Immigration and demand

Some researchers have managed to provide supporting evidence for the basic economic principle that increasing demand in excess of supply increases price.

19.21: immigrants as a share of population
17.71: 10-year percentage increase in housing prices

Keep in mind that these numbers are lower than they should be due to being artificially suppressed by the statistical artifacts of two debt-based housing crashes, as the researchers show both US and Spain showing a reverse correlation thanks to the big real estate crashes in 2008 and whenever the Spanish one took place.

Anyhow, the point is that the reason there are housing crises everywhere from Australia to the United Kingdom is immigration. It’s just one more piece of evidence that mass migration is catastrophic for a national economy.

Forgive us our debts

Jesus wasn’t just talking about sin when he told us to pray for the forgiveness of our debts. That’s one of the reasons the Pharisees hated him so much. Michael Hudson is interviewed concerning a very important trilogy of economic history he is writing:

MH: The key public concern throughout history has been to prevent debt from crippling society. That aim is what Babylonian and other third-millennium and second-millennium Near Eastern rulers recognized clearly enough, with their mathematical models. To make an ideal society you need the government to control the basic utilities — land, finance, mineral wealth, natural resources and infrastructure monopolies (including the Internet today), pharmaceuticals and health care so their basic services can be supplied at the lowest price.

All this was spelled out in the 19th century by business school analysts in the United States. Simon Patten [1852-1922] who said that public investment is the “fourth factor of production.” But its aim isn’t to make a profit for itself. Rather, it’s to lower the cost of living and of doing business, by providing basic needs either on a subsidized basis or for free. The aim was to create a low-cost society without a rentier class siphoning off unearned income and making this economic rent a hereditary burden on the economy at large. You want to prevent unearned income.

To do that, you need a concept to define economic rent as unearned and hence unnecessary income. A well-managed economy would do what Adam Smith, David Ricardo, John Stuart Mill, Marx and Veblen recommended: It would prevent a hereditary rentier class living off unearned income and increasing society’s economic overhead. It’s okay to make a profit, but not to make extractive monopoly rent, land rent or financial usury rent.

JS: Will human beings ever create such a society?

MH: If they don’t, we’re going to have a new Dark Age.

JS: That’s one thing that especially surprises me about the United States. Is it not clear to educated people here that our ruling class is fundamentally extractive and exploitative?

MH: A lot of these educated people are part of the ruling class, and simply taking their money and running. They are disinvesting, not investing in industry. They’re saying, “The financial rentier game is ending, so let’s sell everything and maybe buy a farm in New Zealand to go to when there is a big war.” So the financial elite is quite aware that they are getting rich by running the economy into the ground, and that this must end at the point where they’ve taken everything and left a debt-ridden shell behind.

JS: I guess this gets back to what you were saying: The history of economics has been expurgated from the curriculum.

MH: Once you strip away economic history and the history of economic thought, you wipe out memory of the vocabulary that people have used to criticize rent seeking and other unproductive activity. You then are in a position to redefine words and ideals along the lines that euphemize predatory and parasitic activities as if they are productive and desirable, even natural. You can rewrite history to suppress the idea that all this is the opposite of what Adam Smith and the classicaleconomists down through Marx advocated.

Today’s neoliberal wasteland is basically a reaction against the 19thcentury reformers, against the logic of classical British political economy. The hatred of Marx is ultimately the hatred of Adam Smith and John Stuart Mill, because neoliberals realize that Smith and Mill and Ricardo were all leading to Marx. He was the culmination of their free market views — a market free from rentiers and monopolists.

That was the immediate aim of socialism in the late 19thcentury. The logic of classical political economy was leading to a socialist mixed economy. In order to fight Marxism, you have to fight classical economics and erase memory of how civilization has dealt with (or failed to deal with) the debt and rent-extracting problems through the ages. The history of economic thought and the original free-market economics has to be suppressed. Today’s choice is therefore between socialism or barbarism, as Rosa Luxemburg said.

JS: Let’s consider barbarism: When I observe the neoliberal ruling class — the people who control the finance sector and the managerial class on Wall Street — I often wonder if they’re historically exceptional because they’ve gone beyond simple greed and lust for wealth. They now seek above all some barbaric and sadistic pleasure in the financial destruction and humiliation of other people. Or is this historically normal?

