A Policeman's Lot is not a Happy One

Blog 35  A Policeman's Lot is not a Happy One

There have long been two types of police force.  1. what we might call "democratic police" to protect the demos, the people, from the law-breakers, and 2. what we should call "political police", to protect governments from their people.

Democratic police. Political police.

In the increasingly divided societies we are seeing in the daily news this century (Syria, Egypt, America, are examples), the second function - protecting the government from the people - sometimes looks like the more important one

Governments representing a minority set of their people have gained power and claimed the "mandate" to implement a program representing only their minority constituency. Examples are the Muslim Brotherhood in Egypt, the Harper Conservatives in Canada, and possibly a deeply divided America after the current election. This is not democracy.

Such regimes are prone to expanding their Type 2 police power.

But figures from the US also tell of the rise of a third kind of police - police who are hired by private individuals and corporations to protect them, presumably from both governments and people. These private or contract police now outnumber public police in America.

We are not surprised, believing as The Cogs Blog does, that power draws money, and money buys power, and power draws...


power








money

The most significant division in many nations and across the globe today is the division between the rich ("the 1%") and the rest of the eight billion earthlings. A recent column by an investment commentator, using not the 1%, but the .01%, for the very, very rich, observed that "the billionaires are now drawing their wealth from the millionaires."

Seems like the wealth distribution is so lop-sided that the great majority of mere "people" aren't worth exploiting. But, of course, you still need your own police force to protect you from  --  well, just in case.

(Pssst - an aware, enraged population, or a pesky tax-collecting government?

The columnist also noted that the current wealth inequity is now.  greater than it was in 1929 (before the Crash). So?


But, let US conclude more brightly, with   

 "The Policemen's Song"

WHEN A FELON'S NOT ENGAGED IN HIS EMPLOYMENT (his employment)
OR MATURING HIS FELONIOUS LITTLE PLANS
(little plans)
HIS CAPACITY FOR INNOCENT ENJOYMENT 
(-cent enjoyment)
IS JUST AS GREAT AS ANY HONEST MAN'S
(honest man's.)

OUR FEELINGS WE WITH DIFFICULTY SMOTHER 
(-culty smother)
WHEN CONSTABULARY DUTY'S TO BE DONE
(to be done)
AH, TAKE ONE CONSIDERATION WITH ANOTHER
(with another)
A POLICEMAN'S LOT IS NOT A HAPPY ONE.

From The Pirates of Penzance  W.S. Gilbert, 1879

for more verses go to lyricsplayground.com/alpha/p/policemanssong.shtmi

Blog 34 Fred and Franny, Inflation and the Price of Toothbrushes

Blog 34  Fred and Franny, Inflation and the Price of Toothbrushes

Your blogger re-read Blog 33 and thought it was not only unfunny, but, as an explantation of lenders' and borrowers' different attitudes towards inflation, it was somewhat thickish reading. (He might add, he was not the only reader who expressed that thought.) But that is not why you have had no postings for a month.  Not sulking, just resting.

So, let me introduce you to - well let's just call him Mr. Fred Fewster. Mr Fewster is a nice guy. He lends his friends money. But he gets a little obsessive over bargains. For instance, when he saw his brand of fancy toothbrush - regular price, $4.89, on sale for $4.29, he bought 10 of them. On second thought, he went back and bought 6 more. Got a feel for Fred? 

The same week, he loaned a young friend, a struggling student, $10,000 to pay for her last year at college. He did not charge any interest. Franny was the daughter of a friend. She was effusively grateful. Got a feel for Fred?

So Fred brushed his teeth, and Fanny finished college, got married, had children, and a career. Fred used up his sixteen toothbrushes at the rate of one a year.

Only then, did something remind Franny of the debt. She paid it off at once, with appropriate apologies.

Fred himself had also forgotten the loan. But it was time to buy some new toothbrushes. This time it cost him, with 16 years of inflation averaging 3% a year, exactly $6.89 per toothbrush. That was a sale price, of course.

