중앙일보 [단독]백령도 40㎞ 앞까지 왔다, 中군함 대놓고 서해 위협 정부 소식통 “중국 함정 거의 매일 동경 124도 선 넘어 한국쪽 진입” 시진핑, 해양주권 강화 지시 이후 중국 앞마당 만들기 ‘서해공정 닉네임은왜2자냐 (일베 댓글) 바로 이거임. 중국을 견제하기 위해 한미일 공조를 강화해야 된다고 하면 가끔 허구헌날 무슨 무슨 왕, 무슨 무슨 튜브나 쳐보는 국뽕새끼들이 한국은 중국 동부지역까지 도달하는 미사일을 수천발 가지고 있어서 중국은 한국을 공격하지 못한다느니 개소리하는데 그건 전면전 상황이고 이런 식으로 툭툭 찔러보는 쨉 펀치 도발로 얼마든지 한국을 군사적으로 괴롭힐 수 있음. 중국의 군사비는 미국의 절반 수준에 근접했고 아시아 지역 군사비 지출 2, 3, 4위인 인도, 일본, 한국의 군사비를 모두 합친 것보다 더 많음. 일단 함정 수, 전투기 숫자부터 비교가 안되게 중국이 많음. 그 많은 군함들을 돌려가며 쨉 던지듯 툭툭 찔러대며 도발하면 함정 수가 한정적인 우리나라 해군은 피로가 누적될 수밖어 없음. 대만의 전투기가 작년 영공을 계속 침범하는 중국 전투기에 대응해 반복 출격하다 과잉 운행으로 기기오작동이 발생해 추락한거랑 같음. 중국은 지금 우리한테만 저렇게 치고빠지기 식의 도발을 하는게 아니라 대만의 방공식별구역과 일본의 센카쿠 해역도 거의 매일 침범하다싶이 하고 있음. 일본도 매번 대응 출격하느라 피로도가 쌓이고 있다함. 심지어 중국은 서쪽에서는 인도한테도 툭툭 건드려보고 있음. 미국의 개입이 없으면 중국이 아시아패권을 먹을 가능성이 높은 이유임. 이런데도 한미일 삼각동맹 강화해야 된다고 하면 조선족새낀지 반미반일 친중친북에 미쳐사는 운틀(운동권틀딱)인지 모를 병신들이 우린 미사일이 많아서 중국도 우릴 함부러 침공 못한다고 국뽕에 쩔어사는 거 보면 참 걱정이다 이노스케 (일베댓글) 대륙의 악마와 계약을 맺은 문크 예거의 활약상 1. 월성 원전을 강제로 조기 중단하고 중국산 태양광 부품 납품 몰아줌 2. 중국산 태양광 부품을 한국에서 재포장해서 국산으로 인정해주고 국고보조금 지원해줌 3. 중국 자본 사모펀드가 2차전지 산업을 독점하고 중국산 2차전지가 국고보조금을 싹쓸이함 4. 중국산 철강을 메이드인 코리아로 둔갑 시켜서 미국에 덤핑할수 있도록 중국 도와줌 5. 중국식 스마트 시티 국책 사업 추진하면서 중국 건설기업들에게 일감 몰아줌 6. 정부보조금받는 시민단체가 5배 이상 늘어났고 그 중 대다수가 반일/반미성향임 7. 자국민은 부동산 규제하고 외국 자본 사모펀드가 부동산에 투기할 수 있도록 규제 풀어줌 8. 문재인 정부 외교부 장관이 한국은 중국을 포위하는 쿼드에 참여하지 않을 것이라고 함 9. 중국의 허락 없이 미국의 미사일 방어시스템에 참여 하지 않겠다고 중국에게 약속해줌 시진핑이 발표한 중국몽에는 2025년까지 한반도를 중국 통제 아래 두겠다는 항목이 있음 https://www.chosun.com/site/data/html_dir/2018/03/02/2018030200258.html 한국보다 군사력이 강하고 핵무기를 보유하고 있는 한국 바로 옆에 있는 독재 국가가 한국을 통제 아래 두겠다는 구체적인 계획을 발표했다는 것이 한국이 처한 현실임 한국은 원유 공급을 해외 수입에 의존하고 있고 호르무즈 해협 말라카 해협 남중국해 등에서 미국 해군이 한국의 유조선을 보호해줘서 중동의 원유가 한국의 항구까지 들어올수 있고 한국의 유조선은 일본의 센카쿠 열도 영해를 반드시 통과해야 한국의 항구까지 들어올수 있음 수출을 하기 위해 한국의 항구에서 출발한 상선은 미국 해군의 보호를 받으며 무역을 함 한국은 미국 해군의 보호 아래서 바다로 진출하여 자유 무역을 하며 경제 성장한 국가임 한국이 현재 처한 현실을 직시하고 현실주의적 외교를 추구하는 것이 보수적 외교이고 한국 입장에서는 미국의 인도 태평양 전략에 참여하는 것이 가장 현실적인 국가전략임 --->바이든이 오바마와 유사한 대중국 정책을 펼치면, 그의 재임 기간에 미국의 경제는 쇠락하고, 동아시아는 일본을 제외하고 옛날 당나라 때처럼 조공국들이 될 것 같다. 중국과의 디커플링을 통해 중국의 경제를 붕괴시키지 않으면 세계는 평화를 찾을 수가 없다. ---------------------------------------------------------------------------------------------------- 시진핑, 다보스 연설에서 ‘미국과 전쟁 불사’ 공개 협박, 미국의 대응은? 김영호 교수의 세상 읽기 https://youtu.be/97SpfW3a8yw ------------------------------------------------------------------------------------------ 속보) 삼성 사장이 왜 거기 있는가? 대한항공게이트 추가증거 나왔다 시대정신 연구소 https://youtu.be/HaVtlGimrF8 ------------------------------------------------------------------------------------------ When migrants come, culture migrates too Politicians and the mainstream media in Europe have done their best to downplay the post-2015 wave of harassment or assault My new book, Prey, documents the wave of sexual harassment, assault and rape that followed the surge in immigration that occurred in the wake of the Arab revolutions and reached a peak in 2015 and 2016 아얀 히르시 알리의 글. 사학자 닐 퍼거슨의 아내이기도 한 그녀가, 2015, 16년 아랍의 혁명 이후 아랍인들이 유럽으로 몰려들었고, 그로 인해 성폭행, 폭력사태가 증가했다고 주장하고 있다. ------------------------------------------------------------------------------------------------ Jerry Capital My Notes on Statistical Consequences of Fat Tails "Insurance can only work in Mediocristan; you should never write an uncapped insurance contract if there is risk of catastrophe. The point is called the catastrophe principle." "{thick tailed}, extreme events away from the centre of the distribution play a very large role. Black Swans are not "more frequent", they are more consequential. The fattest tail distribution has just one very large extreme deviation, rather than many departures from the norm" "As tails fatten, to mimic what happens in financial markets for example, the probability of a single event staying within one standard deviation rises... we get higher peaks, smaller shoulders, and a higher incidence of a very large deviation" Beta, Sharpe Ratio and other common hackneyed financial metrics are uninformative "When variance is infinite, R^2 should be 0. But because samples are necessarily finite, it will show, deceivingly, higher numbers than 0. Effectively, under thick tails R^2 is useless, uninformative, and often downright fraudulent" "What is called evidence based science, unless rigorously disconfirmatory, is usually interpolative, evidence-free, and unscientific" "Stating 'violence has dropped' because the number of people killed in wars has declined from the previous year or decade is not a scientific statement" Robust/Fragile/Antifragile "Is robust what does not produce variability across perturbation of parameters of the probability distribution. If there is change, but with an asymmetry, concave or convex response to such perturbation, the classification is fragility/antifragility" Naive Empiricism: never compare thick tailed variables to thin tailed ones. The rationality of of common people with a good tail risk detector, compared to the ignorance of experts. People are more calibrated to consequences and properties of distributions than psychologists claim." "Under fat tails there is no "typical" disaster or collapse... Verbal binary predictions or beliefs cannot be used as guages... Binary bets can never represent *skin in the game* under fat tailed distributions" ......................... --------------------------------------------------------------------------------------- 인플레란 무엇인가? 