A Memorial Day For Afghanistan

I just got done reading an article by John Walsh, a scientist, which is entitled ‘The Prettification Of War: A Big Dose Of Servile Journalism for Memorial Day‘.  I couldn’t agree with him more.  Here are some excerpts:

“Sunday’s NYT, gearing up for Memorial Day, carries a leading front-page story direct from the Afghan front, complete with photos. Does it tell of the 1000 Americans who have perished there in America’s longest war or the unknown number of innocent Afghanis to fall or the many more on both sides to be gruesomely injured or the devastation visited on the poor and backward regions of Iraq, Afghanistan and Pakistan by the firepower of the mightiest war machine the world has yet to produce? Absolutely not.

Instead we are treated to a feel-good story about female Marines “bonding” with their Afghan sisters, under the heading “In Camouflage or Veil, a Fragile Bond.” Did a NYT writer dream up that sappy headline or did it come from a basement office in the Pentagon or Langley where prowar psyops against the U.S. citizenry are concocted? Or can such a distinction even be drawn, with journalistic ambition and careerism run wild? In my edition of the paper of record the story was adorned with a photo of a young Marine woman holding an Afghan toddler. How nice these warriors are. No killing for them. Just handing out ibuprofen, “giggling” (sic) with Afghan women and playing with kids.

….

Out West, the LA Times commissioned a piece by a returned Iraqi vet who writes about a fallen comrade after reminding us why they were sent to that ravaged country, namely to “work on projects aimed at rebuilding Iraq and winning hearts and minds … to rebuild schools, repair the power grid and pass out Beanie Babies.” No mention of who caused the destruction in the first place or the lies that were fed to soldiers and citizens alike to con them into that ugly war. No, just humanitarian efforts by well-meaning Americans. And so it goes. There will be more of the same tomorrow from the NYT to NPR, which has a special affinity for this kind of stuff, no doubt because its clientele is more open to imperialism of the humanitarian variety. And although there is an enormous percentage of our citizenry opposed to these wars, on both Left and Right and in the middle, expect none of them to gain access to the mainstream media to voice their opposition, much less rage at the death and destruction wrought by the Empire to preserve its hegemony.

Many say that the media hides the wars now waged by the U.S. in Afghanistan, Pakistan and Iraq. But it is worse than that. While hiding the death and destruction and certainly blotting out any graphic images of it, our poor excuse for journalism is awash with feel-good stories about the wars.

….

But our rulers learned their lesson well. No more graphic images come to us from the battlefield. They are censored by being cut off at their source. Worse, the war is systematically prettified by the media. Such is the function of the servile journalism of the Empire.”

When it comes to armies and war, I agree with Albert Einstein:

“He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would fully suffice. This disgrace to civilization should be done away with at once.”

“Heroism at command, senseless brutality, deplorable love-of-country stance, how violently I hate all this, how despicable and ignoble war is; I would rather be torn to shreds than be a part of so base an action! It is my conviction that killing under the cloak of war is nothing but an act of murder.”

— Albert Einstein

I don’t want to hear any more sappy stories about the troops and how we’re so good, and they’re so bad.  Blow up their schools and destroy their cities, then walk in and smile for the camera holding some toddlers.  Give me a break.

Sometimes I wonder how people can be like this; how they are unable to think of things from the perspective of those in Iraq and Afghanistan.  Well, psychologists are telling us that we’ve lost our sense of empathy.

http://voices.washingtonpost.com/answer-sheet/college-life/todays-college-students-less-e.html

Quoting from the article:

A new University of Michigan study shows that since 2000, college students have become less empathetic  than before.

Compared to college kids of the late 1970s, the study said, today’s are less likely to agree with statements such as “I sometimes try to understand my friends better by imagining how things look from their perspective” and “I often have tender, concerned feelings for people less fortunate than me.”

“We found the biggest drop in empathy after the year 2000,” said Konrath, who is also affiliated with the University of Rochester Department of Psychiatry. “College kids today are about 40 percent lower in empathy than their counterparts of 20 or 30 years ago, as measured by standard tests of this personality trait.

Why is empathy declining among young adults?

“In terms of media content, this generation of college students grew up with video games, and a growing body of research, including work done by my colleagues at Michigan, is establishing that exposure to violent media numbs people to the pain of others.”

Social media may also play a role, O’Brien said.

“The ease of having ‘friends’ online might make people more likely to just tune out when they don’t feel like responding to others’ problems, a behavior that could carry over offline,” he said.

Add in the hyper-competitive atmosphere and inflated expectations of success, borne of celebrity “reality shows,” and you have a social environment that works against slowing down and listening to someone who needs a bit of sympathy, he said.

“College students today may be so busy worrying about themselves and their own issues that they don’t have time to spend empathizing with others, or at least perceive such time to be limited,” O’Brien said.

We expose ourselves to so much violence in video games, movies, and mass-culture in general, that we can’t even identify killing and destruction when we see it.  Our minds have been numbed.  To top it all off, we’re so busy working two or three jobs, paying off the huge debts we’re buried in, that we don’t have time to think of anyone but ourselves.  And just like the online world, when things become troubling we just want to click the ‘Close’ button in the corner.  Well, before you click ‘Close’ on your web-browser, I ask you not to just think about our troops who have died, but all the innocent Afghans and Iraqis as well.  A lot more of them have died than our troops.

The Conquest Of Happiness

I like this…

I THINK I could turn and live with animals, they are so placid and self-contained,
I stand and look at them long and long.
They do not sweat and whine about their condition,
They do not lie awake in the dark and weep for their sins,
They do not make me sick discussing their duty to God,
Not one is dissatisfied, not one is demented with the mania of owning things,
Not one kneels to another, nor to his kind that lived thousands of years ago,
Not one is respectable or unhappy over the whole earth.

– Walt Whitman

Deficit Financing, Inflation, and Keynesian Economics

A few days ago I wrote about how nothing in this world is random.  Well, when you go to the store and prices continue to rise, college costs soar to new heights, and home prices bloat, none of that is random either.  There’s laws behind all of that.  There’s two main reasons behind inflation — the government spending printed money and the Federal Reserve with their system of fractional reserve banking and manipulation of interest rates, which creates a private cartel for the banking industry.

Before I studied economics I used to wonder why every year people asked their employers to give them a raise.  Why?  People will tell you that the cost of living increases every year.  But that only begs the question: why do costs go up every year?  Why does everything become more expensive?

It all has to do with the government and the banking industry screwing around with the supply of money and deficit spending.  Unfortunately after all is said and done, we the people are always getting the short end of the stick.

In short, our economic system can be summarized as followed:  Scientific technological advances bring down prices whereas our monetary and economic systems continue to erode our currency, destroying its purchasing power.  The two are in continual struggle.  In 1950 one man working and the wife staying home could provide for the entire family.  Now in 2010, both work, have no time for their kids, and STILL can’t pay all their bills, all while suffering under a mountain of debt.  How did this happen?  It’s our government following bad economic policy.

Now there’s intricate Keynesian arguments as to why economists think they can screw around with the money supply and bring about prosperity to us all.  I’ve read several of their textbooks and don’t buy into any of it.

Liberal news pundits and the New York Times make no sense to me when it comes to finance and fiscal policy.  I’m with them when it comes to civil liberties.  I too think the wars need to end and we need to bring the troops home.  I worry for college students getting buried in debts before they’re old enough to even know what they want to do with themselves.  But what I can’t ever understand is their fiscal policies.  They say that government spending can cure an economic recession.  I’d like to go on one of their shows and bring up the following point – I wonder how they’d respond.

Me: “So you advocate that government spending will cure our economic problems.  Ok.  Let’s assume I had a large-scale counterfeiting operating going on in my basement.  Say I was printing billions of dollars down there and spending the money in my community.  Now if I started all sorts of pet projects which were to my own benefit, and hired all kinds of people, and this brought about economic prosperity to my community by providing jobs and income, why would this be a bad thing?”

Them: “Well you would receive a benefit not available to everyone else when you spent the printed money.”

Me:  “Wait wait wait liberal news pundit.  Doesn’t this printed money put funds in people’s hands?  Wouldn’t the money multiplier get to rolling and then the funds circulate throughout the economy benefitting everyone?  Wouldn’t it be just like the government spending money and the magical helicopter dropping funds down on everyone, so they’d have funds to spend and rev up the economy?”

Them:  “You know people can’t be counterfeitting money.  That’s just silly.”

