Thought for the Day

[broncofan]

I will just state my last view and move on. I enjoyed the discussion for the most part.

I probably should have stated why I included the hypothetical. It was intended to cast doubt on whether utilitarianism will always point in the right direction, namely because most people would respond to the hypothetical by either refusing to accept its premises or be certain that authorities should not knowingly kill innocent people to save lives (which is my position). The U.S. criminal justice system does seem to try to avoid extremely unjust outcomes with rules of evidence, burdens of proof, and multiple layers of appeal. If one simply wanted to achieve the greatest overall utility the focus for punishment would be more on recidivism rates than whether someone had an especially malicious mindset. I think for most crimes the two are often consistent with each other. If someone commits a willful and wanton act the assumption is they're more likely to do so again.

People who are sacrificed to save lives will often be the most vulnerable. People who are wrongfully executed are often minorities and poor, and the person the shipwrecked sailors decided to eat to save three lives in R v Dudley and Stephens was the cabin boy who was the most sick and didn't have a family. The court in that case decided not to accept an excuse that eating the cabin boy would result in one death rather than four. I agree with them there, even though four lives is better than one, nobody volunteered to be the sacrifice and nobody ever does. https://en.wikipedia.org/wiki/R_v_Dudley_and_Stephens

I read a few articles on theories of criminal justice and altered my view slightly to a combination of retributivist and utilitarian. Utilitarian in the sense that I think deterring bad outcomes should be the focus of punishment but retributivist in that I don't think it should only be forward looking but also consider how malicious an act is and how just a punishment is in individual cases. I'd have to read more on the subject to know how these two theories can be synthesized.

[filghy2]

Here's a couple of articles on why we shouldn't worry too much about government borrowing.
https://www.bloomberg.com/opinion/ar...e-credit-cards
https://www.nytimes.com/2020/12/03/o...cans-debt.html

Basically, governments are not like households in that they don't have to ever repay their debt. (Individual bonds may have to be repaid, but new bonds can always be issued to someone else.) The only real constraint is that the debt cannot grow indefinitely faster than the economy. The cost of servicing the debt is actually low at present because interest rates historically low, and this is likely to remain the case for the foreseeable future.

The real issue is whether the debt is being used to finance something socially productive. Borrowing for public investment and/or to support the economy when it is weak is likely to be good - borrowing to give your donors a tax cut when the economy is already doing well is not.

[Stavros]

Here's a couple of articles on why we shouldn't worry too much about government borrowing.

Basically, governments are not like households in that they don't have to ever repay their debt. (Individual bonds may have to be repaid, but new bonds can always be issued to someone else.) The only real constraint is that the debt cannot grow indefinitely faster than the economy. The cost of servicing the debt is actually low at present because interest rates historically low, and this is likely to remain the case for the foreseeable future.

The real issue is whether the debt is being used to finance something socially productive. Borrowing for public investment and/or to support the economy when it is weak is likely to be good - borrowing to give your donors a tax cut when the economy is already doing well is not.

Thus spake the Prince of Pragmatism! I agree with you on one level, but have questions and points to make on others.

First, there is a practical reason. The whole basis of a loan is that it is paid back, indeed, that the person or the bank making the loan also make a profit from the interest charged on the loan. The US Government might be able to borrow trillions at low-to zero interest rates, no such blessing is awarded to Malawi or Chad, because when the investors look at the condition of those economies, they know that loans are too much of a risk. If the State does not have the natural or human resources to generate the money to pay back the loan, an additional, political fact, corruption in government, might also deter. Moreover, debt is internatonal -who actually owns the US debt? Not all Americans.

There have been numerous arguments that the Chinese could dispense with their American investments, and the US economy spiral into free-fall, as was said of the Petro-Dollar dimension to the US investments by Saudi Arabia and the oil-rich Gulf in the 1970s and 1980s. I don't know if this would be done, I think the argument is that if the Chinese or the Arabs 'pulled the plug' as it were, the rest of the world economy would also be adversely affected. As you know more about this aspect of economics, your view on it would be most welcome.