일반적으로 통화의 증발에 의해 인플레가 발생하고 가격이 상승하는데, 일부 인사들은 인플레의 원인이 통화의 증가가 아니라, 가격의 인상이라고 주장한다. 물가 지수price level을 말하는 사람들은 온도계의 수은처럼 균일하게 모든 물가가 오르고 내린다고 생각하지만, 물가는 그렇게 균일하게 오르내리지 않는다. 정부가 돈을 새로 찍어 지출했을 때, 초기에 그 돈을 받아쓰는 사람들은 인플레가 시작하기 전이므로, 후에 받아쓰는 사람들에 비해 유리하다. 인플레에는 치명적인 약점이 하나 있는데, 그건 인플레가 계속될 수 없다는 거다. 결국 인플레는 통화에 파탄을 내고 끝나게 된다. 케인즈는 “시간이 오래 가면 우리 모두는 죽는다”고 했는데, 문제는 그 오래라는 기간이 과연 얼마냐는 것이다. 퐁파두르 마담은 “우리가 죽은 뒤에 대홍수가 오든 말든!”이라고 말했는데, 그녀는 일찍 죽어 별일 없었지만, 마담 뒤 바리는 조금 더 오래 살았다가 단두대에 목이 잘리고 말았다. 금본위제도는 한가지 큰 장점이 있는데, 금본위제도 하에서는 화폐의 양이 정부나 정당의 정책과 독립할 수 있다는 점이다. 1880년대에 한 도시의 재난을 돕기 위해 의회가 만 달러의 지원금을 의결했는데, 당시 대통령 클리블랜드는 이를 부결하면서 이렇게 말했다. “정부를 지원하는 건 시민들의 의무이지만, 시민들을 지원해주는 것은 정부의 의무가 아니다.” 1936년 케인즈는 자신의 저서에서 이렇게 말했다. “실업은 나쁜 것이고, 그것을 제거하려면 우리는 반드시 통화를 팽창해야 한다.” 요약하자면 케인즈는 이렇게 말했다. “통화를 팽창해야만 완전 고용을 이룰 수 있다. 그러므로 인플레로 통화의 가치를 떨어뜨려서 노동자들을 속여라.” Understanding the Roots and Causes of Inflation Ludwig von Mises [This is the fourth lecture from Mises's "Economic Policy: Thoughts for Today and Tomorrow"] If the supply of caviar were as plentiful as the supply of potatoes, the price of caviar—that is, the exchange ratio between caviar and money or caviar and other commodities—would change considerably. In that case, one could obtain caviar at a much smaller sacrifice than is required today. Likewise, if the quantity of money is increased, the purchasing power of the monetary unit decreases, and the quantity of goods that can be obtained for one unit of this money decreases also. When, in the sixteenth century, American resources of gold and silver were discovered and exploited, enormous quantities of the precious metals were transported to Europe. The result of this increase in the quantity of money was a general tendency toward an upward movement of prices in Europe. In the same way, today, when a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop, and so prices rise. This is called inflation. Unfortunately, in the United States, as well as in other countries, some people prefer to attribute the cause of inflation not to an increase in the quantity of money but, rather, to the rise in prices. However, there has never been any serious argument against the economic interpretation of the relationship between prices and the quantity of money, or the exchange ratio between money and other goods, commodities, and services. Under present day technological conditions there is nothing easier than to manufacture pieces of paper upon which certain monetary amounts are printed. In the United States, where all the notes are of the same size, it does not cost the government more to print a bill of a thousand dollars than it does to print a bill of one dollar. It is purely a printing procedure that requires the same quantity of paper and ink. I. In the eighteenth century, when the first attempts were made to issue bank notes and to give these bank notes the quality of legal tender—that is, the right to be honored in exchange transactions in the same way that gold and silver pieces were honored—the governments and nations believed that bankers had some secret knowledge enabling them to produce wealth out of nothing. When the governments of the eighteenth century were in financial difficulties, they thought all they needed was a clever banker at the head of their financial management in order to get rid of all their difficulties. Some years before the French Revolution, when the royalty of France was in financial trouble, the king of France sought out such a clever banker, and appointed him to a high position. This man was, in every regard, the opposite of the people who, up to that time, had ruled France. First of all he was not a Frenchman, he was a foreigner—a Swiss from Geneva, Jacques Necker. Secondly, he was not a member of the aristocracy, he was a simple commoner. And what counted even more in eighteenth century France, he was not a Catholic, but a Protestant. And so Monsieur Necker, the father of the famous Madame de Staël, became the minister of finance, and everyone expected him to solve the financial problems of France.A But in spite of the high degree of confidence Monsieur Necker enjoyed, the royal cashbox remained