Dienstag, September 20, 2011

Betrayal, Deceit and Danger...

This spurred me to post in the middle of my forecasting season.

Read the article and think about this:

Betrayal is one of the most dangerous things to do. More often than not it backfires, creating a result exactly opposite what was intended. This applies to the personal and the political: betrayal destroys trust and removes any reason for continuing a relationship. Betraying your spouse (even without getting caught) will end a marriage; betraying a political party or a country will lead to extreme sanctions being placed against you. Betrayal is the breaking of a presumptive contract, resulting in moral and psychological conflict that cannot be easily resolved, if at all. It matters not if the contract is explicit or merely implied: the turnaround, the inversion of the relationship, is what is so damaging.

When you are betrayed you cannot count on the other to be what they represent: it makes it effectively impossible to reconcile what is said with what is actually meant. It destroys the fabric of relationships: a soldier sent to war cannot be expected to continue to fight when his political leadership betrays him; a spouse cannot believe that their husband or wife would betray them in the most intimate of relationships.

Betrayal, of course, relies on deceit to achieve its goals: the betrayer has their reasons for breaking the trust, ruining the relationship and abandoning principles for others. However, a simple change of mind is not betrayal, but rather continuing to act as if one believed in the relationship. That is why betrayal is so difficult, why it is so hard to reconcile once a betrayal is discovered.

As Brett Stephens puts it in the link above:

When the history of the rise and fall of postwar Western Europe is someday written, it will come in three volumes. Title them "Hard Facts," "Convenient Fictions" and—the volume still being written—"Fraud."

This corresponds to truths, deceits and betrayal: the convenient fictions of Mr. Stephens were deceptions, where the truth was hidden, covered up by those unwilling and unable to admit to reality. The accumulated deceptions - the web of lies that make up our modern societies - lead directly and without any chance of redemption to the the betrayal, the fraud that has led to the disillusionment of so many.

This is what is so dangerous: disillusionment. The welfare state, for whom so many have sacrificed so that almost as many could lead lives of leisured discontent, is and has always been what the Germans call a "Lebenslüge", a lie that forms the basis for living. The pay-as-you-go system of pensions is another one. These are deceits of the body politic that have endured and extended themselves such that they can't be avoided: it doesn't change the fact that without changing history (such that demographics that are needed for the functioning of the system could be brought into line) or without changing the promises made, that these systems are fundamentally untenable.

Rather than have solid, dependable social welfare institutions that we could all rely on to do what was promised, we have an increasingly rotten edifice that resembles nothing less than a Potemkin village, designed from the get-go as a fraud and lie.

The reality is that the modern welfare state cannot continue as it has. Pretending anything else is not merely in error, it is a mistake. Just as with all types of rollover schemes that depend on new entrants to maintain the system, it is starting to fail.

This is what is dangerous: disillusionment that the political process can bring change is part of what is called a pre-revolutionary society. Pre-revolutionary in the sense that there is no critical mass for a major rebellion, that a single incident cannot and will not bring massive changes.

Are we in a prer-evolutionary state? Are we facing long-term disillusionment, what the Germans call Politikverdrossenheit" or political apathy? The danger is when so many become political apathetic, no longer caring what is done by politicians because they can't believe that anything that can be done will actually make a difference, the number of people needed to instigate change shrinks. When the vast majority of citizens in a country struggle to continue to live their promised life-styles and fail to notice that politicians are running things into the ground to make even their best attempts moot, that is when things can turn from a pre-revolutionary society to one that is ripe for revolution, for fundamental change that tears away the deceits and lies and goes back to fundamental truths (before, perhaps, the cycle slowly starts up again).

The problem today with revolutions is that the alternatives have all been tested, multiple times, We know that public ownership of the means of production ends, invariably, in the dictatorship of the revolutionary elite (aka "The Party"), leaving people vastly worse off than they were otherwise. There are no real alternatives to modern capitalism if you are interested in achieving some sort of Pareto optimums for society (where the greatest amount of good happens with the least amount of bad). Revolutions, in our connected and interdependent economies and societies, can't improve on things, but only change those who can and do profit from the exploitation of man by his fellow men.

So, in the immortal words of Lenin, what is to be done?

Right now: nothing. The betrayal must out, the truth will indeed make you free. Keeping up the charade, pretending that the economic problems facing us are merely business-cycle related and not part of a great structural slump, cannot be maintained unless they are true.

Which they demonstrably are not.

The modern welfare state is unsustainable and doomed to failure, and appears to be designed to provide the inverse of the Pareto optimum: here the greatest bad occurs with the least amount of good. The modern welfare state fought a war against poverty, but poverty won. Recognizing that the poor will always be with us and that you can't legislate equality of capabilities (as opposed to legal barriers and the like) would be a first step towards facing reality. Understanding that distribution of talents and abilities is and always will be unequal, that markets always abide, despite the best attempts to deny them, would be another step towards facing reality and starting to mend the damage that the body of lies, the deception, the outright fraud committed in the name of social justice and equality, has done to society.

A revolution isn't needed since it only changes the guilty. There are so many out there who have dedicated so much time and effort to undermining modern-day capitalism: they are the deceivers, the betrayers of what really is and what really works. The danger is that things become much, much worse: that seems to be the only sensible explanation of at least some politician's policies.

This is not going to be much fun. Neither is bankruptcy or getting out of financial trouble.

Freitag, September 09, 2011

Parsing the President...

Not quote sure if this deserves the notion of a fisking, but it definitely needs to be parsed...

Mr. Speaker, Mr. Vice President, Members of Congress, and fellow Americans:

Tonight we meet at an urgent time for our country.  We continue to face an economic crisis that has left millions of our neighbors jobless, and a political crisis that has made things worse.  

In other words, the recession wasn't ended by the first stimulus package: why would anyone really think, at this point, that throwing more money at the problem is going to make things better? The best I can think of is "Oops, we spent the money on making sure that our campaign contributors - finance and lawyers - didn't get hurt when their schemes backfired. Guess we gotta spend money on the riff-raff after all..."

This past week, reporters have been asking "What will this speech mean for the President?  What will it mean for Congress?  How will it affect their polls, and the next election?"

If this is the case, then reporters - outside of perhaps a few whose task actually is covering this sort of narcissistic rhetorical questioning - are idiots. But I repeat myself...

But the millions of Americans who are watching right now:  they don't care about politics.  They have real life concerns.  Many have spent months looking for work.  Others are doing their best just to scrape by – giving up nights out with the family to save on gas or make the mortgage; postponing retirement to send a kid to college. 

In other words, making economic choices because their life style is in excess of their incomes: duh. Everyone would love to have unlimited money and simply do what they feel like doing, rather than making basic budgeting choices. The surprising thing is that this is considered somehow a burden: everyone has to make economic choices about what to do with their money.
These men and women grew up with faith in an America where hard work and responsibility paid off.   They believed in a country where everyone gets a fair shake and does their fair share – where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in awhile.  If you did the right thing, you could make it in America.  
Ahhhh. Now we see it a tad more clearly: setting up a never-existent straw man to knock down. Hard work and responsibility always pay off, but not in a life-time job. We are not Japan. The qualifiers here - "decent" and "good" - underscore this: no one gets paid what they think they should be paid, and we all want freebies in terms of benefits. But a decent salary in the eyes of the employer is not what the employee thinks he should be getting. This is the classic working-class story, and there is nothing new here at all. It's not so much that the salaries aren't decent - they are, largely - but rather that expectations have grown so immensely. If you think you can own a house, drive two cars, send your kids to college and save for retirement on a working-class salary, then either you've got a union official's job or you are living back in the 1950s and 1960s when the US had no meaningful competition, where the Big Three sold every car they could make without a problem and where property and building costs were low.

If those are the expectations driving the American dream, then everyone is going to be disappointed. We don't live in that world, and haven't for decades.

But for decades now, Americans have watched that compact erode.  They have seen the deck too often stacked against them.  And they know that Washington hasn't always put their interests first. 

Duh. Triple duh. The American Dream isn't about material things and how a common laborer can have them. Good lord, that's an extraordinarily naive idea of the American Dream, one that is heavily influenced by a rather antiquated view of the relationship between labor and capital. The American dream isn't that: the American dream is even simper than that: it is the ability for you to do whatever it is you damn well please and facing both the consequences and the benefits. Want to be a transsexual school teacher? Go ahead and give it a try: no one is going to say from the get-go that you can't do it. Want to open a family restaurant and create your own little business empire? No one is going to stop you, saying that you come from the wrong neighborhood or the wrong part of society. Want to work three jobs in order to buy a house when you don't have the qualifications to earn better money? No one stops you from those decisions. Want to home-school your kids and believe in whatever you want to? No one stops you from doing that, setting up your own church or giving your kids the education that you think they need.

