Author: George Noga

Progressives Pin Hopes on Sports Betting

George Noga
Gambling revenue is a pipeline of money flowing from the poor and vulnerable to the affluent and educated. It is highly regressive and amounts to a tax on stupidity.
Progressives Pin Hopes on Sports Betting
By: George Noga – June 24, 2018

          MLLG has a strong libertarian bent and opposes banning any activity undertaken freely by adults. Hence, we are okay with the Supreme Court decision permitting states to legalize sports betting. Nonetheless, sports wagering joins lotteries, slots and their ilk in the pantheon of schemes to exact more money for the state from its poorest and most vulnerable citizens. Following is the back story about state sponsored gambling.

Sports betting impetus comes from blue states. New Jersey, a fiscally irresponsible state, was the plaintiff in the Supreme Court case. Progressive politicians and their public sector union sidekicks conspired to seek another desperate fix for their failing blue state governance model with its unsustainable taxing, spending and borrowing.

State sponsored gaming is dishonest at its core. Lotteries are frauds from inception as they invariably are sold to voters as a means to increase spending on education – all the while its advocates (except gullible teachers) know full well that is a lie. Florida instituted a lottery in 1986 devoted entirely to education. Yet real per pupil spending on schools has actually decreased since 1986 as lottery money simply supplanted other funds. The same pattern occurs everywhere lotteries have been instituted.

Gambling is a pipeline of money from the poor to the rich. In the argot of economics, gambling is an inferior good, i.e. demand is higher on the lower rungs of the economic ladder than on the upper rungs. The poor spend seven times more money than the well off and impoverished neighborhoods have triple the lottery vendors per capita. It is the most regressive tax and is tantamount to a tax on stupidity. Gambling revenue is a pipeline of money flowing from the poor and susceptible to the affluent and educated.

State sponsored gaming is a monopoly and a fool’s game. There is no competition and its payout is worse than when organized crime controlled it. The mafia paid out 60% in bolita and in after-tax dollars. The present value of a lottery payout is around 30% after tax – half that of the mob. It is an unfair exploitative wager and a sucker’s bet.

State advertising encourages destructive behavior. Although MLLG believes adults should be free to gamble, it is wrong for the state to promote it. They use dishonest and deceptive advertising promoting a harmful, addictive activity. The state restricts advertising for tobacco and alcohol. What’s next; will the state run ads promoting legal marijuana? Lottery sales are fueled by a stream of slick advertising encouraging suckers and glorifying a fool’s game all the while devaluing hard work and thrift.

Gaming sends the wrong message to our children. It signals that good things in life come from a winning lottery ticket, not from knowledge, initiative, work and savings. Lottery numbers already scroll across our TVs and devices. With sports betting, this will explode with wagers on every possible event – telling our kids this is important.

Legal gambling can be fixed. State advertising must be banned and honest disclosures about the odds and payouts must be prominently displayed. Lotteries and other forms of gaming should be privatized and opened to competition. Let private vendors compete to offer the best odds; even the mafia offered odds twice as good as the state.

       State sponsored gaming exposes the ugly underbelly of progressivism. States run by liberals (and some conservatives) shamelessly exploit their poorest and most vulnerable citizens to feed their unsated appetite for money and power. In Florida, lottery money comes disproportionately from the poorest precincts but goes to fund Bright Futures scholarships, 90% of which go to highly educated, affluent families.

       Progressives claim to be for minorities and the poor. All they really care about is clinging to power. They are addicted to higher taxes even if it means eating their own.

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Next is the first of our popular summer Montana Moments postings.

American Birthright Accounts: Readers Respond

George Noga
This post compares American Birthright Accounts to Social Security and responds to readers’ questions about seeming too good to be true.
American Birthright Accounts: Readers Respond
By: George Noga – June 17, 2018

       Reaction to our May 20th post about American Birthright Accounts (“ABA”) was extensive and spirited. If you missed the original post or wish to reread it, you easily can access it on our website: www.mllg.us; however, we provide a summary in the next two paragraphs. Reader responses (addressed herein) centered on (1) comparisons with Social Security; and (2) questioning whether ABAs were too good to be true.

