Commentary

Inflation Isn’t Going Away

Dave Davis Commentary, Policy, Uncategorized

Inflation continues, and our politicians are busy blaming each other rather than offering common sense solutions. They and the media keep pointing to specific products and sectors in the Consumer Price Index (CPI), causing the price to rise. Akin to the blind men describing an elephant, it’s energy, no rent, no wages, and on and on. We must realize that certain items aren’t going up simultaneously, but an increase in one leads to another; once inflation takes hold, it continues to rachet up until supply increases force prices down or demand is curtailed to the point that lack of sales stops prices from rising.

The last significant inflationary period was in the 1970s and early ’80s. It was brought under control by a combination of the Federal Reserve, raising the cost of borrowing so high it crushed demand, resulting in a severe recession. At the same time, we lowered taxes and regulations. Government pushback, such as Reagan’s firing of the Air comptrollers and continued business movement to right-to-work states, curbed wage demands and improved productivity.

Lowering expenses and making more investment capital available increased businesses’ incentive to expand production. The increase in supply met or exceeded demand, mitigating price pressures. We often forget to look at the profit & Loss effect spurring investment:

The impact on energy prices illustrates how well this worked.

The Great Inflation of the 1970s got its kickstart with the dramatic increase in the crude oil price following the Arab oil embargo. Because oil prices affect so much of the economy, price pressure spreads. Prices followed as transport, chemicals, fertilizer, and heating costs increased.

Rather than suppress the resulting inflation through high interest rates, the Fed created more money to accommodate it.

Continue reading →

Allow People To Interact

Dave Davis Commentary, Policy, The Long Journey to "More", Uncategorized , , , ,

All the noise about the Elon Musk-led Department of Government Efficiency (DOGE) lopping off unneeded chunks of the Federal Government and the horrified response by the big government-favoring progressive left got me thinking about what the purpose of Government is in the modern world and how we can match it to those goals.

My take on the question will shock and horrify others, but hear me out. The purpose of modern Government is to provide the structure for free and open markets to thrive. These markets are another way of saying people can freely and safely interact.

Markets are the best way to allocate resources to better the human condition. Nothing, including the various forms of socialism, mercantilism, feudalism, or tribalism, has lifted humanity more than free and open markets. If you don’t accept this, I urge you to read “Super Abundance.” As the structures necessary for markets to thrive expanded, humanity’s living standards have dramatically improved, even as its numbers have grown.

The reasons for market superiority aren’t hard to find. Billions of people using the latest information will arrive at better decisions and make them quicker than the relatively few elites in Government. In the information age, this advantage only grows.

Markets are the most democratic form of choice. People vote for their preferences. These are hard choices because their money is involved rather than theoretical. We are all human, so markets make mistakes momentarily but self-correct as new information enters the continuous exchange. We invest funds to receive a proper return. If the profit potential leaves, so do we.

Continue reading →

Trump Can Do Better

Dave Davis Commentary, Policy, The Middle East, Uncategorized , , , ,

Donald Trump often sees problems, but as someone who spends little time on in-depth analysis, he comes up with questionable solutions. One example is his suggestion that Jordan and Egypt take in Gazans to ease reconstruction efforts. The two nations immediately shot down the idea, and it isn’t hard to see why. Jordan already has more Palestinian refugees than native citizens. Returning to “Black September” in 1970, their presence has been problematic. They’re not about to add to a problem they never wanted in the first place.

Egyptian President Abdel Fattah el-Sisi gained his position by disposing of the previous Muslim Brotherhood government. Hamas, which governs the Gazans, is an outgrowth of the Muslim Brotherhood’s Palestinian branch. The last thing he wants is to strengthen the Brotherhood’s numbers in his country.  

Trump should’ve known all this and avoided the negative blowback. Still, the president isn’t wrong to wonder, as a builder himself, how you can build a viable Gaza in place of the existing rubble when overrun with 2,000,000 displaced people in just 141 square miles. Gaza was overpopulated and under-employed before the war. Now, the situation is infinitely worse.

Considering Gaza’s makeup, I offered my “Solution for Gaza” posts. Rather than a full-scale invasion, designate areas to be leveled by explosives, inform everyone to leave, then blow them up. Working towards the sea and away from the Israeli border, food and other supplies are landed on the shore by ship. The ships are then required to take women, children, and infirm to safety in accepting countries. If the Arab world and other countries are concerned about these Palestinians, let them show it. International aid now supporting the Gazans would follow them, so there was little if any, increase in cost.

People were horrified, claiming it would level and depopulate Gaza. Looking at things now, with Gaza a pile of rubble and the number of women and children killed, the plan seems a lot better than what has happened.

