Believe it or not, we're in the midst of a war right now. It's not Iraq or Afghanistan. It's a war waged by the major governments of the world to destroy their own currency. All across the world countries are enacting policies that devalue their own money. It's a race to the bottom. Last week, Brazilian Finance Minister Guido Mantega made headlines when he mentioned that a worldwide currency war was brewing, and the winner would be the nation with the weakest currency.
In a normal war countries try to kill the enemy. In a currency war the countries point their guns at their own citizens and kill them with a currency that loses its purchasing power. The country that can make its money worth the least is the country that wins the war. The bad news is that the winner of this war will experience a Pyrrhic victory. The worse news is that America is poised to win this war.
Why on Earth would a country want to devalue its own currency? That is such an easy question to ask because the premise makes absolutely no sense. But the answer is actually quite complicated. That's because modern economists have figured out a way to make it seem like a weaker currency is advantageous to a nation. Of course, this is complete nonsense. A weak currency is the result of bad policies that politicians love. And if an economist can make it seem as though the terrible results of bad policies are actually desirable, well, that economist will probably get a job in the White House on the President's economic staff. An economist who states otherwise (and speaks in terms of truth and common sense) isn't allowed in that elite club.
There are two reasons why a weaker currency would be desirable. First, it helps the nation export more goods. When your money isn't worth very much, it makes the goods you produce considerably cheaper to purchase. When the price of goods is low, the amount of exports goes up. Second, and this is related to the first point in a way, a weak currency leads to more jobs. When the dollars that you pay workers in is worth less, it's more affordable to hire workers and the economy can create more jobs. Politicians love this. Debase the currency, raise exports, create jobs, get elected again. On paper, everything works out perfectly.
Now, you might be thinking that this is what we need right now. If a weaker dollar will create jobs then a weaker dollar we need. But let me ask you something. What's so great about a job? There are very few people who work because they love labor so much. Everyone in Soviet Russia had a job. Every slave in early America had a job. Seriously, the unemployment rate for black people in America during slavery was basically 0%. There is nothing great about having a job. The reason jobs are desirable is because having a job is a means to an end. You earn money at your job and can use that money to buy stuff you want or need. But by making that money worth less, which is what happens in a currency war, the people with jobs lose the ability to buy stuff with the money they earn. Selling goods and having jobs become a means unto themselves and little attention is given to the fact that there are obvious negative effects of currency devaluation: diminished purchasing power and lower living standards. Individuals see jobs as a means to an end. Governments see jobs as an end in and of itself, and a devalued currency is the means to that end.
Way back in the 19th century, before economic models developed their current levels of sophistication, the goal of a government's economic policy was to bring prosperity to its citizens. In other words, they tried to raise the general level of material comfort, while at the same time reducing the amount of toil and work needed to reach that end. Unfortunately, due to the blather spouted by modern economists, success is no longer measured in those terms. A country's currency used to be viewed much like a company's stock price. The reliability, competitiveness, and growth of a national economy usually translated into a strong currency. This system made sense and it worked.
Countries that offered the most fertile soil for investment capital, or that made products other countries wanted, would attract funds from abroad. Demand for the currency of these “blue chip” countries (which was needed to invest or buy locally) would inevitably push up the value of the currency. And so, much as shareholders of successful companies are rewarded by higher stock prices, citizens of successful countries were rewarded with stronger currencies, with which they could buy more goods and services both domestically and internationally, raising their living standards.
But all that has changed in recent years. With a strategy that seems to be taken from the playbook of Sam Walton, governments now look to gain a competitive edge by lowering the cost of their exports. To do this, they have adopted a beggar thyself (as opposed to beggar thy neighbor) policy of habitual currency debasement. Although such a move may benefit those who buy the products, it is a burden to the country’s own workers who, like Wal-Mart employees, have to get by on lower wages. While the markets like a low-cost provider, this is not a niche that everyone can, or should, fill. Some will compete only on price, but more successful ventures will compete on quality and innovation. For every Kia there is a Mercedes Benz. Nearly every country on Earth is attempting to compete by lowering the price of their goods and no thought is given to producing higher quality goods or developing innovative production techniques.
When a government debases its currency in order to gain sales overseas, the nation earns less for the goods that it exports. As a result, its comparative advantage is ruined, and its citizens consume less as a result. In other words, as a nation’s currency declines, its citizens are forced to work harder for less.
If a department store decided to have a sale in which all of its merchandise were marked down 50%, it will surely sell a lot more stuff. However, it would earn a lot less than if it had been able to sell its goods without marking them down. This is how currency debasement works. Similarly, one way for the unemployed to get work is to accept lower wages. Workers will sell a lot more of their labor if they accept 50% pay cuts. But are they better off as a result? Relative to being unemployed, the answer is yes, but they would be much better off being employed at full pay.
As I pointed out earlier, the fact that America holds the world's reserve currency makes it easier for us to have a 50% off sale. It also makes it easier for politicians to print money and inflate the currency at ridiculous levels. Politicians love easy solutions so I'm convinced that extremely high inflation is on our horizon. America is going to win the race to the bottom. And eventually we're all going to be casualties of war.
Monday, October 11, 2010
Wednesday, October 6, 2010
Kittens, Bar Rafaeli and football. Oh yeah, the dollar collapse that will destroy our economy too, I guess...
Since I started writing this blog thing I've gotten some positive response from people who tell me how much they enjoy it. So I want to take the time and say thanks to both of you that read my ramblings. The other people who have brought it up to me have expressed concerns, most notably that politics/economics is much too complicated and boring to waste their time reading about, especially during football season. Well, I want everyone to know that I've heard your criticism and I am going to take some steps to make these posts more enjoyable to a larger audience. I'm not a good enough writer to make these topics interesting and fun, but I do know how to link to pictures and other websites. So as you're reading this just know that there will be some extremely uncomplicated and entertaining links scattered about.
I know reading that paragraph was probably difficult, so here, take some time to enjoy this picture of Israeli supermodel Bar Rafaeli
Now, onto the topic at hand.
I wrote last time about how the trade deficit coupled with the fact that our dollar is the reserve currency of the world has lead to a huge number of dollars that we printed, sent overseas and because they're not coming back we see no inflation. I'm going to try to expand on this inflation idea but focus more on our domestic policy this time. I think that this is the most important issue facing our country right now and it's not going to be very long before we start seeing a currency in shambles. I'll try to explain why I feel this is a very real possibility.
Right after I show you this clever Calvin & Hobbes cartoon strip!
Since the recession started, the Fed has increased the money supply by $2 trillion and lowered the interest rates to 0%, which is what they call "Quantitative Easing". The Fed recently hinted that they were going to do another round of Quantitative Easing. In an effort to prop up an economy that is trying to crumble, the Fed is printing money and giving it to banks at historically low interest rates. This is being done in an attempt to give banks incentives to lend to businesses and consumers. The reason we're not seeing the inflation that should come with an extra $2 trillion is that the banks aren't lending the vast majority of that money. The dollars are just sitting in the banks, and since they're not reaching the economy we don't see the inflation.
