Reason for a New Age

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    What you will expect to see here are discussions of politics and tangentially economics. This blog will do its best to present a rational look at the world of today, how the modern world came into place, and the issues that are currently being discussed in the public realm.
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Posts Tagged ‘human nature’

Pinochet, Putin, and the Bushes

Posted by publius2point0 on 2012/09/09

On a set of forums that I frequent, one of the posters who had spent several years living abroad in Africa and China made the following comment on her experience of Africa:

It is true that in the past Africa was not that different than the rest of the world- The average person scratched out a living on a farm, birthed and buried a pile of kids, and paid tributes to the local warlord/chief/lord/whatever. A smaller portion of people lived in crowded disease-ridden cities where they engaged in trade and light manufacturing. The elites had lots of shiny stuff and occasionally put on a war. After a certain point the big evangelical religions began to overpower and get mixed up with local beliefs. People were really into believing in witches. 

You seem to forget that even individual European countries have not been unified that long. Not long ago places like Germany and Italy were just loose alliances of local warlords. We call the “Ibo” a tribe, and we call the “Catalonians” something else, but it boils down to the same thing. Feudalism ruled- and Africa had pretty much the exact same feudal system. Huge areas- like much of what is now Russia- remained sparsely populated and poorly explored because the climate sucked…kind of like a lot of Africa. Perhaps these moments of development were not perfectly lined up across the continents, but if you brought a Russian serf from 1400 and had him trade place with an African serf from 1400, I don’t think it’d be that big of a downgrade in standard of living.

I do not believe that without colonialism Africa would have developed exactly the same as Europe and have never said that. Africa has some massive climate challenges that would make that nearly impossible. Europe developed technology that probably would not have developed in Africa for a number of reasons. 

I don’t think it’s accurate to say that Africa degraded into a uniquely wretched state. For the average person, things didn’t really go downhill as much as they just didn’t move forward. For most of history famine, ignorance and disease was the norm. Life, historically, is tough. It just never stopped being tough in much of Africa. Many places are in a bit of a middle-ages time warp. 

I gravitate towards the middle ages because that is what it felt like to me. Living in Cameroon felt oddly familiar, and it took me a bit to realize that it was because it felt like a fairly tale. I was friends with the baker, the tailor and the brewer. I knew bored princes that would pose as commoners for a bit of fun, and princess who hated being locked up in seclusion. People worried about witches and poisoned wells. The rich guy down the street got all his money from an enchanted parrot who guarded a magic ring. It was right out of the pages of Grimm’s. 

Anyway, where colonialism and the Cold War come in is that they took the already difficult situation of this level of development and gave it bigger guns and higher stakes. What would normally be a family feud could become a genocide. The greedy kings suddenly got oil and diamonds to plunder.

The original President Bush was, for about a year, the director of the CIA with the task being to reorganize and restructure the agency. While there is a general dearth of information on his actions other than this, one can presume that reviewing the effects of the CIA’s attempts at nation-making in the Americas, and elsewhere, through the 60s and 70s as a response to the Red Threat.

I make that assumption due to the unexpected and unforeseen conclusion of the Gulf War, where President Bush decided to leave a genocidal narcissist who hated the United States in his position as the ruler of a nation of about 18 million people. Why do that?

The hard truth, learned by our nation during the 70s and 80s, is that in a nation ruled by tyrants, kicking out the tyrant and instituting a modern government merely results in a new tyrant who has to point guns every few years to get himself re-elected. Between each tyrant is a period of chaos and death. When a new one comes into power, his first job is to slaughter all of his political enemies and everyone related to them. If it was a clash between different races or sects, then genocide becomes part of it.

To explain this, let’s take for example a dog. If you get a young puppy and are cruel to it, training it to attack and kill all other dogs and people who come near it until it is an adult, then you’ve created what is and will almost certainly always be a risky creature. The only solution is to put it down. While we like to think that humans are different from this, because we can learn new things and reason, in reality only a small percentage of people are disciplined enough to make such a change, if any at all.

If I’m a peasant farmer and the local warlord dies, leaving a power vacuum, and some white guy from another continent tells me that I can become the new warlord if I convince enough people to vote for me, my thought isn’t, “I’d love to serve my fellow farmers and make their world a better place.” It’s, “Wow, I can have ten wives and not be hungry any more!” He has no understanding of a world outside that which he knows. He doesn’t view the position of warlord – under whatever title the Americans might call it – anything other than the position which he has always known it. He doesn’t have the benefit of an outside viewpoint or any knowledge of how to get it there.

