Quotulatiousness

February 24, 2024

Never mind the unfunded liability … money printer go brrrr!

Filed under: Economics, Government, USA — Tags: , , , , , , — Nicholas @ 05:00

Kulak at Anarchonomicon points out that the US government’s debt situation — which was alarming 20 years ago — has continued to get worse every year:

Libertarian Economists have been predicting this collapse of the federal system would happen “By About 2030” since before 2008. I remember in high school in the early 2010s listening to Ron Paul lectures and visiting USDebtClock.com, this was a hot button issue after 2008 … (then of course there was no political will to do anything and everyone just stopped talking about it)

I honestly forget that everyone around me doesn’t already know this, this is so common and accepted in libertarian and economic circles, and everyone who knows it got bored of eyes glossing over when they tried to explain it (in an autistic panic) decades ago.

US Unfunded liabilities:

Social Security, Medicare, Medicaid, US Debt, and Federal employee benefits and pensions, are all basically intergenerational ponzi schemes that require constant 1950s level population growth amongst the productive tax paying middle-class to maintain. By 2000 it was obvious this population growth was not happening, that population was beginning to age and collapse, and NO, the illegals at the border weren’t adequate replacements … (they weren’t adequate to prop up federal expenses in 2000 when they were still Mexican, now that they’re Guatemalan, Haitian, and Senegalese they’re almost certainly a net drain).

The Specter of Mass Boomer retirements with few to no children and grandchildren to replace them and pay for all the costs of their retirements and healthcare was maybe the slowest but most assured crisis ever to be seen in human history … Demographics is destiny.

This was a foreseen problem in 2000 when US Debt to GDP (just the portion that’s already been spent and interest has to be paid on) was 59% of GDP. Today the US Debt to GDP ratio is 122% of GDP whilst just in the past 24 years. Absolute US Federal Debt (not including state or local) has grown from 5.6 trillion dollars to 34 trillion dollars (102k per citizen: man, woman, and child). just the interest that has to be paid out of your tax dollars on that debt is set to eclipse ALL US Military spending sometime this year … And by 2028 Debt to GDP will be 150% (46.4 Trillion, 132k per citizen, 12 trillion more in 4 years, with no additional spending bills) and the Interest (at current estimates) will be over 2.5 trillion dollars, over a third of all Tax Dollars brought in will be spent on just interest, because dollar confidence has collapsed and the only way to keep inflation from destroying the dollar has been to radically raise the interest rates the Federal Reserve offers.

Now all that, That catastrophic state of things, is just the debt, the money that’s been spent … The real crisis is the Unfunded liabilities, all the promises the US has made to Boomers (who dominate the vote) and others about money they’re GOING to spend.

As of now total Unfunded liabilities stand at 213 trillion dollars, $633,000 per US Citizen (Man woman, and newborn babe)… These are all dollars the US has promised to pay to someone somewhere at some point: Social Security, Medicare, Medicaid, Federal pensions, VA Benefits, etc. And cannot in any politically feasible way restructure or get out of.

If no one ever contributed another dime to social security, and in so doing was promised in turn significantly more than that dime (it’s a Ponzi scheme, it loses money in proportion to and at a greater rate than the money being contributed to it (every dollar you contribute you’re promised multiple dollars in return, and your dollar is not invested, it just pays off previous contributors)) … If everything froze and every young person was locked out of ever receiving Social Security, Medicare, or Medicaid, the Unfunded Liability would be $633k per every man, woman, and child … that’d be the debt a newborn American would be born with.

However because it is NOT frozen and it will not be, by 2028 that number will Rise to $837k and an ordinary household of 4 will have seen their, politically unavoidable, family obligation in future tax payments to the federal government increase by $804,000 in just 4 years.

If your response is that your family doesn’t even make 804k in 4 years and there’s no way you could ever pay that much in 4 years given its just going to increase at a faster rate the next 4 years … CONGRATULATIONS! 90% of families don’t make that much, and less than 1% of families could ever afford to pay that much in taxes in a 4 year time.

This has been slowly growing for decades, and in the late 2000s and 2010s Ron Paul types were screaming that those Benefits needed to be reformed NOW (in 2008) or they’d drown America. But of course, cutting benefits is political Anathema to boomers, so nothing was done …

The Course of Empire – Destruction by Thomas Cole, 1836.
From the New York Historical Society collection via Wikimedia Commons.

December 28, 2023

The Liberals may be bad at “deliverology”, but they’re world-beaters at pouring money into black holes

Tristin Hopper explains the apparent paradox that the federal government is spending money faster than it can be printed, yet the things the government is responsible for are perennially underfunded:

From back when The Onion was allowed to be funny – https://youtu.be/JnX-D4kkPOQ

This may surprise the average Canadian given that so much of the government is noticeably threadbare and underfunded. Canadians are dying in hospital waiting rooms due to unprecedented shortages in health care. The navy’s so strapped for cash that it can only deploy one offshore patrol vessel at a time. The RCMP’s federal policing is so under-resourced that Parliamentarians are now calling it a threat to national security. And even $600 billion in cumulative debt hasn’t been enough for the Liberals to honour their 2015 campaign promise to ensure universal clean water on First Nations reserves.

It’s popular to blame all this on some easy-to-identify example of government profligacy, such as Ukraine aid, free hotel rooms for refugee claimants or Prime Minister Justin Trudeau’s noted penchant to rack up outsized travel bills. But Canada’s fiscal problems are well beyond anything like that. At the current rate of spending, the cumulative $2.4 billion in military aid that Canada has sent to Ukraine represents less than a month’s worth of new debt.

So where’s all the money going? Below, a cursory guide to how Canada is able to spend so much while seemingly obtaining so little.

Debt servicing just got way more expensive

First, an easy one: The Trudeau government borrowed an obscene amount during the COVID-19 pandemic, and with rising interest rates the treasury is getting hammered with debt-servicing costs.

As recently as 2021, interest charges on federal debt cost $20.3 billion per year. In the current fiscal year, it’s probably going to blow past $46.5 billion. Ottawa now spends about as much on debt management as it does on health care transfers to the provinces.

