New York: standing tall against nature’s wrath

Let’s praise the man made structures that withstood Sandy’s fury rather than fretting about allegedly man made Frankenstorms.

by Nathalie Rothschild 

It was the stuff of disaster movies: fire fighters travelling down 14th Street in inflatable boats; the facade of a Chelsea building blown out, exposing the interiors of tastefully decorated apartments; a power station explosion lighting up the New York sky; cranes dangling precariously off skyscrapers; floods causing the downtown Canal and Water Streets to live up to their names; Lady Liberty going dark and the lights of Manhattan switching off one by one until the Empire State was one of the few buildings still shining bright on the greatest skyline on Earth.

Following Hurricane Sandy’s pounding of the US East Coast from afar, eyes glued to my hyperactive Twitter feed where these astonishing images from New York City were doing the rounds, the thought of how limited the damage was in proportion to the strength of the storm was humbling.

Yes, it might sound soppy, but it’s worth reminding ourselves just how much gumption it takes to build and run a city that is largely able to withstand such relentless forces of nature as the Sandy superstorm. It’s pretty awesome, as Americans would say.

But on Twitter, the steady stream of blurry Instagram pictures and testimonies to individuals’ heroic efforts - such as the nurses who evacuated babies down nine flights of stairs in the dark - were interspersed with admonitions of human arrogance. We have ourselves to blame for nature’s havoc-wrecking, some suggested, and we are powerless in the face of nature’s wrath.

Doesn’t that seem paradoxical?

Spain, Rescued but Not Saved

The rot that Europe's bailouts won't fix

By RAYMOND ZHONG

In Spain's recent attempts to right its economy, a pattern emerges: There is intervention layered upon intervention, dithering as the problem deepens, "reform" resulting in higher taxes—and, sometimes, the suggestion of cronyism.

Last month La Moncloa announced "perhaps one of the most necessary reforms" to address the "debt hole left by previous governments." Since 1998, Spain has subsidized the production of green power via feed-in tariffs, which require electrical companies to pay renewables producers a fixed, above-market price for their output. It worked. In 2008, Spain accounted for half of the world's new solar-power installations in wattage terms.

But to keep household electricity bills from rising too quickly, the government covered the utilities' extra costs out of the public purse. The accumulated "tariff deficit" had grown to €24 billion by this year, and was set to grow an additional €5 billion annually. (Spain's entire 2011 budget deficit was €100 billion.)

September's solution is a 6% tax on all energy production, renewable and otherwise. The Spanish treasury will also assume €2.1 billion of next year's cost of servicing outstanding obligations. New levies on nuclear waste and hydro power round out the measures, which are expected to eliminate new tariff deficits starting in 2013.

The Lie That Is Social Security

The money you pay into Social Security is not yours

by Lance Roberts

The problems facing the U.S. economy are daunting especially when it comes to issues of Government spending and the current deficit. We recently wrote about the dependency on Government programs which are currently making up as much as 35% of personal incomes. Social Security, Medicaid and Medicare make up the largest portions of the current spending requirements of the Federal Budget. The current administration has promised that cuts will not be made to government "entitlement" programs but is that a promise that any administration can actually keep?

When it comes to Social Security the facts are rather alarming. By 2017 the Social Security Administration will pay out more in benefits than it takes in. This is not surprising given that in the 1950's there were roughly 5 workers for every retiree. Today, it is roughly half of that. With 78 Million "baby boomers" moving into retirement the demands on social security are set to spiral higher in the coming years ahead. Is it really any wonder then that with demographics heading in the wrong direction, not to mention a much slower growth economy, that the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033?

With these rather stark points in mind it was much to my dismay that Smart Money published an article by Alicia Munnell entitled "Social Security: The Cheapest Annuity In Town" which stated: 

"The Center for Retirement Research at Boston College has just released a new study that shows that the best way for people to turn their 401(k) balances into a stream of income is to 'buy' an annuity from Social Security. Many people don't recognize that Social Security is in the annuity business, but it is and it has the cheapest product in town."

