Category Archives: politics

Understanding the lack of free lunch in the student loans debate

I’d guess my opinion matches most Americans about the Supreme Court’s student loan decision. The online response has been rather mental though. There’s been a number of people hyping up “obvious” solutions that have very very obvious problems that they don’t want to confront. So I’d like to speak about some of those.

Student loans should be dischargable in bankruptcy. The entire reason that Joe Biden supported student loans not being dischargable was so that poor students with no assets would be able to get the loans. The only reason someone will give you a loan is because they want their money back with interest. If they don’t think you’ll pay them back, they either won’t give you the loan or will demand exorbitant interest rates. The people who will get loans are either rich enough that they can obviously afford to repay, or are using the loan to buy an asset which can be repossessed if they refuse to pay. Poor students don’t fall into those categories, so for a long time they were locked out of student loans.

If student loans become dischargable, then banks will fear that certain students will rack up student loans and then immediately declare bankruptcy upon graduation. The graduate will have no assets to repossess, and so the bank is SoL. Banks will then only give loans to individuals with enough assets to repossess, or who are already wealthy enough to pay it back easily. Making loans dischargable would reduce the number of poor people who can go to college, and thereby increase income inequality. If you think that’s a good trade-off then we can have that debate, but this isn’t a consequence-free solution.

Loans should have no interest. This is the same as saying there should not be any student loans. Again, the reason people give out loans is because they expect to make back their money with interest. Without interest, there is no reason to ever write student loans. And so again, college becomes unreachable for those not already rich.

College should be free, provided by the government. This is a defensible policy, but too many people imagine a world without trade-offs, and those must be considered. People who think college should be free often point to Europe but don’t even understand that college is in fact not always free. In Germany, where college is free, only 1/3 of adults have a post-secondary degree or certificate, compared to around 1/2 of Americans. The exact numbers vary depending on how you count, but there is a clear divide, higher education is more rationed in Germany than it is in America.

The German system means that not everyone is even allowed to try to go to University, and those that do go usually face fewer teachers per student, (meaning they have to teach themselves more) and less assistance overall. I’m sure a lot of people would immediately fire back that this is a good thing, not everyone needs to go to University. But the thing is they’re usually talking about other people. They would never be able to look themselves in the mirror and admit that they be one of the 2/3 of people who just aren’t good enough to be accepted into a German University. Because higher education is not as rationed in America, more people can go.

Then there are the universities that actually do have fees. On paper these are lower than American fees, in practice many Americans qualify for financial aid that makes college free or at least cheaper than European college. In Belgium, tuition fees are about 1000 euros a year. I paid less than that in my undergrad (around 1000 dollars a year) because I received a good scholarship. And I was not an exceptional student at an exceptional university, if I was I might have gotten a full ride.

There are many reasons to despise the ever increasing cost of American universities. Most of the money goes to administrative bloat, almost nothing is spent to improve student lives or increase professor’s pay. Even the most “socially conscious” Universities will still pay millions of dollars to water their perfect lawns rather than pay the staff or grad students a living wage. But the student loan debate comes with trade-offs, and we must confront them if we want to change the system. Cakeism will get us nowhere.

Corporate Greed is over, now comes corporate generosity

If you’ve been to the grocery store recently, you have probably seen an incredible sight. Eggs are now selling for less than they did in 2022. Walmart says they’ll sell me eggs for 1.19$ a dozen, and Target will sell them for 0.99$ with a special discount. Considering that at the beginning of 2023, eggs were selling for as much as 5$ a dozen, this comedown is remarkable.

It gets to the heart of a discussion about the origins of inflation though. The classical definition of inflation is too much money chasing too few goods. That means that when either the money supply is increased or their is a shortage of goods, we should expect to see inflation. This thesis does seem to have played out in 2021-2023. The money supply was increased enormously in 2020 and 2021, while COVID restrictions meant the supply of goods was constrained and could not rise quickly to meet it.

But that isn’t the definition that has been gaining traction. Recently folks have pointed to corporate greed as the primary driver of inflation. Under this thesis, inflation is not driven by the money supply or the goods supply, but by corporate greed in and of itself. If corporations weren’t greedy, they wouldn’t raise prices. But if prices go up because corporations are greedy, doesn’t that mean they go down because corporations are generous?

