Wednesday, March 26, 2008

Knowledge Deficit on Trade II

I received an interesting comment regarding my post "Knowledge Deficit on Trade" from a reader by the name of Chris that I'd like to answer here. I will post the comment in it's entirety and then proceed to answer each point made by Chris:

"Explain something to me here. You said that American dollars will make there way back [someday]. Then how is that China holds over a billion of dollars in US cash. Is it because maybe they have been stock pilling it and not sending it back through the system.

I guess this also means that there really isn't a national dept either since deficits don't really exist.

I also wonder how complex economics were in the 18th century."

Chris is correct that I said that US dollars will make there way back someday, and they will through future purchases and investments. He asks how China holds over a billion dollars in US cash and wonders if they've been stock piling it. The answer to that question is that even though China owns over a billion dollars in US cash, the United States holds the equivalent in goods and services. My mentioning that US dollars would come back to America, sooner or later, was not used to demonstrate that there is no trade deficit, it was merely a tangent.

Chris guesses that because America doesn't have a trade deficit, it doesn't have any national debt. This is wrong for the simple fact that a budget consists of income and expenses. When America's budget shows more expenses than income, it must sell bonds to third-parties, many of which are foreign countries and investors. The balance sheet then includes additional income offset by liabilities to balance against expenses. Foreign trade on the other hand is between private companies from either nation transacting business.

As for economics in the 18th century, economic theory is like any scientific discipline. For more information on who Adam Smith is, click here.

Tuesday, March 25, 2008

Knowledge Deficit on Trade

Recently a friend of mine at work commented on America's "trade deficit" and alluded to its existence. I quickly corrected him and said that America didn't have a trade deficit and to insist that it did showed ignorance of what trade, particularly international trade, is when talking about deficits and surpluses. In the words of the former president of the Foundation of Economic Education, Donald J. Boudreaux, "Here's a quick lesson in international economic accounting. Every nation's foreign trade is always balanced."

And that's really all there is to it. Let's break it down. If a country's total exports of goods and services do not equal its total imports of goods and services, the country's trade is still in balance, as the following example "balance sheet" shows:

America's exports:              $500,000 minus
America's imports:            $1,000,000
America's trade account:      -$500,000

Capital spent for imports:    $1,000,000 minus
Capital rcvd. from exports:     $500,000
America's capital account:      $500,000


When America imports $1,000,000 worth of goods and services, it exports $1,000,000 worth of currency. When America exports $500,000 worth of goods and services, it imports $500,000 worth of currency. America's foreign trade balances when you consider the entire balance sheet. "If one part of a nation's trade account is in deficit by $1.96 billion, other parts must be in surplus by $1.96 billion," says Boudreaux. This is really what it comes down to and when the entire balance sheet is considered, the "trade deficit" disappears. Those US dollars will make their way back home in future purchases and investments, sooner or later. The supposed trade deficit could just as easily be shown as a trade surplus, when only looking at America's capital account.

Consider for a moment your neighborhood grocer. By those who advocate a trade deficit's logic, there's a trade deficit between you and your grocer. I'm sure you are like me and you import more from your grocer than you export. I don't export anything to my grocer when it comes to goods. I do, as we all do, trade goods with my grocer for capital. Would you say that there's a trade deficit between us and our grocers? And if so, is that a problem? I certainly don't think so. The reality is our trade is always balanced, as is the trade between all people, entities, cities, states, and nations.

I'll close with one of my favorite quotes by 18th century economist Adam Smith, on the subject of international trade, "Nothing…can be more absurd than this whole doctrine of the balance of trade."