Me:  “Is it?  It’s not different from what Keynesian textbooks tell us brings prosperity.  The government is not some holy sinless entity, they’re just people too.  But instead of dodging the question, like you are, I’ll explain WHY this is bad.  What would happen is my community here in Missouri would benefit but others would simply experience inflation.  I’d spend printed money in local stores, who most likely import their goods from a whole network of providers in various locations, and whoever got the money further down the line would only experience increased costs yet receive no benefit.  The early receivers of the printed money get all the benefit.  My community would prosper but others would be impoverished.  It would be unfair.  And by the way, you all love to say how corrupt Washington is.  How we need to throw the whole lot of them out.  Why is giving them an open checkbook to spend printed money on whatever projects they want going to benefit us?”

Them:  “It will put money in people’s pockets.”

Me:  “Not necessarily.  That all depends on who gets the government contracts and projects.  In theory we COULD benefit from this situation, but we also could lose very big.  Also, who is this “people” you’re referring to?  “People’s pockets”.  There is only individuals.  Whoever receives the printed-money contracts get the benefit, everyone else necessarily loses and experiences increased costs.”

When I give this analogy, I’m not exaggerating at all.  This is the exact situation when it comes to the government spending printed money in the economy to stimulate things.  This is exactly what President Obama is doing, and the ones who are “stimulated” are whoever get the contracts.  As the new money diffuses into the economy, those further down the monetary line all lose out.  But I hope within this entry to explain what people like president Obama think and why they do what they do.

I don’t feel we benefit very much from government “stimulus” projects.  I think the contracts are awarded to all the politicians’ buddies, political favors, etc., and we just get stuck with inflation.  But in theory I admit we could possibly benefit.  It’d be near impossible to plan though.  There’s practically an infinite number of complex relationships between businesses, so knowing how those funds will flow once you get the process started, and who will get their hands on the money early, and who will get the short end of the stick, would be impossible to know.  If I was guess who would benefit though, I’d guess the politicians and their buddies, lobbyists, and campaign donors, who would be on the top priority list.

And I suppose that the money could land in just the right person’s hands, who then come into the capital he or she needs to get some business going, or invent some new technology, or whatever, and this new technology or production method brings down the costs of something I buy, making my existing money stretch further.  I think the likelihood of this happening is so low as to not even be worth considering.

There are proper places for the government.  They need to protect the environment.  They need to handle the electricity.  After all, could you imagine every company needing its own set of power lines to send us power?  We’d have power line poles everywhere and it’d be so ugly.  They need to fund the police and provide a limited means to the poor.  We need schools.

Even so, I just can’t understand Keynesian economics.  I read textbook after textbook and they never answer that simple question of counterfeitting I just brought up.  If this printed money brings about economic prosperity, counterfeitting shouldn’t be illegal, but praised.  Here’s an excerpt from one textbook talking about deficit spending:

“Suppose the president of the United States asks for your advice.  The economy he confronts is the recessionary one of Exhbit 3, and his goal is to bring the economy to equilibrium at full employment.  What do you tell him?

How about presidential persuasion?  You could advise the president to invite the economy’s most influential producers to a White House breakfast and there explain the importance of increasing aggregate expenditures.

It would be marvelous if all it took was a little presidential sweet talk to get producers to add another $80 billion to investment.  But even producers who voted twice for the president couldn’t justify a penny more investment when the economy is already in equilibrium at Y = $800 billion.  Where, then, do you find the $80 billion?

Enter Government

If nobody else will do it, government can.  How does government get into an $80 billion investment business?  It designs a public investment package that totals $80 billion.  In ten minutes the president can probably come up with projects that would completely close the recessionary gap.

There are always more superhighways to build, more public housing to construct, more pollution control facilities to finance, more space shots to make, more health care schemes to fund, and more defense to procure.  In fact, the least of his problems would seem to be finding suitable projects to absorb the $80 billion.

What about Congress?  Would it go along?  Members of Congress have been sensitive to voters’ concerns back home, and among their concerns in times of recession are jobs.

The government now becomes an integral part of the economy’s aggregate expenditures.  What was once AE2 is now AE2 = the $80 billion increase representing the government purchases of goods and services.

Suppose the president asks you the brief the White House staff on your $80 billion recommendation.  You prepare Exhibit 3, panels a and b, which shows the economy struggling along without the $80 billion of government spending on goods and services, and how the economy fares with the government spending.  They would see the difference immediately.”

So what do we do when a recession kicks in.  First we invite all the big corporations in and say, “Guys, you have all this money.  Just spend a little of it.  Invest in some new technology.  C’mon guys, have a little heart!  The economy’s at stake!”

Then the Fortune 500 CEOs cross their arms, shake their heads, and say, “Sorry Mr. President.  We can’t justify a penny more in spending.  It’d hurt our bottom line.”

Oh woe is us.  What can we do?  Is a recession inevitable?  Nah!  Who you kiddin’?  All it takes is 10 minutes of President Obama’s time to whip up some spending projects, throw some money at it all, and boom, problem solved!  I’m glad the economy is so easy to manage.  All we have to do is give the politicians an open-checkbook of $80 billion in spending, or whatever their Keynesian math models predict is needed to bring aggregate supply and demand in “equilibrium”, and they go to town.

How will they get the money?  Well, let’s increase taxes.  Uh oh, people don’t like taxes.  Well, they don’t understand the beauty of Keynesian economics.  *sarcasm* If they understood the money multiplier, the paradox of thrift, and monetary velocity, they’d be giving the government 80% of their paycheck without question.  I’ll attempt to explain all this.  First I need to explain aggregate supply and aggregate demand and their equilibrium, which is what all their policies strive for.  Then we’ll discuss the income multiplier, and the tax multiplier.  Based on these assumptions I’ll show you why they think government spending, such as making bombs and munitions, fixes economic problems.

In short, aggregate demand and aggregate supply are very similar concepts to supply and demand on the microeconomic scale.  I’m sure you all know the basics of supply and demand.  For example, if you flood a market with a product, the price drops as people no longer want it, and want to spend their money on other things instead.  Even if it was rare and expensive before, once the supply is made abundant its price falls.  Prices and money are our system to manage and allocate scarce resources.

Ok, so what is aggregate supply and aggregate demand?  Its an abstract attempt to apply the same concept to the economy at large.   The aggregate supply represents the total quantity of goods and services that firms in the economy are willing to supply at different prices.  Its curve relates the “price level” to “real GDP”.  The aggregate demand curve  represents the total quantity of goods and services demanded by households, firms, foreigners, and government at different prices. Its curve relates the “price level” to aggregate quantity demanded.

Now I immediately want to pause and say that I don’t think you can even do this.  This is some abstract basis which they construct, ignoring the fundamental concepts which drive supply and demand.  Then they go and apply it to all products and services at large.  The law of supply and demand only applies to individual products and services.  It can’t be applied to this abstract “aggregate” supply and demand.  I think they’re wrong from the very get go.

Let’s ask ourselves, “What is supply” and “What is demand”, as taught by microeconomics.  Well to create a “demand” curve, you first choose a product.  Say ice cream sandwiches.  Then you list out all these different prices starting with 0.01, 0.02, 0.03 …. 1.00, 1.01, 1.02, …. 3.00, 3.01, 3.02… 10.01, 10.02… and so on.  Then you say, “How many people will buy a box of ice cream sandwiches from the grocery store if they see it there and it costs a certain price.  That’s what a demand curve is.  What is a supply curve?  That’s more complicated.  Basically you take various companies, look at their production methods, how much they’d have to spend in labor costs, raw supplies, and other costs, and then determine how many boxes of ice cream sandwiches companies would be willing to provide at different costs.  Where the two intersect is basically the “market price”.

That makes perfect sense to me.  I’ve ran companies and I’ve sold products to people.  This is all pretty straightforward.  I understand all the different companies, people earning wages, then spending those wages buying products from other companies.  I see the circular flow of it all.

But I don’t get these abstract aggregates.  Think of all the different products and services in an economy.  Some are old and some are brand new.  Technology changes.  Their prices and producers are changing all the time.   It’s insanely difficult just to predict what the demand will be for a SINGLE PRODUCT based on what price you choose, yet we’re going to do so for some aggregate of all products in an economy?   Huge corporations have teams of guys working on answering one question:  How many bottles of Tide will we produce this quarter? If you can simply call what the price of any commodity will do, such as oil or corn, you could earn a killing trading commodities.  But everybody knows you can’t do that, and people who try to make money this way are simply gambling.

