Things could be worse

When all the news seems bad it helps to think about earlier periods of history, such as 1913-14. Imagine if I had been blogging back then and saw this news play out over 18 months:

1. The US makes narcotics illegal, and launches a war on drugs in 1914. A horrific disaster.

2. The US passes an income tax in 1913—another disaster.

3. The US creates the Federal Reserve in 1913. I’m not in the “abolish the Fed” camp. But dear God, don’t combine the Fed with a gold standard regime!

4. Europe launches a completely, 100%, useless World War in 1914, and the US joins soon afterward.

5. Wilson assumes the presidency in 1913. Wilson was a near perfect mix of someone being wrong on civil rights, wrong on civil liberties, wrong on economic policy and wrong on foreign policy.

So while it’s hard not to be depressed by two buffoons running for president, or the US sleepwalking into an insane cold war with China, or the global rise of nationalism and statism, things could be even worse.

The world has made lots of progress in social policies since 1912 (more rights for women, blacks, gays, etc.), which I certainly don’t want to discount. But 1912 was a sort of golden age for economic policy. My dream monetary system is basically 1912 plus NGDPLT:

1. Abolish reserve accounts at the Fed. Make the base 100% currency, as in 1912.

2. Abolish FDIC and TBTF and 100% deregulate the banking/financial system.

3. Use open market operations to adjust the currency stock, using my NGDP futures “guardrails” approach, to keep one-year forward NGDP expectations on target.

And that’s it. The government’s role in our entire monetary/banking/financial system would boil down to just one item. Adjust cash to keep NGDP expectations growing at 4% a year. That’s all. A libertarian paradise. (Of course Bob Murphy would probably regard my proposal as socialism.)

My broader proposal is that we go back to treating people like grown-ups, and see if that makes them act more like grown-ups. Two weeks ago, I was told that one needs a photo ID to buy a 6 pack of O’Doul’s beer. This “beer” is less than 1/2% alcohol. (At this point my European readers are trying to decide whether they are more shocked that Americans would not allow a 20 year old military veteran to drink non-alcohol beer, or by the fact that their favorite cranky blogger has taste in beer that is appalling even by American standards.)

Saudi Arabia now allows women to drive. The Chinese can now have more than one kid. But America still doesn’t allow 20-year olds to buy O’Douls beer. I’m praying for a dino-asteroid to put us all out of our misery.

PS. I sometimes paddleboard in an 11-foot long inflatable device that could support a football player. Last week I was scolded by a patrol boat for not carrying a life preserver on my paddleboard, while on a “lake” where one is never more than 100 yards from shore. I’m 64 years old.

Just shoot me.

PPS. Remember when we were warned that Bernie Sanders would bring us trillion dollar spending increases?

Senator Ted Cruz of Texas told CNN he’s a “hell no” on a $1 trillion package, while Rand Paul of Kentucky told another reporter that Republicans were acting like “Bernie Bros” behind closed doors as they discuss among themselves how many hundreds of billions to spend, a reference to ardent supporters of Senator Bernie Sanders, a self-described democratic socialist.

PPPS. Where does North Carolina go to get its apology?


Tags:

 
 
 

34 Responses to “Things could be worse”

  1. Gravatar of John Hall John Hall
    24. July 2020 at 10:06

    “The Chinese can now have more than one kid.” – They can have two. What happens when they try to have three?

    De facto, 20 year olds can easily get alcohol in America.

  2. Gravatar of ECharles ECharles
    24. July 2020 at 10:19

    “Last week I was scolded by a patrol boat for not carrying a life preserver on my paddleboard”

    In the 1980’s in elementary school I would leave my house on my bike and explore the area (woods, parks, 7-11, etc.) all day with friends. No cell phones. No expectations from parents to be home at any time except before dark. We’ve become soft.

  3. Gravatar of Michael Rulle Michael Rulle
    24. July 2020 at 10:26

    I know you believe China has at the least a suboptimal system. In fact, you dislike their govt much more than ours. So, critique us, we need critique. But don’t imply comparisons with China. It’s ridiculous.

  4. Gravatar of ssumner ssumner
    24. July 2020 at 10:59

    ECharles, Yes, I also have fond memories of the old days.

    Michael, I think you missed the point. I picked Saudi Arabia and China precisely because they are so much more repressive. Otherwise I would have picked a place like Denmark or Switzerland.

