Foolish things people are saying about Egypt

This is going to be a bit of a harangue, so if you don’t want to have your ear chewed off, you might want to pass on today’s post.

I’ve been watching Fareed Zakaria this morning and I think I’m getting a better handle on what’s going on in Egypt.  There is the extreme left political fringe that insists that the only real news we Americans get is from comedians (Maher, Stewart, and Colbert, I’m guessing) or from Al Jazeera.  I wish them well with that, I have no problem relying on actual reporting like Fareed’s.

The extreme left political fringe seems to want the US to do something and they seem to want some opaque outcome.

What should the U.S. do right now?  Should we support the protesters and tell Mubarak to pack his bags?  That is essentially what we did in Iraq, we deposed a vicious dictator and enabled democratic elections.  Yet there is nothing but rage from the extreme left fringe at that effort, which arguably sewed the seeds that are blossoming across the MidEast now.  Yet now that fringe seems to want the US to once again publicly interfere with the affairs of another MidEastern nation to overthrow a dictator.

It’s curious to note that of all the countries in the MidEast, Iraq is one of the few where there is almost no likelihood of a popular uprising to overthrow the regime.

I’m unclear on what outcome in Egypt that would please the extreme left fringe.  Would there be consensus of support among the extreme left fringe if Mohamad Elbaradei were to cooperate with the Egyptian military to establish a moderate, pro-Western, secular, representative government that continued to contain radical Islam?  A government on the model of Turkey?  I am not certain that the extreme left fringe would be fully satisfied with anything other than a radicalized fundamentalist anti-Western theocracy.

Finally, this dialog has resurfaced the argument from the extreme left fringe that the US has as much income inequality as the poorest Arab nations.  To prove this, the extreme left fringe trots our references to the “Gini coefficient” (http://en.wikipedia.org/wiki/Gini_coefficient) that appear to support that contention.  Not necessarily:  “If two countries have the same Gini coefficient but one is rich and the other is poor, it can be seen to measure two different things. In a poor country it measures the inequality in material life quality while in a rich country it measures the distribution of luxury beyond the basic necessities.”  One thing that all political extremists can be counted on to do is to present data without context, claim an unsupported meaning, and ignore inconvenient truths.

I’m probably a lot more liberal than might be apparent.  And more conservative than might be apparent at other times.  I’m simply running out of patience with extremists on both sides who sacrifice everything else in pursuit of ideology.  At the political extreme, the dearly held ideology replaces truth, the general welfare, alternative solutions, everything.  At the extreme, only ideology matters, and anyone who disagrees is stupid or evil.

Well!  I think I’ve gotten that out of my system.  I predict that Egypt will turn out like Turkey, and far better all around for it.  I hope this for the people of Egypt and the people of the world.

G’day all, and may God continue to bless America!

Creolifornia spice mix

For all your Delta (Sacramento River delta, that is) seasoning needs.  This is an “all-purpose” seasoning that works will all meats and vegetables to get that authentic, mildly warm, Creolifornia flavor in your Hambalaya, or Gumbool, or Shrimp Creolifornia.  (The funny names because being from California, I don’t want to get into any authenticity arguments…).

Notes:

1) This isn’t a ‘blackening’ rub.  For that you want a different set of flavors, plus some brown sugar;

2) I generally estimate 1/2 – 1 tbsp of this seasoning per serving (less for the mild of nature, more for the spicy of nature);

3) This is salt free, add salt to taste;

4) I almost always add a shot of Worcestershire Sauce to help lift the flavors.

Use any measure you wish below, if you use tablespoons, you’ll end up with about a cup of spice.

Recipe

3 sweet paprika
2 smoked paprika (try some ground cumin if you like)

4 dry Italian herb
1 dry thyme

2 onion powder
2 garlic powder

1 ground cayenne pepper
1 ground white pepper
1 lemon/pepper blend

1 celery seed

Refrigerate in a sealed container until needed.  This is really, really good stuff, and way cheaper to put together like this than to buy pre-made.  And my thanks to www.gumbopages.com for the basis of this blend.

