Tuesday, September 12, 2006

Response 2

I'd like to respond to a portion of a very well thought out comment from Cosbert Callis:

3) Frankly neither suggestion of the barter system or the gold standard, nor the idea of eliminating the Fed represents an understanding of economics 101.
(as a fiscal conservative, with a BA in Political Science and a Minor in Economics, you would have failed any econ class I was in with these ideas..)

Foreign trade (including deficit spending, which is a form of foreign trade) represents one of the most important natural forces for peace in the world. People just do not make WAR with trading partners. I don't where your original thought inevitably leads to war and inflation. comes from, there is NO, ZERO, NADA in the way of empirical evidence to suggest there is a single iota of truth in that statement.


First, deficit spending is not always a form of foreign trade. Deficits can come in many forms. First, you can sell bonds to your own country. Second, you can have the Fed print more money, thus causing inflation, but giving you the money you requested. Third, you can sell bonds to other countries. I would only classify the last as deficit spending.

Second, deficit spending MOST DEFINITELY causes war. You would have failed any history class I took with your ideas. War's have to be funded in some way. Without funding, you can't fight. There are many ways to get funding, but the easiest is through deficit spending. Do you think the war in Iraq would have happened if we would have had to raise taxes to pay for it? People understand taxes: they understand the effect that taxes have on their pocketbooks. With deficit spending, they don't understand the correlations and are less likely to complain. Therefore, deficit spending is VITAL in starting and maintaining a war machine. Without easily obtainable money, there are far fewer wars.

Third, we didn't always have a national bank. The current Federal Reserve system was established in 1913. Notice that it DIDN'T provide economic stability, as was its mandate. We still went through booms and busts (including the great depression). Before 1913, we had a myriad of different banking styles, including no central bank from 1837 to 1862. Do I think we need banking regulations? Sure. Do we need a central bank? No.

Fourth, a return to the gold standard is independent of the federal reserve system. The Gold standard was not revoked until 1971, almost 60 years after the establishment of the federal reserve. The goal of the gold standard is to reduce inflation. I would say that it did it's job pretty well considering the amount of inflation that has happened between 1971 and today.

Finally, trading partners most definitely go to war. The US traded with Iraq (oil and weaponry). Iraq traded with Kuwait. The US invested in Germany before WWII. The examples go on and on. In a global economy, there is more than one way to get at any resource, so it becomes much easier to bite the hand that feeds you. But, it becomes much harder to bite if you have no teeth. By eliminating easy access to money (via deficit spending through the Fed), we can take out a few rows of teeth.

12 comments:

Cos said...

Tanton, step back.. you just committed a HUGE "logic flaw" (come on programmer...) called a "False Cause"
Deficit Spending does NOT CAUSE WAR

WAR CAUSES Defecit spending.
(and this is actually a good thing...)

IF (War)
{
DeficitSpending();
}

NOT

IF (DeficitSpending())
{
War();
}

You are 'generally' correct that selling bonds domestically and printing more money are forms of deficit spending. Where you had (legitimately) jumped to a point where you mentioned both foreign trade and deficit spending in "the same breath" I just stayed there with you. Given the volumn of deficit spending we are currently engaged in, it is natural to assume that a fair bit of this is being funded off shore. Now think about this, if your neighbor owes you A LOT of money, do you attack him?
Does he attack you? NOPE...

Remember that most wars have been about "resources". Trade is a mechanism for moving those resources without war. (Oh, you would be surprised at how little the US 'traded' with Iraq prior to 1990, They were NOT a source of oil for us, nor was Kuwait, but Saudia Arabia was.)

Oh and No, 'the people' don't 'understand' taxes. They just don't, and it is unfortunate. Taxes are taken out of peoples pay before they get it and they don't even really think of it as THEIRS. Sad but true.
Oh, and given the extent of public support for the war in Iraq when it started, yes, it would have happened anyway. But then again, we didn't need to raise taxes. You will notice that the deficit if FALLING (and FAST). There are two basic ways a government can raise revenue. Raise Taxes and Grow the Economy, so that they recieve more from the current tax rate. Empirically (It has worked EVERY TIME it has been tried) one of the best ways to grow the economy is to CUT TAXES.

