What happens to the WORLD ECONOMY when you buy this book

What happens to the WORLD ECONOMY when you buy this book

European unification

1. Europe is rather Continent than a State (or this is how the Europeans perceive themselves)  that happened to be created some 1000 years ago out of the ashes of Roman Empire and barbarian invasions. Its history is full of bloodshed sometime for understandable reasons but mostly out of very peculiar reasons. Some like to call the bloodshed civil wars, some revolutions and other national wars, but all of them were the result of political system that put the wrong guys in the head of the decision hierarchy. They were called kings, dictators, cancellers, presidents, chairmans, you name it, but all of them had  one thing in common, they felt they are destined and have the right to murder the OTHERS as much as they like. (As contrary to them the founder father of US were the right man in the right position and look what a wonder they created, that makes US relatively a well managed country in spite of all the following inappropriate leaders that followed them). The peak of this bloody tradition was World War II, that ended in some kind of draw between the “Liberal democratic” politician and despotic rulers, who continued the usual state of European history for another 50 years until the despotism collapsed under the burden of their own economic mismanagement.
2. After WWII the “liberal democratic” politicians, who happened to run the western part of Europe (probably because it is closer to US and not for any other reason), felt threatened buy the despotic part of Europe and concluded  that something has to be done, but couldn’t figure out what. Luckily from somewhere appeared a man called Jean Monnet, have you ever heard his name? If not it is not surprising, not like De Gaul or Adenauer, he was just an unimportant figure who happened to establish the European Union. To make it short he successfully persuaded the mentioned above to create an economic union. Nothing was said about national sovereignty in this union, it was all about customs duties and creation of a common market for goods and services. (just a thought, I wonder if not the Soviet threat,  would these two Egos agree to do anything of this kind?).
3. This European Union surprisingly became a great success. Surprisingly, since i would expect that the politicians will spoil the party (As it happened in an other economic unification the Comecon, that was initiated by Soviet politician and its aim as contrary to its misleading name “Council for Mutual Economic Assistance” was to achieve only political goals).
Luckily the “Liberal-Democratic” politicians were still in state of shock after what happened in WWII and what’s more important they felt threatened by the despotic Soviets, who did not stop to try to penetrate Western Europe through their agents the members of the communistic parties, so they made their best to be successful with this experiment.
4. The result was a great success, and all the countries of Europe, surprisingly even  “Great Brittany” (even if they always felt to be above the rest) joined the club. The members of the other club, the “Comecon”, could only watch with envy (if they were let to watch) what’s going on in the EU.  So when the Soviet Union and with it the Comecon finally collapsed, all the East European countries rushed to join the club.
5. After the great success the leaders of European Union were persuaded to do the next obvious  step to create a common currency. Just don’t think it was a easy task to persuade them. Not at all, all kinds of compromises had to be made on the way, where the different states kept most of the symbols and tools of sovereignty while joining a process that ended with a common currency, the Euro.
Since in the process a political compromise had to be done, it was voluntary for each country to join or not. Guess who joined the Euro club?  Of course the founders of EU; France, Germany, Italy and their related neighbours, and all the economically weak countries like Spain, Portugal, Greece and some others. Forget the solidarity, non of the Scandinavians and not the British joined, after all why to join a club into which they have more to contribute than gain. The only one who was ready to pay the price to create the Euro were the Germans, who are still under the spell of shame for their historical crimes, that just recently with the unification of Germany were released a bit.
As it happened the southern countries politician immediately realized that being in the Euro club gives them almost unlimited possibilities to take loans. They like vultures immediately jumped on the novelty, that wouldn’t have to be so bad, if they would use the borrowed money for investments. But they, as these failure politicians know best to do, used the loans to maintain their corrupt political system and with the left over they corrupted their electorates.
6. At 2009 finally all this came to the end, after the banks together with the rating agencies, who beforehand were part of the game, suddenly changed their skin and stop to support this process. The crisis that followed, be it as severe as it may be, is a correcting process. No more transfer of finances to the waste. No more transfer of resources to those who are not doing for themselves, what from adult people is expected to do, to earn honestly for their living. No more solidarity from the strong and capable, to those who don’t take responsibility to their doing. And even more than that, many political obstruction for real unification of Europe were removed. As a prove just try to remember how the proud Irish people, enriched out of bank speculations, rejected the Lisbon Treaty at 2008, to ratify it a year later, after they lost their national dignity together with the collapse of their casino economy.

Conclusion, even if with lots of pain, the process is positive.

Money???