WOW! Have you guys seen the 2010 Lamborghini?!
Now these dollars aren't going to sit in the banks forever. At some point we'll start to inflate another bubble and it'll send false signals through the economy and banks will feel like it's safe to lend again. Or maybe the Fed will take interest rates from the current 0% into negative territory to further incentivise banks to get the money into the economy. Once enough of those dollars enters the economy, we'll start to see real signs of inflation. This is where the Fed will have to time their actions almost perfectly in order to keep inflation from getting out of hand. What can they do to keep inflation under control? Well, they have to suck back those dollars that they pumped into the economy. This is done by raising interest rates. Banks don't lend as much when rates are high, the money starts flowing back to the Fed and they remove the money from the economy. The tricky part is that the Fed has to time this out perfectly. Raise rates too soon and you lose any positive effect of pumping those dollars to banks. Raise rates too late and you'll be chasing inflation and it'll get out of control.
This is essentially what we did in the 1970's. Back then we had inflation at about 12% and a weak economy. In order to fix the mess, the Fed had to raise interest rates to 20% for an extended period of time to get inflation under control. That was a difficult move because it kept people from borrowing money which in turn stalled economic activity. But back then we were the world's largest creditor nation. Today we're the worlds largest debtor nation. This brings with it a whole host of problems, the most notable one is the damage that is done once interest rates start to rise.
Remember this hilarious scene from the hit movie Armageddon? HAHA, that Affleck is so lovable and goofy.
Ok, so let's say for the sake of argument that the banks start lending and the dollars start to hit the economy and inflation starts to go up more than the Fed is comfortable with. Fed chairman Ben Bernanke said that he would combat the inflation with higher interest rates, as is historically done. The problem with that is that we have a lot of debt. And a lot of that debt is financed with short term treasury bills because the interest rate is so low. When the Fed raises interest rates, and those loans are reset, the government's payments on the interest of those loans is going to go through the roof. We just did the same thing when people bought homes with adjustable rate mortgages. When the rates went up, people suddenly couldn't afford their house. Right now we pay about $200 billion every year on interest alone. That's because the interest we pay is at 0.3% If we see interest rates go up to even a modest 4 or 5%, we're going to be paying an astronomical amount of money just on interest, not to mention the principle. What if the Fed has to raise interest rates to 10 or 15% to combat inflation? Remember, with all the Quantitative Easing that the Fed did, they DOUBLED our money supply. In the 1970's they added less than 15% to the money supply and got 12% inflation and 20% interest rates. If you passed 3rd grade math you can see what a mess this is.
Hey, have you seen this adorable clip of cats running in a wheel? How cute!
The bottom line is that there are really only 2 options for the government to take when it comes to the debt we owe to foreign nations. We can either default on the loans and not pay them back, or we can inflate our way out of it. Let's take a look at each option, shall we?
...After this awesome picture of fireworks.
Let's say our fearless leaders (whoever they are when this mess unfolds) default on the debt. They tell China and Japan "Sorry guys, we're not paying this. We cannot afford it at all and we're gonna screw you over". Now this would actually be the better long term option. It's extremely difficult to do in a political sense though. First, nobody likes to tell their lenders that they aren't paying back their loans. Second, it makes the nation look week and good luck trying to get those countries to cooperate with us on anything. Third, and most importantly for America, it means we lose our premium credit rating and are forced to pay MUCH higher interest on any money we borrow. Since we're planning on running deficits measured in trillions of dollars for at least the next decade, and since so many Americans love the perks of deficit spending, it would be political suicide to default on the loans and be forced to balance the budget overnight. That's the worst part about this course of action (from a political standpoint anyway), it happens very quickly and whoever makes that tough decision will not be able to pass the blame on to someone else.
So the easier course of action is to inflate the currency, because it happens relatively slow and allows politicians to pass the blame. It's also, of course, the worst option since it essentially brings us to the same destination in a far more destructive way. Instead of raising interest rates to sufficient levels in order to keep inflation under control, we'll simply keep them low to protect our debts and let the value of the money decline. This also helps us pay our debts because we can borrow $1 trillion now, then make that money not worth as much, and when we pay it back we're paying far less than we borrowed in terms of what those 1 trillion dollars are actually worth.
The problem is that, with inflation, the price of everything we buy goes up. Pretty soon we're paying more for the necessities like food and clothing and spending less on the products that are keeping our economy viable (I'm using that word very loosely). 70% of our economy is based on consumer spending. Once we stop consuming because of inflation, the government will try to prop up the consumer with stimulus packages and business bailouts and more deficit spending (printing and borrowing money) all in an attempt to keep us spending money on stuff. It's exactly what the previous administration did and what the current one is still doing. Obama likes to remind us that it was the failed policies of Bush that got us into this mess. He's absolutely right. The problem is that he's repeating those mistakes and at a much higher level. Keep Americans buying for as long as possible. Keep the country drunk on credit and debt and convince us that this phony economy pipe dream is real. Assure us that we can have it all forever and we can borrow our way to prosperity. Oh, and pray that when the system eventually crumbles you're out of office and the next guy gets all the blame. Bush nearly made it. I don't think Obama will get that close, especially if he picks up a second term.
I'm sorry, I went a long time there without taking a much needed fun break. I bet that was painful. Hopefully not as painful as this though
But anyway, once our lenders see our currency depreciate, there is no way they'll want to lend to us anymore without higher interest on the loans. It will become increasingly difficult to finance our debt. But again, instead of doing the wise and prudent thing (stop running huge budget deficits because credit dried up) that would lead to political backlash (voters complaining about their government checks/programs going away), our fearless leaders at the time, whoever they might be, will decide to finance our debt by simply printing the money. You want your social security check? Sure, we'll just print the dollars. The retired federal employee wants his nice pension and benefits package? Sure, we'll just print the dollars. You're out of work and want the unemployment benefits for another year? Sure, we'll just print the dollars.
Eventually this set of policies can lead to an extremely high rate of inflation that becomes harder and harder to fix. But fear not America, because we'll have fearless politicians to fix (make worse) the problem (that they created). When prices start to rise our fearless leaders will find someone else to blame, probably the greedy business owners who are only raising prices to pad their huge bank accounts. So we'll get price controls on things like food and clothing, but that will only lead to shortages of food and clothing. We'll get wage controls, but that will only lead to higher unemployment. Every solution to a problem will create another problem that cowardly politicians will combat with a terrible solution that creates more problems.
This kitty does the YMCA. Isn't that precious?
