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One of humanity’s oldest forms of national economy is the “palace economy.” Under this system, the king would have the harvest brought into a central granary for storage. In Genesis 41, Joseph interprets Pharoah’s dream as predicting seven good harvests and seven poor ones, and says: “Let Pharaoh do this, and let him appoint officers over the land, and take up the fifth part of the land of Egypt in the seven plenteous years. And let them gather all the food of those good years that come, and lay up corn under the hand of Pharaoh, and let them keep food in the cities. And that food shall be for store to the land against the seven years of famine, which shall be in the land of Egypt; that the land perish not through the famine.”

Egypt, Mesopotamia, Asia Minor, the Minoans, and the Mycenaean Greeks all had similar arrangements. It was a command economy, with subsistence farming as a base and the excess over bare necessity taken into the care of the government. Many examples of early writing are simply accounting records for the acquisition, storage, and disbursement of grain, wine, and olive oil. In theory, the stored food would be redistributed to the poor and, in times of shortage, to the people in general. In practice, it put the weapon of hunger into the ruler’s hands.

Politically, the ruler was the representative and near relation of the gods, and was invested with divine attributes. That may or may not have included shooting 18 holes-in-one in a single round of golf.

Is any of this starting to sound familiar?

Good riddance to the god-king of North Korea. I hope his fellow god-king Stalin has saved him a seat by the fire.

I know it’s confusing, but here is how to tell them apart: one of them used to be an evil alien mastermind bent on universal domination and the destruction of his many enemies; nowadays, he’s more of a comic foil.

The other is a cartoon.

Speaking on conditions of anonymity, a senior White House official indicated that while President Barack Obama realizes there are problems in his relationship with us, the American people, he intends to hang in and work to make it succeed. The spokesman went on to indicate Obama feels particularly disappointed that we have not appreciated all his efforts to bring us free universal health care. He also feels we are not doing our fair share of the national work, and that 20 months after the end of the recession, we should be doing much better than 9.4% unemployment and only 64.3% civilian workforce participation. He thinks we just are not trying hard enough, and wonders how he can expect to fund green jobs, high-speed rail, and universal fast internet connections without the revenues he needs us to provide. The spokesman conceded that while Obama has run up considerable debts, it was all spent on necessities, and if we had been contributing as we should have, he could have paid for it all in cash. The spokesman went on to say that Obama was willing to give this relationship another two years, and then see where we stand. The spokesman indicated Obama was sorry to take such a hard line, but things must change.

Other White House officials, who asked not to be named, said that Obama could do much better, and did not have to settle for the people of the United States. One official mentioned that Tunisia had just left a long-term relationship, and the United Nations has always had the hots for him. Another said that Obama and France were made for each other, and we had better watch our step, and get some help for what Obama considers our electoral dysfunction.

[Officer] Chalifoux said, “When I asked him to recite the alphabet from A to Z, he said, ‘I can’t do that.’ When I asked him why, he stated, ‘No one could do that. From A to Z? Come on. That’s crazy.’ ” From the Boston Herald

Sept. 30, 2010: IASB proposes Severe Hyperinflation amendment to IFRS 1. “The amendment proposes guidance on how an entity should resume presenting financial statements in accordance with International Financial Reporting Standards (IFRSs) after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.” This is good information, and I expect to study it closely.

I’m exaggerating to make a point here. Hyperinflation is unlikely in the US and EU. Inflation, long term, is nearly certain. Why? Because government debt is denominated in inflatable currency. The debtor has the means to determine the real value of the debt. Inflation would also permit the return of “bracket creep.” This prospect is delightful to the political class, as it passively increases taxes through wage inflation, while permitting nominal “tax cuts” through rate/bracket adjustments that can be artfully timed to coincide with the electoral cycle.

If you’re looking for the Bernanke Helicopter as a sign of coming inflation, you may already be too late. The Bernanke Submarine has already delivered its cargo and returned safely to base. The Federal Reserve’s politically invisible policy of paying interest on excess bank reserves has already created a monetary overhang of $1 trillion. So far, the expanded money supply has amounted to a subsidy for banks, as they can get the equivalent of the overnight Fed funds rate on all their reserves, not just the statutory requirement. The government has essentially printed new money, then borrowed it back in order to buy government and agency debt (quantitative easing).