Second, debt goes to the heart of the capitalist economy. You don't need to agree or disagree with either Smith or Marx, but it is clear that what the circulation of capital does, is create the conditions for a profitable return on the investment, while the speculation on the size of that pure profit enables the capitalist to borrow more to fund more investments, the assumption being that nothing will interrupt the circulation, an economic blood clot in the artery, or, as happens to Antonio in The Merchant of Venice, a ship sinking out at sea, taking all his investments with it. When Shylock asks for his share of the investment to be returned, he is merely giving capital investment the moral dimension that libertarian economists try to avoid, which Shakespeare does not.

And yet, these American libertarans, like Rand Paul and Paul Ryan, created a 'debt clock' during the Obama administration to demonstrate the immorality of using 'other people's money' to fund a, b and c when their view is that these decisions ought to be made by the market, and not by Government. Indeed, I read somewhere the other day someone in either the House or the Senate intends to hold Biden's feet to the fire by reviving this dimension of Beltway politics.

What strikes me about the current situation, is that we have rarely in the last 100 years (not sure of the time-line but a long one) ever had such persistently low interest rates in advanced capitalist countries, indeed in some areas negative interest rates.

There is a chapter by the often brilliant, often controversial economic historian, Charles Issawi -Why Japan? (in Ibrahim Ibrahim [ed] Arab Resources: the Transformation of a Society -Croom Helm, 1983) in which Issawi asks why Japan has been economically more successful than Egypt. One of the reasons is that interest rates encourage peope to save. By saving so much of their money in the post-1945 era, and not spending it on foreign holidays, fancy houses and so on, Japan accumulated enough capital to fund private and public investments without having to go deep into debt or borrow from other governments. You could argue it was based on massive investments in Japan by the US for reconstruction after 1945 which Egypt did not -and could not receive- but Issawi then brings in other factors -Japan's hostility to immigration being a salient/controversial one- to offer an intriguing profile of one country in conrast to another.

And thus it would seem that States that did borrow beyond their means, that their debt did indeed grow faster than the economy- African states following the end of Empire have had this problem, compounded by weak state structures and corruption permeating all levels of society. At one point in the late 70s, America's buddy (and Muhammad Ali's too, though let's face it, he was a political moron) Mobutu Sese Soko pleaded with the people of Zaire, 'look, if you are going to steal, at least don't steal so much' - and coming from one of Africa's most disgusting thieves, this was not even outrageous.

So, somewhere in this argument, is a dose of pragmatic financing for wealthy countries like the US -I almost added the UK but let's no tempt fate- where debt is a nightmare from which other countries are trying to awake. It will become a political baseball in the US over the next four years, but I return to this peculiar problem of interest rates, because like taxes, I don't think we can carry on without raising them. The UK it seems to me, has got to raise interest rates, and also raise income tax or there will be an endless level of debt, and if economic growth does indeed decline over the next, say five years, then we will have the kind of crisis that you imply in the relationship between debt and growth.

Lastly, one wonders how much longer Trump can finance and re-finance his loans. He may have made over $100m profit from the Presidency, we don't yet know, and one wonders why a Billionaire needs to borrow a dime, but I would not be surprised if his Hotels and Golf clubs have lost a substantial amount of revenue this year, given that they were losing money for the three years before this one. A year or two ago I also read of a tenant in Trump Tower Manhattan who complained his condo though not worthless, was not attracting buyers, so it may be that the Brand, on which Trump bases so much of his loot, may be tainted and in danger of undermining his legacy. For years, this rent collector from Queen's got lucky, now it seems, his luck is running out. Well, I have tissues, if he needs them. But I shall pretend to be a selfish capitalist on this occasion, and deny him access to them.

[broncofan]

Thus spake the Prince of Pragmatism!

I was thinking the caustic count of consequentialism and you the acerbic archduke of alliteration (or dispassionate deacon of deontology maybe). If it helps I earned the title of smarmy sultan of syncretism honestly, though I don't love the adjective.

Have a good holidays everyone. Interested in discussing whatever Trump and his legal team are doing next week, though perhaps in the election thread. We'll see what the news cycle is by then. Be well!

[sukumvit boy]

"Now boys,be nice!" And happy holidays to you two.