Enjoy!  And may God continue to bless America!

Fixing defense

We have, by far, the most capable, lethal, and flexible military in the world.  And we have a legitimate need to maintain a military superior to all others, into the foreseeable future.  As long a authoritarian governments with the means to do violence exist, one nation or one very small coalition is going to have to stand against them.  It is the 21st Century, and we need a military that will be highly effective in this new age, at a cost we can afford.  We need a 21st Century military with flexibility and reach and vision and lethality and we can only afford to pay about half what we pay now.  So what follows is what we need to do to restructure the Department of Defense.

First, military manpower is tremendously expensive.  And contractors can be both unreliable and expensive.  My proposal is to create a corps of non-combatant ‘excepted service’ civilians to perform all non-combatant roles.  At present, a cadre of 5000 civil service mariners (WM, ‘wage, marine’, not GS/SES) man, maintain, and operate the Navy’s fleet of 40+ auxiliary ships.  These ships operate right alongside Navy ships, they integrate with Battle Groups, they are functionally identical to the formerly Navy-manned auxiliary fleet.  But they do this for a fraction of the cost.  This concept should be further explored, developed, and then implemented in a way to replace a half million uniformed military with 150,000 or fewer ‘WD’ (‘wage, defense’) workers.

My second proposal is to consolidate all common functions into single, DoD level departments, to eliminate redundancy and make better use of resources.  For example: legal and JAG, law enforcement, procurement, logistics, training commands, IT and network operations, civil engineering, medical and hospitals (to include VA), exchanges and commissaries, housing, dependent support activities, financial and payroll, the list goes on.  Right now, these functions are fragmented and duplicated across the services.  Consolidate and centralize them, detail resources as needed.

Close most overseas bases, redeploy most overseas troops.  Establish a robust and active multilateral system of base access and deployment exercises.  Reconfigure the airline industry to serve as an auxiliary military deployment asset.  Rethink strategic sealift, consider land basing instead of sea basing.  Bolster the capabilities of the LHD-centered Marine Expeditionary Unity.

Rationalize strategic weapons and systems.

Design all weapons and systems for the 21st Century environment and threat.  Base future acquisitions on a formula that states cost as a bound constant and adjusts capability against threat to achieve the objective without increasing dollars.

Retain six aircraft carriers and associated airwings, lay up all remaining AOE support ships and substitute less costly supply ships and shore based support.  Scale Army and Air Force heavy forces similarly.  Emphasize force multipliers over brute dollar solutions.

I believe that combining these proposals, along with other worthy ideas, can lead us to retain a military capable of deterring, or if necessary defeating, any foreseeable coalition of adversaries.  At a cost of not more than half of what we spend today.

Demand creates jobs

In my last post, I explained how productivity kills jobs, I introduced the very simple formula C / W = P, where C is consumption, W are workers, and P is productivity per worker.  When P increases, one of three things has to happen.  Fewer workers.  More consumption.  Or some combination of those two.  So all else being equal, increased productivity kills jobs.

Demand creates jobs, that’s why they call it “stimulus spending”.

Today, we’ll be working with Joe the Woodchopper and his cordwood business, his village, and the village in the next valley (maybe) to explain how demand creates jobs.  As you’ll recall, the villagers where Joe’s business is located demand 100 chords of wood in a normal year.  Joe’s woodchoppers, using single bitted axes, could produce 33.333 chords of wood each per year.  So:

100 / W = 33.333 and solving for ‘W’ (workers) we see that Joe needed 3 woodchoppers.  And sure enough, Joe had three woodchoppers: Larry, Moe, and Curly.

The blacksmith in Joe’s village was fooling around one day and tried making an axe head with a blade (bitt) on both sides, instead of just one.  He knew it wouldn’t be any good for most axe work, but figured that woodchoppers mainly use their axes one way, and with two bitts they’d only have to stop half as often to sharpen their axes.  He tried it out, the idea worked, and he sold his new double bitted axes to Joe the Woodchopper.

