Thursday, January 14, 2010

An Apparent Economy.

Chipsters were never very good at algebra, but we excelled at geometry and, consequently, astronomy which, as everyone knows, is simply geometry in motion. We were particularly fascinated by Ptolemy, that genius astronomer of the 2nd Century whose great work, the Almagest, plotted the heavenly motions of planets and stars and whose calculations were so accurate they continued to be used by seafarers well into the 19th century.

Ptolemy introduced into my 17 year old mind a distinction I had never thought of before, or if I had, not very clearly. I knew that things could be disguised; that is, made to look like something they were not -- that after all was the whole point of Halloween when we chipsters scampered around the neighborhood dressed up as a human beings. But it never occurred to me that something could be other than what it actually was. For this stunning concept, we must thank Ptolemy.

Of course, as everyone knows, Ptolemy decided [yes, it was a decision] that the Earth was at the center of the cosmos and that the sun, planets and stars revolved around us. But that wasn't half of Ptolemy's genius. He also decided that since the circle was the most perfect of forms, the sun had to revolve around the earth in a circle. This made perfect sense, and from this premise, calculating where the sun would be next Tuesday would be a simple matter of counting the degrees per day around the celestial clock.

The only problem was that the sun was not where it was supposed to be next Tuesday. No, it was a little bit behind. To make matters worse, the following Friday, the sun wasn't further behind, but had mysteriously advanced forward by half a degree or so. The sun was playing games.

Ptolemy scratched his head and then had the stroke of genius, for which he will ever be remembered and honored by Man. He decided [sic] that there was a "real" sun which moved in a perfect circle, and a merely "apparent" sun which we saw to be further forward or behind and which moved in an epi-cycle around the circle.

As the epi-center moved around the center, the sun moved around the epi-center and this device explained not only why the sun was where it only appeared to be, but also enabled us to accurately predict where it would not really be.

Ptolemy called this "Saving the Appearances" and with ever increasing complexity and ingenuity he saved the appearances for all the planets and, in fact, for the entire cosmos.... at least the apparently visible one.

The Almagest is full of phrases like the "true sun" and the "apparent sun" or the "mean Venus" and the "actual Veuns" the "recession" of the Equinox and the like. I don't know who it was who decided that the "simplest proof is the most elegant." Ptolemy's proofs are far from simple and they are the very paradigm of elegance. Next to him, Copernicus and Kepler are dull, dull, snore, CLUNK.

Everyone should be required to study Ptolemy in order to understand how a premise will dictate a result and how a theory will self-validate and yet, from a certain point of view, be entirely wrong. I say this without intending to cast the least aspersion on Ptolemy for whom I have the greatest admiration and a certain affection. The problem concerns what we know, and how.

Given my background in astronomy, it is hardly surprising that my curiosity was pricked three years ago when a friend of mine, who is an investor, started complaining about how no one was talking about the "real economy."

"Real economy?" I asked with raised eyebrows. Was somebody ... Paul Krugman perhaps? ... out there saving the appearances?

"Yes, the real economy," my friend said with vehemence. No one has caught on that there are TWO economies out there: the corporate economy and the economy for the rest of us.

Gary's point had all the elegant simplicity of an epicycle, and it was, in fact, nothing very complicated. The government counts corporate earnings as part of the country's GNP. So, for example, if GM's profits are up, since GM is an "American" corporation, that contributes to the boost in "our" economy. But suppose, GM's earnings are up due to investments and earnings overseas, say for example, in China? How does this "boost" anything back home in the United States? GM isn't even required to deposit its profits in American banks, but can salt them away in a box in Dubai. What has any of this to do with you and me?

Nothing! Gary said, with a grousing air of annoyance before going on to belly-ache about the falsehood of labels and how "American" corporations were allowed to import duty free products apparently manufactured in China because they were really "made in the U.S.A."

For three years, my friend has been complaining about the economic fraud being perpetrated and about a press that aids and abets corporations that are literally gutting the country alive. Starting six months ago, Gary began complaining that corporations were "now" even shipping their capital overseas. "Soon there will be nothing left! And Americans are too damn stupid to see what is taking place right under their noses."

We at the Gazette have done our part, and have passed along Gary's wisdom to the High Mucky Mucks at the Times and other pillars of the Fourth Estate; but to no avail. Like Henny Penny's more optimistic cousins, the press runs about headlining "Corporate Earnings are Up!!!" "The Recession is Bottoming Out" ... before going on to say, without really thinking much about it, "although 'it is expected that' it will be a jobless recovery."

Oh, rejoice. "Yes, we have no bananas."

Finally, the other day, Robert Reich, who is at least as savvy as our friend Gary, published an article in which he acknowledged that what was good for GM was not necessarily good for America. In an article entitled, The Bad Job Numbers and the Secret Second Stimulus Reich writes,

"American companies are more profitable, to be sure. But there’s a massive disconnect between profitability and employment."Link

Meanwhile, GM's CEO announced cheefully, that the company had turned the corner, that profits were expected to be up, and that the stodgy Buick was selling like hot cakes in the booming middle class market in China. Of course, the UAW took it in the nose on health care and pensions, but hey, the Recession is over! We have positive GNP.

Since the end of the World War, the U.S. has been a fabulously rich country; and it still is, if capital assets are counted. But everything is finite, and anything can be depleted.

Robert Reich calls for more "stimulus" spending to create jobs (at home). But that is no longer a viable solution, particularly under Obama, whose Neo-Trickledown© economics [ here ] have simply consisted in throwing public money at private corporations without strings attached. (It's called "hope" ...dude.) It is too late for that. What is needed is outright nationalization of corporate assets so as to keep them here and repatriation of jobs which have been exported overseas.

Most people have realized for at least a decade if not more, that the U.S. was shipping its productive capacity overseas. But they suffered a disconnect in not seeing that this ultimately impacted on national wealth. It was simply taken as axiomatic that if cheaper overseas production boosted corporate profits at home that was "good for America." How so? According to Clinton, America benefitted by being turned into the world's financial file cabinet as Americans were "retooled" for "good paying jops" in the paper-shuffling "service sector".

Well it did not work out that way, and even in terms of trickledown, there was real trickledown (the kind that led Henry Ford to pay his workers $5.00 a day) and apparent trickledown (the kind that witches and wizards like Greenspan conjured up from their bubbling cauldrons).

We are being gutted under our very noses, and still the country does nothing. It is more enthralled by the Leno-Conan debate over who will reign in our insomniac hours.

Ridet et moritur. Ridet et moritur.


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