       American Birthright Accounts are an original MLLG idea, although the name is borrowed. ABAs are simple and affordable. Every child born in the USA receives a professionally managed, tax-free account funded by government for $5,000 at birth and $500 per year thereafter until age 65. If the account grows at 7% net of inflation, which mirrors the average annual performance of markets since 1930, the account will exceed $1 million at age 65 and generate $6,000 per month of retirement income.

         A retired couple, both with ABAs, receives $12,000 a month tax-free, equivalent to $200,000 per year taxable. They own their own accounts and have $2 million to bequeath to their heirs – all tax-free and in today’s dollars. The cost to the government is equal to one-half of one percent of the federal budget, or 25% of what we will spend this year just on food stamps. ABAs also would vastly reduce inequality in America!

How Do ABAs Compare with Social Security?

       An American working from age 20 to 67 earning the median income ($60,000) pays $430,000 into Social Security (“SS”) and receives a real (net of inflation) rate of return of 1.2% (per Heritage Foundation) resulting in a notional value of $738,000 at retirement. The average SS beneficiary receives $16,000 per year, or a rate of return of 2.2%. Because SS is 85% taxable, the benefit is equivalent to $13,000 after tax – equal to a real return of 1.8%. Finally, SS benefits are unsustainable at their present level and after circa 2030 beneficiaries can expect to receive only 75% of present benefits.

        Let’s put SS side by side with an ABA. The average cost of SS is $430,000, for an ABA it is only $37,500 ($5,000 at birth and $500 a year for 65 years). Average SS benefits are $13,000 per year after tax; for ABAs the comparable number is $72,000. At death, the value of your SS account is zero, zilch, nada; the value of your ABA is over $1 million. Everyone benefits equally from an ABA, whereas the benefits vary wildly for SS. I could go on ad infinitum in this vein, but I believe you get the drift.

Are ABAs Too Good to be True?

      Some readers had trouble with the mathematics of ABAs, wondering how it is possible for everyone to be a millionaire? The math is straightforward; the initial $5,000 increases to $435,000 and the $500 per year grows to $573,000 for a total of $1,008,000, all computed from standard compound interest formulas. ABAs compound from birth for 65 years, whereas SS doesn’t begin until 20 years later. ABAs grow at a market rate, while SS grows at the much lower short-term government bond rate.

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      There is a much larger lesson here. ABAs succeed due to the power of markets, while SS fails because of the evils of government. Progressives oppose privatizing SS, fearing market success will turn workers into nascent capitalists by giving them a big stake in the free-market economy. Liberal poseurs oppose making everyone rich because it doesn’t fit their nihilist, tribalist, class warfare, identity group narrative.

Next up: The Supreme Court decision to permit sports betting. 

Sacrificing Children on the Altar of Gun Control

George Noga
Guns in schools, as part of a proper plan, create a speed bump for killers; this is like having a fire extinguisher or wearing a seat belt.
Sacrificing Children on the Altar of Gun Control
By: George Noga – June 10, 2018

       In the aftermath of recent school shootings, progressives opt for political posturing and moral preening instead of immediate practical measures that will help prevent, and also minimize the toll from, school shootings. They disregard children’s safety to push for pie-in-the-sky gun control, which likely is unconstitutional and the effect, if any, is in the distant future. They have forfeited any claim to the moral high ground.

       Liberals refuse to acknowledge any cause, other than guns, of school shootings even though government failure at all levels was a major cause of Parkland. The FBI failed; the sheriff failed and local government failed. School administrators failed by imposing a loopy Obama policy of not suspending students or calling police regardless of the number or seriousness of offenses. Where is liberal angst about these things?

        Why is federal gun legislation the only remedy ever proffered by liberals? If there were mass shootings at Starbucks, would there be calls for federal action, or would people simply say that Starbucks needed to beef up its security? The latte left opposes guns in schools for one reason only: they fear to acknowledge guns ever can be a positive force as it would destroy their anti-gun mantra. At a minimum, guns in schools (as part of a proper plan) would create a rather large speed bump for killers.

          Not only would guns deter rampage killers, they also would minimize casualties. If armed school personnel start shooting back at wannabe killers, it messes up their plans. The best way to stop killers is an immediate, violent response; school personnel can respond instantly whereas police require 10-15 minutes. When armed civilians stop an attack, the average number of people shot is 2.5; when police stop an attack, the average number shot is 14; this is solely attributable to the faster response times. Many low-casualty incidents never even make the national news because rapid responses by armed civilians stop the killers before casualties have time to mount.