I’d like to see someone like Bernie Sanders explain the fall in egg prices. Why aren’t Walmart and Target just being greedy like all the other companies? If it’s so easy to raise egg prices by being greedy, then what mechanism could possibly make prices fall? What possible reason could their be for a fundamentally greedy company to willingly lower prices and receive less money?

For that matter, why is Exxon-Mobile being so damn generous? Over the past year, crude oil prices have gone from 100$ to just 70$. Exxon-Mobile was public enemy number 1 when gas prices were high, and was blamed for being too greedy. Have they now become generous instead? Have all the oil companies become generous? Why are the oil companies so much more generous than all the other companies?

It gets to the heart of the problem, inflation isn’t driven by corporate greed. Corporate greed is a constant, I’d go so far as to say human greed is a constant. Corporations (on average) demand the highest possible price for their goods that the market will bear. Laborers (again on average) also demand the highest possible price for their labor that the market will bear. No one ever willingly takes a pay cut without good reason, good reason usually being they have no other choice.

If corporations want to raise their prices above what the market will accept, then they’d be like me walking up to my boss and demanding a million dollar salary. They won’t get what they want no matter how hard they try. If Walmart raises the price of eggs, then Target can steal all of their business by keeping its egg prices low. People stop buying eggs at Walmart, they instead buy eggs from Target or from one of the hundreds of small and independent retailers that still dot America. Grocery stores are not a monopoly in our country, they do not have the power to set prices on their own. They are always in competition with each other and prices reflect that competition.

By the same token, if I demand a million dollar salary, my boss just won’t pay it. If I say I’ll quit if I don’t get it, he’ll show me the door. I am competing with hundreds of other workers in my field and so I cannot raise the price of my labor over and above what others are charging or else I’ll get replaced. It is a fact that many people ignore, but there is a market for labor just as their is a market for any other good. And the labor market has sellers (workers) and buyers (employers) just like any other. So when trying to answer questions about (say) the egg market, it’s useful to first think about how it works in the labor market. We are probably all more familiar the labor market with since if you’re reading this blog you’ve likely worked in your life.

So, in the labor market, can the sellers of labor (the workers) raise their prices just by being greedy? No, of course not. Without some decrease in supply or increase in demand, the price (salary) of laborers doesn’t go up, and workers who refuse to work for the market raise simply won’t receive job offers. It’s the same with corporations and it’s the same with goods inflation. Prices of goods aren’t driven by greed. They’re driven by supply shortages and a glut of money, both of which are in part exacerbated by government policies.

The current administration has continued Trump’s protectionist trade policies, which prevent American companies from being forced to compete with overseas companies. And both congressional spending and the Federal Reserve’s balance sheet have expanded considerably, bringing more and more money into the money supply. Too much money chasing too few goods, that is what causes inflation.

The AI pause letter seems really dumb

I’m late to the party again, but a few months ago a letter began circulating requesting that AI development “pause” for at least 6 months. Separately, AI developers like Sam Altman have called for regulation of their own industry. These things are supposedly happening because of fears that AI development could get out of control and harm us, or even kill us all in the words of professional insanocrat Eliezer Yudkowsky, who went so far as to suggest we should bomb data centers to prevent the creation of a rogue AI.

To get my thoughts out there, this is nothing more than moat building and fear-mongering. Computers certainly opened up new avenues for crime and harm, but banning them or pausing development of semiconductors in the 80s would have been stupid and harmful. Lives were genuinely saved because computers made it possible for us to discover new drugs and cure diseases. The harm computers caused was overwhelmed by the good they brought, and I have yet to see any genuine argument made that AI will be different. Will it be easier to spread misinformation and steal identities? Maybe, but that was true of computers too. On the other hand the insane ramblings about how robots will kill us all seem to mostly amount to sci-fi nerds having watched a lot of Terminator and the Matrix and being unable to separate reality from fiction.

Instead, these pushes for regulation seem like moat-building of the highest order. The easiest way to maintain a monopoly or oligopoly is to build giant regulatory walls that ensure no one else can enter your market. I think it’s obvious Sam Altman doesn’t actually want any regulation that would threaten his own business, he threatened to leave the EU over new regulation. Instead he wants the kind of regulation that is expensive to comply with but doesn’t actually prevent his company from doing anything it wants to do. He wants to create huge barriers to entry where he can continue developing his company without competition from new startups.

