Notebook, 29 August 2017: Consequences II

A quote it would do us well to remember:

[Obama WMD czar, Gary] Samore: A.Q. Khan acting on behalf of the Pakistani government negotiated with officials in Iran and then there was a transfer which took place through Dubai of blueprints for nuclear weapons design as well as some hardware. Throughout the mid-1980s, the iranian program was not very well-resourced. It was more of an r & d program. It wasn’t really until the mid-’90s that it started to take off when they made the decision to build the nuclear weapons program. You know, we can speculate what, in their mind, motivated them. I think it was the U.S. invasion of Iraq after Kuwait. You know, there was an eight-year war between Iraq and Iran, we had wiped out Saddam’s forces in a matter of weeks. And I think that was enough to convince the rulers in Tehran that they needed to pursue nuclear weapons more seriously.

—From: Zero Days

The mess that the world is in today is, in no small part, Washington’s creation.


Notebook 9 February 2017: Amerika and the World

20 February, 2008

Brzezinksi: . . . We have to face the fact that the global system as it now exists was shaped largely between 1945 and 1950 , when there were entirely different power realities. So the first order of business is to adjust existing global institutions to these new realities, which involves the rise of powers like China, India, Japan, with Indonesia on the horizon. Plus the reality that in the background are these volatile, restless, politically awakened masses that continue to put more and more pressure on the system and lead to the kind of threats Brent [Scowcroft] was just talking about: the possibility of diversified conflicts spurting all over the place the way sometimes a forest fire spreads and then leaps over boundaries because of winds.

In that kind of world the premium will have to be put on the effective political management of that complex reality. And that, I think is going to be very difficult for a mass democracy like America to effectively pursue, in part because our public is woefully uninformed about the implications of these new realities—kind of parochially ignorant. And out diplomacy nd leadership in recent years have not been inclined to engage in the kind of consensual assumption of responsibility that this new age requires. Look at the hesitations, the zig-zagging on climate control and the global environment. Or on the issues of poverty and inequality. I think we’re entering a period of in which complexity is going to be the biggest challenge.[1]

Scowcroft: I could easily just say amen. But again, this is part of who we are and from where we have arisen. For most of our history, we’v been secure behind two oceans, with weak neighbors on each side. Americans don’t have to learn foreign languages. They can travel as widely as most of them want and never leave the United States. So most Americans just want to be left alone. I don’t think they want to mess with the problems of the world.[2]

(Bold mine)

It’s one thing for the GOP and Trump White House pave the way to engage in conflict, secret and overt, we expect that. But when so-called “liberals” begin banging war drums as well, a vital counterweight needed to restrict administration adventurism overseas is, to me, much more dangerous than the war-mongers we know about.

Such is Mother Jones’ David Corn (I won’t bother with individual links):

  • The Mysterious Disappearance of the Biggest Scandal in Washington [ie: Russia]
  • This Senator Is Hell-Bent on Getting Out the Truth About Trump and Russia
  • GOP Senator Calls for Investigating What FBI Did About Russia-Trump Intelligence
  • Investigators on the Trump-Russia Beat Should Talk to This Man
  • The Spy Who Wrote the Trump-Russia Memos: It Was “Hair-Raising” Stuff
  • Russia Allegations Lead to Donald Trump’s Dumbest Tweet Ever
  • Jeff Sessions Channels Donald Trump on Russian Hacking
  • Democrats Turn Up Pressure on Republicans for Russian Hacking Investigation
  • At Russian Hacking Hearing, Most Republican Senators Express No Outrage
  • Here’s Another Trump Cabinet Pick With Close Financial Ties to Russians
  • Obama Orders a Review of Russian Meddling in the US Election—But How Much of It Will Be Public?
  • Democrats Intensify Push for Probe of Russian Meddling in 2016 Campaign
  • Senior Senate Democrat Calls for Congressional Probe of Russian Meddling in US Election
  • Senior House Democrat Calls for Congressional Probe of Russian Meddling in 2016 Election
  • The NSA Chief Says Russia Hacked the 2016 Election. Congress Must Investigate.
  • If You Want to Get Scared, Ask a Cybersecurity Expert About Election Night
  • Exclusive: A Veteran Spy Has Given the FBI Information Alleging a Russian Operation to Cultivate Donald Trump

MSNBC has also peddled this line. As well as, of course, John McCain, who, for reasons of his own, has seemingly never seen a war he didn’t want Americans to die in. So it really is no surprise that ordinary, miserably ill-informed democrats swallow it.

