A posting every day; an interesting idea every three months…
I joined a group of about 25 people on a bus tour from Tel Aviv to Jerusalem. Half of us were American and half Israeli (from Tel Aviv). Within one hour I heard the following:
During three days in St. Petersburg I questioned various Russians, especially our tour guides, on the question of welfare.
In the Soviet times, every able-bodied adult worked. There were no stay-at-home parents, for example. On the other hand, if you worked the government would make sure that you had a house, food, health care, etc. On the third hand, the “house” might not be so great. One of our guides described living with her parents and brother in a “communal apartment” in which her entire family of four had one room and then shared a kitchen (“three tables”) and bathroom with two other families. “As you can imagine, the line for the bathroom could be long in the morning,” she said, “and we were very happy to get our own apartment in 1975 after 14 years on the waiting list.”
Do Russians offer a plethora of means-tested programs in which the less you earn the more subsidies you get (see “The Redistribution Recession” for an economics professor’s analysis of some of these)? No. It seems that the only government handout that is available is an actual handout of cash. Disabled? You get a “pension”. Single mother? You get a small cash subsidy. Unemployed? You get some cash. (If you continue to be unemployed you will also get training; as in the U.S., the Russian government does not subscribe to the Glengarry Glen Ross “a loser is a loser” theory of employee quality. (near the end of the video clip)) An apartment in the center of the city in a brand-new building, as some low-income families in Manhattan, Cambridge, or San Francisco might enjoy? No. A special debit card that you use to buy food? No. A different price for health insurance than what others pay? No. Once you’ve gotten the government cash you go into the market economy and buy whatever you can afford.
Note that the overall amounts of these cash handouts are small compared to what an American welfare family might get and therefore the welfare standard of living is low (though of course the standard of living for a working family outside of a major city may be quite low by American standards as well). “Your primary safety net is friends and family,” said one Russian.
Isn’t there any way for an able-bodied person to enjoy a comfortable lifestyle without working? “In our school there are mothers who stay at home if the husband has a well-paid job,” said a guide who teaches English in K-12 in what she described as a “wealthy” area. What if the mother was never married and perhaps only slightly acquainted with the father? “She can get 25 percent of his income [as child support], but once men have to pay this they will try to stop working,” she responded. Is there any limit to child support following a brief sexual encounter? The teacher/guide wasn’t sure but she didn’t personally know any women for whom single motherhood, without being preceded by a marriage, had enabled a work-free life.
[Note that the Russian 25 percent formula, if taken on a post-tax basis, would be roughly comparable to the New York or Wisconsin 17 percent of pre-tax income. If in fact there is not a limit, Russia would be unlike Germany and some other Civil Law jurisdictions. Russia would be more like U.S. states such as Massachusetts in that a woman will have a higher spending power if she has sex with a couple of high-income men compared to if she entered into a long-term marriage with a medium-income man.]
Russians with low levels of skill and education and/or who live in obscure parts of the country need Bernie Sanders and Hillary Clinton rather badly. According to one guide, minimum wage is only slightly over $100 per month (confirmed by CNN; compare to about $2595/month at $15/hour). An apartment in St. Petersburg, on the other hand, costs about $2000 per square meter. The same guide said that a typical apartment was about 75 square meters and therefore cost about $150,000 (i.e., about 115 years of minimum wage income if we use CNN’s numbers). How about getting a mortgage? The interest rate in rubles is typically around 14 percent.
What’s the end-result of this rather meager and extremely simple welfare system? Are people reduced to begging in the streets? Certainly there are fewer beggars in St. Petersburg than in San Francisco or Los Angeles. Compared to the U.S., it does seem as though there are more old people working in retail jobs. One gets the impression that there are quite a few Russians doing jobs that they would rather not do because they need the money.
Full post, including commentsWhile in Israel I talked to a British national who was being sued by a woman named Jennifer. He referred to the divorce lawsuit that he was thus defending as “the Jexit”.
Readers: What innovations in language have you heard or do you expect from the Brexit?
