Tuesday, September 27, 2016

First Clinton-Trump Debate: Dumb Economic Policy and Even Dumber North Korea Policy

The first presidential debate between Trump and Clinton ended a few hours ago and it was one for the history books for all the wrong reasons. For an hour and a half, hundreds of millions of people around the world got to witness sheer cynicism being masked around as political debate such as moments when Hillary Clinton talked about the importance of cyber security without a hint of irony or self-consciousness and when Trump went on an incoherent spiel about Rosie O’Donnell, Sean Hannity, and Howard Stern.

The Lincoln-Douglas Debate this was not! Not that anyone ever suspected it would be. Political debates are little more than pomp and pageantry where candidates get to flout their well-rehearsed lines and zingers hoping to spring their gotcha-traps for each other. But even when political candidates for the highest office of the land, and possibly the world, are held to such low expectations, it is amazing how they can still trip over those low bars.

I could honestly think of no other television show in history that was done a greater disservice from an absence of a built-in studio laugh track than that so-called debate.

There are many people who already have and will continue to break down the debates and go through them in excruciating detail until the next debate occurs. I wish them the best of luck. It would be akin to being told to look for gold in the Cheonggyecheon stream.

So instead, I will focus on two small portions of the debate that 
matter the most to me - economics and North Korea.


Economics is a complicated field. It has its own set of experts who have studied the topic their entire lives and those experts bitterly argue with one another with as much intensity as you’d find among those who argue about the Israeli-Palestinian conflict. It truly is a specialized field of its own that can also be divided into its own subgroups that are so disparate that an expert in one field could be completely clueless about the issues that deal with another.

But no layperson could ever be convinced of that when they hear politicians spout their bullshit views about economics when they try their best to dumb down the topic into easily consumable soundbites for the TV-watching audience.

Although many can convincingly argue that Clinton may be more knowledgeable about certain subjects than Trump and that Trump may be better versed in other things than Clinton, the first segment of the debate which dealt with economics clearly showed that neither person knew what the hell they were talking about.

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What Clinton said about the economy:
  1. I want us (the government) to invest in the people and their future by promoting infrastructure, advanced manufacturing, innovation and technology, clean, renewable energy, and small business, because most of the new jobs will come from small business.
  2. I also want to see more companies do profit-sharing. If you help create the profits, you should be able to share in them, not just the executives at the top.
  3. We have to make the economy fairer by raising the national minimum wage and also guarantee, finally, equal pay for women's work.
  4. We need paid family leave and earned sick days, affordable child care, and debt-free college.
  5. We're going to do it by having the wealthy pay their fair share and close the corporate loopholes.
  6. We also, though, need to have a tax system that rewards work and not just financial transactions. And the kind of plan that Donald has put forth would be trickle-down economics all over again. I call it trumped-up trickle-down. Trickle-down did not work. It got us into the mess we were in, in 2008 and 2009. Slashing taxes on the wealthy hasn't worked.
  7. We had the worst financial crisis, the Great Recession, the worst since the 1930s. That was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off of Wall Street, and created a perfect storm.
  8. We can deploy a half a billion more solar panels. We can have enough clean energy to power every home. We can build a new modern electric grid. That's a lot of jobs; that's a lot of new economic activity.
  9. When I was secretary of state, we actually increased American exports globally 30 percent.

My rebuttals to Clinton:
  1. Classic example of Broken Window Fallacy.
  2. The President of the United States does not have the authority to force companies to share their profits “more equitably.”
  3. Raising the minimum wage hurts the most vulnerable members of society - the marginal worker. It will exacerbate wealth inequality, not alleviate it. Also, when is this gender pay gap myth ever going to die?
  4. Ever heard of unintended consequences?
  5. Pray tell, what is fair?
  6. Here’s an old challenge. Please name any economist outside a mental institute who has ever defended or called for trickle down economics.
  7. Please cite evidence that the 2008 financial crisis was a result of low tax rates. Otherwise, please be prepared to be called a bullshit artist.
  8. See rebuttal number 1.
  9. Does the Secretary of State oversee trade?

Well, that was easy. So much for a smart and experienced Hillary Clinton.
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What Trump said about the economy:
  1. American jobs are fleeing the country.
  2. China is devaluing its currency, and there’s nobody in our government to fight them.
  3. I'll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses.
  4. We have to renegotiate our trade deals. Other countries are giving incentives, they're doing things that, frankly, we don't do.
  5. Impose a tax on American companies that manufacture their goods overseas and then sell them in the US.
  6. Bill Clinton approved NAFTA, which is the single worst trade deal ever approved in this country.
  7. I built an unbelievable company. But we’re opening the Old Post Office. Under budget, ahead of schedule, saved tremendous money. I’m a year ahead of schedule. And that's what this country should be doing.

