China Made Simple

Wouldn't it be nice if there was a clear picture of China and why and how they have been doing what they are?  Let me tell you a story and see if I make "China Made Simple".  That is what this blog is about.

Before I get started, I want to remind all that the objective of the USA is to raise our median family income.  Now that we have that settled, here is my story.

Let me start before China embarked on their current economic growth program.  At that time, the USA had very limited economic trade with China.  That was before about 1950.  If any of you can recall that period, you will note that our economic situation was not all that bad.  We got along well without China.  With me on that?  Our economic model included a wide range of people of different incomes and abilities, the even then, the median family income was our objective.  Even at that time, it was difficult to raise the median family income due to the lack of skill and abilities of many of our people who were below the median.  That was the stage when China entered the economic picture.

Now,  look at China in about 1950.  They were an economic mess with a communist government and over population with many poor people with limited skills.  Now, how do they go about entering the world economic system?  What they have is billions of low skilled poor people.  If they can harness those poor low skilled people to make a simple product "cheaper" than it can be made in the USA by our workers who are below the median income level, they have a winner!.  The reason that this worked was due to the economic system of the USA where the presidents of companies like Sears or WalMart were run by individuals whose objective was "not" the median income of USA workers, but for their own personal income.  They found that they could personally make more money if they purchased goods from China that had been made here in the USA by workers who were below the median income level.  If a worker below the median lost their job, it had no affect on the company president's life.  This is not complicated and this is exactly the way it started.

Recall my earlier blogs about how natural resources are a major part of any economic system?  Well, China has a lot of natural resources, but they are divided between billions of people so that doesn't amount to very much per person.  China's advantage over the USA is a  lot of cheap labor and the USA is a sitting duck for a place to dump their products.  Due to our wealth from our natural resources, we had the wealth to buy their products.  As time went on, the skill of China's workers grew and their products could compete with products that were being made by our workers who were near or above the median income level.  Isn't that clearly what has been happening?  China has also recognized that technology was the driver of the economic future and focused their education on technology rather than "fluff" as we have done.  They also took advantage of the "welcome matt" that we rolled out to their technical graduate students.  Interesting?

When global warming came along, China saw another opening.  While we passed laws against burning coal, China took advantage of the now cheaper coal to generate their power.  Was China smart or were we just stupid?  With the shift in technology meant the need for more exotic minerals and the smelting of many generated toxic waste.  While we closed mines and smelters here in the USA, China opened new mines and smelters.  What do you think people are talking about when they refer a region of the USA as the "Rust Belt"?  It is not a joke.

Now that the stage has been set and stacked against the USA, how do we stop the trend or get the jobs back for our workers who are below the median?  If we keep doing what we have been doing, it is clear that things will just get worse.  It is a little like dealing with a bully.  One might have to risk a bloody nose in the process to stop the bully.  Think about how China would naturally respond if we were to clamp down on their cheaper products?  They are not going to pass duties on things made by our workers, because there is no need.  They can make them cheaper than we can and if we stop importing them, we will hear a cry from our workers who are below the median.  Isn't that exactly what has happened?  Now, where can they hurt us?  Hit our natural resources!  Things like corn, rice, lumber and meat.  Isn't that exactly what they have done?  Predictable!

Now, look at the USA.  Who has been hurt most by China?  It is clearly those workers who are below the median.  Isn't it interesting that immigration also hurts those workers below the median.  Who has China helped?  Silicone Valley companies who buy 100% of their products from Asia and sell them here.  When citizens here who are workers below the median get a chance to get higher wages immigrants are allowed in to under cut their wages and thus hold them down.  How could it be any clearer!  Both China and uncontrolled immigration combine to do exactly the same thing.  It might cause the total economy of the USA to grow a little, but it causes the median family income to go down.

How about a reminder?  Our objective is to raise the median family income.  Now that you have a clearer picture of the world, what do you think we should be doing?  You know it is not to keep doing the same thing.  If you want the same, you are the enemy of the USA and many of your neighbors.

First Derivative

Here is a new one. Do you think in terms of the "first derivative"?  If not, this blog may change your mind.

