during this time that the greater majority of Americans have become serfs. The dollar does not spend the same as it once did, we don’t make as much relative to our parents and grandparents, yet tax revenues set newer and newer records each year. It now takes two working parents to afford a household where once it took just one. Homes were paid off sooner and people once could work their way through college. 

Now Americans are deeper in debt and so is the country. Our so-called freedoms to spend and economic choices to make are illusions, a product of psychology and consumer-driven marketing ploys. The truth of the matter is these so-called economic freedoms and choices have been made compulsory in order to live. The “financializaiton” and government involvement in the economy has produced regulatory capture for the consumer.

In a short synopsis what does this all mean? Well, let first me first mention this point: Our national debt roughly stands at $14 trillion. However, that is not our structural debt, which is what our legislators have promised to fund. Programs like Social Security, Medicare, government pensions, etc.  If we go by the General Accounting Office, that number is anywhere between 60 and 80 trillion.

Government’s involvement in the economy has widened and caused a series of bubbles in its wake. Total government spending amounts to more than 40 percent of gross domestic product, equal to what the economy actually produces in a year [1].

How does this affect the US globally? Other economic giants such as China, Japan, Persian Gulf governments and sovereign wealth funds are suspecting, and rightfully so, that they are holding worthless papers. The fear being, of course, the US will default on the massive debt or cheapen the hold by inflation. As these fears grow a few things will happen. These countries, which are essentially our creditors, will stop buying US debt or start selling it or force a higher interest rate to offset the risks associated in holding it.

The Fed will have no choice but to raise rates to attract borrows, which will greatly increase the chances for recession. Once this comes to pass, as many have stated, the US debt will be largest single item in the federal budget. Eerily Lenin supposedly once said that the surest way to bring down capitalism and ruin its institutions was to debauch the currency, whereby through process of inflation, governments can confiscate secretly. In essence, government will swallow the economy and the interest of one is no longer separate from the other. So, what once cost 25 cents now cost $5 or 10. For example, gas today cost 14 to 16 times as much as it did in the 1950s. The point is that dollar has lost anywhere between 75 to 90% of its purchasing power.

Different Course and Social Implications.

There is, of course, an alternative: A nationalistic economy secures the domestic interests, first. When farmers need more workers they should raise wages to attract workers, not import cheap, low-skilled laborers who will require welfare assistance for the duration of their lives. If manufactures, such as car manufactures for example, wish to produce quality goods, suited toward their main consumer, the American people, then perhaps the best way is to allow American workers to manufacture those products. 

If American car manufactures are falling behind Europe and Asia, then time is of the essence to turn ship and take a correct course. Corporations should hire more engineers, invest in human capital by sponsoring advanced degrees for aspiring design engineers, and reform corporate management by putting senior engineers in chief managerial roles as the Germans and Italians do.

America, during the 1950s and ’60s, owned the world market in car manufacturing. Now American auto manufacturing capability is merely a drop in the pacific. Since 1970, Japan has purchased less than a million U.S. cars, while selling us over 50 million [2].

Free traders suggest this is a good thing: Japan makes a superior product, and Japanese consumers, just like American consumers, choose to buy Japanese made cars. However, the deluge of imports and the flood of outsourcing have created, in spite of increased wealth and access to every widget and gadget under the sun, an economic system of diminished returns. College graduates can’t find work and are forced to move back in with their parents. Children are raised in daycare because mothers are forced to find a job and help support the family.

Ernest Hemmingway wrote, “the first principle of a mismanaged nation is inflation of the currency, the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”

It is impossible to deny that free trade works, when it works. In the same breath, it is important to identify and then realize the areas it has failed. For starters take a stroll through the Mon Valley of Pennsylvania; book a tour through a travel guide and take in the sights of the shrinking, gutted city of Detroit—once America’s Great Arsenal of Democracy, its forges now rusts in obscurity, cold and forgotten inside an empty factory.