I don't have time this morning to go into the history of the Fed with you, and its effects, both positive and negative, on the economy and politics. Perhaps I'll have time later for that discussion.

Tanton said...

Ok, I'll go with you on that

If (War())
{
DeficitSpending();
}

but, you missed a precondition, which I was attempting poorly to show.

If (AbilityToDeficitSpend())
{
War();
DeficitSpending();
}

If you CAN NOT deficit spend, then you have to find some other way to fund your war.

Kuwait owed Iraq a lot of money (according to Iraq), so Iraq invaded them to take it. Sounds logical to me. Germany owed the allies a lot of money after WWI. Did they attack to not have to repay it? Yep. Once again, sounds logical.

I have no problem with trade. I'm not an isolationist. I strongly support a global economy. I don't think trade causes war, but I don't think it is an effective war prevention mechanism, either. Will it prevent some war? Sure. To think it is the best way to prevent war is naive. Take away the ability to fund the war, and the war goes away.

I also agree that growing the economy is much better than taxes. I think taxes are a bad thing in general and I support cutting them as often as possible.

I don't think we disagree on much, here. I just believe that the ability to deficit spend makes it easier to go to war, and it looks like you believe (I don't want to put words in your mouth) the positive effects of deficit spending will end up preventing war. We'll just have to agree to disagree on this point. Throughout history, wars have been funded on borrowed money. Eliminate an easy source of that money, and the wars go away.

Cos said...

Your right, there is not much we disagree on here. I would accept that deficit spending in an "enabling technology" to war, but not a "root cause". (Which I believe your original statement implied.) However, remember that wars started long before deficit spending. And what of “Just Wars” Without deficit spending the U.S. and the Allies would never have been able to fight WWII. I would pose that deficit spending as ‘a practice’ is bad, while deficit spending as ‘an ability’ is necessary.

Your 2 examples are poor examples (and fail to support your argument) for the following reasons:
Hitler, The Third Reich, and World War II were all a direct result the Treaty of Versailles whereby Germany was bankrupted in 'war reparations' and the abandoned to flounder on her own. There was no attempt to rebuild Germany or help Germany back into the community of nations etc. etc. (no "Marshal Plan") The 'Debt' that Germany was in was not of its own choosing, but foisted upon it. This lead, inevitably, to the conditions that started WWII in Germany. (and, as a side note, serves as empirical evidence for why we must “stay the course” in Iraq. To come into Iraq, conquer, depose, and withdraw would be treating Iraq the same way we did Germany at the end of WWI, where as if we continue with the efforts to rebuild and reform Iraq we follow the successful example of the marshal plan.)

This, ironically, brings us to Iraq and ‘the first Gulf War’ (in which I was a direct participant as a paratrooper of the 82nd Airborne) I invite you to read my original post on the Dilbert Blog; In short, starting that war was about the DUMBEST thing Saddam could have done. Since the facts don’t support the war, the war then can hardly be used to support and argument that is (or should be) founded in reason.

Now, for an alternate perspective, consider this. Many historians will (in varying degrees of “importance”) blame the Crusades on an ‘excess’ of resources, that was causing growing pains in Europe. (Countries with too many people, food, materials etc. but not enough LAND) That, in order to prevent European nations, no longer under the control of the Roman Empire, from warring with each other, The Pope focused their attention on “The Holy Land”, where they could grow (or die…) unhindered by Christian neighbors. Had, principally England and France, but also Germania, Switzerland and others not needed to consume these resources, the Crusades would not have been ‘necessary’. [Note: I do not fully subscribe to this theory as a driving force behind the crusades, only, perhaps, a minor contributing pressure. But still, something to consider in the context of the current discussion.]

Tanton said...