Related:
Continuing my posts about Lionel Shriver’s The Mandibles: A Family, 2029-2047…
The Mandibles posits a world in which the dollar is no longer a desirable reserve currency for non-U.S. governments and the domestic value has been seriously eroded by inflation. This scenario may sound far-fetched to an American, but it is familiar to a lot of folks in Latin America.
Traditional diversification didn’t protect the characters in the book because (1) anything denominated in dollars fell, (2) the U.S. government ran out of money to pay for entitlements and the salaries of workers and therefore adopted a dual strategy of printing money and taxing savings, and (3) the government simply confiscated hard assets, such as gold, that were held domestically. A character who had a box of gold in a safe place in Asia or Europe would have done okay. Here’s a speech from America’s first Latino president:
Using the powers vested in your president by the International Emergency Economic Powers Act of 1977, I am calling in all gold reserves held in private hands. Gold-mining operations within our borders will be required to sell ore exclusively to the United States Treasury. Gold stocks, exchange-traded funds, and bullion will likewise be transferred to the Treasury. In contrast to Franklin Delano Roosevelt’s gold nationalization of 1933, when FDR made his bold bid to rescue our suffering nation from the Great Depression, there will be no exceptions for jewelers or jewelry. All such patriotic forfeitures will be compensated by weight, albeit at a rate that does not reflect the hysterical inflation of gold stocks in the lead-up to this emergency. Hoarding will not be tolerated. Punitive fines of up to $250,000 will be levied on those who fail to comply. Retaining gold in any form beyond the deadline of November 30, 2029, will thenceforth be considered a criminal offense, punishable by no less than ten years in prison. All gold exports from our shores are henceforth prohibited. In retaliation for outside agitators’ attempts to fray the very fabric of our flag, all foreign gold reserves currently stored with the Federal Reserve are hereby confiscated, and become the property of the American government.
I have never liked gold as an investment because I don’t understand how (1) it can be sustainably worth more than the cost of mining (as with oil, at a high enough price there is a lot of additional gold to be found on Planet Earth), and (2) it can be worth as much as a productive asset such as a factory or a piece of real estate. Thus the purpose of today’s posting is to get ideas for what kind of investment strategy would protect an American citizen from a serious decline in our economy and the value of the dollar. Note that I personally don’t believe that we’re likely to have a crisis in the near-term. In my opinion Americans are biased towards thinking that our economy will either grow dramatically or shrink dramatically. Given our European-style welfare state and associated disincentives to work it seems to me that European-style stagnation is a plausible future. That said, a multi-decade stagnation would look like a serious decline when compared to dynamic economies elsewhere. And the whole point of diversification is to protect oneself against unlikely events, as long as the cost is not too high. (As noted above, I think storing bars of gold in a Swiss bank’s safe deposit box is too high a cost.)
Readers: What are your best ideas for keeping assets safe from (a) a decline in the dollar, and (b) sudden or gradual confiscation by the U.S. or a state government?
[One idea: Why not just own commercial real estate in three foreign countries? If these are leased out triple-net there is minimal management hassle involved. The return should be similar to the return on U.S. real estate, which in the long run might not be that different from other financial assets. Own the real estate either directly (name recorded officially as the owner) or as a shareholder in a small foreign company. If things fall apart in the U.S., just move out to where one of the properties is. Presumably there could be some paperwork hassles in declaring this foreign-sourced income every year to the IRS, but the actual taxes wouldn’t be different than they would on a U.S. commercial property, right? The paperwork hassles could be considered the price of insurance against being wiped out by a U.S. financial crisis.]
More: Read The Mandibles.
