Category: Uncategorized

Karl Denninger explains why the inflate-and-grow strategy cannot work in the current situation:

In 1933 Roosevelt devalued the dollar to get out of this death spiral. He was able to do so because the dollar was linked to gold, and thus he could simply sign a document and change the exchange rate, at the same time banning private ownership of the metal (and thus preventing the market from immediately counteracting his devaluation and rending it meaningless.) Today all currencies are fiat and this option is not available – should it be attempted via massive money printing (doing so would require The Fed to literally print the entire asset base underlying the credit system in the US – somewhere on the order of $20+ trillion dollars!) the outcome would be an instantaneous ramp in energy costs (and all other imports) by more than 1,000% and the immediate collapse of both our economy and all banks, including The Fed itself, since wages would not and cannot increase by that same 1,000% in a global economy.

We must force the outstanding credit levels down to sustainable levels. This will cause a huge number of bankruptcies, especially among the financial “heavy hitting firms” on Wall Street and the pension and insurance funds of Americans as the true “value” of their so-called assets are exposed. The problem is that there is no alternative – we squandered the ability to rebuild our safety margins over the previous 30 years, and now we’re into the maw of the parabola with no remaining margin available to exploit. The longer we wait to do the right thing the worse the outcome will be, and if we wait too long we will lose our nation – literally.

History has shown that the 2000-01 recession “avoidance tactic” of more than doubling outstanding consumer credit in mortgages and increasing it by 60% in other debt while income only rose 23% during the same period bought us seven years of delay and a collapse far worse when we hit the wall – unemployment only reached 6.3% during the 00-01 recession (in 2003) while we are now at 9.7% (officially) and climbing. Consumer spending and defaults were a non-factor in 00-01 – today they are the feature of our recession.

Today we simply have no more “forward debt capacity” in our economy. This is not conjecture or belief – it is hard fact and has been proved by the structure of the current recession.

What most people watching the markets for clues about the economy don’t understand is that the markets are operating on misinformation. The “profits” that the financial institutions are reporting are not real, they’re actually smaller than the amount of money being pumped into them by the government. More importantly, the banks are in much worse shape than anyone is willing to admit; as bad as the banking situation looks, it’s reliant upon assigning false values to worthless loans that have already stopped receiving payments and are never going to be repaid.

As Denninger points out, the extend-and-pretend possibilities have been exhausted because there simply isn’t enough consumer income left to support additional debt. The Keynesians and Neo-Keynesians have always insisted that debt doesn’t matter, but they’re about to find out that it is the critical aspect of the ongoing crisis.

JM thinks it’s the right place to write:

As a retired Marine who served in almost every corner of the globe during my two decades, a man who saw the deliberate insidious socialization of our education system before my kids were even in school, and has been expecting the “Manchurian Candidate” since I first read the book, I am rather picky in my choice of news sources….

You could not find a better journal to write for; you obviously are not told what to write or to slant your writing, and most of your peers on board are in the same boat. I don’t always agree with you, but I never have yet found factual reason to dispute you, only opinion-oriented issue. WND is the only place I can go where I can read only fact-based news, or I can wander into the myopia of the liberal side of things and get a feel for what the liars are publishing today.

This is among the first journals I’ve ever had the opportunity to take as a news source that I can expect to find facts, and opinions that are supported by the facts and the events that surround them. Joe Farah has established a new paradigm and someday, he will be noted for it.

Joe always insists that his is not a new paradigm, but rather a return to an old one. Regardless, I admire what he has done even if I would have done it rather differently. And, one must conclude, less successfully. Possibly the best thing about Farah is that he simply does not possess the contempt for the taste of the masses that pervades so much of the media and the intelligentsia.

Bernanke and company don’t have the gold standard to blame this time around:

There are “troubling similarities” between the US President’s actions since taking office and those which in the 1930s sent the US and much of the world spiralling into the worst economic collapse in recorded history, says the new pamphlet, published by the Institute of Economic Affairs. In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House’s plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run….

The study represents a challenge to the widely held view that Keynesian fiscal policies helped the US recover from the Depression which started in the early 1930s.

The most important thing to keep in mind is that according to those widely held views, neither the financial crisis nor a continued depression next year is even supposed to be possible. If, as they insist, the gold standard was responsible, then how are such similar results even theoretically possible in its absence?

