Democracy

One notion that has always fascinated me is the nature of democracy. Like many abstract philosophical items, everyone has an opinion but no one has a clear definition. Clearly, one of the main aspects of democracy is voting. So be it. But is voting the main prerequisite for democracy? Voting for what? Was the US a democratic country when slavery was allowed? When women could not vote? Is a nation democratic when only a percentage of the population can vote?

I won't have clear cut answers, just a list of observations and I welcome feedback.

While not a definitive source, wikipedia does have interesting text. Accordingly,

"While there is no universally accepted definition of 'democracy', equality and freedom have both been identified as important characteristics of democracy since ancient times. These principles are reflected in all citizens being equal before the law and having equal access to legislative processes. For example, in a representative democracy, every vote has equal weight, no unreasonable restrictions can apply to anyone seeking to become a representative, and the freedom of its citizens is secured by legitimized rights and liberties which are generally protected by a constitution."


Let us recall that Plato, going back to the birth of democracy in Greece, was not very fond of democracy. He called it the rule of the mob, meaning that democracy very much controlled not by rational thinking but immediate emotional responses. In other words you elect people who look nice and tell you what you want to hear.

Clearly democracy seems to entail people electing a set of representatives to govern them, along with a chief administrator be it a president or a prime minister. Leaders are not institutionalized, meaning they are not like kings where the leader is a heriditary positions. Leaders are not bound by family name to be next in line.

So why is this interesting?

Currently there are some interesting elections that will occur in the near future. The most publicized are the US and Russia. Of course there are many other elections occurring due to the Arab Spring manifestations. Morocco, Tunisia, Egypt, Libya, all electing leaders through a mostly untampered process. Furthermore, the financial crisis in Europe has developed into a philosophical debate about democracy and capitalism.

In a recent article in the Atlantic, the notion of democracy in the EU is questioned

With the financial crisis, the debt crisis, and the worldwide coverage of Occupy Wall Street, capitalism has been under fire publicly for quite some time in Europe. Since the debt crisis started to show real potential for damaging the euro zone, both the euro and the European Union have had their futures dissected as well. The question has been this: can the European federal project survive the debt crisis? But now, that question is being repeated with a more melodramatic substitution: can democracy survive the debt crisis?


One of my objections is the notion that capitalism and democracy are somehow joined at the hip. I believe you cam have a market-driven economy without democracy and similarly you can have democracy without capitalism. And in any case desperate times require desperate measures. Thus in times of crisis why not appoint leaders that are best suited for the job. And when a sense of normality returns have elections and restore democratic process with the hopeful understanding that people learn through adversity and would elect smarter leaders.

So we will see how all this plays out in the next few months. I'm certainly curious how the Russian elections play out, how much support Putin will actually get. Especially interested in the US elections, who the Republicans select. And Egypt, what kind of democracy can exists in a country dominated by religion. Not too long ago, nationalism and socialism was dominating the so-called third world, now it's religion.

Anyway, enough for now more to come. This is a very broad and interesting topic, and certainly of very immediate concern.

All the money in the world

OK, the amount of money in the world is not infinite. Given that the US is about to spend $750 billion on defense, I was curious how much money there is in the world. How much money the US has, how many dollars China has. So here are some statistics for the curious. I don't try to make any conclusions here, that is for another blog, but I wanted at least to get a sense of perspective of the available cash in the world.

A calculation in January 2009 was done by Mike Hewitt of the economics blog DollarDaze.com. Hewitt calculated that in October 2008, there was about (in notes and coins of countries that comprised about 97% of the world's GDP) the equivalent of $3.94 trillion in U.S. dollars in circulation [source: Hewitt].

M0 is the amount of outstanding notes and coins in circulation. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 in the US [source: Federal Reserve].

Thus, about 25% of money (cash) circulating in the world is American dollars.

The global market capitalization for all stock markets that are members of the World Federation of Exchanges was $32.5 trillion by the end of 2008.[http://www.world-exchanges.org/about-wfe] [2008 WFE Annual Report, p. 84]. By comparison, the New York Stock Exchange capitalization is $28.5 trillion as of May 2008. [http://en.wikipedia.org/wiki/New_York_Stock_Exchange].

Just for thought, cash in the US = $908 billion, market cap of NYSE = $28 trillion.

Getting back to the US and the rest of the money, after all there is more money than $900 billion. The rest of the money is held in bank accounts of various types, and the Federal Reserve tracks these funds in three different values known as the M1, M2 and M3 money supplies:

M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In July 2009, the M1 money supply for U.S. dollars equaled about $1,655.6 billion [source: Federal Reserve].

M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and small CDs. In July 2009, the M2 money supply was about $8,326.8 billion [source: Federal Reserve].

M3 is M2 plus all of the large CDs. As of March 2006, the Fed no longer tracks the M3 money stock as an economic indicator. That month, M3 totaled around $10.3 trillion [source: St. Louis Fed].

[http://money.howstuffworks.com/how-much-money-is-in-the-world.htm]

And lest we forget, the current US debt is $12,346,427,470,024.01, about $12.3 trillion. That is 4 times the total amount of cash in the world, to put it in perspective. Furthermore it is more than M3, total money in the US. [http://www.treasurydirect.gov/NP/BPDLogin?application=np]. Where there is debt there are interest payments. The annual interest payments by the US is about $400 billion annually. [http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm]

So how do we get out of this mess?

US and China

When it comes to trade, according to the US Census Bureau, the US deficit with China in 2009 was about $208 billion (excluding December).http://www.census.gov/foreign-trade/balance/c5700.html.

At the same time China held about $2.4 trillion in foreign reserves, of which it seems that $2.1 trillion is in US dollars. That is more than 2 times the amount of total cash in circulation in the US. [http://en.wikipedia.org/wiki/Foreign_exchange_reserves]. [http://news.xinhuanet.com/english/2009-07/15/content_11710420.htm]

Furthermore, the US debt to China, in form of US Treasuries, is around $800 billion as of Nov. 2009. [http://en.wikipedia.org/wiki/United_States_public_debt], [http://www.ustreas.gov/tic/mfh.txt].

Enough information for now, more to come so that we can make some conclusion about what it means to have a Federal budget of over $1 trillion and where will the money come from.