Tag: WND

WND column

Ignoring History’s Lessons

ALAN GREENSPAN, the former chairman of the Federal Reserve, proclaimed last month that no one could have predicted the housing bubble. “Everybody missed it,” he said, “academia, the Federal Reserve, all regulators.”… Mr. Greenspan said that he sat through innumerable meetings at the Fed with crack economists, and not one of them warned of the problems that were to come. By Mr. Greenspan’s logic, anyone who might have foreseen the housing bubble would have been invited into the ivory tower, so if all those who were there did not hear it, then no one could have said it.
– Michael J. Burry, New York Times, April 3, 2010

Michael Burry is correct. Alan Greenspan is completely wrong to say everyone missed the housing bubble. Michael Burry recognized it in 2005. I saw it coming in 2002. And Edward Gramlich, a Federal Reserve governor, accurately anticipated the problem as far back as 2000. Moreover, Gramlich personally warned Greenspan about the way in which providing home mortgages to low-income borrowers would lead to widespread loan defaults that would have tremendously negative effects on the national economy. Greenspan, of course, disregarded Gramlich’s warning and rejected Gramlich’s recommendation to audit consumer finance companies because he correctly feared that shining a light on the widespread fraud being committed by the swarming mortgage brokers would reduce the availability of subprime credit.

Interview with John Derbyshire

Vox Day interviewed John Derbyshire, the National Review contributor and author of We Are Doomed: Reclaiming Conservative Pessimism, on March 23, 2010.

Who is this “we” of whom you speak? Are you speaking of America, the West, conservatism, or the human race?

Primarily conservatism. But touching in a larger way on Western civilization.

You’re a fairly serious student of science. Isn’t your theme of doom somewhat in opposition to the usual notion of inevitable progress towards a shiny, sexy, science fiction future?

No, I don’t think so. Science is neutral so far as optimism or pessimism is concerned. Indeed, it is neutral so far as all the affairs of the heart are concerned. As I said in the book, the universe doesn’t care what we think of it, it just goes on its way. I understand what you mean, that sort of H.G. Wells breezy optimism about the prospects for the future based on our understanding more and more about the world is commonplace, although not as commonplace as it was when H.G. Wells was alive. But it’s not founded in any solid principles.

Of the various issues you address directly, from politics, diversity, and culture to immigration, empire, and economy, which do you consider to be the most responsible for this doom?

Let’s see. Probably nature. Most of the truths about the world are contained in the world and they are contained in the nature of reality. It’s that that drives everything. I’m more and more inclined, and this is an odd sort of thing for a conservative to say, perhaps, but particularly this last few days, I’m more and more tempted to the old Marxian idea of impersonal forces driving our affairs, with we ourselves having very little to say about it. That’s actually an awful thing to say and I’d like to qualify it at length, but that would take about 45 minutes, which of course we don’t have. But that’s the mood that’s coming on me, I’m afraid.

Fortunately, we have no word limits on the blog. I don’t know if you’re familiar with Robert Prechter and Elliott Wave theory, which applies primarily to the financial markets but can be utilized for purposes well beyond them. Dating back to Tolstoy, there have been a number of non-Marxian thinkers who have reached similar conclusions about larger forces, waves of mass human emotion rather than individual decisions as per Great Man theory dictating events.

It’s a naughty business and obviously one wouldn’t want to discard altogether the possibility that things can be decisively turned this way or that by a single personality, by a Napoleon or an Alexander. But possibly those turnings are just harmonics imposed on a bigger, deeper wave form driven by very cold natural forces.

What do you think some of those forces might be? I mentioned waves of mass human emotion already, but do you have any other candidates in mind?

That’s fairly appealing. I think so far as human history is concerned that in some way that we are not currently even close to understanding, somehow a kind of vector sum of individual human drives and emotions, a sum that is of hundreds of millions of such drives. There probably are some kind of underlying laws there, if only we could discern them.

One of the most terrifying things I have ever read was Paul Krugman’s statement that he decided to become an economist after reading Isaac Asimov’s Foundation novels.

Yeah, we’re veering a bit close to that here, aren’t we? It was Hari Seldon and psychohistory, wasn’t it? I think if you think we’re close to understanding anything like that, you’re in the zone of what is called misplaced concreteness. I think that’s far beyond our grasp at the moment. But it’s very suggestive. There are great forces and great tides at work, ebbing and flowing. Perhaps we’ll understand them, though I doubt we’ll ever reduce them to mathematics as Hari Seldon did. It’s a strong temptation for economists, and one reason to keep economists at arms-length. They do tend to do this kind of thing. You know, if it’s not Hari Seldon, it’s Ayn Rand, one of these other mechanistic thinkers. We’re not even close to understanding any of those dynamics, but that doesn’t mean they might not be impersonal dynamics.

I am somewhat in awe of your prediction in the book that we shall all be Icelanders, given recent events of that island nation and our own debt/GDP ratio. How was it that you so accurately foresaw the collapse into debt-servitude of the Icelandic economy?