MH: The financial class has always lived in the short run, and you can make short-term money much quicker by asset stripping and being predatory can by being productive. Moses Finley wrote that there was not a single productive loan in all of Antiquity. That was quite an overstatement, but he was making the point that there were no productive financial markets in Antiquity. Almost all manufacturing, industry, and agriculture was self-financed. So the reader of Finley likely infers that we modern people have progressed in a fundamental way beyond Antiquity. They were characterized by the homo politicus, greedy for status. We have evolved into homo œconomicus, savvy enough to live in stable safety and comfort.

We are supposedly the beneficiaries of the revolution of industrial capitalism, as if all the predatory, polarizing, usurious lending that you had from feudal times (and before that, from Antiquity), was replaced by productive lending that finances means of production and actual economic growth.

But in reality, modern banks don’t lend money for production. They say, “That’s the job of the stock market.” Banks only lend if there’s collateral to grab. They lend against assets in place. So the result of more bank lending is to increase the price of the assets that banks lend against — on credit! This way of “wealth creation” via asset-price inflation is the opposite of real substantive progress. It enriches the narrow class of asset holders at the top of the economic pyramid.

JS: What about the stock market?

MH: The stock market no longer primarily provides money for capital investment. It has become a vehicle for bondholders and corporate raiders to borrow from banks and private funds to buy corporate stockholders, take the companies private, downsize them, break them up or strip their assets, and borrow more to buy back their stocks to create asset-price gains without increasing the economy’s tangible real asset base. So the financial sector, except for a brief period in the late 19th century, especially in Germany, has rarely financed productive growth. Financial engineering has replaced industrial engineering, just as in Antiquity creditors were asset strippers.

The one productive activity that the financial sector engaged in from the Bronze Age onward was to finance foreign trade. The original interest-bearing debt was owed by merchants to reimburse their silent partners, typically the palace or the temples, and in time wealthy individuals. But apart from financing trade – in products that were already produced – you’ve rarely had finance increase the means of production or economic growth. It’s almost always been to extract income. The income that finance extracts is at the expense of the rest of society. So the richer the financial sector is, the more austerity is imposed on the non-financial sector.

You can pick up the first book in the trilogy, …and Forgive Them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Yearat Castalia Direct.

Ensafening Wisconsin

We’re announcing tonight that undocumented folks will be eligible to receive driver’s licenses and ID cards. This makes our roads and our communities safer, and helps strengthen our economy and Wisconsin families.
– Governor Tony Evers, Wisconsin

Well, if it strengthens the economy, then it must be good. Pursuant to which I note that the Japanese economy exploded upward after it invaded Manchuria. Perhaps Governor Evers should consider that as a next step.

So much for “hard-working” immigrants

Remember how conservatives like to talk about hard-working immigrants? And how liberals like to talk about how immigrants work harder than native US citizens? Yeah, well, they’re just more lies being utilized to justify the invasion of the United States and the displacement of Americans:

More than 7-in-10 households headed by immigrants in the state of California are on taxpayer-funded welfare, a new study reveals.

The latest Census Bureau data analyzed by the Center for Immigration Studies (CIS) finds that about 72 percent of households headed by noncitizens and immigrants use one or more forms of taxpayer-funded welfare programs in California — the number one immigrant-receiving state in the U.S.

Meanwhile, only about 35 percent of households headed by native-born Americans use welfare in California.

All four states with the largest foreign-born populations, including California, have extremely high use of welfare by immigrant households. In Texas, for example, nearly 70 percent of households headed by immigrants use taxpayer-funded welfare. Meanwhile, only about 35 percent of native-born households in Texas are on welfare.

In New York and Florida, a majority of households headed by immigrants and noncitizens are on welfare. Overall, about 63 percent of immigrant households use welfare while only 35 percent of native-born households use welfare.

Mass immigration is actually WORSE than military invasion and occupation over an extended period of time. It usually costs more native lives too.

Are you joking?

Tucker Carlson demonstrates how nationalists care about their nation more than they do about maximizing corporate profits in a very public spanking of Fake American Ben Shapiro.

So would you, Tucker Carlson, be in favor of restrictions on the ability of trucking companies to use this sort of technology specifically to, you know, sort of artificially maintain the number of jobs that are available in the trucking energy?