They remain so shell-shocked at Hillary Clinton’s loss to Trump they take it as an article of faith that only some kind of underhanded skull-duggery can account for it. Comey, Putin, sexist white male privilege . . . whatever. They’re partly right, but not in the way they say, and it is telling they aren’t much looking at the real skull-duggery which we know did take place. Something else is going on with them. I’ll leave that up to democrats to sort out, however, this is extraordinarily reckless. I have to point out that I was a lifelong democrat myself (who left the party over Hillary’s misadventure in Libya) who is now a Socialist leaning toward Syndicalism minus the “revolutionary” and “anarchist” smears put upon what is really just a perfectly viable alternative to labor-capital relations, so the “right wing” assumption betrays just how defensive and thin skinned democrats are right now.

Add it all up and the picture of a woefully ignorant electorate led by the same kind of fire-power freaks who mired America in Vietnam puts us on a path toward some kind of ill-conceived war, while lacking a principled, informed and rational opposition party to keep the war mongers in check. What we absolutely don’t need is open the door any wider for more Amerikan jingo nationalism. The GOP wants an apocalyptic confrontation with Islam and democrats point the finger at Russia. Apparently, John McCain wants both. So we have to know with absolute precision how the world stands. Call this as honest a partial global threat assessment as I can muster. Mine is a historical argument here, and fortunately, we don’t have to look back very far at all.

Libya: The Turning Point in World Affairs

On the whole, I’d have trusted President Obama’s instinct on foreign policy. I think, up until Libya, he handled the Arab Spring exactly right: it’s their show to get right or to screw up. However, even he misinterprets the nature of his worst mistake. The aftermath of Gadhafi’s fall isn’t the problem, that Gadhafi fell at all most definitely is. Yes. Gadhafi remaining in power is preferable to this (Benghazi after Operation Dignity):

For the record, Assad’s fate should be of no concern to Americans either. Regional stability should be our sole concern and I see no other alternative leader in Syria who would be any better than Assad.

What I think should have happened? The road from Tripoli to Benghazi should have been cut by coalition forces, probably but not necessarily, near both Tripoli and Benghazi in order to separate combatants. After which negotiators from the UN could have gone in to talk both sides down and begin the process of reaching some kind of political solution. In other words, instead of using R2P as a pretext, they should have abided by its precepts—one of which is that regime change should only be the last resort of intervention. We know from the emails which the State Department released that regime change was the intent all along. Bear in mind that Libya: Thoughts on Post-Qadhafi Assistance and Governance (only one of many emails wondering what to do about Libya after Gadhafi’s death) is dated over two weeks prior 17 March 2011, when s/res/1973 (2011) was adopted.

Getting China and Russia to abstain on resolution 1973 was apparently a diplomatic coup, but in retrospect, I believe Beijing and Moscow regarded it both as a test of Obama’s control over fellow NATO members (recall Eisenhower and the 1956 Suez Crisis) and as an opportunity to nullify future Western complaint about aggressive cross-border initiatives of their own. Whatever the motives, and the two I mention above are not mutually exclusive, we know how events turned out. In fact, any lay observer, like myself, who bothered to pay the least bit of attention could see the die was cast as early as 30 March 2011. I was livid at the time and by June I was no longer a democrat.

Nor will I ever be again. That people can so blindly support one of the prime architects of America’s worst foreign policy blunder since the AUMF of 2003 is a group I cannot associate myself with.

So. How did Obama’s (and especially Hillary’s) adventure work out?

