Monday, July 28, 2014

Super Fun Economic Review – Part 2: Partying with Jack Daniel like it's 1999!

As stated in my previous post, both Saenuri lawmakers as well as the Ministry of Strategy and Finance wants to see “adjustments” made to the value of the Won. It's their way of saying that they want to see the value of the currency depreciate.

Well, why does a currency appreciate in the first place? Simply put, it occurs because the currency is in demand. For example, if a country exports a lot, the demand for that currency will go up. There are, of course, other reasons, too, such as increasing (or at least stable) interest rates, an increase in per capital income, a stable government, etc.

So, the value of the Won has been relatively quite high over the past few years.

However, a few really big things have been happening in the world over the past few years that are beyond the Korean government's control. Since 2008, the United States government has injected into its economy close to US$5 trillion in stimulus money while keeping interest rates at nearly zero percent and having the world's largest debt, which has devalued the Dollar somewhat. The Japanese government recently decided to depreciate the Yen. And with several European economies having gone belly up over the past few years (see PIIGS economies), there have been calls by several European governments to depreciate the Euro, and the Euro is expected to depreciate against the Dollar in the next few months.

Congratulations!  You read through that borefest and did't get distracted by porn!  Here's your reward!  Look at those puppies!  LOOK!  AT!  THEM!
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Everyone is depreciating (or wants to depreciate) their own currencies. It's why Saenuri lawmaker Representative Kim Moo-seong said, “There is a Currency War going on in the world right now.”

So why do governments want to depreciate their own currencies? The main reason why any government would want to depreciate its own currency is for the sake of becoming “more competitive.” With one country after another going through some form of economic contraction or another, governments are trying to increase exports. And the best way to increase exports is by making sure to sell at a cheaper price than other countries. And if you can't make the product cheaper, you can make the money worth a little less.

(Side note: If depreciating a currency makes a country more competitive, shouldn't Zimbabwe be the richest country in the world?)

Move over, Travie McCoy.  I want to be a trillionaire!
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The problem with depreciation is that it's like having a shot of whiskey. Everyone who is calling for their currencies to depreciate are basically saying, "A shot would really perk me up right now."

Well, it's true. Having a shot of whiskey will definitely perk people up. But the problem with having that shot of whiskey, as any whiskey aficionado will tell you, is that you can never have just one shot of whiskey... If there is any among you who is thinking that this analogy does not work because you yourself do not enjoy whiskey, YOU SHUT UP AND DIE, YOU ABOMINATION!

The fact of the matter is that we live in an interlinked global economy and in such an economy, currencies don't rise or fall in a vacuum. For example, one complaint that the United States always raises against China is the latter's monetary policy, which has kept the Chinese currency, the yuan, artificially low. The Chinese government has pursued such a policy because it ensured that Chinese goods remain cheap, which is one of the big reasons for the trade imbalance between the United States and China. That has provided a steep incentive for the United States to retaliate by lowering its currency as well, which in effect, it has done.

Yet another reward!
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Countries around the world often see currency wars as a zero-sum game. In reality, it is really a lose-lose game for everyone. For example, unstable exchange rates can deter international investment and slow economic recovery. And of course, currency wars can have secondary political effects as well. Though this may admittedly be a case of post hoc ergo propter hoc, when was the last time that the American and Chinese governments have ever seen eye-to-eye on anything?

So going back to the whiskey analogy, it turns out that people aren't just slamming down whiskey shots just to perk up a bit. They are actually in a drinking competition that's being hosted by Delta Tau Chi (Who got that reference, huh?) and everyone's trying to out-drink each other. And the drunker they get, the more irritable the contestants are getting.

Now it may be an incontestable fact that Jack Daniel's is the best goddamned drink on this side of the Milky Way Galaxy but it is also true that spending a bit too much time with him usually gets people into all manners of trouble.

Just ask this guy!
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Oh, but what is this that I hear? A question from the audience?

But, John, aren't you by definition saying that as long as people slam down their shots of sweet, sweet Jack Daniel's nectar in moderation, it will perk people up and they won't ever have to worry about getting arrested for indecent exposure in a public park in the presence of four minors and their very angry mothers and one dad? Then isn't it also true that depreciating a currency in moderation can actually work to stimulate an economy, too?”