empty—Necker’s greatest mistake having been his attempt to finance aid to the American colonists in their war of independence against England without raising taxes. That was certainly the wrong way to go about solving France’s financial troubles. There can be no secret way to the solution of the financial problems of a government; if it needs money, it has to obtain the money by taxing its citizens (or, under special conditions, by borrowing it from people who have the money). But many governments, we can even say most governments, think there is another method for getting the needed money; simply to print it. If the government wants to do something beneficial—if, for example, it wants to build a hospital—the way to find the needed money for this project is to tax the citizens and build the hospital out of tax revenues. Then no special “price revolution” will occur, because when the government collects money for the construction of the hospital, the citizens—having paid the taxes—are forced to reduce their spending. The individual taxpayer is forced to restrict either his consumption, his investments or his savings. The government, appearing on the market as a buyer, replaces the individual citizen: the citizen buys less, but the government buys more. The government, of course, does not always buy the same goods which the citizens would have bought; but on the average there occurs no rise in prices due to the government’s construction of a hospital. I choose this example of a hospital precisely because people sometimes say: “It makes a difference whether the government uses its money for good or for bad purposes.” I want to assume that the government always uses the money which it has printed for the best possible purposes—purposes with which we all agree. For it is not the way in which the money is spent, it is the way in which the government obtains this money that brings about those consequences we call inflation and which most people in the world today do not consider as beneficial. For example, without inflating, the government could use the tax-collected money for hiring new employees or for raising the salaries of those who are already in government service. Then these people, whose salaries have been increased, are in a position to buy more. When the government taxes the citizens and uses this money to increase the salaries of government employees, the taxpayers have less to spend, but the government employees have more. Prices in general will not increase. But if the government does not use tax money for this purpose, if it uses freshly printed money instead, it means that there will be people who now have more money while all other people still have as much as they had before. So those who received the newly-printed money will be competing with those people who were buyers before. And since there are no more commodities than there were previously, but there is more money on the market—and since there are now people who can buy more today than they could have bought yesterday—there will be an additional demand for that same quantity of goods. Therefore prices will tend to go up. This cannot be avoided, no matter what the use of this newly-issued money will be. II. And more importantly, this tendency for prices to go up will develop step by step; it is not a general upward movement of what has been called the “price level.” The metaphorical expression “price level” must never be used. When people talk of a “price level,” they have in mind the image of a level of a liquid which goes up or down according to the increase or decrease in its quantity, but which, like a liquid in a tank, always rises evenly. But with prices, there is no such thing as a “level.” Prices do not change to the same extent at the same time. There are always prices that are changing more rapidly, rising or falling more rapidly than other prices. There is a reason for this. Consider the case of the government employee who received the new money added to the money supply. People do not buy today precisely the same commodities and in the same quantities as they did yesterday. The additional money which the government has printed and introduced into the market is not used for the purchase of all commodities and services. It is used for the purchase of certain commodities, the prices of which will rise, while other commodities will still remain at the prices that prevailed before the new money was put on the market. Therefore, when inflation starts, different groups within the population are affected by this inflation in different ways. Those groups who get the new money first gain a temporary benefit. When the government inflates in order to wage a war, it has to buy munitions, and the first to get