Government-mandated fantasies

‘Maximum temperature law’ to prevent ‘temperature gouging’ makes as much sense as laws to prevent ‘price gouging’

By Mark J. Perry 

The summer of 2012 was the third-warmest summer on record in the United States.  The average temperature of 74.4 degrees from June-August this year was just one-tenth of a degree below last summer’s average temperature of 74.5 degrees, and two-tenths of a degree short of the hottest summer on record back in the Dust Bowl of 1936, according to the Weather Channel.

The extreme heat waves during the last two summers, and the hardships they have caused for millions of Americans (including 82 heat-related deaths this year), firmly establishes that we are at the mercy of a very cruel, ruthless, merciless, cold-hearted, and uncaring force: Mother Nature. Without some kind of government intervention in the market for high temperature readings being registered on existing thermostats, Mother Nature will continually and ruthlessly expose Americans to harsh summer conditions of unconscionably high temperatures. Who among us wouldn’t agree that the excessively high summer temperatures this year were a form of unfair “temperature gouging”?

The Economics of Dracula

Liberty or Security ?

by Peter C. Earle

Another Halloween is upon us, bringing its late autumnal burst of costumes, candy, and merriment. Ghosts, witches, mummies, zombies, Frankenstein's monster, film and television characters, and others will make appearances, as will the quintessential Halloween figure: Dracula.

Most people are familiar with Count Dracula's first literary appearance in Bram Stoker's 1897 Gothic horror novel Dracula. And many are also aware that the undead villain was loosely based on a real historical figure, Vlad Tepes III — "Vlad the Impaler" (sometimes "Vlad Dracula") — who ruled mid-15th century Wallachia, a region of modern day Romania.

Incredibly, though, there is a real but lesser-known horror story behind Dracula — a story of the long-term effects of inflationary policies and a consequent campaign of economic nationalism, rather than of a mythic, powerful undead creature: interventionism pursued terrifyingly, diligently, to its logical ends.

Euro breaks up the hard way

Credit to EU governments rose by 8.3% while credit granted to the private sector declined by 1.3%

By Martin Hutchinson 

The eurozone appears to be trying to do things the hard way. It has softened conditions on Greece, while promising an unlimited fund to buy debt of the other PIGGY governments and supporting the creation of a supranational banking regulator. In the short term, this has quieted market speculation. In the long term it has increased the probability of a break-up of not only the eurozone but the European Union itself. 

Growth in the eurozone has run just below the flatline this year, with The Economist team of forecasters expecting 0.5% shrinkage of the eurozone economy in 2012 and a tiny 0.1% growth in 2013. Only inflation is creeping up, expected to reach 3% this year as the European Central Bank's various monetary "stimulus" policies have their inevitable side-effects. 

Euro M3 money supply rose only 2.7% in the year to September, a reasonable rate, but in the same year credit to government rose by 8.3% while credit granted to the private sector declined by 1.3%. In other words, the eurozone monetary crisis is squeezing the private sector while its banks contribute further to the perpetual aggrandization of government. 

The real problems are arising in the countries being bailed out. Greece is being given an additional 16-18 billion euros (US$21-$23 billion) through 2016, and in return will be expected to allow direct EU "advisory" interference in its tax collection and budgeting.

Good luck with selling that on the streets of Athens! 

Italy faces an election in March in which neither Silvio Berlusconi, the most important figure of the past two decades, nor Mario Monti, the darling of the EU technocrats, will officially run. The country ranks 92nd on the Heritage Foundation's Index of Economic Freedom, just below Azerbaijan, while public spending runs at 52% of gross domestic product (GDP) and debt above 100% of GDP. The country's relatively lavish living standards are now wholly incompatible with its third-world economic policies. 

Austerity Has Yet To Come To Greece

The idea that austerity is killing Greece is simply absurd

By Nikos Tsafos

The idea that deep cuts are pushing Greece to the brink makes for great punditry. But it is a woefully incomplete description of what is really happening. Austerity is not killing Greece. Instead, austerity has yet to come to Greece.

