Moral Realism vs. Evolutionary Biology?

Moral reasons do not require reduction to something else in order to count as legitimate

by David Gordon

To review Thomas Nagel's new book for the Mises Daily seems at first sight a misplaced endeavor. The book has nothing to say about libertarianism or Austrian economics; moreover, Nagel's own political views are decidedly non-libertarian. He wrote the most influential critical review of Nozick's Anarchy, State, and Utopia, and he rejects Lockean theories of property ownership, instead viewing property rights as conventional.[1]Nevertheless, one chapter in the book raises issues of profound concern to anyone interested in political philosophy, and it is for this reason that I wish to comment on it here.

Suppose one says that it is wrong to initiate force against other people. What does it mean to say that this claim is true? Are moral judgments just personal preferences, or are they more than this? Mises favored the former alternative. We can judge objectively that certain actions are suitable means to achieve a goal, but ultimate value judgments cannot be assessed as rational or irrational.

To apply the concept rational or irrational to the ultimate end chosen is nonsensical. We may call irrational the ultimate given, viz., those things that our thinking can neither analyze nor reduce to other ultimately given things. Then every ultimate end chosen by any man is irrational. It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk. (Human Action, p. 880)

What Real Estate Bubble?

Oh, You Mean the One That's Bigger Than the 2007 Bubble?

By Charles Hugh Smith

The Wilshire REIT (real estate investment trusts) index sums up the current real estate market in one image: 

it’s painfully obvious that real estate valuations are once again at asset-bubble extremes, one that’s even bigger than the last RE bubble that popped in 2008 with devastating consequences to the global economy.

Defenders of current real estate valuations can draw upon an array of justifications, but they boil down to the same one used to justify valuations in every asset bubble: this time it’s different.

Is there anything in this chart that suggests this belief might be misplaced, for example, that credit/asset bubbles burst with a rough time/amplitude symmetry?

Internet lessons to learn

This is a new ball game for everybody, in both democratic and authoritarian governments

By Francesco Sisci 
BEIJING - The whole issue of cyber security exploded in recent days in Europe, as news of America wiretapping its European allies has huge and multi-faceted implications for global safety and development. There are roughly three interrelated aspects to it, and China, although not part of the present scandal, is part of it. (See also Common folk aren't US's cyber-targets, Asia Times Online, June 18, 2013.) 

Cyber-spying has become the main instrument to steal not only political confidences but also technological and scientific secrets. For a developing country like China with growing cyber capabilities, cyber infiltrations abroad can be a very important instrument to improve its own industry, which is currently strained by sanctions forbidding the export of sensitive technologies. 

These technologies may also have dual uses for civilian and military purposes. However, the theft of these tools, although it may help Chinese science leapfrog in its progress, hooks Chinese technologies to the model of the advanced countries. De facto, it may blunt China's indigenous and original scientific advance, as it is easier to try to steal secrets from abroad than to foster homegrown research. 

In a way, the same pattern took place with computers when pirating software and hardware technologies from America hooked Chinese improvement to that of America. In the same way, by having its technologies stolen in China, America, the leading country in many fields, can impose its own model on China or even "leak" (let Beijing cyber-steal wrong parts) faulty technologies to China, which may lead Chinese astray. 

However, there is a bigger issue in cyber security. All countries have a greater ability to attack than to defend their own turfs. That is, if China is able to breach American or European cyber secrets, it is most likely also very weak in defending its own secrets. This may not be too important, because China does not have many scientific secrets to be stolen compared to America or Europe. Overall, the Chinese political and social system is weaker than America's. This reveals a deep weakness of a system that is more rigid and therefore able to be shaken by attacks by foreign cyber forces. Conversely, America may have more secrets to be stolen, but its social and political system is much more resilient to attack.

The fall and fall of Asian fertility

The unwillingness of young Asians to start families echoes a worldwide rejection of the capacity to live independently

by STUART DERBYSHIRE

Fertility rates in East Asia have fallen catastrophically since the early 1970s and are now the lowest in the world. In all parts of Asia, the total fertility rate (TFR) has fallen by half or more in the past 35 years. In Japan, South Korea, Hong Kong, Taiwan and Singapore, the TFR hovers between 1.0-1.3. For a population to replace itself, the TFR needs to be above 2.1. Thus, if these trends in fertility are not substantially reversed, the population of Asia will rapidly shrink as the continent heads into extinction. How did this happen?