Full post, including commentsIsrael is a country of immigrants, which means that many Israelis make the decision to marry in a different legal system from that in which they will get divorced (the fate of 30-41 percent of Israeli married couples, depending on who is counting). At the Museum of the Diaspora, for example, an exhibit shows a guy who was married in Ethiopia and then divorced in Israel:
Based on my discussions with some experienced attorneys, Israeli divorce lawsuit defendants from countries that operate under Civil Law will probably be the ones who wish that they had stayed in their original home. Jewish law provides few financial incentives for divorce plaintiffs. If a man divorces a woman he has to pay her according to the ketubah, essentially a prenuptial agreement. If a woman divorces a man she may not receive any share of the man’s future income (it could still be financially rational for a woman to divorce her husband if she can find someone richer to replace him with). On top of this ancient legal tradition Israel has layered some aspects of British common law. The result of this combination is that what would have been a straightforward procedure in Europe or Russia (examples) with legal fees (if any) limited to a small percentage of total assets can turn into an American-style no-holds-barred war in Israel.
The end of an Israeli marriage results in the parties’ assets being consumed by lawyers in both the government-run courts (about 74,000 cases in 2015) and also in a religious court. A woman who wants to be rid of her husband will sue him in the government court for property division, custody, and child support. The divorce per se is litigated in a religious court, e.g., the rabbinical court for Jews, an Islamic court for Muslims. “The rabbinical court is a lot more efficient than the civil court,” said one lawyer, “but it can still cost [$50,000+] in fees to a separate attorney.”
Israeli plaintiffs who follow economic incentives will sue a husband for property division, custody, and child support in the civil court but not seek a divorce in the rabbinical court. The litigation posture is that she wants to stay married and isn’t interested in a divorce, but she wants to live separately, be the primary parent, and get paid for taking care of the children. Then there is a game of chicken to see who will crack and sue first in the rabbinical court (as noted above, if the woman were to initiative a divorce per se she wouldn’t be entitled to alimony).
Property division is simple in theory but complex and expensive to litigate in practice. It is supposedly a California-style system in which premarital property cannot be obtained by a plaintiff, but property acquired during the marriage is divided 50/50. “There was a Supreme Court decision about two months ago,” said one source, “in which a man had inherited an apartment that was rented out. He deposited the rent into a joint account and that was enough to make the property divisible by the court.” Plaintiffs also may allege that a defendant has hidden assets and don’t need any documentary evidence to keep the allegation alive through a final trial. If there are assets worth fighting over, litigation can take more than three years. “If there are 1 million shekels in assets [$250,000] the fees will end up being about 1 million shekels,” said the attorney. As in the U.S., a judge can order a defendant to pay a plaintiff’s legal costs but this may be only 20 percent of the “real costs.”
What happens to the joint apartment (standalone houses are rare in Israel) during the three years of litigation? “The court cannot order the husband out,” said the attorney, “unless the wife makes an allegation of domestic violence, so either the couple negotiates or, more commonly, the wife accuses him of physical or psychological abuse.” (A variety of U.S. states have a similar system; see “The Domestic Violence Parallel Track” and Amber Heard)
Israel is not a great jurisdiction for profiting from extramarital sex. Unlike many U.S. states where it is more profitable to have sex with a high-income person than to be in a long-term marriage with a middle-income person (some numbers), in Israel child support starts by considering the needs of the child. This in contrast to the U.S. system in which the primary factor determining profitability is the income of the target of the child support lawsuit (see the History chapter for how the big switch happened around 1990). Child support can still be profitable in Israel if there was a marriage and a shared household for at least a year or two. Now the defendant can be ordered to pay to keep the children in the lifestyle to which they were accustomed during the marriage and the only way to enable that is also to keep the plaintiff in the lifestyle to which she was accustomed. If the litigants just met for one night in a bar, however, the official standard for child support is more based on the cost of rearing a typical Israeli child.
As noted in a July 23 posting, custody lawsuits are simple if the child(ren) are under 6: Mom wins. Mom also is guaranteed to be the one receiving child support, even if the children live with their father. As in the U.S., legal fees can be expended to determine a child’s schedule but the end result is nearly always that children are entitled to spend every other weekend with the father (Friday morning until Saturday evening or Sunday morning) plus a few hours on a weekday. With older children, 50/50 schedules are possible though the cash continues to flow from father to mother even when the two parents have equal incomes or when the mother earns more than the father. The mother’s revenue is reduced to one third at age 18 when a child will enter the military and cut off at age 21 (compare to full cashflow through 21 in New York or 23 in Massachusetts).
