Argentina’s Keynesian Policies have given them the Weakest Economy in the Hemisphere

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

The Argentines are strong advocates of Keynesian economics.  And they’ll embrace it till the bitter end.  Even as their economy goes into the crapper (see WRAPUP 3-Argentina economy shrinks in May for first time since 2009 by Hilary Burke posted 7/21/2012 on Reuters).

Latin America’s No. 3 economy is decelerating sharply after posting China-like growth rates for much of the past nine years. High inflation, a sluggish global economy, waning demand from neighboring Brazil, falling grains production as well as new trade and currency controls have prompted the slowdown.

“Stagflation arrived with a vengeance. Argentina now has the weakest economy and the highest inflation in the hemisphere,” wrote Alberto Ramos, a senior economist at Goldman Sachs, adding that private estimates put inflation at closer to 24 percent a year…

Argentina’s unorthodox economic approach centers on heavy state participation in the economy to foment high growth, job creation and domestic demand. The government does not publicly acknowledge the cost of this, which is double-digit inflation.

“We are taking active policies, using our own resources, to generate the virtuous cycle of spending, consumption, investment. You have more demand, more production and that feeds back into more spending, more production, more consumption.”

This is pure Keynesian economics.  Like in the Carter years.  But even Jimmy Carter didn’t have an inflation rate as high as 24%.  So the Argentine stagflation may outdo the Carter stagflation.  No doubt beating Carter on the misery index, too (the sum of the unemployment rate and the inflation rate).  Proving once again that Keynesian economics doesn’t work.

Still this is exactly what President Obama wants to do with the U.S. economy.  And it’s what the leading Keynesian economists are advising him to do.  Invest.  Spend.  To stimulate the economy the only way the federal government can.  By deficit spending.  Financed with more borrowing.  Taking the federal debt to new heights.  Or simply by printing money.  As in another round of quantitative easing.  Even though none of this has worked in the last three and half years under President Obama.  Or in the Seventies during the Carter years.  Or even in Argentina today.

So when will they learn?  When will they abandon Keynesian economics?  Never.  Because governments love to spend money.  And Keynesian economics is all about spending money.  Why, some even call this spending virtuous.  But there is a price in being virtuous.  Asset bubbles (as in Japan resulting in their Lost Decade or in America during their subprime mortgage crisis resulting in their Great Recession).  A sluggish economy.  And double digit-inflation.  Things that never end well.  Just ask the Japanese.  The Americans.  Or the Argentines.

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The Ruins of Past Greek Overspending join the Ruins of their Glorious Past

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

Greece is at the heart of the Eurozone crisis.  Or, as some would say, the cause of the Eurozone crisis.  Their deficit spending threatens to bring an end to the Euro itself.  For the only way to save the Euro appears for other Eurozone members to assume Greece’s debt.  And make their taxpayers pay for it.  Something their taxpayers understandably don’t want to do.  But the Keynesians urge such a plan.  Along with some debt forgiveness.  So the Greeks can start spending some more.  To stimulate their economy to recovery.  As if their overspending ways of the past had never happened (see Greek athletes strive for London as Athens legacy fades by Mark Lowen posted 7/22/2012 on BBC News Europe).

Outside lie many of the venues from the Athens games, others dotted around the city. Most are idle, locked up and empty, simply rusting under a baking summer sun.

They mirror the decay now felt across the country – but also stand as monuments to Greece’s mistakes: the massive overspend of the past, without any plan for later use.

They’re seen as representative of the short-term vision that got Greece into its financial mess in the first place. The hoped-for privatisation of many of the sites has been thwarted by a mix of bureaucracy and mismanagement…

They came at the height of Greece’s borrowing boom: three years after the country joined the Euro, Athens was investing in grand infrastructure projects that it simply couldn’t afford: among them, the Olympics.

What the Keynesians fail to explain (at least with a straight face) is how more such spending will not saddle Greece with more debt that they will also not be able to service.  Putting them back exactly where they are now.  Or even in a worse financial position.

During the 20th century the European countries became social democracies.  Promising a cradle to the grave welfare state.  And large public sectors.  With large public spending.  All paid for by large tax rates on the taxpayers.  Only one problem.  All of Europe’s population is aging.  People are having fewer children.  Meaning there are fewer people entering the workforce to become new taxpayers.  While a greater number of people are leaving the workforce to go into retirement.  While enjoying their pensions and health care.  Paid for by a shrinking workforce.  Add that to grand infrastructure spending and you get unsustainable government spending obligations.  Ever more government borrowing.  And a Eurozone debt crisis.  Or in other words, Greece.