More importantly, even if you look at dictators who did have a foreign education in the US, the UK, France, or elsewhere, you’ll notice that they don’t behave much differently from anyone else who is able to take over the old dictator’s job. Simply put, he’d die if he was any less harsh or ruthless than his predecessor.

Everything about wielding power comes down to respect. If you can’t get the respect of any of the people who are under you, then you’re not going to accomplish a thing. If their vision of what it takes to be respectable is to be a fierce, scary murderer, then going about talking about saving the rain forest and being “the servant of the people” is just going to leave you as a worthless lame duck who’s filling a position of power and luxury that someone else would be quite happy to take from you.

There is a reason that Putin is, for all intents and purposes, a mafia boss running a nation and that’s because for the last 80 years, it has taken that sort of person to run the nation. If he didn’t, he would be ousted, either by his people for being useless, or by someone else who is willing to be the psychopath that it takes to get the job done.

Now, none of this means that a nation can’t be transformed into a modern nation with a republican form of government and a free market. But in order for it to  happen in anything less than some form of natural evolution, at least one or two generations will have to pass, with a concerted effort on the part of the leadership to remove corruption, hire only idealist pansies in any government or professional positions, all while teaching modern philosophies of human rights and the free market to toddlers. No outsider could ever impose such a level of reform except through complete ownership and direct control of every level of government, the economy, and the educational system.

Subsequently, the only two places to succeed (that I can think of) are Chile, under Pinochet, and Japan during the Meiji reconstruction.

And you’ll note that Pinochet was by all accounts an evil, domineering tyrant. He tortured and killed all political enemies, real or imagined. Had he not been, though, it is likely that he never would have been able to accomplish what he did and created a nation capable of joining the modern world.

The point of the opening quote about Africa – besides being generally educational – is that the big gulf between the US and Africa, South America, or the Middle East isn’t to do with the structure of government or economic freedoms, it’s to do with world views. Sticking a gun in Lancelot’s hand doesn’t make him a modern man, it makes him a feudal knight with a gun. He’s going to go out riding, shooting people to death who don’t tell him where to find the Holy Grail because that’s what his Lord told him to do. He’s not going to rise up and start fighting for peasants. Why in the world would he ever do that?

And subsequently, this is where the younger Bush showed himself to be one of the larger idiots in the history of man. I could forgive any other American for not realizing what it means to stick your nose into the political realities of a backwards nation, but the son of a man whose career dealt almost exclusively with that issue to not have learned a thing about it is astounding.

If the younger Bush had rode in, individually hunted down and assassinated each member of the Taliban plus Saddam Hussein, fine. But if you decide to occupy a nation, with the intent of restructuring its government and way of life, then you are effectively stating your desire to be or elect a tyrannical dictator with full force to commit murder at will, suppress freedom of speech, and go on without popular support for the next 20 to 40 years. If you can’t, politically, financially, or morally commit to such an action, then you will be a failure.

In closing, though I am mildly doubtful that Putin reads my blog, I’ll just make a note that while he can feel satisfied about having his picture posted on every wall in Russia today, if he wants to be remembered in History, then he is going to need to start down the same path as Pinochet and rebuilding the world view of his government and people. Otherwise, he is just one more dictator in the bucket.


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Tying it All Together

Posted by publius2point0 on 2010/02/07

Having now discussed money, loans, stock, and all of these topics, we can formulate a simple miniature model of a free economy.

Before I do this, let me note again that economics started in philosophy. The goal was to figure out how man works and what rules he needs to live by to achieve happiness, while not impinging on others happiness. Understanding the basic idea of a free economy does not mean that an unrestricted, free market is the ideal. There are certain reasons why it has a tendency to produce good things, and understanding the apparatus by which this takes place allows one to, ideally, make decisions on how one is best to legislate. But all legislation is, at heart, a restriction of freedoms. The free market does generally work, but it does work better on paper than it does in the real world unless you use legislation to force people to act like their paper analogues. The free market is not a perfect solution for humanity, but it is the best one yet discovered. Possibly a better solution doesn’t exist. But there are certainly still ways in which it can be improved.