Most commentators are inclined to blame the falling rate of TFR on the influence of modernity on women. Speaking in 1983, for example, Singapore’s then prime minister, Lee Kuan Yew, infamously remarked that educating women and bringing them into the workforce had undermined their more traditional role as mothers: ‘It is too late for us to reverse our policies… Our women will not stand for it. And anyway, they have already become too important a factor in the economy.’

Despite the growing prosperity of Asia and the introduction of women into the workforce, family life in Asia remains male-centred, with females playing a subordinate role. Working mothers are still expected to maintain all domestic activity and will perform ‘second shift’ domestic duties regardless of their profession or educational achievement. Korean women, for example, put in an average of four hours of domestic work per day compared with 17 minutes from men (1). That imbalance gets worse after children and, perhaps unsurprisingly, about two thirds of women in Korea and Japan exit the labour force immediately prior to the birth of their first child. Given these punishing expectations, it is understandable that many Asian women make the pragmatic choice to avoid becoming pregnant.

Understanding Europe's Delusion, Dilemma, And Endgame In Under 9 Minutes

Very slowly and then at once

by tyler drusden

If one watches (or reads) any of the mainstream media, it might seem 'obvious' that Europe is doing well; it's recovering; and the crisis is over (almost over..). However, as Punk Economic's David McWilliams explains in this excellent overview of the European delusion and Merkel's dilemma,there is a "wedge" of unreality between the so-called "markets" and the reality of economic progress. From playing with Germany's money to moar bailouts, and from Merkel's enabling of Draghi's excess to the reality that nothing has changed across the European region, in under 9 minutes, McWilliams brief tour-de-force is a must-watch before you 'chase' more performance with the herd. McWilliams concludes, however, with a darker edge of the inevitable endgame of a "slow trudge" to federalization (and loss of sovereignty) that will likely see Nigel Farage (and many others) apoplectic.

So much for the U.S. economy and the free market

Ben Bernanke's Hubris Has Him Attempting To Challenge The Laws Of Gravity

By Moshe Silver

Why is America’s top central banker standing in the way of economic growth and a strong U.S. dollar? If you’re wondering what the answer is to this, and why the monetary madness shows no sign of stopping, you’re not alone. Many Fed observers remain aghast at the power our unelected Fed Chairman has arrogated to himself since being appointed.

Case in point: Last month’s head-scratching “Taper-Not-Heard-‘Round-The-World” when Ben Bernanke challenged economic gravity by refusing to curtail the mind numbing scope of unprecedented Fed asset purchases. Unlike his predecessor (Alan “I made a mistake” Greenspan), Professor Bernanke has yet to admit error. Like New York’s fabled Mayor Fiorello LaGuardia, when he does… it’ll be a doozy! To be clear, the markets were signaling their willingness to charge ahead under their own steam – until Bernanke’s shrug reignited bond prices and depressed an already depressed dollar.

The Trouble with the New “Islamic Science”

Modern science is not a body of facts, but a process for the study of the natural world

By Imad-ad-Dean Ahmad

The history of Islam’s relation to science has largely been one of harmony. It offers no real parallel to the occasional bouts of suspicion toward science that the Christian world experienced. Today, many Muslims can be found in the fields of medicine and engineering. Even the ultraconservative Muslims who long for a return to the ethical norms of the seventh century see no need to abandon cell phones to do so, and even the most extreme of Islamic extremists envies the high-tech oil-extraction techniques and the weaponry of the West. Muslims, both conservative and liberal, issue fatwas (legal opinions) over the Internet without any hesitation over the technology they employ and with no fear that it may be haram (prohibited).

However, although contemporary Muslims tend not to be averse to science or technology, their strong belief in the compatibility of science and Islam may leave them vulnerable to dubious efforts to equate the two. The effort to harmonize modern technical knowledge and practice with Islamic teaching is part of a project known as the “Islamization of knowledge,” and is quite popular among Muslim intellectuals today. The most visible area of this intellectual work has been in the world of finance, with the development of so-called “Islamic banking.” A wide variety of venture-capital investments, joint-development projects, and partnership financing have been devised to avoid the appearance of charging interest, a practice forbidden by traditional Muslim jurisprudence. On a smaller scale, there has been a rising interest in bringing the sciences into a conversation with Islamic teachings.

