Crowding out and economic inefficiency cause high unemployment.

Every school of economics embodies different goals that the government has in the economy.  Each shows us a different policy relationship between the government and the economy.  Under classical economics, the government doesn’t tax the economy heavily or interfere with the cost of capital.  Under classical economics, Say’s Law predicts that workers will always get paid for their production and that demand will be sufficient in the marketplace.  And that law held true in an economy that didn’t have a lot of resources being diverted into government projects.  An economy that retains its capital resources can put those resources into economic production.  And that kind of economy has many paying jobs to do.  Anyone who wants to work can work and get paid.

But Say’s Law isn’t what the Keynesians believed.  Keynesianism holds sway when the government taxes so heavily that productive resources that should have been otherwise able to maintain full employment are diverted into government projects.  Under these circumstances, Keynesians formulate a different idea about employment called the “natural rate of unemployment”.  It arises when a growing economy comes to a state of equilibrium and the growth rate slows down.  The natural rate of unemployment represents people who can’t get work because the resources that would have paid them to work have been withdrawn.  Keynesians thought that the natural rate of unemployment could be lowered by increasing the rate of inflation (a hidden tax on yesterday’s already earned capital).   In a heavily taxed economy, some people can’t get work because the resources that would have employed them have been diverted into politics.

But today’s neoliberal economy is much worse.  In this economy, fiat money and high volatility constantly destroy economic resources and mobile capital circulation into diverse markets creates constant instability.  Taxes continue to be high on the grassroots economy.  Low level overall inflation comes from inflation in some parts of the economy and deflation in other parts.  Mobile capital undermines small capital holders at home and abroad.  The value of money becomes uncertain.  Easy money policies exacerbate economic problems by encouraging malinvestments.  Unemployment is high because monopolies form as the big economic fish eat the little economic fish and this destroys jobs.  Monopolies waste economic resources by charging more because they can in the markets that they dominate.  Unemployment is also high because of high taxes that divert capital resources out of the economy.  Markets lose the ability to use resources efficiently and to provide a stable employment marketplace where people can be fairly compensated for their labor.  Market distortions undermine a stable capital marketplace.  Suddenly the circulation of goods to where they are needed has become confused by problems with the value of capital and the value of goods and services.  Surely all of these resources haven’t suddenly become valueless?  Capital itself becomes a tax resource.  Central banks stop paying interest on capital and they threaten to charge fees to hold capital.

These three paragraphs show that the relationship between politics and economics impacts all of us in this interconnected world.  To learn about the relationship between politics and economics and how it has changed over U.S. history buy Political Catsup with Economy Fries at Amazon.com.

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Deadly policies should give Americans a reason to consider policy changes.

The U.S. has experienced a spike in deaths that hasn’t been seen in other developed nations.  These deaths amount to about 500,000 people who have died prematurely and spiked mortality rates.  According to Angus Deaton, one of the authors of the study, the deaths may be due to an increase in economic insecurity among white middle-aged Americans.  They seem to have “lost the narrative of their lives,” or experienced a significant loss of economic opportunity.  The increased mortality comes from an increase in suicide which stems perhaps from a “loss of hope”.  And that increase in suicide rate has been seen, according to Deaton, in every education demographic.  Here’s a link from Vox, “Nobel Winner Angus Deaton Talks About the Surprising Study on White Mortality He Just Co-Authored” by Julia Belluz on November 7, 2015.  Here’s another link from The Atlantic, for a similar article entitled: “Middle Aged White Americans Are Dying of Despair,” by Olga Khazan.

Making a list of recent economic harms that have hit this group of Americans would lead a thoughtful person to consider more than a single negative event.  Here are some economic negatives that have increased economic insecurity for middle-aged Americans:

(1) The easy money policy (low interest rates) of the Federal Reserve has led to enormous debt and also the hostile takeovers of businesses and job losses.

(2) The subprime mortgage crisis (which happened because of banking deregulation) caused many people to have foreclosures that meant the loss of their capital investment in a home.  They also lost their home.

(3) This group has also been harmed by Zero Interest Rate Policy that has undermined the interest they could have earned in their savings accounts.

(4) And of course there have been losses of employment in this group after the Great Recession.  According to a recent statement by Carly Fiorina, more small businesses have been closing their doors than new small businesses have been opening.  That means that small businesses can’t contibute to employment the way that they did in the past.

(4) A high tax rate including additional taxes for the ACA has hurt this age group.

(5) Constant inflation undermines the value of money at every moment.  The Federal Reserve has a current policy of constant “low level” inflation but that differs from their earlier policy of no inflation under the Humphrey Hawkins Act (which also sought full employment).  (The Federal Reserve abandoned full employment and no inflation decades ago).

Economic policies have long-term and widespread effects.  A more centralized economy wastes resources because governments can’t use economic resources efficiently.  Desperation has increased to dire levels for some groups who are suffering enough to end their lives.  That loss of life is a warning that shows that government policies are hurting people.  More government intervention in the economy will likely increase harms.  Imagining that more government interventionist policies can fix the harms caused by government intervention is foolhardy.

Americans who want more government programs to ensure that people have (1) free community college (2) free healthcare (3) continuing social security, and medicare don’t look at the 19 trillion dollars of government IOU’s.  Although monetarists have believed that the government has an unlimited power to create money, the recent spike in mortality shows that there are negative consequences.  People who want free programs, of course, just want what they want.  But there isn’t really a “free” education or “free” healthcare.  There are economic consequences when the government passes more and more legislation that increases government spending.  Losses of gainful employment and the failure of people to thrive in our economy shows people being hemmed in by government intervention.  Remember when you vote that people can’t live without economic hope and the government can’t substitute economic intervention for economic opportunity.