Other countries have systems that do that. Other countries regiment their people in ways that you can't imagine, cutting entire swaths of society off from education, from entrepeneurship, requiring a state religion and strict obedience to their tenets. Other countries won't let you work certain jobs without going through onerous apprenticeships, regardless of how good you are at doing what you do. Other countries won't give you the chance to study because you belong to the wrong caste.

That is the American Dream. Two cars in the garage and a chicken in every pot are the consequences of that, but are in and of themselves not the American Dream.

Further, it's not something given to you: you have to go out and do it. I've got news for y'all: the deck is always stacked against you. You've got competitors and those who want your piece of the pie. It's up to you to stop them taking it and beat them at their own game. But it has to be done, not whined about.
The people of this country work hard to meet their responsibilities.  The question tonight is whether we'll meet ours.  The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy; whether we can restore some of the fairness and security that has defined this nation since our beginning.    

First and foremost: the dichotomy between the people and the politicians. The people work hard to meet their responsibilities, but politicians haven't met theirs. Fair enough: that's a given. But the question then arises about which politicians have been meeting their responsibilities: those that increase debt and keep doing the same damn thing when it repeatedly fails are the irresponsible ones. Those that pass bills that no one has the chance to read are the irresponsible ones, deeply so.

But stopping the political circus? This is the man, the party that created the circus. They can stop it in three shakes of a charmed quark by telling their operatives to stop the rhetoric of hate and class warfare. He and the Democrats created the political circus of passing bills without debate; he and the Democrats created the political circus of secrecy and deceit about what was in those bills; he and the Democrats created the political circus of publicly trying to humiliate and drown out the loyal opposition when they tried to talk (Michigan, here's looking at you); he and the Democrats keep political clowns in the media supported and has even elected some to office.

Fairness and security as the defining force of this nation since its beginning? Far from the truth: by demanding our freedom and independence, we chose the path of insecurity and unfairness, the insecurity and unfairness of a free people unleashed upon the world. Making fairness and security the cornerstones of what defines the US is to deny the fundamental nature of American history. Fairness in history would have meant compensating Loyalists for losing their war to remain part of Great Britain; fairness during the Civil War would have meant respecting those who supported slavery because all viewpoints are equally valid; fairness would have meant not settling the West because here were Indians there first. Security would have meant never choosing to send warships to the Barbary Pirates; security would have meant paying tribute and avoiding conflicts; security would mean acquiescing to tyrants and dictators in order to buy the peace of being a subject people. Economic security would mean protecting buggy manufacturers against the automobile; economic security would mean protectionism and losing the benefits of world trade; economic security would mean preventing new technologies from disrupting markets and processes.

It is also the path to stagnation and irrelevance.
Those of us here tonight can't solve all of our nation's woes.  Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers.  But we can help.  We can make a difference.   There are steps we can take right now to improve people's lives. 

Oh Dear. While professing the inability to wave his magic wand and make everything better - a pony in every backyard - the insistence that the government is here to help you. Those words should inspire ridicule and rejection, as we know that they are the words that mean the government is here to buy political support and screw everything up except for its political supporters.

I am sending this Congress a plan that you should pass right away.  It's called the American Jobs Act.  There should be nothing controversial about this piece of legislation.  Everything in here is the kind of proposal that's been supported by both Democrats and Republicans – including many who sit here tonight.  And everything in this bill will be paid for.  Everything.  
In other words, don't bother reading this and thinking whether things could be done better. President Obama is telling you what to think, his version of reality. He is saying, in effect, that he knows better.

Oy. He's right in one way: there should be nothing controversial here. The problem is that he refuses to think that any reasonable person could be in any way opposed to what he wants to do and that we should accept this without thinking or debating it.

And of course this bill will be paid for. The taxpayers will be paying for it. He is trying to make the case that for every dollar spent, somewhere a dollar will be saved. And the reason that anyone should believe him is?

The purpose of the American Jobs Act is simple:  to put more people back to work and more money in the pockets of those who are working.  It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed.  It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business.  It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services.  You should pass this jobs plan right away.  
The purpose of the American Jobs Act is simple: it is to distort the US labor market to ensure that the economy is not the reason the President is not re-elected. It will create more boondoggles for his greatest contributors, financial folks and lawyers. It might create a few jobs along the way, but not because demand is up, but rather because we'll spend lots of money to get some people working.

Payroll taxes are not the reason that employers aren't hiring. The jolt to the economy is the jolt of realizing that the last blood is being drained away. Oh, and here's news for the President and his outstanding team of economic advisors: companies hire and invest not because they think it will generate customers for their products and services, but because the demand is already there and is not being satisfied.

The only reason for passing this jobs plan right away is that if you take a close look at it, you'll find that there is lots of smoke and very, very little fire.

Everyone here knows that small businesses are where most new jobs begin.  And you know that while corporate profits have come roaring back, smaller companies haven't.  So for everyone who speaks so passionately about making life easier for "job creators," this plan is for you.  
No, it's not. To repeat: tax cuts on the price of labor won't influence hiring, especially for small businesses. It might appear to do so in academic theories, but in the real world? It's apparent that President Obama and his select and expert team of economic adivsors know very little about small business hiring practices. Small businesses don't hire folks because they think demand might show up when they do so: they hire because they have so much business that they can't afford not to.

At least successful ones do. Those that were to behave like President Obama thinks they should be doing would, generally, simply run out money more quickly.

Pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or raise workers' wages.  Pass this jobs bill, and all small business owners will also see their payroll taxes cut in half next year.  If you have 50 employees making an average salary, that's an $80,000 tax cut.  And all businesses will be able to continue writing off the investments they make in 2012. 

Hmmm: in other words, pass this bill and nothing will happen. Small businesses are not going to be hiring when demand isn't there, nor are they going to raise wages when these aren't justified by the market. Pass this bill and you will improve the profits of small businesses.

Increased hiring as a result? Nope.
It's not just Democrats who have supported this kind of proposal.  Fifty House Republicans have proposed the same payroll tax cut that's in this plan.  You should pass it right away.  
Oy. Again, let's not talk about it, just give me my way right now.

Pass this jobs bill, and we can put people to work rebuilding America.  Everyone here knows that we have badly decaying roads and bridges all over this country.  Our highways are clogged with traffic.  Our skies are the most congested in the world.  
Of course, the fact that the EPA and the NIMBY industry stops new construction of roads and makes it impossible to expand existing roads to handle traffic isn't an issue at all.

This is inexcusable.  Building a world-class transportation system is part of what made us an economic superpower.  And now we're going to sit back and watch China build newer airports and faster railroads?  At a time when millions of unemployed construction workers could build them right here in America?  
Oy. Now we're in a bragging rights competition with a country that remains, largely, filled with peasants and no infrastructure? Faster railroads, Mr. President, would mean declaring eminent domain on tens of thousands of houses and businesses in the Eastern Corridor, since building high-speed rail means traveling in straight lines, not curves from community to community.

There is merit to the idea of putting construction workers back to work, I will give him that. The problem of the construction industry, however, is that the overhang in both private and commercial buildings is going to take decades to work their way out of the system: putting them to work (and let's ignore the fact that the work is different and a carpenter is going to have a hard time building roadbeds) is a good idea, but only papers over the fundamental screwing-up of the construction industry.

There are private construction companies all across America just waiting to get to work.  There's a bridge that needs repair between Ohio and Kentucky that's on one of the busiest trucking routes in North America.  A public transit project in Houston that will help clear up one of the worst areas of traffic in the country.  And there are schools throughout this country that desperately need renovating.  How can we expect our kids to do their best in places that are literally falling apart?  This is America.  Every child deserves a great school – and we can give it to them, if we act now.  

Oy. Now we get to the schools. Sure, every child deserves a great school and an outstanding education, The only problem is that the Federal Government acts against that, not for it.

The American Jobs Act will repair and modernize at least 35,000 schools.  It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country.  It will rehabilitate homes and businesses in communities hit hardest by foreclosures.  It will jumpstart thousands of transportation projects across the country.  And to make sure the money is properly spent and for good purposes, we're building on reforms we've already put in place.  No more earmarks.  No more boondoggles.  No more bridges to nowhere.  We're cutting the red tape that prevents some of these projects from getting started as quickly as possible.  And we'll set up an independent fund to attract private dollars and issue loans based on two criteria:  how badly a construction project is needed and how much good it would do for the economy.  
Reality check: by spending so much on teacher salaries and benefits, including retirement plans, school systems have been cutting back on fixing roofs and windows. He is proposing increased spending to solve a symptom that is the result of poor choices dictated by political pressuring and influence.