(Chuckles) Yes, yes. Do you know the joke that was going around? What’s the capital of Iceland? About $45. That was just fortuitous. That was in my chapter on religion and when I spoke of us being Icelanders I was saying that even in the least religious nation in the world, where only two percent of the population attend church regularly, if you poll them you get big majorities believing in life after death, supernatural powers, and so on. Just by way of illustrating the fact that you can have these diffuse spiritual longings, human beings do have them in the generality, without much in the way of organized religion. It wasn’t actually related to the economics; although I would have liked to have predicted the economic crash in Iceland, but no, I didn’t.

I was aware of that, I just thought you might like to take the credit. You know, one of the interesting data points in one of the Barna religion surveys was that half of the self-identified atheists surveyed believed in Heaven and Hell.

Oh yes, you get all kinds of things. Way back when I was a student, I read Marghanita Laski’s very fine book, Ecstasy in Secular and Religious Experience. It was an inquiry into the religious experience. She found as many people she could who had claimed to have had a religious experience and asked them to describe it in order to draw out the common elements in the experiences, and some striking proportion of her respondents, something like 30 percent, were atheists! Religious experiences for everyone!

Now, you’re not a religious man, but it seems to me there is a certain Voltairean theme in your book. It is customary among the scientific cognoscenti to consider religion a sign of backwardness, however, in We Are Doomed, one of the things you cite as evidence of our doom is this rising tide of unbelief. How do you balance that in terms of where you stand between Voltaire on one side and Sam Harris on the other?

Well, there’s a tragic element there, always. As a number of commentators have pointed out, if you survey the human race dispassionately, it’s hard not to come to the conclusion that a) human beings are better off with religion, and yet, b) religion is ultimately a wishful fantasy. So that the kind of adherence to cold realism that you would want people to have in spheres like scientific inquiry and jurisprudence doesn’t serve the human race well if it is taken up in all aspects of life. Probably people who are not very reflective – Hazlitt had a phrase that I liked very much, “the reflective portion of humanity” amongst which he of course included himself – the reflective portion of humanity is probably only a quarter or a third of the human race at best. And the rest, ordinary people who just want to go about their lives and raise their families and do some type of useful work, I doubt they can be sustained in life without some sort of supernatural beliefs. So, yeah, there’s a tragic element there. What one might wish human beings to be like and what they’re actually like is an unbridgeable gap. That’s the tragic dimension. But the Voltairean optimism is not apt, certainly not in our present circumstances. I think we will lose our faith. I think we’re losing it visibly. I’ve been living in America since 1973 and this is a much less religious country now than it was then. I give the example in the book of the countries I grew up adjacent to, Ireland and Wales, which were then deeply religious in the 1950s and are now completely irreligious. They’re as irreligious as Iceland now, Ireland not quite, but Wales is there already. I don’t know why this wouldn’t happen to any other Western country. The cause is the same and the basic genetic stock is much the same.

Speaking of the change of nations, recent studies have shown that immigrants tend to lean heavily Democrat. You’ve got a chapter devoted to immigration in the book, so how do you explain the continued enthusiasm for immigration into the USA among conservatives and the Republican Party?

It’s based in a heady optimism about American exceptionalism. What I was really arguing about in my chapter in religion is American exceptionalism draining away. The great exceptionalism that America has amongst Western nations is its religiosity. That’s draining away. I think a lot of American conservatives are very much attached to this notion of exceptionalism. Patriotism is one of the half-dozen core features of conservatism, the belief that one’s own country is special and has some sort of special mission in the world. That’s been a core feature, not just of American conservatism but every kind of conservatism. Even the much older, European, Throne-and-Altar conservatism, the Squire Weston type in 18th century England. The exceptionalism of “our King, our Church, our Nation”. That’s a core feature, so in what does American exceptionalism consist? And one of the things it consists of is this having been a nation populated in very recent times. Most of the populating of American has taken place just in the last 400 years; that’s a very exceptional thing. It makes us a new country, structurally, and American conservatives would like to feel that’s going to go on, that we’re going to go on populating ourselves. I think that’s the main pull there. But of course, it’s an illusion. It’s a fantasy. We already have far more people than we can reasonably support. The ideal population for the continental USA is probably about 100 million, I should think. It doesn’t make any sense in terms of economics or demographics. But there’s the pull of wanting to be that unusual nation, wanting to maintain the things that made us what we are, one of those things having been occasional waves of mass immigration. But you know, conservatives aren’t very knowledgeable here. Peter Brimelow likes to point out that the New England states had practically zero immigration for 200 years, from the mid-17th century to the mid-19th century, from the last of the Pilgrims to the first of the Irish. There was essentially no inflow into New England and the population increased naturally. So, these spells of immigration were few and far between, but they caught the imagination of conservatives because they speak to our exceptionalism.

After the passage of the Obamacare bill, you made an analogy to a sinking cruise ship. What are some of the issues that you feel have drawn the bilge-pumpers away from the pumps and onto the dance floor over the last two decades?

