Here’s a great blog post with pictures, from Will Boase, The Muzungu Diaries.

On the night of December 1978, all 18 of Xiaogang’s households met after dark in the biggest house in the village. After a short discussion, they signed or put their thumbprints on a 79-character document agreeing to divide the commune’s land into family plots.

Just what the Pilgrims did, in 1621-1623, in order to avoid starvation.  The US socialists like to emphasize the Indians, who were indeed important, but usually ignore the starting communal farming that was failing, and the reversion to private property which succeeded.

He notes that first order is much less than discussed:

First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well. Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does.

Tyler also focuses on how much of envy is local, with those nearby more than those out of your league.  And there is also the difference between income inequality, and excessive growth at the top:

Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution.

the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007.

for 2004, nonfinancial executives of publicly traded companies accounted for less than 6 percent of the top 0.01 percent income bracket. In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount.

To me, it’s obvious that, for income inequality especially, the Big Banks  should have been allowed to fail, wiping out equity investors, making bond holders lose some, converting debt into equity of new, lower valued firms, ending most big bonuses in finance.

Tyler disagrees, (without noting that the majority Democratic Party voted for these unfair bailouts for the irresponsible rich):

Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression.

This seems totally silly to me, not only without data, but without logic behind it.  Certainly there is no reasonable narrative in that article — is there any  narrative that discusses what is so terrible for non-finance folk about the Big Banks dying?
Had all the big banks gone bankrupt, like Lehman, only the overemployment in the “finance sector”, not Main Street, would be so negatively affected.  There might not even be a 25% reduction in finance employment, much less other sectors.  Recall that house construction DID have a huge drop, from 2006; and associated industry drops were, and still are, being recalculated in the economy.
I recall the Tyler and Alex debate, thru 2008 & 2009,  on whether there was even a real “credit crunch”. (No final verdict?)  If little or no credit crunch, no need for the Big Banks? The increased main street unemployment after banks fail would only come from businesses unable to get loans, right?  With FDIC, none of the depositors would lose; and some bailout could/ would have guaranteed all term deposits.
The equity of all Big banks should have been wiped, the top earners all lose all bonuses and salaries reduced to “median wage” (take it or leave), and the payment obligations which caused the liquidity crisis/ insolvency should convert to new equity in the reconstituted after-bankruptcy firm, if any.No new business, merely least cost wrapping up of old business, tho allowing some rich angel (Buffet? China?) to re-capitalize any particular desired name.
If it is the top 0.01% “finance” earners that are undeservingly getting too much, certainly the best way to reduce it would have been letting the financiers go belly up.
Unfortunately, I’m sure there won’t be such a good chance again in my life — those guys are too smart and know how close they came to losing it, so are making sure the new rules offer them more protection, even if a little less top growth.
Thus, higher gross revenue/ asset management fees on the top 100 finance firms seems reasonable to usually libertarian me.  Punitive taxes for the obvious past moral hazard seems like “social justice” that I can get behind.
Finally, good bankruptcy law IS one of the key gov’t functions all small gov’t advocates support–lack of such for TBTF banks is another gov’t failure.

I also think gov’t parking lots in the USA should be covered with solar panels.

Too bad the panels are made in China; but no surprise.

Fine article in the Stanford Review:

Thoughts on ROTC, Stanford, and the “Two Cultures”

I will start by looking at how the military culture has evolved since the end of the Vietnam War, and what the causes of that change might be.  Then, I will look at the current attitudinal differences that I believe are the most striking differences between the armed services and elite student bodies.  Implicit in an article of this type is the risk of generalization, so I disclaim upfront that no discussion of groups as diverse as the U.S. military and elite students can possibly encompass everyone.