Well, firstly that's a terrific question, hypothetical reader who is actually really me (and no, it is not sad at all that I am having a conversation with myself).

The answer to the question as to whether or not depreciating a currency works to stimulate an economy is this – Yes and no.

Depreciation works if prices and wages don't adjust to the new economic conditions. For example, let's say that you're a citizen of Country A and you make A$1,000 a month. Now it so happens that your country trades with Country B. It also so happens that in order to improve economic conditions, your country's government decides to depreciate your currency. So, in the past, if your A$1,000 was worth B$1,000, now your A$1000 is only worth B$500.

In this new situation, citizens from Country B can afford to buy more of your things. Now if the prices of your goods and your wages remain the same, depreciation will absolutely work as those suckers from Country B (who conveniently aren't depreciating their own currency for no other reason than to let this hypothetical example work; ceteris paribus, bitch!) stops buying their own stuff and continues to buy your stuff! But it will only work temporarily.

Temporarily” is a very important qualification.

Has this blown your mind yet?
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It will only work temporarily because eventually, inflation always catches up to depreciation. Let me explain. When the value of your country's currency is artificially depreciated, other people's demand for your goods will go up. And one of the laws of supply and demand is that if demand goes up, so does price.

What that means specifically for you is that your monthly bills are going to come out higher than you're used to. And when prices go up and enough people get upset about it (Hello, labor unions!) it's not long before wages also go up until it catches up with the price and then some.

So, just like slamming down shot after shot after shot of Jack Daniel's, it's not a matter of whether or not a little currency depreciation will perk you up. It's a matter of how long you get to have fun before you wake up the next day with no memory of why you thought it was a great idea to drunkenly text your ex-girlfriend who has been happily married for the past three years that you still love her thirty-eight times while lying next to a one-legged hooker. Not to mention the massive hangover.

Someone should make this app RIGHT NOW!
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But that's where democratically elected governments come in. Every politician wants to get elected and they want to stay elected. So whenever the hangover is about to set it, they have good news for us partiers! Just a little hair of the dog and you're good to party again like it's 1999!

That hair of the dog usually includes more currency depreciation and more economic stimulus packages. But as anyone who has ever had a destructive love affair with Jack Daniel's can tell you, after a while, even the hair of the dog can't perk you up. You will also need at least a pack of Marlboro’s (Hello, lowered interest rates!) and if it's bad enough, Adderall (Hello, quantitative easing!).

What you slowly begin to realize, however, is that your body is silently pleading for you to stop. You need solid food. You need water. And you need sleep. You need time to recover. You realize that your stress levels are getting higher, your brain function is slowing down, and all that booze and drugs is burning a hole in your checking account, which means that you have to call mom and dad to ask for more money.

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Now you're in a rut. To reduce your stress levels, you need money so that you can pay your rent and not get evicted; but to do that, you need to call mom and dad to ask for more money and explain to them how you misspent their money (that they had to take out in loans from Repos-R-Us Bank) on booze and drugs instead of studying in the library to get that 4.0 GPA that you swore to them that you would get if they would only just bite the bullet and send you to this overpriced Ivy League college campus.

Now you're having second thoughts. Telling them about all those stupid things you did would disappoint them, break their hearts, make them lose faith in you, anger them, and hurt them. Worse yet, they might stop sending you money and force you to move back in to your old bedroom and get a job at the local paper mill where the highlight of your day will be watching reruns of “The Bold and the Beautiful” on your union-approved hour-long lunch break with those other middle-aged factory lifers who don't like yer kind with all that mumbo-jumbo book learnin'.

Talk about getting stuck between a rock and a hard place, right?

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This sort of thing also happens in economies and there's a name for it – stagflation. And it's no fun. If you don't believe me, ask Jimmy Carter.

Before you know it, you've become a junkie and have resorted to stealing (Hello, Taxes Against Corporate Surplus Profits!).

So what's the real solution? Well, unfortunately, the real solution is economic as much as it is political. Do you trust the government to have enough discipline to depreciate the currency only when it is absolutely necessary, and not do it any time it is expedient? Do you trust that the stupid college kid really has the willpower to go to only one Delta Tau Chi-sponsored Drinkathon and then spend the rest of his time to make sure that he graduates with a summa cum laude? Or do you think there has to be strong rules and strict morals?

As for me, I don't trust those bastards. But that's just my opinion.