When Joe tried them out with Larry, Moe, and Curly, he found out that the boys could produce half again as much wood thanks to half as many stops to sharpen their axes.  So worker productivity went from 33.333 chords of wood per woodchopper per year up to 50 chords of wood per woodchopper per year.

Now Joe had a dilemma.  He has money sunk into the new double bitted axes.  His boys were producing 150 chords of wood but he could only sell 100 chords, and it wasn’t likely the villagers would buy more.  And he was paying three woodchoppers, to boot.  He sat down with his stubby little pencil and rumpled piece of paper and plugged in the numbers:

100 / W = 50 (chords of wood per year) and when he solved for W (workers) the answer was clear.  He only needed 2 woodchoppers, he’d have to let Curly go.  Now he had two woodchoppers, Curly was unemployed, and Joe had to refigure out the whole woodchopper pay thing.  He knew he had to recoup his investment in new axes, and that knowing the score on technology now, he should be investing something in the next generation of woodchopping equipment.  He would probably have to advertise more to make sure his customers stayed his customers, because his investment was bigger now.  So in the end, he gave Larry and Moe a 25% pay raise to keep his now highest skilled woodchoppers on his payroll.

So now, we can start looking at how demand creates job, how increasing ‘C’ can offset the negative effect on ‘W’ of increased ‘P’.

Larry and Moe didn’t tell their wives about the pay raise, but they did start meeting at the pub every evening after work.  They spent most of their new income on beer.  Pub rules in their village required a new glass for each new beer (no ‘refills’).  Larry and Moe, having two of the best jobs in the village now, drank so much more beer that the dirty glasses were backing up, and the barkeep often had to stop serving beer (decreasing his productivity) to wait for the beer glass washer to deliver more clean glasses.

The situation was getting so bad that the pub owner realized it was curtailing his business.  He knew from talking to the barkeep that most of the time the one beer glass washer could keep up with demand.  He only had this, if you’ll pardon the expression, logjam when Moe and Larry came in after work.  He got out his stubby pencil and rumpled piece of paper and figured he needed a second beer glass washer for 3 hours a night.

So he hired the only unemployed villager he could find, Curly, to wash beer glasses from 5-8 every evening.  And he paid Curly a crappy wage that was a fraction of what Curly had made as a woodchopper.  But he told Curly that he was in management and made him wear a tie, so Curly was happy.

So that is how demand creates jobs.  When the population consumes more of something, and that demand exceeds any increased productivity, a job is created.  Now, to a happier and more uplifting conclusion.

Things were going along OK in the village, except of course Curly’s family was living on scraps and beer spillings, when the very next year the weather turned brutally cold.  It was colder than anyone alive could ever remember it being.  It was so cold, it never warmed up.  People had to start the fire earlier and keep it burning longer.  They were going through cordwood like crazy, and despite their best efforts to conserve, they simply had to use more cordwood.

Joe could scarcely keep track of the orders, much less dispatch his boys, arrange deliveries, and comply with the new government regulations on reporting production of cordwood.  His stock of cordwood was dwindling at an alarming rate, so out came the stubby pencil and rumpled paper again.  He figured his orders for cordwood were running at the rate of 150 chords per year.  His boys were still producing cordwood at the rate of 50 chords per worker per year.  So, once again:

150 / W = 50  then solving for ‘W’ (workers) he realized that he now needed 3 woodchoppers.  He’s have to hire Curly back on.  So he headed for the pub.

Once he started talking to Curly, it didn’t take long for the ex-woodchopper to realize something.  The shoe was on the other foot, now!  He told Joe that he’d be willing to leave his nice, comfortable management job washing beer glasses and come back to cutting cordwood, but he’d need to make more money than before to a) give up his management position, b) do the hard, uncomfortable, dangerous work of chopping cordwood, and c) take the risk of taking back a job that had disappeared once before.

