Poverty 54% to 28%

Two years ago, over half of Argentina's population lived in poverty. Today that's been cut in half. In just two years the poverty rate dropped from 54% to 28%. 

President Milei has held office since December of 2023, a little over two years ago--the same two years. How has Milei accomplished this tremendous turn-around? 

As a former economist, he understood something important: socialism produces poverty. His country had been under socialism for almost a century. Part of his strategy has been to reduce the size of the government. State subsidies along with public sector payrolls were slashed.

Inflation declined from 200% when he took office to 33% two months ago. For the first time in about a century, Argentina had a fiscal surplus in 2025.

A chainsaw is the symbol of his attack on overspending and socialism.

from Washington Post

(cont'd tomorrow)

US poverty? 2

(cont'd from yesterday's post)

America does not ignore the poor who can't afford housing, food, medical care, etc. A huge 51% of our annual federal spending goes to entitlements. But those benefits are not counted in the poverty statistics you saw yesterday for some reason.

That's the first important point of yesterday's video: the actual percentage of people in the US who lack basic needs is about 3%, not 10-18%. (That means 23 million to 60 million fewer people in the US live that way.) Though their earned income is under the poverty point, government payments lift their lifestyle out of poverty.

We don't want millions of our fellow citizens to lack the necessities, so we're happy to help. That's the motivation behind the American "safety net." 

Unfortunately, there's an unintended consequence of the welfare system, explained very well in yesterday's video. A significant number of people content themselves with dependence rather than using their lives productively. Surprisingly, that includes about 7 million men of working age. Not good for America--devastating for those men.

US poverty? 1

How could America, one of the richest countries in the world, tolerate a crisis of poverty? Claims are published that ~10 to 17.8% of our people are suffering in dire poverty.

If you hear something like this, you have to wonder why the government doesn't lend a hand. But wait, different levels of government have lots of ways to help. If vast numbers of people are barely surviving, why don't they sign up for food stamps? It's confusing. 

What do the numbers mean?

Yes to Texas

Texas is where billionaires go when they leave California (at least some of them). 

Population is increasing, and more people make the state's economy bigger. But more importantly, measuring the state's economy per person reveals that "Texas is generating thousands of dollars more per resident than it did just three years ago."

"Economic output" rose from $64,000/year in 2021 to $71,000 in 2024. That means individuals produce more value and more income overall. Think GDP (Gross Domestic Product) for the whole state, divided by the number of people.

To generalize, families see their standard of living go up. Something is going right (photo of the governor).

from MSN

Buy a house?

Investor and entrepreneur, Peter Thiel (photo), has credentials. When it comes to knowing his way around money, people listen to him because he has real-world results, being a billionaire. 

He notices things about our economy. Housing in America has gone way up in price over the past 5-6 years and you probably noticed it too. Part of the reason is that home building hasn't kept pace with our growing need for it and there are other reasons. But it is certainly true.

Is that good or bad news for all of us? It depends. If you owned property before this rise in prices, it could make you wealthier. But not in terms of income. You wouldn't be able to turn the new and higher value of your home into cash unless you sold it and moved into a much cheaper place. Other properties have risen in value too and you have to live somewhere.

But for everyone who has yet to purchase a property and wants to, it's bad news. Salaries and incomes have risen, but not as much as real estate. You'll pay more, in effect, for your first home than your parents did . . if you're even financially able to do it.

If real estate continues to rise, some segment of our population will be forever priced out. No one actually knows if real estate will keep rising in the future. But if you want to own a property and can do it, maybe you should get on the "real estate ladder" before it's out of reach.

from MSN

Why Mamdani? 2

(cont'd from yesterday's post)

Some thought that the specter of socialism was chased out of America by the fall of Russian communism, and by changing politics in the U.S. But it's still strong. It just won the election in NYC.

A quote in yesterday's post, "I'm a college student--and I want a future," comes from her belief that her financial future will be best under Mamdani's socialism. Billionaire Peter Thiel explains why she thinks that: he says "Capitalism Isn't Working for Young People." 