Dear Patrice, as i tried to explain in my book, if you look at money as an instrument to and not as a holly grail, its value in circulation can be regulated according to economic aims of the government. The question is with what tool to regulate the money is less important if you have clear position about your economic goal. Let us assume the goal is to reduce unemployment, then you can increase the public spending or reduce the interest rate or do the both.To reduce interest rate you can by printing new money by purchasing government securities or by reducing reserve rate requirement. But the second option can work only if the banks reach their limit of minimum reserve rate requirement and every additional credit given to borrowers would cause increase of interest rate. Since 2008 banks reserves exceeded (more than twice) the minimum requirement, because there is no demand for credit, or no will of the banks to give new loans under the existing economic circumstances. So BB can freely print US$ and it comes back to him as deposits of banks, on which he started to pay lately interest, and don’t ask me why.

As to Krugman, he is mainly for increasing the government expenses and if it causes additional government deficit let it be. He claims that if the economy reaches the turn-point from deflation to inflation, the government will have the time and tools to slow down the economy. Many have doubts and worries, if the economist have the tools to recognize the turning point of the economy in time. I fully understand their worries and even agree with them. I personally would follow the credit of US households and mortgages. Since 2008 the credit exposure of households decreased rather dramatically, and it can turn around again. This would mean additional non governmental demand.

As to the tools to fight inflation, they can be monetary, and here the alternative can be selling government securities, or to my opinion a better way could be to increase the minimum reserve rate requirement, because then the government doesn’t have to pay interest on the securities. Both monetary tools cause increase in interest rate. The fiscal tool to fight inflation is by cutting federal budget, and it is more painful than the monetary.

All this short analysis is subject to the assumption that non of the foreign debtors of US, (Japan, China, oil producing countries, etc.) decide to act one day similarly like Samson, when he said, “Let me die with the Philistines!”, And he bent with all his might so that the house fall on the lords who were in it. Judges 16:30

Can historical developments be explained as consequence derived from cause?

If there are some historical developments that can be explained as consequence derived from cause, these are limited cases, in which you can even predict the future to certain extend.
As an example I would use the technological development, that can be predicted when we say, “Most probably the human technological knowledge will be wider in the future”. Out of it we can derive many consequent predictions about the future.
An other example is the demographic development, that has obvious trend, and again we may say; “Most probably the population of the wealthy nations, (US, Europe, Japan) will shrink in the next decades, while the population of rest of the world will grow. Again you can derive out of it many consequent predictions about the future.
The third example I would use is the economy, where you can with certain confidence say; “Since 2008 the economic wealth is shifting from the traditional developed nations, (again US, Europe, Japan), to the rest of the world.
Yet all this historical trends, has nothing to do to historical consequences of political decisions of political communities and/or their leaders. These are unpredictable and the consequences of their deeds are also unpredictable. Take for example the recent history of president Bush the Junior. At first he was elected by 50,000electors from Florida. Then since September 11 he was doing what he was doing. The attack at September 11 wouldn’t be prevented by a different president, but all the rest could be totally different. Probably the war in Iraq would never happen. The economic policy would be different and the world economic crisis of 2008 could have been prevented.
Conclusion, certain trends of human history can be identified, but the human history is about destiny and decisions of individuals and communities, and the consequences of their decision, I wouldn’t be to hasty to predict the consequences of certain decisions.
To make it clear what I meant to say above is; no one could predict before 1936, where Germany is heading too, so no one except of the Nazis themselves are to be blamed for what they had done to the world. No one could even imagine to where all this is heading too until 1938.
In a same way, even if we can with certain level of security predict that the fundamental Muslims will take over the political power in most of the Arab world, we can’t predict today to where the Arab world is heading too? Are they going to implement their ideological-religious agenda, or are they going to sink in the mud of the unsolvable, urgently pressing economic problems? Or to say it in a metaphor, are they going to be troubled with the municipal sewage, or are they going to make wars among themselves and with the others? Who can say with certainty, what the future will bring to us from this part of the world?

שר האוצר

יאיר, אם נגזר עליך להיות שר האוצר. כאחד מנערי אוצר לשעבר (שכבר לא נער ולא באוצר), הרשה לי לתת לך כמה עצות;