I was talking to a friend who said to me, "Did you know that ??% people do........?"  What he had to say was interesting, but there was no way to know if this was good or bad.  Have you found that reports of this or that data sounded significant at the time, but when you thought more deeply about it, it wasn't?  This is the problem with single data points.  Think about a X-Y graph with just one point on it?  How much does it tell you?  Not much!

What we need is to take the "first derivative" of the data on the graph.  If you don't know what the "first derivative" is, let me explain it to you.  One of the first things that you learn in a freshman Calculus class is how to do "first derivatives".  It is a new equation made from the original equation that gives you the "slope" of the line on the original graph at the point mentioned by my friend above.
Now why is this so important?  It tells you what is happening on both sides of the single point above.  It is going up or down or staying the same. I think that is important.

Here is an example.  Your friend tells you that their child had a 3.4 grade point average this past semester.  What they gave you was a single point.  Wouldn't it be more valuable to know if their kid was doing better or worse in school?  That is what the first derivative is.  It is the slope of the kids grades and tells you if he is getting better or worse.

Now, take another example.  Your friend goes on to tell you that the average grade in the school where their kid goes is 3.6.  That tells you a little more.  Their kids is a little below average, which is not so good!  Given that you are interested in the quality of education in our schools, wouldn't it be nice if you had even more information?

What if your friend gave you the "first derivative"?  What if that first derivative was "-0.1"?  That shows that the "slope" of the graph for the grade point average for the school was actually going down at the rate of 0,1 per year.  Now, we are talking about some significant information.  At this rate, if their kid has the same grade point average the next year, he will only be 0,1 below the school average.  Now, what their kid's first derivative was +0.1, then next year his grade point average would be 3.5 and he would be right on the school's average.

Are you starting to see how the first derivative works and how it provides one with a much better understanding of the statistics?  Why don't you try asking one of your friends what the first derivative is for some data point that they have shared with you?  For 99% of the people, you would have to explain what the first derivative is!  Sorry!

First Baby

Did you ever wonder at what age the average girl has her first child?  Well, it is a very big deal.  That is what this blog is about.

You can go find your own statistics, but here are few to think about.  The poorest and most over populated countries in the world also have children at the youngest ages. I broad terms, in Africa, the average age that girls have their first child is less than 20 years.  In the wealthiest countries that have the highest quality of life, the age of when girls have their first child is above 30 years.  Did you ever ask the Catholic church what their position is regarding the age that mothers should have their first child?  I did not think so!  They want more breeding under all conditions so that they can get the most members.

In most countries that are more wealthy and where the quality of life is better, they are waiting longer and longer to have their first child.  The affect is that their populations are growing slower or even going down while the poorer countries are breeding more and getting poorer.  With all the concern about global warming, ask who is doing more to slow global warming? 

Here in the USA we are starting to see two groups forming on the basis of when girls have their first child.  The poorest have children at younger ages while the more well off are having their first child later in life.  As this continues what will happen is a much larger difference between haves and have nots.  That is a fact.  I know of some professional women who have waited so long to have their first child that they are having problems getting pregnant.  That is a concern to some.  If you include in the data those who have children out of wedlock, the picture looks even worse.  Take the example of Blacks, who have a very high percentage of their children out of wedlock and at the youngest ages of the mothers.  Until that turns around, there is zero hope for this segment of our population no mater what other government programs are pushed.

Think about it!

Technology Vs Border Wall

There seems to be at least two camps when it comes to what to do about our Southern border.  Here is my position.

Before we jump into a discussion about the two camps above, we first need to discuss our objective.  Remember that if we don't agree on an objective, there is little use about discussing the subject further?  My objective is to keep illegal immigrants out!  Simple as it should be.  The problem with many of the ideas put forward is that they "don't" keep illegal immigrants out.  If that is the case, why don't we just stop talking about them and wasting all that Oxigen?

For some reason, may of us have been conditioned to  believe that "catching" or "arresting" a bad guy is the solution.  If some bad guy kills your child, "catching" or "arresting" them is clearly not the solution.  It won't get your kid back and it will not prevent bad guys from killing other parents kids.  Are you starting to see that things that help "catch" or "arrest" the bad guys is not a solution just like catching and arresting illegal immigrants who have crossed out border is not a solution?