Monday, March 17, 2008

Immigration and America

These United States of America were built entirely by immigrants and their descendants. Every non-native American citizen owes, in some respect, the blessing that is his life here to his immigrant ancestors. Because of this, it is surprising to me to see so many Americans take the stand they do against those wanting so much to partake of America's goodness that they risk their lives to obtain it. While I don't believe that anybody has the right to disobey our immigration laws and expect to get off scot-free, I recognize that illegally immigrating into this country is not a felony, rather a misdemeanor. As such, I here outline what I believe to be the best way to handle the current immigration problem in four phases:

Phase One – National Security
I believe that national security is the most important function of the federal government. And in my opinion, secure borders, north, south, east, and west, are vital to protecting ourselves and our sovereignty. The first phase in handling the current immigration problem is securing the border. This should be done by any number of effective ways from increasing the number of border patrol agents to building a border wall to video surveillance with illegal migrant apprehension. I support all of these so long as they are done humanely. I also believe this must be accomplished before moving on to phases two and three. Failure to secure the border will show similar results to the immigration reform in the eighties, an increase in illegal immigration.

Phase Two – Illegal Immigrants in America
Like it or not the 12-20 million illegal immigrants living in America are parts of our society. They, those that work hard, the super-majority in my opinion, are also economic assets to this country. I believe it would do great damage to our economy if policies were put into place to seek out and deport these millions of illegal immigrants. Measures should be taken to fine them, as all misdemeanors require, and help them obtain permission to work and stay here legally. Immigrants who take the jobs most people would rather not have always been an important part to the American economy and these immigrants are no different. Deporting them is not the answer and would not produce the good fruit that helping them obtain legal status would. If any undocumented immigrants are guilty of a felony, I support in full their deportation, as they are not contributing to the progress of our society.

Phase Three – Restructure America's Immigration Policy
I believe that our immigration policy should be restructured so as to make it easier for hard-working immigrants to come from all over the world to these United States and contribute to our economy, our society, and in paying taxes. Quotas should be expanded or abolished while at the same time making it cheaper to obtain required documentation to immigrate here legally. Those that are currently immigrating illegally, for example from Mexico, are from among the poorest the country has to offer. Why do they do it illegally instead of legally? Because the lines are too long and the cost too high for them to afford. It is more realistic for them to risk their lives by coming here illegally and staying illegally than it is to do it legally, because of our current immigration policy. As I said, I believe that immigrants are economic assets. This is because they will take jobs nobody else wants and do it cheaper than anybody else would. This makes goods and services cheaper to produce and benefits society through lower prices, at the same time keeping jobs in America. If a country's own policies are pushing their citizens, usually hard-working citizens, out, then they don't deserve them and America should welcome them.

Phase Four – Assimilation
Immigrants from each generation that built America have brought with them the best their cultures had to offer, and combined that with the best America has to offer through the process of assimilation. This is a foundational part of preserving American culture, which is in reality a combination of the best parts of every culture in the world. Central to assimilation, however, is learning America's unifying language: English. Governments and society should encourage immigrants to learn the English language instead of making it easier for them to live here without it. I believe that one of the ways that these United States of America will stay united is through a unified means of communication. English is rightfully called the universal language because of America's influence in the world. And those wishing to become a part of American society should learn and use America's language, English.

These phases, I believe, are what are best for America. I would like to see our government implement policies that would first, secure the border, second, compassionately deal with our illegal immigrant population, third, restructure our immigration policy, and fourth, encourage assimilation into American culture.

Thursday, March 13, 2008

Corporate Welfare

One of the things that are consistently talked about in the media is the supposed alliance between "big business" and the political right. Traditionally, the political right means limited (read small) government and free markets. (This isn't so today.) So who wouldn't see big business aligning itself with these ideas? What may be startling to some is the fact that big businesses, that is, big corporations, actually align themselves with big government and controlled markets. The reason is what is commonly termed "corporate welfare."

What is corporate welfare? Well, before we can answer that we must first define "welfare". According to welfare is "financial or other assistance to an individual or family from a city, state, or national government" or welfare is "receiving financial aid from the government or from a private organization because of hardship and need." Welfare sounds like a pretty nice thing to receive if you are undergoing hardship and have genuine need. This is hardly objectionable if the welfare comes from a private organization.

