Musings on Current American Political Economics

Posted by James Bowery on Tuesday, 17 November 2009 07:02.

I’ve written enough about political economy here in the past to provide those interested with some background for what is to follow:  A political platform alternative to the citizen’s dividend that rides the current discontent by State governments in the US to directly devolve Federal programs to the States via a populist takeover of the House of Representatives.

So what do you make of all the noise out of GOP regulars jockying for 2012?

Clearly, they want to think that it is business as usual and, if they can restrict things to Democrats vs Republicans—locking out anyone but neocons from the Republicans, it is business as usual as far as they’re concerned.  The potential of mortgage foreclosure chaos notwithstanding, something they are missing is the fact that both parties are leaving an enormous “populist” well untapped during a time when they really cannot afford to be so arrogant. 

Every single district where one party dominates is vulnerable to a “populist” coming in on the opposite party ticket, without the “permission” of the party bosses.  Moreover, in areas where things are contentious, both sides are vulnerable because the party bosses simply are not capable of thinking along the lines that it really takes to win votes in these hotly contested districts. 

For example, we all know they can’t talk about immigration except out both sides of their mouths using vague terms like “no amnesty”, “reform” and “enforcement”.  No one will believe anything any boss-endorsed candidate promises about immigration restriction.  If immigration were the top thing on people’s minds that would be the key.  The problem is that the managerial class has so mismanaged things that there are more urgent economic matters confronting people.  Even if they got rid of all the immigrants tomorrow, the economy is structurally so unsound, and the managerial elite is so incompetent and uncomprehending that no one with any sense is confident that there would be enough jobs to go around for US citizens.

I’ve previously proposed the citizen’s dividend as a way for “populist” candidates to wrest control of the money from the managerial class and put it directly into the bank accounts of the citizens.  This would work.  It would win House seats and create tremendous pressure from the States to get the Federal middle man out of the redistribution loop—tremendous devolutionary pressures that would revitalize the laboratory of the States and give people a chance to make voting with their feet matter.  I’m convinced that once this competition for populations started, several reforms would be driven by the States, including replacing taxes on economic activity with taxes on nonhomestead property rights.  But even before that, it would provide exactly the kind of stimulus needed to create jobs creating what people demand.  Fears that the money would just go to Asian manufacturers can be easily addressed through gasp trade barriers.  (Warren Buffet suggests requiring importers to purchase balancing certificates from exporters.) There is absolutely no reason why this could not immediately terminate the economic crisis and start the inexorable devolution of power to the States.

The main problem with this approach is that people are so unaccustomed to localized charity—to vital communities in which there really is a sense of community—that they would fear being in such clear immediate and local control of their own social goods.

A compromise that may be more viable in the near term is to combine a less radical tax reform than net asset taxation, such as land value taxation, with a less radical decentralization of revenue that more directly promotes State sovereignty.

Lets take for one, nearly perfect, example my representative Steven King—a very “populist” and popular Republican who, because of his anti-immigration stands, has become a political pariah among the managerial class even as he has become virtually unassailable in elections.  This is a guy who many would think represents the next wave of “populist” politician.  The problem with Rep. King is that he really just doesn’t understand that the structural problem with the economy is due to Jewish virulence over-centralizing wealth to the point that demand has collapsed.  His mind simply cannot go there.  He may even be able to think about Jewish promotion of open borders, in private, but it is almost certain that he cannot comprehend the idea of wealth centralization being an economic problem, let alone it being due to Jewish virulence.  All of the wealthy guys he knows are problably big land owners in Iowa, most of whom don’t even like Jews very much.  He hasn’t the intellectual vocabulary to form thoughts like “These wealthy land owners are mere Jewish extended phenotypes helping to replace the the next generation of sons of Iowa, and their next generation of mechanized agriculture, with US-born Mexican stoop labor.” 

So what is Rep. King’s solution to the economic crisis?  Well whatever the big land owners say it is, of course!  Which means he supports the so-called “FairTax” which is really just a ridiculously high national sales tax with a paltry “prebate” intended to help families avoid food stamps.  In other words, Rep. King’s “populism” is pure delusion. His anti-immigration stance is undermined by his support by big agriculture and his economic policy is undermined by the influence of big agriculture.

