Sean LaFreniere

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Sean's Political Dictionary
So that YOU know what SEAN is talking about when he opens his big mouth:

 

Conservative:

Date: 1831. From Latin conservare, for "to keep", "guard", or "observe". A Conservative relies upon family traditions and figures of authority to establish and maintain values. 

A Conservative puts group security above personal freedoms. 

A Conservative believes that successful use and maintenance of power proves God's favor for the government. 

A Conservative believes that social values, religious rules, and forms of governments may only be altered gradually. 

Stability and continuity are the goals of government.

 

Liberal:

Date: 1820. From Latin liberalis for "free". A Liberal uses reason and logic to set personal, social, and religious values. 

A Liberal places personal freedom above group security. 

A Liberal believes that governments rule by the consent of the governed. 

A liberal believes that governments may be changed or removed at the will of the people.  

A Liberal supports rapid change in the pursuit of progress and reform.

Freedom and Justice are the goals of government.

 

Note: a nation, and an individual, may move back and forth between these positions often. They rarely sum up a personality completely. And they should never be permanent blinders for anyone to view the world.

When a people succeed in a Liberal revolution, for instance, they often find themselves in the Conservative position protecting these gains. Similarly a person might have a Liberal view on public financial assistance and then move into a conservative position once these demands are met.

One might say that Affirmative Action is a prime example. At one point instituting Affirmative Action was a Liberal position, it was needed to reverse decades of discrimination following the end of Slavery. However, today the Liberal position might well be the ending of Affirmative Action, as it has largely completed its task and now stands as a stumbling block to truly moving the nation beyond race as a discriminatory trait. Meanwhile, the position of defending AA is now actually a Conservative stance (whether its so-called "liberal" defenders realize it or not).

Another way to think about this is that these terms describe a way of thinking about issues, not the positions on those issues. That is a Conservative might support a war because politicians they respect urge it, because the enemy scares them, and ultimately because it just "feels right". A Liberal might also come to support the war in spite of the position of authority figures and celebrities, not because it feels right, but because hours of research and consideration support the cause.

Neither is a "better way" of coming to a position, necessarily. Sometimes too much thinking interferes with a solid moral judgment, such as on the Abortion issue. And then other times only rational examination can skip over the emotional baggage and come to the most reasonable decision, as we see in the Abortion issue.

I realize this might be difficult for some people to accept after a long time of hearing party dogma on the issue. Personally I find value in BOTH positions. On some issues I am myself rather Conservative and on others I am quite Liberal. The same with the terms Radical and Reactionary, noted below. I found that stepping beyond these labels opened up my thoughts and cleared my head of a lot of bs.

 

Reactionary:

Date: 1840. From Latin reagere for "to act". A Reactionary uses government pressure as a means of containing and responding to changes in society.

 

Radical:

Date: 14th century. From Latin radicalis from radix for "root". A Radical supports social movements and political pressure groups as a means of affecting change in government.

 

The Right:

Date: early modern. The term comes from  English Parliamentary Rules; which place the party in power on the right of the Speaker. As the Conservatives held sway for a long time, the term Right came to be associated with the "Establishment" and thus with Conservative politics.

 

The Left:

Date: early modern. The party in Opposition sits on the Speaker's left. The Left came to be associated with labor movements, the lower classes, and socialist politics. It has also come to be associated with Liberalism. This was useful for Conservative politicians, and Socialists as well, during the 60's. But I find this to be a big intellectual and political mistake.

 

Capitol Goods:

Date: circa 1639. From the French from Latin capitalis for "top", used in French for "principal" or "chief". (1) : a stock of accumulated goods; especially at a specified time and in contrast to income received during a specified period (2) : accumulated goods devoted to the production of other goods (3) : accumulated possessions calculated to bring in income

 

Capitalism:

Date: 1877. An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

 

Socialism:

Date: 1837. From Latin socialis for "friend" or "companion" or "associate". Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods; usually there is no private property; in Marxist theory this is also considered just a transitional stage between capitalism and communism and it is distinguished by unequal distribution of goods and pay according to work done.

