21st Century Schizoid Man

Yes, it's been a while...

2012-01-19T12:28:00.001+01:00

My apologies for letting this go dark.

It's not that there isn't anything to say: rather, there is too much to say. Add to that a heavy work load, and my time is extremely limited.

Part of the reason for silence is my sheer and utter disgust at how the world is working right now: dishonesty and prevarication have become new art forms; most - albeit not all - couldn't see the truth if she came up to them and slapped them directly in their faces; the errors of commission are dominant and vastly outweigh simple errors of omission.

The pro-cyclical behavior of policy makers is leading to an increase in volatility everywhere, not a reduction. Keynes has been vastly misunderstood and misinterpreted and his name is now used (vainly) to justify pro-cyclical policies that make things worse, rather than better. If I weren't fairly immune to conspiracy theories - having read too many of them over the last several decades, starting with grassy knolls and Potomac River parks - I'd venture to say that the only plausible reason for many policies is that those behind them want pro-cyclical variances to increase in order to take advantage of them, going short on the downswing and long on the upswing, driving the system to destruction.

The more complex society and civilization is, the easier it is to destroy it. The more people there are living in cities (and today that is almost the definition of civilization) the greater their vulnerability to those who would disrupt the flow of food, water and energy (and waste products), be it in the name of Allah or in the pursuit of yet another billion in profits.

The inmates are running the asylum. There is no other explanation.

At some point the tragedies will come.

Greece is only a few weeks away from a private hell of their own making, and the likelihood of a long, slow, painful and completely predictable decline for many countries.

The greatest tragedy of all?

That no one listens. I won't claim to be writing this for fame (let alone fortune), but right now I'm playing the role of Cassandra on more than one front and it does not fit me well.

Betrayal, Deceit and Danger...

2011-09-20T13:56:00.001+02:00

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.

Parsing the President...

2011-09-09T11:19:00.001+02:00

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.

Inability to learn...

2011-08-31T09:32:00.001+02:00

...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...

Keynes...

2011-08-29T11:42:00.001+02:00

...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.

Should Anyone Be Surprised?

2011-08-15T16:19:00.001+02:00

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...

2011-08-15T09:37:00.001+02:00

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.

Today?

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.

Bumpy Ride, Oh My...

2011-08-12T12:31:00.001+02:00

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.

Rather Unusual Honesty...

2011-08-10T16:29:00.001+02:00

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?

2011-08-10T15:13:00.001+02:00

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

Why?

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.

The Sound of a Sacred Cow Being Gored...

2011-08-09T09:55:00.001+02:00

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.

The End of Keynes...

2011-08-04T09:15:00.001+02:00

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.

Why?

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...

2011-08-04T08:37:00.001+02:00

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!

True colors...

2011-06-22T08:34:00.001+02:00

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.

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

2011-06-06T20:48:00.000+02:00

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.

Goodness.

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.

Further:

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.

You Know You've Blown It...

2011-06-01T18:37:00.001+02:00

...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?

2011-06-01T09:03:00.001+02:00

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

Wrong.

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.

Finally Someone From the World Bank Makes Sense...

2011-05-31T23:03:00.002+02:00

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.

Who Lost The Middle East?

2011-05-31T08:32:00.001+02:00

There is a writer whose last name became a verb, after so many decided to deconstruct and make fun of his reporting, which was so obviously biased and subjective that it belonged on the OpEd pages, rather than "factual".

His name?

Robert Fisk. Of "fisking" fame. I've done it here.

Read this now. For the record, this is classified as a commentary by the Independent, so they are capable of learning.

So it starts:

This month, in the Middle East, has seen the unmaking of the President of the United States. More than that, it has witnessed the lowest prestige of America in the region since Roosevelt met King Abdul Aziz on the USS Quincy in the Great Bitter Lake in 1945.

While Barack Obama and Benjamin Netanyahu played out their farce in Washington – Obama grovelling as usual – the Arabs got on with the serious business of changing their world, demonstrating and fighting and dying for freedoms they have never possessed. Obama waffled on about change in the Middle East – and about America's new role in the region. It was pathetic. "What is this 'role' thing?" an Egyptian friend asked me at the weekend. "Do they still believe we care about what they think?"

President Obama isn't interested in the Middle East for two reasons: they aren't doing anything for him, and he has seen how previous Democratic presidents failed, with perhaps the exception of Carter and getting the Egyptians at least to talk. Of course, that got Sadat killed.

Now, the rest of the Fisk article descends into the usual US and Israel-bashing that he is infamous for, but this is the key quote:

Indeed, Obama's policy towards the Middle East – whatever it is – sometimes appears so muddled that it is scarcely worthy of study.

On that he is right. The rest is a quagmire of conspiracy and speculation, But once in a year of blue moons, the old Fisk, the reporter getting his facts right, glimpses through the rest of the madness and gets something right.

That President Obama and his administration is getting it wrong.

American Indulgences...

2011-05-30T10:41:00.001+02:00

Read this to understand the choices facing us.

It really is pretty much that simple: America can choose to be a superpower or it can choose to be a welfare state, but not both. We're past the point where a President like Lyndon Baines Johnson could persuade Congress to finance both guns and butter: this is the starting point of the slow, dreary and inevitable breakdown of the US government's finances.

You can't have both. Or, more exactly, you can't have both forever without coming up empty. We're at this turning point, reached when US government debt reached 70% of GDP (a while ago) and put off by dealing with symptoms, rather than causes, over the last 30 years or so.

This will be the key debating point of the next presidential election: whether we pay for 30-year old to indulge in their sad sexual fantasies or whether we pay the price in weapons and blood to ensure that the US continues to be the beacon of reason and law in a world that only occasionally behaves.

It really is that simple. That we have come to this point is appalling enough in and of itself. Entitlements creep forward, slowly, insidiously, with the original good intentions - and this road to fiscal hell is paved very well indeed, thank you - perverted as they always will be by the very human desire to have something for nothing and your chicks for free. It's easy and convenient to be indulgent, especially when you have a political party dedicated to making sure that whatever turns you on will be tolerated, supported and no stern words said, all in exchange for supporting that party and casting your vote their way.

If the choice is between paying for the lifestyle of a diapered, infantile (by choice) 30-year old who cannot fathom why the government won't be paying for his choice of sexual perversion and lifestyle, or paying for the soldiers who stand in the line and keep us safe, there is no argument.

You can't have both. Not any longer.

Well, of course he wouldn't think it corrupt: he's a Democrat...

2011-05-26T18:20:00.001+02:00

While I really shouldn't be surprised, things like this still astound me. Not so much the clear corruption as much more the rejection that it is anything out of the ordinary.

Because apparently Democratic politicians don't have to obey the law. It's the only explanation of why he thinks that this being a conflict of interest is "nonsense".

God help the people of Boston "represented" by Barney Frank. The only thing he represents is the need to clean out the stables.

And this is surprising?

2011-05-25T19:27:00.001+02:00

When three of the most famous astronauts that ever lived write an op-ed about US space policy, it's worth a read.

Here.

As far as the Obama Administration is concerned, America does not need to waste money on a space program. That's the clear message being set.

And this is surprising?

President Obama comes from that portion of the Democratic Party that views space flight as a waste of money, with the money being spent better "at home" (ignoring the fact that the money was spent at home: what they really mean is that they want to use the money to create additional dependencies for the aggrandizement of their own power).

The real reason why NASA is being gutted and space programs being deleted? Because there is no constituency for the Democrats here, none that is beholden to them. I've told you here many times, President Obama is a Chicago Democrat: unless there is an in for him, a deal that helps and supports him, helps him directly, then forget about it.

What we have isn't so much a lack of vision, but rather a venal and self-serving vision that doesn't care about space travel. Why should he? It never did anything for him.

The election of President Obama was a disservice to the notion of nation that made Kennedy decide that we would go to the moon in 10 years. Given that challenge, the US government (NASA) and the aerospace industry surpassed that goal and did what no other country could do.

Today? What vision does President Obama bring to the nation? One of decay and a long, slow decline from the world's only superpower to a nation dismayed and divided. That way it's easier to exploit for personal and political gain.

Oh how have the mighty fallen...

95 Days...and Irony...

2011-05-23T11:23:00.001+02:00

It's not so much that there isn't anything to say and for that reason I haven't written, but rather it's much more that there is so much to say that I don't know where to begin.

Start with this.

The problem with big government is that it is BIG. Seriously big, as in too big to fail big, too big to be ignored big, and above all: taking too much, spending it inefficiently, and then pretending that everything is fine.

If we're in a situation where cutting government spending permanently means entering a recession, that is the definition of government spending out of control.

The road to ruin is paved with the very best of intentions, with the gaps filled by platitudes and all covered with a nice, comfy surface so that those driving along feel no pain, feel no disturbances, but instead blithely continue on their journey.

Key quote:

Treasury Secretary Timothy Geithner has warned that if the debt limit isn't increased by August 2, the government will no longer be able to spend more than it collects in revenue. That means it will have to cut spending by about 35%, probably choosing among such items as payments to contractors, soldiers' salaries, social security and Medicare.

On average, the cuts would amount to about $3.8 billion a day, according to our own estimates based on projections from the Congressional Budget Office. At that rate, over a period of only 95 days, the cuts would add up to 2.9% of gross domestic product, adjusted for inflation*. That's just enough to negate all the economic growth forecasters expect in 2011.

The first and most fundamental problem here? If government spending is so large that 95 days' worth of cuts - not no spending, but rather cuts in the growth of spending - would wipe out GDP growth for 2011, it means that the economy is seriously lopsided, with government spending accounting for far too much growth.

You see, government spending, unlike any other part of the supply side of the US economy, doesn't add value per se, but is distributive: it takes taxes and fees spent by the companies adding value to the economy and spends it as politicians see fit. It also borrows to spend that money: we are at a crossroads where all paths are thorny and disturbingly difficult, but some lead to long-term recovery and the resurrection of the American dream, while others - most - lead to paths of greater debt, insolvency, and other options better left unsaid.

The ironic part has nothing to do, yet, with the US. It's just this: as the Spanish realize that socialism doesn't work (deliberate pun there: Spanish youth unemployment is over 30%) and give the Socialists there a resounding message at the polls for a change, the city-state of Bremen, in Germany, elects a red-green majority in a city that is broke. In other words, the Spanish are behaving like rational, thoughtful members of society and the Germans are behaving like voters who are collectively burying their heads in the sand and saying "Nanananan" in order to not to be confronted with the catastrophe rolling upon them, of insolvency and massive fiscal problems. Normally these roles are reversed, which is why it's so .... ironic.

This is what the scientific community has come to...

2011-05-11T12:44:00.001+02:00

I have, sitting in front of me, the IPCC Summary for Policymakers, from 5-8 May 2011, 25 pages of text, released on 9 May 2011. It's easily available on the web.

I've actually read it. To be honest, I had to read it three times, because I wasn't sure I was reading it right.

This is not science. One critic put it this way:

This is policy-based evidence-making. The IPCC's report on renewable energy was written by the renewable energy sector.

One point cannot be denied: the work of the IPCC has become irrefutably captured by lobbyists and special interest groups, which have permanently compromised the working of the IPCC and corrupted the process and purpose of the IPCC to the point that it cannot be taken seriously. Or anyone quoting it as gospel can be taken seriously.

The policy director of Greenpeace is one of the Lead Authors of the report.

That should tell you everything you need to know. If you are a true believer, unswayed by true scientific methodology (as opposed to pseudo-scientific self-referencing "climate science" that is anything but that) and critical questioning, then this is everything you've ever wanted.

This is not a Summary for Policymakers: it is a political pamphlet on how those who consider themselves our masters intend to spend our monies over the next three decades, lining the pockets of those who are courtiers and sycophants whilst ignoring the needs of the world's poor. Put bluntly, if this comes to pass, the world's poor will be worse off, with capital taken away from them to be spent on fanciful energy schemes that benefit only a few in the West. It will kill people because scarce resources will be squandered chasing after a chimera, rather than being spent on economic development. There is nothing in the document that suggests otherwise.

This is what the scientific community has come to. A disgrace.

The Catch With Catch-Share...

2011-05-11T09:05:00.001+02:00

Ah, the joys of the internet. :-)

This I found on Drudge, as a small side-line. But it piqued my curiosity: what could be going on here?

As usual, do-gooders destroying people's livelihoods in the name of an abstract hope.

Read this first. It's what the NOAA says catch-share should be.

The key quote:

A catch share program differs from traditional fishery management by dividing up the total allowable catch in a fishery into shares. These shares are typically allocated based on historical participation in the fishery. They may be assigned to individuals, cooperatives, communities or other entities, who would be allowed to fish up to their assigned limit. Catch share participants also agree to stop fishing when they have caught as much as they are allowed.

Under traditional management programs, fishermen compete for a total allowable catch. This has lead to fishermen racing each other to catch as many fish as they can before the total catch limit is reached. This results in more boats and gear than necessary, quotas being exceeded, increasingly shorter fishing seasons, unsafe fishing and high levels of bycatch. It also may result in too many fish brought to market at once, reducing their market value to fishermen and coastal communities.

So how is it working in the real world?

Read this for one take. And then there's this, and this.

It's killing the industry.

Key quote that got me started here:

Local fishermen said they were told by the federal team not to discuss the new regulations, just their effects.

Ye gods. In other words, they're not interested in having fisherman criticize the regulations. They just want to know what the effects are.

And if you don't think it's killing the industry - 400 years of fishing in New England - then read this.

Even Barney Frank thinks it's a bad idea. Which, in the normal scheme of things, would mean that it would have some merit.

But not in this case.

Unintended consequences? Reducing the fishing fleet in just five months by over 50%? That's not an unintended consequence: that's a deliberate plan. The result, the intended result?

Of the 247 ground-fishing vessels left in New England, 55 boats accounted for 61% of revenue. In other words, the industry is being concentrated in a few well-connected companies. The wealthy ones. not the small fisheries and independent fishermen.

So, who is in charge of doing this?

Jane Lubchenco.

Among other things, she is an environmental activist (former vice-president of the Environmental Defense Fund: you don't get that job without being an activist).

Key quote:

In fishing for a problem to support the regulatory agendas of the EDF and the Obama administration, Lubchenco netted a policy that has wreaked havoc on the fishing industry, and which will continue to put fishermen out of business until its repeal.

For all those who voted for hope and change, this is what you get. Until this is changed, there is no hope.

Another Inane Idea From DC...

2011-05-04T16:22:00.001+02:00

As if there weren't enough inane ideas from that den.

Barney Frank, always good for making sure that the baby is thrown out with the bathwater, wants to not allow the regional Feds to set their own interest rates, permitting only a single one to be set from Washington.

Good lord.

The reason that the Europeans have a crisis is the simple fact that they cannot set regional interest rates. It is a real problem for the EMU, as it means that the ECB has to balance, say, the needs of Portugal against the needs of, say, Germany, resulting in policies that muddle through, rather than being decisive.

This is what Barney Frank wants: he wants to give up flexibility of interest rates to address regional needs in order to have greater control over what interest rates are.

He's a control freak who doesn't care what damage is done as long as he can ensure that Congress controls what is going on.

Is the man completely incapable of thinking?

Sorry, that was a rhetorical question, Of course not. He's a Democrat.

Nov 2012 can't come along soon enough. These fools need to be removed from office. Perhaps the new ones won't be that much better, but at this point, it's hard to see how it can get worse.

The Death of Osama bin Laden...

2011-05-02T18:33:00.000+02:00

Anima eius et animae omnium fidelium defunctorum per Dei misericordiam requiescant in pace.

The above is from the Roman Catholic burial service. It is based in Isiah 57, 1-2:

The righteous perish, and no one ponders it in his heart; devout men are taken away, and no one understands that the righteous are taken away to be spared from evil. Those who walk uprightly enter into peace; they find rest as they lie in death.

Obama bin Laden did not walk uprightly. He did not belong to the righteous, he was not devout in any civilized sense, and he embraced evil wholeheartedly.

Hence let us understand that there is evil in the world, that evil always fails because at the end of the day, good will prevail. It is of utmost importance that we never forget that in order for evil to prevail, all it requires is that good men allow it. We do not do enough in our policies, in our education, in our culture, in our daily lives, in ourselves to stop evil in its tracks: we are merely human, frail and corruptible, weak and easily distracted. But there are times when we rally and do the right thing at the right time for the right reasons.

My deepest and heart-felt thanks for those whose service to the ideals of the civilized world made it possible to fight this evil and help to end it. These are the true heroes, the righteous and devout, those who walk upright for they are fighting the right fight. Evil is still out there, evil will disappear only when the hearts of men are not clouded by their baser interests and that enlightenment, in one form or another, brings peace to us all, allow us to transcend temptation and not be led to evil.

Until then, lock and load. Keep your ammunition dry, your batteries charged, water clean and the rations healthy. Keep you spirits on the goal, your mind on the situation and above all, love those you do love with all your heart and body.

Keep the faith. It was a good day when Osama bin Laden died. It aggrieves me to say that, I deeply wish that he hadn't done what he did, that his twisted path had been a righteous one. It was not, and his personal evil, at least, has ceased.

That is all.

How To Destroy An Economy...

2011-04-28T11:35:00.001+02:00

Here's a case study.

Consider a country that has a divided school system. All children go to elementary school through the 4th grade. Based on grades, a teacher's assessment of the child's natural abilities, as well as discussions with the parents, children are the sent to three different types of schools: the clever ones are sent to a school designed to turn them into well-educated, widely read young people who, basically, reflect the top 25% of the country's potential; the bright ones, but with little ambition or from blue-collar families, go to what amounts to a trade school, learning the proper tools to run a business or become an electrician (math, physics, but not much in the way of literature analysis); the third group goes to a school that is designed to churn out low-level employees such as retail sales people, gas station attendants, that sort of group, this time the lower 25% or so of the country's potential. That middle group is, of course, the larger of the three, with around 50%.

Those going to the clever schools overwhelmingly go on to proper universities, or enter management apprentice programs. Those going the bright schools go into all sorts of apprentice programs, and have a university path in fields such as engineering and other applied sciences. The others go out and get jobs, either directly or after a training period.

That, in a nutshell, is how the German schooling system works. First and foremost, it does recognize that there are differences in intelligence and that there are differences in social origin that can make or break individuals, and for all its flaws - and believe me, after putting my children through that system, there are many - it works well for Germany. You learn at an early age that choices made, right or wrong, have real-world implications down the road. You learn, as well, that you can surmount those decisions, but it takes hard work - transferring from the lower 25% to the upper 25% is not unheard of, but you have to prove to the system that you belong elsewhere - and is something that people respect and can be proud of. Muddling through lands you down at the lower cohort, but even someone not terribly gifted can, by dint of hard work and perseverance, can succeed. Children, of course, from wealthy families can afford to have tutoring to get them through the rough patches, and families with little money will struggle, but it's for a good cause: getting your Abitur - it is roughly the equivalent of an Associate Bachelor's degree in the US, i.e. high school + 2 years of college - means that you have, effectively, been approved by society as being someone who has passed the first test of becoming a productive member of society.

Now, there is one area in Germany that has been spectacularly successful over the last 50 years: Baden-Württemberg, the south-western corner of Germany. It's where Porsche and Mercedes call home; it's where the largest and most successful engineering firms are located; incomes are high, culture is good, life is well organized (there are rules about when you must sweep your sidewalks) and the virtues of the "Schwäbische Hausfrau", or Swabian Wife, are well known. It's a very self-satisfied area, rightfully so.

Now that there is a green-red coalition (German political parties go by a color in the normal vernacular: the Greens are the ecological party, the Reds are socialists, the Blacks are christian conservatives and the Yellows are a kind of liberal) running things in Baden-Württemberg, they have started the discussion about abandoning the three-tier system for a single school system.

In other words, they want to deconstruct exactly that system that has been a major contributor to the success of the German economy.

This is how you destroy an economy in the long run: dismantle the school system in the name of an illusionary system that "is more equal", forcing the bright and clever ones to be bored while pretending those left over are overwhelmed and frustrated. The Green-Red coalition was voted in - the coalition came after the election, not before it - after the Fukushima accident in Japan made the pre-nuclear policies of the blacks unacceptable for many swing voters: a protest vote, fundamentally, that now gives the more radical amongst the greens their opportunity to change how the country is run.

They are going after the school system first, as it is one area where they can simply make it so.

What is it with modern educators? They are sacrificing methods and systems that work in the search for something that is, purportedly, better: however, empirical evidence shows that these sorts of changes makes things worse, rather than better, but too many careers, I suppose, and too much professional status is involved for anyone to admit that the kids are worse off, rather than better.

This is how you destroy an economy: make sure the kids don't get an education that means anything. Make sure they know about gay history and how capitalism is bad, but not how to write something that people actually can understand or do their sums correctly. It takes a while, but it does explain how so many in the pedagogic business are on the political left.

Still missing the point...

2011-04-27T07:50:00.001+02:00

Oy.

I guess I'm blessed by not having to watch shows like this, as the righteous ignorance would drive me up a wall.