Yet somehow these two curves embody the intersection of all products and services supplied, their subsequent demands, and for all possible prices no doubt.  What a weird concept.

So what do these aggregate curves even mean?  I don’t even understand what these curves are really.  I’m guessing they don’t know what these charts are either.  In fact, with economic students I’ve heard from, if you bring up this very question you fail your exams.  They don’t like you to question the mathematical abstractions.  You’re “uninformed” if you do so.  Well, whatever.  The only way I can describe these curves is to vaguely show what numbers they use to calculate them.  That’s about all I can do.

But before I do that, let’s look at what these charts and curves look like.  AS stands for “aggregate supply”, and AD stands for “aggregate demand”.  Notice they intersect.  That’s the “equilibrium”.  When you look along the left side you see “Price Level”.  This is how inflation and price increases come into the picture.  Various economic policies can shift these curves around, and they hope to bring about full employment without inflation.  So, let’s take a look.

(1)

(2)

(3)

(4)

Ok.  So how do they generate these curves?  What are we even looking at?  If we don’t understand what the curves even represent, we’ll have a hard time following their arguments.  Well, let’s first discuss aggregate demand using the Mundell-Flemming model.   Here’s the general equation:

Y = C + I + G + X

What do the variables stand for?  Don’t fall asleep on me.  Bear with it for a few minutes.

Y is GDP.  C is consumption (income minus taxes) . I represents investment as a function of the interest rate (an increase in the interest rate decreases investment).  G is government spending.  X represents net exports.

So it’s a sort of aggregate expenditure based on how much money people have after paying their taxes (people spending money), interest rates (which determine investments), government spending (as opposed to personal spending), and exports and imports from foreign countries.  They interrelate the quantities mathematically and form a curve.

I still don’t think this explains “demand”.  This is way too abstract.  That’s really the problem.  Even so, I do get where they’re going with it all.  I don’t agree with it though.

Now let’s discuss aggregate supply.   We’ll talk about long run aggregate supply.   Here’s the general formula for it:

Y*t = f ( Lt, Kt, Mt)

Y is once again GDP.  T represents time.  L represents the quantity and ability of labor input available to product processes.  K represents the available capital stock (machinery, buildings, infrastructure).  M represents the availability of natural resources and materials for production (land).

So aggregate supply is a mathematical formulation of your workers, a valuation of their skills, factory buildings and equipment, and your natural resources such as timber, coal, and stone.

There’s various short-term aggregate supply models, but those are only intended to project the economy in the short-term, and I’m not one to be very interested in short term economic projections.

In order to give this philosophy a fair chance to explain itself, I’ll simply quote a section directly from a Keynesian textbook explaining aggregate supply, aggregate demand, and how they change.

Explaining Aggregate Supply

Look at the economy’s aggregate supply curve in panel a.  [ Note:  If the graphic looks crappy, it’s because I had to draw it in Paint so you’d have something to look at].  Three distinct segments are apparent.  The horizontal segment shows that real GDP can increase up to point a without affecting the economy’s price level.  The upward-sloping segment of the supply curve depicts, from point a to point b, a positive relationship between real GDP and the price level.  The vertical segment marks the full-employment level of real GDP.  All resources are fully employed, so the real GDP cannot increase.

THE HORIZONTAL SEGMENT

Why the horizontal segment?  For any level of GDP in this range — that is, far below full employment — there are ready supplies of unused resources.  All these idle resources can be put to work before there is any upward pressure on prices.  For example, the economy can increase aggregate supply — the production of goods and services — say from $5 trillion to $6 trillion GDP, without prices going up.  Producers can hire more workers without having to raise the wage rate.  They can use more capital without having to pay higher interest rates because unused capital in the form of unused plant machinery is already available.  As you see in panel a, any increase in real GDP within the range $0 to $6 trillion can occur with the price level remaining unchanged at P = 100.

THE UPWARD-SLOPING SEGMENT

What about aggregate supply beyond $6 trillion?  It becomes upward sloping.  Increases in output are linked to increases in the price level.  Why?  Because unused resources become less available at higher levels of real GDP.  Faced with the difficulty of finding ready resources, firms resort to offering higher prices for them.  For example, to get more labor, firms are willing to pay higher wages.  These higher wages increase the cost of production, which in turn raises the prices of goods produced.  Beyond $6 trillion GDP, the price level beings to rise above P = 100.  The higher the level of GDP — say, $6.5 trillion — the greater is the economy’s absorption of the dwindling unused resources, and the more intense the upward pressure on the price level.  At GDP  = $6 trillion, P = 110.

The upward-sloping relationship between aggregate supply and the price level can be explained in another way.  Instead of dwindling unused resources pushing up prices, increasing prices can pull up resource costs.  Suppose the price level increases from P = 110 to P = 115.  As the spread between prices and costs widens, producers earn higher profits.  Higher profits attract new firms into production and stimulate existing firms to produce more.  The higher production levels tap into unused resource availability, driving resource costs upward.

THE VERTICAL SEGMENT

When resources are fully employed, aggregate supply reaches an impassable limit.  Full employment is shown in the panel (above) at $7.5 trillion GDP.  At that level of real GDP, producers may try to hire more workers, but how can they?  They can bid away already employed workers from each other by offering higher wage rates.  But what one producer gains in output by hiring a worker away from another, the other loses.  In the end, competition among producers for already employed resources can succeed only in raising the economy’s price level.  Its aggregate supply remains unchanged.  In our example, real GDP stays constant at $7.5 trillion.

Explaining Aggregate Demand


The aggregate demand curve shown in panel b is downward sloping.  For example, as the price level increases from P = 100 to P = 110, aggregate demand of households, firms, foreigners, and government falls from $8 trillion to $6.5 trillion.  Why?  Because increases in the price level affect people’s real wealth, their lending and borrowing activity, and the nation’s trade with other nations in such a way that the demand for goods and services produced in the economy declines.

THE REAL WEALTH EFFECT

Consider the effect of a price level increase on the value of people’s wealth, and the effect of changes in the value of wealth on aggregate demand.  Suppose your own wealth consisted of $100,000 held in the form of cash, bank deposits, and government bonds.  You know that, if needed, these holdings can be cashed in, allowing you to buy $100,000 of real goods and services.  In fact, that is how you view your wealth.

But suppose while you are holding these financial assets, the economy’s price level increases.  Videotape recorders that formerly cost $400 now cost $480.  Automobiles that formerly cost $16,000 now cost $18,500.  With prices rising everywhere, what happens to the real worth of your $100,000?  It can no longer buy the same quantity of goods and services, can it?

That is, the real value of your $100,000 wealth decreases.  You feel yourself becoming less wealthy.  And you’re not mistaken!  To replenish the value of your real wealth, you would save more and consume less.  In other words, when the price level increases, the quantity demanded by most people for goods and services in the economy falls.

THE INTEREST RATE EFFECT

When prices rise, people find that they need more money just to by the same quantity of goods and services.  How do they acquire that additional money?  Many borrow.  This increased demand for borrowed money raises the cost of borrowing, that is, the interest rate.

Consider the effect of a higher interst rate on aggregate demand.  Few people buy homes with cash.  Typically, high-priced items like homes and automobiles are purchased with borrowed money.

Suppose mortgage rates increase from 10 percent to 15 percent per year.  Monthly payments on a home with a $100,000 mortgage, carrying a 20-year loan at 10 percent, are $965.03.  At 15 percent, these monthly payments jump to $1,316.79.  Wouldn’t that difference cut many prospective home buyers out of the market?

Students, too, feel the pinch of higher interest rates.  Wouldn’t the number of students attending college be affected by higher interest rates on student loans?  Even the quantities demanded of restaurant lunches, concert tickets, and designer jeans are linked to the interest rate.  Many pay for these items with Visa, MasterCard, or Discover cards.  These plastic cards allow people to build up interest-carrying debt.  If interest rates on these cards rise, people tend to cut back on these purchases, depressing the aggregate quantity of goods and services demanded.

Firms’ demands for investment goods are sensitive to the interest rate as well.  A firm contemplating an investment in new machinery may calculate making 15 percent profit on the investment.  If the interest rate is 10 percent, the 5 percent spread between profit and the interest rate may be sufficient inducement to buy the new machinery.  If the interest rate rises to 15 percent, the firm’s demand for new machinery disappears along with the spread, contributing to the decrease in quantity demanded.