…

But military service, and war, is based on fighting. Killing. Dying. Killing possible civilians in order to reduce the likelihood of being killing.
Just where, and when, do those elites believe it is worth killing possible civilians?The killing of civilians is part of what makes war “hell”.  Every war has it.
Elite students reject the idea that America is always right, but neither do we believe that we are always wrong.
Since Vietnam, the elite have consistently claimed that America is wrong every time it has been involved in a war.  Including limited objections to 1991 Desert Storm to oust Saddam after his attack on Kuwait.  Especially after the 2003 invasion against Saddam, after 16 (or 17?) UN SC resolutions that Saddam violated since his unended 1991 invasion.
Elites like to rationalize their posturing of moral and intellectual superiority, with platitudes like ‘neither do we believe that America is always wrong.’  But if you’re looking at post-Vietnam reality, you need to back that claim with evidence.
Some of us, who support Human Rights, Property Rights, & Civilization, in reality as compared to communist (never been tried! — dishonest) rhetoric, understand that America is imperfect.  It’s just a more exceptional, better example for others, than other real societies.  The willingness of the EU to allow Muslims to suffer genocide by Serbs, not far from the EU border in Europe, is just one example of the laughable idea that the EU is somehow morally superior to the US in military matters.

I agree that Vietnam was the watershed change, but not because of the draft.  Because, after the 1973 Peace Agreement and end of US army presence, the US allowed the N. Viet commies to violate their (Nobel’ed Kissinger brokered) signed agreement and take over; and allowed the Pol Pot commies to take over in Cambodia and commit genocide.This acceptance of genocide is, generally, considered morally superior by the elites.
No side can win a war, nor “decide” to win the war.  One can decide to fight, or to stop fighting (and thus, lose).  Your War Weariness is indeed important — it’s too bad virtually no elites at Stanford or any Ivies have been discussing how to best win the war against Islamist terrorists.  (Setting up small, tribal cantons, with taxing and budget making authority, and military support for the local tribal elite police functions is my own general suggestions.  Switzerland, not the USA, should be the pro-democracy model.)
In deciding to fight, one can decide how.  For instance, I will always believe that if the USA had used a nuke on Hanoi, or Hai Phong harbor, there would have been a different Peace, with the N. Vietnamese accepting a DMZ like N & S Korea.  Then, had the N. Viet copied E. Germany, rather than N. Korea, the two Vietnams could then rejoin each other.If anybody objects to using a nuke to win a war, please recall the actual, historical alternative –losing the war to commies who committed genocide (on innocent civilians who were basically not resisting).The important question not listed is “how many non-fighting civilians are you willing to kill in order to win?”Personally, I wish the US under Bush had also invaded Sudan to stop the Darfu slo-mo genocide, after the long S. Sudan rebellion.  It will be interesting to see how S. Sudan develops after (if?) their referendum on independence coming soon, Feb 2011.

The big difference is the blindness of anti-Vietnam War elites to what they were actually supporting — commie takeover and genocide.  If you feel like “explaining” how the anti-War folk didn’t really support the genocide, remember the other thing about war.  If you support one side, you support the good and the bad; if you oppose one side, you support the other side (good and bad).  Anti-Saddam Iraq war supporters don’t like the thousands of non-fighters killed, and especially the tens of thousands killed by the terrorists (which most elite blame on America, not the terrorist enemy) — but we accept it as part of the price.
Again — what is worth killing (innocent civilians & guilty terrorists) for?

But he claims, persuasively, that there are many issues where entrepreneur data is the reverse of self-employment data.

He asks business owners to self-identify as entrepreneurs or self-employed based on the ambition to grow and innovate. Surprisingly, 80% of the self-employed do not consider themselves entrepreneurs. …

Taxes, the level of regulations, the level of trust and the quality of institutions are examples of variables that are related in reverse ways between entrepreneurship and self-employment.

His conclusion:

Rather than treating small business and innovative Schumpeterian entrepreneurship as more or less synonymous, policy makers should be aware that they face a trade-off: either we pursue policies that give us more small business or we aim to encourage entrepreneurship.

Me: The world needs more entrepreneurs — those willing to start businesses that will hire others.

Why do Intellectuals Oppose Capitalism?