 

Communism:

Date: 1840. From French communisme, from Latin communis for "common". A doctrine based on revolutionary Marxian socialism and Marxism-Leninism in which goods are owned in common and are available to all as needed. It is the final stage of society in Marxist theory in which the state has withered away and economic goods are distributed equitably. In its only examples of practical application, in the USSR, China, and Cuba it became a totalitarian system where a single authoritarian party controls state-owned means of production and the people are enslaved in production geared to support the power of this party.

 

Note: in Marxist theory these three systems represent a sliding scale, with Capitalism on the Right, Socialism in the middle, and Communism on the Left. A nation was supposed to move from one to the other over time. However, in practice few systems in the world have ever been purely one or the other. Most national economic models employ some of all three.

While the US and Europe are considered the paragons of Capitalism, they both retain many Socialist elements. Both the US and Europe offer state sanctioned monopolies of public utilities. The American Postal Service is a state owned enterprise, as are the European aerospace entities. Europe offers state run healthcare, as do many American states, and both regulate the health industry heavily.

Through out history Europe and the US have also held some Communist elements. The common grazing lands of town centers and the great unfenced Western plains were both representative of these traditions. One might say that Social Security, Unemployment Insurance, and the Dole are also holdovers from our more communal days.

On the other hand, while China has long been a paragon of Socialism / Communism, it still has many elements of free enterprise. They allow small farmers and craftsmen to sell excess production on the open market, they have private telecoms and industrial companies, and now they have a stock market, the ultimate symbol and apparatus of Capitalism.

When one system or the other fails to serve a nation, many proponents argue that actually the system simply was not implemented purely enough. However, attempts to purify these systems require a heavy hand in government, education, and economic practice. And this has led to oppressive regimes and brutalized citizens.

 

Democracy:

Date: 1576. From Greek dEmokrati, from demos "people" + kracy "rule". A government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections; usually accompanied by the absence of hereditary or arbitrary class distinctions or privileges.

 

Republic:

Date: 1604. From Latin respublica; from res "thing" + publica "of the people". A government having a chief of state who is not a monarch and who is elected by popular vote.

 

Note: that the root of the word Democracy is Greek, while the root of the word Republic is Latin. These terms are NOT antithetical, they do not even derive from the same language.

In common use they both have come to describe types of Liberal governments, specifically the one is a type of the other. It is possible for a nation to be a Democracy, but NOT also a Republic. However, a nation that is a Republic is ALWAYS also a Democracy. A Republic is a TYPE of Democracy.

The UK is a Democracy, but not a Republic, because of the Queen. Ireland became a Republic only after it dropped from the Commonwealth and replaced the Queen with an elected President

 

Fascism:

Date: 1921 From Latin fascis for "bundle" or group. Last, but not least, is this term, which actually combines the economic system and the political system entirely. In this system the state and large corporations merge, the rights of the individual are subordinated to the glory of the State, and all dissent is suppressed. It often utilizes a racial or religious cause to motivate the people into giving up their rights in the first place. These states usually rise out of an economic collapse or hardship with high inflation and unemployment.

 
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Wednesday, November 28, 2007

The Decline of the Dollar

Dec 2 2004 PBS- News Hour - Ray Suarez interviewed Kenneth Rogoff, a professor of economics at Harvard University, and former chief economist and director of research at the International Monetary Fund, and Irwin Stelzer, director of economic policy studies at the Hudson Institute.

They discussed the fall of US currency relative to the Euro, and other "floating" currencies. They noted that the dollar had dropped 9% since that summer and 40% against the Euro since 2002, down to 3/4 of a "Euro-dollar".

The fall in currency was first blamed on the US budget deficit, how much Congress and the President spend every year compared to the tax revenue brought in that year. It stood at $413 billion that year.