[Stavros]

It was a light-hearted remark as I think most people know.

I also wish everyone the best possible Christmas you can have in these challenging times. I decided to roast half a leg of lamb this year having eaten other people's food for the last 5 Christmases. Smoked Salmon from the Orkney Islands (a gift from old friends), roast potatoes and yes, Brussel Spouts will be washed down with what I hope is an impressive Barolo (because the price was impressive!) and for the seafood, a Gewurztraminer from Alsace.

One last thing before we all head off to the -library, the kitchen? Thomas Friedman in today's New York Times speculates that if Trump retains control of the Republican Party then 'responsible Republicans' may have to form a new party of their own. This puzzles me, because it means abandoning 'the Party of Lincoln' to take a major gamble that if they leave the existing Republican Party they will take their voters with them. When, in the UK MPs from the Conservative and Labour Parties who either left in disgust or were thrown out by their leaders created a new Party, it fell apart within months and as far as I know no longer exists (Change UK). Crucially, the MPs lost the seats they contested in the 2019 election because the voters did not support them.

Surely, it is Trump and his followers who ought to set up a new party?

Anyway, I was struck by this response from a reader called Socrates (!) whose comment to Friedman's article is cut and pasted below.

Times Pick


Evan McMullin: “... there is still no home for Republicans committed to representative government, truth and the rule of law, nor is one likely to emerge anytime soon.” In actuality, there is a political party committed to representative government, truth and the rule of law: the Democratic party....and in Europe, Canada or Australia, the Democratic Party would qualify as the 'Conservative' party in all those countries.... because America has been so hijacked to the extreme right for the last four decades that the Democratic Party is now conservative...and the Republican party is simply Crazytown.Name a Republican public policy that resides in evidence-based reality and you'll get the null set.Today's Republicans don't even want to conserve the Earth; Democrats do.Today's Republicans have no fiscal discipline; the Democratic inclination to 'tax and spend' is actually much more conservative than the Republican record of 'borrow and spend'.The #1 successful way to reduce abortions is....providing free and low-cost modern contraception to poor women....that's a Democratic solution.....as opposed to defunding all contraception, which makes the problem worse.How about the one-person-one-vote principle ? Sounds pretty conservative, right ? And yet the Republican Party has been attacking that principle with a vengeance for decades.The Democratic party is actually more conservative than today's Republican Party, which is little more than a radical cult of resentment.
44 Replies2744 Recommend

Opinion | Will Trump Force Principled Conservatives to Start Their Own Party? I Hope So - The New York Times (nytimes.com)

[filghy2]

Thus spake the Prince of Pragmatism! I agree with you on one level, but have questions and points to make on others.

First, there is a practical reason. The whole basis of a loan is that it is paid back, indeed, that the person or the bank making the loan also make a profit from the interest charged on the loan. The US Government might be able to borrow trillions at low-to zero interest rates, no such blessing is awarded to Malawi or Chad, because when the investors look at the condition of those economies, they know that loans are too much of a risk. If the State does not have the natural or human resources to generate the money to pay back the loan, an additional, political fact, corruption in government, might also deter. Moreover, debt is internatonal -who actually owns the US debt? Not all Americans.

There have been numerous arguments that the Chinese could dispense with their American investments, and the US economy spiral into free-fall, as was said of the Petro-Dollar dimension to the US investments by Saudi Arabia and the oil-rich Gulf in the 1970s and 1980s. I don't know if this would be done, I think the argument is that if the Chinese or the Arabs 'pulled the plug' as it were, the rest of the world economy would also be adversely affected. As you know more about this aspect of economics, your view on it would be most welcome.

Second, debt goes to the heart of the capitalist economy. You don't need to agree or disagree with either Smith or Marx, but it is clear that what the circulation of capital does, is create the conditions for a profitable return on the investment, while the speculation on the size of that pure profit enables the capitalist to borrow more to fund more investments, the assumption being that nothing will interrupt the circulation, an economic blood clot in the artery, or, as happens to Antonio in The Merchant of Venice, a ship sinking out at sea, taking all his investments with it. When Shylock asks for his share of the investment to be returned, he is merely giving capital investment the moral dimension that libertarian economists try to avoid, which Shakespeare does not.