So here’s the platform that can take out every single incumbant with even greater certainty than can a citizen’s dividend:

A 5% land value tax on holdings beyond the value of 40 acres of Iowa farm land replacing all other forms of taxation combined with the immediate withdrawl of US troops from around the world and the devolution of all Federal programs to the States under funded mandates.

The problem with the land tax platform in the past, that led to the 16th amendment, was that land ownership was wide enough and press control was centralized enough that it could be portrayed as attacking small land holders.  This turned a large constituency against land value taxation and led to income tax.

But now that the Scottish Clearances has been repeated in the American Clearances of the 20th century—and now that the Internet is here—things are different.

Candidates can basically say, “The guys that stole your family’s farm land pay taxes and you don’t even file!”  Even Steven King would be toast.  You might not even need to mention immigration because everyone would get it: “Yeah and those are the bastards that replaced our sons with Mexican babies!”

There would have to be a homestead exemption even if there were a citizens dividend because people are too touchy about property taxes given the history of being screwed over.  Farmland in Iowa is around $4000/acre, so 40 acres would be $160k for a homestead exemption.

How big a farm can you have and think going to an LVT is a wash?

Some quick algebra:

beforeTaxLandROI*criticalFarmSize*(1-incomeTaxRate) = beforeTaxLandROI * criticalFarmSize - ( criticalFarmSize - homesteadSize ) * landTaxRate

criticalFarmSize = ( homesteadSize * landTaxRate ) / ( landTaxRate - beforeTaxLandROI *  incomeTaxRate)

Before tax ROI is around 7% and land rents look to be between 4% and 5% of land value.

So for a homestead size of 160k, land tax of 5%, before tax land ROI of 7% and income tax rate of 27%:

(160000*.05)/(.05-.07*.27) = 257235

A quarter million dollars of land value or about 64 acres of prime farm land.

The top 1% own 40% of all wealth.  Median wealth per family is $70K.  1 Million puts you in the upper 5%.  A pretty good guess is that 2/3 of all citizens would have no land value tax at all.

That’s a simple majority right there.  Amend the Constitution as needed.

The LVT is a pretty good approximation to my prior net asset tax proposals and my only major objection to it as an immediate transition simplification is the fact that so much “wealth” has been in derivatives.  However I’m not sure how serious a problem that is anymore.  It may be deflated to the point that it can be ignored to get something through. 

So how much does 5% on 2/3 of land value represent?

Ignoring any changes in land value, it is going to be around $1.2 Trillion.

However, you remove all other taxes and the economy almost immediately booms, as the “dead weight loss” of land value taxation is zero—it doesn’t distort investment decisions.  As the economy booms the increased value falls largely on land values so you get a huge increase in revenue approaching 130% of current revenue and that’s on top of the $1.2 Trillion.

Current revenue is $2.5T so you can figure LVT revenues of somewhere above $4.5 Trillion.

You close the deficit and have a bunch left over.

OK, so now you bring home the troops, devolve all Federal programs to the States in funded mandates and you have basically a political slam-dunk.  The States will support you for sure.  2/3 of the people will support you.  Once you have the States administering all the programs you can gradually remove the mandates and let them keep their tax revenues.  If you do it right, 90% will support it, obviating the increasing calls for a Constitutional Convention.

Will the State GOP and Dem leaderships realize what they are being offered?

No.  They’re too identified with the party bosses.

Aren’t there any recognizable classes of political leaders that really give a &#$! about their States?

The governors must: Taking over the entire Federal bureacracy’s budget has to appeal to them.

The argument for the LVT revenue needs to be made more solid but these figures have been worked out before in some detail by a wide range of economists even including Jews like Milton Friedman.

But what of the pseudo-libertarians?  Aren’t they a factor?

No.