To quote Gandalf the Grey - Fly, you fools!
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Sunday, July 27, 2014

Korea Needs to Liberalize Its Rice Market

I realize that I said that my next post was going to be my second installment of “Super Fun Economic Review” about the Korean government's increasing hints about depreciating the value of the Won.

Rest assured, that post is coming. However, it's taking longer than I had anticipated.  In the meantime, I wanted to upload this post.

Just today, I read an article in The Diplomat about Korea's refusal to liberalize its domestic rice market to international trade. A few days ago, I also read a very impressive article about this same topic that was written by Eric Deok-jin Song who works over at the Korea-based libertarian think tank, Center for Free Enterprise (자유경제원).

As the article was written only in Korean, however, I have taken the liberty of translating the article into English.

I think that this is a good time to state that I am not affiliated with the Center for Free Enterprise in any way whatsoever. Furthermore, any mistakes in the translation are mine and mine alone.

The first two picture files in this post were from the original post, but I have added the other pictures myself.

Is rice life? How much longer will the taxpayers' money be spent to subsidize rice? Rice has already been losing its status as the country's staple food. From 1995 to 2014 whereas rice production increased about 10%, the amount of rice that has been imported has increased 8 fold. The only two countries in the world that have not opened up their rice markets are Korea and the Philippines. Continuing to subsidize rice is a waste of the taxpayers' money.

The white signboard that the man is carrying reads "쌀은 생명이다," which means "Rice is Life."
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The Ministry for Food, Agriculture, Forestry and Livestock says, “For the future of the rice market, the best decision that we have made was to begin to import rice, but to impose tariffs on imported rice.”

With the government on one hand that says that the opening up the rice market can no longer be delayed and opposing farmers on the other hand claiming that such a move would cause irreversible harm, the differences between the two sides are sharply contrasted. It should be noted that Korea made a promise to the international community to open up its rice market in the Uruguay Round of multilateral trade talks in 1994.

By claiming that rice is unique to Koreans, the Korean rice market has received “preferential treatment” and has been waived from opening up the market at great cost. What was the great cost? For failing to open up the market, Korea was obligated to import up to 51,000 tonnes of rice in 1995. That obligation has steadily increased and this year, Korea is obligated to import up to 409,000 tonnes of rice this year alone. At the end of this year, Korea's grace period will come to an end. Korea can no longer afford to delay opening up the market.

The first two lines above and below the Korean and the Philippines flags say "The only two countries in the world that have not opened their rice markets are Korea and the Philippines."
The circles and the text in the middle of those circles say "Rice production has fallen from 4,690,000 tonnes to 4,230,000 tonnes.  Korea has had to increase its obligatory rice imports from 50,000 tonnes to 400,000 tonnes.  An average Korean's rice consumption has fallen from 532 bowls per year to 336 bowls per year."
The last line says, "How much longer will the taxpayers' money be spent to subsidize rice? How much longer will we be forced to import rice?  It is time to compete with imported rice."
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Despite having protected the rice market much more and much longer than any other industry, Korea's agriculture industry has barely survived. Despite continuous large-scale investments, Korea's agriculture industry's competitiveness remains at a standstill. Due to a decline in the number of farming households, more and more people have begun to abandon their farms. As a result, only senior citizens and low-income families continue to live in rural areas, which threatens to shrink Korea's agriculture industry even further. Although rice production has increased somewhat, average income has fallen, which has caused a great income disparity.

Opening up the rice market will provide our agriculture market with new opportunities. Korean agricultural products are popular in China. That is because the Korean brand is considered a trustworthy brand by Chinese consumers. Opening the rice market will not lead to imported rice flooding the Korean market but rather an increase in our exports to overseas markets. Now is the time to increase the rice industry's competitiveness and to focus on the debate of raising tariffs.

Korea's agricultural industry stands at a crossroad. It can either crash as a declining industry tends to do or it can find ways to become a competitive industry. Using competitiveness as a springboard, it has to find the right direction in order to become an advanced agricultural industry. It has to extricate itself from all of its excessive protections and move away from its land-intensive production methods in order to pursue more capital-intensive production methods.