So for lender Fred, toothbrushes were $2.60 more expensive than the last time he bought some. At the latest price he could get only 10 for the price he had paid for 16, sixteen years previously. If Fred had been a banker, that would not have been good business. Interest foregone on $10,000 for 16 years at say 3%, and an equal percentage of inflation loss on the toothbrushes..

Fortunately, friendly Freddy was not a bank. Just a generous friend of the family. 

Who liked to book his dental care well in advance.

Dad, why does Mr. Banks complain of inflation?

    He doesn't want to lend out "good money" and be paid back in "cheap money".

I still don't get it

    Oh, well.

33 Will That Be Cash or Credit ? Part 2

BLOG 33   Will that be Cash of Credit?  Part 2

Some thoughts on the disappearance of cash. Random order.

The move to a cashless society world-wide is an  offensive by the global banking system to take the power of creating money totally away from national governments.

The lending class, fronted by the banks, have long argued that governments cannot be trusted to control the issuance of money, even the minuscule percentage remaining to them (estimates set that at "probably less than 2%" of the total money in use in the world. Governments - the shrill voices of the fearful bankers insist - will create more money than is needed and the value of the nation's/world's money will collapse. That would be a terrible catastrophe. It would unleash a monster -- H.I.D.!


OK. I give up. Why can't I get that funny cartoon of Humpty Inflation Dumpty falling off the wall to upload?

Oh, there you are. Not very clear, though.



Well, read on.

So what's really wrong with inflation? Maybe we should first ask that cutting question, quo bene? who benefits? No, let's first ask who has most to lose. That answer is easy: those who have the most of the world's money.

So it depends on who you are. Different people are affected differently by inflation. 

In fact, it depends on two things. 1. How much money/wealth you have. If you have a lot, you may still be able to pay more for rent, restaurant meals, and your tailor, and rise above it all.

But if you have very little money/wealth - like most of the world's people - inflation may mean you have to do without food, or a roof, or (you middle class guys and gals)  without private schools for your children,  and a Fiat instead of a Ferrari.

2. Secondly, it depends on whether you are a lender or a borrower, because that brings interest rates into the picture.

So which do you prefer, high interest rates or low interest rates? (Think about that now. Your answer may certify which class or age group you belong to.) If you are a young working couple, looking to rising income, you may want to borrow money now. You grandfather, however, who has spent his lifetime saving for retirement at an expected return on savings of 6%, probably does not appreciate the current 2%.  So if he does give or lend you a down payment, gush a little.

To summarize all that in a diagram:

Preferred by                  Preferred by
 LENDERS             0     BORROWERS
                                 0
                                 0
                                 0
HIGH INTEREST   0      LOW INTEREST
                                 0
                                 0
000000000000000000000000000000000000
                                 0
                                 0       ,
LOW INFLATION  0      HIGH INFLATION
                                 0 
                                 0

Lenders prefer high interest rates, of course. Lenders also prefer low inflation, because inflation erodes buying power. They do not want to be paid back money that buys less than the money they lent. Makes sense.  

 So write down: "Lenders like higher interest rates, and lower inflation ."

For Borrowers, on the other hand, a little inflation is a good thing, especially if it means their wages increase. It could be significant, for instance, if wages have risen with inflation during the 25-year term of their mortgage.

So write down, "Borrowers like lower interest rates and higher inflation.   

OThat is, if they are as smart as you are, and have learned today's rambling Cogs Blog lesson. 

One final point: governments can and usually do create the money to  keep their economies stable -- without inflation. So don't believe all you hear about the benefits of the cashless society.

Blog 32 "Will That Be Cash or Credit?

Blog 32  Will that Be Cash or Credit?

Recent news item. Denmark is proposing to rule that cash is no longer legal tender for retail purchases. Norway and Finland are also discussing the idea. Sounds as if that great bankers' dream - the cashless society - is just around the corner. And in three nations with a reputation for being social democracies, no less. Maybe Denmark is to be another Greece. "You have to pick off the little ones first." 