There is reason why the majority of Americans feel the country is headed in the wrong direction. We should listen to them even if most cannot give in detail the source of their anxiety. However, instinctively most Americans, on some level, are economic nationalist. The differences come out when they bump up against a hard advocate for absolute free trade. One issue in particular is the understanding of one word, “need.” For example, free traders will say, “we need immigrants to do the jobs American won’t do.” Or “we need to outsource some jobs that can be done cheaper and more efficient so that Americans can have more for less.” 

These are understandable motivations on a superficial level, but the logic isn’t quite as sound as assumed.

While there are “needs” in one’s life, from an economic standpoint, rarely can a need be objectively and quantifiably determined. In fact, the former is really a wish. Comparing needs and wishes are not semantics but a real idea. Farmers may wish for more farm workers, American manufactures may wish for better profits by reducing production costs. Anyone is entitled to wish for anything they happen to imagine, but the object desired is rarely a need. Even worse is allowing powers at the top to determine for the rest of us what our needs are. 

Bringing in more foreign workers is not without costs to society. Outsourcing jobs to foreign countries is not without costs to the American economy. Our elites inform us we have access to plenty of goods. We have more than we can otherwise produce on our own. However, we also have a long-running trade deficit and a permanent unemployed/underemployed class.

Our nation enjoys its place as the world’s oldest constitutional republic, and is still the model to which other nations aspire. However, if the American people and the politicians they elect cannot standup and prevent the coming calamity, the devaluation or default of our currency, can we continue to say democracy is the pinnacle of human society?

Will we have to concede that John Adams was correct when he dimly reflected, “Remember, that democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” 

Notes

1. “Substantial expansion in the size and scope of government, including through new and costly regulations in areas like finance and health care, has contributed significantly to the erosion of U.S. economic freedom” (online source: http://www.heritage.org/research/commentary/ 2014/1/why-is-america-losing-its-economic-freedom). 

2. Gary Hoffman, (2009). AOL Autos.com

3. Read Patrick J. Buchanan’s Suicide of a Super Power

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The United States can no longer 'grow' its way out of debt.

At one point and really not that long ago it seemed the right-winged philosophy of growing the country out of its present fiscal problems might have seemed feasible. It would have been a very difficult road requiring a comprehensive usage of different economic thoughts; reformation of the tax code, an overhaul of monetarist policy, repatriating American investment capital which is currently being sent overseas in droves, rebuilding and modernizing America's infrastructure, massive R&D projects on both the government and private sides, revitalization of manufacturing sector, increasing the US energy sector, etc. 

Well according to the writers over at ZeroHedge we have reached the tipping-point and can no longer grow out of nation's debtor status. 

Exactly 199 years ago, in 1815, a “temporary” committee was established in the US Senate called the Committee on Finance and Uniform National Currency.

It was set up to address economic issues and the debt accrued by the US government after the War of 1812.

Of course, because there’s nothing more permanent than a temporary government measure, the committee became a permanent one after just one year.

It soon expanded its role from raising tariffs to having influence over taxation, banking, currency, and appropriations.

In subsequent wars, notably the American Civil War, the Committee was quick to use its powers and introduced the union’s first income tax. They also detached the dollar from gold to help fund the war.

This was all an indication of things to come.

Over the subsequent decades there was a sustained push to finally establish the country’s central bank that will control money and credit, as well as institute a permanent income tax to feed the expanding aspirations of government.

They succeeded in 1913 when the Federal Reserve Act was passed and the 16th Amendment ratified, binding the country in the shackles of central banking and taxation of income. 

Over the century that followed, the US has gone from being the biggest creditor in the world to its biggest debtor. 

Decades of expanding government programs, waste, endless and costly wars, etc. have racked up such an enormous pile of debt that it has become almost impossible to pay it down. 

A lot of folks don’t realize that, since the end of World War II, the US government’s total tax revenue has been almost constant at roughly 17% of GDP. 

In other words, even though the actual tax rates themselves rise and fall, the government’s ‘slice’ of the economic pie is almost always the same - 17%. 