And all the while, the countries over in Asia will be going through a transformation of their own. They currently think that they need America to consume their products. That's why they keep lending to America long after it became obvious that they wouldn't ever be paid back. But after Americans stop consuming their goods, they could let the value of their currency gain in value. Suddenly the people who worked hard to make those goods can afford to consume those goods. Their standard of living will go up as the standard of living in America goes down. The world will realize that humans have an unlimited amount of demand for products that make their life better. Americans don't have a monopoly on that. When our ability to monetize that demand goes away, there will certainly be humans on this planet who will fill that void.
One more of Bar Rafaeli. Because seriously, that woman is simply gorgeous.
I know reading that paragraph was probably difficult, so here, take some time to enjoy this picture of Israeli supermodel Bar Rafaeli
Now, onto the topic at hand.
I wrote last time about how the trade deficit coupled with the fact that our dollar is the reserve currency of the world has lead to a huge number of dollars that we printed, sent overseas and because they're not coming back we see no inflation. I'm going to try to expand on this inflation idea but focus more on our domestic policy this time. I think that this is the most important issue facing our country right now and it's not going to be very long before we start seeing a currency in shambles. I'll try to explain why I feel this is a very real possibility.
Right after I show you this clever Calvin & Hobbes cartoon strip!
Since the recession started, the Fed has increased the money supply by $2 trillion and lowered the interest rates to 0%, which is what they call "Quantitative Easing". The Fed recently hinted that they were going to do another round of Quantitative Easing. In an effort to prop up an economy that is trying to crumble, the Fed is printing money and giving it to banks at historically low interest rates. This is being done in an attempt to give banks incentives to lend to businesses and consumers. The reason we're not seeing the inflation that should come with an extra $2 trillion is that the banks aren't lending the vast majority of that money. The dollars are just sitting in the banks, and since they're not reaching the economy we don't see the inflation.
WOW! Have you guys seen the 2010 Lamborghini?!
Now these dollars aren't going to sit in the banks forever. At some point we'll start to inflate another bubble and it'll send false signals through the economy and banks will feel like it's safe to lend again. Or maybe the Fed will take interest rates from the current 0% into negative territory to further incentivise banks to get the money into the economy. Once enough of those dollars enters the economy, we'll start to see real signs of inflation. This is where the Fed will have to time their actions almost perfectly in order to keep inflation from getting out of hand. What can they do to keep inflation under control? Well, they have to suck back those dollars that they pumped into the economy. This is done by raising interest rates. Banks don't lend as much when rates are high, the money starts flowing back to the Fed and they remove the money from the economy. The tricky part is that the Fed has to time this out perfectly. Raise rates too soon and you lose any positive effect of pumping those dollars to banks. Raise rates too late and you'll be chasing inflation and it'll get out of control.
This is essentially what we did in the 1970's. Back then we had inflation at about 12% and a weak economy. In order to fix the mess, the Fed had to raise interest rates to 20% for an extended period of time to get inflation under control. That was a difficult move because it kept people from borrowing money which in turn stalled economic activity. But back then we were the world's largest creditor nation. Today we're the worlds largest debtor nation. This brings with it a whole host of problems, the most notable one is the damage that is done once interest rates start to rise.
Remember this hilarious scene from the hit movie Armageddon? HAHA, that Affleck is so lovable and goofy.
Ok, so let's say for the sake of argument that the banks start lending and the dollars start to hit the economy and inflation starts to go up more than the Fed is comfortable with. Fed chairman Ben Bernanke said that he would combat the inflation with higher interest rates, as is historically done. The problem with that is that we have a lot of debt. And a lot of that debt is financed with short term treasury bills because the interest rate is so low. When the Fed raises interest rates, and those loans are reset, the government's payments on the interest of those loans is going to go through the roof. We just did the same thing when people bought homes with adjustable rate mortgages. When the rates went up, people suddenly couldn't afford their house. Right now we pay about $200 billion every year on interest alone. That's because the interest we pay is at 0.3% If we see interest rates go up to even a modest 4 or 5%, we're going to be paying an astronomical amount of money just on interest, not to mention the principle. What if the Fed has to raise interest rates to 10 or 15% to combat inflation? Remember, with all the Quantitative Easing that the Fed did, they DOUBLED our money supply. In the 1970's they added less than 15% to the money supply and got 12% inflation and 20% interest rates. If you passed 3rd grade math you can see what a mess this is.
Hey, have you seen this adorable clip of cats running in a wheel? How cute!
The bottom line is that there are really only 2 options for the government to take when it comes to the debt we owe to foreign nations. We can either default on the loans and not pay them back, or we can inflate our way out of it. Let's take a look at each option, shall we?
...After this awesome picture of fireworks.
Let's say our fearless leaders (whoever they are when this mess unfolds) default on the debt. They tell China and Japan "Sorry guys, we're not paying this. We cannot afford it at all and we're gonna screw you over". Now this would actually be the better long term option. It's extremely difficult to do in a political sense though. First, nobody likes to tell their lenders that they aren't paying back their loans. Second, it makes the nation look week and good luck trying to get those countries to cooperate with us on anything. Third, and most importantly for America, it means we lose our premium credit rating and are forced to pay MUCH higher interest on any money we borrow. Since we're planning on running deficits measured in trillions of dollars for at least the next decade, and since so many Americans love the perks of deficit spending, it would be political suicide to default on the loans and be forced to balance the budget overnight. That's the worst part about this course of action (from a political standpoint anyway), it happens very quickly and whoever makes that tough decision will not be able to pass the blame on to someone else.
So the easier course of action is to inflate the currency, because it happens relatively slow and allows politicians to pass the blame. It's also, of course, the worst option since it essentially brings us to the same destination in a far more destructive way. Instead of raising interest rates to sufficient levels in order to keep inflation under control, we'll simply keep them low to protect our debts and let the value of the money decline. This also helps us pay our debts because we can borrow $1 trillion now, then make that money not worth as much, and when we pay it back we're paying far less than we borrowed in terms of what those 1 trillion dollars are actually worth.
The problem is that, with inflation, the price of everything we buy goes up. Pretty soon we're paying more for the necessities like food and clothing and spending less on the products that are keeping our economy viable (I'm using that word very loosely). 70% of our economy is based on consumer spending. Once we stop consuming because of inflation, the government will try to prop up the consumer with stimulus packages and business bailouts and more deficit spending (printing and borrowing money) all in an attempt to keep us spending money on stuff. It's exactly what the previous administration did and what the current one is still doing. Obama likes to remind us that it was the failed policies of Bush that got us into this mess. He's absolutely right. The problem is that he's repeating those mistakes and at a much higher level. Keep Americans buying for as long as possible. Keep the country drunk on credit and debt and convince us that this phony economy pipe dream is real. Assure us that we can have it all forever and we can borrow our way to prosperity. Oh, and pray that when the system eventually crumbles you're out of office and the next guy gets all the blame. Bush nearly made it. I don't think Obama will get that close, especially if he picks up a second term.