         Guns won’t prevent all school shootings just as fire extinguishers won’t prevent fires and seat belts won’t prevent accidents – but they all save lives. It’s all about an immediate response which can save an average of 11.5 lives compared to waiting for police. An immediate response can come only from within the school. Although arming school personnel does not deal with the root cause, neither does banning guns. The root cause is people deranged enough to want to commit such horrific acts.

      Nevertheless, progressives reflexively reject immediate, practical measures, like guns in school, to reduce the butcher’s bill from rampage attacks. Instead, they smugly and disingenuously hold out for a feel-good solution they know will take many years and likely will have little or no effect. In the meantime, they leave our school children vulnerable because of dogmatic obeisance to their anti-gun religion.

        Ending school gun-free zones saves children’s lives. Even the possible presence of guns deters would-be killers, whose fantasies would be ruined by an immediate violent resistance. Once an attack began, guns instantly change the killer’s calculus from mass killing to self defense. Guns significantly reduce casualties from an attack and can be introduced immediately with little cost. Liberals would not remove fire extinguishers from schools, yet they want to ban analogous instruments from schools.

       By doctrinaire opposition to guns in schools, progressives make their long-term, unconstitutional and unattainable gun control fantasy the enemy of the present good. They are sacrificing our school children on the altar of their gun control religion.

Next, we respond to numerous reader comments about American Birthright Accounts

Pulse Nightclub Tragedy and the Laramie Project

George Noga
Orlando observes the 2nd anniversary of the Pulse tragedy with The Laramie Project.  
Pulse Nightclub Tragedy and the Laramie Project
By: George Noga – June 3, 2018
       This is a post I’d rather not write, but it must be written. June 12th is the second anniversary of the Pulse shooting. The occasion is being observed (beginning June 2) with a month-long production of The Laramie Project, a play about the 1998 brutal murder in Laramie, Wyoming of Matthew Shepard, a gay 21 year old college student.
The Progressive Narrative
       The common agenda of the OnePulse and Matthew Shepard Foundations is to fight hate crimes and gun violence against the LGBTQ community. Barbara Poma, Director of the OnePulse Foundation, said, “The increase in hate crimes targeting the LGBTQ community . . . puts the responsibility on foundations like ours to work together.” Her narrative is that both the Pulse and Laramie killings were hate crimes targeting gays and that constitutes the rationale for sponsoring The Laramie Project.
          Late one night, Matthew Shepard made a pass at two strange men in a Laramie bar. He later left with the two men, was taken to a remote spot, brutally beaten, crucified to a fence post and left to die – solely because he was gay in what universally was (and still is) regarded as the hate crime of the century. Shepard’s murder became a liberal shibboleth about the homophobia and hatred permeating middle America.
         The Laramie Project, one of the most performed high school plays ever, depicts Matt as an innocent martyr but portrays life in flyover land as ugly, violent, intolerant, bigoted and psychotic. Schools use Laramie study guides that direct classroom discussions to homophobia and injustice in middle America, which is depicted as a crucible of hate, violence and savagery inhabited by gun-toting, homicidal rubes.
The Plain Truth
       Neither the Pulse shooting nor the Matthew Shepard murder was a hate crime directed at gays. The trial of Noor Salman, wife of Pulse killer Omar Mateen, brought out the facts of the Pulse shooting. According to FBI testimony at the Salman trial, the original intended target for Mateen was Disney Springs, a crowded shopping and entertainment venue. Only after Mateen observed the heavy security at Disney Springs, did he search “downtown Orlando nightclub” on his phone and find Pulse. There is no evidence or indication whatsoever that Mateen knew Pulse was a gay nightclub.
         Shepard’s murder resulted from a methamphetamine deal gone bad. One of Matt’s murderers, Aaron McKinney, also was gay and had a prior sexual relationship with Matt. The crucifixion to a fence post never happened. Everything people were told about Matt was a lie; he was a drug dealer murdered by his homosexual lover over a soured meth deal. The facts about Shepard came to light in The Book of Matt written by Stephen Jimenez, who is liberal and gay, after 13 years of research, interviewing hundreds of witnesses and scouring thousands of pages of public records. His book was critically acclaimed by gay groups and favorably reviewed by the Advocate.
The Lesson from Pulse and Laramie
      The takeaway, particularly from the Shepard case, is its exposure of the visceral hatred progressives and the media have for America. They blindly accepted anti-gay accounts from biased sources with unhidden agendas because it fit their narrative that America’s heartland is a cauldron of hate and homophobia. To them, it doesn’t matter if they got their facts wrong because, after all, their narrative was correct. The true hate crime of the century is the revulsion progressives and the media have for America.
      Since neither Pulse nor Laramie were LGBTQ hate crimes, will Ms. Poma cancel the collaboration with the Shepard Foundation? If The Laramie Project is performed in Orlando, will Ms. Poma tell audiences the truth about Matthew Shepard? Surely, there is a better way to commemorate the Pulse tragedy than by performing a play based entirely on lies and that depicts everyday Americans as demented monsters.
       Ms. Poma should travel across our great country to talk with ordinary Americans; she just might discover that we are not a nation of  hating, homicidal homophobes.
Next – we revisit the issue of protecting students from school shootings.