THE INTERNATIONAL TRADE EFFECT

Suppose the price level in the United States rises while price levels elsewhere in the world remain unchanged.  Wouldn’t we tend to buy more foreign goods and reduce the demands for our own goods?  After all, when prices for domestically produced goods such as wines, lumber, and automobiles increase while other nations’ prices remain unchanged, wouldn’t French wines, Canadian lumber, and Japanese automobiles become more attractive?  Our demand for imports would rise, and our demand for domestic goods would fall.

At the same time, the French, Canadians, and Japanese would find our now higher-priced exports less attractive.  Many wouldn’t buy them.  The quantity demanded of our goods and services, then, would fall.

Shifts in the Aggregate Demand and Aggregate Supply Curves

….

SHIFTS IN THE AGGREGATE DEMAND CURVE

The aggregate demand curve relates the quantity fo goods and services demanded in the economy to varying price levels.  A change in the quantity of goods and services demanded at a particular price level, however, is represented by a shift in the curve itself.   [ … ]  What could cause such shifts to occur?

Suppose the government decides to overhaul our economy’s infrastructure.  It programs major construction on highways, bridges, railroad lines, airports, research hospitals, public housing, and other facilities that are in the public domain.  These programs represent new investment demands that shift the aggregate demand curve to the right, from AD to AD’.

Or consider what would happen to aggregate demand when incomes abroad increase.  Canadians, with higher incomes, buy more U.S. imports, shifting our AD curve to the right.  If we decide to consume more goods and services ourselves — even when prices remain unchanged — aggregate demand increases.

What would cause a change in our consumer behavior?  A tax cut could do it, or perhaps changes in our expectations of future income.  After all, if we expect to have more money in the future, we may feel more comfortable about buying more today by borrowing or saving less.

Just reverse the direction of change in these factors, and the aggregate demand curve shifts to the left, from AD to AD”.  For example, a cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future income willf all would all tend to lower aggregate quantity demanded at every price level.

SHIFTS IN THE AGGREGATE SUPPLY CURVE

One of the principal factors accounting for a shift in the aggregate supply curve from AS to AS’ in panel b is an increase in resource availability.  Simply put:  More workers, more land, more capital, and more entrepreneurial energies — no matter what the price level — result in greater aggregate supply.  The prices of these resources affect aggregate supply as well.  If wage rates or interest rates or rents decrease while the economy’s price level remains unchanged, profit margins will expand, making producers more willing to supply greater quantities of goods and services.

Anything that reduces resource availability or increases the prices of resources would, of course, have the opposite effect; that is, it would shift the aggregate supply curve from AS to AS”.”

So when they were talking earlier about needing an $80 billion dollar stimulus to get the economy rolling, they used this aggregate supply and demand curves to calculate that.  They try to spend money (using G in the aggregate demand equation) to push their AD curve as far to the right as possible hoping to place it just at the price level = 100, which means there’s no inflation.  A sort of perfect macroeconomic equilibrium.

I’d like to point out some very important consequences of this model.  Take for instance their calculation of aggregate demand.  Government spending is considered more productive than private spending when it comes to stimulating an economy.  It has a greater effect in raising GDP during a recession.  They also believe that cuts in government spending can seriously hurt the economy.

It’s amazing how credible economists from different sides can recommend completely opposite policies.  Some economists, such as supply-siders, are telling you to cut government spending to stimulate the economy in a recession, whereas Keynesians tell you to increase it.   That’s why you’ll watch your television and see economists recommending completely opposite policies.

For a long time I wondered how a Keynesian could come to such a conclusion.  Why would a politician, spending money on literally anything (remember from earlier, the President can come up with spending programs within 10 minutes which can fix the economy — it could even be digging ditches, it doesn’t make a difference), close the recessionary gap?

You may be wondering, “What is a recessionary gap?”  Well, I’ll try to explain it.

There’s an intimate relationship between companies investing in inventory which they intend to sell to customers, and people saving money in their bank accounts.  Take a shoe manufacturer.  Say the new year is starting and they’re trying to determine how many pairs of shoes they need to produce that quarter.  They do their estimates and believe they need to produce 20,000 pairs of their running shoes.  They do so but are only able to sell 12,000 pairs, giving them an excess of 8,000 pairs of shoes unsold.  When businesses overshoot demand, producing too much, this leaves them with excess inventory and a deficit in cash-flow, and oftentimes they have to let go of some of their staff, leading to unemployment.

Now what do these unwanted inventories lead to?  Well the next quarter rolls around and the shoe company orders less leather and twine than they did the previous quarter.  This leads to unemployment in other supplier companies.  So it has a chain effect down the line.  If a big corporation which orders supplies from a lot of different companies screws up, badly judging market demand, they can cause havoc on a whole lot of people.

This is a nasty cycle in capitalism.  A lot of people can be laid off from their jobs just because corporate management misjudged market demands, either producing the wrong product or too much of a product.  And it’s not easy to know how many of your products will sell either.  We live in a very precarious world.

Another cause of the business cycle, Keynesians contend, is people saving money.  If people don’t spend their money in the marketplace it just sits idle in their bank account.  Money has to flow.  After all, if people don’t spend the money they earn the businesses in town won’t earn any money either, and then they won’t have money to pay their staff and make payroll, leading to unemployment and pay cuts.  So to Keynesian economists, you saving money is a dangerous thing.  They don’t like it.

They believe in the paradox of thrift.  The more money people try to save, the less people will be able to save because it will only decrease their potential earning ability.  Their income will have to decrease because the companies they work for will earn less money.

This brings us to talks of the income multiplier, which a huge part of Keynesian economics is based.  First we need to know the “marginal propensity to consume”, which is a percentage telling us how much people are spending, and how much they’re saving.  Say they spend 80% of all their take-home pay, and save 20%.  The Marginal Propensity to Consume (MPC) would be equal to 0.8.  The Marginal Propensity To Save (MPS) would be 0.2.

I’ll quote from this same textbook, talking about the income multiplier:

“Let’s follow through the impact on the level of national income of one such technological change, say, a $1,000 investment.

Suppose John Flygare, the owner of a tennis shop in Evanston, Illinois, reads and article in Sports Illustrated describing a new machine that restrings tennis rackets in half the time it formerly took.  The new technology costs $1000.  Suppose John decides to make the investment.

Let’s trace the sequence of events that follows that $1,000 increase in investment.  First, a new order is placed for the machine.  John’s decision to invest represents a new order for Bradley Hastings, the machinist and inventor of the restringing equipment.  He produces the machine, sells it to John, and ends up with $1,000 increase in income.  Of course, John ends up with a new machine.

What do you suppose Bradley does with the additional $1,000 income earned?  Since we suppose MPC = 0.8, we know, then, that he increases his consumptive spending by $800.  Let’s suppose he spends $800 on a custom-made water-bed.

Think about what follows.  The carpenter, Jay Malin, makes the bed and warns $800, which represents for him an addition to income.  Once again, real output and real income are created simultaneously.  And, of course, Jay will do with his new income what Bradley did with his — spend part, and save the rest.  With MPC  = 0.8, $640 of the $800 is put to consumption spending.

….

The initial $1,000 change in investment spending sets in motion a chain of events that creates — in successive rounds of income earning, consumption spending, and saving — a $5000 change in national income.  And, as you see, it creates also water beds, violins, computers, healthcare, auto repair, space heaters, and a host of other real outputs whose total value is $5000.

Note that as economic activity progresses through the successive rounds, the additions to national income become smaller and smaller.  For at each round, some of the income is set aside as saving.  The lower the MPC (or the higher the MPS), the greater the sum set aside.”

So based on how much money people save, and how much they spend, determines the effect that the money circulating throughout the economy will have.  So now we come to the income multiplier equation.

First we started off with $1000.  That money was given to a 2nd person who got 800, or 0.8 x 1000, and that money went to a third person who got $640, or 0.8 x (0.8 x 1000) and so on. Or…

$1000 + (0.8 x $1000) + [0.8(0.8 x $1000)] + …

Written more generally we get:

$1000 + $1000(MPC) + $1000(MPC^2) + $1000(MPC^3) + … + $1000(MPC^n)

So basically we multiply $1000 times:

1 + MPC + MPC^2 + MPC^3 + … MPC^n

If you know your algebra, this is the same thing as :  (1 / 1 – MPC) and we get the relation

(1 / 1 – MPC) = 1 / MPS  = the multiplier

In this case we get 1 / 1-0.8 = 1/0.2 = 5.  So our multiplier is 5.

But say people only saved 10% of their income instead of 20%.  The multiplier would be 10!

1 / 1-0.9 = 10

Or what if people spent 99% of everything they earned, only saving 1%?

