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January 16, 2012

The Daily DOOM

DOOOOM

His Majesty thumbs the royal nose at the Founders. History began with His Majesty's ascension to the throne; culture, tradition, and legacy are merely hindrances to His Majesty's plans for his people.

His Majesty’s ministers demand that a private-sector business justify a private-sector business decision.

People unfamiliar with the concept of competition as a discovery procedure – people unaware of the complexity of emergent orders – people unconcerned about concentrated, arbitrary power wielded by worthies in Washington – people unfazed by the arrogance of a bureaucrat presuming to know that some proposed price-hike is to large, but who also cowardly refuses to put her money where her mouth is by opening up a competing insurance company – people unmoved by the prospect of private entrepreneurs and business people having to beg the permission of mandarins on the Potomac in order to conduct business – people unsuspecting that such power can easily be abused to punish politically inconvenient firms and to assist political allies – such people will find nothing frightening about the quoted paragraph.

The rest of us want to vomit out of both fear and loathing.

We need a new kind of Laffer curve -- this time, for government regulation.

E-books are continuing their march to replace paper books. This probably should have been an item in the book thread, but it has economic implications too, especially for brick-and-mortar libraries and bookstores. (Though I will note that trying to create artificial scarcity in the electronic realm through DRM and electronic signing is probably doomed to failure: technology tends to route around blocks like that.)

No developed country in the world is quite as existentially boned as Japan. The great drift of their society in the past two decades hides an even deeper ennui: an inability to decide what kind of future they want. In fact, the Japanese seem to have given up on the future in a very fundamental way -- their birth-rate has fallen far below the replacement rate, and given their cultural hostility to immigration, there seems to be no mechanism to drive future growth. They seem to be hoping (not planning; hoping) that some unforseen technology will save them from the abyss. The future holds many dangers for a shrunken and poorer Japan, and many historical enemies lie in wait at the frontiers looking for weakness.


In the end, the Greeks are who they are and they will do what they will do. Even in the face of economic calamity, cultural habits persist.

Here's the thing about pension plans, both public and private...the health of the plan depends primarily on workers contributing their own money to the plan. If the past several years has shown anything, it's shown the folly of pension plans relying purely on market returns in lieu of employee contributions.

More high-speed-rail FAIL.

When the “guns and butter” equation becomes too unbalanced towards the “butter” end of the scale, decline and collapse are -- historically speaking -- not far off. Remember the advice of Benjamin Franklin: “A Republic, if you can keep it.”

Detroit: just when they think it can’t get any worse...it gets worse. Detroit is a great example of the long-term effects of racial victim-group politics, labor-union politics, and decades of corrupt Democrat one-party rule. And what lesson Detroit provides at the municipal level, Illinois provides at the state level. (As does Detroit's home state of Michigan, for that matter.)

For many fathers -- divorced and otherwise -- debtor’s prison is still a very real and present threat.

The Eurozone bureaucrats tried to use the Jedi Mind Trick on the world over the holidays, but it didn’t work. S&P’s recent downgrades of several “core” Eurozone countries reminded investors that all the old problems are still there: debt, unemployment, vast and unsupportable social-welfare spending, and dismal prospects for future growth.

Nobel laureate Michael Spence, like Teh Krugman, is both very smart and very wrong. He insists that government must be allowed primacy over free markets, and then uses a really bad comparison to make his point:

For example, it has been known for some time that networks that are efficient are often not resilient, because resilient networks have inefficient redundancies. Resilience is a public good, created by the right kind of redundancy.

“Efficiency” has many meanings, and I think Spence only sees the most obvious (and misleading) one. Spence is seeing only directness (and thus speed) in his scenario; a network with the fewest amount of nodes in the path from source to target is generally the fastest. However, there are many “externalities” affecting latency -- the "distance" between two points is only part of the equation. Availability provides more “efficiency” than mere speed over time -- high reliability provides better service over time than pure speed -- and it is the decentralized nature of markets that provides this robustness. Governmental control over markets can be likened to a single point of failure in a network: sometimes it is necessary, but it hampers the ability of the network to route around failure.

