The US Debt is Enormous and You Shouldn’t Care

October 10, 2013 10 comments

Did you know that the US National Debt is almost $17 trillion and growing at a rate of hundreds of billions of dollars a year? Or wait, maybe the debt is at $70 trillion. Or is it $86.8 trillion?

Regardless, what’s important is that our country owes a zillion bajillion dollars and that growing number will lead to the federal government going bankrupt like the City of Detroit, the Chinese marching in with their US debt holdings and taking over, or worse! Even in the short term, you have people like Donald Trump stating that “When you have [debt] in the $21-$22 trillion [range], you are talking about a [credit] downgrade no matter how you cut it.” A credit downgrade! That means the US would have to pay even higher rates on the money it borrows, meaning the debt would increase even faster! And Donald Trump is really rich, so you know he’s smart and wouldn’t be making ludicrous claims with no basis in reality.

Mother of God...

Mother of God…

Are you terrified yet? Ready to demand that the government balance the budget or, better yet, pay off our debt entirely? Relax. I was once like you, worried that the US Government was overspending and undertaxing our way to financial collapse and putting an undue burden on future generations. I cringed at the thought of the US government paying nearly $3 trillion in interest – almost $10k per American – while I responsibly paid all my credit cards and debt payments in full each month. I got a warm, fuzzy feeling from politicians and journalists who talked of balancing the federal budget (that would probably include almost every politician these days). But I, like many others, bought into a critical misunderstanding of how taxation, spending, and public debt work with fiat currency like the US Dollar.

In reality, there is no coherent possibility for the US government to go bankrupt, experience a credit downgrade, or be coerced by foreign debt-holders due to excessive debt. These are all logically absurd outcomes that don’t even merit acknowledgment. In fact, just the notion of any government being in debt of the currency it issues is rather absurd as well.

Chuck E. Cheese’s and the Never-Ending Supply of Fiat Currency

Anyone familiar with the term “fiat currency” is aware that the US government has an infinite supply of dollars at all times. Every dollar in circulation today was created, and distributed, by the US government at one point or another. Note that I used the term “distributed” instead of “spent,” but those words are equivalent in this context since the distribution of dollars from the US government to other parties is the very definition of government spending. Once a dollar is in circulation, it can be used to pay taxes or exchanged for goods and services in the free market.

The US government’s capacity to produce dollars is quite similar to Chuck E. Cheese’s capacity to produce its tickets. It can create them and distribute tickets however it likes, and it also collects them at their arcade stores. But, the process of awarding tickets through its machines doesn’t depend on how many tickets are collected at their stores. Quite simply, Chuck E. Cheese’s can never run out of tickets or ever have a compelling need to acquire them.

All that's missing is "This note is legal tender for all debts, public and private."

All that’s missing is “This note is legal tender for all debts, public and private.”

Now, imagine a world where Chuck E. Cheese’s is duly elected to represent the people, and a new constitution is drafted giving them powers of taxation and declaring the ticket as the national currency. Let’s assume that, on day one of this new order, the government has not yet distributed any tickets. Although they still have infinity of them, as they always do, the people have none and are using a barter system (or maybe SOJs and Bitcoins) for trade.

It’s not really a government without any government spending, so President Cheese himself declares that they are hiring policemen, teachers, road builders, and miscellaneous paper pushers to be paid in tickets. To his dismay, he gets exactly zero applications. Nobody is trading tickets, nobody has a need for them, and in fact tickets don’t even burn well enough to heat one’s house. Likewise, nobody is willing to take a job that pays in tickets.

But President Cheese is a resourceful mouse and he figures out a solution. “All citizens will be required to pay a tax of 10 thousand tickets at the end of the year, and violators will be thrown in jail for tax evasion!” he decrees. Now that may not be the fairest way to allocate tax burdens to the population, but it does the job. People, now clamoring for tickets to avoid jail time, sign up to become government employees in droves. Those that don’t join the public sector instead trade their goods and services to government employees in exchange for tickets. Soon, everything from aardvark meat to zucchini bread can be bought and sold for tickets.

For the sake of this example, suppose that 10 billion tickets are paid to government employees in the first year, while 9 billion tickets are collected in taxes. With 10 billion tickets going into economy, and 9 billion coming out, that leaves 1 billion tickets in circulation. It also means that the government spent a billion more tickets than it collected, although strangely there is still no government debt. At the end of the day, the government leveraged its power of taxation to take some of the workforce and put it towards providing roads, police, and teachers. The government can continue operating with this budget as long as it wants. The only direct impact of the deficit is that a billion tickets are put into circulation each year. Sounds all well and good, right?

Does the Deficit Matter at All?