the additional money are the munitions industries and the workers within these industries. These groups are now in a very favorable position. They have higher profits and higher wages; their business is moving. Why? Because they were the first to receive the additional money. And having now more money at their disposal, they are buying. And they are buying from other people who are manufacturing and selling the commodities that these munitions makers want. These other people form a second group. And this second group considers inflation to be very good for business. Why not? Isn’t it wonderful to sell more? For example, the owner of a restaurant in the neighborhood of a munitions factory says: “It is really marvelous! The munitions workers have more money; there are many more of them now than before; they are all patronizing my restaurant; I am very happy about it.” He does not see any reason to feel otherwise. The situation is this: those people to whom the money comes first now have a higher income, and they can still buy many commodities and services at prices which correspond to the previous state of the market, to the condition that existed on the eve of inflation. Therefore, they are in a very favorable position. And thus inflation continues step by step, from one group of the population to another. And all those to whom the additional money comes at the early state of inflation are benefited because they are buying some things at prices still corresponding to the previous stage of the the exchange ratio between money and commodities. But there are other groups in the population to whom this additional money comes much, much later. These people are in an unfavorable position. Before the additional money comes to them they are forced to pay higher prices than they paid before for some—or for practically all—of the commodities they wanted to purchase, while their income has remained the same, or has not increased proportionately with prices. Consider for instance a country like the United States during the Second World War; on the one hand, inflation at that time favored the munitions workers, the munitions industries, the manufacturers of guns, while on the other hand it worked against other groups of the population. And the ones who suffered the greatest disadvantages from inflation were the teachers and the ministers. As you know, a minister is a very modest person who serves God and must not talk too much about money. Teachers, likewise, are dedicated persons who are supposed to think more about educating the young than about their salaries. Consequently, the teachers and ministers were among those who were most penalized by inflation, for the various schools and churches were the last to realize that they must raise salaries. When the church elders and the school corporations finally discovered that, after all, one should also raise the salaries of those dedicated people, the earlier losses they had suffered still remained. For a long time, they had to buy less than they did before, to cut down their consumption of better and more expensive foods, and to restrict their purchase of clothing—because prices had already adjusted upward, while their incomes, their salaries, had not yet been raised. (This situation has changed considerably today, at least for teachers.) There are therefore always different groups in the population being affected differently by inflation. For some of them, inflation is not so bad; they even ask for a continuation of it, because they are the first to profit from it. We will see, in the next lecture, how this unevenness in the consequences of inflation vitally affects the politics that lead toward inflation. Under these changes brought about by inflation, we have groups who are favored and groups who are directly profiteering. I do not use the term “profiteering” as a reproach to these people, for if there is someone to blame, it is the government that established the inflation. And there are always people who favor inflation, because they realize what is going on sooner than other people do. Their special profits are due to the fact that there will necessarily be unevenness in the process of inflation. III. The government may think that inflation—as a method of raising funds—is better than taxation, which is always unpopular and difficult. In many rich and great nations, legislators have often discussed, for months and months, the various forms of new taxes that were necessary because the parliament had decided to increase expenditures. Having discussed various methods of getting the money by taxation, they finally decided that perhaps it was better to do it by inflation. But of course, the word “inflation” was not used. The politician