The temptations of power. There’s always been enough discontent with the way things are going to draw people to vote conservatives into power now and again. When conservatives are in power, then the temptations of power take over and they become statists. They want to do things – they want to do conservative things – but the only way to do things is to use the apparatus of the federal government – so they then become proponents of federal power and are sucked into the abyss like that. We’ve fallen into the trap of active conservatism, conservatism to do something, conservatism to ban something, conservatism to fix something. And that really isn’t conservatism, it certainly isn’t real American conservatism. That’s why I obsess about Calvin Coolidge, who was the quintessential American conservative.

I admired your refusal to end We Are Doomed on an up note. Since you finished the book, have you seen any evidence that you need to alter your conclusions of doom?

Oh, none at all. I think my conclusions stand. I was writing something for NRO this morning and I was going to quote myself, the bit where I say that I fully expect to live the rest of my life without ever seeing any major conservative legislation passed. I stand by that. I think it looks better now than when I wrote it.

There is a lot of talk on National Review and elsewhere that the Obamacare bill is really going to energize the Right, that people are going to react strongly against the Congressional Democrats and Obama as a result of their ramming health care legislation down the collective throat of the country. Do you think this is true and we’re on the verge of a 1994, Contract With America-style revolution or is something else in the cards?

So what if we are? After ’94 came ’95. The forces that are dragging the ship down quickly reasserted themselves after 1994 and they will after 2010. They are irresistible, I’m sure. Thomas Sowell, who in my book is a wise man, has a piece on NRO where he pours cold water on the dreams of 2010 being another 1994. It just may not be like that, it may be a nine-days wonder and now that it’s done, everyone will just breathe a sigh of relief and say “oh, thank goodness we don’t have to talk about that stuff anymore.” I think inertia will settle in. I’m pessimistic. (laughs) So, don’t take it for granted that there’s going to be some huge upheaval in 2010. A lot of politicians will get voted out of office, perhaps the balance of power will even change in the House. But we’ll still have this president, we’ll still have this establishment, we’ll still have this Federal apparatus, we’ll still have a largely torpid general public not willing to concentrate very long on any of the things that matter.

WND column

Blame Republicans

For the last three weeks, the conservative media and Republican Internet sites have been up in arms about the monstrosity that is the de facto nationalization of the American health-care system. It goes without saying that the Obama health-care bill is an ideological nightmare as well as a masterpiece of budgetary fiction, and there can be little doubt that it will significantly reduce both the quality and availability of health care while increasing its cost for the average American. Increased government intervention has never been the harbinger of either improved service or reduced expense.

A postscript to today’s column: It appears I was correct in assuming that Obamacare would pass. “On the cusp of succeeding where numerous past congresses and administrations have failed, jubilant House Democrats voted 219-212 late Sunday to send legislation to Obama that would extend coverage to 32 million uninsured Americans, reduce deficits and ban insurance company practices such as denying coverage to people with pre-existing medical conditions.”

Welcome to Third World America. It is now upon you. I now wait with no little amusement for Republicans to clean up in the November elections, then, in the name of pragmatism, completely fail to repeal anything. And in an impromptu Mailvox, RC says we shouldn’t think too much of the past, but must instead figure out how to repeal what has become the law of the land:

“You make good points. However, Bush was pre-occupied with the attack on America and the wars pursuant–not trivial matters. Yes, I agree he was not strong enough on domestic policy. With regard the initial bailout–we were told world-wide financial collapse was in the offing. True, I did not like it–but–how could we take a risk that large? No. Never has such a huge bill been passed without the consent of the governed and on a partisan basis. Ron Paul was not in a position to carry the day. For now–we need ideas on reversing this legislation.”

In answer to his question, I replied that it is hardly risky to bet that politicians and bankers are lying when their solution to the world-wide financial collapse of which they are warning is to give those very same bankers billions of dollars. In like manner, you can’t expect the same Republican party that laid the foundation for this national debacle to be capable of fixing it.

Monday column

Against the New Atheism

Now that its moment in the media sun has passed, the New Atheism is fading fast. Richard Dawkins has repeatedly demonstrated why he needs to be put out to intellectual pasture. He published an entire book dedicated to passing off an inference as a fact before belatedly discovering what everyone else knew already; his biggest fans are an unpleasant collection of socially maladjusted losers. Christopher Hitchens was repeatedly beaten up in debates by various Christians before being physically beaten by Syrians he had provoked. He then took Dawkins’s OUT campaign a little more literally than anyone had expected and announced that he was an occasional homosexual. Sam Harris’ two accomplishments have been to create the amusingly misnamed Reason Project, which was founded for much the same reasons and is expected to have about the same success as Air America, and to publish a wildly irrational attack on one of America’s most celebrated and accomplished scientists in the New York Times that was completely disregarded by the Obama administration as well as everyone else.

No one has any idea what Daniel Dennett has been doing, but that’s understandable because no one, including the atheists who claim to be his fans, actually reads his books.

Here is the slideshow addressing the seven New Atheist arguments mentioned in the column.

WND column

The Cross of Debt

Ordinary people, farmers and fishermen, taxpayers, doctors, nurses, teachers are being asked to shoulder through their taxes a burden that was created by irresponsible greedy bankers.
– Iceland President Olafur Grimsson, March 5, 2010

In October 2008, polls showed that the majority of the American people, 56 percent, were opposed to the $700 billion TARP bill that funded the bank bailouts at the cost of $2,334 to each and every 300 million of them. Despite some initial resistance shown by the Republicans in the House of Representatives, the bankers succeeded in overriding the will of the American people, thanks to their elected officials who purport to represent them. So much for democracy in America.