There is no doubt that the plight of the Greek people is real. The government’s draft budget shows that GDP in 2013 will be 22 percent below its 2007 peak. Over eight hundred thousand people have lost their jobs, and unemployment is at 25.1 percent. Private deposits have fallen 35 percent as people and companies tap into savings or send their money overseas. Tax hikes have led to the highest inflation in a decade, further squeezing incomes. Households are suffering with no end in sight. Greece is in the midst of a lost decade.

It is easy to blame austerity for this. But it is also wrong.

Austerity came from the recession, not the other way around. The recession started in mid-2008 and worsened in 2009. Yet government spending rose in both 2008 and 2009. In fact, the recession started during the largest expansion of the state since the 1980s and at a time when government primary spending, or spending excluding interest payments, as a share of GDP was at a historic high. The problem was that despite this stimulus, Greece was not only in a recession but also had a budget deficit that it could no longer finance. That is when austerity started.

Why should the EU be uniquely exempt from austerity?

Almost all EU states, including the United Kingdom, must borrow the money they are sending to Brussels

By Daniel Hannan

The change has been so sudden, so dizzying, that commentators are struggling to keep up. As recently as a a couple of years ago, British Europhiles used to aver that we shouldn't get too hung up about our budget contributions. Paying more in, they said, gave us additional leverage in Brussels; complaining, by contrast, cost us influence.

If there is a single politician making that argument today, I have yet to hear him. Even Denis MacShane –Denis MacShane, for Heaven's sake – now contends that the EU, just like its member nations, must learn to get by with less.

The key amendment tomorrow is the one moved by the Rochester and Strood MP, and former top-rated UK economist, Mark Reckless. It calls for a real terms cut. In other words, the EU budget should increase more slowly than inflation.

The Reckless amendment is remarkably modest. Almost every one of the 27 member governments, including the United Kingdom, is making far more severe cuts than it demands. And almost all of them, including the United Kingdom, must borrow the money they are sending to Brussels. As I argue in a comment piece in the main newspaper today, Britain's contribution to the EU budget more than wipes out all our domestic spending cuts put together.

An Italian Tsar

Mario Draghi backs Wolfgang Schaeuble's 'super commissioner' plan

Mario Draghi told Spiegel that he "completely supported" a plan drawn up by German Finance Minister Wolfgang Schaeuble to bolster the power of the EU's economic and monetary affairs commissioner.

Mario Draghi told Spiegel that he "completely supported" a plan drawn up by German Finance Minister Wolfgang Schaeuble to bolster the power of the EU's economic and monetary affairs commissioner.

"I am certain: if we want to restore confidence in the eurozone, countries will have to transfer part of their sovereignty to the European level," Draghi told Spiegel in comments published in German.

"Governments have taken steps that would have been unthinkable a year ago. That is progress but it is not enough," added the powerful central bank chief.

He also insisted that European rules on economic governance be respected, which he noted had not always happened in the past.

Since the outbreak of the eurozone debt crisis three years ago, the European Union has taken unprecedented measures, including creating a fiscal treaty between them, setting up a huge joint bailout pot and moving towards a banking union next year.

Troika Calls for New Debt Relief for Greece

Another Default?

Greece's international creditors are calling for a new debt haircut for the country so as to bring down its massive debt load. This time, however, taxpayer money from Germany and other donor countries would be involved. Resistance, not surprisingly, is substantial.

By Spiegel

For all of the uncertainty surrounding Greece's future in the euro zone and the mixed messages regarding the political and economic reform process in the country, the math is actually relatively simple. Current plans call for Greece's sovereign debt to drop to 120 percent of gross domestic product by 2020. But the country's debt load is 169 percent of GDP and it is expected to rise to 179 percent by the end of next year. In absolute terms, that is almost €350 billion ($451 billion).

Paying that down will require nothing short of an extended economic miracle in the Mediterranean country, an eventuality not looking terribly realistic following five years of economic shrinkage and a sixth on the horizon.