Remember that government spending injects money into an economy, while government taxing takes it away. If you have too much of the former, but not a lot of the latter, the supply of money grows at a very fast pace. When it grows faster than the output of the economy, the currency in question experiences inflationary pressure. Inflation is not always a bad thing – it is effectively equivalent to a tax on those who hold money – but large or unpredictable amounts of it usually are undesirable.

Yet, sometimes inflationary pressure and putting money into an economy can actually result in a more productive and prosperous society. This is generally true during recessions, including the recent 2008 crash that we’re still recovering from. In a recession, businesses lose revenue and therefore lose money available to spend on wages. Cutting the price of products or services is easy – consumers love a good price reduction – but wages are another story. Wages are sticky, meaning that people don’t like accepting pay cuts, so instead businesses employ fewer people to reduce their wages paid. That leaves us with unemployment, and unemployment represents wasted production in an economy.

Reduced taxes would give businesses more money to spend on wages and individuals more money to buy what they want, decreasing unemployment and helping put an end to the recession. Alternatively, increased government spending could make use of the labor being wasted to unemployment and end the social ills that come with it, also leading to a faster recovery from recession. Either of these, of course, would result in a larger deficit.

Considering all this, cutting taxes and/or increasing spending until a recession is over and unemployment goes down to low levels seems to be a pretty obviously good idea. Yet our government doesn’t do it nearly as much as it should. Why not? Because, as I indicated in the beginning of this article, too many people are paralyzed over fear of national debt.

Instead of issuing new currency to cover deficits, the US government issues treasury bonds. Issuing these bonds is not necessary for government spending, it is merely a relic in constitutional procedure from when the US dollar was on the gold standard. The only practical difference between issuing currency and issuing treasury bonds is that bonds pay interest, effectively encouraging saving and putting upwards pressure on interest rates in the free market. This occasionally results in weird situations when the Federal Reserve decides it wants to lower interest rates, like the government buying treasury bonds from itself. It also means the government has an obligation to redeem those bonds for dollars when they mature, and this is what’s known as the national debt. The term “debt” is something of a misnomer and is not the same debt that people, businesses, and local governments are used to. To “pay off its debts,” the government must simply convert outstanding treasury bonds back to dollars.

The Phony Debt Crisis

Rather than handling fiscal policy in a way that maximizes the well-being and productivity of society, policymakers in Washington bullheadedly pursue disastrous policies in the name of debt reduction with little basis in reason or reality. The size of government is a legitimate question for society to debate, yet rather than compromise between cutting taxes and increasing spending during a recession, we often do the opposite. In the face of a rampant unemployment, Republicans ask for spending cuts while Democrats ask for tax increases.

Actually, our country CAN literally sustain deficit spending forever, as can any country with a sovereign currency.

And now, with the debt rapidly approaching a completely arbitrary debt ceiling, some congressmen are threatening to allow the US to default on its debt payments, despite the massive negative impacts that could have on the economy. That’s like the ocean defaulting on payment of water. Or Chuck E. Cheese’s defaulting on payment of its tickets.

And before you blame it all on the Republicans, keep in mind that it wasn’t long ago that our current President voted against a debt ceiling increase himself:

Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

I therefore intend to oppose the effort to increase America’s debt limit.

None of this is accurate, except perhaps the part about a failure of leadership. Our children need not be burdened by today’s deficits because the government doesn’t need anything from them to pay off its debts. What matters for our children is that they have the technology, education, and infrastructure to provide for their generations. Even if this quote were true, the right away to do something about it wouldn’t be to default on debt payments.

Why can’t our policymakers simply set government spending at a level that allows it to provide the services that society desires from it, and then set taxes at a level that minimizes unemployment without letting inflation get out of hand? Why must our leaders posture, fear-monger, and repeat blatant falsehoods? Is that really too much to ask?

This kind of nonsense policy and rhetoric will continue as long as Americans continue to miscomprehend the nature of our debt and the effects that deficit spending has on an economy. Politicians will capitalize on fear and misunderstanding of our national debt to help their election chances, but don’t allow yourself to be fooled. I only hope that this article takes us a step in the right direction.

Categories: Economics, Politics

Why You Should be Against Sex Work Prohibition

September 13, 2013 2 comments

Today is Friday the 13th, a day sex workers’ rights activists have chosen to raise awareness for their cause. I sympathize with their cause, and although the laws and stigmas against sex workers don’t affect me personally, their struggle for individual liberties and against harmful and overbearing laws is one that everyone should care about. Consider this post me doing my small part.

As you probably know, almost every country in the world has laws against prostitution and other sex work, and the Land of the Free™ is no exception. In many states, getting convicted of paying or receiving money for sex is a felony and can land first offenders in jail for up to a year. In Louisiana, “Crime Against Nature” laws require some convicted prostitutes to register as sex offenders – grouping them with rapists and child molesters. Clearly, our country treats the voluntary exchange of sex for money as quite a serious offense.