Interview with John Williams

Vox Day interviewed John Williams of Shadowstats on April 26, 2009. As of February 2010, his alternate statistics reported -4.5% GDP, 9.8% CPI-U, 21.2% unemployment, and -2.5% M3 for the U.S. economy.

What is your basis for believing the official statistics underestimate unemployment and inflation?

I’ve been a consulting economist for more than 25 years. What I have found over time is that public perceptions as to what’s happening in the economy have tended to vary increasingly from the official reporting, generally moving away from the common experience. It appears to be moving towards generally weaker economic growth and stronger inflation than the government is reporting. I’ve used econometric models over time for forecasting a variety of economic variables and I’ve found the ability of the official numbers to predict what was happening to be also weakening over time. Some of the series are simply nonsense, they’re effectively political propaganda. I’ll state that very specifically in terms of the GDP.

But the reason you’ve seen this shifting sentiment of the quality of the government statistics is that there have been methodological changes over time that have built in upside biases to the economic reporting and downside biases to the inflation reporting. The changes that have been made often have had some academic basis for them. I would contend that most of the changes have been primarily academic and have very little relationship to the real world.

Your GDP chart appears to show that the USA has been in recession since 2000, with only one quarter of positive growth in 2001. That would make it twice is long as the Great Depression. Do you think that is really the case?

I think you’ll find that we’ve had longer and deeper recessions than have been officially reported by the government. What you see in terms of the year-to-year change is not necessarily the quarter to-quarter change. You’ll see this on some of the better series that are more relevant to the GDP, payroll employment, industrial production, and such, used for timing recessions. What is the official short-lived 2001 recession that has now disappeared from the GDP reporting probably began in late 1999 and dragged on into 2003. And again, you can see those patterns in industrial production and payrolls, we did not have recovery when they called the end of the recession. What we’re seeing now, in terms of the indicators I look at, is that the current recession probably started in the fourth quarter of 2006, that’s a year earlier than the National Bureau of Economic Research had it happening. With that short a span between what can be distinguished as two recessions, it’s really just one double-dip recession similar to what we saw in the early 1980s. The Great Depression was a double-dip recession too.

So yes, this is dragging out and this will likely be a longer downturn than any in the last century. I think there may have been one or two that were longer in the 1800s, but what we’re seeing is a structural change. It’s one that Alan Greenspan recognized and I think it’s one that’s generally recognized in Washington, but nothing that has been done in terms of stimulus will address it. This is going to be a particularly protracted downturn, particularly deep and generally unresponsive to most of the stimulus thrown at it.

Are European economic statistics more accurate? Because I’ve been reading in the German statistics, the British statistics, and the Japanese statistics, and all appear to be showing deeper recessions than the U.S. GDP statistics do.

I think they generally are. There have been a lot of efforts to standardize and institutionalize what the U.S. has done, some countries have gone along with it, some have not, but there is a lot of variation between the statistics in different countries. But I would say yes, not only are the European statistics more accurate, they’re also a little bit more open about their financial and banking problems. I think they also have a more realistic outlook as to what is happening in the United States because they have a pretty good sense as to how the system gets politically manipulated here.

Wouldn’t underestimating inflation also have a significant effect on real economic growth, and does your GDP chart take the effects of your CPI calculations into account or not?

Yes, it does. Real GDP growth, which is an inflation-adjusted GDP growth the way it is popularly followed, is an annualized quarter-to-quarter rate. I think is a silly way to look at it only because the error in the reporting is so large that when you raise the growth rate to the 4th power you exaggerate what is a very poor quality number. It’s not just CPI and it’s not just inflation. If you use artificially low inflation, that will give you artificially strong GDP growth once it’s adjusted for inflation. The CPI is not the same thing as the GDP price deflator; CPI is generally related to consumer spending, the deflator covers the industrial sector of the economy, imports and exports, etcetera. It’s not a one-to-one relationship, but I would say that CPI is the major modifier in the adjustments that are made there.

Which of the three unemployment measures, U3, U6, or SGS Alternate, most closely track the economic statistics that are presently reported for the Great Depression?

The unemployment rates reported for the Great Depression were the creation of the academic community and the Social Security adminstration after the fact. There was no unemployment reporting during the Great Depression, that started in 1940. The Federal annual census did some measurements, but even there it wasn’t measuring unemployment, it was measuring what your general trade was versus whether or not you were actually employed. So it’s a best guess that was generated by political entities. I’ll contend that if you talk to an average individual and ask them whether or not they’re employed, they won’t hesitate to give you an answer. It’s the type of thing that they can tell you right away whether or not it happens to match the government’s definition of employment and unemployment. That gets to the crux of what I’m doing here with my numbers because I’m trying to look at them from a standpoint that has a basis in historical government surveying and yet at the same time reflect the common experience.