    If even those two are beginning to liberalize a tiny bit, what are we doing going backwards?

  5. Gravatar of Thomas Hutcheson Thomas Hutcheson
    24. July 2020 at 11:12

    #2 Well a progressive personal consumption tax would have been better, but not a disaster. The “disaster” was not repealing the corporate income tax.

  6. Gravatar of bill bill
    24. July 2020 at 11:38

    I think many Europeans would also be surprised at the American habit of modifying the words “twenty year old” with the words “military veteran”. 🙂

    Totally with you on the water safety. I have chosen to drive several hours south to avoid the ocean life guards in NJ.

  7. Gravatar of Tom Tom
    24. July 2020 at 11:39

    I wonder how many educated people in 1912 would have believed that Europe was two years away from self destructing for no good reason.

    I was just listening to a podcast on the Plague of Justinian. The 540s are up there with 1914-1918 as the worst times to be a human. Our ancestors had to go live through some horrible things.

  8. Gravatar of Michael Sandifer Michael Sandifer
    24. July 2020 at 11:47

    Scott,

    When you refer to Biden as a buffoon, do you mean he’s always been a buffoon, or is he a buffoon now that he’s somewhat senile?

    Even now, he’s capable of public foreign policy discussions that exceed the lucidity and sophistication of many other Washington politicians.

  9. Gravatar of Alan Goldhammer Alan Goldhammer
    24. July 2020 at 12:07

    I know you don’t have any control over the advertising on your blog site but every time I visit I get Trump and NRA advertising. Curious as I support neither.

  10. Gravatar of Philo Philo
    24. July 2020 at 12:48

    I know the theory that both sides gain from trade, but I can’t see how your giving $6 (or whatever) for a 6-pack of O’Doul’s makes you better off!

  11. Gravatar of Ashu Ashu
    24. July 2020 at 15:23

    Can you elaborate on why Wilson is a bad foreign policy president because from my perspective, if the treaty of Versailles was more like his 14 points WW two could have been prevented?

  12. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    24. July 2020 at 15:33

    Drugs are illegal in Japan too, but it’s not a big problem. Why is it a drug “war” in America?

  13. Gravatar of Benoit Essiambre Benoit Essiambre
    24. July 2020 at 16:10

    Dear lord, mega knock on wood when mentioning wwi at this point. I’d rather not end up in a trench, partially limbed, waste deep in sewage mud.

  14. Gravatar of Benjamin Cole Benjamin Cole
    24. July 2020 at 16:29

    Suppose trade with mainland China is only enabling increasing repression by the Xi communist-fascist dictatorship?

    Certainly the No Balls Association (NBA), Disney or Apple will not be the ones that trigger a positive change in China. They are ultimately funneling money to Xi, with affirmation.

    A US military option is too catastrophic to even contemplate.

    What will Joe Biden do on China? Is there a better course than the one the Trump Administration is taking?

  15. Gravatar of Christian List Christian List
    24. July 2020 at 17:19

    Scott,

    I am ambivalent about the regulation of things like alcohol, drugs and gambling. Spontaneously, of course, every libertarian would say, let the people do what they want; but on the other hand, as a doctor I see every day what immense unbelievable destruction of whole families alcohol, drugs and gambling cause every day. This is immense suffering.

    Not to mention that the health care system in the US is quite socialist by now as well, and won’t change any time soon, so the additional question arises why every moron should be allowed to destroy his brain and liver just like that and we all must pay for the immense costs in the end.

    Then rather regulation. And unfortunately, the costs do not disappear if one does not regulate drugs and health insurance at all.

    Maybe we need to extend the saying: A conservative is a liberal who has been robbed. A liberal is a conservative who was innocently been bullied by the police. And a regulator is a libertarian whose family has been destroyed by alcohol or who has been mugged by a junkie.

    Some American beer reminds me of the Monty Python joke that American beer is like making love in a canoe:

    https://www.youtube.com/watch?v=JbxfFOdp-bY

    And its taste was described like this: a faint, distant nose of apple, a watery thin body, hints of apple juice and virtually no bitterness at the end. It is the very epitome of insipid. Sometimes there can be quite good American beer though.