So what is corporate welfare? Corporate welfare is welfare (see definition above) for businesses, more often than not large businesses, or corporations. Welfare has two sources, private financial assistance as in a church's welfare program, and public financial assistance as in a government welfare program. So how does corporate welfare work? It works the same way as regular welfare, corporations "receive financial aid from the government…because of hardship or need." Often, however, hardship or need is not a requirement. How do they receive this financial aid? They receive it through government subsidies, tax-exemptions, and guaranteed loans. In other words, they receive it from taxpayers.

Why do governments give these to big corporations? Because big corporations have big lobbyist hands that lobby for it, and in turn give big to political campaigns. Those who don't have big lobbyist hands are the smaller businesses, the ones in competition with the big businesses. If big corporations can get subsidies, tax-exemptions, and guaranteed loans from the government then they don't have to do much else to stay off competition. So it's in the big corporations' best interest to have big government with big treasuries. Currently, this includes both sides of the political spectrum.

None of this seems fair to new and small businesses because it isn't. It goes against the traditional concepts of limited government and free markets; free markets where the only way to the top is by satisfying direct customers, not government officials (who spend other people's money, not their own). If customers aren't satisfied, the business will lose market share to competitors whose customers are satisfied. The ultimate benefit goes to society in having better and cheaper products and services. Throwing the wrench that is corporate welfare into a free market creates distortion and corruption. And the ultimate detriment goes to society in having worse and more expensive products and services.

Wednesday, March 12, 2008

Bedrooms Are For Beds, Not Televisions

Since my early teenage years to the time that I got married, a television set served as a member of my bedroom, as did a video game system and eventually a computer. As wonderful as these things are, I am now convinced that none of them belong in a bedroom. Something I committed to when I get married was to remove the television set from my bedroom and never allow it to return. And I've been true to that commitment to this day. The reason that I decided to do this was because I learned what a television set in the bedroom does to our bodies. It trains them to do precisely what we don't want them to do when they hit the bed: Stay Awake! This was my biggest problem, one that I failed to see the cause of during the time that I had a television set in my bedroom.

However, I am glad to report that not falling asleep quickly is no longer a problem for me. You see, I have trained my body over the last three years to go to sleep when I lay in my bed. By not using the bed to do anything other than sleep, my body has learned to shut down when it senses I'm in my bed. This is a wonderful thing my body has learned to do. And it's true.

Now there are other reasons that we shouldn't have television sets in our bedrooms but I'd like to focus on why we shouldn't allow our children to have television sets in their bedrooms. Believe it or not there are actual studies about this very thing and their findings are revealing:

  • According to the Science Section of the New York Times, after collating various research on bedroom television sets, conclude that, "Children with bedroom TV's score lower on school tests and are more likely to have sleep problems. Having a television in the bedroom is strongly associated with being overweight and a higher risk for smoking."
  • A study of kids between the ages of 4 and 7 showed that placing a TV in the bedroom increased weekly viewing by nearly nine hours—from 21 hours, to 30. "Under these circumstances, children read less, and make less progress in school. What's more, parents don't keep track of what kids watch in their own rooms, or how much time they spend on the tube."
  • A 2002 study in the journal "Pediatrics" showed that the presence of a bedroom television set greatly increased the risk of being overweight or obese.
  • A 2007 study in the same journal showed that students aged 12 to 14 with a bedroom television set were more than twice as likely to start smoking as those without television sets. (Even after controlling for the risk factors of have a parent of friend who smoked.)

I don't believe there is a single good reason to allow television sets, or video game sets, or computers in our children's bedrooms. Now that I'm a parent, I think more about this sort of thing, as I'm sure, as I hope, all parents do. And I hope that you'll commit as I have in keeping television sets in their proper place, anywhere but the bedroom.

