More Schizophrenia from the Pages of the Wall Street Journal

Peggy Noonan's latest column...

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What a crisis Europe is in, with waves of migrants reaching its shores as the Arab world implodes. It is the biggest migration into Europe since the end of World War II and is shaping up to be its first great and sustained challenge of the 21st century. It may in fact shape that continent’s nature and history as surely as did World War I.

It is a humanitarian crisis.

* NOT AS FAR AS I'M CONCERNED. TO ME... IT'S AN INVASION. (SEE: ROME, ANCIENT; FALL OF)

(*SMIRK*)

As Richard Haass of the Council on Foreign Relations notes, it will not soon go away, for two reasons. First, the Mideast will not be peaceful anytime soon and may well become more turbulent. Second, “The more that Europe responds the more it will reinforce the supply of migrants. Europe is caught.” If it doesn’t respond with compassion and generosity it is wrong in humanitarian terms;

* SO SAYS RICHARD HAASS!

(*SNORT*)

* FOLKS... WHO YA GONNA BELIEVE - HIM OR ME?!

(*GRIN*)

...if it does, more will come and the problem grows. “This is now part of the architecture,” says Mr. Haass.

* SO HAASS TAKES HALF THE EQUATION OFF THE TABLE AND BASICALLY PROCLAIMS EUROPE'S ONLY CHOICE IS CULTURAL SUICIDE. UH-HUH...

Three hundred eighty-one thousand detected migrants have arrived so far this year, up from 216,000 in all of 2014.

* BECAUSE THE EUROPEANS ARE STUPID AND ACCEPT THE "REALITY" OF THE RICHARD HAASS' OF THE WORLD. (NOTE: TAKE AWAY THE INITIAL LAUGH... THE "HA" IN "HAASS"... AND WHAT DO YOU GET?)

(*SNICKER*)

Almost 3,000 died on the journey or are missing.

* SO...? THE WORLD IS A HARSH PLACE. HOW MANY AMERICANS DIE IN AUTO ACCIDENTS EACH YEAR?

(*SNORT*)

The symbol of their plight is the photo of the 3-year-old Syrian boy, Aylan Kurdi, who drowned along with his mother and 5-year-old brother when their boat capsized near a Turkish beach. Just as horrifying is what was found inside a Volvo refrigerated truck stranded on the shoulder of the A4 highway 30 miles from Vienna in late August. Inside were 71 bodies, including a 1½-year-old girl, all dead of suffocation. They’d been left there by human smugglers.

* LET ME GUESS; NON-IRISH, NON-ITALIAN, PROBABLY NON-EUROPEAN SMUGGLERS.

* FOLKS... EUROPE NEEDS TO PUT A STOP TO THIS BY CLOSING THEIR BORDERS! LET THESE PEOPLE FIGHT FOR THEIR OWN COUNTRIES' SURVIVAL AS CIVILIZED POLITICAL UNITS! THEY SHOULD BE FIGHTING FOR THEIR FREEDOM INSTEAD OF FLEEING!

It is a catastrophe unfolding before our eyes, and efforts to deal with it have at least one echo in America, which we’ll examine further down.

According to the U.N. refugee agency, 53% of the migrants are from Syria, 14% from Afghanistan, 7% from Eritrea, and 3% each from Pakistan, Nigeria, Iraq and Somalia. Seventy-two percent are men, only 13% women and 15% children. Not all are fleeing war. Some are fleeing poverty. Not all but the majority are Muslim.

The leaders of Europe have shown themselves unsure about what to do.

* AND THIS SURPRISES ANYONE...???

(*SNORT*)

It is a continent-wide crisis that began in 2011, as Tunisians fled to the Italian island of Lampedusa. The following year, sub-Saharan Africans who’d migrated to Libya made for Europe after Muammar Gadhafi’s fall.

* Er... NOTICE... PEGGY CONVENIENTLY FAILS TO NOTE THAT IT WAS THE OBAMA ADMINISTRATION - OBAMA AND THEN-SECRETARY OF STATE HILLARY RODHAM CLINTON - WHO... AGAINST CLEARLY DEMONSTRATED CONGRESSIONAL OPPOSITION... ENSURED THAT GADHAFI WAS TOPPLED... WITH NO ONE TO TAKE HIS PLACE. (APPARENTLY WE LEARNED NOTHING FROM IRAQ... NOTHING...)

