An Economics Lesson For Obama From Japan

It seems those in Washington will not learn from history.  Printing money, and dreaming this will fix our economic woes only further exacerbates the problem.  We’re not suffering from a lack of “demand.”  Our monetary policies are not properly allocating resources, which is the true cause of the economic recession.  I can’t think of anyone better to explain this all to you than the president of the Ludwig von Mises Institute, and Austrian economist, Doug French.  Japan  was in the same boat we are now back in the late 1980s.  Their central banks flooded their system with cheap credit, creating a massive bubble economy, their housing prices went through the roof, and when it all popped they tried massive stimulus package after massive stimulus package, hoping to stave off deflation and cure their economy.  Did it work?  No.  In fact, they’ve been attempting massive stimulus programs ever since.  Did ANY of those programs work?  No.  But they keep doing it over and over and over.  The end result? After a decade of sucessive stimulus packages, Japan is now buried in debts, running huge deficits, and on the verge of a collapse.  Sound familiar?

The excerpts below can be found in their entirety here.  They are quoted from Doug French’s article ‘Illusions of the Age of Keynes.’  If this is all too much for you to read, I bolded the main points within the article, and put really key points in a huge font.

**********  Begin Quote  ******************************************************************

A year ago George Melloan wrote in the Wall Street Journal, “We’re all Keynesian’s Again.” You remember last January — change was on its way. We had a new rock-star president and he was going to get us out of the mess that Wall Street had got us into. “Now is the time to jump-start job creation, restart lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down,” President Obama told Congress. The new president has a worldview that is “all but in name Keynesian,” Carl Horowitz wrote last spring.

Meanwhile the guy running the Federal Reserve is an expert on the Great Depression. Ben Bernanke wasn’t going to make the same mistakes the policy makers made during the 1930s. After all, he pointed out back in 2002 when he was just a Fed governor,

the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Washington continues to have faith in government expenditure correcting the downturns of private investment. And the financial press has bought into the scam, evidenced by Time voting the Fed chairman “Man of the Year.” The economy would be much worse if not for the actions of Bernanke and the Federal Reserve is the thinking. “He didn’t just reshape U.S. monetary policy,” Time‘s Michael Grunwald gushes, “he led an effort to save the world economy.”

“The Greatest Depression that could so easily have happened in 2009 but did not is the tribute that the world owes to economics,” wrote Arvind Subramanian in The Financial Times.


So what kind of Keynesian world are Bernanke and the other wise ones in Washington shaping for us?

Keynesians see a depression as a lack of aggregate demand — as opposed to Austrians who know a depression is the required cleansing of the malinvestments created by the preceding boom of the government’s making. Policy makers, following the Keynesian playbook, enact policies to stimulate aggregate demand and offset the fall in private investment. On the fiscal-policy side, Keynesians advocate higher government spending. On the monetary side, they insist on lowering interest rates to zero if necessary.

The world has recent experience with attempts at resuscitating a bubble economy. The Bank of Japan cut interest rates six times between 1986 and early 1987 and all that new money caused the Japanese economy to bubble over. As Bill Bonner and Addison Wiggin write in Financial Reckoning Day Fallout,

the problem with all money is that it is as fickle and unreliable as a bad girlfriend. One minute she goes along with the flow. The next minute she turns silly and bubbly. And then, she gives you the cold shoulder.

The prolonged period of low interest rates created one of the largest domestic bubbles in the world. For a brief moment in 1990, the Japanese stock market was bigger than the US market. The Nikkei-225 reached a peak of 38,916 in December of 1989 with a price-earnings ratio of around 80 times. At the bubble’s height, the capitalized value of the Tokyo Stock Exchange stood at 42 percent of the entire world’s stock-market value and Japanese real estate accounted for half the value of all land on earth, while only representing less than 3 percent of the total area. In 1989 all of Japan’s real estate was valued at US$24 trillion which was four times the value of all real estate in the United States, despite Japan having just half the population and 60 percent of US GDP.

The Japanese asset bubbles were identical to other asset bubbles in the sense that they were essentially inflated by credit,” writes Asian bank regulator Andrew Sheng in his book From Asian to Global Financial Crisis.

Banks lent to highly leveraged developers to buy real estate against inflated collateral values, which then fueled the bubble further. Asset prices bore no realistic relationship to their return on capital, particularly since cost of funding was exceptionally low. The minute the credit stopped, the bubble began to deflate, and the main victims were the banks themselves.

After the bubble popped in Japan, that government pursued a relentless Keynesian course of fiscal pump priming and loose fiscal policy with the result being a Japan that went from having the healthiest fiscal position of any OECD country in 1990 to annual deficits of 6 to 7 percent of GDP and a gross public debt that is now 227 percent of GDP. “The Japanese tried to cure an alcoholic with heroin,” writes Bonner. “Now, they’re addicted to it.”

Japan’s monetary policy was to aggressively lower rates to .5 percent between 1991 and 1995 and has operated a zero-interest policy virtually ever since.

Between 1992 and 1995, the Japanese government tried six stimulus plans totaling 65.5 trillion yen and they even cut tax rates in 1994. They tried cutting taxes again in 1998, but government spending was never cut. Also in 1998, another stimulus package of 16.7 trillion yen was rolled out nearly half of which was for public-works projects. Later in the same year, another stimulus package was announced, totaling 23.9 trillion yen. The very next year an ¥18 trillion stimulus was tried, and, in October of 2000, another stimulus for 11 trillion was announced. As economist Ben Powell points out, “Overall during the 1990s, Japan tried 10 fiscal stimulus packages totaling more than 100 trillion yen, and each failed to cure the recession,” with Japan’s nominal GDP growth rate below zero for most of the five years after 1997.

