Tag Archives: inflation

Britons did better than Germans since Brexit

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Britain and Germany are the two largest economies in Europe. When Britain voted to leave the EU seven years ago, 23 June 2016, economists, royals, and the richer, smarter set predicted disaster. The unemployment rate at the time was 5.2% in the UK; economists guaranteed it would rise with Brexit due to the loss of access to the common market. Unemployment fell to 3.7% today: Embarrassing for economists, a bonus for British workers. Germany unemployment today is 5.6%, basically slightly higher than the 4.3% of 2016. There has been a large influx of Ukrainians into both countries, and of illegal boat people into the UK. These are people coming to get jobs, seeking a better life than available in the rest of the EU. That boat people don’t go the other way suggests that things are better in the UK.

Fromm Bloomberg, October 2022. See full article here. UK unemployment is down to 2.5% in February 2023.

Britain’s GDP was supposed to suffer from Brexit, too. Instead, GDP has grown by 18% since 2016, about 2.5% per year on average, outpacing Germany’s 10.6% total growth, 1.5% per year. Between 2016 and 2022, the British GDP rose to $3.19T from $2.7 T. Germany’s GDP increased to $3.57T, from $3.14T (data from the world bank). Separating from the EU helped, it seems and helped us too something Trump promoted. Germany chose close ties to Russia instead. That does not seem to be a big plus.

German Inflation has traditionally been low. It has increased in the past few months due to rising food and energy costs.

Inflation is higher in the UK than in Germany, 10.4% as of February 2023 versus 8.7% in Germany, or 9.9% in the European Union and a whole. I don’t think that’s Brexit. The UK typically has seen higher inflation rate than Germany, something seen by the steady drop of the pound. They have a tradition of inefficiency and silliness. Part of the problem today is that Britain gets much of its electricity from natural gas, while the French use nuclear power. Nuclear is cheap and clean, compared to natural gas. Coal is cheap and dirty; China uses it extensively and plans to use more. But the real cause of the UK’s higher inflation is inherent in the British and Germans, IMHO. The Germans hate inflation, the Brits don’t mind.

Population growth (green) or decline (orange) in Europe

For high-power, white collar workers, Britain seems to be as good a spot as Germany, maybe better. Maximum tax rates are slightly lower than in Germany (45% vs 47.45%), and the population is growing (slowly). Apparently, people like it enough to come there and have children; children are a good sign, IMHO. It’s harder to get good workers, but population growth suggests that the problems won’t be catastrophic (as they were in Japan, and likely will be in Germany). If you want a developed economy with yet-lower taxes, plus good workers, the US is the place to be, IMHO. Our maximum tax rate is 37%. You get fewer free services (healthcare), but you can earn enough to afford it. Prince Harry moved to the US recently, joining foot-baller David Beckham, and Pele a few years back. Former Python, John Cleese, came here too… They complain that Americans are cheap when it comes to helping others (but that’s out attraction). They claim that we’re violent and crass (true enough!) but say that the UK isn’t what it was. The fact that refugees seem to prefer the UK to Germany, suggests that Britain is a place to go. Britain, I’d say seems to have come out pretty well from Brexit.

Robert Buxbaum, April 11, 2023

Biden stops fracking and gas prices go up 300% — Surprise!

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Natural gas prices for June 2022 as of May 6, 2022.

Natural gas prices have quadrupled in the last 17 months. It’s gone from $2.07 per million BTU in mid January 2021 when Joe Biden took office, to nearly $9 today. It’s a huge increase in the cost to heat your home, and adds to the cost of any manufactured product you buy. Gasoline prices have risen too, going from $2/gallon when Biden took office to about $4.40 today. Biden blames the war with Russia, but the rise began almost as soon as he took office, and it far outstrips the rise in the price of wheat shown below (wheat is grown in Ukraine — it’s their major export). The likely cause is Biden’s moratorium on fracking, including his decision to stop permitting oil exploration and drilling on federal land. In recent weeks Biden has walked back some of this, to the consternation of the environmentalists. On April 15, 2022, the Interior Department announced this significant change including its first onshore lease sale since the moratorium.

