#Arkhaven INFOGALACTIC #Castalia House
And you thought Greece, Spain, and Ireland were in desperate straits… consider poor Seattle:
“I think to make it the most competitive for our team, Tarvaris needs to be our starter right now. Tarvaris brings so much continuity to us.”
— Seattle coach Pete Carroll, after naming Tarvaris Jackson the team’s starting quarterback on Saturday.
Ye cats!
If I sounded a little less than fluid in the interview with CTV yesterday, the reason is, ironically enough, that the two Canadian producers prepared me extraordinarily well for it. I was very impressed with their thoroughness and the quality of their questions; I’ve been on a number of national news shows before and I’ve never seen anything like it. After a 30-minute pre-interview going over the debt ceiling debate and how it related to some of the concepts in RGD with one of the producers the day before, I produced two charts that we both thought would be useful as well as nicely visual, after which I was sent me the six questions I was to anticipate.
However, there was just a bit of a curve ball in the interview itself. Not only did they use a different picture than the one I provided, (understandably, since they must have wanted color), and they didn’t make use of the charts I made, (which was fine, I used them in today’s column), but some of the questions asked by the anchor were somewhat different than the ones I’d been provided. Her questions weren’t bad ones, by any means, but they were just far enough afield so I didn’t have the statistics on things like “historical tax revenue as a percentage of GDP” immediately to hand.
Note that I’m not complaining here, merely observing how the process was very different than my experience with American TV and radio.
Anyhow, I found that I was thinking “wait, what?” the entire time I was trying to answer the anchor’s questions. “Did I mishear that? Am I even answering the right question?” Anyhow, since I thought the producer’s questions were pretty good ones and I prepared for them, I thought I might as well post my notes for the interview here.
You recently wrote in an article that the issue is not so much the debt ceiling, but the debt itself. Can you explain exactly why?
The U.S. federal government has spent three years keeping the economy artificially propped up by substituting $4.1 trillion in new government debt for $3.6 trillion in household and financial sector debt-deleveraging. Washington cannot keep playing ostrich without raising the debt ceiling. The reason you’ve seen the number $2.4 trillion bandied about is because that buys them another six quarters at the current rate of $365 billion in new debt per quarter, enough to get them past the 2012 elections. But all this accomplishes is to delay the day of reckoning and increase the eventual cost. Since the housing market and employment numbers have actually gotten worse during this period of extend-and-pretend, it should be clear that raising the debt ceiling isn’t even a potential fix for the problem.
In your book you look at the patterns that led to the Great Depression, and the Heisei boom In Japan that led to it’s famous ‘lost decade”- and you believe it will happen again, only this time it will be worse. What leads you to believe this?
First, the debt-to-GDP ratio is worse than it was in the Great Depression or Japan in 1999. It was 2.6 in 1933, it peaked at 3.7 in 2008 and it is 3.5 now. Second, in the 1930s, it was only the USA that attempted to fight the post-1929 economic contraction with Keynesian stimulus policies and only the USA suffered a Great Depression. In England, the contraction stopped in 1932, France never saw double-digit unemployment, and the Japanese economy was actually enjoying significant growth.(1) This time, Europe, China, and Japan all followed the US lead and applied their own stimulus plans in 2009, which we are already seeing is now in the process of backfiring on everyone.
In a chapter of your book entitled “No one knows anything” you explain that many of the governments calculations for GDP are misleading that they contain wide margins for error and cannot be trusted- why is that?
Because they’re verifiably wrong. Look at the recent first quarter. All three reports, from Advance to Final, had U.S. GDP growth at 1.8 to 1.9%. Then, in the second quarter report, there is an inexplicable revision from 1.9% to 0.4%. That’s a $225 billion mistake, which is almost five times more than the $60 billion growth now being reported. These revisions are so out of control that if you bother to look back at the 2001 numbers, you’ll see that the 2001 recession has been revised out of existence. It’s complete fiction. On the employment side, the game is to not count people who don’t have jobs as unemployed. That’s why they claim the unemployment rate is only 9.2% when it’s really closer to 20%.