Of course, you have Jews like Peter Schiff riding the “Ron Paul” wave, claiming that they can increase wages _and_ immigration at the same time, which is nuts, but the support for guys like Schiff is pretty shallow.  All I get out of the Campaign for Liberty guys is public displays of loyalty to catch phrases when talking about substantive political economy ideas with them.  Yes, they are raising money but if you read my post “One Question for Ron Paul” you’ll see these guys don’t have their own ideology straight.  For most political movements, that doesn’t matter.  But these guys really aren’t well established enough to afford to be so reckless about their faculties of reason—not even with money flowing in.  They can make a few shows of force with guys like Peter Schiff and Rand Paul, but a few seats doesn’t make any real difference. 

Moreover, there is a serious rift within the campaign for liberty over the 10th amendment with the guys like Paul and Schiff basically trying to ignore it. 

Its only going to get worse.

And the whole thing about national territory not really being sovereign (merely a “jurisdiction”)—well—that’s another gaping hole in their ideology that basically says to all men:  “You know the deal we struck with you not to take the law into your own hands because we promised to defend your territory for you in exchange for your loyalty?  Well F*** YOU!”  They’re playing a gambit they can’t win.

This leaves the field wide open for a new political paradigm and an electorate desperate to vote it into office.

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Comments:


1

Posted by tc on Tue, 17 Nov 2009 21:25 | #

Sure, You got my attention, but what do You have offer to the crème de la crème?

A fair trial?...grin


2

Posted by Euro on Wed, 18 Nov 2009 16:32 | #

James,do you have any estimates on how much revenue the state would collect if your LVT proposal was instituted?


3

Posted by James Bowery on Wed, 18 Nov 2009 18:39 | #

A rule of thumb is that if you replace taxes on economic activity (income, capital gains, value added, sales, etc.) with a single tax on land value (sometimes called site value), you end up with a little under twice as much revenue within a few years.  And the growth is sustainable if you devolve appropriations to minimize public sector rent-seeking corruption.  If not, it will cycle much like the current system but with less robust recoveries (more rapid civilizational decline than would occur under largely private sector rent seeking).  In the limit, that means an allodial (inalienable) citizens dividend going, preferentially, to the posterity of the founders (as the founders should be the primary shareholders in any corporate entity).


4

Posted by Baldwin de Cormier on Wed, 18 Nov 2009 20:37 | #

A rule of thumb is that if you replace taxes on economic activity (income, capital gains, value added, sales, etc.) with a single tax on land value (sometimes called site value), you end up with a little under twice as much revenue within a few years.
-James Bowery

What would determine the rate of taxation on land value?


5

Posted by James Bowery on Wed, 18 Nov 2009 22:31 | #

I used 5% in the above calculation because it was the current land rent, but land value taxation rates are set to obtain maximum benefit for the posterity of the founders since the nation, as corporation, is simply a land trust set up by the founders.  In practice, what this means is that the taxation rate will be set to maximize the long term economic growth rate since it is an exponential and that term dominates the present value of the dividend stream.

Once you have removed rent-seeking from economic and political activities, you can expect a very high real growth rate.

PS: Seen in this light, immigration liberalization is essentially a stock dilution scam perpetrated by the managerial class against the citizens.


6

Posted by James Bowery on Thu, 19 Nov 2009 19:36 | #

An indication of the pressure governors are feeling is in this video of a near riot at UCLA over a 1/3 increase in tuition due to State budget problems.


7

Posted by Yu Goh Soon on Fri, 27 Nov 2009 10:09 | #

This tuition hike is scandalous for lower income Chinese and Korean Americans whose parents came to the US solely with a view to ensuring that their children would be highly paid professionals or business people of a type not well known back home and would take care of their extended family and marry a girl approved by parents.

Hell, it’s OK for our richer East Asians who shun academic slums like UCLA and can afford to replace the Whites at Berkeley or Stanford and maybe enjoy a trip to Harvard or Yale for postgrad work and meeting potentially important Jews, but we are also the US ‘s future, dammit.


8

Posted by Mark IJsseldijk on Fri, 27 Nov 2009 16:27 | #

This tuition hike is scandalous for lower income Chinese and Korean Americans whose parents came to the US solely with a view to ensuring that their children would be highly paid professionals or business people of a type not well known back home and would take care of their extended family and marry a girl approved by parents.

