The Trouble with Non-Economists talking about Economics

Murray N. Rothbard once said:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

This maxim applies even more so for academics, who, unfortunately, oftentimes mistakenly presume that possessing superior knowledge in their respective fields of expertise necessarily means that they possess superior knowledge over ALL matters. Perhaps due to vanity, academics tend to suppose that all of their prejudices from A to Z hold value for no other reason than they are academics.

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Unfortunately, many academics outside the field of economics who possess little to no knowledge about even the basic fundamentals of economics do not hesitate to make sweeping pronouncements about the subject. A good example of this is one Robert J. Fouser, who is an associate professor of Korean language education at Seoul National University.

Now I have never met Professor Fouser and I have never spoken to him. All I know about him is that he is a Korean language professor at Seoul National University. Therefore, since all I know about him is his occupation, I will give him the benefit of the doubt and assume that he is an excellent linguist and an expert in the Korean language. In fact, I will go further and even assume that he is a gentleman whose only wish is for everyone in the world to be happy. However, that does not mean that his opinions about anything outside of his field of expertise carry any more weight than the opinions of anyone else.

That did not stop Professor Fouser from pontificating about the state of the Korean economy or the need for “economic democracy” in his editorial in The Korea Herald.

He began by saying:

Talking to ordinary people is the best way to check the pulse of a nation. Last week, I was lucky to be able to take the pulse of Korea through long talks with friends who also happen to be ordinary people. The talks paint a picture of a nation deeply troubled by worry and self-doubt. Above all, the overwhelming message is that the Korean dream is slipping away.

What sorts of criteria must people meet in order to be considered “an ordinary person?” He does not say. Furthermore, assuming that “pulse of Korea” means “the overall mood of the Korean people,” then is talking to a few friends all that is needed to discover the mood of this entire nation? If that's the case, I think all those people at Pew Research Center should quit their jobs and find more meaningful employment elsewhere.

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He also adds rhetorical flair when he says, “Opportunity comes through reforms that break down barriers and help create fair competition.”

Just what does “fair” mean exactly? The fact of the matter is that there is no objective standard of “fairness.” What is “fair” tends to be strictly in the eye of the beholder. So what does Professor Fouser mean when he says “fair?” I guess we will never know. But even if we did get to learn what he thinks the word should mean, would it matter? I think not.

Just like so many unemployed hipsters who think that they have “figured out” what capitalism is, Professor Fouser also felt confident enough to give his diagnosis when he said:

The essential problem is that capitalism, particularly the variety that developed in Korea, relies on expanding markets for its prosperity.

Where have I heard that from before? Oh right, it was Karl Marx who said it first in the Communist Manifesto when he said:

The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.

You'd think that the Ghostbusters would have gotten around to taking care of the ghost of Karl Marx by now.
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Never mind that capitalism is not actually a conscious living being but merely an idea; an economic system which is defined by the private ownership of property. Never mind that capitalism is merely an economic system that allows people the opportunity to pursue their desire to seek greater prosperity, which is not the same as a need to seek greater prosperity. Never mind that prosperity can be had even without “expanding” to new markets abroad. As long as there are any human needs that are unsatisfied, there is no limit to do business, even within Korea's own humble market.

But why try to explain all that when he already knows what “the essential problem of capitalism” really is?

Then Professor Fouser went on to say:

A relatively small number of nations with technological advantages monopolized high-value goods. These nations boomed because they had a growing consumer and production base at home and competitive advantages in exports... Japan, once known for its massive trade surpluses, has seen a trade deficit for 24 months in a row since June 2012.

What does it mean to monopolize something? A monopoly occurs when a single business entity owns all the market for a given product or service. By definition, there can be no other competitive agent. When was the last time any country in the world had a monopoly on any good? I will await patiently for that answer.

Next, is having a growing consumer and production base and competitive advantages in exports all that are needed to get rich? They are certainly important, but they are not the be-all and end-all of gaining riches. If they were, India would be one of the richest countries in the world, and Switzerland would be one of the poorest! Professor Fouser did not mention a single word about other necessary qualifications that a country has to meet in order to break away from the chains of poverty such as the supremacy of the rule of law, the reliability of institutions, low levels of government corruption, the importance of culture, work ethic, education levels, women's rights, the effects of war and peace, or history.

Even if he had mentioned all of that, he would have only begun to scratch the surface about how some societies get rich while others remain poor. But why worry about such fine details? It's all about the Big Picture, I'm sure.

It's like as though no one in the history of the world has ever attempted to study this subject before!
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And just what the hell is wrong with trade deficits? If trade surpluses are so great, seeing how the United States ran a trade surplus in nine out of the ten years of the Great Depression, the 1930s should have been a ten-year long party for Americans!

Conventional wisdom seems to go like this – The Japanese economy's performance has been lackadaisical. Japan has had trade deficits for twenty-four months in a row. Therefore, trade deficits must be bad.

Then, using that same logic, seeing how the United States ran a trade surplus for nine out of ten years during the Great Depression, is it correct to say that trade surpluses must be bad?

Neither a trade deficit nor a trade surplus means a damned thing when it comes to the overall health of an economy. There are many reasons, some of them known and others unknown, as to why an economy flourishes or flounders. Trade deficits and trade surpluses are not one of them. This may be difficult to understand for many people but, believe it or not, economies are far too complex to draw simplistic causal connections.

This should be your level of skepticism when someone claims to have a simple solution to fix the economy.
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So, after having used shoddy research methods, normative statements that can mean anything depending on the reader, and one economic fallacy after another, Professor Fouser finally says:

Focusing on inequality is the first step toward restoring the Korean dream. To do so, Korea needs to move beyond the din of petty politics and revive the national discussion on “economic democracy.”

At this point, I ought to explain how the entire concept of “income distribution” is tendentious; that the concept is flawed from the very start because it takes the existence of wealth for granted, that wealth exists somehow – never mind how it came into existence – meaning that the only thing that people need to be concerned about is that it has to be distributed and apportioned among everyone. Never mind who is going to do the apportioning or how or for whom and damn the morals and damn the consequences!

But nitpicking the arguments that he stated alone were exhausting enough as it was.

I'll say it again. I'm sure that Professor Fouser is an excellent linguist and an expert in the Korean language and a gentleman of noble intent. But perhaps it might be prudent for him (and others) to stick to what he is good at and leave the subject of economics to economists.

Oh, wait.  Never mind.
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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 months.

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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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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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.

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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 30^th 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 25^th 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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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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