Little Ice Age, Protestant Reformation, Louis XIV, Enlightenment, Seven Years’ War, American Revolution and French Revolution

Posted by PITHOCRATES - November 28th, 2013

Politics 101

(Originally published August 30th, 2012)

King Louis XIV remained Catholic as Protestantism was Breaking Out in Europe and Britain

It’s been awhile since the last ice age.  In fact the last time we had a real ice age predated the first civilizations.  We still wore animal skins and hunted and gathered our food.  Long before we first farmed.  But it would get cool again.  Shortly after the Black Death (during the 1300s) it did get unseasonably cool.  So cool that we now call it the Little Ice Age (from 1350 to 1850 or thereabouts).  The glaciers didn’t cover Europe.  But it was cold.  And wet.  The spring took forever to change into summer.  While summer was quick to turn into fall.  Which led to short growing seasons.  Poor harvests.  Hunger.  And famine.

Martin Luther was no fan of the Pope.  Especially because of the indulgences he was selling.  A shortcut to heaven.  For those with money.  Which is what the Pope wanted.  Money.  For he was doing some costly renovations in Rome.  So in 1517 Martin Luther nailed up his Ninety-Five Theses to the church door demanding reform.  And kicking off the Protestant Reformation.  Well, the Catholic Church wasn’t interested in reform.  So Luther set up a new church.  With a new religion.  Protestantism.  A more plain religion.  With masses in the common language of the people.  Instead of Latin.  And no fancy things in the church.  No altars.  No stain glass.  No icons.  Just the word of God.  With over a thousand years of Catholicism already under their belt, though, a lot of people took offense to this.  And their offense offended the new Protestants.  So they went to war with each other for a few centuries or so over their religious differences.

King Louis XIV was one of the great French monarchs.  Under his rule France was the dominant European power.  The Sun King believed in the divine right of kings.  Absolute monarchism.  Doing pretty much as he pleased.  Which included a few wars.  And growing an empire with oversea colonies.  It cost a pretty penny.  And a lot of lives.  Louis remained Catholic as Protestantism was breaking out in Europe.  And in England.  For a couple hundred years or so England and France were bitter enemies.  Contesting colonial lands throughout the globe.  And defending the true faith.  Catholicism.  Or Protestantism.  The Catholic-Protestant battle lines stretched across Europe.  And to distant lands across the globe.  Including the New World.  Where they would both spend fortunes in waging war.

For the French the American War of Independence had nothing to do with the Americans

The Enlightenment, or the Age of Reason, gave the French Voltaire.  One of the great Enlightenment philosophers.  When Benjamin Franklin was in France the French were eager to bring two of the world’s greatest Enlightenment philosophers together.  And did.  The French also gave us the great Charles-Louis de Secondat, baron de La Brède et de Montesquieu.  The greatest influence on the Founding Fathers as they drafted our Constitution.  So there was some great thinking percolating in France.  Thoughts that focused on science and reason.  Not tradition and faith.  Even questioning some long-held beliefs about the Catholic Church, the aristocracy and the absolute monarchy.

Louis XIV built a great French empire.  The French seemed invincible.  Until Louis XV took over.  Who lost the Seven Years’ War to the British.  And saw French North America become British.  (And the Louisiana Territory go to Spain.)  That was tough having their eternal foe humiliate them.  The Protestant British.  It was a blow to French pride.  French commerce.  And French finances.  The near-perpetual state of war that had existed between Britain and France had cost both nations a lot of money.  The British decided to recoup some of that money by taxing their American colonies.  Which didn’t go over well with the Americans.  For unlike France the British had a constitutional monarchy.  Where the Parliament restricted the king’s powers.  That great institute of the people.  Which the Americans had no representation in.  Leading to their rebellion.  Because they didn’t like being treated like second-class subjects of the British Empire.  Which brought about the American Revolutionary War.

After the Americans defeated a British army at the Battle of Saratoga the French joined the Americans in their fight for independence from the oppression of a constitutional monarchy.  Which seemed rather odd being that the French at this time was still an absolute monarchy (though now ruled by Louis XVI).  Which was far more oppressive than the constitutional variety.  But for the French the American War of Independence had nothing to do with the Americans.  It had to do with French interests.  It was a chance to strike back at their eternal enemy.  The Protestant British.  And more importantly, when they won they could get back all their colonies they lost in the Seven Years’ War.

The French were Intoxicated with all of those Enlightenment Ideals and the American Win over an Oppressive Monarchy

The Americans won their independence.  But the French didn’t get anything they wanted.  All they got was a lot of debt.  To add to the enormous pile of debt they already had.  One of the French conditions for their alliance was that the Americans would not make a separate peace with the British.  Which is what the Americans did.  Why?  Because the French and the Spanish were conspiring against the Americans during the peace talks.  So they could expand their holdings in North America at the expense of the British and the Americans.  The French were even willing to trade American Independence away.  The British, who would rather have Americans on their former lands than the French or Spanish, made a separate peace with the Americans.

This act of diplomacy stunned the French.  For they had assurances from the American Congress that they would take the lead in the peace talks.  The Americans double-crossed them before they could double-cross the Americans.  This wasn’t supposed to happen in the world of European diplomacy.  Especially with rubes like the Americans.  But it did.  And the French were now in a world of hurt.  Broke.  And facing bankruptcy.  Desperately needing new tax revenue King Louis XVI called an Assembly of Notables.  The nobility and clergy.  But they didn’t want to pay any more taxes.  So the king called the Estates-General of 1789.  Which included the clergy, the nobility and everyone else (i.e., the Third Estate).