Biden also cancelled the Keystone XL oil pipeline that would have brought tar-sands oil from Canada and North Dakota to Texas for refining. Blocking the pipeline helped increase gas prices here and helped cause a recession in Alberta and North Dakota. The protesters who claimed to speak for the natives are not affected.

Another issue fueling price increases is that Biden is printing money. Bidenflation is running at 8%/year. It’s not hyperinflation, but it’s getting close. It’s money taken from your pocket and from your savings. Much of the money is given to friends: to groups that Biden thinks will use it virtuously, but inflation is money taken from us, from our pockets and savings. Another beneficiary are those who are rich enough to take no salary, but live by borrowing against their real estate and corporate equity. The richest people in the US do this, earning $1 per year or less, (here’s a list compiled by Bloomberg, it’s basically every rich person). They pay no taxes, as they have no income. The only way to tax them is by tariffs, taxing what they import, but the government is against tariffs.

What you can do, personally about energy-cost inflation is not much. I would recommend insulating your home. I plan to repaint the roof white, and put in a layer of roof insulation. I also have fruit trees: an apple tree and a peach tree, grapes and a juneberry. They provide summer shade, and you get a lot of fruit with minimal work. Curtains are a good investment. Another thought is to buy solar cells. A vegetable garden is fun too, but it’s unlikely to pay you back.

Winter wheat prices are up by about 40%, likely due to the loss of supply from Ukraine and Russia

Speaking of wheat prices, they are up. They increased 40% when Russian troops invaded Ukraine, and have held steady at that level since. This is far less increase than for natural gas. Corn and rice prices are up too, but nowhere near as much. Fertilizer prices are up 300%, though, and Biden has indicated he’d like to push for a sustainable alternative; is that poop? There is a baby formula shortage too. We can handle it, I think, unless Biden get involved, or starts a hot war with Russia.

Robert Buxbaum May 10, 2022. As a fun sidelight, here is Biden answering questions about Pakistan when someone in a Bunny costume grabs him and walks him away from the reporters. Who is that masked handler? What’s going on in Pakistan?

Billionaire Democrats and union Republicans

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In the last presidential election, the largest billionaires in the US were vocal Democrats, and two billionaires, Yang and Bloomberg were candidates. Bloomberg had been an anticrime Republican when he ran for mayor but in 2020 he spent $!B of his own money on anti Republican ads, and paid the debts of thousands of Florida felons who he thought would vote his way. It’s a strange new world.

Other vocal Democrats include: Jeff Bezios, majority owner of Amazon and The Washington Post, Mark Zuckerberg, Facebook, Bill Gates, founder and largest owner of Microsoft (just today blasting the Republicans over global warming — Is that logical — is cold better?), and Warren Buffett who likes to note that he pays a lower tax rate than his secretary does (IMHO that’s because he games the tax system and pays no social security tax). Meanwhile union workers and white middle class folks were mostly Republicans in 2020.

Union leadership are still Democrats, but the last few elections saw union workers voting R. These were called “The basket of deplorables, unredeemables” by candidate Clinton. R support among black people is less than 50%, but growing too. it’s quite a lot higher than two decades ago. Many showed up at MAGA rallies, you’ll see plenty in videos at “the insurrection”. The only person shot and killed at the insurrection was a white woman, unarmed, shot in the face by Capital police — no charges filed, but the liberal press, who usually hate such things, was silent. Almost to the man, they sided with the police over the mob.

I notice that the Black Lives Matter rallies are populated with the well off and the well educated. A Princeton lawyer was photographed driving around with a box of Molotov cocktails, and his co-worker, another lawyer tossed a lit fire bomb into a police car. It used to be that Princeton lawyers didn’t do that, at least not in person.

Portrait of a Democrat. From the New Yorker.