My rebuttals to Trump:
  1. Trump spoke a few times about the employment situation in Ohio and Michigan. So in other words, he is talking about manufacturing jobs. But the reality is that the American manufacturing sector is still robust.
  2. If China is devaluing its currency, then what do people call what the Federal Reserve is doing?
  3. That’s actually a pretty nifty idea. Inversions are one of the most visible signs that the U.S. corporate-tax code is broken. One of the reasons Ireland is a popular destination for corporations looking to move their headquarters out of the United States is the fact its corporate tax rate of 12.5 percent - about one-third of America’s rate. Cutting corporate tax rates could potentially help to create hundreds of thousands of new jobs and it could also lead to a significant increase in real wage. The question is how Trump intends to do that. As per usual, he doesn’t offer any concrete plans.
  4. (i) This will come as a surprise to the TPP’s 12 signatory countries that agreed they would not renegotiate the trade deals that have already been made. Seeing how the US is the major partner in the TPP, reneging on that promise would destroy the TPP and would destroy the Asia Pivot.

    (ii) Trade means increased jobs, but trade also means increased security. Reneging on its trade deals would be comparable to the Ming Dynasty suddenly choosing to become an isolationist hermit kingdom in the mid-15th century, after pursuing oceangoing exploration in the early part of the century. China could have been a superpower hundreds of years before the rise of the West. Is the US willing to become the new Ming China of the 21st century?

    (iii) In regards to complaints about “unfair” subsidies foreign governments grant their corporations, once again, Milton Friedman already provided the best rebuttal to that decades ago.
  5. Is Trump talking about companies with captive offshore operations (the practice of completing work at a non-domestic location, whether by workers at a company’s own offshore subsidiary - often called a “captive” center - or by a third-party or companies that outsource to third-parties based overseas) or is he talking about companies that outsource (the practice of contracting out of goods or services to a third party)? Does he even know the difference?

    This is an important distinction because targeting companies that operate subsidiaries overseas would include, for example, IBM and a good number of non-vendor Fortune 500 companies who maintain a presence abroad, such as GE and Proctor & Gamble, some of which provide their parent companies with IT services.

    On the other hand, if it does not affect US companies that “ship jobs overseas” by hiring an offshore company, then the only offshore outsourcing customers this plan could have any bearing on are those who work with US-based IT services companies like IBM, which then deliver those services offshore. If that is the case, it's unlikely the the average American would have much to benefit.

    Also, how would increasing taxes on those companies persuade businesses to relocate to the US? Taxes are not the only reason companies outsource. There are also lower wages in overseas markets. The likely outcome of increasing taxes on such businesses could be more offshoring, not less, as those corporations use labor arbitrage to offset the bigger tax bill.
  6. NAFTA is NOT the worst trade deal the US has ever had.
  7. The idea that it would be better for the government to be run like a finely operated corporation has always been fancied by those on the political right. For good or for ill, however, a government cannot be run like the way a business is run. See here, here, here, here, here, and here.

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North Korea

Very little was said about North Korea. So my response will be short, too. Trump said, “China should go into North Korea. You look at North Korea; we are doing nothing there. China should solve that problem for us. China should go into North Korea. China is totally powerful as it relates to North Korea.”

My rebuttal:

Assuming that the US even has the leverage to “let” China do anything, allowing China to install a pro-Chinese regime in Pyongyang would infuriate not only Seoul, but also Tokyo, Moscow, and Hanoi. It would most likely be the best way for the US to actually become what Chinese nationalists have called it for decades - a paper tiger.

It is obvious except to the most deluded that the only place where Trump is a brilliant strategist or a deep thinker of any type whatsoever is in the deep recesses of his own twisted fantasies where he ought to crawl back into.

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I know that I've said this about politicians many times but I will say it again. A plague o' both their houses!

Wednesday, August 3, 2016

Movie Review: Suicide Squad

WARNING: The following review contains a lot of spoilers. If you have not yet seen Suicide Squad and wish to do so without having the plot given away, then do not read this.

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It is often said that the definition of insanity is doing the same thing over and over again and expecting different results. Technically, that is NOT the definition of insanity, but whatever. Let's go with that definition of insanity and just plainly say that I am clearly insane. I am insane for constantly going to every single comic book movie expecting to come out of the movie theater feeling blown away when in reality, I always end up feeling disappointed and going through my usual bout of self loathing I always feel after watching a comic book movie yet again.