1 / 1-0.99 = 100

And strangely, if we spend everything and save nothing we get:

1 / 1-1 or 1 / 0 = infinity

So if we spend everything we earn the Earth explodes and we instantly become gods transcending all space and time.  Keynes was really onto something here.

The ultimate way to economic prosperity, to Keynesians anyway, is for us all to spend everything we have and we could literally exponentially increase economic output.  The corporations sure love this one.

But this same multiplier also works in reverse.  When the interest rate rises, for example, this may send investments from $100,000,000 to $75,000,000 and the multiplier will work in reverse.  It’s not a loss of $25,000,000 in GDP, but $125,000,000 because our multiplier is 5.

And why is government spending always superior to private spending?  It all has to do with the income multiplier.  If the government takes $10,000 from you and spends it, they didn’t save any of that money.  They spent it all!  So naturally we’ll get the full effect of the money.  But if you would’ve had the money you probably would’ve saved 10~20% of it, and that’s no good.  The money’s not as potent.  GDP doesn’t grow as much as it could have.

And you guys want to know the ultimate way to get GDP rolling strong?  To get our economy out of the slumps during a recession?  Crank out bombs and tanks!  I’ll quote from the text:

WAR INDUCED CYCLES

Are we destined always to go to war?  From time immemorial, wars have been viewed as innate to the human experience.  Admittedly, the evidence is frightfully confirming.  Whether or not wars can be avoided, economists have long observed a link between wars and business cycles.

Does such a link make sense?  Think about it.  Wars create instantaneous demands for all kinds of goods and services.  once the decision is made to go to war, supporting the war effort becomes high priority.  Armies need to be staffed, fed, clothed, housed, transported, equipped, and mended.

That requires considerable spending.  You can see the income multiplier working overtime.  In each of our major wars — the 1861-65 Civil War, the 1914-19 World War I, the 1939-45 World War II, the 1950-53 Korean War, the 1964-75 Vietnam War — miltary production spurred the economy into rapid expansion.  And in at least some, if not all, of them, the end of war brough ant end to the economy’s war-induced prosperity.”

That’s probably what ol’ George Bush and Dick Cheney were thinking too, but somehow our economy is sucking pretty bad right now and we have wars going with Iraq, Afghanistan, Pakistan… Probably soon we’ll be fighting Iran.  Somehow it’s not working.  What’s wrong?

Take a moment and pause for a second and reflect on these Keynesian policies.  Think of the founding fathers and history in general.  This goes against EVERYTHING that history has taught us.  It’s completely against all traditional wisdom.  We’re being told that high taxes is prosperity.  Wars are prosperity.  Saving money is evil and harmful.  The more the government spends on your behalf, the more prosperous you will be.

Remember the whole “no taxation without representation” stuff?  We’ve had the lowest taxes of any nation on Earth, and we’ve constructed a free society, completely opposite of everything this Keynesian stuff is recommending, and we became the most powerful nation on the planet.  Thomas Jefferson would throw a fit if he saw this.  He’d be screaming his head off.  “Is this what I risked my life for?”  They formed a republic with very little government intervention, and now these policies are telling us that the government is the key to all prosperity?  If we submit all of our money to taxation and government spending, and let them spend our money for us, we’re bound to succeed?

Our banking system has become based around these same theories.  Apply the concepts of the multiplier to banking and you get fractional reserve banking and money flowing out of thin air and us all getting buried in debts.

And everything is pro-war and pro-taxes.  All these Keynesian policies give the politicians more and more money to spend, which is why I personally feel it’s so popular in Washington.  Economy is lagging?  Lower interest rates to the floor!  Banks run wild!  They then do their aggregate demand and supply calculations, criss-cross and come up with how much money they need to spend.  Then come one come all.  Politicians line up!  It’s time to dole out printed money and tax funds!  Don’t worry, you can spend the money on any project whatsoever.  Line up all the unemployed, shave their heads, put them in pink bunny outfits and tell them to dig holes; it all has the same effect on the economy.  Missile contracts to Halliburton?  Special science studies for Exxon Mobile?  New fighter jets for Lockheed-Boeing?  Spend spend spend!

I roll in my bed at night wondering to myself, “What even is this?  You guys aren’t serious?  You ARE serious aren’t you?”  *Gaping mouth, eyes wide open*

They don’t even think in terms of efficiency.  As long as the government spends the money, prosperity is on the way.  The multiplier will work wonders.  Thrift?  Who needs that?  Just keep increasing taxes and government spending.  That’ll take care of the recession!  To them money is magical.  Paper flowing around creates value out of nothing.

Just load up the Huffington Post.  All the economists on there recommend this stuff.  And you know, I don’t even understand how progressives (as they call themselves) can even believe this stuff.  They’re all against the wars, they tell us to pull out because it’s costing us too much money, then they advocate Keynesian fiscal policy.  They don’t even get it.  They should be pro-war, like the Republicans.  But they’re not.  They don’t even understand the economics of the very policies they advocate.   I guess maybe they feel the government should spend that money on something else, yet they still feel it’s not a drain on the society but an economic accelerator?  I don’t know.

And ALL of this stuff is based on these weird abstract concepts of “aggregate supply” and “aggregate demand”.  They don’t even make sense.  A supply and demand curve for all products and services combined?  What?  What even is that?  No wonder they come to such crazy conclusions.

I sometimes consider abandoning all of my science research and dedicating myself fully to the study of economics.  It’d be very fulfilling to one day write the most comprehensive and damning economics textbook ever written, fully blasting Keynesian economics to bits and hopefully to eternal oblivion.  I think it’s an evil that’s destroying free society as we know it.  I had planned to write about all that’s wrong in these theories, but as you can see this entry is already a beast.  I’ll be surprised if anyone reads it all the way to the end.

This is why people didn’t see the housing bubble as it happened.  This is why they don’t see the student loan bubble.  This stuff is just wrong.  It’s wrong at so many levels.  It resembles economics, but then based on faulty assumptions they build an edifice of bullshit that doesn’t even work at predicting events.   It should just be intuitively obvious from history studies that this stuff is wrong.

Nothing Is Random

I’m amazed at how nothing in this world is random.  I was listening to a professor of geophysics compare the rocks in a creek bed to a Sherlock Holmes novel by Sir Arthur Conan Doyle.  If you have an astute mind keen enough to know what you’re looking at, each rock tells a story as to its origin.

I listened to him for hours as he went into all kinds of processes.  He talked about the structure of the Earth, the elements it’s made out of, how magma makes it way to the surface, how it cools and depending on how long it has to cool forms different sorts of rocks.

You see, when a rock crystalizes various elements have propensities to stick together.  These elements try to meld together but their random atomic vibrations due to the temperature knocks lose all bonds not strong enough to keep together.  At the right temperature and pressure, rock is a liquid and various dynamics happen after its pumped to the surface and cools.  Because it’s a liquid, denser elements sink to the bottom.  As the iron-oxygen-magnesium-silicon soup begins to clump together based on atomic properties, the denser clumps make their way to the bottom, and lighter clumps to the top.

So if the magma has sufficient time to cool, the rock forms one way, whereas if it cools very quickly it forms another.  If it cools very quickly you get a black glass.  If it has a long time to cool you get distinct layering, each layer being a different color and compound.  If it has a middle-range amount of time you get what’s called igneous rocks.  In igneous rocks the rock had sufficient time to form into distinct little clumps during the cooling process, but the clumps didn’t have time to sink to the bottom, so everything’s all mixed together.

Who would’ve guessed that molten rock and how it cools could be such an intricate process?  I’d seen all those rocks in the creek, with all their variations and colors, but I’d never once thought as to why they are the way they are.

It’s weird when you live in a state of ignorance.  It’s strange how you can live your entire life and never ask why things are they way they are.  I honestly had never once thought about the rocks.  I just never did.  As a kid I spent countless hours wading through the creek waters, catching craw-dads, fishing for bluegill, and skipping rocks across the pond… never once considered why this rock was orange, that rock brown, or how a sandstone became a sandstone.

Then he showed cliff sides and their layers, demonstrating all he was discussing.  There’s so much to learn.  I’ve barely just begun to understand it.

And even those elements out of which the Earth is primarily made, that is not random either.  When you study the evolution of stars you see that the elements the Earth is made out of is no accident.  There’s very precise Physics behind it all – iron, oxygen, silicon, magnesium, and the others.  They’re formed in abundance during nuclear fusion in stars.

