December 2008 - Posts
In 1940 the Wehrmacht was the most successful army on Earth. Nazi Germany's insane leadership had hijacked their nation's professional military and sent them on a rampage across Europe. Prior to their failed invasion of Britain, which rested on the backs of the Luftwaffe, they had tasted only success. Part of this unprecedented run was because they were fighting against the French, and the French haven't won a major battle since before Waterloo. But they fought against the Poles, Belgians, Danes, Czechs, and Dutch, also, and met much stiffer resistance. Still, their mechanized infantry, combined with a lethal assault from above ,rendered the military answer of their foes quickly moot. A charge of heavy Polish cavalry against panzers is the last recorded used of organized cavalry in modern warefare. It was all they had. Even the British Expeditionary Force was no match for this new kind of Blitzkrieg warfare.
There are a variety of reasons that the Germans ultimately failed, starting with a political structure that was as evil as Satan himself. A megalomaniacal, paranoid dictator with delusions of diety didn't help either. But the regular German military man remained effective and ferocious right up to the end. Arguably the best sheer land-fighters of all time, in fact. Which is why the success of the Americans against the Germans on the ground is a bit difficult to understand. Their soldiers were seasoned, well-trained, and by all accounts, incredibly brave. Their equipment was for the most part, technologically superior. Their aircraft were second to none. American tanks were almost paltry by comparison. Yet in every meeting the Yanks advanced steadily against their debatably, militarily superior adversaries. Why?
In World War I, the machinegun entered the battlefield and everything changed. The old strategies disintegrated and hundreds of thousands of bright-eyed youths paid the price of foolish generals who sent them in human waves over the trenches and helplessly to die in no-man's land. By World War II these lessons had been learned and strategies changed. All but one. In World War II, in the Wermacht, the infantry man supported the heavy machine gun. The ground tactics of advance, capture, and hold, were based on squad units supporting heavy machine guns. The Americans on the other hand, had developed tactics in which heavy machine guns supported infantry. The difference is subtle and not immediately apparent, but the American tactical development allowed faster, more fluid movement as well as much quicker adjustment to changing battlefield conditions. So while German soldiers dug in around their MG42s and MG34s, fast moving Americans infantry, supported by their Browning Model 1919s, (still in use today, virtually unchanged, I might add) flanked and neutralized the German positions which were incapable of rapid adjustment. This isn't the only reason that the Americans prevailed, but it is an often overlooked and always underestimated effect.
So why are we supporting heavy machineguns, now?
There is a problem with the American economy. A huge problem. Multiple problems, in fact. There are root causes for this, but at the center of this root ball I believe is a central seed from which the mess has grown. Support of the heavy machinegun. There was a time, I believe, when industry supported the American worker. And industry, in this sense, is not a legal definition, but a person, because decisions are ultimately made by people - or once were. People who owned industrial concerns used the influx of capitol we known as stocks, to fuel business growth which in turn supported the community. And this means, supporting the individuals in the community. The people. Industry supported the workers. This doesn't mean that everyone got rich, but the central focus wasn't necessarily on acquiring individual wealth - or at least it wasn't the only focus as it has become today. Greed. The same thing that drove Hitler to crave every inch of Europe. Pure, unbridled, unadulterated, unmitigated, greed.
Fast forward to 2008. The support of the worker, by industry, is gone. The disappearance of American jobs is the most telling evidence and trumps any and all arguments against this assertion. It is now the worker that supports industry. Labor that fuels lives of almost unimaginable avarice. The difference is subtle, just as it was on the battlefields of Europe sixty years ago. But this time around it is the Americans who are getting their asses kicked. It is all about direction of flow. Emphasis of investment. Choices that benefit community as opposed to bottom line. Because in the end, if the community dies, the bottom line is meaningless. Work in America is no longer an activity, it is a state of being into which one is born and in which they usually die. Can everyone become successful and wealthy? No. But when the incentive of success and wealth is removed, or becomes nearly imporssible to attain without subterfuge, the engine that drives the American economy dies with it.
President-elect Obama's plan for fixing the economy is for the Middle Class to stop saving their money and resume buying crap they don't need by borrowing money they don't have. This isn't a slap against the president elect because it is the same plan on the other side of the aisle. The only difference between the two parties driving our nation into the ground is how to get the 'country' involved. But I say the entire scenario is backward. The entire economy is backward. The solution isn't to get people to behave foolishly so the coffers of business owners will fill up again, it is getting capitol and opportunity back into the hands of the infantry. In nature, forces don't act from low potential towards high potential. Rocks don't fall up. Water doesn't run uphill. Air doesn't move from low to high pressure. And money won't flow, at least for long, from poor to rich. And giving more ammunition to the machinegunners while leaving the infantry to throw rocks isn't going to get us very far.