Our Model

In my blog titled “On Scarcity“, I introduced the “food unit”. 1 food unit is the amount of food that a person needs to eat a day to survive. In an traditional, subsistence farming civilization, a person would need to produce about 1 food unit, every day, for the entire year, just to live. Subsistence farmers rarely did much better than this, but we will say that we have a group who produce 1.2 units every day.

In a community of 100 individuals, we would then have 120 food units of wealth being produced each day.

Wealth and money are distinct terms in economics. An easy (and perhaps wrong) statement of the definition of “wealth” is that if you were to take away all money and commerce, whatever goods everyone is left with is their wealth. Unfortunately, this becomes tricky for one should class personal skills as a wealth, like medical knowledge or acting talent. Farming knowledge would count as a wealth as well, but we are going to ignore that fact for this discussion.

Personally, I think that the food unit is a good measurement of wealth. A person can live without shelter or skills or anything else, but he must have at least 1 food unit every day. As the only true necessity in life, everything you ever purchase that is not food, is diminishing your ability to purchase food. If you can safely afford to do that, you are already wealthy compared to nearly all of humanity since we evolved and all of the rest of the animal kingdom that ever has existed.

We will suppose that our community of 100 farmers is formed principally of specialists. Rather than each one trying to maintain a balanced diet within his own farm, one specializes in corn, another in raising livestock, yet another in fishing, and so on. Because of this, they have invented the concept of money. Our farmers get together periodically, selling most of their produce for money, and purchasing most of what they need from others with the money they have earned. Because of this, they each are able to get a balanced diet, and yet their personal amount of money never changes.

To make things easy, we will suppose that each of our farmers has $1.20. Each one might sell a dollar’s worth of his own produce, enriching him up to $2.20, but of course he then goes out and purchases $1 worth of produce from others, putting him back to holding just $1.20. In either case, the total wealth of the community (120 food units) equates exactly to the amount of money in the community ($120).

One of our farmers, who we will name Damon, comes up with the idea for a device that could double the production of all agrarian farmers. Since 80% of our farmers are of this type, Damon’s machine would increase the wealth of the community to 216 food units per day. The problem is that in order to invent his machine, Damon needs six months of R&D and production time. He can do all the labor himself, but he won’t be able to farm during this time.

With an excess production of 20 food units per day, the community can support Damon for as long as he needs. But, mankind has a particular quirk that if the same fellow shows up to beg for free goodies every day, pretty soon the charity runs dry and the people become antagonistic, telling the guy that he’s wasting his time and he should get back to farming if he wants to eat instead of fooling about with some wild-eyed project. Damon might be able to sell the community on the project to start with, but if he has to sell them on it again and again each day for six months, he will likely have to give up and go back to farming.

Damon would do much better to have a supply of cash ready, up-front, to pay his way through 180 days of labor. As a paying customer, no one can complain, since they are being enriched by his folly either way.

Selling off his excess 0.2 food units each day without buying back any excess, Damon could slowly build up a supply of money. Of course, to build up enough money, he would have to work for 900 days to earn $180. Since there is only $120 in the whole community, Damon and everyone else would have to accept trading with those who are in debt. Technically, this would be a fairly irrelevant thing since money is all a fiction to begin with, but people have a tendency to be wary of accepting $1 in credit from a person who has -$2. More importantly, by wasting 900 days, the whole community lost out on 720 days where they could have been producing 216 food units per day. Trying to do it in this way is less-than-optimal.

The community has the wealth to afford allowing Damon to do this, and he can sell them on the idea at least once, but cash-wise someone will have to go into debt. The answer to this problem that’s been found in modern day is the creation of a community bank (or central bank).

Damon goes to the bank, which might be overseen by some governing council that represents the community. He asks for $180 so that he can create his machine. Once he has his machine, he will be able to pay back his loan by selling it to others. The community bank accepts this, seeing that it is for the good of the community, and simply prints off $180. There is now $300 in our market.

Where does that money come from? The simple and non-philosophical answer is that the community bank is in debt, but since no one trades with the community bank and the village elders are saying, “No no, everything is fine! Just fine! Nothing to see here!”, no one much cares about this. A more philosophical answer would be to say that we suppose that Damon did work for 900 days and drive everyone else into debt. Knowing that he did/will do his part in saving up money, we deduct it all from his future self and put it into the present as a way to offset the debt that the community would have gone into as individuals. We raise the tide so that once Damon takes all their money, they still look and feel like they aren’t in debt–when in secret they have simply pushed that debt off onto the community bank.