An Emerging Pattern

Lame Excuses to Expand State Control Over the Internet

by Pater Tenebrarum

Slowly but surely, a pattern is emerging. We always wondered why the Snowden revelations were 'allowed' to get out, and why the mainstream media, which previously had not breathed a word about what people like William Binneyhad to say (whose whistle-blowing preceded Edward Snowden's by a good while), suddenly started to make so much noise. The pattern that is lately emerging is that governments are using these revelations to try to extend their control over the internet – see for example the plans recently announced by Brazil.

While previous attempts to corral the internet via copyright legislation failed, the outcry over NSA spying has opened new avenues to extend state control, and these plans naturally enjoy broad support – after all, nobody wants to be spied on by US spooks. The reason why one must be highly suspicious of all these proposals that purport to 'protect' the population from spying is that we know for a fact that Western governments are in reality not worried in the least about NSA spying. This is because all of them are doing it.  Mr. Hollande's faux moral outrage (which forms the basis of his insane proposal to tax EU data transfers) should deceive precisely no-one. As we pointed out in early July:

[...] the French government is spying on its citizens wholesale as well – in what has been described as a 'huge operation'.”

In the same article we also wrote about the close cooperation of German and US secret services, and as der Spiegel just reported, even Mrs. Merkel's outrage over the NSA listening in to one of her cell phones is largely play-acting:

“One particular point of clarification was especially important to Angela Merkel during the EU summit in Brussels last week. When she complained about the NSA's alleged tapping of her cellphone, the German chancellor made clear that her concern was not for herself, but for the "telephones of millions of EU citizens," whose privacy she said was compromised by US spying.

Yet at a working dinner with fellow EU heads of state on Thursday, where the agenda included a proposed law to bolster data protection, Merkel's fighting spirit on behalf of the EU's citizens seemed to have dissipated.

In fact, internal documents show that Germany applied the brakes when it came to speedy passage of such a reform. Although a number of EU member states — including France, Italy and Poland — were pushing for the creation of a Europe-wide modern data protection framework before European Parliament elections take place in May 2014, the issue ended up tabled until 2015. Great Britain, itself suspected of spying on its EU partners, and Prime Minister David Cameron, who has former Google CEO Eric Schmidt as one of his advisors, put up considerable resistance. He pushed instead for the final summit statement to call simply for "rapid" progress on a solid EU data-protection framework.

Cuba and the Two Currencies

The Cuban currency is a faithful expression of Cuba's economy

By Carlos Alberto Montaner

The government of Raúl Castro has declared its intention to put a gradual end to monetary duality. Splendid. The faster that cruel anomaly disappears, the better. The fraud, begun in 1994, has lasted all too long.

Two currencies circulate on the island. One is the peso, or CUP, lacking in purchasing power, which is used to pay workers. The other is the CUC, or convertible peso, more or less equivalent to the dollar, which is used to purchase - at international prices - anything its bearer wishes to buy.

Although officially the regular peso and the convertible peso have the same value, in reality the CUC is traded for 24 CUPs. That's one reason why the average salary of Cubans is one of the lowest in the world, ranging from $10 to $20 a month.

The end of monetary duality will not end the island's economic woes. All it will achieve is to make the disaster more transparent. The more transparent the economy becomes, the more obvious its failings will be.

 Bottom of Form

Let us understand: This detestable trick is not the problem. It's only the reflection of a grave reality, the system's huge lack of productivity.

The Cuban currency is a faithful expression of Cuba's economy. It's a mess, because the collectivism planned by the commissars, based on the superstitions of Marxism-Leninism, causes the production and productivity of Cubans to be abysmally low. ("It's the system, stupid," James Carville might say.)

System Reset 2014-2015

Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced

by Charles Hugh-Smith

The global financial system will reset in 2014-2015, regardless of official pronouncements and financial media propaganda hyping the "recovery." Despite the wide spectrum of forecasts (from rosy to stormy), nobody knows precisely what will transpire in 2014-2015, so we must remain circumspect about any and all predictions-- especially our own.