Meanwhile there was widespread hunger and malnutrition.  Poor grain harvests (in part due to the Little Ice Age) pushed the price of bread out of reach for many.  People were cold, hungry and poor.  In the Third Estate, that is.  For though they may have been suffering they saw that the nobility and the Catholic clergy were not.  In fact, they were living rather well.  Which inflamed the masses.  Who became intoxicated with all of those Enlightenment ideals.  And that American victory over an oppressive monarchy.  It got the people thinking.  That they didn’t need a nobility any more.  The Catholic Church.  Or a king.  And the people would get rid of these things.  For awhile, at least.  With something called the French Revolution.

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Even the French feel they are Taxed too Much

Posted by PITHOCRATES - September 28th, 2013

Week in Review

President Obama is sick and tired of the Republicans, conservatives and the people who don’t give him everything he wants.   The fiscal year ends Monday so he has to fight with the Republican controlled House of Representatives to get them to pay for his increased spending.  And because he’s spending so much we have to raise the debt limit again so we can borrow the money to pay for his out of control spending.  How he wished the United States was more like France.  They don’t have these problems.  Why, the French will even elect a socialist president.  While President Obama has to veil his contempt for capitalism France can just tax and tax and then tax again.  And no one bitches about high taxes.  Well, that may be changing (see Why do the French tolerate such high taxes? by S.P. posted 9/24/2013 on The Economist).

The government is planning an extra €3 billion ($4 billion) of taxes next year, which will push up the overall tax take in the economy to 46.5% and make 2014 the fifth consecutive year that the tax burden in France has grown. François Hollande, the Socialist president, was elected last year on a promise to tax the rich, with a scheme for a top income-tax rate of 75%. But the tax bill is now wearing holes in the pockets of not just the rich but the rest, too. Why do the French put up with paying so much tax..?

Historically, the French have tolerated high taxes as the price of decent public services and a proper universal safety-net. All those fast trains, first-rate hospitals and public crèches do not come for nothing, and the French are the first to defend a way of life subsidised by the public purse that can often only be bought privately in Britain or America. Moreover, the French make a firm distinction between taxes and social-insurance contributions. Only half of households have to pay income tax, but everybody pays social charges… Indeed, the longstanding tolerance for taxes has underpinned the solidity of French sovereign debt, since it is a fair bet that France’s government can efficiently collect the taxes it needs…

This social contract, however, could be on the verge of breaking down. Over the past year, as taxes on beer and cigarettes have risen, tax-free overtime abolished, tax deductions squeezed and tax-band thresholds frozen, even the French have started to grumble. Polls suggest that tax increases have become the top worry among voters, and chief reason for Mr Hollande’s calamitous popularity ratings. The sharp rise in taxes, which began under Nicolas Sarkozy, the previous president, as part of an effort to reduce the government’s budget deficit, is all the more resented at a time when the French are no longer convinced that their public services—underperforming state schools, overcrowded commuter trains—are so much better than those that cost less in other countries. What is the point of paying Swedish-style taxes (or more) if you do not receive Scandinavian-style public services in return?

The new mood has not passed the politicians by. Mr Moscovici acknowledged recently that the French are “fed up” with taxes. Mr Hollande even conceded in a television interview that tax increases have been “too much”. Most of the effort to reduce the budget deficit in 2014 will now fall not on tax increases but public-spending cuts. Mr Hollande has promised a “tax pause”, which will be part of the message in the 2014 budget.

Yes, even the French are tiring of constantly rising taxes.  Especially when they keep paying more for less.  Which is what happens with socialism.  High taxes are a disincentive.  When you have “decent public services and a proper universal safety-net” it takes away a person’s ambition to do more and achieve more.  They may want to.  But if half of their income from this extra effort goes to taxes why put in any extra effort?  After all, there are already “decent public services and a proper universal safety-net” available.  Why work twice as hard to have virtually the same things?

This is the price of the welfare state.  It makes people less willing to take risks.  To start a business.  To create something new that everyone will want to have.  Socialism kills the entrepreneurial spirit.  And stalls the engine of job creation.  With all those small businesses going uncreated huge amounts of wealth goes uncreated.  Wealth that they can never tax.  Tax revenue doesn’t grow to keep up with the growth in spending.  So they increase tax rates.  And find other ways to make people pay more taxes.  While the quality of services fall.  Just like they are in France.  Just as they are in the United States.

And they will only get worse in the United States with the addition of Obamacare.  Which will explode the deficit while throwing the country back into recession.  With a corresponding fall in tax revenue the government will look for other ways to make people pay more taxes.  It’s happening in France.  As it has happened in every other socialist country.  And will happen in the United States.  Because of President Obama’s veiled contempt of capitalism.  The kind of contempt for capitalism shown by socialist President François Hollande.

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Post Office, Telegraph, Telephone, Cell Phones, Texting, Technology, Productivity, Savings, Investment, Japan Inc. and Eurozone Crisis

Posted by PITHOCRATES - August 13th, 2013

History 101

(Originally published August 28th, 2012)

Ben Franklin’s Post Office struggles to Stay Relevant in a World where Technology offers a Better Alternative

Once upon a time people stayed in touch with each other by mailing letters to each other.  Benjamin Franklin helped make this possible when he was America’s first Postmaster General of the United States.  And it’s in large part due to his Post Office that the American Revolutionary War became a united stand against Great Britain.  As news of what happened in Massachusetts spread throughout the colonies via Franklin’s Post Office.