(*SIGH*)

Since then the European response has largely been ad hoc and stopgap. European Union President Jean-Claude Juncker has proposed a “permanent relocation mechanism” with EU members taking greater shares of the refugees, but it is unclear how exactly it would work.

In many EU nations there will be powerful push-back.

* YEP! AND I'M WITH THE "PUSHER BACKERS!"

Like the crisis itself the push-back will build.

* YA THINK...?!?! (I GUESS SUCH "BRILLIANT ANALYSIS" IS WHY PEGGY GETS PAID THE BIG BUCKS...)

(*JUST SHAKING MY HEAD*)

Europe is in economic drift. As this newspaper has noted, even Germany is growing at only 1.6% a year. Welfare systems will be strained. Youth unemployment is already high. In Britain the crisis could contribute to a vote to leave the EU outright.

* ONLY IF THE BRITISH PEOPLE ARE LUCKY!

(*HUGE FRIGGIN' GRIN*)

There are fears, which the elites take lightly, that floods of displaced people will “alter the cultural balance of the country forever,” as the columnist Melanie Phillips put it in the Times of London.

* Hmm... PERHAPS WE SHOULD BE READING MORE OF PHILLIPS AND LESS OF NOONAN.

(*SHRUG*)

The Gulf states have not offered a home to their Arab and Muslim cousins.

* I AM SHOCKED! SHOCKED, I TELL YOU! WHAT'S NEXT - GAMBLING IN CASABLANCA?!

Dutch right-wing leader Geert Wilders...

(*ROLLING MY EYES*)

* OR AS I'D PUT IT, "SANE DUTCH LEADER GEERT WILDERS..."

(*SPITTING ON THE GROUND*)

...this week called the wave of migrants an “Islamic invasion” in parliamentary debate, “an invasion that threatens our prosperity, our security, our culture and identity.”

* AS I WAS SAYING... "SANE."

A recent poll showed 54% of Dutch voters opposed to welcoming more than the roughly 2,000 refugees previously agreed to.

* SO 46% OF THE DUTCH ARE JUST PLAIN STUPID...??? (I GUESS SO...)

Hungary is building a fence.

(*ENTHUSIASTIC THUMBS UP*)

Reading the popular press of Europe you see the questions. Do we not have a right to control our borders? Isn’t the refugee wave a security threat? ISIS is nothing if not committed to its intentions. Why would they not be funneling jihadists onto those boats?

Many things could be done to ease the crisis. States such as Jordan and Lebanon work hard to help refugees in neighboring countries and need help. Humanitarian relief is needed for the internally displaced. Go after the human smugglers, patrol the waters, take in those who are truly fleeing war and truly desire to become a peaceful part of their new, adoptive homes.

* NOW, FOLKS... AS MANY OF YOU KNOW... EVERY YEAR RAND PAUL GOES OVERSEAS TO PROVIDE FREE MEDICAL CARE TO THOSE WHO CAN'T AFFORD IT IN PLACES WHERE THERE'S BARELY A HEALTHCARE INFRASTRUCTURE WORTHY OF THE NAME TO BEGIN WITH. DO YOU THINK 'OL PEGGY HERE VOLUNTEERS HER TIME...???

(*SPITTING ON THE GROUND AGAIN*)

But here is a problem with Europe’s decision-makers, and it connects to decision-makers in America.

Damning “the elites” is often a mindless, phony and manipulative game.

* OH... SURE... SO SAYETH ONE OF AMERICA'S MEDIA ELITES...

(*GUFFAW*)

Malice and delusion combine to produce the refrains: “Those fancy people in their Georgetown cocktail parties,” “Those left-wing poseurs in their apartments in Brussels.”

* Er... PEOPLE LIKE PEGGY NOONAN...

(*STILL LAUGHING*)

This is social resentment parading as insight, envy posing as authenticity.

* HEY... PEGS... CHECK OUT MY VACATION PHOTOS; I DON'T DO TOO BAD!

(*LAUGHING*)

* YOU ENJOY YOUR COCKTAIL PARTIES; I'LL CRACK A BEER AND WATCH FOOTBALL! (YOU FRIGGIN' TOOL...!)

But in this crisis talk of “the elites” is pertinent. The gap between those who run governments and those who are governed has now grown huge and portends nothing good.

Rules on immigration and refugees are made by safe people.

* YEP... (SEE! WHEN SHE'S RIGHT I GIVE HER FULL CREDIT!)