The phenomenon of pricier debt is not limited to Canada: Virtually every government in the world ran up record-breaking debts during COVID and are now facing the consequences. But if Canada is different, it’s that our rate of pandemic debt accumulation was at least $200 billion higher than it needed to be. And in justifying all this extra spending at the time, Trudeau argued that it was a good time to take out extra debt since “interest rates are at historic lows”.

The corporate welfare is just unbelievable

Canada has a long history of government signing over grants and bailouts to politically connected corporations. As far back as 1972, then NDP Leader David Lewis famously championed the cause of stopping Canada’s “corporate welfare bums”.

But the Trudeau government has taken corporate welfare to new heights. It was only a few years ago that Bombardier was the undisputed champion in collecting federal grants, bailouts and interest-free loans. Over 50 years, according to an analysis by the Montreal Economic Institute, Bombardier received a cumulative “$4 billion in public funds”.

In just the last calendar year, the Trudeau government has signed two subsidy agreements that would dwarf that $4-billion figure several times over. In the spring, both Stellantis and Volkswagen agreed to build EV plants in Ontario in exchange for federal subsidy packages that could cost as much as $18.8 billion (plus another $9 billion from the Ontario government).

And that new $18.8 billion liability on the books doesn’t even account for the massive ramp-up in the corporate welfare everywhere else. To name just a couple: In 2021, Air Canada got a $5.4 billion loan package. And the Trudeau-founded Strategic Innovation Fund gets about $1.5 billion per year in handouts to green energy companies.

October 31, 2023

In the 1920 presidential election, Americans voted overwhelmingly for a return to “normalcy”

Filed under: Books, History, USA — Tags: , , , , , — Nicholas @ 04:00

Warren G. Harding’s term in office has been treated like a punchline by progressive writers and commentators for a century, but Lawrence W. Reed refutes this easy mockery and points out that the winner of the 1920 election deserves much better:

Warren G. Harding, 14 June 1920.
Library of Congress control number 2016828156

Routinely dismissed as a bad chief executive, Harding’s reputation is undergoing a long overdue renovation. The latest contribution in that regard is a new, must-read biography by Ryan S. Walters titled, The Jazz Age President. Read it, and you’ll forever be skeptical of the lazy, biased, conventional historians who worship power and those who wield it.

Warren Harding didn’t just tell audiences what they wanted to hear. He sometimes told them what they did not want to hear. He went to Birmingham, Alabama to condemn racism and Jim Crow laws, for example — a fact I’ve previously pointed out.

Conventional historians praise Presidents for the bills they signed into law but often it requires more courage and conviction to veto them. On that score too, Harding can be judged favorably. He vetoed six bills in the 2-1/2 years he served in the White House. None of the six was overridden. That may not sound like a lot but remember, his party controlled both houses by big majorities; Congress didn’t send him much it thought he wouldn’t sign.

Four bills Harding vetoed concerned minor issues and generated little attention, but one concerned a bonus for veterans of World War I. It stirred up quite a fuss. As the bill worked its way through the House and Senate, Harding gave ample warning that he wouldn’t even consider a bonus that wasn’t paid for. Congress ignored him and sent the bill to his desk. He rejected it, noting as follows:

    In legislating for what is called adjusted compensation, Congress fails to provide the revenue from which the bestowal is to be paid. We have been driving in every direction to curtail our expenditures and establish economies without impairing the essentials of governmental activities. It has been a difficult and unpopular task. It is vastly more applauded to expend than to deny.

After the Civil War, Congress paid pensions to veterans of the conflict and their dependents. Sixty years later, in 1923, it sent a bill to Harding to grant pensions to women who married aging Civil War veterans long after the war. It even authorized higher payments to them than what recent widows of veterans in the war with Germany were getting. His veto message included this unassailable objection:

    The compensation paid to the widows of World War veterans, those who shared the shock and sorrows of the conflict, amounts to $24 per month. It would be indefensible to insist on that limitation upon actual war widows if we are to pay $50 per month to widows who marry veterans 60 years after the Civil War.

Congress should have known better than to expect Harding to sign such bills. This was the same man who declared at his modest, unembellished inauguration that “Our most dangerous tendency is to expect too much of government”. He had expressed a desire to put “our public household in order”. He said he wanted “sanity” in economic policy, combined with “individual prudence and thrift, which are so essential to this trying hour and reassuring for the future”.

If somebody told me all that, I wouldn’t even think of asking him to approve a check for an able-bodied 30-year-old simply because she married an 80-year-old veteran.

This was the same Warren Harding, remember, who gave the country perhaps the best Treasury Secretary in its history, Andrew Mellon. According to historian Burton Folsom, Mellon slashed government expenses and eliminated an average of one Treasury staffer per day for every single day he held the office. Harding, Mellon and Calvin Coolidge (Harding’s successor), together with a friendly Congress, reduced the federal budget and cut the national debt by more than one-third.

February 28, 2023

QotD: Politicians respond to different economic incentives than the rest of us

Filed under: Britain, Economics, Politics, Quotations — Tags: , , , , , — Nicholas @ 01:00

Politicians in particular have a problem – in good times, people vote for them, and in tough times … not so much.

The temptation is to delay the tough times until your successor can carry the can.

Poor old Keynes inadvertently gave politicians the answer they were looking for – the idea that during the downturn, the government should spend money into the economy to keep it going along nicely. Making sure that those lifeguards sacked from the Skegness lido can swiftly get jobs working at a government Skegness lido prevents them claiming the dole, and keeps them in the economy earning and spending until the economy washes out all the malinvestment and starts growing again. At which point the government Skegness lido closes and the lifeguards go to work at a lido somewhere where the biting Easterly wind doesn’t sandblast your skin off. The government has bridged the gap.

There’s one problem.

The government has no money of its own, so where will it get the money for their lido?

Well, Keynes said it should run a surplus during the good times and stash that surplus money away so it can be used during the downturn – a national rainy-day fund, if you will.

But guess what? Politicians don’t run surpluses.

Why would they? Every penny spent making lives better for voters today makes it more likely they will vote for you. And every penny saved against a rainy day makes it possible for your rivals to win votes tomorrow, by doing the same once they are in power.

