False advocacy fallacy

The false advocacy fallacy occurs when an argument in support of a conclusion is taken to mean advocacy for that conclusion. I don't know if this fallacy is one that has been previously described, but I could not find a similar one.

At it's simplest it can be described as

P(c) → Q(c)

where P(c) means an argument in favor of c and Q(c) is an advocacy for c. However we can show it is really invalidated by usage of the intentionality fallacy, which is the conclusion that an argument can be invalidated based on the intentions of the speaker. It can be represented as a hasty generalization, which is

S(a) → A(a) 

Let's read this as some people do the action a, therefore all people do a. In this case the action is never allowing oneself to argue against their intended conclusion. If we reduce the some to just one, then it becomes a matter of psychological projection.

I(a) → A(a)

I do a, so everyone does a. "No one would make an argument that weakens the case for the conclusion they prefer, because I wouldn't do that." Putting that together, we get the entire propositional logic of the fallacy.

P(c) ^ ( I(a) → A(a) ) → Q(c)

Read this as "the person made an argument supporting a, and because I would never argue against a conclusion I was advocating for, thus no one does that, it means the person is advocating for c."

One thing you'll notice is that the false advocacy will often be used in conjunction with yet another intentionality fallacy in an attempt to invalidate the speaker. "If you argue in support of c, you advocate for c. If you advocate for c, then your arguments in favor of c can't be trusted, so your argument is invalid." This chain of logic I would dub something like the universal nullification fallacy, because if it was sound, it would mean that any argument for any conclusion would be inherently invalid.

Example 1

Although I am not anti-abortion, for reasons stated in previous posts, I tend to find myself arguing against pro-abortion people online because the arguments used to support abortion are usually error-riddled. Even more erroneous are their arguments used to discredit pro-lifers. Immediately I get labeled as a Bible-thumping zealot, even though I don't take an anti-abortion stance and don't practice as a Christian. 

The pro-choice crowd set up this lovely bubble around themselves. "Anyone who argues against me is a hateful religious nut, so their arguments can be easily dismissed."

Example 2

I was having a debate related to Trump on facebook with liberal friend A, who was challenging some post I had made. I stood firmly by my stance and argued in defense of it. At some point liberal friend B chimed in that while he doesn't like Trump in general, in this particular argument he believed I had the correct stance. B is one I frequency debate with on facebook and we are able to get into the weeds on things without getting upset. After he sided with me, I made a concession on the issue, with the intent of showing that I could understand why a person would take up the opposing issue.

A took that as an opportunity to leverage against me, and I went back to defending my original premise. A then got frustrated, said I was constantly changing my stance, and stopped participating.

This was the advocacy fallacy in action. To A it wasn't that I was providing nuanced argument (which I felt comfortable doing after B joined in). To A, I was actually switching my advocacy away from my original stance when I made the concession, and then when I again defended my original stance, it meant I had switched back again.

A probably never makes arguments against the preferred conclusion. In hindsight I probably should have seen it coming and could have prevented a friend from getting frustrated. A was doing what so many people do. When they make an argument that I successfully counter, they will never admit that the argument was lost, but shift the goalposts. So if they say Trump is a racist and you provide compelling evidence he isn't, they won't say, "maybe you're right." They'll say, "well he's unqualified." Basically changing the subject entirely. I encounter this over and over.

In my conversation, perhaps intuitively I knew not to make concessions with a person who was not making their own. It wasn't until B joined in that the dynamic was changed in a way that frustrated A. Something to keep in mind is that while everyone says the want people they debate with to be capable of nuanced discussion, those who fall pray to the advocacy fallacy (which is quite common) will actually become annoyed with those who can make any sort of concession without changing their conclusion.

Countries are banning spanking

France passed a national law banning the spanking of children. It is the 52nd country to do so. Spanking is certainly a difficult subject to have any nuanced discussion about. People tend to be strongly one one way or the other. By seeking middle ground you'll end up finding both sides angry at you. But it is possible to have two opinions on a matter: an ideological stance and a pragmatic stance. To the former I am opposed to bans on spanking, but I understand that pragmatically the benefits may outweigh the downsides. I'll look at both angles in turn.

Ideological argument

I condone spanking, but I don't encourage it. I am quite a fan of Stefan Molyneux and his Peaceful Parenting methodology. That means no hitting, no restraining, no yelling. He takes a zero-tolerance to those things. I respect that, but I see it as an ideal, something to strive for. I think parents should always have Peaceful Parenting in mind, and when they violate it, they should do so out of reason and not emotion. I would recommend a parent never violate Peaceful Parenting when they are frustrated or angry because they will go too far, and typically end up regretting it.

The law bans the infliction of physical pain. But pain can also be emotional. Should there also be a ban against inflicting emotional pain on your child? How would you even legislate that? And emotional pain, I would argue, is not nearly as damaging as inflicting guilt, shame, self-hatred, and any number of emotional issues that bad parenting can cause. And I go so far as to argue that inflicting minor amounts of pain on another person, in general, is neither good nor bad.

The amygdala is considered to be the emotional center of the brain. It triggers fear and emotional pain. The amygdala receives inputs from all over the brain, and matches for patterns that previously caused negative outcomes. Phobias are rooted in the amygdala. For instance, for most of my early childhood I was terribly afraid of dogs. I later found out that when I was a toddler a dog had jumped me and knocked me to the ground (not in an hostile manner). Later, as a young child, I was afraid of dogs, even though I had no conscious memory of the bad encounter. That was the amygdala. It operates at a subconscious level. It is why we can't consciously control our phobias. Most people are afraid of public speaking, and have learned that no amount of positive self-talk helps overcome the anxiety. Only by gradually exposing oneself to speaking, in ways that don't lead to disaster, can one train their amygdala to stop triggering anxiety in these situations.