I’ve worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to ‘grow’ its way out.

Deficits may not matter but the debt and interest they generate sure as hell do.

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Senate's CIA "Torture Report"

It is truth, but truth is not always appearance.

~Ichabod Crane, Sleepy Hollow (1999)

As readers undoubtedly already know...the Senate Intelligence Committee, under the auspice of Senator Dianne Feinstein, has released the very damning report titled "Committee Study of the Central Intelligence Agency's Detention and Interrogation Program." In it we see a pretty horrific picture painted of the CIA's interrogation program; ranging from allegations of "avoiding or impeding oversight" of any kind, was "brutal and far worse" than represented, "not an effective means of acquiring intelligence" etc. Fairly damning and damaging to the Agency's reputation as well as to the United States' standing in the world.

(Before I go on and for the integrity of this topic, I emphatically sanction the use of EIT's on terrorists--who seek to kill, torture, and subjugate the free people of this world in the name of "religious rectitude"--to secure their motivations and plans. My perspective on most foreign policy or security issues is strictly and religiously utilitarian. In that if actions maximize the overall benefit--protecting US civilians, military, and interests--is achieved then the judgement of the action--use of EIT's--should be measured by this metric.)

Now that that disclaimer is out of the way and there is no question as to my motivation let's get started with the critique.

The Partisan Nature of the Report

Absolutely the largest point that makes taking this report seriously extremely problematic is who produced it.

From the Washington Post, (Emphasis Mine.)

The investigation was conducted exclusively by the Senate committee’s Democratic staff. Its release Tuesday is certain to stir new debate over a program that has been a source of contention since the first details about the CIA’s secret prison network began to surface publicly a decade ago. 

So...why weren't any Republican staffers present? Well...the blame and culpability for this being the case lies solely at the feet of the GOP.

“My predecessor, Sen. Bond, was the lead Republican on the Committee when the report was started. Sen. Bond’s determination early on was that this report was clearly a partisan effort, and there was no reason for the Republican staff to continue to participate,” Blunt said.  

(Emphasis Mine.)

Any present day Republican decrying the "partisan nature" of this report should shut his/her collective mouth. Because they, the GOP, had motive and opportunity to fight inside the committee and control some of the report's outcomes. Not take their toys and go home. Anyone who is politically active or pays attention should have known how that these little Progressive knobs would structure this report in the manner they did, it was or should have been expected.

Where the Republican leadership is concerned, these Democrat actions aren't or weren't some kind of fucking recent revelation brought on by a momentary lapse in their judgment. The Republican leadership had five years to mull over this and if they would have stayed engaged they might have had an opportunity to do something about it instead of just crying foul. All of this was part and parcel of the larger problem that has plagued these tools (Democrats) since 2007 and earlier--their Leftist extremism and their sick-headed and morally bankrupt agenda.

If you are uninitiated in the Progressive mind-set towards war and foreign policy, please see this post for an eye opening crash-course on their ludicrous philosophies.

Structure of the Report

By any means necessary...

~Jean Paul Sartre, Dirty Hands (1948)

Piggybacking of the abovementioned content, you would be hard-pressed to convince me otherwise that the Democratic staffers or their leadership didn't start this investigation with the presupposition that the Agency was guilty of transgressions. These little nihilists so vehemently opposed the use of EIT's that they would burst into histrionics at the mere mention of the acronym. So with all the emotional vomiting they had subjected the nation to over the years, they HAD to prove themselves correct.  Regardless of the cost and who it might affect.

In a op-ed for USA Today, former Senator, member of the Senate Select Committee on Intelligence, and Democrat, Bob Kerrey, echoed this sentiment, among other criticisms.

The Republicans checked out early* when they determined that their counterparts started out with the premise that the CIA was guilty and then worked to prove it.

*One point I would like to make is that the motivation that supposedly led the GOP to "check out" for me is still no excuse, they should have stuck it out.