The only real solution is to "prevent" illegal immigrants from coming across the border in the first place.  Is it any different with the bad guy killing your child?  No!  Look at how most technology works.  It helps the border patrol "catch" or "arrest" illegal immigrants who have already crossed our border.  What do we do with them now that we have caught them?  We give them food and let them remain in the country until our expensive and lengthy legal process plays out.  We are talking about years.  What if during that time they have a child or don't show up for their legal hearing?  The bottom line is that 99% will remain here forever.  Are you starting to see that more technology is not the solution?  We have to keep them out in the first place and that means some kind of wall that they can't get across.  Real simple isn't it?

Out legal system is based on "fear of punishment" and it works most of the time to keep illegal activities to a low and acceptable level.  What if we are dealing with a person or groups of people who have no fear of punishment?  Our current system does not work!  In the case of most illegal immigrants, our punishment is not as bad as the conditions that they are trying to leave.  If that is the case, our system will never work.  The fact is that the conditions in the USA are better then 99% of the countries around the world.  What we need to do is to make the punishment for illegally trying to immigrate into the USA "worse" than the conditions from where the illegal immigrants came from.  Are you ready to do that?  Well, I am.  I am willing to go so far as to require people who want to come here for asylum to be neutered,  If they are not willing to go along with that, then conditions back home must not be all that bad.  In most cases the reason that things are so bad back home is due to their over breeding like a bunch of cats and dogs.

It seems clear that if you agree with my objective that the wall is the only real solution. Given our legal system, if they ever get across our border, they are almost home free.  Let's stop all this BS and just get on with building the wall.  China did it a few thousand years ago and it worked then just like it will work now.

PS--Try this example.  There is a silver dollar on a wood stove and you want to make sure that no one picks up the silver dollar.  If the stove is cool, you can be sure that you will lose your silver dollar, so you have to heat up the stove.  How hot does the stove have to be to keep people from taking your silver dollar?  It has to be hot enough so that it is not worth the person burning their hand just for the silver dollar.  Isn't this exactly what we need to do to keep people from illegally crossing our Southern border?  Let's make it hotter!

Trump's Syria Pull Out

I hope this blog will provide some liberals an education about decision making.

There are severals items at play in Trump's decision about pulling our troops out of Syria and here are my points.  First, many claim that we can't leave now after we have spend so much money. lives and time.  For that reason we have to think about all those lives that were lost.  On that basis, we need to stay!  What do you think of this logic?  It is a classic error made by most people to not recognize "sunk cost".  Sunk cost is the cost and effort put into something that can never be recovered.  This is one of the classic errors that most people make when they make bad decisions.  When I used to teach decision theory, I used this simple example.

We have a young couple who want a home, but can not afford one now so they buy a lot with the idea of building a home when they can afford it.  They paid $20,000 for the lot and have paid $5,000 toward their loan.  The husband comes home one day and tells his wife that there is a lot in the same area that is equal to their's that is asking $12,000.  The husband proposes that they default on their lot and buy this new lot.  The wife is horrified and explains to her husband that if they default on their lot and buy the other lot, they will lose the $5,000 that they have already paid toward the other lot. The husband explains that the $5,000 is sunk cost and that they will actually save $2,000 by buying the new lot.  Do you understand this?  If not, don't waste your time reading the rest of this blog.

The other thing that we keep hearing is that we have not killed 100% of the terrorists and that we should keep up the battle until they are all dead.  This is the perfect solution curse.  How many times have you heard claims that a particular action or decision is not perfect?  If you have a brain, you know that there will never be a perfect solution.  Are you following this and have you seen people using the perfect solution as their argument?  People who want perfect solutions are the ones who are the dupes for religion where they are promised perfect solutions.

The third point is that we need to get our "friends" to start pulling their own weight.  Think of Europe and the fact that they are the ones who are being hurt the most by Muslim terrorists, not the USA.  We have been paying the bill long enough and it will take something like what Trump is doing to get our "friends" off their dead asses.  That is the other thing that Trump is doing.  If we keep doing what we are now doing, nothing will ever change and you know it.