The other option? Another partial default. That, indeed, would seem to be the conclusion that Greece's main international creditors have come to. According to information received by SPIEGEL, representatives of the so-called troika -- made up of the European Central Bank, the European Commission and the International Monetary Fund -- proposed just such a debt haircut at a meeting last Thursday held in preparation for the next gathering of euro-zone finance ministers.

What Is a Dollar?

Don't Ask the Fed

By SETH LIPSKY

When the House committee on financial services met in March to hear testimony from the chairman of the Federal Reserve Board, all eyes were on Congressman Ron Paul of Texas. After Republicans won control of the House last year, Paul acceded to the chairmanship of the subcommittee on monetary policy, which has direct oversight of the Fed. A physician by trade and a libertarian by conviction, Paul had emerged over a long career in Congress as the leading proponent of sound money; for more than 30 years, he had been waiting to play a central role in the nation's monetary debate. So eager was Paul to open up the topic that it took him some 670 words to get his question out.

The congressman noted the Fed's legal responsibility to strive for stable prices and full employment, and offered a review that illuminated the instability on both fronts since the early 1970s. He discoursed on the symbiotic relationship through which the Fed and the Congress have been facilitating government spending. He spoke about the importance of a "measurement of value," and asserted that the value of the stocks in the Dow Jones Industrial Average had plunged to eight ounces of gold from 44 in 2000. He reported that he was unable to find a definition of the dollar in the United States Code and wondered how the Fed could manage its task without a definition of the national unit of account. He therefore concluded his remarks with a simple question: "[W]hat is your definition of a dollar?"

Spanish Contraction Continues, Austerity Spurs Inflation

Raising Taxes to Spur Growth - what can go wrong?

Spain’s economy contracted for a fifth quarter, undermining efforts to plug the budget deficit that’s pushing the nation closer to a bailout, while austerity measures kept inflation at a 17-month high.

By Emma Ross-Thomas

Spain’s economy contracted for a fifth quarter, undermining efforts to plug the budget deficit that’s pushing the nation closer to a bailout, while austerity measures kept inflation at a 17-month high.
Gross domestic product declined 0.3 percent in the three months through September, compared with 0.4 percent the prior quarter, the National Statistics Institute said today. That compared with the Bank of Spain’s estimate on Oct. 23 of a 0.4 percent contraction. Consumer prices, rose 3.5 percent from a year earlier, Madrid-based INE said.
The prolongation of Spain’s five-year slump, which is prompting record loan defaults at the nation’s banks and job cuts at companies including Gamesa SA (GAM), adds to pressure on Prime Minister Mariano Rajoy as he resists requesting international aid. While the tax hikes he’s implementing as part of his austerity program are depressing consumption, they are also spurring inflation, which threatens to add 3 billion euros ($3.9 billion) to the country’s pension bill.
“The real discussion should be about how protracted the recession will be and if you look at the fiscal tightening you really have to be conservative about next year,” said Martin Van Vliet, an economist at ING Bank in Amsterdam. “I’m very concerned about the size of the fiscal tightening, the fact they’re going to miss their deficit targets and the fact Rajoy is delaying the request for aid.”

Egalité without liberté?

Non, non, non!

A new army of equality quangos and experts promises to make us all equal – but at the expense of our freedoms 

by Brendan O’Neill 

Historically, when people talked about equality, they meant one of two things. They either meant political equality - that is, equal rights, the expansion of freedom to more and more sections of society. Or they meant material equality - that is, a rethink of the way resources are created and distributed, the expansion of wealth so that more and more sections of society could enjoy it.

But today, we have a very curious situation where the new equality industry - all those quangos, experts and politicians who present themselves as the guardians of equality - actively undermines those two goals of the old struggles for equality. Today, equality is promoted not as a means of expanding freedom, but of limiting it. And equality is celebrated not as a means of expanding wealth, but as a way of shrinking wealth, or at least making it less ostentatious.

Where once we fought for equality in order to expose greater numbers of people to the gains of freedom and the joy of wealth, now the state and its offshoots promote equality in order to protect us from those things - in order to protect us from the alleged dangers of too much freedom and from the alleged mental distress that comes from wanting too much material stuff.