Cry me a river.  Now you know how intelligent lower income Whites have felt for some time.

Hell, it’s OK for our richer East Asians who shun academic slums like UCLA and can afford to replace the Whites at Berkeley or Stanford and maybe enjoy a trip to Harvard or Yale for postgrad work and meeting potentially important Jews, but we are also the US ‘s future, dammit.

You Asians really are full of yourselves, aren’t you?  The US’s future, he proclaims.  You will never match the achievements of the White man at his peak, though you may try, for you Asians are at best copycats.  We may be in decline but you will never reach the heights we did, never.


9

Posted by Mark IJsseldijk on Fri, 27 Nov 2009 16:30 | #

That’s right, I used “never” three times to make sure it penetrated your thick, conceited Mongolid skull.


10

Posted by Mark on Fri, 27 Nov 2009 16:58 | #

Mark IJsseldijk on November 27, 2009, 03:30 PM

That’s right, I used “never” three times to make sure it penetrated your thick, conceited Mongolid skull.

Don’t you think that’s rude, immature and trollish, Mark IJ?


11

Posted by Mark on Fri, 27 Nov 2009 17:02 | #

Some great ideas, James.  You sound like the Ron Paul of white nationalism.  You should make a political run.


12

Posted by Ivan on Fri, 27 Nov 2009 18:30 | #

So far, I like what I hear from Mr. Bowery, to the extent I understand what he is talking about that is. I am not a businessman and I have no formal economics education. I liked what I have learned through self education what Austrian school teaches about economics (in particular Von Mises and Rothbard). But I always had these nagging feelings that something very important is missing here, I always felt there is some Achilles heel in the whole Austrian economics. But, apart from being very suspicious about everything Jewish, it was always elusive, I couldn’t put my finger on it. Now, James got my attention. He bought me with this: The problem with Rep. King is that he really just doesn’t understand that the structural problem with the economy is due to Jewish virulence over-centralizing wealth to the point that demand has collapsed.  His mind simply cannot go there.  He may even be able to think about Jewish promotion of open borders, in private, but it is almost certain that he cannot comprehend the idea of wealth centralization being an economic problem, let alone it being due to Jewish virulence.. I am willing to listen to anybody who has a firm grasp of that the key problem is a political one, especially when what one has to say rings true. James’s understanding of the economic problem rings true to me (business people would probably understand him much better than I ever could), but the most important thing to me is the fact that his economic musings are inseparable from sober political considerations.


13

Posted by Fred Scrooby on Fri, 27 Nov 2009 18:59 | #

Mark IJ, great comment, but I think Yu Goh Soon is a guy on our side who is just being sarcastic for the post (“You Go Soon”).


14

Posted by Mark IJsseldijk on Fri, 27 Nov 2009 19:21 | #

Don’t you think that’s rude, immature and trollish, Mark IJ?

We all have our faults.

Mark IJ, great comment, but I think Yu Goh Soon is a guy on our side who is just being sarcastic for the post (“You Go Soon”).

The thought did cross my mind, but I wasn’t sure.  Now that I look at it, though, the name should have been a dead giveaway that this is just someone having a bit of fun. LOL


15

Posted by Mark IJsseldijk on Fri, 27 Nov 2009 19:38 | #

James, very interesting ideas.  Your vision here seems like a synthesis of some aspects of NS economics (net asset taxes and aims toward reducing rent-seeking/parasitic behaviors) with good old-fashioned Jeffersonian Americanism (neo-allodial thus sacrosanct property rights).  I must admit I wouldn’t have thought it possible.  Now, let’s see if we can put these ideas into practice as political apathy is our largest obstacle at this time.


16

Posted by James Bowery on Fri, 27 Nov 2009 22:22 | #

MI writes: some aspects of NS economics (net asset taxes and aims toward reducing rent-seeking/parasitic behaviors)

Do you have any cites on this tax law?