  16. Gravatar of Rajat Rajat
    24. July 2020 at 17:46

    America is a funny place – we all knew that. In Australia, anyone can buy beverages up to 0.5% alcohol, and the legal drinking age is 18. Society’s use of alcohol is a very culture-specific phenomenon. In English-speaking countries, a lot of people traditionally drunk to get get drunk, and it used to almost be a rite of passage in Australia for teenagers to pass out on the side of roads, etc, like in the UK and elsewhere. Maybe Germany is a bit the same. I guess America has its puritan history, which has made both alcohol and sex even more sensitive.

    It does bother me though, Scott, that you drink this stuff. For someone with a strong artistic sensibility, it’s kind of depressing, really. And even worse, it gets me thinking of Tyler Cowen. This highly-intelligent ‘rennaissance man’-style economist blogger and podcaster – interested in literature, music and food – doesn’t drink. How can one really properly enjoy good food and not enjoy eating it accompanied by really good beer, wine & spirits? Only in America…

  17. Gravatar of brian brian
    24. July 2020 at 17:48

    I feel like you have many contradictory views. You saw first hand the problem with govt intrusion in ones life: the paddleboat issue reduces your freedom. Someone else determines your risk. You could be an extraordinary swimmer, and yet instead of making that life or death choice yourself you are regulated to wear a vest.

    Yet, you support big govt. At every turn you praise China – you praise their technology, even when we know that technology has elements of malware in it. You praise their govt model, even when we know that govt model is fascist and dangerous. They are now book burning. Does that remind you of any other nation in the last 100 years?

    You don’t support any non violent measures to curtail their criminal organization – that is to say, economic sanctions.

    You want everyone to wear a mask and play by big govt rules: but as soon as it effects you personally (wearing a mask) you don’t like it.

    Well, that is sort of the problem Scott. You cannot have your cake and eat it too. Are you going to fight for big govt. Because big govt will tell you when to eat, what to eat, how to dress, and when you need to wear a vest. It is the antithesis to freedom. So do you want freedom or do you want the CCP.

    Please tell us. I’m waiting with bated breath.

  18. Gravatar of brian brian
    24. July 2020 at 17:55

    In fact, just to elaborate a bit. That is the problem with utilitarianism. Subjective morality leads to a small group of self righteous virtual signalers that make decisions for everyone else based on prevailing notions of utility. One no longer has any inalienable rights under that contract of justice.

  19. Gravatar of maria maria
    24. July 2020 at 18:08

    “I wonder how many educated people in 1912 would have believed that Europe was two years away from self destructing for no good reason.”

    — There is a very good reason why Europe went to war in 1914. Fifty years of mistrust, arms buildups, and balance of power treaties.

    “I know you don’t have any control over the advertising on your blog site but every time I visit I get Trump and NRA advertising. Curious as I support neither”

    — Are you suggesting that the world should be a safe haven from advertisements? Are we to now cancel advertisements for fear that they might upset you? Have you completely and totally lost your mind? Do you really want to live in a bubble of group think? This is the problem with new age technology. Information is funneled through a lens on your social media platforms so that you only see more of what you like: the result is that when you see something you don’t like you become outraged to the extent that you want to “ban advertisement”.

    We are being overrun by pathetic wimps!!!!!

  20. Gravatar of Philippe Philippe
    24. July 2020 at 18:47

    What is the point of making the base 100% currency? It seems a bit inefficient to convert all reserves into cash if only a fraction that stock will actually be used as currency.

    Or is it just a way to keep interest on reserves at zero?

  21. Gravatar of ssumner ssumner
    24. July 2020 at 19:38

    Tom, Yes, and indeed pretty much all of history was horrible by our standards. But then they might have found our lives to be pathetic. I suspect they were just as happy. When I read old novels I get that feeling.

    Michael, I used to call him a buffoon back when he was VP. To be sure, he’s 10 times smarter than Trump, but that’s not saying much.

    Alan, Each person sees different ads.

    Philo, It’s a long story.

    Ashu, It’s like the Iraq War, If you are going to get the US into the war, you better have a good endgame ready. Wilson did not.

    Wasshoi, I don’t know.

    Ben, You said:

    “Suppose trade with mainland China is only enabling increasing repression by the Xi communist-fascist dictatorship?”

    Yeah, it’s not like ordinary Chinese people gain from trade. They were better off under Mao. Right? SMH.