After five years in an economic wilderness, the Bank of Japan switched, during the spring of 2001, to a policy of quantitative easing — targeting the growth of the money supply instead of nominal interest rates — in order to engineer a rebound in demand growth.

The move by the Bank of Japan to quantitative easing and the large increase in liquidity that followed stopped the fall in land prices by 2003. The Bank of Japan held interest rates at zero until early 2007, when it boosted its discount rate back to 0.5 percent in two steps by midyear. But the BoJ quickly reverted back to its zero interest rate policy.

In August of 2008, the Japanese government unveiled an ¥11.5 trillion stimulus. The package, which included ¥1.8 trillion in new spending and nearly ¥10 trillion in government loans and credit guarantees, was in response to news that the Japanese economy in July suffered its biggest contraction in seven years and inflation had topped 2 percent for the first time in a decade.

Newswire reports said the new measures would include assistance to the agriculture sector, support for part-time workers to find better employment, and rebates on toll roads. Additional spending was also to flow to healthcare, housing, education, and environmental technology.

Just this past April, the Japanese government announced another ¥10 trillion stimulus program. This was after Japan’s economy shrank by a record 15.2 percent annual rate in the first quarter of 2009. This drop was on the heels of a 14.4 percent drop in the fourth quarter of 2008.

Last month, Reuters reported that the Bank of Japan reinforced its commitment to maintaining very low interest rates and may provide even further easing. “The bank said that it would not tolerate zero inflation or falling prices.” The bank left its policy rate at .1 percent and analysts see the rate staying low possibly until 2012.

According to Reuters, the Japanese government “is fretting over the risk of the economy flipping back into recession and is pushing the bank for action.” Economy flipping back into recession? Are they kidding? Japan’s GDP at the end of this year will be no higher than it was in 1992–17 lost years.

“After 17 years of bailouts and stimulus programs, the Japanese should be getting good at them,” write Bonner and Wiggin. “But it’s a little like a guy who’s getting good at suicide — if he’s so good at it, you’d think he’d be dead already.”

Government Keynesians want to stimulate the economy by pouring taxpayer and inflated money into their pet projects. What they would spend money for stimulus on is different than, say, what Tiger Woods would spend his stimulus money on. And you may have noticed that energy, healthcare, education, infrastructure, and environmental technology are where Keynesians want stimulus money spent on whether they are American Keynesians or the Japanese variety.

“Producing things that nobody wants and propping up malinvestments cannot possibly help any economy,” writes Powell.

This policy is equivalent to the old Keynesian depression nostrum of paying people to dig holes and fill them. Neither policy will revive the economy because neither forces businesses to realign their structures of production to match consumer demands.

And why don’t those low interest rates get things moving? “With distressed banks, reflation fails to induce another bank credit expansion,” Professor Jeffrey Herbener wrote in the Asian Wall Street Journal. “Keynesians have mistaken the impotency of the Bank of Japan to restart credit expansion in the 1990s as a liquidity trap. But the problem is not that interest rates are so low everyone expects them to rise and therefore hoards cash. Banks refuse to lend because of the overhang of bad debt. Any cash infusion is held as reserve against it. Businesses refuse to borrow because of their debt burden, built up to expand capacity during the boom, and their over-capacity resulting from their malinvestments.”

*********  End Quote ************************************************************

A Cold Heart

About a year and a half ago I committed myself to try and more fully understand love.   By love, I mean all possible uses of the word.  I felt that I understood love very little, so attempted to figure out all I could about it.

The more I dug and the more I read, the more confused I became.  I read different philosophers and their writings on love, the beautiful and the sublime.  I read the great works of theology and pondered God’s love, thinking that maybe even religious stories could lead me to what I was wondering about.

No matter how much I read though, I still felt I didn’t understand love.  At least, not what I was looking for.  So instead of reading about it, and hoping to learn it from philosophers and psychologists, I figured I’d just observe kind, loving people, and see how their behavior differs from my own.  There was something about those people that I’ve always admired. For a long time, I’ve wanted to integrate that trait of kindness and love into my own person, but I never could quite put my finger on what exactly was different about them.

After a year of observation, I still hadn’t figured anything out.  But just the other day, while lying in bed, I think I may have finally found out something.  Something I’d been looking for for a long time.

I discovered one principle that their actions had behind them, which mine lacked.  They cared what others thought of them.

I noticed that principle in every loving, kind person that I’ve ever met.  At least, the sort of love I was mentioning just now. It hasn’t failed yet.  And on the other end, people I’ve met who were very unkind seemed to care very little what I thought of them.

Take one kind woman I remember.  This was at a luncheon type event, and she had baked cookies for everyone there.  I made my way to the table, she greeted me, and I took one of her cookies.  She watched attentively as I took my first bite, waiting anxiously in anticipation.  Then she said, “So!?  How is it?”   I replied, “These are great!”  Then she said, “I’m glad you like them!”

Think about this event closely.  There’s so much to learn from it.  She’s very concerned what I think about her cooking.  It’s obvious that she put a lot of effort into those cookies, and wanted everyone to enjoy every bite.

Compare this to a more individualistic, less sociable type of person.  They have a mindset like, “I make cookies because I like cookies.  I make them for me.  If you want one, fine, but if you don’t like them it’s not going to hurt my feelings any.  Whatever people don’t eat I’ll take home and have for myself.”

The kind, gentle, warm people I meet all seem to always extend invitations to be their friend.  They want your attention.  They want you to like them, what they do, and appreciate them.  And the same sort of fawning they seem to desire themselves, they extend to others.