17

Posted by Desmond Jones on Sat, 28 Nov 2009 00:27 | #

but it is almost certain that he cannot comprehend the idea of wealth centralization being an economic problem, let alone it being due to Jewish virulence.

James,

Isn’t centralization of wealth adaptive period, with or without Jewish virulence? The Polish arenda system, or US robber barons to mind. It is much more efficient with Jews as the intermediary, as the Polish aristocracy discovered, but does it not operate regardless of their presence?


18

Posted by Q on Sat, 28 Nov 2009 00:46 | #

Bowery’s ideas are but a fantasy.  In reality, tax policies are THE contemporary means to steer the behavior of the masses. The people in power use tax policy to encourage or discourage how people conduct their lives….strike that. They use tax policy to try to DICTATE ALL BEHAVIOR!!! Who here thinks those in power are going to ‘see the light’ and thereby relinquish their power and adopt Bowery’s proposals? Anybody? ANYBODY???


19

Posted by James Bowery on Sat, 28 Nov 2009 01:02 | #

Desmond Jones writes: “Isn’t centralization of wealth adaptive period, with or without Jewish virulence?”

This is really two questions:

“Isn’t centralization of wealth adaptive?”

The degree of wealth centralization is the problem.  Rent-seeking produces unmerited wealth accumulation which does the worst thing you can do to an economy:  Corrupt the wealthy.  This is a classic failure mode of civilizations.

“Doesn’t wealth tend to centralize with or without Jewish virulence?”

Yes.  What Jewish virulence does, in addition to amplifying centralization, is make corrective measures far less viable.  The takeover of the academic study of economics by Jews is a perfect example.  You’re basically unable to think rationally about wealth centralization and the way to maintain merited accumulation of wealth as opposed to unmerited rent-seeking.  You end up with your choices being along a spectrum from Marx to Ayn Rand.

There was a short period of time during Henry George’s final days when the New York Jewish community got behind his ideas.  That is an interesting era that I would like to learn more about.  My first take on it is that Henry George was basically neutralized and then killed by his entry into NYC mayoral politics, paving the way for the misrepresentation of the land value tax leading up to the 16th Amendment and the Federal Reserve Act—but this is a tentative opinion based entirely on my Bayesian “prior”.


20

Posted by annandale on Sat, 28 Nov 2009 07:21 | #

James, 

I’ve been following your posts on economics with great interest for a while now and I’ve learned quite a bit from you.

I never studied econ formally, so I’ve been trying to study it on my own but I was wondering if you could recommend some kind of curriculum, or econ books/texts from foundational econ to more advanced econ that you would consider essential for a solid grounding in econ.  Perhaps the econ works that were crucial in forming your views on the subject.  I studied some of the Austrian econ, largely because of the resources they make available for free online, but I discovered some of the flaws you’ve criticized them for.

You’ve mentioned Henry George’s work before, and that definitely is on my must read list.  Though it does seem a bit advanced for me at this point.


21

Posted by Al Ross on Sat, 28 Nov 2009 12:01 | #

Avoidance of Neoliberalism has enabled Japan to minimise the adverse effects of globalisation on the nation’s EGI. Capitalism minus the (racially alien) Plutocrats sounds like a compelling proposition. http://www.paecon.net/PAEReview/issue23/Locke23.htm


22

Posted by James Bowery on Sat, 28 Nov 2009 17:05 | #

annandale, genuine libertarian thought is founded on individual sovereignty.  Individual sovereignty has a particular meaning that, if confused as it is by pseudo-libertarians, corrupts the foundation of libertarianism. 

We can construct a good foundation from the components of the phrase “individual sovereignty”, starting with “sovereignty”.  Amazingly, Wikipedia gets the definition of “sovereignty” more or less correct:

Sovereignty is the quality of having supreme, independent authority over a territory.

When qualified by “individual”, we can say simply that:

Individual sovereignty is the quality of individuals having supreme, independent authority over their own territory.

To our civilized minds this is an absurdity but it is easy to demonstrate that, except for eusocial animals, sexually reproducing species are naturally in a state of individual sovereignty.  Clearly, “independent authority” cannot mean that an individual calls forth his own mass-energy-space-time from the void.  These things are given. 