Hurricanes Are Nature’s Keynesianism

Why catastrophic weather doesn't put idle resources to work and make us richer

By ROBERT P. MURPHY

It was inevitable that with the arrival of Hurricane Sandy, various economic pundits would speculate on its effects on “the economy.” Needless to say, some were saying that the hurricane would boost spending—both at the retail and then reconstruction level—and in that sense might actually provide a lift to GDP. The whole episode is yet another reminder that old fallacies die hard in economics. The commonsense notion that a natural disaster is bad is correct; only “sophisticated” analysts could think otherwise.

The basic problem here is what Henry Hazlitt called the “Broken Window Fallacy,”following the famous exposition of Frédéric Bastiat. The essential insight is that it is shortsighted to focus just on the employment given to workers who must rebuild after some act of destruction. In the present case, it is certainly true that glaziers, producers of telephone wire, and various construction crews will see more demand for their services following Hurricane Sandy. Their higher earnings in turn may lead them to spend more on restaurants, luxury items, and so forth, boosting employment in those sectors as well. This is the genesis of the notion that an act of destruction can actually have a silver lining.

The Struggle Over Egalitarianism Continues

It takes a lot of clout to be a victim

by Murray N. Rothbard, February, 1991

Introduction

In the two decades since this essay was written, the major social trends I analyzed have accelerated, seemingly at an exponential rate. The flight away from socialism and central planning begun in Yugoslavia has stunningly succeeded over the entire "socialist bloc" of Eastern Europe, and there is now at least rhetorical allegiance to the idea of privatization and a free-market economy. More and more, Marxism has become confined to the academics of the United States and Western Europe, comfortably ensconced as parasites upon their capitalist economies. But even among academics, there is almost nothing left of the triumphalist Marxism of the 1930s and 40s, with their boasts of the economic efficiency and superiority of socialist central planning. Instead, even the most dedicated Marxists now pay lip service to the necessity of some sort of "market," however restricted by government.

I. New Areas of Inequality and "Oppression"

But this does not mean that the struggle over egalitarianism is over. Far from it. On the contrary, after the New Left of the late 1960s and early '70s had been discredited by its bizarre turn to violence, it took the advice of its liberal elders and "joined the system." New Leftists launched a successful Gramscian "long march through the institutions," and by becoming lawyers and academics — particularly in the humanities, philosophy, and the "soft" social sciences — they have managed to acquire hegemony over our culture. Seeing themselves defeated and routed on the strictly economic front (in contrast to the Old Left of the 1930s, Marxian economics and the labor theory of value was never the New Left's strong suit), the Left turned to the allegedly moral high ground of egalitarianism.

Y2Kyoto: The Final Solution

And everything old is new again

The flat-earth theory of job creation

We need to move beyond this primitive view

By Robert J. Samuelson

Who creates most jobs? Hint: It’s not the government. Almost everyone seems to grasp that the private sector is the true jobs machine. But here’s a notable exception to the consensus: the editorial page of The New York Times. The other day, its lead editorial was “The Myth of Job Creation: The government does in fact create jobs, important jobs, millions of them.” In 35 years, I can’t recall ever writing a column refuting an editorial. But this one warrants special treatment because the Times’ argument is so simplistic, the subject is so important and the Times is such an influential institution.

Let’s examine the Times’ argument. First, it quotes both Mitt Romney and President Obama as embracing the consensus. Obama says: “This notion that I think government creates jobs, that that somehow is the answer. That’s not what I believe.”

Completely wrong, says the Times. Government does create jobs, including “teachers, police officers, firefighters, soldiers, sailors, astronauts, epidemiologists, antiterrorism agents, park rangers, diplomats. ...” There are 22 million federal, state and local workers, notes the Times.

All Pain, No Gain

Retail Sales in Spain Plunge 10.9%, Largest Drop on Record

by Mike "Mish" Shedlock

In a seriously misguided effort to balance its budget, In early September Spain Passed Largest VAT Hike In History.