In America Samuel Morse created a faster way to communicate.  (While others created this technology independently elsewhere.)  Through ‘dots’ and ‘dashes’ sent over a telegraph wire.  Speeding up communications from days to seconds.  It was fast.  But you needed people who understood Morse code.  Those dots and dashes that represented letters.  At both ends of that telegraph wire.  So the telegraph was a bit too complicated for the family home.  Who still relied on the Post Office to stay in touch

Then along came a guy by the name of Alexander Graham Bell.  Who gave us a telephone in the house.  Which gave people the speed of the telegraph.  But with the simplicity of having a conversation.  Bringing many a teenage girl into the kitchen in the evenings to talk to her friends.  Until she got her own telephone in her bedroom.  Then came cell phones.  Email.  Smartphones.  And Texting.   Communication had become so instantaneous today that no one writes letters anymore.  And Ben Franklin’s Post Office struggles to stay relevant in a world where technology offers a better alternative.

As Keynesian Monetary Policy played a Larger Role in Japan Personal Savings Fell

These technological advances happened because people saved money that allowed entrepreneurs, investors and businesses to borrow it.  They borrowed money and invested it into their businesses.  To bring their ideas to the market place.  And the more they invested the more they advanced technology.  Allowing them to create more incredible things.  And to make them more efficiently.  Thus giving us a variety of new things at low prices.  Thanks to innovation.  Risk-taking entrepreneurs.  And people’s savings.  Which give us an advanced economy.  High productivity.  And growing GDP.

Following World War II Japan rebuilt her industry and became an advanced economy.  As the U.S. auto industry faltered during the Seventies they left the door open for Japan.  Who entered.  In a big way.  They built cars so well that one day they would sell more of them than General Motors.  Which is incredible considering the B-29 bomber.  That laid waste to Japanese industry during World War II.  So how did they recover so fast?  A high savings rate.  During the Seventies the Japanese people saved over 15% of their income with it peaking in the mid-Seventies close to 25%.

This high savings rate provided enormous amounts of investment capital.  Which the Japanese used not only to rebuild their industry but to increase their productivity.  Producing one of the world’s greatest export economies.  The ‘Made in Japan’ label became increasingly common in the United States.  And the world.  Their economic clot grew in the Eighties.  They began buying U.S. properties.  Americans feared they would one day become a wholly owned subsidiary of some Japanese corporation.  Then government intervened.  With their Keynesian economics.  This booming economic juggernaut became Japan Inc.  But as Keynesian monetary policy played a larger role personal savings fell.  During the Eighties they fell below 15%.  And they would continue to fall.  As did her economic activity.  When monetary credit replaced personal savings for investment capital it only created large asset bubbles.  Which popped in the Nineties.  Giving the Japanese their Lost Decade.  A painful deflationary decade as asset prices returned to market prices.

Because the Germans have been so Responsible in their Economic Policies only they can Save the Eurozone

As the world reels from the fallout of the Great Recession the US, UK and Japan share a lot in common.  Depressed economies.  Deficit spending.  High debt.  And a low savings rate.  Two countries in the European Union suffer similar economic problems.  With one notable exception.  They have a higher savings rate.  Those two countries are France and Germany.  Two of the strongest countries in the Eurozone.  And the two that are expected to bail out the Eurozone.

Savings Rate

While the French and the Germans are saving their money the Japanese have lost their way when it comes to saving.  Their savings rate plummeted following their Lost Decade.  As Keynesian economics sat in the driver seat.  Replacing personal savings with cheap state credit.  Much like it has in the US and the UK.  Nations with weak economies and low savings rates.  While the French and the Germans are keeping the Euro alive.  Especially the Germans.  Who are much less Keynesian in their economics.  And prefer a more Benjamin Franklin frugality when it comes to cheap state credit.  As well as state spending.  Who are trying to impose some austerity on the spendthrifts in the Eurozone.  Which the spendthrifts resent.  But they need money.  And the most responsible country in the Eurozone has it.  And there is a reason they have it.  Because their economic policies have been proven to be the best policies.

And others agree.  In fact there are some who want the German taxpayer to save the Euro by taking on the debt of the more irresponsible members in the Eurozone.  Because they have been so responsible in their economic policies they’re the only ones who can.  But if the Germans are the strongest economy shouldn’t others adopt their policies?  Instead of Germany enabling further irresponsible government spending by transferring the debt of the spendthrifts to the German taxpayer?  I think the German taxpayer would agree.  As would Benjamin Franklin.  Who said, “Industry, Perseverance, & Frugality, make Fortune yield.”  Which worked in early America.  In Japan before Japan Inc.  And is currently working in Germany.  It’s only when state spending becomes less frugal that states have sovereign debt crises.  Or subprime mortgage crisis.  Or Lost Decades.

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Raped Woman Charged with having Sex outside of Marriage in Dubai

Posted by PITHOCRATES - July 21st, 2013

Week in Review

The political left hates Christianity.  For their opposition to casual sex.  Birth control (where they primarily hate the Catholics).  The morning after-pill.  And, of course, abortion.  They say Christians hate women.  That they have a war on women.  That they are no better than the Taliban.  Which is why the political left bends over backwards to appease Islam.  Not because they like the religion.  But because Islam doesn’t like Christianity.  A little of the enemy of my enemy is my friend.  Despite Islam doing things like this (see Marte Deborah Dalelv: Norwegian woman’s16-month sentence in Dubai after rape claim draws outrage by The Associated Press posted 7/21/2013 on CBS News).

A Norwegian woman sentenced to 16 months in jail in Dubai for having sex outside marriage after she reported an alleged rape said Friday she decided to speak out in hopes of drawing attention to the risks of outsiders misunderstanding the Islamic-influenced legal codes in this cosmopolitan city.

