The Chinese Scale Back their Ambitious High-Speed Rail Plans because their Keynesian Polices Unleashed Inflation

Posted by PITHOCRATES - October 30th, 2011

Week in Review

Railroads are expensive to build.  And to operate.  Especially high-speed railroads.  Why?  Because unlike airplanes that fly in the air between cities trains have to travel on track between cities.  And that’s a whole lot of railroad infrastructure.  That’s why railroads don’t suffer as much during times of escalating fuel costs as trucking and aviation.  Because fuel isn’t their greatest cost.  As it is for trucks and planes.  It’s that massive infrastructure that they have to build.  And maintain.

To build a railroad you need lots of money.  And lots of labor.  Preferably cheap labor.  And that usually means government money.  And immigrant labor.  That’s how they built the first transcontinental railroad in America.  Along with a lot of inefficiencies.  And corruption.  Typical when you put government and big piles of money together.

That first transcontinental railroad needed a lot of ‘fixing up’ before it was safe for use.  They had to move some track from ice to terra firma.  Rebuild some bridges that weren’t disposable after a few uses.  That kind of thing.  Because that’s the kind of craftsmanship you get when government is in charge of the money.  What we call crony capitalism.  Government rewarding their friends.  Picking winners and losers.  And helping those who will help them.  That is, return the favor of government contracts with campaign contributions.

Governments all around the world are in favor of building more high-speed rail.  Because it will ‘put people to work’.  And ‘save the planet’.  By moving people out of gasoline-powered cars into electricity-powered trains.  Electricity that is generated from even more polluting coal-fired power plants.

The Americans have been trying.  Obama’s stimulus included billions for high-speed rail.  That did nothing.  Meanwhile the Chinese have been doing it.  By making money for the banks to lend.  And using cheap ‘second-class’ migrant labor from China’s countryside to build their high-speed rail.  And how has that been working?  Not so good (see Can’t pay, won’t pay posted 10/29/2011 on The Economist).

EFFORTS to curb inflation in China are having some painful side-effects. A squeeze on bank lending has prompted some businesses short of cash to stop paying wages to blue-collar workers. Even the much-vaunted state sector is feeling the pinch. Work has all but ground to a halt on thousands of kilometres of railway track, and many of the network’s 6m construction workers have been complaining about not being paid for weeks or sometimes months…

The government touted building railways as a great way to keep the economy buoyant during global financial trouble, and boost employment. But the $600 billion stimulus launched in 2008 is all but spent. Indeed, the central government has urged state banks to cut back on lending in order to curb inflation, which in the year to July reached a three-year high of 6.5%, before dropping to 6.1% in September.

Yet another example of why Keynesian economic stimulus stimulates only economic bubbles and inflation.  Which are always corrected by recessions.  And the greater the stimulus/bubble the greater the recession.  Of course Keynesian government economists everywhere will all come to the same conclusion.  That China isn’t spending enough.  And that governments everywhere should follow the Chinese example.  But without the one flaw of turning off the easy credit spigot.  Because Keynesians always say that any inflation created by government stimulus is minor and negligible in comparison to all the good that it does.

Similar problems have also been reported in road building and property construction, prompting a growing number of demonstrations and violent incidents, including clashes with employers and suicides. Such difficulties are likely to get worse towards the end of the year, when companies traditionally try to settle accounts with employees. Wage inflation is adding to employers’ woes. Minimum wages have risen by an average of nearly 22% in the two-thirds of China’s provinces which have adjusted them this year. Nice if you can get it, but not much use if you are not being paid at all.

But the Keynesians couldn’t be more wrong.  Once inflation starts it ripples through the economy.  Costs go up.  Wages go up.  Increasing consumer prices everywhere.  There’ll be some economic prosperity for a little while.  But soon inflation will eat away at the standard of living.  People will be making more money everywhere.  But that money will buy less and less.  It will buy less of a house.  Fewer toys.  And even less food.  This is the endgame of Keynesian stimulus.  And we’re seeing it played out on a grand scale in China.  Like we saw in Japan during their Lost Decade.  Where the Japanese suffered a deflationary spiral that just never ended.  To correct all that damage caused by their Keynesian bubble.

This could prove to have a devastating effect on the American economy.  For the Americans will have no one left to finance their debt.  And yet President Obama, the Democrats and all those mainstream Keynesian economists are all clamoring for one thing.  Can you guess what that is?  That’s right.  More Keynesian stimulus.

Some people just never learn.

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If Corporations are Vile and Evil why do Democrats/Feminists want Women to Run Them?

Posted by PITHOCRATES - October 30th, 2011

Week in Review

The Occupy Wall Street movements linger on.  In their battle against capitalism.  Bankers.  And corporations.  The greatest scourge known to human kind.  President Obama has expressed some support for these protesters.  And the Democrats are on board with them.  To teach corporate America a lesson.  All the while trying to put more women into the CEO positions of these evil, vile corporations (see Number of female ‘Fortune’ 500 CEOs at record high by Laura Petrecca posted 10/26/2011 on USA Today).

If no women step down before the end of 2011, there will be 18 women running Fortune 500 companies in 2012. Previously, there haven’t been more than 16 female CEOs at Fortune 500 firms at the same time.

