Monday, January 9, 2017

New Sheriff in Town






And btw more ships on the way, only obstacle is the "out of money!" morons...


26 comments:

Andrew Anderson said...

only obstacle is the "out of money!" morons... Franko

Positive interest/yields on sovereign debt is an implicit denial of monetary sovereignty and is a carry-over of precious metals as fiat since even a monetary sovereign cannot economically create precious metals.

Tom Hickey said...

"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms in not spending money alone.

It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.

The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities.

It is two electric power plants, each serving a town of 60,000 population.

It is two fine, fully equipped hospitals.

It is some 50 miles of concrete highway.

We pay for a single fighter with a half million bushels of wheat.

We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron."


President Dwight D. Eisenhower, 1953, "Cross of Iron" speech

Matt Franko said...

It could be considered compensation for deferring consumption ....

Tom Hickey said...

Compensation paid to the defense industry? Sounds to me more like tribute to the empire.

And not just the defense industry. Many of the best minds in the country go into finance, which produces nothing, because that's were the money is.

This is then siphoning of resources way from socially productive use.

Matt Franko said...

Tom he was assuming equilibrium ... which is BS for today ... we can grow wheat and build ships at the same time... the skills of the workers are completely different in the first place...

Read Bill's latest ... equilibrium models have ZERO applicability within MMT...

Matt Franko said...

Tom I don't think you can consider Ike as objective after all he went thru during the war...

Noah Way said...

The Strait of Hormuz is Iranian territorial waters. Gulf of Tonkin, anyone?

Tom Hickey said...

we can grow wheat and build ships at the same time.

Ike's point is correct. Real resources are diverted from socially useful production to military use, which is unproductive. Workers, managers, technology and natural resources are committed to one use when they could be committed to another.

This means that resources committed to military (non-productive use) is inflationary because $ are put into the economy without corresponding goods to purchase

This is why defense needs to be "funded" by taxation. The taxation withdraws the injection without corresponding production. President Lincoln understood and explained this at the time of issuing greenbacks instead of borrowing for the Civil War.

It is also illustrated graphically by war. During WWII the US shifted production to military use and cut back seriously domestic production. There was both goods rationing and price rationing. Every piece of military hardware produced was "paid for" in cars and trucks not built. There were no cars produced in the US during the war and production did not resume at full capacity until 1949.

This was used during the Cold War and it is being used again by the US to provoke an arms race in order to force Russia and China to commit recourses to military production instead of domestic production to provoke domestic unrest owning to scarcity.

Use of these real resources is rivalrous and excludable, to defense competes with the domestic economy and export sector other than weapons for available resources. Defense wins because there is not limited on spending for the federal government.

The "we can't afford" argument is really about proportional use of real resources. It's also true of finance vs. industry.

Tom Hickey said...

I don't think you can consider Ike as objective after all he went thru during the war..

I would say that people that haven't been through war cannot be objective. They are not fully acquainted with reality, which results in cognitive-affective bias.

Matt Franko said...

Tom, Having a military and judicious use thereof are two different issues...

There is no "crowding out", we are in a continuous surplus condition in real terms... economists think we are in equilibrium...

Tom Hickey said...

Having a military and judicious use thereof are two different issues...

The US has not used either its military or its funding of the military judiciously since WWII. Wars of choice are never judicious. Defense spending in excess of need based on actual threats rather than imagined ones is never judicious.

The US has been a rogue nation in this regard. It's net-imperial overreach.

Ike realized it too late into his presidency to shift gears, so he is part of the problem historically although he came to regret it afterward.

Noah Way said...

This was used during the Cold War and it is being used again by the US to provoke an arms race

Stanilsaw Lem called this indirect economic attrition long before the collapse of the Soviet Union. The problem of course is that both sides are bankrupted.

Matt Franko said...

Well in this case I dont see Trump seeing that sea route as much as a vital US interest as it might have been previously...

It is more of a Europe issue... and a pipeline will make the sea lanes issue mostly moot... and the rails seem to be expanding too...

Regardless we still need much tech refresh in the military in any case...

Andrew Anderson said...
This comment has been removed by the author.
Ignacio said...

"Regardless we still need much tech refresh in the military in any case..."

