Zero Sum Generates NO Wealth.
The economics of zero sum is a limited thing. Everyone knows some zero sum games, because we play them in the kitchen or the dining room: poker, gin rummy, bridge, etc. Any game where the winnings and losses are equal is a zero sum game. All the outcomes sum to zero. Even a Las Vegas game is zero sum if you add in the house take. Zero sum games neither create nor destroy wealth; they redistribute it. If a group of fixed membership, say all the wage earners in the country, plays zero sum games for ten years, at the end of the ten years, they collectively have what they started with, no more, no less. So how does an economy generate more wealth??

Benji’s in the Dark Are Illegal.
There is the Benji’s in the dark theory, explained to me by a colleague. When no one is watching, Benji’s multiply in the dark. But this is not to be trusted, because she could sight read the USA Commodities B Schedule and parse it in her head. (Hi Judy, wherever you are.) We’re talking special powers here. Also, the Secret Service frowns upon Benji’s multiplying in the dark. This could get you ten years of free room and board in a concrete facility. So let us try again.

The USA Circa 1936-to-1940.
Let me start anecdotal. I was born in 1933. I grew up in a west side Chicago neighborhood (Austin). I remember horse drawn carts selling vegetables, ice, and sharpening knives and scissors. My mother shopped at a local storefront grocery. When she wanted, say a can of peas, the proprietor reached up with a long extender grip and grabbed the can from way overhead. Well, it was way overhead for a five year old. Today OSHA probably would take one look at extender and can and close him down. No supermarkets. No frozen anything. (No freezers.) After the grocery we went to the fish market, or the meat market, and last to the bakery. If you were in school, your ride was a bicycle; probably a hand-me-down. Some folk had cars, but most made do with bus, elevated (EL or ‘L’ in Chicago speak), or streetcar. There were about 105 million of us in the USA. A TV set was a big deal. No cell phones; no mobile anything.

Function Comes from Form, or NOT??
You see something which looks different and behaves different. Example: You see a tow truck. It looks different than a normal pickup. There are two ways you can reconcile this. You can assume that the reason it can tow cars is the arm, chain, hook and winch it carries. The difference in function is due to the difference in morphology (shape). Most of us would without hesitation agree with this interpretation. You could also decide that some other hidden factor(s) made it a tow truck and these added implements were actually in the way. We would try to dissuade you of this, but now I have something sad to tell you. If you got sold this way of thinking young enough and by your parents, you are probably not going to fix. You have a form of Stockholm syndrome, and you are probably never going to fix.

Tearing the Wings Off the Bird!!
Another example, a nastier one, you observe birds fly. You love watching them. You see the wings flap all over and decide they must be in the way, so you tear them off. Instead of reading form as implementing function, you are reading all differences in form from your own preconceived image as bad. For the rest of us, the changes in form are enabling; for you they are disabling. Again, this is a head case we probably cannot fix.

Of course, you yourself don’t have this problem or you would not be reading this. But guard your head and the heads of those close to you.

Select Prime Grade Republican Geniuses

Republican Ron Johnson running for the senate as a Wisconsin republican is “glad there is global warming.” Maybe he likes swimming for his life. (Practicing the New Orleans Crawl??) He calls Social Security a giant Ponzi scheme. (What he wants to ‘Ponzi’ is probably all that Soc. Security money.) He thinks drilling in Lake Michigan is just fine. (I guess congressmen can afford bottled water.) He wants the corporations back in charge of the country. (You mean they’re NOT???) He doesn’t think we should beat up on BP. (After all, they have a smashing insanity defense.)

Sharon Angle, republican running for senate from Nevada, believes that “as your U.S. senator,” she’s “not in the business of creating jobs”. (We believe you Sharon!!) She has talked about Americans using “Second Amendment remedies” to protect themselves from this “tyrannical” government. (I didn’t realize that ‘we the people’ were tyrannical. We must mend our ways!!) She opposes abortion even in cases of rape and incest. Her advice to a 13-year-old who became pregnant by her father would be to turn a “lemon situation into lemonade” {Some lemonade!!}

Pat Toomey, republican from Pennsylvania for the senate is former president of the extremist Club for Growth. Rated by the American Conservative Union as being even more conservative than radical former Senator Rick Santorum (R-PA) He voted to give federal loans and benefits to corporations that move off shore and he supports privatizing Social Security. (Equal Aid?? Or do the ones that move offshore get a bonus??) He said that “the derivative industry has..done enormous good and has been an enormous force for positive change in our economy.” {I have never before heard anyone classify bankrupting the banks as “positive change”, but I guess we all have our private definitions.} Toomey wants to “take our country back” to the good old days when Wall Street wrote its own rules. Toomey opposes Wall Street reform, and as a trader was involved in derivatives, which many believe contributed greatly to the current financial crisis. By the way, by “good old days do you think he means the Great Depression??