One thing that I’ve done is take the employment numbers from the old censuses and compare them to the total population figures. Then you just have a straight-up percentage of how many people are nominally employed. There are demographic issues that don’t factor in, but if you add the military, it gives you a much better picture. In 1944, the military made up eight percent of the population! How do you even begin to talk about unemployment when you’re ignoring eight percent of the population, all of which is of prime employment age?

That’s often why the WWII period is excluded from normal business cycle analysis. It’s outside the norm of what you would see with a standard business cycle. But to quickly answer your question on the unemployment measure, I would view that what came out of the estimates for 1933, taken as the peak of the Great Depression, where they had 25% broad unemployment and 34% unemployment estimated for the non-farm population, would generally be along the lines of asking people whether they were employed or unemployed. The closest to this would be the SGS Alternate. In terms of the unemployment rate in 1933, remember that something like 27 or 28 percent of the population was agricultural at the point. Today it’s less than 2 percent. If you’re trying to compare it to today, you have to compare it to the 34% non-farm rate. In terms of the unemployment series that the government publishes from U1 to U6, U3 being the most popularly followed at 8.5 percent, U6 is around 15.6 percent, and my SGS Alternate is around 19.8 percent. (NB: this interview took place ten months ago. U3 is presently 9.7 percent and SGS Alternate is 21.5 percent.)

That’s still a long way from the 34% non-farm in 1933.

It is. The only difference between my number and U6 is that I include marginal discouraged workers that the government defined away in 1994. But these are people, if you asked them if they’re employed or unemployed, they’d say they’re unemployed. A “discouraged” worker meets all the attributes of being unemployed, except they’re not actively looking for work because there are no jobs to be had. The definitional change that was made in 1994 simply put a time limit on that; if you were discouraged for more than a year you were no longer counted as part of the labor force. That removed several million out of the equation. I estimate a number that is still generally proportionate; I think something around 20 percent is probably pretty close. To put it in perspective, going back over the time between now and WWII, in the best of times you are down in the eight-to-nine percent range, which unsurprisingly matches the European experience. In terms of how bad is it now versus how it was… this is the worst since 1975, it’s not worse than the Great Depression yet.

If I understand correctly, your methodology typically involves adding a fudge factor as a correction to the official statistics. Is that correct? Is it possible to recompute the statistics using the formulas that were previously used or is the data simply unavailable?

It’s not available. And even if it were, it would be extremely expensive and time-consuming. My measures are not perfect, they are estimates to give you an idea of what things would look like under different reporting circumstances. In terms of the CPI, if you look at how things were calculated in 1980 you’re looking at a seven percent differential, versus the 1990 methodology where it’s a three percent differential. But if you look at that seven percent, five percent comes directly from the BLS’s estimates as to the impact each different methodological change had on the reported annual rate of inflation. Two percent comes from my estimates of factors that since 1990 such as the substitution effect, the weighting of the CPI index, as well as the shifting of retail prices and such. If you read my answer to the government’s paper on misperceptions about the CPI, you will see my arguments. The gist of it is that the way the CPI was originally used, the way most people believe that it is still used, is that it measures the change in the cost of living needed to maintain a constant standard of living, is not how it is being used now when it attempts to take into account presumed quality of life changes.

What, in your opinion, is the least accurate series and which is the most accurate?

The big three, CPI, GDP, and unemployment series that are so closely followed and are so important politically do tend to get the bulk of the manipulation. Of those three, the GDP is the least accurate, followed by CPI, and then unemployment. The CPI is probably the worst in terms of its negative real-world impact being misrepresented because people rely on it for financial decisions, the others are more informational. I generally prefer private series, such as the Purchasing Managers survey, the Conference Board’s Help Wanted advertising measure, although their newspaper index has taken some hits due to the Internet. Even allowing for that, it still telling you a very negative story on the employment picture. The interesting thing is that if you look at the current year-over-year changes in that index in the nascent online industry, Conference Board and Monster.com, you’re seeing parallel declines. That’s a series in transition, but the Help Wanted advertising is a good one. The Purchasing Managers survey, in particular the New Orders component, is a very good leading indicator. In terms of the government’s data, although you can have some monthly aberrations, the Retail Sales and the Industrial Production are reasonably clean. I look at them as being pretty good indicators of what’s happening and what lies ahead. Even the non-farm payrolls, once you get all the revisions in there, is pretty good. New claims for unemployment is another one, but you can’t use the week-to-week change, you have to use the year-to-year smoothed over 17 weeks because the government does not seasonally adjust well. They try, but they’ve never been successful at it.

There’s been a lot of talk of economic recovery beginning in late 2009 or 2010. What do you see?