Obama and the Congress are making things worse, of course, but they can’t possibly be blamed for next year’s economic downturn. That’s been in the cards for years, if not decades. My primary concern isn’t the extended downturn itself, but rather the state’s customary resort to war as a distraction for an angry populace. For those interested, the IEA paper, “Economic Contractions in the United States:
A Failure of Government”, is available for download in PDF format.

Fall of a Red Czar

I am occasionally asked why I would ever choose to write for WorldNetDaily. I am, after all, a columnist who has been nationally syndicated by Chronicle Features and Universal Press Syndicate. My scribblings have appeared in newspapers ranging from the Atlanta Journal-Constitution and the Boston Globe to Pravda and the North Bay Nugget. I was one of the first St. Paul Pioneer Press columnists to be syndicated in the paper’s 150-year history, and I’m the only one who was ever syndicated twice, for two different columns. I’m considering either a gardening or a women’s shoes column just so I can go for the trifecta. I don’t know anything about either subject, but since Paul Krugman has an economics column, that can’t possibly be a problem.

It’s always funny to see a fat old dog attempt to perform a new trick:

I don’t travel in circles where people say, `I have faith, I believe this in my heart, and nothing you can say or do can shake my faith.’ That’s just a long-winded religious way to say `Shut up’ or another two words that the FCC likes less. But all obscenity is less insulting than `How I was brought up and my imaginary friend means more to me than anything you could ever say or do.’

Forget my upbringing and my imaginary friends. The lingering odor of the dried sweat in the socks I wore to the gym last week means more to me than anything Penn Jillette or any other comedian moonlighting as a philosopher could ever say or do. And why would anyone possibly care what one particular collection of atoms might happen to “think” anyhow, assuming, of course, that “thinking” even means anything at all given the absence of scientific evidence for material consciousness.

My dear atheists, you desperately need to find some better champions. The Sam Harris debacle should have taught you the intrinsic danger of relying upon comedians. Now, if you don’t mind a little helpful advice, I suggest not settling for the first Asperger’s victim to start yapping away about his personal unhappiness with history and human society and finding someone who is at least capable of reading a book or ten. Speaking of which, I read with some amusement Victor Stenger’s comment in his latest book: “Day and other anti-atheists refuse to accept the new atheist argument that the communists did not commit their crimes in the name of atheism.”

Well, yes, that’s quite true. We do refuse to accept it. What Mr. Stenger unaccountably fails to mention is that we do so on the perfectly rational basis of it being an absolutely stupid argument that is obviously and verifiably false and is not accepted in any other context. Second, it would not matter in the least if the atheist communists did not commit their crimes in the name of either communism or atheism, as the pertinent and inescapable fact is that they committed those crimes. Third, as it happens, it is undeniable that statistical and documentary evidence alike shows that both their atheism and their communism played important roles in their decisions to commit those crimes.

UPDATE – It’s worth noting that anti-semitism is not merely left-wing, the concept, which is specific, ethnic, and distinct from generic religion-based Jew-hating, was literally invented by an atheist:

As for anti-Semitism, which is more specific than mere Jew hatred, it’s simply not true to say that it was invented by the political right. It was invented by Wilhelm Marr, a German radical, atheist and leftist. He coined the word, and concept, in his 1879 tract The Way to Victory of Germanicism over Judaism (Der Weg zum Siege des Germanentums über das Judentum). Unlike the old-fashioned Judenhass — Jew hatred — anti-Semitism was modern and scientific, unconcerned with theology. It was progressive! Indeed, Marr hated assimilated Jews more than orthodox ones.

My dear Mr. Jones, it may be vicious, but it’s not a smear when they’re quoting you directly!

“I am resigning my post at the Council on Environmental Quality, effective today. On the eve of historic fights for health care and clean energy, opponents of reform have mounted a vicious smear campaign against me. They are using lies and distortions to distract and divide.

Never write anything that you don’t understand can and will be used against you. The reason I am always careful to articulate my more controversial opinions is that I know perfectly well that they’ll eventually be appearing on Wikipedia or a blog somewhere. Of course, because I know what I’m doing, my critics are usually forced to avoid printing the direct quotes because those never sound anywhere nearly as bad as the inaccurate and exaggerated summaries.