The Greek government did a great disservice to their people.  They spent so much that cutting back will be incredibly painful for their people.  But it’s the spending that’s the problem.  They have to cut it.  And if they don’t do it now it will only become more painful in the future.

Greece.  Home of Athens.  The cradle of Western Civilization.  Once the greatest place in the civilized world.  The nation that pushed back the mighty Persian Empire.  Now adds new ruins to their landscape among those of their glorious past.  But they can once again restore their glory.  If they just abandon Keynesian economics.

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The Socialist Utopia of Oil-Rich Venezuela is Rationing Gasoline

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

Venezuela is a lot like Iran in a way.  They have lots of crude oil.  But little refining capacity.  Which is a problem because nothing really runs on raw crude oil.  It’s what we refine from it that we use in our cars, trucks, buses and power plants.  Causing a bit of a problem in Venezuela.  Because in their socialist utopia they virtually give their gas away.  Which was one thing when they refined it.  But another when they have to buy it (see Chavez’s gasoline rationing plan causes uproar by FABIOLA SANCHEZ, Associated Press, posted 7/20/2012 on Yahoo! News).

As home to the world’s cheapest gasoline, Venezuela has long had to contend with the hemorrhaging of supplies as smugglers haul gas across the border to cash in where the fuel costs far more.

In neighboring Colombia, drivers pay 40 times as much as Venezuelans to tank up — $1.25 a liter ($4.73 a gallon), compared to 3 U.S. cents a liter (11 cents a gallon).

So much gasoline is being taken out of Venezuela illegally that President Hugo Chavez’s socialist government imposed rationing on motorists in one state bordering Colombia last year, and now it’s touched off a furor in a second border state by announcing it will ration gasoline there, too…

Venezuela is a major oil exporter but its refining capacity is limited, so the government buys gasoline from the United States, losing money by then selling it at home for almost nothing. Those imports have been steadily rising since 2009…

Ramon Espinasa, a Georgetown University economist, blames “operational problems” at some Venezuelan refineries as well as rising demand from power plants built in the past two years that burn gasoline and diesel fuel.

“They’re not producing specialized (petroleum) products and must import finished products,” Espinasa said…

“It’s not rationing,” [Hugo Chavez] said. “It’s a means of control, to give everyone gasoline, because the gasoline here is practically free, so the idea is to give everyone what they need.”

One of the problems of socialism is that there is no incentive to risk capital.  Because if you invest and build a refinery the state will just take it away.  So that leaves the state to build their refineries.  And based on their refinery capacity shortfall that’s something the state just doesn’t know how to do.  Or else they would have done it.  And not have gasoline rationing.

Another problem with socialism is the whole ‘from those according to ability to those according to need’ nonsense.  Something that requires some people to work hard so others can have more.  Never a great inducement to get people to work hard.  So they don’t.  In socialism those who show the most need get the most.  And if they show no ability they don’t have to work hard to learn and acquire skills that will advance the economy.  So what can happen is that a chemical engineer with a college degree but no children may earn the wages of a janitor while a janitor with no college degree but with lots of kids can get the wages of a chemical engineer.  From those according to ability.  To those according to need.  You know what this gets you in the long run?  Gasoline rationing.

So socialism requires everyone to sacrifice for the greater good.  And based on the very large black market for gasoline that isn’t happening.  Which is why socialism fails as an economic system.  For people always look after their own interests.  Not the greater good.  Even in the socialist utopia of Venezuela.

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No Republican Administration ever Subjected Women to a Morality Police like they do in Iran

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

In the election cycle the Left typically campaigns on a recurring theme.  That Republicans are anti-women.  That they want to overturn Roe v. Wade.  That they want to prevent access to birth control.  And turn women into clones of Donna Reed and lock them in 1950s suburban America.  Because Republicans hate women.  At least that’s the meme.  Now contrast that with a country that really hates women (see Struggle over what to wear in Iran by Jason Rezaian posted 7/21/2012 on The Washington Post).

Mandatory female covering known as hijab has been a defining element of Iran since the Islamic Revolution in 1979. Although the laws regarding proper cover haven’t changed, some women have grown bolder in interpreting the limits of what they can wear, creating a conflict that inevitably flares each summer as temperatures climb.