First off, thank you for your service. I think it is our God given right (and duty!) to question the wars we enter into - something that many people disagree with. However, I could not be more proud or more in awe of the amazing soldiers that fight those wars for us. Thank you.

I think your point on the the first Gulf War helped prove one of my points that wars happen regardless of any other factors and the only way to prevent them is to take away the funding for them.

As for the people not understanding taxes, you are right to a large degree. I just think they understand them better than they do deficit spending. In fact, I think the economic experts understand the effects of taxes better than deficit spending.

You made some other good points on which I must ponder :-)

Cos said...

(I think that I shall not regret following this thread away from the Dilbert Blog...)

Question Authority, but before you do, remember, sometimes the answer is that "Authority is right". Do not fall into the ASSUMPTION that "Questioning Authority" means that "Authority must be wrong".

I never object to 'questioning authority' (in the appropriate forum, which this is). But when the debate is over, and the vote is cast, live with the decision. It then becomes wrong to fail to support the outcome. As a soldier I will make clear, you can NOT 'support the troops and not the war'.
To 'support the troops' means
* Supporting victory
* Believing that we can and will win.
* Believing that we are doing the right thing
* Believing that WE know what we are sacrificing, and that WE believe what we are doing is worth it.
Remember, there is not a Soldier, Sailor, Airmen or Marine that has not either enlisted or re-enlisted since 9/11/2001. (the longest active term for a contract is 4 years, any soldier active on 9/11 has chosen to remain on active duty)

And finally remember, Sometime war is the answer.

Cos said...

I post here a few addendums to my remarks of 4:30

First; To clarify, it is perfectly acceptable (to me, for whatever that is worth)for citizens to publicly continue to question and debate in the public square on an ongoing basis. My remarks regarding "after the vote" etc. were directed at politicians, and in particular those who currently hold office, whom, through their public acts of dissent, create the outward appearance that we, as a nation, are not unified. There was a debate before Congress, every side was heard, a vote was held. Such is the way of our form of government. Now there are those, who having lost the debate, will not accept the outcome, but instead, breed discontent and in doing so, give aid and comfort to our enemies.
Now that we enter campaign season picture two candidates the first says;
"I have said nothing to this point because I did not wish to hurt my country to advance my career, but I believe we must change course in Iraq, and this is what I would do. Vote for me."

and the second candidate who says;
"I have been telling you all along about how we can't win and it is such a mistake to be in Iraq and we must get out now!.

I would disagree with both candidates, I would at least respect the first.

Second; War has gone on much longer than deficit spending. Enough said.

Third People understand deficit spending, just ask Capital One, ("Whats in your wallet ?")
Most people think a tax REFUND is a gift. (Just listen to H&R Block's advertising.)

Find me a real world example of a nation going to war with a significant trading partner or a war that was actually stopped because it was 'over budget'....

Your thinking is sound, you just need to have not taken so many history and economics classes from liberal instructors. (I know, they are hard to avoid.)

Cheers

P.S. It is not Imperialistic to be Empirical

Tanton said...

I'm most definitely glad you followed this thread. I have since learned much.

I agree wholeheartedly that questioning authority is not the same thing as assuming it is wrong. There are many times that I believe authority to be doing the right thing. Furthermore, I'm not a dove. I think there are many war scenarios that are completely justified (e.g., US entrance into WWI, WWII, and the first Gulf War).

I also strongly agree with three of your four points to supporting the troops. For the second gulf war, I pray for a resounding victory (where victory is rather hazily defined, by necessity, this isn't a bad thing). I also believe that we can and will stabilize Iraq and eliminate terrorist actions there(my definition of win). I also believe that the soldiers are there because they made the choice and the sacrifice and I am thankful for that. I don't believe that the war is right. I certainly can't change my opinion on that just because we've entered the war. Do I think we need to finish what we started, sure, but that doesn't make it right.

Tanton said...