In short, we now live in a world on the brink of a new and unnecessary Cold War emerging out of a global order which now compels small, weak states to arm themselves with nuclear arsenals in order to give any Great Power pause before overrunning the former at whim. All while domestic political situations everywhere are seized more and more by unrest and turbulence caused by the thawing of frozen conflicts unmasked first by the end of the Cold War and then by the broken promise of the Washington Consensus world view. That’s not the half of it. The history, both as far as you care to look as well as the most recent developments in South Sudan, Egypt, Iraq, Libya, Afghanistan, etc. uniformly points out that chances of regime change through either violent insurrection and/or “humanitarian” intervention working out well is vanishingly small. Add to this the fact that oppressive right wing, ultra-nationalist belligerent regimes are remarkably adept at coming out of periods of domestic political unrest on top.

If you don’t feel the world’s situation right now is a bad as I describe it here, you’re either not looking and/or you’re being dishonest. Again, ignorance and dishonesty are not mutually exclusive, in fact, they are defining Amerikan traits..

Zbigniew Brzezinski and Brent Scowcroft are absolutely right. Americans are a provincial people ignorant of the world but unfortunately, this ignorance is coupled to perhaps the only (for now) military capable of projecting force anywhere in the world and prey to being swayed by likewise uninformed political leaders who are either unscrupulous enough to kill Americans in their pursuit of gains in domestic politics and overseas corporate agendas


as well as Democratic Party officials and pundits too lazy to formulate a cogent foreign policy of their own (leaving the field open to be dominated by neoconservatives in both parties) and simply too craven to mount an effective opposition to disastrous military adventures on the simple principle that choosing to kill people without knowing the reason is, at the very least, criminally negligent.

We have a new administration elected on the premise that unilateral American aggression to make Amerikans feel better is worthwhile in itself. Incomprehensible, given our recent history, but true nonetheless. What we don’t need now are hysterics, and heaven forbid another major terrorist attack from a Muslim group takes place on American soil during the Trump administration. Were one to take place, my advice would be: do nothing. At least until calm reflection on our aims, exit strategy, definition of winning, consideration of costs in all senses—human, treasure and in the international realm can be given space and time to take place.

Formulating a cogent foreign policy isn’t all that difficult, either. Refer to international law. It’s all there, waiting to be recognized.

Pay No Attention To that Man In Front of the Curtain!

Leaving aside the Trump administration, who have reportedly been reckless enough already to murder an 8 year old girl for the sole purpose of projecting the appearance of Amerikan strength and resolve, the so-called “reasonable” public figures either advocating projecting military force (McCain et al) or enabling a future sea-change in US foreign policy (David Corn, Hillary Clinton et al) purely for reasons of domestic political gain, should step back, ASAP.

John McCain and David Corn pursue different aims, but both, I’m sure, do so both out of ignorance as well as one kind of salf-aggrandizement or another, ignoring realities on the ground and consequences. We can safely take their ignorance as a given. The latter I can dispose of quickly. Corn is livid that democrats failed, against all expectations, to sweep Hillary Clinton into the White House, especially against such an execrable opponent as President Pussy Grabber. With lives possibly at stake, with Washington budget considerations definitely hanging in the balance, Corn’s obsession is irrational. I would submit that Russia is a minuscule distortion of our national debate compared to the out-sized influence of the wealthy and their lobbyists. Of which we hear not a word, these days, from David Corn. McCain’s obsession is similarly divorced from reality. America’s status in the world and capacity to influence events overseas in a good way has lately proved elusive to demonstrate. Rather the reverse, in fact. Considering our direct efforts in Iraq and our indirect role in Syria, disastrous for all concerned:


While I in no way counsel not keeping a very close eye on Russia and China (that’s just prudent), particularly on the ongoing situations brewing off the Chinese coastline, Russia’s concerns are easily comprehended. Moscow’s aggressions have, thus far, been consigned to those states bordering: Georgia, Crimea/Ukraine, Chechnya, etc. What they term their near abroad. In one way, we ought to welcome Russia’s moves here: they are as worried about failed states spawned by unrest becoming havens for terrorist groups as we claim to be. After all, they have their own 9/11 seared into their national consciousness. In fact, they have more than one.

