Monthly Archives: September 2024

Borrow More and Spend More

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The People’s Republic of China economy is continuing its malaise and apparent downward spiral from falling prices and its festering real estate crisis. International trade tensions aren’t helping.

A solution:

The central government in Beijing needs to borrow and spend more to drive up growth and inflation, he said, and should give its local counterparts more freedom to use their borrowing quotas to support consumption.

“He” is Julian Evans-Pritchard, Singapore-based Capital Economics‘ Head of China Economics. He doesn’t, however, suggest from whom the PRC should borrow.

The population of potential lenders includes the good citizens of the PRC, who are reluctant to lend any further, having been burned by their own borrowing into that real estate market, and whose pullback is feeding that problem. Lenders include those who might lend to those local counterparts who already are not consuming the yuan already borrowed. More room in those local borrowing tills seems scant, and those potential lenders already are debt-strapped on their own. Lenders also include international buyers—individuals, businesses, and governments—of the various PRC government debt instruments. Those instruments already issued have lost and are continuing to lose market value to the detriment of those current lender/holders; this drives up the interest rate the government must offer on new issues, which increases the cost of that borrowing. After a point those increasingly elevated interest rates become prima facie evidence of the current and increasingly risky nature of those instruments.

Evans-Pritchard also doesn’t seem to recognize the inherent weakness of borrowing based on declining value asset collateral—which is what borrowing for consumption is.

It all adds up to the foolishness of Modern Monetary Theory, the theory that money is leaves on an infinite tree. What the People’s Bank of China has done—offering 500 billion yuan in loans to funds, brokers, and insurers to buy Chinese stocks; putting up another 300 billion yuan to finance company share buybacks—is just the first step of pulling leaves off that tree. To be sure, cutting its benchmark interest rate and lowering bank cash reserve requirements, which the PBOC also has done, ordinarily is a standard central bank move to stimulate economic activity, but when they’re done on concert with those other moves, they lose their stimulative effect and just become the sharp sugar high before the crash. The end result of this will be yet more borrowing, but this time from the futures of the PRC’s current children and of their children’s children—whose generational sizes are shrinking.

There are lessons here for us, were our politicians interested in learning them.

Will No One Rid Us of this Troublesome Candidate?—Redux

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The Progressive-Democratic Party’s politicians, even after two attempts to murder former President and Republican Party Presidential candidate Donald Trump, are continuing their deliberately inflammatory rhetoric against the opponent they hate so much.

This time, it’s Progressive-Democrat President Joe Biden’s Commerce Secretary Gina Raimondo with her carefully threatening rhetoric during an interview on MSNBC:

Like, how did we get here? Let’s extinguish him [Trump], for good.

This is Party’s action toward anyone who dares disagree with them or demur from their…policies.

This is the Party that’s so desperate to rule over us this fall.

Destruction

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Progressive-Democrat Vice President and Progressive-Democratic Party Presidential candidate Kamala Harris has committed herself to eliminating the Senate’s filibuster.

I think we should eliminate the filibuster for Roe, and get us to the point where 51 votes would be what we need to actually put back in law the protections for reproductive freedom[.]

Never mind that the filibuster is the only tool the minority party—whichever it is—has with which to be heard in the Senate and to get at least part of its priorities included in legislation that winds up enacted into law.

Aside from her pushing a national mandate for abortions, instead of letting the citizens of each of our 50 States decide that question for themselves (with many of which States deciding in favor of abortion), the elimination won’t stop there. The Progressive-Democratic Party Senators will eliminate the filibuster altogether.

That elimination will lead to a number of nationally destructive outcomes. One will be the prompt passage of new laws accelerating Federal spending and increasing taxes on us average Americans and our businesses.

Another will be the loosening of our election laws, allowing anyone to vote, including illegal aliens. Recall all those Party politicians who oppose requiring voting eligibility to be limited to those who prove their American citizenship. Recall, too, those Progressive-Democratic Party-run local jurisdictions that already allow non-citizens to vote in those local elections.

Damaging as that would be, those moves at least could be reversed at the next election—assuming the other party can overcome the loosened election laws. Far worse will be the destruction of the Supreme Court as Party moves to expand it and to get confirmed activist, progressive Justices. That destruction will last for generations; it won’t be correctable by short-term election cycles.

Tax Data Theft

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A tax data thief stole Donald Trump’s tax data and transmitted them to various press outlets, many of which, in turn, promptly published the data. The thief was caught and has been sentenced to five years in jail. Congress is working on a bill that would make the penalty for such action much more serious.

That’s nice, but that legislation only addresses one side of the crime, and it only addresses one area in which such a crime might occur.

A more complete solution would include all instances of stolen information and the recipients of those stolen goods. If a journalist receives stolen material from any source on any subject and moves to profit from that—moves to publish the material—instead of returning the material to its owner or turning it over to relevant law authorities, that journalist must be held criminally liable for his crime. He is, after all, receiving stolen goods.

In most other cases, recipients of stolen goods who then move to profit from the receipt are criminally liable. There’s no reason to excuse the press from that liability. If no one is above the law, that must include journalists and the organizations for which they work or to which they contribute.

Only a Partial Solution

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The editors of The Wall Street Journal correctly recognize the dangerous (and fatal to our nation if it’s not corrected) weaponization of commercial hardware and software. The solution they propose, though, is badly incomplete.

…we should first recognize that the Chinese Communist Party isn’t interested in cooperating on AI risks and safety.

Absolutely, and in so many other areas, as well. But….

Second, we need to wield the free-world technology stack more effectively. … America has the tools to build a software-defined manufacturing ecosystem, where we can find and fix bottlenecks. A digital twin of the entire defense supply chain would allow us to analyze, allocate, and accelerate production from the factory floor to the front line.

And

Third, a revitalized American technological industrial base should catalyze an interoperable free-world technological industrial base. To outcompete China, we must make it easy for allies and geopolitical swing states to adopt, contribute to, and innovate on top of our software.

I’ll leave aside, here, the risks to our own national security of exposing our technology and software even to friends and allies, much less to those uncertain swing states, only to have secrets and advantages further exposed to our enemies by leaks. Instead, I’ll emphasize that the finest software in the world is useless without the hardware to run it, and the farthest advanced technology does no good for us at all if it sits exclusively in one or two prototype models or in the horribly expensive few production models.

First after recognizing the inimical nature of the PRC, and Russia, and Iran, and northern Korea must be revitalizing our industrial base—that factory floor—so we can build the hardware—the weapons and weapons systems—which will house that wondrous technology and on which will run the bleeding edge (and proven, mind you) software in the vast numbers we’ll need, and our friends and allies will need, when our enemies attack.

After all, that next war will be fought with the forces in place. The speed of war has reached the point that there will be scant time, if any, for reinforcements to reach the theater (if they can survive the trip at all), and no time at all to produce, even from a thoroughly revived industrial base, combat loss replacements.

Rebuilding our industrial base will itself be terribly expensive, but what would be the cost of having our foreign, even domestic, policies controlled by our enemies after we lose the next war they start?