You say that a boom fuelled by easy credit must be followed by a bust of equal size and duration. Instead, it has been FED policy to re-inflate bubbles and they collapse, which only creates bigger bubbles- You say we are currently in the biggest bubble yet- what could pop it?
What will pop it is a reduction in the rate of growth of government spending, an increase in interest rates, or a major sovereign investor’s refusal to continue buying Treasury bonds. Any of the three will suffice to put the USA into a debt-deleveraging spiral. The problem with depending upon debt-based economic growth is that eventually, you run out of people who are willing and able to borrow money. And that’s when the contraction starts.
There is a large backlog of home foreclosures in the United States- what would happen if that backlog were to suddenly be cleared? Are there other potential triggers out there?
Clearing the backlog would put the economy into the equivalent of heart failure because it would instantly kill a lot of banks. The $600 billion decline in household sector debt is deceptively small because over 7.5% of all mortgages have been delinquent for more than 90 days. The banks aren’t writing those bad loans off yet because to do so would bankrupt them. Based on the FDIC statistics, I estimate that about $3 trillion of the $7.5 trillion in assets presently claimed by the big four, Bank of America, Citi, Wells Fargo, and JP Morgan Chase, are worthless.
What are the options for the global economy- what are the best and worst case scenarios?
Pay a high price now, or pay a higher price later. Deflation, default, and economic contraction aren’t fun, but they are perfectly survivable. The best case scenario is we go through the global equivalent of the Great Depression, what I’ve called Great Depression 2.0. It will be very difficult for a lot of people, but the basic governmental structures will survive and there won’t be cannibalism in the streets or anything like that. The worst case is that the politicians keep kicking the can down the road until the entire global financial system finally collapses overnight. In that case, we’re probably going to see wars, civil wars, and fundamental change of the sort most of us find impossible to imagine.
(1)thanks to the invasion of Manchuria, of course, but the GDP statistics are what they are.
Those who make ridiculous assertions that amount to this line of logic should not find it terribly hard to understand why those of us who actually possess working memories tend to be just a little bit skeptical about the reliability of whatever their current positions happen to be. I know you are probably as shocked as I am that the Fowl Atheist is claiming that the “reevaluation” of Archaeopteryx, the fossil that has been hailed as literally rock-solid proof of evolution since I was being subjected to evolutionary propaganda back in elementary school, doesn’t mean that the legitimacy of either archeological science or TE(p)NSBMGDaGF should be called into question:
We all knew this was coming. Xiaotingia, the newly described feathered dinosaur, suggests a reevaluation of the taxonomic status of Archaeopteryx, so the creationists are stumbling all over each other to crow about the failure of science…which doesn’t make any sense, since reconsidering hypotheses in the light of new evidence is exactly what science is supposed to do.
That’s an interesting claim. Precisely when has any evolutionist reconsidered either a) the basic hypothesis that species evolve into different species through natural selection or b) the corollary and requisite hypothesis that life evolved from non-life, as a result of the falsity of one, ten, or even a hundred predictions that relied upon one or both of them? If it weren’t for DNA, which was not discovered or developed with any assistance from evolutionary theory, evolutionary biology would already be openly recognized by every intelligent, rational, science-literate individual as being about as useful as phrenology and astrology.
Darwinian biologists are very much like Keynesian economists. It doesn’t matter how many times their predictions fail. It doesn’t matter how often their models are proven to be wildly wrong. It doesn’t matter how many times they have been wrong in the past even with the benefit of margins of error consisting of millions of years. They continue to insist that their position is based on evidence even when the evidence demonstrates precisely the opposite of what they have been claiming.
An evolutionist is one who is continually convinced, despite past experience, that adding just one more series of magic evolutionary epicycles will somehow make the whole system finally begin to function in a coherent and reliably predictive manner.
In other, somewhat tangential news, we have discovered that the New Atheist Circle Jerk continues unabated. Seriously, you can’t even parody these charlatans without them one-upping you.
The 2011 Richard Dawkins Award goes to…
Category: GodlessnessWho else but Christopher Hitchens?