The government’s offensive this year has been marked by the stationing of mixed-gender teams of morality police in Tehran’s main squares.

In recent weeks, 53 coffee shops and 87 restaurants have been closed in Tehran for serving customers with improper hijab or for other gender-related offenses, such as permitting women to smoke hookah pipes. Concerts have been abruptly canceled because of inappropriate dress and too much contact between male and female fans. Approximately 80 stands at an international food fair were closed last month because, officials said, the women working at them were either breaking hijab rules or wearing too much makeup.

Those arrested face up to two months in prison or even lashing, penalties that have been on the books for years but have rarely been imposed…

Mostafa, a 46-year-old marketing consultant, described how his 16-year-old daughter was arrested in a crowded shopping mall. “They coaxed her into the police van and told her they just wanted to talk to her,” he explained. “Once she was in the van, the whole atmosphere changed, and they said things that made her cry.”

After a brief time in custody, his daughter, Banafshe, was released. “Do you know what her response was to the whole episode?” he asked. “She said, ‘Dad, as soon as I finish high school, I’m leaving this country forever.’ ”

Let’s hope she gets the chance to leave her country.  So she can enjoy living free from oppression.

Morality police?  You know, this is the kind of thing the Left says the Republicans will do if we elect them to office.  Though after 8 years of Ronald Reagan, 4 years of George H.W. Bush and 8 years of George W. Bush that didn’t happen.  Quite the contrary.  The porn industry exploded during the Eighties.  Sleazy topless bars became high-end gentlemen’s clubs.  Television got cruder.  Girls drank to excess on Spring Break and made amateur porn videos.  Sometimes unbeknownst to them.  No, women have been, and continue to be, free to do pretty much whatever they want.  Even when we elect Republicans to office.  Even if these Republicans would prefer that their daughters not dance at gentlemen’s clubs or go into the porn industry.

The Republicans didn’t like this.  They fought against some if it through legal channels.  But the liberals and their lawyers won these contests.  Moralize as they may have tried nothing changed.  But one thing the Republicans never proposed was having morality police stop 16-year old girls in the malls.  At most some religious people told some that they would burn in hell if they stayed on their current wayward paths.  Strong words but not quite the same as being locked up by the state.  Or getting whipped.  Makes living under a Republican administration sound a whole lot freer than life in Iran.  And given a choice I’m sure any woman would choose to live under a Republican administration rather than choosing to live in Iran.  And if that’s the case than Republicans can’t really hate women, can they?

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U.S. Education no longer Leads the World in Science, Technology, Engineering and Mathematics (STEM)

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

There’s bad news.  And news that’s not as good as the bad news.  There’s structural unemployment.  And we’re dumbing down our educational system (see For the U.S. Economy the News Is Bad and Worse by Mortimer B. Zuckerman posted 7/18/2012 on U.S. News and World Report).

Given that the median period of unemployment is now in the range of five months, vast numbers who want to work are just not counted. If we include, as we should, people who have applied for a job in the last 12 months, and those employed part time who want full-time work, the real unemployment number is closer to 15 percent. And we’ve made virtually no progress in reducing this number. We need 150,000 jobs every month just to take into account the people entering the labor force. Today we are looking at monthly job creation estimates of only 75,000 over the last three months.

We do track this true unemployment number.  We just don’t report it.  The official number we report is the U-3 unemployment rate.  The one that includes everyone who can’t find a full time job is the U-6 unemployment rate.  And it does stand around 15%.  So why does the U.S. continue to suffer through the worst recession since the Great Depression?  Because of structural unemployment.  Meaning people lost their jobs because the economy no longer needs their jobs.  Think of print newspapers going out of business because of digital news available online.  The world changes.  And we replace the old technology with new technology.  Meaning there are jobs for who drives this technological change.  And no jobs for those who cling on to the technological past.  So you want to be the people driving this new technology.  Which requires the best education.