What, then, does “independent authority” mean? 

It is necessarily Malthusian:

In competition for reproduction, it is individuals, rather than groups, that battle for limited resources—the primary resource being “territory”, or an ecological domain over which bio-available energy is concentrated.

Humans, unlike other animals, are capable of entering into agreements with others.  Until such agreements are reached, the pseudo-libertarian’s concept of “ownership” simply does not exist.  They say that you own yourself by virtue of exercising control over your own body and that “non-aggression” is “axiomatic”.

No its not.

Aggression is axiomatic because aggression is part of nature.  You own your body only to the extent that you can defend your body from aggression in single combat—individual sovereign vs individual sovereign conflict over reproductive resources.

So, right off the bat, they deny individual sovereignty by denying individual aggression in their axioms.

Intellectual death before they start.

Get individual sovereignty correct and you can start to understand how genuine legitimacy arises from true individual sovereignty.  This culture of genuine individual sovereignty is, in fact, something that guided the evolution of Europeans—impeding the civilization of northern Europe until Christianization—and kept single combat to the death a part of that culture even as recently as the 1800s among the aristocracy and even more so on the American frontier.

The world is so hostile to that culture now that there is little real intellectual defense of it.  The closest I’ve found is in the writings of some quite peculiar folks that were in the Pacific Northwest who variously called themselves “The Valorians” and “The Society for Individual Sovereignty”.  They attempted to codify the culture upholding individual sovereignty in something they call the “Seven Points of Agreement Between Individuals”.

It is from the notion of a natural territory over which an individual, not a gang, is sovereign that is formed the “founders stock” of any society that claims to uphold “property rights” and collect fees to pay for the costs of upholding those “property rights”.


23

Posted by annandale on Sun, 29 Nov 2009 23:58 | #

James, 

Thanks for that great comment.  It was very informative and clarified a lot of the confusion put out by the Austrians and others.

Are there any economists, econ texts/works, books, etc. that you would recommend for a newbie seeking an in depth study of the subject?  Perhaps those that were formative in shaping your thought on economics?


24

Posted by James Bowery on Mon, 30 Nov 2009 21:35 | #

The reason I focused so much on individual sovereignty is that when you straighten out the foundation of libertarianism, the rest of the Austrian school makes sense.  Indeed, one can see the job of the Austrian school as creating a lot of very good economic writings as bait to trap people.  All of their noise about “jurisdiction” vs “national territory” goes away the moment you realize that the nation is really just a land trust set up for the benefit of and defended by the posterity of the founders—and that immigration liberalization is just a stock dilution scam perpetrated by management of the trust against the legitimate beneficiaries.  The Austrians are like a bunch of managers that have become very familiar with the corporate charter of the trust and its by-laws so they can find some sophistry (fraud) to convince the posterity to give up their birthright. 

If you keep in mind that a nation is a privately held land corporation with inalienable rights to its equity possessed by the posterity of its founders, then there is no problem:  They receive dividends from their founders stock and a vote under the bylaws.  The Austrian economists and the rest of the pseudo-libertarians, along with the entire managerial class, are fined for violation of fiduciary responsibility and, in the case of clear leadership in fraud, triple damages are collected.  The posterity of the founders are then compensated and the rascals exiled.

There is a similar con going on with the neoclassical economists.  They have very valuable theories such as modern portfolio theory, capital asset pricing model, arbitrage pricing theory, etc.

They’ve done a lot of beautiful and powerful work describing in great detail the structure of zero-risk profits or private sector economic rent seeking.  This is because they are essentially the think tank of the rent-seekers—folks who want more money simply because they have money.  Those formulae embody an excellent resource for anyone attempting to discover the ways the wealthy are corrupted by unmerited reward and, hence, how large the dividend stream should be for the posterity of the founders.  Of course, the neoclassical economists would be aghast at this since they know who their paymasters are and they most certainly cannot be described as the posterity of the founders of the US.

