Author: VD

I’m looking forward to scoring this one for the skeptics soon:

The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. — 13 times the number who authored the U.N.’s 2007 climate summary for policymakers. Joanne Simpson, the world’s first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak “frankly” of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming “the worst scientific scandal in history.” Norway’s Ivar Giaever, Nobel Prize winner for physics, decries it as the “new religion.” A group of 54 noted physicists, led by Princeton’s Will Happer, is demanding the American Physical Society revise its position that the science is settled. (Both Nature and Science magazines have refused to run the physicists’ open letter.) The collapse of the “consensus” has been driven by reality.

I’ve always had my doubts about the credibility of scientists due to their demonstrated willingness to sell biological philosophy as genuine science. But their collective behavior in what will eventually be known as the Great Global Warming Scandal really demonstrates what a bunch of greedy, power-tripping scum so many of them are. The amusing thing is that scientists like PZ Myers and Sam Harris, ex-scientists like Richard Dawkins, and would-be scientists like Daniel Dennett constantly worry about the “danger” supposedly posed to science by religion, while blithely and unquestioningly accepting the fraudulent gospel of global warming because it came wrapped in scientific clothing. They truly don’t seem to understand how utterly devastating this ongoing scandal is going to be to the public regard for science and scientists alike.

And let’s not forget those who declared global warming to be an established fact. Keep that in mind as you consider their credibility with regards to other matters where they claim science has settled the issue.

Obama demonstrates his logical incapacities:

“If private insurers say that the marketplace provides the best quality health care, if they tell us that they’re offering a good deal,” he asked, “then why is it that the government, which they say can’t run anything, suddenly is going to drive them out of business? That’s not logical.”

It would not be logical if the government were competing on anything remotely resembling a level playing field. However, that’s not the case with government, which has several advantages even when it doesn’t make use of its ability to assert a monopolistic position. First, a government agency has no need to make money. Subsidized by the taxpayers and public debt, it can run at a loss for decades. It can therefore undercut private competition by any amount it chooses, thus creating demand for its services even if they are inferior. Second, a government agency is allowed to exclude itself from regulations that apply to private competitors, giving it further competitive advantages that don’t necessarily show up on the balance sheets. For example, it is highly unlikely that one could successfully sue an employee at a government health care provider for malpractice. The Supreme Court upheld the Feres Doctrine in 1950, which prevents veterans from suing any Veterans Administration physician for malpractice. So, among other things, federal health care providers would not need to carry insurance due to their so-called sovereign immunity.

I don’t buy it either:

Bernanke denied threatening to oust Bank of America’s CEO Kenneth Lewis or the bank’s board members if they abandoned the takeover after discovering spiraling losses at Merrill.

“I never said that I would replace the board and management” if Lewis decided to invoke a clause in the acquisition contract to try to stop the deal, Bernanke told the committee….

Throughout the day, Bernanke faced often hostile questioning — unusual for a Fed chairman, who typically commands deference in public settings. Of Bernanke’s denial that he threatened Lewis’ job, Rep. Jason Chaffetz, R-Utah, said: “With all due respect, I’m just not buying that.”

The Merrill deal made no sense for BofA and they had a perfect out. What reason does Lewis have to lie about it? This is hardly the first time there’s been talk about Paulson and Bernanke putting the squeeze on the banking executives to do as they’re told. It’s really a tremendous accomplishment, when you think about it, that Bernanke can actually make the CEO of a monster bank look sympathetic, and in the present environment, no less! All we need now is the dreaded vote of confidence from Obama and we’ll know that Summers is the chairman-in-waiting.

Some interesting documents regarding the Fed’s discussion of the merger. Page 18 in the PDF document is of particular interest.

Despite the rising unemployment claims, the size of the first quarter contraction continues to drop. So, apparently it wasn’t quite as bad as initially reported, at least, if you actually take the GDP numbers without a grain of salt.

1. The Dosadi Experiment by Frank Herbert

2. Manias, Panics and Crashes: A History of Financial Crises by Charles Kindleberger

3. Loads of Milton Friedman and a bit of Rothbard.

Ghosts of Columbia by L.E. Modesitt, Jr.: 8/10. I really enjoyed this pair of alternate history novels published together in one volume. Intriguing world-building, excellent characterizations, and a thoroughly entertaining take on a Godfatheresque theme of a retired spy who wants to get out but keeps getting pulled back in. I never liked Modesitt’s Recluce novels, but the Columbia ones are quite good.