Carly Fiorina is a republican running for the senate from California. As CEO, she nearly ran Hewlett-Packard into the ground, laid off 33,000 workers and was named one of the nation’s worst CEO s by Portfolio magazine. After being forced out, she collected a $42 million golden parachute. Endorsed by Sarah Palin as one of her “Mama Grizzlies”. Endorsed by Sen. Jim Inhofe of Oklahoma, who said Fiorina shares his goal of weakening the Environmental Protection Agency. Fiorina wants to “take our country back” to a time before environmental regulations. (I guess Californians have forgotten all about SMOG. What an opportunity to repeat history!!) She has pooh-poohed climate change concerns as worrying about “the weather.” (See Hot Weather Followed by a Substantial Chill.) on

There are lots more of these republican political geniuses.

Let us go back to economics. The economy of the United States is hands down the largest in the world. Moreover, it is the largest in the history of the planet.

Economies are the most complex things on the planet. They are effected by the weather (affecting crop production), by disease (workers get ill, farm animals die), by storms (hurricanes, tornadoes, blizzards, heavy snows), by foreign events (famine or trouble in a foreign supplier or purchaser), accidents (fires, explosions), by national mood (a saving mood / a spending mood), by international mood, by things almost without end. The economy is effected by the flow of money, both national and international. By treaties. By past shortages or overages. By future anticipations. By prohibitions (such as no more Freon 12.) By inventions, such as new cellphones. In short, everything physical dead or alive, sentient or dumb affects the economy. Economic growth results from partnership melds which deliver desired product. New product, such as iPhone, produces much growth. New product availability produces growth. For example, easier education funding results in more education being purchased, which in itself adds to the economy, and this additional education strengthens the workforce improving output.

Economists work desperately to understand all of this. Some limited progress has been made. Economists use a set of differential equations borrowed from physics. (The thermodynamic relationships.) There are economists skilled with these tools. Do not look for any Republican politicians skilled with these tools. Moreover, everything that happens has already been factored in. If the public expects the feds to change the interest rate, investors will immediately crank this in. When the change is announced, if the rate cut was less that expected (less than the anticipation), the market goes down. DOWN?? Sure. The investors had cranked a 1 point interest drop into their actions and the investors cranked this 1% into their calculation. Then the fed only went 0.5%. Its a mind game. If you can read minds, you can do very well. Expansion becomes contraction because of investor uncertainty. There is ALWAYS more money locking for a good safe return than can be placed. ALWAYS.

Uncertainty is what sinks the ship.

One of the problems with all economies is instability. The economy tends to feed on its own success or failure, cranking itself up or down. In engineer speak, there is lots of positive feedback built into the economy. Success can cause it to go red hot and inflate out of control. Failure can cause a downward spiral. Anything which builds stability in is a big help. A government program which has a flywheel effect can markedly improve stability. Social Security is such a program. A fixed amount is distributed every month, and promptly spent. Medicare also provides stability.

So now along come these Republican politicians, and they are going to pull things like wings, feathers, legs, etc. off of the bird which will make it fly better. Can anyone give me even a vague and stupid reason to believe this. This bird flies better than any other bird in the history of the planet, and these Republican pols are going to yank a few things off and improve it. They have no proof. None of them has ever actually improved a bird (improved an economy). They have written no papers. They have no computer simulations. You know, to believe them you have to be so stupid as to be certifiable. Before pulling the wings off, it would be good to know that the bird will still fly well and be stable.

All life insurance and retirement funds use early premiums to pay subsequent claims. This does not make them Ponzi schemes. The Tell of a Ponzi scheme is promising returns which can never be realized. (Like a 35% annual ROI.) Later principal is then misappropriated to pay earlier returns. The con artists say, “see, 35%”. Insurance and retirement funds are not Ponzi schemes. If they need adjustment, they can be adjusted. Most of these Republican pols wouldn’t know a Ponzi if it bit them in the ass. The rest of them want to run a Ponzi.

I would say, “exile them to Europe and let them pull the wings off some European birds, but they would probably start either a world wide depression or a world war. We could send them to Nevada and let them do nuclear processing at Yucca mountain (a favorite Sharon Angle project), but I have relatives in Nevada. I am open to suggestions provided no violence is done to the economy. Violence to these Republican pols is acceptable.

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