Full post, including commentsContinuing my posts about Lionel Shriver’s The Mandibles: A Family, 2029-2047…
Shriver’s vision of United States society in the 2020s isn’t very different from what attorneys told us in Real World Divorce. Americans can get hold of assets through marriage and divorce, but much of the litigation involves people who were never married:
Technically Florence may have been a “single mother,” but single mothers in this country outnumbered married ones, and the very expression had fallen out of use.
Reference to diesel engines was strategic. The bulk of the Mandible money was amassed by Carter’s great-grandfather Elliot, a Midwestern industrialist. Douglas had added to the pile a bit, but he’d always lived high, and Mimi extracted a fair whack of his agency earnings in the divorce. The inheritance from Mandible Engine Corp. was protected from marital depredations by a trust.
[at the dinner table with econ professors, one of whom is a thinly disguised Piketty] “Why not?” Tom said. “You regard everyone else’s finances as your business. Fact is, you made a killing from sticking your nose into other people’s bank accounts.” “Hardly a killing,” Ryan said disdainfully. “Internet piracy was already approaching its zenith. For the handful of the upstanding, Amazon was discounting at 70 percent. As for what small royalties I did recoup, my ex-wife walked off with half. Calling me wealthy would be absurd.”
After the economy melts down, however, and an alimony or child-support judgment not indexed to inflation wouldn’t be worth much, turning a sexual relationship into cash has to be done without court involvement:
[late teenage daughter to her parents] “Mom, please! Nobody’s having dinner parties at all, much less catered ones, and most people wear the same clothes for a month!” “The only thing I’m too proud to do is what you’re doing.” “You’re too old for my vocation. And somebody’s got to bring some scratch into this house besides Florence. You want to see inflation work to our advantage for once? Because my prices are going up.” Savannah grabbed her coat and marched out the door.
After the government stabilizes the economy, laws are adjusted so that more sectors can be taxed. Here’s a conversation among three siblings, one of whom works for the “Scab” (formerly the IRS):
he appreciated that Savannah’s work as a “stimulation consultant” was now a legitimate career. While he might have expected to discern a clichéd coarsening in her features, her manner, or her spirit, in truth he detected no such thing. Accredited, registered, regulated, and—most crucially—taxed, Savannah parlayed a respectable expertise. She carried business cards. She didn’t hide behind any euphemistic “escort” nonsense. She was high end. She’d held her own against the robs—increasingly inventive, cheaper, and programmed to swallow at no extra cost. So she was doubtless very good at it. Still. Willing had a conservative side. You couldn’t legislate away that little shiver.
“This is new,” Bing said respectfully. “And very exciting. You’re planning a family soon?” He might have been talking to his schoolteacher, not his own brother. “Sooner the better,” Goog said. “Somebody’s gotta do it. You’re hardly up and at ’em with the ladies. And our sister’s a hole.” “You know I don’t like that word,” Savannah said. “I don’t like being called a scabbie, either,” Goog said. “I’ve manned up about it. You can’t honestly expect me to call you a stimulation consultant with a straight face.” “I have a degree,” she insisted quietly.
“A community college degree in a subject that comes naturally to any slit who can lie on her back. Listen, I know it’s asking a lot, but could I have a real glass?
The novel chronicles a change in female beauty standards. As the Chinese have become the world’s wealthiest people, Caucasian women undergo surgery to appear more like the Chinese.
More: Read The Mandibles.
Full post, including commentsHere’s a sign from Israel that could be a banner for any person or enterprise aspiring to mediocrity:
(From a beach at the Dead Sea; the sign says -418 meters, which is 1371 feet below sea level.)
Readers: What person or enterprise would you nominate to adopt this sign?
[Separately, this region of Israel has a lot of signs to replace if sea level changes dramatically!]