Tell me the infantry isn't supporting the machinegun. Tell me it isn't all about greed.
NEXT: Why They Won't Listen
-Futbol Guru, http://mises.org/Community/blogs/not-a-lemming
My grandmother grew up in Mississippi during the Great Depression. Life for her must have been unimaginably difficult compared to the ease we enjoy today, even with the economy like it is. She knew how to can food, grow a garden, fix things, and generally live on a lot less. She expected less out of life and was frugal, saving her money for a rainy day. On the flip side she was crazy. The privation during her childhood forever altered the way she viewed the world. To her dying day she sent us food for Christmas and birthdays. If you didn't clean your plate at dinner time you could expect to sit there for a long, long time. While she picked up some good habits during the Great Depression she never engaged with a healthy economy so was never able to enjoy life.
Jump forward seventy years.
"We have to get American's engaged back into this economy." A quote from our president-elect and mirrored a million times over the weekend in every paper across the nation.
Right now people are in survival mode. Like my grandmother, they are saving their money for a rainy day. And right now, it's raining. To understand why we're not buying a lot is actually pretty easy. We like to eat, we like to have a place to live, and we like to wear clothes. The necessities trump just about everything else. In essence, we fear a more dramatic disruption in the flow of money, and if it happens, we want to have a little set aside, and we want to have lower obligations. To make us feel better about it, and get us re-engaged, the government has taken $750 billion of our tax player dollars and handed it over without strings or accountability, to banks - the very institutions that got us in this situation in the first place. (Just this weekend, when asked how they were spending their free billions, J.P.Morgan/Chase said they will provide no public statements on how they are spending our money.)
So where are we:
1) The economy is in bad shape
2) People fear job loss so are saving their money and only buying what they need
3) To make us feel better the government has given $750 billion tax dollars to banks.
4) We are supposed to start borrowing money and spending it so the economy will revive.
Am I the only one who thinks this is the craziest thing I've ever seen? I fear my job being lost so I'm saving my pennies and only spending on the necessities. But the government wants me to stop saving and start buying crap that I don't need. And to make me feel better about this they've given $750 billion to the banks!
Suppose I borrow $20,000 from a local bank to purchase a car. I really don't need a car. The one I have works well enough. It isn't new and I just got done replacing the wheel bearings in my drive way in forty degree weather - not as much fun in your forties as when you were in your twenties. But the car's fixed now. However, that commercial with the new car just has me feeling like I'm less of a man without that horsepower. So I take the plunge. Two months later my job dries up and I'm sitting without a paycheck and precious little reserves. How many months will the bank allow me to default on that new car loan before they come get the car? Am I stupid enough to believe someone will step in to cover my bad loan? There will be no bailout for the consumer who's being begged to jumpstart the economy, while untold amounts from the bailout are going into six and seven figure Christmas bonuses for failed bank executives.
This plan is so crazy it is hard to believe that our leaders can be stupid enough to believe it will work. But the fact of the matter is, they know it won't work. And they don't care that it won't work. The truth is, they are horrified. And this is what they are horrified of: Our political system has stupidly sided with an import-driven, consumer-based economy because it is the easiest and fastest way to get rich. A consumer-based economy is driven by people buying things. But by buying only what you need economic growth is extremely limited. Only by getting people to buy crap they don't need, can a consumer-based economy grow. And right now, people aren't buying crap they don't need. (Yes, I'm repeating this phrase on purpose.) What the politicians, and banks, and business owners, and the rest of the wealthy-thieves* fear is that we will realize we don't need all that crap they've been shoveling down our throats. In fact, in most cases we're actually happier without it. Yes, a new iPod is nice, but listening to that iPod when you have $20,000 of consumer debt hanging over your head sort of mitigates the listening experience.
That is what the politicians are afraid of, another generation of people like my Grandmother. They're afraid we'll decide a simpler life is better. Or that fixing a car in the driveway has it's merits. Or that five hundred square feet per person is enough. That is what they are whispering in their closed-door sessions. The longer people don't buy the crap they don't need, the more they're going to realize they don't need it. And then...
*Wealthy Thieves - those who gain wealth through exploitation as opposed to those who gain wealth through innovation, capitalization, and value added.
NEXT: Why The Gravy Train Must Go On
-Futbol Guru, http://mises.org/Community/blogs/not-a-lemming
The popular figure for the ‘bail out’ plan is $750 billion. This doesn’t include a proposed multi-billion dollar bailout of the auto industry. Bank failure, it is said, is the root cause of our economic woes. Lack of access to credit. I disagree. We have a consumer based economy so if there is a problem with the economy it is because money is either inaccessible to the middle class, or in threat of disruption. For this reason, the middle class is not purchasing goods and services resulting in a negative feedback condition which causes economic contraction. It is NOT access to credit. If one’s flow of money is in question – in other words you’ve lost your job or feel you might – you certainly aren’t going to go looking for a loan. Indeed, most banks are using their government money to buy failing banks thereby enriching the incompetent bank managers who brought their businesses to ruin in the first place.
