There is no question that Barack Obama, assuming that is his real name, is a bad president, a bad American and a bad man. Unfortunately, there are a number of reasons to believe that as bad as Obama has been, the Republican alternative being offered in November, Mitt Romney, will actually be a good deal worse.
It’s a mystery!
Massachusetts can’t figure out why its health care costs are growing:
Give Massachusetts credit for setting audacious health care goals. It took the lead in guaranteeing near-universal health insurance coverage for its residents, providing a template for the federal reforms to follow…. But when it comes to controlling health care costs, Massachusetts has no advantage, and in fact is starting behind most other states. Its costs are among the highest in the nation, and they have been growing in recent years at 6 percent to 7 percent while the economy has been growing at less than 4 percent.
The amusing thing about America’s left-liberals is that they are so “thoughtful” and “nuanced” and “complex” that they can’t see blatant causation when it is right in front of them. These are the sort of people who stare at a light, wonder what is meant by the red color, and then conclude that it must mean they are supposed to drive ahead. The subsequent car accident, of course, is nothing more than sheer happenstance and bad fortune.
Can you imagine if these jokers tried to run a restaurant?
“Bill, I’m confused. We’re serving more people, but for some inexplicable reason, we suddenly don’t seem to have enough food anymore.”
Mailvox: Why I am not a Libertarian
This is only one of the many reasons. The Libertarian Party is the only one that can make the Republican Party look smart. With a number of massive issues where both major parties diverge from the mainstream consensus, such as the banks, health care, and immigration, naturally the Libertarian Party ticket is determined to commit suicide on the issue of “gay marriage” according to the email I received from the Johnson-Gray campaign.
Gray said, “Unlike Mitt Romney or President Obama, Governor Johnson and I believe the right to marry who we choose is a constitutionally protected right. People of different faiths and different beliefs are free to follow those beliefs when it comes to embracing or opposing same-sex marriage within those faiths and beliefs. However, it should not be the purview of government to impose one set of beliefs over another. And government absolutely should not sanction discrimination against gay Americans who choose to marry.
This is a Libertarian Party that can’t even win the support of influential libertarians. And that is a sign of a party that is going absolutely nowhere. Where, I wonder, is the right to marriage found in the Constitution? And how could it be in there given that the Constitution predates marriage licenses?
Economics advances
In a modification of Kuhn’s theory of scientific revolutions, it would appear that political economy advances one character assassination at a time. In this case, Mike Shedlock finishes off what I started in putting Gary North out of his intellectual misery:
Obvious Falsehoods
Gary North does not speak for any deflationist, nor does he speak for all the inflationists. He acts as if he does. Sustained price deflation is certainly not inevitable, nor is price deflation inevitable in the short-term either. Since I am a staunch deflationist, and since Gary North is aware of my writing, it appears he is purposely making preposterous straw-man arguments just to be able to shoot them down….
Credibility Issues
People really get into serious trouble using phrases like “no inflationist” and “every deflationist” when they clearly do not speak for everyone, especially when they also need a lecture about changing attitudes and time-preference as well. Finally, it’s easy to setup a straw-man debate that you can win. It’s also easy to lose credibility doing just that.
Unlike athletes, intellectuals seldom seem to recognize when they are done. This is as true of scientists and economists as novelists; while there are the occasional rare exceptions, for the most part very few intellectuals have anything coherent or substantive to say beyond the age of 65. I suspect this has as much to do with a lack of energy as it does with an inability to focus or the mental ossification of age. It’s always alarming, whether one is reading a novel or a polemic, to realize that while the writer may not have lost the plot entirely, the intellectual equivalent of his fifth gear, his burst, his vertical, or his fastball, is gone.
One can be sympathetic, to an extent, in understanding why North is so skeptical about deflation. After all, he’s been hearing warnings about it for some 40 years now and it simply hasn’t ever arrived. But – and here is where his age appears to have become a handicap – the fact that something hasn’t happened in 40 years is totally irrelevant when viewed from the perspective of recorded history rather than one’s own lifetime. Every central bank has eventually failed. Every currency has eventually gone out of circulation. The future failure of the Fed and the collapse in the value of its notes, paper or digital, is not a question of if, but when. At 99 years and counting, the Fed has actually had a pretty good run by historical standards.