So why do I keep watching comic book movies if that's how I always end up feeling? It's obviously because I am insane. Just like how every four years (or five years in other countries) people always come out to vote for Candidate Elephant Excrement or Candidate Donkey Douche for president. It's because we are all bloody insane.

Basically, to boil down the essence of Suicide Squad into a single sentence, it is The Dirty Dozen except that it's on crack and acid at the same time and instead of disgraced US soldiers waiting on death row, we have supervillains (of various skills or the lack thereof) and instead of Nazi officers, we have a powerful ancient witch called Enchantress (Cara Delevingne) who for all intents and purposes looks like a college sophomore who ingested way too many funky mushrooms during Burning Man and forgot to take a shower for a year. By the way, she's the main antagonist.

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Suicide Squad's plot is thinner than the broth that is typically served in any ROK Army chow hall. Granted, one of the complaints of Batman v Superman: Dawn of Justice was that it seemed like as though content that could have been spread out over six movies was crammed into one. So I expected that Warner Brothers would insist on a simpler plot for Suicide Squad but they apparently decided to go with the "little to no plot" route instead.

Anyway, back to the plot. Taking place after the events of Batman v Superman: Dawn of Justice with the death of Superman, Amanda Waller (Viola Davis), who is acting like the kind of government employee that the most paranoid libertarians believe actually exist in all levels of government, decides to round up a group of supervillains to create a paramilitary unit because the next Superman might be an enemy of the United States. She actually calls these supervillains metahumans but it's clear that most of them are NOT metahumans. The only metahumans in the team are El Diablo (Jay Hernandez) who is basically DC's answer to the X-Men's Pyro except he has facial tattoos (because who cares about ever getting a job?) and the aforementioned college sophomore.

The rest are a hitman with a heart of gold-ish (Will Smith), a bubbly nutcase with a baseball bat (Margot Robbie), a guy who is good with a boomerang (Jai Courtney), and a guy who either has a bad skin condition or is actually a human crocodile (Adewale Akinnuoye-Agbaje). And they're overseen by a soldier named Rick Flag (Joel Kinnaman) - because that's obviously not the perfect stage name of an adult film star - who happens to be in love with the college sophomore; and a ninja (Karen Fukuhara) who uses a sword that is able to trap the souls of those it kills because reasons.

That's the team. Seriously. So here's an obvious question. Why use supervillains who don't like or care for authority and who must be threatened with a bomb in their necks when there are perfectly good soldiers that the government could have easily used? For God's sake, one of the bad guys, the college sophomore's brother - who came out of nowhere by the way - was defeated with what looks like C4 explosives. Did the government suddenly forget that they have Tomahawk cruise missiles?

Here's another reason it doesn't make sense. In a post-credit scene, Amanda Waller and Bruce Wayne (Ben Affleck) are having a private meeting and Waller hands over a file to Wayne, which is full of information about the Flash and Aquaman! The government is aware of these two amazingly powerful metahumans and Waller decided that the best she could do was to form a team of people who use boomerangs and comically large mallets?! For God's sake! Was there not a single writer on the production team whose mother did not snort liquid cocaine while she were pregnant with him/her?

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But of course, the villain that the Suicide Squad has to defeat is the college sophomore. She's a powerful wizard but she has a habit of not keeping her heart in her chest where you would think it belongs because, again, reasons. So Waller borrows a page from Pirates of the Caribbean: Dead Man's Chest's equally lousy and stupid plot and threatens to stab holes into the heart unless the college sophomore does as she commands. So the college sophomore rescues her brother who is also a witch (I told you he came out of nowhere) to help retrieve her heart and when he does so, she proceeds to do a weird belly dance to create a weapon that looks like a cloud with rocks swirling around it (which takes a long time) to destroy humanity. Because apparently this powerful witch can't hijack nukes. Makes total sense.

But fighting the college sophomore wasn't even their mission. The Suicide Squad's actual mission was to enter the city (whose name I had forgotten the moment I heard it) where the college sophomore is doing her Burning Man with Bad JuJus routine in order to rescue a high value target. But there is a plot twist! That high value target is Amanda Waller herself! But then they botch the rescue and then end up fighting the college sophomore even when the bombs that have been planted in their necks have been deactivated, which was the only reason they agreed to join this group, because reasons.

The plot holes in Suicide Squad are so big that it would be inappropriate NOT to make yo momma jokes.

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But what about The Joker? He was heavily shown in the trailers. What about him?

Yes, The Joker (Jared Leto) was in the movie. Barely. He didn't contribute at all to the plot (for what little there was) and the few minutes that he was on screen were already shown in the trailers. A lot of noise was made about how he remained in character throughout the filming of the movie because he's a method actor and how at one point, he mailed used condoms and anal beads to his castmates. If he really did all that just for those few inconsequential minutes that he was in the movie, then Leto truly is an asshole.