So politicians don’t ever HAVE a rainy day fund. But that doesn’t stop them wanting to bridge the gap.

So they borrow the money.

And now what they are doing is not Keynesian, or even neo-Keynesian, but pseudo-Keynesian

By bridging the current gap with borrowed money, they simply make sure that the next gap will be costlier to bridge. Because the interest on the borrowing means that the gap will be wider.

But that’s not even the biggest problem – the biggest problem is that the gap is intrinsically important. We NEED it, to give us pause.

Whereas bridging it enables us to carry on being silly and prevents the misallocations from being flushed out – a lido remains operating in Skegness despite having no customers, and the lifeguards continue to work. Their lifesaving skills (which should be fruitfully employed elsewhere) stagnate at a lido with no punters. Their customer service skills deteriorate as the customers disappear, and what they learn instead is how to sit in a chair and stare into space. Their skills are degrading. Hysteresis, technically.

And so by delaying the collapse of the Skegness lido in pursuit of benign conditions for the voters, the government destroys the skills of our workforce.

Sowell was right – the problems we battle today were caused by the government’s interventions yesterday.

Surely using government to solve our problems is like a man quenching his thirst with seawater?

Alex Noble, “Drinking Brine”, Continental Telegraph, 2019-06-14.

February 20, 2023

Thirteen reasons the Dutch did better financially than the English in the Seventeenth Century

Filed under: Britain, Economics, Europe, Government, History — Tags: , , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes investigates the huge differences between the rival English and Dutch financial markets in the 17th century:

The courtyard of the exchange in Amsterdam (De binnenplaats van de beurs te Amsterdam), 1653.
Oil painting by Emanuel de Witte (1617-1692) from the Museum Boijmans Van Beuningen collection via Wikimedia Commons.

One of the weird things about Britain, despite its being the birthplace of the Industrial Revolution, is that its financial infrastructure was for a long time remarkably backward. Its “Financial Revolution”, by which both people and the state began to borrow at ever lower interest rates, only really took off in the early eighteenth century — long after London’s extraordinary growth in 1550-1650, when it had suddenly expanded eightfold to become one of Europe’s most important commercial hubs. Indeed, even for much of the late seventeenth century, England lacked many of the most basic financial institutions that had been used for decades and decades by their most important rival and trading partner, the Dutch Republic.

I was especially intrigued when I stumbled across a discussion of Dutch policies and customs, written up in around 1665 by the young merchant Josiah Child, and published a few years later: a kind of wishlist of many of the things that made the Dutch so wealthy, and which the English continually failed to emulate:

  1. The Dutch councils of state and war always included merchants who had experience of trading and living abroad — Child was perhaps just angling for some influence here, but for all that merchants were getting more influential, in England they were not actually in charge.
  2. Gavel-kind succession laws, whereby all children got an equal share of their parents’ estates, rather than it all going to the eldest. English primogeniture, by contrast, apparently left a lot of gentlemen’s younger sons having to become apprenticed to merchants.
  3. High regulatory standards for goods. A barrel of Dutch-packed herring or cod would apparently be accepted by buyers just by viewing the marks, without having to open them up to check. English-packed goods, by contrast, were rarely trusted because the fish would turn out to be rotten or even missing — the English regulators’ stamps of approval were reputedly given to anyone who would pay.
  4. Encouragement for inventors of new products, techniques, and import trades, who received rewards from the state, and not just temporary monopoly patents.
  5. Ships, called fluyt, which were cheaper to build, required fewer sailors, and were easier to handle. Despite being only very lightly armed, they sailed in fleets for protection, when necessary being convoyed by ships of war. English trading ships, by contrast, were each heavily armed, but with those cannon taking up room and weight that could have been used for carrying merchandise.
  6. Education of all children, even girls, in arithmetic and keeping accounts. As Child put it, this infused in the Dutch “a strong aptitude, love, and delight” for commerce. It also meant that husbands and wives were real partners in many businesses — something that impressed almost all foreign visitors to the Netherlands.
  7. Low customs duties, but high consumption taxes. Very low customs duties, on both imports and exports, meant that it was often very profitable to trade with the Netherlands. The Dutch were famed for their many ships, and for their granaries bursting with grain, despite growing hardly any trees or crops themselves. To fund their state, they instead overwhelmingly relied on the gemene middelen — taxes on the sale of wine, beer, meat, fuel, candles, salt, soap, flour, cloth, and a host of other goods, with many of the higher rates reserved for expensive luxuries. Much like modern value-added taxes, these taxes on consumption raised revenue while preserving the all-important incentive to save and invest.
  8. Thrifty living — which, come to think of it, was probably related to the high consumption taxes, although Childs doesn’t seem to have noticed the connection. Dutch thrift was thought by the English to be especially useful because it allowed wage costs to be kept low — essential for maintaining competitiveness in international markets — while preventing the country having a trade deficit. The English always worried they were sending too much of their silver abroad to pay for French wines and other luxuries, but the Dutch appeared to have prevented this without resorting to import tariffs that might annoy trading partners and prompt retaliation.
  9. Religious toleration, which attracted all sorts of industrious immigrants to bring their families and wealth. (Incidentally, as I’ve mentioned before, this was also one of the key attractions of Livorno, set up by the Medici Dukes of Tuscany to be a major trading hub.)
  10. The use of the Law-Merchant, which meant that all controversies between merchants and tradesmen were decided in just 3 or 4 days’ time. England, rather strangely for such an increasingly commercial nation, did not develop merchant courts with a specific jurisdiction or a distinct body of merchant law — disputes instead had to be resolved in the royal common-law or equity courts, in the Admiralty court, or else abroad. The English courts, however, were often slow. Child complained that cases often took half a year, and often much longer. (Incidentally, slow and rotten justice in the Court of Chancery, the key equity court used by merchants in England, was one of the reasons Francis Bacon was impeached by Parliament and sacked as Lord Chancellor.)
  11. Transferrable bills of exchange — in other words, the circulation of credit notes as a currency. These were not properly supported by English laws, but allowed Dutch merchants to trade a lot more frequently. English merchants often had to wait some six months to a year before receiving all the coin from selling their foreign goods in London, so as to purchase goods again to make fresh trades. They spent much of their time chasing shopkeepers for payment. But the Dutch, by being able to easily buy and sell their credit notes, could “turn their stocks twice or thrice in trade”, immediately settling their accounts and making fresh purchases. (I intend to look into this in a lot more detail soon, as finding a way to bills of exchange transferrable in England appears to have been a major project for many of the mid-seventeenth-century inventors and improvers — after just a cursory glance, transferability was only secured in law as late as 1704.)
  12. Banks. Or rather, as Child actually put it, “BANKS”. In England many of the functions of banks gradually evolved from the practices of individual goldsmiths and the scriveners — legal clerks who specialised in property transfers and mortgages. There was certainly nothing so secure as the municipal Wisselbank of Amsterdam, established in 1609, which had various monopoly powers as a clearing-house for bills of exchange and was backed by a vault full of bullion. Nor the municipal Bank van Lening, established in 1614, which was a pawnbroker modelled on the Italian Monte di Pietà, or mounts of piety, designed to make small and low-cost loans to the poor.
  13. “PUBLIC REGISTERS” — again capitalised by Child — of all lands and houses sold or mortgaged. This item on the policy wishlist would not be ticked off for England until two centuries later, but the key advantage was to prevent lawsuits over land titles — still cited as a major problem even in the 1690s — and so make land more genuinely secure for mortgages.