א. לגבי מה לעשות, הכל ידוע ומוכן במגירות של פקידי האוצר. שנית את כל הגזרות הקשות עליך לעשות מיד בימים הראשונים של כהונתך, והסדר צריך להיות מהקשה ביותר, אל הקל, אותם תוכל לעשות במחצית השניה של הקדנציה.
ב. האגוז הקשה ביותר הוא התמודדות עם החזקים ביותר. אם לא תטפל בהם מיד וביד רמה וזרוע נטויה, חבל שלכלכת את עצמך בפוליטיקה. אבל האויבים המסוכנים לרפורמות אלה יהיה מבפנים. חבריך לממשלה, שמזה שנים שואבים את כוחם הפוליטי מהמבנים הפוליטיים שיצרו הגופים המונופוליסטים האלה. מההסתדרות תוכל להתעלם, הם יזעקו זעקת שבר, אבל בחדרי חדרים ישפשפו ידיים, וחוץ מזה היא סוס מת בין קהל בוחריך.
אולם אם תנחל הצלחה בנושא זה, שלא טופל מאז קום המדינה, תהיה לגיבור ישראל.
אל תוותר לגופים אינטרסנטים שמהלכים אימה על כל אזרחי המדינה, בלסגור את השלטר, שערי הנמל או התחבורה הציבורית. אל תוותר לבעלי הון שביבזו את כספי הפנסיה של אזרחי המדינה בהרפתקאות נדל”ניות בלאס ווגס, ובפלורידה, שמונעים תחרות חופשית בתחומי פעילותם, שמשטלתים על נכסי המדינה במזיד עדשים.
אומנם שניים עד שלושה מנדטים ישנאו אותך, אבל כל השאר יחבקך. ובאשר להתקפה תקשורתית שאתה צפוי לה, מי כמוך ידע להתמודד עם זה.
ג. אם בכנות אתה רוצה לפתור את בעיית חלוקת הנטל בגיוס לצה”ל, יש לדעתי לשחוט שתי פרות קדושות בנושא. הפרה הקדושה הראשונה היא גיוס חובה כללי, והפרה הקדושה השניה היא שירות צבאי חינם של מגויסי חובה. אין טעם לכפות על החרדים גיוס, או אלטרנטיבית חיי “לימוד” בישיבות, שמונעת מהם השתלבות בשוק העבודה. את שיוויון הנטל בין החרדים והחילוניים יש לפתור במישור הכלכלי, על ידי ביטול גיוס הכללי לשלוש שנים של טובי הנוער בגלאים ההכי פוריים שלהם, שרובם מבזבזים את זמנם בשעמום ובטלה. במקום לגיס את החרדים יש להתיחס אליהם כלסטודנטים, כלומר שעליהם לשלם שכר לימוד, וכדי לזכות במילגות עליהם להיות מצטיינים. לעומת זאת למתגיסים גיוס חובה יש לשלם לכל הפחות שכר מינימום. התקציב לשם כך יווצר, מהחיסכון למשק, שמהלך כזה יצור על ידי כניסתם המוקדמת יותר של הנערים האלה לשוק העבודה. כאשר גיוס חיילי חובה לא יהיה עוד עבור צה”ל חינם, הוא ישקול היטב את מי וכמה יש לגייס.
בעבר לצה”ל היה תפקיד של כור היתוך. לא עוד, אם הנושא הזה הוא עדיין רלוונטי, יש להעביר לטיפולו של משרד החינוך, שמטפל בנוער בגילאים יותר צעירים וסיכוייו להצליח בנושא גדולים יותר. כאשר שכר המגוייסים יועבר למשרד הביטחון, צה”ל כבר יידע לא לשלם משכורות עבור בטלה, שנכפת על הנוער בעל כורחו. כך שיגויסו רק את אלה שזקוקים להם, ולא את “כולם”. מהלך כזה יגדיל משמעותית את כוח העבודה האזרחי, (כולל מקרב הנוער החרדי, שלא יחויב עוד ללמד בישיבה כדי להימנע מהגיוס), שהשלכותיו החיוביות למשק יעלו באין שעור על עלות שכרם של המגוייסים. אין לי כל ספק שגם הביטחון וגם אוצר המדינה ירוויחו ממהלך כזה.
באשר לחרדת אמהות, עליה דיברתם במערכת הבחירות, זאת עוד אמירה מופרכת. הרי מזה שנים, עיקר הסכנה הביטחונית של מדינת ישראל היא הטילים המכוונים לעבר אזרחי המדינה, ובמקרה של מלחמה דווקא מחנות הצבא הם המקומות ההכי בטוחים.

ד. לבסוף, למד מיהושוע רבינוביץ, שסיים את הקדנציה שלו עם הבדיחה רע, רבין, רבינוביץ, וזאת למרות שהיה גדול שרי האוצר, שהנהיג רפורמות מרחיקות לכת. למרות הירושה הקשה שירש, שכללה אינפלציה שנתית של 50% לאחר מלחמת יום כיפור, משק ריכוזי שהתנהל כחנות מכולת של פנחס ספיר (וזאת לא ביקורת נגד ספיר, שכפי הנראה בשעתו מדיניותו היתה הכי נכונה, הראייה, המשק צמח ברוב שנות המדינה מיום הקמתה, פרט לכמה שנות מיתון). למרות כל המהלכים הנכונים, כולל הנהגת פיחות זוחל, רפורמת מס, רפורמות אחרות ששחררו את הכלכלה מכיבלי הריכוזיות. הוא אף הצליח להוריד את האינפלציה השנתית בשלוש שנות כהונתו ל- 25%. שלא כמו ארליך, שבאה אחריו וגרם לאינפלציה של מאות אחוזים. מסקנה, לא די במהלכים נכונים, צריך לדעת לשווקם.