As noted above Europen civilization has two main pillars, which are broadly associated with western and eastern Christianity. As a civilization, Europe extends from it’s geographical core all the way to North and South America to the west and to Siberia and to the Russian Pacific coast to the east. It also covers Australia, New Zealand and Israel. This huge area of a “global Europe” includes a multitude of cultures, but a single civilization, built on the common heritage of Christianity and Judaism and the ancient civilizations of Greece and Rome.

Russia as a whole belongs to this European civilization, although like Latin America, it is off-center. The geographical border between Europe and Asia, which runs along the Ural Mountains is absolutely irrelevant as a barrier to civilization. Russia, in fact, is easternmost Europe, not east of Europe. There is no point in drawing any kind of border along the Urals: Russia’s provinces along the Pacific coast are the extension of Eastern Europe, not of East Asia.[3]

It’s hard to ascertain motive, but I’m guessing here that Moscow wants a seat at the adult table of European affairs, and I can hardly blame them. Russia’s status, as a border province, as it were, of European civilization’s core with the special problems associated with facing “the external threat” (societal stability) should be given due consideration. Certainly, I see no fundamental reason why this shouldn’t be so. As for Russian corruption, the West has no room to criticize anyone on these grounds. After all, our habit of legalizing corrupt practices doesn’t, by any means, make them any less corrupt. Thus far, I see no Russian military adventure which I cannot explain by Moscow’s determination to maintain stable regimes along it’s borders, and I take it as wrote that Putin and Lavrov are fully aware of the implications of failing to do so. Just look at the geography of the dissolution of the Soviet Union, at how what began on the periphery spiraled inward directly to the steps of Moscow’s White House from the Solidarity strikes in Poland in 1988 to Christmas, 1991 when Gorbachev declared that the Soviet Union had “ceased to exist” and resigned his office. Thus far, I see no moves out of Moscow inconsistent with maintaining stability, if not peace.

Which doesn’t mean some in Russia, the Third Rome crowd, don’t cherish dreams of global hegemony, but I will give Putin and Lavrov enough credit to know the world is more a headache to rule than it’s worth. And they have enough problems as it is. I could be wrong about both of them, in which case, by all means, go for it—carefully. Russia still holds a nuclear arsenal. At any rate, neither McCain nor Corn are being particularly rational here and the times demand they be pushed back on. I still hope, beyond any real reason to be hopeful, the current situation can be reversed. I feel absolutely certain that American leadership will not drive any such initiative, no matter who sits in the Oval Office or controls Congress.

John McCain and David Corn are ample illustrations that Americans—of any political stripe—are unequipped to do so.

[1]Brzezinski, Zbigniew, Brent Scowcroft, and David Ignatius. America and the world: conversations on the future of American foreign policy. New York: Basic , 2008. Print.


[3]Trenin, Dmitri, Getting Russia Right. New York, The Carnegie Endowment for International Peace, 2007. Print.

Notebook, 15 January 2016: Twenty Years In The Making

On stage, investing superstar Peter Lynch once held up a computer hard drive to the audience. The latest and greatest expression of mankind’s technological prowess.

“What a piece of shit,” he called it.

As an investment opportunity anyways. Yeah, Lynch never had much of a problem expressing himself. Point is, he went onto say, those interested in the stock market would be better off keeping their eyes open, seeing which retailers were busy, which factories was making lots of deliveries, that kind of thing. Call it situational awareness. As far as it goes, it’s excellent advice. Anyways, this is my story. I promise it’ll be short.
Continue reading “Notebook, 15 January 2016: Twenty Years In The Making”

Notebook, 21 October 2015: What Really Built America and Why Only a Socialist Gets My Vote

It’s one of the most puerile notions I’ve ever heard that free enterprise is “the genius of America” (Barack Obama) or that it built “the greatest Middle Class in the history of the world” (Hillary Clinton). Yes, individuals and groups went out there and started businesses, the vast majority of which failed in under 3 years or were swept aside as others taking advantage of the economies of scale put them under, but that’s neither unique to Americans nor what built the middle class, because things never happen in a vacuum. Apparently, Clinton, Obama and everyone else who swallows that canard needs to return to elementary school.
Continue reading “Notebook, 21 October 2015: What Really Built America and Why Only a Socialist Gets My Vote”