I don’t see that. Even if there’s a change that would affect the economy, let’s say for example that the stimulus package was really effective, the economy does not turn on a dime. If the stimulus package were effective, you might expect to see something towards the end of the year, but the stimulus itself is really minimal in the first year and does not address the structural problems. I will contend that the recession is so deep that it’s going to absorb the stimulus package without the economy breaking the surface of the water. We had a circumstance now where there is a real problem for the consumer tied to his income growth falling short of the rate of inflation. If you look at the household income that was reported in the last poverty survey, both median and mean income growth, adjusted for the government’s own inflation numbers, has not recovered, they are still at pre-2001 recession levels. If you look at real average weekly earnings, they still have not recovered from the levels preceding the 1973-1975 levels. Average real weekly earnings are down 15 percent from where they were back in the early 1970s. This has been an ongoing, developing problem as higher-paying jobs in production have been shifted off-shore. As a result, we normally will see more than one breadwinner in a family while back the 1970s it would have been more common to only have one. The average family is not making ends meet, the average individual is not making ends meet, and there is the big problem for the economy. Unless you have a sustained growth in income that exceeds the rate of inflation, you’re not going to have sustained economic growth. You’re not going to have sustained GDP growth unless you engage in temporary measures such as debt growth.

Greenspan saw this. He was aware. It was obvious for many years. But particularly coming in in 1987, before the crash and the financial crisis that he would not let run its course, he took very deliberate action to encourage debt expansion over time which has been the primary fuel of economic growth over the last two decades. Now we’re seeing the debt collapse and without people making adequate income over inflation and without being able to borrow, there is no way to get the economy growing by 2010.

It sounds to me as if you’re saying that there’s not much choice except to accept this structural change and deal with it.

Over time the system will be self-righting. The ways of quickly addressing it would not be considered politically correct, such as to become more protectionist or rebuild the U.S. manufacturing base. And there’s nothing in the works that’s going to turn this quickly. Even if you started to do things like that, you’d probably be looking at a decade before you started to see results. What we have ahead of us, what we’re in now, will be classified as a depression. A decade or so back, I talked with the Bureau of Economic Analysis National Bureau of Economic Research about how they would define a depression in terms of how we look at things today, and came up with a consensus of sorts – it’s nothing official – of a peak-to-trough, inflation-adjusted contraction in GDP or broad economic activity in excess of 10 percent. A great depression would be in excess of 25 percent. If you look at series such as retail sales and industrial production, we’re seeing numbers that year-to-year are in the depression camp, durable goods orders and housing are in the great depression category. Even in terms of GDP, there’s a chance of seeing a 10 percent decline if they don’t fudge it too heavily. That would count as a depression. In terms of a great depression, I think we’re going to have one but that is going to be in conjunction with hyperinflation. You’re writing a book about the Great Depression, right?

It’s called The Return of the Great Depression, it will be out on the 80th anniversary of Black Tuesday.

That’s an interesting title because I’ll contend that what Roosevelt did in abandoning the gold standard, which freed him up to introduce the debt standard, really set us up for what we’re going through now. The debt standard is now collapsing and you don’t have anything supporting it beyond the printing of the money which is now looming. One of the other government statistics that I write about is the budget deficit based on GAAP accounting. And although they argue about whether or not they should include the unfunded liabilities for Social Security and Medicare, they do at least footnote them and there have been times when they’ve included them. If you look at that, last year you had a deficit of about $5 trillion. It’s averaged $4 trillion since they began publishing the combined numbers back in 2000 or 2001. That’s beyond containment. You cannot raise taxes enough to cover that even if you take all of everyone’s income. They’re still adding new unfunded programs, so there is just no way that the system survives. We’re facing a GAAP-based deficit this year of around $8 trillion and net present value of unfunded Federal liabilities of around $65 trillion. That’s bigger than the global GDP and even without the banking crisis, the country is effectively bankrupt and headed for debt-default, which I can’t see the U.S. doing. I think it’s more likely that they’ll go with the traditional solution which is revving up the printing presses and paying off the debts with a debased currency.

What’s happened with the current crisis is that the process has been accelerated. The key here is the dollar. You’ll start to see heavy dumping of the dollar, you’ll start to see very rapid inflation beginning with oil prices. If I’m right in terms of hyperinflation, which could start anytime between the end of this year and 2014, that would throw you into a great depression. If you look what happened in Zimbabwe, the hyperinflation there developed over a number of years but things still continued to function because they had a working black market in the U.S. dollar. We don’t have a black market backup. When it comes here, it’s going to be extremely disruptive and will probably bring normal commerce to a halt.

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.

WND column

Beware of Greeks Selling Bonds

The sum of these various factors is that the shadow of debt hanging over the global economy is more severe than it was in 1929. The threat is heightened by the fact that this time, 80 years later, it is not only the American authorities that are attempting to fight the contraction with aggressive fiscal and monetary policy, the European and Asian authorities are doing so as well. … This increasing inability to spend next week’s money today is exactly what is now beginning to be observed in the Treasury auctions around the world, as more and more national governments are finding it difficult to sell the debt that underlies their currencies.
– Vox Day, “The Return of the Great Depression”

While I have long predicted the collapse of the euro and eventually the European Union, I have to admit that Greece was not even on the periphery of my radar as a potential economic flashpoint. I examined the various economies of Europe in some detail while writing “The Return of the Great Depression,” and based on the incredible amounts of debt incurred by numerous countries during the real-estate boom of the last decade, it was clear there were a number of likely candidates for sovereign debt default.

Interview with James Delingpole

Vox Day interviewed James Delingpole, the British journalist and author of Welcome to Obamaland: I Have Seen Your Future and It Doesn’t Work, on February 4th, 2010.