The price of oil is a function of market prices: supply and demand.

Nothing more, nothing less. Oil is, for the purposes under consideration here, fungible: there are several key places where the oil prices are recorded, from oil from the North Sea to Saudi Arabia to Siberia. Oil prices have futures because companies want to lock in supplies and prices for business purposes.

The price of oil, as a function of supply and demand, is dependent on both supply and demand: if supplies are tight, prices go up. Right now, supplies are not tight.

It's a function of demand. The world is, economically speaking, no longer a duopoly - the US and the EU - but has added a major player in terms of oil demand: Emerging Asian countries, largely India and China, but also including a slew of countries that are starting to transcend poverty.

Hence, Whoopie: you're pissed that a bunch of Chinese and Indians are using the oil that you want to use. To adopt her vernacular: Get used to it, Girl.

She asks the question "Why are they doing this to us?"

The answer: they aren't doing that to you. They're just doing it.

And Jim Avila: "There is really no rational reason for the prices to be so high"? Really? That's your answer? Take a look at world demand patterns and don't tell me there's no rational reason for the prices to be high.

Guess what: they're not going to go down. Too much international demand. The days of cheap oil - and I remember filling up a 20 gallon tank of gas for what it now costs per gallon ($5), back around 1974 - are long, long, long over. Get used to it.

Oy.

Supply and demand: it's not just a good idea. It's how the world works.

Why does this not surprise me?

2011-04-26T21:34:00.001+02:00

One of the basic tenets of law is that there is no such thing as guilt by association. In other words, if your sibling goes on a murderous rampage, you won't get the electric chair (unless, of course, you were helping them load). In much the same manner, if your boss is embezzling money, you won't go to jail as a result.

Or if someone in the company broke the law on their own initiative, the man running the company isn't blamed for breaking the law. He gets blamed for having bad judgement, perhaps, or for not having adequate and feasible checks and balances to prevent criminal behavior.

Unless, of course, you are the CEO of a drug company. Then you have to resign if your company wants to keep on doing business with the government.

Read this.

Key quote:

The Health and Human Services department startled drug makers last year when the agency said it would start invoking a little-used administrative policy under the Social Security Act against pharmaceutical executives. This policy allows officials to bar corporate leaders from health-industry companies doing business with the government, if a drug company is guilty of criminal misconduct. The agency said a chief executive or other leader can be banned even if he or she had no knowledge of a company's criminal actions. Retaining a banned executive can trigger a company's exclusion from government business.

Hmmm. Let's parse that one: someone in the company broke the law, the company accepts responsibility and is convicted of criminal actions. Even if the CEO knew nothing about this, they can be banned.

Just like that.

Why does this not surprise me?

Well, apparently this policy existed but, as the article said, wasn't used much. But apparently now the Obama Administration is now making, basically, the hiring decision of who gets to run drug companies.

Key further quote:

The new use of exclusion is meant to "alter the cost-benefit calculus of the corporate executives," said Lew Morris, chief counsel for the Department of Health and Human Services's inspector general, in congressional testimony last month.

In other words, HHS makes the assumption that corporate executives of drug companies base their operative decisions not on things like market needs and profitability, but rather based on what they can get away with.

Why does this not surprise me?

Again, this is not refusing to do business with someone convicted of doing something, but rather a refusal to do business with a company unless they fire their CEO because someone else at that company broke the law and was convicted for it, and the implementation is left up to the government to decide.

Why does this not surprise me?

Respect for the law and due process don't really seem to mean much to the Obama Administration these days (if ever).

Belated but not forgotten...

2011-04-26T21:19:00.001+02:00

Well, it turns out that WikiLeaks is having some ... unexpected results.

Read this.

There is a mythology on the anti-war left that the Bush Administration made up a connection to Al-Qaeda in order to sell the war to the American public. The only problem is that the Bush Administration never said that: there was an active connection: Vice President Cheney came closest when he said that the two had cooperated.

As always, the reality is a tad stranger than one imagines. Sure, there was no inked treaty of cooperation between the two. But neither did the Bush Administration make something up. The idea that politicians in the Arab world may do one thing in public and another in private may be difficult to accept, but it is reality; further, there is nothing contradictory in the fact that Al Qaeda was sponsoring anti-Saddam forces in areas that Saddam no longer really controlled (Kurdish folk didn't like either) while at the same time discussing operative cooperation with Saddam.

Welcome to the world of Arab politics. Nothing is as it appears, your worst enemy becomes your long-time best friend, and everyone is fully able to hold multiple, contradictory viewpoints all at the same time because that is how the world works there: it's tactical thinking from those whose only interest is survival and advancement.

The anti-war left was and is extraordinarily naive when it comes to such politics and how they, the anti-war left, were deliberately misled, manipulated and in some cases killed when it served the purposes of their erstwhile friends in governments, local NGOs (got news for you: any NGO in Arab countries cannot exist without being a pawn of the government, sometimes more obviously so than others, but no NGO can exist in these countries without being compromised).

The American public believed, back then, that there was a connection. The Bush Administration did not dissuade them of this notion, for it was, as far as anything can be true in that corner of the planet, the case. It never existed as the prima causae belli in anyone's mind except for the rabid anti-Bush left.

An Informed Electorate...

2011-04-14T10:10:00.001+02:00

While the vote in the US doesn't happen for another, oh, 572 days, there is no time like the present for prospective voters to start informing themselves on the issues.

These two links (Part I here and Part II here) are from a fairly unlikely source: an Australian journal called Quadrant, which bills itself as a "journal of ideas, literature, poetry and historical and political debate".

Normally you'd expect modern orthodoxy from such a source, but the links take you to a sensible argument that AGW is, bluntly, a crock and really bad science masquerading as scientific orthodoxy and mainstream thought.

What is disappointing is that you have to go to Australia to get this sort of writing. The US press, the mainstream media (MSM), is failing in one of its self-anointed tasks: of helping people make an informed choice when they vote. The dogmatic orthodoxy that you see in the MSM does exactly the opposite: those who vociferously complain about the ignorance and stupidity of the average American voter are the same people who created the problem.

An informed electorate is the last thing the Left want, as maintaining the Left's myths and fairy tales require a significant lack of intellectual curiosity - a closed mind - and adherence to an orthodoxy that has never had anything to do with the empirical world.

Which is probably exactly why you have to go to Australia to get this sort of writing.

A Shrug: Return of the Railroad...

2011-04-07T11:45:00.001+02:00

Odd title at first, but bear with me.

Starting in 2013, new energy laws come into effect in Germany, requiring companies within an industry to meet "best-of-class" energy targets or be required to buy emission permits to offset the fact that they do not meet best-of-class energy usage.

The problem?

It will drive key industries, those making energy-intensive products, into a corner where they can either close down, move production outside of the Euro-Zone, become uncompetitive or go out of business because profits won't finance the cash flow needed to invest.

The problem? Defining best-of-class energy usage for the industry as a whole.

Simply put, the EU is set to introduce benchmarks that certain key industries cannot meet. Not "can't afford to" or "is unwilling to" or "doesn't want to", but rather can't. The currently planned benchmark means that no open-furnace steel maker anywhere will be able to meet the benchmark as it is not technically possible to do so.

Either the companies can close their operations down and leave the business, or they can move production outside of the Euro-Zone and ignore the energy targets entirely, or they can pass the emissions permit costs on to their customers (driving their prices up and becoming, given the fact that competitors don't have to do this) and become uncompetitive (and hence leaving the business at some point via bankruptcy), or they can eat the costs, which will, however, be so high that they will no longer be able to finance investments out of their cash flow. The amount of money involved is not trivial (and comes out of profits): it will be hundreds of millions of Euro for Germany alone.

This isn't just the case for steel: it is also the case where electricity is one of the raw materials used in manufacturing, not merely used to light things and run computers. The largest PVC production plant, for instance, uses 800 GW-Hours in a year, about as much as fair-sized city: it is not technically possible to make it any other way.

We're not talking old, inefficient plants, either: these are the most modern around. The increases in prices due to the emission permits means an additional tax, as it is that, of around €15k per worker in 2013.

And possibly more.

The problem here is that politicians are making decisions that industry has to live with, but without understanding that at least some of the decisions are simply not technically possible. Not that they aren't feasible, or cost too much, or take too long to implement, but rather that there is simply no way to bend the laws of physics and chemistry to meet those goals.

So why the title?

Consider this: the industries involved (concrete, chemicals,, glass, metals and paper) are core primary industries. They feed into all other industries. Without their production, nothing else can be made.

What we have here is tragedy masquerading as policy. In the name of the greater good, functioning, efficient and profitable industries will be destroyed based upon the whim of politicians who should know better.

It is what happened in Ayn Rand's novel, Atlas Shrugged. If you have read that, you know how it ends. Substitute primary industries for the railroads, and you end up with the same story line.

If you haven't read it: worth the read. It's not the best economics, nor is much the story entirely plausible (railroads aren't that critical given the highway system and air transport), but it does contain a message worth understanding: beware the takers, beware those who are willing to destroy for the greater good.

A Day of Infamy...

2011-03-29T13:04:00.001+02:00

Today is the day that the US fighting troops withdrew from Vietnam. The war had become so unpopular that President Johnson decided not to run for re-election, leaving the winding down of the war to his successor, President Nixon.

It was a day of infamy. Not like Pearl Harbor, which was a surprise attack held during diplomatic talks, but a day of infamy in the original sense of the word, from the Latin infamia, the inversion of fame, the flipping of fame to infamy. It is a state of extreme dishonor, a black spot on US history.

But not for the reasons that the Left would have you believe.

The popular conception is that the Vietcong was fighting for independence against a corrupt government and that the North Vietnamese were helping their oppressed brothers (and sisters) fight against tyranny. The Tet offensive was a popular uprising that the US had to put down to save the regime. The US was involved because we were knee-jerk reactionaries, trying to prevent the spread of communism and willing to kill innocent civilians for the sake of geopolitics. My Lai and "We had to destroy the village in order to save it" proved that the war was horrible and we shouldn't be involved. It was nothing but a colonial war and the US was on the wrong side. We fought a war of genocide and were outfought by peasants.

As usual, the popular conception is wrong.

The Vietcong were financed and run by the North in order to destabilize the South, which, for all its failings, was a functioning government with popular support. The North was financed in turn by both China and Russia, with the latter dominating, who sent billions in weapons and supplies in the hope that the Vietnamese, if successful, would turn over Cam Rahn Bay, a lovely natural harbor, over to the Soviets for their geopolitical games with the US. The North Vietnamese were ruthless Leninists (and remain so today, largely) that were more than happy to massacre the Catholics in the North; they violated each and every agreement signed with the French that split Vietnam without regard to anything but their revolutionary ideals. They beat the French at Dien Bien Phu in a set-piece battle that reflected less on their abilities as much more the incompetence of the French military command which allowed the battle to happen at all. They fought to unify Vietnam under the banner of the Vietnamese Communist Party, hard-core Leninists who learned their trade at Moscow's knee at the start of the Cold War.

The US was involved because the South asked us for help at a time when Wilsonist idealists were running US foreign policy, more than happy to give a helping hand to anyone trying to emulate western political philosophies. The massive amounts of foreign aid corrupted the capital thoroughly and created a political system rife with corruption and incompetence. Tet was a deliberate suicide mission aimed at US public opinion, complete with wide-spread political assassination of Southern politicians by the North, resulting in the destruction of local guerrilla fighters (the Vietcong); thereafter, the war was fought by North Vietnamese regulars, using tactics that were illegal under the Geneva Laws of Warfare (disguising soldiers as civilians and use of cultural sites for military operations). The US was indeed involved to prevent a Communist takeover: there are good reasons to do so, and the fate of those fleeing Vietnam as Boat People should be an object lesson as to how far people will go to flee Communist rule.

Civilian lives were lost, but largely because of the way the North fought. They lost every single set-piece action they tried to fight, every single one. They lost tactically, they lost strategically, the only victory they achieved was political, sapping the will of the US to continue to fight. They fielded an army of peasants that was thoroughly trounced by drafted US soldiers and South Vietnamese soldiers. The story of the ARVN 18th Infantry Division defending Xuan Loc gives absolute lie to the claim that the South Vietnamese were incapable of fighting and worthless: that division outfought the North Vietnamese 4th Army Corps to a standstill until, outnumbered and running out of ammunition (that the US Congress denied them), they withdrew, with one unit staying behind to be completely wiped out to cover the withdrawal.

That is why this is a day of infamy. It is a day of infamy for the US congress, which made foreign policy by cutting aid, making it impossible for South Vietnam to defend itself. They prevented the US military from intervening via what we now call a no-fly zone, giving air support to the South at a time when it was being attacked by the North. The North Vietnamese had tried something similar before and was stopped by US air power

Put bluntly: the US failed in its commitment, failed in its duty, failed to stand by a country - South Vietnam - which by 1973 was fighting the war without US troops and holding its own, indeed winning back the countryside. It finally fell to a combined arms attack using more tanks and artillery than the Germans had when they started WW2.

The North broke every treaty it ever signed, broke every promise it ever made, and after the war was over, killed millions of Vietnamese through "re-education" camps and political oppression that led to desperate attempts to escape. They fought a war of lies and deceit, a typical Communist "war of liberation" that did anything but liberate the country. The Vietnam we see today is still run by that party, mellowed by age (and the dying-out of the Leninists) and itself thoroughly corrupted.

It is also a day of infamy because it led to an entire generation of Democratic politicians whose careers were made by opposing US actions, bordering on treason and sedition, typified by John Kerry, who used his service as a tool to gain and hold political office by making the US look as bad as possible in order to appeal to those who were disgusted by the war. This is nothing but brazen opportunism and is indeed infamous.

Lessons were learned. The US no longer has a drafted military, moving to a purely professional army instead because of many of the problems faced. Allies also knew that the US could only be relied on if led by the right politician, and indeed this gave solace to our enemies because they also knew that the US could not be relied on if led by corrupt and incompetent politicians. The US showed that it is vulnerable to the manipulation of public opinion and that there are more than enough willing and useful idiots more than happy to further their own careers by advancing viewpoints that damage US interests.

Now some reading this might roll their eyes and say "another revisionist..." but I dare anyone to state the case that the facts are different. You're entitled to your own opinions, but the facts speak another language. One of infamy.

An Interesting Point...

2011-03-19T11:50:00.001+01:00

Donald Sensing raises a very, very good point, one that has, as usual, slipped by the MSM and, most tellingly, is not even on the horizon of the left, especially the anti-war left, bringing home the point that these groups are nothing less than purely partisan.

Read it here.

First and foremost, President Obama should be going to Congress for authorization of the use of force under UN Resolution 1973. If he does not, it borders on abuse of presidential powers. President Bush I and II both went to Congress for such authorizations, which is the modern-day equivalent of the declaration of war that apparently has gone completely out of style.

If he fails to do this, he is setting precedence for future Presidents. No President has been happy with the War Powers Act that expressed the Congress' full intent of fulfilling its role under the Constitution of the United States, that it alone may declare war unless there is simply no time for it to meet.

Never has the press been so silent about this: this speaks volumes for the sycophants that appear to be in charge here. If the current President was a Republican, you'd be hearing about this in banner headlines.

Sometimes the absence of something is the proof that it exists.

President Obama has been quoted on this:

"The president does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation," the memo quotes then-Senator Obama saying on Dec. 20, 2007.

In other words, President Obama is on record for stating that he does not have the power to do what he is now doing.

Ye gods. The sooner the 2012 defeat of President Obama at the polls, the better.

Worth watching...

2011-03-10T19:18:00.003+01:00

Finally someone telling it as it really is...and it is not good...

The American people have been lied to since at least the Great Society programs of LBJ.

The mantras of "We can afford to..."; "The richest nation on the planet and we don't have..."; "We need to address the injustices of ..." are what is driving the deficits and the debt to unsustainable levels. Entitlements are the problem: pretending that they may not, can not and shall not be touched is a enduring political myth.

The reason that entitlement programs are called "The Third Rail" of American politics - touch and you die - is that when you look closely at them, the fabric unravels. Social security only works as a pay-as-you-go program when demographics and wage increases support permanent increases; Medicare and Medicaid only work when health care costs do not handily exceed the cost of living increases and only cover those who really cannot pay (as opposed to those who simply don't want to pay); the vast number of subsidies for successful interest groups and their lobbyists are like leeches, living off the life blood and ensuring their own success at the cost of their host.

If entitlements are not addressed now, when there is still a chance to do this with deliberation and with careful review, they will have to be addressed when the full fiscal crisis hits, after interest rates go up and the government has to pay significantly higher interest rates to roll over its debt.

The fiscal irresponsibilities are manifold and cross party lines. The sins of at least three generations of politicians - vote for me and there'll be pork in your district, money for nothing and your kicks for free (deliberate misquote, there) - are coming home to roost: pretending that they are not, that there is no 400lb gorilla in the room, simply pushes the final day of reckoning out to where that gorilla becomes a 25 tons gorilla that fills the room and leaves no other options than dealing with it.

The willful ignorance, the deliberate put-my-fingers-in-my-ears-and-say-la-la-la-la of the Democrat Party reflects the party's virtual total dependence on entitlements. Republicans are better in this aspect - middle-class subsidies such as tax breaks for mortgages have merged into the general landscape, rather than being something that the Republicans depend on to get their votes - but have their own home-made problems and sins of the past.

Unless the problem is dealt with - and as I have said before, only spending cuts will truly address the problem, as raising taxes to actually pay for everything would be onerous and ruinous - then the future of the country is at stake.

To take a slogan, so badly abused by the Democrats: "Do it for the children".

Party Over...

2011-03-10T10:49:00.001+01:00

Two items in today's WSJ.

First of all, this.

The academics running the Obama foreign policy are doing active harm to the US: this will have repercussions. They can retire when Obama is defeated in 2012 and pretend that it wasn't them who screwed things up, but reality will tell another story and history can be so cruel.

To quote from the link:

The U.S. needs to issue a more public, unequivocal statement of support for authentic representative government. And find an active policy to go with it.

Only a U.S. president can lead this fight. But he has to (truly) believe in it. There is a school of thought, popular around the Obama foreign-policy team, that the world would be better off without the myth of American exceptionalism and burdens like these that come with it. If this government can't summon more than rhetoric or a U.N. resolution on behalf of 10 up-and-running democratic movements in the Middle East, that exceptionalism will wither. I'm guessing the world won't be better for it.

This is an moment where the only explanation - besides gross and widespread incompetence - is that such an epic failure is deliberately desired and planned. Such an abdication of US interests amounts to gross negligence and outright treachery, not merely to US interests, but to fundamental human rights and the case for democracy world-wide.

It is supremely ironic that it is the Democratic Party that is pursuing these goals. That party now appears actively moving to make its name as much a farce as "Democratic Republic" was for the Communist rulers of Eastern Germany. Orwell knew what he was writing about.

This also points to the end of the party. Fundamentally, the US government is broke: it is spending far more than it takes in (I originally wrote "earns", but that only makes sense of confiscation is the same as earning) and while it can leverage quite a bit of this spending by using the government's cash flow, at some point the numbers cease to add up and the party is over. This is as true of government as it is for private persons: the only difference is scale and time. Raising taxes, given the already heavy overall general tax burden, would be counterproductive: the only way out of the debt problem is for spending to be cut drastically.

Let me repeat that: the only way out of the debt problem is for spending to be cut drastically.

I've always referred to NPR since my Washington, DC days as "National Pinko Radio". The liberal bias was excruciatingly obvious, with liberal opinions masquerading as facts. The insular nature of their broadcasts, those whom they interviewed regarding issues (invariably heavily weighted towards whatever liberal/Democratic Party talking point story they brought), the issues chosen: All Things Considered is anything but inclusive, preferring to talk endlessly about health care and gay marriage.

In a time when the government is funding Poetry for Cowboys (and thank you, Harry Ried, for giving us all such a lovely pinata to bang away at!) whilst running up massive deficits and increasing national debt, it is time for someone to say that the party is over.

The party is over.

It is time for the government to stop trying to do good. It is time to stop the madness of financing Poetry for Cowboys, for financing the NPR, for financing luxuries in a time when it is hard to pay for the necessities. The party is over. The place needs to be cleaned up, the drunken guests who have shit in the pool need to be tossed out, the remnants of the orgy have to be disinfected and we need to get the stains out of the couch, carpet and drapes. It's time to stop wondering how someone smashed a banana on the ceiling and get out the ladder to clean it off. It's time to get rid of the slackers lying on the couch watching mindless TV - sorry, I repeat myself there - and get them to work cleaning up the mess they made. The house is trashed, the vases broken, no one knows what killed the goldfish (but the water is yellow) and someone thought it was really funny to make the cat drink a bottle of beer. Now morning has arrived and it is time to save what is left of the house.