These are the people who help run countries, who have nice homes in nice neighborhoods and are protected by their status.

(*NOD*)

Those who live with the effects of immigration and asylum law are those who are less safe, who see a less beautiful face in it because they are daily confronted with a less beautiful reality — normal human roughness, human tensions.

* MURDERS... RAPES... ROBBERIES...

(*SNORT*)

Decision-makers fear things like harsh words from the writers of editorials; normal human beings fear things like street crime. Decision-makers have the luxury of seeing life in the abstract. Normal people feel the implications of their decisions in the particular.

* CORRECT!

(*SINCERE APPLAUSE*)

The decision-makers feel disdain for the anxieties of normal people, and ascribe them to small-minded bigotries, often religious and racial, and ignorant antagonisms. But normal people prize order because they can’t buy their way out of disorder.

People in gated communities of the mind, who glide by in Ubers, have bought their way out and are safe. Not to mention those in government-maintained mansions who glide by in SUVs followed by security details. Rulers can afford to see national-security threats as an abstraction — yes, yes, we must better integrate our new populations. But the unprotected, the vulnerable, have a right and a reason to worry.

* DAMN STRAIGHT!

Here is the challenge for people in politics: The better you do, the higher you go, the more detached you become from real life. You use words like “perception” a lot. But perception is not as important as reality.

(*THUMBS UP*)

The great thing in politics, the needed thing, is for those who are raised high in terms of responsibility and authority to be yet still, in their heads and hearts, of the people, experiencing life as a common person on an average street.

* YES... WE... er... COMMONERS...

(*LAUGHING*)

The challenge is to carry the average street inside you. Only then, when the street is wrong, can you persuade it to see what is right.

The biggest thing leaders don’t do now is listen. They no longer hear the voices of common people. Or they imitate what they think it is and it sounds backward and embarrassing. In this age we will see political leaders, and institutions, rock, shatter and fall due to that deafness.

* TAKING THE REST OF US DOWN WITH THEM...

 

(*SIGH*)

Chatting with Rolo and ODM...

An article from Zero Hedge...

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There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

* I DISAGREE.

* THE AUTHOR SEEMS TO PUT THE CART BEFORE THE HORSE, INCORRECTLY ARGUING THAT IT IS THE "RESERVE STATUS" OF THE DOLLAR THAT CAUSES CONGRESS AFTER CONGRESS AND PRESIDENT AFTER PRESIDENT TO ACT IRRESPONSIBLY AND ABUSE THE "PRIVILEGE." NO. HUMAN NATURE BACKED BY MODERN PRECEDENT IS BEHIND OUR NATIONAL RECKLESSNESS! TRUE... THE "DOLLAR WORLD" ALLOWS US TO GET AWAY WITH IT... BUT... ABSENT DOLLAR DOMINATION WE'D BE GREECE - NOT SWITZERLAND!

(*GUFFAW*)

* I CAN JUST "HEAR" ROLO REACTING AS HE READS THIS THAT "NO! WE WOULDN'T BE ABLE TO ACT AS WE DO!" TO THIS... I CALL "BULL$HIT." SELDOM DOES REALITY SWAY POLITICIANS FROM SETTING THEIR NATIONS ON A COURSE OF "FULL SPEED AHEAD; AIM FOR THE ROCKS!" THAT'S SIMPLY THE HISTORICAL RECORD.

(*SHRUG*)

* ANYWAY... THE AUTHOR CONTINUES..

The reasons are best articulated by Kenneth Austin, a Treasury Department economist, in the latest issue of The Journal of Post Keynesian Economics (needless to say, it’s his opinion, not necessarily the department’s). On the assumption that you don’t have the journal on your coffee table, allow me to summarize.

It is widely recognized that various countries, including China, Singapore and South Korea, suppress the value of their currency relative to the dollar to boost their exports to the United States and reduce its exports to them. They buy lots of dollars, which increases the dollar’s value relative to their own currencies, thus making their exports to us cheaper and our exports to them more expensive.

* ALL TRUE...

In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.

* YEP...

Though Mr. Austin doesn’t say it explicitly, his work shows that, far from being a victim of managed trade, the United States is a willing participant through its efforts to keep the dollar as the world’s most prominent reserve currency.

* ABSOLUTELY! (NO ONE IS ARGUING!)