I never thought the destruction and shipping of refugees would go on for very long before Hamas would give in. Faced with a slow but relentless low-cost action, Hamas couldn’t wait for the last Gazan civilian shipped out of a leveled Gaza. Pressure from other Arab countries faced with accepting Palestinian refugees would leave Hamas little choice.

Even though the situation is different now, with Gaza destroyed, few Gazans have left. We have to understand why there were so many Gazans. In 1948, 7000,000 Arabs fled the new nation of Israel, mainly at the urging of the Grand Mufti of Jerusalem. The U.N. established the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNWRA) 1949 to aid them. The agency set up numerous camps ringing Israel:

Why did the U.N. feel it was necessary to create a new refugee agency when the International Refugee Organization (IRO) had existed since World War II and was doing great work in resettlement? This group evolved into the Office of the United Nations High Commissioner for Refugees (UNHCR), the primary vehicle for caring for and resettling refugees worldwide. It has accomplished the resettlement of tens of thousands of refugees annually.

Continue reading →

Changing Times

Dave Davis Commentary, Policy, Uncategorized , , , ,

In line with my efforts to see all sides of an issue, I keep up with ideas on both the left and the right. CNN and Washington Post (WP) columnist Fareed Zakaria usually provides good insight into establishment thinking, especially on foreign affairs. His latest  WP column is an eye-opener. He calls into question the left’s efforts to benefit the working class.

Most noncollege graduates in Red states voted for Trump and Republicans, even though the Biden administration made significant efforts to provide job-producing projects there. Instead of appreciating their benefactors, the ingrates voted for the opposition.

Zakaria feels the left’s prevailing theory is to move away from a market-oriented economy to one with sweeping government interventions. “It passed massive infrastructure and climate spending bills, explicitly designed to help noncollege educated Americans.” Zakaria points to two congressional districts, one in Texas and the other in Mississippi, that received the most significant government-backed projects but still voted increasingly Republican.

Attributing the continuing working-class Republican migration to race, identity, and culture issues among noncollege-educated whites, he thinks the Democrats should concentrate on their “solid base of college-educated professionals, women and minorities,” and strive to add moderate swing voters. He observes, “Biden keeps touting his pro-union credentials but is increasingly speaking of a bygone era. In 2023, only 6 percent of private sector workers belonged to a union.” The votes to win are elsewhere.

Shortly after reading the Zakaria article, I read Peter Suderman, Reason Magazine’s features editor, “Biden’s Legacy: He Didn’t Build That,” “…over and over again, that’s what happened under Biden: Vast sums were spent or authorized, but nothing came of it.” Maybe that’s why the people in Texas and Mississippi aren’t thrilled if there is no lithium refinery or battery factory. Because of red tape, opposition, and slow-moving bureaucracies, building things in the U.S. takes forever or never gets done.  

Continue reading →

Where Has Competence Gone

Dave Davis Commentary, Policy, Uncategorized , , , ,

Years of heavier-than-usual rains, followed by dry and hot weather, left vast fuel for fires. Winter brings the dangerous and unpredictable Santa Ana winds. Thank goodness California Governor Gavin Newsome had the foresight to call an emergency legislative session to fund preparations to handle the threatening situation.

Realizing what could be coming to vulnerable areas, successful governors get out in front and ensure everything is ready and working. Even though Florida suffered from severe hurricanes, Governor Ron DeSantis and his crew minimized problems and returned things to normal quickly.

Florida set the standard of preparedness for California to follow, and with overwhelming Democratic majorities, getting the needed funds and authorizations to be ready to meet the dangers presented no problem for Governor Newsome.

Oh, wait a minute. , the emergency legislative session wasn’t to prepare for a severe fire season; it was to appropriate funds to thwart Trump from expelling illegal aliens from California. The danger Newsome foresaw wasn’t from out-of-control wildfires; it was the federal Government initially deporting the illegal alien criminal element.

The result of this lack of preparation is likely to be the worst wildfire disaster in history. Fire hydrants without water are incompressible, as is a key reservoir without any water. Does this sound like preparation?

This absence of competence isn’t due to Californians not being taxed enough to measure up. They pay a lot more than Floridians. So why does Florida do so much better in crisis? The Sunshine State may spend more wisely.

It isn’t global warming. Both states are equally affected—after all, it’s one planet. No state has invested more and taken more action in combating Global warming than California. Of course, all of it has had zero effect. The truth is that nothing California or even the United States can do will change the direction of global temperatures. It could be a simple difference in competence.

Yes, I’ve shown this chart before, but it bears watching:

While the Federal Reserve has been lowering rates, longer rates are approaching levels reached when inflation was 9%. What is it the market sees the Fed is ignoring? Could higher inflation be in our future? Could the brilliant minds at that institution be missing the signals again? Remember, a few years ago, they told us not to worry; the price rise was transitory.

Continue reading →