Are you joking? In a second. In a second! In other words, if I were president and ran the DOT, Department of Transportation, we’re not letting driverless trucks on the road, period. Why? Really simple. Driving for a living is the single most common job for high school educated men in this country in all 50 states. Okay, that’s the same group whose wages have gone down by 11 percent over the past thirty years. The social cost of limiting their jobs in a ten-year span, five-year span, thirty-year span is so high that it’s not sustainable, so the greater good is protecting your citizens.

Look, capitalism is the best economic system I can think of, I think that anyone’s ever thought of, but that doesn’t mean that it’s a religion and everything about it is good. There’s no Nicene Creed of capitalism that I have to buy into, what I care about is living in a country where decent people can live happy lives, and so, no, I would say, no, are you joking?

The duty of the nation’s leaders is to strive to benefit the actual nation, not “the economy”, not the corporations, and certainly not foreigners who happen to be in possession of paperwork that permits them to live among the nationals.

Cutting off the money flow

Donald J. Trump@realDonaldTrump
We have today informed the countries of Honduras, Guatemala and El Salvador that if they allow their citizens, or others, to journey through their borders and up to the United States, with the intention of entering our country illegally, all payments made to them will STOP

Very good. Now do it to Mexico. And don’t threaten it, just do it. And did you ever notice that all of the estimates concerning the economic benefits of immigration never take into account the financial drain of the transfer payments back to the home countries of the immigrants?

Financial colonialism

The difference is that China is playing the usury card in the national interest, whereas in the West, it is customarily played against the national interest:

Chinese President Xi Jinping on Monday pledged $60 billion in financing for projects in Africa in the form of assistance, investment and loans, as China furthers efforts to link the continent’s economic prospects to its own.

Speaking to a gathering of African leaders in Beijing, Mr Xi said the figure includes $15 billion in grants, interest-free loans and concessional loans, $20 billion in credit lines, $10 billion for “development financing” and $5 billion to buy imports from Africa. In addition, he said China will encourage companies to invest at least $10 billion in Africa over the next three years.

China’s outreach to Africa aims to build trade, investment and political ties with a continent often seen as overlooked by the US and other Western nations. That has provided lucrative opportunities for Chinese businesses, while African nations are often happy to accept China’s offers that come without demands for safeguards against corruption, waste and environmental damage.

President Xi told African leaders that China’s investments on the continent have “no political strings attached”.

They don’t. What’s going to happen is that when the loans first default, they’ll be extended. When the African nations default the second time, China will take the collateral. It’s a subtle and inexpensive way to acquire material resources while posing as a benefactor instead of a predator.

James Burnham’s 1965 concerns about the retreat of the West are proving to be prophetic.

The necessity of trade war

Greg Richards explains why Trump knows the trade war must be fought, and better yet, can easily be won.

Why is this chart important?

It is a death sentence for America.

Although it is a single series of data, the chart is essentially in two parts, split in the year 2000.  There is no manipulation to achieve this effect.  This is how the data lay out, which is why this chart is so significant.

From 1968 into 2000, you see beautiful, real-world steady growth (i.e., “steady” interspersed with recessions).  The red trendline is a trendline of constant percentage growth year to year (i.e., exponential).  When you calculate it, it turns out to be 6{2f950ec02e67afe15e56ddb5018469898c7f7df1891e5cecbf34a80033d044ba} per year.  This is roughly twice GDP annual growth over the same period.  There is no specific significance to that 2X factor except that we would expect capital spending to grow faster than the economy as a whole, as, in fact, it did.

Why is this growth in capital spending important?  Even in our increasingly service-oriented economy, it is capital spending – the stock of capital equipment – that sustains our standard of living.  Healthy capital spending is critical to – really identical with – a thriving economy.  This is why the flat capital spending that America has experienced since 2000 is so grave a condition.

American Thinker readers will be surprised to learn that they are now the only people in the country, aside from this author, who have seen this chart.  I could not be more serious when I say that.

Economists do not think of capital spending in terms of real-world numbers.  They think of it as a concept in their models that self-equilibrates.  There isn’t an economist from Harvard to Stanford or anywhere in between who knows this chart.  Believe me: I have worked with these people.  If you as a reader are in business or in academe, try me out.

The only person in public life who understands this chart is Donald Trump.  I cannot say he has literally looked at it, but he understands it.

Note that we are not talking about the “creative destruction of capitalism” here.  We are not talking about no longer making buggy whips.  We are talking about the staples of a modern economy, many of which we no longer have the capital equipment to manufacture.