What a beautiful, beautiful thing. If I had dared to invent the idea, no one would have believed me. Out of nearly seven billion people on the planet, Richard Dawkins chose to give out his eponymous award to the third-most amusing recipient. Second, you understand, would have been awarding it to himself. But to maximize our collective utility on the happiness-suffering metric, though, he would have had to present the award to Rebecca Watson.
“At the White House and in talks in congressional offices and corridors, most of the attention was focused on finding a way to define the precise conditions under which the president could get a second increase in the debt limit that would be needed early in 2012 under both Republican and Democratic proposals.”
– “Amid New Talks, Some Optimism on Debt Crisis,” The New York Times, July 30, 2011
It’s not hard to understand why the leaders of both political parties are vehemently opposed to the possibility of U.S. default. But as many commentators, including myself, have pointed out for weeks, a failure to raise the debt ceiling has absolutely nothing to do with the possibility of a sovereign U.S. default! In fact, raising the debt ceiling will make a default much more likely in the future. So why are the politicians, particularly Barack Obama, so desperate to see some sort of deal struck that will permit the raising of the $14.3 trillion federal debt ceiling?
NB – This column was written prior to the announcement of the “compromise” plan, which Karl Denninger summarized as below. Nothing in it changes anything substantive regarding the column.
1. Lie once again about “cutting spending.” It does no such thing. It increases spending – every year. Bogus and outright-fraudulent “baseline budgeting” means that if they intended to boost spending $300 billion but only increase it $200, that’s a $100 billion “cut.” If you ran your household like this you’d be broke in a week. For the US, it will take a bit longer.
2. No tax increases. That’s nice, but let’s not forget that while the Democrats scream about the “Bush Tax Cuts” the FICA tax cut was theirs. Obama signed it. You cannot keep reducing income and increasing spending forever.
3. The cuts, fraudulent though they are, aren’t even real anyway – and not binding either. There’s nothing before 2013, which means a downgrade is almost certain. Further, raising the debt ceiling now for the whole among but allegedly finding the “cuts” over 10 years is an outright fraud by a ratio of 10:1.
4. A 2013 timeline for actual changes means nothing, since the next Congress is not bound by what this one does. Period.
5. Sequesterization didn’t work in 1997. It won’t work in 2011 either.
6. We failed to get to $4 trillion. That’s what S&P said they needed, and they said they needed to see that within the next three years. Now we find out if S&P has any balls.
NRO reports: “According to sources, Boehner said the deal was “the best that we could get.”” And that is perhaps the most shameful thing about this whole bipartisan charade. The scriptwriters couldn’t even bother to write new dialogue for Republicans Cave on the Budget XXXI.
Several shots rang out from a handgun during a large fight near an outdoor concert venue in Cleveland, leaving four people wounded after a “Unity in the Park” festival featuring funk music artist George Clinton, police said Sunday.
I always enjoy the way that the mainstream media is now very careful to scrub every last bit of racial information from a news story, unless the point is to make a point about how wonderful diversity is.
Unsurprisingly, it has all turned out to be fake. The choice being presented for public consumption is one between fake spending cuts (Republican) versus non-existent spending cuts (Democrat). Of course, the real issue is the need to keep spending in order to continue the appearance of economic stagnation. Ask yourself this question. What is the magic in the $2.4 trillion addition to the $14.3 trillion debt ceiling?
Answer: $365 billion. That is the average increase in federal debt per quarter since the middle of 2008. $2.4 trillion is six quarters worth of that… which is sufficient to see the current set of politicians safely past the 2012 elections. Assuming that the private sector continues its debt-deleveraging, this means that by the end of 2012, government will account for 27.8% of all debt, the federal government will account for 23.2% of it (up from 10.3% in Q2-2008), households will be at 22.4% (down from 28%) and the financial sector at 24.4% (down from 31.5%).
Speaking of the debt limit, if you happen to be Canadian, I’ve been asked to appear on their 24-hour news channel, CTV, to discuss it. If you are not Canadian, but happen to be so inclined, you can watch the clip here.