in power who proceeds toward inflation does not announce: “I am proceeding toward inflation.” The technical methods employed to achieve the inflation are so complicated that the average citizen does not realize inflation has begun. One of the biggest inflations in history was in the German Reich after the First World War. The inflation was not so momentous during the war; it was the inflation after the war that brought about the catastrophe. The government did not say: “We are proceeding toward inflation.” The government simply borrowed money very indirectly from the central bank. The government did not have to ask how the central bank would find and deliver the money. The central bank simply printed it. Today the techniques for inflation are complicated by the fact that there is checkbook money. It involves another technique, but the result is the same. With the stroke of a pen, the government creates fiat money, thus increasing the quantity of money and credit. The government simply issues the order, and the fiat money is there. IV. The government does not care, at first, that some people will be losers, it does not care that prices will go up. The legislators say: “This is a wonderful system!” But this wonderful system has one fundamental weakness: it cannot last. If inflation could go on forever, there would be no point in telling governments they should not inflate. But the certain fact about inflation is that, sooner or later, it must come to an end. It is a policy that cannot last. In the long run, inflation comes to an end with the breakdown of the currency; it comes to a catastrophe, to a situation like the one in Germany in 1923. On August 1, 1914, the value of the dollar was four marks and twenty pfennigs. Nine years and three months later, in November 1923, the dollar was pegged at 4.2 trillion marks. In other words, the mark was worth nothing. It no longer had any value. Some years ago, a famous author, John Maynard Keynes, wrote: “In the long run we are all dead.” This is certainly true, I am sorry to say. But the question is, how short or long will the short run be? In the eighteenth century there was a famous lady, Madame de Pompadour, who is credited with the dictum: “Après nous le déluge” (“After us will come the flood”). Madame de Pompadour was happy enough to die in the short run. But her successor in office, Madame du Barry, outlived the short run and was beheaded in the long run. For many people the “long run” quickly becomes the “short run”—and the longer inflation goes on the sooner the “short run.” How long can the short run last? How long can a central bank continue an inflation? Probably as long as people are convinced that the government, sooner or later, but certainly not too late, will stop printing money and thereby stop decreasing the value of each unit of money. When people no longer believe this, when they realize that the government will go on and on without any intention of stopping, then they begin to understand that prices tomorrow will be higher than they are today. Then they begin buying at any price, causing prices to go up to such heights that the monetary system breaks down. I refer to the case of Germany, which the whole world was watching. Many books have described the events of that time. (Although I am not a German, but an Austrian, I saw everything from the inside: in Austria, conditions were not very different from those in Germany; nor were they much different in many other European countries.) For several years, the German people believed that their inflation was just a temporary affair, that it would soon come to an end. They believed it for almost nine years, until the summer of 1923. Then, finally, they began to doubt. As the inflation continued, people thought it wiser to buy anything available, instead of keeping money in their pockets. Furthermore, they reasoned that one should not give loans of money, but on the contrary, that it was a very good idea to be a debtor. Thus inflation continued feeding on itself. And it went on in Germany until exactly November 20, 1923. The masses had believed inflation money to be real money, but then they found out that conditions had changed. At the end of the German inflation, in the fall of 1923, the German factories paid their workers every morning in advance for the day. And the workingman who came to the factory with his wife, handed his wages—all the millions he got—over to her immediately. And the lady immediately went to a shop to buy something, no matter what. She realized what most people knew at that time—that overnight, from one day to another, the mark lost 50% of its purchasing power. Money, like chocolate in a hot oven, was melting in the pockets of the