MLLG Collection of Ultra-Short Posts

George Noga
Education spending before and after the lottery – Hate crimes really are political crime. Thirty reasons why Hillary lost – Participation trophies –  Americans’ New Way of Life
MLLG Collection of Ultra-Short Posts
By: George Noga – May 27, 2018

       From time to time we bale together a short stack of pithy topics that, although blog-worthy, cannot justify an entire 500-word posting; this is one of those times.

Lottery and Education: MLLG compared Florida’s per pupil spending on education before and after the lottery. The year before voters approved the lottery (1985), Florida spent $4,060 per pupil – equivalent to $8,000 in 2017.  Actual 2016-17 spending was $7,500 on a comparable basis – $500 less per student than before the lottery. This is unsurprising; anyone with a modicum of walking-around sense knew lottery money would supplant other money over time. What’s truly pitiable is that clueless teachers, who fervently bought in to this three-card monte, are still teaching our kids.

Why Hillary Lost: Hillary has proffered myriad reasons why she lost; following are a few she omitted: Marc Rich pardon, sniper fire in Bosnia, trashing Jennifer Flowers, Paula Jones, Kathleen Willey, Monica Lewinsky, calling half of America deplorable, cheating Bernie Sanders, Vince Foster, travelgate, Whitewater, cattlegate, troopergate, $15 million Chelsea condo with campaign funds, Loretta Lynch interference, accepting stolen debate questions, secret server, deleting 30,000 subpoenaed emails, destroying phones and hard drives, Benghazi, Haitian thefts, Russian uranium deal, Wikileaks, Anthony Weiner, compromising top secret data, Clinton Foundation pay for play, avoiding Michigan and Wisconsin and just being an all-around horrid person.

Self Esteem and Participation Trophys: Self esteem is unearned confidence and hence a lie. American students fed self esteem rate themselves high even though they score below average. Such students will feel good about themselves as they flip burgers while their foreign counterparts own the place. I once supported a charter school in a tough neighborhood. The students were indoctrinated in self esteem and bought into the hype as did their parents. Unfortunately, they learned nothing else; the school’s test scores tanked; the school failed and the students were even worse off than before but they had their participation trophies. Self esteem must be earned through achievement.

New American way of life: A guy with a girlfriend and 2 children receives $90,000 per year as follows. Buy a house, live with your girlfriend, don’t get married and continue to use your parents’ address. Rent to your girlfriend for $900/month paid by Section 8. Your girlfriend receives Obamacare, cell phone and utilities, $600/month food stamps and free college tuition. You each claim one child on your tax return and both claim head of household for credits of $1,800. Your girlfriend claims disability (easy) for another $1,800/month. Married couples get none of these benefits but by following this plan, as many now do, they receive $90,000/year. Is this a great country or what?