Even with more than 20 years of potential intellectual activity in front of me by my own rough metric, I’ve noticed an increasing inclination to take a “been there done that” approach to challenges based on my own experience and familiarity with the same old failed arguments presented time and time again. It is both amazing and irritating how often people continue to keep presenting the same futile arguments again and again and again. But it is important to resist the urge to dismiss challenges without first at least glancing over them and determining whether or not one’s previously successful rebuttals necessarily apply to them. After complacent laziness comes intellectual torpor and then complete stagnation.
But if we can understand Gary North’s failure to rise to the challenge posed by the following generation of right-wing economists, we cannot excuse it. No one is forcing him to remain in the ring contesting these issues, after all. Mish and I would be similarly to blame if we simply ignored the challenges to conventional and Austrian economic theory posed by the likes of Ian Fletcher and Steve Keen. I am perfectly aware that the more ideological Austrians are deeply affronted by my willingness to go off the reservation, but as I have noted in the past, I am not a joiner. Lacking all the benefits of the various intellectual establishments, even the lesser ones, I also lack the ideological restrictions that come with them and so I am free to follow the logic and the evidence wherever it goes. Mises was brilliant, but keep in mind that he did some of his best work nearly 90 years ago. Even if I lack his exceptional brilliance, I have the benefit of considerably more information at my disposal.
To a certain extent, my decision to begin writing the monster epic series on which I’m currently working was partly the result of realizing that if I don’t tackle these sorts of projects now, I am far less likely to do so in the future as I grow older. This realization has also influenced my next non-fiction project, which is going to be even more ambitious in its way than a mere one million word epic fantasy series.
The failure of North’s attempt to rebut the current deflationist arguments does not mean that Mish and I are necessarily correct in predicting the eventual failure of the Federal Reserve to continue its 99-year program of methodically expanding the money supplies through the continuous increase of debt. I freely admit that I didn’t expect The Helicopter to be able to maintain the substitution of federal debt for household and financial sector debt for four solid years. But can the Fed maintain this indefinitely? The history of socialized economies strongly suggests otherwise. Can they maintain it long enough to relaunch the private debt sectors? The inability of the current generation of college graduates, already saddled with heavy student loan debt, to find jobs or finance cars and homes, also suggests the likely failure of this strategy.
Mailvox: atheist debate
TS appears to have learned his formidable debating skillz from the late Christopher Hitchens. He wrote, apropos of nothing, and without so much as a subject matter:
I don’t recall Hitchens ever arguing a point solely by explaining how he “feels” about it. I fear that while your vocabulary may display the results of some kind of education, your ability to reason indicates a resolute refusal to truly learn or listen.
To which I responded: Assuming your memory isn’t flawed, you’re either a complete moron or you haven’t actually read any of Christopher Hitchens’s books. In fact, I would be very interested to know what you feel is the substantive and non-emotional metric by which Hitchens argued God is not great. But considering the possibility that it is your recollection that is the problem, precisely what point do you believe I have argued on the sole basis of my feelings? Deflation vs inflation? Ricardian comparative advantage?
TS responded:
I never claimed that you argue with emotion. I was responding to your message that accompanied the “demotivator” on your website that showed, for some reason, Hitchens with no shirt on. My “feelings” on matters of science are irrelevant, since science is not bridled with emotion. Hitchens is very emotional. What I wrote was that he, from my recollection, does not argue solely based on his emotions. If he did that, you could certainly lump him into the same category as the philsopher, “Dr.” Craig or indeed the televangelists you see on TV. But, he does not. Name calling is not necessary but, unfortunately, it is not surprising. Faith, one could argue, is strictly emotional, if you consider that by it’s very definition, is the belief in something for which there is no evidence, or in spite of compelling evidence to the contrary. I would submit that a rational person could only have strong faith in something, for which there is no evidence or overwhelming evidence to the contrary, only if they have been compelled to do so from an early age or have some other emotional revelation about that something. While I have the disadvantage of being as you put it a “moron” (that was the only possible conclusion, since I have read Hitchens), I “feel” no need to be angered by an email. Settle the fuck down.
Dude, it’s a demotivator! Hitchens, Dawkins, and Harris all ran around acting like complete assholes and more than merited such contempt. But the idea that someone’s “ability to reason” is determined by a demotivator – which, in that particular case, I didn’t even create – is deeply and profoundly stupid. And no, one cannot reasonably argue that faith is “strictly emotional”.