Full post, including commentsContinuing my posts about Lionel Shriver’s The Mandibles: A Family, 2029-2047…
The novel directly concerns four generations within one family and the relationships among these generations as well as the way in which a society’s GDP is parceled out to various age groups.
For those periods in the novel when the U.S. GDP is flat or shrinking, the younger generations resent the money being spent on the old. Being old is psychologically tough, even at the beginning of the novel before the meltdown:
I see the same thing in my elderly clients all the time. They have different obsessions, of course: we’re about to run out of water, or run out of food, or run out of energy. The economy’s on the brink of disaster and their 401(k)s will turn into pumpkins. But in truth they’re afraid of dying. And because when you die, the world dies, too, at least for you, they assume the world will die for everybody. It’s a failure of imagination, in a way—an inability to conceive of the universe without you in it. That’s why old people get apocalyptic: they’re facing apocalypse, and that part, the private apocalypse, is real. So the closer their personal oblivion gets, the more certain geriatrics project impending doom on their surroundings
Inter-generational conflict is worse when the younger generation is a different ethnic group than the older generation:
[a young man who works for a senior citizens’ outdoor excursion company called “Over the Hill”] … Because they don’t like following a guide. Especially a Lat guide. They’re enraged that Lats are running the show now, since somebody has to—” “Enough.” Florence threw the cabbage into what was starting to look like pork soup. “You forget. I’m on your side.” “I know you get sick of it, but you’ve no idea the waves of resentment I get from these crusties every day. They want their domination back, even if they think of themselves as progressives. They still want credit for being tolerant, without taking the rap for the fact that you only ‘tolerate’ what you can’t stand. Besides, we gotta tolerate honks same as they gotta put up with us. It’s our country every bit as much as these has-been gringos’. It’d be even more our country if these tottering white cretins would hurry up and die already.”
In an economy where it is tough to earn money via work, young people may pay attention to and spend time with old people to ensure an inheritance:
It was also standard on the two-hour trip from Brooklyn—this leafy section through Connecticut was pleasant—for Carter to question his motivations for these visits. With an eye to the long view, you naturally dote on an elderly parent as a subtly selfish prophylactic: to be able to assure yourself, on receipt of that fatal phone call, that you’d been devoted. Sometimes being a shade more attentive than you’re quite in the mood for can prevent self-excoriation down the line. After all, old people have a horrible habit of kicking it right after you ducked seeing them at the last minute with an excuse that sounded fishy, or on the heels of a regrettable encounter in which you let slip an acrid aside. To be dutiful without fail is like taking out emotional insurance. Yet in Carter’s case, the self-interest was crassly pecuniary. Did he keep in his father’s good graces with monthly runs to the Wellcome Arms only to safeguard his inheritance from, say, a rash or spiteful late-life impulse to endow a chair at Yale? He’d never know. Worse, his father would never know, and might not ever feel confidently cherished for himself. A family fortune introduced an element of corruption.
Old people drive the economy and people are anxious to get into the driver’s seat:
But as things stood at present: after a dip in the thirties, life expectancy had better than recovered. On average, Americans were living to ninety-two. The US sported an unprecedentedly large cohort of senior citizens. In contrast to Willing’s passive generation, typified by low rates of electoral participation, nearly all the shrivs voted, making it political anathema to restrict entitlements. Together, Medicare and Social Security consumed 80 percent of the federal budget.
From the start, he knew the variety of employment widely available: home health aide placements, health insurance and billing, design and maintenance of healthcare websites, answering healthcare help lines, medical device manufacture, service of medical devices, medical transport, medical research, pharmaceutical manufacture, pharmaceutical research, pharmaceutical advertising, hospital laundry, hospital catering, hospital administration, hospital construction, and work in assisted-living establishments that served every level of decrepitude from mildly impaired to moribund.
“So what’s up with your parents?” Willing interceded. “Dad’s two years from sixty-eight,” Goog said. “Then he’ll be sitting pretty.” People used to dread being put out to pasture. Desperate to qualify for entitlements, these days everyone couldn’t wait to be old.