I'm sorry, I went a long time there without taking a much needed fun break. I bet that was painful. Hopefully not as painful as this though
But anyway, once our lenders see our currency depreciate, there is no way they'll want to lend to us anymore without higher interest on the loans. It will become increasingly difficult to finance our debt. But again, instead of doing the wise and prudent thing (stop running huge budget deficits because credit dried up) that would lead to political backlash (voters complaining about their government checks/programs going away), our fearless leaders at the time, whoever they might be, will decide to finance our debt by simply printing the money. You want your social security check? Sure, we'll just print the dollars. The retired federal employee wants his nice pension and benefits package? Sure, we'll just print the dollars. You're out of work and want the unemployment benefits for another year? Sure, we'll just print the dollars.
Eventually this set of policies can lead to an extremely high rate of inflation that becomes harder and harder to fix. But fear not America, because we'll have fearless politicians to fix (make worse) the problem (that they created). When prices start to rise our fearless leaders will find someone else to blame, probably the greedy business owners who are only raising prices to pad their huge bank accounts. So we'll get price controls on things like food and clothing, but that will only lead to shortages of food and clothing. We'll get wage controls, but that will only lead to higher unemployment. Every solution to a problem will create another problem that cowardly politicians will combat with a terrible solution that creates more problems.
This kitty does the YMCA. Isn't that precious?
And all the while, the countries over in Asia will be going through a transformation of their own. They currently think that they need America to consume their products. That's why they keep lending to America long after it became obvious that they wouldn't ever be paid back. But after Americans stop consuming their goods, they could let the value of their currency gain in value. Suddenly the people who worked hard to make those goods can afford to consume those goods. Their standard of living will go up as the standard of living in America goes down. The world will realize that humans have an unlimited amount of demand for products that make their life better. Americans don't have a monopoly on that. When our ability to monetize that demand goes away, there will certainly be humans on this planet who will fill that void.
One more of Bar Rafaeli. Because seriously, that woman is simply gorgeous.
Tuesday, September 28, 2010
Why Manufacturing Jobs Are Leaving, And How It Could Destroy Our Currency
Ask anyone this question: "Why has America lost over 3 million manufacturing jobs in the last 15 years?" and I'll bet you good money that the most common answer you'll get is "free trade", or maybe "NAFTA". It makes sense, right? American companies can send jobs overseas, get the products built with cheap labor in countries with low regulations and nearly nonexistent labor laws, and then ship the products back to America for next to nothing. Sure beats meeting the laws and regulations associated with hiring workers in America. I mean, this is just common knowledge. Duh.
Well, this is a very solid argument. But there's just one small caveat to it... it's completely and utterly wrong. Free trade may have been a factor in speeding up the outsourcing, but not really. If done right, free trade is a good thing and doesn't automatically lead to the deployment of manufacturing jobs to developing nations. It only worked that way because it's a symptom of a much larger disease. I'll try to explain this in a clear way, but I should warn you that it gets rather complicated.
For all intents and purposes, the United States is the only country that uses the American dollar. Every dollar that leaves America must come back at some point. That is, when America imports goods, we send dollars to the countries that we get the goods from. Since those dollars cannot be spent in the foreign countries, they must eventually come back to America. Foreigners could buy up manufacturing plants in America, but if they move those plants overseas, any profit they make in the United States would have to be spent in the United States.
I'll put it another way. Suppose an American exporter sells his goods to a Japanese importer and is paid in Japanese Yen. The American cannot use the Yen to pay his workers, buy clothing and food for his family, or buy theater tickets. If he wants to do any of those things he needs American dollars. Therefor his Japanese Yen are of no use to him unless he uses them himself to buy Japanese goods or sells them to some other American importer for dollars. The buyer of the Yen will use that currency to buy Japanese goods. So every Yen that leaves Japan has to eventually get back to Japan in exchange for something that Japan produces, because Japan is the only country that uses the Yen as currency. It works the same way with America. Every dollar that we send overseas for goods has to eventually make it back to America.
You see, there really shouldn’t ever be a trade deficit of any major significance. This may seem strange, but it shouldn’t. Exports pay for imports, so they must eventually balance out. Think of a bartering society. I can trade you 5 chickens for your goat. My 5 chickens are my exports, and the goat is my import. Your goat is your export and the 5 chickens are your import. Because we both agree that 5 chickens is worth 1 goat (maybe I have too many chickens and you have too many goats. Supply and demand dictates the value of the chickens/goat), neither one of us has run a trade deficit. It's no different if we were countries instead of individuals. Say my country has a lot of pens, but no pencils. Your country has pencils but no pens. So, we trade. I give you pens and you give me pencils. For both of our countries, our exports paid for our imports and we have no deficit. When money gets involved, the situation is essentially the same. I'll sell you pens for money that you earned by producing pencils and then use that money to buy your pencils. That's how economies work regardless of whether there are 2 goods involved or 2,000. My excess production/resources are traded to you for your excess production/resources, and there is no trade deficit. It works the same way for nations as it does for individuals. At least that's how it's supposed to work.
"But Chris, the U.S. does have trade deficits and we just racked a whopping one of 568 billion dollars in 2008!" Well, two points need to be made here. The first one is general while the second one is specific to the United States.
In general, it’s obvious currencies don’t leave and come back instantaneously. There will be up and down cycles. It’s also hard to account for every economic transaction taking place between individuals, companies and governments in one country or another. This is especially true, given there are often large black markets in even the freest economies. And finally, well, governments just lie sometimes. Shocking, I know. All of this becomes obvious when you look at the CIA Factbook for 2009, which says the world as a whole ran about a $133 billion dollar trade surplus. This is, of course, impossible.
Accounting errors can only account for small discrepancies though. The United States is a very peculiar case. We just so happen to hold the world's reserve currency. To explain what this is and how it came about, we have to go back to the end of World War II. After the war, the Allied governments wanted to set up a system that would facilitate international trade and prevent the hyper-nationalistic protectionism of the 1930′s, which helped spur the Second World War. John Maynard Keynes and Harry Dexter White designed a system known as Bretton Woods, in which every country in the American sphere of influence tied their currency to the U.S. dollar at a fixed exchange rate and the dollar was in turn tied to gold at $35 per ounce. Basically the dollar was valued at $35 per ounce of gold and every other currency in the world was valued at some fixed exchange rate with the US dollar. All these currencies throughout the world could be exchanged for a certain number of American dollars, and those dollars could in turn be exchanged for gold at $35/ounce. Sounds like a good idea, right?