College student debt is a big factor. "Too many people go to college, they don't learn anything, and they end up with incredibly burdensome debt." In  2000, U.S. student debt amounted to $300 billion. Now it amounts to $2 trillion.

Housing, too, is way more expensive for younger generations (image is Grok-generated).

Thiel's interviewer cites evidence that Thiel is right: "Exit polling after Mamdani's victory shows that his voters were likely motivated by two things: high rent and student debt." 

from "Capitalism Isn't Working for Young People"

Why Mamdani?

"I'm a college student--and I want a future." That about sums up common wisdom as to how socialist Zohran Mamdani (photo) won last week's election to be the new mayor of America's biggest city, New York. "Gen Z voters turned out in droves for the beloved underdog whom they turned into the frontrunner."

This student got up at 4 a.m. on election day to go out and knock on doors for him. She was strongly motivated and just 18 years old. 

It's been many years since the average student was taught to understand our own economics system aka capitalism. When I was a new high school teacher, I realized that even I--the teacher--didn't know how to define free enterprise.

What is it going to take to turn that education structure around? Some kind of huge effort. Young people must learn how capitalism historically has been responsible for the growth of wealth: not just for billionaires, but across society.

Besides the fact that they have been educated to approve of socialism and despise America's own system, what convinces Gen Z voters to go for Mamdani? That's tomorrow's post.

(cont'd tomorrow)

Welfare Europe 2

(cont'd from yesterday's post)

Why did French voters reject the budget cut proposal last summer? Because they wanted their share of benefits after paying high taxes for years to support benefits for others. They couldn't bring themselves to vote for financial sacrifice. 

France is not the only EU country headed toward economic disaster. 

One-tenth of working-age people in Britain claim payouts at public expense because of sickness/disability. Are they really entitled to the fruits of the labor of their neighbors? A politician says what they need is the old "work ethic" back, where it's the default to get a job so you take care of yourself and your family.

Germany has been "living beyond its means" for years according to the German chancellor. He says they can't go on with their welfare state. Politicians know this, but can they convince the people to make painful budget cuts for the greater good? It will be tough.

What will they do? As the president of European Central Bank warned a year ago, Europe's welfare states are “utterly unsustainable.”

from The Stream

Welfare Europe

Sustainable agriculture (examples in the last two posts) is farming that preserves resources that we depend on. Unsustainable methods would eventually mean that soil or water quality won't be there for future farming.

It's a good word that can be used in other contexts. An unsustainable over-spending habit, for instance, results in a serious lack of money in the future. Some Europeans worry about that very thing on a national scale in their countries.

Over-spending has been the story for decades. Europeans pride themselves on extravagant welfare hand-outs. They consider it a core European value to be very generous. But how long can anyone keep giving away more money than they have? 

Last summer the Prime Minister of France made a serious attempt to reign in his country's spending because he realized they are drowning in debt. "The life of the nation is at stake," he told them (photo).

But the proposed budget cut was bitter medicine for voters, and they rejected it--and him as well. He left office in September.

from The Stream

(cont'd tomorrow)

Pencil 2

(cont'd from yesterday's post)

It's no small thing to trace the making of the common pencil. 

A child could tell you about its parts. But when you think about what it would take, no individual person could actually create a pencil or even knows how.

You'd have to find a cedar on the west coast of the U.S., take it down, transport it to the mill--using saws and rope and equipment and trucks--which would have to be created from hemp that you grew in a field and metal that you mined from underground.

A lot of people at the lumber mill manage cutting the logs until they're in 1/4" strips, which are kiln-dried and tinted and waxed which requires belts and motors which require heat and light and power which require the hydro-electric plant which required the men who poured the concrete . . . It's endless. 

No master mind organizes the creation of a pencil. But millions are created . . through the mutual cooperation of millions of workers . . who don't know the others in the process or where their product is going. 

Our economy is almost miraculously run by skilled and creative people acting freely for their own benefit.

Pencil

Who cares about a pencil? 