Was Leto at least a scene stealer? No, he was not, which is such a damned shame because everyone knows that the man CAN act! Asshole or not. Requiem for a Dream, anyone? When the late Heath Ledger portrayed his version of The Joker, people couldn't take their eyes off him. Ledger's Joker was charismatic, laughed like a maniac, growled like a rabid dog, and even performed a magic trick with a pencil. He was a cold-blooded sociopath who was out to make a point - that everyone was just one little push away from being as mad as he was. Leto's Joker, on the other hand, was boring. All he wanted to do was rescue his girlfriend. Hell, even Cesar Romero's Joker was more interesting than Leto's version.

If in some later movie Leto's Joker and Affleck's Batman were placed in the same room together, I wouldn't know whom I'd wish were dead more - them or me. And then there's the depressing fact that I'd still probably pay money to watch that crapfest, too, because, like I said, I'm clearly insane.

Sigh. I do miss this man.
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Earlier, I compared Suicide Squad to The Dirty Dozen except that it was on crack and acid. I shouldn't have said that. The Dirty Dozen was a great movie. The overarching plot might have been somewhat similar but The Dirty Dozen made you feel for the characters. The movie showed you the characters' flaws, their weaknesses, their malice, their madness, their contempt, their hopes, and fears - humanity in all of its shameful ugliness. Suicide Squad, being the squeeky clean PG-13 movie that it is, barely does that.

In The Dirty Dozen, the audience got to watch terrible human beings perform a heroic act for their country and then make the ultimate sacrifice as most of them die by the end of the movie. Beyond being a great action-packed war movie, it also touched on the philosophical question of whether one could escape fate; whether or not karmic justice will always find you regardless of how much you may be try to absolve yourself of your sins.

There are deaths in Suicide Squad. One character is killed off as soon as we are introduced to him so there's that. The other character that dies is El Diablo - the only character who is actually sympathetic, but his death is, of course, blanketed underneath a ton of CGI, which has the ability to make people forget what feelings feel like.

The only other character who is also somewhat sympathetic is Deadshot (Will Smith)... but the problem with Deadshot is (1) he was never really portrayed as a villain worth hating to begin with and (2) he being a loving father to an 11-year-old girl makes it hard to distinguish Smith's character in this movie from practically every other movie role that he's had in the past ten years.

As for the other characters, they aren't given any depth and the audience doesn't feel emotionally invested or fear for their safety because, of course, Warner Brothers isn't going to kill off these characters after they had just gotten the rights to them. They've got to keep making sequels and prequels and spin-offs and keep resurrecting characters to keep churning out crap that people like me will inexplicably keep consuming.

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However, there are three nice things that I will say about the movie.

One, I liked the soundtrack. A lot of the songs in the movie were classic rock songs, which I have a soft spot for, but I did feel that it was a bit too much after a while. After a while, it did feel like the filmmakers were trying to compensate for their lousy plot with an awesome soundtrack.

Two, Margot Robbie was fun to watch. Yes, she put the manic in the Manic Pixie Dream Girl role that she was given and she has pretty much guaranteed that the Harley Quinn look is going to be a permanent fixture among Halloween costumes. But more than that, she was the one thing about this sad attempt at a movie that was entertaining.

Which brings us to three. As a result of the bit of humor that Margot Robbie helped to infuse into the movie, I can say with certainty that Suicide Squad is a better movie than Batman v Superman: Dawn of Justice, but of course, that's not saying much.

Ok, I don't dislike all comic book movies. I thoroughly enjoyed Deadpool, but really, who didn't?

Monday, July 11, 2016

What Going Cashless Could Mean

A few months ago, news broke that the Korean government plans to eliminate coins from its money supply by 2020. However, eliminating coins is not the end goal in and of itself. The ultimate goal is to eventually also phase out paper money. However, there is no set date for that yet.

At first glance, this makes sense. More and more people are using debit cards, credit cards, various smartphone apps such as Samsung Pay and Kakao Pay, as well as virtual cryptocurrencies such as Bitcoin (though Bitcoin does not seem to have become mainstream in Korea just yet) to make financial transactions. Considering the overall social trend that we are seeing in Korea unfold before our very eyes, it is understandable when the Korean government says that eliminating coins from the overall money supply would be able to help it reduce minting costs, which is about ₩60 billion (US$52.1 million) per year.

Although it is likely that the Korean government still has a positive seigniorage rate -- the profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs -- in the long term, eliminating coins would be more profitable because of inflationary pressures that devalue money.

