Author: VD

Arrest the banksters

At this point in the depressionary spiral, I’d just about be willing to settle for the “stop” sense of the word. Karl Denninger correctly points out that the American people absolutely will not accept another AIG bailout, this time of sovereign debt of European countries:

Yes, I know all about the stock market rally from last March. I know all about the claimed GDP “improvement.” But I also know that we got both by adding more than $2 trillion in debt to the United States – or roughly 14% of GDP – over the space of the last 18 months. That’s about 10% of GDP annualized, and incidentally, a 10% GDP contraction is the common economist’s definition of an Economic Depression.

So let’s cut the crap – we are in a Depression right now. We are pretending we are not, just like you can pretend you didn’t really lose your job so long as your credit card does not reach its limit. We have been in that depression for about 18 months and there is no evidence that we will exit it, as we have yet to find a way to pull back the deficit spending without an instantaneous collapse in the economy.

Yet at some point we must and will stop. We will either do so of our own volition, or we will do so when the cost of borrowing skyrockets, as others get tired of funding our profligacy. If we attempt to “print” our way out of it the cost of petroleum products will shoot the moon and destroy our economy anyway.

You haven’t seen the half of what happened though – not yet. It appears that AIG – the company we have bailed out (thus far) to the tune of some $100 billion plus, in fact isn’t done. It appears they may have written credit protection on Greece. If this allegation by the German equivalent to The New York Times is true Americans are going to be asked to pay billions of dollars – or more likely, hundreds of billions (since Greece is almost certainly not the only place – try Spain, Portugal, Ireland, etc) to bail out a bunch of FOREIGN NATIONS.

Do you both think Americans can and will pay that bill? A bill that has been forced on us, and yet benefits not The United States economy, but foreigners?

Wars – big wars – start over much less, my friends.

It’s time for the federal government to start arresting and jailing the banksters, now, because I suspect the alternative to being prosecuted for their criminal financial rape of America is going to be even less pleasant . The sense of popular fury is palpably building even though Washington is still managing to hold things together through this last-ditch gigantic spending spree. Once it becomes obvious that it has failed – just to give one example, the FDIC reported today that in Q409 it managed to lose nearly half the $45 billion in three years of pre-paid fees it collected – it is likely to get very ugly indeed.

This isn’t rocket science. It really isn’t. Because it is simply not possible to shift from a manufacturing economy to a “service” economy wherein the services consist of little more than gambling with imaginary numbers and still expect a society to remain stable. The apparent failure to understand that bread and circuses requires not screwing around with the reliable delivery of bread and circuses is really astonishing. The Romans understood this; the one place they didn’t let the provincial governors use as a tool for personal enrichment was Egypt, for the very good reason was that it was Rome’s granary.

I’m not a fan of unaccountable ruling elites, but as long as we’re stuck with one, is it really too much to expect them to be at least a somewhat competent?

Lomborg returns fire

Bjorn Lomborg responds to what appears to be an incompetent, would-be hatchet job on his climate books:

Howard Friel’s book The Lomborg Deception (LD) focuses on two of my books, The Skeptical Environmentalist (TSE) and the U.S. edition of Cool It (CIUS). It is heartening to write books that engage others, and I welcome his critique.
Unfortunately, it is obvious that Friel has no interest in fair-minded criticism or honest disagreement. Rather, he seems determined to portray me as devious, deceptive, and intellectually dishonest. Ironically, in his zeal to do so, he repeatedly commits the very sins he accuses me of – selective or incomplete quotation, misrepresentation of source material, and even outright fabrication. Rather than engaging with my books on their own terms, he caricatures my work and then attacks it.

Friel makes his intent clear in an author’s note at the beginning of his book, in which he identifies what he calls “Lomborg’s Theorem”: the idea that “global warming is no catastrophe” (p. xi).1 His aim, he says, is to discredit this idea—“to show that Lomborg’s Theorem is grounded in highly questionable data and analysis, and that there is little if any factual or analytic basis for the theorem” (p. xi). Fair enough. This is the stuff of academic debate: are my data accurate and is my analysis valid? I have no problem with anyone questioning the basis of my work, provided the questions are honest and fair-minded. But as I will document below, what Friel does in The Lomborg Deception is something else entirely. In his attempt to prove that my data and analysis are misleading and/or dishonest, he quotes source material out of context, mangles source figures and tables, misrepresents my text and source material, relies more on news reports than on peer-reviewed research, and consistently avoids engaging with the central arguments of my work.

Having written a book that is a response to the arguments of other individuals, I can testify that it is vitally important to attack the target’s strongest arguments rather than sniping away at the trivial and peripheral issues and attempting to portray them in a false light. The fact that I directly addressed the New Atheists’ most important arguments – Harris’s Extinction Equation, Dawkins’s Ultimate 747, and Dennett’s Division of Doxastic Labor – meant that it was impossible for their defenders to get away with their false accusations of strawmen construction. Not that that prevented a few of the less intelligent ones from trying, of course….