U3 vs EPR
It’s not the 8.3% U3 that matters, but rather the 58.4% EPR, which is down 0.2% from last month. That means unemployment is still rising as a percentage of the population, regardless of the number of new jobs reported.
Wrong on trade, wrong on money
Gary North isn’t merely a deceitful free trade dogmatist, he’s also off-base when it comes to monetary theory too:
John Exter — an old friend of mine — argued in the 1970s and 1980s that monetary deflation has to come, despite FED policy. There will be a collapse of prices through de-leveraging.
He was wrong. Why? Because it is not possible for depositors to take sufficient money in paper currency notes out of banks and keep these notes out, thereby reversing the fractional reserve process, thereby deflating the money supply. That was what happened in the USA from 1930 to 1933. If hoarders spend the notes, businesses will re-deposit them in their banks. Only if they deal exclusively with other hoarders can they keep money out of banks. But the vast majority of all money transactions are based on digital money, not paper currency.
Today, large depositors can pull digital money out of bank A, but only by transferring it to bank B. Digits must be in a bank account at all times. There can be no decrease in the money supply for as long as money is digital. Hence, there can be no decrease in prices unless it is FED policy to decrease prices. This was not true, 1930 to 1933.
Deflationists never respond to this argument by invoking either monetary theory or monetary history. You can and should ignore them until one of them does answer this, and all the others publicly say, “Yes. That’s it! We have waited since 1933 for this argument! I was blind, but now I see! I’m on board! I will sink or swim with this.”
First, North clearly doesn’t know what he’s talking about with regards to money from the Austrian perspective, which is why he is, like Friedman and the monetarists, focused on M1 rather than Z1. He makes the same mistake that Robert Wenzel made when trying to criticize Karl Denninger and me back in 2011, because he is only considering commodity money and fiat money, and thereby fails to take credit money into account, which, as Mises points out, must be considered in a developed monetary system.
In a developed monetary system, on the other hand, we find commodity money, of which large quantities remain constantly in circulation and are never consumed or used in industry; credit money, whose foundation, the claim to payment, is never made use of; and possibly even fiat money, which has no use at all except as money.
– The Theory of Money and Credit, p. 103 (1953)
Like the proverbial gorilla reading Nietzsche, Gary North looks at the historical monetary statistics but fails to understand what they mean. He ludicrously claims “there can be no decrease in prices unless it is FED policy to decrease prices”, an assertion easily disproved by citing the housing market, which has shown a steady decline in home prices since 2006 despite the desperate efforts of the Federal Reserve to prop them up. More importantly, North doesn’t understand that the reason the broader price declines indicative of deflation have not taken place at any point in the last 70 years is due to the constant growth of outstanding credit over that time, from $355 billion in 1946 to $54.6 trillion in 2012, an amount which absolutely dwarfs the $2.3 trillion in M1 that North erroneously believes to be the controlling factor.
North is factually incorrect. The vast majority of all money transactions in the current economy are not based on digital money, they are based on credit money. Please note that I am once more saying something that North falsely claims has never been said, as I am invoking both monetary theory and monetary history to make the deflationary case. One may reasonably attempt to argue that it is incorrect, but it is a blatant lie to claim that it has not been made. I’ve even addressed the obvious delta between M1/M2 and various measures of inflation that tends to cast doubt upon the monetarist position in the past.
The reason that prices didn’t collapse and monetary deflation didn’t occur in the 1970s and 1980s because none of the required deleveraging took place. Credit money continued to expand throughout, as debt outstanding was $1.6 trillion in 1970 and $12.8 trillion in 1989. Why are the deflationists likely – not certain – to be correct today when they were wrong before? Because the long-predicted deleveraging is finally taking place in the two largest credit sectors, Household and Financial.
Household has been deleveraging since Q3-2008 and is presently down $1 trillion. Financial has been deleveraging since Q4-2008 and is presently down $3.4 trillion. The only reason this private deleveraging hasn’t shown up as general deflation is due to the $5.6 trillion increase in Federal leveraging; the Federal government has literally doubled its outstanding debt in four years.