They compliment one another’s clothing, hair styles, and accomplishments.  They’re always trying to make it clear, “I like you.  I’m glad you’re here.”  Good, loving relatives always tell their family, “I’m proud of you.  I’m so glad you could come visit me.”

And like I said, loving people go to great lengths to make sure you like them and reconcile any conflicts.  They’re the types that ask, “Did I do something wrong?  You seem to be upset with me.”   Or if they’re a more personal friend, “I really hate having you mad at me.  I can’t live like that.”  And they really do seem to be upset that you don’t like them.  It’s not an act.  It really does make them sad.

I’ve struggled with this issue because I’ve always concerned myself too much with individuality.  Basing your happiness and desires on other people leaves you to conformance to their worldviews and lifestyles, which can be a bad thing.  A sort of fear of being bent and giving way to others’ opinions.

There’s something beautiful about being an individual, and walking your own path no matter what people think.  That sort of mindset can take you to new heights if you’re not doing so in fear.  Then again, there’s also something very beautiful about the cookie lady.  It creates a warm environment where everyone seems much more happy.

The two very easily come into conflict.  Either extreme can be bad.  But like I said months ago on here, I’ve been thinking about two topics a lot lately:  moderation, and love.   It seems most anything taken to an extreme is bad.

Extreme individuals, such as myself, tend to create strict environments which don’t seem very open to the public, so to speak.  I’m in my own world, and if you don’t go along with its flow, then, well, I don’t care.  If I’m not invading your personal liberties, leave me alone.

Extreme cookie ladies (lol, that sounds funny), can easily become self conscious, and if it goes too far can become paralyzed in fear.  Other people’s decisions can easily end up ruining their day.

I don’t think I completely understand this issue completely, but even so, I’m going to try to add a little more “cookie lady” to my personality.  From my thoughts on this, it seems the extreme individual position is safer, but is cold.  Being the cookie lady leaves you open to emotional attack, and getting your feelings hurt, though in the end, it’s probably more rewarding.

When a mindset challenges me to be brave and put myself at risk for someone else’s sake, it’s probably not too far from a good one.

To care what others think about me.  To want to be admired by others.  Hmm.  That’s a rather novel concept for me, and one which I’ll have to take very slowly.

Oh, and by the way.  It’s my birthday!

Today’s Thoughts

Lately I’ve been studying economics and quantum mechanics, in particular quantum electro-dynamics (QED).  I was thinking about writing an entry on the basics of QED and how light travels across a room, bends through a lense, or bounces off a mirror.  I think you’d all find it interesting.  It’s very very strange.  Light does not behave how you think it does.  Light is a strange beast.

It’s too late to write up an entry on that tonight though.   But I will share the ending lines from John Maynard Keynes’  The General Theory of Employment, Interest, and Money

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.  Indeed the world is ruled by little else.  Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves to some defunct economist.  Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.  I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.  Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest.  But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.

I don’t agree with Keynes on this point.  He’s too trusting in politicians, government, and humanity in general.  To him, most all “wrongs” are due to stupidity and incorrect economic ideas.  He fears stupidity – I fear the Fed and Goldman Sachs.  With the bailouts, the CDS market, and filibusters on pretty much any meaningful reform, I’m not going to discount the big corporations and their lobbying interests to do anything to keep their profits.   Then again, who am I to know someone else’s motives?  From what I can tell, as far as trusting government, 1 being no trust, 10 being complete trust, Keynes seems to be a 7 or 8.  I’d be a 3 or possibly 4.  I think the economy is too big and complicated to plan.  Their intervention almost always just gets in the way.

I have very little trust in government.  The power attracts a certain type of person, and their campaigns are so expensive, by the time they get in office they owe so many favors they lose whatever values they may have had prior to running for office.  In the big picture, you can’t deny that powerful people are out there trying to build empires.  That’s all our history has ever been.  Adler’s inferiority complex.  Their lives don’t mean anything unless they have a powerful influence controlling the lives and minds of those in their society.

I see it everywhere I go.  It’s not just Washington.  In my hometown’s McDonalds the owner has put up a “philosophy” wall.  His face plastered there for all to see, and he shares his personal quotes of economic thrift, prudence, and business acumen to all the patrons.  Sip away on your chocolate shake, swivel your chair side to side, and contemplate lines like, “Those who are patient enable wisdom to find them.”

But even though I don’t agree with everything I’m reading, I am glad I’ve finally found some time to read Paul Samuelson’s economics textbook, which is one of the best economics textbooks from the Keynesian perspective.   Maybe he’ll convince me on some of government’s roles in the economy, but I doubt it.  I’m far more leaning to the free market and the Austrian school.  I sympathize with social safety nets, and income distribution through taxation, and all societal changes which might well never happen without planning, but once a person tastes a free lunch, it’s over.  Once big funds are collected, the vultures come in to siphon off all they can.  And before long, everyone is wanting everyone else’s stuff and all the good intentions just turn out to be a big mess.

I believe in universal college education.  I’ll pay for kids to go to school.  I’ll pay for their medical bills as well.  If you don’t have the money to have a surgery done, or to fix a cavity in your mouth, I don’t mind that.  I hate seeing kids struggle to make it through school and rejecting a person who needs treatment just because they lack money or insurance is inhumane.  That says their life is worth less than the price of their treatment.

But there’s an opportunity cost to everything, and people have to realize that providing a government service to one person, is taking away from someone else.  Those tax revenues used to fund these programs is money the citizens could’ve spent on what THEY wanted.  As Fredrick Hayek once said, “Collectivism is slavery.”  If we have too many taxes, and too many programs, we’re seceding our freedom to the politicians, who then decide where our money goes, instead of the free market, which represents us spending our money on what we want.