The simplest way to get old is to sleep:
Willing was also perplexed by why slumbering hadn’t taken off decades earlier. When recreational drugs were legalized, regulated, and taxed, they became drear overnight. Only then did people get wise to the fact that the ultimate narcotic had been eternally available to everyone, for free: sleep. A pharmaceutical nudge into an indefinite coma was cheap, and a light steady dose allowed for repeated dream cycles. Inert bodies expend negligible energy, so the drips for nutrition and hydration had seldom to be replenished (slumbers were hooked to enormous drums of the stuff). The regular turning to prevent pressure sores provided welcome employment for the low skilled. Slumbers didn’t require apartments—much less maXfleXes or new clothes. They needed only a change of pajamas and a mattress. An outmoded designation revived, “rest homes” denoted warehouses of the somnambulant, who were only roused and kicked out once their prepayments were extinguished. Previous generations had scrounged to buy property. Many of Willing’s peers were similarly obsessed with scraping together a nest egg, but with an eye to dozing away as many years of their lives as the savings could buy.
The eeriest part of the book is that it anticipates the Sagamihara stabbings. In a society with a lot of dependents, Shriver predicts that workers whose mental health declines may target those dependents.
More: Read The Mandibles.
Full post, including commentsSocialist Israel comes full circle with Ayn Rand being classified as a Jewish “hero” in the children’s gallery of the Museum of the Diaspora:
The museum folks say that, after leaving the Soviet Union, Rand “went on to become one of those responsible for drafting the foundations of American capitalism.” Yet Wikipedia says that she began publishing in the 1930s, just as the U.S. was abandoning a market economy in favor of a Welfare state.
Related:
Continuing my posts about Lionel Shriver’s The Mandibles: A Family, 2029-2047…
One of the things that seems realistic in this novel is that Americans don’t change their views on economics or politics based on new facts. When the economy collapses, therefore, each American explains it according to his or her previously held political or economic viewpoint.
Here are some excerpts:
At Barnard, having written her honors thesis on “Class, 1945–Present” had seemed daring, because Americans flattered themselves as beyond class. But that was before the fabled economic downturn that fatally coincided with her college graduation. After which, Americans talked about nothing but class.
Checking the rice, she [liberal mom] tried to remember what her weirdo son had claimed about the recrudescence of malnutrition in Africa and on the subcontinent, after both regions had made such strides. It was an outrage that the poor simply couldn’t afford to eat, she’d bemoaned to the boy [conservative teenager], when the planet had plenty of food. He’d responded obtusely, “No, it doesn’t.” He proceeded to recapitulate his great-grandfather’s tortured explanation—something like, “It only seems like there’s plenty of food. If you gave the poor more money, then the price would rise even higher, and then they still couldn’t afford it.” Which didn’t make the slightest sense. Around Willing, she should monitor her grandfather’s propaganda more closely. The old man was liberal by creed, but she’d never met anyone with money who didn’t have conservative instincts. One such instinct was to make the morally obvious (if fiscally inconvenient) seem terribly complicated. Like, rice is too costly, then give people the money to buy it. Duh.
[Keynesian economics professor talking with his therapist wife] “Sorry. I did get into an argument, with that boomerpoop Vandermire. Because, okay, the bond auction today, it’s—unfortunate. At the moment, foreign demand for US debt is low—but there are completely unrelated reasons for backing off US debt instruments in a variety of different countries that just happen to be coinciding. Here, the market is hopping; investors can find higher yields in the Dow than in dumpy Treasury securities. Interest rates aren’t likely to stay anywhere near 8.2 percent and this is probably a one-time spike. Jesus, in the 1980s, Treasury bond interest careened to over 15 percent. Bonds paid over 8 percent as recently as 1991—” “That’s not very recent.” “My point is, there’s no reason to get hysterical!” “Then don’t say that hysterically.” “Well, Vandermire is ecstatic. He loves the attention, and he’s on a high of having been supposedly right all along. ‘Unsustainable! The national debt is unsustainable!’ If I heard him say the word unsustainable one more time this afternoon I’d have punched him in the nose. The functional definition of unsustainable is that-which-is-not-sustained. If you can’t keep something up, you don’t. After all that noise twenty years ago about the deficit, the melodramatic shutdowns of government over raising the debt ceiling, and what’s happened? Nothing. At 180 percent of GDP—which Japan proved was entirely doable—the debt has been sustained. It is therefore, ipso facto, sustainable.” The trouble with being a professor is that when you pontificate for a living it’s hard to cut the crap once you get back home. Avery was used to it, though she didn’t find Lowell’s rants quite as enchanting as when they first got married.