Even as we are mindful of the risks of a forecast being wrong (and the righteous humility that befits any analysis), it seems increasingly self-evident that financial systems around the world are reaching extremes that generally presage violent resets to new equilibria--typically at much lower levels of complexity and energy consumption.

John Michael Greer has described the process of descending stair-step resets (my description, not his) as catabolic collapse. The system resets at a lower level and maintains the new equilibrium for some time before the next crisis/system failure triggers another reset.

There is much systems-analysis intelligence in Greer's concept: systems without interactive feedbacks may collapse suddenly in a heap, but more complex systems tend to stair-step down in a series of resets to lower levels of consumption and complexity--for example, the Roman Empire, which reset many times before reaching the near-collapse level of phantom legions, full-strength on official documents, defending phantom borders.

Swedish reforms have been many, systematic, and comprehensive

A Swedish Lesson 

By Anders Åslund

To Brits, Sweden with its tightly regulated social welfare state is often a byword for socialism. But in the last two decades the country has been transformed. today it offers a flexible and dynamic European model with ever falling public expenditure, lower taxes, economic growth and budget surpluses.

After many years of absence from the Swedish debate, I attended a conference on the Swedish economy in the southern city of Malmö in May, organized by Swedbank. The 180 speakers represented the full range of Swedish views, which have moved amazingly far to the free-market right, not least social democrats and trade union leaders. Key values are competition, openness and efficiency, while social and environmental values remain. The idea is not to abolish social welfare but to make it more efficient through competition among private providers. A new consensus has emerged on having a social welfare society rather than a social welfare state.

The changes have been dramatic. While Sweden’s public expenditure has fallen by one-fifth of gross domestic product since 1993, between 2000 and 2009 Britain’s public expenditure skyrocketed by 15 per cent. This has brought Swedish and British public spending to a similar level, but Sweden’s is still steadily falling. Swedish taxes have been cut and her markets have opened up. The Social Democratic Party was in power from 1932 until 1976, and again from 1994 until 2006, but Sweden was actually quite a liberal market economy until 1968. After a century of superior growth, its GDP per capita was the third highest in the world.

Saudi Arabia: The real terror tyrant

Invent enemies and then slay them in order to control your subjects

By Nauman Sadiq 

Social selection plays the same role in the social sciences which the natural selection plays in the biological sciences: it selects the traits, norms and values which are most beneficial to the host culture. Seen from this angle, social diversity is a desirable quality for social progress since when diverse customs and value-systems compete with each other, they take the best and reject the worst from each. 

A decentralized and unorganized religion, like Sufism, engenders diverse strains of beliefs and thoughts which compete with one another in gaining social acceptance. A heavily centralized and tightly organized religion, on the other hand, depends more on authority and dogma, than value and utility. A centralized religion is also more ossified and less adaptive. 

When we look at religious extremism and the consequent militancy and terrorism, in Pakistan in particular and the Islamic world in general, in the natural evolution of religion, some deleterious mutation must have occurred somewhere, which has infected the whole of Islamic world. 

Marx and Alienation

The only happy ending is that of the collective organism, the species, with each individual member of that organism being brusquely annihilated along the way

by Murray N. Rothbard

"Alienation," to Marx, bears no relation to the fashionable prattle of late-20th-century Marxoid intellectuals. It did not mean a psychological feeling, of anxiety or estrangement, which could somehow be blamed on capitalism, or on cultural or sexual "repression." Alienation, for Marx, was far more fundamental, more cosmic. It meant, at the very least, as we have seen, the institutions of money, specialization, and the division of labor.[1] The eradication of these evils was necessary to unite the collective organism or species man "to himself," to heal these splits within "himself" and between man and "himself" in the form of man-created nature. But the radical evil of alienation was yet far more cosmic than that. It was metaphysical, a deep part of the philosophy and the world-view that Marx picked up from Hegel, and which, through its allied "dialectic," brought to Marx the outlines of the engine that would inevitably bring us communism as a law of history, with the ineluctability of a law of nature.

