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February 13, 2012

The Daily DOOM


Follow 'The Daily DOOM' on Twitter: @AoSHQDOOM.

The SSDI component of Social Security is a perfect snapshot of how the welfare state both bankrupts and demeans our society. The program was meant to provide for people who were physically unable to work, but in practice it is simply another vast government program that can be gamed and cheated to provide a paycheck for no work at all. This is the welfare state in all its bureaucratic, amoral, spendthrift glory: rather than helping a relatively few who really need it, it instead enables millions of the able-bodied to avoid work. (Whatever you subsidize, you get more of. If you subsidize unemployment, you'll get more of it.) Samuelson does a good job of explaining why this program will so hard to reform in any meaningful way, too:

For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. "People are driven into the program by desperation," says Autor. Nor are they rolling in money; the average payment is about $14,000 a year.
Any attempt to tie off this spouting artery will bring howls of outrage, and not just from the left. To a large extent the welfare state has transcended the usual ideological boundaries (as it was designed to do right from the start) and made tens of millions of Americans into wards of the state. The end of the welfare state means the end of their monthly checks; it means the end of the "free" money they've been getting. Young or old, rich or poor, sick or healthy: it takes a rare soul to forgo "free" money in the face of some purely theoretical economic emergency. The welfare state will continue until this nation fails because, deep down, Americans don't really want to give it up. Americans still -- mostly -- feel that if we just tweak this knob that way and pull that lever just so, it will all come out okay. It's not so much good old American optimism as it is a deep and inchoate terror: the instinct of many an animal in dire peril is neither to fight nor run, but to crouch trembling where they are and pray that the danger passes them by.

Greece provides a look at our future. Greeks riot after bailout austerity vote. This is what the endgame looks like -- Plan A was the welfare state, but it failed; there is no plan B.

The aging of the industrialized world's population, combined with a low birth-rate, is one of the biggest demographic and cultural challenges facing the world in the 21st century. America is facing the "Boomer bulge", but Japan and China are facing particularly severe pressures.

What would be the economic impact of the end of American football? Professional sports leagues are businesses like any other, and businesses disappear all the time.

His Majesty King Barack I shares many traits with monarchs of times past.

The Angelides report on the 2008 subprime meltdown was a masterpiece of governmental ass-covering and subterfuge, but the AEI's Peter Wallison (and others) have mustered a vast amount of evidence that Fannie Mae and Freddie Mac were in fact integral to the machinery that drove the disaster. As it turns out, the pending lawsuits against Fannie and Freddie pretty much vindicate Wallison et al's contention, and negate much of the "benefit" of Dodd-Frank. Yet Dodd-Frank will remain the law of the land unless and until it is repealed.

James Fallows of The Atlantic spends a large number of words to explain how none of this is his boyfriend's fault. Torquemada could not torture logic and common sense as brutally as Fallows does here.

Even the New York Times finds itself compelled to admit that the federal government sucks at actually creating jobs. The article is the usual heming and hawing, but this sentence makes the travail worthwhile for its pure hilarity: "The stimulus effort should have contained more programs like Cash for Clunkers, which pulled car sales forward, emptied dealership lots and prompted auto plants to bring back thousands of employees." BWA-HA-HA-HA-HA! Oh, man, only the NYT could say that with a straight face.

A Chinese "hard landing" is starting to look more likely: China Instructs Banks to Roll Over $1.7 Trillion in Debt to Avoid Mass Default.

Japan's slow decline is something I've written about before. Japan is carrying debt in excess of 200% of their GDP, and is getting crushed demographically: too many old people and not enough young people. I remain convinced that the decline of this first-world industrial power will be one of the major stories of the 21st century. (It's possible that some unforseen technology will save them...but I wouldn't bet on it.) The only thing saving Japan from catastrophe right now is the fact that the bulk of their debt is held by Japanese citizens. But the citizens are growing older and retiring, and will move from being net savers to net consumers. Japan will at some point have to go to international markets to roll their debt, and when that happens...DOOM.

Here's your horrifying chart-fu for the day: the projected 75-year increase in federal health spending. The only comfort comes from knowing that we'll collapse way before the year 2086 rolls around.

HFT (High Frequency Trading) is very accurate and very fast...but it's not perfect. Thus, though errors are rare, they do occur. And in computer terms, "rare" is measured in minutes -- sometimes even seconds. A computer can perform hundreds of billions of calculations a second, so a one-in-a-billion error isn't all that rare as measured by human time. Modern financial software is also fragile because it often relies on models and algorithms that are badly tested (or simply based on non-scientific "hunches"). Then there is the human element: the programmers, administrators, and users of these systems are themselves fallible and prone to error. Combine all that and it's a wonder that computerized trading doesn't fail catastrophically more often than it does.

ALL IS WELL versus WE'RE DOOMED. You know which side I'm on.

Good question: if the economy is in recovery, why is gasoline usage going down? There are other factors at play here, I understand -- concerns about Libya and Iran, etc. -- but this tends to run against the idea that the economy is in any kind of sustained upswing. (And the BDI is still in the dumper, which means that overcapacity is still a problem in the face of slowing demand.)

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posted by Monty at 08:45 AM

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