And answered it so well: Intellectuals now expect to be the most highly valued people in a society, those with the most prestige and power, those with the greatest rewards. Intellectuals feel entitled to this. But, by and large, a capitalist society does not honor its intellectuals. Ludwig von Mises explains the special resentment of intellectuals, in contrast to workers, by saying they mix socially with successful capitalists and so have them as a salient comparison group and are humiliated by their lesser status.

W. R. Mead talks about the Crisis: America has everything it needs for success in the twenty-first century with one exception: a critical mass of thinkers, analysts and policy entrepreneurs who can help unleash the creative potential of the American people and build the new government and policy structures that will facilitate a new wave of private-sector led growth.

What Mead is missing is the reality of win-win, peaceful, freely chosen purchases by customers.  Capitalism.

Ron Radosh wonders if the new editor of The New Republic can change this crisis.  And echoes Mead in concluding that too many current intellectuals can’t make the adjustment.

Central planning, using force against free people, doesn’t work well.

This is why they Hate Palin, as much (or more) as they hated Bush 43, with a wimpier hate against (wimpier) Bush41, but with a huge hate against Reagan; and starting with the hate against Nixon.

How Our Most Ancient Moral Text Can Renew Modern Life
by David Hazony

The Joel Schwarz review echoes the book’s conclusion:

The Ten Commandments are the Bible’s most poignant symbol of both the complexity and the possibilities of life. Far from being a call for perfection, they embrace the nuance of humanity, the spectrum of real experience, the challenges of weakness and hope, and the need for human beings always to take responsibility for their lives.

For myself, the 10th Commandment, Thou shall not covet, is especially important.  High tax rates (on the rich!) is how the greedy non-rich show their sinful covetousness.

The failure of so much post-WW II aid to actually help create better societies in third world countries is because the Church, like its atheistic anti-rich Liberals, tries to avoid supporting a capitalism which makes the rich, richer.

Instead of peaceful investment & job redistribution, there is too much gov’t and aid.

It is in peaceful hiring of the non-rich, by the rich, which creates the peaceful redistribution those who say they want to help the poor should be supporting.

The rich hire the non-rich for one reason — to get richer.  If you don’t want the rich to get richer, you don’t want them to hire people, to offer more jobs. (Or else you’re ignorant about how and why jobs are offered by the rich.)

Yoram Bauman, StandUp Economist.  Very funny video, especially if you’ve passed Econ 101.  I’d like to translate his cartoon economics into Slovak, but need a publisher.

City Magazine has a Fragile Urban Families short article.  All too expected, on how promiscuity (they don’t name it, tho) is terrible for poor minority city folk.

Since Fabius Maximus turned off his comments, I’ve visited him far less.  But there is still lots of good Gloom and Doom about America, usually making reasoned, strong, but one sided, points.  Today he claims The Constitution Has Died, and calls for long years of effort to build participation.  Hello? Tea Party folk — they are now participating.  They want: tax cuts & better economy, victory in Iraq & Afghanistan, marriage for men & women only.  But Fab Max doesn’t think we can afford victory in Iraq.  And with Obama incompetence, he might be right.

FM often refers to Tomdispatch, but another particular 4 scenarios of American Decline was recommended by a friend.  There is also a seemingly reasonable How the Oligarchs Took America — except it doesn’t talk about how the Dem majority voted to use taxpayer cash to bailout the rich with TARP.  Instead, it’s all about the secret rich blue blood Rep cash behind the Tea Party.  Wha wha what?  It’s preceded by the real horror story of how high cost loans to Blacks and Latinos are really making them the targets of foreclosures, far more than whites.

Roubini has a roundup on Eurozone Austerity.

Megan McArdle notes that Obama’s cut on payroll taxes, as paid by employees, is the least good for increasing employment.  She doesn’t mention that most companies are cash rich right now, and are missing a stable tax/ regulation climate in which to plan investments, and good guesses as to which investments are likely to pay off the most.