Nothing is random.  Every one of those rocks in the creek has a story as to its age, origin, and how it ended up there.  The more I learn the more I get to quietly live my life as Sherlock Holmes, living in this strange and mysterious world, slowly unlocking its mysteries.  No, I’m not solving a murder case, but I wouldn’t want to do that anyway.  I prefer just looking around me and seeing beyond what I’m looking at.

But rocks aren’t the only things with a story to tell.  Each plant leaf has a detailed design and structure behind it.  I was learning today how many forms of plant leaves utilize strategies to discard falling rain water so it doesn’t block their air holes, which breathe in CO2.

Many leaves utilize complex guttering systems which take the water and run it off to the tip, which is often pointed.  I then looked at some leaves and marveled, “You know, I never noticed that all these leaves have points at their ends.  That’s to discard falling rain water.  That’s neat.”  The shape of every leaf carries with it distinct survival advantages.

Then I was studying trees and how they intake water and pump it to the top.  I actually sat back amazed.  Take the sycamore tree in my backyard.  It can pump hundreds of gallons of water up to its leaves every hour (yes every HOUR), 70 feet up in the air, and when you think about it, that’s no small feet.  When you study physics and water pumps you immediately begin to ask yourself, “How in the world can this tree pump all that water up in the air yet make no noise?  How does it pump?”  Talk about wonderfully crafted.  And it can pump up a hundred gallons in an hour.  100 gallons!  That’s a lot of water.  And if that doesn’t amaze you, how about you go and build a pump that brings hundreds of gallons of water out of the ground every hour, up 70 feet in the air, all powered by sunlight.  For us to do the same would require a noisy engine, powered by the burning of fossil fuels, but they do it silently, with great efficiency, in complete silence and give off no pollution.  That’s a marvel and sycamore trees are all around us.

As engineers nature still has a lot to teach us.

Or take the little yellow spots found on many leaves.  I remember when I was little seeing tree leaves with little yellow bumps on them and wondering, “What are these?”  I’d sometimes pick them off.   But like most things, there’s nothing random about that.  Those are intended to deceive butterflies who lay yellow eggs.  The plant hopes the butterflies will decide to lay eggs elsewhere where there won’t be as much competition.

Or do any of you guys have mimosa trees?  My yard is filled with them.  They’re beautiful with their flowers.  I never knew that if you touch one of them their leaves will clasp shut and if you touch them again they will flop down.  Why in the world would they do that?  Well that’s to protect them from insects like grasshoppers.  They climb up on the limb which then sets off little triggers, the leaves then shut up, the grasshopper then can’t eat them, and as it’s walking away disappointed it’s dumped to the ground.

Or how about another seemingly random fact.  Why do tropical rainforests have many plants with huge leaves, whereas say here in the United States the trees and plants have much smaller leaves?  Is that random?  Not at all.  Big plant leaves are made so big by pumping large amounts of water into them expanding the cell walls.  The rainforests never experience winter, so it never freezes there.  If our plants did that here our cold winds would dry out the huge leaves and when the weather dropped below freezing the water in the leaf would expand causing the cell walls to rupture.  Besides all this, there’s more water in the rainforests, and leaves tend to lose 90% of the moisture pumped into them through evaporation.

Nothing’s random.  There’s a reason behind everything.

I never knew that plants were so complicated and intricate.  They have all sorts of ferocious spines, thorny stings, poisonous saps, and hiding techniques.  Some plants can even disguise themselves to look like inanimate objects, like rocks!

Or you look at a hillside somewhere and see the plants are in perfect condition, with no holes in the leaves.  Then you look at the trees nearby and they look moth eaten.  Random?  Nope.  That hillside plant may well have cyanide in its leaves.  Don’t you dare eat it either.  There’s a reason nothing else touches it.  You eat that plant and you’re likely to go blind.  As counter-intuitive as it may sound, your brain will be telling you, “Eat that healthy looking plant.”  In reality, you want to eat the moth-eaten plant, as it’s edible and is less likely to hurt you.

But we can’t digest leaves very well anyway.  Leaves are packed with nutrients, carbohydrates and sugars, but it’s all stored in thick cell walls which the bacteria in our stomachs can’t break down.  You can shovel in the leaves but you won’t get much out of it.  Species that do eat the leaves have special bacteria in their guts which can break the cellulose down, but even they struggle to do so.  They have to spend hours each day eating the leaves, and then sit around for hours letting their guts work on the leaves.  They’re not easy food.

There’s so much I could talk about, but it’s late.  I love learning all this and then taking a walk outdoors.  I feel like I become one with the universe and nature.  Everything ties together into a network of interconnectedness.  There’s not only the aesthetic appeal and coherence, but all the interconnected processes, all beautifully arranged and laid out.  It’s taken nature billions of years to come up with its current balance.  We need to appreciate it more and not hack it all down.

The Search For Truth

This entry is for Tim, though you all can read it as well.  🙂

The other day I promised to make some comments related to truth, after reading a discussion you had on a forum.  Instead of discussing that nature of truth however, I want to talk about the search for truth.

If you set out to find the truth be aware of one thing — you’re not going to like what you find.  In fact, I think it will make you very depressed.  Mark Twain was considered a genius, and when he began to sum up his findings in quotations what did he have to say?

“Be good and you will be lonesome.”

“Sanity and happiness are an impossible combination.”

“No sane man can be happy, for to him life is real, and he sees what a fearful thing it is. Only the mad can be happy, and not many of those.”

“Both marriage and death ought to be welcome: the one promises happiness, doubtless the other assures it.”

— Various quotations of Mark Twain

I know you’re a big fan of H.G. Wells.  He has many quotes along the same lines:

“Heresies are experiments in man’s unsatisfied search for truth.”

“If we don’t end war, war will end us.”

“Man is the unnatural animal, the rebel child of nature, and more and more does he turn himself against the harsh and fitful hand that reared him.”

“Moral indignation is jealousy with a halo.”

“Nothing leads so straight to futility as literary ambitions without systematic knowledge.”

“The path of least resistance is the path of the loser.”

“The path of social advancement is, and must be, strewn with broken friendships.”

— Various quotations of H.G. Wells

I could go on and on quoting various great thinkers, and you’ll be amazed to find common threads of thought among them all.  Most of them share a common pessimism.

But to me, the search for truth embodies something vary noble, even with all the suffering you have to face.   I went on that quest some years ago.  What have I found out so far?   Where to even start…

I was raised in a Christian home and taught all kinds of warm fuzzy things.  God loved me and was watching over me.  This wonderful Father in heaven had built me a mansion made of gold and diamonds and when I died I’d reunite with all my past loved ones there for eternity.  The wicked will all be judged and punished for all their evil doings on Earth.

God himself, the creator of everything, had his attention almost solely focused around the affairs of mankind.  Everything we did mattered.  Our history was a set of trials and tests to determine who God would appoint and reward governance of the entire universe.

Little Jason had a mission to combat the devil and the evil enemies that went against mankind.  I could cure diseases if I only had faith and believed God.  I could perform miracles even greater than those done by Jesus in the Bible.

My head was in the clouds and I admit I was a much happier and nicer person than I am today.   But I began to have all sorts of questions — questions that weren’t being answered.

If the Earth was only a few thousand years old, then what were the dinosaur bones, and how could they be millions of years old?  Why would God create mosquitoes, ticks, and chiggers?   If mankind all came from Adam and Eve, and say they were both white, how did we ever end up with different races?  Not to be racist or anything, but I’ve never seen two white parents have a black baby.

What could possibly be God’s purpose in earthquakes, tornadoes, and tsunamis?  Why did the wicked in the world seem to prosper?  Why would Jesus being nailed to a cross forgive sins?  Why was God so bent up against certain sins which seemed to do no harm to anyone?  How could the God of the Old Testament advocate war and violence, then Jesus, the physical embodiment of the same deity, advocate pacifism and love?

Many years later studying science, philosophy, and just in general thinking about life led me to realize that I had believed nonsense my entire life.  Just complete and utter bullshit.   My mind had to do a complete 360.  I was very pissed off.  I was mad at my parents and everyone I knew who told me all that crap.

I was mad thinking about a conversation I had with one of my friends many many years ago.  I remember going on and on about the devil, and God, and how Jesus would save our souls… My friend, who knew it was all garbage even then must’ve thought to himself, “Jason, how can you believe all that?”  But he was too nice to say that to me.  To be honest, thinking about it is really embarrassing.