The case has drawn outrage from rights groups and others in the West since the 24-year-old interior designer was sentenced Wednesday. It also highlights the increasingly frequent tensions between the United Arab Emirates’ international atmosphere and its legal system, which is strongly influenced by Islamic traditions in a nation where foreign workers and visitors greatly outnumber locals.

That’s right.  In Dubai if a man rapes a woman they charge the woman with a crime.  For having sex outside of marriage.  Strange how in all their campaign messages during the last election we never heard the left talk about Christians doing this in the United States.  Why wouldn’t they do this?  For it would be a powerful message.  Oh, that’s right, because the Christians don’t charge women with having sex outside of marriage after they’ve been raped.  Even with their ‘war on women’.

Christian women can use birth control.  Even some ‘Catholics’ are pro-abortion.  Like Ted Kennedy was.  So women are far freer here in the United States than they are in Dubai.  Yet you never hear the left attack Islam.  They only attack Christianity.  For they may jail women for having sex outside of marriage in Muslim nations.  But they don’t have a war on women like the Christians do in America.  Which is about the only thing you hear the political left complain about when it comes to religion.  Not the oppression and abuse of women in some Muslim nations.

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The Language Police descend upon a Spoon in a Montreal Yogurt Shop

Posted by PITHOCRATES - June 22nd, 2013

Week in Review

If you think there is hostility between liberals and conservatives in the United States try this.  Go to Ontario, Canada, and greet someone by saying, “Bonjour personne anglophone.  Permettez-moi de parler lentement alors même que vous mon obtus ami peut comprendre ma langue supérieure.  (Which, according to Bing, translates to “Hello English-speaking person.  Let me speak slowly so even you my dim-witted friend may understand my superior language.”)

Do NOT do this.  Because if you do you may really offend someone and cause an international incident.  For the English-speaking Canadians are not exactly thrilled with French-speaking Canadians and their French language agenda.  Who even have language police enforcing a French-only language law in Quebec (see Quebec language cops object to yogurt shop’s spoons by Giuseppe Valiante, QMI Agency, posted 6/21/2013 on the Toronto Sun).

David Lipper said he had no idea his two Menchies Frozen Yogurt franchises in the Montreal area were carrying potential contraband.

Lipper said he “was so paranoid to ensure everything in the store was in French” that he missed a pivotal item: the yogurt spoons.

Lipper said an inspector told him he violated the province’s language laws and the oversight will cost his head office at least $30,000…

The “cow” spoon is engraved with the words “sweet moosic!” The language inspector who visited Lipper’s yogurt shop a few days ago didn’t appreciate the play on words.

So why are the English-speaking Canadians so upset with the French-speaking Canadians?  Because of things like this.  While every other province outside of Quebec has to be bilingual.  All of their businesses, their courts, their stores and even their road signs have to be in both English and French.  Which costs a pretty penny.  Yet in Quebec there is no English allowed.  Despite Canada being officially bilingual.

So don’t go up to an English-speaking Canadian and say something rude to them in French.  For it is almost certain that they will fail to see the humor in it.

For the record the French were first to Canada.  The lower town of Quebec City dates back to 1603.  So they had a lot of history there before the British defeated them in the Seven Years’ War and made French Canada British.  So you can understand their desire to keep the French language, customs and institutions alive in the heart of what was once New France.  But on the other hand they have imposed bilingualism on the rest of Canada.  Where the vast majority of these people trace their history back to the British.  So it is a touchy subject.  And will forever remain one.  Just be polite and respectful to whomever you talk to in Canada and you can’t go wrong.  For they are a kind people.  And will treat you like family.

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Cane Sugar, Crystallized Sugar, Sugar Trade, West Indies, Wealth and War

Posted by PITHOCRATES - May 7th, 2013

History 101

As Muslim displaced Christians from the Lands of the Roman Empire Sugar moved West

There is a war on sugar.  It’s making us fat.  And it’s making us sick.  Because it tastes so damn good.  We crave it.  And always have.  Since the first days we chewed on sugarcane.  Sucking out the juice.  Which was where that sweet delight was.  It was so good that the people in New Guinea (just north of Australia) learned how to plant it and raise it themselves.  Instead of just looking for it in the wild.  Around the eighth millennium BC.  From there it spread.  North.  To Southeast Asia.  Southern China.  And into India.  Where they took sugar to the next level.  They didn’t just chew on sugarcane to suck out the juice in India.  They refined it into a crystallized substance.  Around 350 AD.  Concentrating that sweetness.  And making it portable.  Then the Arabs entered the picture.

The Arabs took the Indian sugar-making technique and made it into big business.  They established plantations to grow it in tropical climes.  Where the two things that made sugarcane grow best—heat and water—were plentiful.  They built the first sugar mills to refine the cane.  Basically presses to squeeze out the juice.  Which they then boiled the water out of.  Leaving behind sugar crystals.  And added it to their foods.  As Muslim Arabs displaced Christians from the lands of the Roman Empire sugar moved west.  The Arabs introduced sugarcane plantations as far west as southern Spain.  When Christian Crusaders returned from fighting Muslims in the Holy Land they brought back crystallized sugar to Europe.  And they quickly fell in love with those white crystals.  By the late 13th century even England had grown a sweet-tooth.  Who would go on to consume so much of the stuff that they would rot their teeth away.