So going cashless certainly has benefits. An added bonus that comes with the elimination of cash is that it would severely inconvenience those engaged in criminal activity. As more and more people use cards, physical or virtual, to make and/or receive payments, it would become much harder for activities like tax evasion, gambling, money laundering, terrorism financing, human trafficking, and the drugs trade to go unnoticed by the government. And in Korea's case, it would help the government to better monitor the clandestine flow of money into North Korea, which is no small matter!

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However, there is another reason, a rather big reason, that the government prefers a cashless society; and it is one that is seldom talked about by those outside of groups that focus on cryptocurrencies or economics in general. The reason is that a cashless society would make it much easier for the central bank, in Korea's case that being the Bank of Korea, in tandem with the government, to potentially impose negative interest rates.

What are Negative Interest Rates?

Central banks all over the world are tasked with maintaining a certain level of stability in each country's financial system. Among the tools that central banks possess, nothing is as powerful as their ability to increase or decrease the discount rate, which is the interest rate charged to commercial banks and other depository institutions for loans received from the central bank.

So, for example, if a central bank decreases the discount rate, which is what is typically being done around the world these days, it would make it cheaper for commercial banks to borrow money from the central bank. In turn, the commercial banks would be able to pass on those savings to their customers -- you and me -- in the form of lower interest rates charged on things like auto loans or mortgage loans.

This would compel individuals to borrow and spend more money. That way, a stagnant economy would get the boost that it needs and it might be able to stave off or perhaps even recover from a recession.

Similarly, if an economy is overheating -- witnessing dangerously high inflation rates -- the central bank will increase the discount rate, which would then have a domino effect of making it more costly for people to borrow money, which would then help to cool the economy.

At least that's the theory anyway. But what happens if the theory doesn't match reality?

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What happens if an economy doesn't experience growth despite the fact that interest rates are kept close to zero? For example, interest rates in Japan have been kept at nearly zero for more than 20 years, but it has not helped Japan to escape from its deflationary trap. When we consider the fact that much of Korea's economy was modeled after Japan's economy (see here and here for more wonkish comparison) and also take into account that, like Japan, Korea has an aging population, the possibility of falling into a decades-long deflationary trap is not an unfounded fear.

As a result, more and more governments are now flirting with an idea that was once panned as being ridiculous -- negative interest rates. Basically, it's taking the idea of imposing lower interest rates to stimulate economic growth and injecting it with steroids.

The idea is that the central bank will go all in and impose a discount rate below zero percent for commercial banks. The idea is that if a central bank imposes a discount rate of, say, -0.5%, commercial banks would be less willing to park their money in the central bank where they would be charged money for doing so. So, instead, commercial banks may prefer to lend money to each other. The theory is that when more and more money circulates among commercial banks, then banks would more willingly lend money to their customers, which would in turn help to stimulate economic growth.

Does this mean that the Average Joe/Jane will have to pay to keep money in a bank?

That is a popular argument that many have made in regards to the negative interest rate. However, I think it is unlikely that commercial banks would actually do that. People who make that argument often neglect to look deeper into the very different relationship between central banks and commercial banks and the relationship between commercial banks and their customers.

Whereas the relationship between KB Kookmin Bank and me is one that can be characterized as a business/customer relationship, the same cannot be said of the relationship between Kookmin (or insert other banks here) and the the Bank of Korea. That is because central banks act much like regulators over their respective financial industries. In other words, consent is practically non-existent in the relationship between central and commercial banks. For good or for ill, central banks make the rules and regulations and in order to stay in business, commercial banks have to obey those rules.

It goes without saying that banks hold a lot of leverage over their customers, but no matter how powerful commercial and investment banks may be, there is one power they do not possess over their customers. They have no control over their customers' choices. For example, if Bank A charges their depositors an annual fee to keep their money in their bank, those depositors will more than likely look for other banks to save their money in where they won't have to pay such a fee. And Banks B and C and D and others will only be too happy to oblige.

That is why it is unlikely that commercial banks will somehow end up cannibalizing their customer base. Especially during periods of economic slowdown, market expansion might be a more practical strategy for long-term survival than profit maximization.

However, it does not change the fact that commercial banks would still be losing money because of the negative interest rates. So, they may partially push those costs to their customers by other means such as higher overdraft fees or eliminating free account transfers. So there is a chance that regular bank depositors might end up having to pay additional hidden fees, but being directly charged for saving money in a bank account sounds like a tinfoil hat conspiracy theory.

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What does this have to do with a cashless society?