It’s complicated, I know.  Without love I don’t think we’re ever going to move anywhere.  But love aside, the question of private property is a difficult issue.  When I build up a business, work 12 hours a day for years, and finally start to succeed and then make a lot more money than someone else, who’s to blame here?  I end up with a lot, and someone else has a little.  Who deserves what, based on the labor they do?  Answer that question.

What I do know is this – men hate work.  They’ll do anything and everything to avoid it.  They’ll argue and fight for hours over something that would’ve only taken them 30 minutes to do themselves.  If not strictly enforced, they’ll come into work late, slack off the first hour, goofing off on their computer.  Then they’ll get up and chat with co-workers, or goof off on their cell phones, texting their girlfriends and buddies.  After so long they’ll finally start to feel guilt and put in an hour or so of work.  Then they’ll raise their arms, yawn, and say to themselves, “Well, lunch time’s coming up.  What will I eat?”  They’ll slack off the last 30 minutes before lunch.  Then another hour goes to lunch.  They’ll slack for an hour after they get back, letting the food “settle.”  They browse around on various news sites.  Then they might put in a little more work, then slack off the rest of the day.

Adam Smith showed us that men won’t do anything without incentive.  Salaried employees are that way.  If they get the same amount of money whether they work hard or not, they won’t work hard.  They more often than not could care less about the business, or their employer — outside of losing their job completely that is, and they only care about that if it’d be difficult for them to find another job.

I know this cycle.  I’ve seen it everywhere I’ve ever worked and even in business projects of my own.  I’m guilty of it myself when I’ve worked with others.  We procrastinate when we don’t want to do something, and most people don’t want to work.  Menial jobs are rote, boring, and pointless in the big scheme of things, and the more you think on it the more depressed you’ll be.  That’s why everyone wants to be the manager.  At least then you get the thrill of ordering people around, feeling like the big shot, and not getting stuck with the boring repetitive tasks — you assign those to your secretary!  To top it all off, you get paid more.

The rich and powerful are almost always the most intelligent of that society, and that’s not just a coincidence.  If they’re not, they won’t be rich for long for a fool and his money are soon parted.  This intelligence is typically not used to help the masses, but to escape the harshness of this reality because there’s no degree to which people hate toil and being separated from their desires.   Even Keynes himself, the beloved genius economist, once wrote this about economics, “I think I am rather good at it.  I want to manage a railway or organize a Trust or at least swindle the investing public.”   He tells us to trust the government, as long as they’re listening to his council I suppose.  And why would he want to swindle the public?  If I recall correctly he was quite the investor and then lived an idle life himself.  He supported the Royal Opera House, collected the personal papers and books of Issac Newton, and collected fine arts to ornament his home.  And could you ever earn that kind of money working a normal job?

The ones who speak out against the corruption are those who have no incentive to lie, such as  salaried academics.  I think a lot of their honesty stems from the fact that they have no reason to lie to you.   But skilled economists can be bought, ready to show all sorts of charts and graphs intended to deceive all but the most educated.  They’re on the news every day.  Those who do see through it and speak out will then be ignored and not given any mainstream media attention, or ridiculed and marginalized.

I find something particularly interesting.  People think the “eye of the tiger” (to use the term from the Rocky movies!) comes from a strong desire to accomplish something.   On the positive side of things you can say that men continually strive to better their world.  However, you can just as easily see it from the negative side of things – they’re unsatisfied with where they find themselves, and want a new life.  What else is a goal, other than this?   We all want a better life – how you choose to see that particular truth emotionally is your choice.  We are in a continual flight from reality.  A continual struggle to change a world we don’t like, into one we find more suitable.

Whether you hate life and just say, “Screw it”, or find beauty in the small things life has to offer which are free, or find happiness in a lover, or strive to reform the your world and make it “big” – all of these are simply different psychological reactions to the same truth of life — life is difficult and not what we intended.   So, what are you going to do about it?  From a perspective of happiness I don’t find any of these reactions really all that much different.  They’re all rooted in the same base cause and are very human.

In the end we all want a better life, but get tired of working so hard for it.  Some just give up, some settle for little, some turn to the imagination, while others find theft a viable option.  It’s so much easier to take from someone else.  Like the old tale of the hen and the pigs (I think it was).  Nobody would help her make the bread, but everyone wanted to eat the bread when it was done.   And the “taking” goes both ways.  The poor and middle class are always trying to take from the rich through taxation, and the rich are always trying to take from everyone through cheap labor, swindling through investment and financial industry, and lobbying Congress for price floors and monopolistic legislation.   And who deserves what the society produces?  It’s a gray area, and everyone seems to feel they deserve more than what they currently get, and that war wages on day after day.

Bankers run their companies into the ground but still feel they deserve huge bonuses.   They’re under-compensated!  The middle class feels they work too hard.  They only have 3 cars in the drive-way, and a big flat screen TV which delivers every sort of movie imaginable right into their living room, and a swimming pool out back — but they don’t make enough!  They want comprehensive healthcare, and the rich should pay for it!  And so class warfare ensues, everyone feeling themselves the victim, and trying to get everything they can.

We speak of loving one another, but the love seems to only extend to those in a situation similar to our own.  And when we fight for social reform, isn’t it funny how we’re almost always the benefactors of the changes we fight for?

To trust government denies most of history.  Go back to the first tribal war lords.  All the fun jobs they kept for themselves, and all the toilsome jobs, they forced the weaker members to do.  Later we had monarchs and aristocrats.  The monarchs claimed a divine right, and descent from the Gods.  Maybe in a sense this was to unite the people, but people can be united without having to pay tribute, high taxation, and construction of palaces at the expense of starving and impoverishing their subjects.  This all stems from human greed.  And what is the origin of greed?  To escape the toils of this world!