Finally, the result of many of these policies was the Dutch had significantly lower interest rates — often just 3-4% when the English were still lending and borrowing at 6-8%. Indeed, this list was made because of a long-standing English policy debate I’ve been researching, on whether to lower the legal maximum rate of interest.

September 2, 2022

The winner in 1932 campaigned against high taxes, big government, and more debt. Then he turned all those up to 11

At the Foundation for Economic Education, Lawrence W. Reed notes that we often get the opposite of what we vote for, and perhaps the best example of that was the 1932 presidential campaign between high-taxing, big-spending, government-expanding Republican Herbert Hoover and Franklin Delano Roosevelt, who ran against all of Hoover’s excesses … until inauguration day, anyway:

Top left: The Tennessee Valley Authority, part of the New Deal, being signed into law in 1933.
Top right: FDR (President Franklin Delano Roosevelt) was responsible for the New Deal.
Bottom: A public mural from one of the artists employed by the New Deal’s WPA program.
Wikimedia Commons.

If you were a socialist (or a modern “liberal” or “progressive”) in 1932, you faced an embarrassment of riches at the ballot box. You could go for Norman Thomas. Or perhaps Verne Reynolds of the Socialist Labor Party. Or William Foster of the Communist Party. Maybe Jacob Coxey of the Farmer-Labor Party or even William Upshaw of the Prohibition Party. You could have voted for Hoover who, after all, had delivered sky-high tax rates, big deficits, lots of debt, higher spending, and trade-choking tariffs in his four-year term. Roosevelt’s own running mate, John Nance Garner of Texas, declared that Republican Hoover was “taking the country down the path to socialism”.

Journalist H.L. Mencken famously noted that “Every election is a sort of advance auction sale of stolen goods.” If you agreed with Mencken and preferred a non-socialist candidate who promised to get government off your back and out of your pocket in 1932, Franklin Roosevelt was your man — that is, until March 1933 when he assumed office and took a sharp turn in the other direction.

The platform on which Roosevelt ran that year denounced the incumbent administration for its reckless growth of government. The Democrats promised no less than a 25 percent reduction in federal spending if elected.

Roosevelt accused Hoover of governing as though, in FDR’s words, “we ought to center control of everything in Washington as rapidly as possible.” On September 29 in Iowa, the Democrat presidential nominee blasted Hooverism in these terms:

    I accuse the present Administration of being the greatest spending Administration in peace times in all our history. It is an Administration that has piled bureau on bureau, commission on commission, and has failed to anticipate the dire needs and the reduced earning power of the people. Bureaus and bureaucrats, commissions and commissioners have been retained at the expense of the taxpayer.

    Now, I read in the past few days in the newspapers that the President is at work on a plan to consolidate and simplify the Federal bureaucracy. My friends, four long years ago, in the campaign of 1928, he, as a candidate, proposed to do this same thing. And today, once more a candidate, he is still proposing, and I leave you to draw your own inferences. And on my part, I ask you very simply to assign to me the task of reducing the annual operating expenses of your national government.

Once in the White House, he did no such thing. He doubled federal spending in his first term. New “alphabet agencies” were added to the bureaucracy. Nothing of any consequence in the budget was either cut or made more efficient. He gave us our booze back by ending Prohibition, but then embarked upon a spending spree that any drunk with your wallet would envy. Taxes went up in FDR’s administration, not down as he had promised.

Don’t take my word for it. It’s all a matter of public record even if your teacher or professor never told you any of this. For details, I recommend these books: Burton Folsom’s New Deal or Raw Deal; Murray Rothbard’s America’s Great Depression; my own Great Myths of the Great Depression; and the two I want to tell you about now, John T. Flynn’s As We Go Marching and The Roosevelt Myth.

For every thousand books written, perhaps one may come to enjoy the appellation “classic”. That label is reserved for a volume that through the force of its originality and thoroughness, shifts paradigms and serves as a timeless, indispensable source of insight.

Such a book is The Roosevelt Myth. First published in 1948, Flynn’s definitive analysis of America’s 32nd president is arguably the best and most thoroughly documented chronicle of the person and politics of Franklin Delano Roosevelt. Flynn’s 1944 book, As We Go Marching, focuses on the fascist-style economic planning during World War II and is very illuminating as well.

January 22, 2022

James I and his experiment with “personal rule”

Filed under: Britain, Government, History — Tags: , , , , — Nicholas @ 05:00

In the latest Age of Invention newsletter, Anton Howes explains why King James I grew frustrated in his dealings with Parliament and decided to avoid calling that body into session and ruling the kingdom directly:

King James I (of England) and VI (of Scotland)
Portrait by Daniel Myrtens, 1621 from the National Portrait Gallery via Wikimedia Commons.