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The Confederation of Farmers Alliance that has long opposed the opening of the rice market has already begun to engage in all-night sit-ins and other forms of protests. Instead of engaging in unreasonable protests, they have to embrace market principles and the entrepreneurial spirit. In order to transform the industry into a competitive one, and to transform it from one focused on
공자유전 (耕者有田), which is established in Article 121 of the Republic of Korea Constitution which states that “the State shall endeavor to uphold the notion that those who till the land will use the land,” to one that is focused on 경자용전 (經者用田), which is the notion that those who can manage the land can use the land. Furthermore, the regulations and restrictions on the agriculture industry ought to be abolished.

Only this effort can lead to an increase in new capital investment that is needed to increase the industry's competitiveness and establish an international business that can compete globally.

That large businesses are always opposed to entering the agriculture industry in Korea is worrisome. Dongbu Group, which had built a state-of-the-art facilities in a tomato production facility but faced opposition from farmers groups and had no choice but to discard millions of tomatoes. Dongbu Group had even signed a contract to export domestically produced tomatoes to Japan. However, the farmers and the farmers groups opposed this. After having lost millions, Dongbu Group withdrew from the tomato business.

Toyota, the symbol of Japanese manufacturing, on the other hand, has built and is strengthening their agricultural productivity. The agriculture business is gaining strength to becoming a vital business in the future.

Whenever a free trade agreement has been signed be it with Chile, the United States, the European Union, ASEAN, Australia, or Canada, the farmers have never failed to angrily protest. Yet even with the importing of Chilean grapes, domestic grape production has increased. The beef market has been opened but Korea's beef industry has not weakened. It is the same with other agricultural goods. The farmers have begun to improve their quality, scientific methods, and have begun to become more competitive.

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Although competition and opening up markets can threaten domestic businesses initially, it has in fact strengthened the domestic industry.

Agricultural products have increased in value and improved their income levels. People have to accept this new change and farmers must stop thinking of themselves as farmers and instead think of themselves as “farmakers” and “farmarkets.” Farmers have to accept the entrepreneurial spirit that can only exist within capitalism and only this can ensure the successful development of a competitive agricultural industry.

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Thursday, July 24, 2014

Super Fun Economic Review – Part 1: The Boring News Stuff Before We Dive Into the Fun Stuff

Economics can be a very dry subject to many people. In fact, when I first came across the topic of economics while I was in high school, the only thing I knew about the subject was that it is a study about money that I don't have.

I would have slept through the whole class in high school had it not been for the fact that my economics teacher, Mrs. Charice Lai, was a smoking hot woman who had the amazing ability to make lessons about the Production Possibility Curve and the differences between comparative and absolute advantages sound like she was reading from a dirty romance novel.

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Hence, I paid very close attention in class and before I knew it, I was majoring in economics in college. My other major was political science. So what was it like majoring in both economics and political science? Other than realizing that double majoring in the social sciences during a world-wide economic slump was probably not the best investment decision that I had ever made in my life, the other lesson that I learned can be summed up by this quote from the esteemed economist Thomas Sowell.

The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

As regular readers of this blog will know, I do write a fair deal about economics. And I plan to keep doing it. Mark Twain did say that people should write what they know. But it is a very dry topic and I don't have Charice Lai's curves or sultry voice.

However, when I read a series of news articles recently about Finance Minister Choi Kyung-hwan's views about Korea's economy, its future, exchange rate policies, taxes, and income distribution, I knew that I had to write about it. Unfortunately, there is way too much to write in response to everything he has said and done in the past month. My longest post to date, “The Philosophy of Snowpiercer” was a thirty-minute read (yes, I timed it) but it was at least about a fun movie. A single post that long about economics would bore most everyone to tears. More realistically, it would remain unread.


So, the first decision that I made was that I am going to write this post as a series just like I did when I wrote about the “Are You All Right” Movement. The second decision that I made was that I am going to make this as relatable as possible by trying to incorporate anecdotes, jokes, analogies, etc.

However, before we can get to the fun part, we do have to slog through some of the boring parts that were in the news. If we don't, then you will have no idea where all of this rambling is coming from.

So here we go. This will mark the first of the series “Super Fun Economic Review” – Part 1: The Boring News Stuff Before We Dive Into the Fun Stuff.

(Of course it is a ridiculous title that is begging for clicks! Would you have clicked on the link if it had been “A Critique of Expansionist Fiscal and Monetary Policies?”)

