"A Hated Tax but a Fair One"

The cover article in the latest issue of The Economist argues in favor of death taxes. It's quite fair in theory: you don't need the money anymore and death happens to everyone. I said this a couple months ago just sayin.

Also what if it isn't fair is taxing income, consumption, and investment more fair? Gotta tax something some amount.

Happy Election 2016 Anniversary!

     Since it's "modern day presidential" to keep bringing up the election, here's a hot take: Jill Stein is a nationalist, populist, isolationist, protectionist, executive power loving, anti-science, anti-EU shill for Russia who's only ever led a protest chant. And yes, I’m still bitter about last November, when enough people who could’ve stopped Trump voted for Stein instead.

     Like Trump, Stein is an anti-EU Brexit supporter. Like Trump, she is anti-science, having recklessly raised questions as to the safety of vaccines (they’re safe), effectiveness of homeopathy (it’s not), dangers of Wi-Fi (none), and safety of GMOs (they’re safe – though our patent laws and oligopolistic market structure mean there are negatives involved, just not safety issues). Instead, she’s said that scientists studying these issues should prove they aren't harmful rather than be satisfied with finding no evidence of harm. Oddly for a “scientist” (she went to Harvard Medical School, but doctors strike me as more of skilled practitioners than scientists), she doesn’t seem to realize you can’t prove a negative.

     Like Trump, Stein has falsely accused the Bureau of Labor Statistics of faking unemployment data to make the economy look better than it really is. She also advocated removing the Federal Reserve’s independence, which would send markets tanking and, to take the example of governments with politicized Central Banks, would lead to a loss of monetary stability, a short-lived inflationary boom, and inevitable bust. In 2012, she advocated not increasing the federal debt ceiling, which would've caused the US to default on its debt despite having the ability to pay. Her excuse was that she supports raising taxes on the rich and reducing military spending (i.e. austerity) to keep from going over the limit. I somewhat agree in general with both of those proposals however, at the time it was literally impossible for that to be done before the debt ceiling was breached. And what was her plan for getting that through congress and what would she do if congress didn’t just go along with her wishes? She was either being disingenuous with the voters or is a fool. 

     Like Trump, Stein has cast doubt on the fact that Russia interfered in the 2016 election and suggested it is a conspiracy theory the democrats invented. She literally called allegations that the Russian plot to interfere in the 2016 election included her “fake news” and called for Hillary to be prosecuted instead. In fact the Russians did purchase ads on social media boosting her candidacy. There is presently no evidence she colluded, but she did have meetings with Russian officials at Russia Today (read Russian state media) sponsored events before the election. One such event was in Moscow when she was photographed sitting at Putin’s table along with Michael Flynn, the disgraced former national security adviser. Stein claimed there were no translators so she didn’t really talk to any Russians. This is bullshit. Putin, like many Russians, can speak English, as can his spokesman Dmitry Peskov, who sat right next to Stein. Why you lyin' Jill? Flynn got paid tens of thousands of dollars to be there; I wonder what Stein got out of it.

     Stein stated “I have never said that Hillary Clinton was better or worse than Donald Trump” and “they’re not different enough to save your life, to save your job, to save the planet.” Now, I could make all the obvious arguments why Hillary was better than Trump[1], but the only one that matters is that Trump is a fascist. To say there is an equivalency between him and a status-quo democrat like Hillary insultingly devalues every genuine accusation of fascism. Like Trump, it’s clear that Stein was at least one of Putin’s useful idiots, at most she too betrayed her country for personal gain. 

     So, again, thanks a lot everyone who thoughtlessly voted for her. Or perhaps it wasn't thoughtless, and Stein voters have, like Stein herself, more in common with Trump than they’d like to admit. Jill Stein is Trump without the bigotry. That makes her much better than Trump (I would never say something so stupid as “Stein is no better or worse than Donald Trump”), but still an overall awful candidate with terrible policies that will set our country back. Not to mention she has zero qualifications to lead combined with no ability to enact her agenda. Hillary was unfortunately the best option in the general election, and the only viable one, to oppose what Trump stands for. If having a populist-nationalist president mattered more than having one who wasn’t a white supremacist, then Stein was your candidate. And hey, you’ve actually gotten a good bit of what you wanted anyway.