By the end of 1610, James’s disillusionment with the House of Commons was complete — it was, he said, after six years of fruitlessly wrangling for parliamentary taxes, like a “House of Hell”.

So, despite failing to reach a permanent financial settlement, James decided to try to rule without it. His debts were huge, and his deficit substantial. But after the failure of 1610 he would do everything he could to never have to summon a Parliament again. Although he couldn’t actually afford it, he decided to try ruling as an absolutist monarch anyway — to embark on “personal rule”.

This extraordinary decision, to be an absolutist ruler without adequate financial support, would have dramatic consequences for England’s foreign policy, and perhaps on the whole balance of Europe too. James had already tried to reduce the costs of war when he came to the throne in 1603, by immediately concluding a peace with the vast Spanish Empire. Yet peace now became a necessity — if he couldn’t even plug the deficit during peacetime, he could not possibly pay for a war. Recognising this, Spain intervened freely in the affairs of the Protestant German states, confident that England would not be able to come to their aid.

To make matters worse, James’s financial woes made him especially susceptible to foreign influence. A poor king could be bought. Some of the smaller but wealthier European dynasties began to offer James large sums for his children’s hands in marriage. In 1611, the duke of Savoy offered a vast dowry of £210,000 for his daughter to marry James’s eldest son and heir, Prince Henry. The notoriously wealthy grand duke of Tuscany even put in a bid for £300,000. France then offered £240,000 — not as high, but it had the greater status as a kingdom. Any of these amounts would have plugged the deficit for a few years, even if they were nowhere near to eliminating James’s debt. Yet Henry died in 1612 at the age of eighteen, before any match was agreed, and James’s new heir Charles was much younger and sickly. There was now no rush, so the bidding war ceased. Indeed, by 1616 Charles had given England’s rivals yet another way to influence its king. The Spanish Hapsburgs dangled the prospect of a gigantic dowry of £600,000, but dragged their feet in negotiations, keeping James focused for as long as they could on trying to keep them sweet.

In the meantime, with Henry’s death denying him an immediate windfall, James in 1613 turned [to] Ireland. The Irish Parliament had not been summoned for over a quarter of a century, but it could be a way to reduce the costs of the occupation of Ireland and even raise some funds. The Parliament was initially a disaster. James had flagrantly gerrymandered a Protestant majority by chartering dozens of new towns, particularly in the English plantations in Ulster. Each new town was a borough constituency able to choose its own MPs, and James could even select their initial members — especially in cases where the towns were actually only tiny villages. In protest, the Catholic MPs refused to even recognise the new borough MPs, so each side elected their own Speaker. The Catholic Speaker was only forced out of the chair when the Protestant Speaker was hoisted onto his lap. Nonetheless, although James was legally entitled to create as many new boroughs as he liked, he soon compromised and in 1615 the Irish Parliament ended up voting him some cash.

But the delays forced James’s hand, and in 1614 he briefly suspended his foray into personal rule by summoning the English Parliament again. He needn’t have bothered. Having embarked on personal rule, James had doubled down on legally dubious ways of raising cash, like imposing new customs duties without parliamentary approval — measures that had already been deeply unpopular with MPs in 1610. This time, the Parliament lasted just two months and two days before James dissolved it in a rage — the House of Hell had proved even more impudent than before. One of the veteran opposition leaders, Sir Edwin Sandys, went so far as to explicitly compare James’s impositions on trade to tyranny, before reminding the Commons that tyrants often met a bloody end. When the Parliament was dissolved, the king had MPs’ notes on impositions burned, and a few of the ringleaders were even briefly imprisoned. But with the dissolution of Parliament, which had not voted him any cash, he was still none the richer.

October 29, 2021

Ten years after After America, how are Mark Steyn’s predictions going?

Filed under: Books, Economics, Politics, USA — Tags: , , , — Nicholas @ 03:00

Mark Steyn published his book After America ten years ago:

Speaking of which, we are marking the tenth anniversary of my bestselling book After America. The observances are muted because, from the underpass at Del Rio to the school board meetings of Loudoun County, it has proved too accurate. Nonetheless, I remind you of the book’s opening chapter:

    Look around you. From now on, it gets worse. In ten years’ time, there will be no American Dream, any more than there’s a Greek or Portuguese Dream. In twenty, you’ll be living the American Nightmare, with large tracts of the country reduced to the favelas of Latin America, the rich fleeing for Bermuda or New Zealand or wherever on the planet they can buy a little time, and the rest trapped in the impoverished, violent, diseased ruins of utopian vanity.

    ‘After America’? Yes. It will linger awhile in a twilight existence, arthritic and ineffectual, declining into a kind of societal dementia, unable to keep pace with what’s happening and with an ever more tenuous grip on its own past. For a while, there may still be an entity called ‘the United States’, but it will have fewer stars in the flag, there will be nothing to ‘unite’ it, and it will bear no relation to the republic of limited government the first generation of Americans fought for. And life, liberty and the pursuit of happiness will be conspicuous by their absence.

    On the other hand:

    The United States is still different. In the wake of the economic meltdown, the decadent youth of France rioted over the most modest of proposals to increase the retirement age. Elderly ‘students’ in Britain attacked the heir to the throne’s car over footling attempts to constrain bloated, wasteful and pointless ‘university’ costs. Everywhere from Iceland to Bulgaria angry mobs besieged their parliaments demanding the same thing: Why didn’t you the government do more for me? America was the only nation in the developed world where millions of people took to the streets to tell the state: I can do just fine if you control-freak statists would shove your non-stimulating stimulus, your jobless jobs bill and your multi-trillion-dollar porkathons, and just stay the hell out of my life, and my pocket.

On the world stage, Joe Biden is the literal embodiment of America’s “twilight existence, arthritic and ineffectual, declining into a kind of societal dementia”. The favelas are here in many American cities, and I see that the citizens of what only a quarter-century ago alleged conservative David Brooks hailed as the future — Burlington, Vermont, the chichi post-political latte town of do-gooder liberalism – is now getting used to routine stabbings on Main Street.

I miss the Tea Party because their grievances were mainly economic. Today’s dissatisfactions are more profound and primal: We are not arguing about socialized health care, but about the agreed meaning of America, and whether it will come to more blood than it’s already coming to.