Friday, March 7, 2008

Public Shootings and Self-Defense

I wrote the below a year ago for a college writing class. The assignment was to right a persuasive essay; and like all persuasive essays the topic I chose was one that I truly believe in. The right to defend ourselves and our families from harm is God-given and central to the preservation of liberty:

Public Shootings and Self-Defense – May 24th, 2007

Recently, there have been two major public killing sprees; the rampages at Trolley Square, Salt Lake City, Utah, and Virginia Tech, Blacksburg, Virginia. A not so recent public killing spree occurred at Columbine High School, Columbine, Colorado. These events have spurred both public outcry for tighter gun control, and an increase in applications for a concealed weapons permit. The media have hosted the debate on their front pages. Regardless of who is right and who is wrong, one thing should be very clear: Nature has endowed life with the unalienable right to self-preservation. From the beginning, life has never questioned whether or not this right exists, at least not until this last century.

It is logical to assume that life forms have done everything in their power to protect themselves from harm since life was first introduced on this planet. This is readily observable in the world we live in today. The Discovery Channel has weekly specials portraying such behavior in the plant and animal kingdoms. And there is a plethora of so-called reality television shows that portray such behavior among human beings. Of course, we only need to open our eyes and look around to see the very same behavior exhibited in everyday life.

Such a topic as life or the preservation of life brings with it pages upon pages of scientific and scholarly research. I would like to direct this short essay towards understanding the unalienable right human beings are born with to defend themselves against an immediate threat to their physical person. Early man would protect himself from predators and enemies with clubs, sticks, and the occasional rock throw. Moving through time, what appears in the archaeological record are several types of bows and knives. Eventually, we encounter the invention of the sword and the crossbow. These are all weapons that were used for personal protection in both times of peace and during war, some more easily concealable than others.

Since the mid-second millennium A.D., personal weapons have evolved from hand-held canons, to rifles and pistols. Rifles vary from small pellet-guns to high-powered precision rifles and fully-automatic assault rifles. Pistols, or handguns, come in various sizes from requiring two hands to handle to no bigger than the size of a credit card. Handguns are easier to conceal than rifles and can be used powerfully at a distance, unlike a knife. Both pistols and knives are ideal for everyday, everywhere, personal protection.

With the ratification of the Constitution of the United States with its first ten amendments, the natural right to self defense became a politically legal right to bear arms, which of course includes anything that can be used to protect oneself, including firearms. Not only did this right include protecting oneself from criminals but also from the oppression of tyranny in government. Among other rights guaranteed in the Constitution of the United States, this one was a milestone in the advancement of human liberty. Since the time this milestone was achieved, many have tried to use the power of democracy, or majority rule, to restrict the basic right of self defense. To make it harder for a person to defend him or herself is immoral, with or without a majority vote.

Several places, both public and private, have created what they call "Gun-free Zones" in order to persuade (or in some cases coerce) people from maximizing their level of self protection. They should more accurately be called "Defense-free Zones" because that is what they are. They invite the criminal and deranged to a safe place to prey on the innocent, as has been the case with public massacres in the last decade, September 11th excepted.

Lunatics have a brain and use it when planning such operations as Columbine, Trolley Square, and Virginia Tech. All these places were touted as gun-free and a safe place to come learn or shop and eat. The places not targeted by criminals itching to murder several people are hunting exhibitions, gun shows, and rifle ranges, for the obvious reason that it would be extremely difficult to do such a thing where, in all probability, the majority of people there are carrying some sort of gun. Instead, criminals choose places where they calculate the probability of anybody carrying protection is extremely low, such as schools and shopping malls. This gives them the confidence they need to carry-out as much carnage as they can before being stopped or committing suicide.

One place we are still allowed the protection that guns give us is our home. In America, certain cities excluded, unfortunately, we are allowed to own and keep as many guns as we'd like in our own homes, where we can secure our most valuable possessions including our families from the threat of physical harm.

In conclusion, I would just like to reiterate the fact that all life; plants, animals, and human beings, have the unalienable right to self preservation by the most advantageous means possible. To deny or restrict this right is immoral and against everything America was created for. This nation has been the leader in the advancement of human liberty for over two hundred years. At its very foundation is the right to self defense from criminals and the oppression of tyranny in government.