Then the Europeans entered the sugar business in the 15th century.  At first it was just the wealthy that enjoyed sugar.  Then it spread to the common people.  As demand grew they established new plantations to meet that demand.  In southern Spain.  The Atlantic island of Madeira.  The Canary Islands.  The Cape Verde islands off the west coast of Africa.  All had good growing climates for sugarcane.  And each plantation had its own processing plant.  For a ship’s hold full of crystallized sugar was far more valuable than a ship’s hold full of harvested sugarcane.  Making these plantations labor intensive endeavors.  And working the fields was backbreaking work.  To step up production required a larger labor force than was available.  And to meet that demand they turned to using African slaves.

Sugar was a Turning Point from an Agrarian World of Slaves and Indentured Servants to the Modern Industrial World

By the 16th century the Europeans were taking sugarcane across the Atlantic.  And African slaves.  The Portuguese, Spanish, Dutch, French and British brought sugarcane and slaves to Brazil, Cuba, Jamaica, Barbados, the Virgin Islands, Guadaloupe, Saint-Domingue (present day Haiti) and elsewhere in the Americas.  With the Caribbean Islands becoming the sugar capital of the world.  France’s Saint-Domingue being the single largest producer in the world.  Until their slave uprising.  It was France’s wealthiest possession in the Western Hemisphere.  And its loss changed French ambition in the New World.  For Napoleon had his eyes on rebuilding the French Empire in North America that was so rudely interrupted by France’s loss in the Seven Years’ War.  But with the loss of Saint-Domingue and all that sugar wealth Napoleon lost all interest in the New World.  And sold the Louisiana Territory to the United States.  To prepare for war with Britain.  Again.

The British and the French both had lucrative sugar plantations in the West Indies.  When the American Revolutionary War turned into a world war the British and French squared off once again.  Especially in the West Indies.  Where they wanted to protect their possessions producing that valuable sugar.  And take the other’s possessions.  So they could expand their holdings.  And their wealth from the sugar trade.  As well as put down any slave uprisings.  Such as would later happen in Saint-Domingue.  Some say the reason the British lost the American Revolutionary War was because they diverted too much of their military resources to the Caribbean.  But the French were diverting a lot of their military resources to the Caribbean, too.  Which is one reason why the war lasted 8 years.  As the French were more interested in taking the British possessions in the West Indies than American independence.  Their first efforts fighting alongside the Americans (Rhode Island in 1778.  Savannah, Georgia, in 1779) did not help the cause.  It was only when the French fleet could be spared from the action in the West Indies that they joined General Washington in trapping General Cornwallis at Yorktown in 1781.  With Cornwallis’ surrender effectively ending the war.  Even though they wouldn’t sign the final peace treaty until 1783.

By the end of the international slave trade Europeans sent approximately 10 million Africans to the New World.  Mostly to Brazil and the Caribbean.  To work in the sugar plantations.  Where slave ships left Africa.  They unloaded slaves in the New World.  Loaded the sugar these slaves grew.  Shipped the sugar back to the Old World.  Unloaded the sugar and loaded on finished goods.  Then sailed back to the African slave stations.  Where they traded their finished goods for more slaves.  There was big money in The Trade Triangle (trade from Africa to the New World to the Old World and back to Africa).  But sugar also helped to kick off the Industrial Revolution.  For the iron industry grew to make the machinery of the sugar mills.  As each plantation processed their sugarcane into crystallized sugar that was a lot of cast iron gears, sprockets, levers, axles, boilers, etc.  Basically a turning point from an agrarian world of slaves and indentured servants.  To the modern industrial world and wage-earners.

There is a Correlation between America’s Obesity Problem and the Switch from Cane Sugar to Corn Sugar

By the 19th century technology was making better sugar at lower costs.  The British designed a low-pressure boiler.  As water boils at a lower temperature when at lower pressure they were able to refine sugar with less energy.  Cutting production costs.  And waste.  As higher temperatures caramelized some of the sugar.  Though caramelized sugar can be delicious on crème brûlée you don’t want it when you’re producing crystallized sugar to sell.  Then the Americans improved this process by creating the multiple-effect evaporator.  A multi-stage device where the pressure is lower in each successive stage.  They use steam to boil water in the first stage.  This vapor then provides the energy to boil water in the next stage.  Which is at a lower pressure.  And, therefore, has a lower boiling point.  That vapor then boils water in the next stage which is at a lower pressure.  And so on.  Where one energy input creates a lot of useful work cost-efficiently.

With the advance in refining equipment refinery plants grew more complex.  And expensive.  So instead of building one on every plantation they built fewer but larger ones.  And shipped raw product to them.  Modern ships and economies of scale made this the new business model.  Companies grew and opened other refineries.  And expanded vertically.  Growing sugarcane as well as refining it.  One of the best at this was the American Sugar Refining Company.  That at one point controlled 98% of the sugar processing capacity in the United States.  Which earned it a spot on the original Dow Dozen.  The first 12 industrial stocks the Dow used in calculating their Dow Jones Industrial Average in 1896.  And remained a component of the Dow Jones Industrial Average until 1930.

Eventually the Americans couldn’t compete with foreign sugar producers any more.  They enlisted the help of Congress to impose tariffs on cane sugar imports.  Forcing Americans to pay more for their sugar.  Then they started making sugar out of government subsidized corn.  High-fructose corn syrup.  Which pretty much sweetens anything manufactured in the United States today.  That some say causes more health problems than cane sugar.  Including obesity.  Those in the high-fructose corn syrup business vehemently deny this.  But there is a correlation between America’s obesity problem and the switch from cane sugar to corn sugar.  Because of the different way the body metabolized corn sugar it did not satiate our appetite.  Leading us to over consume.  Such as with sugary drinks.  Which have gotten so large in size that New York City Mayor Bloomberg tried to make these large sizes illegal.  Because America’s over consumption of sugar was making us obese.  While Britain’s over consumption of cane sugar only rotted their teeth away.  It didn’t make them obese.  Which makes the case that corn sugar is less healthy than cane sugar.  Despite what the corn sugar lobby says.