And yet, these American libertarans, like Rand Paul and Paul Ryan, created a 'debt clock' during the Obama administration to demonstrate the immorality of using 'other people's money' to fund a, b and c when their view is that these decisions ought to be made by the market, and not by Government. Indeed, I read somewhere the other day someone in either the House or the Senate intends to hold Biden's feet to the fire by reviving this dimension of Beltway politics.

What strikes me about the current situation, is that we have rarely in the last 100 years (not sure of the time-line but a long one) ever had such persistently low interest rates in advanced capitalist countries, indeed in some areas negative interest rates.

So, somewhere in this argument, is a dose of pragmatic financing for wealthy countries like the US -I almost added the UK but let's no tempt fate- where debt is a nightmare from which other countries are trying to awake. It will become a political baseball in the US over the next four years, but I return to this peculiar problem of interest rates, because like taxes, I don't think we can carry on without raising them. The UK it seems to me, has got to raise interest rates, and also raise income tax or there will be an endless level of debt, and if economic growth does indeed decline over the next, say five years, then we will have the kind of crisis that you imply in the relationship between debt and growth.

To be clear, I was talking about the situation for advanced economies that borrow in currency that they issue. Developing countries are different because they have little capacity to borrow in their own currency, which makes them more vulnerable because a fall in the currency increases the value of the debt. I'm not aware of any advanced economy having a crisis due to government debt issued in its own currency (and this has been tested to extremes in Japan). All such crises in recent decades have involved foreign-currency debt (including Greece, which had no way to issue more euros).

I don't think owing money to foreigners is inherently bad - again, it depends on what it is used for. People have been worrying a crisis caused by foreigners pulling their money out of the US for at least 50 years, as your example suggests, and it hasn't happened. The problem with the idea that China might pull out to punish the US is they they can't do that without also punishing themselves, because the value of their investments would plunge.

The capitalist economy does depend on the flow of credit, and that makes it vulnerable to a credit crunch, as occurred in 2008 (and was a regular feature until the Great Depression led to a change in economic policy thinking). However, the real problem there is private borrowing, not government borrowing - in particular because the banking system (which borrows short-term to lend long-term) is inherently vulnerable to panics. The fact that governments were willing to borrow and issue guarantees to support the economy was what prevented the 2008 financial crisis for becoming another Great Depression.

The underlying reason interest rates are so low is that there are not enough profitable private investment opportunities to absorb the supply of saving. This seems to be generally attributed to structural changes such as technology and the shift toward a services economy. It's not clear why interest rates would rise unless something changes those underlying factors - otherwise trying to increase interest rates would just increase the imbalance.

Incidentally, I'm not sure why pragmatism should regarded as less worthy than idealism. To my mind pragmatism means viewing issues in terms of the balance of positive and negative effects of alternative options (informed by empirical evidence), rather in terms of some overarching 'big idea'. I'm pretty sure that far more misery over the course of human history has been caused by idealists than by pragmatists. The Nazis and Communists were both idealists. Religious fanatics are idealists. The libertarians you refer to are idealists.

[Stavros]

The underlying reason interest rates are so low is that there are not enough profitable private investment opportunities to absorb the supply of saving. This seems to be generally attributed to structural changes such as technology and the shift toward a services economy. It's not clear why interest rates would rise unless something changes those underlying factors - otherwise trying to increase interest rates would just increase the imbalance.

Incidentally, I'm not sure why pragmatism should regarded as less worthy than idealism. To my mind pragmatism means viewing issues in terms of the balance of positive and negative effects of alternative options (informed by empirical evidence), rather in terms of some overarching 'big idea'. I'm pretty sure that far more misery over the course of human history has been caused by idealists than by pragmatists. The Nazis and Communists were both idealists. Religious fanatics are idealists. The libertarians you refer to are idealists.