October 12, 2021

Worthless Paper Money – German Hyper-Inflation Starts After WW1 I THE GREAT WAR 1921

The Great War
Published 8 Oct 2021

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The German post-WW1 economy was under pressure: the loss of territory, the war bonds issued during the war and the reparations under the Treaty of Versailles. All this lead to a downward spiral of rising inflation and living costs for German citizens.

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Feldman, Gerald: Vom Weltkrieg zur Weltwirtschaftskrise. Studien zur deutschen Wirtschafts-und Sozialgeschichte 1914-1932. 1984.

Fergusson, Adam: Das Ende des Geldes. Hyperinflation und ihre Folgen für die Menschen am Beispiel der Weimarer Republik, 1975.

Grosch, Waldemar: Deutsche und polnische Propaganda während der Volksabstimmung in Oberschlesien 1919-1921. 2002.

Lewek, Peter: Arbeitslosigkeit und Arbeitslosenversicherung in der Weimarer republik 1918-1927. 1989.

Michalczyk, Andrezej: Celebrating the nation: the case of Upper Silesia after the plebiscite in 1921.

Neubach, Helmut: Die Abstimmung in Oberschlesien am 20. März 1921. 2002.

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August 21, 2021

Indigo in the red

Filed under: Books, Business, Cancon — Tags: , , , , — Nicholas @ 03:00

In the latest edition of his SHuSH newsletter, Kenneth Whyte looks at the dire financial situation of Canada’s big box bookstore chain:

“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0

Indigo just released its first-quarter financial results, covering the period April-June 2021, which can be compared to its pre-pandemic results from the same quarter in 2019.

Back then, Indigo had revenues of $193 million and no profit. Seventy percent of its revenue, or $136 million, came from the firm’s eighty-nine Chapters and Indigo superstores. Only $25 million came from its 115 smaller stores (Coles and Indigo Spirit), and another $29 million from online sales at chapters.indigo.ca. Not only did the company book no profit, but all three of those revenue channels were down from the previous year, with online sales falling the most (15%).

This is to say that Indigo, in financial terms, was immunocompromised before COVID-19 hit.

The decline in digital sales was especially alarming. It seemed that CEO Heather Reisman was giving up on the web, an impression reinforced by her frequent renovations of in-store environments and her not terribly successful launch of a so-called cultural department store […] in New Jersey, Indigo’s first international gambit. She was all about bricks and mortar.

One also got the sense that Heather was giving up on books. She was building up the candles and blankets side of the business — it represented almost 40% of 2019’s total revenue. She also launched Thoughtfull.co, an effort to graze on Hallmark grass, and another step away from the book business.

I’d certainly despaired of finding much in the way of actual books at Chapters or Indigo stores … more and more of the floorspace that used to be devoted to books had been given over to housewares, candles, hostess gift items, decorative throw cushions and other such non-book items. Even before the Wuhan Coronavirus shut down the western world, it had been at least a year since the last time I’d found anything worth buying in one of their stores.

Two years and several pandemic waves later, Indigo is down to 88 superstores and 88 small-format stores, a net reduction of twenty-eight. I don’t know the significance of 88. Maybe the company’s new retail guru — Indigo always has a new retail guru — is a pianist, or Chinese, or a white supremacist.

The remaining stores are now open to foot traffic, and the company is wrangling with its various landlords over how much rent it should pay for the pandemic months when most of its outlets were closed. Indigo received almost $3 million in federal emergency rent subsidies, and almost $4 million in payroll subsidies, which seems like a lot but isn’t for a company as big as Indigo. As we noted in an earlier post, Heather also received a $25 million “liquidity enhancement”, or bailout, from billionaire husband Gerry Schwartz.

Which brings us to the present. Revenues for Indigo’s most recent quarter are $172 million (down $21 million from two years ago), and it lost $15 million (before depreciation, amortization, etc.).

Indigo doesn’t release enough detail on its operations to give us a clear idea of how the company lost only $15 million when its revenue fell $21 million, but costs were down across the board, probably reflecting the closed stores, reduced staffing levels, and fewer books on the shelves, among other savings.

January 29, 2021

Costs of keeping Biden’s promise to forgive student debt

Filed under: Economics, Education, Government, Politics, USA — Tags: , , — Nicholas @ 03:00

Antony Davies and James R. Harrigan consider the frequently issued campaign promise by Joe Biden and what it will cost to implement:

Given the results of the recent election, it should come as no surprise that we’re poised for the next big expansion: student debt forgiveness, a promise Joe Biden made frequently as he campaigned for the presidency. Like the big ideas that came before it, this idea will cost us more than we can afford from day one, and far more than its proponents will admit. Biden’s plan as currently envisioned would cost over $300 billion. But that’s just this year. The plan will set in motion unintended consequences that will doubtlessly persist for generations.

First, next year’s crop of new students will — understandably — demand that their loans be forgiven too. And so will those of the year after that, and so on. This program will quickly become a sort of college UBI, where the government just hands out $10,000 to every college student. Some argue that if this results in a better educated populace, then it’s worth the cost. But it won’t result in a better educated populace; it will result in a whole bunch of students majoring in things the market doesn’t value, and another batch simply taking a four-year vacation on the taxpayer’s dime. Heretofore, graduates knew they needed marketable skills in order to repay their college loans. But when student loans are forgiven as a matter of course, graduates bear no cost for wasting our collective resources by studying things the market doesn’t value, or by not studying at all.

Data sources: Federal Reserve Bank of St. Louis, National Center for Education Statistics.

Second, colleges and universities will respond to this new reality by raising tuition commensurately. Tuition and fees were a pretty constant 18 to 19 percent of family income from the 1960s until 1978. In 1965, the federal government started guaranteeing student loans. In 1973, Congress established Sallie Mae and charged it with providing subsidized students loans. And by 1978, tuition and fees had started a steady march to 45 percent of family income today. When the government makes it less painful for students to borrow, whether by guaranteeing, subsidizing, or forgiving loans, it takes away some of the pain of student borrowing, which makes it easier for colleges and universities to raise tuition.