Here now is the worse news: America is adding to the length of unemployment lines in the future by falling behind today in skill areas where global competition has become so intense. Too few of our younger people are benefiting from what is called STEM education. STEM stands for science, technology, engineering, and mathematics, the human capital at the core of any productive economy…

A stunning illustration of how far America has started to lag in training its youth is that we are only one of three countries in the 34-member Organization for Economic Cooperation and Development where the youngsters are not better qualified than their fathers and mothers. Men and women ages 55 to 64 have the same or better education than the 25-to-34 generation. The younger workers in most other OECD countries are much better educated than those nearing retirement…

In a 2010 report by the academies, an advisory group on science and technology, the United States ranked 27th among 29 wealthy countries in the proportion of college students with degrees in science and engineering. In a larger study conducted by the OECD in 2009, American 15-year-olds were 31st in math and 23rd in science. Yet another study found American 12th graders near the bottom of students from 20 nations, and this doesn’t even focus on the achievement gap between low-income and minority students and their peers…

Astonishingly, according to recent studies, about 30 percent of high school math students and 60 percent of those in the physical sciences are taught by instructors who either did not major in the subject or are not certified to teach it.

Sadly, the U.S. no longer has the best education.  Sure, students today can recite every bad thing America has done as a nation.   Tell you the inherent evils of capitalism.  And they can tell you everything you want to know about global warming.  But they’re not smarter than their parents.  Which is why our kids today won’t have a better life than their parents.  Because our educational system is dumbing them down.  Making them prime candidates for structural unemployment.  For the sad truth our college graduates are learning today is that having a college degree isn’t all that is necessary for a good job.  You need a degree in something useful.  And the liberal arts and social sciences just aren’t going to give you the science, technology, engineering and mathematics you need to compete in the global economy.

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Street Prostitution makes Life Difficult for Families on those same Streets

Posted by PITHOCRATES - July 22nd, 2012

Week in Review

It’s the world’s oldest profession.  And a crime in most parts of the world.  But a victimless crime.  When it’s between two consenting adults.  Of course that is open to debate as a lot of the women in the industry may have entered it in less than voluntary ways.  But for the sake of the argument let’s say that it is a victimless crime and that it is always between two consenting adults.  Between unmarried and otherwise unattached consenting adults.  Then of course it would be a victimless crime.  Prostitution.  For whose business is it what two consenting adults do in private (see New Zealand sex workers, community ‘poles’ apart by Christine Roberts posted 7/17/2012 on the Daily News)?

Prostitutes have allegedly destroyed over 40 parking-sign poles in South Auckland in the last 18 months by dancing on them to solicit clients, according to a booklet endorsed by the Auckland city council and obtained by the New Zealand Herald.

The Otara-Papatoetoe Local Board of the Auckland city council published the booklet, which contains personal accounts from locals about their interactions with street prostitutes, as part of its fight to ban sex workers from soliticiting clients in areas near homes, schools and sports grounds.

“Prostitutes use these [street signs] as dancing poles,” Donna Lee, a manager of two local business districts in South Auckland told Fairfax NZ News…

New Zealand has boasted some of the most liberal sex-working laws in the world since it decriminalized the sex trade in 2003.

Lee said that business owners in her neighborhood have become so resigned to the situation that they no longer report it to local authorities and clean up their properties — which are often littered with condom, drugs and human waste — on their own…

Local John Lee said he decided to move from Papatoetoe, a suburb northwest of Manukau, when he found two people having sex on his property.

“A couple against the fence were copulating and my ten-year-old daughter was awake and screamed out at them and that’s when we decided we have to go,” he said,” John Lee told TVNZ.

Apparently that’s the problem.  These consenting adults aren’t doing their business in private.  They don’t appear to be very mindful of property, either.  Public or private.  And they’re not very clean.  Or care about the environment.  Littering the pristine planet with soiled condoms.  Which aren’t very biodegradable.

It’s easy to say you support liberal sex-working laws.  To say that you’re enlightened and liberal on social issues.  Unless it’s happening around your house.  In front of your daughter.  Then it’s a different matter.  When people are not considerate of those around them.  Because we want our children to be able to enjoy being children.  And not step on soiled condoms.  Human waste.  Or drug paraphernalia.  When they step out of their home.

Everything changes when you become a parent.  It’s why parents tend to be conservative on social issues.  Because they have to protect their children.  And it’s a whole lot easier to do when street prostitution is illegal.  As well as drugs.  It’s why many liberals become conservatives as they grow up.  Because they become parents.  And once they do their world changes.  They see it’s not all about them anymore.  That life isn’t just about the here and now.  It’s about the future.  Their children’s future.  And all that stuff they rebelled about against their parents?  Well, they eventually understand why their parents did what they did.  And find themselves doing the same.  Continuing the good fight.  For their children.

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