Why won't people read my blog post about Supply Side Policies and Competitiveness???
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Anyway, with less than a week to go for the July 30th by-elections, the ruling conservative Saenuri Party is predicted to lose its majority in the National Assembly. Considering the rapid-paced economic announcements that have been coming out of the Blue House and the Ministry of Strategy and Finance, it would seem that both President Park and the Saenuri Party are desperately trying to stave off defeat. And there is no other time that politicians pander more than when they are truly desperate.

For example, it was reported in an article in The Korea Times that Saenuri Party lawmaker, Representative Kim Moo-seong, said that the government ought to depreciate the value of the Won. He said, “There is a Currency War going on in the world right now and the Bank of Korea ought to come up with ways to adjust the exchange rate. However, the Bank of Korea has not come up with any measures. We have to depreciate the currency.” (This was translated from the Korean text, which does not appear in the English version.)

In the same article, the newly appointed Finance Minister Choi Kyung-hwan said that there are too many corporations that are hoarding excessive profits. In order to ensure that “more money goes to households,” he said that he would push for tax breaks to provide incentives for corporations to increase wages and dividends for small investors. However, if those corporations that have surplus profits build up internal savings without raising wages or dividends, the government will then tax the “excess profits.”

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Furthermore, Minister Choi also said that low growth, low inflation, and an excessive current account surplus are signs that Korea may follow in the path of Japan at the start of its so-called “lost two decades.”

Therefore, in an attempt to avoid a much-feared long period of deflation that Japan went through, it was just reported today (July 25th 2014) that the Korean government plans to inject the economy with a 41 trillion (US$39.8 billion) stimulus package to revive the sagging economy. Minister Choi also said, “The government plans to use expansionary measures until the economy shows clear signs of recovery.”

As further measures, the government plans to expand tax deductions for people who use debit cards to make purchases from 30 percent to 40 percent. The government also plans to increase tax deductions for households that earn ₩70 million in annual salaries or less that plan to purchase homes and also plans to increase government-provided home mortgages.

So, that's the background information that you need to know for now. Stay tuned for the next installment that will deal with the topic of currency depreciation.

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Monday, July 21, 2014

Paying for North Korean Cheerleaders?

With the 2014 Asian Games set to begin in Incheon in September, the North Koreans initially proposed to send up to 150 cheerleaders to the games. At the time, the total cost of hosting the cheerleaders and the North Korean athletes were estimated to be around ₩1.5 billion (US$1.45 million).

Since then, however, the North Koreans have declared that they would send up to 350 athletes and 350 cheerleaders. Of course, this does not count the bodyguards and the political minders that the North Koreans will most likely send to ensure that none of their athletes or cheerleaders gets any ideas about defecting.

If South Korea ends up paying for the North Korean delegation as it has in the past during the days of the so-called Sunshine Policy, then I have a feeling that it would cost more than the aforementioned ₩1.5 billion.

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During the negotiations about how many delegates the North Korean government was planning to send (Does it strike anyone else that it is ludicrous for the meeting to have taken place at all?), the South Korean government, which seems to have grown something that resembles a backbone, did not play the game that the North Koreans wanted. A South Korean government official reportedly said:

At past international sporting events, it was customary to provide all accommodation free of charge for the North Koreans, but we decided to adhere to international practice this time. And under Olympic Council of Asia regulations, each country is responsible for the expenses incurred by its athletes and cheering squads, although accommodation subsidies are provided for underdeveloped countries that are sending a small group of athletes.

On top of that, South Korean government officials told the North Koreans that their flags that they wanted to bring were too big and could become a safety issue.

When the North Koreans were told that they were not going to get a free lunch and that their flags were going to be the same size as everyone else, as per their typical behavior, the North Koreans huffed and they puffed and said something about how South Korea displayed an “improper attitude” to the talks.

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The fact that the North Koreans even brought up these ridiculous demands should not come as a surprise to anyone.

North Korea is a nation of thugs – a country that was founded on the principle of taking everything from everyone and giving it to the Supreme Leader. What is money to the North Koreans? To everyone else who lives in capitalist(ish) economies, money is a tool of exchange – it is what people use to trade with others.

And we have to keep in mind that unless forced to do so, no one in the world trades down. People always trade up. What that means is before I decide to pay for a product, I will always make sure that the product will be of higher value to me than the money that I would give up in exchange for the product. When we accept money in payment for our effort, we do so only on the conviction that we will exchange it for the product of the effort of others. In other words, people trade value for value. That is what money is used for.