It is going to hurt to cut the budget drastically: however, it is hurting right now to ask your average Mr. and Ms. America to pay for Democratic excesses and sheer incompetence when it comes to money. It is time to get our house back in order, to clean out the pigsty, repaint the walls after fixing the cracks and dents, get the washing machine and dryer running full time so that we can get back to normal. There's been a lot of damage done and we have to pay the bills, but this is not the time to head out golfing in the hope that someone else does the job.

Ye gods. It is time that the adults are back in charge.

How To Destroy An Economy...

2011-03-03T11:56:00.001+01:00

If you want to destroy a functioning economy, remove the laws of supply and demand and watch everyone - everyone - flounder, trying to figure out where they should invest, who they should sell to, from whom they should buy. Some will guess right, others wrong, and at the end of the day you'll find that most have guessed wrong and the net benefit is strongly negative.

The single functioning mechanism that tells you everything you want to know about supply and demand is the price mechanism: left to its own devices (aka "The Invisible Hand", prices quickly develop that reflect true scarcity.

If you know the real price for a thing, you can also make the decision to transform that thing into something more valuable. Buy machines and you can turn inexpensive steel into gears and mechanical parts; if steel becomes more expensive, it makes sense to invest in order to use a scarce resource better.

This is fundamental, basic beginning Economics.

The German government, in all its wisdom - and given that it is a conservative government, there is actually some present, rather than what happens under socialist/green administrations - has come up with a real winner.

A tax on raw materials to force German companies to process raw materials better. See the Handelsblatt from today, first page.

Hmmm, you might say: what's so bad about that? Higher efficiencies are always a good thing, ceteris paribus, and if done right will add significantly to the bottom line.

The problem is that it will be the German government (or, more exactly, bureaucrats from the Environmental Agency) that decides which materials will be taxed and how much, rather than the market. That way lies madness.

Why?

Because German companies will be the ones investing their money, not the government. When the government gets it wrong - and it will, that is a fact of life - then German company investments will have been spent on the wrong thing, not because the company made the wrong decision, but because someone decided that it would be so.

That way lies madness. Seriously.

Prices are the only way to determine scarcity. If steel is heavily taxed, then other materials will be used; if all materials are heavily taxed, then companies will have to make decisions which materials to use based not on prices, but solely on technical grounds: that would, if anything, undermine the whole point of taxing materials at all.

It's not like German manufacturers are somehow incapable of producing goods with minimal usage of raw materials and the government has to give them a helping hand, as it were. If anything, they are better at it than most, if not almost all countries (I think that Japan is probably at the top there).

The argument of the Environmental Agency is that by forcing manufacturers to gain greater efficiencies now, their productive capacities will be that much more green and hence - hence! - more profitable.

What they are not taking into account is the destructive effect of misallocated capital, that investing large sums for marginal improvements only makes sense when indeed market prices force this.

Simply deciding what the price for something will be - and taxes do this - removes the rule of supply and demand from the production figure, leaving everyone to flounder.

Given that no less than 20% of German GDP is manufacturing (relatively high: US shows 13%, France and the UK 12%!) is generated directly in manufacturing, raising taxes here is extremely counterproductive at best and downright stupid at worst.

Oh, and inflation: the European Central Bank will blow steam from its ears if this affects overall prices. You can't imagine, even for a second, that German companies will not pass on these taxes in the forum of price increases: or is the German Environmental Agency then going to determine as well selling prices too?

Destroying the almost literal magic of supply and demand in determining prices in the name of a chimerical whimsy that the government can better tell what resources need to be better utilized is one of the surer ways of destroying an industrialized economy.

I cannot imagine that this will actually pass into industrial policy under the current administration in Germany: Chancellor Merkel may have questionable taste in Defense Ministers, but she is not lacking in common sense otherwise.

Words to ponder...

2011-03-03T09:15:00.001+01:00

Leon Wieseltier writing at the New Republic on March 2:

As the dictators fall, the clichés fall, too. Cairo and Tunis and Tripoli are littered with the shards of platitudes about what is possible and what is impossible in Arab societies, in closed societies. Civilizational analysis lies in ruins. Idealism, always cheaply mocked, turns out to be a powerful form of historical causation, as disruptive of the established order as any economic or technological change, and even more beneficent. Stability, the false god of hard hearts, has been revealed to be temporary, chimerical, provisional, hollow, where the social arrangements are not decent or fair: the stability of injustice, though it may last a long time, is essentially unstable. It is delicious to see realists convicted of illusions, to hear them utter the words on which they used to choke. (If there is one thing that realists know how to do, it is pivot.)

The Arab uprisings have been heuristically useful: they have exposed a lack of intellectual preparation, a lack of historical imagination, a lack of moral aspiration, here at home. I count the president among the Americans who are sunk in stereotypes and dogmas, even if the good people at the White House want you to know that he is somehow a hero of this springtime. By now—after Tehran, Tunis, Cairo, and Tripoli—a presidential pattern has been established. Obama's reluctance to lead, and to establish the United States ringingly and incontrovertibly as the ally of the freedom movements, is owed to many things, but most of all, I think, it is the result of certain conventional assumptions about the historical agency of the United States in the developing world. In almost his every pronouncement about the valiant accomplishments of the liberalizing crowds in "the Arab street" (now an honorific!), Obama keeps insisting that we had nothing to do with this, that they did all this on their own, that Arab democracy must not be the work of the United States or any foreign power. He dreads the imputation of our influence. All his assurances of a new world notwithstanding, he is haunted by the ghost of imperialism.

Hat tip to the WSJ for that one.

The core belief system of the modern left - transnationalism, relativistic ethics, refusal to judge other countries yet permanently judge their own - is a intellectual fraud, a facade to hide the emptiness and meaninglessness of the academic. I studied in both the US and Germany and while there are those in academia who deserve accolades, respect and recognition, these are few and far between, More often you see those whose main claim to existence is the manipulation of the system, whose academic career, outside of endless faculty meetings where endless pontification replaces actual thought, is trivial at best and, in the greater scheme of things, irrelevant and a waste of human potential.

People with no actual knowledge of how the world actually works pontificate about imagined injustices and construct massive edifices with foundations of sand, based on fundamental mistakes and speculation replacing real knowledge.

Real scholarship is hard and has been replaced with sophistry.

Academia has failed us miserably, yet demands tens of thousands for the smallest of qualifications. What we have here is not a failure of the imagination, not an honest mistake or pardonable lapse. Rather, it is the willful denial, the conscious rejection of reality. Opinion is held to be more sacred than truth and facts.

The US today is without leadership. Political nature abhors such a vacuum.

The Oscars and Greenlining...

2011-03-03T01:15:00.000+01:00

Ran across this via Instapundit.

First and most fundamental, the subprime crisis was caused by politicians wanting to break market laws. If you don't have money, you can't afford a house: requiring banks to make risky loans was to be subsidized by charging everyone else more to cover the costs.

Didn't work, was destined to fail and the perpetrators are oblivious to the damage.

Read the article at the link to understand that the problem is still there, still alive, still festering and that unless economic ignorance is thoroughly and ruthlessly made public, we will be condemned to listen to the Gods Of The Copybook Headings time and time again.

The real culprit is the idea that you can make laws that abrogate economic reality: the only way it works is fraud.

Read the link: suffice to say that we have met the problem, and it is the Left.

The timing couldn't have been worse...or better...

2011-03-01T22:05:00.001+01:00

Irony sometimes just slaps you upside your head and makes you go "Hmmmm..."

The UN Human Rights Council is about to come out, it appears, with a report on human rights in Libya (see here).

The Universal Periodic Review System of the UN is designed to treat each and every country the same way, objectively and via its peer group of member countries.

Right.

Of course, the irony here is that the UN Human Rights Council, created to replace the thoroughly discredited Human Rights Commission - which had been captured, as it were, by the worst offenders of human rights in order to white-wash what they were doing, has itself now been captured by the same offenders.

You see, the report praises Libyan human rights.

Yep, you read that one right.

Who praised Libya so strongly?

Those paragons of virtue: Iran, Sudan and Cuba.

Like I said, the timing couldn't have been worse for UN credibility. It couldn't have been better either: perhaps now people will understand that the UN is thoroughly corrupted and compromised, incapable of any sort of rational work.

The only rational for further UN funding is that there isn't any real alternative. But that is increasingly a straw-man argument: following that logic, the League of Nations should still be calling the shots.

The UN has fallen to the level of parody, failing to maintain integrity in any way, shape or form. The Secretary-General is too afraid of criticizing those states who richly deserve it, and more than happy to criticize those that are largely flawless in their international standing and relationships for not being subservient enough to the whims of the UN's General Assembly. Moral authority and integrity are sacrificed on the altar of political correctness and the vain, academic and ultimately foolish attempt at engaging thugs and robbers in "constructive dialogue" while at the same time giving them a playground where they can play the bully.

The UN is a failure, just as the League of Nations was a failure. Only fools and simpletons can expect it to play a realistic function in the years to come: it is a complete fraud, a waste of money, time and effort.

Remind me, someone, why we still pay most of the bills?

It just keeps on getting better...

2011-02-27T22:59:00.001+01:00

Ouch.

What a blow to his sainted status amongst the Democrats.

Woops, my bad. They don't care.

Rented a brothel for the entire night.

Key quote:

"The FBI's reluctance to follow the law and release this material shows that it, too, is not above politics. Our tough fight with the Obama administration shows that it was not keen on letting the American people know that Ted Kennedy, one of Obama's leftist politician heroes, liked to hang out with communists and prostitutes,"

The object lesson of Nixon was that the cover-up just never ends, and in the end, is what gets everyone caught.

The FBI covered for Teddy Kennedy and covered his apparent misdeeds. That was a disservice to the country.

Ah, the sweet delicious irony of it all...

2011-02-27T21:08:00.001+01:00

This is simply too ironic to let go unnoticed.

The left is now calling for Gadaffi to be prosecuted and brought to justice.

Using the same arguments that justified the toppling of Saddam Hussein.

First, this:

Terrorism - at least where it is a policy of an organization and not a one-off incident - must surely be a crime against humanity since it is directed, like Gaddafi's present actions, against a civilian population.

Next, this:

...there is now a duty of intervention on the international community, existing under international law, 'whenever it becomes necessary to stop or to punish crimes against humanity'. He sees this as resting on the doctrine of a 'responsibility to protect'.

The illogical anger of the opposition to the Iraq war was and is irrational and absurd. Some of these people wouldn't know right from wrong if they were smacked upside the head with it, which is exactly what is happening.

How ironic. Don't you think?

Truly Amazing...and Appalling

2011-02-24T15:17:00.001+01:00

Here is an book review on a book about Marxism and its effect on the world.

But if you read the review, there is one thing substantially and damningly missing: the sheer inhumanity of Marxism, the necessity of terror and the decades of human suffering imposed by delusional control freaks in the name of a "philosophy" that, in order to work, must deny fundamental human interests and humanity itself, all in the name of a Greater Good.

Appalling. Truly appalling. If this is the face of the modern left, all one can say is that for those who truly believe in the inevitability of history, their historical ignorance is truly appalling.

Here is the tenor:

In 1976, a good many people in the West thought that Marxism had a reasonable case to argue. By 1986, most of them no longer felt that way. What had happened in the meanwhile? Were these people now buried under a pile of toddlers? Had Marxism been unmasked as bogus by some world-shaking new research? Had someone stumbled on a lost manuscript by Marx confessing that it was all a joke?

The only ones who believed that Marxism had a reasonable case to argue in 1976 were those whose knowledge of what went on behind the Iron Curtain was nil. The reason that a decade later no one in their right mind could believe in Marxism is that it is, was, and will remain a fundamentally flawed doctrine.

Marx failed because he reduced work to a commodity: his future utopia could only work if work no longer mattered, that the mechanics of supply and demand were removed entirely and replaced by commands for workers to do as they were told, effectively by their betters.

Further:

If one thinker left a major indelible mark on the 20th century,' Hobsbawm remarks, 'it was he.' Seventy years after Marx's death, for better or for worse, one third of humanity lived under political regimes inspired by his thought. Well over 20 per cent still do. Socialism has been described as the greatest reform movement in human history. Few intellectuals have changed the world in such practical ways. That is usually the preserve of statesmen, scientists and generals, not of philosophers and political theorists. Freud may have changed lives, but hardly governments. 'The only individually identifiable thinkers who have achieved comparable status,' Hobsbawm writes, 'are the founders of the great religions in the past, and with the possible exception of Muhammad none has triumphed on a comparable scale with such rapidity.'

I suppose that you can consider socialism to be one of the greatest reform movements in human history if you see mass murder, genocide, deliberately caused ecological disasters and ruthless surpression of fundamental human rights as being "reform". To consider this a "practical" change underscores the utter moral bankruptcy of those who consider themselves Marxists or, more pointedly, even Leftist.

I find the fact that there are those who consider themselves to be true Marxists to be both amazing and appalling. Amazing because it most certainly must count as a truly bizarre way to look at the world; appalling because of the necessary complete and total denial of the lessons that history has taught us about Marx and his "philosophy" that has led to such massive suffering and death. No religion, despite what has been written there, has ever caused so many deaths as Marxism has.

Menetekel and Reality Intruding...

2011-02-23T14:53:00.001+01:00

First of all, sorry for the long absence: reality has been intruding for some time now. Way too much to juggle for the time being.

However, this reminded me of what is going on in the background.

Simply put, the core principle driving ObamaCare - and how the Democrats are hating having it called that now - is the reorganization of the entire medical profession: the destruction, as it were, of the American Doctor.

Even if it were to be repealed tomorrow - and de-funding is a good first step - it has already started a negative trend, one that is deliberate and, even worse, aimed at doctors based on a faulty understanding of why medical costs are so high.

In the liberal mind set, costs are so high because medical doctors charge so much, earning enormous amounts of money based on their monopoly position as primary health care givers. The vast majority are private and you can't effectively put limits on what they can earn.

So what you do is force the doctors out of their private practices and into collectives of one form or another:

Six years ago, doctors owned more than two-thirds of U.S. medical practices, according to the Medical Group Management Association. By next year, nearly two-thirds will be salaried employees of larger institutions.

This is astonishing: there are fewer and fewer traditional medical doctors out there with their private practices. For the Democrats: goal achieved.

Why is this important?

Because once medical doctors lose their autarky, their independence, they became just one more salaried profession.

Under the faulty Democrat (sorry, I repeat myself) understanding of why medical costs are so high, they have forced medical doctors out of independence into collectivized institutions of one kind or another, which will then be controlled by ObamaCare.

Why is this a faulty understanding?

For two reasons, the second one the more important one.

First, medical doctors in private practice may appear to be earning quite a bit of money, but in reality they are also employers and have to carry their own malpractice insurance as part of being in business. Once that is deducted - plus rent for their offices and bills for their equipment, as well as salaries - things look slightly different for medical doctors' actual real take-home after costs and taxes. They continue to earn well, but it's nothing near what they took in overall.

The real reason why this line of thought is faulty is that the real problem is medical liability and malpractice insurance costs: these are what is driving up health care costs, not merely via the cost of the insurance, but also pushing medical doctors to run tests just in case someone takes them to court.

That is the real problem: this kind of insurance plus the cost of doing due diligence testing (because the cost of not doing the testing is, if you are sued (or even threatened with a lawsuit), is catastrophic and can financially destroy any medical doctor out there.

Now, collectivization of medical doctors may bring some efficiencies, but unless the real cause of increasing medical care costs is addressed, any health care reform is not worth the paper it is written on.

To repeat: ObamaCare is damaging, not merely because it is based on faulty thinking, but because it is already doing damage to the US health care system.

Who benefits?

First and foremost, the insurers who, if they play the game right, can charge more for the insurance they supply. There is no other explanation for the strong support for ObamaCare amongst the insurance companies.

Second, the trial lawyers. Without tort reform, but with collectivization of medical doctors, the pockets of the collective entities of medical doctors becomes automatically deeper and hence more lucrative to sue. What is the worth of bringing a $200mn wrongful injury/malpractice suit against a single doctor, who can never pay that, when they can collectively take 300 doctors to court?

Further, if ObamaCare reaches its logical conclusion, when there are no private medical doctors around any more. The entity of last resort in an injury/malpractice lawsuit is the owner of the company: if ObamaCare sets up the situation, then the payer of last resort will be the US taxpayer, who will then end up feeding the lawyers and accountants (and professional witnesses) through the practically unending deep pockets.

In other words, it is the usual Democrat politics, Liberal thoughts and intentions galore. Misplaced, as usual, and downright destructive if left alone.

Read the writing on the wall: מנא ,מנא, תקל, ופרסין

Daniel 5:25–28: And this is the writing that was inscribed: mina, mina, shekel, half-mina. This is the interpretation of the matter: mina, God has numbered the days of your kingdom and brought it to an end; shekel, you have been weighed on the scales and found wanting; half-mina, your kingdom is divided and given to the Medes and Persians.

The Democrats have numbered the days of the United States and plan to bring it to an end; you will be weighed on the scales and found wanting; your goods will be divided and given away.

That is the writing on the wall: this way lies madness, lies an utterly unsustainable doctrine that must end in thievery and disenfranchisement, all to be sacrificed on the alter of "social justice" and "fairness".

As I've said, reality intrudes on my side of the computer screen and I have been remiss. Suffice to say that things will ease up slightly and you can expect more. Very little of it will be nice and complimentary of recent events.

On Egypt...

2011-02-02T14:54:00.001+01:00

Things are not quite as they appear, I believe.

According to the mainstream observations of what is happening in Egypt, the people have taken a cue from Tunisia and are calling for democracy and an end to dictatorship.The dictator, Mubarak, is holding on to power by refusing to step down, and the Army is keeping neutral and letting politics work itself out.

The reality, I fear, is a tad more complex than that. Read this to understand why.

First and foremost: the Egyptian state has survived as long as it has because it provides bread and circus, with heavy emphasis on the former. The government controls bread and how it is distributed, for instance, rather than allowing private bakers to do that job. The reason for this is that bread prices are heavily subsidized and, as a result, supply and demand are seriously distorted.

The Egyptian government has been introducing liberalizations and reducing subsidies, but slowly. The designated heir-successor was following a neo-liberal approach to transforming Egyptian finances into some more sustainable, one where more private business activities were going to be possible and, at the end of the day, with greater efficiencies, prices would have remained at least stable, if not lower.

So far, so good: the problem really arises when you fail to communicate this and people suddenly no longer see the government supplying services that they have relied on for decades, for their entire lives. If you are used to getting up in the morning and pop down to the bread distribution point to pick up bread for the day, it is disconcerting and frightening to see that place no longer under control by the government. Never mind that the bakeries continue to sell bread: it looks like the government is no longer taking care of the people, ensuring availability at low price.

And that is the basis for the existence of the Egyptian government's longevity: it was seen as being the only institution that wasn't completely corrupted and wastrel, which is why it was charged with ensuring the availability of something as basic as bread.

Oh? Did I say government? The bread distribution in Egypt is in the hands of the military.

Now you can understand that this is a reactionary revolution: people are having their old, trusted system of guaranteed infrastructure dismantled and are reacting against that. The military is on their side: they do not want to lose the rights and privileges that come from fulfilling this fundamental role, resulting in a rejection of the changes in the status quo.

Hence things are not quite what they seem. What we have is the Egyptian people taking to the streets to protect their privileges and fighting reforms; the army is backing them, as they have the greatest to lose if things change.

This is not to say that the Egyptian government and military isn't corrupt and venally incompetent: they are. Many out on the streets have serious, long-term and legitimate complaints about the Mubarak government. But there is a lot more to the story than originally meets the eye.

This is less a revolution to end a dictatorship and bring in democracy as much more a reactionary revolt supported by those who have a vested interest in things remaining, largely, the same. Rather than modernize the Egyptian economy and reduce the role of the government, we will see lack of reforms and further stagnation.

This revolt is not solving the problems facing Egypt: while it probably isn't making them worse, it most certainly doesn't contain the fundamentals needed to move beyond re-arranging deck chairs on the Titanic.

Today's FT...

2011-01-20T11:59:00.001+01:00

If you have a copy, peruse page 10 for a surprise.

That is all...

Unintended Consequences...redux

2011-01-19T14:33:00.001+01:00

Imagine, if you will, a government that believes in the anthropogenic theory of Global Warming. Their "scientific advisers" tell them that they are facing decades of drought, that flood plains have become irrelevant because it will never flood again (or, more exactly, the likelihood of floods is as great as the likelihood of the Sahara becoming green again), that fresh water is a precious, precious resource that needs to be carefully conserved and controlled.

That government takes this advice seriously: they open up flood plains to development; they institute water management policies that are designed primarily to maximize stored and controllable water resources, and they drop training for floods and tell their emergency service people that the need to train for fires and dry conditions instead of floods. This government spent $13bn on desalinization plants to meet water needs, abandoning flood planning because, of course, there wouldn't be any more floods for the foreseeable future.

Sounds sensible, right? Sounds like a sound thing to do?

Read this and see how horribly wrong this has been: just as wrong as when houseowners were told they were not allowed to trim back trees and brush from their houses in the interest of keeping temperatures down to reduce cooling costs, only to see brush fires kill dozens trying to save their houses.