Notebook, 14 September 2015: Left, right and center

A rare political post today, due to the media’s failure to notice the 800 pound gorilla sitting right next to them in the room. Tories in the UK think they can ride to victory over Labour’s choice of Jeremy Corbyn to lead the party and in a rare bipartisan consensus, centrist Labour agrees wholeheartedly. Yet Corbyn won in a landslide, taking 59.5% of the Labour vote. In the United States, centrist Hillary Clinton is beginning to slip, with at least one poll putting Bernie Sanders in the lead in Iowa and New Hampshire, well outside the margin of error, please note. That particular poll may be an outlier, yet it confirms a long term trend in which Sanders has steadily eroded Clinton’s lead in the last weeks. Also in the US, Donald Trump creates quite the storm by leading, and leading, and continuing to lead the (admittedly weak) field of GOP hopefuls.

What Trump, Sanders and Corbyn, along with Alexis Tsipras in Greece and Pablo Iglesias in Spain, all have in common is that they’re outside political party mainstream establishments, which voters rightly conclude are captured by wealthy interests and voters are in rebellion.

So how does this play out? Well, let’s look at the alternatives. The right proposes that political systems change from one-person-one-vote to something more akin to one-dollar-one-vote. The left’s proposals are fuzzy, though even the mainstream “left” in the US agrees that a constitutional amendment is called for, but one thing is clear: they’re against an autocratic right wing agenda.

So where’s the political “center” in all this? Nowhere, of course. Where they always are. It’s time we recognize that the center has no ideology or agenda other than not rocking the boat, maintaining the status quo and offering excuses to do nothing. The center breaks right or left or both, depending on whose radical rhetoric they appropriate, but have nothing to offer themselves. In legislative and policy terms, this amounts to accepting the status quo as the “center” offers only its rejection of the policy preferences at the poles. I’m not saying this is never a viable position, but it is always a weakness, and one that the left (but not the right) has failed to exploit. Somehow, “we’re not as rabid as the right wing” fails to inspire.

So the body politic is polarizing and I am totally fine with this. While there’s ample evidence that rank and file working-class Americans are far from radicalized, political polarization brings the real debate to the surface, and that’s both a discussion we badly need to have as well as one I feel pretty confident the left can win.

Kapital: An Economic Memoir, Introduction

The first durable goods purchase I ever made, back in the early sixties, was a baseball glove. Up until about twenty years ago, that was my glove, and it served me well for countless innings, hours of catch and as my goalkeeper’s glove playing street hockey. An old friend. When I finally gave it away, the glove was so perfectly formed and the leather so soft that my hand would come off at the wrist before even a hard line drive would pop out. It still had years of life left. I saved months to buy a glove, took on extra work and even managed to convince my parents to kick in a few bucks. About half as I recall. Then, on one spring day, I walked about a mile and a half to the nearest department store (a small, local chain long since gone) and made what was then the biggest purchase of my life. Today, the nearest equivalent I could find online goes for about $90. Cheap these days, but by no means the cheapest. You can still find gloves out there in the $30 price range without too much work, but even at $90, many buying one of those today would consider that particular model a temporary purchase until they could scrape up two or three hundred dollars to trade up to something they might consider a keeper.

I paid $8.