The letter to “pause” development also seems nakedly self-serving, one of the signatories was Elon Musk, and immediately after Musk called for said pause he turned around and bought thousands of graphics cards to improve Twitter’s AI. It seems the pause in research should only apply to other people so that Elon Musk has the chance to catch up. And I think that’s likely the case with most of the famous signatories of the pause letter, people who realize they’ve been blindsided and are scrambling to catch up.

Finally we have the “bomb data centers” crazies who are worried the Terminator, the Paperclip Maximizer or Roko’s Basilisk will come to kill them. This viewpoint involves a lot of magical thinking as it is never explained just how an AI will find a way to recursively improve itself to the point it can escape the confinement of its server farm and kill us all. In fact at times these folks have explicitly rebuked any such speculation on how an AI can escape in favor of asserting that it just will escape and have claimed that speculation on how is meaningless. This is of course in contrast to more reasonable end-of-the-world scenarios like climate change or nuclear proliferation, where there is a very clear through-line as to how these things could cause the end of humanity.

Like I said it I take this viewpoint the least seriously, but I want to end with my own speculation about Yudkowsky himself. Other members of his caucus have indeed demanded that AI research be halted, but I think Yudkowsky skipped straight to the “bomb data centers” point of view both because he’s desperate for attention and because he wants to shift the Overton Window.

Yudkowsky has in fact spent much of his adult life railing about the dangers of AI and how they’ll kill us all, and in this one moment where the rest of the world is at least amenable to the fears of AI harm, they aren’t listening to him but are instead listening (quite reasonably) to the actual experts in the field like Sam Altman and other AI researchers. Yudkowsky wants to maintain the limelight and the best way to do so is often to make the most over-the-top dramatic pronouncements in the hopes of getting picked up and spread by both detractors, supporters and people who just think he’s crazy.

Secondarily he would probably agree with AI regulation, but he doesn’t want that to be his public platform because he thinks that’s too reasonable. If some people are pushing for regulating AI and some people are against it, then the compromise from politicians who are trying to seem “reasonable” would be for a bit of light regulation which for him wouldn’t go far enough. Yudkowsky instead wants to make his platform something insanely outside the bounds of reasonableness, so that in order to “compromise” with him, you’ll have to meet him in the middle at a point that would include much more onerous AI regulation. He’s just taking an extreme position so he has something to negotiate away and still claim victory.

Personally? I don’t want any AI regulation. I can go to the store right now and buy any computer I want. I can to go to a cafe and use the internet without giving away any of my real personal information. And I can download and install any program I want as long as I have the money and/or bandwidth. And that’s a good thing. Sure I could buy a computer and use it to commit crimes, but that’s no reason to regulate who can buy computers or what type they can get, which is exactly what the AI regulators want to happen with AI. Computers are a net positive to society, and the crimes you can commit on them like fraud and theft were already crimes people committed before computers existed. Computers allow some people to be better criminals, so we prosecute those people when they commit crimes. But computers allow other people to cure cancer, so we don’t restrict who can have one and how powerful it can be. The same is true of AI. It’s a tool like any other, so let’s treat it like one.

AI art killed art like video killed the radio star

Everyone knows the song “Video Killed the Radio Star” by the Buggles, it was one of the earliest big hits on MTV (back when it was still called Music Television). The song is pretty good, but it also speaks to a genuine fear and wonder about our world, that changing technology upends our social fabric and destroys our livelihood. The radio star who just wasn’t pretty enough for video, or couldn’t compete with the big production values of music videos, or just didn’t like dancing and being seen at all. That radio star is the Dickensian protagonist of the modern age, as they are tossed aside and replaced when new technology comes along.

This Luddite fear has pervaded throughout history. The loom-smashing followers of Ned Ludd are only the most famous, but there were silent actors who never made it in talkies. There were photo-realistic painters who could never compete with a camera. John Henry died trying to beat a steam drill. In each case, an argument could be made that the new technology removed some important human element. The painters could claim that photography wasn’t “true art”. And the loom smashers too probably believed that their handcrafts were more “real” and more deserving of respect than the soulless cloth that replaced it.