It’s not like the platforms have reversed. The Democratic party was always for high taxes, high regulation, and for soft money that they could give away. They still are. In 1900 the call was for “free silver“, now it’s “stimulus money.” It used to be that rich people didn’t like this. They would point of that printing money didn’t add to wealth, but just redistributed it from those who had savings to those who did not. Now they uniformly blast anyone who doubted the wisdom of printing 1.9 trillion in new money ($6000 per person, of which $1400 is given to you), and going on to blast anyone who doesn’t like additional oversight to prevent the systemic racism they see in the less-well-off.

One reason these richest billionaires are no longer Republicans is that they are no longer involved industrial manufacturing in the US. Thus the regulations they favor don’t apply to them. In the olden days, rich people made steel or cars. Regulations were annoying. Rich industrialists had money in US banks. For them inflation was theft. Now rich people own intangible industries that largely operate outside of the country. What money they earn is earned off-shore, tax free. As individuals, they live on US debt, and possess little or no hard cash. Inflation helps them pay off their debt, and high taxes don’t hurt them. Buffett can be down-home and pro environment. He flies private jet to meetings on global warming while investing in overseas petroleum.

Elon Musk seemed like a Republican during the Trump administration, but not so much now. He still makes stuff in America, but has moved to manufacture abroad. In January, he said he was fired up for Biden. He has put a significant chunk of his wealth into bitcoins. Its a protection from the inflation caused by printing money, and it’s a bet that’s paid off handsomely. I expect that we’ll have billionaire Democrats and union Republicans for the foreseeable future.

Robert Buxbaum, March 14, 2021. It’s pie day. Eat a pie at 1:59:27. (Edited Apr. 28, 2021)

Cross of gold democrats

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While it is dangerous to paint a large organization like the Democratic party with a single, broad brush, there are always patterns that appear, in this case in every presidential platform for a century. Beginning in the late 1800s when the Democratic party gave up on slavery, a stated goal of every Democratic platform has been to help the poor and downtrodden. Republicans claim to help too, but claim to target the worthy. For Democrats, by contrast, the common aim is to provide help without reference to individual worth or work — to help just because the individual needs it. All versions of this classic Democratic goal are achieved through forms of wealth redistribution: taking from the rich to give to the poor, Robin Hood style, at least temporarily. There is some inherent tension here: if the recipient can get free money without working, why would he work — a tension that some find insulting, but others accept as part of the comic nature of society. Many Americans accept that helping poor people is such a worthy goal that they knowingly accept the tension and cheating.

Mayor Quimba of Springfield (from the Simpsons). A classical Democrat, his motto: Corrupts in Extremus

Mayor Quimby of Springfield (from the Simpsons) is a classical Democrat, he has no morals beyond, ‘whatever the public wants’. Quimby is corrupt and an awful manager, but quite likable.

Extracting money from the rich always proves difficult: the rich generally object. The most direct way to extract money is taxation, but Democratic politicians, like Mayor Quimby, right try to shy from this to avoid being branded “tax and spend Democrats.” This year, Bernie Sanders has taken this line, proposing to raise the tax rate on the wealthy to 90% of income so he can do good for the poor and curb the power of rich Republicans. He has no problem with rich Democrats like Ms. Clinton, or perhaps he does, but doesn’t say so. In Britain, under Attlee, the tax rate was raised to 95%, a rate memorialized in The Beatles song “Taxman” (there one for you nineteen for me; 19/20 = 95%). Americans oscillate between accepting high tax rates and acknowledging that the worker and creative must be able to keep most of his/her earnings or he/she will stop working.

Every few years recipient Americans revolt against the way redistribution makes rich Democrats richer, and how high taxes seem to go with crony corruption. The motto of The Simpson’s Mayor Quimby is “corruptus in extremus”, a nod to the observation of how corruption in redistribution favors friends and family of those redistributing the wealth. Redistribution also tends to create poverty. This happened in England, for example. As Quimby says: “I propose that I use what’s left of the town treasury to move to a more prosperous town and run for mayor. And, er, once elected I’ll send for you.”