Some planned alien invasion on the earth? Or just more free money for the MIC they can go waste (like that F-35 failure)? "Wealthy people needs to eat too?"

Tom Hickey said...

The problem of course is that both sides are bankrupted

This was not an issue for the US as much as its adversaries, since the US had and still has the largest (broadest and deepest) economy.

That will change as China develops and then the US military will be dwarfed by the Chinese military. China has added its first carrier group. Two more are reportedly on the way, for example.

The difference between the Russian and Chinese militaries and the US/NATO is that the former is basically defensively oriented whereas the latter is offensively aligned.

I doubt that anyone in Western military strategy thinks that either China or Russia is defeatable in a land war in Asia, and certainly not a strategic alliance of Russia and China. The actual strategy in these countries is regime change. The US military build up is to drain their domestic economies and create social unrest for regime change.

The US is preparing for the wrong enemy and the wrong war in a big military buildup that makes no military sense. It's clearly pork to the MIC, which many former US IR and military people are saying.

The actual US ops are special forces and cover operations in some 60 countries.

lastgreek said...

With Trump announcing that he wants to go "bigly" with the US navy, does that mean you guys are going to re-activate some fleets? How about creating an 11th Fleet to finally fill in the gap between the 10th and 12th fleets, damn it? ;)

Seriously, though, why was there never an 11th fleet but there was a 12th? Is it like a Windows 10 thing -- you know, like Windows 8, then straight to 10 bypassing 9? I hate when that happens...messes up my counting :(

Matthew Franko said...

I dont think so Greek.. we have deficiencies in current arrangements they want to get corrected...

imo seems like Trump wants to go back to a '80s style 'cold war' type of mentality so a lot of development and training and less actual use/deployment....

Bob said...

Wage war on Iran. Great plan :/

lastgreek said...

imo seems like Trump wants to go back to a '80s style 'cold war' type of mentality so a lot of development and training and less actual use/deployment....

Waste of real resources, no?

How about a woman (or a man) on Mars? Don't like Mars? No problem -- pick another planet for all I care. Just do something that's going to bring together your best and brightest(for peaceful purposes, please) ... and, in a few years, we get the benefits of all the spin-off technologies. Sure beats building bigger and better "tubs," Matt. OK, we have the US Navy to thank for GPS, I'll give them that :)

GLH said...

TH So, what I hear you saying is that if Trump focuses on military spending without higher taxation he will causing inflation without helping the real economy. If that is the case does that lead to stagflation?

Matthew Franko said...

"Trump focuses on military spending without higher taxation he will causing inflation "

It depends on what he agrees to pay for things... not how much he spends...

ie textbook MMT 101 via rote: "Its about price not quantity..."

The Rombach Report said...

"Every gun that is made..."

Bravo Tom Hickey!

The Rombach Report said...

"Many of the best minds in the country go into finance, which produces nothing, because that's were the money is."

How true! Having worked on Wall Street, I can say with certainty that the rise of derivatives markets was the practical consequence of the abandonment of post WW2 Bretton Woods monetary agreement. I think MMT needs to come to terms with this reality.

The Rombach Report said...

"That will change as China develops and then the US military will be dwarfed by the Chinese military."

Tom - You are dead on about the inevitability of China's military dwarfing the U.S. military. Reports indicate that there are 50 million young men in China of military age, for which there are no brides. This is the result of Chinese cultural preference for male children combined with 1 child per family policy until recently. There is no military solution here. The solution is for the U.S. to do what it can to encourage China to evolve into a democratic society so that it might become more of an ally than a likely adversary.

Tom Hickey said...

TH So, what I hear you saying is that if Trump focuses on military spending without higher taxation he will causing inflation without helping the real economy. If that is the case does that lead to stagflation?

Not necessarily. Military spending adds inflationary bias because it adds to the unit of account in demand deposit accounts, increasing M1 money supply, without adding goods to the economy that are for sale in the domestic economy. But that doesn't take into consideration other producers, domestic and foreign that produce goods for the domestic economy. As long as supply runs equal to or ahead of demand, the price level will not rise domestically.

Military spending increase the M1 money supply like any other government spending. When there is an output gap this is not inflationary in that the government spending offsets demand leakage to saving.

The issue with military spending is not financial but real. It divers real resource that could be used productively in the domestic economy to produce goods and services for the populace.