It’s like the old curse from the book of Genesis in the Bible.  Men fell out of favor with God, and from then on would have to derive their living from the sweat of their brow.  As they multiplied over the Earth, they learned they could earn their living from the sweat of someone else’s brow!  And hence began the world of theft, wars, and manipulation of the mind!  That  curse is what is behind this world’s problems, and when God curses something, it’s no joke.

And you’d think the religious priests, who are supposed to teach these lessons, would be different, but no.  The Catholic church was no better.  Popes continually strove for empire and expansion.  They wanted more churches in every town, and collection of tithes, offerings, and other fees, over which a portion was sent to the Vatican in Rome.  Even modern day TV preachers, what do they tell their congregation?  They say the key to prosperity and wealth is to send gifts and offerings to their ministry, and then God will open a supernatural fountain of blessing over their life, giving them an edge over their fellow man.  They’ll have “favor” with their employers, and in business.

Greed has so many faces.  It’s everywhere.  Aristocrats became the land owners, who simply by “owning” great quantities of land felt entitled to tribute of all sorts.  They lived idle lives sitting in the king’s court, while their serfs labored away for them.  Today, those in the financial world, the big corporations, and even a great deal of the environmental movement… There’s always someone after your money and the things you produce.

There has to be checks and balances.  Checks checks and more checks!  Someone will ALWAYS scheme their way out of labor.  ALWAYS.  You need pure transparency in government, and real journalists who both know what they’re talking about, and actually report things they dig up, not just what the White House feeds them.  Instead, most of them just polarize a left/right paradigm, resort to name calling, and read us the official story.  In the end it seems they work in the interests of the corporations, and rarely truly inform the public.

This may all sound very pessimistic, but really I’m just being realistic.  It’s an empirical observation.  I believe in humanity.  I think we can do great things, and together there’s not anything we can’t do.  But, we’ll have to recognize these things, and see what’s really going on.

I long for a day when there’s more respect in the world of money and the economy.  But honestly, nobody has came up with an system which fixes these problems.  With big government you run into graft and vultures.  With small government, the powerful prey on the weak.  Our fight is with ourselves, and I think we’re all guilty for where the world is today.   A while back I had a talk with my father about these issues, and he seems to feel it’s a moral issue.  I think he’s right.  I don’t know if love would fix everything, but it’d certainly make things better.

Two Videos I Thought Were Funny

Here is a video Greg sent me, which I found to be both hilarious, and a little scary – scary because it’s true.

This other video is about Obama being an absolute failure.  Which he is.

“To think I actually donated to Obama’s campaign.  Me, of all people.  I never volunteer for anything!  Now every day it’s some new broken promise … Putting bills online.   Public financing of campaigns, immediate withdrawal from Iraq, closing Guantanamo, negotiations on C-Span, no new taxes, no more lobbyists.  Obama… You lie.  Why does he still need every word fed to him through a teleprompter?  I can give a speech without notes, why can’t he?”

I think even more important than the points made in this video are the Wall Street bailouts.   Those total trillions and trillions of dollars, literally handing our money to crooks, who still have their jobs by the way, and are paying themselves huge bonuses!   Also we need to audit the Fed, and keep a closer eye on these bankers.  I’ve advocated regulation before here on my blog.  But to clarify, ideally I think a better system would be to end the Fed, implement sound money, backed by a gold standard to keep the government from printing money, end fractional reserve banking, and put banks back on their own.  Sure, I can hear you now, “Wouldn’t that slow down the flow of credit, and hamper economic growth?”  Maybe in an ideal world we can use Keynes’ ideas, but from what I see, our politicians are way too stupid to even understand economics to that degree.  To them, they think, “Oh?  Economic contraction?  That gives us a free license to spend spend spend, all we want!”  And Keynes is more subtle than that.  And even so, I still don’t agree with Keynes.  My views are much closer to the Austrian school. I think all that ends up happening is our politician’s buddies and the big corporations end up getting the money, with a small bit of “stimulus” funds making it into public hands.

I think government intervention tends to inflate bubbles, and make their contractions much more intense.  Without all the intervention the cycles would be far less dramatic.  Greenspan kept inflating homes up and up, trying to keep the contraction from hitting.   For some reason contractions are viewed as this demonic force.  I don’t get that at all.

If everyone in the country is out of debt and living off their paychecks, then all of the sudden the banks issue everyone credit cards, you will inevitably have a boom, then a contraction.  You’ll have a boom when they run up their debts spending borrowed money.  This will lead to companies making huge profits and jobs galore.  But if you issue too much debt, people get buried in them and the interest payments, especially when it’s 30% like on credit cards.  That all starts to eat away at consumptive spending, leading to a contraction.  The money stops flowing to businesses, and flows to the banks instead.   Once the credit cards hit maximum, and people have no more to borrow, they have to start making payments.

So if you issue too much debt, too fast, you get a contraction.  That’s one of our main problems.  Too much debt.  So Greenspan had find ways to artificially make more debt available.  So he inflates home prices way beyond what they need to be by screwing with interest rates and the housing market.  Then people borrow more loans, and spend this fake equity in the economy.  The banks get the money to lend through the Fed.  But, at the same time, this leads to people getting further buried in debt, exacerbating the problem, and making it worse.  That’s what it means to “inflate the bubble.”  It’s not a real fix, but a temporary band-aid, sweeping the real problem under the rug.

Is that the only problem?  No.  We have trade deficits.  Everything in our stores has a “Made In China” label on the back. Our borders aren’t secure.  People are collecting entitlements and aren’t paying into the system.  Our industrial base has eroded, and jobs are outsourcing overseas, making it even harder for people to pay back their loans.  There’s so many other things as well.