It’s good that Obama cut taxes.  Tax cutting stimulus, resulting in more win-win deals by wealth creators, have a good chance of increasing economic growth.  Still untalked about is the horrible truth that Americans are overpaid.

Sisu has a good post on GOP Bluebloods and the Politics of Envy.  Envy is the malicious desire to destroy somebody else’s good fortune.

Last Combat Operations of Jules Crittenden (Aug 2010), great list of great war books.

DaTechGuy, has some nice words for Sarah Palin.  Can she win the GOP nomination?  How can anybody else win it, when she has the fan base?

Dani Rodrik lists 5 books that are interesting, and describes his own recent book, talking about globalization; he argues we should be <i>giving up hyper-globalisation. It’s not an argument against globalisation per se, but it’s an argument against an extreme form of globalisation or pushing for increased globalisation. Because both democracy and national self-determination are also important values. We will have a better, safer, healthier economic globalisation if we accept – and do so explicitly – that democracy will remain mostly a national phenomenon, and that national self-determination is a value in and of itself, because each society has the right to select its own institutions and rules and regulations. And once you accept those, then you have to give up an extreme form of globalisation, and act accordingly.</i>

Ireland should borrow from the Irish by issuing Bearer Bonds

Summary:

To fund high budget deficits, Ireland faces increasing costs of borrowing, and needs a lower cost of loans. Irish people should be the lower cost loan source.

Ireland should print bonds and use these bonds as payment for government wages and other benefits.

The bonds should be 0% coupon, 1-year, bearer bonds.

The amount of the bonds printed should be equal to the 2010 Irish deficit.

The government should accept these bonds at par value for taxes and fees.

The acceptance of the bonds should be optional for all others– they are bonds, not “legal tender”, money.  But they can be used like money at any conversion rate agreed upon.

Handling a budget deficit

Like many democratic governments, that of Ireland faces the problem of how to pay for prior promises.  Government deficits can be handled in four ways:

1) raise taxes, 2) cut benefits, 3) borrow money, or 4) print money.

Voters dislike taxes, and dislike benefit cuts.  Printing money is risky, with Zimbabwe today, like the Weimar Republic in the past, showing the social collapse with hyperinflation. In Ireland’s case, it can’t print money unless it leaves the euro zone, only the ECB can print Euros.

If not 1), 2), or 4), then Ireland will have to borrow (3), with the cost of borrowing measured by the interest rate. That rate for Irish bonds is high now and going higher.  Ireland, like Greece, is at its limit of borrowing.

Lenders do not believe Ireland is a good risk now.  If the Irish government doesn’t borrow at these higher rates, it must raise taxes, or reduce benefits. Or get a bailout.

Solution 3b) – borrow from the people, the government beneficiaries

Ireland should borrow from government workers, and others getting government cash.

Ireland should print “Punt-Bonds”, and should use these bonds to pay 50% of the salaries of government workers, as well as all entitlement distributions over a minimum wage, and if necessary up to 50% of contracting costs to non governmental businesses.

The bonds should have a 1 year maturity (31.12.2011), with a 0% coupon (no interest).

The total amount of bearer bonds should be equal to the budget deficit, to be rapidly distributed within a few months, until the total amount is used, with the 50% maximum being the flexible target which changes.

These Punt-Bonds should be accepted at 100% par value for paying taxes, and all other government fees, but no private business would be required to accept them at par value.

A key point is for the Irish people to bail out the Irish government, not the German, Slovak and other taxpayers.  Another clear issue is that receiving bonds instead of euros is a real but small benefit cut, of an unknown amount.

The Irish government should use Punt-Bonds to pay for a part of all its internal Irish obligations: salaries, pensions, and payments to Irish contractors, above the minimum salary per recipient. This proposal is 50% in Euros, 50% in new Punt-bonds, until all authorized Punt-bonds are distributed.  With direct deposits, banks would set up new parallel bank accounts to receive these amounts, a real but minor bank cost for banks that already allow multiple accounts and alternate currencies, like USD or GBP; just add Punt-Bonds.  With Government officials paid 50% in bonds, the shared pain should decrease backlash against the benefit cut.