(*STILL CHUCKLING*)

When a country wants to boost its exports by making them cheaper using the aforementioned process, its central bank accumulates currency from countries that issue reserves. To support this process, these countries suppress their consumption and boost their national savings. Since global accounts must balance, when “currency accumulators” save more and consume less than they produce, other countries — “currency issuers,” like the United States — must save less and consume more than they produce (i.e., run trade deficits).

* SOMETIMES.

(*SHRUG*)

* BUT THE U.S. - WE DELIBERATELY DRIVE DOWN THE DOLLAR. (AND WE SURE AS HELL DON'T DO SO BY "INCREASING NATIONAL SAVINGS!" JUST THE OPPOSITE, IN FACT...

(*SMIRK*)

This means that Americans alone do not determine their rates of savings and consumption.

* YEAH... WE DO. I MEAN I "GET" THE POINT - THE MACRO POINT - THE AUTHOR IS MAKING... BUT... I REJECT THE INEVITABILITY OF THE EQUATION. NO... OBVIOUSLY AMERICANS - AS INDIVIDUALS... AS A COLLECTIVE - DO NOT "ALONE" DETERMINE OUR RATES OF SAVINGS AND CONSUMPTION, BUT I REJECT THE NOTION THAT WE DON'T HAVE THE UNDERLYING ABILITY TO SIMPLY IGNORE WHAT WE'RE TOLD... DISREGARD THE "SIGNALS" OF THE FED AND TREASURE AND EVEN WALL STREET... AND ACT AS RATIONAL LONG-TERM THINKERS.

(*SHRUG*)

Think of an open, global economy as having one huge, aggregated amount of income that must all be consumed, saved or invested. That means individual countries must adjust to one another. If trade-surplus countries suppress their own consumption and use their excess savings to accumulate dollars, trade-deficit countries must absorb those excess savings to finance their excess consumption or investment.

* NOT QUITE SURE WHAT THE AUTHOR IS BABBLING ABOUT. TAKE CHINA FOR EXAMPLE. THEY'VE BEEN TRYING TO MAINTAIN TRADE SURPLUSES (SUCCESSFULLY - AT LEAST WITH THE U.S.) WHILE ALSO PUSHING FOR RISING DOMESTIC CONSUMER SPENDING AND DOMESTIC RISING STANDARDS OF LIVING. (NOW IT'S TRUE THEY HAVEN'T BEEN TOTALLY SUCCESSFUL... BUT THIS WAS THE POLICY.)

Note that as long as the dollar is the reserve currency, America’s trade deficit can worsen even when we’re not directly in on the trade. Suppose South Korea runs a surplus with Brazil. By storing its surplus export revenues in Treasury bonds, South Korea nudges up the relative value of the dollar against our competitors’ currencies, and our trade deficit increases, even though the original transaction had nothing to do with the United States.

* Er... SOMETIMES... AND SOMETIMES NOT.

(*SHRUG*)

* THE TEXTBOOK EQUATION SOUNDS REASONABLE... AND SIMPLE; THE PROBLEM IS... IN THE REAL WORLD IT HASN'T ALWAYS WORKED THAT WAY. MY GENERAL POINT: STRONG DOLLAR vs. WEAK DOLLAR IS DETERMINED NOT BY SOME STRAIGHT-LINE LINEAR EQUATION, BUT BY A NUMBER OF FACTS BOTH CONCRETE AND PSYCHOLOGICAL.

This isn’t just a matter of one academic writing one article. Mr. Austin’s analysis builds off work by the economist Michael Pettis and, notably, by the former Federal Reserve chairman Ben S. Bernanke.

* BUT... BUT... BUT... I THOUGHT WE WERE ALL AGREED - BEN S. BERNANKE IS A MORON!

(*HUGE FRIGGIN' GRIN*)

A result of this dance, as seen throughout the tepid recovery from the Great Recession...

* "RECOVERY..." HA! HA! HA! HA! HA! OH... THAT'S FUNNY...

(*SNORT*)

...is insufficient domestic demand in America’s own labor market. Mr. Austin argues convincingly that the correct metric for estimating the cost in jobs is the dollar value of reserve sales to foreign buyers. By his estimation, that amounted to six million jobs in 2008, and these would tend to be the sort of high-wage manufacturing jobs that are most vulnerable to changes in exports.