In reality, the system was doomed from the beginning. The problem was simple: it relied on wise fiscal policy by U.S. politicians. In 1971, after a decade of paying for "guns and butter" (the Vietnam War and the Great Society) by inflating the dollar, the U.S. government could no longer justify the $35/ounce exchange rate. When foreign investors started requesting their gold in exchange for dollars, president Nixon responded by removing the gold standard. From that point on the only thing that gave our dollar any value was the trust and confidence of the dollar. It's called fiat money, and without the trust and confidence of its value you may as well have monopoly money or a dirty bar napkin with "IOU" written on it in sharpie.
The fixed exchange rate system was eventually replaced with floating exchange rates that had no gold backing. This allowed investors to set currency values by bidding on them in relation to each other. Now, this system works in principal, but unfortunately it opens up countries to currency attacks. If a government enacts poor policies, investors can leave that currency en masse. Or, as many leftists claim, powerful countries can simply de-fund weaker countries if they don’t like their policies; although whether this has ever actually happened is disputed. Regardless, it leaves countries vulnerable as illustrated by the most famous example of such currency implosions, the Asian Financial Crisis of 1997.
To avoid these crises (and store a “risk free” currency in case of other problems), governments started stockpiling dollars to act as a safety net in case their own currency was attacked. While the dollar was the reserve currency under Bretton Woods, as well as in the ’70′s and ’80′s, government stockpiles really accelerated in the 1990′s and 2000′s when China started taking off and the fall of communism brought with it a whole host of new countries, who, lacking Soviet support, needed to start stockpiling dollars. America, as the world's economic leader, was seen as having the strongest currency and countries began to gather up dollars in their reserves. If their currency was "attacked" at least they had dollars that were worth something. But, as I said before, the dollar is only worth something because people think it's worth something. Since leaving the gold standard, there is nothing of value that these little green pieces of paper represent.
So what does all of this have to do with disappearing manufacturing jobs and trade deficits? As I pointed out earlier, we don't really have a trade deficit per se. What we have is countries selling us goods for dollars. But instead of those countries exchanging the dollars for our goods as would be normal, they're stockpiling them in their central banks because the dollar is the reserve currency and owning dollars is supposed to protect their money against any currency attacks. Essentially, we have no trade deficit because the figures don't include our number one export: little green pieces of paper about the size of a dollar bill that are easy and cheap to print. But remember, the dollar doesn't have anything of value behind it ever since we left the gold standard. Hopefully you can see where all of this is leading.
The dollars are no longer returning to the United States, or at least, a sizable portion of them are not. We buy toys from China and oil from Saudi Arabia and cars from Japan and electronics from Taiwan and cocaine from Mexico and they turn around and stuff those dollars into their central banks. This does two things: first, companies no longer have to buy anything from the United States with the dollars they receive (because foreign countries will buy the dollars to put in their reserves); they can simply outsource their factories and then sell the dollars they collect to the host country’s central bank, or other investors. If these countries did not want to buy and stockpile the American dollars, those dollars would have to be spent in America on goods produced in America. But the dollars are being funneled elsewhere and the result is that our manufacturing sector is hollowed out because foreign countries would rather hoard American dollars than spend them on American goods. Second, it gives the U.S. government a license to print an almost infinite amount of money without producing inflation. Or in other words, we pay for our imports with nothing more than thin, green pieces of paper that we can print for nothing. And as long as those little pieces of paper don't come back to America, we don't see any inflation because there is no velocity. We get a great standard of living, the rest of the world gets jobs, and all we have to do to keep the system working is to print paper (dirty bar napkins with "IOU" written on them in sharpie).
This is a great system, right? Now we get to have Guns And Butter Part Duex and not see any inflation as a result. How wonderful! But as Herb Stein once said, "things that can't go on forever don't". The dollar currently makes up about 64% of foreign reserves, with the Euro at a distant 2nd with about 26%. This creates an extremely precarious situation. While the dollar isn't sinking like a rock (yet), many foreign countries are worried about our bailouts, stimulus packages and gigantic deficits. Foreign central banks are becoming so nervous they have started diversifying into the euro and other currencies. If we’re not careful, they will pull the plug and all those dollars will come rushing back to the United States. If this happens, the dollar will hyperinflate overnight. And all it'll take is for one country to start sending dollars back to America or stop buying American debt. That would start a domino effect where everyone starts trying to sell their dollars but nobody wants to buy them, the price of the dollar will fall through the floor and the whole house of cards --er, dollars-- will come crashing down. Think of the housing crisis, except instead of houses it's dollar bills.
I'm actually surprised that the rest of the world hasn't realized that the dollars they're holding are worthless and they would be better off spending their money on themselves instead of financing our debt and consumption. I guess the short term pain of dumping U.S. dollars currently outweighs the long term positive effects of having a stronger currency and being able to consume the goods that they work so hard to make. It seems that politicians, no matter what country they're in, don't have the guts to make short term sacrifices for long term gains. But eventually this will all happen. Some event will take place and it will trigger a little bit of worry around the globe and within a very short period of time those dollars will all come back to America, the world will stop financing our debt and consumption, and we'll all be millionaires buying $10,000 loafs of bread. Or, you know, we could continue to run trillion dollar deficits forever, nobody will want to be paid back and everything will work out perfectly. We'll probably find out in a few years.
Well, this is a very solid argument. But there's just one small caveat to it... it's completely and utterly wrong. Free trade may have been a factor in speeding up the outsourcing, but not really. If done right, free trade is a good thing and doesn't automatically lead to the deployment of manufacturing jobs to developing nations. It only worked that way because it's a symptom of a much larger disease. I'll try to explain this in a clear way, but I should warn you that it gets rather complicated.
For all intents and purposes, the United States is the only country that uses the American dollar. Every dollar that leaves America must come back at some point. That is, when America imports goods, we send dollars to the countries that we get the goods from. Since those dollars cannot be spent in the foreign countries, they must eventually come back to America. Foreigners could buy up manufacturing plants in America, but if they move those plants overseas, any profit they make in the United States would have to be spent in the United States.
I'll put it another way. Suppose an American exporter sells his goods to a Japanese importer and is paid in Japanese Yen. The American cannot use the Yen to pay his workers, buy clothing and food for his family, or buy theater tickets. If he wants to do any of those things he needs American dollars. Therefor his Japanese Yen are of no use to him unless he uses them himself to buy Japanese goods or sells them to some other American importer for dollars. The buyer of the Yen will use that currency to buy Japanese goods. So every Yen that leaves Japan has to eventually get back to Japan in exchange for something that Japan produces, because Japan is the only country that uses the Yen as currency. It works the same way with America. Every dollar that we send overseas for goods has to eventually make it back to America.