Moody’s tries to spell it out slowly for the Washington politicians:
The “limited magnitude” of both debt plans put forward by congressional leaders would not put the nation’s AAA credit rating back on solid footing, Moody’s Investors Service announced Friday. “Reductions of the magnitude now being proposed, if adopted, would likely lead Moody’s to adopt a negative outlook on the AAA rating,” the credit rating agency said in a new report. “The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high.”
It added that “prolonged debt ceiling deliberations” have increased the odds of a downgrade, but that the firm is still confident policymakers will avoid a default.
“It remains our expectation that the government will continue with timely debt service,” the firm said.
It also clarified that as far as it is concerned, the nation will only default if it misses an interest or principal payment on U.S. debt, not if it misses payments on other obligations like federal employee salaries or Social Security benefits.
Translation: The Republicans that sold out and put their careers at severe risk of Tea Party challenges in the primaries not only accomplished nothing, but never could have accomplished anything meaningful. If Boehner and Cantor were competent, they would have run their multiplicity of plans past the ratings agency, not just the optimistic and reliably inaccurate Congressional Budget Office.
And as I and many other financially literate economics observers have pointed out, a failure to raise the debt ceiling has ABSOLUTELY NOTHING to do with default, despite the ignorant bleatings of “economists” like Megan McCardle. The mainstream commentators have it backwards again, as it is raising the debt ceiling that makes the prospect of sovereign default more likely, not leaving it in place.
In the preceding “Bustina di Minerva” I wrote that many readers find it difficult to ascertain, in a novel, the reality of the fiction, and they tend to attribute to the author the passions and the thoughts of his characters. To confirm this, I found a site on the internet that records the thoughts of various authors, and under “the quotes of Umberto Eco” I discovered this: “The Italian is unfaithful, a liar, vile, treacherous, he is is more comfortable with the dagger than with the sword, better with poison than with medicine, slippery in negotiation, and coherent only in that he changes his flag with every wind.” It’s not that there isn’t something of the truth in all this, but it appears as if it is written by a foreign author. In my novel, The Cemetery of Prague, this sentence is written by a gentleman who in the preceding pages has manifested a racist compulsion making use of all the most hoary old cliches. From now on, I must be sure to never place banal characters in fictional scenes, otherwise one day they will attribute to me philosophies such as “one has but one mother”.
Now I read the last “Blown Glass” of Eugenio Scalfari, which reprises my previous “Bustina” and raises a new problem. Scalfari agrees with the fact that there are people who confuse the fictional narrative for reality, but retains, (and rightly retains that I retained), that the fictional narrative can be truer than the truth in order to inspire identifications and perceptions of historical phenomenons, to create new modes of thought, etc. And we must consider if one cannot be in accord with this opinion.
It is not only that the fictional narrative also confirms aesthetic conditions: a reader can very well know that Madame Bovary never existed and yet enjoy the style with which Flaubert constructs his character. But here the aesthetic dimension can be seen to be in opposition to the “aletic” dimension, (that which has to do with the notion of the truth shared with logic, the sciences, or the judges that make courtroom decisions about the veracity of testimony declaring how a certain thing took place.) They are two diverse dimensions; there are problems if a judge makes his decision based on how aesthetically a defendant lies to him. I was occupied with the aletic dimension. It is for the most part true that my reflections were born of an internal discourse on falsehood and the lie. Is it false to say that a Vanna Marchi lotion will regrow hair? It is false. Is it false to say that Don Abbondio met two bravos?(1) From the aletic point of view, yes, but the narrator does not want to tell us how much of the story is true or false, he pretends it is true and asks us to play along. He asks us, as Coleridge recommended, “to suspend the disbelief”.
Scalfari cites Werther(2), and we know how many romantic young men and women identifying with the protagonist committed suicide. Did they perhaps believe that the story was true? Not necessarily, just as we know that Emma Bovary never existed and yet we are moved to tears on her behalf. One recognizes a fiction as fictional, even as we immerse ourselves in the depths of a character.
It is that we intuit that even if Madame Bovary never existed, there exist many women like her, and it is perhaps as if she is also us to some extent and from her a lesson can be derived of life in general and of our own selves. The ancient Greeks believed the things that befell Oedipus were true and reflected his fate. Freud knew very well that Oedipus never existed, but read those events as a profound lesson on how the aspects of the unconscious operated.