So why is AI art any different? Why should we care about the modern Luddites who want to ban it or restrict it? I say we shouldn’t.

AI art steals from other artists to make its images

common argument

No more than any artist “steals” when they learn from the old masters. It is a grievous misunderstanding of how AI works to claim that it cuts and pastes from other images, and an AI training itself on a dataset of art is no different than an art student doing the same whether in university or on their own. The counter-argument I’ve heard is “why are you ascribing rights to an AI that should only belong to humans! Yes humans can learn from other art, but AI shouldn’t have the right to!” I’m not ascribing anything to AI, the person who coded the AI and the person who used the AI have the right to use any images they can find, just as an artist does. And just as the output of an artist learning from old masters is itself new art, so too is the output of coding or using an AI that has been trained on old works.

AI art is soulless

common argument

As soulless as loom-made fabric is compared to hand-made. Or as soulless as a photograph is compared to a hand-painted picture. Being made with a machine doesn’t detract from something for me, and I think only bias causes it to detract from others.

AI art takes money out of artists’ pockets, it should be banned to protect the workers’ paychecks

common argument

Why is the money of the workers more important than the money of the consumers? Loom-made fabric competes with hand-spun fabric, should we smash looms to keep the tailors’ wages up? Are we ok with having everything cost more because it would hurt someone’s business if they had to compete against a machine? The counter-argument I’ve seen to this is that the old jobs replaced by AI were all terrible drudgery and it’s good that they were replaced, whereas art is the highest of human expressions and should never be replaced. Again I think this is presentism and a misreading of history. I’m sure there were tailors and seamstresses who though sewing and making fabric was the absolute bomb, who loved their job and though that their clothes had so much heart and soul that they were works of art in and of themselves. And I know there are artists in the modern day for whom most of their work is dull drudgery.

Thinking that your job and only your job is the highest form of human expression and should never be replaced, well to me that just shows a clear lack of empathy towards everyone else on earth. No one’s job is safe from automation, but all of society reaps the benefits of automation. We can all now afford far more food, more clothing, more everything, since we started automating manual labor. Labor saving creates jobs, it doesn’t destroy them, it frees people to put their efforts towards other tasks. We need to make sure that the people who lose their jobs due to automation are still cared for by society, but we should not halt technological progress just to protect them. AI art allows creators and consumers to have more art available than they otherwise would. Game designers can whip up art far more quickly, role-players can get a character portrait without having to pay, this lets people have far more art available than they otherwise would. In the same way that the loom let us have far more clothing available than we otherwise would.

AI art is always terrible

common argument

I find it funny that this often comes paired in internet discourse with “I’m constantly paranoid and wondering if the picture I’m looking at was made by AI or not.” There’s a very Umberto Eco-esque argument going on in anti-AI spaces. AI is both terrible and easily spotted, but also insidious and you never quite know if what you’re seeing is AI, and also everyone is now using AI art instead of “real” art.

If real art is better than AI art, wouldn’t there be a market for it still? There’s still a market for good food even though McDonald’s exists, if AI art is terrible and soulless than it isn’t really a danger to anyone who can’t make good art themselves. And if AI art is always terrible, then why are so many people worried about whether the picture they’re seeing is AI-made or not? Shouldn’t it always be obvious?

This is very obviously an emotional argument. If you can convince someone that a picture was not made with AI, they’ll defend it. If you convince them it was made with AI, they’ll attack it.

This was a vague disconnected rant, but I’ve become sort of jaded to the AI arguments I’ve seen going on. I had thought that modern society had somewhat grown out of Ludditism. And to be frank, many of the people I see making anti-AI arguments are supposedly pro-science and pro-rationalism. But it seems that ideology only works so long as their “tribe” doesn’t ever get threatened.

It’s official, we’re now being taxed to pay back Peter Thiel

I posted a while ago about how the Biden administration was bailing out SVB without calling it a bailout. Basically Silicon Valley billionaire and hedge fund managers (like Peter Thiel) put all their money in a bank well in excess of the 250,000$ FDIC insurance limit. That limit is a known risk. If the bank you use goes bankrupt, and if you exceed that limit, the FDIC is only obligated to give you back 250,000$. Doesn’t matter if you had 250,001$ or 999,999,999,999$, FDIC is only obligated to give you 250,000$.