Another reason that it is always a mistake to address the side issues in lieu of the central ones and fail to give your target a reasonable benefit of the doubt is that even when you have correctly addressed the relative trivialities, it is usually possible for people to play the interpretation game in an attempt to circumvent a solid rebuttal. For example, it was only because I directly corresponded with Sam Harris that I was able to explode several excuses manufactured for him by his defenders. In this case, after reading Lombjorg’s response, it would appear that Friel chose rather poorly in selecting a target who is clearly not afraid to stand by his works and present a detailed defense of them.

Just to be clear, I read Cool It and was unimpressed by it, albeit not for the reasons that Friel manufactures. I was unimpressed mostly because it is obvious that global warming is not taking place, therefore Man is not causing it, and I have little interest in the alternative “save people from themselves” schemes which Lomborg would prefer to tax people in order to fund.

For excellence in paying attention

After bestowing a well-deserved Dynamite Prize to Alan Greenspan for being the economist “most responsible for blowing up the global economy”, the Real-World Economics Blog is now accepting nominations for the Revere Award:

The Revere Award in Economics

The economics establishment has attempted to evade responsibility for the Global Financial Collapse by calling it an unpredictable, “Black Swan” event. But in fact some non-neoclassical economists foresaw the crisis and warned the public of its approach. The Revere Award aims to give these economists the professional and public recognition that they deserve, to encourage others to utilize their methods, and to increase the likelihood that, for the benefit of humankind, empirically responsible economists will be listened to in the future

You may nominate up to three candidates by leaving a comment below. They must be economists, and we are looking for the three who first and most cogently warned of the coming calamity.

Nominations are to be made in the comments. While I seem to recall that I may have made a few predictions related to the matter, here are the three candidates I believe to best merit the award:

Ludwig von Mises. He long preceded Hyman Minsky in describing the nature of the boom-bust cycle and assigning responsibility for it to the expansion of bank credit. He provided the best conceptual model for anticipating and recognizing both the housing bubble and its consequences for the financial system. Granted, he didn’t predict this specific boom-and-bust due to the obvious disadvantage of his having been long deceased, so he may not be eligible.

Edward Gramlich. RGD readers will recall him as the Federal Reserve governor who told Alan Greenspan that making home mortgages available to low-income borrowers would lead to widespread loan defaults having extremely negative effects on the national economy. And he did this in 2000! Greenspan blew him off because – seriously – he was afraid of undermining the availability of subprime credit.

Robert Prechter. He forecast both the housing bubble and the threat to the global financial system very early on. Some will complain that he did so too early, but Prechter, by his own admission, usually gets it too early. The much more important point is that he usually also gets it right.

Consequential consequences

Fred Reed muses upon a familiar pattern:

Recently I saw an interview with General McChrystal, head butcher of the the Pentagon’s Democracy Implantation Force in Afghanistan. The General was explaining our ongoing victory. Yes, victory. We were making progress. It was only a matter of time. He could see the light at the end of the tunnel. He didn’t explain what were doing in a tunnel in the first place….

What McMoreland doesn’t get is that people just don’t like being invaded. Yes, yes, it’s for their own good. We, of course, will determine what constitutes their own good. Such is the ingratitude of these people, and their lack of respect for borders, that we find ourselves forced to expand the war into Cambod—Pakistan, I meant. Pakistan. And so the Predators fly, Predating, killing the wrong people because that’s what there are more of. That doing this might produce animosity is irrelevant to soldiers. The Mision is sacred. Our intentions are good.

The consequences of not understanding what you are doing can be consequential.

It is truly remarkable how most self-styled conservatives resolutely refuse to recall the lessons of military history. The failing occupations of Afghanistan and Iraq will hardly mark the first time that a once-wealthy, but still-powerful society in decline has bankrupted itself while haplessly engaging in pointless military overstretch.

I find myself wondering how many pro-occupation “conservatives” have lost their jobs yet? And I wonder how many of them will still believe in the absolute priority of occupying third-world countries on the other side of the planet once they find themselves out on the street and collecting unemployment?

WND column

Deflation vs Inflation

After last week’s report on CPI-U core inflation from the Bureau of Labor Statistics, which was either -0.1 percent or 0.1 percent depending upon whose mathematics inspires you with more confidence, and the Federal Reserve’s decision to raise the discount rate to 0.75 percent from 0.50 percent, the attention of the markets is more closely focused on the question of inflation versus deflation than ever before.