But why? I’ll attempt to deconstruct the two arguments I see used most to justify criminalization of sex work.

Sex Work is “Immoral” or “Indecent” – But That’s Just, Like, Your Opinion, Man

Some form of this accusation gets used against many private, voluntary activities and it is completely without merit in every instance.

There happens to be a handful of major religions that view sex work as inappropriate, and many of their most zealous followers push for prohibition for that reason. Of course, those religions may also view extramarital sex, contraceptives, or masturbation as inappropriate. In fact, strict interpretation of the scripture of those religions may even forbid cursing, eating lobster, or cotton/polyester blends. Is any of this justification for prohibition of certain activities? If enough people found fabric material blends objectionable, would that be grounds for police to set up stings to sell people black-market fabric and arrest those that buy it?

Of course not. People whose religion or personal values disagree with prostitution are free to refrain from it, or even speak out against it. But they have no grounds to push for laws that criminalize it in a free country. The same goes for any other private, voluntary activity.

Sex Work Exploits Women – So We Should Throw Those Women in Jail

This is a slightly trickier issue. It typically goes something like this: “Sex work is exploitation of women by men, and many women are forced into sex work by poverty, human trafficking, or sex slavery.”

Viewing all sex work as exploitation touches on the previous issue of morality. As I see it, it is the woman in question who gets to decide if she is being exploited, not police or lawmakers. Almost by definition, a person who is completely voluntarily engaging in an activity is not being exploited. If a healthy adult woman wants to do sex work for her own reasons and motivations, where is the exploitation? Is she not able to consent to the ways in which she uses her body? Many people would never dream of doing sex work, but projecting one’s own values on others and then forcing them to abide by those values is not a legitimate way of helping people.

Where women often go to stop being exploited

Where women are often held involuntarily to save them from being exploited

But what about women who really are forced into sex work against their will by others? Although the number of these incidents is often greatly exaggerated, this is a real possibility. Quite simply, this should absolutely remain illegal – although with no criminal charges for the women – and is not unlike other forms of slavery. When work is coerced, it is no longer work.

Furthermore, I suspect that decriminalizing voluntary sex work would only serve to reduce or eliminate sex slavery and human trafficking for purposes of sex work. When a black market exists for a certain good or service, unscrupulous criminals emerge to meet demand. Lawful alternatives can crowd out those criminals.

Ironically, some of the most ardent supporters of this claim are self-proclaimed “feminists.” I use scare quotes here because I find it hard to call anyone who would support increasing women’s restrictions and jail populations a feminist.

Only Bad Things Come From Prohibition

So now you know some of the common arguments for sex work prohibition and why they’re completely bogus. What about the consequences from the policies we have today?

There are many similarities between prohibition on sex work and prohibition on drugs. However, many of the most addictive and destructive drugs pose great threats both to society and to users. Certain drugs can stop people from functioning normally and cause long term health problems or even death. Reducing society’s use of certain drugs is a worthy goal with tangible benefits.

“I believe that sex is one of the most beautiful, natural, wholesome things that money can buy.”
Steve Martin

I can’t say the same for sex work. Sex and the desire for sex is a normal part of being human. Safe sex is relatively consequence free, and is actually widely considered to confer health benefits. Most men crave sex, and society hardly thinks twice if men only interested in sex woo women with charm, fancy cars, or expensive jewelry. So where is the harm in allowing voluntary sex work to occur?

If one man pays a woman for sex, and another man promises a woman he’ll call her the next day if she sleeps with him but then never does, who has committed the greater misdeed? The first man engaged in an honest transaction that benefited both parties, while the second man deceived the woman he slept with and probably caused her some emotional suffering after the fact. Yet, society has decided to throw the first man – and the woman he slept with – in jail, while the second man is deemed a “player.”

Regardless, and much like the drug war, prohibition is woefully ineffective at eliminating that which it criminalizes. Rather, it fills our jails with non-violent offenders and pushes voluntary activities into the darkness. Meeting a stranger for sex in a private location could be considered dangerous, but it’s far more dangerous than it needs to be when whores are reluctant to go to the police for help out of fear that they’d be thrown into jail themselves. In fact, you don’t need to look hard to find multiple stories of police officers themselves threatening whores with arrest to extort sexual favors from them.

By now I hope you’re thinking “Well, gee, anti-prostitution laws seem really stupid and actually harm the people they purport to help.” It took me a while to come to this conclusion myself, and I spent most of my life hardly giving sex work prohibition a second thought. Anti-prostitution laws have existed and caused harm for centuries, and they won’t start coming off the books until public awareness about this issue increases. Please share this with people you know, and help sex workers get the attention and the rights they deserve.

Categories: Politics

A Letter Against Dragnet Domestic Surveillance

July 31, 2013 2 comments

Recently, I’ve been making an effort to persuade or pressure my representatives into curtailing the domestic surveillance and counter-terrorism programs that arose after 9/11. To put it briefly, I think these programs are an unwarranted, unconstitutional, and unprecedented invasion of privacy that pose more dangers to American than they eliminate.

