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Local Dollars Local Sense

Book Review of: Local Dollars, Local Sense

How to Shift Your Money from Wall Street to Main Street

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Review of Local Dollars Local Sense, by Michael Shuman (Softcover, 2012)

(You can print this review in landscape mode, if you want a hardcopy)

Reviewer:

Mr. Shuman presents a subject that has been the topic of many well-researched documentaries. Unfortunately, there's been a paucity of good books on the subject, so Local Dollars fills a hole in the marketplace. It is a very good book on this topic.

When I say good book, I mean a work that explains the need for reducing the "transportation waste" inherent in our distribution of food and many other goods, while also identifying some practical things anybody can do to be less a part of the problem. This book also looks beyond purely individual behaviors to some group projects and even some suggested legislation. So it seeks to make more than a little dent in the problem.

The book could use some corrections (see item at end of this review), but basically it's a solid work.

Contrary to what traditional economics teaches (I did graduate economics work, so I know), the comparative advantage model is flawed. That's primarily because it leaves out embedded costs. The concept of a free market is great, as far as it goes. But unfortunately, there is no such market. For example, USA companies must comply with USA laws when manufacturing inside the USA. If they go across the border (north or south), they lose those compliance costs. The effect is that USA consumers subsidize foreign competitors (and USA competitors operating outside our borders) via the compliance "tax" that applies only to domestic producers. So the cost mechanism breaks down.

Mr. Shuman discusses the false promises of non-existent free trade and other fantasies, and provides reality-based alternatives. He also provides a few ideas that stand no chance of becoming reality. For example, he proposes cleaning up SEC regulations so that they reflect today's world. Currently, these regulations harm small businesses immensely. And there's the problem. Since large corporations own what poses as a federal government in the USA, it's a near certainty that this problem won't be fixed. At least, not until we get a law-abiding, Constitutionally valid government in place (fat chance). That's not to say every agency of the government is evil; it's not. I'm merely observing who has the gold and who makes the rules.

This book consists of 10 chapters across 230 pages. The writing is clear and flows well. Mr. Shuman engages the reader and the book is a pleasure to read.

A short lesson in larceny

Chapter 2 starts off with an interesting concept. Mr. Shuman notes that the economy is "in the worst doldrums since the Great Depression." This is a misconception. Yes, the economy is in its worst shape since the 1940s, and that's because we had massive debt accumulation thanks to Bill Clinton and GW Bush, followed by Barrack Obama's unprecedented levels of rampant spending of money we don't have. That is, these three big spenders converted wealth into debt, and did so on a massive scale. No economy can flourish under such unrelenting attacks.

No, it is not true that this spending stimulates the economy (seen the jobless numbers since the Porkulus was inflicted on us?). In fact, it does the opposite. When the federal government diverts limited resources from productive uses to dubious uses, the economy suffers. Think of trying to raise the level of a lake by draining the water and calling that a "stimulus." For Obama's "stimulus" to work in a positive manner, the rules of economic exchange would have to be turned inside out such that you could buy a new Corvette by handing the sales person the same $1 bill 53,000 times. The equation is: Excess government spending = economic decline.

The spending is mostly in the form of wealth transfers from the working classes to the very wealthy (the Pentagon Acquisition program transfers $21 million an hour this way, and 95% of the projects paid for never result in a fieldable weapon). People say we are borrowing from our grandchildren to fund this larceny. That's not exactly true. When the federal government "borrows," it's not borrowing by any definition that applies in any other context. There's no consideration for the "loan." What happens is the Federal Reserve counterfeits the needed money (creates it out of thin air). This new money dilutes the value of existing currency, and that's how we get inflation. The USA had very little inflation until after 1913. Since then, about 97% of the value of the dollar has been inflated away.

We are so depressed

Now, what's the misconception part? If you look at the actual data from the Herbert Hoover's administration forward, you find that the USA was suffering from a recession caused by a market crash and was just starting to emerge from that before nose-diving into the Depression. What caused things to go so horribly wrong? FDR began deficit-spending. This never stimulates an economy, because it replaces usable capital with debt. FDR brought on the Great Depression by rampant spending. Nearly all of it was illegal (see the 10th Amendment).

Most of FDR's spending became institutionalized, rather than corrected. So we never emerged from the Great Depression. We had the appearance of doing so, following World War II. That was primarily because our competitors had bombed each other's factories and we had a monopoly. We also had some real economic stimulus in the form of huge advances in technology (driven by war needs). But our market advantage didn't last even a full generation. By the mid-1950s, our economy began to have problems. Companies were laying off. Yes, that is correct; look at the Eisenhower years and you find that Ike took this problem as a major threat. So Mr. Shuman is incorrect in his view that the Great Depression ever ended.

The fact we are still in the Great Depression is all the more reason this book has so much value! Things are actually worse than the author thinks and his view "how bad is it" is pretty much normal. That makes following his line of "how to solve it" thinking that much more urgent a task to undertake. This book helps in undertaking that task.

False arguments hurt, but are not fatal to, this book

Early on in the book, the author presents many arguments for going local. Some of these, unfortunately, are non-sequitors. The author used to work for a "liberal think tank" (an oxymoron), and thus this kind of misanalysis is something he practiced often (most conservative "think tanks" have this same issue). So just allow for that. And note that the valid arguments he does present are compelling. If the author considers a second edition, he would do well to have a logician identify the false arguments and then remove those. This would result in a much stronger text.

He also has some analysis problems in his discussion of home ownership (renting your home from your county, while being responsible for its maintenance and repairs; don't pay your property tax and you'll see who owns your home) versus renting (from another citizen-renter). The numbers don't work out as rosey as he shows, though his basic conclusion is correct.

Unlike the typical liberal utopian fantasy weavers, Mr. Shuman presents workable, affordable solutions. Unlike some of the more extreme "sustainability" advocates, he has a vision that is, itself, actually sustainable. His suggestions don't require mining vast quantities of lithium from China to store energy for coal-powered cars. He doesn't advocate replacing your incandescent lamps with mercury-contaminated lamps that drop your power factor by 50% and have such high inrush current that the actually cause a home to use more electricity than the lamps they replace do. He doesn't advocate some crazy tax scheme administered by corrupt government officials who are on the payrolls of large corporations.

Unlike the typical conservative fantasy weavers, Mr. Shuman looks at actually solving problems by taking advantage of what is right there in front of us. He doesn't suggest that we can solve our energy and (impending) water shortages by simply consuming someone else's resources faster.

I wanted to frame his position this way to underscore that, though he came from the false left-right environment, he apparently took the red pill and is now working in reality on real problems. And he recommends real solutions.

Buy a copy

This book is very well researched. And review of his bibliographical references shows that his sources are good ones. So even with its few flaws, this book is a valuable addition to the collection of anyone who is serious about making life a little simpler and a lot more reasonable in its use of limited resources. It's good to see a serious work that provides some good "take aways" for regular people to benefit from.

 

 

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