Yet, while the upcoming ascensions are notable, the gender gap between men and women in the workplace remains vast, with females struggling to get the mentors they need and the pay to equal their male counterparts.

If these are so evil and vile why is it so important to get more women running them?

The Democrats claim the feminists.  They are always fighting for the equality of the sexes.  Yet it is the Democrats throwing in with the Occupy Wall Street protesters.  Those people who hate these evil, vile corporations.  So are corporations bad?  And if so why do Democrats want women running them?

Anecdotally speaking, men are also more apt to quickly say “yes” to a career-enhancing assignment that could affect their personal life, while women tend to consider how the opportunity could affect home situations such as elder care or child care, Catalyst’s Soon says.

In turn, the next time a manager has a job to offer, he or she may remember that woman’s hesitation and consider going with another candidate, she says.

So I guess there are differences between the sexes.  One cares about children and parents.  The other doesn’t.  They’re just a bunch of selfish bastards.  So that’s why we pay men more.  Because they put career ahead of children and parents.  The selfish bastards they are.

Of course, in choosing a CEO for a corporation, being that kind of selfish bastard is definitely a plus.  Besides, corporations are vile and evil.  Better a selfish bastard run them than a selfless, good woman.

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The Free Market Sweeps Away the Boring and Old and Replaces it with the Exciting and New

Posted by PITHOCRATES - October 30th, 2011

Week in Review

Oh my, the market is failing (see Time to Regulate These Tech Titans by Adam Thierer posted 10/22/2011 on the Technology Liberation Front).

Ladies and gentlemen, it is time for decisive action. Cyberlaw scholars have been warning us for years that tech titans dominate the digital landscape.  Our leaders must act immediately to ensure that these 4 Internet gatekeepers don’t lock us in their walled gardens and turn us into their cyber-slaves. The future of Internet freedom is at stake. It’s market failure! There is no possibility of escaping their evil clutches. And there’s certainly no possibility markets will evolve to give us better choices. Only decisive regulatory action can give us a more competitive, innovative future.

So who are these titans?  Google?  Yahoo?  Bing?  Baidu?  Yandex?  No.  There’s a graphic following the paragraph quoted above showing the 4 titans.  Prodigy.  CompuServe.  MS Network.  And American Online.  (If you don’t know who these companies are ask your parents).  Which dominated in the mid 1990s.  But they don’t dominate anymore.  And it’s not because of regulatory action.  Which is the point of this humorous piece in Technology Liberation Front.

Innovation in the free market swept these titans aside and replaced them with something better.  The way it always has.  And always will.  The market constantly changes.  It sweeps away the boring and old.  And replaces it with the exciting and new.  Always.

As long as we don’t sweep away the free market, that is.

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After a Series of Central Planning Failures Senator Durbin says what the Economy Needs is more Central Planning

Posted by PITHOCRATES - October 30th, 2011

Week in Review

The great Margaret Thatcher was a limited-government conservative.  She brought the UK back from the abyss of socialist malaise.  Fixed the economy.  Gave the people a life of plenty.  And good times.  The last Soviet leader, Mikhail Gorbachev, visited Margaret Thatcher.  He was impressed.  The people in the UK weren’t hungry.  He asked her how she did it.  How was she able to feed her people?  For in the Soviet Union this was a never ending crisis.  Growing enough food on their collective farms to feed their people.

An odd question for Thatcher.  Or any other capitalist.  Because elected leaders of capitalistic countries don’t feed their people.  The free market economy does.  And it does it very well.  For the Soviets had the breadbasket of Europe within her borders.  The Ukraine.  And the UK was but a tiny island nation.  With barely a fraction of the farmland as the breadbasket of Europe.  Yet the British could feed her people.  And the Soviets could not.  Which just goes to show you that planned economies are all well and good if you want to control and oppress your people.  But they’re abject failures if you want to feed your people.  Still, there are those who still believe in the folly of central planning (see Durbin knocks GOP for not ‘designing the economy’ by Joel Gehrke posted 10/29/2011 on The Washington Examiner).

Despite the demonstrable failure of the bank bailouts, the 2009 stimulus, and the federal loan program that produced the Solyndra scandal, Democrats still believe that Congress should play a major role in shaping the economy — with the help of expert planners, of course.

Senate Majority Whip Dick Durbin, D-Ill., acknowledged as much while offering a misguided rebuke to congressional Republicans. “Simply standing back while trying to design the bumper sticker for the 2012 election instead of designing the economy to put Americans back to work,” Durbin said during an interview with the Chicago Tribune, “is not what the American people are looking for.”

The Democrats took both the House and the Senate in the 2006 midterm elections.  They held that power until the Republicans took back the House in the 2010 midterm elections.  They had 4 years of full legislative control.  And what designing of the economy did they do?  Just the destructive kind.

The housing bubble blew up on their watch.  And the fallout, the subprime mortgage crisis, happened on their watch.  The Great Recession happened on their watch.  The bank bailouts, the stimulus and the federal loan program that produced the Solyndra scandal happened on their watch.  And if that wasn’t enough destruction, they unleashed the job-killing, economy killing, private health care insurance killing Obamacare.  And they wonder why the economy isn’t doing any better.

No, Senator Durbin.  We don’t need any more of your expert planning.  Anymore and I’m afraid you guys will do some damage that not even a Margaret Thatcher can fix.

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