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Tag: economics

Problems with Populism

Or, why populism irritates me.

Economics and sociology are mind-bendingly complex because of the human element. Humans are mind-bendingly complex and often irrational, and we bring that mess to everything we do. That’s how we are. We’re not robots. Each of us is unique, composed of our life story, experiences, hopes, fears, wants, knowledge, and neuroses. Politics is a mixture of economics and sociology, so it’s equally complex.

My observation is that populists oversimplify. Populists think they have all the answers. They think they’re real smart. They think they know more or see more than the rest. In fact, they know less and see less. That’s why they don’t see the complexities of reality and think things are simpler than they really are.

Because populists think everything is so simple and obvious, they’re like a bull in a china shop, with little respect for the complexities of humans. They look down on and ridicule people who have a genuine understanding of the complexities.

Populists are often idealists. They’re unwilling to compromise. This is a fatal flaw when it comes to politics because the practice of politics is the art of compromise. That’s what politics is. You never get what you want. If all goes well, you get something closer to what you want than what you had, but that’s all you’ll get. In politics, if you try to stand your ground, you’ll get run over and end up worse off than when you started. That’s how politics works, how it’s always worked, and it will never change because: human nature.

All of these things that I see in populists today are way too familiar. Populists remind me of libertarians. Back in the 1970s I was a libertarian and I exhibited all of the flaws I describe above, and so did all my libertarian friends. We used to hang out and talk about how all the world’s problems could be solved if we just did a few simple things, A, B, and C. It was all so obvious. How could anyone with a brain not see it? Unfortunately, the truth is that we didn’t understand the problems because we omitted human nature from our analyses. In particular, we omitted human greed and its overwhelming power. This is breathtakingly ironic because libertarians are all about capitalism. What is capitalism? Capitalism is institutionalized greed. Greed is the engine — the only engine — that drives capitalism. This and its ramifications somehow never occurred to us. It was like some kind of blindness that I still find astonishing to think back on.

Populism is enabled by a similar form of selective blindness and/or refusal to accept reality. There’s an old saying that “familiarity breeds contempt”. It’s true in my case. When I talk to populists today, it’s like I’m talking to who I was in the 1970s and it irritates the heck out of me.

By the way, this rant was triggered by a good post here: https://truth-sandwich.com/2019/02/15/tastes-like-chicken/

China Losing Taste for U.S. Debt

I like being right but sometimes I wish I wasn’t. Last March I wrote a couple of posts about what I foresaw for the U.S. economy. Now another piece of the puzzle that I discussed is coming to pass:

China Losing Its Taste for U.S. Debt

Here’s the post I wrote back in March 2008

Slow Motion Train Wreck

Bush’s Argument in Favor of Drilling is Nonsense

President Bush is pushing Congress to drop the ban on U.S. offshore oil drilling.


This argument is nonsense. It’s a red herring. First of all, everyone needs to understand that $130 oil is not due to a lack of supply. Most people automatically assume that the price of oil has been driven up by market forces. If the price goes up, it’s because of demand, right?. Normally this would be true but that is not the case right now. There is plenty of oil in the market. There is no shortage. This is why the Saudi’s have come out and said “there’s no reason for prices to be this high” and they pretended to be puzzled. However the President of Iran put his finger on the real cause, which is the revelation of the long-latent inflation in the U.S. dollar. As the dollar is collapsing one of the first places investors run is oil futures. The run on oil futures drove up the price. It had nothing to do with the oil producers setting the price at $130. They didn’t set anything. The $130 price is set in the commodities exchanges of the world.

Inflation in the U.S. dollar, which has previously been masked by massive foreign infusions of investment capital into the U.S., is now being revealed. This is the reason for the rise in the price of oil. And since much of the world’s economy is tied to the U.S. dollar, the pain is being experienced throughout much of the world.