    Christian, Do you think America has a better opioid drug policy than Switzerland? Should Colorado have legalized pot? Was the US prohibition of alcohol in 1920-33 a good idea?

    Rajat, I love a good glass of wine. I really wish I could drink more, as when I was younger. Unlike Tyler, I have no principled objection to alcohol at all. Basically, my body can no longer handle almost any food or drink that I actually enjoy. It’s pathetic.

    Brian, You said:

    “Yet, you support big govt. At every turn you praise China”

    LOL, where did you come from?

    Maria, Are you confusing “reasons” with “good reasons”. Those are not good reasons to go to war.

    Philippe, I don’t doubt that electronic reserves are a bit more efficient in a micro sense. But it takes a heap of Harberger triangles to fill an Okun’s gap. With an all cash base there’d be less excuse for monetary incompetence. K.I.S.S.

  22. Gravatar of Benjamin Cole Benjamin Cole
    24. July 2020 at 20:27

    Scott:

    I said that in the present that trade, as exemplified by the No Balls Association (NBA), Disney and Apple, is enabling an increasingly oppressive Xi and CCP. I did not say trade is lowering living standards of the Han Chinese.

    Through CCP-led industrial policy (including the harnessing of regulated and subsidized, but private-sector companies), China has become materially much better off than 30 years. This is indisputable. Recently you defined Xi and the CCP as “fascist,” and that may be mostly true.

    I said oppression has been getting worse in China, and trade, by the likes of Disney, the NBA and Apple is enabling CCP oppression. They are enabling fascism.

    Two different topics. Read carefully.

    Interesting side topic (given the present).

    You are against the FDIC. I am reluctantly in favor of the FDIC, as many private-sector financial insurance schemes have collapsed.

    AIG was bond insurance, sold by a sophisticated shop to sophisticated buyers of bond insurance. It collapsed like a $2 suitcase under the first bear-swipe of the 2009 recession.

    But, in the present…we must ponder modern economies that could be the target of a bio-attack, such as an intentionally, or accidentally released virus.

    Seems to me such calamities can bring entire economies to grinding submission, and wreck quickly any free-market financial system. Private-sector financial insurance would fail, like AIG.

    Of course, what I have just described (somewhat exaggerated) is no longer theoretical.

    Can we rely on the AIGs of the world…of pandemics?

  23. Gravatar of Ray Lopez Ray Lopez
    24. July 2020 at 23:22

    Sumner’s rants are moot. Money is neutral, so all his rants about the Fed are moot. Woodrow Wilson was a proto-UN pioneer and his 14 points are considered landmark for the post-colonialism, post-imperialist, post-WWII era, so if Sumner really is for more minority rights, he should be for Wilson (who was a closet racist BTW, but his public stance was good). O’Douls beer? Yes, Sumner is right about that, America does have a Puritanical streak, but so does Europe (e.g., outside of the Red Light District of Amsterdam, most Dutch people are very conservative, possibly even more so than Americans).

    In short, much ado about nothing, one reason I read this blog, I like people who are constantly wrong!

  24. Gravatar of anon85 anon85
    25. July 2020 at 00:11

    Scott, why do you favor cash as the only base currency? Cash seems so outdated — it is inefficient to transport, it can be stolen, etc. Wouldn’t reserves that pay 0% interest be equivalent to cash, but without the downsides? What am I missing?

  25. Gravatar of Iskander Iskander
    25. July 2020 at 00:43

    In terms of economic freedom most places were probably better off in 1912 than 2012.
    I guess it just demonstrates that everything else pales in comparison with technological progress when it comes to Econ growth.

  26. Gravatar of ssumner ssumner
    25. July 2020 at 08:09

    Ben, You said:

    “Through CCP-led industrial policy (including the harnessing of regulated and subsidized, but private-sector companies), China has become materially much better off than 30 years. This is indisputable.”

    Not only is it not true, it’s idiotic. China has become much richer by sharply cutting back on industrial policies and relying more on free markets. The private sector is what drives Chinese growth.

    anon85, See my reply to Philippe.

    Iskander, And don’t underrate social progress, which also helps the economy.

  27. Gravatar of Christian List Christian List
    25. July 2020 at 14:45

    Christian, Do you think America has a better opioid drug policy than Switzerland? Should Colorado have legalized pot? Was the US prohibition of alcohol in 1920-33 a good idea?