Government regulations, in terms of economic markets, hinder this kind of robustness more often than not. But then, advocates of government intrusion in markets really don’t have efficient market outcomes in their minds. They are about control, about redistributionist social goals, not about markets. That’s why liberals and leftists generally don’t like free-market economics: it imposes a natural-world kind of “fairness” on a system rather than a man-made one.

It’s facile to paint Americans as just a bunch of free-spending consumers who exist merely to give the rest of the world a market to sell into. Americans more than most in the world are exquisitely sensitive to quality-of-life issues -- being the most individualistic people in the world -- so we always face a challenge in the “buy now or save for later” dilemma. And America’s monetary policy in the past sixty years has been totally geared to favor consumption over savings: (comparatively) cheap credit, a culture oriented to entertainment and services rather than production, and abundant personal free time argue in favor of consumption. And in past times, America was a youthful nation, and youth is inherently geared to consume rather than save -- no one ever thinks old age or disability will come when they’re young. There is also the economic truth that money tends to be more efficient in motion than at rest. But this is where the misconception comes in: “saved” money is not necessarily at rest. When it is invested it is in motion and being used for productive purposes. It’s not like burying your money in a coffee can in the back yard (though with bond yields where they are, you’d be almsot as well off). To the extent that “saving” is a moral issue, it rests on a person’s ability to provide for themselves in old age or during hardship. To rely on strangers to fund your own needs over the long term is neither ethical nor sustainable over the long term (as the entire world is finding out as the welfare state begins to collapse). “Saving” is, finally, about adult responsibility -- it’s about providing for yourself and your family not only now, but into the future. And it involves more than just putting part of your income away each month.

Greeks are moving into the “blame the foreigners” phase, I see. I expect street riots and possible revolution very shortly.

Something tells me that a spectacularly incompetent ship captain will be hitting the unemployment line pretty soon. Along with his dumbass navigator.

Teh Bernank liked QE’s 1 and 2 so much that he decided to go ahead and make it a trilogy.

Moody’s to Illinois: BAM!

S&P to France: BAM!

S&P to Italy: BAM!

The next bubble to burst? NATO ally Turkey. It would make for an odd kind of balance -- at the moment their traditional enemy Greece goes down the tubes, Turkey follows right behind them.

Europe’s pension bomb may be even bigger than ours. Their situation is exacerbated by the wider monetary crisis going on there right now.

Europe and the north/south productivity divide. The American experience was similar going all the way into the modern age: you had a highly-productive industrialized North, and an agrarian, rural, comparatively unproductive South. And this was in a country that even prior to the Civil War had much more commonality between states than European nations have now -- common laws, common language, common culture (to a great degree), and so on. The American South only began to show real strength during Reagan’s term, when urbanization and industrialization showed that the citizens of the American south had finally adjusted to the demands of modern life. It remains to be seen if the citizens of southern Europe can do the same.

Europe has a lousy political class, but that’s been the case more often than not for most of Europe’s history. Eichengreen is dreaming if he thinks this will work:

Getting all of the stakeholders to go along will require compensating losers. And here Europe’s social model can be an asset rather than a liability. The losers from reform can be provided generous but temporary unemployment benefits. They can enroll in government-funded, industry-organized training schemes. European governments that promise to aid the losers are more likely to retain political support. They will be better able to stay the reformist course.

Whatever you subsidize, you get more of. And “temporary” measures have a way of becoming permanent features of the landscape, especially where government programs are concerned. But then, Eichengreen like most liberals thinks that if only governments can shovel money into the furnace fast enough, perhaps it will douse the flames rather than stoke them.

The Chevy Volt has moved from “failure” to full-on “boondoggle” status.