Now, with that in mind, be very clear that if the U.S. resumes offshore drilling and production, and / or if the U.S. develops the ANWR, since there is no shortage of oil, the oil from offshore drilling and the ANWR will be sold at the market price, which will still be $130. You don’t think the oil companies are going to sell the oil for less than the market price do you?

President Bush’s proposal will give the oil companies what they have been wanting for 27 years but it will not bring down the price of oil. Be very clear on that.

Slow Motion Train Wreck

Inflation has been underway for quite a while already. Anyone who shops for food over the past two years can see it. Finally, it has become bad enough that the official government agencies that calculate inflation can no longer “alter the basket” and fudge the numbers to cover it up. With prices skyrocketing all around us, everyone can see it.

So what now? I expect that we are seeing just the tip of the iceberg and it’s going to get a lot worse. The magnitude of the problem is enormous. The U.S. has spent way beyond its means on borrowed money. We have lost most of our export industries to other countries. The hole that the U.S. has dug for itself is very deep and it will be a long time before we can dig back out. We no longer have the ultra-high powered economy we had coming out of WW II, capable of manufacturing anything and everything in any quantity almost immediately. I remember a quote from a British physicist who worked on the Manhattan Project when they asked him what was the main difference between working in England and working at Los Alamos. He said, in England I could order a box of pencils and it would take three months to arrive; here I can order a cyclotron and it arrives in three days. This is the economic and industrial muscle that powered us through the 50’s and 60’s. The world had never seen anything like the United States. But times have changed.

Fed Chairman Bernanke is discovering that his position no longer has the power it used to have. Years ago, back when the United States was the 800 pound gorilla of world economics, the fed chairman could make a slight adjustment and all the economies of the world would respond. Today, you can see this is no longer true. The fed can make radical changes in interest rates and nothing happens, even in the United States, much less the world. The president wants to stimulate the economy with a $100 billion in tax rebates–well, over Christmas Week, the feds and other world banks flushed $550 billion into the capital markets and, you guessed it, nothing happened! $100 billion will do basically nothing in this situation. The U.S. economic system is maxed out and we can no longer manipulate the world’s economies to our advantage because we are no longer the 800 pound gorilla. China and India have trillions of dollars of capital to spend and invest as they please. They have been investing it in the U.S., but when the U.S. ceases to be a good place to invest, all that cash we’ve been spending will dry up. We don’t have trillions in cash to spend, we are in debt. For years, and especially during the Bush administration, the U.S. has been behaving like a rich teenager with his parent’s credit card. Those days are coming to an abrupt end. For years I’ve been wondering just how long the U.S. could keep up the drunken party spending spree. I think I shall soon know the answer.

What we are witnessing is what people have warned about for 30 years. Spending beyond our means on borrowed money and based on the good will and strength of the almighty dollar eventually must come to an end. The crash will be long and deep for the following reasons: It will be deep because we are so vastly overstretched and overextended. It will be of long duration because we no longer export much, we don’t make steel, we don’t make vehicles, almost no heavy industry, we have nothing much to export, we have a “service economy”, so we can’t earn the cash to dig ourselves out of the hole. We are witnessing a slow-motion train wreck and there’s nothing that can stop it. Unemployment is skyrocketing, the recession is accelerating, Bernanke is making radical interest rate cuts and all that’s happening is he’s debasing the currency, but the economy is not responding.

What can individuals do? Not much. Those who have not prepared starting three or four years ago to get out of dollars and into hard assets are pretty much out of luck. If hyper-inflation sets in then $900 gold will seem cheap, but who’s to say exactly what will happen? A lot of it depends on how the other economies of the world treat the U.S. once we fall over the edge and into the hole. The fact that a lot of countries don’t like us and don’t trust us is not going to help when our economy becomes a charity case. If someone has a crystal ball maybe they can leave a comment to this post and let us know whats going to happen. This will likely play out over a long period of time. What do you think? Anyone out there have a crystal ball?

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