This makes the amygdala sound like it serves a very negative role, but remember it exists to keep you safe in the way that physical pain keeps you safe. Physical pain causes us to avoid harming the body. The amygdala causes us to avoid dangerous circumstances. It may sometimes feel like an outdated function in a world where saber-toothed tigers don't lurk behind every tree and human tribes don't exist in perpetual states of warfare, but still it serves a vital role.

Amygdala development is absolutely necessary for proper emotional function. It may seem intuitive that a weakly developed amygdala would be, well, weak, and inactive. That might actually be a benefit in our very safe society, where fear reactions tend to be unwanted. But in actuality a poorly developed amygdala is overactive. Unable to discern subtle differences between safe and dangerous circumstances, it tends to fire when in doubt. A paranoid or neurotic person is someone who's amygdala function is so overreactive that it has learned to fear the amygdala itself. Most people who are afraid of public speaking are more afraid of getting uncontrollably nervous in front of a crowd than they are that they'll say something very awful. The unhealthy amygdala becomes a positive feedback loop. On the other hand a healthy amygdala is able to discern nuances of danger and can react proportionally.

Pain is what develops the amygdala. Pain teaches children how to walk. A one-year old falls all the time, and gets hurt. They learn to behave in a way that reduces the risk of injury. They are guided by emotional pain too. My 3-year-old can be incredibly sensitive. Even mild rebukes may devastate her. There is an evolutionary reason for this. The child is primed to receive feedback from her parents to train her amygdala. We evolved in an environment where if children didn't learn quickly from their parents, they didn't survive. Thus children are very sensitive to physical and emotional pain. This is the amygdala in training mode. Without any pain inputs it will not develop well. I read of a study a while back which determined that children of nagging mothers had better outcomes. It's counterintuitive, but those mothers were constantly training their children. To this day I can't stand to put my elbows on the table. My mother always rebuked me when I did, and that habit has persisted.

The problem with banning spanking is that it is a form of pain input. We hope that it never comes to spanking, and rarely when it does, but sometimes it does. I have trouble believing that the people opposed to spanking never cause any sort of pain to their children. Never a rebuke or a firm grasp to get their attention? If they don't, they are doing their child a tremendous disservice. Sparing your child the training they need because it makes you feel bad to inflict pain is narcissistic parenting. You are more worried about your feelings than the child's best outcomes. Parenting is dirty business. You have to deal with all kinds of body fluids and sometimes you have to make your kid cry. No one likes doing either one, but it's what loving parents do.

I have to say that I think the law is a reflection of two larger trends I see in society that I don't like. One is the reaction against all social hierarchy. Many have the conviction that all hierarchies are oppressive, and seek to dismantle them wherever they are found. They promote equality everywhere, even between parents and children. They seek to remove authority of the parent over the child, and what is more authoritarian than corporal punishment? But still, well-meaning though they may be, I think they are putting a social agenda before the child's best interests.

Second, there is the growing conviction that every social ill can be solved through education. In Europe, where migrant rape is rampant, the solution offered is more education. Apparently migrants simply don't know rape is frowned upon in Western society. We also see this constantly in how the left addresses conservatives: they call them ignorant. If only conservatives were more informed they'd come to the proper political conclusions. I fear this mindset is now being applied to parenting. The dogma is that when a child misbehaves, we must calmly explain why they were wrong, and the child will understand and correct the behavior, with no need for any pain or negative emotions. Of course it is the preferred approach if it will work. But it can't work all the time. The amygdala must be developed as well. If the amygdala is weak, no amount of reason will correct the behavior of an unruly child.

Pragmatic argument

With all that said, a ban may be beneficial because many parents who spank do so in an abusive or harmful manner. I don't know how prevalent it is, and I don't think anyone really does. The legislation is based on studies that show children who are spanked are more likely to exhibit all sorts of antisocial behaviors. But that is only a correlation. It may very well be that children who behave poorly require more spanking, because the child is under poor parenting to begin with, or because of the inherent nature of the child. It's really tough to say. 

Certainly bad and abusive parenting will cause lifelong damage. We all see it, and we hate it. On the other hand, when the government starts reducing parents' ability to train their children using pain input, they limit the tools at the disposal of good parents. There's a slippery slope. Will yelling at kids be banned? Stern voices? What about restraining, or rough handling? What about handling that's not particularly rough but not very soft either? I would suspect that a particularly malicious parent will find ways around any laws applied to them. It may very well be that the law reduces violence against children that damages them, but it may also be that weakening parental authority will cause even more negative outcomes. I'm not sure if studies can even be devised to isolate all the complexities of the issue. So while I concede the bans may be pragmatically beneficial, it is the burden of the state to effectively make that case before they start impeding parental behavior, and I'm not convinced they have done so.

The government must run a deficit

In my previous posts in describing the economy from a viewpoint of Modern Monetary Theory, I have stated that money only has value because it must be used to pay taxes. In this description, the government spends all "high-value" money into existence, and the banks leverage some of the surplus to create bank credit. This would seem to make the government the issuer of currency, and the banks users.

But actually it is the central bank that issues the currency, and the government is merely a user. The government can be thought of as a corporate entity with some special privileges. From an economics perspective it behaves like any company. It borrows money to spend, and it repays the loans from the revenues it generates. Rather than selling a product or service it has the power to take money from the economy in any manner it sees fit, but ultimately it's just a revenue. The only difference from a financial perspective is that corporate entities must pay back more money than they borrowed. The government does not have this requirement, and in fact it wouldn't be possible.

Let's look at how the money is circulated.

Lifecycle of fiat money

The lifecycle proceeds like this:

1. The central bank buys a bond from a borrower. The bank holds the bond, and in return the borrower gets money. The money didn't come from anywhere, it was just created. The bond has value because someone is legally obligated to repay it. The money has value because someone is willing to exchange good & services to repay the bond.
2. The borrower spends the money, and it goes into general circulation in the economy.
3. The borrower gathers money back out of the economy. Citizen borrowers do so by trading out goods & services in return for money. The government does so by simply taking it.
4. The money is returned to the central bank, and the money and the bond annihilate one another like matter and anti-matter.