Ultimately, how you choose to view it doesn’t much matter since it’s already being done and you’ve already lived with it being like that just fine. This is proof enough that people are happy enough to accept this method of operation.

For six months, thence following, Damon works on his project. Each day he trades for 1 food unit until he is left with his original $1.20. Everyone else in the community now has about $3.02. The central bank has -$180.

Damon knows that 80% of the people will want his machine and so he produced 80 machines to sell. Since this took $180, he spent $2.25 per machine. If he sells at that rate, he breaks even. Damon would much rather profit.

A farmer who will live for 40 more years, with Damon’s machine can make 34,176 food units. Without the machine, he can only produce 17,088 food units. If each farmer thinks to himself that $1 is equivalent to 1 food unit, Damon can charge $17,087 to buy one of his machines and a farmer would still eventually see a profit. Since he has no competition, Damon has no particular incentive to charge anything less than he can feasibly get away with. If he can make $17,087 * 79 people, he’ll not only never need to work again–at current prices–but he’ll also be able to see to the secure and easy futures of many of his descendants.

But of course, the farmers want to make as a great a profit as they can as well.

Let’s say that either group would be happy with 20% profit. Damon will charge no less than $2.70 and his fellow farmers will pay no more than $13,670.40. In this case, Damon would of course simply charge $13,670.40.

In the real world–and an item I realize that I forgot in Evolution, Instinct, and People, is that people are fairly short-sighted. Profit that can’t be attained for 30 years is something that most people wouldn’t really consider. Out on the edge of the bell-curve you might find one fellow who is willing to do this–the so-called early adopter–but to sell all 80 of his machines, Damon will need to lower his price. In fact, gradually lowering his price until all 80 units are sold is of course the route to the greatest profitability–though this takes longer and more finesse than simply charging whatever the lowest price is that can move all 80 machines.

Let’s say that the average price at which Damon sells comes out $100 per machine. Our entire market only has–at this moment–$300 in it. To buy Damon’s machine a further almost $8000 must be created. Our 80 farmers each end up going to the central bank and taking out loans for up to $100 each. Damon pays back his $120 quite quickly, but the market is still inflated to over $8000.

If you ask where inflation comes from, this is your answer. The central bank continues to go further and further into debt as people borrow against their futures.

An interesting thing, though, is where I supposed that $1 is equivalent to 1 food unit when the farmers do their mental math to decide whether to buy Damon’s machine, and how much to buy it for.

Back when Damon only had $1.20 and each of our farmers had $3.02, it’s fairly likely that the price of food would have increased. Everyone, knowing that everyone had $3.02 to spend, and being greedy, will charge more for their own produce. This all evens out so that no one ends up any richer–they just continue to stay at the same equivalent level of financial standing–but it means that the cost of food increases with inflation. Thus, when Damon considers how much he wants to charge, and when the farmers consider how much they want to spend, they will do this math, adjusting for inflation. Quite likely Damon will end up charging $200 per machine rather than $100, because the farmers would view the value of their future produce as being worth double what I said. This would mean our economy becomes worth over $16,000 instead of over $8000.

But then once our community is producing 216 food units per day, far more than is needed for 100 people even allowing for a desire for excess, some of our farmers will decide to become actors or to embark on similar ventures as Damon did and forgo farming. A full half of our community may stop being farmers. This means that half of our money will go towards watching plays or investing in new technologies or whatever, and only half to food. Instead of food commanding 100% of our market, it now only represents 50%. When our market value went from $120 to $300, the price of food matched that equally. When it goes up to $16120 (say), the price of food might only go up to $8060.

Remember, though, all of this is borrowed money. As our farmers farm, actors act, and so forth, some percentile of their earnings goes back to the central bank, until the central bank is back to zero debt.

When that happens, how much money does everyone have? Let’s work through what really happens, since everything still isn’t so simple as all that.

1) Our farmers each give Damon $200. putting the bank at -$16,180. The farmers maintain their $3.02 having borrowed everything they need from the bank.