Because the mainstream economic models, both Neo-Keynesian and Monetarist, are constructed around tax rates and government spending on the fiscal policy side and interest rates and money supplies on the monetary policy side, the inflation-deflation debate is almost invariably limited to contemplating interest rates and money supply. However, these analytical approaches also happen to leave out what is easily the most sizable and important factor, which is the amount of debt in the economy and the ability of the various economic actors to service their debts.

Econoblogger query

It has become entirely apparent that I simply can’t manage two blogs. So, rather than simply shut down the RGD economics blog or quit blogging here and focus on all economics all the time, I’m interested in finding out if there are one or two economically aware bloggers who might be interested in becoming co-bloggers there. I’d like to see it become a statistical and analytical resource, like Calculated Risk, only more focused on the factors I consider to be more relevant. My thought is that I would direct the content, including the schedule of economic data releases, produce the graphs for the data I track on a regular basis, and generally serve as the editor, but the brunt of the daily blogging would be done by the co-bloggers. There should probably be three or four posts per day, including the statistical releases with historical charts incorporated.

While there are a lot of decent econoblogs on the Internet, only CR comes close to what I think of as a one-stop statistical shop. What I’d like to see is something that is a mix of CR, Mish, and the Market Ticker, albeit with a more international flavor. Ideally, there would be one European, one American, and one Asian blogger to cover all the bases.

Anyhow, if this may happen to be of interest to you, you possess a basic knowledge of economics, and more importantly, the time to post a few times per day, let me know in the comments here. Or shoot me an email. If no one is interested, that’s fine, it’s certainly not a problem. But I thought the idea was worth throwing out there in case there is a stat geek or two with an Austrian inclination.

But, but… he’s UNELECTABLE

Ron Paul wins the CPAC straw poll:

U.S. Rep. Ron Paul, R-Texas, a stalwart foe of government spending, won a blowout victory Saturday in the annual Conservative Political Action Conference presidential straw poll. With participants naming “reducing the size of federal government” as their top issue, the 74-year old libertarian hero captured 31 percent of the 2,400 votes cast in the annual contest, usually seen as a barometer of how the GOP’s conservative wing regards their potential presidential candidates.

Former Massachusetts Gov. Mitt Romney finished second with 22 percent of the vote, ending a three-year winning streak at CPAC. Former Alaska Gov. Sarah Palin finished third with 7 percent of the vote, followed by Minnesota Gov. Tim Pawlenty at 6 percent and Indiana Rep. Mike Pence at 5 percent.

Needless to say, this straw poll win won’t be trumpeted by the NY/DC Axis Republicans the way it would have if Romney or Jindal had won. It is astonishing how they continue to argue that a liberal Mormon from Massachusetts or an Indian from Louisiana is going to have more national appeal than the libertarian Texan who everyone now knows was correct about the failed World Democratic Revolution, correct about the financial crisis, and correct about TARP and the banking bailouts.

Ron Paul would have beaten Obama because his positions were in alignment with the American people rather than with the financial elite. John McCain couldn’t because his weren’t. McCain had the election and threw it away by siding with Goldman Sachs, Citigroup, and the Federal Reserve rather than with the voters. Look at the alternatives now. Romney is a liberal Mormon; he’s about as electable as an Aztec priest. Palin is a political rock star, but she’s a lightweight and won’t be running if she has any sense at all because she’d be throwing away a very lucrative career in what passes for political commentary these days. Jindal is a lightweight who looks and talks funny. Pawlenty is an unprincipled snake, which is probably why the neocons are talking him up. I don’t like Huckabee, but he’s probably the only other serious candidate in the bunch.

With apologies to Ann Coulter, if you call yourself a conservative but don’t support Ron Paul due to his foreign policy, you’re neither economically literate nor are you truly conservative. It doesn’t matter how afraid of Iranian nukes you are or how sexually aroused you become at the thought of invading foreign lands because the great terrorist hunt and the world democratic revolution are rapidly coming to an end for lack of funding. This will become abundantly clear with the first failed Treasury auction or when the bank meltdowns begin to pick up speed. Ron Paul is the only Republican candidate who realizes this, which is precisely why he is the only viable Republican candidate in 2012 in much the same way that he was the only viable candidate in 2008.

Running another Wall Street-approved, neocon-vetted presidential candidate is about the only way the Republicans can guarantee an Obama victory in 2012. So, it won’t surprise me in the least if that is precisely what they do. If, on the other hand, they actually want to win, the ideal candidacy would probably be a Paul-Palin ticket. The economic situation is not about to get better, so the bipartisan appeal of Paul’s message is only going to grow.