Third, expect many taxpayers to cry foul. Homeowners will quite sensibly wonder why the government is not forgiving their mortgages. After all, student loans add up to about $1.4 trillion, while American mortgages total more than $16 trillion. If relieving students from the burden of their debts is a good idea, it should be an even better idea to relieve homeowners of theirs.

What about students who worked multiple jobs or attended less prestigious schools so they could avoid going into debt? Why aren’t they being rewarded? What about students who diligently paid off their debt and are now debt free? Will they receive nothing? What about, fantastically, people in the trades? Is it reasonable to charge people — via the higher taxes loan forgiveness will bring — who did not go to college to subsidize those who do? Regardless of the answers to these questions, implementing this plan will be fraught with difficulty.

January 26, 2021

The brief and inglorious life of Penn Central

Filed under: Books, Economics, History, Railways, USA — Tags: , , , , , — Nicholas @ 04:00

In City Journal, Nicole Gelinas recounts the tale of the fateful merger of two great American railroad systems that lasted just long enough to support massive financial chicanery before descending into inevitable bankruptcy:

More than 50 years on now, the spectacular collapse of the Penn Central railroad in 1970 is little remembered today, but its legacy is still with us — not so much as a warning, but as a prelude: to New York City’s own near-bankruptcy in the 1970s; to four decades of financial engineering, beginning in the 1980s; to the 2001 Enron downfall; to the 2008 financial crisis and its “too big to fail” bailouts — and yes, even to the public discontent that elected President Donald Trump.

As America emerged from World War II, most people would have laughed at the idea of the nation’s two premier freight and passenger railroads, the Pennsylvania and the New York Central, going broke in a quarter-century’s time. By design, the Pennsy and the Central were not fierce competitors but complementary “frenemies” that had long agreed not to undercut one another’s monopoly profits. From Massachusetts to Missouri, the two railroads dominated freight and passenger travel in the northeast quarter of the United States, with nearly 21,000 miles of track between them.

Yet even as America built its powerhouse postwar economy, the railroads struggled. As Joseph R. Daughen and Peter Binzen write in The Wreck of the Penn Central, their cult-classic chronicle of the Penn Central’s demise, during the war the then-separate railroads had been running their equipment 24 hours a day to transport troops and supplies, leaving them with “worn-out” equipment.

In the fifties and sixties, moreover, new competitive pressures prevented them from catching their breath. Trucks competed with the railroads for freight hauling via the new, free highways the nation was building. Commuter-rail passengers moved to the highways as well, while long-haul rail passengers took to the skies. The railroads’ decline accelerated in the sixties, partly because of the collapse of northeast manufacturing.

In 1962, the two companies decided to merge. But railroading was one of the most heavily regulated industries in the United States, so the merger took six years, as it wound its way through multiple levels of public approval for the creation of the 100,000-worker, 100,000-shareholder, 100,000-creditor behemoth. Meantime, government-set rates already fell short of the railroads’ long-term costs.

The combined entity that would become the Penn Central made significant concessions to win political support for the merger, including no-layoff pledges that would hamper its ability to cut spending and a promise to take on the independent (and chronically insolvent) New York, New Haven, and Hartford passenger railroad.

After the merger, the railroads discovered that they had incompatible computer systems, which threw railyards into chaos and angered customers. The Penn Central’s three top officials, too, were incompatible. They “scarcely spoke to one another,” write Daughen and Binzen. Stuart Saunders, the board chairman, was a political guy. Alfred Perlman, the president, was a trains guy. These different outlooks could have complemented each other, but personalities got in the way. Rounding out this dysfunctional triumvirate was Penn vet David Bevan, the top financial official, perpetually “angry and humiliated” at not being picked for the top job.

Penn Central route map from us.leforum.eu
http://us.leforum.eu/t1355-Photos-du-Penn-Central-PC.htm

H/T to Ed Driscoll at Instapundit, who also posted this video the combined entity put together to celebrate the merger:

November 20, 2020

The political danger if the “chumps” unite

Filed under: Economics, Education, Politics, USA — Tags: , , , — Nicholas @ 03:00

In City Journal, James B. Meigs describes what he calls the “Chump Effect” in American politics:

Senator Elizabeth Warren speaking at the Iowa Democrats Hall of Fame Celebration in Cedar Rapids, Iowa, on 9 June, 2019.
Photo by Lorie Shaull via Wikimedia Commons.

Last January, a small but telling exchange took place at an Elizabeth Warren campaign event in Grimes, Iowa. At the time, Warren was attracting support from the Democratic Party’s left flank, with her bulging portfolio of progressive proposals. “Warren Has a Plan for That” read her campaign T-shirts. The biggest buzz surrounded her $1.25 trillion plan to pay off student-loan debt for most Americans.

A man approached Warren with a question. “My daughter is getting out of school. I’ve saved all my money [so that] she doesn’t have any student loans. Am I going to get my money back?”

“Of course not,” Warren replied.

“So you’re going to pay for people who didn’t save any money, and those of us who did the right thing get screwed?”

A video of the exchange went viral. It summed up the frustration many feel over the way progressive policies so often benefit select groups, while subtly undermining others. Saving money to send your children to college used to be considered a hallmark of middle-class responsibility. By subsidizing people who run up large debts, Warren’s policy would penalize those who took that responsibility seriously. “You’re laughing at me,” the man said, when Warren seemed to wave off his concerns. “That’s exactly what you’re doing. We did the right thing and we get screwed.”

That father was expressing an emotion growing more common these days: he felt like a chump. Feeling like a chump doesn’t just mean being upset that your taxes are rising or annoyed that you’re missing out on some windfall. It’s more visceral than that. People feel like chumps when they believe that they’ve played a game by the rules, only to discover that the game is rigged. Not only are they losing, they realize, but their good sportsmanship is being exploited. The players flouting the rules are the ones who get the trophy. Like that Iowa dad, the chumps of modern America feel that the life choices they’re most proud of — working hard, taking care of their families, being good citizens — aren’t just undervalued, but scorned.