When Obama prints money he discourages private investment.  There is no private investment anymore because of all that’s going on in Washington and the Fed.  All investment is coming from the government, and they’re basically just throwing money around, mostly to their buddies.  The more money they print, the more this will erode private capital from flowing into the country and creating new jobs.

From what I see, the more they intervene, the more they’re probably going to have to intervene to keep it all going.  Print money here, buy up GM, GM’s crappily managed… Print more money to keep it going.   It’s so ironic.  Cheap credit made GM go under, and now the same force — money being created out of thin air, is keeping it going.  It’s so terrible.

All of these things are caused because they don’t have a true free market, and this Fed/Washington intervention.  It’d be better to let the free market handle interest rates, and leave banks on their own, without the “lender of last resort.”

Also, the banks have proven themselves to be not only crooks, but untrustworthy in every sense.  They’ve loaned way too much money to the public in credit cards, and home loans, and are guilty all kinds of market manipulation and housing bubbles — all for their short term gains.  So I say go back to how the founding fathers intended – gold and silver being our currency, being issues by Congress, not some private banking cartel with absolutely no oversight.   Let the invisible hand smash those bastards the second they start scheming. But we can’t have that.. “Too big to fail.”  Whatever.

You can’t print gold.  Can’t print silver.  Can’t create gold by some log entry in the accounting books.  Gold is gold.  That’s why our founding fathers, like Thomas Jefferson, intended our country to work that way.  You can’t live free without a currency which is secure.  Which keeps its value.  The Fed claims to stave off inflation, but I agree with Murray Rothbard — they are the real force behind inflation.  Their intervention in the money supply is the primary factor behind inflation.

People who believe a lack of regulation is what got us into this mess are completely wrong.  We have a mix of government intervention, and free market.   We have a banking system where banks can loan out money, and then fall on the Fed when they get in trouble.  That’s the REAL problem.  Crooked politics has made them bloated, and the same Fed keeps them afloat when they scheme, and run wild.

A lot of people wonder how a person who just filed bankruptcy starts getting credit card offers just six months later.  Why would a banker lend them money, when they KNOW they won’t get it back?  That’s because of this fractional reserve system.  They can loan out more money than they have in their reserves, and if they’re ever called on it, the Fed (this quasi-government entity with no oversight – owned and controlled by a private cartel of banking elites) bails them out.

They get money dirt cheap from the Fed (and all the Fed does is print it, or create it out of thin air on the computer), then lend it to you at 30% interest.  They keep the difference.  And even with people defaulting on their cards and loans, they still make money, because of the insane interest rates.  It’s so crooked it’s beyond belief.

You see, George Bush deregulated some things, but not others.  He removed regulations which prevented the cronies on Wall Street to do whatever they wanted, but kept the safety nets.   Reagan may have claimed to follow Adam Smith’s policies, but how can you say we have a free market when we have organizations like the Federal Reserve?  He never touched that.  And Clinton removed Glass-Steagall.  And Obama bails out Wall Street and passes no reforms.   They all work for Wall Street.

The biggest problem is fractional reserve banking.  The banks may have $1,000,000 of their own money, then $10,000,000 issued out in loans.  The $9,000,000 is all cooked up in the books, and if they’re called on it, the Fed just creates the money out of thin air, and hands them whatever they need for super low interest rates.   These days the money is pretty much free.  “Lend banks, lend!  We need more lending!”   That’s the problem!  Too much debt and lending.  Credit’s too easy.  It’s destroying everything.

But I can’t see people becoming informed enough about the system to realize what’s going on.  Banking and money isn’t exciting.  There’s no celebrities posing in bikinis talking about synthetic CDOs, credit default swaps, and fractional reserve banking.  They’ll continue to cling to slogans like, “Lack of regulation got us into this mess!”  A lot more complicated than that!  So, since people will never study economics and banking, I can’t put much faith in the real problems being fixed.  The banking elite and the fortune 500 would never let the Fed go down without a fight.  Bankers make a fortune in this system, and the big corporations like the cheap credit to expand their empires.  The Ron Paul, Alan Grayson “Audit The Fed” bill had some momentum there for a while, but everyone seems to have forgotten about it.  And Sen. Dodd has been trying to get a much worse financial regulation bill through which “has no teeth.”  An easier fix, for the time being, would be to at least regulate the CDS and CDO markets, and audit the Fed.

Pisses me off.  Our system amounts to socialized losses, and privatized gains.  That’s what’s ridiculous.  Regulation will ultimately fail though, I think.  The regulations will always be one step behind, and there will be loopholes.   And we’ve seen how ineffective our politicians are.  Like they’re going to stay on top of the banking system.

But next to Wall Street and banking reform, the second on my list would be the wars, which we can’t afford, and are not justified.  They’re costing us trillions, and for what?  That money needs to be spend here at home, rebuilding our infrastructure, and sending kids to school, and paying for healthcare, and paying off our bills.  In third place I’d put the trampling of the bill of rights, and Obama’s renewal of the Patriot Act, which is police state legislation which needs to be abolished immediately.  Along those same lines we need to close Gitmo, and get rid of this RIDICULOUS airport security.  Those nude scanners have to go.  They’ve went WAYYYYY too far.  Healthcare would be next.  We’re spending at least twice as much as we should be, and people are losing their coverage everyday because they can’t afford the costs, which are mushrooming.  Then the reform bill, which wasn’t great, but at least had SOME fixes… it may well die.  But overall, just like Bill Maher said, this healthcare bill is a blow-job to Big Pharma and the insurance companies.