The theory behind negative interest rates is almost sound. Incentives are important and when there is no incentive to save -- in fact, if there is every incentive to spend -- people will spend more money, which would help to stimulate economic growth. However, there is a problem with the theory. It depends entirely on the assumption that human beings think and act like Homo Economicus. The problem is that Homo Economicus does not exist.

Homo Economicus is all about maximizing one's economic utility and is aware of all publicly known information and responds accordingly. So for example, if the government taxes kale at 100% but taxes candy bars at only 10%, and assuming that they are the only two things that anyone can buy and depending on the utils that Homo Economicus derives from kale and candy bars, respectively, there is a very good chance that Homo Economicus would buy only candy bars. None of that describes a typical human being.

Human beings do not possess all publicly known information. Everyone suffers from asymmetric information from one degree to another, we are all biased, and we all tend to act emotionally. And one of the most powerful emotions that dictates how people think and act is fear.

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Theoretically, a negative interest rate will drive individuals to make the necessary cost-benefit analysis and decide that spending one's money would be more profitable than saving money at zero percent interest. However, the theory discounts humans' fear of the future. Though we do not possess all publicly known information, we are a species that is aware of our own frailty and mortality. Barring any unforeseen circumstances that could potentially snuff out our lives at any given moment, we will all some day grow old. Our bodies will become weak, our minds will become feeble, and we will all die. That is ultimately why we save our money and not spend every penny that comes our way (if you do spend your money like this, STOP IT!).

Negative interest rates could potentially wreak havoc on people's retirement plans. If the interest rate is above zero, we can save our money with the full knowledge that the balance that we end up with at the time of our retirement will be greater than the principal that we started out with (assuming that our savings are not canceled out by inflation). Unlike interest rates that can be changed at will, however, assuming there is no sudden medical breakthrough that will cure everything, the aging process does not change. So even if the interest rate is at zero percent, it will not change the fact that we still have to plan for retirement. But zero percent compounded for X years is still zero. That means that in order to reach our targeted savings goal for our retirement, we need to save more money than we would have to had the interest rate been above zero.

This is one of the possible reasons that might explain the ineffectiveness of keeping interest rates low.

So especially in aging societies like Korea and Japan, it is possible that imposing negative interest rates could lead to drastic unintended consequences (not to mention the fact that lower profit margins that negative interest rates would impose on banks in general could drive a lot of smaller banks out of business, thus inadvertently exacerbating the "too big to fail" phenomenon).

So imagine what you would do if you were planning for retirement but the bank is basically telling you that it will do nothing more than simply hold your money. What would you do? The more risk averse among us would still likely keep our money in our bank accounts despite the zero percent interest. After all, the money in the banks are insured by the government. But for those who are more prone to taking risks for whatever reason, it is likely that they will pull their money out of the bank and invest it in something that will give them a greater long-term yield. That is why so many people who can afford to do so buy property (though everyone should always keep an eye out for economic bubbles).

But if enough people pulled their money out of their banks to look for greener pastures, couldn't that lead to a bank run and wouldn't that be catastrophic? Yes, it would certainly be catastrophic. But what if there were no cash to withdraw from the banks to begin with? When there is no physical money that you can hold in your hands or literally stuff under your mattress, when the only money that you can use is all digital e-money and, unlike cryptocurrencies like Bitcoin, it can all be tracked by the central bank, then you literally cannot flee from the banks. Or at least it would be really hard to do so.

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That is because it would become much easier for the government to "direct" people from deciding against "hoarding" their money upon the imposition of a negative interest rate after cash has been eliminated. To explain, in order to have better returns, individuals may desire to take their money out of their bank accounts and invest it in private asset markets such as property or what have you. However, unlike banks, other private asset markets are not guaranteed by the state, and thus not safe for investors. At least not as safe as banks. That way, there will be incentive for people who prefer safety and risk-free investments to keep their money invested in state-guaranteed banknotes, even if all of those banknotes are purely digital.

In other words, a cashless society transfers absolute control of the money supply to the central bank. Combine that with negative interest rates and the central banks have the perfect mix of ingredients necessary to incentivize spending, disincentivize savings, AND prevent bank runs that could offset the stimulative goals of the negative interest rate. Theoretically, assuming everything goes according to plan, the macroeconomic outlook will become less dire and might be a winning strategy to overcome negative economic growth. But what will that do to individuals' savings? How will this effect retirement plans?

So why not go cashless from the get go?

Like the case in Germany, though many people prefer to use other methods of payment, cash still has a special place in everyone's hearts for various reasons (see here, here, here, here, and here).

So, a sudden abandonment of cash would be met with great resistance. It would make a lot more sense to gradually acclimate the public to going cashless.