I back Trump 100% on this and you should too.  Do you want to stay on dead center with everyone taking advantage of our stupidity?  I don't and I am not stupid!

PS--I have been listening to all the comments about Trump's decision and "none" mention that the rest of the world needs to "step up" and assume some responsibility for the Muslim terrorist problem.  Most of the world must be cowards, because they run from the fight rather than fighting to protect their own country.  Trump is trying to "unlearn" them from all of our past Presidents who taught them that we would protect them and they could spend their own tax money on socialism!

Immigrants Make The USA Poorer

It is a fact that immigrants make us poorer!  I am tired of hearing that immigrants pay their share of taxes.  How about you?  In this blog I will share a few facts.

Federal tax data from 2014 show that the top 10% paid 70.88% of all income tax.  In 2014, to be in the top 10%, you needed to have a taxable income of $133,445.  What percentage of immigrants earned that much?  It is less than 1% and of what they earned, most sent more back home than they spent here.  Now, do you really think that immigrants make us wealthier?  Not me!

To judge wealth, you don't just look at the total economic figures.  You have to look at it on an individual basis.  You have to ask if the median person is wealthier?  Do we have more oil in the ground per person with more immigration?  The answer is "no"!..Do we have more farm land per person?  Again, the answer is "no"!  How can the median person be wealthier when immigration causes individuals to have less?

Do we have less garbage to deal with when we have more immigrants?  Again, the answer is no!  How about less traffic on our roads?  Same answer.  Do we have more green open spaces with more immigrants?  No!  Do we generate "more" green house gases with more immigrants and now the answer is "yes".  Do we have to spend more to deal with global warming with more immigrants?  The answer is yes!  Is the quality of our education going up or down due to more immigration?  It is clearly going down!

Are you starting to understand the problem that we have?  If you look around the world, most of the countries who have strict limits on immigration are doing better economically than we are.  Don't claim that our population is aging and so we need more immigrants.  The average age of the USA population is about 37.5 while Canada's is about 40.  Is Canada a bad place and are they in trouble due to their older population?  No!  They have a higher median income and quality of life than we do.

I can think of no benefit of more immigration that is not more than off set by the cost to our quality of life.  Immigration might work if we could get "just the right" people, but no one knows how to do that so it is not on the alternative list.  We can't hold out for "magic" can we?

The USA could be a lot better place is if more people had some skin in the game rather than leaching off taxpayers.  If we would concentrate on that rather than more immigration, I feel that we would be making more progress for ourselves and our children.  The bottom line is that there is no free lunch. If you think that more immigration is a good thing, then let them live in your basement and you feed them.  Don't expect your neighbor to pay for what makes you feel good.

Interesting STEM Data

I was just checking the inter net to see how the USA is doing on STEM degrees and here is what I found.  The data is based on the percentage of college degrees that are in the STEMs.  The USA placed 37th out of the top 40 countries.  This is bad, but to some degree it is a little misleading.  I think that the reason that the USA is so low is that a very large percentage of our college degrees are "fluff" types while most other countries don't waste their money on these "fuff" degrees.  It is one thing to offer a free college degree in Black Studies vs a degree in Physics.  I don;t think there is a country in the world who would waste their taxpayer's money on something like Black Studies or Art Appreciation like we do.  The bottom line is that our kids are too weak and lazy to tackle the more difficult STEM degrees even though it is clear that the economic future of the human race will be driven by technology and the STEM's.  Is it too late for the USA to catch up?  Big question.

Here is something that research on the inter net and you might find something interesting.  What country produces the most Mathematicians per capita?  It is not the USA or China.

PS--Hungary produces the most mathematicians per capita while little Portugal has the highest percentage of it college graduates in the STEM's.  Portugal is a small poor country and they know that an investment in STEM degrees is a good investment.  The USA is so stupid that we waste much of our taxes and intellect on "fluff" degrees.  That is why we are only 37th!

