Economics 101

Reading the news about Israel, I keep hearing statements that “If Israel does not give up Judea and Samaria, the European Union will boycott Israel, or punish them in some other way, economically”.

In the same way, we keep hearing that we (Canada and the USA) need to trade globally in order to be prosperous.

In both cases these are examples of propaganda.  People who say these things don’t understand the first thing about economics.

Let’s start at the beginning;

In the beginning, God created the Heavens and the earth.  On the earth He placed all kinds of plants, animals, and fish, and in the rocks He placed all kinds of minerals.  Then He planted a garden, and placed a man and woman in the midst of it.

That is it.  This is what we inherited.  All the world’s nations are descendants of those two people, and all the wealth of the entire world was created from the plants, animals, and minerals God placed on the planet for us, by descendants of those two people.

All the plants, animals and minerals on the planet only have potential value in their natural state.  A vein of gold has no value as long as it remains in the rocks.  Value is added when someone discovers the vein, but it still only has potential value until miners get in there, and extract the ore.

Even then, the ore’s value is not fully realized until someone puts it in an oven and separates the gold from the rocks.  In other words, work has to be done to it, for it to realize its potential.

Still, the value of gold is really related to what can be done with it.  Gold is a useful element that can be used for jewellery, coatings on electronic components, coatings on canopies of fighter planes, and many other uses.

It is the same for every other product used by mankind.  Value is added by human labour.
So what if all we have is a town with a handful of people with various skills?  In and around this town we have a couple of farmers, who provide food for the town.  One man is a shoe maker.  Another is a tin-smith.  There are also a few sewers (seamsters; used to be called seamstresses), and weavers.  There are a couple of builders, and a machinist who makes mechanical components.

With a town of a couple thousand people we conceivably could have all professions represented.  Each person performs his work in exchange for products made by someone else.  Now, in order to make the exchange easier the village council creates coins, and value can be transferred from one person to another.  Now the shoe maker can save his coins and purchase a larger product, like a house, or a car.

Money, whether coins, paper, or “bitcoins”, is simply a way to make one’s labour transferrable.

That is economics in a nutshell.

All the so called advanced theories of economics are subservient to the above.  It is possible to manipulate economies by creating a fiat currency, and to play games with people’s confidence in the value of the currency, but in the end, everyone needs food, clothing, and shelter.

If the currency loses its value, or people lose their confidence in it, people will end up going back to the basic old barter system, of trading goods and services for goods and/or services, but really every economy boils down to a form of barter.

We started talking about Israel, so what does Israel really need from the rest of the world?  Israel has more than a couple thousand townsfolk; they have several million intelligent people, both Jews and Arabs.  Israel also has natural resources, such as natural gas, oil, building materials, and farmland.

What Israel needs to do is to ensure that they have people with all the skills required for a modern economy.  It is possible for governments to encourage national industries, through the use of tariffs and import taxes.  Both Canada and the USA developed thriving economies by the use of these devices, and both have suffered terribly since removing them in the interests of encouraging a “global economy”.

While China’s economy is booming, North America’s is suffering incredible job losses, and record unemployment.  Anyone who does not think there is a connection here is living in a dream-land!

China’s new-found wealth has not made them more free, or democratic; rather it has given them the resources to become more aggressive toward their neighbours! http://www.theguardian.com/world/2013/dec/07/senkaku-diaoyu-china-japan-parliament  http://rt.com/news/japan-military-drill-islands-491/

Meanwhile the Chinese Yuan is artificially pegged to the US dollar, unfairly penalizing North American businesses.

Both the USA and the EU use the promise of financial aid as a carrot on a stick, to manipulate Israel, and other nations, into doing their bidding.

IAI Lavi

The IAI Lavi is a case in point.  This was an advanced fighter aircraft developed by Israel Aircraft Industries in the 1980s.  Because of pressure from the United States, Israel cancelled the program.  This airplane was so good it would have been a competitor to the American F16, so the Americans convinced Israel to “just buy American aircraft”.  In the end it was the USA who benefited, not Israel.

Now Israel has ordered advanced F35 fighter aircraft from Lockheed-Martin.  The first planes are set to arrive in 2017, but what if Israel goes ahead and attacks Iran’s nuclear program in the mean time?  Will the US cancel the order, as they did with Egypt, leaving Israel with an ageing fleet of F16 and F15 aircraft?  Is it possible that some of those (F35) planes could end up in the hands of Israel’s enemies?

Israel should have encouraged their own defence industries.  It is unwise for a nation to depend on other nations for defence supplies, especially when you are surrounded by enemies.  We are not talking about luxuries here, this is about survival!

Not only is this about survival, it is also about having a thriving economy and not having to depend on handouts from other nations to maintain one’s sovereignty.  Having an advanced fighter aircraft that a nation can sell would bring in billions of dollars, or shekels, of much-needed cash.  It would provide jobs for highly skilled workers, so they could stay at home and not have to move to the US, or Europe.

The US did the exact same thing to Canada in 1958, with the cancellation of the Avro Arrow, also an advanced fighter aircraft.  The Diefenbaker government caved in to American pressure, and cancelled a world-class, high-technology fighter aircraft. In that case, Canada relinquished its position as a world leader in the field of aviation, and had to purchase its military aircraft from the USA.  Meanwhile our skilled workers made their way down to California, Seattle, and Wichita, Kansas.

The difference is that Canada is next door to the USA, and the Americans have a vested interest in ensuring Canada’s security.  Israel, on the other hand, is thousands of miles away, and the current American administration appears intent on sucking-up to the radical Islamists in the neighborhood. On Israel’s security they appear double-minded.  This does not bode well for Israel’s future.

This is not only about defense industries.  It is all encompassing.  Look at Japan, and the limited natural resources they have.  Japan is a world leader in many market sectors, such as automotive, and consumer electronics, and they did it all without their own coal, iron ore, bauxite, or oil!

Welfare recipients usually become so dependent on hand-outs, that they think they need welfare to survive.  The truth is that Israel has all the resources, provided by God, that they need.  The most important resource, by the way, is intelligent people!

So, does Israel really need the EU, or the USA?  Not really.  They have all the resources they need to foster a thriving economy, with or without help from abroad.  Most importantly, Israel has God.  It is God who is bringing Israel back to the land, and this will continue with or without help from the EU, or the USA.  In fact, I would argue that an independent Israel will bring back the rest of the family faster than an Israel who is dependent on outside support.

So Israel, my advice is; get your people trained in all kinds of skills, and get to work!  There are many skilled workers in North America who have had a hard time finding work since the economic collapse of 2009.  I am sure many of them would jump at the chance to use their skills to train Israeli youth, in Israel.

The same advice applies to the USA and Canada; Stop favouring the Chinese. Use tariffs to protect your workers!  Get your people off of the entitlement programs, and get them back to work!