The measure could be sad news for democrats around the world who have been watching the world-wide struggle between national states and global corporations for the world's wealth/power. 

Or maybe the lining is silver. I'll save that for the next blog..

If implemented the measure would mean citizens will have no cash money in their pockets. But they will have that little card (or maybe a mere blink into an eye-scanner will do it) to provide them with purchasing power - in bank-created rental money.

So no matter how much cash you have socked away, if cash is on its way out, you will have to use credit money, that unavoidable tax on economies, personal and national.  There will probably be a reasonable time period in which you can spend your cash before your government declares it worthless. After that, everybody will be a total borrower - for every cup of coffee or package of peppermints. 

So what about the bigger picture? It could be that the cashless society is inevitable. Statements of the  merits of it have been popping up like a barrage of trial balloons across the world. They say:

1. It will provide savings to merchants - in the costs of handling cash. Just swipe, and walk away with your bag of groceries. (They'll have to speed up that credit card transaction at the checkout. But that's a "mere  technicality").  Importance rating on a scale of 1-5  0.9

2, It will prevent tax evasion, With everybody's income and money assets recorded in  banks somewhere and accessible to government law enforcers, tax evasion will be a thing of the past!  Just think of all those celebrity tax-evaders we keep uncovering!  And how many more there must be!!  Importance rating (if it works out that way)  4

3. It will be good for government budgets, Less spent on items like policing and courts and jails. So there will be more resources to spend on other public goods, like pensions, healthcare, free education. U know, the usual public values everywhere. Or on reducing taxes, or (reach for this one) reducing the national debt!  Importance rating  3.5

Summing up:  the absence of cash will reduce crime. There will be fewer robberies when people have nothing to steal but the clothes on their backs. And it will be easier to identify "proceeds of crime". and to track and prosecute vicious money-laundresses, terrorists and other base criminals, and - need I repeat - tax evaders!

Cogs Blog Prediction: You are going to hear more and more of these arguments on talk shows, newscasts, from political spokesfolk, financial advisors and indentured economists. Be sure to watch which way your politicians sway.

So, unless..

Unless what?
Unless the new credit money-mechanism is controlled by government-owned banks!

I have more to learn, but  I believe Denmark already has a public bank, which lends to citizens.  Still, Danes carry the highest level of private debt among 24 OECD countries. Maybe that is why they have been a target for this cashless economy move.

All this bears looking at further. Next blog maybe.

Blog 31 Notes from History: of Horses and Men, Elephants and Donkeys

The Roman Emperor, Caligula (full name Gaius Julius Caesar Augustus Germanicus) is reported (probably falsely) to have made his favorite horse a Senator. The question still remains, was this idiocy or satire?  That is, was he really crazy, or simply mischievously clever at putting down the old aristocracy?

So does it matter today? Probably not, but history does repeat, and repeat. And, as philosopher, George Santayana, said, "Those who do not know history are doomed to repeat it."

We may be witnessing a historical parallel today without knowing it.

For instance, the irreversible decline of a great republic.

On March 15 in 44 BC, Julius Caesar returned to Rome, a great Republic, from a series of very successful foreign wars. He had written a whole history of his exploits and sent it back to Rome like weekly news bulletins. It made him very popular.

The old Republican ruling class had lost touch with a large, various, and unruly populace. Knowing the law of money, as we do, we might safely surmise that their wealth bought their political power and their political power increased their wealth .... Well, you know. Till there were only a few rich and a great many poor.

When the poplar Caesar started home, he just happened to have brought back with him a seasoned army. That gave him a certain political independence.Officials of the ruling Senatorial class had ordered the popular general not to come back into Italy. But he did. He crossed the Rubicon River, and Rome was never the same. 

We still use the phrase, "cross the Rubicon", to refer to a decisive action from which there is no turning back.

When the victorious warrior arrived back in the City itself, he was mobbed with supporters. They wanted to make him King!  King!!
For six centuries, "King" had been a bad word in Rome. The great Roman republic had been born out of a successful revolution against their oppressive foreign kings.