We were the only country to emerge from World War II stronger than when we went into it, and our relative strength at the end of World War II was immeasurable.  It became our policy, and then our unconscious attitude, to “help other countries get back on their feet.”  This attitude became a permanent part of our trade policy-making, wherein we essentially opened our markets to other countries while accepting that their markets were closed to us.

The chart shows that our ability to sustain the Lord Bountiful approach to trade ended forever in 2000, although nobody in power saw it until Donald Trump came along in 2016.

If one looks at debt growth, one will actually achieve a deeper understanding, but this will do for non-economists. The most important part of the article is this section, which I have been trying to explain to people in multiple venues with varying degrees of success:

Economists think mercantilism can never work, thus Trump attacking it as practiced by China is a fool’s errand or worse.  This is based on the early 19th-century Theory of Comparative Advantage developed by David Ricardo.  It states that among trading parties, even if one party’s production costs are greater in all goods than the other party’s, the first party should focus on those goods where it has a comparative advantage – i.e., where its own cost of production is lower.  If the two countries then trade, both will improve their welfare.  If, under these conditions, a country practices mercantilism, it impoverishes itself.  This is a substantial insight.

But it depends on a key assumption: that capital is fixed.  Ricardo’s example was that the British should raise sheep and the French should make wine, and they should trade these goods with each other.  The example was based on climate, the ultimate in fixed capital.

With capital mobile, as it is now, mercantilism works.  By forcing a trading partner to move its assets, technology, know-how, intellectual property, and R&D to the mercantilist country in order to participate in its market, a country can build itself up at the expense of its trading partner.  Following its accession to the WTO, China has been strip-mining the U.S. economy of high value-added industries and high-wage jobs by doing this.

The USA can only benefit from a trade war. That, of course, is why everyone around the world is freaking out. The genie is out of the bottle and it is becoming more and more apparent to everyone that the economic foundation for the globalist world order has not only failed, but was built on intellectual sand from the very start.

No one knows anything (G edition)

The core problem with macroeconomics is that it is an abstraction piled upon fiction which is then used to set policies with material consequences. As I addressed in no little detail in The Return of the Great Depression, the margin of error observably involved in the reporting of economic statistics is greater than that required to know something as basic as if the economy is growing or contracting. That is why it matters very much indeed that over half of the government’s spending data is wrong:

A new bipartisan Senate report revealed more than half of the government’s public data on federal spending is wrong, as the website is riddled with errors.

The Permanent Subcommittee on Investigations, led by chairman Rob Portman (R., Ohio) and ranking member Tom Carper (D., Del.), released a report Tuesday finding nearly every agency is failing to accurately report its spending as required by federal law.

The subcommittee reviewed over two dozen inspector general reports and determined 55 percent of the spending data submitted to was inaccurate. The errors accounted for $240 billion in spending during the second quarter of 2017, according to the report.

The Digital Accountability and Transparency Act of 2014, or DATA Act, required federal spending to be easily accessible to the public through a searchable website, which became The website was revamped earlier this year, but agencies are not meeting their requirements to submit accurate, consistent, and reliable data on its spending.

The agency in charge of—the Treasury Department—is among the worst culprits, as 96 percent of its own data is inaccurate.

To put this in perspective, $240 billion amounts to 1.3 percent of the $18.6 trillion US GDP. Since it was reported that GDP grew 3.1 percent in the first quarter of 2018 compared to the previous quarter, that means that actual GDP growth was either 4.4 or 1.8 percent that quarter, depending upon which way the error lies.

And since the last two quarters growth are reported at 0.7 and 0.5 percent, these government spending errors may mean that the US economy is already in a statistically hidden recession.

It’s now the G6

The God-Emperor is refusing to play the neo-liberals free trade game for suckers:

President Trump retracted his endorsement of the final statement from the G7, tweeting afterward he had instructed representatives “not to endorse” it. He blamed Canadian Prime Minister Justin Trudeau’s statement afterward that Canada will not be “pushed around” and will go through with retaliatory tariffs.

Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!
— Donald J. Trump (@realDonaldTrump) June 9, 2018

Seeing Trump cut off the heads of global government one organization at a time is like watching Hercules kill the Lernean Hydra, but on a grand scale. I just hope he’s remembering to cauterize the necks.