Airbnb and Uber Under Attack: Deep blue cities and states continue attacking Airbnb and Uber at the behest of their unionist paymasters. Progressives insist any two people can share a marriage but are adamantly opposed to two people sharing a ride or an apartment. Liberals likewise believe in a woman’s right to choose provided her choice is not about where to school her children, owning a gun, joining a union, buying health insurance and obviously not about sharing a ride or apartment. While Uber and Airbnb were investing in transformative technology, taxi owners were investing in politicians and morphed into powerful, politically connected, state-sponsored cartels.

Hate Crimes are Political Crimes: Millennia of conflict and confrontation were needed to purge the world of the notion that a crime against one person should be treated differently than the same crime against another person. Hate crime laws diminish the actual crime and contain different standards of justice for different victims. Whether or not a crime is a hate crime is purely a political decision which ultimately depends on whether charging a hate crime advances a certain political narrative. Hate crimes, thought crimes and hate speech are throwbacks to the middle ages and the inquisition.

Next: The second anniversary of the Pulse nightclub tragedy. Do not miss this one!

American Birthright Accounts

George Noga
American Birthright Accounts can make every child born in America a millionaire!
American Birthright Accounts
By: George Noga – May 20, 2018

         Browsing The Wall Street Journal one day, I saw a piece by David Smick about federal baby bonds. The article mentioned a decade-old piece of legislation that would have given every baby born in the USA a $500 bond. It failed to pass Congress despite bipartisan support. I couldn’t get baby bonds out of my mind. As a college math major and a CPA, I am good with numbers. This post presents my realistic and affordable plan to make every child born in the USA a millionaire and in today’s’ dollars.

        During my career in what now is called wealth management, I advised clients who owned businesses to set up Roth IRA accounts for their children as young as age 6. This is legal provided you pay them for actual work around the office. If my clients contributed the maximum amount each year until the children finished college and if the money continued to grow until their retirement, the sum could approach $1 million tax free – even if not another penny ever was contributed after the kids left college.

       Thus, I already was familiar with the power of money to grow over long time periods. People, like my business owning clients, could afford IRAs for their kids who likely would be well off no matter what. Those on the lower rungs of the economic ladder however are mostly wage earners who cannot legally make (nor afford) Roth contributions for kids and who never benefit from stock ownership over time. These folks need a user-friendly way to participate in future global wealth generation.

        My plan is simple. The federal government creates a tax-free American Birthright Account (“ABA”) for each child born in the USA and funds it for $5,000. Each year until the recipient retires, another $500 is added. The ABA is professionally invested in a diversified portfolio of global index funds. Since 1930, markets have increased 7% per year net of inflation despite depressions, bubbles and meltdowns. Since the 2009 market bottom, stocks quadrupled but working class families have not participated. When the ABA beneficiary is 65 years old, the account exceeds $1 million and generates over $6,000 per month of income – all tax free and in today’s dollars.

         My plan is affordable. There were 3,945,000 US live births in 2017. Taking into account infant mortality and premature deaths, there will be about 3.5 million new ABA beneficiaries every year. This equates to an annual cost of $17.5 billion for the initial $5,000 and $1.75 billion for the additional $500 per year. The average cost for the first 10 years is $25 billion. In year 11 the cost is $35 billion and increases $1.75 billion each year thereafter. This is only one-half of one percent of the federal budget.

          Every person born in America is a millionaire and receives tax-free over $6,000 per month in retirement income. A retired couple, both with ABAs, receives $150,000 per year tax free, equivalent to $200,000 taxable income in the 25% bracket. Unlike Social Security, ABA beneficiaries own their accounts and a couple would have $2 million to bequeath to heirs. ABAs would reduce inequality and give working class families the same advantages enjoyed by affluent Americans. Moreover, ABAs would give all Americans a stake in our economic system by making them stockholders.

        There are no tricks or legerdemain involved; American Birthright Accounts would transform America. It would be the most significant economic legislation ever enacted and would rival the Homestead Act of 1868 as the greatest legislation in American history. Just as the Homestead Act made landowners out of working class Americans, American Birthright Accounts would make them stakeholders in America and would affix an entirely new and profound meaning to “Born in the USA“!

Next up is our MLLG collection of blog-worthy but short topics.