The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession by Richard Koo: 7/10. While I was impressed with Koo’s balance sheet recession theory and his accessible writing style, a few historical errors of fact were surprising and I don’t buy into his policy recommendations that ultimately amount to a circuitous entrance of neo-Keynesianism by the back door. It’s great that he recognizes when monetary policy simply isn’t working, but the answer is not a perfectly timed injection of expansionary fiscal policy. I don’t know how much Austrian theory Koo knows, but it strikes me that aspects of his theory are perfectly compatible with it.

Once more, the evolutionary model is shown to be an inaccurate one. And, as I have predicted, it is genetic science that is increasingly punching holes in the theory of evolution by natural selection:

Recent research has produced a surprise, however. Population geneticists expected to find dramatic differences as they got a look at the full genomes — about 25,000 genes — of people of widely varying ethnic and geographic backgrounds. Specifically, they expected to find that many ethnic groups would have derived alleles that their members shared but that were uncommon or nonexistent in other groups. Each regional, ethnic group or latitude was thought to have a genomic “signature” — the record of its recent evolution through natural selection. But as analyses of genomes from dozens of distinct populations have rolled in — French, Bantu, Palestinian, Yakut, Japanese — that’s not what scientists have found. Dramatic genome variation among populations turns out to be extremely rare….

“Adaptations to the environment absolutely do occur,” said Joseph K. Pickrell, a graduate student at the University of Chicago who, with Graham Coop of the University of California at Davis, co-authored the recent study. “But they don’t occur according to this simple model that we and others have been looking for.”

Given the lack of required change, it will be interesting to see how the true believers deal with this latest blow to their conceptual model. No doubt they’ll quickly draw some cycles and epicycles to attempt accounting for the vast holes in the temporal schedule this creates. Regardless of whether natural selection is, as biological philosopher Richard Dawkins declares, the exact opposite of random, it’s interesting to see that the real scientists are beginning to conclude that it is the random element that is the more important one.

Republican scandals always seem to involve sex, Democratic scandals always seem to involve money:

Gov. Mark Sanford admitted today that his secret trip to Argentina over Father’s Day weekend was to visit a woman he is having an affair with.

Not that I was ever buying it, but this should put an end any presidential speculation about the guy. I did like his attempt to turn down the stimulus money, though.

This interview was recorded in March 2008. Thanks very much to Justin, Ian, and Taylor for transcribing the interview:

Vox: You recently wrote about an Alice in Wonderland economy and you mentioned that it was bizarre to see the dollar gaining strength after a 75 basis point rate cut by the fed. What’s going on?

Peter: Well, you know, it’s the expectations game. The fed had allowed the market to build in an expectation for a larger cut of a hundred basis points. But when they didn’t come through with a hundred basis points, Wall Street was able to spin it into “The Fed is now hawkish on inflation”, “The Fed is going to be a little bit tougher on inflation”. Which, of course, is not true, but it was able to result in a bit of a rally in the dollar. And I think that really has helped lay the foundation for this bounce in the stock market, because people were afraid the dollar decline was going to get out of hand. And they’re right. The dollar is going to get clobbered. This is just a short term bounce. What the fed did is completely irresponsible. They shouldn’t have cut rates at all. They should have raised rates. They are going to cut them even more. Inflation is just going to decimate the U.S. economy and the value of U.S. dollars. People around the world who hold dollars I think understand this and they are going to be getting rid of them as quickly as they can.

Vox: That makes a lot of sense of course from a conventional perspective. But, if you look at it from the “pushing on a string theory”, which says that it’s not possible to inflate your way out of a deflationary credit crunch. How do you balance the one against the other then?

Peter: The Fed is going to do all that they can. You can’t inflate your way out of any problems, you just inflate your way into greater problems, and that’s what’s happening. If you look at what it’s doing, the Federal Reserve is basically taking on all the mortgage debt that nobody wants. Increasingly, all mortgage securities are going to pass from private hands to public hands as the Fed ultimately ends up being the only mortgage lender in the United States and all mortgages will be originated by the Fed. The Fed’s balance sheet will increasingly consist of mortgages. This is pure inflation, as the Fed creates money to subsidize the housing market, to artificially prop up home prices. The dollar is going to cave in. That’s the Fed’s hope, that they can just create enough inflation to lift nominal home prices to the point where Americans can afford them. And, of course, they need to engineer an increase in average income. They need to see wages starting to rise along with prices so that Americans can have the income to afford the mortgage payment. But, of course, it’s all going to be phony money. The dollar, as I said, will collapse. There is going to be no private demand for U.S. dollar denominated debt. All the demand is going to be created by the Fed. We are going to be completely a printing press economy, where instead of being able to borrow money from the Chinese and the Japanese like we’ve done in the past. All the money that we need to borrow is going to be borrowed from the Fed, which means there’s not going to be any real savings behind it. It’s going to be a printing press, and prices are going to run out of control.