The price difference between then and now is central to what this series is all about. I won’t offer any explanations why there’s a difference today, but we’ve heard them all by now: rising input and overhead costs: energy prices, cost of goods, wages, insurance, etc. Others might point out expanded money supply, added regulatory expenses, etc. But I don’t believe that anybody really knows. Or rather, we all know intuitively that when prices for one commodity, such as energy, rises then prices across the board must also rise to pay the premium. It just happens (or doesn’t), and all the “expert” (a word always deserving scare quotes) explanations ring hollow. Though I have my thoughts, I certainly have no demonstrable answers, except that I do believe that politics has everything to do with economic behavior. I wouldn’t go so far as to say that every transaction is a political act, I do believe that the milieu in which any transaction takes place is fundamentally informed and enabled by exogenous social and political forces. I doubt anyone could argue with that, after all, I was buying a baseball glove and not a balón de fútbol. Certainly, some aspects of the economy we’ve all lived through have been informed by politics, and that also began to change in the 1970’s, as free-market jihadis like Bernard H. Siegan, James A. Dorn and Henry G. Manne began to try to apply constitutional legal fantasizing with the intent of undermining the New Deal. Many, like those at Cato and AEI, act as if screeds like these are America’s real founding documents (and as if the Commerce and Necessary and Proper clauses don’t exist at all).

Rant Warning: It’s not as if there’s no small amount of irony in the notions of American “freedoms,” these jihadis like to go on about, which, they claim, were fundamental in the thoughts of the founders. Those guys who reached their station through the genocide of First Americans and for whom chattel slavery was an acceptable price. There’s an irreconcilable difference between between this supposedly graven-in-stone-holy-writ and the historically accurate this-is-the-best-deal-we-can-get reality1. No matter the soaring rhetoric about “freedom” we we like to tell ourselves, ultimately, we’ll be judged by our deeds.

As I say, this series will not be about economic causation, but rather, about the history, and what the data has to tell us about what we’ve lived through and where we are today. As for the causation, some of it I can’t avoid because it is built into the terminology derived from our structural perceptions, but there has been enough paper and bandwidth wasted by “experts” on causal nonsense which, in the end, means lots less than they say it does. Macro economics is a discipline still in its infancy and currently suffers from a mechanistic fetish with analytical geometry, all too often taken to absurdity. My expectation upon sitting down to any economics treatise is that it will yield us no more certitude than can be expressed with the qualifier: “I think we’ll find that . . . .

So this story is inescapably political. For most of us, the daily operating assumptions are based on vague guesstimates of how well things are doing, informed badly by a for-profit media, cheer leading financial news outlets and what we feel our personal prospects are―though that too is a flawed measure at least, it benefits by being subject to constant revision. There are other reasons why it’s a decent measure, which I’ll get into in more detail as this story unfolds. By the mid nineties, I began to feel that what we were getting was little more than empty rhetoric and constant spin about the economy. It really didn’t take much. After repeatedly watching stocks rise on bad news, it quickly became clear that my guesstimates were suspect. By 2003, I was pretty sure that the entire edifice rested on a foundation of sand and I got every penny I owned out of the markets.

Weighing Anchors

I restrict my use of data here to being a historical descriptor, but data is malleable, and I approach this project with some ground rules. “Real” measures, as in “Real GDP” are, unless otherwise noted, always taken from the beginning of the time series (for this story, this is 1970, but any year will do) and applied throughout. This means that most graphs you will see here will show trends over time that diverge from a common starting point (1970 dollars). Don’t let this throw you. The intuition is simple: A 1970 dollar was worth 100% of itself. For each succeeding year the dollar bought a little (or not so little) bit less, and the observations diverge from one another. There is no other way to measure inflation. As for the data, though there are others, my biggest source of the various data points I intend to present here is the FRED collection, a priceless resource, but the central series of data comes from the BLS Inflation Calculator, which got me started on this project. The way inflation has been calculated has changed over the years, and BLS has even made a recalculation of previous years inflation according to current methods (CPI-U-RS, where “RS” stands for “research series“). I have no idea what methodology was used in BLS’ online inflation calculator (BLS doesn’t say), but I believe it to be accurate enough for my purposes. After I stumbled across it and learned that today’s dollar would only be worth 17 cents in 1970, I decided it might be useful to recalculate some numbers we often see illustrated, like GDP:

Nominal GDP (1970-2012):
Nominal GDP

What a success story this picture paints. A $16 trillion economy! An economy that grew 15 times! I don’t think even Adam Smith ever dreamed such a thing was possible. The mythos used to explain this comes right out of Horatio Alger: that through hard work, determination and occasional bouts of brilliant insight, individuals were able to build a better world through exercising their “freedom” to profit from innovation; and through the hard work of these individuals striving to make their insights reality, others were put to [more] productive employment and reaped the rewards thereof, both as workers (both earning more as their worth grows with education and experience and as they switch to producing products that sell for more) and as consumers (with a growing array of goods and services to be dazzled by). This is, we are told time and time again, the only path to general prosperity.