    Scott,

    An intelligent way of legalisation is certainly desirable, so I welcome any policy that goes into this direction. You “just” have to do it intelligently, and here lies the problem.

    I know almost nothing about the world of course, but based on the knowledge we have, the path taken regarding (nicotine) smoking is probably the best path at present: legalisation yes, but a ban on all forms of advertising, strict protection of young people, and influencing society so that drug use is considered uncool.

    In the case of cannabis in particular, unfortunately, there are a great many press articles which do the opposite, which emphasise its alleged coolness, its alleged harmlessness, and even claim that it promotes health, in other words, pretty much the same nonsense that was circulated about smoking in the 1940s and 1950s

    I love your piece about Woodrow Wilson by the way. Every point hits the mark. It’s really rare these days that one gets to read such an accurate assessment of him.

    And I can see why you like this beer. There is definitely beer in this area that you can drink surprisingly well.

  28. Gravatar of Benjamin Cole Benjamin Cole
    25. July 2020 at 16:16

    Scott:

    This is just a toenail of the body of China government involvement with the economy and the “private sector.”:

    “China semiconductor fab SMIC gets $2.2 bln investment from gov’t funds amid global chip spat”

    https://www.reuters.com/article/china-semiconductor-smic/china-semiconductor-fab-smic-gets-22-bln-investment-from-govt-funds-amid-global-chip-spat-idUSL4N2D019Y

    Even a cursory recitation of Beijing’s involvement in the Sino economy would take you several dozen blog posts.

    You yourself have termed Beijing “fascist.” The term “fascist” is usually used to include government control of private enterprise. Beyond that, China has plenty of SOEs, all the land is owned by the government, and they have forced savings.

    Are even the property markets of Los Angeles “free”? Well, what about property zoning, dictated by government in collusion with property owners?

    You called China “fascist.” I think you were right and you have proven that fascism can work as an economic development model.

    I still prefer free markets, but China has chosen a different course… and has won muted acceptance from the No Balls Association (NBA).

  29. Gravatar of Matthias Goergens Matthias Goergens
    26. July 2020 at 06:58

    Scott, surely your dream monetary policy must have been Canada’s 1912, not the US 1912?

  30. Gravatar of Matthias Goergens Matthias Goergens
    26. July 2020 at 07:03

    Christian List, your concerns about the health impact of drugs make sense, especially in the context of socialised medicine. But they suggest taxation, not prohibition.

  31. Gravatar of ssumner ssumner
    26. July 2020 at 09:04

    Christian, You said:

    “strict protection of young people, and influencing society so that drug use is considered uncool.”

    You just contradicted yourself. What do young people view as “cool”, if not stuff that is hard to get?

    Ben, You said:

    “Even a cursory recitation of Beijing’s involvement in the Sino economy would take you several dozen blog posts.”

    For a summary of Washington DC’s role in the US economy, you’d need 100s of blog posts.

    Mattias, Yes, I should have mentioned Canada, which had and has a much better system.

  32. Gravatar of Carl Carl
    26. July 2020 at 16:11

    Appropriate that you compare us to pre WWI. Things aren’t as bad as they were back then in many ways but are worse in others. We are a more brittle society in a number of ways: higher levels of debt, greater centralization of power and dependency, imperial overstretch. If we end up repeating WWI, I’m worried we will end up playing the part of Great Britain.
    One other note about the aptness of of looking at WWI: We are also suffering a similar resurgence of nationalism after a period of technological advancement and globalization.

  33. Gravatar of Christian List Christian List
    27. July 2020 at 08:12

    strict protection of young people, and influencing society so that drug use is considered uncool.

    Scott,

    It worked surprisingly well with smoking. The anti-smoking trend came from the US and the allowed age there was 18. In Germany it was 16 and I still know how we were suddenly considered uncool smokers by the young-aged Americans.

    These are youth trends, apparently relatively independent from smoking being a forbidden fruit or not.

    Maybe it has something to do with advertising, in any case the trend was broken when advertising was banned, it was banned much sooner in the US than in Germany. It might not be the whole story, but as far as I can see it is an important part.

  34. Gravatar of ssumner ssumner
    27. July 2020 at 09:02

    Christian, Maybe, but I think the smoking thing worked because people have simply become more concerned about health risks.

    Banning or even discouraging something doesn’t make it less cool with teenagers.

Leave a Reply