The government has stated that people will be issued special cards for them to store their e-change. For example, if someone buys ₩9,500 worth of goods and handed over a ₩10,000 note to the cashier, instead of receiving a ₩500 coin as is done right now, the cashier would digitally wire that ₩500 worth of change to the card that the customer carries. This is perfect in many ways. That is because eventually, all the change that gets digitally wired to individuals' cards will begin to accumulate over time and once that happens, that accumulated money in people's cards will be used for transactions side by side with paper money (for as long as paper money is still circulated).

This means that the continued use of e-money could be further incentivized. Doing so would just be a matter of imagination. For example, the government could provide a favorable rate environment for e-money, or by an enticing exchange rate for swapping out of paper money for e-money via credit or point systems or special offers in partnership with Korean conglomerates.

Combine that with a a steady campaign to stigmatize the use of paper money -- as has already been done throughout Europe -- and the Korean government would be able to gradually shift toward a cashless society while facing minimal resistance. It's actually quite brilliant.

What it would mean to live in a cashless society

As I mentioned earlier, a cashless society could wreak havoc on people's retirement plans. And this is no small matter especially when we take into account how much debt the average Korean household has

There are other possible outcomes that could arise from going cashless. For one thing, a cashless society would certainly reduce privacy for the average person as our money could easily be tracked, thus making it incredibly difficult to hide our money from the Tax Man. However, it is not just the government that people will have to worry about. Once e-money is "printed" by the government and administered to the general public by private financial institutes, it could become much easier for our spending habits and history to be tracked by others such as insurance companies and marketers.

As usual, the rich will still be able to benefit. They can buy anonymity via shell companies or charities. However, for average people, anonymity would be a thing of the past. However, those who would be hit most are those who currently do not have bank accounts because of poor credit scores. Once cash becomes a thing of the past and they are still barred from banks because of their poor credit scores, their lives could become much more difficult. It would not be a stretch to conclude that this could potentially exacerbate the wealth gap.

If you're rich
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Further, it could also make life miserable for those who are deemed immoral by societal standards. Take the porn industry for example. In 2014, it was reported that Chase Bank had shut down a number of bank accounts that were discovered to have been used by porn actors. Porn is already illegal in Korea and those who are apprehended are usually prosecuted to the fullest extent of the law. Pornographers may be difficult to defend, particularly if they might also peddle revenge porn. However, other possible victims of the morality police are sex workers who already face a lot of discrimination in their lives as they might get locked out of banks, too.

Also depending on how well the relevant laws are enforced, it could also make it impossible for businesses to pay people anything lower than the minimum wage. Many people might think that this is a good thing. However, it could potentially make life much harder for marginal workers as it is possible that people might not even bother to hire them at all.

However, all of those problems pale in comparison to the much bigger issue -- what if going cashless and imposing negative interest rates on top of that still do not help to spur economic growth? What happens then? That is what people should be pondering.

Tuesday, June 14, 2016

My Response to Se-Woong Koo's "South Korea's Misogyny"

Late last month, I wrote a post called "I am part of the problem and I want to talk about it," where I talked about the Gangnam murder case and the level of misogyny that exists in Korea.

It was the most personal thing that I had ever written on this blog. I don't usually write my personal feelings, but the reason I wrote that was because I felt angry, but more importantly, I felt helpless. The amount of hate, ridicule, and marginalization (and sometimes straight up violence) that women face in their lives is not something that I am entirely familiar with, but something that I want to get to know better so that I will no longer be part of the problem that women face; and hopefully, become a part of the solution. I said that I wanted to be a part of the conversation, and this is my way of continuing it.

But we have to identify what the problem is, and also what it isn't. And no matter how I look at it, misogyny seems like the product of a social problem. And I use the word "social" to encompass culture, religion, and tradition. You'll notice that there is one category that is missing in my definition of "social problem" -- legal.

It goes without saying that there are certainly laws that are unfair to women. I think one of the best examples of laws being unfair to women are child support laws. In many instances after a divorce, the woman almost always takes custody of the child(ren), but most women are awarded an inadequate amount of child support, if they are awarded any child support at all.

So there are certainly laws that put women at a disadvantage. But the reason why I did not add legal in my definition of "social problems" is because it is my opinion that the law itself is not the source of misogyny. That is because laws are but a reflection of a society's shared morals. In other words, what I am saying is that in my opinion, misogyny is a social problem, which at times is reflected in a country's laws, but is not necessarily a problem caused by the law.

This is why misogyny is so incredibly pervasive and just as hard to combat. During that time when so many Korean women were sharing their thoughts and feelings about the Gangnam murder case and sharing their stories about being objectified and victimized in various Naver blogs and Facebook posts, I found far too many men leaving behind distasteful comments. One commenter said that women couldn't complain about sexism because Korean women are not forced to serve in the military. I know that I'm no Mr. Perfect either, but I can't imagine how self-absorbed someone has to be to be unable to fathom that someone else could actually be a victim.