Something like the American Republic, you know.

Well, they did not get Julius Caesar for their king. A group of Senatorials, including some of his good friends, publicly stabbed him to death.

But 17 messy years later, his adopted son/nephew, Octavianus Augustus, became the first in a long line of Roman emperors.

Augustus did not call himself King, but "First Citizen". Good PR department, I'd say.

The Republic never recovered.

A divided society, a wide gap between rich and poor, wealth, political power, military power.  Hmmmnnnn.

Those who don't know history...

Blog 30 Power Play

Power

Money

Blog 30   POWER PLAY

One of my favourite places is New Zealand. Not primarily because it was the first national state to experience the Neo-liberal destruction of the post-war welfare state, but because New Zealand has partly recovered from that public catastrophe.

In 1994, a new Labour government was highjacked by disciples of the Chicago School of Economics, and among the things done in the next four years was the privatization of publicly-owned infrastructure. In 1998, a big lesson was learned. With credit to Wikipedia, here's the story.

The 1998 Auckland power crisis was a five-week-long power outage affecting the central city Auckland, New Zealand. At the time, all of downtown Auckland was supplied with electricity by Mercury Energy via four 110 KV power cables originating from the national grid at Transpower's Penrose substation, with two cables each connecting to two central city substations at Liverpool Street and Quay Street. The two cables connecting to Quay Street were 40-year-old gas-insulated cable that were past their replacement date. One of the Quay street cables failed on 20 January, possibly due to the unusually hot and dry conditions, although this did not warrant a crisis; the three remaining cables could still supply the central city. The second Quay Street cable failed on 9 February, leaving only the Liverpool Street cables supplying the city. Due to the increased load from  the failure of the first cables, these remaining two cables failed on 19 and 20 February, leaving the entire central city supplied by a single 22 kV cable from Kingsland, resulting in about 20 city blocks (except parts of a few streets) losing power. Queen Street was almost deserted for the first few days, as few businesses could operate. Some brought goods out onto the street to sell, but heavy rain in the first week made that impractical. Generators were brought in from around the country to power essential services and some businesses. These made queen Street a very noisy place and thus deterred customers.

In the five weeks it took to restore the power supply, about 60,000 of the 74,000 people who worked in the area worked from home or from relocated offices in the suburbs. Some businesses relocated staff to other new Zealand cities, or even to Australia. The majority of the 6,000 apartment dwellers in the area had to find alternative accommodation. Temporary power was supplied for a while from large container ships at the port supplying power to the CBD grid

The old gas cables were found to be repairable and were put back into service, but were restricted to 30 MVA capacity. The newer oil cables were irreparable, so to restore full supply to the city, a temporary 110 kV overhead line was constructed along the rail corridor between Penrose and Liverpool Street.

Subsequent public inquiries into the causes of the outage blamed two things - failure of components used beyond their replacement date, and "failure of governance." Translated, "failure of governance" means the directors of the recently privatized electric corporations were not technical people, but were solely focussed on serving their constituency - the shareholders. That is, making money for dividends.

The final lesson of the blackout I have found well summed up by

Sharon Beder, University of Woolongong, Australia:

"Electricity is not a commodity that can be governed by market forces. It is a service that is essential to human welfare and economic prosperity, and it needs to be controlled by those who place public interest ahead of commercial imperatives."

Let me conclude with two quotations offered in the New Internationalist article, "Ten Economic Myths that We Need to Junk.:

"The myth of private-sector superiority has three components that feed off and reinforce one another. First, that the private sector is always dynamic and best; second, that the public sector is costly and inefficient, and third, the conclusion that everyone benefits from the continual incremental privatization of the public sphere. All three elements are false." Andrew Simms British author.

and,

"Privatization means you take a public institution and give it to an unaccountable tyranny. Public institutions may have many side benefits. They're not for profit. They may purposely run at a loss because of the side benefits. So, for example, if a public steel industry runs act a loss it's providing cheap steel to other industries. Maybe that's a good thing. Public institutions can have a counter-cyclic property. So that means that they can maintain employment in periods of recession, which increases demand, which helps you to get out of recession. Private companies can't do that in a recession. Throw out the work force because that's the way you make money.  
Noam Chomsky, in the film "The Corporation."