The word “chump” probably derives from an ancient Norse term for a stump or large chunk of wood. The modern word “blockhead” comes to mind, which — no coincidence — was Lucy’s favorite label for the too-trusting Charlie Brown in the Peanuts comic strip. Lucy never tired of snatching away the football; Charlie fell for it every time. We all know the feeling: when you’re inching forward in the freeway exit lane, say, and another driver flies past and swerves onto the ramp at the last second; when your child has to complete her college-entrance exams within a designated time period, but your neighbor’s child gets twice as long because of a suddenly diagnosed “learning disability”; when you pay extra to have your pet travel in the airplane’s cargo hold but the yipping poodle across the aisle, an “emotional-support animal,” gets to ride on its owner’s lap for free. You didn’t know that you could get an emotional-support card just by claiming an anxiety disorder and paying a fee to an online agency? What are you — a chump?

April 27, 2020

The Economy of Ancient Rome

Filed under: Economics, Europe, History — Tags: , , , , , — Nicholas @ 04:00

Economics Explained
Published 26 Apr 2020

Ancient Rome was perhaps the most significant ancient civilisation to have existed throughout history, the empire lived for over 1000 years and in that time, it gave us the foundations for our modern society. Democracy, a court based legal system, Latin languages and alphabet, three course meals, and perhaps it was one of the first modern economies to move beyond a simple agrarian empire and develop things like modern banking, lending, taxation and yes even financial crisis as we know them today.

In the same way that scholars study a dead language like Latin to discerned the foundation of meaning in our modern dialects economists can study the histories of ancient civilisations like Rome to determine basic economic functions in a time before modern financial systems could skew results and Rome was perhaps the most developed case study we could look at.

#rome #economics #recession

Patreon – https://www.patreon.com/EconomicsExpl…

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References –

Morley, N., 2002. Metropolis and hinterland: the city of Rome and the Italian economy, 200 BC-AD 200. Cambridge University Press.

Temin, P., 2006. “The economy of the early Roman Empire”. Journal of Economic Perspectives

Temin, P., 2017. The Roman market economy. Princeton University Press.

Garnsey, P., Hopkins, K. and Whittaker, C.R. eds., 1983. Trade in the ancient economy

Brown, P., 2012. Through the Eye of a Needle: Wealth, the Fall of Rome, and the Making of Christianity in the West, 350-550 AD. Princeton University Press.

Braund, D.C., 1983. Gabinius, Caesar, and the publicani of Judaea. Klio

Articles

http://penelope.uchicago.edu/Thayer/E…

https://www.rug.nl/ggdc/historicaldev…

https://www.pwc.com.au/publications/a…

April 13, 2020

James J. Hill, US railroading’s premier “market entrepreneur”

Filed under: Business, Government, History, Railways, USA — Tags: , , , — Nicholas @ 03:00

Dane Stuhlsatz outlines the story of US federal government subsidies and other interventions into the 19th century railroad industry and the one tycoon who avoided the lure:

Postcard photo of the Great Northern Railway’s “Empire Builder” streamliner between Everett and Seattle, Washington, circa 1963.
Great Northern Railway postcard via Wikimedia Commons.

Burton W. Folsom, Jr. outlined this story in his book, The Myth of the Robber Barons, identifying two models of entrepreneurship; the “political entrepreneurism” of lines like the Union Pacific and Central Pacific versus the “market entrepreneurism” of James J. Hill and his Great Northern Railway.

Canadian-born James J. Hill (1838-1916) in 1914.
Photo from Famous Living Americans, edited by Mary Griffin Webb and Edna Lenore Webb via Wikimedia Commons.

As Folsom details, the former chased government largesse, ultimately in exchange for loss of control of their business, while the latter chased profits through prudent business decisions. Hill’s success juxtaposed with UP’s and CP’s failure is due in no small part to his steadfast refusal to accept any federal subsidies. In short, UP’s and CP’s government subsidized incentives were vastly different from Hill’s profit driven incentives, which lead to vastly different outcomes.

Federal subsidies incentivized speed, not efficiency. The subsidies were paid in the form of both land grants and direct payments. For each mile of track laid, the UP and CP would receive 20 acres of land and either $16,000 (for track on flat land), $32,000 (for track on hilly terrain), or $48,000 (on mountainous terrain). This incentive for speed resulted in winding, inefficient, routes built with inferior materials, ultimately culminating in a federal price tag of 44,000,000 acres and $61,000,000 (astronomical sums in the 1860s-70s). Despite all this federal assistance, shortly after the golden spike was driven on May 10, 1869 at Promontory Summit, Utah, the UP and CP were nearly bankrupt and required further assistance to stay afloat.

The lines which were born and brought up on federal aid needed federal aid to continue. This led to the passage of the Thurman Law in 1874 which forced UP to pay 25% of its earnings a year to pay its federal debt.

UP’s profitability decisions were also subject to government approval. Branch lines — smaller lines off the main line into rural communities — which could have helped UP’s bottom line, were often not approved by federal bureaucrats. Additionally, the federal Bureau of Railroad Accounts required constant checking of UP’s books. All these measures stifled the ingenuity that UP so desperately needed to make its line profitable. UP quickly found out that the power to subsidize was the power to destroy.

Hill’s line on the other hand was methodically surveyed and built, on the shortest routes possible, with the least gradient possible, and using the best steel and other materials on the market at the time. Rather than political largess, Hill made his decisions based on profit and loss. But, for all the efficiency that Hill built into his line — he was able to transport across the country faster, cheaper, and with less maintenance costs than could the UP and CP — arguably the most important aspect for the viability of his business was the freedom to conduct business untethered by the strings that accompanied government subsidies.

While Hill was free to build when and where he wanted so long as he reached voluntary agreements with landowners, consumers, and employees, UP was tied up in red tape. As Hill’s line grew evermore profitable and reliable for customers, the UP and CP struggled along on federal aid, until they ultimately went bankrupt in 1893.

For his part, Hill’s line was the only transcontinental railroad to never go bankrupt.

Route map from the Great Northern Railway, circa 1920. Red lines are the GN route; dotted lines are other railroads. Created from the Map Maker at nationalatlas.gov and routes drawn in, using a 1920 map as a reference.
Map by Elkman via Wikimedia Commons.

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