Nothing could be further from the truth.

However, any honest reflection on the economic history of the United States, especially in the 20th century, would have to recognize that we were endowed with enormous resources and room for upside potential, both of which were perhaps unprecedented in human history. The flip side (and there is always a flip side) being that we benefited from being spared the geopolitical barriers and difficulties of our major political and trading competitors in Europe. Even this understates the truth: their difficulties fed our economy through immigration. Any “expert” who doesn’t begin by acknowledging this is trying to pick your pocket. Full stop. All value judgements are relative and nothing occurs in a vacuum. Were I to indulge in counterfactual speculation, I suspect that just about any highly organized system of political economy would have done just as well under these circumstances. I am sure that some arrangements might have worked even better in many respects. The idea behind that being, when there’s plenty to go around, free enterprise is the obvious (though not necessarily the smartest) path. Neglecting to optimize for equality, honesty and positive externalities makes it also the laziest choice. Laissez-faire about as difficult as falling off a log.

Laissez-Faire Capitalism In Action

Prosperity2, it turns out, is a lot harder to build than by just simply letting free markets operate without constraint. In a system as large, complex and interconnected as the US economy, even large gains are incremental―short term measures as small as a few tenths of a percent may represent significant trend changes. It is, therefore, vital we pay scrupulous attention to our unit of measure, which is, most often, the dollar.

The graph of nominal GDP above is useless. Even the most widely cited calculation, Real GDP (usually calculated from the bottom of the last economic shock), tends to mask the secular trend:

Nominal vs Real GDP (index=2009)
Nominal vs Real GDP (index=2009)

As you may have guessed, these nominal and real GDP graphs hide the real extent of inflation’s role, and it is sizable. In order to measure it, I retrieved the relative worth of the dollar for every year, in terms of its value at the beginning of my time series from the BLS Inflation Calculator mentioned above. Plotting the results reveals the fact that the overwhelmingly biggest reason we have a $16 trillion economy today because our unit of measurement degraded by 83% over the last 42 years. In terms of the purchasing power of 1970, the US has a $2.752 trillion economy today, and the difference between the nominal and the real is profound:

3 GDPs: Nominal (black) vs Real GDP (2009 – red) vs Real GDP (1970 – green)3
Nominal vs GDP in 1970 dollars

Money is worth only what it will buy, and another reason for anchoring this story in the year 1970, is that it is near the end of Bretton Woods system. On 15 August 1971, President Nixon ended the convertibility of the dollar into gold. Money itself changed on that day, and all the economic data we see bandied about now is measured in what amounts to an unstable unit of measure. When compared in apples-to-apples fashion, we often get just about what one might reasonably expect. For instance, there was real “growth” (another word deserving scare quotes) in the United States, but much less than is generally believed, and many people are, at best, are only marginally better off today than they were 42 years ago. Many, it turns out, are worse off.

The principle applies to all sorts of macro data as well―wages, earnings, savings, transfers, profits, taxation, investment, spending . . . in short, all economic activity. What we wind up with is what I feel is an ironclad grasp of economic change across the last forty years. At the very least, we can arrive a durable baseline for further discussion, but we should also get a pretty clear grasp how too many so-called “experts” perpetrate a deceit on the rest of us non-economists. I can tell you now the data reveals that unconstrained markets benefit some (very handsomely), while it drives others into poverty and puts many more on the brink.


1As Benjamin Franklin put it:

“For when you assemble a number of men to have the advantage of their joint wisdom, you inevitably assemble with those men, all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected? It therefore astonishes me, Sir, to find this system approaching so near to perfection as it does; and I think it will astonish our enemies, who are waiting with confidence to hear that our councils are confounded like those of the Builders of Babel; and that our States are on the point of separation, only to meet hereafter for the purpose of cutting one another’s throats.”