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Deficits, Debt and Interest on the Debt 1988-2012

Posted by PITHOCRATES - March 26th, 2013

History 101

Congress printed so much Money that the Continental Dollar became Worthless

The American Revolutionary War lasted eight years.  And eight years of war ain’t cheap.  It took money to buy arms.  It took money to buy uniforms.  It took money to pay soldiers.  And paying for these for eight years required a lot of money.  Which the Americans didn’t have.  They were at war with Great Britain.  Who was their major trading partner.  And pretty much their only trading partner.  As the Americans were a British colony in the days of mercantilism.  Which meant the Americans sent raw materials to the mother country.  On British ships.  Through British ports.  Britain then transformed those raw materials into finished goods.  And exported them.  On British ships.  Through British ports.  Throughout the world.  And back to America.  Before the Revolution, that is.

Thankfully for the Americans there was a nation that hated the British.  And had been in a near perpetual state of war with them since about forever.  And they had just recently lost their North American territories to the British.  Which they wanted back.  So the French had other interests than American Independence.  But American Independence was a good opportunity to settle the score with their old nemesis.  And when the Americans defeated a British Army at Saratoga the French thought that just maybe the Americans could pull this off.  And if so they wanted to be in on the spoils of a British defeat.

So the French financed a large part of the American Revolutionary War.  But it wasn’t enough.  The Continental Army was poorly fed and poorly clothed.  Even leaving bloody footprints in the snow as the Continental Congress couldn’t put boots on their feet.  Nor could they pay them.  So they turned to printing money.  Unleashing a brutal inflation.  No one wanted the currency.  The inflation was so bad that it lost its value before they could spend it.  So no one wanted to accept the Continental paper dollar.  Giving rise to the expression ‘not worth a Continental’.  Everything had two prices.  A low price if you paid with hard currency (gold and silver coins).  And a very high price if you paid in Continental dollars.  They printed so much money that the money became worthless.  So the Continental Army just took what they needed from the people to keep their men from starving to death.  Leaving the people with an IOU.  That Congress would redeem one day.  Maybe.

The Percentage of Tax Receipts going to Pay the Interest on the Debt has fallen as the Federal Debt Rose

Today hard currency is a thing of the past.  It’s pure un-backed paper these days.  This paper money has no intrinsic value.  And you can’t exchange it for gold or silver that does.  But you sure can print it.  Well, the government can.  And they do.  They borrow and print money like there’s no tomorrow.  Allowing them to spend money they don’t have easier than ever before.  And it’s not just for feeding and clothing our soldiers.  But just about everything under the sun.  Causing the federal debt to soar.

Think of the growing federal debt like a credit card with a growing balance.  And these balances grow fast because each month they charge you interest on your past purchases.  And on your past interest charges.  Which is why if you let that credit card balance get too high it’ll grow beyond your ability to pay it off.  A lot of people who do find themselves filing a personal bankruptcy.  Because the interest charges just balloon their monthly payment.  With the interest in their credit cards consuming an ever larger portion of their paycheck.  As should the interest on the federal debt consume an ever larger portion of federal tax receipts.

Debt and Interest as Percentage of Receipts

(Sources: A History of Debt In The United States; Interest Expense on the Debt Outstanding; Historical Amount of Revenue by Source)

Interestingly, the percentage of federal tax receipts going to pay the interest on the debt has in general fallen as the federal debt rose.  Odd.  The more debt one has the greater the interest one pays.  That’s how it works on our credit cards.  When the debt was approximately $6.2 trillion in 1991 the percentage of total tax receipts going to pay the interest on the debt was 27.1%.  But when the debt soared to $16.1 trillion in 2012 the percentage of tax receipts going to the interest on the debt fell to 15%.  The federal debt grew to be 2.6 times what it was in 1991.  Yet it appears we are paying less interest in 2012 than in 1991.  Something doesn’t seem right.

Interest Rates will Rise as the Purchasing Power of the Dollar Falls, Raising Prices and the Cost of Borrowing

A couple of things could explain this.  And the first thing that comes to mind is tax revenue.  The reason why interest on the debt as a percentage of tax receipts has fallen while the federal debt grew is, perhaps, that tax revenues grew even greater.  So even though interest on the debt could be soaring along with the soaring federal debt the government could be awash in tax revenue.  And if the number you’re dividing by is larger than the number you’re dividing into it than you get a smaller percentage.  Simple arithmetic.  The driver of the federal debt is the annual deficits.  So let’s compare interest on the debt to the deficit.  To see if the interest on the debt rises with the deficit.

Interest on the Debt and the Deficit

(Sources: Interest Expense on the Debt Outstanding; Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2017)

And it doesn’t.  In fact, the interest on the debt almost held constant when the deficit plunged into a surplus.  And when the deficit soared to a record high.  It seems like there was some other factor involved here.  Something actually keeping the interest on the debt down.  Even when the deficit soared after 2007.  What could do this?  Well, there is only one other thing to look at.  Interest rates.