And to believe that there will be no boondoggles and earmarks is absurd in and of itself. The Democratic party lives on boondoggles and earmarks, and that is not about to change. Dream on.

This idea came from a bill written by a Texas Republican and a Massachusetts Democrat.  The idea for a big boost in construction is supported by America's largest business organization and America's largest labor organization.  It's the kind of proposal that's been supported in the past by Democrats and Republicans alike.  You should pass it right away.  
Again, do as I tell you. Nothing to discuss, nothing to debate, do as I say.

Pass this jobs bill, and thousands of teachers in every state will go back to work.  These are the men and women charged with preparing our children for a world where the competition has never been tougher.  But while they're adding teachers in places like South Korea, we're laying them off in droves.  It's unfair to our kids.  It undermines their future and ours.  And it has to stop.  Pass this jobs bill, and put our teachers back in the classroom where they belong.  
It's unfair to out kids to inflict the US educational system upon them. Education in the US is about fairness and feeling good about yourself, it's about not being ambitious, it's about sports and social activities. The reason that foreign competition is handing us our hat is that their kids are being taught intellectual skills like math and science, with an emphasis on understanding what these are good for, and delegates fairness and feeling good about yourself to the family and sports and social activities to leisure time. The emphasis in US schools is absurd for what the US labor market needs. With unions running schools, all you are doing is putting the incompetent back to "work" and inflicting more nonsense on the kids than ever before.

Pass this jobs bill, and companies will get extra tax credits if they hire America's veterans.  We ask these men and women to leave their careers, leave their families, and risk their lives to fight for our country.  The last thing they should have to do is fight for a job when they come home.  
I can agree with this one: however, it should never have been an issue to begin with, underscoring the basic hostility that the Democratic party has toward the military. I thought the President said, effectively, that only the stupid went into the military...

Pass this bill, and hundreds of thousands of disadvantaged young people will have the hope and dignity of a summer job next year.  And their parents, low-income Americans who desperately want to work, will have more ladders out of poverty.    
Play on the heartstrings of helping the poor. We have been fighting a war on poverty almost all of my life, and poverty keeps on winning.

Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.  We have to do more to help the long-term unemployed in their search for work.  This jobs plan builds on a program in Georgia that several Republican leaders have highlighted, where people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job.  The plan also extends unemployment insurance for another year.  If the millions of unemployed Americans stopped getting this insurance, and stopped using that money for basic necessities, it would be a devastating blow to this economy.  Democrats and Republicans in this Chamber have supported unemployment insurance plenty of times in the past.  At this time of prolonged hardship, you should pass it again – right away.  
Again the obsession of passing this right away, no debate, no discussion. And creating a class of permanent unemployed doesn't mean you should keep feeding the monster: get them back to work instead. A $4k tax credit won't increase hiring: it might, at best, shift existing hiring from recently unemployed to long-term unemployed. Again, tax credits or tax cuts won't generate demand.

Pass this jobs bill, and the typical working family will get a fifteen hundred dollar tax cut next year.  Fifteen hundred dollars that would have been taken out of your paycheck will go right into your pocket.  This expands on the tax cut that Democrats and Republicans already passed for this year.  If we allow that tax cut to expire – if we refuse to act – middle-class families will get hit with a tax increase at the worst possible time.  We cannot let that happen.  I know some of you have sworn oaths to never raise any taxes on anyone for as long as you live.  Now is not the time to carve out an exception and raise middle-class taxes, which is why you should pass this bill right away.     

The mantra of "pass this bill right away" is impossible to miss.

For the first time, we see the President actually admitting that allowing a tax cut to expire means that taxes will increase. Duh for the most, but this is a point which Democrats have tried to deny for ages.
This is the American Jobs Act.  It will lead to new jobs for construction workers, teachers, veterans, first responders, young people and the long-term unemployed.  It will provide tax credits to companies that hire new workers, tax relief for small business owners, and tax cuts for the middle-class. And here's the other thing I want the American people to know:  the American Jobs Act will not add to the deficit.  It will be paid for.  And here's how:
The agreement we passed in July will cut government spending by about $1 trillion over the next ten years.  It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas.  Tonight, I'm asking you to increase that amount so that it covers the full cost of the American Jobs Act.  And a week from Monday, I'll be releasing a more ambitious deficit plan – a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.  
In other words, it will be paid for in the sense of somebody has to pay for it. What he is not saying is that the deficit plans don't actually cut the deficit, but rather only slows the growth. That is a certain and clear way to bankruptcy.

This approach is basically the one I've been advocating for months.  In addition to the trillion dollars of spending cuts I've already signed into law, it's a balanced plan that would reduce the deficit by making additional spending cuts; by making modest adjustments to health care programs like Medicare and Medicaid; and by reforming our tax code in a way that asks the wealthiest Americans and biggest corporations to pay their fair share.  What's more, the spending cuts wouldn't happen so abruptly that they'd be a drag on our economy, or prevent us from helping small business and middle-class families get back on their feet right away.   
Again, fairness: the wealthy and big corporations already pay the lion's share of the tax bill.

Now, I realize there are some in my party who don't think we should make any changes at all to Medicare and Medicaid, and I understand their concerns.  But here's the truth.  Millions of Americans rely on Medicare in their retirement.  And millions more will do so in the future.  They pay for this benefit during their working years.  They earn it.  But with an aging population and rising health care costs, we are spending too fast to sustain the program.  And if we don't gradually reform the system while protecting current beneficiaries, it won't be there when future retirees need it.  We have to reform Medicare to strengthen it.  

Halleluiah! Recognition of the fundamental problem of Medicare and Social Security. But in the same breath, he perpetuates the lie that you have "earned" these welfare programs by paying in. That's not been the case from day one.
I'm also well aware that there are many Republicans who don't believe we should raise taxes on those who are most fortunate and can
best afford it.  But here is what every American knows.  While most people in this country struggle to make ends meet, a few of the most affluent citizens and corporations enjoy tax breaks and loopholes that nobody else gets.  Right now, Warren Buffet pays a lower tax rate than his secretary – an outrage he has asked us to fix.  We need a tax code where everyone gets a fair shake, and everybody pays their fair share.  And I believe the vast majority of wealthy Americans and CEOs are willing to do just that, if it helps the economy grow and gets our fiscal house in order.    

Warren Buffet may pay a lower tax rate than his secretary, but that would be on his overall income, not on his salary. Fear any government that wants to create a "fair" tax rate: there is no such thing. It's like being slightly pregnant. Taxes are and always will be unfair: trying to make them fair creates unfairness in one way or another. Doomed to failure.

I'll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington.  By eliminating pages of loopholes and deductions, we can lower one of the highest corporate tax rates in the world.  Our tax code shouldn't give an advantage to companies that can afford the best-connected lobbyists.  It should give an advantage to companies that invest and create jobs here in America.   
Believe that, and I have a bridge in New York for sale, for you a special price...

So we can reduce this deficit, pay down our debt, and pay for this jobs plan in the process.  But in order to do this, we have to decide what our priorities are.  We have to ask ourselves, "What's the best way to grow the economy and create jobs?"

Get out of trying to make markets "fair" and let the markets determine the best allocation of scarce resources. The President and his party won't like the results, but then again, the President and his party don't much like markets to begin with.
Should we keep tax loopholes for oil companies?  Or should we use that money to give small business owners a tax credit when they hire new workers?  Because we can't afford to do both.  Should we keep tax breaks for millionaires and billionaires?  Or should we put teachers back to work so our kids can graduate ready for college and good jobs?  Right now, we can't afford to do both.  

Oh. My. Goodness. Recognition of limited resources and the need to make economic, rather than political decisions?
This isn't political grandstanding.  This isn't class warfare.  This is simple math.  These are real choices that we have to make.  And I'm pretty sure I know what most Americans would choose.  It's not even close.  And it's time for us to do what's right for our future.      
A tad late to realize that the Cold Equations apply to everyone.
The American Jobs Act answers the urgent need to create jobs right away.  But we can't stop there.  As I've argued since I ran for this office, we have to look beyond the immediate crisis and start building an economy that lasts into the future – an economy that creates good, middle-class jobs that pay well and offer security.  We now live in a world where technology has made it possible for companies to take their business anywhere.  If we want them to start here and stay here and hire here, we have to be able to out-build, out-educate, and out-innovate every other country on Earth.   
Oy. Here is where things start to go downhill quickly. We have always lived in a world where companies can take their business anywhere: globalization is nothing new (even at the time of Christ there was trade and the movement of production elsewhere).

