Pee Pee Pee

 

WHEN NOTIONS THAT LIE PLEASE PLUTOCRACY:

Abstract: Plutocracy has caught American society in an overwhelming web. Pernicious concepts and tools have been engineered by financiers and economists to justify its rule. The credit rating agencies are a famous example: they, and their plutocratic owners (Warren Buffet) rate the privates who pay them (but the governments do not pay them, so raters can rate them according to whether their private clients are long or short, the example of Greece and Goldman Sachs, also a Buffet property, a case in point).

Economic concepts such as GDP, productivity, PPP, the very basics of measuring economic performance objectively, are grossly biased. But always in the same way.

Price Purchase Parity, PPP, was invented mostly, in its present nature, to prove to the increasingly suspicious masses, that American plutocracy is best. GDP, itself biased, was not biased enough, in the eyes of the plutocratic masters. So the little economist robots functioned as wanted, and biased the bias some more, until masters were pleased. I am not saying that the concept of PPP could never work. But, as it is, it works only for the owners of the USA, and the obsessively materialist world they want us to live in.

As it is PPP belittles the economic achievements of other countries. PPP excludes services, hence health care, education, welfare, and general services (such as child care, public transportation, smart web and very high speed trains). Instead the existing PPP favors goods, thus consumption, and the more frantic the better. It judges a man’s happiness by its stomach. Existing PPP blossoms with debt, the way most of the money is created in the USA (by private bankers funded by the state in several ways, some secret, some blatant). Too much debt served, that’s called serfdom. Debt can destroy democracy: that is how the average Frank ("Free") became a serf, over a few centuries, in the High Middle Ages.

Even leftist "opponents" embrace many an erroneous basic economic tool (as I show by deconstructing my preferred self conscious economic robot once again).

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DISINFORMATION EVERYWHERE:

Let’s recapitulate first the biggest absurdity of the American economy in the last two years (and thus the absurdity of economic and financial theory when reduced to the cult of greed). Citizens of the USA were programmed into believing that nationalizing the so called financial "institutions" was "not-American". So what happened?

PEOPLE WERE NATIONALIZED BY THE BANKS:

Five corporations controlled by the rich constitute the U.S. mainstream media: there used to be around fifty independent news organizations in the early 1980s. No wonder people think all the same.

The right screams that Obama nationalized the banks, and that this is "un-American". The left says that banks could never be nationalized, because this will not fly in America. Both are sure of their opinions, both are wrong.

Verily, the nationalizations were paid for, but without acquiring title. The Obama administration, like a deer in the headlights, chose the middle course, the middle of the road, a place of wisdom, according to deer in headlights. Obama was being fed delicious poisonous advice by the wolves surrounding him, his "friends" Summers, Geithner, Dimon, Buffet, the agents of Goldman at the White House, etc…

Those worthies thought they could foil everybody. And, so far, it has worked, because opinion makers have been thoroughly confused, or have been in the position to claim they were thoroughly confused. The insistence that it was all the fault of little people who had defaulted on their mortgages, masked the reality that the largest hedge funds in the world were the publicly financed private banks, and they had failed, but not because of the little guys. They had failed, because they all piled up on the same side of a losing bet, with huge leverage. So the little guys got accused, while we read everywhere that hedge funds did not fail. That is disinformation. Smaller hedge funds made a fortune against the publicly financed, privately managed, HEDGE BANKS, which were too big to unwind their giant "investments" (and still are).

Imagine offering to pay for somebody’s house, because they had lost their house playing with your money, with their friends. And then you, the public, have to pay for the next house too, and the house after that, and the entire neighborhood of fat cats, as they all played with each other, with your money, and "lost" it all, giving your money to each other, buying for themselves other stuff with it, that it is none of your business to look at. All of this to ensure they still own the neighborhood, although you paid for it. This astoundingly gross conspiracy is what happened, it is called the "financial crisis of 2008", but the propaganda is so thick, nobody seems to understand the simplicity of it all.