Vox: When you talk about the Fed being the sole provider of mortgages, are you referring to Steve Forbes’ idea.

Peter: No, I’m just referring to what’s actually happening, where the Fed is taking mortgage collateral from Wall Street with no questions asked and the fact that Fannie Mae and Freddie Mac are going to be increasingly buying mortgages that nobody else would touch with a ten foot pole. As the private sector is increasingly tightening their lending standards, the government sector is loosening theirs. The private sector has learned a lesson and they want to start to require bigger down payments while Fannie Mae and Freddie Mac are now being told to secure mortgages with smaller down payments than they had in the past. So, this is ultimately going to create a bigger problem for these securities because nobody is going to want to buy Fannie and Freddie debt because it is going to be increasingly risky. So, again, all of that debt is going to find its way to the Federal Reserve. The Fed is going to end up buying all this Fannie and Freddie insured paper because private individuals won’t want to own it because its not government insured, so that they’ll be able to take their Fannie and Freddie May debt and give it to the Federal Reserve in exchange for Treausuries. So, the whole mortgage industry is going to be socialized and financed by the Fed, which means it’s financed by a printing press. A lot of people are criticizing this as a taxpayer bailout, you know “why should taxpayers have to pay for this?” It’s not the taxpayers per se who are paying for it. It’s anybody who has U.S. dollars: people on social security, people on welfare, people who aren’t paying taxes but are receiving government checks. They are going to pay for it because their checks are going to buy less. And Americans who have money saved in pensions and retirement accounts and government bonds and municipal bonds. They are going to suffer. The prices are rising. Oil prices are $100 a barrel. People are going to the supermarket and they are seeing big increases in the price of food. This is all a result of what the Fed is doing. It’s got nothing to do with the scapegoats that the government is creating. It’s not because of the Arab sheiks jacking up oil prices. It’s not because some peasant in China is eating more meat. None of this is true. Prices are rising strictly as a function of the Federal Reserve debasing our money to bail everybody out. This is the price that we pay. Higher prices for all consumer goods and less value for our savings.

Vox: That would explain, obviously, the big leap up in the gold market that happened before the recent correction. One thing that I discussed with Robert Prechter a little while ago was that the jump in metals and commodities was partially the result of a bubble. We had the equity bubble then the real estate bubble and now we’re seeing some money move from real estate into commodities. But are you saying that it’s simply the result of inflation from these moves by the Fed?

Peter: Sure, and I don’t think there’s a bubble in gold or commodities. These prices are simply rising to reflect the loss of value of U.S. currency. Now, maybe the rise has gotten ahead of itself a bit, and is due for a pullback. Maybe you have had a lot of speculators that have come along for the ride, but the underlying trend is for these markets to move higher because the dollar and other currencies are going to be moving lower because the central banks are going to continue to debase them.

Vox: The chief economist for the national association of realtors is forecasting that home prices will remain flat in 2008.

Peter: Well, what do you expect? You remember what David Lehrer used to do. They denied that there was a problem, there was no bubble. Then they said it is going to be a soft landing. I mean these guys are shills. All these guys are cheerleaders for the realtors. They are trying to encourage people to buy homes. And if they came out and said that your real estate prices are going to drop by ten or fifteen percent nobody would want to buy, so they constantly come out with rosy forecasts. Just like Wall Street. Wall Street is in the business of selling stocks, so they want to tell everybody things are great. The national realtors are in the business of encouraging people to buy homes. They are not going to come out with a forecast that says home prices are going to drop, because that is going to discourage people from doing exactly what they want them to do.

Vox: No, of course, what I thought was funny was that they were forecasting a flat 2008 from a price of $
218,000 with the medium existing homes. Today the report came out for February and the price is already $28,000 lower.