Look at just the banks loans cycle. Because loans are always repaid with interest, the collections inflow will be larger than the capital outflow. By lending at interest the central bank removes money from the economy. Well where did that money come from? The only way it is possible is if the government is putting in more money that it is taking out. That is: it is running at a deficit. If the government ran a balanced budget, the banks would suck money out of the economy and cause deflation. Thus a balanced budget is actually a deficit where the government overspends by an amount equal to what is returned to it by the central bank. (The regional central banks return 6% of their profits to the banks and give the rest to the government.) 

I'm not sure if the central bank refund is calculated into the federal budget or not. I assume it is, and I'll update here when I find out for sure.

The Wall is not a change in policy

Common Beliefs of the Wallophobe

A number of acquaintances of mine stand strongly against The Wall. They find it to be inhumane towards the people that strive to enter our country for a better life and as a poor symbol for America. I saw on facebook today that the proposed wall is analogous to the heavily fortified walls that separated East and West Germany. The core difference between the two is that traditional border walls are meant to limit the movement of outsiders, whereas the Berlin Wall was meant to limit the movement of its own citizens. To keep them contained within the harsh conditions of the Iron Curtain.

The US legal system generally does not limit the movement of its citizens. To build a wall in the East German style, to prevent citizens from exiting the country, would require a change in policy. We would have to outlaw leaving the country for such a wall to be legally justifiable. On the other hand, the US does limit the movement of people who are not legal residents. You must be granted permission, one way or another, to enter. To build The Wall requires no change in immigration policy; it is meant to enforce the laws already on the books. There currently exist numerous enforcement mechanisms. There are already physical barriers in place at some points. If you try to enter the country at an airport you will be met with barriers and armed guards at customs.

The Wall is intended as a tool of enforcement for the policy in place. If you are presented with a Wallophobe, you might point out that they really only have two options: (1) the wish for current immigration laws to continue to go unenforced, or (2) the wish to repeal legal statutes that outlaw the entry of non-residents. In this particular case, the Wallophobe responded that he did not oppose the immigration laws, just The Wall (and other structures) as a tool of enforcement. Okay so there's actually a third option then. And I suspect that it is the mostly widely help stance of Wallophobes. They're not against enforcement altogether, but believe The Wall is inhumane and a bad symbol for America. Fair enough, let's take that apart a little.

Tools of Immigration Enforcement

Broadly there are three classes of enforcement mechanisms for immigration laws in response to someone who has determined to enter the country illegally.

Preventative

Preventative measures physically discourage or prevent the act of entry. Physical barriers such as walls are one technique. Also posting armed guards at the border will detract would-be aliens, under threat of lethal force. That is, instead of building a wall to block movement, we say, "If we see you crossing the border we will kill you." 

Extractive

Extractive measures deal with physically removing an illegal alien from the country. This is always done by armed men* authorized to use whatever amount of force is necessary.

Punitive

Punitive measures are meant to act as a deterrent to entry in the first place, and to detain those who won't be kept out by other available means. Punitive measures may include being killed, beaten, or tortured if discovered, but that is not permissible in the US. In our country, punishment always ultimately means being locked into prison. 

The least humane option

As far as I can tell, those are the major tools of immigration enforcement available to us. If I have missed some, please let me know. Ideally the laws are strongly enforced, and we rely on all 3 tiers of enforcement. Preventative measures reduce the inflow, extractive measures reduce those who manage to get through, and punitive measures are used to address repeat offenders or those who commit additional crimes.

What happens when barriers are removed? Then the only remaining preventative measure is armed guards. We'll just line the border with guards and shoot whoever dares to cross. Now I'm going to go out on a limb here and assume that anyone who sees a wall as inhumane and a bad symbol is going to be similarly opposed to border patrolmen with rifles ready to fire on all intruders. So we are left with no preventative measures.

If someone is opposed to using a wall to restrain the movement of foreigners just for crossing an imaginary border, they must also be opposed to restraining them with prison walls for the same offence. Thus we are left with no means of punitive responses.

That leaves us only with extractive measures, of which there is only one: forced removal. Anyone opposed to to physical structures as a tool of immigration policy must also in favor of increasing the number of people who cross and the amount of physical force that must be applied to remove them. It would seem that eliminating barricades is the least humane enforcement option.

But really, I don't think anyone who thinks walls are inhumane is going to advocate for more Elian Gonzalez style extractions. They say they support the enforcement of immigration laws, but they reject all enforcement mechanisms. So they don't really support the policy. There is no third option after all. They must either reject the policy, or reject enforcement of the policy. But rejection of enforcement is really just rejection of the policy. 

This does not mean that enforcement always requires a wall. A wall is required whenever a wall is required. We have up to 30 million data points indicating that a southern wall is needed. If there were 30 illegal Canadians here then that would suggest the need for a northern wall. We have not invalidated cost-benefit analyses that might apply.

Deterrents

The above described the available immigration enforcement. Once you ask a Wallophobe what enforcement they would choose, they will not be able to provide any. Because like I said, the wall is the most humane mechanism. If you're opposed to that, you're opposed to them all. They will however offer up alternative solutions, that amount to deterring people from immigration in the first place. Let's look generally at what deterrents could be.

Immigration enforcement

Everything we've mentioned so far. If effective, it should deter most immigrants in the first place.

Removal of welfare

This is so obvious it shouldn't have to be stated. There should never ever ever be direct wealth transfers from citizens to illegal aliens, and is a direct violation of my first law of immigration theory: you cannot have open border and a welfare state. This isn't just meant to snub immigrants. There is no faster way to destroy a country than to institute this policy. If your philosophy is "well some foreigners are destitute so we should all be" then that should be your preferred policy. Enjoy the ensuing social and economic collapse.