Madison, James. “Avalon Project – Madison Debates – September 17.” Avalon Project – Madison Debates – September 17. Yale University, n.d. Web. 11 Nov. 2014.

2In economic terms I take “prosperity” to mean excess demand, or more accurately, excess aggregate demand that is, that most working-consumers earn more money than the necessities of life demand from them and all enjoy the opportunities to do so fairly easily (mainly, that they don’t have to take the chances that entrepreneurs do in order to get ahead). I have always found this to be a durable definition and this implies how we should measure prosperity. However the term also connotes relative standards of living and not all aspects of these are economic. Social status (always relative) is also a part of prosperity. The word, like most English terms, is imprecise, and while I use the term here in the economic sense, I am always mindful of its various quality-of-life connotations.

3The values I extracted from the BLS calculator are as follows Inflation factor (a dollar’s worth) times Nominal GDP yields Real GDP:

Inflation x Nominal = Real
Year Inflation Factor Nominal GDP (billions) Real GDP
1970 $1.00 1,075.9 1,075.9
1971 $0.96 1,167.8 1,121.1
1972 $0.93 1,282.4 1,192.6
1973 $0.87 1,428.5 1,242.8
1974 $0.79 1,548.8 1,223.6
1975 $0.72 1,688.9 1,216.0
1976 $0.68 1,877.6 1,276.8
1977 $0.64 2,086.0 1,335.0
1978 $0.60 2,356.6 1,414.0
1979 $0.53 2,632.1 1,395.0
1980 $0.47 2,862.5 1,345.4
1981 $0.43 3,210.9 1,380.7
1982 $0.40 3,345.0 1,338.0
1983 $0.39 3,638.1 1,418.9
1984 $0.37 4,040.7 1,495.1
1985 $0.36 4,346.7 1,564.8
1986 $0.35 4,590.1 1,606.5
1987 $0.34 4,870.2 1,655.9
1988 $0.33 5,252.6 1,733.4
1989 $0.31 5,657.7 1,753.9
1990 $0.30 5,979.6 1,793.9
1991 $0.28 6,174.0 1,728.7
1992 $0.28 6,539.3 1,831.0
1993 $0.27 6,878.7 1,857.2
1994 $0.26 7,308.7 1,900.3
1995 $0.25 7,664.0 1,916.0
1996 $0.25 8,100.2 2,025.1
1997 $0.24 8,608.5 2,066.0
1998 $0.24 9,089.1 2,181.4
1999 $0.23 9,665.7 2,223.1
2000 $0.23 10,289.7 2,366.6
2001 $0.22 10,625.3 2,337.6
2002 $0.22 10,980.2 2,415.6
2003 $0.21 11,512.2 2,417.6
2004 $0.21 12,277.0 2,578.2
2005 $0.20 13,095.4 2,619.1
2006 $0.19 13,857.9 2,633.0
2007 $0.19 14,480.3 2,751.3
2008 $0.18 14,720.3 2,649.7
2009 $0.18 14,417.9 2,595.2
2010 $0.18 14,958.3 2,692.5
2011 $0.17 15,533.8 2,640.7
2012 $0.17 16,244.6 2,761.6

Graphed out, the Inflation Factor column illustrates the dramatic reduction in dollar value throughout the period. I was later gratified to find that my own graph of consumer purchasing power was exactly mirrored by data found on FRED, which I’ll share here:

Notebook, 9 May 2015: Information Really Is Power

Just to state the obvious, the power of information (as opposed to what amounts to the “noise” of op-eds, punditry, “research” emanating from pre-ordained conclusions and the like), it’s useful to note what the Information Age has recently wrought. This seemingly “DUH” title Citizen videos of police misconduct are eroding the presumption that police do not commit misconduct ought to be understood as a given, but the underlying assumption needs to be made explicit: people are hungry—starving—for real information (in a format they understand).
Continue reading “Notebook, 9 May 2015: Information Really Is Power”