If you want to connect the dots between the past and the present, if you want to understand how politics and economics work together to affect your opportunities, buy Political Catsup with Economy Fries at amazon.com and don’t wait another day to understand how we got where we are right now.

Abnormally low interest rates have hurt savers.

If a saver has worked for twenty years to earn $100,000 and they have put that money in the bank at zero interest, how much money have they lost when the usual rate of interest in the United States during its history has been about 5%?  According to www.thecalculatorsite.com, the $100,000 saver has not earned $49,178.38 over eight years of zero interest (compared to 5% interest on their capital compounded monthly).

That’s a really big “tax” that savers have paid to the Federal Reserve over the last seven years.  And it bites into people’s retirement money and undermines the value of the work that they did to earn that money.  It also undermines the practice of saving money in a bank (which can be lent out for productive investments).  It also reduces the person’s economic freedom to earn interest on their capital (capital has a proper cost).  What a crazy economy!

As the government continues to promise more “programs” it is useful at this time to consider saying “no” to all of them.  It is government overspending and government debt that led to the Federal Reserve zero interest rate policies that have been followed since 2008.  More government overspending will not fix the non-productive parasitic economy that Americans are struggling under right now.  If you are curious you can go to the site listed above and see how much money you aren’t making on whatever amount of savings you have in the bank.  Even if you don’t have any savings, it’s bad when other small capital holders that have saved money can’t earn interest.  That’s because no interest policy freezes-up the once ordinary opportunity to earn a fair return for putting money in the bank (and bank deposits offer up capital for community borrowing).

The current Federal interest rate of 0.75% is still woefully poor payment to savers.  Interest payments on $100,000 at 0.75% for a year ($752.81, interest compounded daily) as compared with the more usual 5% interest rate over U.S. history ($5,126.75) would yield a shortage of about $4,373.94.  If you add that to the last several years at zero interest rates, the total money lost to the saver of $100,000 is $53,552.32 since severely low-interest rates were adopted experimentally by the Federal Reserve.  Some people have taken a political position and said that savers should put their money into the stock market instead of into a savings account.  But an artificially sustained stock market under QE isn’t an attractive investment for most savers.

Buy Political Catsup with Economy Fries by Mel Scanlan Stahl at Amazon.com

Note:  This “zero interest” from 2008 until 2016 is only an approximation for Federal Reserve policy which paid 0.25% from 2008 until 2016 when the rate went to 0.5%  (Wikipedia lists zero interest rate policy as having ended in 2015).  In 2016 the rate was increased to 0.75%.  Unfortunately, ordinary earnings at 5% interest haven’t been restored as of nine years since the Great Recession.  This hurts savers, especially the elderly, many of whom can no longer earn money by working.

For information on ZIRP, see: Wikipedia, “Zero Interest-Rate Policy,” accessed 10 Feb 2017.

Trump represents nationalism instead of post-nationalism.

I’ve been trying to discover why there has been so much controversy regarding Donald Trump’s candidacy for the Republican nomination of President.  Although some would have you believe that the controversy settles around his personality, a personality issue wouldn’t cause this level of opposition that amounts to millions of dollars of Anti-Trump ads.  In my life, I’ve never seen opposition within a party against its own candidate as we are seeing in the Republican Party.  And suddenly, protestors are disrupting Trump rallies–so why would they do that?  What do they seek politically (what do they want to get for themselves)?  And the morning news is painting Trump as a racist based on his slow response to people who expected him to more quickly denounce a KKK supporter, which he eventually did denounce.  I’m a person who looks for the real nuts and bolts so what is the issue that brings establishment opposition to Donald Trump?

When I mentioned Donald Trump and political power earlier, I listed a link to another site that suggested that Trump is a populist (The Economic Populist, “A Strategic Case for Donald Trump,” by Dan Phillips (link is listed again below).  Another site that I visited said that populism has historical roots that go back to Andrew Jackson, the president that shut down the Second Bank of the United States.  But the most pertinent controversy is probably nationalism vs. post-nationalism (which was also mentioned in the aforementioned article).  U.S. citizens have rights under the U.S. Constitution, where the U.S. government has limited powers in the context of the U.S. being a nation.  But citizens have no enforceable rights under international law and a post-national system doesn’t protect natural rights because there’s no consequences for harming natural rights in a post-national system.  If the public realized that their Constitutional rights might be endangered by post-nationalism, it might lead to the build-up of a wave of support from U.S. citizens for protecting national politics.  And that could help Donald Trump to win the Presidency.  Donald Trump’s support for controlling national borders and having protective tariffs to defend American jobs is a nationalist approach which rubs post-nationalists the wrong way.  All the other candidates are post-nationalists.

What all of this tension illuminates is that America has conflicts between multiple political ideologies.  We’ve had three different political ideologies that have operated over American history.  These different ideologies have been coming to the rally floor at Trump rallies because he’s the only candidate that’s offering any kind of alternative.  These groups go to Trump rallies in order to compete for political advantages.  And each group wants something different and each according to a different set of cultural values and a different context of political and economic partnership.  So are you a person that has confidence in classical liberalism, modern liberalism or neoliberalism?  Do you understand American political history well enough to imagine a new political ideology if these three others have failed America already?  Read Political Catsup with Economy Fries to find out where your political convictions are best placed.  See what the consequences are for the operation of each ideology.  Discover where you want to make your political stand.

The Economic Populist, “A Strategic Case for Donald Trump”

Also here’s a great and rational article using information to explain trade agreements on Thad Beversdorf’s site, First Rebuttal: A Search for Truth Among the Madness, www.firstrebuttal.com “Let Mee Show You Why Trump is Right on Trade Agreements”

Buy Political Catsup with Economy Fries on Amazon.com