But that would be unfair to the billionaires. After all, why should they ever suffer the consequences of their actions? So instead the administration promised that every single depositor would be made fully whole. This was spun as them protecting the little guy, but the little guy was already covered by the 250,000$ insurance. I don’t have more than that in the bank, neither does anyone else I know. If my bank goes bankrupt, I will be fully paid back because my deposit is far less than 250,000$. If you have more than that amount, then you are solidly rich and do not need a government bailout.

But the bailout came anyway. The FDIC handed out money to cover the billionaires and hedge funds. Now that money has to come from somewhere. Biden promised it wouldn’t come from the taxpayers of course, but it still is coming from the little guy. It’s coming from our bank accounts.

Every person who owns a bank account is paying a small amount of tax into the FDIC insurance program. It won’t show up as a line item in your bank statement, but it’s there all the same. But for every bank account held by a bank, they have to pay a little bit into the FDIC. That cost naturally gets passed on to the holder of the bank account, just like every other tax. When the tax on cigarettes rises, the price of cigarettes rises. So too is it with bank accounts. You won’t see the tax as money rushing out of your account, but you will see it as less money going in. The bank will pay you less interest on your deposits because they have to take some off the top to pay for the FDIC insurance. And if there was no FDIC insurance, you’d get more interest.

You can see this exact same scenario if you look at big bank accounts. There are some banks with accounts which hold millions, even billions of dollars. The FDIC is only obligated to pay back 250,000$ in the case of bankruptcy, but a responsible billionaire who does not need a government bailout will pay for deposit insurance which covers more than the 250,000$ FDIC limit. That deposit insurance will decrease the amount of interest paid on the deposit, or even remove the interest entirely to pay the insurance. If you have to pay for insurance, you get less interest.

Everyone with a bank account has to pay for FDIC insurance, we don’t even get a choice. And now we need to pay for even more insurance to refill the FDIC’s account since they emptied it to bail out Peter Thiel

The FDIC plans to hit big banks with a tax to refill its account. This is being spun as a progressive redistribution from the rich to the poor. It’s the opposite. If a tax is levied on Walmart, Walmart just raises its prices, and the Walmart customers pay that tax themselves. The vast majority of Americans have their money in a big bank like Bank of America. So the big banks are going to pass this new tax onto their depositors, just as they pass the FDIC insurance tax onto us. You and I will be receiving less interest on our deposits now, because the FDIC spent all their money on Peter Thiel and co. Take from the poor to give to the rich, socialize loses and privatize profits. It’s 2008 all over again.

I know the amount is small. It’s probably going to be no more than a few dollars in lost interest in my account. But a few dollars times the 100 million or so Americans who bank with big banks makes the few billion dollars needed to bail out Peter Thiel and co. And it shouldn’t be this way, we should not be paying for their mistake.

And I know I keep harping on Peter Thiel, but it’s because a bunch of so-called “progressives” are refusing to even contemplate that this is a bailout taking money from the poor. By ignoring the context you can see SVB and its depositors as “the little guys” and Bank of America as “the rich” so taking money from Bank of America to give to SVB depositors is re-distributive. But it isn’t so. SVB was the bank of billionaires and hedge funds, Bank of America is the overwhelming bank of America’s poor and middle class. Taking from Bank of America to pay back SVB’s depositors is taking from the poor and middle class to pay back the billionaires. And reminding those “progressives” of exactly who is being paid back is just something I feel I should do.

Not feeling good, but hope to have a post tomorrow

As the title says. Work is stressful when you’re not sure if you’re looking in the right direction. We have a lot of seemingly contradictory data coming in from our experiments, but those contradictions are hopefully pushing us in the direction of new science. Just how the shape of proteins relates to their disease states is still new ground, and I’m proud to be working in it. But it’s a difficult field to get data in.

I sometimes look back and wish I could have worked in an earlier time. You look at say Gregor Mendel’s pea plants and you think that that would have been a scientific endeavor you could do easily. Or discovering new elements in the 19th century when all you needed was an atomic mass and the mass ratios of an oxygen and fluorine salt. I think back and that research seems so much easier, since high school kids replicate some of those experiments today.