2) Damon has $16,001.20. He pays back his loan to the bank, leaving himself with $15,821.20. The bank now has -$16,000 exact.

3) The farmers establish a market for select produce and a market for less-than-perfect produce. They charge $10 for 1 food unit of select produce and $2 for normal produce. Damon doesn’t work at all, he just spends money. Having the option to buy the best, he always does so, losing $10 each day for his food. This is only about 10 cents, divided out among all the farmers.

4) Since the farmers owe back their loan, as they chip away at Damon’s money, they maintain a level $3.02 apiece, gradually shrinking the total amount of money in the central bank. When Damon starts getting down to having $30 or however much, he stops buying the $10 produce, and so the price of select produce is lowered and lowered.

5) As Damon (or his son as may be) approaches only having $3.02 himself, there arises a distinction. While he only has as much money as everyone else, he is the only person in town who doesn’t owe money to the central bank. And so the distinction of select and normal produce remains. Damon still has greater purchasing power, while as the rest of everyone has to live cheap and send all profits that they make off of Damon or each other back to the bank.

6) Eventually, everyone has $1.20, including Damon, and the bank has zero debt. But, the value of produce will be only something like 60 cents per 1 food unit. The amount of money has equaled out, but the community still has more wealth than it did when this all began. Only half of their number work at producing food anymore, splitting the money pool.

The wealth of the community equals 216 food units as soon as Damon has sold all of his machines. They may only continue to produce 120 actual units of food, since that’s all they need, but the value of food has declined. People are willing to trade away food for other sorts of labor because they have plenty. The monetary value that they use at any given time is based on inflation, the imbalance of money distribution, and so on. But the important thing is the value of wealth and how it is distributed. Giving more money to one guy may make him feel like a king for a while, but everyone wins through in the end. The people at the bottom of money ownership might have less money, but the price of food and all other things decreases. They might have to take the bottom wring of food and acting and other products, but before there was no acting or other products besides food. With free time, people are able to study medicine and science and create products that become, in the eye of the consumer, as valuable as food itself like vaccines, houses, and cars. People consider profit that they can give back to the central bank to be the excess that comes after having attained a permanent residence, a car, baby vaccinations. This takes longer to pay back the central bank, but the world is better for it.

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Evolution, Instinct, and People – Part 4

Posted by publius2point0 on 2010/01/24

This will be the final segment of this series, though I presume that I will bring up further thoughts in future blogs.

Bootstrapping and the Flynn Effect

There’s a fairly interesting thing. Through history there has been some small number of babies who actually were brought up by animals and survived into adulthood.  Despite what the Tarzan stories might lead you to believe, such feral children don’t end up as likable, sociable ruffians. Instead, for lack of a better description, they end up as poo-flinging monkeys. They can’t learn to read, write, nor speak, let alone mingle and socialize with people in any more meaningful way than an animal might.

Obviously humans can learn to do these things, but it isn’t something that can be achieved as an adult. Quite likely there are particular stages of development which each have a window of time during which they can be taught. If you miss that window, you have likely impaired the child’s abilities. You might be able to teach them later, but it’s a much harder path and of course eats time away from the things that should be being taught at that time. Work with aboriginal peoples has indicated to a large extent that even when one does receive training from human parents, you are largely limited to whatever the level of abstract thinking is of your group (though the precise level of this is still debated). Other research seems to indicate that based on the way ones language refers to things can change the methods by which people think.

In total, the amazing difference between people who receive the training of how to be a modern human by their modern humans and those who have received none, and the differences in ability based on various minutiae is terribly interesting.

But so then there was a thing discovered that is referred to as the Flynn Effect, which noted that IQ rates seem to continue to rise from generation to generation in the modern world. When, generally, people of lower IQ have more children than those of higher IQ, one might expect that if anything the general intelligence of modern communities would lower as the upper classes start having only single children or whatever.

One possible explanation that is put forth is that this is largely a matter of continuing development in nutrition. People who have healthy, nutritious diets growing up have a healthier and more powerful brain.

Another explanation though, and much more interesting, is the thought that the human brain hasn’t reached the peak of its ability yet, just like the aboriginal may have improved over the feral human, but not yet gained all the ideas that modern man has. People theorize that with TV and internet and an ever-widening source of information coming at each of us, and doing so in a more rapid-fire way, that it is spurring our youthful brains to adapt to a faster, more intensive world.