I posted my last reply before your addendum. I'll have to think for a while on what a politician should do. I certainly don't want him to say "Yeah, this war is great," if he doesn't mean it. I think I would want him to say something like, "I did not support the involvement of the US in this war; however, we are there and that is no longer relevant. Here's what I would do with that situation going forward." When we're in the middle of a war, your agreement with the war is irrelevant.

Second: Yes, war has gone on longer than deficit spending. However, the way people supported the war in the past was heavy taxation. I don't believe that our people would support wars such as the second gulf war if they had to increase taxes by 20% to do so. Therefore, I think it would cut down on the wars and engagments that _our country_ entered into.

Third: I agree completely. Once again I'm implying something I don't mean. I'm trying to say that they don't understand the effects of deficit spending on our economy, so they don't balk at it. Basically, they think it doesn't affect them. However, with taxes, they know it will have an effect on them, therefore they are more likely to vote against them, "No new taxes." My point was that it is easier to get people to agree with deficit spending than taxation because they know that taxation is bad for thier pocketbooks, but they don't understand the positives and negatives of deficit spending on the scale of the US economy.

To some degree, the war in Vietnam and the Russian war in Afghanastan were stopped because they were over budget. Was that the only reason? No. But finaces always play a part.

Also, I would say that the war of 1812 was between two trading partners.

I don't attribute my views to liberalism or liberal instruction, as I'm very conservative. Back when Republican's were conservative, I used to vote heavily for them. Now, it's not so clear cut. I would say Bush the Younger is rather liberal.

Cos said...

Ok, I'm going to work may way backwards through your last post...

I would not call GW 'liberal' (even on a relative scale...) no, he is not a 'conservative' but the only comparisons that really matter are GW vs. Gore or Kerry. I'm not 100% happy with his decisions, but 6 years of GW have been better than 8 years of Clinton.

Um.. the result of the War of 1812 was that Britain "officially" recognized the US and "officially" opened trade with us. No, we were not trading partners prior to that. Now, that said there was some trade going on, but it was being buffered by private trading companies rather than the "crown".

Again I have to take issue with your rather loose utilization of 'causality'. Were Vietnam and Afghanistan "over budget"? yep. Did they end? Yep... was there any causality from A to B, nope.(Please learn the difference between 'correlation' and 'causation' (Logic 101))

Ah, and people will vote for "no new taxes" etc. Actually, the 'people' (I just finished watching a bit of Leno's 'Jaywalking' so my immediate opinion of 'the people' is rather low) Are more inclined to believe a Clintonesk statement like "I just want to raise taxes on 'the Rich'" and just assume that they are not who he is talking about than they are to believe I want to cut taxes for everybody. Remember that Bush (40) lost re-election to Clinton on the "No New Taxes" not because of the taxes, but because of the credibility that he lost when he violated it.

Again, your view of history is a bit off. Taxes were not historically raised to wage war, wars were often waged to plunder the riches of others. Again, open up trade so that you can get what you want from your neighbor without the cost of waging a war ($100/barrel oil is cheap compared to the Marginal cost of maintaining 2 additional Army divisions to get the oil for $24/barrel)

Overall, I suspect we find far more to agree about than to disagree about. I have (as I'm sure you have noticed...) laid a few well place 'rhetorical land mines' to get a feel for your explicit opinions on various matters (does your aversion to entitlements as a vote getting mechanism spill over to a view that is 'totally anti-welfare' etc...).

If we could just get you to use a real mature programming language, like Basic, there might be some hope for you. (You want Generics, Macros, Strong O/R mapping with a truly OO language, VB has it all, and no obnoxious curly braces or semi-colons.)

Tanton said...

The jab on GW being liberal was to make a play on the literal definition of liberal and conservative rather than the political definition. I agree that he is a political conservative, but right now they are supporting a lot of changes, which makes them, literally, liberal. As for GW being better than Clinton, that is obviously an opinion question. There was a lot about each that I didn't/don't like. I happen to think GW's errors are more egregious than Clinton's; however, I respect someone who disagrees with that.

Sorry, didn't realize we were talking official trade by governments...I'll look for a better example.