Two days ago, I received a response from Senator Tim Kaine from Virginia. His letter attempted to deflect my concerns, but wound up having the opposite effect. It was apparent to me that he is not interested in stemming the tide of growing domestic surveillance and eroding liberties and privacy, much less changing the status quo.

I’ve reproduced the letter from Mr. Kaine in full below:

Dear Mr. Mcnally:

Thank you for contacting me about recent reports concerning the National Security Administration’s intelligence programs. I appreciate hearing your concerns.

On June 6, 2013 details of two National Security Administration (NSA) programs were published in the media as a result of leaked confidential documents. These articles indicated that since 2007, under provisions within the Foreign Intelligence Surveillance Act and the PATRIOT Act, the NSA has legally monitored private communications in an effort to increase national security.

Many have expressed legitimate concerns about the privacy implications of this policy. I believe there needs to be an open discussion about the limits of surveillance, the need for transparency, and the protection of Americans’ privacy, while maintaining national security.

The primary mission of the U.S. intelligence community is to detect and prevent the very real threat of terrorism on our homeland. According to General Keith Alexander, Director of the NSA, and Robert Mueller, Director of the Federal Bureau of Investigation, the intelligence community has successfully used these programs to identify and thwart dozens of terrorist plots at home and abroad. Additionally, leaders from the House and Senate Intelligence Committees have defended these programs stating that they are transparent, lawful, and have been instrumental in defending our homeland.

It is also important to note that these intelligence programs are limited in scope to viewing phone records and other metadata under strict court-enforced protocols. They do not allow authorities to listen to private conversations or access private e-mails, and court orders are required before any additional information to be obtained. President Obama has urged the intelligence community to review, declassify, and release information regarding these programs to the public to ensure that the programs aren’t jeopardized and more importantly, that Americans are made aware of the intelligence programs currently in place.

Please be assured I will work to ensure that efforts to improve our national security protect constitutional rights in a balanced way.

Thank you once again for contacting me on this important matter.

Sincerely,
Tim Kaine

I was quite disillusioned after reading this, particularly since I’d voted for Kaine’s Senate run just last November. So, the next day I crafted another letter in response which I’d like to share on this blog. It doesn’t go into detail as to why I disapprove of the NSA’s programs, but rather focuses on the fallacies in the arguments that Kaine (and others) use to justify them. I’ve copied the letter below, with emphasis added for this post.

This is in response to your letter on July 29, 2013 regarding my concerns over the NSA’s intelligence programs.

I was extremely disappointed with your justification of the NSA’s practices. In that letter, you made several statements to which I take exception.

  • You called for an “open discussion” about surveillance, privacy, and transparency. This is a line repeated several times by the Obama administration. While I agree that an open discussion is necessary, I see this line as more of an attempt to deflect attention away from much needed reform (as it was when the Obama administration urged Congress to vote against an amendment that would defund suspicionless, dragnet data collection on Americans). For one thing, to have a legitimate open discussion about these issues, Americans need to know the facts about what their government is and isn’t doing. Is the government monitoring which people we e-mail? Which websites we visit? Unfortunately, this information remains confidential for the foreseeable future while the government aggressively prosecutes and demonizes those who dare leak it to the public.
  •  

  • You call the threat of terrorism in our homeland “very real.” I disagree, at least relative to countless other threats that kill or injure Americans in far greater numbers. In fact, according to numbers from the Heritage Foundation, more Americans have been killed in our misguided wars/occupations in Afghanistan and Iraq (~6700) than in all acts of terror against Americans worldwide from 1969 to 2009 (~5600). This number accounts for 9/11, which is responsible for over half of those deaths. This is but one example of how inordinate efforts to curtail terrorism can wind up doing more harm than the terrorism itself.
  •  

  • You note that members of the House and Senate have described the NSA’s programs as “transparent.” This claim is brazenly dishonest and deceitful. Were it not for a leak by a government contractor, the NSA’s practice of collecting every American’s phone records would continue to operate in complete secrecy – even secret from Congress. Meanwhile, other parts of the program – including those we’re not even sure exist – continue to operate using secret warrants, secret FISA courts, and secret legal reasoning and justification. How is any of this even remotely transparent?

Proponents of aggressive surveillance and counter-terrorism practices often claim they are necessary to protect our freedoms and democracy. I believe that is nonsense. I believe that such practices are greater threats to freedom and democracy themselves than the threats they’re designed to eliminate. Privacy and civil liberties have been eroded drastically during the so-called “war on terror.” As for democracy, how can democracy and public discourse about counter-terrorism occur when the federal government is concealing or even lying about its surveillance programs and the innocent deaths our actions are responsible for?