Assuming this latter theory to be true, it suggests that the method by which children are taught could use a fairly impressive overhaul.

People Fear Conflict

By the word conflict, I mean debate or otherwise being challenged upon some point. People, of course, love sports, games, and other sorts of non-cerebral conflict.

The reasons why people do things are usually quite shallow. We’re religious because, 90% of the time, our parents were. With 99% certainty, I could determine your political affiliation based on the region you live in, your skin color, your religion, and your income–of course that will match up almost exactly with the type of people that you socialize with regularly. Essentially you believe in your politics because the people in your social group are being promised more by party X than party Y. There is almost no one who self-sacrifices for the sake of the greater good, based on reasoned debate.

Going against your peers–aka the pack–going against your self-interest, is hard. Educating yourself on the issues is laborious. And even when you are more aware of the specifics of any one topic than 90% of everyone, you can still get slapped down like you don’t know anything by the guy who knows 92% more than everyone. For instance, I can point at socialism and say that it’s a failure, but a die-hard socialist who has studied every ounce of data on the subject can make me look like I have no idea what I’m talking about. If I knew as much about the subject as he, I’m quite certain that I could readily debate and come out ahead. I don’t though. Similarly, I can make most people look like they’re idiots when they bring up some particular issues that I know more about than most, and yet still know that I’m just as likely wrong given how passing my knowledge truly is.

All of this takes energy and time, and to do it all when deep down in your subconscious you’re fairly certain that you’re either acceding to something not in your best interest or to something that will be disruptive to your ability to continue socializing with the pack, that’s just more than can be expected for most people. But then getting right in their face and making them feel bad about their lack of willingness to consider greater or finer points, this is active antagonism, regardless of best intentions.

And all this makes sense, again, from an evolutionary standpoint. If there is, for example, a leader of the pack and then one rogue wolf who is trying to usurp control, if people are easily willing to convert to any side, the battle between the two leaders has the pack in chaos for lengthy periods of time and nothing gets done. A certain amount of pigheadedness and inertia is necessary. The rogue wolf has to make very good points, so good that the chance of splitting the whole pack in two is possibly worth it. Otherwise, regardless of whether his way might be somewhat more efficient, it’s not worth the conflict.

There are very few things in life which are all that important.

In many countries though, for instance Japan or China, the idea of popular interest in political affairs is fairly non-existent. Everything is done within the realm of those who enjoy or are not fearful of conflict. And honestly, so long as the people are able to continue to eat and raise babies, they’re quite happy to leave all that hassle up to the politicians. Even within the US, political battles between the parties are to most people little more than sports games. Red team versus Blue. If their team loses, the ire is that of having lost, not due to any particular understanding of what implications it actually has. They go home and make food and raise babies. If the economy gets bad, a few of them switch teams.

Self-Fulfilling Prophecy

As I pointed out in Failure in the Information Age, the cause of the recent recession was nothing more than everyone knowing that a recession was coming. Rather than be the person left with his pants down, everyone pulled out of the economy and thus tanked it.

People have a tendency to make what they think is going to happen, happen. When they think the world will be good, they buy things, great others with open arms, trade, invest, etc. With everyone doing this, everything becomes good. If I think that, if I go on that cruise vacation, I’ll meet people, I’m likely to go and join all the outings, talk to people, and end up meeting people. If I think I’ll be hated and ridiculed for being overweight and looking bad in my swimwear, I’ll hide in my room, wear clothing that is bland and reeks of reclusiveness, and end up not meeting anyone.

I suppose that this isn’t so much a human trait as “just one of those things.”

But it bears mentioning in a blog about politics because “managing expectations” becomes a significant factor in doing the job well. If you wrestle for a trillion dollars to stimulate the economy but then tell everyone that we really needed 2 trillion and what we have now will only go towards paying off interest on our debts, you’ve just killed your entire stimulus package. People will receive their bonus check, and put it straight into savings, waiting for when things will improve.

For issues such as this, the amount of the stimulus isn’t as important as how well you can sell whatever dollar amount it was that you decided on.

And when you talk about a “housing crisis”, you need to make sure that people understand how small a crisis it really is, lest they all sell their stocks and hunker down for a recession.

It may seem silly, but economics and politics are still more about psychology and philosophy than math.

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