Since such Punt-bonds will replace most, if not all current government borrowing, the interest payment pressure on the Irish budget would be nearly eliminated, with little need to borrow from the capital markets. By cutting spending on interest, the deficit will also be reduced.  Directly saving the 5-9% of interest that otherwise must be paid to borrow is a key incentive, that remains true even if a bailout if offered.

Punt-Bonds accepted as tax payments, accepted as “money”

Having 100% convertibility when paying the government will encourage more and earlier payments.  Because of this legal value, and the cash like anonymousness, these bearer bonds will have significant value. Whenever something tradable is widely accepted as having value, like cigarettes in prison, that value can be the basis of money.

With payment of taxes possible in bonds, it is likely that a small increase in tax compliance will be noted, as businesses choose to pay full tax, sooner, with bonds they’ve received.  Most retail companies would be willing to take such bonds with a conversion exchange rate around 90%, as soon as many government employees have the Punt-bonds available.

Big retail chains will likely see that accepting Punt-Bonds at 90% offers them an advantage, even at 95%, even at 99%; without needing laws to require this, the market value will not vary much from the par value.  It might well be that some big chains decide to offer a 100% equality rate of Punt-Bonds to Euro, as part of a marketing campaign.  In any case, it will converge towards 100% by the 1 year maturity date.

Logistically, Irish banks would need to have sufficient Punt-bonds in bearer bond form, like a new currency, available for withdrawal. ATMs will need to serve government employee customers with bonds first in withdrawals, to get the bonds into circulation.

Ireland borrowing money from the Irish with such bearer bonds is probably not covered by current Euro-zone restrictions.  This policy reduces tax increases and reduces nominal cuts, beyond those changes already part of the fiscal adjustments, so most Irish will prefer printing Punt-Bonds to either tax increases, or more benefit cuts.  While initial recipients would have some additional hassle, and perhaps a small discount on the Punt-Bonds at first, when compared to a bigger cut of wages in euros, it is much less painful.

It would be a great Teaching Moment about what money is, comparing Euros to Punt-Bonds.  They will not print Euros, they will print bonds, Irish bonds.

After a Year, Through to 2013

Printing Punt-Bonds does not solve the short-term problem of excess government expenditures, but it allows the Irish economy another year to make progress on the imbalances.  Any graph of government revenue and expenses will clearly show the problem as huge increases in spending.  This crisis in excess spending cannot be solved by any merely financial program.  However, in making it clear to those getting the bonds that it is their benefits which are excessive, such bonds will increase the knowledge of the crisis among the people.  It also allows a year of far less financial pain than immediate spending cuts would cause.

If necessary, perhaps partly due to the need to retire the first issue of bonds, the Irish can issue another budget deficit amount of bonds, rolling over their debt, just like most governments already do.  But such a deficit should be far less, so the new bond issue should be less.  This can even continue to and through the 2013 time frame of the recent bailout fund agreement.

Alternatively, once Punt-Bonds are in circulation, if the government continues spending more than it is willing to tax by the issue of these quasi-money bearer bonds, there might be a greater quantity issue of Punt-Bonds.  This political choice leads to Ireland leaving the euro zone.  Then their printing of bond money to cover excess spending will result in a devaluation, making asset owners relatively poorer, but increasing employment in export industries.

Using Bearer Bonds would also be an option for the Greeks, as well as Portugal, Spain, even Italy.  Perhaps even Slovakia and other members to the euro zone could find it beneficial to introduce domestic bearer bonds to reduce interest payments.

This could even be a good model for US states having problems, like CA or NY.  It might well be politically easier to print bonds to cover the deficits, rather than raise taxes or reduce nominal benefits, until expected benefits balance with politically acceptable tax burdens.

Don’t Bearer Bonds makes sense in such a global bear market?