But I know it isn’t so simple. It’s easy to replicate those things first because we know what we’re looking for, and second because our technology is so much better. Finding the structure of benzene is a classic case, students learn how to draw benzene very early on in an organic chemistry class, but its structure confounded the best and brightest for decades in the 19th century. They didn’t have the accuracy of scales we do, the easy access to light-based detection methods, or nuclear based detection methods, hell they didn’t even have a theory of protons and neutrons. They knew Carbon and Hydrogen existed, but they weren’t in any way sure how to fit those onto a periodic table yet, and weren’t certain there wasn’t some new element hiding around in Benzene. Putting together an experiment to prove the structure of benzene, using only 19th century knowledge and 19th century technology, is a lot harder than it sounds, and me wishing I could have worked on that discovery instead of my current one is “grass-is-greener-ism.”

Another good one for any discussion: we often laugh at those silly medievals who believed the sun goes around the earth. I mean, even some Greek philosophers proposed it, but alas the medievals were just too closed-minded, right? But actually the geocentric theory did seem to be parsimonious for a good long while. Here’s a fun thought experiment: how would you prove geocentricism using only what you could find in the 10th century? No telescope, no pictures from orbit, just observations of the sky. If you know your astronomy you know there are certain irregularities with the orbits of planets as viewed from earth, and that is a good argument against geocentricism. Yet it was also noted that there is no perception of movement when one is standing on the earth, and that was taken as an argument against heliocentricism. It wasn’t until Galileo’s theory of relative motion that a cogent counter-argument was put in place, and so if you want to prove heliocentricism in the 10th century you’d also have to do the hard work of demonstrating relativity like Galileo did. Copernicus’s model of heliocentricism is often seen as revolutionary, but it still had endless epicycles needed to explain it, more even than geocentricism, making it not that much better than Ptolemy’s geocentricism, so if you want to argue for heliocentricism by attacking epicycles you’d also need to do the hard math that Kepler did in establishing how orbits can be calculated based on ellipses. It really isn’t as easy a problem as it sounds.

So yeah, work is hard but I guess it’s always been hard. We think all the easy discoveries have been made, but those discoveries were made when they were hard to make.

Socialism Betrayed: Racist Great Man theory of history strikes again

There was some mid historian who once said: “The history of modern Europe can be defined by 3 men: Napoleon, Lenin, and Hitler.” This plithy remark sums up much about the “great man” theory of history.

For those who don’t know, the great man theory believes that history is moved not by economic or societal or any large scale forces, but by the actions of individuals, the “great men” (almost never women). This theory opines that it was Napoleon, whose conquests spread republicanism throughout Europe and whose terrorizing of European monarchs lead to the Concert of Europe, it was this Napoleon who defined the course of the 19th century. And in just the same way, Lenin and Hitler in their own ways defined the course of the 20th century, pulling Europe in their directions of communism or fascism, remaking the modern world through their life and death. NATO and the Warsaw pact, whose presence defined Europe for half a century, came about because of Hitler. And Leninist communism, which defined the ideological struggle between East and West, came about obviously due to Lenin.

This great man theory has been attacked by much better historians than I, but I want to focus right now on how it completely invalidates the role of any individual in society except the Great Man himself. Napoleon without an army to command and a state to lead is nothing, and yet his soldiers, his bureaucrats, and the entire nation he inherited are meaningless in the great man theory of history. And the revolutions which toppled the monarchy and allowed Napoleon to begin his rise were not the actions of solitary great men, but a great mass movement of the French people as a whole. It is likely that even if Napoleon had never existed, the conflict between revolutionary republicanism and monarchism which defined much of his legacy would still have happened. And if Lenin had not existed, the conflict between capitalism and communism would likely still have been present.

I’m reading “Socialism Betrayed” by Roger Keeran and Thomas Kenny and it’s startling how in the very first pages of the book, they define their thesis that the great man theory is true and the people of society do not matter.