An alternative many Democrats favor is to print money or borrow it. This appears to be Ms Clinton’s approach, and was proposed famously in the “cross of gold” speech of William Jennings Brian in 1896.  In this speech, one of the finest in American history, Bryan (an unknown until then) proposed to monetize silver and other assets, allowing him to print money. He would spend the money on the poor by debasing the currency, that is by inflation. Bryan claimed that the rich were anyway sitting on unused money: a useless, dangerous pile that he’d inflate away. He also claimed that the poor are the ones who owe money, a burden that he would wipe out with inflation. Bryan’s final line is immortal: “you shall not press down on the people this crown of thorns, you shall not crucify the nation on a cross of gold.” The speech managed to combine God and greed and was an enormous success. Following the speech there was stunned silence, and then whoops and hollers. Bryan was carried around the convention for an hour before being chosen the Democratic candidate for president in 1896, 1900, and 1908. His speech has appeared, to a greater or lesser extent, in the platform of every Democratic candidate since with a greater or lesser reference to God depending on the conservatism of the speaker.

Donald Trump currently the front runner for GOP president reads to his grand-daughter Chloe from that Christmas classic, 'winners aren't lots.' photo by Donald Trump, jr (Chloe's Dad) aboard their car (?) plane (?).

Donald Trump currently the front-runner for GOP president reads to his grand-daughter, Chloe from ‘winners aren’t losers.’ photo by Donald Trump, jr., Chloe’s Dad. Trump seems to revel in the lovable, rich jerk persona as no Liberal or Democrat could.

Republicans have traditionally supported property rights and harder money: gold in the old days, a balanced budget today. They claim that low inflation is good for the rich and poor alike, and especially for the small businessman. Entrepreneurs are pictured as more virtuous than the idle, wastrel Democrats. Free money, the Republicans note, discourages work. Of course, distinguishing worthy from wastrel is easier said than done. Republicans are accused of being uncharitable, and of helping the idle rich once they get into office. Presidential candidate, Donald Trump claimed that until now he’d give big donations to candidates of the left and right so they would repay the favor with interest at a later date. No one knows if it will change when he gets in office, but so far he’s avoided the major rich donors. He’s doing well running as a lovable, rich, jerk who’d do things different.

Inflation is a dangerous mistress, the middle class generally doesn’t like the way it wipes out debts and savings, while supporting a class of rich wastrels, drunks and the chronically unemployed. Many of the poor and middle class save, while the rich tend to build up debts. The rich have better credit ratings than the poor, and thus borrow more. They are also better positioned to increase their borrowing if they think inflation is coming. The money they borrow is invested in hard assets: land, homes, and businesses. When inflation slows, they can sell these assets. And if they pick wrong, the government bails them out!. William Jennings Bryan lost all three of his runs at the presidency, twice to McKinley and once to William H. Taft, who stood for doing nothing.

William Jennings Bryan: for inflation and silver; against alcohol. Lost twice to McKinley and gold.

William Jennings Bryan: for inflation and silver; against alcohol. Lost twice to McKinley and gold.

I think the American people want a balance in all things. They want a balance between helping everyone, and helping only the deserving; between high taxes to help folks, and allowing folks to keep their wealth. They don’t quite know where to draw the line, and will even help the wastrels, even those who refuse to work, because they don’t want them starving in the street. They also seem to accept rich folks getting richer, especially when a big project is needed — a ship or a bridge, for example. We elect an alternating mix of Democrats and Republicans; conservatives, and liberals to avoid false paradoxes, achieve some liberty, and establish one of the richest states known.

As for me, you might as well know, I’m a liberal Republican. I favor low income taxes, but some welfare; taxing imports (tariffs), and low inflation –“bread currency,” I like Peter Cooper, and the Greenback Party, 1876. Cooper claimed that the dollar should always have the same value “for the same reason that the foot should always have 12 inches and the pound 16 ounces.” I also think enforcing morality is a job for preachers, not politicians. For 160 years students of Peter Cooper’s union were getting a free college education and I’m one of those engineering students, see my biography of Peter Cooper.

Robert E. Buxbaum, December 30, 2015. See my view of Scrooge’s economic education in the Christmas Carol.