The only thing anthropogenic about the Brisbane floods was the policies that led to abandonment of flood planning, of allowing buildings to be erected on flood plains, of being forced to release massive amounts of water into Brisbane all at once (to save the dam from overflowing) because policies forbade measured releases that would have avoided the degree of flooding to begin with.

In other words, the authorities in charge ignored the historical record, ignored the geological record, ignored the direct and causal relationship between flooding/droughts and the Pacific Decadal Oscillation; ignored the warnings of those who said they were talking a crock, and barged ahead with policies that have now killed people.

There will be an inquiry now, a full judicial review by the Lord Mayor of Brisbane. Tad late for that.

These are the unintended consequences of believing in something to the exclusion of any alternatives. It shows the utter idiocy of politicians beholden to special interest groups.

Oh, and the desalination plants?

Mothballed because of a lack of demand: rain has been so heavy that it is no longer needed. More misallocated capital.

Isn't it ironic, don't you think?

The Conundrum of Low Interest Rates...

2011-01-18T10:12:00.001+01:00

Low interest rates are great, right? As a consumer, you pay less for the money you are borrowing; as a government, you can issue far more debt; as a company, money is easily available.

So what's not to like?

Read this to understand the dangers of low interest rates.

First and foremost: misallocation of capital.

This is the first and foremost cardinal sin of economics: money poorly spent, money frittered away on non-essentials, money invested in projects that fail to perform, all of it is wasted.

Economics, after all, is primarily about limited resources and unlimited demand, reconciling the two.

Misallocation of capital is, I repeat, a cardinal sin in economics.

What does this have to do with low interest rates?

Simple: lowering the price of money increases the possible universe of projects that can be financed. Not all projects should be financed; not all projects will be financed; not all projects deserve to be financed. By putting a price on money, you can judge which projects are those that should be financed, that deserve to be financed, and finally those that will be financed because they bring a proper return in income.

Drop the price of money and you strongly expand the "proper" return on income, that which is enough to pay for the project and remain profitable. The more expensive money is, the more difficult it is to find projects worthy of investment: when interest rates are 10%, the universe of viable projects is much, much smaller (and generally involved considerably more work) than when interest rates are at 3%.

A fundamental truth, despite low interest rates remains: that capital is and always will be a limited resource, despite the activities of the government printing presses. Once invested, it is no longer fungible and easily moved from one project to the next; once invested, it is no longer available for other uses.

Hence low interest rates can be extraordinarily destructive: it leads to investments that fail to perform when interest rates are no longer low and when it comes time to refinance the investment, the business case evaporates and someone is left with a white elephant that cannot be sold for love or money. Case in point: Xanadu.

Now, why then the insistence of low interest rates by the Fed?

Well, there was this recession...

Seriously: low interest rates by the Fed saved the financial system from gridlock and collapse as the subprime crisis and its follow-on effects worked it way out. It allowed the banks to avoid liquidity traps and survive.

It also allows the government to take on very large debt levels, as the cost of financing that debt remains well within the ability of the US government to pay via its cash flow.

The downside, of course, is that while the banks survived, they also stopped lending in order to eliminate any new debt turning into a problem, as well as to return to profitability, since the liquidity was invested in US government debt, with the banks making a handy, risk-free return on the money that they had borrowed from the Fed in the first place. After being burned so badly, a risk-free return of 100 basis points sounds awfully good to a lot of bankers; why loan money with risks of default at relatively high levels when you can earn it for free elsewhere?

Another downside is that interest rates won't remain low forever, but that is exactly the only way that the US government can afford a debt crisis without having to either cut spending drastically and/or raise taxes significantly. If interest rates for US government bonds were to climb to, say, 5% for a 90 day bond (which is where a significant portion of US government bonds are issued), the government would have to spend quite a bit more for interest servicing. Back in the good old days (pre-Clinton, to be exact), the US government largely financed spending via long-term bonds; this was explicitly changed by the Clinton Administration to short-term bonds, increasing the inherent instability of the US government's ability to service those bonds.

Why this?

Because short-term bonds are always more volatile than long-term bonds. Bonds have an interest rate and a price; the combination of the two determines the performance of the bond. The interest rate is determined when the bond is issued; the price fluctuates, approaching 100% of the nominal price of the bond when the bond reaches maturity and is paid out at the face value. If demand for a bond suddenly tanks - no one wants to buy it, everyone wants to sell it - then the effective interest rate skyrockets upwards; long-term bonds are usually fairly free of these fluctuations, as they can first be redeemed in years, not in months or days.

Hence if the Fed were to raise interest rates, the ability of the US government to finance its debt could be called into question, as the sum of the debt is huge and even small changes here make mockery of any budgetary planning.

This is perhaps the greatest danger of low interest rates coupled with heavy debt: once that debt is accumulated, it has to be serviced and, invariably, re-financed as short-term bonds mature and have to be repaid (financed by new bonds). The fact that interest rates are low has enabled the US government to take on massive debt; the flip side is that this debt is largely short-term and must be refinanced. Raising interest rates here would effectively cripple the ability of the US to refinance its debt.

If that happens: watch out, what we saw in the last few years is nothing in comparison to a US sovereign debt default.

So now we have the conundrum of low interest rates: great to have as a consumer, but a catastrophe for the economy. The Fed cannot afford to raise interest rates because if it does so, the ability of the federal government to raise capital is badly damaged; if it does not, in the face of inflation, it will damage the rest of the economy. Companies have taken on projects that can only show a return on profit when interest rates are low (because when interest rates rise, they turn the project unprofitable) because it was simpler and easier to do so, rather than finding the projects that were more resilient and rewarding, but harder to do and harder to make work well.

Low interest rates are a trap for the unwary. If companies and the US government had maintained their standards, low interest rates wouldn't be a problem: however, low interest rates drive both companies and the US government to misallocate capital, the cardinal sin of economics.

The conundrum remains: there is no simple solution. The only real solution would have been to not go so heavily into debt (US government) or to maintain high standards of due diligence for corporate investments and spending (companies).

Returning to economically sensible behavior after such a period of debauchery will be both expensive and tedious, marked by much stronger savings rates and the accompanying postponement or abandonment of consumption in order to regenerate savings and hence capital.

We'll all be paying for the low interest rates for decades to come, until companies have written off their losses and government debt comes down significantly.

Now that's a legacy.

There is no easy answer

A Political Inversion...

2011-01-13T15:31:00.001+01:00

The political inversion in the US is striking.

On the one hand you have the Democrats, the traditional party of the unions, of the little guy, fighting for the disadvantaged, caring about those less better off.

On the other hand you have the Republicans, country club members, bosses and exploiters of the poor, slumlords and commercial developers who would love nothing better than to turn out grannies and unmarried black lesbian single mothers onto the street in order to build another shopping mall.

Okay, so much for the fantasy image that the Democrats have been living for the last 50 years.

The inversion of these roles is, for me, amazing. The Democrats have been completely corrupted and now actively are in collusion with those who would rob most Americans blind in a second if they could (and that is what they are working on right now).

Read this to understand what is going on.

Simply put: there has been massive incompetence, fraud and outright theft by the mortgage servicers. Massachusetts (yes, liberal-until-our-dying-breath Massachusetts!) courts have found that the mortgage servicers have been foreclosing on properties that they have no title to (and hence no standing before a court of law). The corollary of this is that if the mortgage servicers don't have title, how can they have securitized the mortgages?

Let's back up a second so that this is better understood.

Someone buying a house gets a mortgage from a mortgage originator. The mortgage originator used to be the local bank, it no longer generally is. The mortgage and the note for the house (title) goes to the mortgage originator. The mortgage originator usually turns the mortgage around and securitizes it, selling off the cash flow of the mortgage to a financial instrument. The note is transferred to the legal entity of the financial instrument as security against failure of the cash flow (non-payment): in this case, with a home mortgage, the financial instrument would be a residential-backed mortgage security (RBMS). If a homeowner fails to pay their mortgage, the mortgage servicer - which, remember did not originate the loan and does not have direct title to the property, as this has been turned over, physically, to the legal entity of the financial instrument as security (it's the basic definition of what a security is!) - then tries to come to an agreement about repaying the monies owed; failing this, they foreclose on the home, selling it for what it can be sold for, and turning the monies over to the financial instrument. When the RBMS is formed, as a legal entity, there is a relatively small window of opportunity for transferring the title and effective legal ownership of the property without paying taxes (this is done deliberately to avoid having unresolved tax problems).

So,that's the theory.

What really happened?

When the mortgage was sold by the mortgage originator, titles and paperwork were transferred. When the mortgage servicing companies sold the mortgages to the RBMS, the paperwork wasn't done properly: the notes of ownership, in some cases, were scanned in and the originals discarded (in violation of 8 centuries of legal precedents); on other cases, no one knows what happened to them, as the originators, original servicers and everyone in-between were closed, were taken over, became another company, etc.

In other words, the legal chain of ownership, the core of the real estate business, was disrupted for any number of reasons, the most usual one being efficiency, rather than doing what the law required. The problem isn't so much that there is a problem when it comes to foreclosure: if the notes weren't properly transferred - and apparently the lawyers involved vouched for the correct transfer, even when they could not have known that this was the case - it also means that the RBMS are no longer securitized financial instruments, but rather ... no one really knows. They don't have recourse to the securities that they were supposed to have, meaning that they are actually worth...no one really knows.

In the name of efficiency and getting literally millions of deals done and sold off, the mortgage servicers failed in their duties, miserably so. They know this or, more exactly, the companies that unwittingly bought their assets without due diligence now know this. Legally, the whole mess must be unwound under control of the courts in order to clearly identify who owns what and who is actually allowed to foreclose; the RBMS side of the business is a catastrophe, as the investors there have been clearly defrauded, fooled into thinking they were buying securitized investments (i.e. with recourse to the assets if the cash flow failed) when, in fact, they were sold fraudulent financial instruments.

However, we are talking billions and billions of dollars here, as well as the future existence of the entire industry.

Rather than leaving this to the courts - where it is supposed to be dealt with - the mortgage servicing industry is putting on an all-stops effort to change the laws in order to make the fraud non-fraud.

Let me quote from that link above:

This proposal guts state control of their own real estate law when the Supreme Court has repeatedly found that "dirt law" is not a Federal matter. It strips homeowners of their right to their day in court to preserve their contractual rights, namely, that only the proven mortgagee, and not a gangster, or in this case, bankster, can take possession of their home.

This is central to the inversion of the political parties in the US: Democrats (which, remember, was the party of States' Rights leading up the Civil War) want to take over determining real estate law from all the states, eliminating due process (since a homeowner being foreclosed on can't have their day in court to point out that they have been current on their payments and that the bank has made a mistake, for instance), all in the name of fixing the greatest cluster-fuck in American history.

Sorry for the language, but this is really what is going on.

The Democrats appear increasingly to be committed to do outright harm to the little guy, the homeowner, really anyone buying a home with a mortgage, in order to protect those who, through their own abuse of the system, have a vested interest in not having the system fall apart because it would cost them money.

In other words, the Democrats are becoming the party of big business, pandering to corrupt businesses in order to preserve the profitability of those businesses.

Don't believe me?

Again, from the link above:

The discussion in the summary takes the view that the only "injured" homeowners that get any consideration are those "genuinely damaged by paperwork failures". Thus the only problems that are addressed are screw-ups in the mod/short sale process and wrongful foreclosures. We see nary a mention of origination fraud or servicing abuses and errors. Yet foreclosure defense attorneys have said in 50% to 70% of the cases they represent, the borrower got in serious arrears as a result of servicing errors and compounding fees; a single late or misapplied payment can quickly compound into a multi thousand dollar deficiency before the borrower even finds out something is amiss.

Read that again: 50%-70% of foreclosures are because the servicers erred and then charged homeowners for their errors, driving them into foreclosure. This is as close to outright theft as can be imagined.

To make matters worse, this destroys contracts without recourse. All in the name of protecting businesses that have been good supporters of the Democrats.

The political inversion is amazing. The Republicans are now fighting for state's rights, protecting the disadvantaged and the small guy, fighting to let them keep what they earn, while the Democrats are the party of big business, corrupted through and through.

Hat-tip to Yves at Naked Capitalism, of course: without her diligent work, much of this would have remained carefully hidden, out of the limelight.

Back In The Day...

2011-01-12T10:47:00.001+01:00

I did my undergraduate degree in philosophy and psychology. I decided that psychology was not for me (or, more exactly, working in group made me realize how little patience I had with people who had easily solveable problems that they were reluctant to solve for one neurotic reason or another), but it was an excellent education in the foibles and nature of my fellow humans. I did some clinical work at a local institution learning how to classify, how to identify patients that could be helped and those who could not, as well as meeting some truly evil individuals (nightmares back then about those folks) that underscored the need for institutionalization.

This prodded me to recall some of the topics discussed back then.

Fundamentally, there was a shift, driven in no small part by the film "One Flew Over The Cuckoo's Nest" in terms of general consciousness-raising amongst the population, from institutionalization to non-institutionalization.

Back in the day, there were abuses of the system. Borderline (not syndrome, but actual borderline) cases where someone could have lived in society, but parents and others responsible didn't want to be bothered (and yes, there was often money involved, usually a sizable inheritance) and hence someone who simply needed some therapy (to overcome deliberately induced feelings of worthlessness and self-disgust) and normal, non-destructive relationships to become a functioning and, dare say, even happy member of society would often be institutionalized and end up vastly worse-off than before.

But the solution was and is devastating,driven by do-gooders who wanted to correct "horrible wrongs" and ended up inflicting misery and more often than not outright horror and death by removing as many from institutionalization as possible.

The goal wasn't only to "liberate" those who were, in many cases, clinically insane, but also to confront society with its debris, with those who failed to make the grade, to rub society's nose in the dirt, so to speak, because capitalism was so horrible and anyone who didn't want to live the capitalist dream was oppressed and downcast. The institutionalized were viewed as victims of a ruthless and brutal society who did not want to deal with their problems, which needed to have half-way houses placed in the best neighborhoods in order to remind the successful of the societal costs of capitalism.

Yes, I am being serious about this. This is virtually verbatim from one activist psychologist working with one of the deinstitutionalization advocacy groups of the day.

There was a method to the madness: throw the institutionalized out in order to generate budgets for half-way houses, employing those who proclaimed the need to integrate these people into society. The idea was that a generation of advocates could live off the state this way, while at the same time confronting American capitalist society with the costs of capitalism, mental illness of those who were too frail to withstand the rigors of that society. Half-way houses were considered optimal, situated with plenty of room, plenty of space, in upscale neighborhoods to force the rich to see what costs their success required. Half-way houses would let the institutionalized, taking their medications, to reintegrate with society and ultimately help change society so that their "different" ways of perception and behavior would become acceptable.

The reality, of course, was that the advocates, as did most people, found the institutionalized to be extremely difficult to get along with, that they would conveniently forget to take their medications, that putting a half-way house near a school would only infuriate the parents and that the half-way houses would end up in the worst possible neighborhoods because they were powerless to fight them. The reality was that institutionalization was actually necessary in many cases - I remember the statistic of over 90% - in order to prevent, for instance, a severely neurotic young man who masturbated constantly from doing so in the local playground.

It was, as is so often the case, a massive failure. But the activists based their careers on it, the institutions were closed down, the institutionalized became homeless and lived lives of despair in a mental fog.

The best intentions. The worst possible results.

Blood On Their Hands...

2011-01-11T08:39:00.001+01:00

Reading this in the WSJ got me to thinking.

I've not commented on the Arizona shootings because there is too much going on and already too much vitriol - from the left - that it scarcely deserves serious thought.

But seeing that article and the sheer bloody-mindedness that has led to the deaths of many, let's consider this: that the "progressives" in our society are the most dangerous elements in society.

Not because they want to overthrow established principles in the name of progress, not because they want to spend all of your money as do-gooders on pet projects.

No, rather because they are dangerous in their ignorance, dangerous in their deeds, and dangerous in their intentions.

The key quote in the link above is this:

The editor of the Lancet, Richard Horton, sent Dr. Wakefield's paper to six reviewers, four of whom rejected it. That should have been enough to preclude publication. But Mr. Horton thought the paper was provocative and published it anyway.

In other words, Mr. Horton put his own opinions above that of scientific research, choosing to publish bad science in the name of ... what?

Pretending that vaccines are bad for you? Making up a story to further your career? Living in a fantasy world where science is debased into opinion and peer review destroyed - and it has been most thoroughly by the likes of Mr. Horton and by the Global Warming Alarmist Industry, which has rigged peer review to the point of censorship - in order to be "provocative"?

Why not, after all, it's risk-free for the editor. Nothing is going to happen to him: if, at the worst, he comes under fire for being a really bad editor, he can say "but I thought it would be an interesting topic for greater discussion".

Too bad kids have died for this.

The same sort of risk-free political nonsense permeates the left. They can call for the welfare state and insist that the primary role of government is to do good, that progressives have a right to re-make society into something they think is better (destroying family structures and economies along the way). That's why you see the vitriol coming from them in the wake of the Arizona shootings: they think, seriously, that anyone who disagrees with them is not just wrong, but are, necessarily, bad people.

The truth is that the left is seriously irresponsible. You can't trust them with the simplest of tasks, let alone complex ones.

And they have blood on their hands. They just don't see it as blood, but rather necessary sacrifices for the greater good.

Back to the Good Old Bad Days...

2011-01-06T10:49:00.001+01:00

With the relative unimportance of the old-school conflict between the forces of Light and Dark after the Cold War ended, strategic thinking - the mind-games of how nuclear deterrence needed to work, of what role nuclear weapons play in strategic planning, of what the basis should be for war-fighting capabilities, etc - basically disappeared from the view screen.

Well, it's back.

But with a dearly ironic difference.

Read this to see what I mean.

Back in the day NATO was faced with a potential foe - who made it quite clear in their own writings and actions that they considered war, if not inevitable, to be a clear part of the spectrum of political tools at their service. The Soviet Union and the delightfully named Warsaw Pact - delightfully so named because the shorthand became "WarPact" - were belligerent and not above shooting to kill when warning shots were perfectly adequate. Their doctrine - we now know this as a fact, while back in the day it was considered to be an extremist interpretation - was massive use of nuclear weapons to cripple NATO while sending in very large conventional forces to achieve quick victories at extreme cost to civilian populations. When it became clear that NATO could survive and that such a doctrine would be counter-productive at best, the move went to massive conventional forces to achieve "proper correlation of forces" to achieve needed battlefield superiority to be able to defeat NATO divisions in detail. The creation of Operational Maneuver Groups (OMG!) to break through the crust defense of NATO was the final strategic plan of the Soviet Union and the Warsaw Pact.

NATO at first designed its forces as tripwires that would then result in nuclear strikes on WarPact forces entering NATO territories. When certain key countries realized that it would be political suicide if it became public knowledge that NATO's war fighting strategy was massive use of tactical nuclear weapons to destroy WarPact forces, this strategy had to change. While the WarPact chose to use its comparative advantages - large conscript armies coupled with products from heavy industry (tanks, artillery) - NATO chose to counter this with technology, developing extremely effective anti-tank weapons (the Soviets despaired of facing attack helicopters armed with TOW missiles) and long-reach weapons designed to dismantle the ability of the WarPact to actually wage war by crippling their logistics.

We know how this ended: the WarPact collapsed because they devoted too much of their less productive economic output to feeding the military with troops, weapons and logistics and ended up bankrupting their system long before anyone thought that their State would wither away. The NATO plan worked: substituting technology for mass led to the modern US war-fighting doctrine, of relatively small and mobile forces appearing at exactly the right place and the right time with the right weapons to destroy their enemies with minimal casualties, combining technology and information with war-fighting capabilities fine-tuned to achieving the goal of winning the battle with minimum casualties.

So, what does this have to do with China?

China sees itself confronted with a potential foe - who makes it quite clear in their own writings and actions that the deliberate use of force to resolve political confrontations is part and parcel of the spectrum of political tools at their service - that has overwhelming conventional superiority.

Now that's ironic.

Read the story at the link: China is saying, moving from a long-term no-first-use commitment to "we're going to nuke your fleet if you attack us" doctrine of nuclear weapons. They are deliberately lowering the nuclear threshold in order to avoid having to try to match their potential opponent in terms of conventional forces: back in the day, such a doctrine for NATO generated massive bad publicity and quite a bit of opposition (in no small part financed by the WarPact, but that is another story for another day) that ultimately led to the development of conventional weapons to do what nuclear weapons were to be used for.

Lowering the nuclear threshold becomes very, very dangerous when conflict looms: it really does imply that even a small attack will bring Armageddon, that there could be no doctrine of "limited war," that escalation to using nuclear weapons would be fast and unavoidable. If that is your policy, then you have to implement strategic planning that matches that policy (otherwise it is non-believable and invites provocation, since your opponent does not see you backing up your public statements with weapon systems).