You see, there really shouldn’t ever be a trade deficit of any major significance. This may seem strange, but it shouldn’t. Exports pay for imports, so they must eventually balance out. Think of a bartering society. I can trade you 5 chickens for your goat. My 5 chickens are my exports, and the goat is my import. Your goat is your export and the 5 chickens are your import. Because we both agree that 5 chickens is worth 1 goat (maybe I have too many chickens and you have too many goats. Supply and demand dictates the value of the chickens/goat), neither one of us has run a trade deficit. It's no different if we were countries instead of individuals. Say my country has a lot of pens, but no pencils. Your country has pencils but no pens. So, we trade. I give you pens and you give me pencils. For both of our countries, our exports paid for our imports and we have no deficit. When money gets involved, the situation is essentially the same. I'll sell you pens for money that you earned by producing pencils and then use that money to buy your pencils. That's how economies work regardless of whether there are 2 goods involved or 2,000. My excess production/resources are traded to you for your excess production/resources, and there is no trade deficit. It works the same way for nations as it does for individuals. At least that's how it's supposed to work.
"But Chris, the U.S. does have trade deficits and we just racked a whopping one of 568 billion dollars in 2008!" Well, two points need to be made here. The first one is general while the second one is specific to the United States.
In general, it’s obvious currencies don’t leave and come back instantaneously. There will be up and down cycles. It’s also hard to account for every economic transaction taking place between individuals, companies and governments in one country or another. This is especially true, given there are often large black markets in even the freest economies. And finally, well, governments just lie sometimes. Shocking, I know. All of this becomes obvious when you look at the CIA Factbook for 2009, which says the world as a whole ran about a $133 billion dollar trade surplus. This is, of course, impossible.
Accounting errors can only account for small discrepancies though. The United States is a very peculiar case. We just so happen to hold the world's reserve currency. To explain what this is and how it came about, we have to go back to the end of World War II. After the war, the Allied governments wanted to set up a system that would facilitate international trade and prevent the hyper-nationalistic protectionism of the 1930′s, which helped spur the Second World War. John Maynard Keynes and Harry Dexter White designed a system known as Bretton Woods, in which every country in the American sphere of influence tied their currency to the U.S. dollar at a fixed exchange rate and the dollar was in turn tied to gold at $35 per ounce. Basically the dollar was valued at $35 per ounce of gold and every other currency in the world was valued at some fixed exchange rate with the US dollar. All these currencies throughout the world could be exchanged for a certain number of American dollars, and those dollars could in turn be exchanged for gold at $35/ounce. Sounds like a good idea, right?
In reality, the system was doomed from the beginning. The problem was simple: it relied on wise fiscal policy by U.S. politicians. In 1971, after a decade of paying for "guns and butter" (the Vietnam War and the Great Society) by inflating the dollar, the U.S. government could no longer justify the $35/ounce exchange rate. When foreign investors started requesting their gold in exchange for dollars, president Nixon responded by removing the gold standard. From that point on the only thing that gave our dollar any value was the trust and confidence of the dollar. It's called fiat money, and without the trust and confidence of its value you may as well have monopoly money or a dirty bar napkin with "IOU" written on it in sharpie.
The fixed exchange rate system was eventually replaced with floating exchange rates that had no gold backing. This allowed investors to set currency values by bidding on them in relation to each other. Now, this system works in principal, but unfortunately it opens up countries to currency attacks. If a government enacts poor policies, investors can leave that currency en masse. Or, as many leftists claim, powerful countries can simply de-fund weaker countries if they don’t like their policies; although whether this has ever actually happened is disputed. Regardless, it leaves countries vulnerable as illustrated by the most famous example of such currency implosions, the Asian Financial Crisis of 1997.
To avoid these crises (and store a “risk free” currency in case of other problems), governments started stockpiling dollars to act as a safety net in case their own currency was attacked. While the dollar was the reserve currency under Bretton Woods, as well as in the ’70′s and ’80′s, government stockpiles really accelerated in the 1990′s and 2000′s when China started taking off and the fall of communism brought with it a whole host of new countries, who, lacking Soviet support, needed to start stockpiling dollars. America, as the world's economic leader, was seen as having the strongest currency and countries began to gather up dollars in their reserves. If their currency was "attacked" at least they had dollars that were worth something. But, as I said before, the dollar is only worth something because people think it's worth something. Since leaving the gold standard, there is nothing of value that these little green pieces of paper represent.
So what does all of this have to do with disappearing manufacturing jobs and trade deficits? As I pointed out earlier, we don't really have a trade deficit per se. What we have is countries selling us goods for dollars. But instead of those countries exchanging the dollars for our goods as would be normal, they're stockpiling them in their central banks because the dollar is the reserve currency and owning dollars is supposed to protect their money against any currency attacks. Essentially, we have no trade deficit because the figures don't include our number one export: little green pieces of paper about the size of a dollar bill that are easy and cheap to print. But remember, the dollar doesn't have anything of value behind it ever since we left the gold standard. Hopefully you can see where all of this is leading.
The dollars are no longer returning to the United States, or at least, a sizable portion of them are not. We buy toys from China and oil from Saudi Arabia and cars from Japan and electronics from Taiwan and cocaine from Mexico and they turn around and stuff those dollars into their central banks. This does two things: first, companies no longer have to buy anything from the United States with the dollars they receive (because foreign countries will buy the dollars to put in their reserves); they can simply outsource their factories and then sell the dollars they collect to the host country’s central bank, or other investors. If these countries did not want to buy and stockpile the American dollars, those dollars would have to be spent in America on goods produced in America. But the dollars are being funneled elsewhere and the result is that our manufacturing sector is hollowed out because foreign countries would rather hoard American dollars than spend them on American goods. Second, it gives the U.S. government a license to print an almost infinite amount of money without producing inflation. Or in other words, we pay for our imports with nothing more than thin, green pieces of paper that we can print for nothing. And as long as those little pieces of paper don't come back to America, we don't see any inflation because there is no velocity. We get a great standard of living, the rest of the world gets jobs, and all we have to do to keep the system working is to print paper (dirty bar napkins with "IOU" written on them in sharpie).
This is a great system, right? Now we get to have Guns And Butter Part Duex and not see any inflation as a result. How wonderful! But as Herb Stein once said, "things that can't go on forever don't". The dollar currently makes up about 64% of foreign reserves, with the Euro at a distant 2nd with about 26%. This creates an extremely precarious situation. While the dollar isn't sinking like a rock (yet), many foreign countries are worried about our bailouts, stimulus packages and gigantic deficits. Foreign central banks are becoming so nervous they have started diversifying into the euro and other currencies. If we’re not careful, they will pull the plug and all those dollars will come rushing back to the United States. If this happens, the dollar will hyperinflate overnight. And all it'll take is for one country to start sending dollars back to America or stop buying American debt. That would start a domino effect where everyone starts trying to sell their dollars but nobody wants to buy them, the price of the dollar will fall through the floor and the whole house of cards --er, dollars-- will come crashing down. Think of the housing crisis, except instead of houses it's dollar bills.