Median Family Income Objective

This may be a repeat title, but his blog is different.

If the over all basic objective for a country is to increase the "median family income", then exactly how does one go about doing that?  Talk is cheap, but real action is a lot more complex.  I blogged in the past that the simple objective of economic growth is "not" an adequate objective for a  society.  Actions by President Trump have improved the rate of economic growth for the USA, but has not done too much for the median family income.  It is still only around $55,000 and we are "not" in the "top ten" for the world.

I learned a long time ago that I earned what I was worth.  One year, I picked 200# of cotton in one day and was paid $7.00. The next year I picked 250# in one day and only earned $6.25.  What had happened to me was that my "worth" had gone down due to automatic cotton picking machines.  It did not take too much skill to pick cotton, only physical ability and I had that.  I also had some mental ability too, but I was not being paid for that.  What I needed to do was to figure out how I could make myself  "worth" more!  I started working a lot harder in school in the 4th or 5th grade.  Just like I was the fastest cotton picker among my friends, I soon became the best in Math and Science in my school.   What I was doing was making myself "worth" more.  Are you following all this?

If we want to raise the median family income, we need for people to start early figuring out how they can make themselves "worth" more.  Remember that we are paid what we are "worth".  It used to be that we only had to be worth more than the kids in our class or those down the block, but not any more.  Now, we have to beat out kids from around the world.  Kids who are hungry around the world who have the opportunity to increase their worth are now our competitors.  It is not like the old days.

The question is, "How do we turn over a new leaf in our education system such that we make out kids "worth" more?"  Like any race, it is critical that we get off to a fast start.  Once some other kid gets a lead on you, it is very very difficult to ever catch up.  That is a fact of life.  Look at how early a kid figures out that it is not a good idea to touch a hot stove.  Think about why that was.  Don't know?  It was because he understood the "reason" for not touching the hot stove.  Still don't get it?  How many times have you heard a young person ask, "Why do I need to know that?"  It seem clear that few kids just want to learn something for the hell of it.  They need a reason and if they have a good reason then they want to learn.  How does a young kids learn the reason for learning this or that?  It is not from the teacher.  All they are interested in is "presenting" the information.  Some pick it up and other don't.  It is not all due to intelligence.  There is something else.

Parents are the ones who can show their kids "why" they need to learn this or that.  They can not push this responsibility off onto the teacher.  They don't explain "why".  Some kids exercise and lift weights.  Why do they do that?  Notice that I just asked "why"?  The kid must have figured out "why" or you can be sure that they would not be doing all that exercising and lifting weights.  Starting to see where this is going?  Some where, while the child is in grammar school, the parent is going to have to figure out how to show their child both "why" and "how" to make themselves "worth" more.  You can't have "how" until they understand "why".

I know that we can't ever get 100% of our citizens on board with the above, but we can do a lot better than we are now doing.  Compare Asians to Blacks on what I have said above and you tell if their is a significant difference?  You know that there is!  Notice that both kids go to the same school and have the same teacher, but the results are very different.  Now, are you starting to understand why?  It is not the quality of our schools that is the problem so we don't need to push more of our tax money into our schools.  What is needed is both cheaper and much more needed.  We need better parents and we need to start demanding it!!  We should start asking parents what they are doing in order to make their children "worth" more.  I am sure that they will not understand the question, but we can't stop there.  One idea is to demand a letter from the parent of every kid who enters first grade. "What are they doing to make their child "worth" more?"  If they can't answer this simple question, the parent should be require to take some night classes to figure it out.

What do you think?

PS--I was just reviewing some data on how kids were doing in grammar school and it showed that "on the average" Whites and Asians ranked about the same.  My friend concluded that they were "equal", but that may not be true.  I proposed that the two groups might have a very significant different "variance"!  If that is the case you might then find more Asians in the top 5% than Whites.  Compare this with data that shows the average height of Blacks and Whites is almost exactly the same.  Based on my personal observations, I thought that Blacks were much taller.  It appears that my misconception is the result of a larger variance in the height of Blacks compared to Whites.  There is a danger in just thinking in terms of "averages"! 