What happens instead to the readers of whom I speak, those who don’t absolutely distinguish between fiction and reality? Their situation does not have aesthetic validity. To the extent they are inclined to take the story so seriously that they never ask if it is told well or poorly, they are not looking for instruction and they do not identify with the characters. They simply manifest that which I will define as a fictional deficit; they are incapable of suspending their disbelief. Since there are more of these readers than we think, it is worth the trouble to consider them because we know that all the questions of morals and aesthetics will elude them.
(1) The Betrothed, Alessandro Manzoni
(2) This must mean The Sorrows of Young Werther by Goethe rather than the opera entitled Werther since the opera premiered 118 years after the book was published and well after the wave of the suicides it inspired.
It looks like we’re going to have the chance to see how serious the Tea Party is about electorally cutting the throats of the politicians that betray it as well as their ability to actually do so:
Freshman Rep. Allen West (R., Fla.), a tea-party star, is under pressure:
“Several Tea Party organizations are working to punish conservative Republicans who plan to vote yes on Speaker John Boehner’s (R-Ohio) debt-ceiling proposal. Tea Party leaders announced Thursday that they are targeting Republican Reps. James Lankford (Okla.), Allen West (Fla.), Mike Kelly (Pa.) and Bill Flores (Texas), all four freshmen and declared yes votes for Boehner. . . . West has been particularly vocal in his support of Boehner’s plan, which many consider a surprise endorsement by the Tea Party firebrand not known for falling into line behind his party’s leadership.”
In an interview with National Review Online this morning, West was defiant. When asked about whether he is worried about the heat, he looked me straight in the eye, stayed silent, lifted his right hand and brushed off both of his shoulders, Jay-Z style.
“The Taliban targeted me, al-Qaeda targeted me and I’m still alive,” West smiled. He praised Boehner for adjusting the debt-limit bill, calling it a “good move.” The proposal, he said, “does not have tax hikes and is not a clean raise of the debt ceiling. For the first time in the history of the nation, we are having a debt-limit increase with real spending cuts. What more could you want?”
My first thought is that all I wanted was no debt-limit increase period. Increasing the debt ceiling with fake spending cuts – and as we learned from the last go-round, they are fake – serves no purpose whatsoever. My second thought is that it is eminently stupid to place any trust in anyone who runs for office. A politician will always come up with some excuse to rationalize doing what he promised he would not do.
And my third thought is: what an asshole! He’s going to strike the tough guy pose contra those who put him in office to stop more government spending? I know nothing else about the guy, don’t really care who is in Congress, don’t believe the Tea Party will be able to do anything about government spending, and I’d still like to see the Tea Party leave a smoking crater where this guy’s career used to be in 2012.
It gets even better. Apparently the real Tea Party hasn’t said boo about being betrayed.
““A press release has been issued claiming Tea Party Nation supports a primary challenge against Allen West. TPN’s name was used without permission. I will be giving a more detailed statement shortly but neither I nor Tea Party Nation supports a primary challenge against Allen West.”
In other words, the Tea Party would appear to be as worthless as the Republican Party.
UPDATE – Boehner’s White Flag passed 218-210. It would appear there are only 22 Republicans who aren’t economically illiterate. I’m sure “it was the best deal we could get” is going to sell every bit as well as George Bush’s “Read My Lips” cave in. It’s not like the U.S. is going to be less in debt this time next year.
UPDATE II – Harry Reid and the Senate refused to accept the House Republican surrender:
At the other end of the Capitol, Senate Democrats rejected the measure without so much as a debate. The vote was 59-41, with all Democrats, two independents and six Republicans joining in opposition. Moments later, Senate Majority Leader Harry Reid, D-Nev., unveiled an alternative that would cut spending by $2.4 trillion and raise the debt limit by the same amount, enough to meet Obama’s terms that it tide the Treasury over until 2013.
It should be interesting to see what the Boehner-led Republicans will try next or if they’re seriously going to go with the “unconditional surrender is the best deal we could get” theme.
In this week’s podcast, I interview John Hawkins of the Right Wing News about the Republican presidential primary.