Another problem that this "investigation" suffers from is what was investigated. From the Bob Kerrey op-ed.

I have participated in two extensive investigations into intelligence failures, once when Aldrich Ames was discovered to be spying for Russia after he had done substantial damage to our human intelligence collection capability and another following the 9/11 attacks. In both cases we were very critical of the practices of the intelligence agencies. In both cases we avoided partisan pressure to blame the opposing party. In both cases Congress made statutory changes and the agencies changed their policies. It didn't make things perfect, but it did make them better.

In both of these efforts the committee staff examined documents and interviewed all of the individuals involved. The Senate's Intelligence Committee staff chose to interview no one. Their rationale - that some officers were under investigation and could not be made available – is not persuasive. Most officers were never under investigation and for those who were, the process ended by 2012.

Fairness should dictate that the examination of documents alone do not eliminate the need for interviews conducted by the investigators. Isolated emails, memos and transcripts can look much different when there is no context or perspective provided by those who sent, received or recorded them.

(Emphasis Mine.)

Timing of the Report's Release

The essential ingredient of politics is timing.

~Pierre Trudeau, 15th Prime Minister of Canada

There are many reasons that could be offered for the timing and release of this report. But rest assured, all of the reasons offered are purely political in nature. 

One motivation for the Democrats which has gained traction in conservatives circles was that report was coincidentally released as Jonathan Gruber was given his testimony to the House Oversight Committee on the 10th. Mr. Gruber, in case you forgot, was the so-called architect of Obamacare who recently and on several occasions called the American people, "stupid." 


Another reason that could be considered is that in one month the Democrats are leaving their majority position in Congress. They know full well that propaganda piece would probably have not seen the light of day when the Republicans took over. So they do what Democrats do, they shit all over everything before turning over the keys.

Timing, for Feinstein was a big factor. "I realize the Senate changes leadership in January, and so the likelihood of the report coming out next year was slim and none, so we had a limited opportunity after five and a half years of work to get this out," she said. She conceded that the safety situation abroad was "difficult," but, she continued, "It's going to remain difficult."

Furthermore there is the aspect of hypocrisy and the depth to which Feinstein and her ilk actually oppose the use of EIT's.

From William McGurn in the New York Post, 

 If you really wanted to ensure the CIA never tortures again, why didn’t you just outlaw waterboarding and other methods you call torture altogether — instead of leaving it to an executive order another president might reverse?  

The honest answer to this question speaks to contemporary congressional morality, and underscores how the loudest notes of moral outrage in the Beltway are so often sounded by its least serious people.

After all, back in 2009 the stars were all in alignment for putting a ban into law. The war in Iraq had been turned around by the surge; the CIA in fact hadn’t waterboarded anyone since 2004; and the need for harsh tactics, if ever they were necessary, seemed far behind us.

Indeed...? Why not end it?

Back in 2009 the Democrats had the political capital, the moral authority, and above all else the control of the executive branch and the legislative numbers to make this happen. Beyond burning down the building on the way out, this lends itself to the upcoming general election in 2016. Since the Democrats took such a drubbing in the mid-terms--getting completely decimated in the South--there base is disillusioned, beaten down to the lowest level possible, and the country is souring on their brand. They need revival and they need it badly.

From Ferguson, to Eric Gardner, and now a play from the old playbook that was near and dear to the political hearts of the Progressive faithful...EIT's. Nothing gins up the base like a Bush administration/Iraq war related controversy.  The base gets motivated and therefore mobilized and the wheels will start to turn. But, how far the wheels will take them is another story altogether.

You see the attitude that American's possess towards EIT's has changed quite a bit since the mid-2000's.

From the  Pew Research Center,

Pew Research Center (Fact Tank, Dec 2014)

This may produce fire in the belly of the your local activist--or maybe just indigestion--but the average American is a little more pragmatic on the subject. So...parading the CIA report come election time and the Right will use it as a political wall that the Left's head will be smashed on.

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