China’s Currency Manipulation and Dumping

George Noga
Are Americans helped or harmed if China sells us stuff far below cost?
China’s Currency Manipulation and Dumping
By: George Noga – May 13, 2018

        This post about currency manipulation and dumping by China concludes our pivot to China. Whether or not and to what extent China manipulates (undervalues) the yuan is the subject of intense debate. The yuan renminbi (“CNY”) trades at 6.27 to the US dollar (“USD”). For this posting, I assume the value of CNY should be 7.50; this is at the high end of estimates and equates to an undervaluation versus the USD of 20%. The effect of China’s dumping of exports below cost also is open to much debate.

     Let’s assume, a arguendo, China subsidizes exports, uses artificially cheap labor and thereby dumps goods below cost and that these practices result in China gaining an additional 13% unfair trade advantage vis-a-vis the USA. When this 13% is added to the 20% from its undervalued currency, China’s total unfair advantage becomes 33%.

        Now, let’s say you shop online for a good pair of athletic shoes made in the USA and find ones you really like for $100. Miraculously, the very next day an overnight package arrives at your door with a pair of identical shoes made in China for $67 along with a note from Xi Jinping stating that the money you saved is a gift from the Chinese people. Do you accept the Chinese shoes and the $33 savings and consider yourself lucky; or do you question the donor’s motives and refuse the shoes and the money?

       Such acts of beneficence from the Chinese people to the American people occur not just for shoes but for apparel, appliances and consumer electronics. China exports $525 billion a year to the US; if China is exporting goods 33% below its cost, the benefit to American consumers is $260 billion per year. Note: If the nominal value of exports is $525 billion, the undiscounted value is $785 billion, or $525 billion divided by .67 (1-.33 ). When subtracting $785 from $525, we derive the $260 billion. 

       Pause to consider this for a moment. Under the assumptions used herein, China’s currency manipulation and dumping of goods result in a gift of $260,000,000,000 each and every year to ordinary Americans – this is equivalent to $2,200 for each of the 120 million households in America. Even if my assumptions are off somewhat, the benefit to American families still is stupendous. The Chinese people are sacrificing to shower us with goods at far below the cost of their components and labor.

       There is a temptation to overthink this; don’t do it! If anyone tries to complicate this or tells you not to accept gifts from China, don’t listen to them. If anyone domestic, foreign or extraterrestrial sells you something below cost, it is an unalloyed blessing. A gift is a gift is a gift and should be accepted everywhere and always without question. The recipient always is better off accepting a gift even if the motives of the donor might be nefarious. There is no need to beware of Chinese bearing gifts.

 

        China’s currency manipulation and dumping is a gift that just keeps on giving. After pocketing the $260 billion a year munificence from China, Americans now have that same amount of cash savings that they can spend (mostly in the USA) on other goods and services they would not have been able to afford absent China’s largess.

        Although economics can be complex, this is straightforward. There is absolutely no downside. It is a no-strings-attached gift from Chinese to Americans; think of it as foreign aid. If China manipulates its currency, uses cheap labor and subsidizes exports, it is an unleavened blessing for American families to the tune of $2,200 each and every year. Take the shoes and run and it isn’t even necessary for you to say thank you.

Next: Our plan to make every new baby born in America a millionaire.

Trump Tariffs and Trade War With China

George Noga
Imports are what make us well off; exports are merely the cost of obtaining imports.
Trump Tariffs and Trade War With China
By: George Noga – May 6, 2018

          US trade with China is patently unfair. They have higher tariffs, use cheap labor, subsidize exports and steal intellectual property. They also manipulate their currency, but that is our topic for next week. Our 2017 trade deficit with China was $340 billion. Americans’ fierce belief in fair play accounts for the popularity of Trump’s tariffs on the Middle Kingdom. Whether or not such tariffs are wise is the topic of this post.

       Economists are in lockstep that expanding markets to their maximum potential size (global) optimizes specialization, economies of scale and comparative advantage thereby generating more wealth for everyone than tariffs or trade barriers. Imports are the things we want to eat, wear or use like bananas, athletic shoes and iPhones; they make us better off. Exports are merely the price we pay to obtain imports; they do not make us better off because they are eaten, worn or consumed in other nations.

        As first conceived by Adam Smith and later espoused by Milton Friedman, the objective for any nation is to get the most possible imports with the least possible exports. Trade occurs between people, not countries; it is voluntary and non-coercive. Living Americans eat the bananas, wear the shoes and use the phones, not government. Our households, just as our nation, are better off getting more in and sending less out. Grasping that imports are desirable is the key to understanding international trade.