The way out was just to nationalize everything, wipe the crooks out, and order the nationalized banks to finance the economy as needed for the furtherance of economic growth. It is said that government spending is responsible for 40% of Japanese growth in the last 20 years (but then, the government debt is 200% of GDP, much higher than Greece).

Those who had bankrupted the banks, were left just as powerful as before, if not more, because they realized they could get away with anything. They are so powerful that they are now able to block any reform which would hinder them. The bankers can even block understanding the very system which made them rich, this system that turn into a profit for the few, bankrupting not just the banks, but the entire "developed" world. Their half sentient robotized professors go on TV, orchestrated by the likes of Glen Beck, and sing as ordered.

Just today Glenn Beck, this uneducated, but well financed right wing preacher who weaves his discourse with material which sometimes seems straight out of this site, was comparing the fate of bankers under Obama to that of the Americans of Japanese descent under Roosevelt. The citizens had their freedom and property taken away, while the banks had the freedom and property of the citizens taken away from them, but for plutocratic propaganda it is all the same. Old fashion propaganda made people believe lies, but we have now a new type of propaganda, deliberately as confusing as possible. When the public does not know what to think, it does not know what to do, and, meanwhile plutocracy splurges.

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HOW PPP LIES ABOUT WELLFARE STATES BEING POORER THAN THE USA:

Groupthink was made worse as economics, the theory of house (eco)-management (nomy), presently in power, is obviously wrong. Not just because it crashed, and stays crashed. But also because it can be easily demonstrated to be deeply flawed, in its most basic logic, here, there, and everywhere. Economists learned to enjoy a non sense financial system, a tail that wags the dog, making rich the opinion makers who approve of it. It paid to become non sensical.

I focus here on a technical instrument, PPP, Price Purchase Parity, used, often implicitly, by most American economists (see the extract from Krugman below). That neat little PPP trick ruins all fair comparisons of the USA with Europe. That is why PPP exists, in its present nature, for the greater glory of the USA as it is, and thus of American plutocracy. PPP undermines the will to leave behind the economic lunacy implemented in the USA in the last 30 years. Even the most critical of American economists are affected by plutocratic PPP cult.

Here is a subtle example of plutocratic propaganda hidden, no doubt unwittingly, inside Paul Krugman’s logos, just as he is making… a particular case of the general philosophical point I am making in this essay!

"There’s also an issue of labor-leisure choices. In the 70s the long-run trend of taking productivity gains out partly in the form of shorter working hours came to an end in the US, while continuing elsewhere. What that’s about is the subject of dispute, but it’s important to understand that a large part of the GDP difference between the US and Europe reflects that choice. France, in particular, is a country with about the same level of technology and productivity as America, but with roughly 25 percent lower GDP per capita; this mainly reflects longer vacations and earlier retirement, which may or may not be bad things, but are not a straightforward case of inferior performance."

I agree with Krugman’s basic drive here. The French could work more, but they prefer vacations. That is a different philosophy of economics. (Although the French government think the French ought to work more.)

At first sight, it is hard for US citizens to detect the misinformation above, because they have been fed it so many times before, it has become them. Moreover there is nothing subtle about it, and, as Hitler said, common people cannot detect big lies, because they only practice small ones. Repeating big lies all day long makes them into the truths, as far as the commons are concerned. That is the real tragedy of the commons.

Verily, here are the latest numbers from the World Bank in "nominal" GDP per person:

12. United States $46,716

13. Belgium $46,486

14. France $45,981

("Nominal" means: the raw numbers, as they are, converted as the currencies stand. "Latest": 2008.)

Contrarily to what the honorable Paul Krugman breezily asserts, one does not observe a 25% difference in GDP between France and the USA. It’s more like $750 per head, namely 1.5%. Tellingly, this deviation from reality is systematically entertained by American economists: they always insist that France is much poorer than she really is.

I must recognize it is embarrassing: the French are having their cake, and eat it, during their unending vacations. (Moreover, it’s even worse than that: France producing only a small fraction of CO2 per person or per unit of GDP of the USA, per person, or per unit of GDP, the difference of "wealth" of a grand $ 750, is more than compensated by the energetic inefficiency of the economy of the USA. In other words, the USA spends more on waste: sitting in traffic jams augments US GDP, more than it does the French.)