Get ready for the avalanche of “all is well!” stories as the MSM goes into overdrive trying to get their boyfriend re-elected.

For an antidote to the coming flood of happy-talk from the liberal media, just look at the numbers, which are still pretty grim. We’re recovering from the crash, but very slowly...and we face enormous structural headwinds that may yet strangle the recovery aborning.

Today, over 4 years since the recession started, there are still almost 25 million Americans unemployed or underemployed. That includes 5.6 million who are long-term unemployed for 27 weeks, or more than 6 months. Under President Obama, America has suffered the longest period with so many in such long-term unemployment since the Great Depression.

American economic freedom continues to erode during the reign of His Majesty the King Barack Obama.

We have top men working on the problem. Top. Men.

The year began with adulation all around for Greenspan. In that January meeting, Roger Ferguson, then Fed vice chairman and now head of the TIAA-CREF financial services group, called Greenspan a “monetary policy Yoda.”

[GEEK MODE: ON]That comparison is probably far more apt than Ferguson knew at the time; Yoda failed to sense that Senator Palpatine was in fact Darth Sidious, and thus failed to prevent the fall of the Galactic Republic.[GEEK MODE: OFF]

Among his other talents, President Obama is a magician: he made 1 million workers just disappear.

Using a murdering Communist thug as your corporate icon just seems...ill advised. Unless of course your target audience is clueless leftist retards with too little sense and too much money, I guess.

This is the ultimate in head-in-the-sand stupidity: a suggestion that America kiss off the global trade regime and “go it alone”. This is stupid on so many levels that it would take a book to explain them all, but simply put: we couldn’t “go it alone” even if we wanted to because we no longer have the industrial base or the raw materials to “go it alone”. And even if we did have those things, we still couldn’t do it, because it would require prices to go up by so much that the citizenry would revolt -- and I mean in an actual torches-and-pitchforks kind of way. America has never been “self sufficient”, not at any point in our history.

Hazards at all points: if Greece leaves the Euro, they may face Zimbabwe-level hyperinflation.

“Spengler” -- David P. Goldman’s nom de plume -- writes a good piece on Bain Capital, private equity, and Schumpeterian “creative destruction”. (Or you can listen to this fabulous speech from “Larry the Liquidator” in the movie Other People’s Money.)

Technological progress means that the process of “creative destruction” can happen with terrifying speed, but a commensurate “construction” period can take a lot longer, especially where employment is concerned: the skills needed to compete in a high-tech job market take a long time to acquire via training and experience...and many workers may not have the cognitive ability to retrain to get a job that provides the same standard of living they had before.

Almost anyone can be a waiter, a checkout clerk, or a custodian; relatively few people can be a doctor, a computer programmer, or a mechanical engineer. This is not a question of demand; it is simply a question of relative ability, especially cognitive, on the part of the employable workforce.

I use the term “Austrian school” and “Austrian economics” sometimes, and here’s a good primer on what the Austrian school of economics is, and what it means.

To the Austrians, economics is not a tool of social control, it’s a framework for helping us understand humanity, its history, and our plight in the world.

If politicians won’t solve the public-sector pension mess, angry voters will. And if voters won’t, angry investors will.

This shouldn’t come as a surprise to anyone: 5% of patients account for half of all healthcare spending. It stands to reason: the very elderly and the chronically ill require a hugely inordinate amount of medical care, especially in the terminal stages of their lives.

Drug maker Novartis to cut 2000 US jobs.

Who’s to blame for California’s woes? A political party that has been a dessiccated joke for at least the last 25 years -- at least, according to the Democrats. Somehow, it’s all the GOP's fault.

Andrew Biggs: AFSCME’s pension numbers are wrong, and here’s why and how, in detail. AFSCME: I can’t hear you, LALALALA, can’t hear you, LALALALA, by the way here’s more of the same crap you just debunked.

Thomas Friedman, you pitiful fool.


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posted by Monty at 08:31 AM

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