Removal of services

We might further deny any public services to illegal immigrants, to the extreme of denying police protection. Basically it removes all advantages of entering in the first place. Some of these laws exist. For instance, it is illegal for a business to hire illegals, but this isn't greatly enforced.

Enriching the source nation

This is the one Wallophobes will actually suggest. If we just transfer enough wealth to them, they won't want to immigrate in the first place! Or more cynically put, if we just make our country shitty enough, no Mexicans will want to come here. I call this the Obama Doctrine. 

It's just a racket. It means that a nation of people can't work hard and build up wealth, because all other people are entitled to it. It's like me saying to a rich person, you need to pay to fix up my house or I'm gonna come live in yours.

Conclusions

• The wall is not a change of policy
• The wall is the most humane form of policy enforcement we have available
• If you oppose the wall, you oppose the current immigration policy

* men in the gender-neutral sense, of course

Global reserve currency: army of the modern empire

The post MMT and the US Economy asked what the benefit was of being host to the world's reserve currency. Let's examine that a bit.

USD for Foreign National Currencies

Several countries use the US dollar as a national currency. Typically this happens when a currency fails and the people don't trust the state to issue a new one. By using the dollar they can bring relative stability to their own economies, and know they'll be able to conduct international trade. The tradeoff is the country loses the benefits of a sovereign currency. It has little control over the varying value of the dollar, and cannot inflate its way out of debt (which may actually be a long-term benefit).

Are there benefits to the host country when their currency is adopted by a foreign state? A nation switching to the dollar should increase the demand for dollars. The value of the dollar reflects the value of the economy divided by the size of the money supply. When a nation adopts a currency they are effectively adding themselves to the numerator of the equation. To prevent deflation, the host government must increase the money supply. They can only do this by increasing spending, which increases the interest paid due to bond financing. Effectively, the host country pays a tax whenever their currency is adopted by a foreign country.

This gives an insight into another benefit for the foreigners. They get to use a stable, liquid, fiat currency without the costs of overhead! But, they must acquire the currency somehow, and the only way to do that is to sell goods and services to currency holders. They are buying their monetary system instead of renting it. The downside would be if the country had to sell productive capital to make the acquisition, which would set back their economic growth.

By paying for the money supply up front, they make a one-time transfer of wealth to the host country. Any time they wish to increase the money supply they must transfer wealth to the host country. At any time they can import wealth by "selling" currency. Each participant has some amount of control over the other. The foreign state can extract wealth from the host by selling dollars. However, the host country can counter by inflating the hell out of the currency, or by destroying it entirely.

USD for International Trade

The US dollar is the de facto reserve currency of international trade, accounting for 64% of the world's foreign exchange reserves. (Down from a peak of 71% at the turn of the century). This amounts to over 4 trillion dollars. Remember the US has to pay finance interest on all those reserves. Oil is almost exclusively traded in dollars, giving lend to the term petrodollar. Being the holder of the global currency makes it easy for US companies to do global business. An advantage cited in Wikipedia is

the world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year

I don't follow the claim, and their source offers no explanation. From an MMT perspective providing the liquidity needed to allow vast sums of overseas foreign exchange reserves denominated in USD doesn't mean that it's easier for the government to borrow but that it must borrow. Or more precisely, it must issue debt. Remember the government doesn't "borrow" dollars. It doesn't need to collect dollars to fund its operations. Here is another source stating that the reserve status means more liquidity which allows easier access to capital for US firms. Again I'm confused. Doesn't dragging currency out of the country imply less liquidity? It might be the case that it allows US firms easier access to foreign capital, but that distinction is never made.

The argument that the interest rate is lowered doesn't follow either. If the US dollar is in high demand, shouldn't interest rates increase? I have to suspect that the advantage being alluded to is that economic value must enter the US in exchange for the currency to leave, but that just means the US is in debt to foreign entities. A short-term advantage to be sure. The article continues

However, the U.S. dollar's status as a reserve currency, by increasing in value, hurts U.S. exporters.

See they admit the dollar value goes up. And of course it hurts exporters. An interesting paradox arises in that many Americans want to reduce the national debt and bring back manufacturing jobs. But to benefit US exporters (or at least to squash the flood of imports) the dollar would have to be devalued, which must be done through spending.

From this economics perspective, is it any wonder to anyone why US manufacturing has been gutted? Why make things when other countries are eager to send us their things in exchange for our currency? The downside of this of course is that foreigners now have claim to the real wealth of our nation. And what's scary is that when the dollar starts to lose it reserve status and other countries start to "sell" their dollars back, the American economy will not have the wealth or productive capacity to fund it. Saying that America now has an "advantage" of 100 billion a year is sort of like saying credit cards give you an advantage, except that we don't earn airline miles.

It might be in our best advantage to restore that productive capacity before it's too late. Our incoming president has campaigned primarily on that promise. And he doesn't seem adverse to the requisite spending. If he has his way the US productive base will grow, but so will the debt. It might be in America's best interest to "build & spend" and let loose with some inflation to help pay down the foreign-held debt. Can we really fight debt with debt? Ehh, I reckon we cannot. The ugly reality is that the US will ultimately have to default. We should not look at those foreign reserves as debt we owe, but as a price those countries paid to have the liquidity to conduct international trade, which benefited their economies. And we should do so while we still have the military strength to not be told otherwise.

USD as Tool for US Foreign Policy

The most important considerations when evaluating the benefits of operating a global currency are not economic, surprisingly, but political.  By controlling the world's reserve currency the US holds an immense economic weapon. You hear about it in the news. The US levies sanctions on Iran. The US levies sanctions on Iraq. On Russia. The US is able to do this by denying the target access to dollar-based markets. This is especially effective when applied to oil-exporting countries.