Over the last 12 years, I have many times felt embarrassed to be an American. Embarrassed to have a government that recklessly kills innocents, tortures prisoners, invades the privacy of its citizens, and misleads the public – all in the name of fighting terrorism. Embarrassed to have elected officials who pay lip service to the founding principles of liberty, freedom, and due process while simultaneously trampling all over them. However, I was very proud last week to watch a group of Congressmen from various states and backgrounds speaking spiritedly on the House floor against the suspicionless surveillance of every American.

The amendment these Congressmen supported, which would end the NSA’s dragnet surveillance of Americans, failed narrowly. However, I suspect that this type of reform is just beginning. I strongly urge you to join this reform and work towards restoring the United States’ place as a worldwide leader in freedom, liberty, and human rights.

I was expecting to end this blog post here. However, the morning after I wrote that letter, new information was released outlining an NSA program that monitors nearly everything Americans do on the internet, including e-mail and visiting websites. This information, of course, wasn’t released by the Obama administration or anyone within the NSA, but rather through leaks.

How quaint, then, that Tim Kaine’s letter insisted that the NSA does not “access private e-mails.” Or that Mike Rogers said that the NSA doesn’t collect e-mails and Michelle Bachmann claimed there is more information in the phone book than in the NSA database, both statements being made on the House floor moments before they voted to continue these programs.

I am outraged, and many other Americans are as well. I urge you to contact your representatives and demand that they join the fight against dragnet domestic surveillance. If they refuse, do your country a favor and vote them out of office in the coming election year.

Categories: Politics

It’s all Monopoly Money Now

December 25, 2012 14 comments

I used to play Diablo II, an action role-playing game that could be played online with other players. In the game, the players’ characters would slay monsters which occasionally dropped weapons, armor, and other items that could be used to make characters more powerful. The items they’d get from slaying monsters would be generated randomly by the game, and every now and then they’d get lucky and find exceptionally rare and powerful equipment. However, the valuable items found were not always useful to the character that found them, and an in-game barter system quickly arose.

Let’s say I found a rare crossbow, but my character had no need for a crossbow and instead could use a better helmet. I would look for another player who wanted a crossbow and was offering a helmet so we could make a mutually beneficial trade. However, this was not always a simple task. What if the player offering the helmet didn’t want a crossbow? What if the player who wants a crossbow doesn’t have a helmet to offer? What if someone does want a crossbow and offers a helmet, but my crossbow is much rarer and more powerful than his helmet, or vice versa? These issues complicate trading.

Currency and its characteristics

Currency can facilitate these types of trades. However, the Diablo II universe did not trade in dollars, euros, pounds, or pesos. There was an in-game currency called gold, but it was exceedingly common and there were restrictions on how much of it a character could carry or store which made it useless for trading rare items.

A useful form of currency should have the following characteristics:

  • Fungibility: One unit of the currency must be equivalent to any other units.
  • Portability: It must be easy to move and carry around significant amounts.
  • Divisibility: It must be able to be split into smaller quantities for precision when performing transactions.
  • Scarcity: It must be difficult to find or produce in large quantities.
  • Durability: It must not spoil or decay over time.
  • Acceptability: It must be recognizable, desirable, and demanded by a large portion of the population.

Over time, one item started being used as a de facto currency in the Diablo II world. The Stone of Jordan (SOJ) was a rare type of ring that was useful across all the different character classes and most character levels. It was small and therefore possible to carry and store large amounts of them at once. All SOJs were more or less equivalent to each other, and they never decayed. As such, it had all of the above characteristics except divisibility, and soon all rare items and valuable transactions were denominated in SOJs. A player could sell his rare crossbow for SOJs, and then use them to buy a rare helmet. Trade flourished and the players benefited.

Stone of Jordan

Suppose that one day a player in Diablo II announced that he had made his own rings. These rings were small and durable like SOJs, but they conferred no bonuses to the character that wore them and were therefore worthless on their own. Furthermore, the player that made these rings would have the ability to make more of them whenever he wanted at his own discretion. Imagine you were a Diablo II player and this player offered to trade you his rings in exchange for your rare equipment or SOJs. You would laugh him off and tell him to take his useless trinkets elsewhere, right?

SOJs in the Real World

Now, let’s go back to the real world. Currency has been a boon to trade and the prosperity of humanity. Gold and silver are the SOJs on planet Earth; they are fungible, portable, divisible, scarce, durable, and widely recognizable and desirable. They’ve been valuable across generations and across eras. However, they are not as convenient to use for currency as paper money. It’s much easier to give someone exactly $3.50 than it is to give someone the equivalent amount in gold or silver (which would involve a lot of dividing and weighing I imagine).