It all started with the 3rd-century philosopher Plotinus, a Platonist philosopher and his followers, and with a theological discipline seemingly remote from political and economic affairs: creatology, the "science" of the First Days. We have already seen, in fact, that another allied and almost equally remote branch of theology — eschatology, or the science of the Last Days — can have enormous political and economic consequences and ramifications.

The critical question of creatology is, Why did God create the universe? The answer of orthodox Augustinian Christianity, and hence the answer of Catholics, Lutherans, and Calvinists alike, is that God, a perfect being, created the universe out of benevolence and love for his creatures. Period. 

Alan Greenspan’s Shock Revelation

Asking for Trouble

by Bill Bonner

 “We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

– Alan Greenspan, speaking this week on “The Daily Show”

“Jobs Report Leaves Fed in Doubt,” was a big headline on Wednesday morning. Later in the day came this: “Dow down 54 on jobs concern.” What is the Fed in doubt about? To taper, or not to taper, that is the question. And why should a jobs report make any difference?

Oh, dear reader, where have you been? Don’t you know everyone now sits on the edge of his seat wondering when and how the Fed will back off from its massive QE program? And don’t you know the future of civilization hangs in the balance? On that point, we have a position… a thought… a reaction. Civilization hangs in the balance, but not in the way you think.

 We have been trying to introduce a new way of looking at civilization. In short, we’ve tried to make it more civilized. What is the difference between a civilized community and a barbaric one? We have introduced a simple test. The civilized community relies mostly on cooperation and consent. The uncivilized community depends heavily on force and violence.

A French historian first introduced the word “civilization” less than 300 years ago. Since then there has been much argument about what it means. We enter the fray gingerly, but sure of ourselves. It only makes sense on our terms. A civilized community is peaceful; a barbaric one is not.

“Okay, Bill,” you may be saying to yourself. “I’ll give you that one… I guess. But what the hell difference does it make? What has it got to do with the jobs report?” Good questions. Glad you asked.

The New, Tyrannical Normal

DC Big Bank Takeover

By Mark Hendrickson

If there is one truth that became apparent during the financial panic five years ago, it is that Big Government and Big Finance are inseparable. Of course Uncle Sam was going to bail out Wall Street, for without the financial infrastructure that Wall Street provides to maintain orderly markets in various securities, particularly debt instruments, the multi-trillion dollar operation of our federal government would cease to function.

I wrote about “The de facto Nationalization of JPMorgan Chase” in April, 2008, suggesting that when the Federal Reserve helped to plan and finance JP Morgan Chase’s absorption of many of Bear Stearns’ assets and operations, it represented “a major turning point in U.S. financial history.” Subsequent events have corroborated that assessment.

If anyone doubted that Uncle Sam was moving to take charge of the U.S. financial system, those doubts should have been dispelled by the passage of the Dodd-Frank Act in 2010. Dodd-Frank conferredunprecedented leverage over financial institutions through its enforcement arm, the Consumer Financial Protection Bureau. Through its power to designate the institutions of its choice as “too big to fail” or “systemically important,” and, as I fear we shall see, to effectively dictate policy to firms so designated, the federal government is moving to convert gigantic private corporations into administrative arms of government.

Two recent stories illustrate this point that the trend is moving toward government dominance of Big Finance. The insurance giant, Prudential Financial, attempted to resist the feds designating it a SIFI (the acronym du jour: Systemically Important Financial Institution.) Not a chance. Washington regulators crushed Prudential’s resistance and trampled the principle of federalism by usurping the state insurance regulators that heretofore have overseen Prudential’s operations. According to Richard Liskov’s account in The Wall Street Journal, the feds apparently are devising rules on the fly, having assumed regulatory control over Prudential before the actual regulations have been drafted.

Bandar Bush's mad, mad world

The writing is on the wall for the House of Saud

The Shaker
All signs are showing that the otherwise secretive Saudi regime is angry. Very, very angry. Not only did the Kingdom of Saudi Arabia refuse to take a seat at the UN Security Council, [1] but now the Saudi spy chief, Prince Bandar bin Sultan, appears to be threatening a "major shift" in "relations with the United States at its perceived inaction over the Syria war and its overtures to Iran". 