This task, of making America more competitive for the long haul, is a job for all of us.  For government and for private companies.  For states and for local communities – and for every American citizen.  All of us will have to up our game.  All of us will have to change the way we do business.  
Oh dear. We're from the government and we're here to help you. Fathers, hide your daughters; mothers, hide your sons.

My administration can and will take some steps to improve our competitiveness on our own.  For example, if you're a small business owner who has a contract with the federal government, we're going to make sure you get paid a lot faster than you do now.  We're also planning to cut away the red tape that prevents too many rapidly-growing start-up companies from raising capital and going public.  And to help responsible homeowners, we're going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% -- a step that can put more than $2,000 a year in a family's pocket, and give a lift to an economy still burdened by the drop in housing prices.  
In other words, we promise not to screw you over so badly and we promise to continue to screw around with the housing market. That worked so well over the last 40 years that we want to fix all the problems we created by meddling in the market by meddling further in the market. This time, it's different...oy!

Other steps will require Congressional action.  Today you passed reform that will speed up the outdated patent process, so that entrepreneurs can turn a new idea into a new business as quickly as possible. That's the kind of action we need.  Now it's time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama, Colombia, and South Korea – while also helping the workers whose jobs have been affected by global competition.  If Americans can buy Kias and Hyundais, I want to see folks in South Korea driving Fords and Chevys and Chryslers.  I want to see more products sold around the world stamped with three proud words: "Made in America."  
Earth to Obama and Government Motors: build products that people actually want. That is the greatest problem with products "Made in America".

And on all of our efforts to strengthen competitiveness, we need to look for ways to work side-by-side with America's businesses.  That's why I've brought together a Jobs Council of leaders from different industries who are developing a wide range of new ideas to help companies grow and create jobs.  
A committee is going to help here? Seriously? I think we see the community organizer background of the President clearly here.

Already, we've mobilized business leaders to train 10,000 American engineers a year, by providing company internships and training.  Other businesses are covering tuition for workers who learn new skills at community colleges.  And we're going to make sure the next generation of manufacturing takes root not in China or Europe, but right here, in the United States of America.  If we provide the right incentives and support – and if we make sure our trading partners play by the rules – we can be the ones to build everything from fuel-efficient cars to advanced biofuels to semiconductors that are sold all over the world.  That's how America can be number one again.  That's how America will be number one again.      
Wishful thinking. Now if we all think positive thoughts, everything will be fine...

Now, I realize that some of you have a different theory on how to grow the economy.  Some of you sincerely believe that the only solution to our economic challenges is to simply cut most government spending and eliminate most government regulations.  
Yep. First realistic thing said, recognizing reality.

Well, I agree that we can't afford wasteful spending, and I will continue to work with Congress to get rid of it.  And I agree that there are some rules and regulations that put an unnecessary burden on businesses at a time when they can least afford it.  That's why I ordered a review of all government regulations.  So far, we've identified over 500 reforms, which will save billions of dollars over the next few years.  We should have no more regulation than the health, safety, and security of the American people require.  Every rule should meet that common sense test. 

Some? Hah! How about making regulations have an expiration date that ensure that nonsense isn't perpetuated?
But what we can't do – what I won't do – is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades.  I reject the idea that we need to ask people to choose between their jobs and their safety.  I reject the argument that says for the economy to grow, we have to roll back protections that ban hidden fees by credit card companies, or rules that keep our kids from being exposed to mercury, or laws that prevent the health insurance industry from shortchanging patients.  I reject the idea that we have to strip away collective bargaining rights to compete in a global economy.  We shouldn't be in a race to the bottom, where we try to offer the cheapest labor and the worst pollution standards.  America should be in a race to the top.  And I believe that's a race we can win.   
Straw man.

In fact, this larger notion that the only thing we can do to restore prosperity is just dismantle government, refund everyone's money, let everyone write their own rules, and tell everyone they're on their own – that's not who we are.  That's not the story of America.    
Well, it would have been a decent start. But first after we disenfranchise those who drove subprimes and CDOs.

Yes, we are rugged individualists.  Yes, we are strong and self-reliant.  And it has been the drive and initiative of our workers and entrepreneurs that has made this economy the engine and envy of the world.

Ummmmm, yes. Your point being?
But there has always been another thread running throughout our history – a belief that we are all connected; and that there are some things we can only do together, as a nation.
Ummmmm, yes. Your point being?

We all remember Abraham Lincoln as the leader who saved our Union.  But in the middle of a Civil War, he was also a leader who looked to the future – a Republican president who mobilized government to build the transcontinental railroad; launch the National Academy of Sciences; and set up the first land grant colleges.  And leaders of both parties have followed the example he set.  
Ummmmm, yes. Your point being?

Ask yourselves – where would we be right now if the people who sat here before us decided not to build our highways and our bridges; our dams and our airports?  What would this country be like if we had chosen not to spend money on public high schools, or research universities, or community colleges?  Millions of returning heroes, including my grandfather, had the opportunity to go to school because of the GI Bill.  Where would we be if they hadn't had that chance?  
Ummmmm, yes. Your point being?

How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the Internet and the computer chip?  What kind of country would this be if this Chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do?  How many Americans would have suffered as a result? 

Ummmmm, yes. Your point being?

No single individual built America on their own.  We built it together.  We have been, and always will be, one nation, under God, indivisible, with liberty and justice for all; a nation with responsibilities to ourselves and with responsibilities to one another.   Members of Congress, it is time for us to meet our responsibilities. 

Ummmmm, yes. Your point being?
Every proposal I've laid out tonight is the kind that's been supported by Democrats and Republicans in the past.  Every proposal I've laid out tonight will be paid for.  And every proposal is designed to meet the urgent needs of our people and our communities.  
That's according to President Obama. I dare say that there's other viewpoints on that, but as we've seen, let's pass this now before there is discussion...

I know there's been a lot of skepticism about whether the politics of the moment will allow us to pass this jobs plan – or any jobs plan.  Already, we're seeing the same old press releases and tweets flying back and forth.  Already, the media has proclaimed that it's impossible to bridge our differences.  And maybe some of you have decided that those differences are so great that we can only resolve them at the ballot box.   
Well, it is the place to do that.

But know this:  the next election is fourteen months away.  And the people who sent us here – the people who hired us to work for them – they don't have the luxury of waiting fourteen months.  Some of them are living week to week; paycheck to paycheck; even day to day.  They need help, and they need it now. 

In other words, President Obama is setting the time table. This needs to be passed today so that he has a chance of being re-elected...
I don't pretend that this plan will solve all our problems.  It shouldn't be, nor will it be, the last plan of action we propose.  What's guided us from the start of this crisis hasn't been the search for a silver bullet.  It's been a commitment to stay at it – to be persistent – to keep trying every new idea that works, and listen to every good proposal, no matter which party comes up with it. 

As if that were the case: the President actively dis-listens to anyone not within his limited circle of advisors.
Regardless of the arguments we've had in the past, regardless of the arguments we'll have in the future, this plan is the right thing to do right now.  You should pass it.  And I intend to take that message to every corner of this country.  I also ask every American who agrees to lift your voice and tell the people who are gathered here tonight that you want action now.  Tell Washington that doing nothing is not an option.  Remind us that if we act as one nation, and one people, we have it within our power to meet this challenge.
In other words, let's not talk about how irresponsible the President and his party has been. Do as I tell you, and if you don't, I will tell everyone what a spoil-sport you are being.

President Kennedy once said, "Our problems are man-made – therefore they can be solved by man.  And man can be as big as he wants."

Leaving those who created the problem in charge of the problem is nonsense.
These are difficult years for our country.  But we are Americans.  We are tougher than the times that we live in, and we are bigger than our politics have been.  So let's meet the moment.  Let's get to work, and show the world once again why the United States of America remains the greatest nation on Earth.  Thank you, God bless you, and may God bless the United States of America.

Oy. This is a speech that bordered on bullying, of talking down to the Republicans, a fine speech for a neighborhood organizer.

But as a speech to the people of the United States, to the Congress? A speech designed to generate support and cross bridges?

The only bridges here are those falling apart and desperately in need of repair. The President seems intent on burning them by bullying and threatening, rather than real agreement and working towards making things better.

There is no real plan here. Markets are not being freed and deregulated. Instead, in the name of fairness and security, they are kept under control. That means when the markets finally break free of these constraints, the effect will be vastly worse than the effects of an unconstrained market.

I've had enough of this now.

Mittwoch, August 31, 2011

Inability to learn...

...is a sign of severe aging. When you can't learn something new, it usually means that you've reached a point in your life where you've given up, in one way or another, on looking towards a future that includes change.

This and this reminds me of why I cannot be a Democrat. Anyone who can seriously believe that it is the government's job to force banks to make loans to those who cannot afford them shows an inability to learn, at least from past mistakes.