When did you first become skeptical about the idea of man-made global warming?

There was no Saul-line moment of conversion, it was a gradual dawning. One thing that the global warming lobby likes to do is to make out that people who disagree with them somehow hate nature and that the reason they object to global warming is not on scientific grounds but because they aren’t prepared to make the necessary lifestyle changes. This is nonsense. In a way, I think my love of nature is the reason I care so much about this battle. For example, the measures adopted by the British government to deal with so-called man-made global warming involve carpeting the most beautiful countryside on Earth with wind farms that are inefficient, can only operate economically if heavily subsidized by the government and therefore the taxpayer, and utterly destroy the landscape. I don’t believe in this thing they call “the precautionary principle” because sometimes doing something can be much, much, much worse than doing nothing.

Historians are aware that Greenland used to be farmed and that the Romans grew grapes in England. Are the global warming scientists historical illiterates or were they just hoping that no one would remember that the world was quite a bit warmer a few centuries ago.

It’s a very interesting question. The first part of the answer is that scientists stick to their particular field. I think what’s happened with some of these climate change scientists is that they’ve been so engrossed in their little corner of the picture that they haven’t bothered to look at the bigger one. And the second part is that in some cases they have actively sought to rewrite history, as in those Climategate emails where you see Michael Mann mulling aloud how he might get rid of the Medieval Warm Period. That’s the kindest complexion one can put upon it. The Medieval Warm Period is an embarrassment to them. The fact is that the majority of scientists in that field agree that during the Medieval Warm Period it was warmer than it is now. There was no industrial civilization then, so how do you explain it? You can see why it’s a huge embarrassment to them. The same applies to the Roman history. They were growing grapes by Hadrian’s Wall.

I think it’s natural to be skeptical of global warming when you come from Minnesota, which was once covered by ice. And of course, around this time of year, global warming sounds pretty good.

There is a very interesting report that was sent to me recently written by one of the numerous lobbying foundations that advises the propagandists of how best to advance the cause of global warming in the minds of the various people around the world. And it said precisely this: in warmer countries it clearly makes sense to talk in terms of global warming. But in other places, where the weather was unlikely to behave in the correct manner, they should call it climate change and be sure to claim that any form of extreme weather event, be it cold or hot, was definitely further proof of this “climate change”. The dishonesty of what is being foisted upon us is extraordinary.

Why did it take so long for the global warming proponents to realize that Climategate was a serious blow to their efforts?

Denial. Denial is the obvious answer. Even now, you’re getting a lot of warmists, particularly the environment correspondents in the mainstream newspapers and at the BBC, they’re kind of finessing their position. They’re preparing their lines of defense. A lot of them are saying things about the recent IPCC revelations like “this of course is much more important than the totally insignificant Climategate emails”. This is a) an attempt to justify how they were sniffy and didn’t report the Climategate emails when they happened, and, b) they want to give their opponents as little ammunition as possible. They want to credit their opponents with as little intelligence or journalistic skill as possible. For me, the significance about the Climategate emails was not due to any new and specific revelations, but that for the first time, we had emails confirming what a handful of journalists and dissenting scientists had been saying for over a decade. You know, that the global warming scientists had been cooking the books and fiddling the data, that they had been suppressing the research of scientists who disagreed with them. All of these things that people had suspected before but never been able to prove were suddenly there. The Climategate emails were the smoking gun.

Do you think we’ve seen the last of the scandalous revelations to come out of the IPCC and the CRU?

No, it’s the gift that goes on giving. First of all, we had Glaciergate, then we had Amazongate, and of course before that we had Pachaurigate. Yesterday we had Hollandgate, where it was discovered that the IPCC report had exaggerated the extent to which lowland Holland is at threat from global warming and exaggerated, by a significant factor, the number of people there who were endangered by flooding being caused by global warming.

When I consider how wildly off these reports have been, I’m beginning to worry that the real danger is being overrun by hordes of ravenous polar bears.

I would think this is almost certainly the case. We’re actually in more danger of being frozen as well.

Copenhagen fell out of the news rather rapidly. Was that the result of Climategate or the economic situation?

I think Climategate had very, very, very little to do with the failure of Copenhagen. The fact is that the policymakers, the NGOs, and the lobbying groups were sitting in a bubble and carried on talking their talk as if nothing had changed at all. The reason that Copenhagen failed was the reason it was going to fail long before Climategate happened. People were talking about it inevitably being a failure and that the policymakers wouldn’t get their act together because the countries could not agree. It was in the midst of a recession.

Why has the international media been so quick to believe the claims of the global warming scientists and why has the British press been more skeptical than the American press?

