Dead-weight loss

We are constantly being massaged to believe that if someone in charge were doing his job, the economy would be back on the tracks chugging along. But, I believe there is a fly in the ointment that cannot be ignored. It’s the economic concept of “dead-weight loss”.

In a nutshell, dead-weight loss represents the difference between what we would pay for something if we had to pay cash versus buy on credit.

DeadweightlossIs there any doubt you would pay less for emergency room services at a hospital if you didn’t have insurance or you had to pay out of pocket? What about the price of your house or car? If you didn’t have access to credit would you pay $350,000 for a large but poorly built house? Didn’t you willingly over-pay for your car because it had zero % financing and the monthly payments fit your budget?

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And, what about those Christmas presents under the tree. Would you really have paid the amount your spouse spent in an orgy of spending to fulfill a fantasy? Hell no, you wouldn’t. Economists call this “dead-weight loss”.

American health care is nearly 18% of GDP, which is nearly double what European socialized democracies pay. Many of our best and brightest people go into health care and it is our biggest employer at 14% of the workforce. If we hit the numbers of our socialist comrades in Europe, health care would be 10% of GDP and 8% of employment. And, if health care was a truly competitive and productive sector the U.S. would be at 7% of GDP and employ 5% of the workforce. We are overspending by hundreds of billions of dollars and millions of workers are in employed in health care rather than growing food or inventing the next iPad.

If we continue systematically through every sector of our economy we would find similar savings to be achieved in education, highway construction and government services of all types. Another way to get at the number would be to focus on market segments where there is easy availability of credit. This includes government fiscal and monetary stimulus which force feeds dollars into every nook and cranny such as student loans, SBA guarantees and the like. It represents a false prosperity that leads to dead-weight loss. If we were not printing money so the banks could lend it out and if governments balanced their budgets there would be far less money to spend. Unfunded liabilities for pensions and all manner of debt will eventually require additional funding.

Every trillion dollars of spending equals 10 million jobs. If we suddenly reigned in health care spending and reduced government deficits tens of millions of people would be displaced. What would they do? The plain and simple fact is that government largesse over many years has created a gradient that has encouraged the migration of millions of workers into sectors of the economy that are now infected by dead-weight loss. This inevitably creates bubbles in the economy. When things change there is a bursting of the bubble. Reaction to popped bubbles results in even more dead-weight loss.

Government has painted itself into a corner. In every case in the past, government has used inflation as a way to get itself out of the mess. It pays off old debt with cheaper dollars and it prints money to continue the pensions and false employment. To solve this problem with restraint would displace millions and that is politically untenable.

My criticism of government should be extended to the private sector. Corporate owners achieve the same effect by encouraging massive influxes of illegal immigrants and outsourcing jobs to low cost countries to solve their problems. It contributes to unemployment. And, there are millions of underemployed working in call centers who cannot find jobs in the economy.

Taken as a whole, we have serious structural problems in the economy that cannot be solved by mere tinkering. There is a disconnect between worker skills and education and what the economy needs. We import more than we export and wealth creation has gone into reverse. Our economy cannot sustain itself without the addictive fix of easy credit.

Politicians who purport to have a fix for these problems are simply not leveling with the American people. We are stranded on one side of a raging river at the bottom of a chasm. To cross that gap will be extremely difficult and painful. Anyone who thinks it can be achieved by waving a magic wand will be disappointed in the magic act.

Right now we do not have leaders willing to step up and help us deal with problems because there is a general lack of understanding of the nature of the problem. And, we have not yet sobered up and realized that we are careening down a slippery slope and the rocks are rushing up toward us. Dead weight loss is really the cognitive dissonance between what we as individuals do in our actions and the abstract thoughts we use to perpetuate our addictions and fantasies. We haven’t bottomed out yet. There will be no positive change until that inflection point is reached.

Gods of the copybook headings

My thoughts often turn to the Book of Genesis and its mention of the Garden of Eden and our loss of paradise. Man thought he could do better with his laws and his technology. Nature has clearly suffered and we seems to be drifting away from what little remains. Whether you embrace the Bible’s book of revelations, there is a consistent belief across most religions that this will all end poorly.

* * * * *

Of all the writings that best express my feelings are Rudyard Kipling’s “Gods of the Copybook Headings

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As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place;
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: “Stick to the Devil you know.”

On the first Feminian Sandstones* we were promised the Fuller Life
(Which started by loving our neighbor and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four —
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man —
There are only four things certain since Social Progress began: —
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!–Rudyard Kipling

*Feminian sandstones are a geological stratum representing a former age in which sexual mores declined as ours did in the last century, and the human race learned by natural selection that the wages of sin is death.

Isaiah on my mind

Paraphrased from the Book of Isaiah:

Many offered to help;
But, this was something I had to do on my own.
My friends have all grown tired of me!
Now that it is done, I hope they forget all that;
For it is nothing compared to what I am going to do!
For I am going to do a brand new thing.
See, I have already begun! Why won’t they believe it?
I will make a road through the wilderness of the world;
A straight smooth road through the desert;
Fill the valleys and level the hills;
Straighten out the crooked paths;
And smooth off the rough spots in the road,
For my people to return to Paradise; and
Create rivers for them in the desert!
The wild animals in the field will thank me,
The deer, raccoons and homeless cats and dogs, too.
For giving them water in the wilderness;
Yes, springs in the desert

Churchill On Islam

 

Churchill

“How dreadful are the curses which Mohammedanism lays on its votaries! Besides the fanatical frenzy, which is as dangerous in a man as hydrophobia in a dog, there is this fearful fatalistic apathy. The effects are apparent in many countries, improvident habits, slovenly systems of agriculture, sluggish methods of commerce, and insecurity of property exist wherever the followers of the Prophet rule or live.

A degraded sensualism deprives this life of its grace and refinement, the next of its dignity and sanctity. The fact that in Mohammedan law every woman must belong to some man as his absolute property, either as a child, a wife, or a concubine, must delay the final extinction of slavery until the faith of Islam has ceased to be a great power among men.

Individual Muslims may show splendid qualities, but the influence of the religion paralyses the social development of those who follow it.

No stronger retrograde force exists in the world. Far from being moribund, Mohammedanism is a militant and proselytizing faith. It has already spread throughout Central Africa, raising fearless warriors at every step; and were it not that Christianity is sheltered in the strong arms of science, the science against which it had vainly struggled, the civilization of modern Europe might fall, as fell the civilization of ancient Rome.”

Source: The River War, first edition, Vol. II, pages 248-50 London