people. This last phase of German inflation did not last long; after a few days, the whole nightmare was over: the mark was valueless and a new currency had to be established. V. Lord Keynes, the same man who said that in the long run we are all dead, was one of a long line of inflationist authors of the twentieth century. They all wrote against the gold standard. When Keynes attacked the gold standard, he called it a “barbarous relic.” And most people today consider it ridiculous to speak of a return to the gold standard. In the United States, for instance, you are considered to be more or less a dreamer if you say: “Sooner or later, the United States will have to return to the gold standard.” Yet the gold standard has one tremendous virtue: the quantity of money under the gold standard is independent of the policies of governments and political parties. This is its advantage. It is a form of protection against spendthrift governments. If, under the gold standard, a government is asked to spend money for something new, the minister of finance can say: “And where do I get the money? Tell me, first, how I will find the money for this additional expenditure.” Under an inflationary system, nothing is simpler for the politicians to do than to order the government printing office to provide as much money as they need for their projects. Under a gold standard, sound government has a much better chance; its leaders can say to the people and to the politicians: “We can’t do it unless we increase taxes.” But under inflationary conditions, people acquire the habit of looking upon the government as an institution with limitless means at its disposal: the state, the government, can do anything. If, for instance, the nation wants a new highway system, the government is expected to build it. But where will the government get the money? One could say that in the United States today—and even in the past, under McKinley—the Republican party was more or less in favor of sound money and of the gold standard, and the Democratic party was in favor of inflation, of course not a paper inflation, but a silver inflation. It was, however, a Democratic president of the United States, President Cleveland, who at the end of the 1880s vetoed a decision of Congress, to give a small sum—about $10,000—to help a community that had suffered some disaster. And President Cleveland justified his veto by writing: “While it is the duty of the citizens to support the government, it is not the duty of the government to support the citizens.” This is something which every statesman should write on the wall of his office to show to people who come asking for money. I am rather embarrassed by the necessity to simplify these problems. There are so many complex problems in the monetary system, and I would not have written volumes about them if they were as simple as I am describing them here. But the fundamentals are precisely these: if you increase the quantity of money, you bring about the lowering of the purchasing power of the monetary unit. This is what people whose private affairs are unfavorably affected do not like. People who do not benefit from inflation are the ones who complain. If inflation is bad and if people realize it, why has it become almost a way of life in all countries? Even some of the richest countries suffer from this disease. The United States today is certainly the richest country in the world, with the highest standard of living. But when you travel in the United States, you will discover that there is constant talk about inflation and about the necessity to stop it. But they only talk; they do not act. VI. To give you some facts: after the First World War, Great Britain returned to the prewar gold parity of the pound. That is, it revalued the pound upward. This increased the purchasing power of every worker’s wages. In an unhampered market the nominal money wage would have fallen to compensate for this and the workers’ real wage would not have suffered. We do not have time here to discuss the reasons for this. But the unions in Great Britain were unwilling to accept an adjustment of money wage rates downward as the purchasing power of the monetary unit rose. Therefore real wages were raised considerably by this monetary measure. This was a serious catastrophe for England, because Great Britain is a predominantly industrial country that has to import its raw materials, half-finished goods, and food stuffs in order to live, and has to export manufactured goods to pay for these imports. With the rise in the international value of the pound, the price of British goods rose on foreign markets and sales and exports declined. Great Britain had, in effect, priced itself out of the world market. The