Back in 1958, every child in America needed a pencil for school work. It was common and under-appreciated. An economist that year used this totally overlooked item to wake Americans up to the wonder of their economic system.

He wanted them to think about their pencil's genealogy - how did this common, cheap thing actually come into existence?

Build things

"America won't exist if we don't build things." This author founded and runs a manufacturing startup, and he says we must restore our country's capacity to "build things," to manufacture. We must re-build our industrial base, in his theory, because every great power rose to prominence "by building the strongest industrial base of their time."

We could lose our strength. It could happen if we get too comfortable with our success and start to off-shore everything. 

Wait . . that sounds like the present day. As an example, we in the U.S. made five ships last year, while China made 1,000 ships. We lead the world in pharmaceutical R&D but we imported 88% of the active ingredients. "Submarine production has slowed drastically," a reflection of our lack of skilled workers (yesterday's post).

Jobs in the trades can yield a good living. Not everyone must go to college or university.

from The Free Press

Space econ

Space came back to the headlines in America when SpaceX started a new era.

Cost was the huge deterrent to exploration. When SpaceX began to produce rockets that could be re-used, the enormous cost of getting out of earth's atmosphere was cut spectacularly.  

Other space companies followed, and space was no longer un-reachable. What else could we do out there?  

Materials - including water - exist on the Moon and Mars and beyond. When we get there, we'll apply intellect and knowledge and turn some of those materials into resources for humanity. A Hillsboro professor explains:

Dinner cost 2024

(cont'd from yesterday's post)

That big 2022 spike in the cost of Thanksgiving dinner (yesterday's post) didn't continue, thankfully. Last year the cost declined a bit, and this year the cost declined a bit more. The Farm Bureau makes the point, however, that we're still paying more than we ever paid any time before 2022 (image).

 

How these average prices impact us has been figured out in a practical way by economist Gale Pooley. He compares average prices to average wages paid to workers at the time.

 

It's a good measure of what these prices actually mean to people at the time of the survey. He calls this measure of what it costs the "time price," meaning the amount of time an average worker would have to work to purchase this dinner.

Average wage in 1986 was $8.96 per hour, so a wage earner then paid for their 1986 dinner with about 3.2 hours of work. Today in 2024 the average wage is $30.48 per hour. So an average wage earner pays for that dinner today with about 1.9 hours of work.

In general terms, Americans are finding it more affordable to pay for that dinner than we did thirty-eight years ago. How did that happen? Innovation and improvement in agriculture, transport, manufacturing, all the businesses that touch our dinner in some way.

from Doomslayer

Dinner cost

American Farm Bureau surveys the cost of a typical Thanksgiving dinner prepared for ten guests every year. (Go here for the list of items; somehow they neglected green bean casserole.) Here is the history of that cost (image) since 2005:

These prices are not adjusted for inflation, so it's just the raw dollars' cost from each year's survey. You can see the inflation we all know has been happening since the pandemic started in 2020. Prices were almost flat from 2011 til 2020, a long time. The highest costs ever in the survey occurred two years ago.

But the survey was started long before 2005. When it began back in 1986, the raw cost of the dinner was $28.74. Since then the cost has risen to $58.08, a rise of 102% in 38 years.

What is the real impact on us? In tomorrow's post we'll see the way an economist has figured that out.

from Doomslayer

(cont'd tomorrow)

No turkey czar 2

Remember 2020? We were deep into the covid pandemic. Thanksgiving was different because we couldn't get together.

This re-post from four years ago is a good reminder that we easily obtain our holiday dinner turkey due to the "invisible hand" of the U.S. free market, not due to a bureaucratic Turkey Czar.

My niece invited the extended family to her apartment for Thanksgiving this year. She created a  Facebook event called "A Very 2020 Thanksgiving." Then she cancelled it because our governor's covid restrictions forbid multiple household gatherings. Yes, a very 2020 Thanksgiving.