The left wing American economists say: "France is much poorer, but…" the neo-conservative, if not neo-fascist, American economists say: "France is much poorer, and… ". In both cases, American economists keep on crowing about the unequalled greatness of the USA, never mind that the numbers say otherwise.

However naïve and inappropriate, GDP is a straight calculation: it is the addition of all money transactions (kisses don’t count, only cash). However, Krugman and all American economists in good standing in the power halls of the USA, do not use GDP to compare France and the USA, that would be too sad. Instead they use a completely flawed theory of PPP. PPP is GDP manipulated by those who want to please plutocrats, as the later provide economists with halls of power to amble through.

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PPP IS IMPORTANT, AND ITS BIAS MATTERS:

As it is, Krugman reinforces, however unwittingly, as I already emphasized, neo-con Americans with just what they want to hear. Namely that the French live 25% less well than the Americans. This looks like splitting hair, but the case of France is important, because France does everything the USA does, PLUS has a lesser gap between the rich and the poor, and is more of a welfare state. That is why American plutocrats obsess about France all day, and all night long, and make sure that the American public gobbles a distorted vision of that original source of American civilization (As Michael Moore pointed out in his movie, "Sicko", the danger is that Americans like the French all too much).

Americans plutocrats have been arguing that "welfare states" cost too much, and France, as she really is, proves that they are lying. PPP is the device that make academics able to support that lie with a clear conscience.

Why is PPP important? To validate an economic strategy, one needs to look at different economic systems, worldwide, and compare them. (PPP calculations are used to measure poverty rates, so they are very important socially, worldwide.)

Comparisons between economic systems are difficult to do because the worth of countries is, at first sight, dependent from their currencies, and the relative worth of currencies vary in time, often spectacularly. (Example: the value of the euro has varied, relative to the US dollar, by a factor of two, in less than a decade, from about 80 cents to 153 cents!) So economists invented PPP, to correct for that. It was a good basic idea. What is not working is that the computation made rested on an 80% wrong philosophy. In other words, it had a huge conceptual flaw, as I will explain.

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CONSUMERIST OBSESSION VERSUS A MORE WHOLESOME PHILOSOPHY:

Existing PPP is erroneous for a drastic reason: STANDARD PPP ASSUMES THAT WEALTH IS ONLY MEASURED BY A FEW PARTICULAR CHEAP CONSUMABLES, AND THE CHEAPER, THE BETTER. As it turns out, the French care less about these particular goods, the French prefer other goods and SERVICES.

American economists find themselves in the curious position of cows declaring lions to be poorer, because in the lions’ den, grass is expensive. And cows believe that stuffing oneself with grass is of the essence. (Don’t laugh: the French have the highest animal protein consumption per person, in the world, they do not eat water logged meat as all too many Americans do.)

Let’s go back to the problem at hand. The GDP per capita statistics used by the honorable Krugman (USA 25% above France) reflects INTERPRETATIONS American economists traditionally have to make, because they like to earn a good living.

It would not look good if the USA was not superior, where it is supposed to be superior, in providing wealth. The wealthy masters would be displeased, should that impression endure, and thus the rabble could become suspicious of the incomparable greatness of the USA, and thus for their great leaders. In North Korea, one cannot doubt the Great Leader, in the USA, one cannot doubt the Great Leaders, the so called "philanthropists", who lead America. So American robot economists, as good little scribes who want to keep their jobs, improve the statistics by nearly 25% in favor of the USA.

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PPP: PHILOSOPHICALLY WRONG:

In particular PPP does not reflect behavior modifying taxes. The European Union has a mandatory minimal 15% Value Added Tax. That VAT makes everything at least 15% dearer in the EU. In France, Germany, the UK, the VAT is 17%, and 23% in Greece (as an emergency measure). The American economists react by saying that Europeans are that much poorer (by 17% in Franco-Brito-Germania).

This VAT abates the consuming of goods, indeed. It also buys Europeans a lot of state mandated services… The wealth does not disappear, it is replaced by a balanced diet, with more services in it. Those services the Americans are deprived of, but the Europeans cannot do without. So who is the wealthier? Those, the Europeans, who have services that the others, the Americans, have not, or are those Americans wealthier, because they can buy even more stuff made in China?

Thus I have a general objection to PPP. Conventional PPP assumes that wealth is judged by goods Americans splurge on. This is weird: most of the wealth produced by advanced countries is in SERVICES. Services constitute more than 80% of the economy of the France, or the USA. PPP only concentrates on 20% of the economy.

The French like to be served, with health care, education, and general caring. The difference between France and the USA, is that Americans are content to go to the restaurant, and be served there, so restaurants, and valet parking, are very important in the USA. Whereas the French like to be served all day long, not just when they go to restaurants. The French like to be served in health, education and welfare more than Americans do, so more French economic activity is diverted into services rather than in purchasing some particular consumables Americans are more obsessed by. The French do not just define wellness with splurging on Chinese made goods (although they do that too, just not as much).

PPP assumes that if a hamburger cost only one cent in the USA, and 100 cents in France, the Americans will buy 100 hamburgers when the French can buy just one. Thus, say American economists, the Americans are 100 times richer than the French. Instead, a good doctor will say that the American economists are risking obesity, and cardiac arrest. And obesity of the brain, too, they think too much.

Moreover this is a virtuous, or, at least, a fattening, loop. While Americans gulp more and more hamburgers, the price of hamburgers drops, because the more demand, the more supply, the more of the Amazon forest is cut down for vast pastures to raise cattle to feed American economists and financiers, etc…

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PPP: PLAIN PLUTOCRATIC PHILOSOPHY:

A country such as France deliberately taxes consumption. The idea is to limit waste, and increase savings, thus investments (France has indeed a better, more modern and performing physical plant than the USA; only the army of the USA is better equipped). The difference between the gourmet and the pig comes to fore.

The encouragement to save and invest reminds one of what is asked from private banks today: augmenting capital requirements, lending to the real economy. France wants its population to be rich, not just indebted. It is a lesson of history. A debtor, in the European Middle Ages, one called that a serf. Men who wanted to be freed of their obligations defaulted by fleeing to the cities. Later some fled to the Americas. A land of owners, such as France, is more economically motivated than a land of debtors, such as the USA. So they get more involved, and demonstrate more. So good was this approach that it was adopted by the entire European Union (even the UK, as I said!)

Hamburgers or savings? That is the question. PPP, as presently computed, is biased towards viewing consumption of goods as an absolute good. Health care basically is free in France, thus, say American economist, worthless. Same for education. Free in France, so worthless.

Those who have long lived both in France and the USA, will guarantee you that the average person lives poorer in the USA. And even the rich in the USA have to worry about private school for children, extraordinary medical expenses etc (there are private schools in France, 25% of the total, but they are getting state subsidies, and are about ten times cheaper than in the USA, where they typically cost at least a third of the average family income!).

It is revealing that American economists such as Krugman, who howler about the end of the euro, because it is coming down from its 54% overvalued peak, use an undervalued euro to evaluate French overall economic performance. It is variable geometry economics: true here, false there, depending upon what one wants to prove, depending upon what will please the masters, those whose name is on the buildings on the hallowed campuses of power of the USA.

In any case, Price Purchase parity is an example, one of many, of a basic economic notion assuming the inferiority of some philosophical values. Unfortunately for the long term reputation of American style economic theory, our civilization, and even our non pathological neurology cannot do without these philosophical values.

***

Patrice Ayme

***

P/S 1: I have already complained about PPP, in a more general set-up.

P/S 2: PPP, this Pathological Plutocratic Ploy, has long been well known to be biased. The conventional objection to PPP is that it does not reflect standards of living, because:

• PPP numbers can vary with the specific basket of goods used, making it a rough estimate. (Example: "The Economist" loves to use the price of hamburgers, worldwide, and claims that its "Big Mac index" is just as good as PPP, thus unwittingly proving how bad PPP is, since in many countries people don’t care about hamburgers. In those countries there is less demand for hamburgers, hence less supply of hamburgers, hence smaller economies of scale, hence higher prices.)

• Differences in quality of goods are hard to measure and thereby to reflect in PPP. (Example: In the USA , meat is often loaded with water to be made cheaper, a cheap trick unimaginable in France. So USA meat is less good quality than French meat, its lower price reflecting in part the lower price of water. other ways to improve the PPP of American meat are antibiotics and hormones and lower quality feeds, the first two are, unlawful in Europe)

I added above my more drastic objections.

P/S 3: The cheating on PPP affects primarily international comparisons. The cheating on other major economic such as the CPI affects more directly daily lives of average citizens. Using the pre-1980 inflation calculation method, the Consumer Price Index would be over 9 percent. Today’s reported, official CPI, is around 2 percent.

The government gets there by using a a basket of goods that does not match the real-world cost of living. For example, health care costs are one sixth of GDP. but only one-sixteenth of the price index.

Subdued reported inflation enables the Fed to rationalize its easy money policy (which profits big banksters and their derivatives), and it allows the government to reduce payments to the common People (such as social security). It also allows to overestimate reported real GDP, higher reported real income and higher reported productivity.

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6 Responses to “Pee Pee Pee”

  1. CMike Says:

    I especially liked your: That is why American plutocrats obsess about France all day, and all night long, and make sure that the American public gobbles a distorted vision of that original source of American civilization.

    [Consider fixing the “its stomach” pronoun.]

    Like

    • Patrice Ayme Says:

      Thanks CMike, and I appreciate the editorial suggestion: since I write the essays by myself, they tend to have typos, and sometimes more than that!

      The reason England ended as the forward post of democracy was its founding as a melting pot of Celtic, Roman, Anglo-Saxon, Normand, and finally French influences, mixing the best ideas from all over, all the more since the small minority which led England after 1066 had to engage in war to stay in power. Including war of ideas. Throughout the centuries, leaders all over Western Europe, were fully cognizant of the Roman republic, and, or, the Roman empire, and were busy trying to reconstitute it.

      Since the French in England wanted their power to be independent of the old English aristocracy, and the power in Paris, they leaned heavily on the People, building up the power of Parliament, starting with Guillaume Le Conquerant, and much later the effort of the Toulousain de Monfort, who wanted to be elected king of England, used old Roman republican ways to foster himself. France and England were the same polity for about four centuries (after 1066… They had been the same for 400 years too, at least, under Roma; later Saint Patrick was educated and trained in Cannes, in the islands off the coast there, a monastery then, or now.)There were also independent republics in the Alps, and Italy, and they played an important role in the advancement of democracy (to say the least!) The Franks themselves saw themselves as a democracy, and fostered for example Venice, as early as 800 CE.

      That does not mean England was more democratic than France in all ways. In particular, by 1600 most French peasants were owners, whereas their colleagues were destitute in England (paradoxically that favored a giant British baby boom, and forceful emigration all over the world, exporting democracy -and empire- all over).
      PA

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  2. Roger Henry Says:

    A wonderful and insightful comparison of economies. You are right about the Golden Rule dictating the output of academia and the fraudulent CPI.
    However, no mention of how supporting a bloated military plays into all this.
    I would recommend an article for your consideration , also in wordpress.com, called” I write to you from a disgraced profession”. You have probably already read it, if not , it is definitely worth the time.

    Like

    • Patrice Ayme Says:

      @ Roger: I do not mention the military all the time, because I have to try to concentrate, and I do not want to bore my readers with apparent senility, always repeating the same thing. I mentioned recently though that the defense budget was about 708 billion plus at least 30 billions (CIA , etc.), and that was half of Bush’s entire Federal budget (I mentionned it, a week before that absurdly bloated budget was actually voted by Congress). It is as if, not satisfied with sinking to the bottom of the sea, we are digging a hole down there to make the situation worse: drilling the bottom of the sea, what glorious feeling, what happy refrain, we can never get enough of all the fossilized rot down there, let’s spread it all over!

      Speaking of oil, at least, the army ought to be used right away in the Gulf of Mexico to close the barrier islands with dams. That would prevent more oil for entering. But that would make the army useful instead of simply killing and getting killed, that is too much to ask, probably.

      Obama and his advisers-clowns are apparently not aware that the Roman empire crumbled militarily when the defense budget was way too high, and at the highest, ever, with a standing army of 800,000.

      One cannot have a strong military without a strong economy.

      (I will try to find this essay, thanks!)
      PA

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  3. leo Says:

    Patrice,
    indeed PPP is not a perfect measurement since it can be skewed by structural country differences. Your example on health care is right on target.
    However, imperfect as it may be, PPP, just as GDP is a practical way of removing price differentials from country comparisons.
    And, being French, living in France and visiting the USA very often, it is quite obvious to me that the US average living standard is fairly higher than ours. Staples such as food and housing are way cheaper.
    By the way, PPP stands for Purchase Price Parity and not the opposite.

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    • Patrice Ayme Says:

      Leo:
      Thanks for the help about PPP being Purchase Price Parity. I am so used to mangle the notion, and make fun of it, that I do it even unconsciously. I call it: Pathetic Plutocratic Ploy.

      I have lived extensively in France, and the USA (and on other continents as well). It is true that French housing is way overvalued at this point.

      French housing is 40% over valued relative to American housing. Now the later is still heading down, in spite of trillions of dollars unwisely spent on keeping the valuations up by the Obama administration, instead of sending them to social programs, giving jobs to people, education, and research… not that they spent little on these, but not enough… And keeping the housing valuations up disadvantages nearly everybody, except those who own housing free and clear, and, of course the mega banks, by allowing them to lie about their toxic products. So i expect a housing crash in France, tempered by the fact that everybody wants to live there.

      If you are French, and visit the USA very often, you belong to the upper crust, and you meet the American upper crust. The later had it really good in recent years, but nobody else did. The American middle class is heading down, big time, Titanic style: unsinkable, but settling down in the calm, icy ocean.

      In most places, except rich enclaves, public schools are in an abysmal state. So parents in the upper middle class send children to private school, where tuition can be 30,000 dollars, a year (more than half the average family income).

      Coming from Europe, one will look naturally enough about PPP, without thinking that services which are basically free in Europe are hyper expensive in the USA. Spending ten dollars to go round trip 15 kilometers on public transportation is standard in places such as the SF Bay Area. Then there are other problems, such as bad health care caused by cheap health care… Cheap for the health providers. Staying in hospitals 2 days for a difficult pregnancy, with surgery, where the French will keep you nine days.

      Then food quality can be abysmal too. Try (most) American cheese! Solution: European cheese… but it will cost you, a lot.

      Another thing: About half of American home owners rent their houses to banks… A one million dollar loan, from the bank, on a 30 year fixed (the most conservative loan), will cost truly more than two millions. So many Americans are in slavery, borrowing for everything from cars to food. The Obamas were particularly incensed about student loans, during the campaign, and could reimburse them only after he got a gold plated contract to write his heartbreaking story as a brown man who imagined he was black, while sitting pretty in Bali, Indonesia…

      Other staples Europeans take for granted are security, the humanity and the stability of one’s environment, luxuries that Americans have less than Europeans. That is why Americans fall in love for French villages. The French may be poorer in some staples, such as big water logged tasteless food, but they have the good luck to live in a more human and tasty society. But of course, they do not know that, since the French national sport is to complain about France. An excellent habitude to have to keep on going with democracy, however costly it is to the national psyche. The American sport is closer to watching advertizing on TV, interspaced with samples of baseball-football-basketball… And democracy is paying a heavy price: two right wing plutocrats in California are postulating to become the chosen “Republican” Party candidate for the gubernatorial elections in November to replace the humvee loving Terminator.

      So those two worthies are only candidate to the candidacy. How much did they spend to seduce the electorate? They admit to have spent more than 100 million dollars. From their own pocket. Life is so cheap in the USA, that democracy is for sale. Plutocrats are buying, people are watching TV

      A correct theory of the PPP would involve the price of democracy. It is worth a lot, and the French take it for granted.
      PA

      PA

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