You need to look at it historically. In the 1990s, there was a general feeling abroad among the chattering classes that they had had it too good for too long. People were enjoying the inflationary boom, the debt-fueled boom, but at the same time, in the way that middle classes do, they were starting to feel guilty about it. Maybe we’ve had it too good for too long. Maybe we should start thinking about more important things than money. And so you had lots of people going organic and talking about ethical lifestyles. This intellectual climate coincided with activists like James Hansen of NASA and Al Gore pushing for this vision of a world that was doomed by Man’s greed and consumption. It hit the spot perfectly. There was the famous conference that Al Gore staged in Washington on the hottest day of the year. They opened all the windows the night before, then closed them in the morning so the air conditioning broke down. Of course, it was sweltering inside as they announced the news that the world was in trouble and it was all Man’s fault. So you had suddenly an exciting story that the newspapers could get their teeth into and it gelled with their chattering class readership. This meme took off very quickly. At the newspapers you also had these environment correspondents, who I think are probably the most partisan correspondents in any genre you can imagine. They were not objective at all. These were environmental activists taking their cue from the propaganda of organizations like the World Wildlife Fund, which is effectively a Marxist revolutionary organization closely associated with people like Maurice Strong, the one-world government guy. So all these activist groups were feeding this information into the newspapers where it was reported uncritically and people read it because it was what they wanted to hear. You had this great big movement going on and no one wanted to say that the emperor was wearing no clothes. Anyone who pointed it out was marginalized.

As for the second part of your question, the grass is always greener on the other side. I don’t think the record of the British press has actually been much better than the American press. You’ve got papers like the Washington Times that’s taken the skeptical position, hasn’t it? I know you’ve got lots of papers like the New York Times pushing the warmist agenda, but if you look at most British newspapers, and also the BBC, you will find that they have been taking the same abject position as most American newspapers, reporting this AGW as if it were indisputable fact and expressly squashing the work of anyone who disagrees with it.

You mentioned the connection of some of the environmental organizations to the one-world advocates. Geoffrey Lean was writing that the idea global warming is a hoax perpetrated by a conspiracy of the world’s scientists and political leaders pushing a one-world agenda is far-fetched. Have the British learned nothing from the example of the European Union? It was always sworn up and down that the European Common Market had nothing to do with politics until it suddenly turned into a political entity?

Well, he would say that, wouldn’t he. Listen, why do you think I want to emigrate so badly? It is precisely this. I feel that we are living in an eco-fascist tyranny. Many of us look aghast at what has been done by the European Union. 80 percent of all new laws passed in Britain emanate, not from the British government, but from the European Union. These are laws over which we have no democratic control. The people in the European Union are democratically unaccountable. And unfortunately, AGW is the European Union mark two. It’s no coincidence that the European Union has been pushing the AGW agenda harder than almost any political entity in the world. The reason for that is very simple. As Jonah Goldberg argues in Liberal Fascism, in order for fascist regimes to impose their power on the populace, what they need is an excuse, a crisis so apparently grave that only the most dire and stringent government action is justified. And this action, of course, can circumvent the wishes of the populace. It is perfectly okay for unelected bureaucrats and technocrats to impose unwanted policies on people because the world is doomed and if we don’t do something now, we’ve had it.

I always find this to be an interesting argument in light of the great government successes in eradicating poverty, drug use, and crime.

Exactly, exactly! I despair, I really do, of what’s happening and what’s going to happen. Since November, we have seen AGW unraveling at the most extraordinary rate. What has been the response among our lawmakers and what has been the response at the scientific institutions implicated in these scandals? Why, it has been to close ranks, to cover up, and to pretend nothing has changed as the caravan moves on! In Britain, we have the energy and climate minister, Ed Miliband, and the conservative opposition both saying effectively the same thing. They’re saying we must cut carbon by massive amounts, they’re talking about green jobs and expecting people to believe them! They’re saying this when we know from the evidence of Spain that for every green job created by the government, 2.2 jobs are lost in the real economy. The idea that green jobs are going to bail us out of this economic situation is pie in the sky, it’s Enron accounting.

I have one final question. Why are Guardian readers such wankers?

They are, aren’t they! Actually, having said that, one of my great pleasures in life, one of the few pleasures left for those of us who don’t believe in one-world government, is rooting through the comments below articles written by people like George Monbiot and seeing just how many of them have been censored by the moderators and how many more are antipathetic to George Monbiot’s point of view. What you realize is that certainly out in the blogosphere and on the Internet generally, skepticism is growing. There are a lot of very informed, clever, funny people out there who are saying “we won’t buy this shit, enough is enough!” I’m hoping that this revolutionary spirit that we see on the Internet spreads out into the real world too, because I think the Internet is our best defense against the one-world government tyranny that is being imposed upon us in the name of global warming. This is a battle worth fighting. The future of Western civilization depends on the outcome. I think it’s that serious.

On a tangentially related note, this Audi “Green Police” ad is a timely and light-hearted demonstration of the eco-fascism of which Delingpole is warning.  The ad is funny, but the reality won’t be, if the people of what were once known as the Western democracies are foolish enough to allow it to come to pass.

WND column

The Map is not the Land

Thanks to media that have absolutely no understanding of the economic-related news they are attempting to cover, it is commonly believed that the U.S. is no longer in a recession. The Bureau of Economic Analysis’ advance report for fourth-quarter Gross Domestic Product, usually known as GDP, increased at a rate equivalent to 5.7 percent growth on an annual basis, more than twice the average GDP growth since 1950. This would be astonishing if there were any chance whatsoever that it was real.