The Wall Street Journal provides further details:

In the run-up to expected US strikes, Saudi leaders asked for detailed U.S. plans for posting Navy ships to guard the Saudi oil center, the Eastern Province, during any strike on Syria, an official familiar with that discussion said. The Saudis were surprised when the Americans told them U.S. ships wouldn't be able to fully protect the oil region, the official said. 

Disappointed, the Saudis told the U.S. that they were open to alternatives to their long-standing defense partnership, emphasizing that they would look for good weapons at good prices, whatever the source, the official said.

In the second episode, one Western diplomat described Saudi Arabia as eager to be a military partner in what was to have been the U.S.-led military strikes on Syria. As part of that, the Saudis asked to be given the list of military targets for the proposed strikes. The Saudis indicated they never got the information, the diplomat said.

Need a Hand?

Boy Gets Prosthetic Hand Made by 3-D Printer (Cost $5 vs. $30K Medical Device)

by Mike "Mish" Shedlock

What do you do when you cannot afford a $30,000 prosthetic hand that your son needs?
Two years ago, Paul McCarthy began searching for an inexpensive yet functional prosthetic hand for his son Leon, who was born without fingers on one of his hands.
McCarthy came across a video online with detailed instruction on how to use a 3-D printer to make a prosthetic hand for his son. McCarthy made a prosthetic hand for his son for a cost of $5 and free time on a 3D printer.

Link for the video  prosthetic hand made by 3-D printer

Large Mechanical Hand
A "large mechanical hand" invention by Ivan Owen is what kicked off the technological progression to "Robohand".

Science and Non-Science in Liberal Education

One in a hundred

By Harvey C. Mansfield

Allan Bloom in his famous book The Closing of the American Mind (1987), drawing on Max Weber, calls the “fundamental issue” of our time “the relation between reason, or science, and the human good.” I would say that in the university today the most obvious issue, reflecting directly the fundamental issue, is the relation between science and non-science. Let’s start from non-science as the residue of what is not science. Personally, I am not a scientist; I am a non-scientist; but what is that positively? This is the main question in today’s university, and the main question for liberal education: What is non-science? We see in the universities, among both faculties and students, that, in answering that question, science is confident and non-science is confused. That is the first impression, which I will try to make muddy by showing that science is not so confident and non-science not so confused. But let the confident party speak first.

The confidence of scientists arises from their knowing what they are doing and from their ability to say what science is. Science is progressive and exact. It is progressive in that it is always being revised, with new findings replacing what was once held to be knowledge. To be sure, what is held to be knowledge now will change, perhaps very soon. Is physics about atoms? No, today it is about the distance between atoms. Strict science is today’s science; there is no reason for scientists to study the past of their discipline, the history of science. That field is part of non-science, the history department, not of science. If Galileo were to return today, he would accept our science as improved, as more exact. “Exact” means “leaves no room for doubt.” What is most exact? Mathematics; so science today is mathematical. Galileo began modern mathematical science, but science is not sentimental about its founders; like everyone else at his time he got some things wrong, only less wrong than the others of his day.

Social science and the humanities vie for the territory of non-science, the former imitating science and always failing, the latter not imitating and not knowing quite why. Both are excluded from science, the humanities officially and social science by the unofficial rejection of true scientists. They are not exact, not progressive. In the words of the once-famous Harvard “Red Book”: “Goethe does not render Sophocles obsolete, nor does Descartes supersede Plato.” Today there just might be agreement that these four authors are worth studying, but why? Because they differ, and the differences are still worth studying. That means that in the humanities, scholars accept unresolved doubts, whereas mathematical scientists strive to resolve all doubt. Non-science is not progressive; we cannot throw away old ideas. The Federalist and Tocqueville’s Democracy in America are still the best books on American politics, though of course in need of intelligent updating.

Science students do well in non-science courses, but non-science students have difficulty in science courses. Slaves of exactness find it easier to adjust to the inexact, though they may be disdainful of it, than do those who think in the realm of the inexact when confronted with the exact. Non-science students usually need less demanding courses in which to satisfy their science requirements; science students in non-science, however, suffer mainly from their sense of superiority. Are science students smarter? Maybe so, but at least they are good at mathematics, which is the big difference between science and non-science. Social science tries to be progressive and exact but fails in both; it cannot predict: witness the spectacular failure of economics to predict the financial crisis of 2008.