Joe wasn’t happy, but his choices weren’t happy either.  Curly was the only underemployed villager who knew how to chop wood with a double bitted axe.  Joe knew that if he ran out of cordwood, some of the villagers might go to the woodchopper in the next village, and if they did they might not come back to him.  In the end, Joe hired Curly back at the new higher pay rate, so now his workforce was back to 3 woodchoppers, where it had started.

So what just happened here?  Due to cold weather, demand for cordwood increased from 100 chords per year to 150 chords per year.  Productivity could not easily be increased to fill the demand.  So the excess demand created a job.  But wait!  There’s more.

Now the pub owner had a problem, because Larry, Moe, and Curly were drinking beer in prodigious quantities at the pub from 5-8, and the beer glasses were backing up faster than ever.  The pub owner needed a part time dishwasher, so he put up a ‘Help Wanted’ sign.  And as insurance he went and talked to the village blacksmith about building some sort of contraption that could wash beer glasses, maybe powered by the village water wheel….

Increased productivity kills jobs.  Increased demand creates jobs.  The former without the latter leads to unemployed or underemployed woodchoppers and other citizens.

G’day all, and may God continue to bless America!

The Productivity Myth

Well, maybe not a myth, but if you ever hear someone claim that increased productivity creates jobs, you can be sure that on that point they are wrong.  By definition, increased productivity kills jobs.  How can this be?

Let C represent total consumption, W equal the number of workers, and P equal productivity:

C / W = P

Let’s put some real numbers to that.  Suppose the folks of your town consume 100 chords of firewood per winter (small town, I know).  And it takes 3 woodchoppers to produce that chordwood.  So:

100 / 3 = 33.33   woodchopper productivity is 33.33 chords per year (awfully low, I know).

Now, suppose Joe the Head Woodchopper buys his guys doublebitted axes (less downtime for axe sharpening).  Now each woodchopper can produce 50 chords per year.  The town still needs 100 chords of firewood per year, but we don’t know how many woodchoppers we need.  Let’s call the unknown number of required woodchoppers = “X”.

So:  100 / X = 50 (our new “chords per year per woodchopper”)

Solving this equation tells Joe (the Head Woodchopper) that he now needs 2 woodchoppers, not 3.  One woodchopper job is now, if you’ll pardon the expression, on the chopping block.

This is how increased productivity kills/destroys jobs.  So why do we seek greater productivity?  That answer is simple.

If the remaining woodchoppers get paid per unit of work, they now have excess income.  If their expenses remain the same, and there’s no inherent reason they wouldn’t, each woodchopper now has an extra bit of income to spend.  When they spend this extra income, it creates demand elsewhere, which increases jobs elsewhere.  So the net effect can be that the jobs created elsewhere balance, or even exceed (if the other workers are less productive) the number of jobs killed by increased productivity.

The other case where increased productivity can lead to more jobs is if woodchoppers in the village in the next valley are still using singlebitted axes.  And if they’re willing to buy their firewood from Joe the Woodchopper.  In that case, Joe might now need to produce 200 chords of wood a year.  Now we need, say, 200 chords of wood, each woodchopper still producing the productivity-enhanced 50 chords per year, so:

200 / X = 50

Simple arithmetic, Joe now needs 4 woodchoppers.  An increase of 1 woodchopper despite the increased productivity.  But but but, wait!  We used to have 3 woodchoppers, and the village in the other valley used to have 3 woodchoppers, so there used to be 6 woodchoppers.  But now there are 4.  Increased productivity has now killed/destroyed 2! jobs.  Hopefully the still employed woodchoppers are getting paid enough extra, and the unemployed woodchoppers are able to adapt their skills, to create and fill extra demand.  Otherwise, we have two woodchoppers who are going to be spending their days at the pub.  Which (if you know how woodchoppers at the pub tend to act) will lead to less demand at the pub, too (and I say this jokingly, but there’s sadly an element of truth to it).

Just like we’re seeing in the real world today.  This is why “local and sustainable” is an important concept.  In essence, “local and sustainable” take productivity backwards, make production less efficient, keeps resources in the local community, and gives everyone a good life.

G’night all, and may God continue to bless America!