I can’t stand politics.  Lies lies and more lies.  If I didn’t have my physics studies, I’d go insane.  I find myself searching for some method to utilize quantum physics to warp myself out of here.

Quantum Mechanical Time Machines!

Today I’ve been reading a book written by UCLA physicist Fred Alan Wolf called “Parallel Universes:  The Search For Other Worlds”.  I just started on Part V and, after reading the first few pages, I think my mind is about to explode.  Yes, I’m busy scraping my brains off my desk as it exploded all over my desk just a moment ago.  You know what?  I’m just going to type out these last few pages and let you all see for yourself just how crazy this stuff is.

“What did the early universe, the universe that existed before there were any observers, look like?  Since there were no observers at the time of the big bang and since quantum rules run the show, there must, and I emphasize the word must, have been parallel universes occurring then, because all possible scenarios for the big bang must have occurred according to the rules of quantum physics.
Even the conservative Copenhagenists should agree.  The world we see, according to the Copenhagen physicists — who believe that an act of observation rules out alternatives — appears when an observation takes place.  Even they would agree that before the first observation, all we can really say is that the universe was in some superposition of quantum possibilities.
Take, for example, the radius of the early universe.  Did it even have one?  How could it, because according to a quantum picture it wouldn’t have had any radius until that radius was measured?  Who measured it?  When was that measurement accomplished?  Several physicists have addressed these questions and have come to a startling conclusion — one that is nevertheless consistent with the theme of this book:  It is our observations now that are determining the past.

Do Thoughts and Wishes Time Travel?

Thus an observation of an event now somehow sends a message backward in time and “causes” events in the past.  If this is true, then what is really the past?  It would seem that there is no absolute past, because there is always the possibility at any time that some present event will alter it.
A way out of this paradox is found in the parallel universe theory.  Accordingly, there is no fixed past.  The past we believe is the past is what a community of communicating intelligent beings choose to be the past.  Other pasts are out there waiting to be discovered.  In other words, there are parallel pasts — an infinite number of them.  The past that is altered by the present is just one of the many.
Since, according to relativity theory, there is no such thing as an absolute present, then what is present for someone could be the past or the future for another.  Consequently, it would seem that the future also communicates with the present.  But which future?  The future that we believe will be the future is again that which is chosen by a community of intelligent communicating persons.  According to the quantum rules governing parallel worlds there are an indefinite number of futures.  So how can a future that is not fixed communicate with the present?  Which future sends messages back to us?
The only consistent view possible is that all possible futures act on the present.  Viewing the whole scenario of an infinite number of parallel universes as one big continuum stretching from the infinite pasts (actually not so infinite — only about 15 billion years ago) to the infinite futures, the effects of observations propagate in both directions through time — to the pasts and to the futures.  What is future or what is past is purely a personal viewpoint, like being on one of many roads in a gigantic city leading from somewhere to somewhere.
And here comes a surprise.  If the future communicates with the present, and by the same line of reasoning, the present communicates with the past, then it must follow that time is not fixed.  We are not stuck in it like so many flies in a jar full of jelly.  If we are not stuck in time, can we, like the unsuspecting hero of Kurt Vonnegut’s Slaughterhouse Five, become unglued in time?  Is a time machine, a device that can send one backward or forward in time, possible?
With parallel universes appearing as a result of space-time distortion induced by gravity, new effects appear.  For example, assuming that travel to a parallel universe is possible, it is impossible to go to it without traveling in time.  In other words, time travel as described by multitudes of science-fiction writers now turns out to be possible.  Just get near a whopping space-time warp and you have found one of nature’s time machines.
Now the existence of parallel universes is troublesome enough.  Why bring in time machines?  Again the answer is consistency.  As strange as it appears at first glance, time machines — devices that enable a conscious being to travel in time backward or foward — must be constructable if parallel worlds exist.

These are the sort of consequences you run into when you try to fuse quantum mechanics with Einstein’s general relativity.  According to Wolf, every possible existence already “exists” and has always existed.  Atoms, or at least our models of them, are these clouds of potential which can take on any possible existence.  The quantum wave function outlines how all the parallel realities tie together.  It’s a sort of bridge between the parallel universes.  It’s kind of like a navigation tool.  Each decision a sentient being takes “splits” the universe and their consciousness travels to a parallel world.

These sorts of books really make you think, but aren’t necessarily useful.  At least, not yet.

If it’s true that I’m splitting the universe with my every “decision”, whatever a “decision” may be, this still doesn’t tell me how to live my life or help me at all.  To use a computer analogy, it’s kind of like a vendor selling me a new computer yet it has no software loaded on it.  All they give me is a text editor where I can write my own software code.  Then they say, “Look!  You could program this computer to literally do anything!”

I would then tell the salesmen that he’s offering me little to nothing at all.  To give someone everything is the same thing as giving them nothing at all.  People don’t want the ability to do anything.  That’s something you learn in business.  People become perplexed when they’re given too many choices, and they even pay consultants to make decisions for them when things get difficult.  In fact being an individual, and being alive is really the business of making decisions, and choosing your life.

If all parallel universes all exist side by side, and somehow we’re navigating them, then “truth” and learning the story of the “universe”, its past, and its ultimate fate, aren’t really the key issues.  Imagination and deciding where you want to go are the primary factors.

But freedom is useless if you don’t know how to utilize it.  In fact, you don’t even realize that you are “free.”  We all have absolute freedom, in a sense, and that’s why we find this life so miserable.