This strategy, which has worked in the past in Japan as a countermeasure to deflation, creates its own risks. First, it has a tendency to reduce whatever stimulating effect other measures might have by soaking up money and taking it out of circulation. Why should banks lend money to businesses and consumers when they can safely lend to the Fed? Second, it can be difficult to exit. At 0.25%, the Fed is up against the limit of zero interest rates, so the effectiveness of quantitative easing as an anti-deflation device is near its limit. But even if it stops being effective for the purpose, the Fed has a wolf by the ears, and can neither hang on indefinitely nor let go safely. To unwind the position, it would have to sell government and agency debt in the open market. Done abruptly, it would effectively raise interest rates by depressing the price of government debt, immediately inflating the currency. It would have the same effect as an overt currency devaluation, and carries a risk of hyperinflation. Done gradually, it has the risk of continuing to lock up money in the banking reserves and restricting growth. Done clumsily, welcome back stagflation.

The only good exit from this bind is a growing economy. A small amount of inflation is always a by-product of vigorous GDP growth. To the extent that other government policies discourage GDP growth, the Fed’s strategy could make matters worse.

I have always been a little suspicious of the official unemployment rate, just from observing the ways people can be in or out of work, and the many ways it can be measured. Disability and workers compensation claims seem to rise when jobs are scarce. People may decide to go to law school, stay home with the kids, take temporary jobs, or start drawing a pension rather than continue a fruitless search. None of these substitutes show up in the unemployment figures.

I find the labor force participation rate a lot more straightforward. It includes anyone over the age of 16 who has a job, whether permanent or temporary. The rate of participation declines as a population ages, of course. You can drill into the Bureau of Labor Statistics database for more details, but the overall picture is pretty bad.

At the end of 2008, it all went south in a hurry:

Labor force participation rates

The National Bureau of Economic Research nearly called the end of the recession as July 2009 at their April 2010 meeting, based on positive GDP reports, yet job losses are accelerating (unexpectedly). There is very little point in trying to stimulate the economy while making it less attractive to hire American workers. How long before someone in the Obama administration figures that out?

Just a couple more observations, based on this chart and some of the other things I found rummaging around in the data:

• The jobs lost in the 2000-2001 recession don’t seem to have ever come back. The percentage of people in the workforce stabilized, but never recovered. This time, it looks like the re-employment picture will be even worse.
• The biggest change in the rate since WW II was caused by the massive entry of women into the workforce (not shown in this chart). In the past few years, the rate of workforce participation for women has actually decreased slightly. Men’s employment picture is far more dire, but the change in women’s employment rate, while much smaller, is unprecedented.
• The Boomers are not retiring. Their workforce participation rate is well above forecast. Have you looked at your 401(k)?

As an exercise in self-congratulation, the mainstream media has established a museum in Washington DC. There is a web portal for it, and you can input queries about the glories of American journalism. Sometimes, though, things disappear.

Both species gang up to devour everything they can find, spreading ruin. According to this article, being part of the devastating horde triggers the development of the brain in one species.

This phenomenon has never been observed in Washington DC, where the ravening swarms of the other species are most often found feeding.

The president of Mexico, Felipe Calderon, does not like the immigration law recently enacted in Arizona. He thinks it “doesn’t adequately guarantee respect for people’s fundamental rights.” Whether there exists a right to enter and remain in a foreign country without permission is certainly a proposition open to debate, and not often said to exist in other circumstances.

The US border has long served as a safety valve for Mexico. When there are no jobs available there, unemployed Mexicans have often come north for better prospects. Not only does this situation permit Mexicans to make their living here and support the families they left behind, but it also takes pressure off the Mexican establishment. From the point of view of the Mexican authorities, the poor and unemployed are better off working in the US than staying home causing trouble. The prospect of violence and insurrection is a real one. A porous border protects Mexico from some of the effects of its statist policies. The remittances from abroad, even with the US in recession, are still second only to oil as a legal source of foreign income.

The US has an official policy of excluding illegal immigrants from Mexico, a business policy of employing them cheaply, and a political policy of appealing to whatever side of the question brings in votes and money. What we have not done is address the Mexican government’s policies. The current Mexican policy is to encourage illegal emigration to the US in sufficient numbers to compensate for the lack of economic opportunity within Mexico’s borders. Mexico makes little or no effort to restrict the northward flow, and has no incentive to do so.