The fall was also blamed partly on the "current account deficit," the trade gap between how much in goods and services the US buys versus what it sells to other countries. It was at about $600 billion in 2004.

The invited guests largely agreed on the causes and even the effects of this currency adjustment, but differed in how much they worried about it. Both agreed that the drop in the dollar would hurt US tourists in Europe and US companies trying to buy supplies, or even suppliers, from Europe.

However, they both acknowledged that American companies selling their own products and services to Europe are given a boost by the stronger value of the Euro. And European tourists will find NY and LA "on-sale" by comparison to home. US assets in stocks and real estate will also become much more attractive to European buyers.

And both conceded that Asian currencies such as the Chinese and Japanese are "pegged" to the dollar... meaning that their value is constantly adjusted by their governments to float in a constant ratio to the US dollar. So, financial institutions and the government in these countries will be far more stressed by a falling dollar than either US or Asian consumers.

Finally, both noted that we have had previous "adjustments," or drops, in the dollar. Under both Reagan and Carter the dollar declined by as much as 40%. In both cases we saw a rush of foreign investment in the US, the Japanese buying up movie studios and hotel chains. However, in both cases the outside investment actually led to growth in the US economy, with more cars and movies being made in the US for the global market than ever before, rather than any negative outcome.

On Dec 6, 20004 CBS news did their own cover story on the decline of the dollar. In their piece a broad panoply of economic theories were mentioned in passing and then dismissed with out explanation in favor of the alarmist theory of the author that "America was living beyond its means" and a warning that if China decided "to sell off a substantial part of this mountain of dollar assets, the dollar would collapse."

CBS then gave us a "simple" answer as to how we got into this "mess". CBS explained that: "The Bush administration cut taxes, launched two wars in what it calls the Greater Middle East, and is now bleeding lives and money in an Iraqi insurgency that shows no signs of abating."

Then CBS gave us the now almost standard comparison to the British and the Roman Empires. They noted that these once mighty currencies fell when their respective nations suffered economic pressure due to major wars such as WWII. At least CBS gave us credit for having "not yet reached that point, of course".

CBS ignored the major fact about world currency markets… namely that the Roman dinarius was based on the price of gold and the British pound on the price of silver. The US dollar also used to be based on gold, until WWII stressed this bond and Nixon removed it entirely in 1972. These currencies were then tied directly to their national coffers of precious metals, collected by tax and spent by the government (on wars).

Seen another way, currencies used to be judged by how much of an outside commodity it could buy. However, today the US dollar is a "floating" currency that is valued relative to the strength of the US economy - the largest and most consistently growing in the world. Today commodities are priced by the number of dollars they can buy, instead of the other way around.

What most people have been missing, or avoiding, is the true risk not to the US, but to Europe, of the "sliding dollar"...

After WWII the US did Europe the "favor" of taking all their local currencies off the gold standard and "floating" them against the dollar itself in the "Bretton Woods Accord". This allowed world markets to judge the currencies of Europe by the strength of their national economies relative to that of the US, regardless of the fact that Europe had emptied most of its coffers (of gold) during WWII.

After this agreement, when a European nation became economically distressed they could simply devalue their currency, by lowering their interest rates or printing more bills, this would instantly make their goods cheaper relative to the dollar.

This currency arrangement may have been instrumental to funding the rebuilding Europe after WWII and to avoiding profound political unrest due to the layoffs that would have been necessary if Europe (a Labor dominated economy) found itself unable to sell its goods (primarily to the US).

This currency arrangement also transformed the US dollar from a "failed currency" following the Great Depression (and in comparison to the British Pound - itself artificially damaged by Nazi counterfeiting during WWII) into the banknote standard of the black market and crazy dictators around the world.

In 1999 Europe tried to "grow up" by launching their own global floating currency, the Euro. Now the entire EU market (450 million consumers, more or less) is compared against that of the US (which is actually smaller at 300 million or so) and the interest rates and monetary policies of the central EU bank.