Labor and Capital

Most prosperous nations are either free market capitalist economies, or modified versions of that system.  Labor are the workers who earn wages.  Capital refers to accumulated money invested for the purpose of generating a return.

Through much of history, labor and capital are seen in opposition to each other.  That conception is self-limiting and inaccurate.  One financial objective of every laborer in a capitalist society should be to convert labor wages into capital.  The correct ultimate objective of labor in a capitalist economy is to become a capitalist.

Tens of millions of laborers have done this, almost anyone who sets their mind to it can do the same.  Many laborers who don’t even know they have become capitalists in fact are headed toward retirement as an “accidental capitalist” (most retirement plans function by investing the laborers’ retirement contributions into capitalist financial instruments).  There are objections and obstacles:

- Most people think that if they don’t have a huge salary or other “found money” to work with, that they just can’t become capitalists;

- Being labor is cool, being a capitalist is evil, so many people throw their money away as fast as possible to avoid the stigma of success;

- For ordinary working people, it will take a long time to become a capitalist, and the road will have rises and dips.

Expect to spend 30 or 40 years on this project of moving from labor to capital.  But if you stick with it, you’ll get there.  Here are some very rough figures to give you an idea of the task.  The only feasible way for a laborer to become a capitalist, short of living like a monk, is to invest at least some of your capital in equities (ownership share in companies).  The historical return of the overall stock market has been a bit over 7% per year.  The median income in the US is around $45,000 per year.  In retirement as a capitalist, you will need to leave some capital gains aside so your capital income keeps pace with inflation.  So you’ll need about $800,000 in capital to sustain a median income for the rest of your life.

How to accumulate $800,000, that’s the trick.  Here are the numbers.  Work and invest for 35 years.  Invest $300 per month.  Manage your investments to achieve an 8% return.  You will retire with that $800K and a median income, adjusting for inflation, for the rest of your life.

Thirty five years is a long time and that’s what discourages most people, unless they are forced to contribute through their employment.  If you aren’t forced by your employer to contribute, you’re going to have to rely on imposing that discipline on yourself.  I believe in the old adage, “Pay yourself first”, meaning, the first dollars that come out of your paycheck go to retirement investments.

It’s important to find encouragement where you can.  I recommend looking for the “crossover point”, where your capital gains are contributing more toward growth than your payday contributions do.  Depending on how much you’re contributing and how well your investments do, that can happen around the ten year point.  When tht happens, and you should take encouragement from it.  That is, after all, the ‘income’ that your invested wages (capital) is generating.

Investment advice is easy.  Be tax efficient and be cost efficient in the way you invest.  Capital you have to use to pay taxes or fees is taken away from your retirement capital.  This doesn’t mean to be cheap: if good advice makes more money for you than you reasonably believe you could make on your own, then it’s a good deal.  If your employer offers ‘matching funds’, absolutely maximize those dollars.  When looking for a job, give due consideration to the retirement plan, including matching funds.  Never invest in something you don’t understand, and if something guarantees a return above the current CD rate, be highly skeptical.

Mostly, start as soon as you get your first job, seek out good cheap advice, persist and don’t become discouraged.  Do everything possible to avoid having to liquidate any retirement funds for living expenses, or any other reason, before retirement.  Think strategic, gains and losses are only locked in when you sell.

In the end, I truly write this for my nation.  Because America must rebuild the habits of thrift, investment, risk, and prosperity once again.  No government can do this for us.  Only the collective efforts of the overwhelming majority of the citizens can reconstitute the opportunity for our children and grandchildren to prosper.

G’day all, and may God continue to bless America!

A Tale of Three Unions

I was in a discussion with an online correspondent the other day, and the fellow made a remark that led me to think.  He suggested that the United States would benefit by being more like the European Union.  Two Unions, located in different spots and apparently headed in opposite directions.  Could the United States benefit by adjusting course to parallel the European Union?  I think we could.