How bad is the accumulated US debt to the world economy?

When the day of the US debt repayment comes the government will have three ways to repay it, either to increase taxes, to cut budget or to print money. Eventually which way to go will depend on the situation, the economy will be in the day of the repayment. If the unemployment of production capacity prevails, the government will do it by printing money, if the economy will be at full employment or close to it, it will rise the taxes or cut the budget (probably both). This government step would be necessary anyway, without to consider if there is need to repay debts or not. So the problem how to repay the domestic debts in the future in reality doesn’t exists.

As to the bonds owned by the foreigners, this is mainly the foreigners problem (about half of it is of Japan and China). If they stop to purchase the bonds, it will cause depreciation of the US dollar against their currencies, assuming that production capacities are unemployed, this will increase the US exports and employment. If the production capacity will be fully employed, the depreciation of the US dollar will cause inflation, with it reduction of domestic consumption and depreciation of the value of the US debts in real terms. Again the foreign bond holders are paying the price. If the foreigners not only stop to purchase new bonds but start to sell the old once in huge scale, the effect will be in the same direction, but with much bigger and immediate response. This could be very devastative to the whole world and not only to the US or the foreign bond holders economy. Let us all pray, they don’t come up with such a policy.

As mentioned above, the main problem with the huge US government debt is, that it was created to finance increased households consumption and government expenses, (mainly military), and not to finance investment to create additional potential capacity for future economic growth. To whom it is not obvious, increased government expenses used for education, health, infrastructure, are all investments with positive effect in the future potential economic growth, military expenses are not. (I don’t count the development of technology, that is side product of the military budget, since this aim could be achieved more effectively by investing directly into science and high education.)

The main problem of the government debt is the growing interest rate, the government has to pay on its debts. This may negatively influence its fiscal economic policy flexibility. The solution to this is repurchasing government bonds by printing money, and if this step would cause inflation pressures, it can be corrected by increasing to the commercial banks the demanded minimum reserve requirement rate, that would cause credit squeeze.

Europe and its Wars

In the last millennium there were 3 major wars Europe, the thirty year war that ended with defragmentation of the Holly Roman Empire to hundreds of non imperial fractions. Then we have the hundred years war that started with William the Conqueror winning by accident a very improbable victory at 1066, and ended with the “Entente Cordiale” peace treaty, signed between France and Great Brittany at 1904. This would make this war rather a thousand than hundred years war. After all what were the eighteen century colonial wars between England and French, if not part of the same event at 1066, and luckily ended with establishment of United States of America, or the Napoleon wars if not continuation of the same war? And then we have the eighty years war what started as the Great War, than changed its name to WWI after the WWII came to existence, and continued practically uninterrupted until the disassembling of the Soviet empire at 1992. It lasted only 78 year, but lets drop this detail.

You are probably right about the conspiracy of the Prussian generals, but even they couldn’t do what they have done, if the two Caesars would not have a great problem with their political legitimacy. After all, during their long reign, ( at the eve of the Great War in Franz Josef’s case it was 66 years and Wilhelm’s 55 years), the countries they ruled went throw major changes. The most important is the rapid industrialization, that created huge growth of urban population, that happened to learn lately to read newspapers, after the basic education became obligatory. Fables and fairy tales ceased to be good enough to give legitimacy to these rulers. As to the Czar, in his case the problem was not the over literacy of the population, but rather the literacy of the Czar himself, who believed in the fables and fairy tales on which he based the legitimacy of his rule. Non of these three clowns thought for a moment, about having problem of their legitimacy. Who did understand the problem of legitimacy, was Franz Ferdinand, The Poor Ferdinand, who was killed while working on finding solution to the problem of legitimacy of the Hapsburg anachronism.

Pity, if not killed, probably Russia would have become major economic power of the continent within 20 years, being in balance only with Great Brittany and France. Germany would probably shrink into today’s size, plus some more portal cities in the Baltic See (Koenigsberg for example). Russia would probably under pretext of Slavophilism and orthodox church philism kick out the Turks from Europe and northern Anatolian, and the Ottoman empire, would shrink to small Turkey, Kurdistan and Arabia, and being neglected by others in their backwardness, ignorance and rigor religiousness until someone would discover the oil reserves in the Arab desert.

Conclusion, my alternative history thesis just proves the historical determinisms, since more or less this is what happened anyway, just in the way were murdered at least 100 million Europeans and only God knows how many non Europeans, if we count the Communistic murderers of Asia as part of the story.