The recent explosion on Wall Street resulted from the rent-seekers and their think tanks buying their own material.  Basically, they tell the rest of us that what they are doing is investing where “investing” profits the investor for genuine economic improvement of the society.  They started believing their own material and things went up in smoke because there was no real economy left after all those decades of “investment”.

The people most likely to get away with the loot are those who have a lot of cultural history pulling similar “take the money and run” stunts:  What Henry Ford called “The International Jew” although as Yuri Slezkine says: “We’re all Jews now.”  While this may be an exaggeration, the more salient point is that some of us are more “Jew” than others in that some of us are more capable of profiting from centralization, collapse and migration cycles.


25

Posted by annandale on Wed, 02 Dec 2009 03:11 | #

James,

I see.  So I suppose you’re saying that the Austrians and neoclassicals are worth studying as long as some of the foundational issues (like individual sovereignty and rent-seeking) are clarified and understood?


26

Posted by James Bowery on Wed, 02 Dec 2009 04:41 | #

Yes, they need to be put in their place.  They will object to this, of course.


27

Posted by Ivan on Wed, 02 Dec 2009 06:10 | #

There is a similar con going on with the neoclassical economists…They’ve done a lot of beautiful and powerful work describing in great detail the structure of zero-risk profits(-James Bowery)

Zero-risk profits are indeed possible in con games only.

Back in 2004, I had a short email exchange with John Nash where I put forward an idea that the boom-bust economic cycle is for the process of transferring wealth from one group of people to another what Carnot cycle in thermodynamics is for the process of transforming heat energy into the energy of mechanical motion. Legalized counterfeiting and unlimited, virtually unsupervised by any governmental agency, control over money supply in reserve currency and credit flow in the globalized economy put the Federal Reserve System virtually in control of the economic boom-bust cycle, i.e. in control of a mechanism that can suck wealth (~energy) out of the financial markets, just like a steam engine can draw heat energy out of hot steam by means of Carnot cycle. I posed a question to the legendary mathematician: Is it feasible to come up with a non-constructive proof of existence of a winning strategy in financial market games? Understandably, it would be too much to ask of anybody for a constructive proof. If the house has being playing a sure game all along, it would do whatever it takes to keep the illusion of fair and square game alive. On the other hand, had somebody discovered a sure strategy in behalf of stock market trader, that person would want to keep it secret to prevent unavoidable, if shared widely, deterioration in its effectiveness and reliability. Nash replied succinctly with a touch of irony (italics his): Without divine guidance it is difficult to win at stock market games because there are other players also wanting to prophesy!

Who could argue with that?


28

Posted by James Bowery on Wed, 02 Dec 2009 06:16 | #

The thing is there really are “zero risk” profit opportunities so long as you have acquired the proper niches.  An obvious one is regulatory capture of currency trading where arbitrage cycles are available to the favored few who “own” the exchanges, one way or another.  We’ll, ok, its true they are risking the guillotine…


29

Posted by Ivan on Wed, 02 Dec 2009 07:04 | #

? ... and I suffer premonitions
confirm suspicions
of the holocaust to come ?

(“Two Suns In The Sunset” Pink Floyd)


30

Posted by annandale on Wed, 02 Dec 2009 08:04 | #

James,

Are all your economics writings hosted here at MR?  Anywhere else?

Ever think about writing a book or a new long essay (I’ve read your net asset tax essay, which is fantastic) on economics?



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Thorn commented in entry 'Reich and Rangel reveal the new anti-white, anti-middle-class agenda' on Sun, 29 Sep 2024 11:46. (View)

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Al Ross commented in entry 'Reich and Rangel reveal the new anti-white, anti-middle-class agenda' on Sun, 29 Sep 2024 05:28. (View)

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Thorn commented in entry 'What can the Ukrainian ammo storage hits achieve?' on Sat, 28 Sep 2024 11:07. (View)

Thorn commented in entry 'Reich and Rangel reveal the new anti-white, anti-middle-class agenda' on Sat, 28 Sep 2024 10:26. (View)

Thorn commented in entry 'Reich and Rangel reveal the new anti-white, anti-middle-class agenda' on Wed, 25 Sep 2024 14:49. (View)

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