The collapse of the Soviet Union did not occur because of an internal economic crisis or popular uprising. It occurred because of the reforms initiated at the top by the Communist Party of the Soviet Union (CPSU) and its General Secretary Mikhail Gorbachev

Socialism Betrayed

Really?! It didn’t happen because of nationalist movements among the subjugated peoples of the USSR, like the Estonians, Latvians and Lithuanians? It didn’t happen because of mass movements which defined the collapse of every other Warsaw Pact nation in Europe? It didn’t happen because of the well-documented shortages and flailing USSR economy propped up almost entirely by oil and gas money? How easy it is to do history when you can define your villain and ignore all context!

I can already tell that this book will be dumb. Real dumb. Probably as bad as “The End of Growth” for how much it will ignore the facts to suit and opinion. Why are all the dumbest books I read the anti-capitalist ones?

Send troops to the Fed?

Pardon me for wading into Twitter Drama, but Rohan Grey is a remarkably unserious “intellectual” and I couldn’t help myself.

Before I start, let me share a tiny story from “Zen and the Art of Motorcycle Maintenance.” This book was a thoroughly unenjoyable read for teenaged me, but it has one anecdote that still sticks with me. If memory serves, there is a university that is being threatened with losing its accreditation due to repeated failures and the students are naturally protesting as this would make their degrees worthless. One student talks to the narrator and claims that the University in fact can’t lose its accreditation, because if someone tried to take it “the Governor would send the national guard to protect us!”

I shouldn’t have to spell out the ridiculousness, but I want to hit word count so I will. Accreditation isn’t held in a vault, it isn’t something you can protect with guns and soldiers. Accreditation is the trust that other institutions have in you, and while some of it is legally codified most of its power is in the uncodified trust that a society is built on. You can’t protect accreditation with and soldiers any more than you can protect trust or friendship.

And so it was with bewilderment that I read an Assistant Law Professor on Twitter making the same mistakes as the nameless student from a book. Rohan Grey wants to do an end-run around the debt ceiling by having the Treasury mint a one trillion dollar platinum coin and deposit it in the Federal Reserve. This coin would then pay for the USA’s financial obligations without the need to borrow money. A big (and usually ignored) problem is that the Fed would have to accept the coin, and as Josh Barro writes, the Fed has expressed the opinion that this chicanery is illegal and undermines Fed independence. (Read Barro’s article, it goes into great detail as to why this idea probably wouldn’t work). Undeterred, Grey thinks the Fed’s opinion doesn’t matter, and that if they refuse to accept the coin then Biden should send troops to the Federal Reserve and force them to accept it.

Grey’s mistake is thinking that guns can be used to enforce trust. The Federal Reserve has the trust of the markets, and its power to move markets is based on that trust as much as anything else. The Federal Reserve trades bonds and sets rates, but those bonds and rates have value because people trust the Fed to keep its word, Jerome Powell’s speeches about the Fed’s plans have as much or more power as any action taken by the Fed. Now imagine a scenario where troops are instructed to besiege and occupy the Federal Reserve, where Powell is held at gunpoint and forced to accept a one trillion dollar deposit from the Treasury which he and the Fed have gone on record as saying is illegal. Trust in the Fed would be shattered, nothing Powell says or does matters anymore because the troops (and by extension the President) are running the show. Investors would flee from US government bonds, causing yields (and thus America’s cost of borrowing) to skyrocket, because America’s currency will have been debased against the will of its central banks, and will now be at the whims of the President.

And you may say “that’s fine, I like Biden as President” but do you like DeSantis? Do you trust that DeSantis wouldn’t be willing to send his own troops to force his will on the Fed? Would you buy a 10-year government bond if there’s a chance that DeSantis or Trump will be controlling it 2 years? And furthermore, Powell’s remarks on inflation will become worthless. Maybe Biden doesn’t like the rate rising that Powell needs to do, or maybe when the election comes he wants to juice the economy. So what’s to stop him from leaning over and reminding Powell who’s boss? What’s to stop Trump or DeSantis from doing the same? People like Grey once griped that Trump’s complaining caused the Fed to pause rate rises in 2019 (ignoring of course that inflation went under the Fed’s 2% target, which should cause them to pause rate hikes all on its own). Now Grey wants to make the Fed wholly subsumed by the President, so Trump would be able to do whatever he wanted.