“The Fed chief was emphatic. Krugman said the limits were for a few days, max.” [Paul Krugman is running the Fed and puts in capital controls]
[teenage son talking to liberal mom] “The government will have lots of money. But it won’t be worth anything. Which is the same as having no money.” One of her few concerns about her only child was that he inclined toward smugness. “All right. What. Since I’ve heard we need regular inflation, like at least 2 or 3 percent, my whole life.” “I know you have. You’ve been brainwashed.” He sounded so cheerful. “We could easily get along with a small, steady, predictable rate of deflation. Inflation is a tax. Money for the government. A tax that people don’t see as a tax. That’s the best kind, for politicians. But inflation isn’t inevitable. Starting in 1300, the British pound pretty much maintained its value for six hundred years. And that was during the Empire, when English people practically ruled the world.” … “Prices aren’t going up,” Willing said authoritatively. Florence snorted. “Could have fooled me!” “They have fooled you.” Willing’s stride had developed a swagger. “It’s the mistake people always make. They think things are getting more expensive. Actually, everything costs the same. Prices aren’t going up; the currency is going down.”
“They’re in a corner. They can’t borrow. They could raise taxes. But the rich already pay high taxes. And now their investments are gone. The rich aren’t rich. So the only people left to tax are people like you and Esteban. Who can’t buy cabbage. Blood from a stone, as Great Grand Man put it. What else is there to do? Photocopy the money.”
“Never forget where information comes from, puppet. I wouldn’t accept everything your great-grandfather says as gospel. He’s liberal on social issues, but wealth always pulls people to the right—because they can’t help wanting to keep it. Everyone has an agenda.”
The patriarch is the main source of family conservatism.
“Carter. I will let you in on what isn’t a secret to any housewife who’s bought a cucumber. The American dollar is worthless now not because of the rate spike, and not because of crashing on the international currency exchange, and not because of the bancor. It is worthless now because it was worthless before.” “That’s melodramatic.” “Not melodramatic—dramatic. In the hundred years following the establishment of the Federal Reserve in 1913, the dollar lost 95 percent of its value—when one of the purposes of the Fed was to safeguard the integrity of the currency. Great job, boys! Ever wonder why no one talks about millionaires anymore—why no one but a billionaire rates as rich? Because a man who had about ten grand in 1913 would be a millionaire a century later. Hell, everyone’s a millionaire these days, every halfway solvent member of the middle class. And the majority of that currency decay is historically recent. Why, the dollar lost half its value in the mere four years between 1977 and 1981.”
The academics are the ones who really go at it. Here are the boring Keynesian professor and his exciting Thomas Piketty-like colleague at a dinner party:
“Morally, your money does belong to everybody,” Ryan said. “The creation of capital requires the whole apparatus of the state to protect property rights, including intellectual property. Private enterprise is dependent on the nation as a whole for an educated workforce, transportation networks, and social order. No country, no fortune.”
“I’ll grant you this much.” Tom was making an almighty effort to remain affable, for which Avery was grateful. “’Kay, for the last several years inflation has bounced between 3 and 4 percent. I realize that to experts like you folks, I’ll sound dumb as a coal shovel. But the figure I tripped across the other day came as a shock to me: with 3 percent inflation, the dollar halves in value every twenty-three years. That’s from Fed money printing. So when I don’t control what ‘my’ money is worth, maybe it isn’t really mine in the first place. At best, it’s a loan. Which Krugman can zap into ashes while it’s still in my pocket, like a superhero.”