Of course, what it does is lower the nuclear threshold and raise the specter of a nuclear war actually being fought, as once they are in use, there is little or no likelihood that the other side will not use them as well. What was a conventional war with lousy consequences for civilians becomes a nuclear war with absolutely devestating consequences for civilians.

The world is not going to be a safer place if this becomes really is becoming Chinese nuclear doctrine. That is the fundamental line that "peace movements" used to try to discredit NATO war fighting plans and doctrines, that these would make the risk of war greater, rather than less.

How ironic, don't you think?

It looks like we are heading back to the good old bad days of nuclear war-fighting doctrines.

Why the Democrats Are Doomed...

2011-01-05T19:41:00.001+01:00

I saw this, and rejoiced.

It's the answer to all of our problems: let's simply get rid of the Fed, disband it entirely, and replace the Federal Reserve Notes (aka "money") with ... US Money. Printed by the Congress.

Repudiate all debt, simply print money. Need to fund something? Simply print money.

Hallelujah! All of our problems solved!

Author of the Bill, HR 6550: a certain Mr. Kucinich.

If that is the solution, then it is rather apparent that the Democrats have no clue what the problem is. Zilch, nada, not one whit of a tad.

Read this specifically

SEC. 106. ORIGINATION IN LIEU OF BORROWING.

(a) In General- After the effective date, and subject to limitations established by the United States Monetary Authority under provisions of section 302, the Secretary shall originate United States Money to address any negative fund balances resulting from a shortfall in available Government receipts to fund Government appropriations authorized by Congress under law.

(b) Prohibition on Government Borrowing- After the effective date, unless otherwise provided by an Act of the Congress enacted after such date--

(1) no amount may be borrowed by the Secretary from any source; and

(2) no amount may be borrowed by any Federal agency or department, any independent establishment of the executive branch, or any other instrumentality of the United States (other than a national bank, Federal savings association, or Federal credit union) from any source other than the Secretary.

(c) Rule of Construction- No provision of this Act shall be construed as preventing the Congress from exercising its constitutional authority to borrow money on the full faith and credit of the United States.

(d) Technical and Conforming Amendment- On the effective date, chapter 31 of title 31, United States Code, is hereby repealed, subject to the retirement of outstanding instruments of indebtedness of the United States in accordance with section 401.

Ye gods. This is the complete and total abolition of any fiscal responsibility and the destruction of US government bonds as the most secure investment instruments the world has ever seen (okay, the Democrats have been working on that last one for quite a while).

He seriously wants to forbid borrowing by simply allowing Congress to print whatever money it needs.

What would monetary policy then be? Take a look:

(5) GOVERNING PRINCIPLE OF MONETARY POLICY- The Monetary Authority shall pursue a monetary policy based on the governing principle that the supply of money in circulation should not become inflationary nor deflationary in and of itself, but will be sufficient to allow goods and services to move freely in trade in a balanced manner. The Monetary Authority shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

How is this then to be reconciled with allowing Congress to print whatever money is needed?

Hopeful thinking is all: stating that whatever Congress needs will, in effect, not become inflationary or deflationary in and of itself, but will be ... sufficient.

If this is not a case of serious parody - and Mr. Kucinich is scarcely capable of such a sense of droll humor - then this is one of the better examples of why the Democrats are doomed. Sheer ignorance of basic economics and sheer ignorance of how economies actually function appears to be the basis for their thinking: it is the only explanation for such a folly.

Oh, and interest rates may not exceed 8%, nor may the amount of interest over the life of the loan exceed the equity, nor may interest be paid on your regular banking account. Oh, and local governments can borrow money for nothing.

Ye gods. The man seriously just wants to get rid of economics because it keeps on getting in the way.

Keep it up, Democrats. Keep on showing how you elect congresscritters who are fundamentally incompetent, fundamentally ignorant and cannot even begin to understand the consequences of such an act.

Keep it up, and you'll look back at 2010 as one of the good years.

First post of 2011...

2011-01-04T12:40:00.001+01:00

Generally speaking, 2010 was a fairly lousy year, highlighted really only by the pummeling the Democrats took in November.

On the other hand, 2011 is shaping up to be a fairly interesting year, not the least because the Democrats were pummeled so heavily and lost the House.

Congress right now is held largely in contempt, with congresscritters of all types rated down there with used car salesmen and the like. It is also rightly held in such contempt: largely speaking, Congress has failed to do its right and proper job under the Constitution, and hasn't since the New Deal. What is this right and proper job?

Read this.

If you consider that, you can see that Congress has been irresponsible for far too long. The whole system of earmarking - aka pork - is indicative of this: it is a way of getting something done without having to stand up and push a bill through that obviously is a payoff for some congresscritters' pet project/constituency/lobbyist payoff/etc. No exceptions here: Congress has failed to fulfill its constitutionally appointed role.

What is that role?

To quote from the above link:

The Constitution gave the federal government the authority to pursue certain limited ends, like national security and ensuring free interstate commerce, but otherwise left us free to pursue our ends either through the states or as private individuals. It did not authorize the federal government to provide us with the vast array of goods and services that today reduce so many of us to government dependents.

How did Congress get into its current state? Roosevelt and the New Deal: they abdicated their responsibility to the Supreme Court to determine what was constitutionally allowed (the Supreme Court should really only decide what is not allowed, rather than what is allowed...) and gave the Executive an enormous expansion of enumerated powers.

What are enumerated powers?

Well, to quote that radical and subversive document, the Constitution of the US, Article I, Section 8:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; [Altered by Amendment XVI "Income tax".]

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and Post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

In addition, to put this in perspective, the 10th Amendment is worth quoting as well:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Now, this is going to out me as a strict constructionist (duh), but the Supreme Court made mistakes when it allowed the US Congress to interpret "To make all Laws which shall be necessary and proper" to mean an effective carte blanche to make laws however Congress saw fit, rather than to make laws "necessary and proper".

It's all a question of perspective: how is the government allowed to spend money?

To again quote from the above link:

In 1794, for example, James Madison, the principal author of the Constitution, rose on the House floor to object to a bill appropriating $15,000 for the relief of French refugees who had fled to Baltimore and Philadelphia from an insurrection in San Domingo. He could not, he said, "undertake to lay [his] finger on that article of the Federal Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." The bill failed.

Bingo: if such a bill were to be brought forward today, it would pass without a fight (well, at least under the last Congress). Who would want to go on record of not caring for the modern equivalent of French refugees?

Well, according to James Madison, it is not the role of the government to spend money on objects of benevolence.

It is the role of the Federal government to do what is enumerated: we are going broke trying to be benevolent.

The sooner that this is realized, the better. If you want to be benevolent, Democrats, then do it with your own damn money. Not with the money of taxpayers.

Nowhere amongst the enumerated powers is "to provide benevolence."

If "progressives" (in quotes because their policies increasingly show them to be regresssive, not progressive, i.e. harming the poor, rather than helping them) or Democrats want to provide for benevolence, let them amend the Constitution. Anything less than that is cowardly, showing that they have not the courage of their convictions.

It will be a good start to 2011 when the Constitution, for the first time, is read out aloud at the beginning of the next Congress. A very good start indeed...

The Face of Corruption...

2010-12-23T10:23:00.001+01:00

This is typical: in a largely Democratic state, more than $500,000 is being spent on a new film studio near Santa Fe, the first use of a $10mn package to help local industries. In addition, $3.6mn is being spent to improve the local infrastructure.

Doesn't sound so bad, does it? A film studio for New Mexico, what's so bad about that?

Simple:

Father and son Lance Hool and Jason Hool — longtime friends of Gov. Bill Richardson — are the principal shareholders in Santa Fe Studios. State Democratic Party chair Javier Gonzalez is also a partner in the venture.

Further, after initial approval, the agreement has been changed multiple times, with the local government paying for more and more of the project:

The most recent version of the deal includes the following commitments of public resources:

Santa Fe County will administer the $10 million economic- development grant on the project.
Santa Fe County will provide $3.6 million worth of infrastructure improvements to the project, including dedicating as many as 25 acre-feet of water for the studio.
Los Alamos National Bank will loan the project developers at least $6.5 million, which Santa Fe County will guarantee by placing $6.5 million worth of "cash reserves" in a "lock box" account at the bank.

According to the motion filed Wednesday, if there is a default of the terms of the Project Participation Agreement, Santa Fe County will also be obligated to reimburse the state for any of the grant money spent on the project.

So, from a modest spending proposal, Santa Fe county is now administering the project and, most importantly, is guaranteeing the project, removing any and all risk for anyone investing...and those investing just happen to be longtime friends of the Governor and the State Democratic Party Chair.

This is the face of corruption today: instead of taking on risk in a commercial undertaking, your friendly local government takes that on instead, but only if you are the right people.

At least some is trying to fight this:

But Wednesday's filing claims the new agreement still violates laws meant to prevent the government from donating public resources to private developers or from lending or pledging its credit to aid "any person, association or public or private corporation."

The motion alleges that:

Neither Santa Fe Studios nor its holding company, La Luz Holdings, qualifies for public assistance under Local Economic Development Act rules.
Santa Fe County changed the terms of its own ordinance governing the use of county gross-receipts tax revenue to allow the use without posing the question to voters as is required by law.
Only 16.5 of the 65 acres purchased by Santa Fe Studios and La Luz Holdings for the studio project will be used to build the studios that are named as the focus of the $10 million grant, while the remainder will be a private real-estate development.

See how all of a sudden there's something additional, something simply not mentioned? Only a small portion of acquired land will be used for the studio, the rest is a private real-estate development.

Corruption, in the eyes of the corrupted, is simply a way of doing business. It costs the taxpayers massive amounts of money, but because there isn't one single person "hurt", a blind eye is turned and those with connections make out like bandits. In a town facing real problems with oversupply of housing, foreclosures and bankruptcies, someone is using his leverage with the local government to build more housing.

But hey, what's the rule of law to these friends of the Governor and the State Democratic Party Chair?

At least someone is trying to stop this: it may well get nowhere, because all of those involved are either corrupt or complicit: oddly enough, no one involved could be reached for comment, or declined to comment because they weren't aware of what is going on.

Now that's convenient.

And kudos to the Santa Fe New Mexican: they are doing their job, reporting on what is obviously a sweetheart deal for political friends.

Ironic Is The Least I Can Say...

2010-12-21T09:32:00.001+01:00

...to this.

Ye gods.

What is ironic is that the Democrats, the party that claims to represent the workers in the US, the friend of the little guy, the party so dead set against big business, is ... yep, lobbying for changes that big business desperately want.

Net neutrality is nothing less than an attempt by internet providers to rout internet traffic to maximize their profitability. Ignore all other arguments: at the end of the day, that is all that there is to this. This is commercial interests wanting to maximize their profitability, minimize their costs, and try to make monopoly profits.

The only way they can do this is to change the laws, changing the fundamental nature of the internet, allowing them to fiddle with packets and their routing. Don't pay enough? Then you get dropped into the big bucket of "well, your packet will get there someday"; pay enough, and your access is like it is now.

And that is supposed to be a consumer benefit?

Not.

What the Democrats also don't realize is that if you allow discrimination based on price, you can also discriminate against content and source. Which opens the internet to significantly more censorship than has been the case. But what do you expect from the party that desperately fought the Civil Rights Act.

A lot of money was invested in what are now called darknets, parts of the internet that are usually not very accessible because the companies that control them have largely turned them off. They are the fiber-optic networks that were installed during the Dot-Net bubble, when companies threw billions at infrastructure.

Now they are kept deliberately off the system in order to create artificial constraints on data flow in order to bring them back on only when the companies involved can charge monopoly prices for access.

The building of these networks is a classic bubble malinvestment, an investment that turned out to be completely useless. Now the companies involved want to turn that around and recover their invested billions. Right now, there is no cash flow, no revenues from these nets, and the investments, if they haven't been completely written off, are like lead weights on the balance sheets, reducing profitability.

Here's an idea: how about simply opening the nets up and start earning a revenue stream from them. The companies that blew billions on these nets need to feel the pain of making poor investment decisions rather than forcing consumers to pay for them (since pricing without discrimination doesn't let them raise prices due to competition: ain't capitalism grand for consumers as well?)

Sigh. Knowing the Democrats, this will probably go through, only to be repealed. But the only victories the Democrats are capable of, it seems, are Pyrrhic victories. Isn't it ironic...

Ha! Of course...

2010-12-14T08:29:00.001+01:00

...trying to force folks to buy a commercial product whether they want it or not is not constitutional.

Duh. Been the problem from the start.

Eric Cantor has the right idea:let's put a stake through the heart of ObamaCare and repeal it in its entirety, end the nightmare that Pelosi wrought.

What a catastrophe she has been for this country. What a catastrophe both she and Obama have been for the Democrats. At this point, any decent conservative, especially a woman, could beat Obama hands-down based on his fiscal track record alone, and he would richly deserve the defeat.

The only good thing that has come out of this is the slowly dawning comprehension that if you want to redistribute people's money, you gotta let them earn it first, and that at some point folks are going to say "hell no". Only idiots think otherwise.

Then again, that's who was elected in 2008.

It Takes A Government...

2010-12-02T16:33:00.000+01:00

There's a lot going on: outright fraud in securitization, with companies claiming that they didn't need to actually follow the letter of the law, since no one was paying attention; bond markets behaving in ways never seen before; failing economies that are too big to fail; banks so heavily leveraged that there can be no creative destruction ala Schumpeter (desperately needed, but being blocked by those with too much to lose) and at least two major bubbles that no one wants to see burst.

The last shall be first: two bubbles. Gold and China, and they are inter-related. The Chinese who can are buying up gold like never before - hence the gold bubble - and for very, very good reason. China itself is a bubble.

Don't believe me?

Consider this:: as I've said time and time again, a cardinal, deadly sin of economics is the misallocation of capital.

Great portions of the Chinese economy are currently working without price information. See this here by Megan McArdle:
When you're in China, it's easy to get caught up in the constant extolling of the benefits of (modified) central planning, After all, the Shanghai-Hangzhou train, which I rode, is awesome, and it's certainly true that the market probably wouldn't have provided it. The Chinese argue that the new high speed rail network is critical not merely to move the population around, but to free up the existing railbed for more freight traffic.
On the other hand, there are great dangers to being able to point at an infrastructure problem like this and say: "Make it so." We interviewed someone at the rail ministry, and initially I was going to ask him the normal financial questions you ask someone planning a major capital expansion in the United States: capital costs, cost-effectiveness, and so forth. The answers are more often than not the fever dreams of the most optimistic consultant they could find, but at least there is some tether to reality: the head of the agency doesn't actually want to be fired because his budget overruns just ate the money allocated for children's health care.
In China, I was stumped as to how you'd even ask that question. These projects don't have to go to the market for loans; the government directs the state-owned banks to lend to them, at interest rates decided by the state. There's no opportunity cost to the money, since it's not like the rail ministry would otherwise be building a chain of noodle shops. And the ridership projections are vetted by the same people who want to build 16,000 km of high-speed rail.
Prices are really useful. But in whole large sectors of the Chinese economy, particularly the banking sector, the government sets those prices. This means huge information loss, and the concomitant possibility that there is a vast misallocation of resources.

Understand, please, that China is not a market economy: it remains a controlled economy, one where prices continue to be made meaningless. It is first and foremost a government-owned economy with some privatization (but don't you dare think about behaving in ways that The Party doesn't like!) and a mercantilist attitude that exploits the openness of foreign markets to destroy competition and assimilate technologies in order for The Party to survive. It is, of course, not entirely that simple, but this remains the core of the Chinese political economy. They, The Party (which, of course, in its current incarnation is nothing but a collection of apparatchniks and thugs), is riding a wave of economic expansion and growth, one that almost literally has to grow at 8% a year in order to cover all the mistakes, errors and incompetence of The Party in order to keep peasants coming to the cities and entering the industrial workforce under conditions that should outrage, but don't because they are kept carefully hidden.

Further (same source):

To get a really catastrophic misallocation of resources, it seems to take a government; corporations can only screw things up on an artisinal scale. For that matter, it's worth noting that our government has spent the last seven decades trying to keep the price of housing low, and that much of that intervention, such as the creation of mortgage securitization, ultimately significantly contributed to the crisis.

It's worth remembering that at the time they were built, all those useless houses looked like prosperity. So too, massive mispricing in China may look pretty sweet--unless a hiccup suddenly leaves the government with a hell of an expensive white elephant. Or lots of them. As anyone who has contemplated purchasing a luxury car will know, just because something is really awesome, doesn't mean it's a good idea, economically speaking. Buying without knowing the price is dangerous no matter where you are.

This is what is facing us now: far too many True Believers in the Chinese economy, convinced that it will continue to expand at 8%+, coupled with the Chinese themselves, buying gold like it is going out of style.

If prices were accurate, you wouldn't have that: the uncertainties of missing prices (or, more exactly, the intuitive knowledge that capital is being misallocated right and left, largely because the Chinese government cannot bear to have someone point out that the Emperor has no clothes.

It really does take a government for really catastrophic misallocation of resources: this is happening in China today. We don't know if China can afford a HS rail network (not only for the reasons that Megan put forward in that link) as we don't know what it will cost and whether that will be an investment that really will pay back.

Especially when you consider that the Chinese are aiming at a vast expansion of inner-China flights, which is in direct competition to HS rain. In other wards, the left hand doesn't know what the right hand has done, is doing, and plans to do.

When China falls, it will fall very, very hard. Communist countries always do when The Party tries to hold onto power far too long. This is going to be a major catastrophe, an epic fail. It really does take a government to do that.

Happy Thanksgiving, Everyone!

2010-11-25T08:25:00.001+01:00

A wonderful and happy Thanksgiving to everyone. Us expats gotta work.

But I wanted to pass this on from John Scalzi, a rather talented science-fiction writer: I'm guessing that he may not have a cousin named "Chet". But this remains a lovely prayer for Thanksgiving...

Dear Great and Gracious Lord,

This Thanksgiving, we pause to reflect on all the bounty and good fortune with which you have graced us this year. Thank you, Lord, for this feast we have in front of us and for the family and friends who are with us today to enjoy this bounty and this day with us, even our Cousin Chet. Thank you for our health and for our happiness.

We also thank you for the world and that in your wisdom you have not stopped the Earth's core from rotating, collapsing our planet's magnetic field and causing microwaves from the sun to fry whole cities, requiring a plucky band of scientists to drill down through the mantle and start the core's rotation with nuclear bombs. That seems like a lot of work, so we are pleased you've kept the Earth's core as it is.

We also thank you for once again not allowing our technology to gain sentience, to launch our own missiles at us, to send a robot back in time to kill the mother of the human resistance, to enslave us all, and finally to use our bodies as batteries. That doesn't even make sense from an energy-management point of view, Lord, and you'd think the robots would know that. But in your wisdom, you haven't made it an issue yet, so thank you.

Additionally, let us extend our gratitude that this was not the year that you allowed the alien armadas to attack, to rapaciously steal our natural resources, and to feed on us, obliging us to make a last-ditch effort to infect their computers with a virus, rely on microbes to give them a nasty cold, or moisten them vigorously in the hope that they are water-soluble. I think I speak for all of us when I say that moistening aliens was not on the agenda for any of us at this table. Thank you, Lord, for sparing us that duty.

Our further thanks to you, our Lord, for not allowing the aliens to invade one at a time and conquer us by taking us over on an individual basis. That you in your wisdom have not allowed aliens to quietly inhabit our bodies and identities -- the better to attack us by cornering us in the rec room or outside while having a smoke -- means that we can enjoy each other's company without undue paranoia. It also means that if we are obliged to set a flame thrower on Cousin Chet, as we are sometimes tempted to, we will not see his flaming head sprout arms and try to scurry away. And for that we are truly blessed.

Thank you for not allowing the total moral and economic decline of the United States, our Lord, that would turn one or more of our great cities into a prison or spring any number of apocalyptic scenarios upon us that would turn our planet into a vasty wasteland where only dune buggies and leather-clad miscreants have survived. It's not that we have anything against leather-clad miscreants -- I refer you, Lord, to the previously mentioned Cousin Chet -- but we prefer them to be in the minority, and also those dune buggies so rarely have seat belts -- that's just not safe.

Most specifically, thank you, Lord, for not sending a large meteor or comet tumbling straight at the planet, forcing the government to turn to oil-rig operators to save us all. That oil rig in the Gulf this year didn't exactly inspire confidence, if you know what I mean, Lord. And while we know that humanity would likely survive such a massive impact thanks to those underground cities the government has built, we are not at all confident that any of us at this table would get a pass into those cities, and we don't have either dune buggies or wardrobes made mostly of animal hide. So thank you, Lord, for not making us worry about that this year.

Finally, Lord, thank you for once again keeping the scientists from bioengineering dinosaurs back to life. While the idea of a pterodactyl with stuffing and all the trimmings seems like a good one at first blush, getting past the raptors in the supermarket parking lot would probably be a challenge, and we would end up having to stake one of our own to the shopping-cart return so the rest of us could get past, and I'm not sure that we could persuade Cousin Chet to do that more than once.