The truth you find is kind of like what Neo found out when Morpheus gave him that little pill in the movie The Matrix.  Morpheus only offered the truth, nothing more.  Neo took the pill and we all saw what happened.  The world he lived in was a complete illusion and reality was nothing like what he thought it was.

When Neo became self-aware, woke up in that weird vat of liquid, tubes all over his body, and then found himself flushing down some sort of drain like structure, only to wake up in poverty and misery onboard Morpheus’ ship, cold, eating slimy slop, that about explains my experience as well.

There was that one character, I forget his name, who talked about going back to the Matrix.  He wanted the agents to plug him back in and erase his memory.  “The matrix is more real than this place!”  But somehow, once you learn the truths of this world, you really can’t go back, even if they make you miserable knowing them.

So what have I learned?  Well, I can’t quickly go over such a huge list of things I’ve learned, but I’ll try to make some highlights:

First off the economic system.  Business and money were my first things to study as I’ve been living as an entrepreneur ever since I graduated high school, and you pretty much have to understand money in order to make it out there.  What did I learn?

The system is rigged.  A lot of people guess that it’s rigged but don’t know the mechanisms.  I spent years and years pillaging through huge economics texts, reading and reading.  Then I applied that knowledge and man oh man.  I still can’t believe what I see.

One Christmas eve I was with my cousin and we were talking at the kitchen table.  He said, “I bet there’s so much corruption in Washington we wouldn’t believe it if we saw it.”  He’s exactly right, and the more you learn the more horrified you become.  It’s WORSE than you thought.  Worse than you ever could have thought.  It takes brilliant criminal minds to come up with these schemes.

And the propaganda they use is so good that even when people think they’re fighting against the system, enacting reforms, most of the time they’re just putting on more and more chains.

To make matters worse, if you DO start to criticize it, and DO try to tell people about it, you look like the BAD GUY.  Their propaganda is that good.   That’s part of what Mark Twain meant when he said, “Be good and you will be lonesome.”  You speak out against what’s going on and you’re just thought to be a psycho, imbalanced and not knowing what you’re talking about.

Just to give a common example in economics.  Say a politician gets on the TV and says, “We need to start special programs to help subsidize homes for the poor.  Everyone in America should own a home.”  I’m the guy who stands up yelling, “No.  NOOOOOO.  Nooooo.  He lies.  This doesn’t work.  It’s never worked.  Nooooo.”  Then security drags me out of the town hall.

All the cute girls there say, “Man look at that sick human being.  All he thinks about is himself.  He doesn’t care about the poor.  I hate people like him.”  So guys like me go for walks alone through the park, and the free-love hipsters wearing their t-shirts and sandals hold their girl’s hand, smile at one another, and think they’re saving the world.  Then they volunteer at the homeless shelter not even knowing that the main reason there’s so many homeless is because of the economic policies they just helped get passed.

But when you examine economic policies, every time such things have been enacted you vastly INCREASE homeless rates and end up with ghettos everywhere you imposed price controls.

Homes are a rare commodity, and anything that is scarce is governed by prices.   Once prices are artificially set low by price controls imposed by the government, you’ve screwed up demand.  In the beginning you get a group of college students moving into a large apartment together, sharing space and splitting the rent.  But afterward some of them graduate and move off leaving a single tenant in the huge apartment.   Normally the high prices would send the student off to find a cheaper, smaller place he can more easily afford. But since prices are so low he decides he’ll just stay.

The end result?  You get under-utilized apartments and homes.  Normally homes are reserved for full families who have graduated from college, have secure jobs, and have kids.  Now you have single college students living in an entire home by themselves.  This leads to homelessness in the area, and people struggling to find a place to live.  Families can’t find homes to live in.

And besides this, landlords also lose their incentives.  This is how the ghettos appear.  If the government simply pays outright for poor people’s rents, you always get ghettos.  That’s because the landlord gets paid no matter what happens, and like he cares.  They’re just a paycheck to him, and he gets paid the same no matter what he does.   Price controls also have the same effect.  With the profit motive gone, landlords quit putting effort into their properties.  They don’t even bother competing for business, because they’re always full — remember, they’re underutilized.

So everything goes to hell, and the person who warns against the upcoming fiasco is branded a greedy, selfish bastard with no sympathy for the poor.  That’s just one of thousands of lessons you learn.  When bad things happen they’re all taken by surprise and because they have no clue what’s going on they blame all the wrong things, and make it out to be a moral issue.  “Those greedy businessmen.  Landlords exploiting their renters.  God look at them.  They won’t even put anything into their properties.  Too greedy.”

But the ones who are greedy are THEM.  They’re the ones hijacking personal property and telling others to house the poor in them for cheap.  They’re the ones imposing price controls, telling others what to do with their property.  And THEY’RE the reason why things have went south, because businessmen can’t even earn enough money off the properties to buy new things to put in them.  So then they want businessmen to invest MORE money into them, sinking the investment further into the red.

Ideas have consequences and most ideas have bad consequences.  Unless they’re very well thought out, and scientifically qualified, they almost always end badly.  Things that sound good are often terrible when more closely scrutinized.

Another example would be the government getting involved in student loans.  Any time money is made cheap and more abundant, in any industry, prices immediately get distorted.  The problem is the colleges don’t just continue along their same trajectory, even though they have more money.  No, they begin to add more and more services to provide a better “experience” for students.  So they start building ice skating rinks, new gymnasiums, and expensive computer labs.

I’m not against any of those things, but these universities have a tendency to increase costs to match their revenues.  In other words, as long as they can get students to pay for the bills they impose, regardless of how they’re paying for it, their costs continue to increase to match.  As long as the money is there, those costs keep going up.  It’s an economic law.  The more abundant money is the more inefficiency and waste come into the picture.

So government programs intended to help kids afford college by giving them discounted loans and other programs have the exact opposite effect.  But when you come against government involvement in such things people think, “What?  Are you against helping kids go through college?  Are you that selfish?  Don’t you realize that everyone these days needs a college degree to get a decent job?  We should be helping these kids.”

Socialist programs always have this problem.  Under socialism there is no way to negotiate price.  Once the government intervenes in areas, immediately you get price distortions and misallocation of economic resources.  If the free market isn’t in operation, there is no way to determine a price, as Ludwig von Mises points out.

But once the prices get distorted and shoot through the roof, the people begin to say, “Look at these corporations!  They’re gouging the government for money.  We need regulations to impose price controls so they quit ripping the tax payer raw.”

So they impose price controls and regulations and we continue on a downward spiral of inefficiency and waste.  It’s well intentioned most of the time, but it all ends badly because people don’t get how these economic principles work.

You have to implement policies correctly or you get disaster, and many policies which people think help society really hurt it.  I heard a song the other day and the lyrics went something like, “There’s so many ways to move yet go nowhere.”  That about sums up this life.  There’s very few paths which take you forward.  And even when you walk those paths, you’ll be ridiculed the entire way.

Are there other instances of this?  You bet!

If you tell the world they’re destroying the environment, and that we need to learn how to respect the Earth more, you get ridiculed.  You may even get death threats.  My own grandpa one Sunday looked right at me and said, “I have nothing but contempt for environmentalists.  They’re destroying this nation.  Tree huggers and all of them.”   Obviously he intended to let me know what he thought of me.  Most of the time I don’t even talk with my family.  They’re so closed minded you can’t even discuss anything with them.

Warn them about CO2 emissions, pollution, deforestation… you get reactions like what I receive from my own family.  People who never touch books and haven’t read anything for 20 years will tell you how stupid you are to think such things.  It doesn’t even matter if it’s backed by top scientists and it’s almost uncontested.  It’s a big conspiracy and just another ploy of the government.

Many scientists say global warming could literally trash the planet and make it uninhabitable.  Hurricanes and floods will increase in ferocity.  Ice caps will melt causing sea levels to rise putting coastal cities underwater.  New York, New Orleans, and London may end up completely submerged.  The tropical rainforests may turn to desert.

You stare at all these things and think, “This isn’t something to play around with.”  And literally mobs of idiots are chasing you with pitchforks having “nothing but contempt” for you.

You’d think my family would be proud of me for learning all these things, but it’s the exact opposite.  I’m treated terribly, and made an outsider.  My grandpa loves to tell me every Sunday how I’m going to go to hell when I die because I don’t go to church.  He wonders why I never visit him.

If you speak against religion you’re viewed as an immoral, terrible person.  Even if terrible things go on everyday in the name of religion.  It’s only just recently that you can speak about evolution.  Past generations would practically stone you to death for bringing up the topic.