Econ 102

We  need to all get past Econ 101 and that is why I am calling this Econ 102.  It is not just a second semester class in economics.  It is a total rethinking of the subject.

Looking back on my educational experience in economics, 99% was devoted to "how" the economic systems work.  They never discussed what the objective was.  What it mostly stressed was how one could "game" the economic system for their own individual advantage.  Does all this sound familiar to you?  What our colleges and universities do is to prepare their graduates to go out into the country and see how they can "game" the system.

What do the political science departments do in our colleges and universities at the same time?  They all seem totally out of touch with the economics departments.  Just like the economics departments go back to old economic writers for their teachings, the political science departments do the same thing.  Neither have a program that is forward looking and takes into account what we all know are the major factors affecting the future.

Now, take the sociology department and their attachment to things like global warming.  Their message to their students are just as out of touch as the two above.  If global warming is driven by the human population, then why don't they advocate more population control?  See how out of touch they are?

What these three departments should be doing is discussing the "objective" of the whole country rather than just their individual power and egos.  Notice how the technical departments are mostly silent when we all know that what they are teaching is the most important for the future of our country?  I know that our colleges and universities are not serving their students.  The fact that their department sizes have grown while the technical departments have show little growth or actually declined should be a wake up call for all.  You only have to look at the waste of our country's wealth  by our liberal student loan program.

I pointed out above how Econ 101 prepares our students to "game" our economic system while the political science and sociology departments prepare their students to "game" our government which is really the taxpayers who have private sector jobs.  Are you starting to see that most of us are "gaming" the system rather than making the whole country more wealthy and with a higher quality of life?

Now, I ask you, "Are you gramming the system for your individual advantage or are you making the quality of life better for the "median family?"  It is possible to do both, but few are doing it.

China, The Perfect Storm

I have blogged in the past about the economic objective of the USA and now, I am at it again.  This time, I want to show how the economic objective should apply.

I pointed out that my objective is the median family income, that is clearly not what it is now.  If you follow the stock market, you have to realize that it does not correspond to the median family income.  It actually follows the economic interests of the top 10% or 15% of our citizens.  That is obviously not the median family income.  Here is how it plays out.

Most economist here in the USA will admit that "consumption" is the big driver of our economy.  If we take that point and apply it to some actual situations, I think you will follow the impact.  Take either a retailer of a manufacturer and see how different situations will be viewed by the a person who is in the top 10% or 15% or the median.  A retailer wants to buy their wholesale products at the lowest price and sell them at the highest price they can get.  Start with a shoe store.  The store owner finds that he can buy shoes cheaper from China rather than from a plant in Iowa.  Which way does he make the most money?  It is clear that he makes more if he buys from China.  The people in Iowa who make shoes are out of jobs, but that has very little affect on the store owner.  It actually lowers the median family income by a little while helping the store owner.  Starting to see the point?

I could have used the factory owner in Iowa who makes shoes closing his plant and buying his shoes from China.  His plant is a corporation that is sold on the stock market and since he now makes more profit, his stock price goes up.  Notice that a decision that makes the median family income go down can make the stock market go up?  If we just focus on what the stock market is doing as the objective for the USA we will kill the USA economy in the limit.

The reason that this is a perfect storm is that the USA started out with so much wealth and the people who still have jobs making shoes can buy socks from China to go with their shoes for "less"!  One other reason is that the basic home they purchased in 1975 for $45,000 is now selling for $275,000.  He feel rich and can buy all the shoes that he wants.  Is he really rich?  How about his children who need a home, but now have to live in the parent's basement?  How much longer do you feel that this perfect storm can continue before we are all under water?  How long can we buy three times as many products from China as we sell to them?  When does this party of musical chairs end and when it does, who do you think will hold all the chairs?

PS--If we focus on letting in only immigrants who have special skills as our solution, do you think it will work?  No!  What they will do is to make money here and send it back to their former home.  How is that any different from our imbalance of trade with China?  Not much, so it is not the solution.  The solution is for our own people to gain the needed skills needed so we can be competitive with counties like China.  Are out young people willing to work that hard and become more responsible?  Big question!