I wrote at the time, "Stunning Ineptitude Will Make History Books".

Spain's unemployment rate is over 25% and the youth unemployment rate is near 53% yet the fools in the Spanish government hiked taxes yet again, this time by the largest amount in history.

Spain's handling of this economic implosion is sure to make the history books as a prime example of complete ignorance in how to deal with a fiscal crisis.

History in the Making

That prediction took a single month to pan out. Reuters reports Spain retail sales decimated by VAT hike.

Spanish retail sales fell at their fastest pace on record in September as already battered consumer confidence took another hit from a hike in value added tax, driving many shoppers to trade down to cheaper products.

Sales fell 10.9 percent year on year, Monday's National Statistics Institute data showed, reflecting an economy struggling through its second recession in three years and plagued by chronically high unemployment.

Inequality Is The Child Of Fiat Money

Finance’s share of GDP has gone up one and a half times since we went off gold

By Brian Domitrovic

For a while there, it looked like the 2012 election was going to be a referendum on economic inequality. This would have been weird, in that economic growth and its twin, employment, are the clear issues of choice in these years of torpid economic recovery. Had President Obama succeeded in making the election about inequality, which it appears now he will not, it would have amounted to one of the great examples of changing the subject in recent political history (as I pointed out a few months ago in a talk at the Cato Institute).

But let it be clear that there are serious issues of economic inequality that deserve a hearing in our politics today. We are not likely to have them aired by an opportunistic presidential campaign, the Occupy Wall Street movement, or those academics who have made a career of dilating on the “top 1%.” Rather, we should turn our attention to that be-all and end-all of the contemporary economy—the fiat money system so beloved by the Federal Reserve.

One of the most shocking statistics of recent economic history is the change, since the 1960s, in the share of the economy taken up by the financial sector. That share has at least doubled, from 4% to probably about 10% today. People wonder what happened to manufacturing (and its generally high wages) in this country. One of the answers is alluded to in the subtitle of Judith Stein’s 2010 book, “How America traded factories for finance in the 1970s.”

The Quest for Certainty

The Economics of Assumptions

By John Mauldin

“As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.”  – Albert Einstein

“To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"   – Friedrich Nietzsche

“Very few beings really seek knowledge in this world. Mortal or immortal, few really ask. On the contrary, they try to wring from the unknown the answers they have already shaped in their own minds – justifications, confirmations, forms of consolation without which they can't go on. To really ask is to open the door to the whirlwind. The answer may annihilate the question and the questioner.”  – Anne Rice, The Vampire Lestat

The last two weeks we have been looking at the problems with models. First we touched on what I called the Economic Singularity. In physics a singularity is where the mathematical models no longer work. For example, models based on the physics of relativity no longer work if one gets too close to a black hole. If we think of too much debt as a black hole of sorts, we may understand why economic models no longer work. Last week, in “The Perils of Fiscal Cliff,” we looked at the use of fiscal multipliers by economists in order to argue for or against governmental economic policies. Do you argue for austerity, or against it? There is a model that will support your case, most likely using the same data that your adversary uses.

These letters have generated a great deal of positive response and conversation. While I very rarely suggest to readers to go back and read previous letters, but reading these may help you appreciate why it is so difficult to understand what is happening in the global economy today.

A police state created by ‘anti-fascists’

In their enthusiasm to clamp down on ‘hate speech’, anti-fascists have become an unofficial arm of the state

by Patrick Hayes 

Given that the key thing about twentieth-century fascism was its extreme authoritarianism, you might reasonably expect those who describe themselves as ‘anti-fascist’ to be anti-authoritarian. You might imagine that these campaigners, more than most, would know the dangers of giving the state too much power and trusting it to determine who may speak and who may not, who is a ‘decent’ person and who is not.

But you would be wrong – certainly if the events in the north-east London district of Walthamstow this weekend were anything to go by. There, anti-fascists campaigning against a protest planned for Saturday by the right-wing, allegedly fascistic English Defence League (EDL) demonstrated that they are uncritically pro-state, and unabashedly pro-authoritarian, trusting the powers-that-be to police public protest and political discourse more broadly.

