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January 25, 2012

The Daily DOOM


His Majesty insists upon more gold for the royal coffers. His Majesty did consider being more conciliatory towards opponents of the Royal House, but in the end decided that imperious disdain was the better (and more natural) approach.

How much does His Majesty love you? He loves you so much that he will force the banks to reduce your mortgage payment. Contracts, regulations, rights, and laws? Fiddlesticks! The law is what His Majesty decrees it to be. The world must turn upon His Majesty's imperial whim.

Federalism has been ailing for a long, long time (since the New Deal era at least, if not Reconstruction), but modern States are in a state of deep vassalage to the Federal government. The Founders clearly did not intend for this to be the case...but they’re just a bunch of dead white guys, so who cares?

I always say that of all the human virtues “humility” is the one economists show the least. And yet it’s the one they need almost above all others. (I also think a good sense of humor -- about themselves and about the world -- is a sine qua non for a good economist.)

Walter Russel Mead reinforces a point I often make myself: no matter your situation in life, you need to save for your old age. I’m not even going to say “retirement” because I think that concept is rapidly going obsolete, but you need to be absolutely hard-assed about putting some percentage of your income away for your needs in old age. To the extent that many elderly people are having trouble making ends meet in the current downturn, it is as often the result of poor financial choices earlier in life as it is of simple bad luck. (And “bad luck” is quite often a euphemism for “poor choices” where human beings are concerned. Luck favors the well-prepared.)

I often wonder if Apple is going to be the template for the 21st century multinational corporation, in much the same way that GM was the template for the 20th century multinational corporation. Apple’s ascendance is pretty dazzling to those of us who remember the dark Gil Amelio years when it always seemed like Apple was a heartbeat away from going broke. It’ll be interesting to see what happens to Apple in the post-Steve Jobs era.

Remember, folks: AFSCME represents public-sector workers who are funded in large part by tax revenues. So they’re actually spending your money to do this.

Shorter version? When things go to shit, they go to shit fast.

The Eurozone crisis as political failure. The 2008 downturn didn’t “cause” Europe’s problems, any more than it did America’s. The Euro project was flawed right from the start; all the downturn did was expose the rot sooner. I often point out that Europe has always had a lousy political class, which is why the continent tends to go to war every five decades or so.

I think Tyler is wrong when he says this, though:

Critics get it wrong when they blame the euro crisis on “too much socialism.” For one thing excess public ownership is only a secondary problem (while a problem), for another thing Sweden is doing fine.

Sweden is a small country with a homogeneous population, with large geographical and historical advantages. And it’s not clear to me how “fine” they’d be doing without the huge economic engine of Germany nearby, in much the same way that Canada is only able to maintain their own welfare state because the United States is next door. (I’d use the term “welfare state” rather than “socialism” in the European context, furthermore, since it more accurately conveys the basic problem.)

California is so boned: San Francisco “discovers” another $100 million hole in their public-sector employee pension plan that must now be filled somehow (*cough* HIGHER TAXES!! *cough*). And note well: this is caused by simply lowering the outrageous “rate of return” calculation by a mere quarter of a point. Furthermore, this is just a municipal plan. The same problem exists in nearly every city, village, burg, hamlet, and settlement in that benighted state, and at the county and state level as well as municipal. No one really knows the scope of the problem, either: years of actuarial tricks, deceptive accounting, complex financial rules, a dysfunctional budgeting process, and a deeply in-denial electorate has left Californians with no clear idea of the scope of their public liabilities. (Hint: the number is at least in the hundreds of billions of dollars, if not actual trillions. And that’s just for California.)

Speaking of California being boned...how much did CalPERS earn on its investments last year? A whopping 1.1%, my groovy babies. Yet they're estimating an aggregate 7-8% annual yield on a 10 year average. Do you know what kind of return they’re going to have to get in future years to make up that shortfall? The kind of return they are extremely unlikely to get (or even get anywhere near). You can almost imagine with what quivering lip the public-sector workers read this sentence:

The 2011 performance was well below the estimated average annual return of 7.75% that the fund's actuaries say is needed to meet current and future obligations to its members.

As Bob Uecker might say: juuuuust a bit outside!

But lest we allow California to hog too much of the spotlight, my home state of Minnesota is also boned. Yet we congratulate ourselves on having a real, actual surplus this year (which we’ll no doubt squander immediately as opposed to saving against future need). It also strikes me the extent to which this issue transcends usual partisan politics: if you’re one of the private-sector packmules that governments expect to fund these outrageous pension plans, you’re probably feeling pretty burned regardless of your political affiliation...and nowhere near as burned as you’re going to feel in a few years when the disaster is seriously underway.

Taxes are for the private-sector peasants, not our public-sector lords and masters.

Bacon inflation? My God, the iniquity! This is just inhuman!

This is what passes for “intellectual diversity” in Obama’s administration.

Greece to “name and shame” tax-dodgers. This only works if the tax-dodgers are ashamed of their actions, and in the case of the Greeks I wouldn’t bet on it. But then, these are the wages of public-sector corruption -- when people lose respect for their public institutions, they lose respect for public authority. Americans are very diligent taxpayers as a rule, but this may change if they sense that the government is pervasively corrupt.

Speaking of Greece being boned: S&P may make the obvious (finally) official.

Connecticut moves up a few notches in the ranks of the LOTB.

This is an interesting story because it presents an case where charity comes up against contract law, and the obligations that can be imposed on charitable organizations by their benefactors. “Charity” doesn’t mean “no strings attached”.

Is the résumé going out of style? It’s not terribly useful these days as a filtering tool, that’s for sure.

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posted by Monty at 08:31 AM

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