Jones, on the other hand, clearly didn’t. The direct quotes were damning, which is why he had no choice but to resign.

Megan Mcardle, who voted for Obama, likes the idea of boycotting the largest independent right-wing news site:

This strikes me as a very good idea. If the right ever wants to get back in power, it needs to start policing its lunatic fringe.

You’d think a woman who calls herself an “econoblogger” would be capable of doing basic math. I have no idea why anyone pays her any attention whatsoever, considering how reliably clueless she is about politics and economics alike. Her analysis is on the level of those who believe that the Republican Party must abandon social conservatives order to seek the support of one-fourth that many social moderates. Rockefeller Republicanism isn’t a viable political strategy, it’s little more than evidence of historical ignorance and innumeracy. It’s precisely the same incompetent strategery that advises embracing John McCain and rejecting Sarah Palin. And it’s the same sort of ideological “policing” that saw the Republican Party reject the only presidential candidate who foresaw the financial crisis and the failure of the occupation in Afghanistan, Ron Paul.

Commenters there have already pointed out the obvious: there is zero evidence that an ideological “lunatic fringe” harms the mass appeal of any political movement. And there is actually a fair amount of evidence to suggest that a hard-core ideological element tends to help the core cause by making the base look like a more reasonable and moderate compromise. As William F. Buckley learned to his obvious chagrin, ban the Birchers and the next thing that happens is you’re the one labled a crypto-Nazi.

As for the boycott, does anyone seriously believe that seeing some Obama voters and Republican squishes pointing fingers at WND in an attempt to curry favor with the moderate Left is going to harm it in the slightest? Considering how unpopular the present Republican leadership is with the Republican Party base already, it’s more likely to underline the independence of WND and assist its continued ascendance on the Right.

This is the final 25-question test. I would like to thank everyone who participated, especially those 150 or so stalwarts who persevered through what proved to be a particularly brutal winnowing process from the 5,000 or so who took the first quiz on the Introduction. This method of book study obviously isn’t for everyone, but I think it is quite safe to say that if you managed to participate throughout the 12 weeks and pass the final, you probably now know the contents of the text better than anyone except Jonah Goldberg himself.

I’ll be posting my post-study review of the book here later today; it might be interesting to contrast that with my initial review, in which I gave the book an 8/10 rating. But, I doubt those who participated throughout will likely disagree that a close and detailed reading of the book will force one to conclude that the whole is greater than the sum of the parts. This is not a criticism nor does it detract in the slightest from the importance of the book, it is merely an observation based on reading through the book three times.

In any event, I hope that those who participated found this to be a worthwhile exercise; as before, my own level of participation in the discussion fell well short of my intentions. Fortunately, there’s seldom a shortage of intelligent regulars here willing to pick up the slack.

Conservatives back Obama on Afghanistan

Prominent conservative foreign policy thinkers and activists who backed the Iraq war are circulating a letter to President Obama supporting his engagement in Afghanistan against criticism from left and right, and urging him to stay the course.

The letter responds in part to a widely-circulated column by conservative columnist George Will, headed “Time to Get Out of Afghanistan.” The letter is a mark of the longstanding rift in conservative foreign policy circles on the use of American power abroad, and it echoes divisions on the right over the Iraq war. The letter quotes President Obama at length and approvingly.

The headline would be more accurately titled “Fake Conservatives back Obama on Afghanistan and Anywhere Else He Wants to Send Troops”. Look at the list! Kristol… Podhoretz… it’s the collection of mediocre, second-generation neo-conservatives. The conservative movement has destroyed itself by permitting these charlatans to infiltrate and take over the commanding heights of the so-called conservative media. And if Obama wins a second term, don’t be surprised if they suddenly morph into neo-liberals.

If we’re in an economic recovery, why are things going worse than the stress test’s adverse scenario? Calculated Risk has the details – with graphs!

This is a quarterly forecast: the Unemployment Rate for Q3 is an average of July and August (rounded to 9.6%), and will probably move higher. Once again, the unemployment rate is already higher than the “more adverse” scenario. Note also that the unemployment rate has already exceeded the peak of the “baseline scenario”.

U3 is 9.7 and U6 is 16.8. Not good times.