For these and so many other things, Lord, we offer our humble gratitude to you this Thanksgiving. However, I think I speak for everyone when I say we would still like speeder bikes, so if you could get someone to invent those by Christmas we would all be obliged.

Amen.

That is all. Let the tryptophane overdosing begin!

People feel misled and betrayed...

2010-11-23T15:45:00.001+01:00

This is going to be a ongoing and developing meme as the general unraveling of the economic-political system of the last 45 years continues. It's not so much that the entire system will unravel - capitalism is simply too efficient for that - but rather it is the political system that has latched on to the economic system as a parasite, living off of it and now slowly strangling it. Those who can grab the meme and ride it will thrive: those who in the name of progressivism fight to keep the system will fail.

The title of the post comes from this. Key phrase, the only one that really matters:

The past week has been a traumatic one for the Irish electorate. People feel misled and betrayed.

This covers it all.

It is the reason for the dismal Democratic showing in the US as well: the people feel misled and betrayed.

We are seeing the culmination of literally decades of mistakes and errors, of sheer blind bloody-mindedness, all made in the name of "doing good."

Margaret Thatcher put it well when, in a TV interview for Thames TV This Week on Feb. 5, 1976, she said, "...and Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people's money. It's quite a characteristic of them."

We have reached that point. The Welfare State is driving everyone into poverty. We have reached the point where there is no money left.

The collapse of the Soviet Union and "Real Existing Socialism" wasn't enough to kill this fundamental point: the basic tenets of socialism - that the great, unwashed masses need to be led to a glorious future where they will get what they deserve - have, implemented incompetently and led by the New Class of classless socialists (see Milovan Đilas and this for more), now led to the collapse of finances world-wide.

The slow, subtle and incremental destruction of wealth via redistribution of income via social spending plans must be manifestly visible by now. Decades of debt accumulation for welfare systems designed by do-gooders meddling with societies en masse are now crushing and increasingly reaching the point of no return.

The people feel misled and betrayed: they were misled by the promises of socialists promising them that they could have a future without work, that they could enjoy the fruits of success without having to work for them; they were betrayed because this is not possible. Repeat: Not Possible.

I've mentioned Kipling here time and time again: The Gods of the Copybook Headings. The poem tells you all of the reasons never, ever to believe someone who calls himself a progressive (which today is the cover-name for socialist, given the utter bankruptcy of socialism). Here are the last two stanzas:

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

When all men are paid for existing and no man must pay for his sins: that is exactly what progressives have been championing for the last 45 years. The Gods of the Copybook Headings are nothing more than moral and economic truths of the most basic kind, the ones that stand firmly in the way of utopias of all kinds and fashions, the nemesis of the woolly-thinking, do-gooders of all times, and the shoals upon which all such pipe-dreams shatter and drown.

That is why the people are feeling misled and betrayed. As Abraham Lincoln once said: You can fool all the people some of the time, and some of the people all of the time, but you can't fool all of the people all of the time.

Old Abe had something there. The progressives have educated three generations to believe that they could bring prosperity to all by spending other people's money; the progressives have squandered the wealth of three generations to make it so; the progressives have given the next three generations a burden to bear that will grind them down as none of them has ever deserved; the progressives have betrayed the future and misled the people like almost none before (Communist governments did it better and collapsed just as thoroughly).

Progressives have bankrupted the West. It is time to throw off the shackles of progressive lunacy and turn out the betrayers, sending them into exile and despair for their sins.

The workers (blue and white collar both), the productive elements of society, are now oppressed by the New Class of Djilas, parasites living off their toil.

To paraphrase Marx: Workers Of The World, Unite: You Have Nothing Left To Lose. Government debt has taken everything else.

The Fox Has Opened Up A KFC Franchise...

2010-11-16T17:52:00.001+01:00

That has got to be one of the best lines in recent memory, from here. Scroll down a tad to find:

The city's Health Services Board, which decides what medical plans San Francisco uses and how they're implemented, has seven members — a majority of whom are elected by city employees to represent city employees. Every step of the retirement process is controlled by people who have a vested interest in it — literally. Not only is the fox guarding the henhouse, the fox has opened up a KFC franchise.

The man is right: the purpose of San Francisco, at this point, is not to run the city of San Francisco, but rather to ensure that the workers of San Francisco have some awfully nice pensions that the taxpayer has agreed to pay for.

What?

You say that you didn't agree?

Sucker: your elected officials bowed before the public employee unions and you, the taxpayers of that lovely city, where you'll find people with flowers in their hair, are being sent the bills.

Ye gods.

Before you say that the politicians should have stopped this, understand that politicians and public unions are joined at the hip in San Francisco, Siamese twins that cannot survive or function without each other.

As it is, both have conspired to ensure that when push comes to shove, the taxpayer will be going to jail.

Ye gods.

And liberals wonder why they are unpopular? Why they lose elections?

We'll know that the lesson has percolated down to where it will really start to make a change when San Francisco gets its pension schemes in order and has jailed those responsible for fraud and conspiracy, The income from RICO should be enough to cover the court costs to tear that system down, but only public outrage - aka Tea Party - can ensure that it never happens again.

For the children's sake, you know. You can do this so that San Franciscans can still be known at people with flowers in their hair...

Environmentalism as Secular Religion...

2010-11-12T12:37:00.001+01:00

This was interesting to read.

First and foremost, it's a bit of a hatchet job on someone that the author readily admits he can't understand, done in the name of discounting Dyson Freeman's arguments about anthropogenic global warming.

But the quote that really popped out was this:

Environmentalism does indeed make a very satisfactory kind of religion. It is the faith in which I myself was brought up. In my family, we had no other. My father, David Brower, the first executive director of the Sierra Club and the founder of Friends of the Earth, could confer no higher praise than "He has the religion." By this, my father meant that the person in question understood, felt the cause and the imperative of environmentalism in his or her bones. The tenets go something like this: this living planet is the greatest of miracles. We Homo sapiens, for all the exceptionalism of our species, are part of a terrestrial web of life and are utterly dependent upon it. Nature runs the biosphere much better than we do, as we demonstrate with our ham-handedness each time we try. The arc of human history is unsustainable. We cannot go on destroying natural systems and expect to survive.

Hence: when looking at what environmentalists write, say and propagate, this is what lies at the core of their thought. It is a religion.

The author continues:

Freeman Dyson does not have the religion. He has another religion.

"The main point is religious rather than scientific," he writes, yet never acknowledges that this proposition cuts both ways, never seems to recognize the extent to which his own arguments proceed from faith. Environmentalism worships the wisdom of Nature. Dysonism worships the indomitable ingenuity of Man. Dyson often suggests that science is on his side, but lately little of his popular exposition on planetary matters has anything to do with science. His futurism is solidly in the tradition of Jules Verne, as it has been since he was 8 and wrote "Sir Phillip Roberts's Erolunar Collision." On the question of global warming, the world's climatologists and scientific institutions are almost unanimously arrayed against him. On his predictions for the future of ecosystems, ecologists beg to differ. Dysonian proclamations like "Now, after three billion years, the Darwinian interlude is over" are not science.

Bingo: at the core of the AGW controversies is a religious dispute.

And finally:

Dyson, clearly a busy man, was extraordinarily generous with his time with me at an early stage of my career. His allowing me to be present at an intimate family affair—his reunion with George—provided the climax and denouement for my best and most successful book. In the field, Dyson was an amusing and never-boring companion. Never have I had a relationship of such asymmetrical understanding. Dyson always got the drift of my ideas and sentences before I was three or four words into them, but the converse was not true. When the physicist spoke of his own pet subjects—quantum electrodynamics, say, or certain characteristics of the event horizon in the vicinity of black holes—I had no idea what he was talking about. Dyson is a discoverer of, and fluent in, the mathematics by which the fundamental laws of the universe operate, and in that language I am illiterate.

This is something that constantly and consistently strikes me of being at the core of the problem: that there is no communication, largely because there is a fundamental lack of understanding because one side is functionally illiterate.

An example: when economists talk of consumption, we don't mean that the goods involved are destroyed. For the Club of Rome and others, they assumed that when copper was used for any particular purpose, it was effectively destroyed, never to be used again, which led to their fairly absurd dire forecasts. I've had enough discussions with secular religionists, aka ecologists, who whilst claiming to understand the complexities of the ecosystems to the point where they felt able to forecast dire results, were economic illiterates who, at the same time, were proscribing economic solutions.

Which makes about much sense as me, your humble economist, trying to tell farmers how to farm best. I can't: I can tell them how to perhaps be more productive, but I can't tell them how to farm. I don't know the faintest about farming except what I have read, and that tells me that I really don't know the reality of farming.

Democratic Debacle...

2010-11-03T18:11:00.000+01:00

Now that some of the dust has cleared and it's clear that the Democrats lost yesterday, let's take a look at the extent of the damage.

They lost the House with a shift of 60 seats: that's the largest shift since 1948.

But read this as well: the Democrats lost massively in State races.

North Carolina and Alabama have apparently forgiven the Party of Lincoln and their State Legislatures are now Republican for the first time since the Reconstruction (1870 and 1876, respectively).

Also turning Republican: Wisconsin (!) and New Hampshire legislatures.

State Houses in Indiana, Pennsylvania, Michigan, Ohio, Iowa, Montana, and Colorado: now Republican.

Both the Maine and Minnesota Senates: now Republican.

Democrats in Texas and Tennessee saw their virtual tie eliminated, with Texas so solidly Republican that they have the absolute majority and can now pass state constitutional amendments of the the legislative process without Democrat support.

Awesome. Use that power wisely...

Oh, and a small prediction: many companies still in California will find that while the weather isn't quite so perfect in Texas, being able to stay in business is a worthwhile reason to move. California will apparently have to fall flat on its face before reforms can take hold there that will actually do anything to address the problems facing that state.

In one way, the radical environmentalists are right: people invariably destroy nature. The best example for that is now California, where that state, blessed with natural resources, a fantastic climate and scenery, will have to have an epic fail before the current, toxic generation of Democrats can be purged from the system. Governor Moonbeam will lead the way, I am sure, with the rest of the Californian Democrats following him like rats following the Piper from Hameln.

Disappointment Amongst Victory...

2010-11-03T10:37:00.001+01:00

A gain of 65 seats in the House of Representatives ain't chopped liver: kudos to the American people for making some smart decisions.

But there is some disappointment for this ex-pat:

First and foremost, Barney Frank survived. If anyone (besides Harry Reid, Barbara Boxer and Nancy Pelosi) deserved to lose his re-election bid, it was Rep. Frank, who more or less single-handedly prevented anyone from taking a serious look at Fannie Mae and Freddie Mac when there was enough time to do something about them. For that alone her deserved to lose.

Harry Reid, Barbara Boxer and Nancy Pelosi are in the same category: for their sins, they should have lost.

One particular bright sign of sanity: Alan Grayson, Rep from Florida, was soundly trounced. The worst thug and bully ever to grace Washington DC (at least in recent memory) has been sent packing.

Generally, though: nice job. It's time for the Democrats to say "Well, that didn't go well" for a richly deserved change.

Now, for 2012...gonna be interesting.

Ouch...

2010-10-26T17:51:00.001+02:00

...but the man has a point.

Read this.

His fundamental point, that there is a real sense of betrayal out there, is fundamental for the development of what is generically called The Tea Party and which may well change the face of US politics.

Not because there are powerful backers, but because of the absolute frustration and disgust that so many have for politics and politicians.

It's not so much that so many are corrupt and enriching themselves, but more so that there a real sociopaths out there who really enjoy screwing the system up for profit and gain. Read this to understand what he means by that.

Systematic cheating, corruption and abuse of the system has led to the dysfunctional system we now have in the US, where if you do everything wrong, you end up getting the most in benefits: the rewards for bad behavior greatly outweigh the rewards for right behavior.

Appearance trumps knowledge.

Without realizing it, without seeing it coming, the Sophists have triumphed: the truth is no longer something to be desired and searched for, but rather to be manipulated and re-defined until there is no meaning to it whatsoever.

Of course, when the Sophists triumph, chaos and anarchy follow, as there are no virtues any more.

Read this for more to understand how the fraud and anger are going to lead to an interesting 2. November. That is, unless voter fraud - which, if you research this, has been an exclusively Democratic act since the 1960s - takes that away as well. If that happens, then all bets are off: political instability will follow economic uncertainty.

Communism, Mercantilism and China...

2010-10-26T11:49:00.001+02:00

Two op-ed articles in today's FT (behind their paywall, unfortunately), got me to thinking.

The one, from Ilene Grabel and Ha-Joon Chang, argues for capital controls as a good thing for growth (ignoring, of course, the historical dimension of the days when capital controls also prevented growth), while Gideon Rachman argues that China can no longer plead poverty when foreigners criticize Chinese economic policy.

What both fail to understand is that China is and remains a communist country, which in terms of economic policy is dominated by two major traits: one, an obsession with preventing foreign meddling in their economy (because foreigners can't be controlled the way that domestic investors can) and two, a fundamental belief in the benefits and advantages of a closed economy, closed in the sense that the ownership of the means of production is fundamentally closed to anyone not of that country.

In either case - and indeed in both - the fundamental problem is that such systems do not survive contact with an otherwise open and uncontrolled (and uncontrollable) world economy. The Chinese leadership apparently truly does not understand how the free and uncontrolled economy works - otherwise they would allow their currency to float - and, more importantly, nor do they care.

I'll quote from Rachman:

The Chinese government insists that foreigners have no legitimate interest in the country's political development.

He needs to expand on that: foreigners, in the eyes of the Chinese government, have no legitimate interest in China whatsoever: their interests are politically illegitimate (trying to destabilize the country for political purposes) or are an attempt to force the Chinese to pay for their economic errors and woes.

Ignoring the arguments for and against for the moment, the key point is that the Chinese government (and probably a large majority of Chinese) are economic illiterates: they do not understand that economic imbalances always lead to economic corrections that have unintended consequences.

Always. There is no way to finesse this, no way to manipulate and bully trade partners into continuing one-sided trade patterns. You can do this for a while - even decades - but you make the problem worse, rather than better. Controlling exchange rates means that a normal and completely natural change is prevented, resulting in sharp and disruptive changes, more often than not resulting in crisis and damage to those trying to control what cannot, in the long run, be controlled.

Communist ideology, given the dependence of Marx' international trade thought on Fichte's idea of self-sufficiency (taken to extreme in the Korean ideology of juche) where the government controls international relations and the value of money, is first and fundamentally a mercantilist philosophy, a zero-sum game where the best trade policy is one that destroys your foreign competitors and allows full employment in your country, supplying the world with goods priced at monopoly pricing levels (not currently the case, as competition remains, but most assuredly the goal). The world's economic history is littered with fixed exchange rate regimes that invariably fail. This will be no different.

Chinese trade and economic policies don't make much sense otherwise.

We are facing a return to poor and destructive economic policies if these trends extend and become mainstream policy. Free and unencumbered international trade in goods is first and foremost something that provides consumers with greatest value for their money: reverting away from this neo-liberal ideal means that consumers will pay more and receive less for their money.

Hence, and with little or no apology:

Consumers of the world unite, you have nothing to lose but your chains.

Well, Did You Expect Anything Different?

2010-10-20T22:13:00.002+02:00

I've said it before: President Obama is a Chicago politician, through and through.

So this should come as no surprise. Corruption masquerading as incompetence. This is systematic and deeply, deeply ingrained in the political machinery of the Democratic Party. This is one of the most corrupt and venal administrations we've seen since Tammany Hall. The Columbian Order has returned (if indeed it has really ever left the spirit of the Democratic Party.

The key is exploiting immigrants in the guise of "helping them out". Watch for exactly this come, say, 2011, heading into 2012. Immigration reform that legalizes the illegals with the clear aim of turning them into Democratic voters, ones that will influence elections for decades to come. It is a problem that the Democrats have deliberately created in order to exploit. Fast-process "social integration" with massively expedited, legally dubious naturalization that will make a mockery of the system. This worked in New York, this worked in Chicago, and now it looks like this is going to be applied to the rest of the country.

It reminds me of the famous Brecht quote:

The people have lost the confidence of the government; the government has decided to dissolve the people, and to appoint another one.

That is exactly what the Democratic Party is trying to do: they are losing their base, and so they have decided to appoint a new one.

Be warned.

And Here's The Next Big Thing...

2010-10-20T17:20:00.001+02:00

Be prepared, over the next several weeks, to be bombarded with yet another attempt to grab your wallet and impose Watermelon policies on an unexpecting populace.

The word to remember is an acronym: TEEB: The Economics of Ecosystems and Biodiversity.

Put simply, it's an attempt to put a price on the ecosystem to make it highly profitable for companies to behave as their betters demand: don't pollute, don't harvest forests, don't do anything that can be considered even remotely environmentally unfriendly. I've take a preliminary look at what they report, and all I can say is: meh.

First and foremost, it's a problem of valuation. They are trying to put a value on something that is fundamentally and inherently not out there on the market, meaning that the price is what they say it is. In other words, they are behaving as monopolists do, setting up monopoly rents for their "ecosystems services" to be what is most profitable for them.

In other words, it's yet another attempt to grab your wallet and take whatever they can from you: "proper" and "approved" behavior will be rewarded, all others, prepare to be taxed out of existence (they don't say that explicitly, but at the end of the day, that is their goal).

Here's a press release.

It's fundamentally an attempt to obtain control over any economic activity by requiring a cost-benefit analysis to be performed before the economic activity is allowed: in other words, if they think keeping a mangrove forest in place would be of greater benefit than using that forest as a shrimp farm, then if you want to put in the shrimp farm regardless of what they say, you'll have to buy offsets.

In other words, a tax.

The fatal flaw here is the subjective nature of the valuations and the fact that they are using an extraordinary simple analysis of future values: they take the current value of "ecosystems services" (determined, apparently, in an ad-hoc manner) and determine the NPV (net present value) of future "ecosystems services" to get a summed price, then compare that to the current value of the alternative usage.

Problems with this approach:

This always results in "ecosystems services" to be vastly more expensive than alternative usages;

The discount rate becomes critical (as we've seen with the absurdities of the Stern Report: anything deviating from a net discount rate of 0% is considered immoral...) and subject to abuse;

It completely ignores the costs to humans of deferred economic betterment across the same time periods.

Like I said, meh. Yet another attempt by those who really, truly think that they know better to run the lives of everyone else.

Meh.

Geopolitics and Naïveté

2010-10-20T09:55:00.001+02:00

Sorry it's been so quiet lately: reality continues to intrude...

This prompted me to write: yes, I do read the New York Times occasionally.

The naïveté of newspaper people - driven by their absolute dependence, it seems, on being told what to write by their masters - is once again painfully obvious.

China is and remains a country dominated by a communist party that is concerned about one thing and one thing only: power. Economic power is of greater interest than military power, to them, because the Chinese communists know how incredibly vulnerable they are in terms of population concentration and weak infrastructure. One good strike on several dam complexes and you flood out more than half of China's industrial potential, crippling the country economically. The Chinese know this - it's unavoidable, given the geography of the country - and also know that this makes them vulnerable, militarily.

Hence the push for economic power.

What the pundits have forgotten - or perhaps never considered - is that the Chinese government, while well out of the limelight and keeping a very, very low profile, remains unchanged from the government that has killed, literally, millions of its people without regret (and indeed has done so deliberately in order to meet political targets). Politics is a one-player game in China, despite the fervent and misplaced hopes for political liberalization in the wake of economic development. The Chinese government is, if anything, equal to the French in terms of playing their own game, more than happy to let their political opponents believe what they will (usually wrongly) whilst aiming at purely national advantages, all while disclaiming and touting their international interests.

China is at a cusp: while the Chinese population will continue to rise over the next several decades, the inner shift has started, with fewer people entering the work force than leaving it. Population here will start to decline in 2050, expected to stabilize at some 600mn Chinese in 2150. This means that one of the key tenets of Chinese economic development - increasing numbers of entry-level workers to expand their industrial base - will be coming to an end.

So what is to do? The Chinese government, which still effectively runs the economic development of the country, has started to behave like a classic mercantilist: it buys up raw materials to prevent competitors from even entering the market; it buys competitors to eliminate price competition; it is playing a zero-sum game.

Hence: the decision of China to cease supplying rare earths to anyone outside of China should be utterly unsurprising. Utterly. It should be expected and will continue. The government of China, while murmuring a commitment to free enterprise and capitalism, is in reality the last mercantilist out there. Mercantilism is economic nationalism, the notion that the prosperity of a nation is dependent on its supply of capital.

Why else would China be more than happy to amass such huge monetary reserves? There is no other real explanation: under normal circumstances, the Chinese currency would revalue in the wake of such high reserves and such a long-term positive balance of trade figures. Instead, the government here keeps the Chinese currency artificially low in order to perpetuate its accumulation of capital.

Without this in mind, Chinese economic policy makes little sense. Just like any other political intervention in markets, it is also doomed to failure: at some point, the markets will reset themselves and the Chinese currency will appreciate rapidly in order to bring trade into equilibrium. It is just a question of when and how badly markets will be bent before they restore themselves.