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Whenever I read any of those comments, I just wanted to grab them all by their collars and slap some sense into their thick skulls. (Aren't we all a bunch of keyboard warriors when we are behind our computer screens?) But even if I could, that wouldn't solve the problem.

Perhaps I am wrong, and if I am, I'd be only too happy to be corrected, but as I said, I see misogyny as a social problem, which is a culmination of culture, tradition, and religion. These elements are the very fabric of society and a society's fundamental building blocks cannot and do not change overnight, at least not if it is done in the least bloody manner possible (the alternative that I am referring to is, of course, violent revolutions). Getting a society to change is tiring, tedious, frustrating, and painful work; but I think it is uncontroversial to say that it is less tiring, tedious, frustrating, and painful than violent social upheavals.

So although I recognize that this will be a long and thankless journey, and even though I will most likely be little more than just another tiny voice in a sea of people who wish to strive for social improvements, I still wish to be part of the conversation if for no other reason than the fact that I don't wish to feel ashamed every time I look into the mirror wondering why I didn't do more to help.

It was at this point that I read Se-Woong Koo's column in The New York Times - South Korea's Misogyny. I am not unfamiliar with Mr. Koo's work. I have read a few of them and more often than not, I have strongly disagreed with some of the things that he has said (see here and here). And I found myself once again disagreeing with Mr. Koo's proposed solution -- passing Korea's stalled anti-discrimination laws.

I started my blog back in 2013 and the stalled anti-discrimination bill was the second thing that I had ever written about. For those who are more familiar with my economic and political views, I am sure that it will come as no surprise to you that I was (regretfully) happy that the bill did not pass. If you would like to read what I had written about it then and understand why I added "regretfully" in parenthesis, you can read it here.

Another thing that I found lacking in Mr. Koo's column was his lack of explanation of some his points. In all fairness, he was writing an op-ed for The New York Times, which, unlike his blog, has a word limit. So I don't hold that against him too much. However, I would be remiss if I did not take a swipe at his throwaway comment about Korean women getting paid only two-thirds of how much men get paid considering the fact that he seems to completely neglect the fact that that is actually a median wage gap. You can read more about what I had to say on the subject of the gender wage gap here.

Also his statement about how "an anti-discrimination bill would help reduce discrimination, create legal protections and compensation, and, hopefully, reduce misogyny" is rather unconvincing.

I recognize that neither of my positions regarding the anti-discrimination bill and the gender wage gap is particularly popular, but I stand by every word that I said in those blog posts.

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Now of course, I agree with Mr. Koo about everything else, particularly his diagnosis of Korean society. I remember when I was a child, I was shocked when my grandmother told me that she didn't know how to read. She was part of that generation when people thought that girls didn't need any kind of education whatsoever. I also learned later on that my grandmother had put on makeup only once in her life, which she washed off promptly, because my grandfather barked at her for doing so because "it made her look like a whore."

I say this without any exaggeration that when my grandmother was younger, the only two places that she "belonged" were in the kitchen and the bedroom. Obviously Korean society has progressed since my grandmother's day but, as Mr. Koo said, those changes have "come too late for her, but it’s not too late to give respect to South Korean women of new generations."

So, to repeat, although I agree with Mr. Koo's diagnosis, it is my opinion that Mr. Koo's proposed solutions leave much to be desired.

As I said before, I want to be part of the conversation and I want to be part of the solution. Misogyny is real and there have been far too many victims. As Mr. Koo himself also said, there is no easy solution. What's unfortunate is that as soon as he said that, he offered an easy solution, which is no solution at all. In fact, it could be downright counterproductive.

I think the way forward is going to be long, exhausting, and just completely unpleasant. But I think that is the only way forward that will bring about real lasting change that everyone can be proud of; and that using the law to try to fix a deeper social problem is like telling a cancer patient to use a band-aid.

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I don't know if you've taken the time to read my previous posts about the anti-discrimination bill or the gender wage gap. The one about the gender wage gap is admittedly rather TL;DR. Anyway, my approach to economics, the law, and politics in general have been affected by liberal economics (just so there is no confusion, I do mean classical liberalism). And no one has to tell me that a lot of people do not subscribe to that school of thought.

So if you are one of those people who think that Mr. Koo has a point, hell, if you are Se-Woong Koo and you'd like to take the time to respond, and think that passing the anti-discrimination bill would somehow help reduce discrimination and misogyny, I am all ears.