I'm actually surprised that the rest of the world hasn't realized that the dollars they're holding are worthless and they would be better off spending their money on themselves instead of financing our debt and consumption. I guess the short term pain of dumping U.S. dollars currently outweighs the long term positive effects of having a stronger currency and being able to consume the goods that they work so hard to make. It seems that politicians, no matter what country they're in, don't have the guts to make short term sacrifices for long term gains. But eventually this will all happen. Some event will take place and it will trigger a little bit of worry around the globe and within a very short period of time those dollars will all come back to America, the world will stop financing our debt and consumption, and we'll all be millionaires buying $10,000 loafs of bread. Or, you know, we could continue to run trillion dollar deficits forever, nobody will want to be paid back and everything will work out perfectly. We'll probably find out in a few years.
Thursday, September 2, 2010
Mosque - 1, Ground - 0
OK media, you win. The ground zero mosque is, somehow, a topic worthy of a national debate. I suppose I'll throw my hat in the ring as well, even though it's utterly pointless and stupid.
First of all, I take issue with the term "ground zero mosque". It is neither on ground zero, nor is it a mosque. It's a few blocks away from ground zero and it's a Muslim community center. (It's at this point that half of everyone reading this will tune out and lose any sliver of open-mindedness that might have existed. But I guess I'll continue anyway.) It'll have a basketball court, swimming pool, auditorium, culinary school, and *gasp* a place for Muslim prayer. If the "place for Muslim prayer" part makes it a mosque, then the pentagon is technically a mosque. This is little more than a YMCA with a prayer room.
The media pundits have gotten very good at misleading phrases just like this. Death panels, blood for oil, welfare queens, vast right-wing conspiracy, yes we can, ad nauseum... These phrases might sound vaguely correct, but they're horribly misleading. "Ground zero mosque" is just another one to add to the list. Is everything around ground zero a "Ground zero [something]"? Ground zero starbucks. Ground zero McDonalds. Ground zero jiffy lube. Ground zero homeless bum begging for change and vodka next to the ground zero transvestite prostitute. Just how far away does something have to be before it stops being in the "ground zero" halo area? Would it be OK if they built this building 5 blocks away? 10? 20? Where do you draw the line with this?
There are really only a couple things to consider here. Is the land privately owned? Why yes, yes it is. Can people do whatever they want with the land they buy (for the most part)? Why yes, yes they can. But there I go, trying to use logic and reason in an issue as emotionally ripe as this one. So instead of trying to give you my opinions, I'll take some time to address a few of the arguments I've heard. And give you my opinions in the process, I guess.
"THEY'RE BUILDING A MOSQUE AT GROUND ZERO!!!!!!!!!!!!!!!" - Shut up, they're building a Muslim cultural center a few blocks away from ground zero.
"BUT MUSLIMS BLEW UP THE TOWERS!!!!!!!!!!!!!!!!!!!!!!" - Shut up. The 'terrists' were Muslim extremists. Stop grouping a whole religion into the most radical elements of that religion. It's not as if all Christians rub little boys, blow up abortion clinics and protest war veterans' funerals with "God hates fags" signs. Muslim does not equal Terrorist. It's a very simple concept.
"BUT THEY COULD BE TRAINING NEW TERRORISTS THERE!!!!!!!!!!!!" - Seriously, I heard someone argue that. I don't even know where to start with this one. But I'm gonna go out on a limb here and say that if you actually believe this, then there is nothing I can say to make you come to your senses. It's like arguing with someone who thinks Bush was behind 9/11. Or, better yet, it's like trying to convince a complete moron who thinks they're really smart that they are, in fact, a complete moron.
"WHAT IF SOMEONE BUILT A JAPANESE CULTURAL CENTER DOWN THE ROAD FROM PEARL HARBOR??!!??!!!!???!!!????!!!??!???!!" - First of all, if some Jap bought the land, he should be able to do whatever he wants with it. And yes, that includes building a Japanese cultural center. Second, shut up and click here.
"BUT THE PEOPLE ON THE LEFT ARE CONSTANTLY ATTACKING CHRISTIANS!!!!! - Shut up. When someone tries to keep you from doing your Christian thing it pisses you off. So your response is to keep Muslims from doing their Muslim thing? How childish is this? Seriously, it's the same response you get when you ask a 5 year old why he did something wrong. "BUT MOM, HE DID IT TO ME FIRST!!!!!!!!!" Turn the other cheek and stop whining.
"NYC ALREADY HAS A LOT OF MOSQUES!!!!!!!!!!! THEY DON'T NEED ANOTHER ONE!!!!!!!!!!!!!!!!!!!!! - Shut up. If you substitute "Wal Mart" for "mosque" you would be pissed at anyone making that same argument, and rightly so. If there are too many mosques, then nobody will go there and it'll eventually shut down. Let the free market decide how many mosques should be built in an area. Yeah, you can't pick and choose when you want to invoke the free market argument.
"BUT THE TERRORISTS WILL VIEW THIS AS A VICTORY AND USE IT AS A RECRUITING TOOL!!!!!!!!!!!!!!!!!!!!!!!!" - Shut up. I'm so sorry that I don't allow the opinions of religious extremists to dictate my actions. Forgive me.
BUT IT'S INSENSITIVE!!!!!!!!!!!!!!!!!!!!!!!!!!" - OK, this one I can actually understand. I think it's a knee jerk emotional response with no real merit, but I can at least understand the response. 9/11 was an extremely tragic event, and it changed us all in some way. In many ways, it defined this generation. But we all need to take a deep breath and think things through before we start letting our emotions control our logic. And by "we all" I mean "men". Women, there's no hope for you using logic in emotional situations. And what is the only logical argument here? Let them build the mosque if they want.
Maybe the people behind it have ulterior motives. Maybe it's insensitive. Maybe it's an asshole thing to do. I might actually agree with some of that, but so what? This is fucking America. You know what we get to do in fucking America? We get to be insensitive fucking assholes as long as we're not hurting someone else or stopping someone else from being an insensitive fucking asshole. Once we start to prevent someone from pissing us off, then we start to lose the right to piss other people off. And just because something pisses someone else off doesn't mean they shouldn't get to do it. Maybe the mosque pisses you off. I can appreciate that. But that doesn't mean they shouldn't build it. Eating meat pisses some people off, but that doesn't mean we should quit eating it. Driving an SUV pisses some people off, but that doesn't mean we should quit driving it. "In God We Trust" on our money pisses some people off, but that doesn't mean we should quit using it. Saying "Merry Christmas" pisses some people off, but that doesn't mean we should quit saying it.