There is a workaround for this, however. Banks can accept deposits of gold and silver and issue bank notes that are redeemable for the gold and silver on deposit. These notes can come in varying denominations – grams, milligrams, etc… – which makes the underlying commodity even more portable and divisible. Notes from banks that are sufficiently reputable and reliable can be considered as good as the gold or silver they represent. There are shortcomings of such a system, namely the risk of fraud and bank failure, but that is a different topic altogether.

Gold, silver, and notes that represent them have been used as currencies in human history because they were the best forms of currency known to man at the time. Suppose that you lived in a society where these were the most widely used and accepted forms of currencies. And suppose that, as in my Diablo II example, a person started making his own currency and this time called it “monopoly bucks.” These offered the same convenience that bank notes did but had no intrinsic value of their own and were not redeemable for anything that did. This person could also make more monopoly bucks whenever he felt like it. If he came up to you and offered you his monopoly bucks in exchange for your gold, silver, or other objects of value, wouldn’t you laugh him off just as you would the Diablo II player peddling his trinkets?

Fiat money – “This is valuable because I said so”

If, however, a national government were the entity making the monopoly bucks instead of some arbitrary person or private party, what you wind up with is basically the fiat money system that is used all over the world today. What are fiat bills if not arbitrary, inherently useless artifacts that can be created in unlimited quantities by an issuing authority? They are not truly scarce – producing them is a matter of turning on the printing press. Perhaps more importantly, they don’t provide any functional advantages over other forms of paper currency.

500 billion dinar bill

That’s a lot of zeroes…

What makes US Dollars any different from the monopoly bucks in my previous hypothetical? Americans are, to a certain degree, compelled to use dollars by the government. Legal tender laws make it so that only debts in dollars are enforceable by the courts. Taxes are imposed in dollars, and Americans must pay capital gains tax on their nominal gains when they convert other currencies to dollars, even if those gains do nothing more than keep up with inflation.

Dollars can satisfy the demands of the US Government and, to that extent, they have a use that other fiat currencies don’t. Even in places outside of the US government’s jurisdiction, dollars are recognized as valuable because it’s understood that they are useful for people in the USA. However, the value of the dollar isn’t due to it being any more desirable or better suited for use as a currency than other types of paper money. Its value is artificial and propped up by the policies of the US government.

Bitcoin – The Cadillac of monopoly money

Bitcoin is a decentralized, virtual currency with a predictable and limited supply. Bitcoins are inherently worthless and they are not backed by anything of value, like fiat money. However, they have essentially all of the desirable characteristics of currency.

Bitcoins are extremely portable; carrying large amounts is no more difficult than carrying small amounts and bitcoins can be sent across the globe in seconds with virtually no transaction fee. They can easily be divided down to eight decimal places. They are scarce, with a fixed long term supply of roughly 21 million bitcoins and no possibility for any party to increase the bitcoin supply or to create counterfeits. Bitcoins never decay, and large amounts can be stored securely without needing to trust a bank.

When I tell people about bitcoin (which is often), I usually am faced with skepticism. Some of the first questions I generally get are:

“What are bitcoins backed by?”

“Who decides what they’re worth?”

“Who invented bitcoin and who makes new ones?”

The answers are simple: Nothing. Nobody decides but the free market. An anonymous software developer designed and released it, all the code is open-source and the process for making new bitcoins is entirely predictable and open to anyone with a computer.

Bitcoins combine the scarcity of gold and silver with divisibility and portability even greater than that of paper money; and that’s without needing to trust banks to honor their notes. Although bitcoins are inherently worthless, their scarcity and superlative usefulness as a currency makes them valuable to society and to whomever holds them. That is something that can’t really be said about fiat money.

Many still dismiss bitcoin as online funny money, yet those same people are generally blissfully unaware and accepting of the inherent worthlessness of the government fiat money that pervades their lives.

I don’t expect the US Government to start printing $500,000,000,000 bills any time soon, although that is an inevitability if we continue with our current monetary system. Nor do I expect it to revise its legal tender laws or accept alternate currencies to satisfy tax payments. But, if that were to happen, I wonder how long it would be before people realize their dollars are only truly good at hotels on Boardwalk and Park Place…

Fix the Government by “Wasting” Your Vote

October 13, 2012 3 comments

The Problem

Recent polls have concluded that 40% of Americans identify as “independents” and 81% are not satisfied with the federal government. Nevertheless, in next month’s presidential election the vast majority of them will vote for one of the two major parties that, combined, are responsible for every action and piece of legislation the federal government has made in our lifetimes. The party in power changes every now and then, but when one party falls into disfavor the other steps right in.

This practice borders on insanity. It’s like getting cavities from drinking sugary sodas, then switching between Coke and Pepsi every time you get a toothache.