       Trump’s rationale for tariffs is that because America imports $525 billion from China while they import only $185 billion from us, they have more to lose in a trade war. Once it is understood that imports are what is truly desirable, living, breathing Americans would lose $525 billion in imports versus only $185 billion for the Chinese. Humans in both countries lose, but American humans lose more. Moreover, the Trump tariffs ultimately are paid by Americans as higher prices for imported goods.

        Looking beyond China, 138 countries run trade deficits with the US; in half those countries the deficit is 500%. Don’t each of those nations have the same brief against us as we have against China? What if all those countries imposed tariffs on American goods? It is normal for a country to have both trade surpluses and deficits. Similarly, your family runs trade deficits with your grocer and power company but enjoys countervailing surpluses with your employer and your investment company.

        When China sells us goods, we pay with dollars. They use $185 billion to buy things from us. They also buy goods from other countries – in many cases from the 138 countries that run trade deficits with us. Many of the dollars we send to China thus find their way back to the US. Finally, China uses some of its trade surplus to purchase US assets and to buy Treasury securities ($1.2 trillion) to finance our national debt.

       What if we imposed huge tariffs on bananas such that it would be profitable to build massive hothouses to grow them in Minnesota? It certainly would create jobs and capital investment. The price of bananas would skyrocket and American consumers would suffer immensely. Would anyone argue that banana tariffs are a wise move?

        The rise of humanity began and blossomed due to trade and it remains so today. Milton Friedman believed Americans would be better off if we unilaterally abolished all tariffs and trade barriers – even if no other country reciprocated. The United States has run 42 consecutive years with a trade deficit. Where is the harm?

        In times of war, countries blockade their enemies to prevent them from trading. Tariffs restrict a nation’s own citizens from trading; hence, countries imposing tariffs harm their own people in the same way they punish enemies in time of war.

Next: The final part of our pivot to China – currency manipulation (horrors)

China: Economics, Demographics and Politics

George Noga
Is China an economic tiger or a pussycat doomed by its demographics and politics? Given enough cavemen, it is possible caveman GDP could surpass that of the USA.
China: Economics, Demographics and Politics
By: George Noga – April 29, 2018

      To hijack popular parlance, we are pivoting to China. This post presents MLLG’s inimitable perspective about China’s economy, demography and politics and it isn’t what you read in the popular media. Upcoming posts will address the Trump tariffs, China’s balance of trade with the US and whether or not the yuan is undervalued.

       Americans have been swamped with hype about China’s economy overtaking ours. Let’s look at the numbers. US GDP is $19.8 trillion or $61,700 per capita, 5.5 times the world average, 8th best in the world and highest of any major nation. China’s GDP is $12 trillion or $9,400 per capita, 17% below the world average and 74th in the world behind Mexico and Equatorial Guinea and similar to Botswana and Gabon. Also remember that China’s reported economic data are widely regarded with skepticism.

       China’s economy is 61% of ours but, as the hype goes, they soon will blow by us. Let’s test this assertion. Assume the US economy grows at 2.3%, a full percentage point below its historic average. Further assume China’s GDP grows at 4% until 2030 and then 3% thereafter. Under that scenario, China would require 55 years to pass the US in nominal GDP. Even then, its GDP per capita would be only 25%-30% that of America’s. If there were a trillion cavemen, each producing $20 a year, caveman GDP of $20 trillion would surpass America’s; however, they still would be living in caves!

       Another reason China won’t overtake the USA is demographics. Gender selection due to China’s one-child policy resulted in 140 million more men than women. Their 1.16 fertility rate is lowest in the world and will decimate the population in the next generation. The shortage of women creates social and political unrest. China’s ageing demographic already has resulted in a shortage of workers and an army of the elderly.

      Politics is another source of China’s woes. All empires throughout human history have broken up. China is an empire; therefore, it too will break apart. China doesn’t even have a common language; Cantonese and Mandarin are as different as Portuguese and German; people from different parts of China use broken English to communicate. Over 150 million people in China are not Chinese; there is Tibet, Manchuria, Inner Mongolia and the Uighurs. There is a significant and growing Muslim population in China’s outer western provinces, which is ruthlessly suppressed. Communists still govern with an iron fist; the internet is censored; and there is no political freedom.