Leaving Mexico out of this discussion makes it completely useless to deal with the subject at all. Any immigration reform in the US that is not acceptable to Mexico will be subverted.

Physical barriers can make it more difficult to cross into the US, but no barrier is impenetrable. Past efforts have affected the immigration flow only marginally. Now people cross the desert in Arizona instead of California. It is more dangerous and expensive now, which makes the smuggling gangs more important and prosperous. Short of erecting a Soviet-style border defense, with barbed wire, minefields, and machine gun posts, this is an approach that has not worked and will not work.

The single largest factor that reduced illegal immigration from Mexico was the US recession. We should take a hint from that. Think of the border as a semi-permeable membrane. If the border is impermeable to investment, but permeable to people, people will flow across toward where there is investment (and jobs) until an equilibrium point is reached. To reduce this osmotic pressure, and reach an equilibrium point involving less movement across the border, it is necessary to increase investment in Mexico.

Under the Mexican constitution (Article 27), all mineral rights belong to the government. Oil is extracted and processed by a state monopoly, Pemex. With the state desperate for money, Pemex has deferred maintenance and exploration, and is considered to be in a run-off mode as existing petroleum reserves are used up and newer extraction techniques are ignored. Nevertheless, Mexico has for many years issued licenses to foreign mining companies, and is the world’s second largest producer of silver. Under the same article, foreigners cannot own land within 100 km of a border or 50 km of the sea. Various restrictions also apply to foreign ownership in communications, transportation, and financial services.

The Mexican state uses its power over the economy to reward political allies, punish enemies, and extract benefits for the politicians themselves. Nothing about this should seem unfamiliar to residents of any large American city, but the scope given by Mexican law for self-serving politicians is something even big city mayors could only dream of.

We are going to have to accommodate a certain large number of Mexicans coming to the US. The circumstances of their coming and remaining should be debated, but so should the conditions that drive them. We should not let it happen without getting economic concessions from Mexico.

Update: Fausta has much more about the Mexican government’s cynical policy on immigration.

This was the view from the back of the crowd.

Way off in the distance, there is a platform bristling with cameras and microphones. Somewhere behind it, hidden from view, Sarah Palin was speaking, but I could not hear much. The physical arrangement was pretty poor.

Free stuff! Everybody gets everything! How could you possibly be against this, unless you're a hater?

This bunch was the hard left. They seem to be affiliated with the International Action Center and Workers World Party, also known as ANSWER.

The pierced and tattooed ironists of the cultural left were not to be denied their place, either:

If you can't answer, sneer.

The lumpentelligentsia is the revolutionary vanguard! If they annoy you, just remember to stiff them on the tip next time you see them.

Big day tomorrow in Massachusettes.

I have been trying to map the physical progress of Xenophon through the Middle East and back to the Greek cities in Anatolia. His starting point is relatively easy to find: the city of Sardis, now called Sart, still exists, although now it is just a village near the ruins. The city was destroyed several times by earthquakes.
The next city mentioned, Colossae, was located near what is now Denzli (Turkey). They went on to Celaenae, near the present-day town of Dinar, where they remained for 30 days. While looking at the area in Google Earth, I noticed some landscape features that look like they might be the outlines of ancient buildings under the plowed fields. Have a look for yourself.

I usually read articles about business management the way my dog watches us eat dinner: with hope – never quite crushed, no matter how seldom fulfilled – that some toothsome morsel will come to me. This one was a nice meaty steak, fresh from the grill. If you have anything to do with corporate IT, whether as a member, manager, or customer, read it. The premise is that geeks value competence, logic, and contribution, and reward these attributes with respect. Looking at that statement logically, you can see that the contra-positive must also be true: if you are not getting respect from your IT department, you should look to yourself to see why not. If you ask a good IT person to do something dumb, illogical, or counter-productive, he will object. If you force the issue, you may get compliance but you will certainly forfeit respect. This is where a good IT department will start to rot. IT people tend to view management incompetence as a bug, and if they cannot fix it, they will come up with a work-around. If the bug is in corporate management, the IT department will pursue paths that they believe are better for the company’s interests than what they were told to do. If the bug is in IT management, there will be subversion, factionalism, and low morale, since the IT staff knows that IT management is not effectively representing them to the rest of the company. Either situation causes a split between IT and the rest of the company which may not even be recognized until there is a major failure.