From the first link:

A government department is again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Welcome to the next housing mess.

The 1990s may have brought us supercharged politicized lending, but Eric Holder's Department of Justice is taking the game to an entirely new level, and then some. The weapon is a "fair lending" unit created in early 2010, led by special counsel Eric Halperin and overseen by Civil Rights Division head Thomas Perez.

To make a long story short, Perez et alia are using their ability to bring lawsuits on the public dime to force banks to make loans according to political criteria, rather than financial criteria.

Good lord, that's what got us into this in the first case: here we have an absolute blindness to financial and economic reality in the pursuit of a political chimera - economic justice - that has essentially already bankrupted the housing sector.

These people are dangerous. You can ignore economics for a certain amount of time if you have deep pockets, but at some point or another, the markets will toss you out on your ear after taking all of your money. The only thing that happens when you force the banks to behave as if finances and economics didn't matter is that the banks fail.

I mean, how stupid can you be? If this is the calibre of lawyers that are running the country...ye gods. One of the best arguments ever for passing a constitutional amendment forbidding lawyers from holding public office (it's actually not such a bad idea, as conflict of interests are rife: lawyers-turned-politicians get laws passed that profit politicians-turned lawyers...).

The second link underscores how fundamentally clueless Democrats are. Seriously clueless, clueless in the sense that they apparently can't think things through to their logical conclusions (or, probably more accurately, they have been thinking things through, to the logical conclusion that they can create opportunities for crony capitalism and corruption).

Here the recommendation is for the resurrection of the Fannie Mae/Freddie Mac model for infrastructure investments, because those institutions worked out so well (actually they did for the Democrats, enriching the party faithful, including Barney Frank's boyfriend, while committing fraud upon the US taxpayers):

The new bank would be a government-sponsored enterprise, or GSE, whether or not anyone admits it. The bank would have an implicit subsidy for its debt because it is backed by the government. And the debt it issued would be "off-budget," which means it wouldn't show up in annual outlays. When she first proposed the concept in 2008, Connecticut Democrat Rosa DeLauro explicitly described the bank as a "public private partnership like Fannie Mae."

Such an outfit will inevitably be politicized, as similar examples have been all over the world. Japan's postal bank has been used for decades to finance public works. Japan's roads and bridges are grand but its economy has grown little in 20 years. Agribanks, regional development banks, Brazil's BNDES national bank have all become vehicles for the political allocation of credit.

Ms. DeLauro's bill admits as much, stating that the bank must take into account the "economic, environmental, social benefits and costs" of the projects seeking financial assistance. Among the considerations: responsible employment practices, use of renewable energy, reduction in carbon emissions, poverty and inequality reduction, training for low-income workers and public health benefits.

Right, Like that's going to work.

The inability to learn from past mistakes is a sign of deteriorating mental ability. Of course, that is assuming that both of these approaches is not the deliberate attempt to create institutions capable of committing, for political and personal gain, immense damages to the US economy.

Aren't we screwed enough already? I cannot, seriously, fathom why anyone can trust the Democratic Party, at this point in time, to behave like responsible adults. This is the party of the crony deals completed in back rooms, backed up with extortionate demands from "public prosecutors" whose sole job is to make it impossible for anyone to escape the fleecing.

This is not the America I grew up in. It is not the America that is the shining city on the hill. This is the America of race politics, of the Chicago machine, of deep corruption and vampire policies that aim only to bleed the productive dry while laughing their way to the bank. Like all corrupt societies, it is dysfunctional and can only end up in one way: chaos and collapse. It's just a question of time...

Montag, August 29, 2011


...is going to be the ruin of us all.

Seriously: in today's Handelsblatt (the article isn't currently online, but it's in German anyway), the lead article is about how the "economic elite" in the US is calling, apparently in a Keynesian unisono voice, for additional spending: the hundreds of billions spent weren't enough.

Ye gods.

Apparently these folks still believe that throwing money at problems is all you really need to do: it is, after all, a classic Washington solution to any problem that shows up (which does explain part of the reason the budget looks like it does).

Here's a question that has, as of yet, not been answered: At what point does a Keynesian economist say that his set of dogmatic tools fails to work and that an economy must go through a very painful period of austerity - paying off the bills, as it were, after decades of Keynesian excess - in order to restore order to the country?

I fear the answer is that a Keynesian economist will admit the failure of the system about the same time that a Marxist will admit that the Marxist system failed as well.

In other words, never.

Ye gods. The way things are going, the economy and the country will be sacrificed in order to meet the belief structure of a long-dead economist. Keynes was right:

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist."

How ironic can it be that the defunct economist that Keynes here speaks of is ... Keynes himself?

Another quote:

"The difficulty lies not so much in developing new ideas as in escaping from old ones."

That economists of the calibre of Stiglitz call today for increasing government spending underscores how bankrupt Keynes' thought has become.

Ye gods.

Montag, August 15, 2011

Should Anyone Be Surprised?

Just read this.

Does this surprise anyone? Scratch the surface of any government-mandated ecological pie-in-the-sky program and you will get the usual: graft, incompetence and, apparently in this case, sheer stupidity.

The government gives ethanol producers lots of money to produce the stuff using new technologies, it turns out that these don't work, then the government mandates the usage of non-existent products and fines companies for failing to use what the suppliers can't supply them with.

Ye gods.

Wonder what the track record of other government-funded ecological-wonder-programs that are based on untried technologies and wishful thinking are like.

I doubt that they are much different.

Oh, and as an aside: the way things look right now, the EPA will mandate buying massive amounts of ethanol from Brazil, rather than changing its targets, spending the money originally mandated for domestic production - which can't be generated - on foreign suppliers, subsidizing them to increase their market share, making it more difficult - you guessed it - for domestic production to ever get up to speed.

Gotta love the unintended consequences here...but should anyone, really, be surprised?

An Interesting Twist...

Recent events have made it partially clear what is wrong in Great Britain:

"England is a nation of shopkeepers."

While generally attributed to Napoleon I, it is based on what Adam Smith wrote:

"To found a great empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers."  — Adam Smith, The Wealth of Nations, Glasgow edition, 1976), Book IV, section vii. c.

Napoleon's quote is more to the point.

Back then, however, Napoleon was wrong: Great Britain, though with a much smaller population (half that of France in the day), had a superior manufacturing base and the "nation of shopkeepers" trounced the French. The same view was held by many Germans before WW2, belittling the ability of the UK to field a modern army. They were also wrong.


Goodness. Read this to understand that, if anything, Great Britain today is indeed a nation of shopkeepers, unable to assert itself in the face of what amounts to an assault on the core structure of any society.

It's an interesting twist: a general judgement of foreigners (Smith, after all, was Scottish) about the English turns out, after generations of being proved time and time again to be wrong, to be right.

Let's just hope for the case of the residents of the UK that it doesn't take generations to claw back their rights to not be intimidated by yobs and prove all those foreigners wrong. That would be the true tragedy.

Freitag, August 12, 2011

Bumpy Ride, Oh My...

We're in for a bumpy ride.

As long as governments continue to do things half-way, the longer it's going to take to run the speculators down into the ground.

A speculative bubble bursts when it becomes apparent that the only way to make money in the bubble is to have already left it. If you're still in it, you're screwed.

While I dislike the man intently, George Soros had something intelligent to say today in the Handelsblatt. I'm not going to link, but the gist of the story was that the core countries of the EMU will probably have to lose their AAA rating in order to save the periphery: the leverage that these countries will have to take on in order to bail out the welfare systems and failed government finances of many European countries - if not most - will mean, much like the US, that their pristine ratings are in jeopardy.

Which they are because of the political decision to support those countries come hell or high water, or both.

Now, speculators have a place in the world of finance. They are the ones who are willing to take great risks for great rewards.

Today, speculators who are desperately scrambling to get any sort of return of the kind that was barely adequate yesteryear are chasing mirages of high returns that are, under sober circumstances, more than outweighed by the risks involved: even the high-risk, high-return platitude of the past is under question. What we are seeing is the destructive phase of Schumpeter's creative destruction, a frenzy of self-destructive and Pyrrhic victories that is eating away at the soul of modern finance.

This is not an end game, the End of Days. It is, however, a major crisis, one that will see landscapes consumed by fire and floods, with "too big to fail" failing. It is a crisis of confidence, it is a crisis of fidelity, it is a crisis of trust. Wide-spread fraud, aided and abetted by politicians and by those who were charged with keeping an eye on things, must come out and be thoroughly cleansed from the system before trust can be established again.

Mittwoch, August 10, 2011

Rather Unusual Honesty...