Interest on the Debt the Deficit 10 Year Treasury

(Sources: Interest Expense on the Debt Outstanding; Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2017; Market yield on U.S. Treasury securities at 10-year constant maturity, quoted on investment basis)

And we have our answer.  Interest on the debt has not kept pace with the debt because of bad monetary policy.  Keynesian economic policies introduced permanent inflation into the economy.  The Keynesians in government kept interest rates artificially low to stimulate economic activity.  Those low interest rates stimulated so much economic activity in the Nineties that it created a dot-com bubble.  And when it burst it created a painful recession in the early 2000s.  Also, President Clinton’s Policy Statement on Discrimination in Lending lowered lending standards in the Nineties setting the stage for a great housing bubble that burst into the subprime mortgage crisis in 2007.  And the Great Recession.

The Keynesians have been increasing the money supply (i.e., printing money) in a desperate attempt to pull the economy out of recession.  Which is why the market yield on a 10-year treasury has fallen as the deficit soared in the early 2000s.  And fell even more as the deficit soared even further after 2007.  With the yield falling to as low as 1.8% in 2012.  Even though the demand for so much borrowing should have raised interest rates.  Which would have happened had the government not been increasing the money supply.

And this is why interest on the debt as a percentage of receipts has fallen.  Despite record debt.  Some may look at this and think it’s a good thing.  As it lets the government borrow more money.  So they can give us more stuff.  But printing money causes inflation.  Which has been kept at bay for now thanks in large part to the Eurozone sovereign debt crisis.  As investors everywhere are desperate to find a safe harbor for their money during these uncertain times.  But that won’t last forever.  Eventually those interest rates will rise as the purchasing power of the dollar falls.  Raising prices.  And the cost of borrowing.  A lot.  Because of that record debt.  And when they start selling new treasuries at higher interest rates than the ones they’re replacing a very large portion of our tax receipts will go to pay the interest on the debt.  Just like when people charge too much on their credit cards.  Pushing the country closer to bankruptcy.  Just like people with overextended credit cards.  And like countries in the Eurozone.

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France’s New Socialist Policies are pushing France back into Recession

Posted by PITHOCRATES - March 24th, 2013

Week in Review

The French brought back the Socialists to power in France with their election of Francois Hollande.  And they voted for him because he was going to stick it to the rich.  Raising the top marginal tax rate to 75%.  All the Keynesian economists said this would solve all of France’s problems.  It would reduce the deficit.  And increase confidence in the business sector.  Boosting the economy.  When critics of the move said this would drive the wealthy and their money out of France they said pish tosh.  They are patriots.  And will simply whistle a happy tune and pay this new high tax rate.  Time has passed.  And now we can see the economic results of the new Socialist policies (see Recession stalks France as business slump hits crisis levels by Leigh Thomas posted 3/21/2013 on Reuters).

French business activity shrank in March at the fastest pace in four years, defying expectations for an improvement and probably plunging the euro zone’s second-biggest economy into a recession, a survey showed on Thursday…

Separate figures for the services and manufacturing sectors showed that business activity was retreating even faster than economists polled by Reuters had forecast…

That would mean that France, which has already abandoned its 2013 deficit target due to the lack of growth, has entered its third recession since the financial crisis…

The increasingly dire state of French business is all the more alarming as consumers, traditionally a major driver of the economy, are in no place to pick up the slack.

Unemployment is above 10 percent and there is no sign that it will fall any time soon, which is weighing on consumer spending.

It also explains in large measure why President Francois Hollande’s approval ratings are at record lows less than a year into his term in office, which he won on promises to revive growth and boost jobs.

Apparently the Socialists and the Keynesian economists were wrong.

You don’t create economic activity by increasing the cost of business.  And lower the rate of return on investment.  You create economic activity by lowering the cost of business to making it attractive to expand business.  You increase the rate of return on investment capital to encourage investors to take more chances on new startup companies.  It’s not rocket science.  If you increase the price of groceries people buy less groceries.  If you increase the cost of gasoline people by less gasoline.  Because people have limited disposable income.  And the higher the prices are the less that disposable income can buy.

If you increase the cost of business it raises the prices on the goods and services they sell.  The higher prices cause people to buy less.  And if you raise the cost of investment capital by taxing rich people more that will increase the cost of financing for businesses.  Which they will pass on to the consumer in higher prices.  Somehow Keynesian economists just don’t understand this.  But people living under their bad economic policies do.  Because they are always getting by on less because of these rising tax rates.

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The French protest against Gay Marriage and Gay Adoption

Posted by PITHOCRATES - January 13th, 2013

Week in Review

Progressives in America lament the provincial ways of the American Right.  Who they feel are so out of touch.  Stuck in the past.  They wish they were more like the open-minded Europeans.  Who have much more liberal attitudes toward sex.  Drugs.  And gay marriage and gay adoption (see Thousands protest against French president Francois Hollande’s plan to legalise gay marriage by Reuters posted 1/13/2013 on The Times of India).

Several hundred thousand people massed at the Eiffel Tower in Paris on Sunday to protest against President Francois Hollande’s plan to legalise gay marriage and adoption by June.

Three columns of protesters, waving pink and blue flags showing a father, mother and two children, converged on the landmark from different meeting points in Paris. Many came after long train and bus rides from the provinces…

Strongly backed by the Catholic Church hierarchy, Barjot and groups working with her mobilised church-going families and political conservatives as well as some Muslims, evangelicals and even homosexuals opposed to gay marriage to protest…

“The French are tolerant, but they are deeply attached to the family and the defence of children,” said Daniel Liechti, vice-president of the National Council of French Evangelicals, which urged its members to join the march.

Opponents of gay marriage and adoption, including most faith leaders in France, have argued that the reform would create psychological and social problems for children, which they believe should trump the desire for equal rights for gay adults…

Support for gay marriage in France has slipped by about 10 percentage points to under 55 percent since opponents began speaking out, according to surveys, and fewer than half of those polled recently wanted gays to win adoption rights.