And where does our effort, the goods that we produce, come from? They don't magically appear out of thin air. We have to use our minds to create something that is worth selling. If we didn't use our minds, we wouldn't be able to create a single thing.

In sum, money is the tool that we use to exchange with each other the efforts of our minds.

That is why money is sacred. That is why we hate those who steal and commit fraud. Thieves, through no merit of their own with the exception of thuggery and skulduggery, take from the rest of us what we have rightfully earned by the sweat of our brow. That is why in a civilized society, thieves are shamed and punished (or at least ought to be).

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What do North Korean officials know about money? They certainly know that it is something that they need to buy luxury cars, French cognac, Uzbek caviar, and Danish pork. But what do they know about earning money? Why go through the trouble of earning money when they can just get easy riches by printing counterfeit money or producing crystal meth or selling women as sex slaves?

They have no rational minds to speak of – only power lust and the desire for unearned greatness. They wouldn't even know how to begin to think of something as being sacred. They are unthinking brutes, and the only good thing that they could ever possibly do for themselves and the rest of the world is to commit mass suicide.

However, now that I think about it, I think I may have been far too charitable to people who live south of the DMZ when I said that everyone who lives in capitalist(ish) economies knows that money is a tool of exchange. There are clearly some people who not only lack that knowledge, but also lack anything that resembles a brain altogether.

Case in point, The Korea Times published an editorial about how Seoul should have been the one to initiate this unbelievable fiasco by having invited North Korea to participate in a regional sports festival in South Korea and offering to pay the cost. The editorial goes on to say that Seoul needs to be more magnanimous and tolerant, no longer citing “international standards” or “popular sentiment.”

Never mind that the North Korean government is responsible for numerous crimes against humanity as well as against South Korean sailors, marines, soldiers, civilians, and diplomats. As far as The Korea Times' editorial staff is concerned, Seoul ought to be more magnanimous and tolerant toward these thugs who have threatened to attack us AND actually attacked us on numerous occasions.

When faced with such incredible stupidity, I suppose there really is only one thing that can be said.

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Saturday, July 19, 2014

“Voting Against Their Own Interest” - You should probably stop saying this.

The majority of people in the world, except perhaps the mentally ill, seldom ever claim to be Marxists anymore. Whenever progressives are accused of being Marxists or socialists, they mock their simple-minded opponents and go on their merry way.

However, we have to keep in mind the famous quote about the greatest trick the Devil ever having played was how he convinced the world that he didn't exist.

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The great irony of present-day Marxists is that the majority of people who are either consciously or subconsciously influenced by Marxism have never read any of Marx's works. Then there are those who have read his works and who have failed to understand Marx.

(Joseph A. Schumpeter listed in his book, “History of Economic Analysis” (Page 362, “Concerning the Marxist System”) quite a formidable and hefty set of prerequisites that people have to read in order to properly understand Marx. This probably explains why so many people are reluctant and/or unable to fully understand Marxism.)

Regardless of whether people have read or not read or understood or not understood Marx, many people have uncritically accepted many of his views as gospel truth. And I am willing to bet that most of those people don't even know that they are channeling Marx.

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For example, one thing that I have heard many progressives complain about often is that, especially after having been “influenced” by the “corporate media,” far too many middle to low income earners “vote against their own interest.” For proof simply do a Google search for “vote against their own interest.”

However, we have to ask what people mean by “interest” when they pose their question. In every single instance, when that question is asked, what they almost always mean by “interest” is the interests of the group that the individuals supposedly belong to.

For example, people often ask why ethnic minorities or women vote for conservative parties, or why the low-to-middle income earners vote for tax breaks for the “super rich.” Notice how no one ever asks why a particular woman or member of an ethnic minority group might vote for a conservative politician or why individuals would vote for tax breaks that they themselves might not benefit from immediately. It's always about the group.

This goes back to Marx's belief, which he stated in the Communist Manifesto, that “the history of all hitherto existing human society is the history of class struggles.” As far as Marx was concerned, “interests” are something definite and apart from a person's ideas.

It was a belief that Marx himself contradicted in the same damned book. As Marx was not a member of the proletariat, he conveniently added that “in times when the class struggle nears the decisive hour... a small section of the ruling class cuts itself adrift, and joins the revolutionary class.”