As stated previously, the United States has a consumer-based economy wherein money flows from producer to consumer and back to producer. If, for whatever reason, consumers stop consuming, the flow of money slows and jobs shrivel. Giving money to banks isn’t going to stop this. The only thing that is going to stop it is getting cash – not loans – into the hands of consumers.
Bailing out the banks, and I use the term ‘bank’ to include a variety of investment firms, will do only one thing: allow ‘banks’ to give their usual six and seven figure Christmas bonuses and take jaunts to expensive resorts. It will have zero effect on the average middle class citizen whose purchasing drives our economy. And, I might add, with potentially $750 billion in tax-payer funds for the taking, if I was running a bank, I’d make sure it appeared to be on the verge of collapse.
But there is an alternate solution. Instead of giving $billions to people who have already demonstrated that they aren’t responsible or competent stewards, why not give it to the people who have proven they are? It isn’t easy raising a family of five on $150,000 a year. Or $100,000 a year. Or $50,000 a year. But there are people who do it all the time AND make their mortgage payment every month. That is responsibility and resourcefulness! The millions of Americans who start life with nothing, don’t buy more than they need, and somehow manage to stay in the black and raise productive kids have demonstrated that they can manage money better than any Harvard educated banker, while at the same time proving they are not driven by greed. If the current state of affairs isn’t enough to make this an axiom, I have two words: Bernard Madoff.
I conservatively estimate there are 10,000,000 non-wealthy, responsible families in the United States who have served their nation well for years by raising good kids and being productive, tax-paying, law-abiding citizens. Using the $750 billion bailout figure this translates to $75,000 per family with an average of 200,000 families in each state. Give these people the money. For starters, $75k isn’t enough to make anyone rich. It’s a nice chunk but rich? Uh-uh. No doubt a significant fraction of families would spend part of it on home improvement increasing the value of their prime asset and flowing money into the economy thereby generating an instant economic boost. A percentage would upgrade their vehicles instantly sparking recovery in the auto industry. Some might use the money as a down payment on new homes. A percentage would go into luxury items helping our consumer-based economy. But I am convinced that the bulk would wind up in bank accounts as college funds, retirement money, and other investments. Exactly where it needs to be to prop up the wealthier but far less resourceful, irresponsible, and unethical segment of our society. You may say, “You can’t just give money to people!” To which I would reply, “Seven hundred and fifty billion dollars is sure as hell going to someone.” Because in five years we're going to look around and ask were the money went, and the new ultra-wealthy who stole it from us aren't going to say a damn thing.
So, Mr. Obama: You said, “All my economic programs will be focused on the middle class.” This is a direct quote that I heard with my own ears. Time to put our money where your mouth is.
NEXT: Getting Americans Back Into the Economy
-Futbol Guru, http://mises.org/Community/blogs/not-a-lemming
I work in the defense industry. As many may know this industry is funded by the government, which means the money comes from tax-payer dollars. Many towns and cities across this nation survive and in some cases thrive off of these tax dollars. Some people get really, really rich and our military is second to none.
Regardless of ones feelings on this subject, it should come as a comfort that the government keeps pretty close track of this funding. Are there abuses? Certainly. And there is even fraud. But for the most part, a strict accounting system set in place by Federal Law ensures that the government’s money, your taxes and mine, are actually going to produce something, even if that something is pork. At my company we have weekly meetings on virtually every program where government employees charged with tracking spending do exactly that. Individual sessions are even more frequent. By and large the government people are polite and professional, our program managers are kind and professional, and everything slides along in greased grooves.
So what the hell is going on with the bailout? $750,000,000,000 has simply been handed over to banks with zero accountability. 14% of our Gross National Product. 14 cents of every dollar you spent this year. There are no auditors. No accounting. Not even any agency with oversight on how the money is spent. That’s 44 times larger than NASA’s budget request for next year. One and-a-half times larger than the entire military. Army, Navy, Air Force, and Marines, tanks, ships, planes, submarines, salaries, wars, etc. Everything it takes to run the military, including the money that goes to slimy contractors for R&D. With virtually no debate, and no control over how the money will be spent, or even the authority to ask, 14% of our GNP was transferred to banks; the same banks that hit you with a $50 fee for bouncing a check then repossess your car for missing a payment. I would sum this up in a single sentence but it would include the words ‘revolution’ and ‘violent overthrow’ and that would be against the law.
Tomorrow: A Reasonable Solution for the Problem We Have.
Futbol Guru, http://mises.org/Community/blogs/not-a-lemming