* Er... BY MY ESTIMATION IT'S FED, TREASURY, CONGRESSIONAL, PRESIDENTIAL, AND BUREAUCRATIC POLICIES - IDEOLOGY... THE PURPOSEFUL GROWTH OF THE WELFARE STATE - ETC., ETC., ETC., THAT HAS COST US JOBS.

(*ANOTHER SMIRK*)

* ASININE TRADE POLICIES... INSANE TAX POLICIES... COUNTER-PRODUCTIVE REGULATORY POLICIES...

(*SIGH*)

(*ROLLING MY EYES*)

* MUST I GO ON...?

Dethroning “king dollar” would be easier than people think. America could, for example, enforce rules to prevent other countries from accumulating too much of our currency.

* Er... WHY WOULD WE NEED "RULES" IN THIS BRAVE NEW WORLD OF THE U.S. DOLLAR NO LONGER BEING THE WORLD RESERVE CURRENCY?

* WHY WOULD OTHER COUNTRIES WANT TO STOCKPILE A NON-RESERVE CURRENCY? (AND IF THEY DID... WOULDN'T THEY END UP SPENDING THOSE ACCUMULATED DOLLARS HERE? AND WOULDN'T THAT BE GOOD?

(*BIT OF A HEADACHE*)

In fact, others do just that precisely to avoid exporting jobs. The most recent example is Japan’s intervention to hold down the value of the yen when central banks in Asia and Latin America started buying Japanese debt.

* AGAIN... IT'S NOT THE RESERVE DOLLAR THAT HAS DEINDUSTRIALIZED AMERICA; IT'S AMERICAN TAX POLICIES... TRADE POLICIES... REGULATORY POLICIES... AND SO ON AND SO FORTH.

Of course, if fewer people demanded dollars, interest rates - i.e., what America would pay people to hold its debt - might rise, especially if stronger domestic manufacturers demanded more investment. But there’s no clear empirical, negative relationship between interest rates and trade deficits, and in the long run, as Mr. Pettis observes, “Countries with balanced trade or trade surpluses tend to enjoy lower interest rates on average than countries with large current account deficits, which are handicapped by slower growth and higher debt.”

* HEY! I'VE BEEN CALLING FOR RAISING INTEREST RATES SINCE THE 1990's! I ANTICIPATED THE HOUSING COLLAPSE! THE AUTHOR IS PREACHING TO THE CHOIR!

Others worry that higher import prices would increase inflation.

* NO. HIGHER IMPORT PRICES WOULD STIMULATE DOMESTIC PRODUCTION - AND DOMESTIC JOB/ECONOMIC GROWTH!

But consider the results when we “pay” to keep price growth so low through artificially cheap exports and large trade deficits: weakened manufacturing, wage stagnation (even with low inflation) and deficits and bubbles to offset the imbalanced trade.

* WE DON'T HAVE LOW INFLATION. THAT'S A LIE. THE PAST YEAR'S OIL COLLAPSE HAS OF COURSE HELPED A GREAT DEAL... BUT DON'T LET THESE CHARLATANS GET AWAY WITH SELLING YOU A BILL OF GOODS.

But while more balanced trade might raise prices, there’s no reason it should persistently increase the inflation rate. We might settle into a norm of 2% to 3% inflation...

(*SIGH*)

* PAY NO ATTENTION TO THE GOVERNMENT NUMBERS; THEY'RE BULL$HIT.

...versus the current 1% to 2%.

* ABSOLUTE NONSENSE...

(*ROLLING MY EYES*)

(*SPITTING ON THE GROUND*)

But that’s a price worth paying for more and higher-quality jobs, more stable recoveries and a revitalized manufacturing sector. The privilege of having the world’s reserve currency is one America can no longer afford.

* SO... TO CLOSE... TWO POINTS:

* FIRST... NO... IT'S GOOD TO BE THE WORLD'S RESERVE CURRENCY.

* TWO... WHAT THE HECK THIS HAS TO DO WITH OBAMA'S IRAN DEAL...

(*SNORT*)

* FOLKS... JUST SO YOU KNOW... THAT WAS THE ORIGINAL TOPIC THAT THIS POST IS RIFFING OFF; MY BUDDY ROLO WAS ARGUING FOR THE TREATY AND ARGUING THAT SOMEHOW THE IRAN DEAL IS ACTUALLY ALL ABOUT THE DOLLAR - NOT NUCLEAR WEAPONS.

(*SHRUG*)

* ANYWAY... PERHAPS ROLO AND ODM WILL COMMENT FURTHER.