It’s like being given a brand new car and your parents tell you, “Here you go son!  Take a road trip and see the world!”  Then they don’t teach you how to drive it and when you go to leave the drive-way you slam into the garage door, puncturing the tire.  Then you slam into reverse, tail-spin into a tree, and then roll into the ditch.  So much for the road-trip.  Yeah, you were given the chance but, driving is difficult.   You don’t just give a young child the steering wheel on the interstate, driving at 70 mph, in stormy weather, surrounded by semi-trucks.

People already know that life is insanely complicated and that their every decision influences where they end up in life.  We’ve always known this.  What perplexes us is that it seems there’s so many decisions which take us in directions we don’t want to go.  We don’t know the consequences of our decisions.  That’s the problem.

In a way, thinking about what’s in this book is painful.  I start thinking that there’s a parallel world where all my decisions went how I wanted them to.  I’m sitting in my chair, writing on my cherry desk, working on my physics and other studies.  I have all the books and materials I need for my theoretical research.  I’m free from all toilsome labor, am never bothered with “projects’ and “work”, and am able to research everything I’m wondering about.  I’m married to my beautiful dream girl, my business endeavors all went beautifully, I live in a home which was designed to my every specification, I’m adored by everyone… Yeah, I suppose I can imagine such a world, and according to Wolf, it actually exists in some parallel potential universe, and if I would’ve made all the proper decisions I would be experiencing that world right now.

But to be fair, this stuff he’s talking about is backed by real science and is deeper than that.  It’s not something to be dismissed as mere vapid speculation, and just because it’s not useful right now doesn’t mean it won’t be one day when we learn more.  When the Greeks were researching conic sections they didn’t have any idea what they could be used for.  They ended up providing a mathematical framework to chart the heavens, plot trajectories of all sorts in physics, and became extremely useful in all sorts of engineering problems later on.  Who would’ve known.  Who could’ve?  This stuff may be the same.

I think we’re just now starting to realize the mechanical structure running the universe.  It’s mind-blowing when we begin to realize that nature’s “constraints” aren’t really constraints at all.

Makes me think of John Mayer’s song Gravity “Gravity, is working against me.  And gravity, wants to bring me down.” Einstein and many other physicists don’t believe this at all.  Gravity is a warping of space-time due to matter, and this warping is not only how time itself takes place, but is probably the key to how we’ll be able to navigate between parallel universes.

Gravity is like the car example I gave earlier.  We don’t understand it, therefore we crash in the driveway.  But later, when we learn to “drive” gravity, we’ll probably be able to travel to any time, any place, and possibly live any life we can imagine.  When we come to understand it more, I think we’ll fall in love with it.

Gravity is not some force that’s hell bent on pinning us down to Earth.  It’s actually a time warp.  Time slows down under the influence of gravity.  Science experiments have been done, placing clocks both in the basement of a building, and on top of of high towers.  The clocks in the basements actually run slower than the clocks way above the ground.  In areas of high gravitational concentration, such black holes, time and space do weird things.  They rip the space-time fabric open, and provide doorways to parallel worlds.  A spinning black hole is actually a doorway to infinite parallel universes!

And yes, they’re building small black holes in labs today!  I don’t think people realize it but humanity is on the verge of an explosion of progress.  Things people have never dreamed possible.  Time travel.  Immersion in parallel worlds which are nothing but vast amusement parks.  Genetically modifying our bodies.  Materializing food out of raw energy, like seen in Star Trek.  It’s getting closer day by day.  It’ll probably all happen too.

If this stuff is all true, and my research keeps telling me it is, death is an illusion.  I’ll always exist.  You’ll always exist.  The parallel universe where I exist, and you exist, and every possible way we could’ve interacted will always exist.  It’ll also always be there for us to experience, together.   Like energy, it can never be destroyed.  The world only changes because we navigate between the worlds by our decisions.  I also see no reason why my “consciousness” is confined to this body, or why yours is confined to yours.  I may end up living life as you, and you as me.  Maybe “I” already have.  That’s what’s strange about all this.  Identity is also an illusion.  It seems this physics is telling us we’re all one – literally.  Or it’s all confused thinking.  We’ll see.

I will say this though.  Ever since I started seeing the world this way, it has made me far more happy.  I no longer fear death.  There’s no cruel God waiting to throw me in hell.  I’ll never be separated from any of my loved ones.  I’ll always have a chance to meet you, and you, me.  And even if I make a mistake, it’s ok.  It’s no big deal.  The main goal is to skillfully navigate these parallel worlds, and be happy.  We’re immersed in a game of all games, infinite in both complexity and simplicity, with every imaginable difficulty setting to enjoy, or endure, to your heart’s content.  We’re here to let the world awe us with all the different things there are to experience – and somehow, together with friends, overcome the trials of this world and celebrate together.

On the other side of the spectrum, this philosophy doesn’t help me endure problems well.  I find myself asking, “If I could literally be in any possible parallel universe, why am I here?  Why am I working some stupid job?  What does this do for the universe?  For me?  For anybody?”  I see no point in doing anything we don’t enjoy.  It also, strangely, brings both suicidal and joyful thoughts, at the same time.  I find myself screaming, “I want out of here.  Off to something more exciting.  More fulfilling.  Away from idiots.  Away from politicians.  Away from religion.  Away from toil, sickness, starvation, and disease.”

I think it’s  a valid question to ask why reality is so messed up, especially if from a quantum perspective we’re “choosing” this reality.  Who chose this world, of all things?  Who would choose dieing painfully of cancer?  Who would choose starvation?  Who would choose dysentery?  That’s what I need to figure out.  There’s more to this reality than meets the eye.  It’ll take quite the detective to figure out how it’s all working, and I love that role.

*Puts pipe in mouth and takes a puff*

Wait a minute?  Did I just answer my own question?