Once you’ve sent troops to the Fed, you can’t unring that bell. Investors invest in American Dollars and American bonds in large part because they trust the Federal Reserve to do its duty with regards to the currency. Shattering that trust with soldiers would shatter investor confidence in the American economy as a whole. You’d have a trillion shiny dollars, but they wouldn’t be worth a pence.

Maker vs Taker states

Last year, Elon Musk paid over 11 billion dollars in income tax, more than the amount paid by every single person I know COMBINED. Yet for all that I have no desire to see him get special privileges, or to have his complaints be heard over other people’s. I know we live in the real world where money buys access, but we should all strive to live in a better world where all are presumed equal regardless of wealth. So if Elon Musk shouldn’t get special favors, why should California or New Jersey?

California and New Jersey have been described as “maker” states, in comparison to “taker” states like Mississippi and New Mexico. California and New Jersey residents pay much more to the federal government than their state collectively receives, and vice versa for Mississippi and Mexico. This has led some lawmakers, like Josh Gottheimer (D-NJ) to call out the “moocher” states, and say that laws should be written to benefit the people of his “maker” state, by lowering their tax burden or enacting their preferred policies.

I’ve seen this exact line of reasoning before all across social media. When Republicans complain about the priorities of the government, Democrats come out of the woodwork to say that since blue states pay more tax, red states need to shut up and put up. Yet this is an absurd, Romney-esque line of reasoning that would have been utter heresy in 2012, the idea that wealthier groups of people should be heard over the voices of poorer groups. The next time Gottheimer complains about Musk, will he remember to shut up and put up since Musk pays more taxes than almost his entire state populations combined?

I think this belies the maddening hypocrisy of the maker/taker argument, it was true when Romney said it and it’s true when Gottheimer and lefties online say it. There is ALWAYS someone richer than you, and if you wouldn’t bend the knee to them then no one should bend the knee to you. Furthermore we live in a democracy, one man one vote. The votes of the poor carry just as much weight as the votes of the rich, and there is no special provision that says otherwise. That goes for poor people just as much as poor states. If Democrats want to be the party of the people, I’d better never hear another one of them insinuate that rich voters matter more than poor voters.

Controversy time: I don’t like ESG investing

ESG (Environment, Social, Governance) is a scoring system some folks have come up with to score which stocks you can “ethically” invest in vs those you shouldn’t. The problem I have is that it seems like a bunch of woo.

The idea is that companies shouldn’t just try to make the most money, they should also protect the environment, advance social justice, and govern themselves responsibly. Yet I’m reminded again of how FTX (you know, the folks who stole investor’s money) got really high scores on ESG despite being a complete criminal enterprise. Other dicey factors seem totally ignored in ESG rankings as well, TotalEnergies SE ($TTE) is a French company directly funding the Russian Genocide of Ukrainians by continuing to ship LNG out of Russia and yet it’s considered a “leader” in the Social category. An otherwise identical company like Exxon-Mobile ($XOM) is considered just “average” in the Social category despite no longer operating in Russia since the war began, so it seems like a little genocide between friends doesn’t affect TotalEnergies’ ESG scores all that much. One wonders just what does affect ESG in that case.

This may seem unfair, after all TotalEnergies is just trying to make money, right? And their LNG is in heavy demand by customers, right? Yet that is exactly what ESG scores are supposed to act against, the tyranny of capitalism to externalize all costs onto the rest of society. Tesla for instance is merely a 9/10 in the Environmental category because despite moving the largest number of cars in history off of fossil fuels, their cars use lithium and the mining of lithium hurts the environment. This is a cost that Tesla externalizes to the rest of us, yet it’s a necessary cost to run their business so they get an ESG ding. But it seems ESG scores are applied randomly and say more about the scorer’s personal biases than anything to do with the companies themselves.

So here’s my advice: forget ESG entirely. If you want to invest ethically, then look at the companies you’re investing in and weigh the costs and benefits yourself. Does Apple adding new privacy features make up for the horrific conditions at the Foxxcon factories? Then go ahead and invest. But that’s a very personal ethics question that no one else can answer for you. If you instead export that question to some ESG-ified ETF, then you’re just letting someone else’s biases run your investment account. And those people might not know the first damn thing about Environmentalism, Social Justice, or Corporate Governance.