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On the one hand, we have the Obama administration’s grand plans for universal health care, investment in our infrastructure, reducing our atmospheric carbon output, and world-wide reduction in sea levels. On the other, we have the requirement to pay for it, assuming the Chinese would like to have some significant portion of their money returned to them. Currently, the administration seems to favor increased taxes (sorry, “contributions”) on those with the highest incomes. The problem is that there are not enough rich people to go around. Even at a tax rate of 100%, there is still not enough money to pay for all the urgently needed good stuff. What to do, what to do…

A possible remedy comes from the Internal Revenue Code, which starts with this:

§ 61. Gross income defined
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.

The definition is broad enough to encompass just about anything that could be construed as income; that is, anything that would result in the improvement in the economic situation of a person or entity. Cash need not be involved. Income can be recognized, and taxes must be paid, on the unrealized gains of certain derivatives (§ 1256, § 988), on bonds that do not pay anything at all until they mature (§ 1272), and even in some situations where you pay too little for something (§ 1274). This is a marvelously flexible idea, and suggests that we can close our budget deficits not by raising the tax rates, but by discovering and taxing previously undiscovered sources of income.
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It looks like Al Franken is going to be the junior Senator from Minnesota. Does this mean we can stop taking Democrats seriously? Or should the Republicans nominate someone like Ann Coulter for the Senate to ensure that the bozo factor is evenly distributed between the parties? Floppy shoes and red rubber noses all around! Good grief, why did I even bother to register to vote? I could have enjoyed the spectacle without having to participate. I’m almost ashamed of giving a s**t.

Here is some encouraging news: “On April 29, 2008, Franken released a statement noting that he will pay about $70,000 in back income taxes in 17 states dating to 2003″ (link). Since Timothy Geithner had to pay only $34,000 in back taxes, Franken is about twice as qualified as Geithner to handle the fiscal affairs of our country. Senate Appropriations Committee, here comes a fellow who knows which end of a calculator is up, if not much more. Maybe someone can teach him what those symbols on the buttons mean.

My grandparents came here because their continent had gone insane. May they rest in peace, never having known what happened here later.

It was a vital national industry, employing many thousands. The plants, although state of the art when built, were outdated. Years of poor management and outright hostile labor relations had not helped. Foreign competitors were taking market share, and US companies were belatedly moving production facilities south or offshore. Would you like to contribute your tax dollars reviving this industry?

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Design by Michelle Yang. Thank you!
I couldn’t really hear what was going on, but you can read more about it at GOP Mom. The inevitable tricorne hats and other 18th century finery were there, and there were some people with other issues (returning to the gold standard, abolishing the Federal Reserve, etc.), but most of the crowd seemed like normal people fed up with the shenanigans in Washington. My guess is that a couple of hundred people were there at any one time. Michelle points out that she distributed 1,000 postcards like the one above, so my estimate is probably too conservative. More pictures after the break.

Update, courtesy of Michelle Yang again: I missed it, but there was another demonstration today across town, down by the water at Christopher Columbus Park in the North End. The harbor has been getting cleaner in recent years, even to the extent of supporting living fish. The tea dumped there today is not likely to harm them. This second demonstration was sponsored by the local FM talk radio. There was even a third gathering in the morning on the Common. Unfortunately, I was unable to attend that one, either. I spent the morning struggling with extensions for Massachusetts income taxes. Let me just point out that (1) if you put a telephone number in the instructions, you should probably do better than have the answering machine tell callers that they cannot use that number; (2) if you require your victims to use the website and forbid them to use paper forms, it is not really a good idea for all your site search results to point to the paper forms; and (3) if a CPA with web development experience can’t figure out what is going on in your website, your website probably sucks and your web developer should be firmly disciplined. “Bad codemonkey! No donut!”
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Many of you – far too many – will shortly receive an invitation to be my “friend” on a site called Mylife.com. I am so sorry to have caused you this inconvenience. The sign-up for this “free service” (only the useful parts require payment) ask you to import your email contacts. In my case, that included a lot of Chicago Boyz correspondents. Only later did I realize that instead of using them to search, it blasted spam to all of you. Again, my profound apologies. Please avoid this awful site.

This with this.

Discuss the role of civil society when it is healthy, and the role of the state when it is weak or damaged.