What many people do not realize, however, is that the Euro is not truly "floating". Instead it is a currency in a "managed float". That is, the European Central Bank has both the mandate and the capacity to raise or lower the currency’s value regardless of the national policies of member states.

Unlike in the US, the European Central Bank does not have "encouraging European economic growth" as a mandate at all. Since being launched in 1999 the central goal of the European Central Bank has been to beat the Dollar, to displace the US currency as the note of choice for foreign investors. To this purpose they have ignored high inflation and unemployment in the Euro Zone and even allowed member states to "cheat" by adopting economic and tax policies that are officially barred by Euro regulations.

The machinations of Euro-bankers, not any intrinsic economic or political factors in the US, are the primary cause of the dollar’s relative decline. The only other great "threat" to the value of the dollar would be the machinations of Chinese autocrats and bureaucrats. In each case, however, the US does not need to defend itself or its currency. International markets will likely police themselves.

In the unlikely case that China tried to "cash in" its mountain of US Dollars the international markets, not the US Federal Reserve, would automatically begin "devaluing" the currency as its supply went up. Thus for each bill the Chinese turned in they would be paid less and less and their own goods would become more expensive to their largest customers, the US.

Meanwhile, currencies whose floating values are managed are very expensive. Europe will find itself less and less competitive as its currency continues to rise. Their companies will be able to purchase their American competitors at a bargain, but they wont be able to sell their products to American consumers (or to the Chinese, since their currency is pegged to the Dollar, and for good reason, as noted before). Massive layoffs, street protests, etc will be high price for Europe to pay merely to recover from the embarrassment of Bretton Woods and WWII.

The entire point of taking currencies off the Gold Standard was to allow their currencies to reflect the strength of the entire national economy, rather than simply reflect the amount of some (often arbitrarily valuable) commodity held in that nation's "Fort Knox". This allows the markets to judge the value of the "company" rather than just the amount of capital it has saved up.

Taken as a whole the US remains the smart investors' choice. We have the most stable government and economy in the world. Changes in the legal climate come very slowly and the entire economy grows steadily year after year... Despite today's "recession" the US economy has actually produced growth rates of 2-4% annually since 1992. And our government has long proved the backer of property rights above all others.

Meanwhile, defense spending is probably not the cause of even an inch of the Dollar's decline. In fact, military spending today (4%) is much less than during the Cold War (15%) and much less than during WWII (50%). The US economy is tied in with the defense industry (as President Eisenhower feared) and benefits from increased government spending.

When consumers reach their limit of consumption (when the have enough TV's, PC's, and cars) the businesses that made those products will naturally lay off workers. Unfortunately this stops consumer spending, which leads to more layoffs. President Roosevelt understood that government spending, even into a deficit, was required to move the US out of such economic slumps (such as the Great Depression).

Unfortunately for Europe, their monetary regime values a strong currency above national economic or political health. Their governments are limited in their spending and interest rate adjustments in order to maintain a high Euro value. Again, this will limit the political and social strength as well as the economies of member states.

Despite the momentary "sexiness" of the Euro and the apparent "weakness" of the US Dollar I would put my money on the greenback over the long term. So too will other investors, including the Chinese. When the Euro falls a bit I will pursue my vacation plans over there... unless their train and sanitation workers are on strike again.


(Graph taken from the Heritage Foundation - admittedly, a right wing/libertarian think tank)

Stats:

US economy
Size of: $13.13 trillion (2006)
Average income per person: $44,000
Inflation: 2.5%
Unemployment: 4.4%
Population below poverty line: 12%

EU economy
Size of: 13.06 trillion (2006)
Average income per person: $29,900
Inflation: 1.9%
Unemployment: 7.0%
Population below poverty: 17%

Sean: Wednesday, November 28, 2007 [+] |
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