Goodness. I never, ever expected this kind of honesty from a government statistical office. Maybe there *is* hope after all.

Today's release of the Monthly Wholesale Trade: Sales and Inventories report shows that the sales of merchant wholesalers was up 0.6% from the revised May number.

Not so bad, I thought.

Then I saw the +-0.7% after that number, in brackets. And an asterisk for the footnote.

The footnote says, and I quote directly:

The 90 percent confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

Goodness. Such direct honesty is severely refreshing in this day and age. I've always liked working with the Census folks. Now I know why. Rarely does one meet such honesty on the front page of a statistical document. Seriously: what they are saying is that after the rather extensive revisions, the actual values of the month-on-month changes are difficult to nail down. The year-over-year numbers, on the other hand, are not marked with that asterisk, indicating that while there may be a variance (which is documented), the values actually mean something.

Kudos to the U.S. Census Bureau. May you remain well funded...

Mark-to-Market, Instability & Just How Bad Are Things?

For those of you who have been following me for a while, you would know I am no fan of mark-to-market accounting.


Well, read why here, here, here, and here.

Seriously, mark-to-market is a disaster. There is one aspect of mark-to-market that has now emerged over the last several months that took me a while to notice: it leads to instability by inadvertently promoting what the Germans call "Beamten-Mikado". That's a version of the classic Mikado game, also known as "pick-up-sticks": dump a pile of elongated toothpicks on the table and try to remove them one by one without moving the other sticks.

In the German version called "Beamten-Mikado", played each and every day in German government offices, the one who makes the first move loses. Doesn't matter if you get any sticks, it is the inverse of the standard Mikado game. Move and you lose.

According to mark-to-market principles, if you see the value of an asset decline on the markets, you are required to re-assess your assets and change their value appropriately (well, not changing it all until you sell the asset would be the most appropriate thing to do, but you get what I mean). What happens when there is no market?

Hmmm. The mark-to-market people didn't think that one through.

What happens when markets start acting funny - and I scarcely think anyone can deny that this continues to be the case - is that companies cease acting within the market, deciding instead to see what the market will do. Given that every one of the bigger players is holding assets that may or may not turn toxic and, at the same time, take down those holding them if they were to revalue mark-to-market, what's a holding company to do?

Nothing, of course. Nothing that would require them to revalue their assets. Especially nothing that would require the revaluation of toxic assets.

As Brian Rogers of Fator Securities put it (link here to Zero Hedge):

The $60tr global economy can take a haircut on billions of dollars in Greek debt, but it simply cannot take a haircut on $700tr in global derivatives sitting on the balance sheet of every major government, hedge fund, financial services company, TBTF bank, insurance company and major corporation that engages in any hedging activity. 

In other words, anything that would require a change in valuation of the hedges that these companies hold destroys the world financial system.

Greece, Italy, Spain, Portugal and Ireland could all simply restructure their debt and life would go on were it not for the leverage of the banks that hold them.  In the US, real estate could be allowed to fall to its market clearing price or be written off by the lender were it not for the leverage of the banks that own it.  No matter which way you turn, all roads lead to the TBTF banks, their leverage and the $700tr derivatives market. 

Bingo: the system is fundamentally unstable because, at the end of the day, the markets are not being allowed to function. In the pursuit of some magic recovery, some strange and bizarre turn of events that would turn the game around from lose-lose to win-win, the powers-that-be have chosen not to allow markets to work, thus, in their eyes, removing the mark-to-market catastrophe that would otherwise loom, done in the name of stability.

In other words, in the name of stability, instability has been created, where the massive leveraging of finances means that any small change, anything that forces a major player to move, will instead bring down the system as a whole.

Right now, there is real incentive not to do anything: whoever moves first, loses.

The difference between this and Beamten-Mikado is that the latter doesn't actually exist as a game: it is a cynical observation.

Just how bad are things?

Consider the $700 tr derivatives markets. If these were to start to fail, it would represent the greatest destruction of capital bar a nuclear war. Not even the destruction of German and Japanese cities wholesale comes close to this. It is the inverse neutron bomb of the modern world: it would destroy capital, but leave the people alive.

Just how bad are things?

Consider the world population and the farm-to-person chain: disrupting logistics chains because of bankruptcies due to mark-to-market revaluations of derivatives. Millions starve because food can't move from farms to cities (and don't think that the government can "intervene" and get things running again: it doesn't work that way).

Just how bad are things?

I remember reading, back in the 1970s, some of the "get rich by financial manipulation" books that were the rage. One of them recommended living very frugally and maxing out your equity by leveraging your cash flow - aka income - as fully as possible. Keep on driving an older car, live in a small apartment, eat frugally, skip the movies, live off of 20% of your income in order to borrow as much as you could with the other 80%: "invest" the money in the stock market and you'd be a millionaire in 10 years tops. Of course, that meant that any small change in interest rates or returns would lead to personal bankruptcy, which, of course, back then wasn't that much of a problem (since changed). The major economic players out there apparently read those books, and as a result we have, speaking as a nation, no income for consumption, as it is so heavily leveraged.

Just how bad are things?

Consider this: growth in China, driven by politically determined prices to drive exports, has reached the point where additional debt no longer generates growth (see this for more). However, this hasn't stopped China from expanding debt and increasing investments with no regard to their profitability. This is the next catastrophe coming, one that will change the game and may even mean the end of China as we now know it.

Just how bad are things?

Keynes called for government intervention to improve worker's salaries during recessions. The governments, as they are wont to do, screwed that up royally and instead pumped money into the economy in the (vastly) mistaken expectation that vast amounts of really cheap money would lead to growth. It led, instead, to massive misallocation of capital - THE cardinal sin of economics as such - and a resulting landscape of financial ruins that are little more than empty shells behind a Potemkin-village-like facade.

Just how bad are things?

Consider this: the Fed interventions over the last several decades were made to stabilize the economy and dampen out negative effects, while allowing positive effects to expand (ending up in a series of bubbles). The cumulative effects of trapping corrections is that when the correction have to be made, they have to resolve not merely the current crisis, but rather any number of crises that haven't been resolved. Trying to impose stability on an unstable system - capitalism, after all, is fundamentally unstable,as it is designed to tear down and reconstruct on a continuing basis (Creative Destruction) - only leads to greater instabilities in the system, with new harmonics to the movements tearing the system apart from within.

We are heading to a new phase of creative destruction, one that will be, at best, a wild ride and, at worst, a write-off of debt that will make the Great Depression look like a minor accident. Writing off $700tr in derivatives means that the dollar will be worthless in its current form - there simply aren't that many dollars around - and that would mean the US taking a deadly, fell blow to the body in order to save the world economy.

Not going to happen, of course: that means that when push comes to shove, the same thing will happen.

Just how bad are things? Worse than you can imagine. Pretending anything else is naive at best and outright self-delusion at worst.

Gonna be a bumpy ride. Fasten your seat belts, put your tray in an upright position and review the safety manual in the seat pocket ahead of you. We will be turning off the entertainment system at this time.

Don't forget your air sickness bag as well.

Dienstag, August 09, 2011

The Sound of a Sacred Cow Being Gored...

What drives liberals and democrats into apoplexy is calling their sacred cows into question: the entire holy trilogy of Great Society, Medicare and Social Security. Raise even minor problems with these and you can watch their blood pressure increase by the second. The yelling starts, discourse is shut down and only by silencing their opponents can they start to recover their composure. It makes it hard, at times, not to tease, since you can get them so riled up with little effort.

This is a great example of how these folks react to criticism. It's a capture of a certain point in time, a point in time where the original author decided that she had enough lip and removed the comments. Read and see how she utterly fails to make her point and gets taken down.

Of course, there's more to the story than that. The woman involved is Froma Harrop, She is the President of the National Council of Editorial Writers and runs the Civility Project, designed to improve the quality of political discourse: in other words, shutting down discourse is an epic fail.

Read the comments - where there is no cursing and no ad-hominem attacks - and understand what liberals mean when they demand an end to incivility: they are really demanding an end to anyone talking back to them.

It is the sound of sacred cows being gored. They are losing, slowly, gradually, but consistently, their world picture of how the world should be working. They are the do-gooders and can do no wrong (and have done so much wrong that it will take a generation to fix it); they are the smart ones that everyone should listen to (whose ignorance is legion and legendary); they are the ones who understand how to make peace (and end up make wars not only possible, but inevitable); they are the ones sympathetic to the down-trodden and the disadvantaged (but exploit these groups in order to have a good life for themselves); they are the ones who will remake the world so that it is just and fair (but lack the understanding that there is no such thing in the real world and that by taking from others to give to others, they are just as unjust and unfair).

