The NSA and the Economy

President Obama told key members of Congress on Thursday that he was “open to suggestions” for reforming the National Security Agency surveillance programs that have embroiled his administration in controversy. Guardian article

President Obama wants to pull back the NSA’s far too extensive phone tap of the world and internet.

It is uneconomic activity. American values are offended by this data collection. The rest of the world is now in fear of the totalitarian juggernaut overwhelming the world with its moral values. In the last seven years it has prevented one terrorist attack. Acts of love and kindness may have well prevented another, natural causes may have prevented another, and the predator assassinations of the Al Quaeda leadership may have prevented a larger number of terrorist attacks. But if you spent the billions this programme must be costing on education, health, foreign aid and development and energy you would save far more lives.

Yes aid has been argued against as the results of it may not always be progressive. The tax system has not always benefitted the individual or hospitals always saved lives, but water and food production internationally is about to become increasingly significant in the future wars which will not be about religion.

The NSA data collection of intimate details of our private lives is every bit as scary as terrorism. And this incredible investment could be driven into into energy renewables that could slow the fatal decline into the global weather catastrophe that will lead to mass starvation and sunken cities.

Progress

Progress dictates that we determine our future based not on history but on future needs. We did not need an industrial sector before we had one.

The service sector is the largest employer and supplier of needs. Without technology and medicine, today’s world would be pretty awful. Those primary elements of productivity are not the source of all productivity. People are. Innovation and ideas are worth more than widgets or burnt coal.

I think we have yet to find an economic path that works for everyone, but so far what we have evolved with a thriving service sector is better than centralised wealth only consequential on primary production being the mainstay of all economic activity. More directly: the fewer people who can make money from the productive activity, the smaller the economy.

Banks do create money. Investment does create money. But for 100% employment to be possible, there has to be value for services and ethical organisations. Primary sectors are always smaller than what they grow. It is wrong to think we rely upon them for growth.

World class education is our most valuable export.

Primary Industry and the recovery

An argument against the assertion: “In political-economic reality, we’re still reliant on fossil fuels”

If all economic activity were purely there to convert energy, maybe that would make sense. But economic activity is actually to manage resources necessary for life. We do not have to progress into some kind of mythic space age to be successful. We have to live, grow, breed and die without making too much mess in the process. Progress means more result from less energy. Our service sector includes intellectual and cultural industries we are rather excellent at and form valid exports.

The model of human productivity and economy that depends on primary industry seems destined to fail. We can not expand primary production to solve our problems. Economic activity must be shared by all and what we make matters.

It makes little difference to the consumer if the public transport burns oil or electricity generated by nuclear power. They spend a fare or walk based on price. But this does not mean that to reduce transport costs we had better drill for more oil and gas. It is an example of how a service industry drove academic progress in science due to the war effort; the software revolution and being at the forefront of academic achievement in the sciences and arts is going to have larger economic effects in the long term than primary or secondary industry will.

Primary produce also includes agriculture and that in itself has an extraordinary economy involving much waste and unsafe practices.

Freemarket Trade

The UK faces a question of staying in the EU. Meantime the USA and EU are negotiating a free trade agreement, the largest trade deal in human history.

Scotland is facing a referendum on whether it stays with the UK or rules itself, as an independent member of the EU.

The possible future relationships include Scotland having a Free Trade with the USA but not proud independent England that becomes instead a massive tax shelter free wheeling gambling and banking hub for investment shills.

Value of Money

Does the value of money matter? This is the primary divide between left and right wing economics.  To the Conservative, the idea that old money becomes inflated away is an anathema.  To the Progressive minded, the idea that there is no social churn, allowing social mobility upward is worth it but still possibly hopes that does not mean inflating away wealth. Accumulated wealth is only power if not attacked by time.  Investors with large funds therefore must hedge themselves against extreme market turbulence while increasing their capital base by accumulating returns.  When the Government invests in reducing interest rates, it is effectively transforming the sovereign wealth to protect an early version of some horror monster that can leave massive footprints on wealth.  An important part of progress is not to accelerate risk beyond the ability of the state to meet it.  When there is relatively no state, as in a tax haven, then wealth is not tied to the fortunes of people.

The balance between state and the potentials of commerce that grows across borders inexorably is challenged

The Price of Gold

The price of gold was once $35/oz.  Last time I looked it was looking like it would exceed $1900/oz.  And now it is falling past $1,500/oz.

The taxing of bank accounts by Cyprus has sent a shudder down the spine of the very wealthy who believe tax shelters provide a safe haven.  However, without Government backing, their accounts are vulnerable to runs on the bank.  It was only EU intervention that saved them from a disorderly default by Cyprus.  Maybe that would have been better for the rest of the EU.

And now we see that the price of Gold is also vulnerable.  Indebted countries may have to see off their gold reserves to cover their debt and this sudden increase in supply depresses prices.  Also affects the very wealthy as only they could afford to invest in gold as a “safe” place for their liquid assets only to find that their own actions to avoid taxation now produce instability in every capital market.

Horror of horrors.  Wealth may have to be invested in business.  Building wealth for others and a fair level of taxation provide the stability that wealth needs.  Continued investment in tax shelters and avoiding mutual responsibility by favouring speculative investment over long term business building threatens wealth as well as welfare.

 

Social Economics

The blood supply can suffer from pressure or the lack of it. A well beating heart is the key to health and the functions of all parts of the body. The ancients bleed the system when pressure got too much risking ruptures or arrhythmia   A single point of failure is risky.  By putting pumps all over the body, and charging us for the privilege, the banks have effectively added multiple points of failure. So the system can go crazy hot or it can leak.  Offshore tax havens starve the tax payer from the benefits of prosperity.  Sometimes that selfish money finds its way back in along with bailouts to try and restart the engine.  All this extra capital sloshing around is hyper inflationary, but nobody is able to take advantage and grow as the capital leaks out.

We are giving the banks our pensions and lowering our cost of living as our numbers increase too far. The disturbing trend is that Governments stopped trying to prevent poverty.

 

Originally a comment in the Guardian in reply to article The Cyprus crisis is a symptom of what is rotten in the EU by Slavoj Žižek

 

The secret of economic growth

Economic arguments polarise into Right vs Left arguments.  How about recognition that our democracy allows change and adapting to the environment is what we need to do more of.  What are we, the British public, doing to export more?

Businesses need to take note that tax-haven economies are inherently unstable and can go belly-up.  Governments at least provide ballast.  Ultimately we will do better because the EU will cause economic growth.   If we build infrastructure it will be there to grow into, if we do not, growth is no longer possible.
(published as a comment in The Telegraph here)