Thank you for this intriguing post. You probably know there are claims that we are in the fourth wave of the industrial revolution, chracterised by digital economics. But to me this is not an industrial revolution, and as an ageing idealist with pragmatic tendencies, my view is that the industrial revolution ended in the 1960s and petered out in the 1970s, if by industrial we mean the mechanical or manufacture of goods -this does not mean that hard goods are no longer produced, but it does mean that entirely new industries have not emerged, merely changes to the means of production.

Since the 1980s services and telecoms have outpaced traditional industry, but I don't see this as an industrial revolution, and the question is this: have developments since the 1980s taken Capitalism to a new level, of global particiation in global markets -allowing for the industrial expansion of China which in my view rescued the global economy from a decade of low-growth- or has the consequence been an end to Capitalism as we have known it since 1776, with no coherent replacement other than State-directed economics?

The point about interest rates is not just that they are at an all-time low, but that there are now below zero interest rates, which begs the question: what is this capitalism that does not return a profit on an investment, and proclaims in advance it will not do so? One of the many flaws in Marx's critique of Capitalism, is that the worker had nothing but his labour to sell, and in return received as wages nothing more than he could survive on. In reality, and ironically because of militant worker's Unions, even a modest increase in wages has enabled some workers to put money in an interest-yielding account, so that, at least in theory and allowing for a stability in interest rates, a worker doing so at the age of 25 would have more money in the account when 60, whereas the contemporary situation suggests there is no point saving money at all, that any money in a below zero-interest account is merely pure profit for the bank. This is not Capitalism, but if so, what is it?

On another level, low-to-zero interest rates are a trick which Governements have been using since 2008 to use 'Quantitative Easing' to find financial solutions to the problems they created without having to lose their hair worrying about when and how to pay it all back. Thus Marx again, but correctly so -as he described Capitalism as a fish eating is own tail, we see Governments encouraging the Banks to lend money they can't get back, and then themselves borrowing money to give to the banks so they remain solvent -Murray Rothbard, Von Mises, maybe even Adam Smith might have said,'let them fail', indeed, let the banking system collapse, and then re-build it from zero, because what they would see if they were alive, is the State taking command of the economy even when the Marshals are self-declared free market -or in Trump's phrase, 'Fair Market'- actors, as crystal clear a contradiction of Capitalism as you can find.

Thus for all of Boris Johnson's jolly-wallah optimism for Brexit Britain, the questions that undermine it concern fundamental aspects of the Free Market Capitalism on which Brexit is based, economically -where are the jobs going to come from that sustain a Capitalist economy? What is the long term impact of low-to-zero interest rates on an ageing population if, 30 years from now, the mean cohort of working people have no savings for their old age at a time when the State too might not have the funds to sustain pensions? Surely as the whole point of Saving is to set money aside for the future, low-to-zero interest rates for individuals is little short of a kick in the face? Not to enjoy one's retirement -and a retirement in which spending has been based on savings as pensions rather than income. From what I see now, in 30 years time if not before, there will be an incomes crisis as pervasive and destructive as Covid-19.

Interest rates must rise, or the economy is doomed, though I suspect the British economy as we have known it is doomed anyway, at least the one that I have known since I started work in 1968. What replaces it, I don't know, but it seems to me that for all the glad morning bullshit of Libertarians like Steve Baker, the State is going to be in command of the economy for some time to come. But I could of course be wrong, and everyone will be rich in the course of time. But long after my time.

[broncofan]

https://twitter.com/keithedwards/sta...96238722129923

This is 4 minutes of the audio. This is a felony and he really has to be prosecuted. I don't care what the political fallout is. Either you can legally threaten election officials to "find" votes for you or you can't. And if you can then we are not a country of laws. For fucks sake.

[KnightHawk 2.0]

https://twitter.com/keithedwards/sta...96238722129923

This is 4 minutes of the audio. This is a felony and he really has to be prosecuted. I don't care what the political fallout is. Either you can legally threaten election officials to "find" votes for you or you can't. And if you can then we are not a country of laws. For fucks sake.

Completely agree 1000% that Donald Trump actively interfering in an election and pressuring
Georgia Secretary of State Brad Raffensperger to change the results in Georgia is a felony, and he really should be prosecuted for this criminal act. And it's time for the spineless cowards in the GOP to stand up and do what's right.