I could go on. R. Emmett Tyrell Jr. wrote a lovely book called "The Liberal Crack-Up" back in 1984. You could call it the disintegration of principled liberalism into trendy enthusiasms without principles.

Now the sacred cows of liberalism are being gored. It will get much uglier out there than anyone really wants to see, and that is the hope of the liberals: they want to shut anyone up who disagrees.

Donnerstag, August 04, 2011

The End of Keynes...

This pretty much says it all.

Fundamentally, if you actually go back and read what Keynes said, it's all about jobs and incomes: without improvements in either, the economy will tank. It really is that simple. No amount of redistribution can cover up a jobless recovery and stagnating wages.

While some may call for the end of Keynesian meddling with the economy, this would be too fundamentally wrong, since Keynes was right.

It's his followers that have royally screwed things up.


Because Keynes wanted the government to intervene in recessions in order to give workers both jobs and wages to get consumer spending back up. You can do that very well by cutting taxes for businesses and private persons so that they have more money to spend and invest; by making it easy to hire (and fire!) workers; by having the government go out and buy services directly to build and renew. It's a very simple solution to kick-starting growth and getting the economy back up to speed, and if done right - by putting expiration dates into the measures and having the decency to ensure that people's money isn't wasted - it works. It may not jump-start an economy in a depression, but it does prevent more serious collapses.

Of course, modern-day government interventions do anything but work. The TARP money was a boondoggle without end, generating virtually no jobs by enriching those who lobby well and government cronies, and the the pork - aka entitlements - has replaced any reasonable semblance of effective and productive government spending to counter the effects of a recession.

Obama and Bernanke have flogged the dead horse that is Keynes to the point where even the MSM can recognize that it is fruitless to continue to throw money at the problem.

The problem is that we now need an anti-Keynes to remove the parasite that is government spending today. Once that is achieved, a multi-generational undertaking, perhaps Keynes can be reinstated as the excellent economist that he was and for which he should be respected and taught.

But not the parody that he represents today.

Talk About Projection...

First of all, sorry for the extended absence: as you can imagine, given the markets and the contradictions of data from so many sources, things have been...hectic.

But this brought me back. Hmmm: that link doesn't seem to be working, perhaps it will. If not, simply go to the blog there and the article appears.

Key quote:

MSNBC host Martin Bashir interviewed Stanton Peele, a psychologist and an "expert on addiction," this afternoon. Bashir urged Peele to psychologically evaluate supporters of the Tea Party. "It reminds us of addiction because addicts are seeking something that they can't have," Peele said. "They want a state of happiness or nirvana that can't be achieved except through an artificial substance and reminds us of the Norway situation, when people are thwarted at obtaining something they can't, have they often strike out and Norway is one kind of example to one kind of reaction to that kind of a frustration."

Bashir later asked: "So you're saying that they are delusional about the past and adamant about the future?"

"They are adamant about achieving something that's unachievable, which reminds us of a couple of things. It reminds us of delusion and psychosis," Peele responded.

Sorry, guys: the ones who are delusional are the MSM, the left, the Democratic Party (sorry, but I repeat myself).

Addicts seeking something that they can't have? Sounds like the left with their visions of "economic justice" or "equality."

A state of happiness or nirvana that can't be achieved except through an artificial substance? Sounds like the left with their heavy meddling in business and their dependence on federal money (now there's an artificial substance if there ever was one!) to try to remake society after their own vision.

When people are thwarted at obtaining something they can't have, they often strike out? Sounds like the name-calling and hysteria of the MSM, the left and the Democratic Party (again, I repeat myself) towards the semblance of responsibility that the deficit ceiling agreement appears to be (it's a long, long way from being really responsible, but it's a start...).

They are delusional about the past and adamant about the future? Doesn't that sound like the delusions about the Great Society - which led to a worsening of society, rather than an improvement - and the whole edifice of New Deal beggar-thy-neighbor-especially-if-he-has-more-money distributional policies?

Delusion and psychosis are some of the fundamental core values of those who have dedicated their lives to maintaining the shibboleths of US liberalism: that the government is there to do wonderful things for society, that throwing money at problems is a solution; that the government can do no wrong; that by dwelling on the past and making injustices of the past inviolate and holy, one can achieve a better society.

Those are delusional and psychotic, my friends: the reality is that government is doing terrible things to society in the name of a utopian good; that throwing money at problems only serves to corrupt; that government does wrong each and every day; and that by maintaining and enhancing grudges and hates, the government divides in order for the politicians to conquer.

Talk about projection!

Mittwoch, Juni 22, 2011

True colors...

Why doesn't this surprise me?

President Obama wants to be re-elected, so he is throwing Afghanistan under the bus in order to make himself look good.

Of course, that follows a long, long pattern of US betrayal of allies when it was politically opportune to do so. Always, always during a Democratic presidency.

It is a sad fact: the President of the United States is a political hack, without direction or vision beyond what his financiers have been telling him to do, and even that has been spotty. For them, of course, he's the only game in town. He knows that, and is, I think, honestly perplexed that his honorable opposition isn't willing to get on the deal.

Look at the historical record: Democratic presidents, almost without fail, get the US into trouble internationally with poor decisions, bellicosity and incompetence. Kennedy started US involvement in Vietnam and Johnson escalated, and a Democratic congress cut Vietnam off in their final hour of need. Carter had the Desert One fiasco, while Clinton had the Balkans and alienated Russia for at least a generation. Obama may have inherited both Iraq and Afghanistan, but is doing just fine screwing things up in Libya and Sudan.

I think the problem with the Democrats and foreign policy is that they both don't really care about it (domestic politics is where the money is and where careers are made) and when they do, behave like Wilsonists and present carefully thought out, brilliant and complete unworkable solutions that make everyone shake their heads and go "what are they smoking?" whilst, of course, at the same time solving nothing. Carter's sole claim to fame is the Egypt-Israeli peace deal, and that got Sadat murdered, Clinton failed to achieve anything in the Middle East.

The true colors of the Democrats is that they cannot be trusted with foreign policy because they consistently screw things up. The days of Sam Nunn and the Senate Democratic Hawks are long, long gone, and there is no one of his character left. His retirement from the Senate was because the party shifted left: he could no longer be a part of that.

You can't run a super-power based on the politics you need to put together a coalition of gays, minorities and unions. You won't care about the hard military and defense decisions you have to make if all you are worried about is playing gay marriage advocates against Black church goers in order to keep the support of both. You won't be able to call upon everyone to make sacrifices when you think a sacrifice is 8% growth of the money for your union supporters, rather than 15%.

The Democrats are thoroughly corrupt and corrupted, unable to see, given the degree of support given a slimeball like Wieners, that what they are willing to accept as the new normal is far, far beyond the pale of normality.

You can't run a super-power based on wishful thinking and plans to have everyone sign kumbya around a camp fire making smores.

Montag, Juni 06, 2011

Revisionism at its best, with a seasoning of intolerance tossed in as well...

Good lord.

When I read this, I had to double-check to make sure it wasn't the Onion.

Nope. You usual Sydney Morning Herald, not a bit of onion in sight.

First of all, the intolerance. Mr. Glover feels that anyone who isn't a true believer should be tattoed so they can be identified as sinners. Above and beyond the sheer intolerance and outright bloody-mindedness of the idea, Mr. Glover takes it one step further, actively denying the past.

Mr. Glover, the Left defended and justified the brutal repression of the Hungarians in 1956. Not perhaps your smarmy drawing-room git who thought he was a socialist (but in fact simply resented his low place in society) and was perfectly willing to change his colors whichever way the wind blew, most likely supporting Mrs. Thatcher when it became apparent that it behooved him to do so.

No, I'm talking about your true believers, the unrepentant, those who could, with a straight face, argue that the Wall in Germany was really to protect the East Germans from the fascist West Germans.


Key quote:

Facts that don't fit one's world view can be difficult to see. Consider the way the left spent decades ignoring the horrors of Soviet communism, horrors that were obvious to anyone who cared to look from at least the early 1930s. The facts didn't fit in with the way they wanted to see the world, so they spent decades in denial, looking the other way.

For most of the left, that blindness ended, dramatically, with the invasion of Hungary in 1956: it became impossible not to acknowledge the brutal realities of the dictatorship of the proletariat.

Like I said, revisionist history at its finest. Further, and this is the core of Mr. Glover's thesis, he is projecting: the reality is that the facts on global warming don't fit the theories (and if you think the IPCC talks about facts, take a closer look: peer review doesn't mean something is true, especially the kind of kid-glove peer review that is the norm for what is dubiously called climate change science), not the other way around. Mr. Glover wants those who don't think like him - he calls them the right - to suffer the same disappointments that he and his ilk have.