This allows the US to use the dollar a lever for coercion and is often applied with the desire of weakening the targeted government to the point they are overthrown internally. Sanctions allow a sort of indirect and soft warfare. They allow the appearance of clean hands, they spare the loss of US resources and lives, and they don't trigger the anti-war contingents of the electorate.

It is a common misconception that the US goes to war to acquire oil resources. In actuality, the US goes to war to protect the reserve currency status of the dollar, and prevent the rise of regional hegemonies that could contest it. If you start to look at US actions through the lens of preserving reserve currency status you'll start to realize they are nearly obsessed with it. There is some argument to make in favor of the strategy. If the US is to adopt the role of maintaining world stability, it is preferable to do so by deploying financial rather than military weapons whenever possible.

It may be reflexive to view the US as imposing economic servitude on the world. That it is, to borrow the left's favorite word, oppressive. But look at the other side. International trade demands a global reserve currency due to the network effect. Would you want to conduct your day-to-day business in multiple currencies? Imagine your town had several gas stations but one operated on pesos and one on euros and one on yen, etc. Not only would you have to constantly calculate exchange rates to make the best financial decisions, but you'd also have to keep stocks of all the relevant currencies and frequently pay currency exchange fees. Business works better and more efficiently when there is a common currency. This provides extra incentive for the US to preserve her reserve status. It's not just that the US will lose the privileges that come with reserve status, but also that another country is likely to acquire those privileges. There are reasons to oppose the US as world financial dictator, but there are many more reasons to oppose China in that role.

Case Studies

Zimbabwe

Zimbabwe is one of several states that use the US dollar as official currency rather than issuing a sovereign currency. They adopted the dollar after the infamous hyperinflation of the Zimbabwean dollar circa 2008, and they exhibit some of the predicted effects of such a currency migration, namely in lack of liquidity. The country has even taken to minting small dollar-backed "bond coins" in denominations between a penny and fifty cents. Although they are desperately needed to facilitate common daily transactions, they've had a cool reception from Zimbabweans who distrust any sort of currency produced by their government.

Once the breadbasket of southern Africa, Zimbabwe is now a basket case. Most often this is attributed to Mugabe's decision to chase off the white farmers, legacies of British colonialism. The claim is the native farmers are not as capable as the British were. And I have no idea, that may well be true. In particular, I have heard them scorned because they stripped out much of the irrigation infrastructure and sold it off for scrap, particularly the copper pipes. From the outside, this appears extraordinarily foolish, especially in light of the fact that Zimbabwe now suffers perpetual famine and must import food. It certainly would seem to be a lack of leadership from a government that already destroyed the national currency.

On the other hand, the selling off of accumulated wealth to acquire dollars is just what would have to happen in this kind of a currency migration. As mentioned before, buying your monetary supply upfront is fine as long as productive capital doesn't have to be sold to fund it. You can really appreciate what a pickle Zimbabwe is in. They can't issue a sovereign currency because no one trusts the government. They can't adopt a foreign currency without dismantling their critical infrastructure. One solution would be for the US to be generous and freely provide enough currency to run their economy. But even if Americans were so charitable (and often they are), African governments have a strong tendency to pilfer foreign aid. We return to the same roadblock: the government can't be trusted. There is no economic solution for Zimbabwe without a political solution first.

Iraq

The number one priority of US foreign policy is to maintain the dollar as the reserve currency. As a result, the number one geopolitical objective of the US is to prevent the rise of an oil-producing superstate in the Middle East. If such a state arose, it could dictate to the world how oil purchases were transacted, rather than being told.

When Iraq invaded Kuwait, they nearly doubled their oil reserves, vastly outweighing their Iranian adversaries reserves (although falling a bit short of Saudi Arabia). The way Arabia is carved up leaves a few Gulf states with great oil reserves that are too small to defend themselves. If it were not for the ability of the US to project global military dominance, the arrangement wouldn't last for long. The US responded. It forcibly removed Iraqi forces from Kuwait, and inflicted a heavy toll on Iraq's military to forestall any future aggressions. The order had been maintained.

Note that the war was never sold to the American people on these economic and geopolitical bases. We weren't told that failing to act would encourage aggression by the stronger powers and cause the smaller nations to lose faith in the American order, ultimately causing the dollar to lose its monopoly status in the international oil trade. No, we were told some lies about incubator babies. I don't know if the decision for that war was good or bad morally, but clearly it was good for America in many ways. In our democracy, the government can't sell war to the people. Theoretically the people should be given maximal information so they can make a rational decision to best further the national interest. In reality the American public must be lead around by their emotions.

America went to war with Iraq again in 2003. Again, the war was sold on lies and appeals to emotion. We were provided with fabricated intelligence telling us if we didn't act our cities were at risk of destruction by Iraqi WMDs. Colin Powell went into the UN waving around a vial of anthrax. Polls showed the majority of Americans believed that Iraq was linked to 9/11. But the real reason was never greatly publicized: in 2000, Saddam Hussein decided to stop trading in petrodollars.

It has always troubled me as to why we invaded Iraq. I understood that the neocon objective is no regional hegemonies but Iraq didn't make sense. Its military was already greatly reduced, and Saddam's strongman tactics not only kept stability within the otherwise fractured boundaries of Iraq, but were a balance against the Iranian threat of a Shia superstate. (As it happens most Gulf oil lies in Shia regions). But with the economic understanding it makes more sense. A typical person reading about Iraq switching currencies for oil sales would not be phased. Who cares, they can sell it however they want, right? But in fact this was Iraq's nuclear option. A giant middle-finger and existential challenge to the American empire. Iraq by itself could not destroy the dollar's status. But if they were allowed to openly tell America to fuck off, what's to stop the next country from doing so, and the next?

From a neocon policy point of view Iraq was a big mistake. Bringing down Iraq has unleashed great Iranian influence in the region, which we are fighting like hell to contain. (Syria can be viewed somewhat as a proxy war against Iran). But they had no choice. Threats to the dollar dominance must be met head-on. When Barrack Obama complains about the mess Bush left for him, it is all political theater. The Iraq invasion was caused by the same policies that drove him to overthrow governments in Libya and Syria, to bomb Yemen, and to push the American empire right up to Russia's western border.