It seems Robert Costa is, along with Jonah Goldberg and John Derbyshire, one of the few remaining voices of sanity at National Review: “There may have been some boos, but Paul was by far one of the more popular speakers at CPAC this year. “End the Fed!” was one of most-heard chants and his “Campaign for Liberty” group was everywhere… Unlike the 2012 wannabes, Paul doesn’t play coy: He has a manifesto and wants to broadcast it. Period. No worries about the media spin or whether the speech gets headlines (see Pawlenty, Tiger doctrine). And, instead of the usual anti-Obama talk, Paul framed a hefty chunk of his CPAC address upon a critique of Woodrow Wilson. And the crowd dug it.

Some older CPAC attendees don’t seem to care much for the Texas congressman, sure, but many young activists seem to regard him as a hero of sorts. When he talks about the debt, like he did on Friday, calling it a “monster” that will “eat up” our future, it was with a passion that you can’t fake in politics. He also didn’t mind challenging many of the room’s security hawks on foreign policy. “There is nothing wrong with being a conservative and having a conservative belief in foreign policy where we have a strong national defense and don’t go to war so carelessly,” Paul said. That line was met with a lot of silence, some nods, but, based on my conservations with activists afterward, strong respect from many for not simply pandering.”

Inflation manipulation

Karl Denninger calls shenanigans on the Bureau of Labor Statistics:

Remember the market’s “cheering” of the “-0.1%” CPI-U reading (core) yesterday?

There’s a problem – it was wrong.

Look at the highlighted numbers. Let’s multiply them up.

(5.966 x 0) + (.769 x -2.1) + (25.206 x -0.1) + (.347 x 0.4) / 32.288 = -0.12%, or -0.1%.

But it was reported as -0.5% in the line directly above (inverted tone.)

Oops.

I didn’t re-run the weightings for the entire series but a quick “eyeball” of the table shows that this should result in a CORE reading of 0.1% (positive), not the negative number reported.

Will the BLS admit to this error? Who the hell knows, but if you have a calculator, you can verify that yet another game to “boost” the market was run, with desire effect – a roughly 1/2% spike in the S&P 500 futures right on the BOGUS data release…. We now officially live in a world where intentionally-incorrect data is published by our government for the specific intention of misleading the markets.

It’s entirely possible. I certainly wouldn’t put it past them. On the other hand, given the BLS’s autopodiatrical assault chronicled in RGD, when they proved their own CPI-U numbers to be less reliable than the Shadowstats statistics they were incompetently attacking, it doesn’t stagger the imagination to think they just got the number wrong because they’re stupid government bureaucrats.

Of course, either way, you have to be an idiot yourself to put any credence in their reports. It simply doesn’t matter what the official paper count happens to be, because debt-deflation is well on its way.

Ashes on the dollar

Americans continue to opt out of the financial system:

Hoskins told News 5’s Courtis Fuller that he issued the bank an ultimatum. “I’ll tear it down before I let you take it,” Hoskins told them. And that’s exactly what Hoskins did. The Moscow man used a bulldozer two weeks ago to level the home he’d built, and the sprawling country home is now rubble, buried under a coating of snow.

If your life is being financially destroyed by the bankers and bureaucrats anyhow, there’s really not much reason to avoid repaying them ashes on the dollar. With 10.5% of all homes already delinquent or in default, what are the banks going to do when people simply refuse to leave or pay for them, beg the Feds to put 6.6 million homeowners in jail? And who is going to pay the costs of their imprisonment?

In 2008, the bankers, bureaucrats, and politicians tore the veil of the unwritten American social contract that permitted our debt-based economy to function. While the deck was always stacked to the benefit of the financial elite, it wasn’t always so egregious. But in ramming through TARP and the bailouts over the furious objections of the American people, they shattered the illusion of relative fairness. So now, they have absolutely no response when the American people stop playing a game that is stacked so heavily against them. The parasites came to believe they were invaluable and in doing so forgot the very first rule of parasitism: do not harm the host.

It’s almost surely too late to salvage the present financial system, but it is still worth attempting to restore the broken American social contract. The first step in doing so is to follow the Market Ticker’s advice of arresting, prosecuting and asset-stripping every member of the financial elite that can be proven to have committed criminal fraud over the last decade. The second step is to audit the Federal Reserve and open the books to the public. The third step is to unwind the banking bailouts and tax all of the bailed-out executives and employees 100 percent while making it clear that no such bailouts will ever be permitted to take place again. These measures will be totally unacceptable to the banking class, but the alternative will be much worse for everyone.

The vast majority of Americans are never going to bulldoze their houses. But millions of them – or rather, tens of millions more – are simply going to stop paying their debts and transform themselves from productive members of society into societal parasites. The time for playing economic charades is over, everyone knows that the system is crumbling because they can see the signs of it all around them. Extend and pretend simply isn’t an option anymore and the risks of refusing to deal with reality are only going to continue to grow with time.