“Better everyone is somewhat less well off than we keep tolerating the grotesque economic disparities of the last thirty years,” Lin Yu said. “As Americans, we can return to first principles. This is a chance at reboot and rebirth. A chance for transformation and redemption. An opportunity to eschew corruption, and cronyism, and inequity, and division, and re-create this country from the ground up. To be the United States again, to live in a united state. To restore this nation to the egalitarian utopia the founding fathers envisioned. We should all be proud to be participating in this watershed.”“Better everyone is somewhat less well off than we keep tolerating the grotesque economic disparities of the last thirty years,” Lin Yu said. “As Americans, we can return to first principles. This is a chance at reboot and rebirth. A chance for transformation and redemption. An opportunity to eschew corruption, and cronyism, and inequity, and division, and re-create this country from the ground up. To be the United States again, to live in a united state. To restore this nation to the egalitarian utopia the founding fathers envisioned. We should all be proud to be participating in this watershed.”
Eventually the professor debates with the teenagers:
“The national debt was bound to come to a head eventually,” Nollie held forth on her third glass of wine. “It was just hard to predict when. And prophets too ahead of their time are always ridiculed. Take population. In my teens, the species was allegedly reproducing itself into extinction. Last time I checked, the human race was still here. Now we’re closing on nine billion—a tripling in seventy years. But what if the ‘overpopulation’ hysterics were right, just too soon? Same with debt. Twenty years ago, doom-and-gloomers were foaming at the mouth about excessive borrowing. Nothing happened then, either—until a year ago, when everything happened. Familiar with complexity theory? It helps to explain why everything can be fine for a long time and then go to hell all at once.”
Avery had tried to tolerate her husband’s self-importance about “his work,” some vital economic analysis without which the world would fall apart. The world having already fallen apart, her tolerance had morphed to contempt. In retrospect, it seemed pretty rich for her whole family to have none too subtly dismissed her PhysHead practice as quackery, when Lowell’s whole field had been exposed as far dodgier hocus-pocus; at the worst, Avery’s cures merely overpromised, while Lowell’s gang of charlatans had wreaked nationwide havoc.
“I wouldn’t write off the United States just yet!” Lowell said. “See the Dow is climbing back up, Goog? What’d I tell you!” “It’s only going up in dollars,” Willing said from the coffee table. “What else is it supposed to go up in?” Goog jeered. “In a hyperinflationary economy—” “Whoa, hold on there, Willing,” Lowell said. “Hyperinflation is a technical term. In my field, Philip Cagan’s definition is broadly accepted: at least 50 percent per month. We’re nowhere near that. In the 1920s, German inflation was 30,000 percent, and Serbian inflation was 300 million percent. In Hungary, after the Second World War? It was 1.3 times ten to the sixteenth—literally beyond your imagination. No comparison.” “Sorry,” Avery mumbled to her sister. “I think Lowell misses teaching.” “In a high inflation economy, then,” Willing corrected, and it was difficult to tell who was more patronizing to whom, “all assets seem to appreciate, including stock. But the gains are false. In bancors, the market continues to drop.”
“It’s the usual GOP austerity blunder,” Lowell said. “Because this is a time to pump up government expenditure. Invest in infrastructure, like a second New Deal. Reinvigorate America’s industrial base, and reduce the need for imports.” It occurred to Avery that her husband needed to get out more. His familiar economics platitudes failed to connect with the rampaging crowds on the Mall, the encampments on the Potomac, the numerous cars on the interstate on the trip to New York with mattresses and bundles of clothing lashed on top, like a modern-day Grapes of Wrath. She had the same sensation listening to press conferences from the White House. The administration went through the motions of being the American government, and saying the things that American officials say, but the exercise had an air of imitation—the studied intensity of tots who cook pies with mud.
The aunt from France and the teenager try to sum it all up:
Full post, including comments“To have that much power and let it