Peter: Yeah, as I said, they are never going to forecast the truth. They are constantly going to be wrong. I don’t know why anybody even pays any attention to what their economists say because it’s really advertising or propaganda whatever you want to call it. It has nothing to do with some kind of objective economic analysis of the housing market. If that were the case, they would be predicting a substantial decline. How can home prices stay where they are? It’s impossible. The government is doing all they can to maintain inflated home prices, but it’s not going to work. It could only work in the sense that they create so much inflation that real home prices plunge but nominal home prices hold up. But that’s not going to make anybody happy. They are going to live in a home that is still worth what they paid but they are not going to be able to afford to heat it or air condition or put food in the refrigerator.

Vox: Much less take out money based on their growing equity.

Peter: All that’s going to grind to a halt unless of course the government finances it. The private market for these home equity loans and second mortgages is drying up. The market realizes that there is no collateral there. And, of course, Americans are desperate. They already owe more money on their homes than they are worth. They are loaded up with credit card debt they can’t repay and auto loans and student loans. Nobody wants to lend Americans more money and Americans figure, “we already owe so much money we can’t possibly pay it back; we might as well borrow even more because we might as well go out with a bang.” Nobody is willing to lend them money of their own, so it is only the government that is willing to do it. Of course, they have no money to lend. All they can do is print it, which means they deprive society of purchasing power through a printing press that individuals never would have willingly given up on their own.

Vox: Sure. Now what are some of the best tips from your new book, which is called Crash Proof, which recommends ways to profit from the coming economic collapse?

Peter: The best thing to understand is that it’s not the taxpayers. It’s holders of dollars, people who have dollar savings and dollar-denominated investments. So, if you want to avoid the biggest tax increase in U.S. history the only way to do it is to divest yourself of your dollars. The advice that I gave in Crash Proof is really a giant tax shelter. That’s what I am helping people do at my company, EuroPacific Capital. We help American savers and investors to get out of U.S. based assets, reorganize their stock portfolios, get into foreign stocks in Europe and Asia. Earn dividends in other currencies. Have bonds in other currencies. Get into commodities and precious metals. Anything other than the U.S. dollar so you can avoid having to pay the price of what Bernanke is doing. I describe the average American investor or saver with a giant bullseye on their back and they’re in Ben Bernanke’s cross hairs. He’s going to shoot you unless you get rid of your dollars. We can help you do that, but people need to do that as quickly as possible.

Vox: Okay. Last question. As an economic advisor to the Ron Paul presidential campaign, do you find a certain irony in the fact that most Republicans failed to support him when he is the only candidate who has a solid grasp of the structural challenges facing the financial markets and the economy.

Peter: I don’t find it ironic. Unfortunately the Republicans are not the limited government party that they claim to be. That’s how they try to get votes, but if you look at the way Republicans govern, they are politicians just like the Democrats. They want big government. They want high taxes. They want high government regulation as the best way to secure their own re-election. So, they try to appeal to the wing of the Republican party that is libertarian-oriented, limited government, traditional conservative values. They figure that they are going to get those votes because they figure “they’ve got not choice because the Democrats are even for bigger government than we are. We’ll pay lip service to their limited government views so that we can at least keep their votes away from the Democrats. But the reality is that the mainstream rank and file of the Republican party is a big government party just like the Democrats. When Ron Paul comes up and actually tries to run on Republican principles that a lot of people think represent the Republican party they shoot him down. Because the Republican party of today, the modern Rebublican party, has nothing to do with small government and low taxes. They are a big government party.

Vox: You’re preaching to the choir here: *laugh*.

Peter: I know. And it’s unfortunate, because that’s the choices we have in America, is, y’know, which, uh, big-government candidate do you want to support? And unfortunately, the only, y’know, [only] avenue that we have left is to get rid of U.S. assets. I mean, they’re going to tax us to death, and they’re going to inflate, uh, us to death [and] so Americans need to read the writing on the wall. And, y’know, if you read my book – “Crash-Proof: How to Profit From the Coming Economic Collapse” – I, y’know, I’ve got a few chapters in the back of the book that really detail the blueprint for how to build a crash-proofed portfolio and [and] get out of U.S. assets – before it’s too late.

Vox: Or, better yet, y’know, buy a beach place in the Bahamas and watch it all from the beach: *laugh*.