     China is not nearly as formidable economically as the chattering classes and the mainstream media would have you believe. Its GDP will never catch the US and some time, in the not too distant future, it will begin to lose ground. Its demographic imbalance is a ticking time bomb and inevitably will result in chaos and social unrest. China will be the only country in history to grow old before it grows rich. Communism won’t survive as economic freedom inevitably leads to political freedom.

     China will experience increasing entropy economically, demographically, politically and socially. Its decline is ineluctable. America is a great nation because its people chose to be part of it. China is an empire of unwilling people of different ethnicities and languages held together by brute force. As a consequence, the Chinese empire, like all others throughout the history of mankind, will shatter amidst ethnic strife.

Our next post continues our pivot to China as we address the Trump tariffs.

The Climate Industrial Complex

George Noga
Climate change is not about warming, carbon or even renewables; at root, it is a ruse to confuse and to beguile people into enacting the radical green agenda.
The Climate Industrial Complex
By: George Noga – April 22, 2018
          Few Americans know what you are about to read. I became aware of parts of this saga only during the past year despite writing about climate change for 10 years. It is an incredible but 100% true story. Buckle your seat belts and hang on for a wild ride.

        Once upon a time, an existential climate crisis threatened Earth. Scientists were certain they had found the cause and that it was man-made. Alarmed environmentalists and credulous politicians quickly fell into line. International conferences produced a United Nations convention, followed later by a protocol. Lakes, rivers and forests were dying and a war on coal was declared. Public alarm was intense; in Germany, hysteria reached fever pitch. The media sensationally asserted that the planet was dying.

       The National Academy of Sciences and the EPA said the evidence of its cause was “overwhelming”. The president created a blue ribbon scientific working group to study the problem and signed international agreements. When the next president expressed skepticism, 3,000 scientists protested. Cap and trade legislation was in Congress.

       Then came a huge surprise! The blue ribbon scientific working group found that the science was all wrong. The true cause of the problem was identified, the problem fixed and the planet saved. The EPA never admitted it was wrong; they suppressed the evidence and used dirty tricks to discredit the scientist who proved them wrong. EPA still clings to the discredited story and still spends money on the disproven cause.

       To end your suspense, the above story is about acid rain, which was but one part of a long train of junk climate science beginning with the nuclear winter panic in the 1950-60s. Then came acid rain in the 1970s, followed by global cooling and the ice age. Next came global warming which morphed into today’s climate change paranoia.

         All these episodes share a common playbook. An existential threat to the planet is conjured; scientists are certain they know the cause; international organizations jump on the bandwagon; the media sensationalize with apocalyptic hype; the public panics; politicians demand more money and power; and anyone skeptical is branded a heretic. They have one other significant thing in common: they have been proven wrong about everything. My study of global warming leads to two unshakable conclusions.

    Man’s role is somewhere between non-existent and inconsequential. A peer reviewed study (Fyfe, Gillett, Zwiers) of 15-year rolling average temperatures shows Earth returning to its long-term secular warming pattern of .7 degrees Celsius per century; i.e. the warming is not man-made. The evidence against human causation is strong and includes warming throughout the solar system, no warming for 20 years, failure of all climate models, most warming occurring before 1945 and much more.

       There is something much bigger going on. Climate change is misdirection having little to do with CO2, warming or renewables. It is maskirovka by radical leftists and environmentalists and their fellow travelers in science, media and politics to beguile and to scare people into enacting their agenda. They have used the same playbook for everything from nuclear winter to climate change. In his book Green Tyranny Darwall (see source note) labels all these groups the climate industrial complex.

       This Earth Day take a moment to ponder nuclear winter, acid rain, global cooling and the coming ice age. The same people and organizations in media, science and politics, i.e. the climate industrial complex, were certain about all these crises and they were dead wrong every time. They are just as wrong now about man-made warming!

Source Note: Some of the data used in this post were taken from “Green Tyranny” by Rupert Darwall. If you are interested in this issue, I wholeheartedly recommend you read this book.

Beginning next week MLLG pivots to China and the Trump tariffs