Libya

Libya is very similar to Iraq: it was a threat to the dollar monopoly of oil sales. Gadaffi had long resisted US hegemony but typically did the bare minimum to get along. Oil was sold in dollars. He openly ended WMD programs to remove pretense for Western invasion. He was also benevolent for a dictator, giving his people the second-highest standard of living in Africa.

But at the same time, he was using his petrodollars to purchase gold stockpiles. His plan was to amass enough to stand up a gold-backed currency and a pan-North African economic zone. This was a direct threat to the dollar. Again we heard the appeals to emotion and the fabrication of crimes against humanity. We were told Gadaffi, leader for 26 years, would soon start committing genocide against his own people if urgent action was not taken. The UN no-fly zone was established on the premise that regime change would not be pursued. I have to wonder if Russia ever really believed that. Surely they understood the geopolitical battle being waged.

By any other objective measure, Libya has been a disaster of epic proportions. The legitimate ruler dethroned and the standards of living eroded. ISIS free to commit mass beheading on the beach. A US Ambassador was brutally tortured to death. Open-air slave markets. And, perhaps worse of all, it created a migration crisis in Europe that is destroying the EU and leading that sleepy continent on the path towards civil war and internal strife. None of those outcomes are desirable to the US, but if that's what it takes to keep them selling oil in dollars, then that's what happens.

Political tangent

From this perspective, is it any wonder why Hillary Clinton was the establishment favorite, and why she seemed so sure that she deserved to be the next president? She did the leg work to save the economic empire, of course she deserved it! The most amazing aspect of all this is that she was almost fully backed by liberals, people who would tell you in a heartbeat that the American empire is evil and that America is only rich by oppressing poor non-white nations. This says all you need to know about (a) her shrew skills as a politician, (b) the willingness of our media to shield the public from reality, and (c) the high level of immunity liberals have to cognitive dissonance. (Not all liberals though. Jill Stein frequently called Clinton out on Twitter for it). She won the popular vote, and she did it by saying one thing and doing another, which was easily discoverable for anyone with any sort of intellectual curiosity. I ranted at length repeatedly about Libya in my blog and facebook page and not many seemed too concerned. This has just puzzled me to no end, and has eroded any faith I had that the American people are capable of self-government.

Russia

Russia supplies nearly all of Europe's gas, and is the only oil-exporting regional power. If any one nation has the power to undermine the US economic order, it is Russia. Currently the US political and media establishment are pushing heavily for Russia confrontation. Ostensibly the reason is the Russians may have attempted to influence the election. Of all the unmitigated gall! This is entirely ridiculous. I won't get into it here, but you can read the Saker's take on it if you like.

What are they really upset about? Le's walk this back a ways.

• The US establishment is furious that Russia stood up against them and frankly humiliated them in Syria. They had expected their favorite foot soldier to breeze into office, but instead the election went to the man they spent a year vilifying and who has shown interest in resuming friendly Russian relations.
• Russia intervened in Syria because they saw the US empire as creating more harm than good. In particular, they were lied to about US intentions in Libya.
• The US had issued economic sanctions on Russia in response to Russian actions in Ukraine, in particular their annexation of Crimea. 
• The Russians took action in Ukraine after western meddling in Ukranian politics, as well as overtures from NATO to states in the former Soviet bloc. The Russian actions generally had the support of the people in the regions they operated, as the majority are ethnic Russian and view the Ukranian government as an ultra-nationalist Nazi regime.
• The US empire began pushing on Russia's home turf, I suspect, in response to Russia's decision to sell oil outside the dollar markets.

The question is what will happen now with Trump elected? Some say they are trying to push for war with Russia before the inauguration and that the transfer of power will be suspended. That's not a totally hare-brained prediction. I have every reason to believe that's what they would do, if they could get away with it. But that might very likely trigger a civil war in the US, which would not bode well for the dollar they're trying to protect.

People said the same thing about Bush, that he would implement martial law to hold on to power, because Obama was going to undo all their work in the Middle East. But neither happened. And despite basically campaigning on the notion that he would not be a neocon, the establishment did not oppose Obama, and he in fact carried on the work of the Bush administration. Clearly there was signaling somewhere to let the establishment know the dollar empire was not in danger. Could it be that Trump also, despite his campaign rhetoric, will fall in line to the establishment orthodoxy? Well the same signaling certainly hasn't happened with Trump, or we wouldn't be witnessing this foaming-at-the-mouth obsessive diatribe levied against him. He may pivot at any time, but at this point it is clear he poses a real threat to the project of American global hegemony.

I suspect they'll hand over power, and do everything in their power to sabotage him, assault his reputation, and get someone back into office who can continue their work. The bigger question is, what will happen to the reserve status of the dollar under Trump?

Conclusion

And there you have it. The American path to war almost always begins with a threat to the dollar's monopoly on the trade of energy commodities. American foreign actions are much less confusing when you look at them this way. The thing that gets me is that, I'm always opposed to the American empire. I've never voted for a presidential candidate who wasn't effectively an anti-empire candidate. The lies, the inconsistencies, they drive me bananas. But if the government was actually forthright about it's intentions and actions, I might actually be compelled to support them. I understand the benefit of a global currency for trade. I appreciate the benefits of a Pax Americana, and that there are costs involved in maintaining that. Hell, I'm pretty nationalistic. I'd be on board with straight up invading Saudi Arabia and saying, "we're going to take this oil because you're a backwards & brutal dictatorship and we are an advanced civilization that sends scientific probes into the far reaches of the solar system." Fine by me. Give it to me straight; I can handle it. The electorate, as a whole, cannot, so these kinds of public policy decisions are always decided through the illusion of some humanitarian issue. The decisions to defend the dollar reserve status may well be in the best interest of Americans, and they generally support those actions, even though they don't realize it.