The two-headed monopoly in American government has several consequences. Most importantly, politicians are practically required to secure a nomination from one of the two major parties if they want to get elected. Often times, the nominee of one major party runs in a partisan district and is therefore a shoe-in for the general elections. The problem is that these parties are private organizations that represent the interests of their donors, the largest of which are typically corporations and special interest groups. Generally, the winner of a primary is whoever best represents and serves the interests of that party’s platform. If you need an example of a political party rejecting a candidate who does not adequately represent its platform, look no further than the way Ron Paul was mistreated in the 2012 RNC.

What this means is that all elected officials come from two narrow-minded, private organizations that are driven by wealthy and powerful interests. Most of these officials would, in all likelihood, not have been elected without the support of their parties and they are well aware of that fact. Furthermore, politicians whose policies and performance are frequently antithetical to the interests of their constituents are bound to get elected as long as they have enough partisan voters – or if the other party nominates an even less appealling candidate. For the President, he’s practically guaranteed to be win his party’s nomination after his first term. Even if he broke numerous promises, disappointed many of his supporters, and continued many of his predecessor’s policies which he originally ran against, he’d still get reelected as long as the other nominee is perceived to be worse. The incumbent could even be revealed to be an evil space alien bent on human enslavement, and STILL get elected as long as he was the “lesser evil.”

“Don’t blame me! I voted for the other guy!”

As for the aspiring politician who won’t sell out to one of the two major parties, they’re hopeless unless maybe they’re obscenely rich and can pay for an entire campaign out of pocket. In fact, I’m surprised the Witness Protection Program doesn’t have their witnesses disappear by running for federal office under one of the lesser known political parties. I’m pretty sure there’s no better way to make sure nobody ever hears of you again.

Why is this so? There are a number of reasons; campaign finance, media, the debates, and even unscrupulous attempts by the major parties to keep third parties off of ballots. But the crucial reason third party candidates struggle, and the one I will discuss now, is that too many voters play along and allow it to happen.

Vote third party? Nah…

We take it for granted that only two parties are viable enough to win elections, a notion which becomes a self-fulfilling prophecy. Of the millions of Americans who identify as independents or the legions more who are dissatisfied with the options from the major parties, far too many of them follow the thought process outlined below.

As you can see, this always leads to failure

This behavior, voting for the perceived lesser of two evils or not voting  at all, is a positive feedback loop that only strengthens and legitimizes the two-party monopoly. Third party candidates are irrelevant because few will consider voting for them, and few will consider voting for them because they’re irrelevant. Remember, these are people who are decidedly dissatisfied with the federal government, who profess allegiance for neither of the two major parties, yet they won’t even consider voting for someone besides a major party candidate.

Many disillusioned citizens simply do not vote. Either they think their vote won’t make a difference, or they decide they don’t like either major candidate and don’t bother voting at all.

But it seems even more adhere to a utilitarian voting strategy, voting for the less objectionable of the two major candidates since they are the only two with any realistic chance of winning the election.

Voting for the lesser of two evils – it doesn’t work

Essential to the utilitarian voting strategy is the belief that one’s vote has a chance of affecting the outcome of the election. In 2012, one might vote Obama only because one really doesn’t want Romney to be elected and believes that one’s vote might actually help keep Romney out of office, or vice-versa. This belief, that one’s vote can change the outcome of the election, is downright delusional for most Americans and merely extremely unlikely for a small minority voting in swing states.

Most states, numbering at least 40 each election, lean for one candidate significantly more than the national average and the eventual winner of these states is all but a certainty. These states are givens in the electoral math that determines who wins the Presidential election. While they could theoretically become competitive, any scenario in which that were to happen would include a massive national shift towards one candidate that would make the election a landslide.

Let’s take a look at what needs to happen for one’s vote to determine the winner of an election.

  1. The election needs to be close, really close, on election day.
  2. One needs to vote in a state that is a true toss-up between the major candidates.
  3. Neither candidate may accumulate more than 269 electoral votes outside of the state where one votes.
  4. One’s state, with its hundreds of thousands or million of votes cast, must be tied without one’s vote.

Sounds unlikely?

Nate Silver, who runs the FiveThirtyEight blog which simulates and predicts elections, published a paper that aims to quantify the probability of a single vote being decisive in a presidential election. Using polling data from two weeks before the 2008 presidential election, he concluded that a vote in a small handful of swing states had a roughly 1 in 10 million chance of deciding the election, while most states were at a small fraction of that or essentially zero. Of course, by election day in 2008, Obama had widened his lead to the point where his victory was all but a certainty. As it turned out, even a million votes allocated strategically in swing states wouldn’t have given the election to McCain. As it turned out, 98.6% of Americans voted for Obama or McCain anyway.

Even when the 2008 presidential race was still close, the best chance a single vote would have of deciding the election was one in millions. In the map below, I’ve attempted to qualify the chances of a single vote in each state deciding the 2012 election according to the current electoral outlook, recent polls, and expected number of votes cast in each state.