Of course, mercantilists don't care much about markets.

These are the corer tenets of mercantilism (from here):

The Austrian lawyer and scholar Philipp Wilhelm von Hornick, in his Austria Over All, If She Only Will of 1684, detailed a nine-point program of what he deemed effective national economy, which sums up the tenets of mercantilism comprehensively:

That every inch of a country's soil be utilized for agriculture, mining or manufacturing.
That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials.
That a large, working population be encouraged.
That all export of gold and silver be prohibited and all domestic money be kept in circulation.
That all imports of foreign goods be discouraged as much as possible.
That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver.
That as much as possible, imports be confined to raw materials that can be finished [in the home country].
That opportunities be constantly sought for selling a country's surplus manufactures to foreigners, so far as necessary, for gold and silver.
That no importation be allowed if such goods are sufficiently and suitably supplied at home.

Sound familiar? Replace gold and silver with fiat money, and you've got China. Add to it a ... unique interpretation of intellectual property rights (i.e. if it isn't nailed down, steal it), and you can see China's approach to the rest of the world.

The naïveté of the West in dealing with China is legendary. It is also inexcusable.

Getting Back To Square One...

2010-10-08T16:15:00.003+02:00

I'm not usually a fan of Jon Stewart: I find him to be a clown, twisting and manipulating the stories he tells via ignorance and deliberate misunderstandings.

But this is about as good as it gets:

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Foreclosure Crisis

www.thedailyshow.com

Daily Show Full Episodes

Political Humor

Rally to Restore Sanity

And, probably to the shock of most readers, I also give President Obama at least the credit that he did not sign the legislation aimed at making the whole problem "go away", instead using the pocket veto to stop it.

Those who in Congress were involved in making that bill richly deserve any and all epithets thrown at them: that was a vile and desperate attempt to sweep the problem under the rug.

PS: I replaced the original small-format with a larger-format link...and a hat-tip to Naked Capitalism!

A Bone To Pick...

2010-10-07T09:42:00.002+02:00

Well, Steve Levitt manages to really screw things up here.

Some of what he says is fine: however, the idea that businesses don't need economists is simply absurd.

What he is correct about is that business does not need academic economists. But that's not what he says, and indicates that he actually has little or no idea of what business economists actually do.

What do they do?

Simple: bring an economist's skills and abilities to the company to help the decision makers understand their operating environment, what sort of challenges will show up (largely demographics) and what the implications of these are for the future of the company. While many companies either buy these services from external sources or continue to have a company economist, most rely on a non-economist to give that sort of input.

And that is exactly the problem: while many non-economists have a basic knowledge of economics, you will not get the same level of expertise and in-depth understanding that a right and proper business economist will give you. An MBA tries to provide some of this, but the relentless pursuit of the bottom line and office politics blinds many to the realities of the world.

Mr. Levitt has done all economists a disservice for not saying, clearly, that it is academic economists that are fairly useless for the rough-and-tumble real world economics out there.

What the business world needs are more business economists, not fewer: anyone watching this would come away with the idea that the business world doesn't need economists at all...

A $9.5 Trillion Fraud...

2010-10-05T20:11:00.001+02:00

There are some simple rules for financial folks who prepare financial instruments for investors: do your homework is one of them.

If a financial instrument has legal requirements and you do not follow those legal requirements, you commit fraud: you are selling something as something that it is not.

Consider this:the volume of mortgage backed securities in August 2010 was around $9.5 trillion.

Now consider this: it appears that the basis of mortgage-backed securities - the ownership of the mortgage itself, which is clearly defined as based on a transfer with real-world signatures - has been systematically destroyed. If this is true - and the class-action suites seem to indicate that this is indeed a problem - that means that anyone holding a mortgage-based security needs to determine if that security is actually bona-fide, i.e. that the legal requirements were actually fulfilled, rather than relying on the word of companies that have apparently not done what they have said they did.

This is developing into the world's largest fraud. $9.5 trillion? That's real money, folks.

Here is the key quote:

We've said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere "accessory" to the note).

The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who'd then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.

It gets better:

Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.

The foreclosing party often obtains the note from the originator at the time of foreclosure, but that isn't kosher under the rules governing the mortgage backed security. First, it's too late to assign the mortgage to the trust. Second. IRS rules forbid a REMIC (real estate mortgage investment trust) from accepting a non-performing asset, meaning a dud loan. And it's also problematic to assign a note from the originator if it's bankrupt (the bankruptcy trustee must approve, and from what we can discern, the note are being conveyed without approval, plus there is no employee of the bankrupt entity authorized to endorse the note properly, another wee problem).

In other words, the companies involved have sold people something that isn't what it is claimed to be. While this might appear to be a technicality, it fulfills the definition of fraud. Those who believe that they own the mortgages cannot enforce their rights: they have been defrauded.

Playing with public trust - corners were cut here apparently because of the volume of business, which is an explanation, but not an excuse - is deadly for anyone involved in the financial services industry. Trust is the most difficult thing to replace and the most damning indictment. Fraud is not a victimless crime, as investors here are going to find out.

Unintended Consequences...

2010-09-28T10:13:00.001+02:00

One of the downsides of the lack of economists in the loop is that those making policies are making mistakes, serious ones: the law of unintended consequences applies here with a vengeance.

Case in point: this.

Good old Matt Yglesias is in form, ranting and raving about how health care reform is key to making progressive policy "irreversible."

He presses all the proper buttons, using the plight of a middle-class family with their adopted daughter as a keystone, talking about how forcing the insurance companies to cover her regardless of her pre-existing condition will be one of the cornerstones of the health reform efforts, and how mean and nasty everyone is who opposes this.

What he doesn't talk about are the unintended consequences.

What are these?

Simple: health insurance companies are not offering that type of insurance any more. Rather than provide coverage that virtually guarantees that they will lose money, the insurance companies are no longer offering the coverage at all. Zilch, nada.

Of course, that the insurance companies would decline to enter into business activity that would lose them money never, ever crossed the brow of folks like Matt, who know significantly less about economics than they think they do.

But ask any industrial economist, someone who understands how companies behave under competitive pressures and how companies move their center of business around to meet market demands - we call these companies successful and survivors, as opposed to those companies who stick to a business plan and cannot consider themselves being anything but a producer of widgets in an economy that no longer demands widgets - and you'd get a "duh".

Companies are in business to make money. Take away their ability to make money, and within a very short period of time the only companies left are either doomed or are paid to not make money (aka "subsidies").

This is not rocket science. This is basic microeconomics. Which apparently the health reform people wouldn't recognize if it came up in front of them, waving a flag, and smacked them upside their face with a 2x4.

I'll give you another example of unintended consequences when no one listens to economists.

The US once had a broad-based and very successful shipping fleet. US-crewed and registered ships were profitable and more than competitive. Personnel costs in shipping are basically irrelevant, as fuel and capital costs are the vast majority of costs.

What happened?

The US tax code changed and US shipping companies had to pay US corporate taxes on overseas operations. Given that the US is the only country that taxes its shipping companies in this manner - it is one of the reasons why shipping can be a very lucrative business, as it operates largely tax-free because the activities involve are not within tax jurisdiction - this meant that US companies either moved their corporate headquarters overseas (duh) or sold their operations off to competitors before these operations became a loss-center.

Hence in the attempt to increase tax revenues - the justification for this, after all, was that it was "unfair" that these companies have what amounted to a tax break - an entire industry was basically eliminated.

The funny thing is, the industry was paying taxes. Any stock owner got rather nice dividends, which were then taxed at the personal tax rate. But in its infinite wisdom, the government decided that it was better - more just - that the industry cease to operate as American companies.

As a result, there is now movement to open up intra-coastal shipping (shipping from one US port to another US port) to foreign shipping because there is not enough US shipping to meet demand.

Duh. Given these circumstances, there never will be.

The laws of unintended consequences are simple. Just ask any industrial economist how they work. Were that a few more folks would do so, rather than be blinded by the brilliance of their sophomoric ideas.

Epic Fail...

2010-09-22T15:46:00.001+02:00

Six months into ObamaCare, and what do we have?

Broken promises, outright lies, and an Epic Fail.

I won't get into the details of the broken promises (see here, and yes, that is a link to the GOP website. Doesn't change the facts of the situation, sorry!)

What is more interesting is the fact that the Democrats are now facing an Epic Fail.

What is an Epic Fail?

From the Urban Dictionary:

A mistake of such monumental proportions that it requires its own term in order to successfully point out the unfathomable shortcomings of an individual or group.

What happens, then, when the President of the United States is responsible for an Epic Fail? When his party actually controlled both houses of Congress and where not a single member of the opposition thought his ideas were good and worth supporting? Where the political necessity of pushing the bill through took priority over giving anyone the time to actually read the bill and understand what was being pushed through Congress?

The Democrats were so convinced of the absolute, complete necessity of passing Health Care Reform (aka ObamaCare for now and forever) that they simply passed a bill that bears the mark of lobbyists and serves the industry, rather than the public. Costs aren't and won't be reduced; ObamaCare is the insurance industry's wet dream of being able to take more and more disposable income, helped along by the trial lawyers and aided by corrupt politicians who take their orders from unions and lobbyists.

Now we have the Epic Fail of the Democratic Party. It is going to be a very, very interesting couple of weeks to watch the moderate Democrats abandon their Great Leader and to watch the left go hysterical about how the mean and nasty Republicans are going to dump babies out into the streets and stomp on them while bayoneting social workers and tossing Grandma out of the airlock (or words to that effect).

This is where the absurdities of the Democratic Party have led us: a party dedicated to statism and fewer freedoms, all in the name of rights and maintaining power; a party incapable of cleansing itself, corrupt to the core and beholden to the rich (Soros) and criminal (unions); a party whose fundamental beliefs require perpetual denial of the laws of economics (and these laws are there: sooner or later you run out of other people's money...) and logic; a party indulgent and wastrel, concerning itself with the trivial, distracted from the greater truths, the lunatics firmly in control of the asylum and almost literally incapable of understanding why anyone could dare think different.

We haven't seen such an Epic Fail since the collapse of the Confederates in the Civil War.

It's gonna be an interesting fall. Pun intended.

RIP...

2010-09-16T15:47:00.001+02:00

Martin Lukes, that is.

Parachuting accident.

Of course, given the fact that he was wearing a parachute, that shouldn't have made a difference, just as his purported upbringing gave him a cultural parachute that he also chose to ignore, preferring the head-long destructive path that was his life.

Looking back at his life, it strikes me that the thrownness to death is really what Martin exemplified. This is a primordial banality: we are thrown into the world with no preparation, with zero readiness, thrown towards our final destination, death and the unknown that comes with that. During life we are being-here, a nexus of being, localized and within a lived-world, a life-world that moves and changes according to our perceptions and our being's state in the world.

Much like Martin lived his life.

He is survived by an ex-wife, a son from his first marriage, a wife and twin children from the second marriage. Funeral ceremonies were not mentioned in the press release.

His last communication, by twitter, was "AARRRRRGGGGGHHHHH..."

Seldom was he so eloquent as in his final and departing statement.

After many years of providing head-shaking humor, the editors of the FT (one in particular), has finally, apparently, killed him off.

Of course, consider this (and I doubt the FT had thought of this): the thrownness is translated from the German "Geworfenheit", which could be construed to point to a crime involved in his death, not an accident: he was thrown from the plane, probably by all the women in his life.

He will be missed, but largely because reading his exploits almost invariably induced a visible cringe.

A Balance for 9/11

2010-09-15T19:13:00.001+02:00

Read this and judge for yourself. I am not as pessimistic has he is, but he has some good points on the downside.

Why am I more optimistic? Because in less than 2 months, the makeup of the Congress shall change. This is the best feature - some say the only redeeming one - of democracy as practiced in the American Republic: every two years, you can throw out scoundrels and bums, charlatans and fools. You can't throw them all out, but you can get started.

Best form of government ever.

Worth the read...

2010-09-15T18:29:00.001+02:00

This in the Weekly Standard is worth the read. Seriously: Read.The.Whole.Damn.Thing. The indictment of parts of the French military is damning, and it would have taken so little to change the outcome. So very little indeed.

The incompetence of politicians...and the resulting futility of sacrifice. That one led to mutiny and revolt, the collapse of a government and a military dictatorship.

"We had been told, on leaving our native soil, that we were to defend the sacred rights conferred on us by so many of our citizens settled overseas, so many years of our presence, so many benefits brought by us to populations in need of our assistance and civilization. We were able to verify that this was true, and because it was true, we did not hesitate to shed our quota of blood, to sacrifice our youth and our hopes. We regretted nothing, but whereas we over here are inspired by their frame of mind, I am told that in Rome factions and conspiracies are rife, that treachery flourishes, and that many people in their uncertainty and confusion lend a ready ear to the dire temptations of relinquishment and vilify our action. I cannot believe that all this true, and yet recent wars have shown how pernicious such a state of mind could be and to where it could lead. Make haste to reassure me, I beg you, and tell me that our fellow citizens understand us, support us and protect us as we protect the glory of the Empire. If it should be otherwise, if we should leave our bleached bones on these desert sands in vain, then BEWARE THE ANGER OF THE LEGIONS!!"

This is attributed to being from a letter written by Marcus Flavinius, a centurion in the second cohort of the Augusta Legion serving overseas, to his cousin, Tertullus, in Rome, quoted in the Prologue of Jean Larteguay's, "The Centurions." However, it is unclear whether this quote is actually legitimate (largely due to the phrasing: if it is indeed based on an actual letter, then it has been heavily transliterated over the years into something more powerful than a probable original (I know from my Latin that this would be a very heavy text indeed).

That said: those who would throw away military accomplishments - indeed, victories - in the name of political gain and who would vilify soldiers for doing what they do should bear this well in mind.

Moving From Infuriation To Rage...

2010-09-15T12:19:00.000+02:00

This got me back on the track of something I've been contemplating for a while. Sorry for being scarce lately, but reality intrudes.

The point that Auerback makes is correct: that TARP didn't address the problems, but rather enabled fraud to be unrolled in its entirety.

This is the core of what is being said:

Calling the TARP a success is like claiming your wastrel son is getting his life together because he's settled his gambling debts, while omitting that you are paying for his apartment, got him an overpaid job at your company, and handing him $100 bills more than occasionally.

and this:

...inadequate capital didn't cause the financial crisis. Lying and corruption did.

and this:

Congress adopted unprincipled accounting principles that permit banks to lie about asset values in order to hide their massive losses on loans and investments, which allowed them to raise the capital.

and finally:

The problem is that the policy was not shaped by finance or sound economics, but by politics. Both administrations have sought to keep the American people from knowing about these cover-ups and secret subsidies because they know that we would not tolerate either policy. The cover-ups and secret subsidies are not simply awful financial policies; they are also a betrayal of democracy. And our press has gone from clulessly enabling this treachery to actively promoting it.

This should be sending the American voting population into a collective rage: this goes beyond the usual (largely Democratic) corruption of Congress and is the active defrauding of an entire generation, the generation which has given so richly to the Democrats and their smokescreen of liberalism and "being for the common man".

Nothing could be further from the truth: that is the fundamental of any fraud.

I think you need to consider this: TARP did save the US banking system from collapse, did prevent The Great Depression 2.0, and did prevent an even worse world-wide melt-down that would have seen most of the world's economy collapse.

It did so at the cost of bankrupting US government finances.

Who profited?

Those who were liars and who were corrupting the banking system in the name of profits. In other words, a significant number of folks. All the subprime lenders, all those who aided and abetted them, as well as their political lackeys. All the derivative sellers who were betting on the other side, buying insurance on their neighbors' houses while selling gasoline and matches to known pyromaniacs (and making it clear which houses weren't to be burned down).

If you look at the real, underlying economy, ignoring the feel-good numbers, you can see that the real economy is in a depression: employment remains way down, consumer spending remains weak, and there is a very, very long way to go before we approach pre-recession employment and wage levels.

The economy is in a depression, not a recession. It was caused by moral hazard and is characterized by "Too Big To Fail", which at the end of the day really means "I Can't Allow My Campaign Sponsors To Go Bankrupt" or words to that effect.

This isn't merely infuriating: it should generate genuine rage, since it literally means that our children's futures are being sold down the pike for a pittance today. The only ones profiting are those who were deeply invested in the fraud that drove the collapse: unless that fraud is addressed, nothing will change, as Mr. Auerback correctly says.

Oh, and as an afterthought (and this is something I have repeated here a number of times): mark-to-market accounting valuations are pro-cyclical and guarantee that normal business cycle movements become crises. Mark-to-market is, in any trading environment, an invitation to mass bankruptcy and unemployment, as well as extremely risky investments and loans made during any upswing. As such it is something that only accountants can love, since they don't care about the real-world effects of accounting rules.

For the economy to really, truly, recover, we need to get both accountants and lawyers back to where they belong: support services that serve the real economy and those who create real value, rather than the parasitical entities they have become today, who aim at controlling the real economy in their own interests. Being a lawyer or an accountant should be a hindrance to your career as a businessman, not an asset.

Hell Frozen Over...Really.

2010-09-09T14:23:00.001+02:00

Yes, hell has frozen over.

I am going to link to two articles by a certain writer, one whose name has become a verb.

Read this.

And then read this.

While normally I would love to fisk Mr. Fisk, this is an occasion where I cannot, will not, would not.

Read the whole thing and understand my repulsion. This is not propaganda, trying to make things worse than they seem. It is an indictment of an entire culture, one richly deserved, an indictment of failed societies, without any sense of honor or faith, without any sense of morality.

All done in the name of honor and morality.

Read the whole thing. Both of them.

Learning From The Master...

2010-09-09T11:36:00.001+02:00

There's an article in today's FAZ. Just in German, but let me give you the gist of it. It's too precious for words...

German development aid is largely organized by something called the GTZ, the "Gesellscahft für Technische Zusammenarbeit" or Society for Technological Cooperation. The GTZ is active in the Congo, it's one of the key countries for German development aid.

The accounts of the GTZ have been frozen and the building they own there has been confiscated.

What happened? Someone take off with the books, disappear with the petty cash, run away from the bills with a new car for a mistress?

Scarcely.

Instead, it's the lawyers. In this case, Congoese lawyers.

Tabura Kashali trades in wood in Goma. Back in 1994 he was supposed to deliver wood to a refugee camp. Of the 3400 cubic meters he was to deliver, 2820 never arrived, and he claimed it was stolen. He demanded $47k for the entire delivery, although security was his job. The GTZ paid him $8500. Four months later, Kashali sued the GTZ in the Congo courts, demanding $15k additional payment. The judge awared him $150k, i.e. 10 times the amount. The GTZ appealed, and Kashali counter-sued, asking for $33.8k, $80k in lost profits and $190k in damages and interest, using the same judge. The GTZ lost the appeal and was sentenced to pay the sum total of $280k. This was 2006.

At this point the Congo government intervened and paid $150 920, which at that point was exactly half of the sum owed (with interest). That was 2007. This year - three years later - Kashali demanded the other half plus interest, which had grown to $91 150 on top of the $150 920. Otherwise he would request that GTZ property by seized to pay these debts. The GTZ went to the German Ambassador, who tried to talk to the Minister for Development, who couldn't be bothered to meet with him. On 2 June 2010, Kashali demanded, on top of the monies owed to him, $1.5m dollars in damages. The GTZ had to set up a deposit account with close to $250k in it to avoid having their accounts seized.

In a second case, the "Initiative congolaise pour la gestion autonome des populations" or ICGP, was hired by the GTZ in 2002 to help after the volcano eruption in Goma. The ICGP, which is an NGO, received around $1mn to help, but it became quickly apparent that they were both incompetent and corrupt, and the GTZ cancelled the contract. The ICGP promptly sued, found the right judge, and has now seized the GTZ building in the Congo and has frozen over 44 GTZ accounts.

Adding insult to injury, the GTZ now has to pay $20k/month to use their own building, reflecting a rental contract that they did not even sign. If they don't pay, they will be locked out of the building and would have to leave the country.

The Germans (as opposed to the ex-colonial powers, the French and the Belgians) now have a reputation for being easy prey. After being fired, one former employee sued for $1.9mn damages, his wife (who quit her job) has sued for $51k in damages.

There is a treaty between Germany and the Congo which expressly acknowledges that the GTZ does not have immunity before the courts, but which expressly also states that accounts can't be frozen. This is being explicitly ignored by the courts.

It doesn't stop the Germans from investing in the Congo: they are to deliver new turbines for the hydroelectric plant in Inga, near Kinshasa, for between $15mn and $40mn, depending on the size of the project.

Well, one thing is clear: the Congo does not need any help whatsoever in regards to lawyers, they seem to have learned well enough from American trial lawyers to strike out on their own.

Fair Enough...

2010-09-07T09:06:00.001+02:00

One of the text-book definitions of a depression is a decline in overall economic output of more than 15% with a recovery that takes more than five years.