unions could not be defeated. You know the power of a union today. It has the right, practically the privilege, to resort to violence. And a union order is, therefore, let us say, not less important than a government decree. The government decree is an order for the enforcement of which the enforcement apparatus of the government—the police—is ready. You must obey the government decree, otherwise you will have difficulties with the police. Unfortunately, we have now, in almost all countries all over the world, a second power that is in a position to exercise force: the labor unions. The labor unions determine wages and then strike to enforce them in the same way in which the government might decree a minimum wage rate. I will not discuss the union question now; I shall deal with it later. I only want to establish that it is the union policy to raise wage rates above the level they would have on an unhampered market. As a result, a considerable part of the potential labor force can be employed only by people or industries that are prepared to suffer losses. And, since businesses are not able to keep on suffering losses, they close their doors and people become unemployed. The setting of wage rates above the level they would have on the unhampered market always results in the unemployment of a considerable part of the potential labor force. In Great Britain, the result of high wage rates enforced by the labor unions was lasting unemployment, prolonged year after year. Millions of workers were unemployed, production figures dropped. Even experts were perplexed. In this situation the British government made a move which it considered an indispensable, emergency measure: it devalued its currency. The result was that the purchasing power of the money wages, upon which the unions had insisted, was no longer the same. The real wages, the commodity wages, were reduced. Now the worker could not buy as much as he had been able to buy before, even though the nominal wage rates remained the same. In this way, it was thought, real wage rates would return to free market levels and unemployment would disappear. This measure—devaluation—was adopted by various other countries, by France, the Netherlands, and Belgium. One country even resorted twice to this measure within a period of one year and a half. That country was Czechoslovakia. It was a surreptitious method, let us say, to thwart the power of the unions. You could not call it a real success, however. After a few years, the people, the workers, even the unions, began to understand what was going on. They came to realize that currency devaluation had reduced their real wages. The unions had the power to oppose this. In many countries they inserted a clause into wage contracts providing that money wages must go up automatically with an increase in prices. This is called indexing. The unions became index conscious. So, this method of reducing unemployment that the government of Great Britain started in 1931—which was later adopted by almost all important governments—this method of “solving unemployment” no longer works today. In 1936, in his General Theory of Employment, Interest and Money, Lord Keynes unfortunately elevated this method—the emergency measures of the period between 1929 and 1933—to a principle, to a fundamental system of policy. And he justified it by saying, in effect: “Unemployment is bad. If you want unemployment to disappear you must inflate the currency.” He realized very well that wage rates can be too high for the market, that is, too high to make it profitable for an employer to increase his work force, thus too high from the point of view of the total working population, for with wage rates imposed by unions above the market only a part of those anxious to earn wages can obtain jobs. And Keynes said, in effect: “Certainly mass unemployment, prolonged year after year, is a very unsatisfactory condition.” But instead of suggesting that wage rates could and should be adjusted to market conditions, he said, in effect: “If one devalues the currency and the workers are not clever enough to realize it, they will not offer resistance against a drop in real wage rates, as long as nominal wage rates remain the same.” In other words, Lord Keynes was saying that if a man gets the same amount of sterling today as he got before the currency was devalued, he will not realize that he is, in fact, now getting less. In old fashioned language, Keynes proposed cheating the workers. Instead of declaring openly that wage rates must be adjusted to the conditions of the market—because, if they are not, a part of the labor force will inevitably remain unemployed—he said, in effect: “Full employment can be reached only if you have