You see, almost everything that someone does will piss off someone else. Maybe the greatest quality of America is that we don't get caught up with the emotion of being pissed off. We have been pissing each other off throughout our history. You know what we do about it? Nothing. Sure, we argue and protest and scream and yell. But ultimately, we let people go about their business even if it offends others. Christians, Jews, Atheists, etc. have all been offending their fellow Americans for as long as America has existed. And now the Muslims want to join the party. I say let them in. After all, we've been building ground zeros next to their mosques for years now. And if you want to buy the land next to their mosque and build a 1,000 foot tall statue of Muhammad, I'll defend your right to do it. Even if it does make you an insensitive fucking asshole.
First of all, I take issue with the term "ground zero mosque". It is neither on ground zero, nor is it a mosque. It's a few blocks away from ground zero and it's a Muslim community center. (It's at this point that half of everyone reading this will tune out and lose any sliver of open-mindedness that might have existed. But I guess I'll continue anyway.) It'll have a basketball court, swimming pool, auditorium, culinary school, and *gasp* a place for Muslim prayer. If the "place for Muslim prayer" part makes it a mosque, then the pentagon is technically a mosque. This is little more than a YMCA with a prayer room.
The media pundits have gotten very good at misleading phrases just like this. Death panels, blood for oil, welfare queens, vast right-wing conspiracy, yes we can, ad nauseum... These phrases might sound vaguely correct, but they're horribly misleading. "Ground zero mosque" is just another one to add to the list. Is everything around ground zero a "Ground zero [something]"? Ground zero starbucks. Ground zero McDonalds. Ground zero jiffy lube. Ground zero homeless bum begging for change and vodka next to the ground zero transvestite prostitute. Just how far away does something have to be before it stops being in the "ground zero" halo area? Would it be OK if they built this building 5 blocks away? 10? 20? Where do you draw the line with this?
There are really only a couple things to consider here. Is the land privately owned? Why yes, yes it is. Can people do whatever they want with the land they buy (for the most part)? Why yes, yes they can. But there I go, trying to use logic and reason in an issue as emotionally ripe as this one. So instead of trying to give you my opinions, I'll take some time to address a few of the arguments I've heard. And give you my opinions in the process, I guess.
"THEY'RE BUILDING A MOSQUE AT GROUND ZERO!!!!!!!!!!!!!!!" - Shut up, they're building a Muslim cultural center a few blocks away from ground zero.
"BUT MUSLIMS BLEW UP THE TOWERS!!!!!!!!!!!!!!!!!!!!!!" - Shut up. The 'terrists' were Muslim extremists. Stop grouping a whole religion into the most radical elements of that religion. It's not as if all Christians rub little boys, blow up abortion clinics and protest war veterans' funerals with "God hates fags" signs. Muslim does not equal Terrorist. It's a very simple concept.
"BUT THEY COULD BE TRAINING NEW TERRORISTS THERE!!!!!!!!!!!!" - Seriously, I heard someone argue that. I don't even know where to start with this one. But I'm gonna go out on a limb here and say that if you actually believe this, then there is nothing I can say to make you come to your senses. It's like arguing with someone who thinks Bush was behind 9/11. Or, better yet, it's like trying to convince a complete moron who thinks they're really smart that they are, in fact, a complete moron.
"WHAT IF SOMEONE BUILT A JAPANESE CULTURAL CENTER DOWN THE ROAD FROM PEARL HARBOR??!!??!!!!???!!!????!!!??!???!!" - First of all, if some Jap bought the land, he should be able to do whatever he wants with it. And yes, that includes building a Japanese cultural center. Second, shut up and click here.
"BUT THE PEOPLE ON THE LEFT ARE CONSTANTLY ATTACKING CHRISTIANS!!!!! - Shut up. When someone tries to keep you from doing your Christian thing it pisses you off. So your response is to keep Muslims from doing their Muslim thing? How childish is this? Seriously, it's the same response you get when you ask a 5 year old why he did something wrong. "BUT MOM, HE DID IT TO ME FIRST!!!!!!!!!" Turn the other cheek and stop whining.
"NYC ALREADY HAS A LOT OF MOSQUES!!!!!!!!!!! THEY DON'T NEED ANOTHER ONE!!!!!!!!!!!!!!!!!!!!! - Shut up. If you substitute "Wal Mart" for "mosque" you would be pissed at anyone making that same argument, and rightly so. If there are too many mosques, then nobody will go there and it'll eventually shut down. Let the free market decide how many mosques should be built in an area. Yeah, you can't pick and choose when you want to invoke the free market argument.
"BUT THE TERRORISTS WILL VIEW THIS AS A VICTORY AND USE IT AS A RECRUITING TOOL!!!!!!!!!!!!!!!!!!!!!!!!" - Shut up. I'm so sorry that I don't allow the opinions of religious extremists to dictate my actions. Forgive me.
BUT IT'S INSENSITIVE!!!!!!!!!!!!!!!!!!!!!!!!!!" - OK, this one I can actually understand. I think it's a knee jerk emotional response with no real merit, but I can at least understand the response. 9/11 was an extremely tragic event, and it changed us all in some way. In many ways, it defined this generation. But we all need to take a deep breath and think things through before we start letting our emotions control our logic. And by "we all" I mean "men". Women, there's no hope for you using logic in emotional situations. And what is the only logical argument here? Let them build the mosque if they want.
Maybe the people behind it have ulterior motives. Maybe it's insensitive. Maybe it's an asshole thing to do. I might actually agree with some of that, but so what? This is fucking America. You know what we get to do in fucking America? We get to be insensitive fucking assholes as long as we're not hurting someone else or stopping someone else from being an insensitive fucking asshole. Once we start to prevent someone from pissing us off, then we start to lose the right to piss other people off. And just because something pisses someone else off doesn't mean they shouldn't get to do it. Maybe the mosque pisses you off. I can appreciate that. But that doesn't mean they shouldn't build it. Eating meat pisses some people off, but that doesn't mean we should quit eating it. Driving an SUV pisses some people off, but that doesn't mean we should quit driving it. "In God We Trust" on our money pisses some people off, but that doesn't mean we should quit using it. Saying "Merry Christmas" pisses some people off, but that doesn't mean we should quit saying it.
You see, almost everything that someone does will piss off someone else. Maybe the greatest quality of America is that we don't get caught up with the emotion of being pissed off. We have been pissing each other off throughout our history. You know what we do about it? Nothing. Sure, we argue and protest and scream and yell. But ultimately, we let people go about their business even if it offends others. Christians, Jews, Atheists, etc. have all been offending their fellow Americans for as long as America has existed. And now the Muslims want to join the party. I say let them in. After all, we've been building ground zeros next to their mosques for years now. And if you want to buy the land next to their mosque and build a 1,000 foot tall statue of Muhammad, I'll defend your right to do it. Even if it does make you an insensitive fucking asshole.
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