Once we have a basic understanding of the European Union and the United States we can compare, contrast, and evaluate.  The EU is made up of 27+ member States.  The USA consists of 50 member States.  There are differences in the nature of the States, but not as many as one familiar only with the 21st Century might assume.

Land area: EU 1.7M sq mi, USA 3.8M sq mi
Population: EU 510M, USA 308M
GDP: EU $16T  USA $14T
Capital: EU Brussels(?), USA Washington, DC

Based on raw numbers, the two unions are reasonably comparable.  Not to diminish or ignore other cultures, but taken together, the EU and the USA have the overwhelming preponderance of art, culture, and institutions of higher learning and research.  As well as an inordinate share of Nobel Prizes.  And most of the world’s greatest wine.

The differences are not as stark as many Americans, and Europeans, might imagine.

Europeans who are not happy at home leave, and often come to the USA.  When they get to the USA, having cut ties with home, these expat Euros all too often come to realize that the problem wasn’t geography.  So there are a fair number of unhappy and ill-at ease Euros in the US.  And some who’ve returned home, taking their new-found unhappiness with the USA along.  I know this because I worked with many Europeans, a large portion of whom were unreasonably testy.

Americans who are not happy at home generally retire to some Third World country where the cost of living is low, expectations almost non-existent, and further contact with the USA increasingly unlikely.

The EU is not yet a complete Nation, it’s approximately at the “Articles of Confederation” stage, where the USA was a bit more than 200 years ago.  The States of the United States of America are not complete either, having yielded certain external Nation-State functions to the federal USA government, in exchange for membership in the Union.

The greatest similarities that exist between the EU and the USA come in comparing the EU of today with the pre-FDR USA.  The European Union of today is very similar to the United States of America before the New Deal.  The EU is far closer to the USA of 100 years ago than it is to the USA of today, leaving the USA of today as the outlier.

The EU budget is $120B Euros, whatever that comes out to in real money.  By regulation the budget must be balanced.  The EU has a policy of only getting involving when a problem cannot be solved by the affected state(s).  The European Parliament meets occasionally, and the entire operation has limited directive power over the member states.  In other words, the European Union has a highly functional Tenth Amendment, whether they know it or not.  The entire organization of the European Union, and functioning of the apparatus of government, are deeply reminiscent of the US federal government under Grover Cleveland.

So what about health care?  Indeed.  In the European Union, each State provides its own solution.  Germany, France, Britain and the rest each design and operate their own system.  Precisely what the Massachusetts Plan does, and what California SB 810 would do.  Why would we not follow the European model on this?  Introducing the ‘Third Union’…  What is the alternative, central planning?  Another Union, the Union of Soviet Socialist Republics tried running everything from one central Imperial Capital in Moscow, and history shows how that turned out.  It failed spectacularly.

These issues unavoidably get wrapped up in ideology.  But there is a greater issue that bears on how these Unions should be governed.  That issue is simple pragmatism, how does a Union go about governing itself?  What works, and what doesn’t work (no matter how theoretically seductive it may be)?  The European Union has a small-footprint, minimally intrusive, decentralized, local and sustainable model.  The Union of Soviet Social Republics was a big-footprint, maximally intrusive, centralized, distant and unsustainable model.  The United States has the former, and is undeniably moving toward the latter.

If we follow the model of the European Union, we will push decisions, authority, responsibility, and resources back out toward the States.  We will celebrate diversity instead of imposing uniformity.  In the United States of America, this model can work even better than it does in Europe because of mobility.  If Germany screws things up, it’s not that easy for a German to move entirely to Portugal.  So some Europeans are stuck with broken systems, they can’t easily “vote with their feet”.  In the United States of America, the mobility of citizens is far more perfect, so the marketplace will work with less friction.

Conservatives and Liberals alike need to look at both the EU and the USSR for examples of what works and what doesn’t.  The USA is at a crossroads, we can choose either future and call it our own.  The question is, do we want to have more autonomous States, like the EU?  Or do we want a more powerful central government, like the USSR?  I most strongly urge all sides to help adjust our course back toward the EU/Tenth Amendment model.