Peter: Well, I mean, y’know, if you want to physically leave the country – I don’t know how bad it’s going to get, but I think the first thing you need to do is get your money out of the country, or at least out of U. S. dollar investment. You can do that within a, uh, U. S. brokerage account, like, that’s what we do in EuroPacific Capital. I hope it doesn’t to the point where it’s so bad that we actually literally have to flee the country. And [and] get our bodies out of the country as well. I mean, it might come to that. Uh, but, for now, I’m hoping it doesn’t, but I know for sure, uh, that Americans are going to suffer a dramatic diminution in their standard of living, in their quality of life, as a result of what we’ve done in the past – the huge consumption binge, the borrowing and consumption binge we went on in the past. And now, as a result of what the government is doing to try to delay the day of reckoning. They are making the situation much, much worse. And so people have to be very, very careful about where their money is invested, and, more importantly, what currency those investments are in. Eh, they should go to my website and, y’know, there’s a lot of information on my website, uh, to help you, [to help you] understand this problem. And [a-, eh] the address is W- W- W- dot Europac, E- U- R- O- P- A- C- dot net, Europac dot net. Or people can talk to one of my brokers at [at] the company, call eight hundred, seven two seven, seven nine two two – eight hundred, seven two seven, seven nine two two – I’ve got a whole staff of brokers that can help, uh, y’know, walk you through these strategies.

vox: What kind of timeframe are you looking for? I mean, typically, I tend to have a contrarian edge myself. The housing crash didn’t surprise me, and it came along as I expected, but it came along about two years later than I expected. What’s your timeframe on this?

Peter: It’s always hard to talk about the timing, but I think this is going on right now. The dollar is losing value as we speak. I mean, it’s bounced a little bit today against the Yen and the Swiss franc, but it’s down, y’know, almost as much against the Canadian and Australian dollars, but, in general, the dollar is going down; these problems are huge. And, y’know, it was amazing once the problems became evident in th
e housing market how quickly it all unraveled. And so, y’know, things can happen very quickly. And [and, and] the key to this is to be early. Y’know, dont try to finesse it, don’t think “hey, maybe we got six more months, maybe we got a couple [ye-] more years” – I don’t know, maybe we do, maybe we don’t. But, nobody knows for certain. The best thing to do is understand what’s going to ultimately happen to the value of the dollar and the cost of living in the United States, our standard of living. And, people need to be protected. Y’know, if you’re a day late, uh, y’know, that’s, y’know, you’re [you’re] a day late. You’re done. Y’know, so it’s better to be early than late, because, y’know you can’t survive if you’re late, even if it’s by a day. So if you’re a year early or if you’re two years early…uh, but meantime, y’know, our strategies are throwing off some rather substantialdividend yields, uh, while people are waiting, so there’s no real opportunity cost, uh, to, uh, being early.

Vox: No, I can recall when the Euro was at point-eighty-eight rather than one-fifty-four, so…

Peter: Yeah, look, and it’s going a lot higher. There’s nothing that can happen to the dollar based on what they’re doing but decline in value. I mean, it’s obvious, it’s clear what’s going on, so, y’know, rather than just remaining ignorant or closing your eyes, uh, people need to understand what’s happening and take action before it’s too late.

Vox: Well, Peter, I really appreciate your time. Thanks very much.

Peter: Okay, thanks for talking to me.

It’s interesting to see how the Left’s grievance techniques are being used against it now that its Gramscian march through the institutions is largely complete:

A US teenager has successfully won a lawsuit against a teacher who described creationism as “superstitious nonsense”. Chad Farnan, a devout Christian studying at California’s Capistrano Valley high school, persuaded a judge that his European history teacher, James Corbett, violated the establishment clause of the First Amendment, which courts interpret as banning government employees from promoting, or displaying hostility towards, religion….

Judge Selna concluded that there was no legitimate secular purpose to the statement and it constituted “improper disapproval of religion in violation of the establishment clause”.

It will be interesting to see how other anti-religious bigots teaching at publicly-funded institutions react to this. If government employees cannot be permitted to promote religion, they cannot reasonably expect to be able to denigrate it either. Poor old PZ may find himself reduced to talking about actual biology for a change.

I find the whole thing to be absurd, of course, since the government has absolutely no business being involve in education for a variety of Constitutional, practical, and freedom-related reasons. But, if the rules are in place, one shouldn’t be surprised if people elect to play by them. I’m rather looking forward to seeing the first “adverse impact” lawsuit filed against one of the professional sporting leagues, or better yet, Hollywood.

I could use a transcript of the Voxonomics interview with Peter Schiff. If you’re up for it, please let me know. And email me a copy when you’re done, at which point I’ll post it here.

Quote for the day: “The remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and keeping us permanently in a quasi-boom.”
– John Maynard Keynes