Obama: Evil, Incompetent, or Impotent?

Pre-tenure

When Barrack Obama seemed destined to win the Presidency, my take was that his supporters were going to be disappointed. I wasn't taking a political side. That year I voted for Ron Paul in the primary, and Cynthia McKinney in the general. So I wasn't terribly biased. It was easy to be cynical if you weren't caught up in the Obama hype train, because, well the hype was for real, and the man had no sort of qualifying background. He had no executive experience of any type whatesover. His primary accomplishment was a well-regarded speech at the Democratic National Convention in 2004. Even his election to the US Senate was not a great accomplishment because he basically ran unopposed after someone got ahold of his opponent's lurid divorce proceedings. Chicago politics are dirty.

Obama was promising a lot, he was getting mad hype as the "first black" president, and he had nothing to show but an ability to give appealing speeches when provided with a teleprompter. (He also has great comedic timing). He had a patchy background. Conspiracy theories abounded. There was a lot of reason to question his competence. There was style but was there any substance?

Tenure

As he ran the country and it became apparent that a lot of the campaign promises weren't happening, I started to ask whether Obama was naive or duplicitous. Did he not understand what he was getting himself into, or did he realize the difficulties but pretend otherwise to get elected? As time has gone I've leaned towards the former. It seemed the he was overwhelmed by the practical difficulties of getting his policies implemented. He often seems frustrated. I hope it was the former, as that is morally more forgivable, yet is certainly no merit to the electorate that they chose a Dunning-Kruger Effect victim, or someone who knows so little about a given domain that they don't even realize how little they know.

Post-tenure

As his tenure runs out my analysis shifts again. Presidents should be judged primarily on their foreign policy. Domestic policy is largely set by Congress (and increasingly the activist judicial) and most presidents just hope to get a few pieces of legislation through to make good on campaign promises. But in foreign policy the president is king. Perhaps emperor. While elections focus most on domestic, the president has the greatest impact overseas. Wedding parties getting accidentally droned probably aren't super concerned about the US President's abortion stance.

Using Syria as a case study, I have to ask. Was Obama evil, incompetent, or impotent?

Evil

If Syria went as Obama wished, then he is an evil man. He allowed ISIS to rise to counter Assad. He intentionally spared their economic activities during the year-long bombing campaign against them. He stoked civil war in Syria knowing there would be a humanitarian/refugee crisis. He knew Saudi Arabia and Quatar were funding ISIS but didn't pressure them to stop, or to take Arabian refugees. He intentionally violated the ceasefire that had been negotiated between the US, Russia, Syria, and numerous rebel factions.

Incompetent

The following evidence would suggest he wasn't evil but just incompetent.

• He tried to rally for war after the infamous "red line" incident but couldn't muster enough support, either at home or abroad.
• He was diplomatically outmaneuvered by Russia who relieved Assad of all chemical weapons.
• He failed at his primary objected: regime change.
• Russia was able to sneak into the country and establishment air dominance overnight, in a massive challenge to US regional hegemony.
• Obama showed great regret for the fall of Aleppo. Clearly he was not able to enact his policy objectives. [That he and the MSM showed open regret after Aleppo was liberated from ISIS is just utterly amazing.]
• He failed to make adequate in-theater humanitarian accommodations. Some US allies in the region haven't take a single refugee. The refugee crisis has destabilized Europe, is causing the collapse of the EU, and is creating a resurgence in right-wing political parties. (surely not Obama's intention).
• He has been unable to maintain any illusion as a peace maker, despite being the only Nobel Peace prize recipient in the theater. The US failed to uphold the previous cease fire, and the current one was orchestrated by Russia.

Impotent

It might be argued that he wasn't so much incompetent as much as impotent. That is, it wasn't just that his policy was a failure, but that he didn't actually have that much control over the policy.

The first argument is that Obama's foreign policy was so different than his campaign rhetoric. While I advised that he would be disappointing, I would have never suspected that the man who was elected and won a Nobel Peace prize for basically saying he wasn't a neocon, ended up extending the Bush Doctrine for 8 years. Did Obama have a major change in heart? Who was influencing him?

Second, Obama's actions are not quite Bush-style neoconservatism. Before Bush, the US has long meddled in the affairs of other nations. We deposed leaders we didn't like in Latin America and other places. We normally did this covertly through entities like the CIA or more shadowy elements of the military, and maintained a level of plausible deniability. Bush basically made the secret policy the public policy, and said we'd use conventional military forces to do so. 

Obama didn't end the neocon policy, but to a large degree reverted to the old ways. Not completely, as air power was used to topple Libya and the policy to intervene was codified in a UN resolution. But no boots were put on the ground. Instead we armed and funded rebels. This is just standard CIA activity. In Syria the same thing happened. The entirety of US involvement there was basically CIA operations: arming and funding rebels, psy-ops to stir dissent, etc. The foreign policy sure looks like it was entirely driven by the CIA, not the antineocon Nobel Peace laureate.

Third, there was visible incohesion in US activities. The CIA and Defense Department had different objectives and supported different factions. At times CIA-backed factions were fighting DoD-backed factions. This was America in a proxy war with herself. At the time I commented that our foreign policy had hit "peak insanity". What was clear is that there is no way Obama had strong control over foreign policy, if different elements were acting in different ways, sometimes directly opposed to one another. It seems to me that the CIA was having their way, and the DoD was resistant.

Fourth was the end of the ceasefire when US forces killed 60 or 70 Syria Army troops. This ceasefire was negotiated at a high-level and broken at a lower level. It's certainly possible that things sort of "organically" got out of control. But I suspect the cease-fire was broken intentionally against Obama's wishes. 

Conclusion

As you ponder the question, whether he was evil, incompetent, or impotent, don't rack yourself with indecision, as the conclusions are not mutually exclusive.