With regards to causality vs correlation, I do know the difference. Notice I said "to some degree." If war were free, there would have been one less pressure on stopping it. The fact that it had cost us so much money and was taking a toll on our economy was a factor in our decision to pull out. I'm ok if you disagree with that :-)

I do think taxes have been raised to wage war. Take for example, the story of Robin Hood were the poor were bled for all they were worth to fund the crusades. Now, we can argue that they would have been bled dry for another reason, and I wouldn't disagree with you. But war has been used as a reason to raise taxes.

All of these opinions on history are relative, nothing is absolute :-)

I have used VB...I had to wash my hands with bleach afterwards to get the smell off ;-)

Cos said...

So just what are GW's errors that are so 'egregious'? I mean, I disagree with his stem cell position, (but oddly enough I agree with his reasoning) and he has been too willing to spend my money on things that I would not, but he has cut taxes, grown the economy, brought unemployment to historical lows and effectively prosecuted The War on Terror. (This INCLUDES Iraq)

Also, I'm not trying to limit matters to "official trade by (or between) governments" as much as "sanctioned" trade. From the end of the revolution through 1814 (the end of the war of 1812) what 'trade' there was between the US and England was unsanctioned.

I only criticize your imprecise wording because I believe you too freely cross from correlation to causation and one of the greatest barriers to solving problems (whether its 'peace in the middle east' or 'deficit spending') is the failure to understand WHY these problems exist. As a prime example, the inablity to deficit spend would not have stopped any war in history from starting (even if we accept your premise that Vietnam and Afghanistan (for the Soviets) were ENDED because of some spending constraint, still they would have STARTED) And such logic does nothing to address to root cause of the wars.

Oh, and the over taxation during the Crusades do represent a good example of taxes feeding a war, but the Crusades also represent and interesting anomaly in the history of warfare, for a lot of reasons. The principal actors were not nations, but individuals. (Even the heads of State, King Richard, acted, not for England but for his own salvation (as he percieved it) at the direction of the Pope.)

(on a side note, you remind me of a favorite saying, that I believe you will apreciate:
Robin Hood was a REPUBLICAN, he did NOT rob from the RICH and give to POOR. He did rob from the Government and return the taxes to the people from whom they were taken.)

Hmmm... opinions on History are 'relative'.... Nothing is "absolute". Hmmmm...

Ok, I'll give you a chance to clarify this one. Others have said the 'same thing' with I suspect a 'different meaning' (Chocobean, for instance on the Dilbert blog)...

To a certain extent causality, correlation, meaning and value are certainly open to debate, to varying degrees. Even some 'events' are obscured by a lack (or perceived lack) of information. (Like "Was there a shooter on the grassy knoll?) But, “History” itself is rather carved in stone, though we may not always have all the pieces of the tablet. UBL and Al Qaeda did in fact advance a plan that led to the use of four commercial passenger planes as missiles on 9/11/2001, there is no room for interpretation as to who, what and when. Those who wish to debate these points are simply wrong, and I mean absolutely wrong. There is no ‘relativism’ here, nor is there a lack of information. There are things which we do KNOW about in history and those who chose to debate those question waste their own time and try my patience.

And finally, if you had a bad experience with VB (or at least VB.Net) then it was a faulty operator. One of the greatest strengths of the VB language is that there is an incredibly low threshold of understanding required to do a wide variety of 'useful' things.

One of the greatest weaknesses of the VB language is that some people will only learn that low threshold of material, stop, and then go forth and call themselves "programmers", never fully understanding the real power of the tool they are using.

Tanton said...

There are a lot of things we know about history, a lot of things we think we know, but find out later we didn't know, and a lot of things that we can only guess at. I meant that there is more in the second and third than in the first.

As for VB, I was primarily kidding. I don't do a lot of Windows programming, so I haven't used it. I used some VBScript in a previous job, but not enough to get good at it. I'm sure it is a fine language, just one I haven't taken the time to learn.