It's not those who you call deniers who are in denial, Mr. Glover: it is you. You and your fellow travellers were wrong on socialism and communism - and you cannot separate the two, as they are tied together forever - and you are wrong on anthropogenic climate change.

The Left didn't have any problems acknowledging the brutal realities of the dictatorship of the proletariat: it is exactyl what they deeply wanted and desired for their own countries. Anything else would have been bourgeois sentimentalities and worthy of a lengthy stay in Siberia to understand the errors of their thinking.

Good lord. Only in today's deliberate ignorance and respression of how truly evil the Left was, is, and will always be could someone even try to make this case. The examples that disprove his thesis are legion: the unwillingness of the SPD in Germany, for instance, to even contemplate unification because it meant abandoning the dream of real existing socialism on German soil (they were dragged kicking and screaming - behind closed doors, but nonetheless - by the US, the UK and France, along with the German conservative parties into agreeing for the liberation of East Germany and unification with West Germany. These were the same folks who tut-tutted when the Czechs dared to stand up to their rightful Soviet masters and want some meaningless, bourgeios freedoms instead of the glorious life of Czech socialism in 1968, warning that to even protest the march into Czechoslovakia would be provocative.

Mr. Glover is both guilty of projection and viewing what is apparently his own history with rather rose-colored glasses, selectively seeing what he wants to, rather than what actually is.


Each generation of people has a job to do; a burden that falls to their time. Sometimes, it's a war or depression. Sometimes, it's the work of building the first railways and roads. Sometimes, it's a plague that wipes out half the population or a fire that destroys a whole city.

God help anyone who actually believes such nonsense: they are in the arms of delusion and, worst of all, true believers in something that doesn't exist. There is no such thing as History as a force of nature, something that charts the paths of men: there are just people trying to exist and live their lives as they see fit. Mr. Glover and all of his like would put that to a right proper stop and show them the errors of their ways.

Beware the utopian idealist. The greatest political slaughters always beging with them, and end only when ordinary people stop them. It's one of the great mysteries of human society that so many fail to see this.

Mittwoch, Juni 01, 2011

You Know You've Blown It...

...when your minions catch on to how they are being lied to and screwed.

This is damning, less so much because of what it says as where it comes from.

It's written by a water-carrier for the Democratic Party, a true sycophant. Kevin Drum over at Mother Jones, never afraid to toe the party line and defend the indefensible.

He laments the collapse of the Unions, ignoring, of course, the stench of corruption and the inequity of seeing your labor dues spent on things you find appalling.

Ultimately, the Unions died - effectively - because the New Left of the Democratic Party found actual workers - blue-collar, red-necked and generally your average American in all their glory - to be truly appalling.

And here is the key quote:

In other words, it's not that the working class has abandoned Democrats. It's just the opposite: The Democratic Party has largely abandoned the working class.

Duh. I've said that here time and time again. It's about time one of their own realizes it.

Why Doesn't This Surprise Me?

Casinos are cool, right? Bright lights, music, cheap drinks and food, and who knows, ya might win big.


First and foremost, casinos exist for one thing only: to separate money from those who are bad at statistics. Nothing more, nothing less. There is a single verity when dealing with gambling, be it legal or unlawful: at the end of the day, the house always wins. Always.

Sure, you read of the guy tossing in a quarter and winning $10mn from the slots. The casinos need these stories to distract you from the fundamental fact that the guy winning $10mn didn't get that money from the casino: he got it from literally hundreds of blue-haired grandmothers feeding the slots, from hundreds of blue-collar workers out for a thrill and losing their paychecks at blackjack, from hundreds of office workers trying a system in roulette. The casino exists to provide a thrill in a mundane life, of the never-to-be-vanquished-hope of winning it big, of being someone special, of having the skill to beat the house and break the bank.

What fools we be.

Casinos bring all sorts of secondary effects. First and foremost, there is the problem of gambling addiction, of those who are so convinced that the next pull of the handle, the next deal, the next turn of the wheel will finally bring in the big bucks, that they are psychologically impaired and do foolish things in the pursuit of something that is extremely unlikely to happen. This addiction, like most, is destructive and insidious, affecting both rich and poor (with the only real difference being the length of time before they hit bottom). It breaks up families and destroys careers. But hey, it's not the casino's fault that these folks are susceptible to the allures, the bright lights and fleeting fame that gambling brings.

Second, casinos don't come alone. People out looking for a wild time will seek other ... distractions, and there is no casino out there that doesn't have the twin companions of drugs and rented sex. Maybe you didn't win big at the tables, but hey, you can still have that threesome you fantasized about, or you can get higher than a kite and what happens in Vegas, stays in Vegas.

Which is why Vegas is coming to Chicago.

Why doesn't this surprise me? Simple: because it is, after all, the logical next step on the road to perdition.

The City of Chicago is expecting upwards of $1bn of additional revenues from no less than 4 casinos, slots at the racetrack and at the two remaining Chicago airports.

Consider it instead a tax on statistical incompetence and stupidity. The City will need the revenue as bad money drives out what little is left of the good money.

Sin City just got some competition. Hope you like your new Mayor, Chicago, and what he is going to do to your city. Lock up your daughters (and sons!) and hope that the damage won't be too severe.

But this doesn't surprise me in the least. Letting casinos operate is a sign of desperation, not a sign of intelligent planning. Casinos are parasitical: they don't create meaningful jobs, but exist to take money from those who do not know better and serve the baser instincts. Expect fawning stories about job creation in the MSM, since they won't report on the thousands of lives destroyed.

But it doesn't surprise me: it is, if anything, the logical consequence of having Democrats running Chicago for so long, and also the logical consequence for electing the Mayor that Chicago apparently deserves.

It doesn't surprise me at all. Expect a move to decriminalize the sale of both soft drugs and sex; expect a police force interested in making sure the casinos work smoothly and keeping the human debris from showing up; expect strange deals and odd developments aimed at washing money. Standard operating procedures for a Democratic county that is already infamous for corruption and outright thievery of tax monies.

It doesn't surprise me at all.

Dienstag, Mai 31, 2011

Finally Someone From the World Bank Makes Sense...

This is a good read. Solid research, honest work.

It's titled "On the Relevance of Freedom and Entitlement in Development, New Empirical Evidence (1975-2007)", by Jean-Pierre Chauffour.

If you are at all interested in why some countries succeed and others don't: read it.

Key quote:

These results tend to support earlier findings that beyond core functions of government responsibility—including the protection of liberty itself—the expansion of the state to provide for various entitlements, including so-called economic, social, and cultural rights, may not make people richer in the long run and may even make them poorer.

That's right: expanding functions of the state beyond core functions tends to make people poorer, rather than richer.

The reason is simple:

...the extent to which political institutions and human interactions in society are formed around the concept of freedom constitutes one key determinant of growth, perhaps the ultimate cause of why economic agents actually create and accumulate.

The emphasis is in the original. The fundamental is this: that people actually create and accumulate, generate economic growth, because left to their own devices, free to do what they want to, they can.

Finally, we do not find any robust relationship between entitlement rights and economic growth. The initial level of the entitlement right is negative and statistically significant in regression where only this variable has been included ... and not statically significant in other specifications. The change in entitlement rights seems to influence the average economic growth positively, but this relationship is not robust to the inclusion of economic freedom.

Duh. Not so much what Mr Chauffour writes, but much more: of course. There can't be any robust relationship between entitlement rights and economic growth because the former inhibits the latter: the relationship is inverse. Entitlement rights are the opposite of economic freedoms!

From the conclusion:

Freedom and entitlement are largely two different paradigms to think about the fundamentals of economic development. Depending on the balance between free choices and more coerced decisions, individual opportunities to learn, own, work, save, invest, trade, protect, and so forth could vary greatly across countries and over time. The empirical findings in this paper suggest that fundamental freedoms are paramount to explain long term economic growth. For a given set of exogenous conditions, countries that favor free choice—economic freedom and civil and political liberties—over entitlement rights are likely to growth faster and achieve many of the distinctive proximate characteristics of success identified by the Growth Commission (2008): leadership and governance; engagement with the global economy; high rates of investment and savings; mobile resources, especially labor; and inclusiveness to share the benefits of globalization, provide access to the underserved, and deal with issues of gender inclusiveness. In contrast, pursuing entitlement rights through greater state coercion may be deceptive and even self-defeating in the long run.

I've highlighted the key point: entitlements are nothing less than coerced decisions. Take free choice awaz and coerce decisions, and you run counter to the natural state of man, that of freedom. Fundamental freedoms are not some sort of old white man political constructs: they are the very foundation of long-term economic growth.

Don't take it from me: take it from the World Bank.