If it is possible for some people to extricate themselves from the trappings of their own class and its supposedly inherent interests, then the law is really not a law! Too many Progressives, however, don't seem to be able to see the contradiction to question their own beliefs when they talk about people “voting against their own interests.” They believe that the “interest” of a class is obvious and that there could be no doubt about what it is.

I suppose it is much easier to assume that people who do not agree with them are brainwashed class traitors than individuals who genuinely have their own independent minds that happen to be opposed to theirs.

Furthermore, this idea about class interest is an idea that is all too similar to that of racists. Racists tend to believe that members of a race all look and think alike. That they should all behave in a particular way. That there are certain things that all members of a certain racial group should inherently like and dislike. Replace the word “race” with “class” and you get the same argument!

It all comes down to collectivism. Modern-day Marxists (whether they know that they are channeling Marx or not) do not believe in individualism. They may say that they do, but their inner most philosophy seems to say otherwise.

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The quote about the Devil may be attributed to Charles Baudelaire but in all fairness, Kevin Spacey did make it sound much better.

Wednesday, July 9, 2014

Soccer is just an illusion and we need to wake up to reality.

Everyone is fan of some kind of sport and football is one of the most popular sports in the world. As for me, I don’t care much for football. My sport of choice has always been economics with a side of politics.

I bet there would have been fewer economically illiterate people in the world if economics had been taught like this.

Anyway, I was on the bus on my way to work when I heard the Brazil-Germany game being announced on the radio. I didn’t pay much attention to it. Honestly, I don’t understand how anyone can be in the mood for anything else besides a strong cup of coffee at half past six in the morning. But I heard the score being announced.

Seven to nothing.”  (The game ended seven to one.)

I might not be a football fan, but even I know that that is not the kind of score that you hear very often. Especially when the losing side is Brazil.

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From what I have seen in the news, Brazilians appear to be in mourning. Although it is doubtful that Brazilians are going to begin to dislike football, it is quite likely that more and more Brazilians will begin to question the wisdom of having hosted the World Cup in the first place.

Brazil is now the seventh largest economy in the world and is one the BRIC economies that is a darling case study of successful developing economics. The problem with GDP rankings, however, is that looking at the GDP alone belies the other smaller, but not less important, economic details that often plague a country.

For example, Brazil has some of the highest tax rates in the world, has 35 pensioners for every 100 contributing workers despite the fact that 62% of Brazilians are under 29 years of age. It has also one of the most corrupt governments in the world. To make matters worse, Brazil will have to face the consequences of holding down government-regulated prices when it faces inflationary pressures in about a year or so. Others seem to take an even dimmer view of Brazil’s persistent rate of inflation.

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Despite all of these economic problems, however, the Brazilian government insisted on hosting the 2014 FIFA World Cup, which is estimated to have cost more than US$11 billion. As frightening as the price tag may be, though it is not reported so much now, even days before the games started, stadiums remained unfinished or did not meet safety standards. However, this doesn’t even begin to count the human costs (more on the human cost here and here) that were involved in hosting the games.

Considering the immense costs of the World Cup, it would seem that the promise of economic development that the World Cup brings to its host countries is a lie. This should not come as a surprise, however. The only reason why governments get involved in hosting the World Cup is that it is not profitable. If it were profitable, there would be no need for massive government subsidies, which these games really are.

However, it’s not just the World Cup that is a drain on the host country’s economy. The Olympics is another financial nightmare. Just ask the Greeks what they think about the 2004 Olympic Games (more about the cost of hosting the Olympics can be found here). It’s for such reasons that the residents of Munich sensibly voted NOT to host the 2022 Winter Olympics.

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The smartest thing that I have heard come out of this World Cup game was from Antonio Hipolito, a Brazilian man who works at a bookstore in a wealthy part of Rio, who said this right after the Brazil-Germany match:

Soccer is just an illusion and we need to wake up to reality.

It is sound advice that Brazilians should heed.

Now, how about that 17th Incheon Asian Games, which apparently has cost US$1.62 billion (whereby the cost of housing North Korean cheerleaders alone is estimated to cost up to ₩1.5 billion), and the 2018 Pyeongchang Winter Olympics?

It seems that Koreans might need to heed Senhor Hipolito’s advice, too.

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