Under this pressure, legislators dropped a plan to also allow lesbians access to artificial insemination.

Organisers insist they are not against gays and lesbians but for the rights of children to have a father and mother.

The audience of the Daily Show will not like this.  They were fine with the French not supporting George W. Bush in some of his war on terror stuff.  Even mocked those who called French fries freedom fries.  But protesting against gay marriage and gay adoption?  That’s just beyond the pale.  Once Jon Stewart makes fun of the French for this his audience will soon be ordering freedom fries instead of French fries.

In all the talk about gay marriage and gay adoption what you hear most about is what’s best for those who want to get married or adopt a child.  Not what’s best for the children.  Which is about the only time the Left is not doing something that is best for the children.  Whether it’s changing the lunch menu at our public schools to banning 2nd and 3rd hand smoke anywhere within a hundred yards of our children to the clamor for gun control.  Everything is always for the children.  Except gay marriage and gay adoption.  That’s for gay adults who want what heterosexual couples have.  Wedded bliss.  And a family.

Whereas in France there are a lot of people who worry about what it may do to the children.  Who are concerned for the children.  Who are fragile and influenced by their environment.  Which is why the Left is constantly trying to protect them.  From cigarette ads.  To violence in movies.  But for some reason they have no concerns of the affects of being raised by gay parents will have on a child.  Who is confused enough with the birds and bees as it is.

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Paying French Workers more for less Work is putting France on the Path towards Greece

Posted by PITHOCRATES - December 9th, 2012

Week in Review

France is where President Obama is trying to take the United States.  While the French are trying to figure out a way to save the French from the French (see Insight: Making France work again by Mark John posted 12/9/12012 on Reuters).

Yet the overtime episode is a telling insight into a France struggling with itself: the France whose appetite for work sits uneasily with the France whose priority is to sustain one of highest standards of living in the world…

Its welfare system is among the most generous in the world. A road and rail transport network means its companies are within hours of tens of millions of potential customers. It is a leader in luxury goods and is the world’s top tourist destination.

But somehow that Gallic vigour is being lost.

Unemployment is at 14-year highs as plant closures mount, France’s share of export markets is declining, and the fact that no government in three decades has managed a budget surplus has created a public debt pile almost as big as national output…

And it was the cost of that generous welfare state that has raised the cost of doing business in France so much that less business is done in France.  Less business means fewer jobs, less private income to tax and less corporate income to tax.  Forcing the French to turn to borrowing to sustain that generous welfare state.

By 1980, French economic growth had shrunk to two percent compared to its pre-oil crisis rate of above six percent – a rate which France and most rich states have not seen since.

In the years that followed, governments around the world reacted in their fashion: Britain’s Margaret Thatcher faced down Britain’s unions in a drive to free up labor markets, while Scandinavian leaders sought to free their economies of debt.

In France, governments of left and right chose entrenchment: strong rises in public spending which helped ease the social and employment shocks but which sent national debt soaring from 20 percent of output in 1980 to its current record of 91 percent…

The high productivity of its workers might have compensated for their rising cost. But decisions such as the 1997 cut in the working week from 39 to 35 hours meant many French were also starting to work less.

A 2008 paper on “the Liberation of French growth” by Jacques Attali, ex-adviser to Socialist President Francois Mitterand, calculated that while the French lived 20 years longer than they did in 1936, they worked 15 years less over their lifespan – a shortfall he labeled “35 years of extra inactivity”.

“Even given that each French worker produces five percent more per hour than an American, he produces 35 percent less over his working life,” he found in the 245-page report.

You need two things to generate tax revenue.  A tax rate.  And income to tax.  In other words, you need businesses to grow and hire more people.  But when they reduced the work week down to 35 hours that’s fewer hours worked.  And less income to tax.

One of the ideas behind the reduced work week was to force employers to hire more workers.  For example, if a company had 15 employees working 39 hours per week that’s a total of 585 hours a week to complete the necessary work each week.  When they reduced the work week to 35 hours it now took 16.7 workers (585/35) to complete the 585 hours of required work per week.  As you can’t hire 0.7 of a worker that rounds up to two new workers the state believed owners would hire.  The government believed they’ve reduced the unemployment rate.  But they’ve actually increased the unemployment rate.

The existing workers may be working 4 hours less a week but their employers are still paying them the same.  Which makes workers more costly to employers.  For they’re getting paid the same but are working fewer hours.  Forcing the owner to raise his or her selling price to cover these higher costs.  Or laying off a worker or two so their current revenue can pay for their higher labor costs.

So all of the government’s policies intended to increase the number of high-paying jobs actually decreases the number of high paying jobs.  Encouraging employers to hire part-time workers or temporary workers in lieu of full time workers to escape these higher labor costs.  Reducing the gross amount of income in the economy to tax.  Forcing the government to borrow more to support that generous welfare state.  And it gets worse.

France has an aging population.  So not only are French employees working fewer hours there are fewer workers entering the workforce than leaving it.  And those who are leaving the workforce are collecting pensions.  And consuming health care resources.  With these growing expenditures being paid by fewer workers entering the workforce who are working fewer hours each week.  Forcing the government to borrow even more to support that generous welfare state.  Which is why their total debt now is 91% of GDP.

And it will only get worse if France doesn’t make the country more business friendly.  While at the same time cutting their spending.  As French students took to the streets to protest a proposed increase in the retirement age a year or so ago don’t expect either to happen anytime soon.

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