In addition to ignoring the fact that credit money is a much more important factor than fiat money, be it paper or digital, Gary North clearly doesn’t realize that everyone with any exposure to the economy will sink or swim on the Federal government’s ability to continue substituting its own ability to leverage for private sector deleveraging. So long as the government can continue to borrow and maintain that ratio, it can stave off deflation. But unless it can borrow infinitely, it cannot do so forever.
Another mass killing
Sigh…. Another senseless, unnecessary tragedy caused by America’s primitive lack of gun control…. wait a minute:
A teenager killed eight people with a knife and wounded five more in northeast China after falling out with his girlfriend, state media said Thursday.
In other words, a guy with a SCARY ASSAULT RIFLE managed to kill all of four more people than a guy with a knife. So much for the gun control argument.
Aztlan rising II
Well, at least we can be pleased that the reconquistadors aren’t actually physically attacking the American players… at least not yet:
If the U.S. soccer team were hoping for the home advantage during Saturday’s Gold Cup final then they were in for a nasty surprise. Despite being the ‘home’ side in California’s Rose Bowl stadium, the majority of fans – most of them American born of naturalized Mexicans – booed and jeered the U.S. team.
The surprising scenes were followed by angry outbursts from U.S. team goalkeeper Tim Howard, who was visibly shaken after the entire post match ceremony was conducted in Spanish…. The Americans were not even spared in the trophy ceremony after Mexico’s 4-2 win – booed for one final time as they were announced as runners up.
California is done and gone already, most Americans simply don’t realize it yet. If one thing is clear from all my history reading, it is that most people don’t recognize the historical patterns at work until they are complete. It’s only a matter of time before the California Mexicans refuse to recognize U.S. sovereignty over them or the land they have peacefully reclaimed in the same way they presently refuse to recognize America’s national team.
So much for integration.
Too soon
It is very slowly becoming apparent to everyone but the mainstream economists that the USA has been in a depression since 2008:
The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.
It’s just that like radiation — it’s invisible.
We’ve called it the recovery, the jobless recovery, the slogging recovery and more recently the fading recovery. We’ve measured modest growth in our nation’s gross domestic product to record that our so-called Great Recession ended in June 2009. And now we are saying that if this disappointing growth suddenly disappears, as currently feared, we will be in a new recession.
There is nothing more depressing than hearing about a new recession when you haven’t fully recovered from the last one. I take heart in suspecting that in a still-distant future, historians will look back with clarity and call this whole rotten period a depression.
Which, of course, is very close to what I have been repeatedly saying since early 2009, as The Return of the Great Depression was published on October 29, 2009, the 70th anniversary of the Black Tuesday crash on Wall Street. And some of you may recall the following failed economic prediction for 2011, which is looking at least partially correct for 2012.
One U.S. state and at least three major cities (100k population plus) will attempt to file for bankruptcy or federal bailout. (It’s unclear if states can file for bankruptcy and public employee unions will oppose the city filings.)
– December 31, 2010
“San Bernardino [pop. 210,000] on Wednesday became the third California city to declare insolvency, joining Stockton [pop. 291,707] and Mammoth Lakes [pop. 8,234] after officials say they filed an emergency petition for Chapter 9 bankruptcy.”
– August 1, 2012
Now, you are certainly welcome to dismiss my economic predictions due to my inability to pinpoint the precise timing with which these events will occur. But even in light of my temporal inaccuracy, I think it is worthwhile pointing out that these predictions are completely contrary to those made by the vast majority of economists and economic observers, many of whom are still talking about the ongoing recovery in the fourth year of the Great Depression 2.0. This failure to note the readily apparent is not unprecedented, as Megan McCardle noted in 2009.
I don’t want to push the Great Depression analogy too far, but what’s surprising when you go back to primary sources from 1930 is the optimism. I don’t mean to imply that everyone thinks things are just swell. But while you know that they are facing the worst economic decade of the twentieth century, they don’t. They’re expecting something more like the recession that followed World War I.
What was the big difference between the recovery from the 1920-21 recession and the non-recovery from the 1929-30 depression? Then, as now, the federal government decided to fight the economic contraction with economic stimulus. The reason that the Great Depression 2.0 will be much bigger and last much longer than its predecessor is because the debt overhang is larger and the stimulus attempts have not only been larger, but are global in their scope.