So Ontarians, what can you do to offset the increase in your hydro bills?  (Remember those dividends.) Or to compensate for the inconvenience of longer blackouts, especially in those winter storms, where your TV news (when you can get it) shows your heroic public power workers labouring long days and nights to get the power flowing?

Can't help you. Your new neoliberal government has three years to go.

Maybe, after the election of the next government they might do as New Zealand has done, recover some of your public power ownership.

Or, for now, if you are a well-to-do opportunist, you could buy some of the newly-offered stock. Toronto Stock Exchange. Symbol (H).  Easy to remember.

"The Economy is Slowing." Part 2

Blog 29  "The Economy is Slowing,:  Part 2

Blog 28 had a diagram representing money moving through four zones. It named the functions of each zone.

1 Government     (tax and spend)

2 The Economy    (produce and exchange goods & services)

3 Banks
    i.    create money;
    ii.   lend money;
    iii.  collect interest on money lent;
    iv.  pay taxes;
    v.   pay dividends to shareholders

4 Shareholders, who own the banks and other corporations, and  receive dividends. They also pay the unavoidable taxes.

Now I have made the point that money to keep the economy moving can be injected by both governments and banks.

Elsewhere I have made the point that bank-created money carries a burden because interest has to be paid on it. The banks do not create the interest; it has to come out of the economy. So government money goes further and stays in play longer because it has no interest strings pulling it back out.

                   No, this is not a chicken with a house over its head. Read on.



Let's take another look at that word "moving".  It makes a significant point about money in the economy.

For this I like to picture a fancy cuckoo clock, with little figures popping out every quarter-hour, displaying a little hip action to entertain you. In my imaginary clock, however, there is a knob to turn up the speed of the actions. Turn it on high, and watch those figures dance through a whole week on the clock - in half an hour!

Money is like that speed-knobbed cuckoo clock. So if you need money to make the economy go, you have two things to consider: the total amount of money available, and the speed at which it changes hands.  In the jargon of economists the second is called "velocity".)

You can have a lot of money out there, but if it is not being spent  back - whether it's the puny jar behind the microwave, or the billions of dividend dollars/yen/francs  which the richest of the earth's citizens divert from the real economy to buy up more wealth-producing assets -- well, it's a losing battle if the real need is to prime a slumping economy.

The usual, and wrong,  process of trying to escape a dismal slump is to turn to governments and plead for public austerity. The right response of government on the other hand, is to pour money directly into the real economy in a way that promotes a rapid exchange of money ("velocity"). For example, by direct lending/granting of money to young people to buy and furnish new houses. What governments are usually bribed, bullied or bamboozled into doing, however, is to give banks money (taxed or, usually, borrowed). and beg the banks to lend to young people to build and furnish houses. This is the slower and costlier ("private") way to do it.

Same option with government direct spending to build or repair bridges, highways, harbour facilities, power lines - where most of the wages are quickly spent and circulate throughout  the economy.

Why have governments around the world gone further and further into debt over the last forty years?. Because of Myth #5: "The private sector is more efficient than the public sector."

We must ask, "More efficient at what?"  Not at moving the economy, keeping workers fed, highways paved and hospitals and schools open. No. But - because of those little financial devices  called interest and dividends - the private sector is better than government at extracting money from the productive economy.

It is time to see that governments are more efficient in achieving the goals of public good. Look for that in Blog 30.

A little hint: the next blog will make a short observation on privatizing public services, with a glance at the New Zealand experience and the Ontario provincial government's current sale of shares in its publicly-owned hydro-electric company.

Till then, turn your lights off and go to bed early.