inflation. Cheat the workers.” The most interesting fact, however, is that when his General Theory was published, it was no longer possible to cheat, because people had already become index conscious. But the goal of full employment remained. VII. What does “full employment” mean? It has to do with the unhampered labor market, which is not manipulated by the unions or by the government. On this market, wage rates for every type of labor tend to reach a point at which everybody who wants a job can get one and every employer can hire as many workers as he needs. If there is an increase in the demand for labor, the wage rate will tend to be greater, and if fewer workers are needed, the wage rate will tend to fall. The only method by which a “full employment” situation can be brought about is by the maintenance of an unhampered labor market. This is valid for every kind of labor and for every kind of commodity. What does a businessman do who wants to sell a commodity for five dollars a unit? When he cannot sell it at that price, the technical business expression in the United States is, “the inventory does not move.” But it must move. He cannot retain things because he must buy something new; fashions are changing. So he sells at a lower price. If he cannot sell the merchandise at five dollars, he must sell it at four. If he cannot sell it at four, he must sell it at three. There is no other choice as long as he stays in business. He may suffer losses, but these losses are due to the fact that his anticipation of the market for his product was wrong. It is the same with the thousands and thousands of young people who come every day from the agricultural districts into the city trying to earn money. It happens so in every industrial nation. In the United States they come to town with the idea that they should get, say, a hundred dollars a week. This may be impossible. So if a man cannot get a job for a hundred dollars a week, he must try to get a job for ninety or eighty dollars, and perhaps even less. But if he were to say—as the unions do—“one hundred dollars a week or nothing,” then he might have to remain unemployed. (Many do not mind being unemployed, because the government pays unemployment benefits—out of special taxes levied on the employers—which are sometimes nearly as high as the wages the man would receive if he were employed.) Because a certain group of people believes that full employment can be attained only by inflation, inflation is accepted in the United States. But people are discussing the question: Should we have a sound currency with unemployment, or inflation with full employment? This is in fact a very vicious analysis. To deal with this problem we must raise the question: How can one improve the condition of the workers and of all other groups of the population? The answer is: by maintaining an unhampered labor market and thus achieving full employment. Our dilemma is, shall the market determine wage rates or shall they be determined by union pressure and compulsion? The dilemma is not “shall we have inflation or unemployment?” This mistaken analysis of the problem is argued in England, in European industrial countries and even in the United States. And some people say: “Now look, even the United States is inflating. Why should we not do it also.” To these people one should answer first of all: “One of the privileges of a rich man is that he can afford to be foolish much longer than a poor man.” And this is the situation of the United States. The financial policy of the United States is very bad and is getting worse. Perhaps the United States can afford to be foolish a bit longer than some other countries. The most important thing to remember is that inflation is not an act of God; inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy—a deliberate policy of people who resort to inflation because they consider it to be a lesser evil than unemployment. But the fact is that, in the not very long run, inflation does not cure unemployment. Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating. One has to balance the budget of the government. Of course, public opinion must support this; the intellectuals must help the people to understand. Given the support of public opinion, it is certainly possible for the people’s elected representatives to abandon the policy of inflation. We must remember that, in the long run, we may all be dead and certainly will be dead. But we should arrange our earthly affairs, for the short run in which we have to live, in the best possible way. And one of the measures necessary for this purpose is to abandon inflationary policies. -------------------------------------------------------------------------------------------