Fair enough.

Today's Wall Street Journal runs this headline:

The Obama Economy

How trillions in fiscal and monetary stimulus produced a 1.6% recovery.

Fair enough.

Consider this: this may actually be the good news.

Bluntly, it will be at least another 2-3 years before the economy starts to approach pre-recession levels. Given the time already lapsed, we are looking at least five years before the economy recovers to where it once was.

Hence: one condition of a depression is fulfilled.

Now, one of the mantras coming from President Obama and the Democratic Party is that the massive upswing in government debt is really all Bush's fault, that they inherited this.

Fair enough.

Of course, that really means that the avoidance of Depression 2.0 (or at least the really, really bad parts of it, i.e. that -15% growth) can't be claimed by President Obama and his administration.

Make up your minds, Democrats: either pony up, accept the debt as the necessary evil to avoid Depression 2.0 and claim the moral ownership of recovery, or blame it on Bush, but then accept that avoiding Depression 2.0 is something that Mr. Bush can lay claim to. Not the Obama Administration, which seems hell-bent on redistribution policies that are so 20th century.

Can't have both.

Fair enough?

Quote of the Day...

2010-09-03T14:49:00.001+02:00

In this case, I'm not sure where I read it.

The best description of the state of the economy is that we are now in a supermodel economy. The curves just keep on getting flatter and flatter.

While obviously true for interest rates, it's also indicative of the general malaise: no one is investing, no one is buying big-ticket items, no one is building worth a damn. Even government spending is flat, given how the US government shot its wad buying off the unions and democratic interest groups (with the pretense, but really at the expense, of creating jobs).

Why are the curves so flat? Because we are going to be very, very lucky if we can continue to tread water and not go under.

Banking is all about getting rewards for taking risks. No one can risk, right now, the collapse of government finances if interest rates were to increase. This is an inverse risk, where nothing happens because no one wants to go there, rather than everyone wanting to get a piece of the pie that got us in the trouble we are now in.

Quote of the Day...

2010-09-02T17:06:00.001+02:00

Just intuitively, if the inflation rate is at a 50-year low and the unemployment rate is near a 50-year high, it's hard to believe that the monetary dials are set right.

From here.

The man's got a point: there are too many who believe that the orthodoxy will come up with a solution. Keynes does not have a solution for our problem (he'd be aghast at the idea that during an upswing, government finances worsened, rather than having gotten better) and there really are no solutions that do not include either the gutting of holy calves or the dismantling of what are effectively Third Rails in US politics (the concept that the government can be the best solution for things like pensions and health care).

Anything else means you are living in denial of the problem.

Inflation at a fifty-year low and unemployment near a 50-years high = does not compute in the standard macroeconomic models.

Something has to give. The way things look right now, when it does give way, watch out downstream.

An Uncomfortable Truth...

2010-08-31T09:41:00.001+02:00

Thilo Sarrazin, a German politician (SPD) who is on the board of Germany's Central Bank (still around after the establishment of the European Central Bank for reasons too arcane to go into here). He's professionally trained as an economist (PhD Bonn 1973) and is in a world of trouble right now. The SPD is thinking of throwing him out of the party and the Bundesbank (the central bank) is under pressure to fire him.

Why?

Because he isn't afraid to rattle cages and point out some very, very unpleasant truths.

He recently wrote a book called ""Deutschland schafft sich ab", or "The Cancellation of Germany" (this is often translated as "Germany Abolishes Itself" or "Germany Is Doing Away With Itself", but those translations are, I think, clumsy).

Why?

This is a popular quote:

„Integration ist eine Leistung dessen, der sich integriert. Jemanden, der nichts tut, muss ich auch nicht anerkennen. Ich muss niemanden anerkennen, der vom Staat lebt, diesen Staat ablehnt, für die Ausbildung seiner Kinder nicht vernünftig sorgt und ständig neue kleine Kopftuchmädchen produziert."

My translation:

"Successful integration is the result of those who integrate. Anyone who does nothing (to integrate, ed.) deserves no recognition. I don't have to recognize anyone who lives off of the state, who rejects the state, who fails to ensure that their children become productive members of society, and who only produces new little girls wearing headscarves."

Provocative? Yep.

But not in any way different from what, say, Rush Limbaugh would say: he has the facts on his side and is in the process of goring the sacred calves of modern-day German liberalism, goring them beyond the ability of any veterinarian to save them.

While many have called for his head, there are dissenters who think that maybe the man has a point.

One of them is here. Unfortunately, it's only in German, but the article was written by a woman, muslim, with a doctorate in Sociology, who was used by Sarrazin as a reference in his book.

His fundamental thesis is that Germany is removing the basis for its success: demographic and societal factors that have led to the success of the German economy (and society!) are being dissolved, one by one, through political errors and mistakes that are leading to a different society than Germans realize. Not today, not tomorrow, but inevitably the pillars that support Germany's wealth creation and hence economic and political success are being undermined and destroyed, in some cases actively by those with agendas that do not match those of the German mainstream.

Fundamentally, the autochthone portion of the German population (meaning the "German" Germans) has too low a birth rate and that the German population is starting to decline. The non-Germans have a significantly higher birth rate, which leads to the population of those living in Germany (but not the Germans!) remaining relatively constant, but with problems.

Part of the problem is schooling: the schools with the smallest sized classes and the largest budgets are producing students with the lowest abilities and qualifications, a theme that, unsurprisingly, correlates with the US experience: the classic school system in Germany, for all its warts and problems, does produce kids with some great skills. Unless, of course, everything is watered down to meet low expectations for immigrant kids whose parents couldn't give a shit.

The other part of the problem, of course, is that the German birth rate is too low: while Germany provides support for families in the form of monthly subsidies for kids, etc., the core of the matter is that Germans have been having fewer and fewer kids not merely for a few years, but rather for over 100 years. It is the result of improved living conditions and the realization, for women, that when they do have kids, they are going to survive the first couple of years and that there is no need to have five or six kids in order to have two or three reach maturity. While obviously not true of all individuals, the tendency of wealthier societies to have fewer kids is normal.

So what is to be done?

Simple: immigration. It is the only real way to maintain the number of workers that Germany needs to continue its economy without decline. The problem? Current immigration laws prefer immigrants with relatively low qualifications, a remnant of the 1950s immigration policies during the "Wirtschaftswunder" when untrained factory workers were needed in large numbers because WW2 had decimated that cohort of workers in Germany.

Today? There are enough blue-collar workers because the industry has moved from blue-collar work to greater and greater value-added: this is also characteristic of developed economies and societies.

German immigration policy is broken: the facts speak volumes, with 65% of immigrants not willing to be integrated, with 15% of second-generation residents unable to speak German at all (and relatively few able to speak it like a native, i.e. without heavy accent and with proper grammar and vocabulary).

These are the uncomfortable truths. Sarrazin is under attack because he has the numbers on his side, the facts: his opponents aren't interested in facts, but rather in protecting the holy calves of their belief system. They are the ones doomed to failure, that now have a track record of 20 and more years of failure, that are sitting on the railroad tracks with their fingers in their ears, singing loudly so that they cannot hear the locomotive approaching.

What Sarrazin is saying is not racist, not populist, not derogatory and insulting. Unless you think that the truth will not make you free, of course.

The danger? Two-fold.

One: that Sarrazin's warnings will be dismissed out of hand and actively defamed. That is already happening.

Two: that Sarrazin's warnings will be taken out of context, abused by right-wing groups (Germany, of course, is particularly sensitive to this because of fairly recent history...) and outright racists and opportunists.

A sensible discussion could defuse this entirely. Of course, denying that there is a problem and denying that this is a topic that needs to be addressed makes the situation worse.

If you are not a part of the solution, you are part of the problem.

Worth Watching...

2010-08-24T15:28:00.002+02:00

...not the least because it is telling the truth. The financial policy of the Obama Administration is unsustainable. Period.

VAT Redux...

2010-08-24T08:35:00.001+02:00

I think that it can be taken for granted that the US will face severe fiscal and financial restraint whilst dealing with the deficit that the Obama Administration has created for the US taxpayer (and yes, it is his problem, not one he can blame on others: the fact that he tries to underscores the weakness of his character...).

One approach to increase tax revenues would be to impose a VAT, a Value Added Tax. This is a tax on every stage of value added in the economic chain: when raw materials are processed into semi-finished goods, a tax is added; when semi-finished goods are transformed into factory goods, another tax is imposed (subtracting the first tax, though, to avoid double-taxing); when the goods move from the wholesaler to the retailer, another tax is imposed (subtracting the previous step, of course); and when the goods are finally sold, they are taxed once again. Hence, for instance, a 20% VAT tax is imposed at every stage of production: when raw materials worth $10 are transformed into semi-finished, they are sold for $12 and $2 is sent to the government; when they are input into a product that is sold to a wholesaler for $100, $20 is added, but the $2 is discounted, so that the government gets $18 from the factory; the wholesaler sells for $200, adding $40 but discounting $20; the retailer sells it for $400 ($80 VAT) but discounts $20. Hence $2+($20-$2)+($40-$20)+($80-$40) = $80 for the government on the final sales price of $400.

Of course, this is a marvelous way to raise revenues: it takes consumption, most of which is fairly involuntary, as we consume to live (and it does tax those who prefer to live to consume...) and turns it into a revenue generator of significant proportions.

Of course, there are downsides: it is highly regressive, tax those who can afford it the least proportionally the most (and for this reason alone should be rejected by all politicians who claim to represent the little people...), and while you can free certain necessities (or impose a lowered VAT) such as food, housing and clothing, the tax burden remains on those who consume.

There is, however, another component that people have completely forgotten to include, and one with sever and unintended consequences: the VAT must also be imposed upon imported goods when they arrive, in the form of an import tax that is the same level as the VAT. Hence when you, coming from a country without VAT, export to a country with VAT, your goods have a import tax placed on them at the port of entry that is equivalent to the VAT, with the importer paying for this.

The unintended consequence of a US move to a VAT would be this import tax, which will be viewed by many as a major change in the US policy of freedom of trade: the imposition of a VAT in the US could be interpreted as an act of protectionism, leading to a significant worsening of international trade relations.

Just something to think about when y'all are contemplating how we are going to pay for Obama's Follies.

The Best Proof...

2010-08-20T12:36:00.001+02:00

One of the best proofs of the worth and efficacy of a political system is what others, not inclined to be sympathetic to the system, think of it.

This is interesting.

Key quote:

Liu's backing of democracy is purely practical, and really has nothing to do with political beliefs. He describes American democracy as a system designed by a genius for effective use by stupid people. As Liu puts it, ''a bad system makes a good person behave badly while a good system makes a bad person behave well. Democracy is the most important reform for China, for without it there can be no sustainable growth.''

That's Chinese Lieutenant General Yazhou Liu, by the way, a political officer in the Chinese military.

Can't get a better endorsement for the wisdom of the founding fathers than this.

Of course, even a system designed by a genius for effective use by stupid people can be destroyed by those who think they can do it better. No system can be designed to be fool-proof, especially when those who meddle with the system in the name of "progress" are the biggest fools.

This also points to ... interesting changes going on in China.
Liu points out that communists can compete in a democratic environment, especially since Chinese communists have abandoned the most destructive aspects of traditional communist doctrine (state control of the economy). But growing corruption, especially among communist officials, is crippling China and threatens the economy, as well as continued communist control of the country. Better to compete in a democratic environment, and risk losing national power, than to proceed with the current system and risk everything. Liu is being listened to by a lot of senior officials, both military and government, who back clean government. But the "dirty communists" are opposed, and that is a formidable opponent for someone like Liu.
Liu is a special kind of officer. He's a political officer, a job invented by the Russians during the Soviet period. The political officer is assigned to units from company size on up, and is second in command of the unit. The political officer is responsible for the political loyalty of all the officers and troops in the unit. He also acts as a (non-religious) chaplain, morale officer and publicist for the unit. These days, political officers rarely say much about communist doctrine, as few Chinese care for it. Political officers do serve as a source of grassroots information on what's going on with the troops, and the word is that corruption is a big issue with military personnel as well. Change is in the air, whether communist officials want it or not. Liu offers a way out, but there's no guarantee that enough of these officials will take it.

If the events that Liu hopes for come to be, this would be, for the Chinese, the best of all worlds. Clean, non-corrupted government could be that which saves China from collapse and chaos. The US system of checks and balances has been proven time and time again to be the best system to prevent corruption of the entire government: while parts go bad now and then (and more now right now than then...) it is virtually impossible, despite the best efforts of the Chicago machine, to corrupt all parts of the government within a single legislative period.

Whether they continue to try during the rest of the President's term is yet to be seen.

Accountants, Transparency and Sheer Idiocy...

2010-08-19T11:36:00.001+02:00

There are days when I come close to despair.

I've just read about how the accountants want to handle leasing.

Leasing is an attractive business because it gives users the usage of a piece of equipment without having to add it to their capital stock, returning it to the owner when the leasing period is over. It's not exactly rent for that piece of equipment, but rather the customer pays for the depreciation of an asset plus costs plus a profit for the owner of the asset.

As such, it belong to the capital stock of the owner and is a cost for the user. The owner takes it off-balance, as it is part of capital stock and can be taken off-balance, while the user never puts in his balance beyond the simple position in the cost sheet.

Now?

Both user and owner are supposed to put leases into their balance sheets "to better judge the potential risks".

Insanity: the effect that this has will be wide-spread and, I sincerely hope, unintended.

Basically, the new rules will require leasing companies to carry the remaining time period of the lease as a debt position, with a review of this debt position (since it is a position that will be carried out in the future) every 3 months as to the ability of their customers to pay their leasing costs. For the leasing customer, the sum that has to be paid yet for the leased good must also enter into the balance sheet because it is a future cost that must be included, as a leasing obligation.

Ye gods.

While this sounds like a trivial thing, it is most assuredly not: it will mean that companies which use leasing extensively will see a significant increase in their debt, even though their debt has not, actually and really, changed. Sudden increases in debt levels, however, trigger bank reviews of customer creditworthiness, usually leading to higher costs due to increased risks. Under normal conditions, this is true: however, in reality, nothing has changed.

Zilch.

So what, you say? It's just that in 2013, when this becomes the rule for accountants, the balance sheets of thousands of companies will take a turn for the worse, We're not talking a couple of bucks, but rather an increase of around 25%: there are companies, such as airlines, which will then see their debt skyrocket, as they are heavy users of leased airplanes and equipment. What do I mean by skyrocket?

Well, Lufthansa, for one, had €2.5bn in net debt on its books in 2009, with an additional net leasing obligations of €2.251bn. This new rule means that Lufthansa has then not €2.5bn in debt, but rather €4.751bn, an increase of no less than 90%.

This means, not only for Lufthansa and other airlines, but in general, that in 2013 there would be a significant worsening of cash flows, as leased - not owned, but leased - equipment, buildings and the like have to be included in the balance sheet, even though these are a pure cost and not a capital acquisition.

This could well mean the virtually complete loss of leasing as an alternative to capital spending, meaning not only the loss of jobs in the leasing industry, but also the loss of flexibility in planning, as while today you can expand capacity by leasing something for a short period of time, in the future you'll have to buy the equipment and depreciate it yourself, tying up capital.

It's also sheer stupidity for the real world, since you are worsening the financial shape of a company without them actually doing anything: given the fact that this will hit business in 2013, about when the upswing will finally have reached everyone, it's like tossing a wooden shoe into machinery.

Otherwise called sabotage.

The accountants are clearly out of control. First "mark to market" which destroyed the financial industry during a downswing, now this. Can anyone please tell me what motivates the accountants to make such changes?

Not what they say motivates them (to have a better picture of "true" liabilities and obligations), but what really motivates them? To have power over the economy and force others to do as they please?

David Tweedle, the head of the IASB, once said he'd like to sit in an airplane that actually appeared on the balance sheets of the airline.

What he is going to get instead is no airline, since it can't afford to tie up its capital in something more properly leased. The major US airlines have failed to be profitable because they own their own aircraft: Ryan Air, on the other hand, leases all of its aircraft and is profitable.

I guess he wants a level playing field where nobody makes any money except the accountants.

The Environment, Politics and Dead-Ends...

2010-08-16T15:08:00.001+02:00

This is worth taking the time to read.

My relationship to the environment can be found there as well: while we were not long-distance walkers, we spent our summers in the wilderness, camping in National Parks and enjoying as much nature as possible.

I remember, in my teens, paddling out on the Allegheny and Monongahela Rivers to take water samples near where companies were dumping industrial waste into the rivers. My first disillusionment set in when one of the researchers said that the water wasn't dirty enough and, in violation of how we were to collect the waters, collected it from what was being poured out of the pipe directly in order to make his case. I stopped helping that group of environmentalists shortly thereafter, since they were faking their results to achieve what they wanted: publicity to stop industrial waste being dumped into the rivers.

Disillusioned, I ceased to be involved. Good thing, too.

Here's the money quote for me:

So there was a reason for environmentalism's shift to the left, just as there was a reason for its blinding obsession with carbon. Meanwhile, the fact of what humans are doing to the world had become so obvious, even to those who were doing very well out of it, that it became hard not to listen to the greens. Success duly arrived. You can't open a newspaper now or visit a corporate website or listen to a politician or read the label on a packet of biscuits without being bombarded with propaganda about the importance of "saving the planet". But there is a terrible hollowness to it all; a sense that society is going through the motions without understanding why. The shift, the pact, has come at a probably fatal price.

Now that price is being paid. The weird and unintentional pincer-movement of the failed left, with its class analysis of waterfalls and fresh air, and the managerial, carbon-über-alles brigade has infiltrated, ironed out and reworked environmentalism for its own ends. Now it is not about the ridiculous beauty of coral, the mist over the fields at dawn. It is not about ecocentrism. It is not about reforging a connection between over-civilised people and the world outside their windows. It is not about living close to the land or valuing the world for the sake of the world. It is not about attacking the self-absorbed conceits of the bubble that our civilisation has become.

Today's environmentalism is about people. It is a consolation prize for a gaggle of washed-up Trots and at the same time, with an amusing irony, it is an adjunct to hyper-capitalism; the catalytic converter on the silver SUV of the global economy. It is an engineering challenge; a problem-solving device for people to whom the sight of a wild Pennine hilltop on a clear winter day brings not feelings of transcendence but thoughts about the wasted potential for renewable energy. It is about saving civilisation from the results of its own actions; a desperate attempt to prevent Gaia from hiccupping and wiping out our coffee shops and broadband connections. It is our last hope.

If environmentalists were really serious about preserving the environment, they'd be out there buying land and just letting it be, much like the Western Pennsylvania Conservancy. That's where the real environmental work is being done. Anything else is just lipstick on a pig.

Think of that the next time someone accosts you demanding your attention to whatever is selling these days within the Watermelon society.

The Coming American Insolvency...

2010-08-11T17:35:00.001+02:00

There's a Bloomberg commentary by Laurence Kotlikoff (see here) that should put the ever-loving fear of God into you. Seriously.

Fundamentally, as he correctly points out, the US is bankrupt: we cannot pay the debts we owe with the means we have at hand.

You can take a look at the numbers behind what he is saying here (PDF from the IMF).

First: structural unemployment is up by 150 basis points, which is one of the reasons that we haven't seen unemployment decline;

Second: consumer de-leveraging (i.e. reduction of consumer debt) will probably take at least 6-8 years, with much more savings needed;

Third: both lending and consumer spending will remain depressed for the mid-term, reducing growth significantly;

Fourth: the debt will outstrip foreign financing, resulting in the need for domestic financing, crowding out many other investment instruments;

Fifth: Existing debt, entitlements and the aging of the baby boomers conspire to ensure that US debt will continue to grow, rather than to decline;

Sixth: the fiscal gap (difference between government revenues and government spending as a long-term trend) cannot be closed without running a permanent fiscal surplus for as along as the eye can see (i.e. permanent), meaning that taxes must essentially double across the board (and finally affect the close to 50% of Americans who currently do not pay any taxes);

Ye gods.

Right now, entitlement mandates, especially those of health care (including the Obama "reform"), will boost entitlement spending to over 18% of GDP by 2050. Given that long-term US government spending, until very recently, was around 18%, this means that all government spending, without any changes between now and then, will be spent on entitlement mandates. leaving nothing else available unless taxes are raised to around double where they are right now.

To quote from the Kotlikoff article linked to above:

To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.

Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It's also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.

Is the IMF bonkers?

No. It has done its homework.

Given this situation, no accountant could, in good faith, sign off on the US national accounts. The US is bankrupt unless it raises taxes significantly AND reduces spending drastically. The chance of this happening earlier, rather than later?

Nil. This will fester and fester until it pops. As I have said already, we are in the middle of the sovereign debt bubble, and when it pops, it will take down the state.

Keynes cannot save us now: this is a permanent structural problem, not a business cycle problem. Keynes could, at best, help to solve a business cycle problem, but Keynes is a not a solution to structural problems: his policies make them worse, not better.

May the Good Lord have mercy on us all.