Tell them about the sexual dimorphism of the brain, its development during early growth, and how sexuality isn’t a choice, and they hate you.  They hate gays, and they hate people like you who defend their rights.  Why?  Gays are different, and people who are different need to go away.

These sorts of things are why the world gets worse and worse day by day.  People fight against one another for causes which won’t change anything, no matter which side wins.  They throw big celebrations every time a new politician is elected.  “So and so will change everything.”  But nothing changes.  The people in power sit back laughing, manipulating puppets on one side or the other.  But don’t look at the man behind the curtain!  Most people don’t know the curtain even exists.

The search for truth leads to a horrid alienation from everyone around you.  You learn things and try to tell others about it but they want no part of you.

Speak against problems with outsourcing all our jobs overseas?  You’re a racist!  When really you’re just telling how the big corporations are exploiting foreigners for cheap wages because they don’t want to pay benefits and the high wage rates to American workers.  But once again, you’re the bad guy.

People don’t want the truth — they want their paradigm of lies.  It comforts them and tells them everything will be ok, when it won’t.

You tell them to disarm the nuclear weapons and the Sarah Palins come out of the crowds screaming, “You wussy.  What do you want to do, sing kum-bay-yah with the enemy?  These missiles are the only thing keeping us safe.”  No they’re not.  They’re putting us all in danger.  Some false alarm and a bit of fear and the world is disintegrated.  We have nuclear bombs aimed at every square inch of civilization.  All it would take is a few button presses and the world is destroyed.

Where does the search for truth lead you?  You find out the sun is compressed hydrogen and helium.  These atoms gets crunched together by gravity and begin to fuse together into denser elements and give up radiation in the process, which we see as sunlight.

Our planet is a rock, and its material originated in ancient star supernovas which exploded billions of years ago.

Life evolved from simple compounds on our surface and over billions of years formed beings of varying complexity.  What do these lifeforms do?  Well, their activity patterns vary greatly but David Attenborough summed up all their behavior as follows:

“If you watch animals objectively for any length of time you’re driven to the conclusion that their main aim in life is to pass on their genes to the next generation.  Most do so directly by breeding.  In the few examples which don’t do so by design they do it indirectly by helping a relative with whom they share a great number of their genes.  And inasmuch as the legacy that human beings pass onto the next generation is not only genetic but to a unique degree cultural, we do the same.  So animals and ourselves to continue the line will endure all kinds of hardship, overcome all kinds of difficulties, and eventually the next generation appears.”
– David Attenborough, The Trials Of Life

That comes from a man who has studied animals his entire life.  That’s the conclusion I too have drawn from all life on this planet, including ourselves.

Most all this life on the planet will be killed off soon enough as we make room for our “civilization”.  There’s no room for anyone or anything but us.

Our civilization is at odds with our nature, which comes from our development as apes in the African forests over millions of years.  Six to seven million years to be exact.  That’s why wars will continue on for some time, if we don’t kill ourselves off first with our weapons.  It’s our evolutionary baggage.

As Immanuel Kant said, we’re forced to construct our society with the crooked timbers of human nature.  Trying to impose neat and orderly societies with such crooked material immediately poses problems.

Men care primarily about eating, securing a home, having sex, hatching out kids, and securing a modest livelihood.  They care little about the big picture of life, what’s going on, the universe, the economy, politics, human society, large scale implications of their actions, or anything of the sort.  I don’t blame them either.  There’s nothing but misery thinking on all these problems and I don’t think half of them are intelligent enough to understand the problems anyway.  They’re too busy working jobs and wouldn’t have enough time to devote to the studies.

Most people live lives in a bubble reality of sort, believing in a reality which doesn’t exist.  Such bubbles include religion and political views.  If a person believes something that hasn’t been discovered through science, and verified through science, it’s pretty much guaranteed to be wrong.

Most everything man has believed in the past has been wrong.  Mostly likely everything we now believe to be true is also wrong, or at the very least, very primitive.  I’m sure future generations, if the human species lives on long enough, will view us as witch doctors as well, just as we do the ancients.

The vast percentage of our energy comes from burning fossil fuels, which is destroying our environment with global warming.  It’s very possible that if we don’t come up with new technology and change our ways, our entire planet may become uninhabitable in a few hundred years.

As mentioned earlier, our money system is rigged by the bankers to bury people in debts they can’t possibly pay off.  They print money out of thin air and bury us in these debts.  Just like the stock market which can supposedly drop 1000 points, people losing vast sums of their retirements, just from a “fat finger”.  Who believes that?

As for the questions bigger than life, such as the universe, I’d say I’m not yet qualified to answer.  The universe seems to have originated in a big bang of sorts, where energy flowed in from a point and spread out into space, “cooling” and forming the first atoms, which are hydrogen and helium.   Space is a complicated multi-dimensional thing which I still don’t fully understand.  It’s not three dimensional.  Time also doesn’t flow from moment to moment as we think.  It’s much more complicated.

All the stars originate from these hydrogen and helium atoms being pulled together by gravity and starting the fusion process.  Let there be light!

The atoms of which we’re made follow crazy quantum mechanical laws which are almost incomprehensible.  I shouldn’t say almost – they ARE incomprehensible.  But strange puzzles intrigue people like us, who need something to do with our lives.

I read books by eminent physicists talking about black holes and how we can travel forward and backward in time, and even move into parallel universes.  The stuff becomes so sci-fi’ish that it doesn’t seem real.

Apparently if we start to move at speeds close to the speed of light stuff starts to bend and behave strangely.  Time slows down, space bends, and colors of things begin to change.

Gravity is not fully understood.  It’s a sort of rogue force evading our understanding.  It doesn’t tie into the other forces.

Only a fraction of a fraction of a fraction of 1% of humanity has an appreciation for this sort of science, or sees its implications.  They think NASA is a waste of money and that space research is a hinderance to mankind.  In reality it’s nothing compared to the Federal Reserve and the bankers, but understanding that requires economics.  Really it’s one of the few things moving our species forward.

I spend most of my days studying mathematics and physics, though I read a lot of other books as well.  It’s something that takes years to even begin to understand it.  Advanced physics takes a lifetime of research.  I’m already getting to a place where the things I study are so complicated, and require such a background in mathematics, that I don’t even bother talking about it to anyone.   I wrote a simple entry on the basics of quantum electro-dynamics, and talked about light, but that was very basic.  You can find that entry in the ‘Physics’ section.

Whenever I talk to people about these things they just find me strange, and don’t seem to care anyway.  They get to talking about the sports game, or the weather, or something else which I have no interest in.

As for the Earth itself, it’s a rock with an iron metal core.  It originates in a bunch of rocks slamming into one another in space over quite a long period of time.  This all took place at the same time the sun was forming.  Our planet’s surface is constantly shifting around, being pulled under and new rock coming to the surface.  It’s really not so much a solid as it is a very viscous fluid.  Even the continents move around centimeters a years.  Over millions of years the surface changes dramatically.

The plates of the Earth’s surface move all about, continents slamming together forming mountain ranges.  Then the rain erodes them over millions of years, tearing them all back down.  This movement causes Earthquakes.  Similar sorts of processes give rise to islands and new land masses.

The Earth will eventually be incinerated when the sun becomes a red giant.  It seems to be a temporary stage of life to exist.

Consciousness, which seems to exist in higher life forms, originates in certain neural structures which are called Brodmann areas.  The neurons take on certain characteristics, and somehow they radiate energy at some frequency which responds to our consciousness.  Or something.  I don’t really know.

Our bodies aren’t really a solid “thing”.  They’re mostly empty space, and even so, it’s not like we’re a single living entity.  Our skin is covered in mites.  Our stomach and digestion system is filled with bacteria.  We’re moreso a swarm of micro-organisms.  A huge portion of “us” isn’t “us”.  Or maybe those little critters can be considered “us” as well?  There’s no sharp line to be drawn where we begin and where we end.

The more science you study the more things become one.  The self sort of disappears, or at least its role becomes less and less dominant.  Mankind’s place in the universe shifts farther and farther from the center of things, becoming insignificant in the big scheme of things.

Even so, consciousness brings us back to the center, and in four-dimensional space all of us share a common center.  So whee, there is no center.  Then again, no absolute up, down, left or right either.  So no absolute space!  We instead get a shifting bending craziness which I’ll hopefully grasp years from now.  Woohoo!

Reality is stranger than fiction.  That’s where the search for truth takes you.  I think it was Einstein who said he’d have nothing to live for if it wasn’t for physics.  For me, I’d have to say the same.