Jerome Powell is Unqualified to be Fed Chair

     Jerome Powell has been nominated by Trump to be Chairperson of the Federal Reserve. Now for Trump, who is an ignorant dim-wit on a good day, Powell is not horrible. But he is nevertheless unqualified for the position. His most relevant experience is the fact that he is currently a member of the Board of Governors of the Fed, a job that he was, at the time, even more unqualified for. Powell doesn’t have any economics degrees. He has a BA in political science and a JD, so nothing relevant.

     Some may argue that his experience in Wall Street banks is relevant and qualifies him for the job. But that’s like saying my experience in economics qualifies me to be an investment banker; it just isn’t so. Business and economics are not the same, just as finance and monetary economics are not the same. The job of the Federal Reserve is to stabilize the macroeconomy. Banks only matter in this because they expand the broad money supply through lending and fractional reserve banking. If the banks all crash at once the money supply shrinks and so does the economy. But if the Fed cancels out the monetary effect of a banking collapse through expansionary policy, the banks are irrelevant in a macro sense. The ins and outs of finance don’t matter here just as the retail sector doesn’t, but the ins and outs of monetary economics do.

     Ben Bernanke is one of the world’s leading monetary economists, and indeed made similar arguments before he was Fed chair (while he was Fed chair he adopted the Board’s views as his own to minimize panic rather than admit the other idiots on the Board (many of whom were appointed by Obama) were keeping him from doing what he would have preferred). Paul Krugman said the same thing before he turned pop. You may think finance matters because the Fed manipulates interest rates. But interest rates are merely a symptom as well as a communication tool so that all the chumps, such as bankers, who would otherwise be hopelessly lost vaguely know what the Fed is saying. When the Fed says it is going to increase interest rates, it really means it is going to tighten monetary policy such that nominal interest rates rise to x level in the short run, and vice versa.

     Here’s an example of why Powell is unqualified: earlier this year Powell said below target / low inflation was a “kind of mystery” given low unemployment. Any economist should know that there is not a stable relationship between unemployment and inflation over time (see graph). In the 1930s there was high unemployment and inflation, same with the 1970s. 

     Here’s why it isn’t a mystery. There is what economists call the “natural rate” of unemployment. The labor market will tend towards this rate in the long run. Say you have a massive recession and tight monetary policy, or that monetary policy doesn’t loosen past a certain point because of a mistaken belief in the “zero lower bound”. Unemployment won’t stay above the natural rate forever, people will be willing to work for less rather than make nothing. The economy will add jobs and inflation will stay low because monetary policy isn’t expansionary enough for it to increase. That is the Great Recession recovery in a nutshell. It certainly isn’t a mystery that inflation has been slow to increase while the Fed has been tightening monetary policy, which it’s been doing ever since it started tapering QE3. This isn’t a mystery to me because I’ve studied economics. How should one run a bank? I have no idea, beyond lend at a higher rate than you pay depositors and supply a level of output such that MC=MR. 

     You know who is qualified to be Fed Chair? Janet Yellen. She's a PhD economist[1],and has one of the most successful records of a Fed Chair. Inflation is about at the Fed’s target, unemployment is low, and this expansion is almost the longest in US history. And she has, so far, succeeded where all other rich world central banks have failed: tightening monetary policy after the Great Recession. The Euro Zone central bank tried to and had to backtrack, as did Sweden's central bank. I know we would disagree on theory here and there, but you can’t argue with results. That she was not re-appointed is a break with recent tradition among presidents, since Reagan, of keeping the prior appointee for another term[2].

     In arguing that Powell is a safe pick, pundits point out how similar his voting record has been to Yellen [3]. So why replace her? In addition to Trump despising powerful women and having no qualms about politicizing independent institutions, Powell is a Republican former Wall Street banker seen as softer on bank regulation, which Trump’s Wall Street patrons like. What could go wrong? Powell’s lack of relevant knowledge won’t matter much in “normal” times, but he may be lost in a crisis, at the mercy of whoever he believes is making the strongest argument about a subject he is ignorant of.

     That being said, he is the least worrisome of the speculated contenders (besides Yellen), and certainly not the worst appointment Obama made to the Board.