MMT and the US economy

In my post Modern Money Theory Thought Exercises I walked through some scenarios using my rudimentary grasp of Modern Money Theory (MMT), which is a field of economics that promotes the notion that governments that issue their own fiat currency operate in a way that is not intuitive when considered in terms of standard household budgets. A few of the more surprising outcomes of those thought exercises, and of MMT in general, are:

• The government collects taxes not to raise funds for itself, but to give the money it issues value.
• A national debt is necessary to maintain a liquid money supply.
• Bond financing is necessary to maintain a liquid money supply. (my conclusion)
• A fiat money system is not inherently inflationary.
• Fractional reserve banking is not inherently inflationary (in the long run).

In my exercises I attempted to create scenarios that proved the latter two were false, but I was unable to do so. I was hoping my thought process would lead to conclusions that invalidated the premises of MMT but that did not occur. However, just because I wasn't able to show that catastrophe is inevitable is in no way an assertion that catastrophe is impossible, or even unlikely. If driven incompetently the safest automobile in the world will still crash. Also, I mentioned in my conclusions that I've not confirmed how similarly the US operates to the theory. The practical deviations could be important.

Spending

I showed that simply holding a national debt is not inflationary. The effect of the debt is that the government must effectively reduce spending to make interest payments. Currency would be redistributed from government programs towards bond holders. While this may have undesirable consequences (plenty of people state that bonds are a form of corporate / oligarchic welfare, but then again anyone can buy them) this does not drive some infinite debt spiral.

Those scenarios were simple and short-term, all just one or two years, and mostly assumed a steady national debt. They did not assume a continuously increasing national debt. They did not assume a debt that doubles roughly every 8 years. MMT suggests that it is okay to have a national debt, but says nothing about exponential debt growth!! National debts may not matter, but deficits definitely do matter. (Reagan and Cheney are not vindicated by MMT).

When the national debt grows, the government must either reduce spending to accommodate debt growth, or it must increase the money supply to cover the debts. If the economy is growing fast enough they can safely issue extra money to cover the interest payments, otherwise inflation occurs. In our situation everything is at odds. The money base is growing fast, spending is increasing fast, the economy is growing slowly. Only one of those can be true at the same time for sustainability. 

The strongest counterargument to this is that we are not actually witnessing a lot of inflation based on consumer price indexes. However it may very well be that the inflation is hidden from those metrics. They don't account for some of the fastest growing expenses, like education. Also, I suspect that much of this excess currency is being sponged up by the soaring stock markets. I don't quite understand the mechanisms for this right now so I'll save that for another post. But the fundamentals are there: money base expansion is outpacing economic growth. From basic macroeconomics there must be inflation.

Foreign Interest Payments

If bonds are held domestically then the interest payments still trickle through our economy towards the government tax sinks. As mentioned before they cause a transfer of wealth towards bond holders. But as I showed in my previous post, if the bonds are foreign-held then the interest paid amounts to a transfer of wealth out of the country. The money still must come back to the US tax sinks, but in exchange we send them goods and services - some percentage of our economic output.

Foreign financing amounts to a tax on the domestic economy. Policy proposal: the percentage of debt that can be foreign-held should be capped. Right now we're at a about 33%, which seems high. Interest payments consume 6% of the US budget (which isn't that terrible). This indicates that an amount of wealth equal to 2% of the US budget is sent overseas every year, simply for the sake that they hold bonds that we need to give our currency value for our system to work, with nothing of material value offered in exchange. 

As an aside, I don't understand how being the world's reserve currency favors typical Americans. Many people act as if we have some great benefit because of it, but I don't know what that is. We are paying out our wealth to other countries in return for doing them the favor of providing that stable reserve currency! I've heard this argument before, from smart people. The example often provided is that gas is much cheaper here than in Europe. But they had to convert the local currency to dollars to make that comparison. There is nothing stopping the Europeans from converting their currency to dollars to make the purchase! Surely the difference can be explained by the high gas taxes over there, and that the US is a large oil producer.

But I would like to hear some compelling argument as to how the US dollar as a global fiat currency benefits me as a citizen economically. There are benefits of course to the US government, many of which are purely political.

Fractional Reserve Banking

I found that reserve banking is not inherently inflationary, which is in line with what the MMT people say. In fact getting this point across seems to be a constant struggle for them, as there are many blog posts dedicated to the notion. Many of us have watched videos such as this one that tell us the government and banks create money out of thin air, thus inflating the currency as a secret tax. But they ignore the part where the debt is repaid and the money is destroyed. 

However, there are two ways catastrophe can occur:

Unsound money

Bank credit relies on so called high-value money, or money that is directly issued by government spending, as a reserve. Bank credit is created by leveraging high-value money and I've shown that it seems to be a sound practice. But what if the reserve was not high-value? If bank credit was used as the reserve, the could lead to an infinitely expanding money supply. Banking is regulated, of course, but so is the financial industry, and the 2008 crisis was caused because Wall Street crooks were using dirty tricks to sell high-risk instruments as low-risk. High-value money carries less risk than bank credit because it is backed by the US government. Surely there is great incentive for those same crooks to find ways to leverage the difference. The question is really how much of that is going on?

Debt bubbles

I've shown that fractional reserve lending is not inflationary in the long run, but it does expand the money supply. This should balance out into a steady state. Loans are created and settled every day. But what happens when the debt all collapses at once? If that occurs, there could be massive deflation, which can be even more devastating than inflation. (Economic planners strive for a small inflation). There are all kinds of reasons a debt collapse can occur, and MMT doesn't change any of that. So in light of all this I still advocate that people prepare for deflation. Inflation is likely to be gradual, and we aren't even suffering the consequences of that for some reason. But deflation could be truly drastic. At this point I am more worried about the collapse of an already over-inflated credit supply than I am about runaway hyperinflation from government spending.