Will the House of Saud pivot to China?

Losing my (petrodollar) religion

By Pepe Escobar 

The favorite geopolitical sport du jour is to deconstruct the reasons why the House of Saud - that marriage of hyper-absolute monarchy and Wahhabi fanatics - has gone completely bonkers, with the ineffable Bandar Bush in the frontline. 

They are terrified with the possibility that the 34-year Wall of Mistrust between Washington and Tehran finally tumbles down. They are terrified that those American infidels refused to fight "our" regime change war on Syria. They were horrified by (mild) criticism about hardcore repression in Bahrain (which was invaded by Saudi in 2011, by the way). They abhor the American worshipping of that weird deity - democracy - that allowed friendly tyrants in Tunisia and Egypt to be abandoned (Libya is different; King Abdullah had wanted Gaddafi snuffed since at least 2002). 

The House of Saud is so mad as hell at the Obama administration that even "all options" are supposed to be "on the table". Which begs the question; what if Riyadh is actually dreaming of pivoting to China? 

Beijing's self-described "socialism with market characteristics" badly needs Saudi oil; after all the House of Saud is already China's top supplier. King Abdullah looks East and what he sees is an aspiring superpower, flush with unlimited cash, which will never dream of interfering in Saudi internal affairs, not to mention contemplate toxic Arab Spring ideas. 

So picture the dying King Abdullah dreaming of a Riyadh-Beijing axis as his legacy - with the inbuilt added benefit of displacing mortal enemy Iran as a supreme matter of national security for the Chinese (although Beijing would certainly see it as the proverbial win-win situation, keen to buy even more oil from Saudi as it keeps buying more gas from Iran). 

Saudi Arabia produces roughly 10% of the global total, which stands at around 90 million barrels of oil a day. It is the world's top exporter, swing producer, and essential in influencing the price of oil - which remains very high not only because of Chinese and Indian demand but also due to ceaseless speculation. 

Riyadh is carefully observing the possibility of the US becoming energy self-sufficient because of fracking technology - dirty, nasty and causing devastating pollution. They are certainly factoring that even with the US producing http://www.allgov.com/news/top-stories/us-now-leads-the-world-in-oil-and-gas-production-131008?news=851336 more than Saudi - around 12 million barrels a day, including ethanol - it still needs to import no less than 6.7 million barrels of oil a day in 2013. The US will still need oil - Saudi oil - in the foreseeable future. 

If "all options" are really "on the table", the House of Saud may be mulling striking a decades-long deal with the energy-voracious Chinese, assuring supply for a certain price. But let's assume demand - especially from Asia - rises, as it will; the House of Saud knows the US may find itself in trouble, and graphically manifest its displeasure. 

The House of Saud also knows very well it is the solid anchor that keeps OPEC tied to the petrodollar system. Without Saudi Arabia the petrodollar is history. 

Welcome to the Barbershop

Europe’s Tottering Banks are 'Coming Clean'

by Pater Tenebrarum

Reuters reports that 'Europe prepares to come clean on hidden bank losses'. Prepares to come clean? You mean, they haven't come clean yet? And what 'hidden losses'? Readers may recall the farcical 'stress tests' by the European Banking Authority over the past few years, which evidently failed to uncover what the true state of the banking system was. We still recall that Dexia was given a clean bill of health as one of the 'best capitalized banks in Europe' a mere three months before it failed and had to be bailed out.

In addition, keep in mind that commercial banks in places like Spain and Italy have loaded up big time on the debt issued by their governments, so that the often invoked 'breaking of the nexus between banks and their sovereigns' has definitely not happened. The exact opposite has in fact occurred. Meanwhile, there seem to be a great many toxic assets still rotting in the closets where the skeletons are habitually kept. The Reuters report highlights what a gigantic farce this still is by noting that 'nobody knows how big the losses are': 

“Euro zone countries will consider on Monday how to pay for the repair of their broken banks after health checks next year that are expected to uncover problems that have festered since the financial crisis.

Nobody knows the true scale of potential losses at Europe's banks, but the International Monetary Fund hinted at the enormity of the problem this month, saying that Spanish and Italian banks face 230 billion euros ($310 billion) of losses alone on credit to companies in the next two years.