Most Americans have no chance of deciding the outcome of the election with their vote, and the few that do have a chance that’s roughly on par with winning the lottery. Voting for the lesser of two evils is about as effective at stopping evil as voting for Captain America as a write-in. So what should a citizen who’s concerned about politics do?

The Solution

The answer is simple. Presidential elections are major events that attract a number of diverse candidates with backgrounds, philosophies, positions, and ideas that are truly different from what the two major parties are offering. While they won’t get much media coverage, there is no shortage of information about them on the internet. Go read about them and see if you like any of these candidates or their ideas. If you do, support those candidates or ideas and discuss them with friends and family. Then, when election day rolls around, go out and vote for whichever candidate you think would be best for you and the country. Don’t neglect voting and don’t give your vote to a major candidate only because he or she seems less objectionable than the alternative. If nothing else, the presidential election is the most visible and significant opinion poll of the U.S. population there is, and votes for a third party candidate lend support and credibility to that candidate and his or her platform.

Hold the major parties and candidates accountable when they disappoint you. If you’re one of the many Americans who are tired of the usual lies, letdowns, and broken promises in presidential elections, then do something about it.  With the election less than 4 weeks away, you can start right now.

100 Mile Walk

April 15, 2012 1 comment

I’m going to attempt to walk 100 miles without sleep. It’s crazy, it’s extremely difficult, and it’s very likely I won’t be able to do it, but that’s kind of the point. I want to see what it’s like and I want to see how my body will respond. I want the experience, and if I manage to somehow succeed I can say I’ve done something that very few people have.

I’ve been planning this for close to a month. I will be walking predominantly on the W&OD trail in northern Virginia, which is about 45 miles long and passes close to my parents’ house. I have a schedule that includes six stops that total 5.5 hours of rest for food, water, restrooms, and phone charging. I plan on leaving at 2 PM and returning at 5 AM two days later. If I’m unable to continue, I’ll call for someone to pick me up. Throughout the entire walk, I’ll be tweeting updates about my progress and condition from @sangaman.

My 100-mile walk route

The last (and only) time I tried an endurance feat was the Charlottesville ten miler in 2008. I wrote an article about it for the school paper here. It was a last minute decision, I hardly trained at all, and I used basketball shoes since I didn’t own any running shoes. My knee started hurting very badly for the last mile or so which slowed me down, but I managed to finish at about an 8:45/mile pace. The thrill of finishing was incredible; easily worth the pain.

My stamina now isn’t as good as it was then. I play basketball about once a week these days, but I don’t get as much exercise as I’d like. Regardless, one thing that’s in my favor is I love walking. Whenever I’m walking long distances, I feel like I can walk forever.

However, feeling like I can walk forever is not the same as actually doing it, so I’ve been preparing. I’ve done some running/walking for medium distances to get myself ready and to break in a new pair of walking shoes. I’ve done a lot of research on ways I can avoid common pitfalls such as dehydration, injury, blistering, and chafing. To stave off boredom (and possibly sleepiness) I’ll listen to audiobooks on my phone, starting with The Long Walk.

When I first got this idea, I sent off e-mails to a bunch of companies who sell energy/endurance/athletic products asking if they would sponsor my walk by sending me a bit of merchandise. Almost all of them turned me down, but the one company that was generous enough to accept my request was 5-hour Energy. I’ve never actually used their product before, and in my experience I’m immune to the energizing affects of caffeine, but this might be crucial when I’ve been awake for over 24 hours. Regardless, I really appreciate the generosity and goodwill, especially considering how many companies turned me down or ignored me.

Thanks 5-Hour Energy!

I’m also trying to raise some money for charity, so that I’ll know that some good will come out of this attempt even if I don’t make it. I chose the Arlington Food Assistance Center, which helps feed low income families in Arlington, VA. I chose them because they are local and because they get high marks for transparency and efficiency from Charity Navigator. Donations of any amounts would be greatly appreciated and a motivating factor for me. If you want to donate $10 or more and get a receipt for tax deduction purposes, you can donate on their website. Send me a line if you do this so I can keep track. If you want to donate a smaller amount, you can send me money on PayPal at ‘mcnallydp at gmail dot com’ and I will donate on your behalf.

If the weather in VA is projected to be dry and mild this weekend, I’ll probably start this walk on 4/20. If the weather is bad or if something comes up, I’ll attempt the walk on one of the next two weekends. I definitely want to do this before it gets too hot. I’ll be updating this post when I know the starting date for sure. Wish me luck!

 

Update: I’m starting this walk around Noon on Friday 4/20/12.

Mockery of Education

April 2, 2012 Leave a comment

Here’s a little foray into webcomics. I don’t expect many laughs, but I hope it makes a point.

[Click to Enlarge]

"I can't believe we skipped class to watch these dumb jocks play basketball!"

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