My household had no turkey. But if you did, I think I know how you got it. You didn't order it special from a local shop or farm. You put it in your cart on a normal trip to the grocery store. You knew there would be plenty of reasonably priced turkeys for all who wanted one.

Thousands of people made that happen:

"Poultry farmers, of course, but also the feed distributors, and the truckers who brought it to the farm, not to mention the architect who designed the hatchery, the workmen who built it, and the technicians who keep it running. The bird had to be slaughtered and defeathered and inspected and transported and unloaded and wrapped and priced and displayed. The people who accomplished those tasks were supported in turn by armies of other people accomplishing other tasks — from refining the gasoline that fueled the trucks to manufacturing the plastic in which the meat was packaged."

There is no turkey czar with a master plan, issuing orders, forcing these workers to cooperate. But they do cooperate. They made thousands of smart decisions independently. Why? To create an income and take care of their loved ones. 

"Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance." 

Adam Smith called it the "invisible hand" of the free marketplace.

from the Boston Globe

Why it works 2

Freedom to trade as you choose is one of those principles that helps our society flourish. When you freely engage with others, you and your neighbors will wind up more satisfied. Even a child can understand it.

Free trade 1

(cont'd from yesterday's post)

Yesterday's post says that even the poor get richer under free trade. But . . why? How does free trade increase the prosperity of everybody? Does that really work? Unless we can understand why, it can be hard to believe that free trade increases wealth.

Jay Richards explains with his own story. His elementary school teacher bought a cheap toy for each student in her class. Many, like Jay, did not feel wealthier. He got Barbie doll playing cards. The teacher had each child pick a number from one to ten describing how happy they were with their toy; she added up the numbers and placed the total on the blackboard.

Then she allowed them to trade toys, restricted only to other students in their row of desks. They again picked a number, the numbers were added up, and the total happiness number went up.

Then she allowed them to trade toys freely within the whole room. The happiness number went up again. The children had more "toy-wealth" in spite of the fact that no additional toys had been brought into the classroom.

"Rule of law" applied in the class: no stealing someone else's toy, no cheating, no hitting, all of which would have coerced other kids into a trade, which would have made it un-free.

When both trading parties make their own decisions based on their own needs, not coerced by the government, free trade makes them wealthier. That's how it works.

Why it works 1

Are the concepts of our own economic system in the U.S. (and generally in the West) still taught in our schools? That's a good question. 

Years ago, I realized that I had never been taught the foundations of economic freedom and didn't even know what "free enterprise" means. Going back to 2016, there are some posts that can fill in the gaps in our understanding. I'm going to re-post a few of them.

* * * * *

"Trade"

Trade enables us to enjoy better quality of life. If we couldn't trade with each other but had to make everything we need, we might starve to death. But if each of us is free to specialize, we all have a skill or product to trade (buy and sell) with people who have something we want.

That's really simplified, but true to the basic rationale behind trade.

What if you had to make your own, say, chicken sandwich from scratch? It would take much more than a couple of minutes at the fast food window. Here is one man's personal experience with this idea.



It's easy to forget the work and organizing behind a simple product.

(cont'd tomorrow)

The mother lode

Rare earths are essential for the manufacture of modern technology products. They're not common or abundantly found on earth. When you put together those two factors, essential and uncommon, it means that manufacturers will pay a high price to get them.

China is the main source of rare earths. That means China makes a lot of money from supplying them to manufacturers, and it means that they can manipulate this advantage for political goals.

photo

But all of this may change because the "mother lode" of rare earths, the largest deposit ever found, has been discovered--and it's not in China. It's in the US, in the state of Wyoming.

"If wisely exploited, this find—estimated to be the richest in the world—will give the U.S. an unparalleled economic and geopolitical edge against China and Russia for the foreseeable future."

from WSJ, "Wyoming Hits the Rare-Earth Mother Lode"

Dinner $ 2023

Dinner for ten on Thanksgiving this year will cost just a bit less than last year . . but much more than three years ago. 

Every year the Farm Bureau figures it out:

Farm Bureau image

Inflation cheapens the value of all our dollars.