The modern anti-fascist left has provided plenty of justification for increased state control over political to and fro in modern Britain. It has strengthened the use of public-order laws over political freedom, and it has empowered the state to govern all forms of political speech. That control extends not just to the statements and actions of ‘fascist’ groups, but also to the statements and actions of left-wing groups and anti-fascists, too.

France’s Quiet Bank Rescues Top $78 Billion With Peugeot

"Free Market" Socialism in France 

By Fabio Benedetti-Valentini 

France’s aid to PSA Peugeot Citroen SA (UG)’s troubled finance arm brings the state’s backing for the nation’s banks to more than 60 billion euros ($78 billion).

The government yesterday said it will guarantee 7 billion euros in new bonds by Banque PSA Finance, the consumer-finance unit of Europe’s second-largest carmaker. The aid comes on top of support for Dexia SA (DEXB), the French-Belgian municipal lender, and for home-loans company Credit Immobilier de France.

“These bank rescues on the quiet should be getting more critical market attention,” said Bill Blain, a strategist at Mint Partners Ltd. in London. “We don’t know what’s next, but it certainly demonstrates that some of the specialized financial institutions remain very, very weak.”

The third such French bailout in the past year coincides with President Francois Hollande’s push for a European banking union and a common euro-area bank supervisor to break the link between lenders and governments. It also comes as the French government struggles to keep a pledge to cap its budget deficit at 3 percent of gross domestic product next year.

U.S. risks falling off a global cliff

A fiscal-gap serial offender

By William H. Gross

The popular TV series “Breaking Bad” may be an appropriate analogy for the U.S. “fiscal cliff” and ongoing debt crisis. In the show, a chemistry teacher is lured into producing crystal meth. As the title indicates, his middle-class life turns from a temporary high into something much worse, the conclusion of which viewers will learn next year.

Washington, it seems, has a similar story. Hooked on the temporary high of tax cuts and increased entitlements over the past several decades, the nation’s capital is approaching the end of the line traveled by most addicts: Reform, or suffer the consequences.

At first blush, the comparison to a methhead might seem a bit of a stretch. Despite approaching the edge of the fiscal cliff with a deficit equivalent to 8 percent of gross domestic product, the United States is still considered the “cleanest dirty shirt” in global financial markets. Whenever an authentic crisis (Lehman Brothers in 2008) or a minor aftershock occurs, investors buy U.S. Treasury bonds, the dollar rises and this country’s reserve-currency status is reaffirmed. The United States still seems to be the first destination of global capital in search of safe (although historically low) prospective returns.

Mugging our descendants

Plundering our descendants’ wealth to finance the demands of today’s entitlement mentality

By George F. Will
The election-eve mood is tinged with sadness stemming from well-founded fear that America’s new government is subverting America’s old character. Barack Obama’s agenda is a menu of temptations intended to change the nation’s social norms by making Americans comfortable with the degradation of democracy. This degradation consists of piling up public debt that binds unconsenting future generations to finance current consumption.

So argues Nicholas Eberstadt, an economist and demographer at American Enterprise Institute, in “A Nation of Takers: America’s Entitlement Epidemic.” This booklet could be Mitt Romney’s closing argument.

Beginning two decades after the death of Franklin Roosevelt, who would find today’s government unrecognizable, government became a geyser of entitlements. In 2010, government at all levels transferred more than $2.2 trillion in money, goods and services to recipients — $7,200 per individual, almost $29,000 per family of four. Before 1960, only in the Depression years of 1931 and 1935 did federal transfer payments exceed other federal expenditures. During most of FDR’s 12 presidential years, income transfers were a third or less of federal spending. But between 1960 and 2010, entitlements exploded from 28 percent to 66 percent of federal spending. By 2010, more than 34 percent of households were receiving means-tested benefits. Republicans were more than merely complicit, says Eberstadt: