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.

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Patrice Ayme

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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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Tags: GDP, plutocracy, PPP