Yet five years after the United States demanded its big banks take on new capital to reassure investors, Europe is still struggling to impose order on its financial system, having given emergency aid to five countries. Finance ministers from the 17-nation currency area meeting in Luxembourg will tackle the issue of plugging holes expected to be revealed by the European Central Bank's health checks next year.

The Gathering Storm

Intellectual, moral and financial bankruptcy all go hand in hand

Doing more of what failed spectacularly will not save the day a second time, as the scale required to create yet more phantom collateral and more asset bubbles will collapse the system.

by Charles Hugh-Smith
The financial storm clouds are gathering, ominously darkening the horizon. Though the financial media and the organs of state propaganda continue forecasting blue skies of recovery and rising corporate profits, the factual evidence belies this rosy forecast: internal measures of financial and economic activity are weakening across the globe as the state-central bank solutions to all ills--massive increases in credit creation, leverage and deficit spending--have failed to address any of the structural causes of the 2008 Global Financial Meltdown.

This failure to address the causes of 2008 Global Financial Meltdown is disastrous in and of itself--but the status quo has magnified the coming disaster by scaling up the very causes of the 2008 Global Financial Meltdown: excessive credit expansion, misallocation of capital on a grand scale, an opaque shadow banking system constructed of excessive leverage and a dependence on phantom collateral, i.e. risks and assets that are systemically mispriced to skim stupendous profits for financiers, bankers and their political enablers.

This is what I have called doing more of what has failed spectacularly.

Extremes inevitably lead to collapse, but even the most distorted system has some feedback mechanisms that attempt to counter the momentum toward disaster. Just as the body will try to mitigate the negative consequences of a diet of greasy fast food, our grossly distorted financial and political systems still retain some modest feedback loops that attempt to mitigate rising risks.

These interactive forces make it impossible to predict the moment of collapse, even as systemic failure remains inevitable. Precisely when the heart of an obese, unfit person who eats nothing but fast food will give out cannot be predicted, but what can be predicted is the odds of systemic failure rise with every passing day.

Doing more of what has failed spectacularly--inflating new asset bubbles in housing, stocks and bonds via quantitative easing, obfuscating financial skimming operations with thousands of pages of new regulations, and so on--is the equivalent of pushing an obese, unfit person to run uphill. Rather than repair the system, doing more of what has failed further stresses the system.

But even if the financial system were cleansed of bad debt and phantom collateral, the status quo would remain only partially repaired. For it's not just the financial system that has reached the point of negative return: the entire economic foundation of the developed world--credit-dependent consumerism--is as bankrupt and broken as the financial system that fuels it.

The state's response to this economic endgame is depersonalized welfare, both corporate and individual. When favored sectors can't succeed in the open market, the state enforces cartel-capitalism that enriches the corporations at the expense of the citizenry. When the cartel-state economy no longer creates paying work for the citizenry, the state issues social welfare benefits, in effect paying people to stay home and amuse themselves.

This destroys both free enterprise on the corporate level and the source of individual and social meaning, i.e. the opportunity to contribute in a meaningful way to one's community, family and trade/skill.

The status quo is thus not just financially bankrupt--it is morally bankrupt as well.

The status quo is as intellectually bankrupt as it is financially bankrupt. Our leadership cannot conceive of any course of action other than central bank credit creation and expanding state control of the economy and social benefits, paid for with money borrowed from future generations.

Let's take a wild guess that the obese, unfit person won't make it up the second hill, never mind the third or fourth one.The status quo responded to the financial heart attack of 2008 by doing more of what had failed spectacularly. That injection of trillions of dollars, euros, yen, renminbi, quatloos, etc. revived the global financial system in the same way a shot of nitroglycerin resolves a life-threatening crisis: it doesn't fix the causes of the crisis, it simply gives the system some additional time.

The next global financial storm is already gathering on the horizon. Doing more of what failed spectacularly will not save the day a second time, as the scale required to create yet more phantom collateral and more asset bubbles will collapse the system.

Intellectual, moral and financial bankruptcy all go hand in hand. There isn't just one storm gathering on the horizon--there are three, each adding force and fury to the other two.